Protara Therapeutics, Inc. 10-Q

Item 1. Financial Statements PROTARA THERAPEUTICS, INC. AND SUBSIDIARIES Unaudited Condensed Consolidated Balance Sheets (in thousands, except share and per share data) As of June 30, 2024 December 31, 2023 Assets Current assets: Cash and cash equivalents $ 89,581 $ 39,586 Marketable debt securities - 25,994 Prepaid expenses and other current assets 2,633 3,125 Total current assets 92,214 68,705 Restricted cash, non-current 745 745 Property and equipment, net 1,185 1,296 Operating lease right-of-use asset 4,768 5,264 Other assets 2,735 2,944 Total assets $ 101,647 $ 78,954 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 1,385 $ 2,434 Accrued expenses and other current liabilities 3,228 2,732 Operating lease liability 1,035 983 Total current liabilities 5,648 6,149 Operating lease liability, non-current 3,949 4,484 Total liabilities 9,597 10,633 Commitments and contingencies (Note 9) Stockholders’ Equity: Preferred stock, $ 0.001 par value, authorized 10,000,000 shares: Series 1 Convertible Preferred Stock, 8,028 shares authorized at June 30, 2024 and December 31, 2023, 7,991 shares issued and outstanding as of June 30, 2024 and December 31, 2023. - - Common stock, $ 0.001 par value, authorized 100,000,000 shares: Common stock, 20,629,772 and 11,364,903 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively. 21 11 Additional paid-in capital 313,021 268,725 Accumulated deficit ( 220,992 ) ( 200,384 ) Accumulated other comprehensive income (loss) - ( 31 ) Total stockholders’ equity 92,050 68,321 Total liabilities and stockholders’ equity $ 101,647 $ 78,954 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 1 PROTARA THERAPEUTICS, INC. AND SUBSIDIARIES Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands, except share and per share data) For the Three Months Ended June 30, For the Six Months Ended June 30, 2024 2023 2024 2023 Operating expenses: Research and development $ 6,387 $ 7,247 $ 14,135 $ 12,390 General and administrative 4,274 4,893 8,377 9,482 Total operating expenses 10,661 12,140 22,512 21,872 Loss from operations ( 10,661 ) ( 12,140 ) ( 22,512 ) ( 21,872 ) Other income (expense), net: Interest and investment income 1,148 846 1,904 1,533 Other income (expense), net 1,148 846 1,904 1,533 Net income (loss) $ ( 9,513 ) $ ( 11,294 ) $ ( 20,608 ) $ ( 20,339 ) Net income (loss) per share attributable to common stockholders, basic and diluted $ ( 0.45 ) $ ( 1.00 ) $ ( 1.26 ) $ ( 1.80 ) Weighted-average shares outstanding, basic and diluted 21,233,163 11,307,842 16,327,056 11,305,867 Other comprehensive income (loss): Net unrealized gain (loss) on marketable debt securities 1 133 31 352 Other comprehensive income (loss) 1 133 31 352 Comprehensive income (loss) $ ( 9,512 ) $ ( 11,161 ) $ ( 20,577 ) $ ( 19,987 ) The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 2 PROTARA THERAPEUTICS, INC. AND SUBSIDIARIES Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity (in thousands, except share and per share data) Series 1 Convertible Preferred Stock Common Stock Additional Paid-in Accumulated Accumulated Other Comprehensive Total Stockholders’ Shares Amount Shares Amount Capital Deficit Income (Loss) Equity Balance at December 31, 2022 8,027 $ - 11,267,389 $ 11 $ 262,724 $ ( 159,964 ) $ ( 688 ) $ 102,083 Issuance of common stock upon settlement of restricted stock units - - 39,364 - ( 64 ) - - ( 64 ) Stock-based compensation - restricted stock units - - - - 314 - - 314 Stock-based compensation - stock options - - - - 1,261 - - 1,261 Unrealized gain (loss) on marketable debt securities - - - - - - 219 219 Net income (loss) - - - - - ( 9,045 ) - ( 9,045 ) Balance at March 31, 2023 8,027 $ - 11,306,753 $ 11 $ 264,235 $ ( 169,009 ) $ ( 469 ) $ 94,768 Issuance of common stock upon settlement of restricted stock units - - 1,209 - - - - - Stock-based compensation - restricted stock units - - - - 326 - - 326 Stock-based compensation - stock options - - - - 1,292 - - 1,292 Unrealized gain (loss) on marketable debt securities - - - - - - 133 133 Net income (loss) - - - - - ( 11,294 ) - ( 11,294 ) Balance at June 30, 2023 8,027 $ - 11,307,962 $ 11 $ 265,853 $ ( 180,303 ) $ ( 336 ) $ 85,225 Balance at December 31, 2023 7,991 $ - 11,364,903 $ 11 $ 268,725 $ ( 200,384 ) $ ( 31 ) $ 68,321 Issuance of common stock upon settlement of restricted stock units - - 68,934 - ( 76 ) - - ( 76 ) Stock-based compensation - restricted stock units - - - - 151 - - 151 Stock-based compensation - stock options - - - - 1,075 - - 1,075 Unrealized gain (loss) on marketable debt securities - - - - - - 30 30 Net income (loss) - - - - - ( 11,095 ) - ( 11,095 ) Balance at March 31, 2024 7,991 $ - 11,433,837 $ 11 $ 269,875 $ ( 211,479 ) $ ( 1 ) $ 58,406 Issuance of common stock, pre-funded warrants and warrants from private