| Item 2.05 | Costs Associated with Exit or Disposal Activities. |
On November 8, 2022, the Board of Directors (the “Board”) of Surgalign Holdings, Inc. (the “Company” or “Surgalign”), approved a plan intended to help the Company drive growth in the most valuable and profitable parts of its business (Digital Health and core hardware assets). Throughout 2022, the Company has focused on bringing new products to market and the commercialization of new technologies, improving operational efficiencies, and lowering its working capital requirements. To further support these areas of focus, the Board has approved certain restructuring programs, which include continued brand and product portfolio rationalization initiatives and further streamlining resources, which are anticipated to result in workforce reductions and a significant decline in non-essential spending, particularly general and administrative expenses. Estimated cash savings are expected to be realized throughout 2023 and programs are anticipated to begin late in the fourth quarter 2022 and be substantially complete in the first half of 2023.
The Board has also approved the exploration of further restructuring initiatives, which include but are not limited to, the potential paring down, selling or exiting certain aspects of the Company’s business, both domestically and abroad. This exploration coincides with the Company’s ongoing efforts to improve margins and profitability, and free up resources to support what the Company believes to be greater growth and value creation opportunities. The Company continues to invest in its research and development and design and engineering capabilities, bringing to market several new products over the past year, with plans to develop new offerings based on market feedback and customer needs.
As a result of the foregoing restructuring programs and initiatives, the Company expects to reduce its cash expenditures, resulting in estimated cash savings of approximately $30.0 – $35.0 million, as compared to 2022. To achieve these savings, the Company expects to incur approximately $3.0 – $3.5 million in employee-related severance costs and $2.5 – $3.5 million in other exit and disposal costs during the fourth quarter of 2022 and first quarter of 2023 for a total estimated restructuring cost of approximately $5.5 – $7.0 million. Estimated cash savings are expected to be realized throughout 2023.
Efforts to raise additional capital from fundraising initiatives are currently underway to supplement the cash on hand to fund operations and implement certain aspects of the restructuring. The Company continues to evaluate and identify other areas of its business to enhance efficiencies and improve processes, with a goal to further lower its operating expenses and capital needs.
Forward-Looking Statements
The forward-looking statements contained herein, including those relating to our expectations regarding expected annualized cash savings, severance costs and other restructuring charges, involve risks and uncertainties. The forward-looking statements are not guarantees of future performance and are based on certain assumptions including general economic conditions, as well as those within the Company’s industry, and numerous other factors and risks identified in the Company’s most recent Form 10-K, 10-Q and other filings with the SEC. Factors that could cause actual results to differ materially from those forward-looking statements include: (i) the Company’s access to adequate operating cash flow, trade credit, borrowed funds and equity capital to fund its operations, implement certain aspects of the restructuring, and pay its obligations as they become due, and the terms on which external financing may be available, including the impact of adverse trends or disruption in the global credit and equity markets; (ii) risks relating to existing or potential litigation or regulatory actions; (iii) the identification of control deficiencies, including material weaknesses in internal control over financial reporting; (iv) general worldwide economic conditions and related uncertainties; (v) the continued impact of the COVID-19 and the Company’s attempts at mitigation, particularly in international markets served by the Company; (vi) the failure by the Company to identify, develop and successfully implement its strategic initiatives, particularly with respect to its digital surgery strategy ; (vii) the reliability of our supply
