Ontrak, Inc. (OTRKQ) Earnings Call Transcript & Summary

Ladies and gentlemen, I am Terren Peizer, Chairman of the Board of Directors of Ontrak, and Chairman of this annual meeting. As you know, we are hosting today's annual meeting through a virtual online platform hosted by Lumi. Before we proceed with the formal business of the annual meeting, I would like to introduce to you the members of the Board who are with us virtually today: Michael Sherman, member of our Board and Audit Committee and Chairman of our Compensation Committee and Nominations and Governance Committee; Richard A. Berman, member of our Board and Nominations and Governance Committee and Chairman of our Audit Committee. Also virtually attending this annual meeting of stockholders today are our company's executives, Mr. Brandon LaVerne, Co-President and Chief Operating Officer; and Mr. James Park, Chief Financial Officer and Corporate Secretary. In addition, our company's SEC Counsel, Mr. [ Norwood Beveridge ] and Ms. Lili Taheri of Loeb & Loeb and her company's auditors, Mr. Marc Fogarty and Mr. Ryan Berman are with us virtually today as well. After I describe and we fix each item to be voted on, we will open the polls for voting. After voting has completed on all matters on the agenda, we will close the polls, and the inspector of election will provide their preliminary report. We will not accept ballots, proxies, revocations or changes after the closing of the polls. If you have already submitted your vote by proxy and do not wish to change your vote, you do not need to vote now and your shares will be voted as previously instructed. If you intend to vote and have not already done so and are a stockholder of record, which means you hold your shares in your own name and not through a brokerage account as of July 15, 2022, you must submit your vote online now in order for it to be counted. If you are a stockholder record as of that date and have not yet voted, I encourage you to vote online now. I have asked Mr. James Park to act as Secretary of this annual meeting and to record the minutes of this annual meeting. Before considering the business to be discussed at this annual meeting, I would like Mr. Park to report on the formal steps taken in connection with the annual meeting.

Mr. Chairman, the Board of Directors has adopted resolutions, which provide that this annual meeting be held today and which fixed the close of business on July 15, 2022, as a record date for the determination of stockholders entitled to notice of and to vote at this annual meeting. I have an affidavit of [ Dominic Becker ], an employee of the American Stock Transfer & Trust Company, the company's transfer agent, AST, certifying that the notice of the Annual Meeting of Shareholders, proxy statement, annual report on Form 10-K and proxy card were first mailed on July 28, 2022, to each holder of the company's common stock at the close of business on the record date. I also have at this annual meeting a list of stockholders of the company's common stock as of the record date that were compiled by AST. Stockholders of record at the close of business on July 15, 2022, can contact the company to coordinate a view of this list by e-mailing [email protected]. According to this list, there were 20,966,127 shares of common stock issued and outstanding on the record date. Each outstanding share of common stock is entitled to one vote per share on the matter presented to this annual meeting.

Thank you, Mr. Park. I would like you to file the affidavit as to the mailing of the proxy material in the minute book of the company with the minutes of this annual meeting. The Board of Directors has adopted resolutions, which appoints Mr. Brandon LaVerne to act as Inspector of Election of this annual meeting. Inspector of Election has executed an oath to carry out his duties impartially and to the best of his ability. His function is to decide upon the qualifications of voters, accept their votes and when balloting on all matters is completed to tally the final votes.

Mr. Chairman, I will file this oath signed by the inspector of election with the records of the annual meeting.

The oath of the inspector of election will be filed with the minutes of this annual meeting. Will the inspector of the election now provide us with the count of the stockholders virtually present or by proxy.

Mr. Chairman, I can report that the number of shares virtually present or by proxy is more than 50% of the outstanding vote in stock of Ontrak. We, therefore, have a quorum and this annual meeting is duly constituted.

