ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation) | (I.R.S. Employer Identification Number) |
Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered | ||||||
Yes ☐ |
Yes ☐ |
No ☐ |
No ☐ |
Large accelerated filer ☐ | Accelerated filer ☐ | Smaller reporting company | |||||||||
Emerging growth company |
Yes | No ☑ |
1 | ||||||||
Item 16. | Form 10-K Summary | 35 |
PART I |
● | We have a limited operating history, have incurred significant losses since our inception and may be unable to obtain additional funds before we achieve positive cash flows. | |||||||
● | We may fail to manage our growing business and may not be successful in identifying or completing any acquisitions necessary to continue such growth. Any such acquisition completed may not be successfully integrated with our operations or yield additional value for stockholders. | |||||||
● | Our programs and solutions may not be as effective as we believe and may not achieve broad market acceptance and announcements of disappointing results may lead to declines in the market prices of our securities. | |||||||
● | Our business currently depends upon four large customers; the loss of any one of such customers would have a material adverse effect on us. | |||||||
● | We depend upon our senior management and key consultants and their loss or unavailability could put us at a competitive disadvantage. | |||||||
● | We need to attract and retain highly skilled personnel; we may be unable to effectively manage growth with our limited resources. | |||||||
● | Customers may not achieve the savings we expect are created by our programs and solutions, which could adversely impact our business. | |||||||
● | Market acceptance of our programs and solutions depends in large part on the willingness of third party payors to cover them, which is beyond our control. | |||||||
● | We may be unable to protect our intellectual property rights and we may be liable for infringing the intellectual property rights of others. | |||||||
● | Ongoing healthcare legislative and regulatory reform measures may have a material adverse effect on our business and results of operations. | |||||||
● | We must comply with significant government regulations, including with respect to licensure and privacy matters. | |||||||
● | The agreement with our lenders regarding our outstanding senior secured indebtedness contains significant restrictions on our business and operations and requires ongoing compliance with detailed financial covenants. Any failure to comply with the terms of such indebtedness would have a material adverse effect on our business and our securities. | |||||||
● | Our Series A Preferred Stock has no fixed maturity date, ranks junior to our currently outstanding indebtedness, is entitled to the payment of dividends only to the extent we may do so under Delaware corporate law, is subject to restrictions on transfer contained in our charter and has limited voting rights. | |||||||
● | Our Chairman and CEO controls over 51% of the outstanding common stock and may determine all matters presented for stockholder approval, including the election of directors, significant corporate transactions and our dissolution. | |||||||
● | The price of our common stock and preferred stock may be volatile. | |||||||
● | The market prices for our common stock and preferred stock may be adversely impacted by future events. | |||||||
● | Our certificate of incorporation, bylaws and Delaware law have anti-takeover provisions that could discourage, delay or prevent a change in control, which may cause our stock price to decline. |
PART II |
Year Ended December 31, | |||||||||||||||||||||||
(in thousands, except outreach pool) | 2020 | 2019 | Change | % Change | |||||||||||||||||||
Revenue | $ | 82,837 | $ | 35,095 | $ | 47,742 | 136 | % | |||||||||||||||
Effective outreach pool | 152,000 | 108,000 | 44,000 | 41 | % | ||||||||||||||||||
Cash flow from operations | $ | (6,282) | $ | (16,901) | $ | 10,619 | 63 | % |
Year Ended December 31, | |||||||||||
2020 | 2019 | ||||||||||
Revenue | $ | 82,837 | $ | 35,095 | |||||||
Cost of revenue | 43,603 | 20,408 | |||||||||
Gross profit | 39,234 | 14,687 | |||||||||
Operating expenses: | |||||||||||
Research and development | 12,923 | 5,439 | |||||||||
Sales and marketing | 4,525 | 4,735 | |||||||||
General and administrative | 36,709 | 24,527 | |||||||||
Total operating expenses | 54,157 | 34,701 | |||||||||
Operating loss | (14,923) | (20,014) | |||||||||
Other expense, net | (1,213) | (2,598) | |||||||||
Interest expense, net | (7,219) | (3,047) | |||||||||
Loss before income taxes | (23,355) | (25,659) | |||||||||
Income tax benefit | 645 | — | |||||||||
Net loss | $ | (22,710) | $ | (25,659) |
Year Ended December 31, | |||||||||||||||||||||||
(in thousands, except percentages) | 2020 | 2019 | Change | Change % | |||||||||||||||||||
Commercial revenue | $ | 47,741 | $ | 21,753 | $ | 25,988 | 119 | % | |||||||||||||||
Percentage of commercial revenue to total revenue | 58 | % | 62 | % | (4) | % | |||||||||||||||||
Government revenue | $ | 35,096 | $ | 13,342 | $ | 21,754 | 163 | % | |||||||||||||||
Percentage of government revenue to total revenue | 42 | % | 38 | % | 4 | % | |||||||||||||||||
Total revenue | $ | 82,837 | $ | 35,095 | $ | 47,742 | 136 | % |
Year Ended December 31, | |||||||||||||||||||||||
(in thousands, except percentages) | 2020 | 2019 | Change | % Change | |||||||||||||||||||
Cost of revenue | $ | 43,603 | $ | 20,408 | $ | 23,195 | 114 | % | |||||||||||||||
Gross profit | 39,234 | 14,687 | 24,547 | 167 | |||||||||||||||||||
Gross profit margin | 47 | % | 42 | % | 5 | % |
Year Ended December 31, | |||||||||||||||||||||||
(in thousands, except percentages) | 2020 | 2019 | Change | % Change | |||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||
Research and development | $ | 12,923 | $ | 5,439 | $ | 7,484 | 138 | % | |||||||||||||||
Sales and marketing | 4,525 | 4,735 | (210) | (4) | |||||||||||||||||||
General and administrative | 36,709 | 24,527 | 12,182 | 50 | |||||||||||||||||||
Total operating expenses | $ | 54,157 | $ | 34,701 | $ | 19,456 | 56 | ||||||||||||||||
Operating loss | $ | (14,923) | $ | (20,014) | $ | 5,091 | (25) | % | |||||||||||||||
Operating loss margin | (18.0) | % | (57.0) | % | 39.0 | % |
Year Ended December 31, | |||||||||||||||||||||||
(in thousands, except percentages) | 2020 | 2019 | Change | % Change | |||||||||||||||||||
Other expense, net | $ | 1,213 | $ | 2,598 | $ | (1,385) | (53) | % |
Year Ended December 31, | |||||||||||||||||||||||
(in thousands, except percentages) | 2020 | 2019 | Change | % Change | |||||||||||||||||||
Interest expense, net | $ | 7,219 | $ | 3,047 | $ | 4,172 | 137 | % |
Year Ended December 31, | |||||||||||
2020 | 2019 | ||||||||||
Net cash used in operating activities | $ | (6,282) | $ | (16,901) | |||||||
Net cash used in investing activities | (4,638) | — | |||||||||
Net cash provided by financing activities | 100,112 | 27,349 | |||||||||
Net increase in cash and restricted cash | $ | 89,192 | $ | 10,448 |
PART III |
PART IV |
Exhibit No. | Description | |||||||
3.1 | ||||||||
3.2 | ||||||||
3.3 | ||||||||
3.4 | ||||||||
3.5 | ||||||||
3.6 | ||||||||
4.1 | ||||||||
4.2 |
14.1 | ||||||||
21.1* | ||||||||
23.1 * | ||||||||
31.1* | ||||||||
31.2* | ||||||||
32.1** | ||||||||
32.2** | ||||||||
101.INS* | XBRL Instance Document | |||||||
101.SCH* | Inline XBRL Taxonomy Extension Schema Document | |||||||
101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |||||||
101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | |||||||
101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | |||||||
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document | |||||||
104* | Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101) |
ONTRAK, INC. | ||||||||
Date: March 9, 2021 | By: | /s/ TERREN S. PEIZER | ||||||
Terren S. Peizer | ||||||||
Chief Executive Officer (Principal Executive Officer) |
Signature | Title(s) | Date | ||||||||||||
/s/ TERREN S. PEIZER | Chairman of the Board of Directors | March 9, 2021 | ||||||||||||
Terren S. Peizer | and Chief Executive Officer | |||||||||||||
(Principal Executive Officer) | ||||||||||||||
/s/ CURTIS MEDEIROS | President, Chief Operating Officer | March 9, 2021 | ||||||||||||
Curtis Medeiros | ||||||||||||||
/s/ BRANDON H. LAVERNE | Chief Financial Officer | March 9, 2021 | ||||||||||||
Brandon H. LaVerne | (Principal Financial and | |||||||||||||
Accounting Officer) | ||||||||||||||
/s/ RICHARD A. BERMAN | Director | March 9, 2021 | ||||||||||||
Richard Berman | ||||||||||||||
/s/ EDWARD ZECCHINI | Director | March 9, 2021 | ||||||||||||
Edward Zecchini | ||||||||||||||
/s/ MICHAEL SHERMAN | Director | March 9, 2021 | ||||||||||||
Michael Sherman | ||||||||||||||
/s/ ROBERT REBAK | Director | March 9, 2021 | ||||||||||||
Robert Rebak | ||||||||||||||
/s/ GUSTAVO GIRALDO | Director | March 9, 2021 | ||||||||||||
Gustavo Giraldo | ||||||||||||||
/s/ DIANE SELOFF | Director | March 9, 2021 | ||||||||||||
Diane Seloff | ||||||||||||||
/s/ KATHERINE QUINN | Director | March 9, 2021 | ||||||||||||
Katherine Quinn |
December 31, | |||||||||||
2020 | 2019 | ||||||||||
Assets | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Restricted cash - current | |||||||||||
Receivables, net | |||||||||||
Unbilled receivables | |||||||||||
Deferred costs - current | |||||||||||
Prepaid expenses and other current assets | |||||||||||
Total current assets | |||||||||||
Long-term assets: | |||||||||||
Property and equipment, net | |||||||||||
Restricted cash - long-term | |||||||||||
Goodwill | |||||||||||
Intangible assets, net | |||||||||||
Other assets | |||||||||||
Operating lease right-of-use asset | |||||||||||
Total assets | $ | $ | |||||||||
Liabilities and stockholders' equity (deficit) | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | $ | |||||||||
Accrued compensation and benefits | |||||||||||
Deferred revenue | |||||||||||
Current portion of operating lease liability | |||||||||||
Other accrued liabilities | |||||||||||
Warrant liabilities | |||||||||||
Total current liabilities | |||||||||||
Long-term liabilities: | |||||||||||
Long-term debt, net | |||||||||||
Long-term operating lease liability | |||||||||||
Long-term finance lease liabilities | |||||||||||
Total liabilities | |||||||||||
Commitments and contingencies | |||||||||||
Stockholders' equity (deficit): | |||||||||||
Preferred stock, $ | |||||||||||
Common stock, $ | |||||||||||
Additional paid-in capital | |||||||||||
Accumulated deficit | ( | ( | |||||||||
Total stockholders' equity (deficit) | ( | ||||||||||
Total liabilities and stockholders' equity (deficit) | $ | $ |
Year Ended December 31, | |||||||||||
2020 | 2019 | ||||||||||
Revenue | $ | $ | |||||||||
Cost of revenue | |||||||||||
Gross profit | |||||||||||
Operating expenses: | |||||||||||
Research and development | |||||||||||
Sales and marketing | |||||||||||
General and administrative | |||||||||||
Total operating expenses | |||||||||||
Operating loss | ( | ( | |||||||||
Other expense, net | ( | ( | |||||||||
Interest expense, net | ( | ( | |||||||||
Loss before income taxes | $ | ( | $ | ( | |||||||
Income tax benefit | |||||||||||
Net loss | ( | ( | |||||||||
Dividends on preferred stock - declared and undeclared | ( | ||||||||||
Net loss attributable to common stockholders | $ | ( | $ | ( | |||||||
Net loss per common share - basic and diluted | $ | ( | $ | ( | |||||||
Weighted-average common shares outstanding - basic and diluted |
Preferred Stock | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total Stockholders' Equity (Deficit) | |||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2018 | — | $ | — | $ | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||
— | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Warrants exercised | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Warrants issued for services | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Stock options exercised | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Stock-based compensation expense | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
Balance at December 31, 2019 | $ | $ | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||
Preferred stock issued, net | — | — | — | ||||||||||||||||||||||||||||||||||||||
Preferred dividends declared | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
Stock issued in acquisition | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Warrants exercised | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Reclassification of warrant liability to equity | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Stock options exercised | — | — | — | — | |||||||||||||||||||||||||||||||||||||
401(k) employer match | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Stock-based compensation expense | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
Balance at December 31, 2020 | $ | $ | $ | $ | ( | $ |
Year Ended December 31, | |||||||||||
2020 | 2019 | ||||||||||
Cash flows from operating activities | |||||||||||
Net loss | $ | ( | $ | ( | |||||||
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||
Stock-based compensation expense | |||||||||||
Write-off of debt issuance costs | |||||||||||
Paid-in-kind interest expense | |||||||||||
Depreciation | |||||||||||
Amortization | |||||||||||
Deferred taxes | ( | ||||||||||
Warrants issued for services | |||||||||||
Change in fair value of warrants | |||||||||||
Change in fair value of contingent consideration | ( | ||||||||||
401(k) employer match in common shares | |||||||||||
Deferred rent | ( | ||||||||||
Changes in operating assets and liabilities: | |||||||||||
Receivables | ( | ( | |||||||||
Unbilled receivables | ( | ( | |||||||||
Prepaid and other assets | ( | ( | |||||||||
Accounts payable | ( | ||||||||||
Deferred revenue | |||||||||||
Lease liabilities | ( | ||||||||||
Other accrued liabilities | |||||||||||
Net cash used in operating activities | ( | ( | |||||||||
Cash flows from investing activities | |||||||||||
Purchases of property and equipment | ( | ||||||||||
Acquisition of LifeDojo, net of cash acquired | ( | ||||||||||
Net cash used in investing activities | ( | ||||||||||
Cash flows from financing activities | |||||||||||
Proceeds from issuance of preferred stock | |||||||||||
Preferred stock issuance costs | ( | ||||||||||
Dividends paid | ( | ||||||||||
Proceeds from revolving loan | |||||||||||
Repayment of revolving loan | ( | ||||||||||
Proceeds from A/R facility | |||||||||||
Repayment of A/R facility | ( | ||||||||||
Proceeds from loan | |||||||||||
Debt issuance costs | ( | ( | |||||||||
Debt termination related fees | ( | ||||||||||
Proceed from warrant exercise | |||||||||||
Proceed from options exercise | |||||||||||
Finance lease obligations | ( | ||||||||||
Financed insurance premium payments | ( | ||||||||||
Net cash provided by financing activities | |||||||||||
Net change in cash and restricted cash | |||||||||||
Cash and restricted cash at beginning of period | |||||||||||
Cash and restricted cash at end of period | $ | $ | |||||||||
Supplemental disclosure of cash flow information: | |||||||||||
Interest paid | $ | $ | |||||||||
Right of use asset obtained in exchange for lease obligation | |||||||||||
Non-cash financing and investing activities: | |||||||||||
Stock issued in acquisition of LifeDojo | $ | $ | |||||||||
Financed insurance premiums | |||||||||||
Warrant issued in connection with 2024 Note | |||||||||||
Reclassification of warrant liability to equity | |||||||||||
Finance lease and accrued purchases of property and equipment | |||||||||||
Contingent consideration and cash holdback relating to acquisition of LifeDojo | |||||||||||
Estimated Useful Lives (years) | |||||
Software | |||||
Computers and equipment | 3 - 7 | ||||
