false 0001136174 0001136174 2020-12-14 2020-12-14 0001136174 otrk:CommonStockCustomMember 2020-12-14 2020-12-14 0001136174 otrk:SeriesACumulativePerpetualPreferredStock00001ParValue950CustomMember 2020-12-14 2020-12-14
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):  December 14, 2020
 
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.)
 
 
2120 Colorado Ave.Suite 230
Santa MonicaCA
 
90404
(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.
 
On December 15, 2020, Ontrak, Inc. (the “Company”) terminated an At Market Issuance Sales Agreement (the “Sales Agreement”) with B. Riley Securities, Inc. (“B. Riley”), as sales agent or principal (the “Agent“), pursuant to which the Company previously offered and sold shares (the “Shares”) of the Company’s 9.50% Series A Cumulative Perpetual Preferred Stock ($25.00 liquidation preference per share), $0.0001 par value (the “Series A Preferred Stock”) by means of transactions deemed to be an “at the market offering” (“ATM Offering”), as defined in Rule 415 under the Securities Act of 1933, as amended.
 
The Shares sold in the ATM Offering were issued pursuant to a registration statement on Form S-3 (Registration No. 333-248770) filed with the Securities and Exchange Commission (the “SEC”) on September 14, 2020. In connection with the termination of the Sales Agreement, the Company filed a preliminary prospectus supplement to the prospectus contained in such registration statement to modify the plan of distribution therein to contemplate an underwritten offering of Series A Preferred Stock (the “Underwritten Offering”).
 
As a result of modifications required to the amendment and consent previously received upon entering into the Sales Agreement to contemplate the Underwritten Offering, on December 14, 2020, the Company entered into a further amendment (the "Fifth Amendment") to the Company’s Note Purchase Agreement originally 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”) governing $45.0 million in aggregate principal amount of the Company’s outstanding senior secured notes (the “2024 Notes“). The Fifth Amendment includes changes intended to permit the Company to issue Series A Preferred Stock in the Underwritten Offering and to pay dividends thereon for the first seven dividend periods following issuance, and permits the issuance of up to $25 million of Series A Preferred Stock in acquisitions allowed under the terms of the Note Agreement.
 
The Fifth Amendment is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference. The foregoing description of the terms of the Fifth Amendment is qualified in its entirety by reference to such exhibit.
 
Item 7.01
Regulation FD Disclosure.
 
On December 15, 2020, the Company issued a press release announcing that it had commenced the Underwritten Offering of the Series A Preferred Stock. A copy of that press release is attached as Exhibit 99.1 to this Current Report and incorporated by reference into this Item 7.01.
 
Item 9.01         Financial Statements and Exhibits.
 
(d) Exhibits.
 
Exhibit No.
Description
 
 
10.1
99.1
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:  December 15, 2020
 
By:
/s/ Brandon LaVerne
 
 
 
Brandon LaVerne
 
 
 
Chief Financial Officer
 
 

Exhibit 10.1

 

 

FIFTH AMENDMENT TO NOTE PURCHASE AGREEMENT

 

 

THIS FIFTH AMENDMENT TO NOTE PURCHASE AGREEMENT (this “Fifth Amendment”) is entered into as of December 14, 2020 by and among ONTRAK, INC., a Delaware corporation formerly known as CATASYS, INC. (the “Company”), the Purchaser signatory hereto and GOLDMAN SACHS SPECIALTY LENDING GROUP, L.P., as collateral agent for the Purchasers (in such capacity, the “Collateral Agent”).

 

RECITALS

 

A.      The Company, certain subsidiaries of the Company, the Purchaser and the Collateral Agent are parties to a certain Note Purchase Agreement, dated as of September 24, 2019 (as amended, restated, supplemented or otherwise modified from time to time, the “Note Purchase Agreement”; capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Note Purchase Agreement), pursuant to which the Purchaser has agreed to purchase the Notes issued by Company;

 

B.     The Company has requested an amendment to the Note Purchase Agreement in relation to the Company’s issuance of additional shares of its 9.50% Series A Cumulative Perpetual Preferred Stock (the “Series A Preferred Stock”) and, subject to the terms and conditions hereof, the Purchaser (being the sole Purchaser under the Note Purchase Agreement) executing this Fifth Amendment is willing to do so;

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained, and intending to be legally bound, the parties hereto agree as follows:

 

A. AMENDMENTS

 

1.     Section 1.1 of the Note Purchase Agreement is hereby amended by adding the defined term “Third Amendment”:

 

“‘Third Amendment’ shall mean the Third Amendment to Note Purchase Agreement dated as of September 11, 2020.”