placement, net of offering costs of $ 3,034 9,143,380 10 41,954 41,964 Issuance of common stock upon settlement of restricted stock units - - 4,975 - ( 7 ) - - ( 7 ) Issuance of common stock upon exercise of stock options - - 47,580 -- 135 - - 135 Stock-based compensation - restricted stock units - - - - 111 - - 111 Stock-based compensation - stock options - - - - 953 - - 953 Unrealized gain (loss) on marketable debt securities - - - - - - 1 1 Net income (loss) - - - - - ( 9,513 ) - ( 9,513 ) Balance at June 30, 2024 7,991 $ - 20,629,772 $ 21 $ 313,021 $ ( 220,992 ) $ - $ 92,050 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 3 PROTARA THERAPEUTICS, INC. AND SUBSIDIARIES Unaudited Condensed Consolidated Statements of Cash Flows (in thousands) For the Six Months Ended June 30, 2024 2023 Cash flows used in operating activities: Net income (loss) $ ( 20,608 ) $ ( 20,339 ) Adjustments to reconcile net income (loss) to net cash used in operating activities: Stock-based compensation 2,290 3,193 Operating lease right-of-use asset 496 683 Depreciation 166 155 Amortization of premium (Accretion of discount) on marketable debt securities ( 75 ) ( 204 ) Changes in operating assets and liabilities: Prepaid expenses and other current assets 492 ( 2,044 ) Other assets 209 ( 2,237 ) Accounts payable ( 1,049 ) 266 Accrued expenses and other current liabilities 496 ( 1,106 ) Operating lease liabilities ( 483 ) ( 663 ) Net cash provided by/(used in) operating activities ( 18,066 ) ( 22,296 ) Cash flows from investing activities: Purchase of marketable debt securities - ( 12,186 ) Proceeds from maturity and redemption of marketable debt securities 26,100 44,405 Purchase of property and equipment ( 55 ) ( 8 ) Net cash provided by/(used in) investing activities 26,045 32,211 Cash flows from financing activities: Proceeds from private placement, net of offering costs of $ 3,034 41,964 - Proceeds from exercise of stock options 135 - Taxes paid related to net share settlement of restricted stock units ( 83 ) ( 64 ) Net cash provided by/(used in) financing activities 42,016 ( 64 ) Net increase (decrease) in cash and cash equivalents and restricted cash 49,995 9,851 Cash and cash equivalents and restricted cash - beginning of year 40,331 24,872 Cash and cash equivalents and restricted cash - end of period $ 90,326 $ 34,723 Reconciliation of cash and cash equivalents and restricted cash to the condensed consolidated balance sheets: Cash and cash equivalents $ 89,581 $ 33,978 Restricted cash, non-current 745 745 Cash and cash equivalents and restricted cash $ 90,326 $ 34,723 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 4 Protara Therapeutics, Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements (amounts in thousands, except share and per share data) 1. Organization and Nature of the Business Overview Protara Therapeutics, Inc., and its consolidated subsidiaries (“Protara” or the “Company”), is a clinical-stage biopharmaceutical company committed to advancing transformative therapies for the treatment of cancer and rare diseases. Protara’s portfolio includes two development programs utilizing TARA-002, an investigational cell therapy in development for the treatment of non-muscle invasive bladder cancer, or NMIBC, and lymphatic malformations, or LMs. Additionally, the Company’s portfolio includes Intravenous, or IV, Choline Chloride, an investigational phospholipid substrate replacement therapy in development for patients receiving parenteral nutrition, or PN. Liquidity and Capital Resources The Company is in the business of developing biopharmaceuticals and has no current or near-term revenues. The Company has incurred substantial clinical and other costs in its drug development efforts. The Company will need to raise additional capital in order to fully realize management’s plans. The Company believes that its current financial resources are sufficient to satisfy the Company’s estimated liquidity needs for at least twelve months from the date of issuance of these unaudited condensed consolidated financial statements. 2. Summary of Significant Accounting Policies The Company’s significant accounting policies are disclosed in the audited consolidated financial statements and the notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the United States Securities and Exchange Commission, or SEC, on March 13, 2024. Except as reflected below, there were no changes to the Company’s significant accounting policies as described in the Annual Report on Form 10-K. Reflected in this note are updates to accounting policies, including the impact of the adoption of new policies. Basis of Presentation The accompanying condensed consolidated financial statements and the related disclosures as of June 30, 2024 and for the three and six months ended June 30, 2024 and 2023 are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP, and the rules and regulations of the SEC for interim financial statements. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These interim condensed consolidated financial statements should be read in conjunction with the 2023 and 2022 audited consolidated financial statements and notes included in the Annual Report on Form 10-K. The December 31, 2023 consolidated balance sheet included herein was derived from the audited financial statements as of that date but does not include all disclosures including notes required by GAAP for complete financial statements. In the opinion of management, the condensed consolidated financial statements reflect all adjustments, consisting of normal and recurring adjustments, necessary for the fair presentation of the Company’s financial position and results of operations for the three and six months ended June 30, 2024 and 2023. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or any other interim period or future year or period. 5 Protara Therapeutics, Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements (amounts in thousands, except share and per share data) Principles of Consolidation The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in the accompanying condensed consolidated financial statements. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements. Significant items subject to such estimates include but are not limited to research and development accruals as well as contingencies. On an ongoing basis, the Company’s management evaluates its estimates based on historical and anticipated results, trends, and various other assumptions believed to be reasonable. Actual results could differ from those estimates. The results of any changes in accounting estimates are reflected in the financial statements of the period in which the change becomes evident. Concentrations of Credit Risk Financial instruments, which potentially subject the Company to concentrations of credit risk, consists principally of cash and cash equivalents, restricted cash and investments in marketable debt securities. The Company currently invests its excess cash primarily in money market funds and high quality investment grade marketable debt securities of corporations. The Company has adopted an investment policy that includes guidelines relative to credit quality, diversification and maturities to preserve principal and liquidity. Net Income (Loss) Per Share Attributable to Common Stockholders Basic net income (loss) per share is computed by dividing the net income (loss) attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net income (loss) per share is computed by dividing net income (loss) attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period plus, if dilutive, the common equivalent shares for the period from unvested restricted common stock, outstanding stock options, potential shares issuable under the 2024 ESPP, the conversion of preferred stock, and the exercise of Common Warrants issued in connection with the 2024 Private Placement, discussed further in Note 10. Stockholders’ Equity. Given the nominal exercise price associated with the Company’s pre-funded warrants, or the Pre-Funded Warrants, issued in connection with the 2024 Private Placement (discussed further in Note 10. Stockholders’ Equity) such Pre-Funded Warrants are included in the calculation of basic and diluted net income (loss) per share. The exercise price per warrant is deemed nonsubstantive when compared to the market value of the underlying common shares. The weighted average impact of the 1,700,000 unexercised Pre-Funded Warrants as of June 30, 2024 was included in the Company’s calculation of basic and diluted loss per share. Warrants The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in the Financial Accounting Standards Board, or the FASB, Accounting Standards Codification, or ASC, 480, Distinguishing Liabilities from Equity , or ASC 480, and ASC 815, Derivatives and Hedging , or ASC 815. The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. Finally, the Company determines if the warrants meet the definition of a derivative based on their contractual terms. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and at each balance sheet date thereafter. Changes in the estimated fair value of liability-classified warrants are recognized as a non-cash gain or loss on the consolidated statements of operations. The Company also evaluates if changes in contractual terms or other considerations would result in the reclassification of outstanding warrants from liabilities to stockholders’ equity (or vice versa). The fair market value of the warrants may be estimated using a Black-Scholes option-pricing model or potentially more complex valuation models depending on the nature of the contractual terms. 