Form 4: Ontrak Insider Terren S. Peizer Boosts Stake with $1.3 Million Convertible Note and Warrants

Terren S. Peizer, a 10% owner and Director of Ontrak, Inc., through Acuitas Capital, acquired a $1.3 million senior secured convertible promissory note and warrants to purchase 1.63 million shares of common stock.

Summary

• Terren S. Peizer, a Director and 10% owner of Ontrak, Inc., and Acuitas Group Holdings, LLC, jointly filed a Form 4 reporting a significant transaction.
• Acuitas Capital LLC, an entity wholly owned by Acuitas Group Holdings, LLC (where Mr. Peizer is Chairman and sole member), purchased a senior secured convertible promissory note from Ontrak, Inc. for a principal amount of $1,300,000.
• The Demand Note, dated May 27, 2025, is payable upon demand and is convertible into Ontrak's common stock at Acuitas Capital's option.
• The conversion price for the note 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, Acuitas was issued a five-year warrant, dated May 27, 2025, to purchase up to 1,635,220 shares of Ontrak's common stock.
• The warrant is exercisable upon issuance at an initial exercise price of $1.59 per share, subject to adjustment, and expires on May 27, 2030.
• These transactions were executed pursuant to the Sixth Amendment to the Master Note Purchase Agreement, dated March 28, 2024.

Sentiment

Score: 6

Explanation: The transaction provides $1.3 million in capital to Ontrak, which is positive for liquidity. However, it introduces potential future dilution from the convertible note and warrants, which could be a concern for existing shareholders.

Positives

• Ontrak, Inc. received $1,300,000 in funding through the senior secured convertible promissory note, improving its capital position.
• A significant insider and 10% owner, Terren S. Peizer, through Acuitas, is increasing their financial commitment and stake in the company, which can be seen as a vote of confidence.

Negatives

• The promissory note is 'payable upon demand,' which could potentially create liquidity pressure for Ontrak if Acuitas Capital demands repayment.
• The conversion price range ($1.80 to $5.40) and the warrant exercise price ($1.59) are relatively low, indicating potential significant dilution for existing shareholders if the note is converted and warrants are exercised.

Risks

• Potential future dilution of existing shareholders' equity due to the conversion of the $1,300,000 promissory note into common stock.
• Further dilution risk from the exercise of warrants to purchase up to 1,635,220 shares of common stock.
• The 'payable upon demand' nature of the senior secured promissory note could pose a liquidity risk to Ontrak if the holder chooses to demand repayment.

Future Outlook

The transaction provides Ontrak with additional capital and grants Acuitas Capital the option to convert debt into equity and acquire additional shares, indicating potential future changes in the company's capital structure and ownership concentration. The exercise of warrants and conversion of the note will depend on future stock performance and Acuitas Capital's strategic decisions.

Industry Context

This transaction represents a financing event for Ontrak, Inc., utilizing a convertible note and warrants. Such instruments are common financing mechanisms, particularly for companies seeking capital while deferring immediate equity dilution or attracting strategic investors. The involvement of a significant insider and 10% owner in providing this capital is notable within the context of corporate financing strategies.

Related Party Transactions

• Terren S. Peizer, a Director and 10% owner of Ontrak, Inc., is also the Chairman and sole member of Acuitas Group Holdings, LLC. Acuitas Group Holdings, LLC, through its wholly-owned entity Acuitas Capital LLC, entered into the financing agreement with Ontrak, making this a related-party transaction.

Stakeholder Impact

• Shareholders: Potential future dilution of their ownership percentage if the convertible note is converted and warrants are exercised at the stated prices.
• Company: Improved liquidity and capital position due to the $1.3 million funding, which can support operations or strategic initiatives.

Next Steps

• Potential conversion of the senior secured convertible promissory note into Ontrak common stock by Acuitas Capital LLC.
• Potential exercise of the common stock purchase warrants by Acuitas to acquire additional shares.

Key Dates

Keywords

Ontrak, OTRK, Terren S. Peizer, Acuitas, convertible note, promissory note, warrant, insider transaction, Form 4, beneficial ownership, equity financing, dilution, capital raise