Item 2.05. Costs Associated with Exit or Disposal Activities

The Company disclosed in the Original Form 8-K that it expected to incur pre-tax restructuring charges totaling approximately $2.0 million. As disclosed in the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2022, in connection with the Optimization Plan, the Company incurred $1.0 million of the $2 million of originally estimated restructuring costs.

On February 17, 2023, the Company committed to additional actions to continue and expand the Optimization Plan. These additional actions include closing and consolidating a location in Texas, reducing the Company's workforce by an additional 14%, and prioritizing investments and operations in line with near-term revenue generation.

For committed restructuring activities under the expanded Optimization Plan, the Company now expects to incur total pre-tax restructuring charges of approximately $2.6 million, which include the following items:

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Approximately $1.0 million of one-time termination benefits and associated costs;

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Approximately $1.0 million in equipment and inventory write-offs;

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Approximately $0.3 million in lease termination costs; and

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Approximately $0.3 million associated with moving and relocation costs.

The updated plan is expected to generate approximately $19.5 million in net pre-tax annualized cost savings upon completion, up from approximately $5.5 million disclosed in the Original Form 8-K. The cash expenditures associated with the plan are expected to total approximately $1.6 million.

The Company continues to anticipate that implementation of the Optimization Plan will be substantially complete by the end of the second quarter of 2023.

Forward-looking Statements

This Current Report contains certain forward-looking statements within the meaning of the within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this Current Report that do not relate to matters of historical fact should be considered forward-looking statements, including the timing of completion of, the costs incurred, and the future charges related to, the Reorganization, and the impact of the Reorganization on the Company's business, finances, and operations.

Forward-looking statements generally are identified by the words such as "believe," "project," "expect," "anticipate," "estimate," "intend," "strategy," "future," "opportunity," "plan," "may," "should," "will," "would," "will be," "will continue," "will likely result," and similar expressions. Forward-looking statements are predictions, projections and other statements about future events that are based on current expectations and assumptions and, as a result, are subject to risks and uncertainties. Many factors could cause actual future events to differ materially from the forward-looking statements in this Current Report, including but not limited to, the risks and uncertainties set forth under the heading "Risk Factors" in the Company's Annual Report on Form 10-K filed on April 8, 2022 and the Company's other filings with the U.S. Securities and Exchange Commission. These filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those contained in the forward-looking statements. Forward-looking statements speak only as of the date they are made. Readers are cautioned not to put undue reliance on forward-looking statements, and the Company assumes no obligation and does not intend to update or revise these forward-looking statements, whether as a result of new information, future events, or otherwise.

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