Company Performance - Ontrak, Inc. reported a quarterly loss of $0.19 per share, which was worse than the Zacks Consensus Estimate of a loss of $0.10, representing an earnings surprise of -90% [1] - The company posted revenues of $2.45 million for the quarter ended June 2024, missing the Zacks Consensus Estimate by 5.73%, and down from $2.96 million in the same quarter last year [2] - Over the last four quarters, Ontrak has surpassed consensus EPS estimates only once and has not beaten consensus revenue estimates during this period [2] Stock Performance - Ontrak shares have declined approximately 47.5% since the beginning of the year, contrasting with the S&P 500's gain of 9% [3] - The current Zacks Rank for Ontrak is 3 (Hold), indicating that the shares are expected to perform in line with the market in the near future [6] Future Outlook - The consensus EPS estimate for the upcoming quarter is -$0.10 on revenues of $3 million, while for the current fiscal year, it is -$0.40 on revenues of $11.8 million [7] - The outlook for the Medical - Outpatient and Home Healthcare industry, where Ontrak operates, is currently in the top 29% of over 250 Zacks industries, suggesting a favorable environment for stock performance [8]

Financial Performance - Q2 2024 revenue was $2.5 million, a 17% decrease year over year[3] - Revenue for Q2 2024 was $2,451,000, a decrease of 17.2% compared to $2,960,000 in Q2 2023[17] - Gross profit for Q2 2024 was $1,607,000, down 25.4% from $2,156,000 in Q2 2023[17] - Operating loss for Q2 2024 was $(4,047,000), compared to $(4,628,000) in Q2 2023, representing a 12.5% improvement[17] - Adjusted EBITDA for Q2 2024 was $(3.3) million, an 8% decline year over year[5] - Adjusted EBITDA for Q2 2024 was $(3,332,000), compared to $(3,090,000) in Q2 2023, indicating a decline of 7.8%[22] - Net loss attributable to common stockholders for Q2 2024 was $(12,527,000), compared to $(8,994,000) in Q2 2023, an increase of 39.5%[17] - Net loss for the three months ended June 30, 2024, was $10.289 million, compared to a loss of $6.756 million for the same period in 2023, representing an increase of 52.5%[23] - Non-GAAP net loss attributable to common stockholders for the six months ended June 30, 2024, was $12.223 million, down from $18.042 million in the same period of 2023, showing a 32.5% improvement[23] - Net loss per common share for the three months ended June 30, 2024, was $(0.19), compared to $(1.84) for the same period in 2023, indicating a significant reduction in losses[23] - Non-GAAP net loss per common share for the three months ended June 30, 2024, was $(0.09), compared to $(1.66) in the same period of 2023, reflecting a 94.2% improvement[23] Cash and Assets - Cash and restricted cash at the end of Q2 2024 was $7,292,000, down from $10,094,000 at the end of Q2 2023[20] - Total assets increased to $25,275,000 as of June 30, 2024, compared to $19,846,000 at the end of 2023[19] - Total liabilities rose to $9,862,000 as of June 30, 2024, up from $5,575,000 at the end of 2023[19] Membership and Outreach - Total enrolled members in the WholeHealth+ program increased to 1,752 at the end of Q2 2024, up from 1,521 at the end of Q1 2024[6] - The total callable outreach pool for WholeHealth+ was 7,511 at June 30, 2024, compared to 5,057 at March 31, 2024[6] - A new contract with a large northeast regional health plan is expected to double the outreach pool for the WholeHealth+ solution[2] - The company achieved $721 per member per month cost savings for a Medicaid health plan's members through the WholeHealth+ program[6] Technology and Innovation - The company launched the Mental Health Digital Twin technology to provide personalized insights and recommendations[6] - The company adopted the Comprehensive Healthcare Integration framework to enhance its care delivery model[6] Future Projections - The estimated revenue for the quarter ending September 30, 2024, is projected to be between $2.4 million and $2.8 million[7] Expenses and Costs - Research and development expenses for Q2 2024 were $1,026,000, down 33.1% from $1,537,000 in Q2 2023[17] - Stock-based compensation expense for the three months ended June 30, 2024, was $442,000, down from $892,000 in the same period of 2023, showing a decrease of 50.5%[23] - Debt issuance costs expensed related to Demand Notes for the three months ended June 30, 2024, amounted to $3.262 million, with no comparable expense in the same period of 2023[23] - Restructuring, severance, and related costs for the six months ended June 30, 2024, totaled $290,000, compared to $457,000 in the same period of 2023, indicating a reduction in restructuring costs[23] - Gain on termination of operating lease for the six months ended June 30, 2024, was $(471,000), reflecting a loss compared to no gain in the same period of 2023[23]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2024 Commission File Number 001-31932 ____________________________ Ontrak, Inc. (Exact name of registrant as specified in its charter) ____________________________ (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 333 S. E. 2nd Avenu ...

