otrk-20250331

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________

FORM 10-Q

[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2025

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

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 14, 2025, there were 4,217,848 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 March 31, 2025 (unaudited) and December 31, 20 24	3

		Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2025 and 202 4 (unaudited)	4

		Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2025 and 2024 (unaudited)	5

		Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2025 and 202 4 (unaudited)	6

		Notes to Condensed Consolidated Financial Statements	7

	ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		28

	ITEM 3. Quantitative and Qualitative Disclosures About Market Risk		36

	ITEM 4. Controls and Procedures		36

PART II - OTHER INFORMATION			36

	ITEM 1. Legal Proceedings		36

	ITEM 1A. Risk Factors		36

	ITEM 2. Unregistered Sales of Equity Securities , Use of Proceeds, and Issuer Purchases of Equity Securities		36

	ITEM 3. Defaults Upon Senior Securities		37

	ITEM 4. Mine Safety Disclosures		37

	ITEM 5. Other Information		37

	ITEM 6. Exhibits		37

	Signatures		39

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, 2025		December 31, 2024
Assets	(unaudited)
Current assets:
Cash	$	4,087	$	5,710

Accounts receivable, net	602		1,012
Unbilled receivables	879		595

Deferred costs	179		178
Prepaid expenses and other current assets	2,162		2,065
Total current assets	7,909		9,560
Long-term assets:
Property and equipment, net	454		490

Goodwill	5,713		5,713

Other assets	4,064		5,167
Operating lease right-of-use assets	131		145
Total assets	$	18,271	$	21,075
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	725	$	179
Accrued compensation and benefits	824		558
Deferred revenue	19		18
Demand notes payable, net	7,037		6,008
Current portion of operating lease liabilities	72		68
Other accrued liabilities	2,379		1,949

Total current liabilities	11,056		8,780
Long-term liabilities:
Long-term debt, net	2,489		2,327
Long-term operating lease liabilities	79		98


Total liabilities	13,624		11,205
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, 2025 and December 31, 2024	—		—
Common stock, $0.0001 par value; 500,000,000 shares authorized; 4,217,848 shares issued and outstanding at each of March 31, 2025 and December 31, 2024	7		7
Additional paid-in capital	552,253		550,585
Accumulated deficit	(547,613)		(540,722)
Total stockholders' equity	4,647		9,870
Total liabilities and stockholders' equity	$	18,271	$	21,075

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,
		2025		2024
Revenue		$	2,017	$	2,680
Cost of revenue		1,271		975
Gross profit		746		1,705

Operating expenses:
Research and development		1,408		1,078
Sales and marketing		564		532
General and administrative		4,624		4,078
Restructuring, severance and related costs		—		290
Total operating expenses		6,596		5,978
Operating loss		(5,850)		(4,273)

Other expense, net		—		(2)

Interest expense, net		(1,041)		(183)
Loss before income taxes		(6,891)		(4,458)
Income tax expense		—		—
Net loss		(6,891)		(4,458)
Dividends on preferred stock - undeclared		(2,239)		(2,239)
Net loss attributable to common stockholders		$	(9,130)	$	(6,697)

Net loss per common share, basic and diluted		$	(1.65)	$	(1.65)

Weighted-average common shares outstanding, basic and diluted		5,517		4,059

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 (Deficit)
	Shares	Amount		Shares	Amount


























































Balance at December 31, 2024	3,770,265	$	—	4,217,848	$	7	$	550,585	$	(540,722)	$	9,870




Demand Warrants issued	—	—		—	—		247		—		247



Stock-based compensation expense	—	—		—	—		1,421		—		1,421

Net loss	—	—		—	—		—		(6,891)		(6,891)
Balance at March 31, 2025	3,770,265	$	—	4,217,848	$	7	$	552,253	$	(547,613)	$	4,647

Balance at December 31, 2023	3,770,265	$	—	2,564,465	$	6	$	484,926	$	(470,661)	$	14,271
Debt issuance costs	—	—		—	—		10,495		—		10,495
Common stock issued relating to settlement of contingent consideration	—	—		83	—		64		—		64
Pre-Funded Warrants exercised	—	—		268,827	1		—		—		1
Public Offering Warrants exercised	—	—		96,667	—		522		—		522




Restricted stock units vested, net	—	—		3	—		—		—		—
Stock-based compensation expense	—	—		—	—		352		—		352

Net loss	—	—		—	—		—		(4,458)		(4,458)
Balance at March 31, 2024	3,770,265	$	—	2,930,045	$	7	$	496,359	$	(475,119)	$	21,247

See notes to condensed consolidated financial statements.

