Form 4: Ontrak Director and 10% Owner Acquires Convertible Note and Warrants in $250,000 Capital Infusion

Terren S. Peizer, a Director and 10% owner of Ontrak, Inc., through his affiliated entities, has acquired a $250,000 senior secured convertible promissory note and warrants to purchase 359,712 shares of common stock, providing capital to the company.

Summary

• Terren S. Peizer, a Director and 10% owner of Ontrak, Inc., along with Acuitas Group Holdings, LLC and its wholly-owned entity Acuitas Capital LLC, reported the acquisition of derivative securities.
• Acuitas Capital LLC purchased a senior secured convertible promissory note from Ontrak, Inc. with a principal amount of $250,000.
• The note is convertible into Ontrak's common stock at Acuitas Capital's option, with a conversion price equal to the lesser of $5.40 and the greater of the consolidated closing bid price immediately prior to conversion or $1.80.
• In connection with the note purchase, Acuitas Group Holdings, LLC was issued a five-year warrant to purchase up to 359,712 shares of Ontrak's common stock.
• The warrant is exercisable upon issuance at an initial exercise price of $1.39 per share and expires on June 18, 2030.
• These transactions were made pursuant to the Sixth Amendment to the Master Note Purchase Agreement, dated March 28, 2024.
• The transaction was made pursuant to a Rule 10b5-1(c) plan.

Sentiment

Score: 6

Explanation: The capital infusion is positive for liquidity and shows insider confidence, but the potential for future dilution from the convertible note and warrants, along with the demand feature of the note, introduces some negative aspects and risks for existing shareholders.

Positives

• The company received a $250,000 capital infusion through the sale of a senior secured convertible promissory note.
• The capital comes from a significant insider (Director and 10% owner), indicating continued support and confidence from a key stakeholder.
• The transaction was pre-planned under a Rule 10b5-1(c) plan, suggesting a structured approach to financing.

Negatives

• The issuance of a convertible note and warrants could lead to dilution for existing shareholders if converted/exercised.
• The conversion price for the note has a floor of $1.80, which is below the $5.40 cap, suggesting potential conversion at a lower price if the stock price declines.
• The note is 'payable upon demand,' which could create liquidity pressure for Ontrak if Acuitas Capital demands repayment.

Risks

• Dilution Risk: Conversion of the promissory note and exercise of the warrants will increase the number of outstanding common shares, potentially diluting the ownership percentage and earnings per share of existing shareholders.
• Conversion Price Volatility: The conversion price of the note is variable, potentially allowing conversion at a lower price if Ontrak's stock price falls, leading to greater dilution.
• Demand Note Risk: The note is payable upon demand, which could create an immediate liquidity obligation for Ontrak if the holder chooses to demand repayment.
• Share Price Impact: The potential for future dilution from conversion/exercise could put downward pressure on the company's stock price.

Future Outlook

The document indicates a future potential for conversion of the promissory note into common stock and exercise of warrants, which could lead to an increase in outstanding shares and potential dilution for existing shareholders. The note is payable upon demand, which could impact future liquidity.

Management Comments

• "This Form 4 is jointly filed by Terren S. Peizer ('Mr. Peizer') and Acuitas Group Holdings, LLC ('Acuitas') with respect to the issuer Ontrak, Inc. ('Ontrak'). Mr. Peizer is the Chairman and sole member of Acuitas and, in such capacity, exercises voting and investment power over any securities held for the accounts of Acuitas."
• "As previously disclosed, Ontrak and Acuitas Capital LLC, an entity wholly owned by Acuitas ('Acuitas Capital'), entered into the Sixth Amendment (the 'Sixth Amendment') to the Master Note Purchase Agreement, dated March 28, 2024 (as amended by the Sixth Amendment, the 'Keep Well Agreement'), pursuant to which Acuitas Capital purchased from Ontrak a senior secured promissory note (in the form attached thereto, the 'Demand Note'), dated as of June 18, 2025, in principal amount of $250,000."

Industry Context

This transaction represents an insider-led capital infusion for Ontrak, Inc., a company operating in the healthcare technology or behavioral health sector. Such transactions can be viewed as a sign of confidence from key stakeholders, but also highlight the company's need for additional capital, which is not uncommon for growth-stage or financially challenged companies in this industry. The use of convertible notes and warrants is a common financing mechanism, particularly when traditional debt or equity financing might be more challenging or dilutive at current valuations.

Comparison to Industry Standards

• Direct comparison to specific companies or projects is not feasible as this is an insider transaction disclosure rather than a performance report.
• However, the use of convertible notes and warrants for capital raising is a standard practice across various industries, including healthcare technology, especially for companies seeking flexible financing options or those with fluctuating valuations.
• The terms of conversion and exercise prices would typically be evaluated against prevailing market conditions and the company's financial health relative to peers, but this document does not provide sufficient detail for such a granular comparison.

Related Party Transactions

• Acuitas Capital LLC, an entity wholly owned by Acuitas Group Holdings, LLC (which is controlled by Director and 10% owner Terren S. Peizer), purchased a $250,000 senior secured convertible promissory note from Ontrak, Inc.
• Acuitas Group Holdings, LLC was issued a five-year warrant to purchase 359,712 shares of Ontrak's common stock in connection with the note purchase.

Stakeholder Impact

• Shareholders: Potential for future dilution if the convertible note is converted or warrants are exercised, which could impact share price and ownership percentage. However, the capital infusion provides financial stability.
• Company (Ontrak): Receives $250,000 in capital, improving liquidity and potentially funding operations or strategic initiatives. Faces potential future dilution and the obligation of a demand note.
• Acuitas/Terren S. Peizer: Increases their potential ownership stake and influence in Ontrak through convertible securities and warrants, while providing financial support.

Next Steps

• Potential conversion of the Senior Secured Convertible Promissory Note into common stock by Acuitas Capital LLC.
• Potential exercise of the Common Stock Purchase Warrant by Acuitas Group Holdings, LLC.
• Potential demand for repayment of the Senior Secured Convertible Promissory Note by Acuitas Capital LLC.

Key Dates

Recommendation

Keywords

Ontrak Inc., OTRK, SEC Form 4, Insider Trading, Terren S. Peizer, Acuitas Group Holdings, Convertible Note, Warrants, Capital Raise, Dilution, Corporate Governance, 10% Owner, Director, Rule 10b5-1