[Ontrak Health Q1 2024 Earnings Release](index=1&type=section&id=Ontrak%20Health%20Q1%202024%20Earnings%20Release) Ontrak Health reports Q1 2024 financial results, operational achievements, and future outlook [Management Commentary](index=1&type=section&id=Management%20Commentary) Management highlights new Medicaid customer approval and strong value proposition with improved patient health and reduced medical costs - Ontrak has been approved by the Florida AHCA as a subcontractor for Community Care Plan, a South Florida-based Health Plan, to serve its adult Medicaid population[3](index=3&type=chunk) - The company reports strong value and ROI metrics, including an **NPS score of 77**, **41%-64% improvement in GAD-7 and PHQ-9 scores**, a **43% reduction in medical costs**, and a **62% reduction in inpatient admissions**[3](index=3&type=chunk) [Financial Performance](index=1&type=section&id=Financial%20Performance) Q1 2024 revenue increased 6% to $2.7 million, with significant improvements in operating and adjusted EBITDA losses [Q1 2024 Financial Highlights](index=1&type=section&id=First%20Quarter%202024%20Financial%20Results%20Highlights) Key financial metrics for Q1 2024 show revenue growth and improved profitability compared to the prior year Q1 2024 Key Financial Metrics vs. Q1 2023 (in millions) | Metric | Q1 2024 | Q1 2023 | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | $2.7 million | $2.5 million | +6% | | Operating Loss | $(4.3) million | $(7.2) million | 41% improvement | | Adjusted EBITDA | $(3.4) million | $(5.4) million | 38% improvement | | Net Loss | $(4.5) million | $(8.4) million | 47% improvement | | Diluted Net Loss per Share | $(0.11) | $(2.26) | 95% improvement | [Financial Outlook](index=2&type=section&id=Financial%20Outlook) The company provides revenue projections for the upcoming second quarter of 2024 - For the second quarter ending June 30, 2024, the company projects revenue to be in the range of **$2.4 million to $2.8 million**[10](index=10&type=chunk) [Operational Highlights & Corporate Developments](index=2&type=section&id=First%20Quarter%202024%20and%20Recent%20Operating%20Highlights) Operational achievements include a new Medicaid customer, expanded outreach pool, and significant financing and partnership developments - Total enrolled members in the WholeHealth+ program were **1,521** at the end of Q1 2024, compared to **1,758** at the end of Q4 2023 and **1,526** at the end of Q1 2023[10](index=10&type=chunk) - The company's effective outreach pool grew significantly to **5,057** at March 31, 2024, from **2,161** at December 31, 2023[10](index=10&type=chunk) - Amended its financing agreement with Acuitas Capital, issuing **$3.0 million** in senior secured convertible promissory notes and securing the option for up to an additional **$12.0 million**[10](index=10&type=chunk) - Expanded its partnership with a major health system customer, increasing the number of eligible members for the Ontrak WholeHealth+ program by **more than 6.5 times**[10](index=10&type=chunk) [Financial Statements](index=5&type=section&id=Financial%20Statements) Consolidated financial statements for Q1 2024 detail net loss, balance sheet positions, and cash flow activities [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) The income statement provides a detailed breakdown of revenues, expenses, and net loss for Q1 2024 Q1 2024 Income Statement Summary (in thousands) | Line Item | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Revenue | $2,680 | $2,529 | | Gross Profit | $1,705 | $1,682 | | Total Operating Expenses | $5,978 | $8,909 | | Operating Loss | $(4,273) | $(7,227) | | Net Loss | $(4,458) | $(8,350) | [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) The balance sheet presents the company's financial position, including assets, liabilities, and equity, as of March 31, 2024 Balance Sheet Summary (in thousands) | Line Item | March 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash | $6,400 | $9,701 | | Total Assets | $26,723 | $19,846 | | Total Liabilities | $5,476 | $5,575 | | Total Stockholders' Equity | $21,247 | $14,271 | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) The cash flow statement details cash movements from operating, investing, and financing activities for Q1 2024 Cash Flow Summary for Q1 2024 (in thousands) | Cash Flow Activity | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(3,259) | $(4,953) | | Net cash used in investing activities | $(37) | $(25) | | Net cash (used in) provided by financing activities | $(5) | $7,339 | | Net change in cash | $(3,301) | $2,361 | [Non-GAAP Financial Measures & Reconciliation](index=4&type=section&id=Non-GAAP%20Financial%20Measures) Non-GAAP measures, including Adjusted EBITDA and Non-GAAP net loss, provide insights