Right of use assets - finance leases | |||||
Leasehold improvements |
Level Input: | Input Definition: | |||||||
Level I | Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date. | |||||||
Level II | Inputs, other than quoted prices included in Level I, that are observable for the asset or liability through corroboration with market data at the measurement date. | |||||||
Level III | Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. |
Balance at December 31, 2020 | |||||||||||||||||||||||
Level I | Level II | Level III | Total | ||||||||||||||||||||
Letter of credit (1) | $ | $ | $ | $ | |||||||||||||||||||
Total assets | $ | $ | $ | $ | |||||||||||||||||||
Contingent consideration (2) | $ | $ | $ | $ | |||||||||||||||||||
Total liabilities | $ | $ | $ | $ |
Balance at December 31, 2019 | |||||||||||||||||||||||
Level I | Level II | Level III | Total | ||||||||||||||||||||
Letter of credit (1) | $ | $ | $ | $ | |||||||||||||||||||
Total assets | $ | $ | $ | $ | |||||||||||||||||||
Warrant liabilities (3) | $ | $ | $ | $ | |||||||||||||||||||
Total liabilities | $ | $ | $ | $ |
Level III Warrant Liabilities | |||||
Balance as of December 31, 2018 | $ | ||||
Reclassification of warrant liability to equity upon adoption of ASU 2017-11 | ( | ||||
Issuance of warrants | |||||
Change in fair value | |||||
Balance as of December 31, 2019 | $ | ||||
Reclassification of warrant liability to equity upon exercise of warrant | ( | ||||
Reclassification of warrant liability to equity upon change in classification | ( | ||||
Change in fair value | |||||
Balance as of December 31, 2020 | $ |
Level III Contingent Consideration | |||||
Balance as of December 31, 2019 | $ | ||||
Contingent consideration - acquisition of LifeDojo | |||||
Change in fair value | ( | ||||
Balance as of December 31, 2020 | $ |
December 31, | |||||||||||
2020 | 2019 | ||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Accounts receivable | |||||||||||
Unbilled accounts receivable | |||||||||||
Prepaid and other current assets | |||||||||||
Total assets | $ | $ | |||||||||
Accounts payable | $ | $ | |||||||||
Accrued liabilities | |||||||||||
Deferred revenue | |||||||||||
Payables to Ontrak | |||||||||||
Total liabilities | $ | $ |
December 31, | |||||||||||
2020 | 2019 | ||||||||||
Volatility | % | ||||||||||
Risk-free interest rate | % | % | |||||||||
Weighted average expected life (in years) | |||||||||||
Dividend yield | % | % |
December 31, | |||||||||||
2020 | 2019 | ||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Restricted cash - current | |||||||||||
Restricted cash - long term | |||||||||||
Cash, cash equivalents and restricted cash | $ | $ |
December 31, | |||||||||||
2020 | 2019 | ||||||||||
Software | $ | $ | |||||||||
Computers and equipment | |||||||||||
ROU assets - finance lease | |||||||||||
Leasehold improvements | |||||||||||
Software development in progress | |||||||||||
Subtotal | |||||||||||
Less: Accumulated depreciation and amortization | |||||||||||
Property and equipment, net | $ | $ |
Goodwill | |||||
Balance at December 31, 2019 | $ | ||||
Acquisition of LifeDojo | |||||
Balance at December 31, 2020 | $ |
At December 31, 2020 | Weighted Average Estimated Useful Life (years) | Gross Value | Accumulated Amortization | Net Carrying Value | ||||||||||||||||||||||
Acquired software technology | $ | $ | ( | $ | ||||||||||||||||||||||
Customer relationships | ( | |||||||||||||||||||||||||
Total | $ | $ | ( | $ |
2021 | $ | ||||
2022 | |||||
2023 | |||||
2024 | |||||
2025 | |||||
Total | $ |
Year Ended December 31, | |||||||||||
2020 | 2019 | ||||||||||
Net loss | $ | ( | $ | ( | |||||||
Dividends on preferred stock - declared and undeclared | ( | ||||||||||
Net loss attributable to common stockholders | $ | ( | $ | ( | |||||||
Weighted-average shares of common stock outstanding | |||||||||||
Net loss per common share - basic and diluted | $ | ( | $ | ( |
December 31, | |||||||||||
2020 | 2019 | ||||||||||
Warrants to purchase common stock | |||||||||||
Options to purchase | |||||||||||
Total shares excluded from net loss per share |
Volatility | % | ||||
Risk-free interest rate | % | ||||
Expected life (in years) | |||||
Dividend yield |
December 31, | |||||||||||
2020 | 2019 | ||||||||||
Principal | $ | $ | |||||||||
Less: debt discount | ( | ( | |||||||||
Net carrying amount | $ | $ |
December 31, | |||||||||||
2020 | 2019 | ||||||||||
Contractual interest expense | $ | $ | |||||||||
Accretion of debt discount | |||||||||||
Total | $ | $ |
Year Ended December 31, | |||||||||||
2020 | 2019 | ||||||||||
Volatility | % | % | |||||||||
Risk-free interest rate | 0.00%-1.55% | 1.63%-2.60% | |||||||||
Expected life (in years) | 2.63-6.08 | 2.85-6.08 | |||||||||
Dividend yield | % | % |
Number of Shares Outstanding | Weighted- Average Exercise Price | ||||||||||
Outstanding at December 31, 2019 | $ | ||||||||||
Granted | |||||||||||
Exercised | ( | ||||||||||
Forfeited | ( | ||||||||||
Expired | ( | ||||||||||
Outstanding at December 31, 2020 | |||||||||||
Options vested and exercisable at December 31, 2020 | $ |
Restricted Stock Units | Weighted- Average Grant Date Fair Value | ||||||||||
Non-vested at December 31, 2019 | $ | ||||||||||
Granted | |||||||||||
Non-vested at December 31, 2020 |
Number of Warrants | Weighted Average Exercise Price | ||||||||||
Outstanding as of December 31, 2019 | $ | ||||||||||
Exercised (1) | ( | ||||||||||
Outstanding as of December 31, 2020 | |||||||||||
Warrants exercisable as of December 31, 2020 |
Grant Date | Performance Measures | Vesting Term | Performance Period | # of Shares | Exercise Price | |||||||||||||||||||||||||||
December 2017 | Weighted Average Price of our common stock is $ | Fully vest on January 1, 2023 | January 1, 2023 | $ | ||||||||||||||||||||||||||||
August 2018 | Weighted Average Price of our common stock is $ | Fully vest on January 1, 2023 | January 1, 2023 | $ |
December 31, | ||||||||||||||
Consolidated Balance Sheets | Balance Sheet Classification | 2020 | 2019 | |||||||||||
Assets | ||||||||||||||
Operating lease asset | "Operating lease right-of-use-asset" | $ | $ | |||||||||||
Finance lease assets | "Property and equipment, net" | |||||||||||||
Total lease assets | $ | $ | ||||||||||||
Liabilities | ||||||||||||||
Current | ||||||||||||||
Operating lease liability | "Current portion of operating lease liability" | $ | $ | |||||||||||
Finance lease liabilities | "Other accrued liabilities" | |||||||||||||
Non-current | ||||||||||||||
Operating lease liability | "Long-term operating lease liability" | |||||||||||||
Finance lease liabilities | "Long-term finance lease liabilities" | |||||||||||||
Total lease liabilities | $ | $ | ||||||||||||
Year Ended December 31, | ||||||||||||||
Consolidated Statements of Operations | 2020 | 2019 | ||||||||||||
Operating lease expense | $ | $ | ||||||||||||
Short-term lease rent expense | ||||||||||||||
Variable lease expense | ||||||||||||||
Total rent expense | $ | $ | ||||||||||||
Finance lease expense: | ||||||||||||||
Amortization of leased assets | $ | $ | ||||||||||||
Interest on lease liabilities | ||||||||||||||
Total | $ | $ |
Year Ended December 31, | |||||||||||
Consolidated Statements of Cash Flows | 2020 | 2019 | |||||||||
Cash paid for amounts included in the measurement of lease liabilities: | |||||||||||
Operating cash flows from operating lease | $ | $ | |||||||||
Financing cash flows from finance leases | |||||||||||
December 31, | |||||||||||
Other Information | 2020 | 2019 | |||||||||
Weighted-average remaining lease term (years) | |||||||||||
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At December 31, 2020 | |||||||||||
Operating Lease | Financing Leases | Total | |||||||||
2021 | $ | $ | $ | ||||||||
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2024 | |||||||||||
Total lease payments | |||||||||||
Less: imputed interest | ( | ( | ( | ||||||||
Present value of lease liabilities | |||||||||||
Less: current portion | ( | ( | ( | ||||||||
Lease liabilities, non-current | $ | $ | $ |
Year Ended December 31, | |||||||||||
2020 | 2019 | ||||||||||
Current: | |||||||||||
State | $ | $ | |||||||||
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Deferred: | |||||||||||
Federal | ( | ||||||||||
State | ( | ||||||||||
Total deferred taxes | ( | ||||||||||
Income tax benefit | $ | ( | $ |
Year Ended December 31, | |||||||||||
2020 | 2019 | ||||||||||
Net operating losses | $ | $ | |||||||||
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Interest expense | |||||||||||
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Fixed assets | ( | ||||||||||
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Other temporary differences | |||||||||||
Deferred commission | ( | ||||||||||
Prepaid expenses | ( | ( | |||||||||
Right-of-use assets | ( | ( | |||||||||
Valuation allowance | ( | ( | |||||||||
Net deferred tax asset | $ | $ |
Year Ended December 31, | |||||||||||
2020 | 2019 | ||||||||||
Tax at federal statutory rate | % | % | |||||||||
Stock-based compensation | ( | ||||||||||
Section 162(m) | ( | ||||||||||
Change in federal valuation allowance | ( | ||||||||||
Reduction in federal NOL carryforward DTA due to 382 study results | ( | ||||||||||
Other | ( | ( | |||||||||
Effective tax rate | % | % |
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● | Removal of directors and filling board vacancies. The Company’s amended and restated certificate of incorporation and bylaws provide that, subject to the rights of the holders of any series of preferred stock then outstanding, directors may be removed with or without cause by the affirmative vote of the holders of a majority of the voting power of all the outstanding shares of capital stock entitled to vote generally in the election of directors voting together as a single class. |
● | Transfer Restrictions. As described above, the Company’s Amended and Restated Certificate of Incorporation prohibits transfers of the Company’s common stock if it would result in an “ownership change” within the meaning of applicable tax regulations. | |||||||
● | Blank check preferred stock. As described above, the Company’s amended and restated certificate of incorporation authorizes 50,000,000 shares of preferred stock. The existence of authorized but unissued shares of preferred stock may enable Ontrak’s Board of Directors to render more difficult or to discourage an attempt to obtain control of Ontrak by means of a merger, tender offer, proxy contest, or otherwise. For example, if in the due exercise of its fiduciary obligations, the Company’s Board of Directors were to determine that a takeover proposal is not in the best interests of the Company or its stockholders, the board of directors could cause shares of preferred stock to be issued without stockholder approval in one or more private offerings or other transactions that might dilute the voting or other rights of the proposed acquirer or insurgent stockholder or stockholder group. In this regard, the Company’s amended and restated certificate of incorporation grants the Board of Directors broad power to establish the rights and preferences of authorized and unissued shares of preferred stock. The issuance of shares of preferred stock could decrease the amount of earnings and assets available for distribution to holders of shares. The issuance may also adversely affect the rights and powers, including voting rights, of these holders and may have the effect of delaying, deterring, or preventing a change in control of Ontrak. |
13 |
Name | Jurisdiction of Incorporation | ||||
LD Acquisition Holdings, Inc. | Delaware | ||||
LifeDojo Inc. | Delaware |
Date: March 9, 2021 | /s/ TERREN S. PEIZER | ||||
Terren S. Peizer | |||||
Chief Executive Officer | |||||
(Principal Executive Officer) |
Date: March 9, 2021 | /s/ BRANDON H. LAVERNE | ||||
Brandon H. LaVerne | |||||
Chief Financial Officer | |||||
(Principal Financial and Accounting Officer) |
/s/ TERREN S. PEIZER | March 9, 2021 | |||||||
Terren S. Peizer | Date | |||||||
Chief Executive Officer | ||||||||
(Principal Executive Officer) |
/s/ BRANDON H. LAVERNE | March 9, 2021 | |||||||
Brandon H. LaVerne | Date | |||||||
Chief Financial Officer | ||||||||
(Principal Financial and Accounting Officer) |
Consolidated Balance Sheets (Parenthetical) - $ / shares |
Dec. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized (in shares) | 50,000,000 | 50,000,000 |
Preferred stock, shares issued (in shares) | 3,770,265 | 0 |
Preferred stock, shares outstanding (in shares) | 3,770,265 | 0 |
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized (in shares) | 500,000,000 | 500,000,000 |
Common stock, shares issued (in shares) | 17,543,218 | 16,616,165 |
Common stock, shares outstanding (in shares) | 17,543,218 | 16,616,165 |
Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Income Statement [Abstract] | ||
Revenue | $ 82,837 | $ 35,095 |
Cost of revenue | 43,603 | 20,408 |
Gross profit | 39,234 | 14,687 |
Research and development | 12,923 | 5,439 |
Sales and marketing | 4,525 | 4,735 |
General and administrative | 36,709 | 24,527 |
Total operating expenses | 54,157 | 34,701 |
Operating loss | (14,923) | (20,014) |
Other expense, net | (1,213) | (2,598) |
Interest expense, net | (7,219) | (3,047) |
Loss before income taxes | (23,355) | (25,659) |
Income tax benefit | 645 | 0 |
Net loss | (22,710) | (25,659) |
Dividends on preferred stock - declared and undeclared | (1,987) | 0 |
Net loss attributable to common stockholders | $ (24,697) | $ (25,659) |
Net loss per common share, basic and diluted (in dollars per share) | $ (1.44) | $ (1.56) |
Weighted-average shares of common shares outstanding (in shares) | 17,112 | 16,418 |
Organization |
12 Months Ended |
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Dec. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization | Organization Company Overview Ontrak, Inc. (“Ontrak” or the “Company”), formerly known as Catasys, Inc., is an AI-powered and telehealth-enabled, virtualized healthcare company, whose mission is to help improve the health and save the lives of as many people as possible. The Company’s PRE™ (Predict-Recommend-Engage) platform organizes and automates healthcare data integration and analytics through the application of machine intelligence to deliver analytic insights. The Company's PRE platform predicts people whose chronic disease will improve with behavior change, recommends effective care pathways that people are willing to follow, and engages people who are not getting the care they need. By combining predictive analytics with human engagement, the Company delivers improved member health and validated outcomes and savings to healthcare payors. The Company’s integrated, technology-enabled OntrakTM programs, a critical component of the PRE platform, are designed to provide healthcare solutions to members with behavioral conditions that cause or exacerbate chronic medical conditions such as diabetes, hypertension, coronary artery disease, chronic obstructive pulmonary disease, and congestive heart failure, which result in high medical costs. Ontrak has a unique ability to engage these members, who do not otherwise seek behavioral healthcare, leveraging proprietary enrollment capabilities built on deep insights into the drivers of care avoidance. Ontrak integrates evidence-based psychosocial and medical interventions delivered either in-person or via telehealth, along with care coaching and in-market Community Care Coordinators who address the social and environmental determinants of health, including loneliness. The Company’s programs seek to improve member health and deliver validated cost savings to healthcare payors of more than 50% for enrolled members. Ontrak solutions are available to members of leading national and regional health plans in 30 states and in Washington, D.C.
