8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  July 15, 2022

Ontrak, Inc.

(Exact name of registrant as specified in its charter)

Delaware	001-31932	88-0464853
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

2200 Paseo Verde Parkway, Suite 280, Henderson, NV 89052

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code   (310) 444-4300

(Former name or former address, if changed since last report.)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value	OTRK	The NASDAQ Global Market
9.50% Series A Cumulative Perpetual Preferred Stock, $0.0001 par value	OTRKP	The NASDAQ Global Market

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):

☐   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Item 1.01 Entry into a Material Definitive Agreement.

The information set forth below under Item 2.03 with respect to the Keep Well Note (a defined below) and the letter agreement described therein is hereby incorporated by reference into this Item 1.01.

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

As previously reported, on April 15, 2022, Ontrak, Inc. (the “Company”) entered into a Master Note Purchase Agreement (the “Keep Well Agreement”) with Acuitas Capital LLC (“Acuitas”), an entity indirectly wholly owned and controlled by Terren S. Peizer, the Company’s Executive Chairman and largest stockholder, pursuant to which, subject to specified conditions, the Company may borrow up to $25.0 million from time to time.

On July 15, 2022, the Company borrowed $5.0 million under the Keep Well Agreement and applied the proceeds therefrom to pay off in full all outstanding amounts owed by the Company under that certain Note Purchase Agreement, dated as of September 24, 2019, by and among the Company, as issuer, certain of its subsidiaries, as guarantors, the purchasers party thereto from time to time, and Goldman Sachs Specialty Lending Group, L.P., as collateral agent (as amended, the “Note Purchase Agreement”). All obligations owing by the Company and the other Note Parties (as defined in the Note Purchase Agreement) under the Note Purchase Agreement were released, discharged and satisfied in full, the Note Purchase Agreement and all other Note Documents (as defined in the Note Purchase Agreement) were terminated (other than those provisions therein that expressly survive termination), and all liens securing the Company’s obligations under the Note Purchase Agreement were released.

In connection with the borrowing under the Keep Well Agreement, the Company issued to Acuitas a senior secured note in the principal amount of $5.0 million (the “Keep Well Note”), a form of which was filed as Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 11, 2022. The Keep Well Note will accrue interest based on the Term SOFR Reference Rate for a 30 day tenor plus a corresponding applicable margin for each interest period (the interest rate for the initial interest period is 17.7%). The Keep Well Note will be due on September 1, 2023, subject to acceleration for certain customary events of default, including for failure to make payments when due, breaches by the Company of certain covenants and representations in the Keep Well Agreement, defaults by the Company under other agreements related to indebtedness, the Company’s bankruptcy or dissolution, and a change of control of the Company. The Company’s obligations under the Keep Well Agreement will be secured by a first priority lien on substantially all of the present and future property and assets of the Company and certain of its subsidiaries, subject to customary exceptions and exclusions.

In accordance with the terms of the Keep Well Agreement, as a result of the borrowing under the Keep Well Agreement, subject to obtaining approval of the Company’s stockholders as required by applicable Nasdaq listing rules, (a) the final 25% of the 739,645 shares of the Company’s common stock (the “Commitment Shares”) that the Company agreed to issue to Acuitas in connection with entering into the Keep Well Agreement will be issued upon obtaining such stockholder approval, and (b) the Company will issue to Acuitas a warrant to purchase 591,716 shares of the Company’s common stock upon obtaining such stockholder approval. The Company agreed to seek such stockholder approval on or on or before September 9, 2022, and the other 75% of the Commitment Shares will also be issued upon obtaining stockholder approval. The warrant issuable to Acuitas will have a term of five years and an exercise price equal to $1.69, which was the consolidated closing bid price of the Company’s common stock as reported by Nasdaq immediately preceding the time the parties entered into the Keep Well Agreement, and will be in the form attached as Appendix B to the Keep Well Agreement, which was filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 11, 2022.