into core business performance by excluding specific items [Reconciliation of Operating Loss to EBITDA and Adjusted EBITDA](index=8&type=section&id=Reconciliation%20of%20Operating%20Loss%20to%20EBITDA%20and%20Adjusted%20EBITDA) This section reconciles operating loss to EBITDA and Adjusted EBITDA, highlighting key adjustments for Q1 2024 Reconciliation to Adjusted EBITDA (in thousands) | Line Item | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Operating loss | $(4,273) | $(7,227) | | EBITDA | $(4,014) | $(6,541) | | Adjustments (Stock Comp, Restructuring) | $642 | $1,108 | | **Adjusted EBITDA** | **$(3,372)** | **$(5,433)** | [Reconciliation of Net Loss to Non-GAAP Net Loss](index=8&type=section&id=Reconciliation%20of%20Net%20Loss%20to%20Non-GAAP%20Net%20Loss) This section reconciles net loss to Non-GAAP net loss, including per share data, for Q1 2024 Reconciliation to Non-GAAP Net Loss (in thousands, except per share data) | Line Item | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net loss | $(4,458) | $(8,350) | | Adjustments (Stock Comp, Restructuring, etc.) | $644 | $656 | | **Non-GAAP net loss** | **$(3,714)** | **$(7,694)** | | **Non-GAAP net loss per share** | **$(0.10)** | **$(2.12)** |

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to 240.10D-1(b). ☐ A smaller, high-cost subset of these patients with behavioral health conditions drives the majority of the claims costs for the overall substance dependent population. According to the Milliman research report, the behavioral subgroup patients cons ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 Commission File Number 001-31932 ____________________________ Ontrak, Inc. (Exact name of registrant as specified in its charter) ____________________________ Delaware 88-0464853 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification ...

PART I [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) H1 2023 financials show revenue decline, improved profitability from cost cuts, and weakened equity with debt reliance [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (in thousands) | | June 30, 2023 (unaudited) | December 31, 2022 | | :--- | :--- | :--- | | **Total current assets** | $13,853 | $14,259 | | **Total assets** | $22,610 | $25,757 | | **Total current liabilities** | $9,745 | $9,469 | | **Total liabilities** | $21,854 | $20,080 | | **Total stockholders' equity** | $756 | $5,677 | | **Total liabilities and stockholders' equity** | $22,610 | $25,757 | - Total stockholders' equity decreased significantly from **$5.7 million** at the end of 2022 to **$0.76 million** as of June 30, 2023, primarily due to net losses[8](index=8&type=chunk) [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Statements of Operations Highlights (in thousands, except per share data) | Metric | Q2 2023 | Q2 2022 | Six Months 2023 | Six Months 2022 | | :--- | :--- | :--- | :--- | :--- | | **Revenue** | $2,960 | $3,903 | $5,489 | $9,161 | | **Gross Profit** | $2,156 | $1,697 | $3,838 | $4,109 | | **Operating Loss** | $(4,628) | $(11,910) | $(11,855) | $(25,055) | | **Net Loss** | $(6,756) | $(15,058) | $(15,106) | $(29,703) | | **Net Loss per Share** | $(1.84) | $(4.97) | $(4.09) | $(9.86) | - For Q2 2023, revenue decreased by **24% YoY**, but gross profit increased by **27%** due to a significant reduction in the cost of revenue. The operating loss narrowed substantially from **$11.9 million** in Q2 2022 to **$4.6 million** in Q2 2023[10](index=10&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash Flow Summary for the Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | **Net cash used in operating activities** | $(10,068) | $(14,215) | | **Net cash used in investing activities** | $(123) | $(754) | | **Net cash provided by (used in) financing activities** | $10,572 | $(36,043) | - For the first six months of 2023, cash from financing activities was positive **$10.6 million**, primarily from **$8.0 million** in proceeds from Keep Well Notes. This contrasts with a **$36.0 million** use of cash in the same period of 2022, which was driven by **$31.7 million** in debt repayments[14](index=14&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) - The company has incurred significant net losses and negative operating cash flows since inception. Management states that cash on hand and the **$6.0 million** remaining under the Keep Well Agreement are sufficient to meet obligations for at least the next 12 months[20](index=20&type=chunk)[23](index=23&type=chunk) - Revenue is highly concentrated, with two customers (Customer A and B) accounting for **88.9%** of total revenue in Q2 2023[33](index=33&type=chunk) - In March 2023, the company implemented a headcount reduction, eliminating approximately **19%** of employee positions and incurring **$0.5 