Form 4: Ontrak Insider Terren S. Peizer and Acuitas Group Holdings Acquire $1.5 Million Note and Warrants

Terren S. Peizer, Chairman of Acuitas Group Holdings, reports the acquisition of a $1.5 million senior secured convertible promissory note and warrants to purchase over 13 million shares of Ontrak's common stock.

Summary

• Terren S. Peizer, both a Director and a 10% Owner of Ontrak, Inc., along with Acuitas Group Holdings, LLC, jointly filed a Form 4.
• On August 28, 2024, Acuitas Capital LLC, wholly owned by Acuitas, purchased a senior secured promissory note from Ontrak for $1.5 million, as per the Sixth Amendment to the Master Note Purchase Agreement.
• The promissory note, termed the 'Demand Note', is payable upon demand and convertible into Ontrak's common stock at Acuitas Capital's option.
• The conversion price is the lesser of $0.36 or the greater of the closing bid price immediately prior to conversion or $0.12, subject to adjustments.
• In connection with the note purchase, Ontrak issued Acuitas a five-year warrant to purchase 13,233,348 shares of Ontrak's common stock at an initial exercise price of $0.2267 per share, also subject to adjustments.

Sentiment

Score: 5

Explanation: Neutral sentiment. The transaction provides Ontrak with needed capital, but the potential dilution from the convertible note and warrants is a concern.

Positives

• Ontrak secured $1.5 million in funding through the sale of a senior secured promissory note.

Negatives

• The conversion of the note and exercise of the warrants could dilute existing shareholders' equity.

Risks

• The conversion price of the note is subject to adjustment, potentially leading to a lower conversion price and greater dilution.
• The exercise of the warrants could put downward pressure on the stock price if a large number of shares are issued.

Future Outlook

The document does not contain explicit forward-looking statements from Ontrak regarding future performance or guidance.

Management Comments

• Mr. Peizer, as Chairman and sole member of Acuitas, exercises voting and investment power over securities held by Acuitas.

Industry Context

This type of transaction, involving convertible notes and warrants, is common for companies seeking capital, especially smaller companies or those in turnaround situations. It provides immediate funding but can have dilutive effects on existing shareholders.

Comparison to Industry Standards

• Similar transactions involving convertible notes and warrants are often seen with companies like Cassava Sciences (SAVA) or Ocugen (OCGN), which have also utilized such instruments for financing.
• The terms of the note, including the conversion price and warrant exercise price, would need to be compared to similar deals in the healthcare technology sector to assess their favorability.

Related Party Transactions

• The transaction involves Acuitas Capital, an entity wholly owned by Acuitas Group Holdings, and Terren S. Peizer, who is the Chairman of Acuitas and a Director of Ontrak, indicating a related-party transaction.

Stakeholder Impact

• Shareholders may experience dilution if the note is converted and the warrants are exercised.
• The funding provides Ontrak with capital, potentially benefiting the company's operations and employees.

Key Dates

Keywords

Ontrak, Acuitas Group Holdings, Terren S. Peizer, Form 4, Senior Secured Promissory Note, Warrant, Common Stock, Acquisition, Conversion, Dilution