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Summary of Significant Accounting Policies |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements include Ontrak, Inc., its wholly-owned subsidiaries and its variable interest entities (VIEs). The accompanying consolidated financial statements for Ontrak, Inc. have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and instructions to Form 10-K and Article 10 of Regulation S-X. All intercompany balances and transactions have been eliminated in consolidation. At December 31, 2020, cash and restricted cash was $103.2 million and the Company had a working capital of approximately $87.2 million. The Company could continue to incur negative cash flows and operating losses for the next twelve months, with an average monthly cash burn rate of approximately $0.5 million for the year ended December 31, 2020. The Company expect its current cash resources to cover expenses through at least the next twelve months from the date of this report. However, delays in cash collections, revenue, or unforeseen expenditures could impact this estimate. The Company’s ability to fund ongoing operations is dependent on several factors. The Company aims to increase the number of members that are eligible for its solutions by signing new contracts and identifying more eligible members in existing contracts. Additionally, the Company’s funding is dependent upon the success of management’s plan to increase revenue and control expenses. The Company operates its Ontrak solutions in 30 states and the District of Columbia. The Company provide services to commercial (employer funded), managed Medicare Advantage, and managed Medicaid and dual eligible (Medicare and Medicaid) populations. The Company generates fees from its launched programs and expect to increase enrollment and fees in the near future. Certain prior year amounts have been reclassified for consistency with the current year presentation. Management’s Plans Historically, we have seen and continue to see net losses, net loss from operations, negative cash flow from operating activities, and historical working capital deficits as we continue through a period of rapid growth. The accompanying financial statements do not reflect any adjustments that might result if we were unable to continue as a going concern. We have alleviated substantial doubt by both entering into contracts for additional revenue-generating health plan customers and expanding our Ontrak program within existing health plan customers as well as completing equity and debt financings totaling approximately $87 million and $10 million, respectively, in 2020. To support this increased demand for services, we invested and will continue to invest in additional headcount and enhancements to technology needed to support the anticipated growth. Additional management plans include increasing the outreach pool as well as improving our current enrollment rate. We will continue to explore ways to increase operational efficiencies resulting in increase in margins on both existing and new members. We have a growing customer base and believe we are able to fully scale our operations to service the contracts and future enrollment providing leverage in these investments that will generate positive cash flow in the near future. We believe we will have enough capital to cover expenses through the foreseeable future and we will continue to monitor liquidity. If we add more health plans than budgeted, increase the size of the outreach pool by more than we anticipate, decide to invest in new products or seek out additional growth opportunities, we would consider financing these options with either a debt or equity financing. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgements and assumptions that affect the reported amounts in the financial statements and disclosed in the accompanying notes. Significant areas requiring the use of management estimates include expense accruals, accounts receivable allowances, accrued claims payable, the useful life of assets subject to depreciation and amortization, revenue recognition, the valuation of warrant liabilities and contingent consideration, and shared-based compensation. Due to the inherent uncertainty involved in making estimates, actual results could differ from those estimates. Revenue Recognition The Company generates virtual healthcare service revenue from contracts with customers as it satisfies its performance obligations to customers and their members enrolled in our Ontrak program. The virtual healthcare service is transferred to a customer when, or as, the customer obtains control of that service. A performance obligation may be satisfied over time or at a point in time. Revenue from a performance obligation satisfied over time is recognized by measuring progress in a manner that depicts the transfer of services to the customer. Revenue from a performance obligation satisfied at a point in time is recognized at the point in time that the Company determines the customer obtains control over the promised service. The amount of revenue recognized reflects the consideration the Company expects to be entitled to in exchange for those promised services (i.e., the “transaction price”). In determining the transaction price, the Company considers multiple factors, including identification of the performance obligation and the effects of variable consideration. Variable consideration is included in the transaction price only to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainties with respect to the amount are resolved. In determining when to include variable consideration in the transaction price, the Company considers the range of possible outcomes, the predictive value of past experiences, the time period of when uncertainties expect to be resolved and the amount of consideration that is susceptible to factors outside the Company's influence, such as the judgment and actions of third parties. Cost of Revenue Cost of revenue consists primarily of salaries related to care coaches, outreach specialists and other staff directly involved in member care, healthcare provider claims payments, and fees charged by third party administrators for processing these claims. Salaries and fees charged by third party administrators for processing claims are expensed when incurred and healthcare provider claims payments are recognized in the period in which an eligible member receives services. Cash and Cash Equivalents Cash and cash equivalents consist of highly liquid investments with original maturities of three months or less from the date of purchase. The Company's cash balance does not contain any cash equivalents at December 31, 2020 and 2019. Commissions Commissions paid to our sales force and engagement specialists are deferred as these amounts are incremental costs of obtaining a contract with a customer and are recoverable from future revenue that gave rise to the commissions. Commissions for initial contracts and member enrollments are deferred on the consolidated balance sheets and amortized on a straight-line basis over a period of benefit that has been determined to be six years and one year, respectively. For the year ended December 31, 2020 and 2019, amortization expense relating to deferred commission costs was $1.7 million and $0.03 million, respectively. Property & Equipment Property and equipment are stated at cost and depreciated using the straight-line method over the estimated useful lives of the assets, as noted below. We capitalize computer software that meet both the definition of internal-use software and defined criteria for capitalization. See discussion below under "Capitalized Internal Use Software Costs" for more information.
Capitalized Internal Use Software Costs We account for the costs of computer software obtained or developed for internal use in accordance with ASC 350, Intangibles—Goodwill and Other (“ASC 350”). We capitalize certain costs in the development of our internal use software when the preliminary project stage is completed and it is probable that the project will be completed and performed as intended. These capitalized costs include personnel and related expenses for employees and costs of third-party consultants who are directly associated with and who devote time to internal-use software projects. Capitalization of these costs ceases once the project is substantially complete and the software is ready for its intended purpose. Costs incurred for significant upgrades and enhancements to the Company’s internal use software solutions are also capitalized. Costs incurred for training, maintenance and minor modifications or enhancements are expensed as incurred. Capitalized software development costs are amortized using the straight-line method over an estimated useful life of three years. Leases ROU assets represent our right to use an underlying asset during the reasonably certain lease term and lease liabilities represent our obligation to make lease payments arising from the lease. We recognize ROU lease assets and lease liabilities at lease commencement on our consolidated balance sheet based on the present value of lease payments over the lease term using a discount rate determined based on our incremental borrowing rate since the rate implicit in each lease is not readily determinable. We elected the package of practical expedients, which permits us to not reassess (1) whether any expired or existing contracts are or contain leases, (2) the lease classification of any expired or existing leases, and (3) any initial direct costs for any existing leases as of the effective date. We elected the practical expedient to account for each separate lease component of a contract and its associated non-lease components as a single lease component. We also elected the hindsight practical expedient, which allows us to use hindsight in determining the lease term. We do not record an ROU asset and corresponding lease liability for leases with an initial term of 12 months or less (“short-term leases”). The terms in our leases may include options to extend or terminate the lease when it is reasonably certain that we will exercise those options. Judgment is required in our assessment as to whether renewal or termination options are reasonably certain to be exercised and factors such as contractual terms compared to current market rates, the importance of the facility and location to the Company’s operations, among others, are considered. Lease payments are made in accordance with the lease terms and lease expense, including short-term lease expense, is recognized on a straight-line basis over the lease term. Share-Based Compensation Stock Options and Restricted Stock Units – Employees and Directors Stock-based compensation for stock options and RSUs granted is measured based on the grant-date fair value of the awards and recognized on a straight-line basis over the period during which the employee is required to perform services in exchange for the award (generally the vesting period of the award). The Company estimates the fair value of RSU awards based on the closing stock price of our common shares on the date of grant. The Company estimates the fair value of employee stock options using the Black-Scholes option-pricing model. Forfeitures are recognized as they occur. Stock Options and Warrants – Non-employees Stock-based compensation for stock options and warrants granted to non-employees is measured based on the grant-date fair value of the awards and recognized on a straight-line basis over the period during which the employee is required to perform services in exchange for the award (generally the vesting period of the award). The Company estimates the fair value of employee stock options using the Black-Scholes option-pricing model. For options and warrants issued as compensation to non-employees for services that are fully vested and non-forfeitable at the time of issuance, the estimated value is recorded in equity and expensed when the services are performed and benefit is received. For unvested shares, the change in fair value during the period is recognized in expense using the graded vesting method. Income Taxes The Company accounts for income taxes using the liability method, under which deferred tax assets and liabilities are determined based on the future tax consequences attributable to differences between the financial reporting carrying amounts of existing assets and liabilities and their respective tax bases and tax credit carry forwards and net operating loss carryforwards. Deferred tax assets and liabilities are measured using the enacted tax rates that are expected to be in effect when the differences are expected to reverse. To date, no current income tax liability has been recorded due to the Company's accumulated net losses. The Company assesses the likelihood that deferred tax assets will be recovered from future taxable income, and a valuation allowance is established when necessary to reduce deferred tax assets to the amounts more likely than not expected to be realized. The Company's net deferred tax assets have been fully reserved by a valuation allowance. Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities recorded at fair value in the consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure fair value. The fair value hierarchy distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level I) and the lowest priority to unobservable inputs (Level III). The three levels of the fair value hierarchy are described below:
The following tables summarize fair value measurements by level at December 31, 2020 and 2019, respectively, for assets and liabilities measured at fair value on a recurring basis (in thousands):
_______________ (1) $0.4 million was included in "Restricted cash - long-term" on our consolidated balance sheets as of December 31, 2020 and 2019. (2) Contingent consideration was included in "Other accrued liabilities" on our consolidated balance sheet as of December 31, 2020. (3) See Note 9 below under "Stock Options and Warrants – Non-employees" for more information about warrants. Financial instruments classified as Level III in the fair value hierarchy as of December 31, 2020, represent liabilities measured at market value on a recurring basis which include warrant liabilities and contingent consideration relating to a stock price guarantee in an acquisition. In accordance with current accounting rules, the warrant liabilities and contingent consideration liability are being marked-to-market each quarter-end until they are completely settled or expire. The warrants are valued using the Black-Scholes option-pricing model, using both observable and unobservable inputs and assumptions consistent with those used in the estimate of fair value of employee stock options. See "Warrant Liabilities" below. The fair value of contingent consideration liability is valued using the Monte Carlo simulation model, using both observable and unobservable inputs and assumptions. The carrying value of the 2024 Notes is estimated to approximate their fair value as the variable interest rate of the 2024 Notes approximates the market rate for debt with similar terms and risk characteristics. The fair value measurements using significant Level III inputs, and changes therein, for the years ended December 31, 2020 and 2019 were as follows (in thousands):
The $0.5 million of contingent liability as of December 31, 2020 was included in "Other accrued liabilities" on our consolidated balance sheet. We recorded a gain of $0.02 million relating to a change in fair value of the contingent consideration relating to stock price guarantee in "Other expense, net" on our consolidated statement of operations for the year ended December 31, 2020. Variable Interest Entities Generally, an entity is defined as a Variable Interest Entity (“VIE”) under current accounting rules if it either lacks sufficient equity to finance its activities without additional subordinated financial support, or it is structured such that the holders of the voting rights do not substantively participate in the gains and losses of the entity. When determining whether an entity that meets the definition of a business, qualifies for a scope exception from applying VIE guidance, the Company considers whether: (i) it has participated significantly in the design of the entity, (ii) it has provided more than half of the total financial support to the entity, and (iii) substantially all of the activities of the VIE are conducted on its behalf. A VIE is consolidated by its primary beneficiary, the party that has the power to direct the activities that most significantly affect the economics of the VIE and has the right to receive benefits or the obligation to absorb losses of the entity that could be potentially significant to the VIE. The primary beneficiary assessment must be re-evaluated on an ongoing basis. As discussed under the heading Management Services Agreement (“MSA”) below, the Company has an MSA with a Texas nonprofit health organization (“TIH”) and a California Professional Corporation (“CIH”). Under the MSAs, the equity owners of TIH and CIH have only a nominal equity investment at risk, and the Company absorbs or receives a majority of the entity’s expected losses or benefits. The Company participates significantly in the design of these MSAs. The Company also agrees to provide working capital loans to allow for TIH and CIH to fund their day to day obligations. Substantially all of the activities of TIH and CIH include its decision making, approval or are conducted for its benefit, as evidenced by the facts that (i) the operations of TIH and CIH are conducted primarily using the Company's licensed network of providers and (ii) under the MSA, the Company agrees to provide and perform all non-medical management and administrative services for the entities. Payment of the Company's management fee is subordinate to payments of the obligations of TIH and CIH, and repayment of the working capital loans is not guaranteed by the equity owner of the affiliated medical group or other third party. Creditors of TIH and CIH do not have recourse to the Company's general credit. Based on the design of the entity and the lack of sufficient equity to finance its activities without additional working capital loans the Company has determined that TIH and CIH are VIEs. The Company is the primary beneficiary required to consolidate the entities as it has power and potentially significant interests in the entities. Accordingly, the Company is required to consolidate the assets, liabilities, revenues and expenses of the managed treatment centers. Management Services Agreement In April 2018, the Company executed an MSA with TIH and in July 2018, the Company executed an MSA with CIH. Under the MSAs, the Company licenses to TIH and CIH the right to use its proprietary treatment programs and related trademarks and provide all required day-to-day business management services, including, but not limited to: •general administrative support services; •information systems; •recordkeeping; •billing and collection; •obtaining and maintaining all federal, state and local licenses, certifications and regulatory permits. All clinical matters relating to the operation of TIH and CIH and the performance of clinical services through the network of providers shall be the sole and exclusive responsibility of the TIH and CIH Board free of any control or direction from the Company. TIH pays the Company a monthly fee equal to the aggregate amount of (a) its costs of providing management services (including reasonable overhead allocated to the delivery of its services and including salaries, rent, equipment, and tenant improvements incurred for the benefit of the medical group, provided that any capitalized costs will be amortized over a -year period), (b) 10%-15% of the foregoing costs, and (c) any performance bonus amount, as determined by TIH at its sole discretion. The Company's management fee is subordinate to payment of the entities’ obligations. CIH pays the Company a monthly fee equal to the aggregate amount of (a) its costs of providing management services (including reasonable overhead allocated to the delivery of its services and including salaries, rent, equipment, and tenant improvements incurred for the benefit of the entity, provided that any capitalized costs will be amortized over a -year period), and (b) any performance bonus, as determined by CIH at its sole discretion. The Company's consolidated balance sheets included the following assets and liabilities from its VIEs (in thousands):