million** in termination-related costs[45](index=45&type=chunk) - As of June 30, 2023, the company had total undeclared dividends of **$11.9 million** on its Series A Preferred Stock[53](index=53&type=chunk) - The company is heavily reliant on the Keep Well Agreement with Acuitas (an entity controlled by the former CEO) for liquidity, having borrowed a total of **$19.0 million** as of June 30, 2023. The debt matures on September 30, 2024[101](index=101&type=chunk)[81](index=81&type=chunk) - The company is subject to multiple legal proceedings, including securities class actions, and an SEC investigation into trading of its securities. The DOJ and SEC have filed charges against the former CEO, Terren S. Peizer, for unlawful insider trading[128](index=128&type=chunk)[136](index=136&type=chunk)[137](index=137&type=chunk) - Subsequent to the quarter end, on July 27, 2023, the company effected a **1-for-6 reverse stock split** of its common stock[139](index=139&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=36&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses H1 2023 revenue decrease, improved profitability from cost cuts, and liquidity primarily supported by the Keep Well Agreement [Results of Operations](index=41&type=section&id=Results%20of%20Operations) Revenue by Source (in thousands) | Revenue Source | Six Months 2023 | Six Months 2022 | Change % | | :--- | :--- | :--- | :--- | | Commercial revenue | $1,917 | $4,357 | (56)% | | Government revenue | $3,572 | $4,804 | (26)% | | **Total revenue** | **$5,489** | **$9,161** | **(40)%** | Profitability Metrics Comparison (Six Months Ended June 30, in thousands) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | **Cost of Revenue** | $1,651 | $5,052 | | **Gross Profit** | $3,838 | $4,109 | | **Gross Profit Margin** | 70% | 45% | | **Total Operating Expenses** | $15,693 | $29,164 | | **Operating Loss** | $(11,855) | $(25,055) | - The decrease in revenue for the first six months of 2023 was primarily due to a decrease in total average enrolled members compared to the same period in 2022[170](index=170&type=chunk) - The significant improvement in gross profit margin (from **45%** to **70%** for the six-month period) was driven by lower headcount and cost optimization initiatives implemented throughout 2022 and March 2023[172](index=172&type=chunk)[173](index=173&type=chunk) [Liquidity and Capital Resources](index=44&type=section&id=Liquidity%20and%20Capital%20Resources) - As of June 30, 2023, the company had **$10.1 million** in total cash and restricted cash and working capital of approximately **$4.1 million**[180](index=180&type=chunk) - The primary source of working capital is borrowings under the Keep Well Agreement, with **$6.0 million** remaining available for funding as of June 30, 2023[181](index=181&type=chunk) - Management expects that cash on hand plus the remaining available funding under the Keep Well Agreement will be sufficient to meet obligations for at least the next 12 months[182](index=182&type=chunk) - The average monthly cash burn rate from operations for the first six months of 2023 was **$1.7 million**[180](index=180&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=47&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company, as a smaller reporting company, is not required to provide this information - As a smaller reporting company, Ontrak is not required to provide quantitative and qualitative disclosures about market risk[192](index=192&type=chunk) [Item 4. Controls and Procedures](index=47&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal controls - The principal executive officer and principal financial officer concluded that as of June 30, 2023, the company's disclosure controls and procedures were effective[193](index=193&type=chunk) - There were no changes in internal controls over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting[194](index=194&type=chunk) PART II - OTHER INFORMATION [Item 1. Legal Proceedings](index=47&type=section&id=Item%201.%20Legal%20Proceedings) The company faces various legal proceedings, including securities class actions and an SEC investigation, with charges against its former CEO - The company incorporates by reference the discussion of legal proceedings from Note 13 of the financial statements, which details ongoing securities class actions, shareholder derivative complaints, and an SEC investigation[196](index=196&type=chunk)[128](index=128&type=chunk) [Item 1A. Risk Factors](index=49&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including losses, customer concentration, funding needs, Keep Well Agreement reliance, and potential Nasdaq delisting - The company has incurred significant losses since inception and may be unable to obtain additional funds before achieving positive