# EDGAR Filing Document

**Accession Number:** 0001136174
**File Stem:** 0001628280-23-008088
**Filing Date:** 2023-3
**Character Count:** 40402
**Document Hash:** 7c3e2bd476e0e3d27be6174e9ac694e0
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001628280-23-008088.hdr.sgml**: 20230315

**ACCESSION NUMBER**: 0001628280-23-008088

**CONFORMED SUBMISSION TYPE**: 8-K

**PUBLIC DOCUMENT COUNT**: 15

**CONFORMED PERIOD OF REPORT**: 20230309

**ITEM INFORMATION**: Results of Operations and Financial Condition

**ITEM INFORMATION**: Cost Associated with Exit or Disposal Activities

**ITEM INFORMATION**: Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing

**ITEM INFORMATION**: Financial Statements and Exhibits

**FILED AS OF DATE**: 20230315

**DATE AS OF CHANGE**: 20230315

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Ontrak, Inc.
- **CENTRAL INDEX KEY:** 0001136174
- **STANDARD INDUSTRIAL CLASSIFICATION:** SERVICES-MISC HEALTH & ALLIED SERVICES, NEC [8090]
- **IRS NUMBER:** 880464853
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 8-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-31932
- **FILM NUMBER:** 23735216

**BUSINESS ADDRESS:**
- **STREET 1:** 2200 PASEO VERDE PARKWAY
- **STREET 2:** SUITE 280
- **CITY:** HENDERSON
- **STATE:** NV
- **ZIP:** 89052
- **BUSINESS PHONE:** 310 444 4300

**MAIL ADDRESS:**
- **STREET 1:** 2200 PASEO VERDE PARKWAY
- **STREET 2:** SUITE 280
- **CITY:** HENDERSON
- **STATE:** NV
- **ZIP:** 89052

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** CATASYS, INC.
- **DATE OF NAME CHANGE:** 20110316

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** HYTHIAM, INC.
- **DATE OF NAME CHANGE:** 20101029

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** HYTHIAM INC
- **DATE OF NAME CHANGE:** 20031003

?xml version="1.0" ? cats-20230309

**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): March 9, 2023

**Ontrak, Inc.** 

(Exact name of registrant as specified in its charter)

---

| | | |
|:---|:---|:---|
| **Delaware** | **001-31932** | **88-0464853** |
| (State or other jurisdiction<br>of incorporation) | (Commission File Number) | (IRS Employer<br>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:

---

| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;Title of each class | &nbsp;&nbsp;&nbsp;Trading Symbol(s) | &nbsp;&nbsp;&nbsp;Name of each exchange on which registered |
| &nbsp;&nbsp;&nbsp;Common Stock, $0.0001 par value | &nbsp;&nbsp;&nbsp;OTRK | &nbsp;&nbsp;&nbsp;The NASDAQ Global Market |
| &nbsp;&nbsp;&nbsp;9.50% Series A Cumulative Perpetual Preferred Stock, $0.0001 par value | &nbsp;&nbsp;&nbsp;OTRKP | &nbsp;&nbsp;&nbsp;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 2.02&nbsp;&nbsp;&nbsp;&nbsp;Results of Operations and Financial Condition.**

On March 15, 2023, Ontrak, Inc. (the "Company") issued a press release announcing its financial results for the quarter and year ended December 31 2022. The full text of the Company's press release is furnished herewith as Exhibit 99.1.

The information set forth under this "Item 2.02. Results of Operations and Financial Condition," including the exhibit attached hereto, shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

**Item 2.05&nbsp;&nbsp;&nbsp;&nbsp;Costs Associated with Exit or Disposal Activities.**

As part of the Company's continued cost saving measures and to reduce its operating costs and to help align with its previously stated strategic initiatives, on March 9, 2023, the Company implemented additional headcount reductions wherein approximately 19% of the Company's employee positions were eliminated. These headcount reductions are expected to result in a reduction of approximately $2.7 million of the Company's annual compensation costs. The Company estimates one-time costs of approximately $0.3 million of termination benefits to the impacted employees, including severance payments and benefits. The headcount reductions were completed by March 10, 2023.