Warrant Liabilities The assumptions used in the Black-Scholes option-pricing model were determined as follows:
For the years ended December 31, 2020 and 2019, losses related to the revaluation of warrant liabilities, which were recorded in "Other expense, net" in the consolidated statements of operations, were $1.2 million and $0.06 million, respectively. Concentration of Credit Risk Financial instruments, which potentially subject us to a concentration of risk, include cash, restricted cash and accounts receivable. All of our customers are based in the United States at this time and we are not subject to exchange risk for accounts receivable. The Company maintains its cash in domestic financial institutions subject to insurance coverage issued by the Federal Deposit Insurance Corporation ("FDIC"). Under FDIC rules, the company is entitled to aggregate coverage as defined by the Federal regulation per account type per separate legal entity per financial institution. The Company has incurred no losses as a result of any credit risk exposures. For the year ended December 31, 2020, four customers accounted for approximately 94% of revenues and two customers accounted for approximately 99% of accounts receivable. For the year ended December 31, 2019, four customers accounted for approximately 85% of revenues and three customers accounted for approximately 85% of accounts receivable. Recently Adopted Accounting Standards In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"). The guidance provides optional expedients and exceptions to accounting for contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The guidance is effective for all entities as of March 12, 2020 through December 31, 2022, and may be applied prospectively to contract modifications entered through December 31, 2022. The adoption of ASU 2020-04 on March 12, 2020 did not have a material effect on our consolidated financial statements. In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”). The amendments in this update align the requirements for capitalizing implementation costs incurred in a cloud computing arrangement (i.e. hosting arrangement) that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software under Subtopic 350-40. The amendments require certain costs incurred during the application development stage to be capitalized and other costs incurred during the preliminary project and post-implementation stages to be expensed as they are incurred. Capitalized implementation costs related to a hosting arrangement that is a service contract will be amortized over the term of the hosting arrangement including reasonably certain renewals, beginning when the module or component of the hosting arrangement is ready for its intended use. The guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year. The adoption of ASU 2018-15 prospectively on January 1, 2020 did not have a material effect on our consolidated financial statements. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820) ("ASU 2018-13"), which modifies the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, including, among other changes, the consideration of costs and benefits when evaluating disclosure requirements. For public companies, the amendments are effective for annual reporting periods beginning after December 15, 2019, including interim periods within those annual periods. The adoption of ASU 2018-13 on January 1, 2020 did not have a material effect on our consolidated financial statements. Recently Issued Accounting Pronouncements In October 2020, the FASB issued ASU No. 2020-10, "Codification Improvements" ("ASU 2020-10"), which includes amendments to improve consistency of disclosures by ensuring that all guidance that require disclosures or provides an option for an entity to provide information in the notes to the financial statement is codified in the disclosure section of the codification. ASU 2020-10 is effective for public companies, other than smaller reporting companies, for fiscal years beginning after December 15, 2020. For all other entities, ASU 2020-10 is effective for fiscal years beginning after December 15, 2021, and interim periods beginning after December 15, 2022. The Company is currently evaluating the impact of adoption of ASU 2020-10 on its consolidated financial statements and related footnote disclosures. In August 2020, the FASB issued ASU No. 2020-06, “Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) ("ASU 2020-06").” ASU 2020-06 modifies and simplifies accounting for convertible instruments, and eliminates certain separation models that require separating embedded conversion features from convertible instruments. ASU 2020-06 also addresses how convertible instruments are accounted for in the diluted earnings per share calculation. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier the fiscal year beginning after December 15, 2020. The Company is currently evaluating the impact of adoption of ASU 2020-06 on its consolidated financial statements and related footnote disclosures. In December 2019, the FASB issued ASU No. 2019-12, "Simplifying the Accounting for Income Taxes" ("ASU 2019-12"), which enhances and simplifies various aspects of income tax accounting guidance. The guidance is effective for the Company in the first quarter of 2021, although early adoption is permitted. The Company is currently evaluating the impact of adoption of ASU 2019-12 on its consolidated financial statements and related footnote disclosures. In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”), which requires recognition of an estimate of lifetime expected credit losses as an allowance. For companies eligible to be smaller reporting company as defined by the Securities and Exchange Commission (“SEC”), ASU 2016-13 is effective for annual reporting periods beginning after December 15, 2022, including interim periods within those annual periods. The Company is currently evaluating the impact of adoption of ASU 2016-13 on its consolidated financial statements and related footnote disclosures.
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Restricted Cash |
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Cash and Cash Equivalents [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted Cash | Restricted Cash At December 31, 2020, we had $15.7 million of cash restricted solely for the purpose of seven future quarterly dividend payments on our Series A Cumulative Perpetual Preferred Stock (see detailed discussion in Note 4 below under "Preferred Stock"), of which $9.0 million was included in "Restricted cash - current" and $6.7 million was included in "Restricted cash - long-term." Also, $0.4 million relating to a letter of credit required as part of our corporate headquarters office lease and $50,000 cash balance required under our 2024 Note were included in "Restricted cash - long-term" as of December 31, 2020. At December 31, 2019, we had $0.4 million relating to the letter of credit required as part of our corporate headquarters office lease included in "Restricted cash - long-term." The following table provides a reconciliation of cash, cash equivalents and restricted cash total as presented in the consolidated statement of cash flows for the years ended December 31, 2020 and 2019 (in thousands):
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Property and Equipment |
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Property and Equipment | Property and Equipment Property and equipment consisted of the following (in thousands):
During the year ended December 31, 2020, we capitalized $1.1 million of costs relating to development of internal use software and recorded approximately $0.2 million of amortization expense relating to these capitalized internal use software costs. There were no capitalized costs relating to development of internal use software, and no related amortization expense, during the year ended December 31, 2019.
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Acquisition |
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Business Combinations [Abstract] | |
Acquisition | Acquisition We account for acquisitions under ASC 805, Business Combinations, in which the acquisition method of accounting requires us to record assets acquired and liabilities assumed in an acquisition at their respective estimated fair values at the date of acquisition. The excess of the total purchase price over the estimated fair value of the assets acquired and liabilities assumed is recorded as goodwill. Such valuations require management to make significant estimates and assumptions which are believed to be reasonable but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the one year period following the completion of an acquisition referred to as the measurement period, we may record adjustments to the fair values of assets acquired and liabilities assumed with corresponding adjustments to goodwill as additional information becomes available. Any adjustment after the measurement period is reflected through earnings. LifeDojo On October 28, 2020, we completed the acquisition of LifeDojo Inc. (“LifeDojo”), a comprehensive, science-backed behavior change platform based in San Francisco, California, for total consideration of approximately $8.9 million, including $3.4 million in cash payment, 75,000 shares of our common stock (of which 74,984 shares were issued and 16 fractional shares were settled in cash) worth approximately $5.0 million at close, as well as certain contingent consideration based on a computation, as defined in the merger agreement, in the event the daily closing price per share of our common stock falls below a specified target price of $60 on two consecutive trading days during a month period beginning on the sixth month anniversary to the twelfth month anniversary of the closing date of the acquisition (measurement period). As of October 28, 2020, we determined that the fair value of this contingent consideration was $0.5 million. The contingent consideration amount, if any, is generally payable within business days following completion of the measurement period. LifeDojo provides online behavior change and wellness programs, using a combination of coaching and mobile apps to help members form health habits and change health behaviors. This acquisition was not significant to our consolidated financial statements.
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Goodwill and Intangible Assets |
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Goodwill and Intangible Assets | Goodwill and Intangible Assets Goodwill The carrying amount of indefinite-lived goodwill was as follows (in thousands):
The $5.7 million of goodwill related to the acquisition of LifeDojo is not deductible for tax purposes. Intangible Assets The following table sets forth amounts recorded for intangible assets subject to amortization (in thousands):
Amortization expense for intangible assets was $0.2 million for the year ended December 31, 2020. There were no intangible assets and no amortization expense for the year ended December 31, 2019. At December 31, 2020, estimated amortization expense for intangible assets for each of the five years thereafter was as follows (in thousands):
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Common Stock and Preferred Stock |
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Common Stock and Preferred Stock | Common Stock and Preferred Stock Net Loss Per Common Share Basic net loss per common share is computed by dividing the net loss attributable to common shareholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per common share is computed by giving effect to all potential shares of common stock, preferred stock and outstanding stock options and warrants, to the extent dilutive. Basic and diluted net loss per common share was the same for each period presented as the inclusion of all potential shares of common stock outstanding would have been anti-dilutive. Basic and diluted net loss per common share were as follows (in thousands, except per share amounts):
The following common equivalent shares issuable upon the exercise of stock options and warrants have been excluded from the calculation of diluted earnings per common share as their effect was anti-dilutive:
Preferred Stock In August 2020, we completed the offering of 1,700,000 shares of 9.50% Series A Cumulative Perpetual Preferred Stock (the "Series A Preferred Stock") and in September 2020, we completed the closing of the underwriters' full exercise of the over-allotment option of 255,000 additional shares of Series A Preferred Stock, resulting in aggregate gross proceeds of $48.9 million to the Company (or $45.1 million net of underwriting fees and other offering expenses). In mid-September 2020, we began an at-the-market ("ATM") offering of the Series A Preferred Stock through a designated broker for up to 2,000,000 shares, of which we sold 5,027 shares in November 2020. In December 2020, we terminated the ATM offering and began an underwritten offering of the Series A Preferred Stock, under which we completed the offering of 1,730,000 shares of Series A Preferred Stock as well as the issuance of 80,238 shares of Series A Preferred Stock under the over-allotment option, resulting in total gross proceeds, including the proceeds of the ATM offering, of $44.9 million (or $41.4 million net of underwriting fees and other offering expenses). The Series A Preferred Stock is listed on the Nasdaq Global Market under the symbol "OTRKP." The Company, generally, may not redeem the Series A Preferred Stock until August 25, 2025, except upon the occurrence of a Delisting Event or Change of Control (as defined in the Certificate of Designations establishing the Series A Preferred Stock), and on and after August 25, 2025, the Company may, at its option, redeem the Series A Preferred Stock, in whole, at any time, or in part, from time to time, for cash at a redemption price of $25.00 per share, plus any accrued and unpaid dividends. The Series A Preferred Stock has no maturity date and will remain outstanding indefinitely unless redeemed by the Company or exchanged for shares of common stock in connection with a Delisting Event or Change of Control. Holders of Series A Preferred Stock generally have no voting rights, but will have limited voting rights if the Company fails to pay dividends for six or more quarters, whether or not declared or consecutive) and in certain other events. Holders of Series A Preferred Stock of record at the close of business of each respective record date (February 15, May 15, August 15 and November 15) are entitled to receive, when, as and if declared by our Board of Directors, out of funds legally available for the payment of dividends, cumulative cash dividends at the rate of 9.50% per annum of the $25.00 per share liquidation preference (equivalent to $2.375 per annum per share). Dividends, if and when declared by our Board of Directors, are payable quarterly in arrears, every February 28, May 30, August 31, and November 30, as applicable, beginning on or about November 30, 2020. Dividends will accumulate and be cumulative from, and including, the date of original issuance, which was August 25, 2020. On November 11, 2020, our Board of Directors declared the first quarterly dividend on the Company's Series A Preferred Stock for shareholders of record as of the close of business on November 15, 2020. The first quarterly cash dividend equaled $0.6333333 per share, representing more than a full quarter as it covered the period from, and including, the first date the Company issued the Series A Preferred Shares, at 9.50% per annum of liquidation preference of $25.00 per share. As such, we paid cash dividends of $1.2 million on November 30, 2020. At December 31, 2020, we had undeclared dividends of $0.7 million.