cash flows[200](index=200&type=chunk)[202](index=202&type=chunk) - The business is highly dependent on a few large customers. In 2021, the company lost two such customers, and any further loss would have a material adverse effect[200](index=200&type=chunk)[221](index=221&type=chunk)[222](index=222&type=chunk) - The company has **$19.0 million** in secured debt outstanding under the Keep Well Agreement, and a default would have material adverse consequences. The company's ability to draw the remaining **$2.0 million** is subject to conditions, including remaining listed on Nasdaq[200](index=200&type=chunk)[205](index=205&type=chunk)[208](index=208&type=chunk) - The company's largest stockholder, Acuitas (controlled by former CEO Terren Peizer), beneficially owns approximately **85.4%** of the outstanding common stock, giving it substantial influence over all stockholder matters[200](index=200&type=chunk)[299](index=299&type=chunk) - Both the common stock and Series A Preferred Stock are at risk of being delisted from Nasdaq for failing to meet continued listing standards, such as the minimum bid price rule and stockholders' equity requirements[200](index=200&type=chunk)[283](index=283&type=chunk)[303](index=303&type=chunk) [Item 3. Defaults Upon Senior Securities](index=72&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company is in arrears on Series A Preferred Stock dividends, with **$12.9 million** undeclared since May 2022 - The Board of Directors has not declared dividends on the Series A Preferred Stock since May 2022. As of the filing date, the company had approximately **$12.9 million** of undeclared dividends in arrears[322](index=322&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 Commission File Number 001-31932 ____________________________ Ontrak, Inc. (Exact name of registrant as specified in its charter) ____________________________ Delaware 88-0464853 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) ...

Part I [Business](index=4&type=section&id=Item%201.%20Business) Ontrak, Inc. is an AI-powered, telehealth-enabled healthcare company focused on treating behavioral health conditions that exacerbate chronic medical diseases, despite facing significant customer losses and restructuring efforts - Ontrak is an AI-powered and telehealth-enabled healthcare company focused on improving health for individuals with behavioral conditions that worsen chronic medical diseases like diabetes and hypertension[17](index=17&type=chunk)[18](index=18&type=chunk) - The company's business model combines predictive analytics for member identification with human engagement through care coaches to deliver improved health outcomes and cost savings to healthcare payors[17](index=17&type=chunk)[23](index=23&type=chunk) - The company experienced significant setbacks, including the termination of contracts by two large customers in 2021, which led to multiple rounds of workforce reductions in 2021, 2022, and March 2023 to reduce operating costs[41](index=41&type=chunk) - As of December 31, 2022, the company had **119 employees**, a **53% year-over-year decrease**, reflecting the significant restructuring and downsizing efforts[45](index=45&type=chunk) Treatment Effect Study Outcomes | Metric | Result | | :--- | :--- | | Per Member Per Month Savings | $485 (durable for 24 months post-enrollment) | | Avoidable Inpatient Utilization | 66% reduction | | Preventive Care Services | 50% increase | [Risk Factors](index=8&type=section&id=Item%201A.%20Risk%20Factors) The company faces substantial risks including significant losses, funding needs, reliance on the Keep Well Agreement, customer concentration, potential Nasdaq delisting, ongoing litigation, and governance risks due to its largest stockholder's legal issues - The company has a history of significant operating losses and negative cash flow, with an average monthly cash burn of approximately **$2.0 million** in 2022, requiring additional funding to sustain operations[55](index=55&type=chunk)[57](index=57&type=chunk) - The business is highly dependent on a few large customers, and the loss of two such customers in 2021 has had and will continue to have a material adverse effect on financial results[74](index=74&type=chunk)[75](index=75&type=chunk)[76](index=76&type=chunk) - The company is reliant on the Keep Well Agreement with Acuitas Capital for funding, with **$19.0 million** in secured debt outstanding, where a default would have severe consequences, and future funding is conditional on common stock remaining listed on Nasdaq[58](index=58&type=chunk)[61](index=61&type=chunk) - The company's common stock (OTRK) and Series A Preferred Stock (OTRKP) are at risk of being delisted from Nasdaq for failing to meet the minimum bid price