 

“‘Third Amendment Effective Date’ shall mean September 11, 2020.”

 

2.     Section 6.1 of the Note Purchase Agreement is hereby amended by replacing clause (o) thereof in its entirety with the following:

 

“(o)   the issuance of the Series A Preferred Stock in an aggregate amount (taking into account the amount issued as allowed under the Third Amendment) not to exceed $125,000,000, of which up to $25,000,000, if not issued in an “at the market” or underwritten offering, may be used by the Company as consideration for a Permitted Acquisition or otherwise with the Purchaser’s prior written consent.”

 

 

 

B. CONSENTS

 

The Purchaser consents to one-time waiver of the condition in section 6.7(f) of the Note Purchase Agreement so that the Company may provide a one-time loan of $575,000 with a three-month duration to a senior employee of the Company, provided that such loan is made within 30 days from the date hereof.

 

C. CONDITIONS TO EFFECTIVENESS

 

Notwithstanding any other provision of this Fifth Amendment and without affecting in any manner the rights of the Purchaser hereunder, it is understood and agreed that this Fifth Amendment shall not become effective, and the Note Parties shall have no rights under this Fifth Amendment, until the Purchaser shall have received executed counterparts to this Fifth Amendment from the Company and the Purchaser.

 

D. REPRESENTATIONS

 

To induce the Purchaser and the Collateral Agent to enter into this Fifth Amendment, each Note Party hereby represents and warrants to the Purchaser and the Collateral Agent that:

 

1.     Each of the Note Parties and its Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, (b) has all requisite power and authority to own and operate its properties, to carry on its business as now conducted and as proposed to be conducted, to enter into the Note Documents to which it is a party and to carry out the transactions contemplated thereby, and (c) is qualified to do business and in good standing in every jurisdiction where its assets are located and wherever necessary to carry out its business and operations, except in jurisdictions where the failure to be so qualified or in good standing has not had, and could not be reasonably expected to have, a Material Adverse Effect; and

 

2.     The execution, delivery and performance of this Fifth Amendment has been duly authorized by all necessary action on the part of each Note Party that is a party hereto.

 

E. OTHER AGREEMENTS

 

1.     Continuing Effectiveness of Note Documents. As amended hereby, all terms of the Note Purchase Agreement and the other Note Documents shall be and remain in full force and effect and shall constitute the legal, valid, binding and enforceable obligations of the Note Parties party thereto. To the extent any terms and conditions in any of the other Note Documents shall contradict or be in conflict with any terms or conditions of the Note Purchase Agreement, after giving effect to this Fifth Amendment, such terms and conditions are hereby deemed modified and amended accordingly to reflect the terms and conditions of the Note Purchase Agreement as modified and amended hereby. Upon the effectiveness of this Fifth Amendment such terms and conditions are hereby deemed modified and amended accordingly to reflect the terms and conditions of the Note Purchase Agreement as modified and amended hereby.

 

2.     [Reserved].

 

2

 

3.     Acknowledgment of Perfection of Security Interest. Each Note Party hereby acknowledges that, as of the date hereof, the security interests and liens granted to Collateral Agent and the Purchasers under the Note Purchase Agreement and the other Note Documents are in full force and effect, are properly perfected and are enforceable in accordance with the terms of the Note Purchase Agreement and the other Note Documents.

 

4.     Effect of Agreement. Except as set forth expressly herein, all terms of the Note Purchase Agreement, as amended hereby, and the other Note Documents shall be and remain in full force and effect and shall constitute the legal, valid, binding and enforceable obligations of the Note Parties to the Purchasers and Collateral Agent. The execution, delivery and effectiveness of this Fifth Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of the Purchasers under the Note Purchase Agreement, nor constitute a waiver of any provision of the Note Purchase Agreement. This Fifth Amendment shall constitute a Note Document for all purposes of the Note Purchase Agreement.