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Debt |
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Debt | Debt 2024 Notes The Company is party to a Note Purchase Agreement dated September 24, 2019 (the “Note Agreement”) with Goldman Sachs Specialty Lending Holdings, Inc. and any other purchasers party thereto from time to time (collectively, the “Holders”) (the "Amended Note Agreement"), as amended, pursuant to which the Company initially issued $35.0 million aggregate principal amount of senior secured notes (the "Initial 2024 Notes"). In August 2020, pursuant to a Second Amendment to the Note Purchase Agreement (the "Second Amendment"), the Company issued an additional $10.0 million principal amount of senior secured notes as provided under the additional note purchase commitment of the Note Agreement (together with the Initial 2024 Notes, the "2024 Notes"). The Second Amendment included changes in certain definitions in the Note Agreement intended to permit the Company to issue the Series A Preferred Stock in an amount not to exceed $50 million and to pay dividends thereon under specified conditions, including a waiver of the mandatory prepayment of the 2024 Notes with the proceeds of the Series A Preferred Stock offering. The Second Amendment also modified the Leverage Ratio covenant, Consolidated Adjusted EBITDA covenant, Minimum Consolidated Liquidity covenant and Minimum Revenue covenant providing increased financial flexibility to the Company. In September 2020, the Company and the Holders entered into a Third Amendment to the Note Purchase Agreement, which increased the maximum amount allowed for issuances of the Series A Preferred Stock to $100 million. In late September 2020, the Company and the Holders entered into a Fourth Amendment to the Note Purchase Agreement, which changed certain definitions and covenants in the Note Agreement primarily intended to reduce the Company’s information reporting obligations to the Holders under specified conditions. The Company was subsequently notified on March 3, 2021, that pursuant to Section C of the Fourth Amendment to the Note Purchase Agreement, the Collateral Agent is rescinding all amendments under the Fourth Amendment and the Fourth Amendment shall immediately cease to be effective and all provisions amended by the Fourth Amendment shall revert to their respective formulations prior to the execution of the Fourth Amendment. In December 2020, the Company and the Holders entered into a Fifth Amendment to the Note Purchase Agreement, which increased the maximum amount allowed for issuances of the Series A Preferred Stock to $125 million. The 2024 Notes bear interest, based on the Company's election, at either a floating rate plus an applicable margin based on cash interest payments or a floating rate plus a slightly higher applicable margin based on interest payment in kind. The applicable margins are subject to stepdowns, in each case, following the achievement of certain financial ratios. The LIBOR index is expected to be discontinued by the end of calendar year 2021. The terms of the Note Agreement allow for a replacement rate if the LIBOR index is discontinued. At December 31, 2020, the effective weighted average annual interest rate applicable to the outstanding 2024 Notes was 15.03%. The entire principal amount of the 2024 Notes is due and payable on the fifth anniversary of the Note Agreement (September 24, 2024) unless earlier redeemed upon the occurrence of certain mandatory prepayment events, including 50% of excess cash flow, asset sales and the amount by which total debt exceeds an applicable leverage multiple. The principal amount of the 2024 Notes increased by $3.5 million in the form of payment in kind of the interest component during the year ended December 31, 2020. The Amended Note Agreement contains customary covenants, including, among others, covenants that restrict the Company’s ability to incur debt, grant liens, make certain investments and acquisitions, pay certain dividends, repurchase equity interests, repay certain debt, amend certain contracts, enter into affiliate transactions and asset sales or make certain equity issuances, and covenants that require the Company to, among other things, provide annual, quarterly and monthly financial statements, together with related compliance certificates if and when requested by Holders, maintain its property in good repair, maintain insurance and comply with applicable laws. The Amended Note Agreement also includes covenants with respect to the Company’s maintenance of certain financial ratios, including a fixed charge coverage ratio, leverage ratio and consolidated liquidity as well as minimum levels of consolidated adjusted EBITDA and revenue. The Amended Note Agreement also contains customary events of default, including, among others, payment default, bankruptcy events, cross-default, breaches of covenants and representations and warranties, change of control, judgment defaults and an ownership change within the meaning of Section 382 of the Internal Revenue Code. In the case of an event of default, the Holder may, among other remedies, accelerate the payment of all obligations under the 2024 Notes and all assets of the Company serves as collateral. Any prepayment of the 2024 Notes must be accompanied by a yield maintenance premium and on or prior to the third anniversary of the date of the Note Agreement must be accompanied by a prepayment premium. The Company was in compliance with all of its debt covenants as of December 31, 2020. In accounting for the issuance of the 2024 Notes, the Company separated the 2024 Notes into liability and equity components. The fair value of the liability component was estimated using an interest rate for debt with terms similar to the 2024 Notes. The carrying amount of the equity component was calculated by measuring the fair value based on the Black-Scholes model. The gross proceeds from the transaction was allocated between liability and equity based on the proportionate value. The debt discount is accreted to interest expense over the term of the 2024 Notes using the interest method. The equity component is not re-measured as long as it continues to meet the conditions for equity classification. The assumptions used in the Black-Scholes option-pricing model remain unchanged and are determined as follows:
The net carrying amounts of the liability components consisted of the following (in thousands):
2022 Loan In June 2018, the Company entered into a venture loan and security agreement (the “2022 Loan”) with Horizon Technology Finance Corporation (“Horizon”), which provides for up to $7.5 million in loans to the Company. In addition, in June 2018, the Company entered into a loan and security agreement (the “A/R Facility”) in connection with a $2.5 million receivables financing facility with Corporate Finance, a division of Heritage Bank of Commerce (“Heritage”). The Company borrowed and subsequently repaid $1.9 million on the A/R Facility during the six months ended June 30, 2019. In March 2019, the Company entered into an amended and restated 2022 Loan with Horizon, which provides for up to $15.0 million in loans to the Company, including initial term loans in the amount of $7.5 million previously funded under the original agreement and an additional up to $7.5 million loan in three revolving tranches of $2.5 million in availability, subject to the Company's achievement of trailing three month billings exceeding $5.0 million, $7.0 million and $8.0 million, respectively (collectively, the “Billing Requirements”). An initial advance of $2.5 million was funded upon the execution and delivery of the Amended Loan Agreement, subject to repayment if the foregoing $5.0 million threshold is not reached by July 1, 2019. The Company concurrently entered into an amendment to the previously disclosed $2.5 million A/R Facility with Heritage intended primarily to reflect the amendment and restatement of the Amended Loan Agreement. The Company had met all three of the Billing Requirements and as a result had incurred the full $7.5 million under the Amended Loan Agreement. In connection with our entry into the Amended Loan Agreement, the Company issued Horizon 40,279 -year warrants to purchase an aggregate of $600,000 (depending on the level of availability under the Amended Loan Agreement) at the trailing volume weighted average price (“VWAP”) of our common stock on the NASDAQ Capital Market for the five days preceding the relative dates of grants at a per share exercise price equal to the lower of (i) $9.93 or (ii) the price per share of any securities that may be issued by us in an equity financing during the 18 months following the agreement date. The 2022 Loan bore interest at a floating coupon rate of the amount by which one-month LIBOR exceeds 2.00% plus 9.75%. After September 30, 2020, upon the earlier of (i) payment in full of the principal balance of the 2022 Loan, (ii) an event of default and demand by Lender of payment in full or (iii) on the Loan Maturity Date (September 30, 2022), as applicable, the Company shall pay to Lender a payment equal to the greater of $150,000 or 6% of the outstanding principal balance on August 31, 2020. Upon the issuance of the 2024 Notes, the balance of the 2022 Loan was repaid and terminated. As part of the termination, the Company incurred $1.1 million of early termination costs and wrote off deferred debt issuance costs of $1.5 million, which has been recorded in "Other expense, net" in the consolidated statement of operations for the year ended December 31, 2019. The following table sets forth total interest expense recognized related to the 2024 Notes and 2022 Loan (in thousands):
Other In August 2020, the Company financed a portion of its insurance premiums totaling $0.3 million at an annual effective rate of 8.25%, payable in ten equal monthly installments beginning on September 1, 2020 and a down payment of $86,000 at inception. In November 2020, the Company financed $3.0 million of insurance premiums at an annual effective rate of 4.95%, payable in ten equal monthly installments beginning on December 8, 2020 and a down payment of $0.8 million at inception. At December 31, 2020, a total of $2.2 million relating to these financed insurance premiums was outstanding, which was included as part of "Other accrued liabilities" on our consolidated balance sheet.
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Stock Based Compensation |
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Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Based Compensation | Stock Based CompensationOur 2017 Stock Incentive Plan (the “2017 Plan”) and 2010 Stock Incentive Plan (the “2010 Plan”) provides for the issuance of 4,806,513 shares of our common stock. We have granted stock options to executive officers, employees, members of our board of directors, and certain outside consultants, and restricted stock units ("RSUs") to employees. The terms and conditions upon which options become exercisable vary among grants; however, option rights expire no later than ten years from the date of grant and employee and Board of Director awards generally vest over conditions upon which RSUs vest vary among grants; however, RSUs generally vest over four years on a straight-line basis. As of December 31, 2020, we had 3,616,314 vested and unvested stock options outstanding, and 30,000 unvested RSUs. We had 198,636 shares reserved and available for future awards as of December 31, 2020. Stock-based compensation expense was approximately $8.1 million and $5.2 million for the years ended December 31, 2020 and 2019, respectively. The Company issued $0.4 million of common stock to one of the Company's executives during the quarter ended March 31, 2020 and it is included in stock-based compensation expense for the year ended December 31, 2020. During the quarter ended September 30, 2019, the Company determined that it was not probable to achieve its internal performance targets for a tranche of warrants issued for the fiscal year 2019, resulting in the reversal of the compensation expense recognized previously for the shares that were not expected to vest. As a result, the Company recognized a reversal of compensation expense related to these performance based awards of $1.1 million for the year ended December 31, 2019. The assumptions used in the Black-Scholes option-pricing model were determined as follows:
The expected volatility assumptions have been based on the historical and expected volatility of our stock, measured over a period generally commensurate with the expected term. The weighted average expected option term for the year ended December 31, 2020, reflects the application of the simplified method prescribed in SEC's Staff Accounting Bulletin (“SAB”) No. 107 (as amended by SAB 110), which defines the life as the average of the contractual term of the options and the weighted average vesting period for all option tranches. Stock Options – Employees and Directors A summary of stock option activity for employee and director grants was as follows:
As of December 31, 2020, there was $22.8 million of unrecognized compensation costs related to non-vested share-based compensation arrangements granted to employees and directors under the Plan. These costs are expected to be recognized over a weighted-average period of 2.14 years. Restricted Stock Units - Employees We estimate the fair value of RSUs based on the closing price of our common stock on the date of grant. The following table summarizes our RSU award activity during the year ended December 31, 2020 issued under the 2017 Plan:
As of December 31, 2020, there was $1.5 million of unrecognized compensation cost related to unvested outstanding RSUs. We expect to recognize these costs over a weighted average period of 3.89 years. Stock Options and Warrants – Non-employees The Company did not issue any stock options to consultants during the year ended December 31, 2020 compared to 50,000 stock options at a weighted average exercise price of $9.93 for the year ended December 31, 2019. Stock compensation expense related to consultants was $0.1 million for the year ended December 31, 2020 and $0.1 million for the year ended December 31, 2019. As of December 31, 2020, there was $0.1 million of total unrecognized compensation cost related to non-vested stock compensation arrangements granted to non-employees under the 2017 Amended Plan, which is expected to be recognized over a weighted-average period of approximately 1.17 years. In addition to stock options granted under the Plan, we have also granted warrants to purchase common stock to certain non-employees that have been approved by our Board of Directors. A summary of warrants activity for non-employees was as follows:
_______________________ (1) Included in total number of warrants exercised are 12,936 shares that were net settled at the election of the warrant holders during the year ended December 31, 2020. There were no warrants issued during the year ended December 31, 2020, compared with 228,607 warrants during the year ended December 31, 2019. Of the total outstanding warrants as of December 31, 2020, 1,249,189 warrants were held by an entity controlled by the Company's chairman and chief executive officer. Performance-Based and Market-Based Awards The Company’s Compensation Committee designed a compensation structure to align the compensation levels of certain executives to the performance of the Company through the issuance of performance-based and market-based stock options. The performance-based options vest upon the Company meeting certain revenue targets and the total amount of compensation expense recognized is based on the number of shares that the Company determines are probable of vesting. The market-based options vest upon the Company’s stock price reaching a certain price at a specific performance period and the total amount of compensation expense recognized is based on a Monte Carlo simulation that factors in the probability of the award vesting. The following table summarizes the Company's outstanding awards under this structure:
During the quarter ended March 31, 2020, the Company amended the option agreement of one of the Company's former executives to vest additional options previously forfeited and extend the period to exercise, resulting in $0.6 million of additional stock-based compensation expense, which is included in stock-based compensation expense for the year ended December 31, 2020. During the quarter ended December 31, 2019, the Company entered into a separation agreement with a former executive. As part of the agreement, 115,950 of previously forfeited awards were immediately vested. As a result, $1.1 million of stock compensation expense was recorded during the quarter and classified in operating expenses within the consolidated statement of operations. The remaining awards were forfeited. During the quarter ended September 30, 2019, the Company determined that it was not probable to achieve its internal performance targets for the tranche issued for the fiscal year 2019, resulting the reversal of the compensation expense recognized previously for the shares that did not vest.
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to five years on a straight-line basis. The terms and
Leases |
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Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases | Leases The Company determines whether an arrangement is a lease, or contains a lease, at inception and recognizes right-of-use assets and lease liabilities, initially measured at present value of the lease payments, on our balance sheet and classifies the leases as either operating or financing leases. The Company leases office space for our corporate headquarters in Santa Monica, California, which is accounted for as an operating lease and various computer equipment used in the operation of our business, which are accounted for as finance leases. The operating lease agreement includes 7,869 square feet of office space for a lease term of 60 months, which commenced in July 2019, with base annual rent of approximately $0.6 million subject to annual adjustments. The finance leases are generally for 36 month terms. The Company’s operating lease relating to its Santa Monica Headquarters does not require any contingent rental payments, impose any financial restrictions, or contain any residual value guarantees. The lease includes renewal options and escalation clauses. The renewal options have not been included in the calculation of the operating lease liability and right-of-use asset as the Company is not reasonably certain to exercise the options. Variable expenses generally represent the Company’s share of the landlord’s operating expenses. Quantitative information for our leases was as follows (in thousands):
The following table sets forth maturities of our lease liabilities (in thousands):
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Leases | Leases The Company determines whether an arrangement is a lease, or contains a lease, at inception and recognizes right-of-use assets and lease liabilities, initially measured at present value of the lease payments, on our balance sheet and classifies the leases as either operating or financing leases. The Company leases office space for our corporate headquarters in Santa Monica, California, which is accounted for as an operating lease and various computer equipment used in the operation of our business, which are accounted for as finance leases. The operating lease agreement includes 7,869 square feet of office space for a lease term of 60 months, which commenced in July 2019, with base annual rent of approximately $0.6 million subject to annual adjustments. The finance leases are generally for 36 month terms. The Company’s operating lease relating to its Santa Monica Headquarters does not require any contingent rental payments, impose any financial restrictions, or contain any residual value guarantees. The lease includes renewal options and escalation clauses. The renewal options have not been included in the calculation of the operating lease liability and right-of-use asset as the Company is not reasonably certain to exercise the options. Variable expenses generally represent the Company’s share of the landlord’s operating expenses. Quantitative information for our leases was as follows (in thousands):
The following table sets forth maturities of our lease liabilities (in thousands):
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Income Taxes |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Income Taxes The components of our income tax benefit consisted of the following (in thousands):
The income tax benefit for the year ended December 31, 2020 was a result of the deferred tax liability recorded at the time of the LifeDojo acquisition that was subsequently reversed at December 31, 2020. As of December 31, 2020, the Company had net federal operating loss carry forwards and state operating loss carry forwards of approximately $295 million and $159 million, respectively. The net federal operating loss carry forwards begin to expire in 2023, and net state operating loss carry forwards begin to expire in 2020. As of December 31, 2020, the Company completed an analysis of its ownership changes since formation in accordance with Section 382 of the Internal Revenue Code of 1986, as amended. As a result of the study, the Company expects federal and state NOLs of approximately $151 million and $90 million, respectively, to expire unutilized and the Company has reduced its gross deferred tax asset associated with the NOL carryforward, for the amount that is expected to expire unutilized, with an offsetting reduction to the valuation allowance. Due to such uncertainties surrounding the realization of the deferred tax assets, the Company maintains a valuation allowance of $38.6 million and $70.1 million against all of its deferred tax assets as of December 31, 2020 and 2019, respectively. For the years ended December 31, 2020 and 2019, the total change in valuation allowance was $(31.6) million and $6.0 million, respectively. Realization of the deferred tax assets will be primarily dependent upon the Company's ability to generate sufficient taxable income. Net deferred tax assets and liabilities were as follows (in thousands):
The Company has provided a valuation allowance in full on its net deferred tax assets in accordance with ASC 740 - "Income Taxes" ("ASC 740"). Because of the Company's continued losses, management assessed the realizability of its net deferred tax assets as being less than the more-likely-than-not criteria set forth by ASC 740. Furthermore, certain portions of the Company's net operating loss carryforwards were acquired, and therefore subject to further limitation set forth under the federal tax code, which could further limit the Company's ability to realize its deferred tax assets. A reconciliation between the statutory federal income tax rate and the effective income tax rate for the years presented was as follows:
The Company has adopted guidance issued by the FASB that clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements and prescribes a recognition threshold of more likely than not and a measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. In making this assessment, a company must determine whether it is more likely than not that a tax position will be sustained upon examination, based solely on the technical merits of the position and must assume that the tax position will be examined by taxing authorities. Our policy is to include interest and penalties related to unrecognized tax benefits in income tax expense. There were no interest and penalties for the years ended December 31, 2020 and 2019, respectively. The Company files income tax returns with the Internal Revenue Service (“IRS”) and various states with sufficient nexus. For jurisdictions in which tax filings are prepared, the Company is no longer subject to income tax examinations by state tax authorities for tax years prior to 2016, and by the IRS for tax years through 2017. The Company’s net operating loss carryforwards are subject to IRS examination until they are fully utilized and such tax years are closed. There are currently no income tax audits in any jurisdictions for open tax years and, as of December 31, 2020, there have been no material changes to our tax positions.
