8. Restructuring and Asset Impairment

On July 14, 2026, the Board approved a restructuring and workforce reduction plan (the “Plan”) intended to better align the Company’s workforce, facilities and operations with the anticipated needs of its business pending the closing of the Merger. The Plan began in July 2026 and resulted in a reduction in force affecting a substantial majority of the Company’s workforce during the quarter ended September 30, 2026. In conjunction with the Plan, the Company also exited and terminated its leased facilities, disposed of substantially all manufacturing, laboratory and facility-related assets, and significantly reduced its operating footprint.

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Following implementation of the Plan, the Company retained a limited number of employees, including certain executive officers and personnel in clinical, regulatory, finance and CMC (chemistry, manufacturing and controls) functions. These retained personnel support the Company’s ongoing obligations under the Transition and Continuation Agreement with LigaChem, including LNCB74 transition and collaboration activities; the close-out of the SIM0505 clinical study; the Company’s efforts to partner, license or otherwise monetize its legacy assets; the Company’s obligations as a reporting company under the Exchange Act; and the completion of the proposed Merger.

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 In connection with the implementation of the Plan, the Company expects to incur one-time charges and cash expenditures of approximately $2.4 million through October 31, 2026, primarily related to employee wages and severance payments, healthcare continuation benefits and other employee termination costs. The Company incurred the majority of these charges during the third quarter of 2026 and expects substantially all related cash payments to be completed by the fourth quarter of 2026.

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The following table summarizes the activity for accrued severance costs for the three months ended September 30, 2026 (in thousands):

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The accrued severance liability of $0.3 million is payable within the next three months and has been included as accrued severance costs in accrued liabilities and other liabilities on the condensed balance sheet.

During the quarter ended June 30, 2026, the Company experienced a sustained decline in its stock price and market capitalization. As management met with potential investors and concluded they would not be able to raise additional capital, management had strong market indications that the value of its long-lived assets might not be recoverable. On July 14, 2026, the Company announced that it entered into the Merger Agreement and approved the restructuring plan described above. The Company also committed to a significant reduction of its operating footprint, including the planned termination of facility leases and disposition of certain long-lived assets.

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These events constituted indicators of impairment under ASC 360, Property, Plant and Equipment, requiring the Company to evaluate the recoverability of its long-lived assets, including operating lease right-of-use assets and property and equipment. Because the Company operates as a single reporting unit and had ceased pursuing further internal development of its clinical programs, management concluded that the applicable asset group was the Company as a whole.

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The Company estimated undiscounted future cash flows associated with the asset group, including expected proceeds from the sale of certain assets. Based on this analysis, management determined that the carrying value of certain long-lived assets was not recoverable and recorded impairment charges of approximately $5.1 million related to operating lease right-of-use assets and property and equipment during the quarter ended June 30, 2026.

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Assumptions used in the impairment analysis included estimates of the salvage value of property and equipment that was no longer in use. These estimates represent nonrecurring Level 3 fair value measurements.

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On July 31, 2026, the Company entered into an Asset Purchase Agreement with Xcellon Biologics, LLC, pursuant to which the Company sold certain equipment, furniture, fixtures, supplies, permits and other assets located at the Company's Beltsville, Maryland facility. The assets sold consisted primarily of manufacturing, laboratory and facility-related assets associated with the Company's restructuring activities. The Company received cash consideration of approximately $0.5 million and recognized a gain on sale of approximately $0.2 million.

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During the quarter ended September 30, 2026, the Company sold all remaining fixed assets after the sale mentioned above for aggregate cash proceeds of approximately $0.2 million and recognized an additional gain of approximately $0.2 million. The total gain on sale of assets of approximately $0.4 million is included within restructuring and asset impairment charges, net, in the condensed statements of operations and comprehensive loss for the three and nine months ended September 30, 2026.

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During the quarter ended September 30, 2026, the Company completed the termination of its remaining facility leases and recognized a gain of $3.4 million associated with these lease terminations. See Note 7, Leases, for more information.