**Item 3.01 Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing.**

As previously reported, on September 14, 2022, the Company received a letter from The Nasdaq Stock Market LLC ("Nasdaq") indicating that the Company no longer meets the minimum bid price requirement set forth in Nasdaq Listing Rule 5450(a)(1) (the "Minimum Bid Price Requirement") because the closing bid price for the Company's common stock was less than $1.00 for the previous 30 consecutive business days. Under Nasdaq Listing Rule 5810(c)(3)(A), the Company had a 180-calendar day grace period, or until March 13, 2023, to regain compliance with the Minimum Bid Price Requirement. On March 7, 2023, the Company applied to transfer the listing of its common stock from The Nasdaq Global Market to The Nasdaq Capital Market. On March 14, 2023, the Company received notice from Nasdaq that the Company's application was approved and that the Company is eligible for an additional 180-calendar day period, or until September 11, 2023, to regain compliance with the Minimum Bid Price Requirement. Both the Company's common stock and 9.50% Series A Cumulative Perpetual Preferred Stock will be transferred to The Nasdaq Capital Market at the opening of business on March 16, 2023. If at any time during the 180-calendar day period, the closing bid price of the Company's common stock is at least $1.00 per share for a minimum of 10 consecutive business days, Nasdaq will provide written confirmation of compliance, and the matter will be closed, unless Nasdaq exercises its discretion to require the Company to maintain a closing bid price for its common stock of at least $1.00 per share for more than 10 consecutive business days. In connection with the Company's application to transfer to The Nasdaq Capital Market, the Company notified Nasdaq of the Company's intention to cure the non-compliance with the Minimum Bid Price Requirement during the additional compliance period, such as by effecting a reverse stock split, if necessary. If the Company does not regain compliance with the Minimum Bid Price Requirement by September 11, 2023, Nasdaq will provide written notification that the Company's securities will be delisted. At that time, the Company expects to be afforded seven days to request that a Nasdaq hearings panel review the delisting determination. If the Company makes such request, the Company expects that its appeal will be heard by a Nasdaq hearing panel within 45 days of its request for a hearing. A timely request for a hearing will ordinarily stay the suspension and delisting action pending the issuance of a written panel decision. The Company is monitoring the closing bid price of its common stock and will consider options to regain compliance with the Minimum Bid Price Requirement. However, there can be no assurance that the Company will be able to regain compliance with the Minimum Bid Price Requirement.

**Item 9.01&nbsp;&nbsp;&nbsp;&nbsp;Financial Statements and Exhibits.**

&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp;Exhibits.

**<u>Exhibit No.</u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Description</u>**

99.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>[Press Release, da](q42022exhibit991.htm)[ted](q42022exhibit991.htm)[March 15,](q42022exhibit991.htm)[202](q42022exhibit991.htm)[3](q42022exhibit991.htm)[.](q42022exhibit991.htm)</u>

104&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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. | Ontrak, Inc. |
| Date: March 15, 2023 | By: | /s/ James J. Park |
|  |  | James J. Park |
|  |  | Chief Financial Officer |

---

## Exhibit 99.1

**Exhibit 99.1**

---

| | |
|:---|:---|
| ![image.jpg](image.jpg) | **News Release**<br>**For Immediate Release** |

---

**Ontrak Announces 2022 Fourth Quarter and Year End Financial Results**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**• Q4 Revenue of $2.5 million and Full Year Revenue of $14.5 million**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**• Company announces signing of new amendment with Optima Health to impact highest acuity members**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**• Company announces partnership with Lyssn, AI-based platform to strengthen coaching outcomes**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**• Company to Host Conference Call at 4:30 pm ET Today** 

Henderson, NV – March 15, 2023 – **Ontrak, Inc. (NASDAQ: OTRK)** ("Ontrak" or the "Company"), a leading AI-powered and telehealth-enabled healthcare company, today reported its financial results for the fourth quarter and year ended December 31, 2022.

