Form 4: Ontrak Director Peizer and Acuitas Group Holdings Report Acquisition of Senior Secured Promissory Note and Warrants

Terren S. Peizer, a director and 10% owner of Ontrak, Inc., along with Acuitas Group Holdings, LLC, reports the acquisition of a $1 million senior secured promissory note and warrants to purchase 760,456 shares of common stock.

Summary

• Terren S. Peizer, both a director and a 10% owner of Ontrak, Inc., and Acuitas Group Holdings, LLC jointly filed a Form 4.
• On September 30, 2024, Acuitas Capital LLC, wholly owned by Acuitas, purchased a $1 million senior secured promissory note (Demand Note) from Ontrak.
• The Demand Note is payable upon demand and is convertible into Ontrak's common stock at Acuitas Capital's option.
• The conversion price is the lesser of $5.40 and the greater of (i) the consolidated closing bid price immediately prior to conversion and (ii) $1.80, subject to adjustment.
• In connection with the note purchase, Ontrak issued Acuitas a warrant to purchase up to 760,456 shares of Ontrak's common stock, exercisable at $2.63 per share, also subject to adjustment.
• All share amounts and exercise/conversion prices reflect Ontrak's 1:15 reverse stock split, effective September 23, 2024.

Sentiment

Score: 4

Explanation: The sentiment is neutral to slightly negative. While the financing provides capital, the terms (convertible note, warrants) introduce potential dilution and financial risk.

Positives

• The investment by Acuitas Capital provides Ontrak with $1 million in funding.

Negatives

• The promissory note is secured, potentially increasing risk for other creditors.
• The conversion of the note and exercise of the warrants could dilute existing shareholders' equity.

Risks

• The Demand Note is payable upon demand, creating potential liquidity risk for Ontrak.
• The conversion price of the note is subject to adjustment, which could negatively impact Ontrak.
• The exercise of the warrants could further dilute existing shareholders.
• Ontrak's ability to meet its obligations under the Keep Well Agreement is crucial.

Future Outlook

The document does not contain explicit forward-looking statements beyond the terms of the note and warrant.

Industry Context

This type of financing arrangement, involving convertible notes and warrants, is relatively common for smaller companies seeking capital, but it can introduce complexity and potential dilution for existing shareholders.

Comparison to Industry Standards

• Similar financing structures are used by companies like Cassava Sciences (SAVA) and Ocugen (OCGN) to raise capital, often involving convertible notes and warrants.
• The terms of the note and warrant, such as the conversion price and exercise price, will be compared to similar deals in the biotech and healthcare technology sectors to assess their favorability.
• The potential dilution from the conversion of the note and exercise of the warrants will be a key consideration for investors, as it can impact earnings per share and shareholder value.

Related Party Transactions

• Acuitas Capital LLC, an entity wholly owned by Acuitas Group Holdings, LLC, purchased the senior secured promissory note from Ontrak.

Stakeholder Impact

• Shareholders may experience dilution if the note is converted and the warrants are exercised.
• Creditors may face increased risk due to the secured nature of the promissory note.

Key Dates

Keywords

Ontrak, Peizer, Acuitas, Promissory Note, Warrant, Form 4, Beneficial Ownership, Reverse Stock Split, Conversion, Dilution