requirement[135](index=135&type=chunk)[152](index=152&type=chunk)[154](index=154&type=chunk) - Acuitas Group Holdings, LLC, controlled by former CEO Terren S. Peizer, beneficially owns approximately **85.5%** of the company's common stock, giving it substantial influence over all stockholder matters, while Mr. Peizer is facing DOJ charges and an SEC civil complaint for alleged insider trading in the company's stock[151](index=151&type=chunk)[86](index=86&type=chunk) - The company is subject to ongoing securities class action and stockholder derivative litigation, which could result in substantial liabilities and divert management resources[86](index=86&type=chunk)[89](index=89&type=chunk) [Unresolved Staff Comments](index=29&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments - Not Applicable[172](index=172&type=chunk) [Properties](index=29&type=section&id=Item%202.%20Properties) The company's principal executive office is in leased space in Henderson, Nevada, having terminated its former Santa Monica office lease - The company's principal executive office is in a leased space in Henderson, Nevada[173](index=173&type=chunk) - The lease for the former principal office in Santa Monica, California was terminated effective February 28, 2023[174](index=174&type=chunk) [Legal Proceedings](index=29&type=section&id=Item%203.%20Legal%20Proceedings) The company is subject to various legal proceedings, with details provided in Note 13 of the Consolidated Financial Statements - The company refers to Note 13, "Commitments and Contingencies," for details on legal proceedings[175](index=175&type=chunk) [Mine Safety Disclosures](index=29&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not Applicable[176](index=176&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=30&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on NASDAQ under 'OTRK', with 36 stockholders of record as of April 2023, and no unregistered securities sold or equity repurchases - The company's common stock is traded on the NASDAQ Capital Market under the symbol "OTRK"[179](index=179&type=chunk) - As of April 12, 2023, there were **36 stockholders of record** for the common stock[179](index=179&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The company's financial performance significantly deteriorated in 2022 due to major customer losses, resulting in an 83% revenue decline and widened net loss, despite cost-cutting, with continued negative cash flow and reliance on the Keep Well Agreement for liquidity Key Financial Metrics (2022 vs 2021) | Metric | 2022 | 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $14.5M | $84.1M | ($69.6M) | (83)% | | Cash flow from operations | ($24.0M) | ($26.2M) | $2.2M | 8% | | Effective outreach pool (at YE) | 3,861 | 5,415 | (1,554) | (29)% | - The significant decrease in 2022 revenue was primarily due to the loss of two of the company's largest customers in 2021[213](index=213&type=chunk)[224](index=224&type=chunk) - The company has undergone significant management changes, with Terren S. Peizer resigning as CEO and Chairman in March 2023, and Brandon H. LaVerne being appointed Interim CEO[187](index=187&type=chunk)[188](index=188&type=chunk) - The company fully paid off its 2024 Notes in July 2022 using cash on hand and **$5 million** from the Keep Well Agreement[198](index=198&type=chunk)[199](index=199&type=chunk) - The company has a history of net losses and negative operating cash flows, and expects this to continue, but management believes cash on hand and borrowings under the Keep Well Agreement are sufficient to meet obligations for at least the next 12 months[236](index=236&type=chunk)[238](index=238&type=chunk) [Results of Operations](index=38&type=section&id=Results%20of%20Operations) In fiscal year 2022, revenue decreased by 83% to $14.5 million due to customer losses, leading to an 87% drop in gross profit and a widened operating loss of $44.1 million, despite a 37% reduction in operating expenses Consolidated Statements of Operations Summary (in thousands) | | 2022 | 2021 | | :--- | :--- | :--- | | **Revenue** | **$14,514** | **$84,133** | | Cost of revenue | 7,461 | 31,214 | | **Gross profit** | **7,053** | **52,919** | | Total operating expenses | 51,170 | 80,900 | | **Operating loss** | **(44,117)** | **(27,981)** | | **Net loss** | **(51,573)** | **(37,144)** | - Total revenue decreased by **$69.6 million (83%)** in 2022, driven by the loss of two major customers, with government revenue seeing a larger decline (**85%**) than commercial revenue (**80%**)[224](index=224&type=chunk) - Gross profit margin decreased from **63%** in 2021 to **49%** in 2022, primarily due to the significant drop in revenue[227](index=227&type=chunk)[228](index=228&type=chunk) - Operating expenses decreased by **$29.7 million (37%)**, driven by