**Management Commentary** 

"We are pleased with the progress we are making across our strong sales pipeline and the positive momentum we continue to build with our prospects," said Brandon LaVerne, chief executive officer of Ontrak. "As we continue our focus on driving adoption, we believe the enhancements to our go-to-market strategy will accelerate our return to growth. Through this refined strategy, we offer our prospects and our customers the flexibility to design a program that directly addresses their needs, while maximizing our differentiated platform."

Mr. LaVerne continued, "We are confident that our business strategy positions us well for a bright future ahead. We remain focused on executing across our growth initiatives and delivering on our mission to provide durable, value-based outcomes for our members and for our customers."

**Fourth Quarter 2022 Financial Results Highlights** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Revenue for the fourth quarter of 2022 was $2.5 million, representing a 76% decrease compared to the same period in 2021.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Operating loss for the fourth quarter of 2022 was $(8.0) million compared to an operating loss of $(18.0) million for the same period in 2021.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Adjusted EBITDA for the fourth quarter of 2022 was $(6.1) million compared to adjusted EBITDA of $(6.5) million for the same period in 2021.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Net loss for the fourth quarter of 2022 was $(9.1) million, or a $(0.42) diluted net loss per common share (after deduction for declared and undeclared preferred stock dividends), compared to net loss of $(20.1) million, or a $(1.12) diluted net loss per common share (after deduction for declared and undeclared preferred stock dividends) for the same period in 2021.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Non-GAAP net loss for the fourth quarter of 2022 was $(7.6) million, or a $(0.36) non-GAAP diluted net loss per common share (after deduction for declared and undeclared preferred stock dividends), compared to non-GAAP net loss of $(9.4) million, or a $(0.59) non-GAAP diluted net loss per common share (after deduction for declared and undeclared preferred stock dividends) for the same period in 2021.

Adjusted EBITDA, non-GAAP net loss and non-GAAP diluted net loss per common share are non-GAAP financial measures. See our description and reconciliation of such non-GAAP measures at the end of this release.

------

**Fiscal Year 2022 Financial Results Highlights**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**•** Revenue for the full year of 2022 was $14.5 million, representing an 83% decrease from prior year.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Operating loss for the full year of 2022 was $(44.1) million compared to an operating loss of $(28.0) million for the prior year.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Adjusted EBITDA for the full year of 2022 was $(31.5) million compared to adjusted EBITDA of $(3.5) million for the prior year.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Net loss for the full year of 2022 was $(51.6) million, or a $(2.60) diluted net loss per common share (after deduction for declared and undeclared preferred stock dividends), compared to net loss of $(37.1) million, or a $(2.47) diluted net loss per share for the prior year.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Non-GAAP net loss for the full year of 2022 was $(39.6) million, or a $(2.09) non-GAAP diluted net loss per common share (after deduction for declared and undeclared preferred stock dividends), compared to non-GAAP net loss of $(14.6) million, or a $(1.26) non-GAAP diluted net loss per share (after deduction for declared and undeclared preferred stock dividends) for the prior year.

