Ontrak(US:OTRK)2024-04-16 21:19Financing Activities - Ontrak completed a public offering on November 14, 2023, issuing 4,592,068 shares of common stock and 9,184,136 warrants at a combined price of $0.60 per share, generating gross proceeds of $6.3 million[465]. - The total net proceeds from the public offering were approximately $5.3 million after deducting offering-related fees and expenses[465]. - The minimum amount required for a "Qualified Financing" was reduced from $10.0 million to $8.0 million, and then further to $6.0 million under a letter agreement with Acuitas[464][480]. - Ontrak converted $16.2 million of senior secured convertible notes into 18,054,791 shares of common stock, with the conversion price set at $0.90 per share[484]. - The maturity date of the remaining Surviving Note was extended from September 30, 2024, to May 14, 2026[484]. - The exercise price of the Conversion Warrant was adjusted to the public offering price, and the number of shares subject to the warrant was increased accordingly[485]. - The lowest VWAP during the Restricted Transaction Measuring Period was $0.3442, leading to a reduction in the exercise price of the November 2023 Warrants to this amount[466]. - The company will issue Demand Warrants to Acuitas with a term of five years and an initial exercise price of $0.3442, subject to adjustments[488][500]. - The conversion price of the Surviving Note will be set at the lesser of $0.36 or the greater of the consolidated closing bid price or $0.12, effective as of the Stockholder Approval Effective Date[492]. - The company plans to seek stockholder approval for the issuance of Demand Warrants, New Keep Well Warrants, and Demand Notes, among other terms[493]. - The exercise price of the November 2023 Warrants was reduced to $0.3442 per share, which will also apply to Demand Warrants and New Keep Well Warrants[499][500]. Revenue and Financial Performance - Revenue for 2023 was $12.7 million, a decrease of 12% from $14.5 million in 2022[524]. - Cash flow from operations improved to $(15.5) million in 2023 from $(24.0) million in 2022, an increase of $8.5 million or 35%[519]. - Effective outreach pool decreased to 2,161 in December 2023 from 3,861 in December 2022, a decline of 44%[525]. - The company incurred legal defense costs totaling approximately $3.1 million related to ongoing investigations, with $2.7 million paid by the insurer[523]. - Total assets increased to $1.563 million in December 2023 from $1.273 million in December 2022[530]. - Payables to Ontrak rose to $2.281 million in December 2023 from $1.602 million in December 2022[530]. - Software assets decreased to $4.575 million in December 2023 from $6.882 million in December 2022[537]. - The company has no accounts receivable outstanding as of December 31, 2023[536]. Restructuring and Cost Savings - The company implemented multiple restructuring plans, resulting in a 34% reduction in employee positions in August 2022, leading to annual compensation cost savings of approximately $7.7 million and third-party cost savings of approximately $3.0 million[511]. - In March 2023, the company eliminated approximately 19% of employee positions, resulting in annual compensation cost savings of approximately $2.7 million[512]. - A further reduction of approximately 21% of employee positions was completed in February 2024, expected to save approximately $2.0 million in annual compensation costs[513]. - The company incurred approximately $0.9 million in one-time termination-related costs due to the restructuring efforts in August 2022[511]. Internal Controls and Compliance - The company evaluated the effectiveness of its disclosure controls and procedures as of the end of the reporting period, concluding they were effective[559]. - There were no changes in internal controls over financial reporting during the fourth quarter ended December 31, 2023, that materially affected the internal control[560]. - Management believes that the internal control over financial reporting was effective as of December 31, 2023, based on established criteria[564]. - The company’s internal control system is designed to provide reasonable assurance regarding the preparation and fair presentation of financial statements[561]. Asset Management and Impairment - The company conducted its annual goodwill impairment test on October 1, 2023, and determined no impairment existed[543]. - The company conducted an impairment analysis of long-lived assets and determined no impairment as of December 31, 2023[547]. - The company recognizes impairment losses when undiscounted future cash flows are less than the carrying amount of the asset[545]. Stock and Compensation - The company implemented a 1-for-6 reverse stock split in July 2023[522]. - The company measures and recognizes compensation expense for share-based payment awards based on estimated fair values on the date of grant[550]. - The company uses the Black-Scholes option-pricing model to estimate the fair value of stock options and warrants[551]. - The company assesses whether warrants are classified as liability or equity based on specific accounting standards[549].