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Commitments and Contingencies |
12 Months Ended |
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Dec. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies From time to time, we are subject to various legal proceedings that arise in the normal course of our business activities. As of the date of this Annual Report on Form 10-K, we were not party to any litigation the outcome of which, if determined adversely to us, would individually or in the aggregate be reasonably expected to have a material adverse effect on our results of operations or financial position except the following: Loss Contingency On March 3, 2021, a purported securities class action was filed in the United States District Court for the Central District of California, entitled Farhar v. Ontrak, Inc., Case No. 2:21-cv-01987 (C.D. Cal. filed Mar. 3, 2021). In this action, plaintiff, purportedly on behalf of a putative class of purchasers of Ontrak securities from November 5, 2020 through February 26, 2021, alleges that the Company and certain of its officers violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78j(b), 78t(a), and Rule 10b-5, 17 C.F.R. § 240.10b-5, promulgated thereunder, by intentionally or recklessly making false and/or misleading statements and/or failing to disclose that (i) Ontrak’s largest customer evaluated Ontrak on a provider basis, valuing Ontrak’s performance based on achieving the lowest cost per medical visit rather than clinical outcomes or medical cost savings; (ii) as a result, Ontrak’s largest customer did not find Ontrak’s program to be effective and was reasonably likely to terminate its contract with Ontrak; (iii) because this customer accounted for a significant portion of Ontrak’s revenue, loss of the customer would have an outsized impact on Ontrak’s financial results; and (iv) as a result of the foregoing, Ontrak’s positive statements about its business, operations and prospects were materially misleading and/or lacked a reasonable basis. The complaint has not yet been served. We believe that the allegations lack merit and intend to defend against this action vigorously.
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Related Party Transactions |
12 Months Ended |
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Dec. 31, 2020 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Related Party TransactionsAccounts payable outstanding with Mr. Peizer, the Company's Chief Executive Officer, was approximately $0.2 million and $0.4 million as of December 31, 2020 and 2019, respectively. |
Subsequent Event |
12 Months Ended |
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Dec. 31, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Event | Subsequent EventOn February 26, 2021, the Company was notified by its largest customer that the participation status with this customer will be terminated effective June 26, 2021. The Company has been advised to stop enrollment of new members for this customer and await guidance from the customer on transition plans for the 8,100 members who are currently benefiting from the Ontrak program. For the year ended December 31, 2020, this customer accounted for approximately 58% of our total revenue. |
Summary of Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation | Basis of Presentation The accompanying consolidated financial statements include Ontrak, Inc., its wholly-owned subsidiaries and its variable interest entities (VIEs). The accompanying consolidated financial statements for Ontrak, Inc. have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and instructions to Form 10-K and Article 10 of Regulation S-X. All intercompany balances and transactions have been eliminated in consolidation. At December 31, 2020, cash and restricted cash was $103.2 million and the Company had a working capital of approximately $87.2 million. The Company could continue to incur negative cash flows and operating losses for the next twelve months, with an average monthly cash burn rate of approximately $0.5 million for the year ended December 31, 2020. The Company expect its current cash resources to cover expenses through at least the next twelve months from the date of this report. However, delays in cash collections, revenue, or unforeseen expenditures could impact this estimate. The Company’s ability to fund ongoing operations is dependent on several factors. The Company aims to increase the number of members that are eligible for its solutions by signing new contracts and identifying more eligible members in existing contracts. Additionally, the Company’s funding is dependent upon the success of management’s plan to increase revenue and control expenses. The Company operates its Ontrak solutions in 30 states and the District of Columbia. The Company provide services to commercial (employer funded), managed Medicare Advantage, and managed Medicaid and dual eligible (Medicare and Medicaid) populations. The Company generates fees from its launched programs and expect to increase enrollment and fees in the near future. Certain prior year amounts have been reclassified for consistency with the current year presentation. Management’s Plans Historically, we have seen and continue to see net losses, net loss from operations, negative cash flow from operating activities, and historical working capital deficits as we continue through a period of rapid growth. The accompanying financial statements do not reflect any adjustments that might result if we were unable to continue as a going concern. We have alleviated substantial doubt by both entering into contracts for additional revenue-generating health plan customers and expanding our Ontrak program within existing health plan customers as well as completing equity and debt financings totaling approximately $87 million and $10 million, respectively, in 2020. To support this increased demand for services, we invested and will continue to invest in additional headcount and enhancements to technology needed to support the anticipated growth. Additional management plans include increasing the outreach pool as well as improving our current enrollment rate. We will continue to explore ways to increase operational efficiencies resulting in increase in margins on both existing and new members. We have a growing customer base and believe we are able to fully scale our operations to service the contracts and future enrollment providing leverage in these investments that will generate positive cash flow in the near future. We believe we will have enough capital to cover expenses through the foreseeable future and we will continue to monitor liquidity. If we add more health plans than budgeted, increase the size of the outreach pool by more than we anticipate, decide to invest in new products or seek out additional growth opportunities, we would consider financing these options with either a debt or equity financing.
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Use of Estimates | Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgements and assumptions that affect the reported amounts in the financial statements and disclosed in the accompanying notes. Significant areas requiring the use of management estimates include expense accruals, accounts receivable allowances, accrued claims payable, the useful life of assets subject to depreciation and amortization, revenue recognition, the valuation of warrant liabilities and contingent consideration, and shared-based compensation. Due to the inherent uncertainty involved in making estimates, actual results could differ from those estimates.
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Revenue Recognition | Revenue Recognition The Company generates virtual healthcare service revenue from contracts with customers as it satisfies its performance obligations to customers and their members enrolled in our Ontrak program. The virtual healthcare service is transferred to a customer when, or as, the customer obtains control of that service. A performance obligation may be satisfied over time or at a point in time. Revenue from a performance obligation satisfied over time is recognized by measuring progress in a manner that depicts the transfer of services to the customer. Revenue from a performance obligation satisfied at a point in time is recognized at the point in time that the Company determines the customer obtains control over the promised service. The amount of revenue recognized reflects the consideration the Company expects to be entitled to in exchange for those promised services (i.e., the “transaction price”). In determining the transaction price, the Company considers multiple factors, including identification of the performance obligation and the effects of variable consideration. Variable consideration is included in the transaction price only to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainties with respect to the amount are resolved. In determining when to include variable consideration in the transaction price, the Company considers the range of possible outcomes, the predictive value of past experiences, the time period of when uncertainties expect to be resolved and the amount of consideration that is susceptible to factors outside the Company's influence, such as the judgment and actions of third parties.
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Cost of Revenue | Cost of RevenueCost of revenue consists primarily of salaries related to care coaches, outreach specialists and other staff directly involved in member care, healthcare provider claims payments, and fees charged by third party administrators for processing these claims. Salaries and fees charged by third party administrators for processing claims are expensed when incurred and healthcare provider claims payments are recognized in the period in which an eligible member receives services. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash and Cash Equivalents | Cash and Cash Equivalents Cash and cash equivalents consist of highly liquid investments with original maturities of three months or less from the date of purchase. The Company's cash balance does not contain any cash equivalents at December 31, 2020 and 2019.
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Commissions | Commissions Commissions paid to our sales force and engagement specialists are deferred as these amounts are incremental costs of obtaining a contract with a customer and are recoverable from future revenue that gave rise to the commissions. Commissions for initial contracts and member enrollments are deferred on the consolidated balance sheets and amortized on a straight-line basis over a period of benefit that has been determined to be six years and one year, respectively. For the year ended December 31, 2020 and 2019, amortization expense relating to deferred commission costs was $1.7 million and $0.03 million, respectively.
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Property & Equipment | Property & Equipment Property and equipment are stated at cost and depreciated using the straight-line method over the estimated useful lives of the assets, as noted below. We capitalize computer software that meet both the definition of internal-use software and defined criteria for capitalization. See discussion below under "Capitalized Internal Use Software Costs" for more information.
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Capitalized Internal Use Software Costs | Capitalized Internal Use Software Costs We account for the costs of computer software obtained or developed for internal use in accordance with ASC 350, Intangibles—Goodwill and Other (“ASC 350”). We capitalize certain costs in the development of our internal use software when the preliminary project stage is completed and it is probable that the project will be completed and performed as intended. These capitalized costs include personnel and related expenses for employees and costs of third-party consultants who are directly associated with and who devote time to internal-use software projects. Capitalization of these costs ceases once the project is substantially complete and the software is ready for its intended purpose. Costs incurred for significant upgrades and enhancements to the Company’s internal use software solutions are also capitalized. Costs incurred for training, maintenance and minor modifications or enhancements are expensed as incurred. Capitalized software development costs are amortized using the straight-line method over an estimated useful life of three years.
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Leases | Leases ROU assets represent our right to use an underlying asset during the reasonably certain lease term and lease liabilities represent our obligation to make lease payments arising from the lease. We recognize ROU lease assets and lease liabilities at lease commencement on our consolidated balance sheet based on the present value of lease payments over the lease term using a discount rate determined based on our incremental borrowing rate since the rate implicit in each lease is not readily determinable. We elected the package of practical expedients, which permits us to not reassess (1) whether any expired or existing contracts are or contain leases, (2) the lease classification of any expired or existing leases, and (3) any initial direct costs for any existing leases as of the effective date. We elected the practical expedient to account for each separate lease component of a contract and its associated non-lease components as a single lease component. We also elected the hindsight practical expedient, which allows us to use hindsight in determining the lease term. We do not record an ROU asset and corresponding lease liability for leases with an initial term of 12 months or less (“short-term leases”). The terms in our leases may include options to extend or terminate the lease when it is reasonably certain that we will exercise those options. Judgment is required in our assessment as to whether renewal or termination options are reasonably certain to be exercised and factors such as contractual terms compared to current market rates, the importance of the facility and location to the Company’s operations, among others, are considered. Lease payments are made in accordance with the lease terms and lease expense, including short-term lease expense, is recognized on a straight-line basis over the lease term.
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Share-Based Compensation | Share-Based Compensation Stock Options and Restricted Stock Units – Employees and Directors Stock-based compensation for stock options and RSUs granted is measured based on the grant-date fair value of the awards and recognized on a straight-line basis over the period during which the employee is required to perform services in exchange for the award (generally the vesting period of the award). The Company estimates the fair value of RSU awards based on the closing stock price of our common shares on the date of grant. The Company estimates the fair value of employee stock options using the Black-Scholes option-pricing model. Forfeitures are recognized as they occur. Stock Options and Warrants – Non-employees Stock-based compensation for stock options and warrants granted to non-employees is measured based on the grant-date fair value of the awards and recognized on a straight-line basis over the period during which the employee is required to perform services in exchange for the award (generally the vesting period of the award). The Company estimates the fair value of employee stock options using the Black-Scholes option-pricing model. For options and warrants issued as compensation to non-employees for services that are fully vested and non-forfeitable at the time of issuance, the estimated value is recorded in equity and expensed when the services are performed and benefit is received. For unvested shares, the change in fair value during the period is recognized in expense using the graded vesting method.
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Income Taxes | Income Taxes The Company accounts for income taxes using the liability method, under which deferred tax assets and liabilities are determined based on the future tax consequences attributable to differences between the financial reporting carrying amounts of existing assets and liabilities and their respective tax bases and tax credit carry forwards and net operating loss carryforwards. Deferred tax assets and liabilities are measured using the enacted tax rates that are expected to be in effect when the differences are expected to reverse. To date, no current income tax liability has been recorded due to the Company's accumulated net losses. The Company assesses the likelihood that deferred tax assets will be recovered from future taxable income, and a valuation allowance is established when necessary to reduce deferred tax assets to the amounts more likely than not expected to be realized. The Company's net deferred tax assets have been fully reserved by a valuation allowance.
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Fair Value Measurements | Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities recorded at fair value in the consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure fair value. The fair value hierarchy distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level I) and the lowest priority to unobservable inputs (Level III). The three levels of the fair value hierarchy are described below:
Financial instruments classified as Level III in the fair value hierarchy as of December 31, 2020, represent liabilities measured at market value on a recurring basis which include warrant liabilities and contingent consideration relating to a stock price guarantee in an acquisition. In accordance with current accounting rules, the warrant liabilities and contingent consideration liability are being marked-to-market each quarter-end until they are completely settled or expire. The warrants are valued using the Black-Scholes option-pricing model, using both observable and unobservable inputs and assumptions consistent with those used in the estimate of fair value of employee stock options. See "Warrant Liabilities" below. The fair value of contingent consideration liability is valued using the Monte Carlo simulation model, using both observable and unobservable inputs and assumptions. The carrying value of the 2024 Notes is estimated to approximate their fair value as the variable interest rate of the 2024 Notes approximates the market rate for debt with similar terms and risk characteristics.
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Variable Interest Entities | Variable Interest Entities Generally, an entity is defined as a Variable Interest Entity (“VIE”) under current accounting rules if it either lacks sufficient equity to finance its activities without additional subordinated financial support, or it is structured such that the holders of the voting rights do not substantively participate in the gains and losses of the entity. When determining whether an entity that meets the definition of a business, qualifies for a scope exception from applying VIE guidance, the Company considers whether: (i) it has participated significantly in the design of the entity, (ii) it has provided more than half of the total financial support to the entity, and (iii) substantially all of the activities of the VIE are conducted on its behalf. A VIE is consolidated by its primary beneficiary, the party that has the power to direct the activities that most significantly affect the economics of the VIE and has the right to receive benefits or the obligation to absorb losses of the entity that could be potentially significant to the VIE. The primary beneficiary assessment must be re-evaluated on an ongoing basis. As discussed under the heading Management Services Agreement (“MSA”) below, the Company has an MSA with a Texas nonprofit health organization (“TIH”) and a California Professional Corporation (“CIH”). Under the MSAs, the equity owners of TIH and CIH have only a nominal equity investment at risk, and the Company absorbs or receives a majority of the entity’s expected losses or benefits. The Company participates significantly in the design of these MSAs. The Company also agrees to provide working capital loans to allow for TIH and CIH to fund their day to day obligations. Substantially all of the activities of TIH and CIH include its decision making, approval or are conducted for its benefit, as evidenced by the facts that (i) the operations of TIH and CIH are conducted primarily using the Company's licensed network of providers and (ii) under the MSA, the Company agrees to provide and perform all non-medical management and administrative services for the entities. Payment of the Company's management fee is subordinate to payments of the obligations of TIH and CIH, and repayment of the working capital loans is not guaranteed by the equity owner of the affiliated medical group or other third party. Creditors of TIH and CIH do not have recourse to the Company's general credit. Based on the design of the entity and the lack of sufficient equity to finance its activities without additional working capital loans the Company has determined that TIH and CIH are VIEs. The Company is the primary beneficiary required to consolidate the entities as it has power and potentially significant interests in the entities. Accordingly, the Company is required to consolidate the assets, liabilities, revenues and expenses of the managed treatment centers. Management Services Agreement In April 2018, the Company executed an MSA with TIH and in July 2018, the Company executed an MSA with CIH. Under the MSAs, the Company licenses to TIH and CIH the right to use its proprietary treatment programs and related trademarks and provide all required day-to-day business management services, including, but not limited to: •general administrative support services; •information systems; •recordkeeping; •billing and collection; •obtaining and maintaining all federal, state and local licenses, certifications and regulatory permits. All clinical matters relating to the operation of TIH and CIH and the performance of clinical services through the network of providers shall be the sole and exclusive responsibility of the TIH and CIH Board free of any control or direction from the Company. TIH pays the Company a monthly fee equal to the aggregate amount of (a) its costs of providing management services (including reasonable overhead allocated to the delivery of its services and including salaries, rent, equipment, and tenant improvements incurred for the benefit of the medical group, provided that any capitalized costs will be amortized over a -year period), (b) 10%-15% of the foregoing costs, and (c) any performance bonus amount, as determined by TIH at its sole discretion. The Company's management fee is subordinate to payment of the entities’ obligations. CIH pays the Company a monthly fee equal to the aggregate amount of (a) its costs of providing management services (including reasonable overhead allocated to the delivery of its services and including salaries, rent, equipment, and tenant improvements incurred for the benefit of the entity, provided that any capitalized costs will be amortized over a -year period), and (b) any performance bonus, as determined by CIH at its sole discretion.
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Warrant Liabilities | Warrant Liabilities The assumptions used in the Black-Scholes option-pricing model were determined as follows:
For the years ended December 31, 2020 and 2019, losses related to the revaluation of warrant liabilities, which were recorded in "Other expense, net" in the consolidated statements of operations, were $1.2 million and $0.06 million, respectively.
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Concentration of Credit Risk | Concentration of Credit Risk Financial instruments, which potentially subject us to a concentration of risk, include cash, restricted cash and accounts receivable. All of our customers are based in the United States at this time and we are not subject to exchange risk for accounts receivable. The Company maintains its cash in domestic financial institutions subject to insurance coverage issued by the Federal Deposit Insurance Corporation ("FDIC"). Under FDIC rules, the company is entitled to aggregate coverage as defined by the Federal regulation per account type per separate legal entity per financial institution. The Company has incurred no losses as a result of any credit risk exposures.
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Recently Adopted Accounting Standards and Recently Issued Accounting Pronouncements | Recently Adopted Accounting Standards In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"). The guidance provides optional expedients and exceptions to accounting for contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The guidance is effective for all entities as of March 12, 2020 through December 31, 2022, and may be applied prospectively to contract modifications entered through December 31, 2022. The adoption of ASU 2020-04 on March 12, 2020 did not have a material effect on our consolidated financial statements. In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”). The amendments in this update align the requirements for capitalizing implementation costs incurred in a cloud computing arrangement (i.e. hosting arrangement) that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software under Subtopic 350-40. The amendments require certain costs incurred during the application development stage to be capitalized and other costs incurred during the preliminary project and post-implementation stages to be expensed as they are incurred. Capitalized implementation costs related to a hosting arrangement that is a service contract will be amortized over the term of the hosting arrangement including reasonably certain renewals, beginning when the module or component of the hosting arrangement is ready for its intended use. The guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year. The adoption of ASU 2018-15 prospectively on January 1, 2020 did not have a material effect on our consolidated financial statements. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820) ("ASU 2018-13"), which modifies the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, including, among other changes, the consideration of costs and benefits when evaluating disclosure requirements. For public companies, the amendments are effective for annual reporting periods beginning after December 15, 2019, including interim periods within those annual periods. The adoption of ASU 2018-13 on January 1, 2020 did not have a material effect on our consolidated financial statements. Recently Issued Accounting Pronouncements In October 2020, the FASB issued ASU No. 2020-10, "Codification Improvements" ("ASU 2020-10"), which includes amendments to improve consistency of disclosures by ensuring that all guidance that require disclosures or provides an option for an entity to provide information in the notes to the financial statement is codified in the disclosure section of the codification. ASU 2020-10 is effective for public companies, other than smaller reporting companies, for fiscal years beginning after December 15, 2020. For all other entities, ASU 2020-10 is effective for fiscal years beginning after December 15, 2021, and interim periods beginning after December 15, 2022. The Company is currently evaluating the impact of adoption of ASU 2020-10 on its consolidated financial statements and related footnote disclosures. In August 2020, the FASB issued ASU No. 2020-06, “Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) ("ASU 2020-06").” ASU 2020-06 modifies and simplifies accounting for convertible instruments, and eliminates certain separation models that require separating embedded conversion features from convertible instruments. ASU 2020-06 also addresses how convertible instruments are accounted for in the diluted earnings per share calculation. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier the fiscal year beginning after December 15, 2020. The Company is currently evaluating the impact of adoption of ASU 2020-06 on its consolidated financial statements and related footnote disclosures. In December 2019, the FASB issued ASU No. 2019-12, "Simplifying the Accounting for Income Taxes" ("ASU 2019-12"), which enhances and simplifies various aspects of income tax accounting guidance. The guidance is effective for the Company in the first quarter of 2021, although early adoption is permitted. The Company is currently evaluating the impact of adoption of ASU 2019-12 on its consolidated financial statements and related footnote disclosures. In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”), which requires recognition of an estimate of lifetime expected credit losses as an allowance. For companies eligible to be smaller reporting company as defined by the Securities and Exchange Commission (“SEC”), ASU 2016-13 is effective for annual reporting periods beginning after December 15, 2022, including interim periods within those annual periods. The Company is currently evaluating the impact of adoption of ASU 2016-13 on its consolidated financial statements and related footnote disclosures.
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Summary of Significant Accounting Policies (Tables) |
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Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of property and equipment | See discussion below under "Capitalized Internal Use Software Costs" for more information.
Property and equipment consisted of the following (in thousands):
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Schedule of fair value measurements by level | The following tables summarize fair value measurements by level at December 31, 2020 and 2019, respectively, for assets and liabilities measured at fair value on a recurring basis (in thousands):
_______________ (1) $0.4 million was included in "Restricted cash - long-term" on our consolidated balance sheets as of December 31, 2020 and 2019. (2) Contingent consideration was included in "Other accrued liabilities" on our consolidated balance sheet as of December 31, 2020. (3) See Note 9 below under "Stock Options and Warrants – Non-employees" for more information about warrants.
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Schedule of fair value measurements using significant Level III inputs | The fair value measurements using significant Level III inputs, and changes therein, for the years ended December 31, 2020 and 2019 were as follows (in thousands):
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Schedule of VIEs | The Company's consolidated balance sheets included the following assets and liabilities from its VIEs (in thousands):
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Schedule of warranty liability assumptions | The assumptions used in the Black-Scholes option-pricing model were determined as follows:
The assumptions used in the Black-Scholes option-pricing model remain unchanged and are determined as follows:
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Restricted Cash (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash and Cash Equivalents [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of cash and cash equivalents | The following table provides a reconciliation of cash, cash equivalents and restricted cash total as presented in the consolidated statement of cash flows for the years ended December 31, 2020 and 2019 (in thousands):
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Property and Equipment (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of property and equipment | See discussion below under "Capitalized Internal Use Software Costs" for more information.
Property and equipment consisted of the following (in thousands):
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Goodwill and Intangible Assets (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of goodwill | Goodwill The carrying amount of indefinite-lived goodwill was as follows (in thousands):
The $5.7 million of goodwill related to the acquisition of LifeDojo is not deductible for tax purposes.
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Schedule of the useful life of internal use software | The following table sets forth amounts recorded for intangible assets subject to amortization (in thousands):
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Schedule of intangible assets' estimated future amortization expense | At December 31, 2020, estimated amortization expense for intangible assets for each of the five years thereafter was as follows (in thousands):
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Common Stock and Preferred Stock (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of basic and diluted net loss per share | Basic and diluted net loss per common share were as follows (in thousands, except per share amounts):
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Schedule of shares excluded from calculation of diluted earnings per share | The following common equivalent shares issuable upon the exercise of stock options and warrants have been excluded from the calculation of diluted earnings per common share as their effect was anti-dilutive:
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Debt (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of debt valuation assumptions | The assumptions used in the Black-Scholes option-pricing model were determined as follows:
The assumptions used in the Black-Scholes option-pricing model remain unchanged and are determined as follows:
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Schedule of carrying amounts of debt | The net carrying amounts of the liability components consisted of the following (in thousands):
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Schedule of interest expense recognized | The following table sets forth total interest expense recognized related to the 2024 Notes and 2022 Loan (in thousands):
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Stock Based Compensation (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of assumptions used in the Black-Scholes option-pricing model | The assumptions used in the Black-Scholes option-pricing model were determined as follows:
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Schedule of stock option activity | A summary of stock option activity for employee and director grants was as follows:
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Schedule of restricted stock units activity | The following table summarizes our RSU award activity during the year ended December 31, 2020 issued under the 2017 Plan:
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Schedule of warrant issued to non-employees | A summary of warrants activity for non-employees was as follows:
_______________________ (1) Included in total number of warrants exercised are 12,936 shares that were net settled at the election of the warrant holders during the year ended December 31, 2020.