**Fourth Quarter 2022 and Recent Operating Highlights**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Total enrolled members numbered 1,333 at the end of Q4 2022.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• In November 2022, the Company and Acuitas Capital, LLC ("Acuitas"), an entity indirectly wholly owned and controlled by Terren S. Peizer, the Company's largest stockholder and former Chief Executive Officer and Chairman, entered into an amendment to the Master Note Purchase Agreement entered into between the Company and Acuitas in April 2022 (as amended to date, the "Keep Well Agreement"), pursuant to which, among other things: the maturity date of borrowings thereunder was extended from September 1, 2023 to June 30, 2024; the remaining amount available for borrowing was increased from $10.7 million to $14.0 million, and the Company's obligation to pay accrued interest on a monthly basis was eliminated, and instead accrued interest will be added to principal. As a result of the approval by the Company's stockholders of a proposal submitted at the special meeting of stockholders held in February 2023, in accordance with the terms of the Keep Well Agreement, Acuitas received additional shares of the Company's common stock, the warrant coverage on warrants previously issued, and to be issued in the future, to Acuitas under the Keep Well Agreement was increased, and Acuitas has the right to convert the principal amount of its loans to the Company under the Keep Well Agreement and accrued interest into shares of the Company's common stock. Acuitas funded $4 million under the Keep Well Agreement in each of January and March 2023.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•*** On December 15, 2022, the Company announced the publishing of its Treatment Effect Study in the prestigious American Journal of Managed Care, an independent peer-reviewed journal. The Company's Treatment Effect Study highlights and validates the effectiveness of the Company's whole-person approach through care coaching interventions and behavioral health provider referrals, engaging high acuity populations with chronic comorbidities and underlying behavioral health conditions to drive behavior change, improve health outcomes, and lower costs.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•*** In March 2023, as part of the Company's continued cost saving measures and to reduce its operating costs and to help align with its previously stated strategic initiatives, the Company implemented additional headcount reductions wherein approximately 19% of the Company's employee positions were eliminated, which is expected to result in a reduction of approximately $2.7 million of annual compensation costs.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•*** On March 2, 2023, Terren S. Peizer resigned as a member of the Board of Directors, as Chairman of the Board, as Executive Chairman, and as Chief Executive Officer of the Company, effective immediately. Mr. Peizer explained that his resignation was for the good of the Company and to minimize any distraction from the important work that the Company does. The Company's Board of Directors appointed Brandon H. LaVerne as Interim Chief Executive Officer and Mary Louise Osborne as President. Mr. LaVerne continues to serve as the Company's Chief Operating Officer and Ms. Osbourne continues to serve as the Company's Chief Commercial Officer.

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•*** On March 9, 2023, the Company announced its partnership with Lyssn, an innovative software platform that uses AI and natural language processing to enhance communication and outcomes between healthcare professionals and their members. The partnership will provide the Company's care coaches real-time analysis and feedback on the fidelity of Motivational Interviewing (MI) during coaching calls with members.

**Financial Outlook**

The following outlook is based on information available as of the date of this press release and is subject to change in the future.

For the year ending December 31, 2023, the Company estimates revenue in the range of $12 to $14 million. The foregoing estimate is based on existing and currently planned enrollment launches, currently anticipated program expansions with current health plan partners, current expectations with the Company's existing customers regarding outreach pool, budget considerations and timing of expansions.

**Conference Call & Webcast Details**

The Company will host a conference call/webcast today at 4:30 pm ET/1:30 pm PT. Investors, analysts, employees and the general public can access the call by registering online for dial-in information or via live audio webcast at: https://ontrakhealth.com/investors/presentations-events. Participants interested in dialing in to the conference call are requested to register a day in advance or at a minimum 15 minutes before the start of the call to obtain a unique pin for the call.

A replay of the call will be available via webcast for on-demand listening shortly after the completion of the call, at the same web link, and will remain available for approximately 90 days.

**About Ontrak, Inc.**

Ontrak, Inc. is a leading AI and telehealth-enabled healthcare company, whose mission is to help improve the health and save the lives of as many people as possible. Ontrak identifies, engages, activates and provides care pathways to treatment for the most vulnerable members of the behavioral health population who would otherwise fall through the cracks of the healthcare system. We engage individuals with anxiety, depression, substance use disorder and chronic disease through personalized care coaching and customized care pathways that help them receive the treatment and advocacy they need, despite the socio-economic, medical and health system barriers that exacerbate the severity of their comorbid illnesses. The company's integrated intervention platform uses AI, predictive analytics and digital interfaces combined with dozens of care coach engagements to deliver improved member health, better healthcare system utilization, and durable outcomes and savings to healthcare payors.

Learn more at www.ontrakhealth.com

**Forward-Looking Statements**

This press release contains "forward-looking" statements that are based on the Company's beliefs and assumptions and on information currently available to the Company on the date of this press release and are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as "may," "will," "could," "should," "believes," "estimates," "projects," "potential," "expects," "plan," "anticipates," "intends," "continues," "forecast," "designed," "goal," or the negative of those words or other comparable words. Forward-looking statements may include, but are not limited to, the Company's belief that its strategy will accelerate the Company's return to growth, maximize the Company's differentiated platform, and strengthen the Company's position, the Company's expectations regarding reductions in costs resulting from its cost saving measures, and the Company's estimated revenue for 2023. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the Company's actual results, performance or achievements to be materially different from those expressed or implied by forward-looking statements, including, without limitation, risks related to: the Company's ability to successfully execute on its strategy and business plan; the Company's ability to increase its revenue and efficiently manage expenses and achieve profitability; the Company's high customer concentration and the ability of its customers to terminate their contracts for convenience; the adequacy of the Company's existing cash resources and anticipated capital commitments and future cash requirements to enable the Company to continue as a going concern; the Company's ability to raise additional capital when needed; difficulty enrolling new members and maintaining existing members in the Company's programs; the

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effectiveness of the Company's treatment programs; lower than anticipated eligible members under the Company's contracts; the Company's dependence on key personnel and the Company's ability to recruit and retain key personnel; the Company's ability to maintain the listing of its stock on Nasdaq; the outcomes of ongoing legal proceedings brought by the U.S. Department of Justice and the Securities and Exchange Commission against the Company's largest stockholder and former Chief Executive Officer and Chairman, and whether governmental authorities will institute separate investigations or proceedings against the Company and/or its current or former executives and/or directors; substantial regulation in the health care industry; changes in regulations or issuance of new regulations or interpretations; the Company's limited operating history; difficulty in developing, exploiting and protecting proprietary technologies; business disruption and related risks resulting from the COVID-19; general economic conditions, nationally and globally, and their effect on the market for our service; intense competition and competitive pressures and trends in the Company's industry and the Company's ability to successfully compete; changes in laws, regulations, or policies; and risks related to the Company's ability to realize the potential benefits of and to effectively integrate acquisitions. For a further list and description of the risks and uncertainties the Company faces, please refer to the Company's most recent Securities and Exchange Commission filings which are available on its website at http://www.sec.gov. Forward-looking statements are current only as of the date they are made and the Company assumes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

**Non-GAAP Financial Measures** 

To supplement its consolidated financial statements, which are prepared and presented in accordance with U.S. generally accepted accounting principles, or GAAP, the Company has provided in this press release and the quarterly conference call held on the date hereof certain non-GAAP financial measures. The non-GAAP financial measures presented include EBITDA, Adjusted EBITDA, Non-GAAP net loss, and Non-GAAP net loss per common share, which are not U.S. GAAP financial measures. We believe that the presentation of these financial measures enhances an investor's understanding of our financial performance. We further believe that these financial measures are useful financial metrics to assess our operating performance from period-to-period by excluding certain items that we believe are not representative of our core business.

EBITDA consists of net loss before interest, taxes, depreciation and amortization expenses. Adjusted EBITDA consists of net loss before interest, taxes, depreciation, amortization, stock-based compensation, restructuring, severance and related costs, acquisition related costs, and loss (gain) on change in fair value of warrant liability and contingent liability. We believe that making such adjustments provides investors meaningful information to understand our results of operations and the ability to analyze our financial and business trends on a period-to-period basis.

Non-GAAP net loss consists of net loss adjusted for stock-based compensation, write-off of debt discount costs, restructuring, severance and related costs, acquisition related costs and loss (gain) on change in fair value of warrant liabilities and contingent liability. Non-GAAP net loss per common share consists of loss per share adjusted for non-GAAP net loss attributable to common stockholders. We believe that making such adjustments provides investors meaningful information to understand our results of operations and the ability to analyze our financial and business trends on a period-to-period basis.

We believe the above non-GAAP financial measures are commonly used by investors to evaluate our performance and that of our competitors. However, our use of the term EBITDA, Adjusted EBITDA, Non-GAAP net loss and Non-GAAP net loss per common share may vary from that of others in our industry. None of EBITDA, Adjusted EBITDA, Non-GAAP net loss or Non-GAAP net loss per common share should be considered as an alternative to net loss before taxes, net loss, net loss per common share or any other performance measures derived in accordance with U.S. GAAP as measures of performance.