In connection with the Company’s borrowing under the Keep Well Agreement, the Company and Acuitas entered into a letter agreement pursuant to which, among other things, Acuitas waived, subject to the terms and conditions therein (a) the condition in the Keep Well Agreement that the Company shall have unrestricted cash and cash equivalents of greater than $5.0 million as of the date of issuance of any senior secured note pursuant to the Keep Well Agreement and after giving pro forma effect to the purchase of such note by Acuitas, and (b) any violation, through and including August 15, 2022, of the covenant in the Keep Well Agreement that the Company shall have unrestricted cash and cash equivalents of greater than $5.0 million at all times. The foregoing description of the letter agreement does not purport to be complete and is subject to and qualified in its entirety by reference to the complete text of the letter agreement, a copy of which is filed as an exhibit to this report, which is incorporated by reference herein.

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Item 9.01. Financial Statements and Exhibits

(d) Exhibits.

Exhibit No.	Description
10.1	Letter Agreement dated July 15, 2022, between Ontrak, Inc. and Acuitas Capital LLC
104	Cover Page Interactive Data File (formatted as Inline XBRL)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Ontrak, Inc.
Date: July 21, 2022	By:	/s/ James J. Park
	Name:	James J. Park
	Title:	Chief Financial Officer

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EX-10.1

EXHIBIT 10.1

July 15, 2022

Ontrak, Inc.

2200 Paseo Verde Parkway, Suite 280

Henderson, NV 89052

Attention: Brandon LaVerne

Email: blaverne@ontrakhealth.com

RE: Waiver of Certain Conditions

Ladies and Gentlemen:

Reference is made to that certain Master Note Purchase Agreement dated as of April 15, 2022 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Note Purchase Agreement”) entered into by and among ONTRAK, INC., a Delaware corporation (the “Company”), as issuer, certain of its Subsidiaries, as Guarantors, ACUITAS CAPITAL LLC, a Delaware limited liability company, as initial purchaser (“Purchaser”), and the Collateral Agent. Capitalized terms used but not defined in this letter agreement (this “Waiver”) shall have the meanings given them in the Note Purchase Agreement. All section references herein are to sections of the Note Purchase Agreement.

Background

The Company delivered to Purchaser a Funding Notice on July 14, 2022 pursuant to which the Company agreed to issue and to sell to Purchaser a Note in a principal amount of $5,000,000 (the “InitialNote”). In connection with the foregoing, the Company requested that Purchaser waive compliance with (a) certain conditions required to be satisfied in connection with the purchase and sale of the Initial Note, and (b) the covenant in Section 6.8(b) through and including August 15, 2022.

Waiver

Subject to the terms and conditions herein, Purchaser (being the sole Purchaser under the Note Purchase Agreement) and the Company hereby agree:

(i)Purchaser shall waive the condition in Section 2.1(b) that the Company provide not less than ten Business Days advance written notice to Purchaser and the Company shall be required to provide such written notice to Purchaser in connection with purchase of the Initial Note not less than one Business Day in advance of the date of the proposed purchase of the Initial Note (which the parties acknowledge has been provided);

(ii)With respect to the purchase and sale of any Notes on any Credit Date on or before August 15, 2022 (including the Initial Note), Purchaser shall waive the condition in Section 3.2(a)(v) that, after giving Pro Forma Effect to the purchase of such Notes, the Borrower be in compliance with the requirements of Section 6.8(b) as of the date of issuance of such Notes and after giving Pro Forma Effect to the purchase of such Notes;

(iii)Purchaser shall waive the condition in Section 3.2(a)(xiii) that, at least ten days prior to each Credit Date, the Purchasers shall have received all documentation and other information required by bank regulatory authorities under applicable “know-your-customer” and anti-money laundering rules and regulations, including the PATRIOT Act and the Company agrees to deliver such information to the Purchaser no later the date that is ten days following the Initial Note Date;

(iv)Purchaser shall waive the condition in Section 3.2(a)(xiv) that, at least five days prior to each Credit Date, the Note Parties shall deliver a Beneficial Ownership Certification in relation to such Note Party and the Company agrees to deliver such information to Purchaser no later than the date that is five days following the Initial Note Date; and

(v)Purchaser shall waive any violation of Section 6.8(b) through and including August 15, 2022.

