Restructuring, Impairment, and Related Charges

9 Months Ended

Sep. 30, 2023

Restructuring and Related Activities [Abstract]

Restructuring, Impairment, and Related Charges

A description of the Company’s restructuring initiatives and their related costs is provided below.

March 2023 Restructuring Plan

Employee Termination Benefits

In March 2023, the Company announced the commencement of a process to explore strategic alternatives and implemented reductions in workforce across all functional areas impacting 63 employees representing approximately 82% of its employee base (the March 2023 Restructuring Plan). Impacted employees were eligible to receive severance benefits and Company-funded COBRA premiums, contingent upon an impacted employee’s execution (and non-revocation) of a customary separation agreement, which includes a general release of claims against the Company. For the nine months ended September 30, 2023, the Company recognized $5.6 million of employee termination benefits provided under an ongoing benefit arrangement, which were fully paid as of September 30, 2023. As of September 30, 2023, the Company has 13 full-time employees.

Asset Impairments

As part of the March 2023 Restructuring Plan, the Company decided to operate under a fully-remote model and committed to a plan to sell all tangible fixed assets located at its leased facilities, consisting primarily of manufacturing and laboratory equipment. In addition, the Company modified its operating leases to shorten their lease term. For the nine months ended September 30, 2023, the Company recognized non-cash impairment charges totaling $5.4 million as a result of classifying all tangible fixed assets as held for sale and to write-off leasehold improvements upon vacating leased premises. As of September 30, 2023, all tangible fixed assets were either sold or disposed of.

During the nine months ended September 30, 2023, with the exception of an operating lease that is subject to a sublease in which the rental period is co-terminus with the term of the head lease and expires in August 2024, the Company exited all its operating and finance leases (see Note 6) and recorded impairment charges to write off right-of-use assets and related leasehold improvements upon vacating the leased premises.

Other Related Costs

The Company incurred other related costs of $0.6 million for the nine months ended September 30, 2023 primarily consisting of costs to terminate contracts before the end of their term, costs for professional services incurred in connection with restructuring measures of $1.0 million and a $0.3 million loss on disposal of fixed assets, partially offset by a $0.7 million gain on partial termination of lease.

May 2022 Restructuring Plan

In May 2022, the Company implemented a restructuring plan (May 2022 Restructuring Plan) to preserve capital and focus its resources on advancing its then lead product candidate through key development milestones. The May 2022 Restructuring Plan resulted in a reduction of the Company’s workforce by approximately 40%, or 52 employees. For the nine months ended September 30, 2022, the Company incurred total charges of approximately $3.8 million under the May 2022 Restructuring Plan, primarily consisting of $3.3 million related to severance payments and other employee-related separation costs, $0.8 million related to contract termination and facility exit costs and $0.1 million in write-offs of property and equipment, partially offset by

a $0.4 million reduction in stock-based compensation expense as a result of applying modification accounting for accelerated vesting of RSUs related to impacted employees.

The following table details “Restructuring, impairment, and related charges” for each of the periods presented (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Employee termination benefits	$	—	$	—	$	5,585	$	3,339
Stock-based compensation	—		—		—		(419)
Asset impairments	—		—		10,642		80
Other related costs	(40)		12		605		799
Total restructuring, impairments, and related charges	$	(40)	$	12	$	16,832	$	3,799

The following table summarizes the charges and spending relating to restructuring program activities for the nine months ended September 30, 2023:


	Employee Termination Benefits		Asset Impairments			Other Related Costs		Total
Liability balance at December 31, 2022	$	—	$	—		$	420	$	420
Expense	5,585		10,642			605		16,832
Payments	(5,585)		(5,250)		(1)	(1,387)		(12,222)
Non-cash activity	—		(5,392)			362		(5,030)
Liability balance at September 30, 2023	$	—	$	—		$	—	$	—

(1) Represents cash payments for early termination fees associated with exiting operating leases, which were recorded as increases to right-of-use assets. Upon vacating the leased premises, any remaining balances related to right-of-use assets were written off.

Applied Molecular Transport Inc. 10-Q