Since the holders of record of at least the majority of the outstanding shares of common stock entitled to vote at this annual meeting are virtually present or by proxy, I declare that a quorum is present. First order of business is the election of 3 directors to hold office until the next annual meeting and until their respective successors are selected and qualified. I note the supplement proxy materials filed with the SEC, Securities and Exchange Commission on August 26, 2022, indicating that Mr. Rob Rebak has resigned as a director and is not standing for reelection and accordingly, modifying the Board election proposal to be the election of 3 directors for the 3 board seats. The persons receiving an affirmative vote of shares of common stock representing the plurality of the votes cast on the proposal at the annual meeting shall hold that position for a term of 1 year or until the next annual meeting or until another is chosen in his or her stead. I hereby open the floor for nominations.

Mr. Chairman, as proxy for a stockholder of record of the company, I move that we nominate the slate of director candidates recommended to the stockholders by the Board of Directors, including the following persons each to serve for 1-year term as described in the proxy statement. Mr. Terren Peizer, Mr. Richard Berman; and Mr. Michael Sherman.

I second the motion. We have received no other nominations to elect directors of the company. The nominations are now closed and the Board proposal is approved for voting. The second order of business is the ratification of the appointment of EisnerAmper, LLP as the company's independent registered public accounting firm for the 2022 fiscal year, otherwise known the auditor's ratification proposal. This proposal needs to be approved by the affirmative vote of shares of common stock representing the majority of votes cast on the proposal virtually present or represented by proxy at the annual meeting. I will entertain a motion for the auditor's ratification proposal.

I so move.

I second the motion. The auditors ratification proposal is now closed and approved for voting. The third order of business is the approval of an amendment to the terms of the company's 2017 stock incentive plan as amended to the date of the 2017 plan to provide for an additional 4 million shares to be issued in connection with the [indiscernible] granted here under and to amend the evergreen or automatic replenishment provision of the 2017 plan pursuant to which the number of shares authorized for issuance under the nonbinding advisory resolution is automatically increased on an annual basis to 3% of the issued and outstanding shares of common stock of the company. This proposal needs to be approved by an affirmative vote of at least the majority of the votes cast on the proposal virtually present or represented by proxy at the annual meeting. I will entertain a motion for the 2017 plan amendment proposal.

I move that the 2017 plan amendment proposal be presented to the stockholders.

I second the motion. The 2017 plan amendment proposal is now closed and approved for voting. The fourth order of business is the approval of the issuance of shares of common stock of the company to Acuitas Capital LLC pursuant to the master note purchase agreement dated April 15, 2022. For the purpose of complying with NASDAQ's listing 5635 share issuance proposal. This proposal needs to be approved by an affirmative vote of at least a majority of the votes cast, and the proposal virtually present are represented by proxy at the annual meeting. I will entertain a motion for the shares issuance proposal.

I move that the share issuance proposal will be presented to the stockholders.

I second the motion. The share issuance proposal is now closed and approved for voting. The fifth order of business is the approval of the issuance of warrants and shares underlying such warrants to Acuitas capital pursuant to the master note purchase agreement dated April 15, 2022, for the purpose of complying with NASDAQ listing rule 5635 to the extent required, this proposal needs to be approved by an affirmative vote of at least a majority of the votes cast on the proposal virtually present or represented by proxy at the annual meeting. I will entertain a motion for the warrant issuance proposal.

I move that the warrant issuance proposal be presented to the stockholders.

I second the motion. The warrant issuance proposal is now closed and approved for voting. The sixth order of business is the approval of the director retention plan. This proposal needs to be approved by an affirmative vote of at least the majority of the votes cast and the proposal virtually present or represented by proxy at the annual meeting. I will entertain a motion to the director retention proposal.

I move that the director retention plan be presented to the stockholders.

I second the motion. The Director retention plan is now closed and approved for voting. The seventh order of business is the approval of the amendment to the company's amended and restated articles of incorporation as amended to remove certain restrictions on transfers of the company's securities as set out in the Article 8 of the Certificate of Incorporation. This proposal needs to be approved by an affirmative vote of at least a majority of the outstanding shares of common stock. I will entertain a motion for the charter amendment proposal.

I move that the charter amendment proposal will be presented to the stockholders.

I second the motion. The charter amendment proposal is now closed and approved for voting. The eighth order of business is to authorize one or more adjournments of the annual meeting to solicit additional proxies in the event there are insufficient votes to approve the charter amendment proposal. This proposal needs to be approved by an affirmative vote of at least the majority of votes cast on the proposal virtually present or represented by proxy at the annual meeting. I will entertain a motion for the adjournment proposal.

I move that the adjournment proposal be presented to the stockholders.

I second the motion. The adjournment proposal is now closed and approved for voting. As there are no other matters to be brought before the annual meeting, I now call off for votes for, one, the Board election proposal; two, the auditor ratification proposal; three, the 2017 plan amendment proposal; four, the share issuance proposal; five, the warrant issuance proposal; and six, the Director retention plan proposal; seven, the charter amendment proposal; and eight, the adjournment proposal. If you are voting today, you must submit your votes at this time in order for them to be counted by the Inspector of Election. The Inspector of Election will now accept proxies, ballots or votes [ for ] any changes or revocations submitted after the closing of the polls. The results of the balloting will be certified by the Inspector of Election. Upon certification, the company will publicly announce the results of the voting on items presented at this meeting. [Voting]

The polls for each matter to be voted on at this annual meeting are now closed. Now I'd like to have the Inspector of Election provide the preliminary count of the stock represented today and by proxy and the tally of the votes cast in regard to each proposal.

As the inspector of election, I hereby report that there are 14,121,783 shares of common stock entitled to vote represented at this annual meeting, comprising approximately 67.4% of the outstanding common stock of the company. In voting for directors, I hereby preliminarily report that Mr. Terren Peizer, Mr. Richard A. Berman; and Mr. Michael Sherman, each received the plurality of the votes cast. In voting for the auditor ratification proposal, I hereby preliminarily report that 13,912,552 shares of the company's common stock voted in favor of this proposal, representing approximately 98.5% of the shares of common stock represented in person or by proxy with respect to this proposal. In voting to approve the new 2017 plan amendment proposal, I hereby preliminarily report 9,448,554 shares of the company's common stock voted in favor of this proposal, representing approximately 66.9% of the shares of common stock represented in person or by proxy with respect to this proposal. In voting to approve the share issuance proposal, I hereby preliminarily report 10,677,635 shares of the company's common stock voted in favor of this proposal, representing approximately 75.6% of the shares of common stock represented in person or by proxy with respect to this proposal. In voting to approve the warrant issuance proposal, I hereby preliminarily report 10,670,002 shares of the company's stock voted in favor of this proposal, representing approximately 75.6% of the shares of common stock represented in person or by proxy with respect to this proposal. In a minute to approve the Director retention plan proposal, I hereby preliminarily report 10,089,726 shares of the company's common stock voted in favor of this proposal, representing approximately 71.4% of the shares of common stock represented in person or by proxy with respect to this proposal. In voting to approve the charter amendment proposal, I hereby preliminarily report 10,677,844 shares of the company's common stock voted in favor of this proposal, representing approximately 50.9% of the shares of the outstanding common stock represented in respect to this proposal. In voting to approve the adjournment proposal, I hereby preliminarily report 13,675,220 shares of the company's common stock voted in favor of this proposal, representing approximately 96.8% of the shares of common stock represented in person or by proxy with respect to this proposal.

Mr. LaVerne, I declare based on the preliminary voting results that Mr. Richard A. Berman, Mr. Michael Sherman, and I have been elected as directors of the company to serve for a 1-year arm in accordance with the Board election proposal and the appointment of EisnerAmper LLP as independent auditors of the company for the fiscal year December 31, 2022, has been ratified, and the 2017 plan amendment proposal has been approved, and the shares issuance proposal has been approved and the warrant issuance proposal has been approved, and the director retention plan proposal has been approved, and the charter amendment proposal has been approved, and the adjournment proposal has been approved.

I move that the annual meeting be adjourned.

I second the motion. There being no objections to the motion made to adjourn this annual meeting, I hereby declare this annual meeting adjourned. Thank you, everyone.