6 Protara Therapeutics, Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements (amounts in thousands, except share and per share data) Recent Accounting Pronouncements Not Yet Adopted In November 2023, the FASB issued ASU 2023-07 – Improvements to Reportable Segment Disclosures, which enhances the disclosures required for reportable segments in annual and interim consolidated financial statements, including additional, more detailed information about a reportable segment’s expenses. The standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is available. The Company is still evaluating the full extent of the potential impact of the adoption of ASU 2023-07, but believes it will not have a material impact on its consolidated financial statements and disclosures. In December 2023, the FASB issued ASU 2023-09 – Improvements to Income Tax Disclosures, which enhances the transparency and decision usefulness of income tax disclosures. The standard is effective for public companies for annual periods beginning after December 15, 2024. Early adoption is available. The Company is still evaluating the full extent of the potential impact of the adoption of ASU 2023-09, but believes it will not have a material impact on its consolidated financial statements and disclosures. Subsequent Events The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were available to be issued. The Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements. 3. Fair Value of Financial Instruments The Company measures certain financial assets and liabilities at fair value. Fair value is determined based upon the exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants, as determined by either the principal market or the most advantageous market. Inputs used in the valuation techniques to derive fair values are classified based on a three-level hierarchy, as follows: ● Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date. ● Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability. ● Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date. The following tables present the Company’s financial assets and liabilities that are measured and carried at fair value and indicate the level within the fair value hierarchy of valuation techniques it utilizes to determine such fair value: As of June 30, 2024 Level 1 Level 2 Level 3 Total Cash equivalents: Money market funds (a) $ 89,079 $ - $ - $ 89,079 Restricted cash, non-current: Money market funds (b) 745 - - 745 Total $ 89,824 $ - $ - $ 89,824 7 Protara Therapeutics, Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements (amounts in thousands, except share and per share data) As of December 31, 2023 Level 1 Level 2 Level 3 Total Cash equivalents: Money market funds (a) $ 39,031 $ - $ - $ 39,031 Restricted cash, non-current: Money market funds (b) 745 - - 745 Marketable debt securities: Corporate bonds (c) - 23,495 - 23,495 Agency bonds (c) - 2,499 - 2,499 Total $ 39,776 $ 25,994 $ - $ 65,770 (a) Money market funds and bonds with original maturities of 90 days or less are included within Cash and cash equivalents in the condensed consolidated balance sheets. (b) Restricted money market funds are included within Restricted cash, non-current in the condensed consolidated balance sheets. (c) Bonds with original maturities greater than 90 days are included within Marketable debt securities in the condensed consolidated balance sheets and classified as current or non-current based upon whether the maturity of the financial asset is less than or greater than 12 months. Money market funds are classified as Level 1 within the fair value hierarchy, because they are valued using quoted prices in active markets. Corporate and agency bonds classified as Level 2 within the fair value hierarchy are valued on the basis of prices from an orderly transaction between market participants provided by reputable dealers or pricing services. Prices of these securities are obtained through independent, third-party pricing services and include market quotations that may include both observable and unobservable inputs. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrices and market transactions in comparable investments and various relationships between investments. There were no transfers of financial instruments among Level 1, Level 2, and Level 3 during the period presented. Cash and cash equivalents, prepaid expenses and other current assets, accounts payable and accrued expenses and other current liabilities at June 30, 2024 and December 31, 2023 are carried at amounts that approximate fair value due to their short-term maturities. 