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ONTRAK, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)


	For the Three Months Ended March 31,
	2025		2024
Cash flows from operating activities
Net loss	$	(6,891)	$	(4,458)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense	1,421		352


Paid-in-kind interest expense	586		112
Depreciation expense	104		198
Amortization expense	454		100


Change in fair value of warrant liability	—		2






Changes in operating assets and liabilities:
Accounts receivable	411		(241)
Unbilled receivables	(284)		(25)
Prepaid expenses and other assets	(84)		365
Accounts payable	545		104
Deferred revenue	1		146
Leases liabilities	(16)		(13)
Other accrued liabilities	1,030		99
Net cash used in operating activities	(2,723)		(3,259)
Cash flows from investing activities
Purchase of property and equipment	(58)		(37)
Net cash used in investing activities	(58)		(37)
Cash flows from financing activities
Proceeds from Demand Notes	1,500		—

Proceeds from warrants exercised	—		523











Financed insurance premium payments	(342)		(528)
Payment of taxes related to net-settled stock awards	—		—
Net cash provided by (used in) financing activities	1,158		(5)

Net change in cash and restricted cash	(1,623)		(3,301)

Cash at beginning of period	5,710		9,701
Cash at end of period	$	4,087	$	6,400


Supplemental disclosure of cash flow information:
Interest paid	$	17	$	30

Non-cash financing and investing activities:
Debt issuance costs	$	—	$	10,495
Warrants issued in connection with Demand Notes	247		—




Finance lease and accrued purchases of property and equipment	—		4
Common stock issued to settle contingent consideration	—		64

See notes to condensed consolidated financial statements.

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ONTRAK, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1. Organization

Company Overview

Ontrak, Inc. (“Ontrak,” “Company,” “we,” “us” or “our”) was founded with a passion for engaging with and transforming health outcomes for anyone impacted by behavioral health conditions through our Wholehealth+ and accompanying suite of solutions. Ontrak is a value-based behavioral healthcare company that identifies and engages people with unmet health needs using our proprietary Advanced Engagement System to improve clinical outcomes and reduce total cost of care. Through access to comprehensive claims data and other healthcare information, the Company's technology-enabled platform utilizes analytics and predictive modeling to uniquely identify connections between behavioral health issues and physical chronic conditions, exposing gaps that traditional behavioral health providers often miss. The Company's program predicts people whose chronic disease will improve with behavior change, recommends effective care pathways that people are willing to follow, and engages and guides them to and through the care and treatment they need. By combining advanced analytics with human engagement, we deliver improved member health and validated outcomes and savings to healthcare payors.

The Company's integrated, technology-enabled solutions 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, chronic obstructive pulmonary disease, and congestive heart failure, which result in high medical costs. Ontrak has a unique ability to engage these members, who may 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 coaches who address the social and environmental determinants of health. The Ontrak programs seek to improve member health and deliver validated cost savings to healthcare payors.

The Company generates revenues from the services it provides to populations insured by private health insurance programs, including employer funded programs (which the Company refers to as commercial revenue) and by government-funded health insurance programs, such as managed Medicare Advantage, managed Medicaid and dual eligible (Medicare and Medicaid) populations. The Company aims to increase the number of members that are eligible for our solutions by signing new contracts and identifying more eligible members within customers with whom the Company has existing contracts.

Basis of Presentation

The accompanying condensed consolidated financial statements include Ontrak, Inc., its wholly-owned subsidiaries and its variable interest entities. The accompanying condensed consolidated financial statements for Ontrak, Inc. have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and instructions to Form 10-Q and Article 8 of Regulation S-X. All intercompany balances and transactions have been eliminated in consolidation. Certain information and note disclosures normally included in the annual consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the accompanying condensed financial statements includes all adjustments (consisting of normal recurring adjustments) necessary for the fair presentation of the interim periods presented. Interim results are not necessarily indicative of the results that may be expected for any other interim period or for the entire fiscal year. The accompanying unaudited financial information should be read in conjunction with the audited financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 10-K”), filed with the Securities and Exchange Commission (“SEC”), from which the consolidated balance sheet as of December 31, 2024 has been derived. The Company operates as one segment.

