otrk-20240331

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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)

____________________________


Delaware			88-0464853
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

333 S. E. 2nd Avenue, Suite 2000, Miami, FL 33131

(Address of principal executive offices, including zip code)

(310) 444-4300

(Registrant's telephone number, including area code)

(Former name, former address and former fiscal year, 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 Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,’’ “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	☒	Smaller reporting company	☒
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. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

As of May 8, 2024, there were 47,967,363 shares of the registrant's common stock, $0.0001 par value per share, outstanding.

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TABLE OF CONTENTS


PART I - FINANCIAL INFORMATION			3

	ITEM 1. Financial Statements		3

		Condensed Consolidated Balance Sheets as of Ma r ch 31 , 202 4 (unaudited) and December 31, 20 23	3

		Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2024 and 202 3 (unaudited)	4

		Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2024 and 2023 (unaudited)	5

		Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023 (unaudited)	6

		Notes to Condensed Consolidated Financial Statements	7

	ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		33

	ITEM 3. Quantitative and Qualitative Disclosures About Market Risk		41

	ITEM 4. Controls and Procedures		41

PART II - OTHER INFORMATION			42

	ITEM 1. Legal Proceedings		42

	ITEM 1A. Risk Factors		42

	ITEM 2. Unregistered Sales of Equity Securities , Use of Proceeds, and Issuer Purchases of Equity Securities		43

	ITEM 3. Defaults Upon Senior Securities		44

	ITEM 4. Mine Safety Disclosures		44

	ITEM 5. Other Information		44

	ITEM 6. Exhibits		44

	Signatures		46

In this Quarterly Report on Form 10-Q, all references to “Ontrak,” “Ontrak, Inc.,” “we,” “us,” “our” or the “Company” mean Ontrak, Inc., its wholly-owned subsidiaries and variable interest entities, except where it is made clear that the term means only the parent company. The Company’s common stock, par value $0.0001 per share, is referred to as “common stock" and the Company’s 9.50% Series A Cumulative Perpetual Preferred Stock, par value $0.0001 per share, is referred to as “Series A Preferred Stock.”

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

ONTRAK, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)


	March 31, 2024		December 31, 2023
Assets	(unaudited)
Current assets:
Cash	$	6,400	$	9,701

Receivables, net	241		—
Unbilled receivables	232		207

Deferred costs	119		128
Prepaid expenses and other current assets	2,439		2,743
Total current assets	9,431		12,779
Long-term assets:
Property and equipment, net	757		913

Goodwill	5,713		5,713
Intangible assets, net	50		99
Other assets	10,589		147
Operating lease right-of-use assets	183		195
Total assets	$	26,723	$	19,846
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	667	$	563
Accrued compensation and benefits	756		442
Deferred revenue	244		97

Current portion of operating lease liabilities	59		56
Other accrued liabilities	1,982		2,784

Total current liabilities	3,708		3,942
Long-term liabilities:
Long-term debt, net	1,617		1,467
Long-term operating lease liabilities	151		166


Total liabilities	5,476		5,575
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.0001 par value; 50,000,000 shares authorized; 3,770,265 shares issued and outstanding at each of March 31, 2024 and December 31, 2023	—		—
Common stock, $0.0001 par value; 500,000,000 shares authorized; 43,950,678 and 38,466,979 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively	7		6
Additional paid-in capital	496,359		484,926
Accumulated deficit	(475,119)		(470,661)
Total stockholders' equity	21,247		14,271
Total liabilities and stockholders' equity	$	26,723	$	19,846

See notes to condensed consolidated financial statements.

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ONTRAK, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands, except per share data)


	Three Months Ended March 31,
		2024		2023
Revenue		$	2,680	$	2,529
Cost of revenue		975		847
Gross profit		1,705		1,682

Operating expenses:
Research and development		1,078		1,644
Sales and marketing		532		990
General and administrative		4,078		5,818
Restructuring, severance and related charges		290		457
Total operating expenses		5,978		8,909
Operating loss		(4,273)		(7,227)

Other (expense) income , net		(2)		291
Interest expense, net		(183)		(1,394)
Loss before income taxes		(4,458)		(8,330)
Income tax expense		—		(20)
Net loss		(4,458)		(8,350)
Dividends on preferred stock - undeclared		(2,239)		(2,239)
Net loss attributable to common stockholders		$	(6,697)	$	(10,589)

Net loss per common share, basic and diluted		$	(0.11)	$	(2.26)

Weighted-average common shares outstanding, basic and diluted		60,882		4,686

See notes to condensed consolidated financial statements.

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ONTRAK, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(unaudited, in thousands, except share data)


	Preferred Stock			Common Stock			Additional Paid-In Capital		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount		Shares	Amount




















Balance at December 31, 2023	3,770,265	$	—	38,466,979	$	6	$	484,926	$	(470,661)	$	14,271




Debt issuance costs	—	—		—	—		10,495		—		10,495
Common stock issued relating to settlement of contingent consideration	—	—		1,238	—		64		—		64
Pre-Funded Warrants exercised	—	—		4,032,398	1		—		—		1
Public Offering Warrants exercised	—	—		1,450,000	—		522		—		522
Restricted stock units vested, net	—	—		63	—		—		—		—

Stock-based compensation expense	—	—		—	—		352		—		352

Net loss	—	—		—	—		—		(4,458)		(4,458)
Balance at March 31, 2024	3,770,265	$	—	43,950,678	$	7	$	496,359	$	(475,119)	$	21,247

Balance at December 31, 2022	3,770,265	$	—	4,527,914	$	3	$	448,415	$	(442,741)	$	5,677
Common stock issued for financing	—	—		339,689	—		—		—		—
Warrants issued in connection with Keep Well Notes	—	—		—	—		10,797		—		10,797
Loss on extinguishment of debt with related party	—	—		—	—		(2,153)		—		(2,153)



Restricted stock units vested, net	—	—		208	—		(2)		—		(2)
401(k) employer match	—	—		18,897	—		—		—		—
Stock-based compensation expense	—	—		—	—		651

SEC Form 10-Q filed by Ontrak Inc.