4. Marketable Debt Securities The Company did not hold any marketable debt securities as of June 30, 2024. Marketable debt securities, all of which were classified as available for sale as of December 31, 2023, consist of the following: As of December 31, 2023 Amortized Cost Unrealized Gains Unrealized Losses Estimated Fair Value Corporate bonds - presented in marketable debt securities $ 23,525 $ - $ ( 30 ) $ 23,495 Agency bonds - presented in marketable debt securities 2,500 - ( 1 ) 2,499 Total $ 26,025 $ - $ ( 31 ) $ 25,994 For the three and six months ended June 30, 2024 and 2023 there were no realized gains or losses. Gains, if any, would be included in investment income within the condensed consolidated statements of operations and comprehensive loss. The Company has recorded the securities at fair value in its condensed consolidated balance sheets and unrealized gains and losses are reported as a component of accumulated other comprehensive income (loss). The amount of realized gains and losses reclassified into earnings are based on the specific identification of the securities sold or securities that reached maturity date. The amount of realized gains and losses reclassified into earnings have not been material to the Company’s condensed consolidated statements of operations and comprehensive loss. 8 Protara Therapeutics, Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements (amounts in thousands, except share and per share data) At the time of purchase, the Company determines the appropriate classification of investments based upon its intent with regard to such investments. The Company classifies investments in marketable debt securities with remaining maturities when purchased of greater than three months as available-for-sale. Investments with a remaining maturity date greater than one year are classified as non-current. There were no sales of marketable debt securities in the periods presented. Credit Losses Securities with an amortized cost basis in excess of estimated fair value are assessed to determine what amount of the excess, if any, is caused by expected credit losses. For the period ended June 30, 2024, no securities were held and as such it was determined that there was no expected credit loss. Marketable debt securities in a loss position consist of the following: As of December 31, 2023 In Continuous Loss Position Less Than 12 Months In Continuous Loss Position Greater Than 12 Months Total Estimated Fair Value Unrealized Losses Estimated Fair Value Unrealized Losses Estimated Fair Value Unrealized Losses Corporate bonds – presented in marketable debt securities $ 19,498 $ ( 27 ) $ 3,997 $ ( 3 ) $ 23,495 $ ( 30 ) Agency bonds – presented in marketable debt securities 2,499 ( 1 ) - - 2,499 ( 1 ) Total $ 21,997 $ ( 28 ) $ 3,997 $ ( 3 ) $ 25,994 $ ( 31 ) Investment Income Interest and investment income consist of the following: For the Three Months Ended June 30, For the Six Months Ended June 30, 2024 2023 2024 2023 Interest income $ 1,130 $ 710 $ 1,809 $ 1,315 Dividend income 11 4 20 4 Accretion of discount (Amortization of premium), net 7 132 75 214 Total interest and investment income $ 1,148 $ 846 $ 1,904 $ 1,533 5. Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consist of the following: As of June 30, 2024 December 31, 2023 Prepaid research and development $ 1,574 $ 1,957 Prepaid insurance 460 659 Prepaid retention bonuses 200 - Prepaid software 122 67 Accrued interest on marketable debt securities - 242 Other prepaid expenses 273 163 Other current assets 4 37 Total $ 2,633 $ 3,125 9 Protara Therapeutics, Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements (amounts in thousands, except share and per share data) 6. Other Assets Other assets consist of the following: As of June 30, 2024 December, 31, 2023 Prepaid research and development, non-current $ 2,580 $ 2,661 Prepaid insurance, non-current 136 272 Other non-current assets 19 11 Total $ 2,735 $ 2,944 7. Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consist of the following: As of June 30, 2024 December 31, 2023 Research and development costs 2,108 440 Employee costs 999 2,112 Other expenses 121 180 Total $ 3,228 $ 2,732 8. Leases Operating leases Leases classified as operating leases are included in operating lease right-of use, or ROU, assets, operating lease liabilities and operating lease liabilities, non-current, in the Company’s condensed consolidated balance sheets. Cash paid for operating lease liabilities was $ 663 during each of the six months ended June 30, 2024 and 2023. Lease expense consist of the following: For the Three Months Ended June 30, For the Six Months Ended June 30, 2024 2023 2024 2023 Operating lease expense $ 338 $ 342 $ 676 $ 683 Total $ 338 $ 342 $ 676 $ 683 Variable lease expenses for the three and six months ended June 30, 2024 were $ 26 and $ 46 , respectively. Variable lease expenses for the three and six months ended June 30, 2023 were not material. 