See the Reconciliation of Non-GAAP Measures table at the end of this press release for a reconciliation of the Non-GAAP financial measures to U.S. GAAP financial measures.

**Contact**

<u>For Investors:</u>

Ryan Halsted

Gilmartin Group

investors@ontrakhealth.com

------

**ONTRAK, INC.**

**Consolidated Statements of Operations**

***(in thousands, except per share data)***

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended <br>December 31,** | **Three Months Ended <br>December 31,** | **Year Ended <br>December 31,** | **Year Ended <br>December 31,** |
| | **2022** | **2021** | **2022** | **2021** |
| Revenue | $2510 | $10332 | $14514 | $84133 |
| Cost of revenue | 973 | 4089 | 7461 | 31214 |
| Gross profit | $1537 | $6243 | $7053 | $52919 |
| Operating expenses: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Research and development | 1861 | 4748 | 10974 | 18279 |
| &nbsp;&nbsp;&nbsp;&nbsp;Sales and marketing | 1113 | 2056 | 5006 | 9895 |
| &nbsp;&nbsp;&nbsp;&nbsp;General and administrative | 6562 | 9808 | 34256 | 43774 |
| &nbsp;&nbsp;&nbsp;&nbsp;Restructuring, severance and related charges |  | 7613 | 934 | 8952 |
| Total operating expenses | 9536 | 24225 | 51170 | 80900 |
| Operating loss | (7999) | (17982) | (44117) | (27981) |
| Other expense, net | (248) | (9) | (3461) | (1013) |
| Interest expense, net | (911) | (1907) | (3907) | (7997) |
| Loss before income taxes | (9158) | (19898) | (51485) | (36991) |
| Income tax benefit (expense) | 52 | (153) | (88) | (153) |
| Net loss | (9106) | (20051) | (51573) | (37144) |
| Dividends on preferred stock - declared and undeclared | (2238) | (2238) | (8954) | (8954) |
| Net loss attributable to common stockholders | $(11344) | $(22289) | $(60527) | $(46098) |
| Net loss per common share, basic and diluted | $(0.42) | $(1.12) | $(2.60) | $(2.47) |
| Weighted-average common shares outstanding, basic and diluted | 27032 | 19902 | 23265 | 18656 |

---

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**ONTRAK, INC.**

**Consolidated Balance Sheets**

***(in thousands, except share and per share data)***

---

| | | |
|:---|:---|:---|
| | **December 31,** | **December 31,** |
| | **2022** | **2021** |
| **Assets** |  |  |
| Current assets: |  |  |
| &nbsp;&nbsp; Cash and cash equivalents | $5032 | $58824 |
| &nbsp;&nbsp; Restricted cash - current | 4477 | 6716 |
| &nbsp;&nbsp; Receivables, net | 973 | 5938 |
| &nbsp;&nbsp; Unbilled receivables | 453 | 3235 |
| &nbsp;&nbsp; Deferred costs - current | 156 | 600 |
| &nbsp;&nbsp; Prepaid expenses and other current assets | 3168 | 5019 |
| **Total current assets** | **14259** | **80332** |
| Long-term assets: |  |  |
| &nbsp;&nbsp; Property and equipment, net | 2498 | 3785 |
| &nbsp;&nbsp; Restricted cash - long-term | 204 | 406 |
| &nbsp;&nbsp; Goodwill | 5713 | 5713 |
| &nbsp;&nbsp; Intangible assets, net | 1125 | 2346 |
| &nbsp;&nbsp; Other assets | 1326 | 444 |
| &nbsp;&nbsp; Operating lease right-of-use assets | 632 | 656 |
| **Total assets** | $**25757** | $**93682** |
| **Liabilities and stockholders' equity** |  |  |
| Current liabilities: |  |  |
| &nbsp;&nbsp; Accounts payable | $1927 | $1001 |
| &nbsp;&nbsp; Accrued compensation and benefits | 1987 | 2343 |
| &nbsp;&nbsp; Deferred revenue | 326 | 441 |
| &nbsp;&nbsp; Current portion of operating lease liabilities | 653 | 595 |
| &nbsp;&nbsp; Other accrued liabilities | 4576 | 5953 |
| **Total current liabilities** | **9469** | **10333** |
| Long-term liabilities: |  |  |
| &nbsp;&nbsp; Long-term debt, net | 10065 | 35792 |
| &nbsp;&nbsp; Long-term operating lease liabilities | 546 | 932 |
| &nbsp;&nbsp; Long-term finance lease liabilities |  | 136 |
| &nbsp;&nbsp; Other liabilities |  | 934 |
| **Total liabilities** | **20080** | **48127** |
| **Commitments and contingencies** |  |  |
| Stockholders' equity: |  |  |
| &nbsp;&nbsp; Preferred stock, $0.0001 par value; 50,000,000 shares authorized; 3,770,265 shares issued and outstanding at each of December 31, 2022 and 2021 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common stock, $0.0001 par value, 500,000,000 shares authorized; 27,167,479 and <br>&nbsp;&nbsp;&nbsp;&nbsp;20,680,186 shares issued and outstanding at December 31, 2022 and 2021, respectively | 3 | 2 |
| &nbsp;&nbsp; Additional paid-in capital | 448415 | 436721 |
| &nbsp;&nbsp; Accumulated deficit | (442741) | (391168) |
| **Total stockholders' equity** | **5677** | **45555** |
| **Total liabilities and stockholders' equity** | $**25757** | $**93682** |

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**ONTRAK, INC.**

**Consolidated Statements of Cash Flows**

***(in thousands)***

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| | | | |
|:---|:---|:---|:---|
| | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
| | **2022** | | **2021** |
| **Cash flows from operating activities** |  |  |  |
| Net loss | $(51573) |  | $(37144) |
| Adjustments to reconcile net loss to net cash used in operating activities: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Stock-based compensation expense | 7532 |  | 11858 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Write-off of debt issuance costs | 3334 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Restructuring and related costs |  |  | 6297 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Paid-in-kind interest expense | 553 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Write-off of other asset | 259 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Depreciation expense | 2494 |  | 1070 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Amortization expense | 2706 |  | 2941 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Gain on forgiveness of PPP loan |  |  | (171) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Change in fair value of warrants | (133) |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Change in fair value of contingent consideration |  |  | 1315 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 401(k) employer match in common shares | 628 |  | 1105 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Common stock issued for consulting services | 102 |  |  |
| Changes in operating assets and liabilities: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Receivables | 4965 |  | 10744 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Unbilled receivables | 2781 |  | 1191 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Prepaid and other assets | 1558 |  | (867) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accounts payable | 791 |  | (314) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred revenue | (115) |  | (20513) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Lease liabilities | (328) |  | (310) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other accrued liabilities | 480 |  | (3357) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in operating activities | (23966) | -23966000 | (26155) |
| **Cash flows from investing activities** |  |  |  |
| Purchases of property and equipment | (1156) |  | (4480) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in investing activities | (1156) |  | (4480) |
| **Cash flows from financing activities** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Repayment of 2024 Notes | (39194) |  | (10807) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from Keep Well Notes | 11000 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Proceeds from issuance of common stock | 4000 |  | 11142 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Common stock issuance costs | (706) |  | (271) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Dividends paid | (2239) |  | (8954) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Debt issuance costs | (907) |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Proceed from warrant exercise |  |  | 58 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Proceed from options exercise |  |  | 5584 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Payment of taxes related to net-settled stock awards | (6) |  | (24) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Finance lease obligations | (282) |  | (325) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Financed insurance premium payments | (2777) |  | (3032) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in financing activities | (31111) |  | (6629) |
| Net change in cash and restricted cash | (56233) |  | (37264) |
| Cash and restricted cash at beginning of period | 65946 |  | 103210 |
| **Cash and restricted cash at end of period** | $**9713** |  | $**65946** |
| **Supplemental disclosure of cash flow information:** |  |  |  |
| Interest paid | $2330 |  | $7146 |
| Income taxes paid | 136 |  | 108 |
| **Non-cash financing and investing activities:** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common stock issued in connection with Keep Well Agreement | $1249 |  | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Warrants issued in connection with 2024 Notes | 458 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Warrants issued in connection with Keep Well Notes | 544 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued debt issuance costs | 5 |  |  |
| Common stock issued to settle contingent liability | 293 |  | 1443 |
| Financed insurance premiums | 2474 |  | 3144 |
| Finance lease and accrued purchases of property and equipment | 171 |  | 162 |