 

5.     Governing Law. This Fifth Amendment 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.

 

6.     No Novation. This Fifth Amendment is not intended by the parties to be, and shall not be construed to be, a novation of the Note Purchase Agreement and the other Note Documents or an accord and satisfaction in regard thereto.

 

7.     Costs and Expenses. The Note Parties agrees to pay on demand all costs and expenses of Purchaser and Collateral Agent in connection with the preparation, execution and delivery of this Fifth Amendment, including, without limitation, the reasonable fees and out-of-pocket expenses of outside counsel for Purchaser and Collateral Agent with respect thereto.

 

8.     Counterparts. This Fifth Amendment may be executed by one or more of the parties hereto in any number of separate counterparts, each of which shall be deemed an original and all of which, taken together, shall be deemed to constitute one and the same instrument. Delivery of an executed counterpart of this Fifth Amendment by facsimile transmission, electronic transmission (including delivery of an executed counterpart in .pdf format) shall be as effective as delivery of a manually executed counterpart hereof.

 

9.     Binding Nature. This Fifth Amendment shall be binding upon and inure to the benefit of the parties hereto, their respective successors, successors-in-titles, and assigns. No third party beneficiaries are intended in connection with this Fifth Amendment.

 

10.     Entire Understanding. This Fifth Amendment sets forth the entire understanding of the parties with respect to the matters set forth herein, and shall supersede any prior negotiations or agreements, whether written or oral, with respect thereto.

 

3

 

11.     Release. (a) Each Note Party hereby releases, acquits, and forever discharges Collateral Agent and each of the Purchasers, and each and every past and present subsidiary, affiliate, stockholder, officer, director, agent, servant, employee, representative, and attorney of Collateral Agent and the Purchasers (each a “Releasee”), from any and all claims, causes of action, suits, debts, liens, obligations, liabilities, demands, losses, costs and expenses (including attorneys' fees) of any kind, character, or nature whatsoever, known or unknown, fixed or contingent, which such Note Party may have or claim to have now or which may hereafter arise out of or connected with any act of commission or omission of Releasee existing or occurring on or prior to the date of this Fifth Amendment or any instrument executed on or prior to the date of this Fifth Amendment including, without limitation, any claims, liabilities or obligations arising with respect to the Note Purchase Agreement or the other of the Note Documents. The provisions of this paragraph shall be binding upon each Note Party and shall inure to the benefit of Releasees, and their respective heirs, executors, administrators, successors and assigns, and the other released parties set forth herein. No Note Party is aware of any claim or offset against, or defense or counterclaim to, any Note Party’s obligations or liabilities under the Note Purchase Agreement or any other Note Document. The provisions of this Section shall survive payment in full of the Obligations, full performance of the terms of this Fifth Amendment and the Note Documents, and/or Collateral Agent’s or each Purchaser’s actions to exercise any remedy available under the Note Documents or otherwise. Each Note Party warrants and represents that such Note Party is the sole and lawful owner of all right, title and interest in and to all of the claims released hereby and each Note Party has not heretofore voluntarily, by operation of law or otherwise, assigned or transferred or purported to assign or transfer to any person any such claim or any portion thereof.

 

[remainder of page intentionally left blank]

 

4

 

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

 

 

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

 

 

 

 

 

 

 

 

 

 

By:

/s/ Brandon LaVerne

 

 

Name: Brandon LaVerne

 

 

Title: Chief Financial Officer

 

 

 

[Signature Page to Fifth Amendment to Note Purchase Agreement]

 

 

 

 

GOLDMAN SACHS SPECIALTY LENDING GROUP,

L.P. as Purchaser

 

 

 

 

 

 

 

 

 

 

By:

/s/ Greg Watts

 

 

Name: Greg Watts

 

 

Title: Senior Vice President

 

 

 

 

 

GOLDMAN SACHS SPECIALTY LENDING GROUP,

L.P. as Collateral Agent

 

 

 

 

 

 

 

 

 

 

By:

/s/ Greg Watts

 

 

Name: Greg Watts

 

 

Title: Senior Vice President

 

 

 

[Signature Page to Fifth Amendment to Note Purchase Agreement]

 

 

Exhibit 99.1

 

 

EX_217587IMG001.GIF

News Release

 

For Immediate Release

 

