Item 2.05 Costs Associated with Exit or Disposal Activities.
Previously, on March 1, 2021, Ontrak, Inc. (the "Company") reported the
notification of termination from its largest customer with an effective date of
June 26, 2021. As a result of this termination notice, the Company's management
assessed various options and deemed it prudent to initiate a workforce reduction
plan to effectively align its resources, manage its operating costs and position
it to achieve its previously stated growth target for 2021.
Under the workforce reduction plan and in order to address the change in
staffing needs in the short term resulting from the impending termination of the
customer contract, the Company intends to reduce approximately 35% of positions,
predominately within departments directly supporting the contract. The Company
estimates one-time costs of approximately $1.5 million of termination benefits
to the impacted employees, including severance payments and benefits. The
Company expects to complete the reduction in workforce plan by the end of the
second quarter in 2021 and expects to bring back capacity to scale appropriately
as new or expanded customer relationships are onboarded from its pipeline.
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