Going Concern

We have incurred significant net losses and negative operating cash flows since our inception, and we expect to continue to incur net losses and negative operating cash flow, in part due to the negative impact on our operations by customer terminations. As of March 31, 2025, our total cash was $4.1 million and we had negative working capital of approximately $3.1 million. For the three months ended March 31, 2025, our average monthly cash burn rate from operations was $0.9 million.

As of March 31, 2025, we had $13.5 million of secured debt, including accrued paid-in-kind interest, outstanding, all of which is represented by senior secured promissory notes issued under the Keep Well Agreement (as defined in Note 7 below) we entered into with Acuitas (as defined in Note 7 below). On May 9, 2025, we borrowed an additional $0.5 million under the Keep Well

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ONTRAK, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Agreement (see Note 12 below). On May 19, 2025, we and Acuitas entered into an agreement relating to the Keep Well Agreement pursuant to which, among other things, Acuitas (i) committed to purchase up to an additional $5.0 million in principal amount of Demand Notes (as defined in Note 7 below) and up to $5.0 million in principal amount of senior secured non-convertible promissory notes , and (ii) agreed not to exercise its right to require that any amounts due under any Demand Note or any senior secured non-convertible promissory note be paid until the earlier of (a) September 1, 2026 and (b) 30 days following the date on which Acuitas has purchased all $5.0 million in principal amount of the senior secured non-convertible promissory notes (see Note 12 below). As of the filing date of this report, approximately $14.4 million of secured debt, including accrued paid-in-kind interest, issued under the Keep Well Agreement is outstanding, $11.6 million of which is represented by senior secured convertible promissory notes issued under the Keep Well Agreement that are payable upon demand of the holder at any time after the earlier of (y) September 1, 2026 and (z) 30 days following the date on which Acuitas has purchased all $5.0 million in principal amount of the senior secured non-convertible promissory notes, and the balance of which matures on May 14, 2026, unless it becomes due and payable in full earlier, whether by acceleration or otherwise.

The Keep Well Agreement includes the following financial covenants: a requirement that annualized consolidated recurring revenue for the preceding twelve months be at least $11.0 million tested monthly, and a requirement that consolidated liquidity must be greater than $5.0 million at all times. In addition, the Keep Well Agreement contains various financial and other covenants, and any non-compliance with those covenants could result in an acceleration of the repayment of the amounts outstanding thereunder. At March 31, 2025, we were not in compliance with either of the consolidated liquidity or consolidated recurring revenue covenants. On April 8, 2025, the Company and Acuitas entered into an agreement under which Acuitas waived (a) any non-compliance and/or violation of each of those covenants through and including June 30, 2025, and (b) solely with respect to the Company’s consolidated financial statements for the year ended December 31, 2024, any non-compliance and/or violation of the covenant in the Keep Well Agreement requiring that such financial statements and the report of the Company’s auditor thereon be unqualified as to going concern. There can be no assurance that we will receive a waiver from Acuitas for any future defaults under the Keep Well Agreement. See the risk factor in Item 1A of Part I of the 2024 10-K titled, “As of the filing date of this report, we have approximately $13.6 million, including accrued paid-in-kind interest, outstanding under the Keep Well Agreement, and a default thereunder would have material adverse consequences to our financial condition, operating results, and business.”

Management is actively pursuing execution of the Company’s growth strategy and has been engaged in discussions with prospects in its sales pipeline as well as in discussions with existing customers to expand their business relationship with the Company. There can be no assurance that the Company will be successful in any of these endeavors.

Under applicable accounting standards, our management has the responsibility to evaluate whether conditions or events raise substantial doubt about our ability to meet our future financial obligations as they become due within 12 months from the date the financial statements in this report are released. Based on our current analysis of the conditions described above and our forecast of our future operating results, we will require additional capital to fund our operations through the next 12 months from the date the financial statements in this report are released. Accordingly, management has concluded that these circumstances raise substantial doubt about our ability to continue as a going concern.

