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Balance Sheet Components

3 Months Ended

Mar. 31, 2024

Note 5. Balance Sheet Components

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following (in thousands):


	March 31, 2024		December 31, 2023
Prepaid expenses	$	342	$	365
Prepaid insurance		568		809
Prepaid research and development expenses		687		133
Short-term Italian research and development refundable tax credit		971		993
Other current assets		48		81
Total prepaid expenses and other current assets	$	2,616	$	2,381

EryDel is eligible to obtain an R&D tax credit as companies in Italy that invest in eligible research and development activities, regardless of the legal form and economic sector in which they operate, can benefit from a R&D tax credit. Such tax credits can only be used to offset payments of certain taxes and contributions (e.g., social contributions, VAT payables, registration fees, income and withholding taxes and all other tax-related items that companies usually pay monthly). The Company recognized reductions to R&D expense of $0.4 million and $0 for the three months ended March 31, 2024 and 2023, respectively.

Novosteo Pty, Ltd, a wholly-owned subsidiary of Novosteo, LLC, is eligible to obtain a cash refund from the Australian Taxation Office for eligible R&D expenditures under the Australian Tax Incentive as well. During the three months ended March 31, 2024, the Company received $0 refundable tax credit. During the three months ended March 31, 2023, the Company received a refundable tax credit of $0.5 million, which reduced prepaid expenses and other current assets by $0.5 million as of March 31, 2023.

Other Assets

Other assets consisted of the following (in thousands):


	March 31, 2024		December 31, 2023
VAT receivable	$	3,569	$	3,463
Long-term Italian research and development refundable tax credit		4,891		4,993
Assets held for sale		7		10
Total other assets	$	8,467	$	8,466

Property and Equipment, Net

Property and equipment, net consist of the following (in thousands):


	March 31, 2024			December 31, 2023
Computer equipment	$	35		$	36
Computer Software		29			30
Lab equipment		476			486
Leasehold improvement		35			36
Office furniture		189			153
Less: accumulated amortization and depreciation		(530	)		(507	)
Property and equipment, net	$	234		$	234

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following (in thousands):


	March 31, 2024		December 31, 2023
Personnel expenses	$	1,368	$	2,340
Professional fees		405		211
Research and development expenses		857		564
Current portion of operating lease liabilities		93		64
Other		297		257
Total accrued expenses and other current liabilities	$	3,020	$	3,436

For the three months ended March 31, 2024 and 2023, the severance accrual activity were as follows (in thousands):


	2024			2023
Beginning accrued severance	$	341		$	—
Incurred during the period		—			268
Severance paid during the period		(128	)		(237	)
Ending accrued severance	$	213		$	31

On January 30, 2023, in response to the reprioritization of the Company's pipeline following the decision to discontinue internal development of NOV004 and to pursue out-licensing opportunities, the Company's Board of Directors approved a cost reduction program to reorganize operations and allow continued support for the needs of the business. Under the cost reduction program, the Company lowered headcount through a reduction in workforce. The Company recognized the severance of $0.3 million and related expenses of $0.1 million over the requisite employment obligation period. The reduction in force was completed in April 2023.

On August 4, 2023, the Company entered into a transition and separation agreement with Karen Smith, M.D., Ph.D., (the “Separation Agreement”) in connection with Dr. Smith’s transition and departure from the Company as the Company's Chief Medical Officer, effective as of September 1, 2023. Pursuant to the Separation Agreement, the Company is required to pay cash severance, equal to her annual salary, in the aggregate amount of $0.5 million, of which $0.1 million was paid during the three months ended March 31, 2024. The severance is to be paid on regular payroll schedule through the third quarter of 2024. Additionally, pursuant to the Separation Agreement, the Company paid an additional cash bonus severance payment equal to 100% of Dr. Smith’s target annual bonus opportunity for 2023 on a prorated basis, an additional cash severance payment equal to 12 months’ of the monthly premiums for health care continuation benefits, and provided for 50% accelerated vesting with respect to Dr. Smith’s equity award. The acceleration of 612,141 options and 54,757 RSAs resulted in a stock-based compensation expense of approximately $0.1 million that was recorded in 2023.