10 Protara Therapeutics, Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements (amounts in thousands, except share and per share data) The weighted-average remaining lease term and the weighted average discount rate for operating leases were: As of June 30, 2024 Weighted-average discount rate 7.0 % Weighted-average remaining lease term – operating lease (in months) 49 As of June 30, 2024, the expected annual minimum lease payments of the Company’s operating lease liabilities were as follows: For Years Ending December 31, Operating Lease Payments 2024 (excluding the six months ended June 30, 2024) $ 663 2025 1,395 2026 1,429 2027 1,429 2028 718 Thereafter 87 Total operating lease payments 5,721 Less: imputed interest ( 737 ) Present value of future minimum lease payments $ 4,984 9. Commitments and Contingencies Commitments The Company has commitments under certain license and collaboration agreements, lease agreements, and employment agreements. Commitments under certain license agreements primarily include annual payments, payments upon the achievement of certain milestones, and royalty payments based on net sales of licensed products. Commitments under lease agreements consist of future minimum lease payments for operating leases which are further described in Note 8 of this Quarterly Report on Form 10-Q. Contingencies From time to time, the Company may be subject to various legal proceedings and claims that arise in the ordinary course of its business activities. Management is of the opinion that the ultimate outcome of these matters would not have a material adverse impact on the financial position of the Company or the results of its operations. In the normal course of business, the Company enters into contracts in which it makes representations and warranties regarding the performance of its services and that its services will not infringe on third-party intellectual rights. There have been no significant events related to such representations and warranties in which the Company believes the outcome could result in losses or penalties in the future. 10 . Stockholders’ Equity Common Stock As of June 30, 2024 and December 31, 2023, the Company had 100,000,000 shares of common stock authorized for issuance, $ 0.001 par value per share, of which 20,629,772 and 11,364,903 shares were issued and outstanding, respectively. The holders of the Company’s common stock are entitled to one vote per share. Preferred Stock As of June 30, 2024 and December 31, 2023, the Company had 10,000,000 shares of preferred stock authorized for issuance, $ 0.001 par value per share, of which 8,028 shares of Series 1 Convertible Preferred Stock were authorized for issuance and 7,991 shares were issued and outstanding as of June 30, 2024 and December 31, 2023. Each share of Series 1 Convertible Preferred Stock is convertible into approximately 1,000 shares of common stock, at a conversion price initially equal to approximately $ 7.01 per common share, subject to certain adjustments as described in the certificate of designation of preferences, rights and limitations of Series 1 Convertible Preferred Stock. 11 Protara Therapeutics, Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements (amounts in thousands, except share and per share data) During August 2023, approximately 36 shares of Series 1 Convertible Preferred Stock were converted into 35,823 shares of common stock. The holders of Series 1 Convertible Preferred Stock are not entitled to vote. April 2024 Equity Financing On April 5, 2024, the Company entered into a subscription agreement with certain purchasers, or the Purchasers, pursuant to which the Company agreed to sell and issue to the Purchasers, in a private placement, or the 2024 Private Placement, an aggregate of 9,143,380 shares of the Company’s common stock, or the Shares, and, for certain purchasers, pre-funded warrants, or the Pre-Funded Warrants, to purchase an aggregate of 1,700,000 shares of the Company’s common stock. In each case, the Shares or Pre-Funded Warrants were issued with warrants, or the Common Warrants, to purchase an aggregate of up to 10,843,380 shares of the Company’s common stock. Each Share, along with its attached Common Warrant, had a purchase price of $ 4.15 , and each Pre-Funded Warrant, along with its attached Common Warrant, had a purchase price of $ 4.149 . The closing date of the 2024 Private Placement was April 10, 2024. The 2024 Private Placement resulted in gross proceeds of approximately $ 44,998 and net proceeds of approximately $ 42,964 , reflecting approximately $ 3,034 of placement agent’s fees, legal costs and other expenses connected with the transaction. The Pre-Funded Warrants are exercisable at any time after April 10, 2024, at an exercise price of $ 0.001 per