 

Ontrak Announces Follow-On Offering of Non-Convertible Perpetual Preferred Stock
Company to use non-dilutive capital for working capital,

M&A, investment in technology

 

 

Santa Monica, CA – December 15, 2020 – Ontrak, Inc. (NASDAQ: OTRK, OTRKP) (“Ontrak” or the “Company”), a leading AI-powered and telehealth enabled, virtualized healthcare company, today announced that it has commenced an underwritten public offering of shares of its Series A Cumulative Perpetual Preferred Stock (the “Series A Preferred Stock”) with a liquidation preference of $25.00 per share. B. Riley Securities, Ladenburg Thalmann and William Blair are acting as book-running managers for the offering. Aegis Capital Corp., The Benchmark Company, Incapital and Kingswood Capital Markets, division of Benchmark Investments, Inc., are acting as co-managers. The Company expects to grant the underwriters a 30-day option to purchase up to an additional 15% of the shares of Series A Preferred Stock initially sold to the public. The Series A Preferred Stock is listed on the Nasdaq Global Market under the symbol “OTRKP.”

 

The Company intends to use a portion of the net proceeds of the offering to fund a segregated dividend account for the payment of dividends on the Series A Preferred Stock through August 2022 and to use the remaining net proceeds for general corporate purposes, which may include working capital, M&A, and investments in technology.

 

The offering of the Series A Preferred Stock will be made under the Company’s existing effective shelf registration statement (File No. 333-248770), which was filed with the Securities and Exchange Commission (“SEC”). The offering will be made only by means of a prospectus supplement and prospectus, which will be filed with the SEC. Before you invest, you should read the applicable prospectus supplement and prospectus for more complete information about the Company and the offering. You may obtain these documents free of charge by visiting the SEC website at www.sec.gov. Alternatively, you may obtain copies, when available, by contacting B. Riley Securities, Inc. at 299 Park Avenue, New York, New York 10171, by telephone at (703) 312-9580 or by email at prospectuses@brileyfin.com.

 

This press release shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of any securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

 

About Ontrak, Inc.

 

Ontrak, Inc. (f/k/a Catasys, Inc.) is a leading 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 predicts people whose chronic disease will improve with behavior change, recommends effective care pathways that people are willing to follow, and engages people who aren’t getting the care they need. By combining predictive analytics with human engagement, Ontrak delivers improved member health and validated outcomes and savings to healthcare payers.

 

The company’s integrated, technology-enabled Ontrak™ 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, COPD, 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 improve member health and deliver validated cost savings to healthcare payers of more than 50 percent for enrolled members. Ontrak solutions are available to members of leading national and regional health plans in 30 states and in Washington, D.C.

 

 

 

Learn more at www.ontrak-inc.com

 

Forward-Looking Statements

 

Except for statements of historical fact, the matters discussed in this press release are forward-looking and made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect numerous assumptions and involve a variety of risks and uncertainties, many of which are beyond our control, which may cause actual results to differ materially from stated expectations. These risk factors include, among others, the impact of the ongoing COVID 19 pandemic, changes in regulations or issuance of new regulations or interpretations, limited operating history, our inability to execute our business plan, increase our revenue and achieve profitability, lower than anticipated eligible members under our contracts, our inability to recognize revenue, lack of outcomes and statistically significant formal research studies, difficulty enrolling new members and maintaining existing members in our programs, the risk that treatment programs might not be effective, difficulty in developing, exploiting and protecting proprietary technologies, intense competition and substantial regulation in the health care industry, the risks associated with the adequacy of our existing cash resources and our ability to continue as a going concern, our ability to raise additional capital when needed and our liquidity. You are urged to consider statements that include the words "may," "will," "would," "could," "should," "believes," "estimates," "projects," "potential," "expects," "plan," "anticipates," "intends," "continues," "forecast," "designed," "goal," or the negative of those words or other comparable words to be uncertain and forward-looking. For a further list and description of the risks and uncertainties we face, please refer to our most recent Securities and Exchange Commission filings which are available on its website at http://www.sec.gov. Such forward-looking statements are current only as of the date they are made, and we assume no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

 

 

 

Contact

 

For Investors:

 

Caroline Paul

Gilmartin Group

investors@ontrak-inc.com