| Item 1.01 | Entry into a Material Definitive Agreement. |
On February 10, 2022, Surgalign Holdings, Inc., a Delaware corporation (the “Company”), entered into an Underwriting Agreement (the “Underwriting Agreement”) with H.C. Wainwright & Co., LLC, as sole underwriter (the “Underwriter”). Pursuant to the Underwriting Agreement, the Company agreed to sell, in a firm commitment public offering (the “Offering”), an aggregate of (i) 38,565,220 shares (the “Shares”) of its common stock, par value $0.001 per share (the “Common Stock”), (ii) pre-funded warrants exercisable for an aggregate of 4,913,044 shares of Common Stock (the “Pre-Funded Warrants”) and (iii) warrants exercisable for an aggregate of 32,608,698 shares of Common Stock (the “Warrants”), as well as up to 6,521,736 additional shares of Common Stock and/or additional Warrants to purchase up to an aggregate of 4,891,302 shares of Common Stock that may be purchased pursuant to a 30-day option to purchase additional securities granted to the Underwriter by the Company. The public offering price for each share of Common Stock and accompanying 0.75 of a Warrant to purchase one share of Common Stock is $0.46, and the public offering price for each Pre-Funded Warrant and accompanying 0.75 of a Warrant is $0.4599. On February 14, 2022, the Underwriter exercised its option to purchase additional Warrants to purchase up to an aggregate of 4,891,302 shares of Common Stock.
The Offering, including the additional Warrants sold pursuant to the exercise of the Underwriter’s option to purchase additional Warrants, closed on February 15, 2022.
The net proceeds from the Offering, after deducting underwriting discounts and commissions and other estimated Offering expenses payable by the Company and excluding the net proceeds, if any, from the exercise of the Warrants, are approximately $17.8 million (or $20.6 million if the Underwriter exercises its option to purchase additional shares of Common Stock in full). The Company intends to use the net proceeds from the Offering for working capital and general corporate purposes, including preparation for approval, utilization and ongoing development of its digital health offerings.
The Underwriting Agreement contains customary representations, warranties, covenants and closing conditions and customary indemnification rights and obligations of the parties. Pursuant to the Underwriting Agreement, the Company has also agreed to be subject to a lock-up period of 60 days following the date of the Underwriting Agreement in respect of certain equity issuances and a one year lock-up period in respect of certain issuances of securities that are subject to a price reset based on the trading prices of the Company’s Common Stock or upon a specified or contingent event in the future, in each case subject to certain exceptions set forth in the Underwriting Agreement.
Pursuant to the Underwriting Agreement, the Company agreed to pay the Underwriter a cash fee equal to 7.0% of the gross proceeds received in the Offering and a cash management fee equal to 1.0% of the gross proceeds received in the Offering and to issue to the Underwriter (or its designees) the Underwriter Warrants (as described below). Upon any exercise of the Warrants issued in the Offering for cash, the Company has agreed to pay the Underwriter (i) a total cash fee equal to 7.0% of the aggregate gross proceeds from the exercise of the Warrants and (ii) a cash management fee equal to 1.0% of the aggregate gross proceeds from the exercise of the Warrants. The Company also agreed to reimburse the Underwriter for certain expenses, including payment of $35,000 for non-accountable expenses, up to $100,000 for fees and expenses of legal counsel and other out-of-pocket expenses and $15,950 for clearing fees. The Company has also agreed to pay the Underwriter, subject to certain exceptions, a tail fee equal to the cash and warrant compensation in the Offering, if any investor who was contacted by the Underwriter during the term of its engagement or introduced to the Company by the Underwriter during the term of its engagement, provides the Company with capital in any public or private offering or other financing or capital raising transaction during the 12-month period following the termination or expiration of the Underwriter’s engagement letter with the Company. In addition, the Company has granted a right of first refusal to the Underwriter pursuant to which it has the right to act as the exclusive advisor, manager or underwriter or agent, as applicable, if the Company or any of its subsidiaries, at any time prior to the 9-month anniversary of the closing date of the Offering, raise funds by means of a public offering (including at-the-market facility) or a private placement or any other capital-raising financing of equity, equity-linked or debt securities other than with respect to certain excluded transactions.