In addition to potentially borrowing additional funds under the Keep Well Agreement, we are currently seeking to raise capital; however, when we can raise such capital, and how much we can raise, depends on a variety of factors, including, among others, market conditions, the trading price of our common stock, and our business prospects. We do not know whether, and no assurances can be given that, capital will be available to us, including under the Keep Well Agreement, on terms favorable to us and our stockholders or at all. Further, additional borrowings under the Keep Well Agreement and/or an equity financing may have a dilutive effect on the holdings of our existing stockholders. If additional adequate capital is not available or is not available on acceptable terms, we will need to reevaluate our planned operations and may need to cease operations, file for bankruptcy, liquidate, and/or wind-up our affairs. As noted above, as of the filing date of this report, we have approximately $14.4 million of secured debt outstanding under the Keep Well Agreement. If we become unable to continue as a going concern or if Acuitas were to exercise its rights under the Keep Well Agreement in the event of default thereunder, Acuitas would have the rights of a secured creditor with a first priority lien on our assets, including, the right to collect, enforce or satisfy any secured obligations then owing, including by foreclosing on the collateral securing our obligations under the Keep Well Agreement (which generally comprise all of our assets), and our other stockholders may lose all or part of their investment in our common stock. See the risk factor in Item 1A of Part I of the 2024 10-K titled, “We need additional capital to continue our operations and execute our business strategy, and we cannot guarantee that we will raise adequate additional capital on a timely basis, on favorable terms, or at all.”

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ONTRAK, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

We prepared the accompanying consolidated financial statements on a going concern basis, which assumes that we will realize our assets and satisfy our liabilities in the normal course of business. As discussed above, we do not believe that our cash on hand and other sources of capital will be sufficient to allow us to meet our obligations as they come due and to continue our operating activities for at least the next 12 months from the date the financial statements in this report are released. These factors raise substantial doubt about our ability to continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and reclassification of assets or the amounts and classifications of liabilities that may result from the outcome of the uncertainty of our ability to remain a going concern.

Reverse Stock Split

Following stockholder approval of a proposal obtained at the annual meeting of the Company's stockholders held on September 10, 2024, on September 23, 2024, the Company effected a 1-for-15 reverse stock split (the “2024 Reverse Stock Split”). Fractional shares of the Company’s common stock resulting from the reverse split were automatically rounded up to the nearest whole share. The Company’s common stock began trading on The Nasdaq Capital Market on a post-split basis at the open of trading on September 23, 2024. The Company’s common stock continues to trade under the symbol “OTRK,” but was assigned a new CUSIP number (683373401).

All restricted stock units, stock options and warrants to purchase shares of the Company’s common stock and securities convertible or exchangeable for shares of the Company’s common stock (including the Series A Preferred Stock) outstanding immediately prior to the 2024 Reverse Stock Split, and the shares of the Company’s common stock reserved for issuance under the Company’s equity incentive plans immediately prior to the 2024 Reverse Stock Split, were proportionally adjusted.

All common share and common stock per share amounts presented herein for all periods have been retroactively adjusted to reflect the impact of the 2024 Reverse Stock Split.

Recently Adopted Accounting Standards and Recently Issued Accounting Pronouncements

Recently Adopted Accounting Standard

In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”), related to income tax disclosures. The amendments in ASU 2023-09 are intended to enhance the transparency and decision usefulness of income tax disclosures primarily through changes to the rate reconciliation and income taxes paid information. This update is effective for annual periods beginning after December 15, 2024. The Company adopted ASU 2023-09 on January 1, 2025 and expects to provide enhanced income tax disclosures in its full year financial statements for the year ended December 31, 2025.

Recently Issued Accounting Pronouncement

In January 2025, the FASB issued ASU No. 2025-01, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date” (“ASU 2025-01”), to clarify the effective date of ASU 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40)” (“ASU 2024-03”), which requires disclosures by public entities about specific disaggregated information regarding specific costs and expenses, including purchases of inventory, employee compensation, depreciation, amortization, and depletion, in the notes to its financial statements. For public business entities, ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. The Company is currently evaluating the impact of adoption of ASU 2024-03 on its consolidated financial statements and related footnote disclosures.

Note 2. Accounts Receivable and Revenue Concentration

The following table is a summary of concentration of credit risk by customer revenue as a percentage of our total revenue:

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ONTRAK, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)


	Three Months Ended March 31,
Percentage of Revenue		2025		2024
Customer A		78.3	%	9.9	%
Customer B		13.8		—
Customer C		—		62.1
Customer D

SEC Form 10-Q filed by Ontrak Inc.