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**ONTRAK, INC.**

**Reconciliation of Non-GAAP Measures** 

***(in thousands, except per share data)***

**<u>Reconciliation of Operating Loss to EBITDA and Adjusted EBITDA</u>** 

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended <br>December 31,** | **Three Months Ended <br>December 31,** | **Year Ended <br>December 31,** | **Year Ended <br>December 31,** |
| | **2022** | **2021** | **2022** | **2021** |
| Operating loss | $(7999) | $(17982) | $(44117) | $(27981) |
| Depreciation expense | 272 | 412 | 2494 | 1070 |
| Amortization expense (1) | 413 | 514 | 1630 | 2061 |
| EBITDA | (7314) | (17056) | (39993) | (24850) |
| Stock-based compensation expense | 1250 | 2987 | 7532 | 11858 |
| Restructuring, severance and related costs (2) |  | 7613 | 934 | 8952 |
| Acquisition related costs (3) |  |  |  | 583 |
| Adjusted EBITDA | $(6064) | $(6456) | $(31527) | $(3457) |

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**<u>Reconciliation of Net Loss to Non-GAAP Net Loss; and Net Loss per Common Share to Non-GAAP Net Loss per Common Share</u>**

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended <br>December 31,** | **Three Months Ended <br>December 31,** | **Year Ended <br>December 31,** | **Year Ended <br>December 31,** |
| | **2022** | **2021** | **2022** | **2021** |
| Net loss | $(9106) | $(20051) | $(51573) | $(37144) |
| Stock-based compensation expense | 1250 | 2987 | 7532 | 11858 |
| Write-off of debt issuance costs (4) |  |  | 3334 |  |
| Restructuring, severance and related costs (2) |  | 7613 | 934 | 8952 |
| Write-off of other asset | 259 |  | 259 |  |
| Gain on change in fair value of warrant liability | (12) |  | (133) | (29) |
| Loss on change in fair value of contingent liability (5) |  | 10 |  | 1315 |
| Acquisition related costs (3) |  |  |  | 583 |
| Gain on forgiveness of PPP loan (6) |  |  |  | (171) |
| Non-GAAP net loss | (7609) | (9441) | (39647) | (14636) |
| Dividends on preferred stock - declared and undeclared | (2238) | (2238) | (8954) | (8954) |
| Non-GAAP net loss attributable to common stockholders | $(9847) | $(11679) | $(48601) | $(23590) |
| Net loss per common share - basic and diluted | $(0.42) | $(1.12) | $(2.60) | $(2.47) |
| Non-GAAP net loss per common share - basic and diluted | (0.36) | (0.59) | (2.09) | (1.26) |
| Weighted-average common shares outstanding - basic and diluted | 27032 | 19902 | 23265 | 18656 |

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**_______________________** 

(1) Relates to operating and financing right-of-use assets and acquired intangible assets.

(2) Includes one-time severance and related benefit costs related to reduction in workforce for the year ended December 31, 2022, and restructuring charges relating to write-off of capitalized software, computers, equipment and related contract costs, as well as one-time severance and related benefit costs and impairment of a right-of-use operating asset related to our headquarters office lease for the three months and year ended December 31, 2021.

(3) Includes external legal, accounting, and advisory costs associated with acquisition activity.

(4) Represents write-off of debt issuance costs related to senior secured notes paid off in July 2022.

(5) Relates to loss resulting from change in fair value of contingent liability related to a stock price guarantee associated with an acquisition.

(6) Relates to gain recognized upon forgiveness of LifeDojo's PPP loan in May 2021.