6 – RESTRUCTURING AND SEVERANCE COMPENSATION EXPENSE

Background

On June 30, 2025, the Company’s Board of Directors approved a restructuring initiative that included a revision to the Company’s severance policy and compensation structure. Effective July 1, 2025, the Company implemented a reduction in base salaries for all employees by approximately 30% and amended the severance policy to provide one (1) week of severance pay per year of service (versus one (1) month previously). In connection with this amendment, the Company approved a one-time severance compensation payment due to employees based on service accrued through June 30, 2025, calculated in accordance with the prior severance policy.

The severance payment was based on service accrued under the prior severance policy in effect through June 30, 2025, which was replaced by a revised policy effective July 1, 2025 offering reduced benefits on a prospective-only basis.

Summary of Costs Incurred

As a result of this action, the Company recognized a one-time charge of approximately $1.6 million in the three months ended June 30, 2025. The amount accrued is the total cost that was approved related to the restructuring initiative. This amount reflects severance obligations earned through June 30, 2025, and includes payments due to all eligible employees and executive officers.

The restructuring charge was fully accrued in accrued restructuring reserve in the accompanying consolidated balance sheets in the second quarter of 2025 and primarily consists of termination benefits, as defined under ASC 420-10, Exit or Disposal Cost Obligations. The Company expects that the majority of these severance payments will be disbursed in the first quarter of 2026. The restructuring charge is recorded in restructuring and severance expense on the accompanying consolidated statements of operations.

Liability Rollforward Table

The following table summarizes the activity related to the severance accrual for the three months ended June 30, 2025: