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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): September 7, 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 September 7, 2022, the Company borrowed $6.0 million under the Keep Well Agreement and plans to use the proceeds therefrom to fund its working capital needs. In connection with this borrowing, the Company issued to Acuitas a senior secured note in the principal amount of $6.0 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 18.36%). All outstanding borrowings under the Keep Well Agreement are 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 are 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.
The Company's stockholders approved the proposal to approve the issuance of shares of common stock of the Company to Acuitas and the issuance of warrants and shares underlying such warrants to Acuitas pursuant to the Keep Well Agreement at the annual stockholders meeting held on August 29, 2022, as previously reported. In accordance with the terms of the Keep Well Agreement, as a result of the $6.0 million borrowing under the Keep Well Agreement, the Company will issue to Acuitas a warrant to purchase 710,059 shares of the Company’s common stock. 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 on or before September 6, 2022 and after giving pro forma effect to the purchase of such note by Acuitas, and (b) any violation, through and including September 6, 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.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits.
| | | | | | | | |
| Exhibit No. | | Description |
| | |
| 10.1 | | |
| 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: September 9, 2022 | | By: | /s/ James J. Park |
| | Name: | James J. Park |
| | Title: | Chief Financial Officer |
EXHIBIT 10.1
August 26, 2022
Ontrak, Inc.
2200 Paseo Verde Parkway, Suite 280
Henderson, NV 89052
Attention: James Park
Email: jpark@ontrakhealth.com
RE: Waiver of Certain Conditions
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 August 26, 2022 pursuant to which the Company agreed to issue and to sell to Purchaser a Note in a principal amount of $6,000,000 (the “Note”). 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 Note, and (b) the covenant in Section 6.8(b) through and including September 6, 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) With respect to the purchase and sale of any Notes on any Credit Date on or before September 6, 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;
(ii) Purchaser shall waive any violation of Section 6.8(b) through and including September 6, 2022.
Miscellaneous
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 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]
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/ James Park_______________________________
Name: James Park
Title: Chief Financial Officer