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Ontrak, Inc. (NASDAQ:OTRK), a healthcare company specializing in providing data-driven, personalized behavioral health interventions, has entered into a financing agreement with Acuitas Capital LLC, according to a recent 8-K filing with the U.S. Securities and Exchange Commission. The company, currently valued at $6.66 million in market capitalization, has been experiencing significant financial challenges, with revenue declining by approximately 15% over the last twelve months to $10.85 million. According to InvestingPro analysis, Ontrak shows signs of being undervalued compared to its Fair Value. Under the terms of the agreement dated May 19, 2025, Acuitas has committed to purchasing up to $10 million in senior secured promissory notes from Ontrak. This financing comes at a crucial time, as InvestingPro data reveals the company is quickly burning through cash, with negative EBITDA of $16.99 million and a concerning debt-to-equity ratio of 0.95.
The agreement stipulates that Acuitas will buy up to $5 million in convertible promissory notes and up to $5 million in non-convertible promissory notes, both of which are payable upon demand. Ontrak has the flexibility to request Acuitas to purchase notes in increments of up to $1.5 million, subject to certain conditions. These conditions include the company’s efforts to raise capital through a registered equity offering, the absence of a material adverse change in the company’s business, and the requirement of sufficient unrestricted cash to meet its obligations for a 30-day period following a notice for funds.
Furthermore, the agreement restricts Ontrak from requesting Acuitas to purchase more than $1.5 million in notes within any 30-day period without Acuitas’ consent. Additionally, proceeds from any capital contributions or issuance of capital stock by Ontrak on or after May 19, 2025, may lead Acuitas to reduce the amount of notes to be purchased on a dollar-for-dollar basis.
In connection with the issuance of each convertible note, Ontrak will also issue warrants to Acuitas, allowing them to purchase shares of Ontrak’s common stock. The number of shares and the exercise price of these warrants will be determined based on the principal amount of the notes and the stock’s closing bid price at the time of issuance.
Acuitas has agreed not to demand payment on any notes until either September 1, 2026, or 30 days after purchasing the full $5 million in non-convertible notes, whichever comes first. No warrants will be issued in connection with the non-convertible notes, but the company will pay an additional amount in cash representing the difference in value between a convertible and a non-convertible note.
The terms of the agreement also provide for an adjustment mechanism for the exercise price of previously issued warrants if the exercise price exceeds the lowest volume-weighted average price of Ontrak’s common stock following the public announcement of the new financing agreement.
This financial arrangement is part of Ontrak’s broader strategy to secure the necessary capital to continue its operations and fulfill its financial obligations. The detailed terms of the May 2025 Agreement and the form of the Non-Convertible Demand Note are included as exhibits to the SEC filing. This news is based on a press release statement. With a current ratio of 1.09 and significant operational challenges ahead, investors seeking deeper insights into Ontrak’s financial health can access comprehensive analysis and additional ProTips through InvestingPro’s detailed research reports, which cover over 1,400 US stocks with expert analysis and actionable intelligence.
In other recent news, Ontrak Inc. reported its Q4 2024 financial results, revealing a revenue of $3.1 million, which marks an 11% decrease year-over-year. Despite the decline in revenue, the company has secured a $10 million financing commitment from Acuitas Capital, LLC, aimed at enhancing its growth and innovation in behavioral healthcare solutions. This financial boost is expected to support Ontrak’s expansion of its customer base and the development of its AI and digital capabilities. Additionally, Ontrak launched its new Whole Health Plus solution and reported growth in membership, increasing from 2,065 to 2,125 members.
The company is projecting significant growth in the coming years, with expectations to double its revenue in 2025 and again in 2026. Ontrak is actively expanding its presence in the Medicare Advantage market and enhancing its AI-driven engagement systems. In strategic developments, Ontrak has secured three new regional health plan customers and four health plan expansions over the past fourteen months. The company is also in late-stage discussions with a large Midwest plan, which could potentially double its run-rate revenue.
Ontrak’s gross margin for Q4 was reported at 61%, with cash reserves standing at $5.7 million, down from $9.7 million the previous year. The recent financing and strategic moves indicate a shift towards innovation and market expansion, aligning with broader industry trends in healthcare technology. CEO Brandon LaVerne has highlighted the potential for growth and the strategic shift to a value-based provider model, which aims to reshape the company’s economic framework.
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