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Schedule of performance based and market based issuances |
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Leases (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of quantitative information for operating leases | Quantitative information for our leases was as follows (in thousands):
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Schedule of maturities of the operating lease liabilities | The following table sets forth maturities of our lease liabilities (in thousands):
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Income Taxes (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Income Tax Benefit | The components of our income tax benefit consisted of the following (in thousands):
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Schedule net deferred tax assets and liabilities | Net deferred tax assets and liabilities were as follows (in thousands):
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Schedule of reconciliation between the statutory federal income tax rate and the effective income tax rate | A reconciliation between the statutory federal income tax rate and the effective income tax rate for the years presented was as follows:
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Organization (Details) |
Dec. 31, 2020
state
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Enrolled members benefited from products, more than (in percentage) | 50.00% |
Number of states in which products are available | 30 |
Summary of Significant Accounting Policies - Useful Life of Property & Equipment (Details) |
12 Months Ended |
---|---|
Dec. 31, 2020 | |
Software | |
Property, Plant and Equipment [Line Items] | |
Property & equipment, useful life | 3 years |
Computers and equipment | Minimum | |
Property, Plant and Equipment [Line Items] | |
Property & equipment, useful life | 3 years |
Computers and equipment | Maximum | |
Property, Plant and Equipment [Line Items] | |
Property & equipment, useful life | 7 years |
Right of use assets - finance leases | |
Property, Plant and Equipment [Line Items] | |
Property & equipment, useful life | 3 years |
Leasehold improvements | |
Property, Plant and Equipment [Line Items] | |
Property & equipment, useful life | 5 years |
Summary of Significant Accounting Policies - Summary of Amounts and Classification of Assets and Liabilities of the VIE in Our Consolidated Balance Sheets (Details) - USD ($) $ in Thousands |
Dec. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Variable Interest Entity [Line Items] | ||
Cash and cash equivalents | $ 86,907 | $ 13,610 |
Prepaid expenses and other current assets | 4,144 | 733 |
Total assets | 144,701 | 23,855 |
Accounts payable | 1,287 | 1,385 |
Deferred revenue | 20,954 | 5,803 |
Total liabilities | 83,950 | 47,764 |
Variable Interest Entity, Primary Beneficiary | ||
Variable Interest Entity [Line Items] | ||
Cash and cash equivalents | 1,206 | 379 |
Accounts receivable | 0 | 564 |
Unbilled accounts receivable | 272 | 0 |
Prepaid expenses and other current assets | 46 | 26 |
Total assets | 1,524 | 969 |
Accounts payable | 9 | 9 |
Accrued liabilities | 234 | 100 |
Deferred revenue | 76 | 73 |
Payables to Ontrak | 1,695 | 685 |
Total liabilities | $ 2,014 | $ 867 |
Restricted Cash - Summary of Restricted Cash (Details) - USD ($) $ in Thousands |
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
---|---|---|---|
Cash and Cash Equivalents [Abstract] | |||
Cash and cash equivalents | $ 86,907 | $ 13,610 | |
Restricted cash - current | 9,127 | 0 | |
Restricted cash - long term | 7,176 | 408 | |
Cash, cash equivalents and restricted cash | $ 103,210 | $ 14,018 | $ 3,570 |
Restricted Cash - Narrative (Details) $ in Thousands |
Dec. 31, 2020
USD ($)
payment
|
Dec. 31, 2019
USD ($)
|
---|---|---|
Cash and Cash Equivalents [Abstract] | ||
Number of dividends payments | payment | 7 | |
Restricted Cash and Cash Equivalents Items [Line Items] | ||
Restricted cash - current | $ 9,127 | $ 0 |
Restricted cash - long term | 7,176 | 408 |
Restricted Due to Future Dividend Payments | ||
Restricted Cash and Cash Equivalents Items [Line Items] | ||
Restricted cash | 15,700 | |
Restricted cash - current | 9,000 | |
Restricted cash - long term | 6,700 | |
Restricted Related to Letter Of Credit | ||
Restricted Cash and Cash Equivalents Items [Line Items] | ||
Restricted cash - long term | 400 | $ 400 |
Restricted Under 2024 Note | ||
Restricted Cash and Cash Equivalents Items [Line Items] | ||
Restricted cash - long term | $ 50 |
Property and Equipment - Schedule of Property and Equipment (Details) - USD ($) $ in Thousands |
Dec. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 4,290 | $ 2,086 |
Less: Accumulated depreciation and amortization | 2,017 | 1,558 |
Property and equipment, net | 2,273 | 528 |
Software | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 2,441 | 1,247 |
Computers and equipment | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 893 | 461 |
Right of use assets - finance leases | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 934 | 378 |
Leasehold improvements | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 17 | 0 |
Software development in progress | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 5 | $ 0 |
Property and Equipment - Narrative (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Property, Plant and Equipment [Abstract] | ||
Capitalized internal use software costs | $ 1,100,000 | $ 0 |
Amortization expense related to capitalized internal use software costs | $ 200,000 | $ 0 |
Goodwill and Intangible Assets - Schedule of Goodwill (Details) $ in Thousands |
12 Months Ended |
---|---|
Dec. 31, 2020
USD ($)
| |
Goodwill [Roll Forward] | |
Goodwill, beginning balance | $ 0 |
Acquisition of LifeDojo | 5,727 |
Goodwill, ending balance | $ 5,727 |
Goodwill and Intangible Assets - Schedule of Finite-Lived Intangible Assets (Details) $ in Thousands |
12 Months Ended |
---|---|
Dec. 31, 2020
USD ($)
| |
Finite-Lived Intangible Assets [Line Items] | |
Gross Value | $ 3,770 |
Accumulated Amortization | (209) |
Total | $ 3,561 |
Acquired software technology | |
Finite-Lived Intangible Assets [Line Items] | |
Weighted Average Estimated Useful Life (years) | 3 years |
Gross Value | $ 3,500 |
Accumulated Amortization | (194) |
Total | $ 3,306 |
Customer relationships | |
Finite-Lived Intangible Assets [Line Items] | |
Weighted Average Estimated Useful Life (years) | 5 years |
Gross Value | $ 270 |
Accumulated Amortization | (15) |
Total | $ 255 |
Goodwill and Intangible Assets - Narrative (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Acquisition of LifeDojo | $ 5,727,000 | |
Intangible assets, net | 3,561,000 | $ 0 |
Amortization of intangible assets | $ 200,000 | $ 0 |
Goodwill and Intangible Assets - Intangible Assets' Estimated Future Amortization (Details) $ in Thousands |
Dec. 31, 2020
USD ($)
|
---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | |
2021 | $ 1,215 |
2022 | 1,221 |
2023 | 1,026 |
2024 | 54 |
2025 | 45 |
Total | $ 3,561 |
Common Stock and Preferred Stock - Earnings per share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Earnings Per Share [Abstract] | ||
Net loss | $ (22,710) | $ (25,659) |
Dividends on preferred stock - declared and undeclared | (1,987) | 0 |
Net loss attributable to common stockholders | $ (24,697) | $ (25,659) |
Weighted-average shares of common stock outstanding (in shares) | 17,112 | 16,418 |
Net loss per common share, basic and diluted (in dollars per share) | $ (1.44) | $ (1.56) |
Common Stock and Preferred Stock - Antidilutive shares (Details) - shares |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total shares excluded from net loss per share (in shares) | 5,082,241 | 5,557,326 |
Warrants to purchase common stock | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total shares excluded from net loss per share (in shares) | 1,465,927 | 1,550,975 |
Options to purchase | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total shares excluded from net loss per share (in shares) | 3,616,314 | 4,006,351 |
Debt - Valuation Assumptions (Details) |
Dec. 31, 2020 |
---|---|
Volatility | |
Debt Instrument [Line Items] | |
Equity component valuation input | 0.9801 |
Risk-free interest rate | |
Debt Instrument [Line Items] | |
Equity component valuation input | 0.0158 |
Weighted average expected life (in years) | |
Debt Instrument [Line Items] | |
Equity component valuation input | 7 |
Dividend yield | |
Debt Instrument [Line Items] | |
Equity component valuation input | 0 |
Debt - Net Carrying Amounts (Details) - USD ($) $ in Thousands |
Dec. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Debt Disclosure [Abstract] | ||
Principal | $ 50,001 | $ 36,502 |
Less: debt discount | (4,282) | (4,905) |
Net carrying amount | $ 45,719 | $ 31,597 |
Debt - Interest Expense (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Debt Disclosure [Abstract] | ||
Contractual interest expense | $ 6,429 | $ 2,653 |
Accretion of debt discount | 750 | 394 |
Total | $ 7,179 | $ 3,047 |
Stock Based Compensation - Assumptions Used in the Black-Scholes Option Pricing Model (Details) |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Volatility | 78.00% | 100.34% |
Risk free interest rate, minimum | 0.00% | 1.63% |
Risk free interest rate, maximum | 1.55% | 2.60% |
Dividend yield | 0.00% | 0.00% |
Minimum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected life (in years) | 2 years 7 months 17 days | 2 years 10 months 6 days |
Maximum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected life (in years) | 6 years 29 days | 6 years 29 days |
Stock Based Compensation - Restricted Stock Units Activity (Details) - Restricted Stock Units (RSUs) |
12 Months Ended |
---|---|
Dec. 31, 2020
$ / shares
shares
| |
Restricted Stock Units | |
Restricted stock units, non-vested ending balance (in shares) | 30,000 |
Employees | |
Restricted Stock Units | |
Restricted stock units, non-vested beginning balance (in shares) | 0 |
Restricted stock units, granted (in shares) | 30,000 |
Restricted stock units, non-vested ending balance (in shares) | 30,000 |
Weighted- Average Grant Date Fair Value | |
Weighted-average grant date fair value, non-vested, beginning balance (in dollars per share) | $ / shares | $ 0 |
Weighted-average grant date far value, granted (in dollars per share) | $ / shares | 51.98 |
Weighted-average grant date fair value, non-vested, ending balance (in dollars per share) | $ / shares | $ 51.98 |
Stock-Based Compensation - Warrants Granted to Non-employees for Services Outstanding (Details) - Nonemployees |
12 Months Ended |
---|---|
Dec. 31, 2020
$ / shares
shares
| |
Class Of Warrant Or Right, Outstanding [Roll Forward] | |
Warrants outstanding, beginning balance (in shares) | 1,550,975 |
Warrants exercised (in shares) | (85,048) |
Warrants outstanding, ending balance (in shares) | 1,465,927 |
Exercisable (in shares) | 1,465,927 |
Class of Warrant Or Right, Weighted-Average Exercise Price [Roll Forward] | |
Warrants outstanding, exercise price, beginning balance (in dollars per share) | $ / shares | $ 6.08 |
Exercised (in dollars per share) | $ / shares | 7.14 |
Warrants outstanding, exercise price, ending balance (in dollars per share) | $ / shares | 6.02 |
Exercisable (in dollars per share) | $ / shares | $ 6.02 |
Number of warrants exercised at the election of warrant holders (in shares) | 12,936 |
Stock Based Compensation - Performance-based and Market-based Awards (Details) - Market Based Options - $ / shares |
1 Months Ended | |
---|---|---|
Aug. 31, 2018 |
Dec. 31, 2017 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Common Stock, share price (in dollars per share) | $ 15.00 | $ 15.00 |
Fully Vest On January 1, 2023 | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Stock options granted (in shares) | 397,693 | 642,307 |
Stock options granted (in dollars per share) | $ 7.50 | $ 7.50 |
Leases - Narrative (Details) $ in Millions |
1 Months Ended | |
---|---|---|
Jul. 31, 2019
USD ($)
ft²
|
Dec. 31, 2020 |
|
Leases [Abstract] | ||
Area of real estate property (in sq. ft) | ft² | 7,869 | |
Operating lease, term | 60 months | |
Base annual rent | $ | $ 0.6 | |
Finance lease, term | 36 months |
Leases - Condensed Consolidated Balance Sheets (Details) - USD ($) $ in Thousands |
Dec. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Leases [Abstract] | ||
Operating lease asset | $ 1,959 | $ 2,415 |
Finance lease assets | $ 721 | 378 |
Finance Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List] | us-gaap:PropertyPlantAndEquipmentAndFinanceLeaseRightOfUseAssetAfterAccumulatedDepreciationAndAmortization | |
Total lease assets | $ 2,680 | 2,793 |
Current operating lease liabilities | 434 | 374 |
Current finance lease liabilities | $ 321 | 145 |
Finance Lease, Liability, Current, Statement of Financial Position [Extensible List] | us-gaap:OtherAccruedLiabilitiesCurrent | |
Non-current operating lease liabilities | $ 1,403 | 1,836 |
Non-current finance lease liabilities | 418 | 233 |
Total lease liabilities | $ 2,576 | $ 2,588 |
Leases - Condensed Consolidated Statement of Operations (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Leases [Abstract] | ||
Operating lease expense | $ 663 | $ 443 |
Short-term lease rent expense | 104 | 58 |
Variable lease expense | 37 | 73 |
Total rent expense | 804 | 574 |
Amortization of leased assets | 209 | 38 |
Interest on lease liabilities | 31 | 5 |
Total | $ 240 | $ 43 |
Leases - Condensed Consolidated Statement of Cash Flows (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Leases [Abstract] | ||
Operating cash flows from operating lease | $ 580 | $ 381 |
Financing cash flows from finance leases | $ 186 | $ 48 |
Leases - Other Information (Details) |
Dec. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Leases [Abstract] | ||
Weighted-average remaining lease term, operating lease | 3 years 9 months 18 days | 4 years 6 months |
Weighted-average remaining lease term, finance lease | 2 years 4 months 24 days | 2 years 10 months 24 days |
Weighted-average discount rate, operating lease (in percentage) | 10.15% | 10.15% |
Weighted-average discount rate, finance lease (in percentage) | 10.88% | 7.89% |
Leases - Maturities of Operating Lease Liabilities (Details) - USD ($) $ in Thousands |
Dec. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Operating Lease | ||
2021 | $ 601 | |
2022 | 622 | |
2023 | 643 | |
2024 | 332 | |
Total lease payments | 2,198 | |
Less: imputed interest | (361) | |
Present value of lease liabilities | 1,837 | |
Less: current portion | (434) | $ (374) |
Lease liabilities, non-current | 1,403 | 1,836 |
Financing Leases | ||
2021 | 363 | |
2022 | 302 | |
2023 | 139 | |
2024 | 0 | |
Total lease payments | 804 | |
Less: imputed interest | (65) | |
Present value of lease liabilities | 739 | |
Less: current portion | (321) | (145) |
Long-term finance lease liabilities | 418 | 233 |
Total | ||
2021 | 964 | |
2022 | 924 | |
2023 | 782 | |
2024 | 332 | |
Total lease payments | 3,002 | |
Less: imputed interest | (426) | |
Total lease liabilities | 2,576 | $ 2,588 |
Less: current portion | (755) | |
Lease liabilities, non-current | $ 1,821 |
Income Taxes - Schedule of Income Tax Benefit (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Current: | ||
State | $ 9 | $ 0 |
Total current taxes | 9 | 0 |
Deferred: | ||
Federal | (540) | 0 |
State | (114) | 0 |
Deferred taxes | (654) | 0 |
Income tax benefit | $ (645) | $ 0 |
Income Taxes - Narrative (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Income Taxes [Line Items] | ||
Valuation allowance | $ 38,562,000 | $ 70,127,000 |
Change in valuation allowance | (31,600,000) | 6,000,000.0 |
Interest and penalties | 0 | $ 0 |
Domestic Tax Authority | ||
Income Taxes [Line Items] | ||
Operating loss carryforwards | 295,000,000 | |
Net operating losses to expire unutilized | 151,000,000 | |
State and Local Jurisdiction | ||
Income Taxes [Line Items] | ||
Operating loss carryforwards | 159,000,000 | |
Net operating losses to expire unutilized | $ 90,000,000 |
Income Taxes - Primary Components of Net Deferred Tax Assets (Details) - USD ($) $ in Thousands |
Dec. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Income Tax Disclosure [Abstract] | ||
Net operating losses | $ 34,593 | $ 66,405 |
Stock-based compensation | 1,888 | 1,648 |
Interest expense | 3,253 | 1,494 |
Accrued liabilities and reserves | 322 | 744 |
Fixed assets | (864) | |
Fixed assets | 51 | |
Lease liability | 655 | 658 |
Other temporary differences | 200 | 23 |
Deferred commission | (612) | 0 |
Prepaid expenses | (192) | (186) |
Right-of-use assets | (681) | (710) |
Valuation allowance | (38,562) | (70,127) |
Net deferred tax asset | $ 0 | $ 0 |
Income Taxes - Reconciliation Between the Statutory Federal Income Tax Rate and the Effective Income Tax Rate (Details) |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Income Tax Disclosure [Abstract] | ||
Tax at federal statutory rate | 21.00% | 21.00% |
Stock-based compensation | 1.90% | (1.20%) |
Section 162(m) | (0.042) | 0 |
Change in federal valuation allowance | 121.00% | (19.60%) |
Reduction in federal NOL carryforward DTA due to 382 study results | (135.60%) | 0.00% |
Other | (1.30%) | (0.20%) |
Effective tax rate | 2.80% | 0.00% |
Related Party Transactions - Narrative (Details) - USD ($) $ in Millions |
Dec. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Travel and Expenses | Chief Executive Officer | ||
Related Party Transaction [Line Items] | ||
Accounts payable to related party | $ 0.2 | $ 0.4 |
Subsequent Event (Details) - Largest Customer - member |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Feb. 26, 2021 |
|
Subsequent Event | ||
Subsequent Event [Line Items] | ||
Number of members currently benefiting from program | 8,100 | |
Revenues | Customer Concentration Risk | ||
Subsequent Event [Line Items] | ||
Concentration risk percentage | 58.00% |
3%%