share. The Common Warrants are exercisable on or prior to the earlier of (i) April 10, 2027 and (ii) 90 days after the public announcement that the Company has demonstrated a six-month complete response rate of minimum 42% from at least 25 Bacillus Calmette-Guérin (BCG)-Unresponsive patients in the ADVANCED-2 (Cohort B) clinical trial, at an exercise price of $ 5.25 per share. The Pre-Funded Warrants and the Common Warrants are exercisable so long as the aggregate number of shares of the Company’s common stock beneficially owned by the holder (together with its affiliates) would not exceed 4.99 % of the number of shares of the Company’s common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of such Pre-Funded Warrant or Common Warrant, as applicable. Such percentage may be increased or decreased to any number not in excess of 19.99 % at the holder’s election upon notice to the Company, any such increase not to take effect until the sixty-first day after notice to the Company. Both the Pre-Funded Warrants and the Common Warrants contain standard adjustments to the exercise price, inclusive of stock splits, stock dividends and pro rata distributions and contain customary terms regarding the treatment of such Pre-Funded Warrants or Common Warrants in the event of a fundamental transaction, which include but are not limited to a merger or consolidation involving the Company, a sale of all or substantially all of the assets of the Company or a business combination resulting in any person acquiring more than 50 % of the outstanding shares of Common Stock of the Company. The Company concluded that the Pre-Funded Warrants and Common Warrants met the requirements to be classified in stockholders’ equity. The fair market value of the Pre-Funded Warrants has been estimated as the difference between the share price of our stock on the agreement date and the exercise price of the Pre-Funded Warrant. The fair market value of the Common Warrants at their issuance has been estimated using the Black-Scholes option-pricing model. The assumed dividend yield is based upon the Company’s expectation of not paying dividends in the foreseeable future. Expected volatility for the Company’s common stock is determined based on the historical volatility of the Company over the full term of the warrant. The risk-free interest rate is based upon the U.S. Treasury yield curve commensurate with the expected term at the time of grant. The expected term of the Common Warrants was calculated utilizing the three-year expiration date, taking into consideration the possibility of an accelerated expiration date pursuant to the terms of the Common Warrants. The estimated fair market values of the Shares, Pre-Funded Warrants and Common Warrants have been recorded in additional paid in capital. As of June 30, 2024 no warrant has expired or has been exercised. 12 Protara Therapeutics, Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements (amounts in thousands, except share and per share data) 11 . Stock-Based Compensation 2020 Inducement Plan On March 26, 2020, the Compensation Committee of the Board of Directors, or the Compensation Committee, approved the 2020 Inducement Plan in order to award nonstatutory stock options, restricted stock awards, restricted stock unit awards and other stock-based awards to persons not previously an employee or director of the Company, or following a bona fide period of non-employment, as an inducement material to such persons entering into employment with the Company. The total number of shares authorized under the 2020 Inducement Plan is 600,000 for the issuance of the Company’s common stock. The Compensation Committee also adopted a form of stock option grant notice and stock option agreement and forms of restricted stock unit grant notice and restricted stock unit agreement for use with the Inducement Plan. As of June 30, 2024, there were 526,597 shares of common stock subject to outstanding awards and 73,403 shares of common stock available for future issuance under the 2020 Inducement Plan. 2017 Equity Incentive Plan On August 10, 2017, Private ArTara (a predecessor entity of the Company), its Board of Directors and its stockholders approved the ArTara Therapeutics, Inc. 2017 Equity Incentive Plan to enable Private ArTara and its affiliates to recruit and retain highly qualified personnel and to incentivize personnel for productivity and growth. The total number of shares authorized under the 2017 Equity Incentive Plan was 2,000,000 for the issuance of stock options, stock appreciation rights, restricted stock and restricted stock units to among others, members of the Board of Directors, employees, consultants and service providers to the Company and its affiliates. As of January 9, 2020, no additional awards will be made under