Miscellaneous

As of the date hereof, there is no Collateral Agent under the Note Purchase Agreement.

This Waiver is a discretionary action by Purchaser and, except as expressly set forth herein, does not constitute, and shall not be deemed to be, a waiver of, any Event of Default that may exist or any future failure of any Note Party to fully comply with the Note Purchase Agreement and other Note Documents. In addition, neither this discretionary action by Purchaser nor anything in this Waiver shall directly or indirectly: (i) constitute a Waiver to any future departure under the Note Purchase Agreement or create a course of dealing, (ii) constitute a Waiver to or waiver of any past, present or future Default or Event of Default or other violation of any provisions of the Note Purchase Agreement or any other Note Documents except as expressly set forth herein, (iii) except as expressly set forth herein, amend, modify or operate as a waiver of any provision of the Note Purchase Agreement or any other

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Note Documents or any right, power, privilege or remedy of the Collateral Agent or Purchasers thereunder, or (iv) constitute a course of dealing or other basis for altering any rights or obligations of the Collateral Agent or Purchasers under the Note Documents or any Obligations of the Company or any other Note Party under the Note Purchase Agreement, other Note Documents or any other contract or instrument.

The Note Purchase Agreement and each other Note Document shall continue in full force and effect in accordance with its respective terms and is hereby ratified and confirmed in all respects, and the waivers set forth above are limited solely to the matters expressly stated above and shall not be deemed to be a waiver or amendment of, or a departure from, any other provision of the Note Purchase Agreement.

This Waiver shall be governed by, and construed in accordance with, the internal laws of the State of New York and all applicable federal laws of the United States of America.

This Waiver shall be binding upon and inure to the benefit of the parties hereto, their respective successors, successors-in-titles and assigns.

This Waiver, and the terms and provisions hereof, constitute the entire agreement among the parties hereto pertaining to the subject matter hereof and supersede any and all prior or contemporaneous amendments relating to the subject matter hereof. There are no oral agreements among the parties hereto pertaining to the subject matter hereof.

This Waiver may be executed in any number of counterparts and by different parties hereto in separate counterparts; each counterpart so executed and delivered shall be deemed an original and all of which taken together shall constitute but one and the same instrument. Delivery of an executed counterpart of this Waiver by electronic mail in pdf form shall be as effective as delivery of a manually executed counterpart hereof.

[Signatures follow]

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IN WITNESS WHEREOF, this Waiver has been duly executed as of the date first written above.

ACUITAS CAPITAL LLC, as Purchaser

By:     /s/ Terren S. Peizer                    

Name: Terren S. Peizer

Title: Chairman

ONTRAK, INC., as the Company and as a Note Party

By: __/s/ Brandon LaVerne_________________________

Name: Brandon LaVerne

Title: Co-President and Chief Operating Officer

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XML

Cover	Jul. 15, 2022
Document Information [Line Items]
Document Type	8-K
Document Period End Date	Jul. 15, 2022
Entity Registrant Name	Ontrak, Inc.
Entity Incorporation, State or Country Code	DE
Entity File Number	001-31932
Entity Tax Identification Number	88-0464853
Entity Address, Address Line One	2200 Paseo Verde Parkway
Entity Address, Address Line Two	Suite 280
Entity Address, City or Town	Henderson
Entity Address, State or Province	NV
Entity Address, Postal Zip Code	89052
City Area Code	310
Local Phone Number	444-4300
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Entity Emerging Growth Company	false
Entity Central Index Key	0001136174
Amendment Flag	false
Common Stock
Document Information [Line Items]
Title of 12(b) Security	Common Stock, $0.0001 par value
Trading Symbol	OTRK
Security Exchange Name	NASDAQ
Series A Cumulative Perpetual Preferred Stock
Document Information [Line Items]
Title of 12(b) Security	9.50% Series A Cumulative Perpetual Preferred Stock, $0.0001 par value
Trading Symbol	OTRKP
Security Exchange Name	NASDAQ