reductions in R&D (**$7.3 million**), Sales & Marketing (**$4.9 million**), G&A (**$9.5 million**), and Restructuring costs (**$8.0 million**)[230](index=230&type=chunk)[232](index=232&type=chunk) [Liquidity and Capital Resources](index=41&type=section&id=Liquidity%20and%20Capital%20Resources) The company has a history of net losses and negative operating cash flows, with $24.0 million used in 2022, and relies on the Keep Well Agreement for liquidity, asserting sufficiency for the next 12 months - As of December 31, 2022, the company had **$9.7 million** in cash and restricted cash and a working capital of **$4.8 million**[236](index=236&type=chunk) - The average monthly cash burn from operations was **$2.0 million** for the year ended December 31, 2022[236](index=236&type=chunk) - The primary source of working capital is the Keep Well Agreement, which had **$14.0 million** of principal borrowing capacity remaining as of December 31, 2022[237](index=237&type=chunk) Summary of Cash Flows (in thousands) | | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(23,966) | $(26,155) | | Net cash used in investing activities | $(1,156) | $(4,480) | | Net cash used in financing activities | $(31,111) | $(6,629) | | **Net decrease in cash and restricted cash** | **$(56,233)** | **$(37,264)** | [Financial Statements and Supplementary Data](index=45&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) The audited consolidated financial statements for 2022 and 2021 are presented, with a Critical Audit Matter on variable consideration, detailing significant declines in assets and equity, and highlighting liquidity, customer concentration, debt, and legal contingencies - The independent auditor's report identified the "Calculation of variable consideration related to price concessions" as a Critical Audit Matter due to the significant judgment and estimation required by management[392](index=392&type=chunk)[393](index=393&type=chunk) Consolidated Balance Sheet Highlights (in thousands) | | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total Assets | $25,757 | $93,682 | | Total Liabilities | $20,080 | $48,127 | | **Total Stockholders' Equity** | **$5,677** | **$45,555** | Consolidated Statement of Operations Highlights (in thousands) | | Year Ended Dec 31, 2022 | Year Ended Dec 31, 2021 | | :--- | :--- | :--- | | Revenue | $14,514 | $84,133 | | Operating Loss | $(44,117) | $(27,981) | | **Net Loss** | **$(51,573)** | **$(37,144)** | | Net Loss per Share | $(2.60) | $(2.47) | - The company is party to several legal proceedings, including a securities class action and stockholder derivative lawsuits, related to alleged false and misleading statements regarding its customer relationships and business practices[533](index=533&type=chunk)[535](index=535&type=chunk)[536](index=536&type=chunk) [Controls and Procedures](index=45&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal controls over financial reporting were effective as of December 31, 2022, with no material changes in the fourth quarter, and no auditor attestation report is included due to filer status - Management concluded that disclosure controls and procedures were effective as of the end of the period covered by the report[268](index=268&type=chunk) - Management assessed internal control over financial reporting as effective as of December 31, 2022, based on the COSO framework (2013)[272](index=272&type=chunk) - The annual report does not include an attestation report from the independent registered public accounting firm regarding internal control over financial reporting, as permitted by SEC rules for the company's filer status[274](index=274&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=46&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) This section details the Board of Directors and executive management as of April 2023, including biographies, committee compositions, a board diversity matrix showing three male directors, and notes a late Section 16(a) filing - As of April 12, 2023, the Board of Directors consists of three members: Richard A. Berman, Michael E. Sherman (Chairman), and James M. Messina[279](index=279&type=chunk) - Key executive officers include Brandon H. LaVerne (Interim CEO & COO), Mary Louise Osborne (President & CCO), and James J. Park (CFO)[300](index=300&type=chunk) - The Board Diversity Matrix indicates that of the three directors, two identified as male and white, and one did not disclose demographic information, with no female directors[298](index=298&type=chunk) - A late Form 4 filing was reported for Dr. Judith Feld for fiscal year 2022[310](index=310&type=chunk) [Executive Compensation](index=51&type=section&id=Item%2011.%20Executive%20Compensation) This section outlines compensation for Named Executive Officers in 2021 and 2022, including former CEO Terren S. Peizer's $0.66 million compensation in 2022, employment agreements, equity awards, and non-employee director compensation 2022 Summary Compensation for Named Executive Officers | Name and Principal Position | Year | Salary ($) | Bonus ($) | Option Award ($) | All Other Comp ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Terren S. Peizer (Former CEO) | 2022 | 650,000 | — | — | 11,306 | 661,306 | | Jonathan E. Mayhew (Former CEO) | 2022 | 446,250 | 35,000 | 299,907 | 20,176 | 801,333 | | Brandon H. LaVerne (Interim CEO) | 2022 | 400,000 | — | 146,710 | 40,436 | 587,146 | | Mary Louise Osborne (President) | 2022 | 400,000 | — | 153,215 | 21,903 | 575,118 | - In March 2023, Terren S. Peizer resigned as Chairman and CEO, with his 2022 compensation consisting mainly of his **$0.65 million** base salary[315](index=315&type=chunk) - Employment agreements for current executives Brandon H. LaVerne and Mary Louise Osborne provide for a **$0.45 million** base salary and an annual bonus target of **100%** of base salary[318](index=318&type=chunk)[319](index=319&type=chunk) - Stock options for executive officers provide for full vesting of unvested awards in the event of a change of control[324](index=324&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=58&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) This section highlights significant ownership concentration, with former Chairman and CEO Terren S. Peizer beneficially owning approximately 85.5% of the common stock through Acuitas Group Holdings, LLC, while all current directors and executive officers as a group own about 2.5% - As of April 12, 2023, former Chairman and CEO Terren S. Peizer beneficially owned **102.65 million shares**, representing approximately **85.5%** of the class, primarily through Acuitas Group Holdings, LLC and including common stock, convertible debt, warrants, and options[353](index=353&type=chunk)[356](index=356&type=chunk) - All current directors and executive officers as a group (8 persons) beneficially own **0.75 million shares**, or approximately **2.5%** of the outstanding common stock[356](index=356&type=chunk) Equity Compensation Plan Information as of Dec 31, 2022 | Plan Category | Securities to be issued upon exercise | Weighted-average exercise price | Securities remaining available for future issuance | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 6,345,048 | $3.54 | 1,610,731 | [Certain Relationships and Related Transactions, and Director Independence](index=60&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) The Board of Directors has determined that all three of its members are independent under NASDAQ listing standards, and each committee member also qualifies as independent - The Board has determined that all three of its current directors (Messrs. Berman, Sherman, and Messina) are independent as defined by NASDAQ listing standards[357](index=357&type=chunk) [Principal Accountant Fees and Services](index=60&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) This section details fees paid to EisnerAmper LLP, totaling $0.37 million in 2022, an increase from $0.26 million in 2021, consisting entirely of audit fees, with all services pre-approved by the Audit Committee Accountant Fees (EisnerAmper LLP) | Fee Type | 2022 | 2021 | | :--- | :--- | :--- | | Audit fees | $367,988 | $262,000 | | Audit-related fees | — | — | | Tax fees | — | — | | All other fees | — | — | | **Total** | **$367,988** | **$262,000** | - The Audit Committee has a policy to pre-approve all audit and permissible non-audit services provided by the independent registered public accounting firm[361](index=361&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=61&type=section&id=Item%2015.%20Exhibit%20and%20Financial%20Statement%20Schedules) This section lists all financial statements, schedules, and exhibits filed as part of the Form 10-K report, including corporate governance documents and material contracts - This section provides an index of all financial statements and exhibits filed with the report[370](index=370&type=chunk)[371](index=371&type=chunk) [Form 10-K Summary](index=63&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company indicates that no Form 10-K summary is provided - None[375](index=375&type=chunk)

Ontrak, Inc. (NASDAQ:OTRK) Q4 2022 Earnings Conference Call March 15, 2023 4:30 PM ET Company Participants Ryan Halsted - Investor Relations Brandon LaVerne - Chief Executive Officer and COO Mary Lou Osborne - President and CCO James Park - Chief Financial Officer Conference Call Participants Operator Good day. And welcome to the Ontrak Fourth Quarter 2022 Earnings Call. At this time, all participants are in listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. [Op ...