the 2017 Equity Incentive Plan. 2014 Equity Incentive Plan On October 3, 2014, the stockholders approved the 2014 Equity Incentive Plan. On June 20, 2017, the Company’s Board of Directors amended the 2014 Equity Incentive Plan, or the Amended and Restated 2014 Plan. On July 31, 2017, the stockholders approved this amendment. On January 1, 2020, Protara Therapeutics, Inc. amended its Amended and Restated 2014 Equity Incentive Plan. The Amended and Restated 2014 Plan, as amended, provides for the grant of incentive and non-statutory stock options, stock appreciation rights, restricted stock and stock unit awards, performance units, stock grants and qualified performance-based awards. The Amended and Restated 2014 Plan, as amended, provides that the number of shares reserved and available for issuance will automatically increase each January 1, by four percent of the Company’s common stock on the immediately preceding December 31, adjusted for the number of shares of the Company’s common stock issuable upon conversion of any security that the Company may issue that is convertible into or exchangeable for the Company’s common stock, or such lesser number of shares as determined by the Company’s Board of Directors. Terms of the stock awards, including vesting requirements, are determined by the Board of Directors, subject to the provisions of the plans. Certain awards provide for accelerated vesting if there is a change in control as defined in the plan. 13 Protara Therapeutics, Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements (amounts in thousands, except share and per share data) On January 1, 2024, pursuant to the annual evergreen feature of the Amended and Restated 2014 Plan, as amended, the number of shares authorized under the Amended and Restated 2014 Plan, as amended, was increased by 911,380 shares to 4,474,683 shares. As of June 30, 2024, there were 3,776,050 shares of common stock subject to outstanding awards. Following the approval of the Company’s 2024 Equity Incentive Plan, or 2024 EIP, by the stockholders of the Company on June 7, 2024, no additional awards will be made under the 2014 Equity Incentive Plan. 2024 Equity Incentive Plan On June 7, 2024, the stockholders approved the 2024 EIP. The 2024 EIP provides for the grant of 1,500,000 shares of common stock for stock options, stock appreciation rights, restricted stock, restricted stock units, performance units, performance shares and other stock and cash awards. Terms of the stock awards, including vesting requirements, are determined by the Board of Directors, subject to the provisions of the plan. As of June 30, 2024, there were 0 shares of common stock subject to outstanding awards and 1,500,000 shares of common stock available for future issuance under the 2024 EIP. 2024 Employee Stock Purchase Plan On June 7, 2024, the stockholders of the Company approved the 2024 Employee Stock Purchase Plan, or 2024 ESPP. The number of shares authorized under the 2024 ESPP is 1,000,000 . As of June 30, 2024, the number of shares available for issuance was 1,000,000 . During the three and six months ended June 30, 2024, no shares were issued under the 2024 ESPP. Restricted Stock Units The following table summarizes restricted stock unit, or RSU, activities for the six months ended June 30, 2024: Restricted Stock Units Weighted Average Grant Date Fair Value Non-vested as of December 31, 2023 236,679 $ 7.07 Granted 210,700 1.91 Forfeited ( 39,886 ) 2.89 Vested ( 111,579 ) 10.45 Non-vested as of June 30, 2024 295,914 $ 2.69 The fair value of RSUs is amortized on a straight-line basis over the requisite service period of the respective awards. As of June 30, 2024, the unamortized value of RSUs was $ 594 . As of June 30, 2024, the weighted average remaining amortization period was 2.09 years. As of June 30, 2024 and December 31, 2023, 289,500 RSUs have vested that have not yet been settled into shares of the Company’s common stock. During the six months ended June 30, 2024, the Company issued 73,909 shares of the Company’s common stock from the net settlement of 111,579 RSUs. The Company paid $ 83 in connection with the net share settlement of these RSUs. 14 Protara Therapeutics, Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements (amounts in thousands, except share and per share data) Stock Options The following table summarizes stock option activities for the six months ended June 30, 2024: Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term (years) Aggregate Intrinsic Value (1) Outstanding as of December 31, 2023 2,900,205 $ 9.50 8.03 $ 20 Granted 1,301,700 1.99 - - Exercised ( 47,580 ) 2.83 - 23 Forfeited ( 302,137 ) 3.14 - - Expired ( 627 ) 3.20 - - Outstanding as of June 30, 2024 3,851,561 $ 7.54 7.95 $ 167 Vested and expected to vest at June 30, 2024 3,851,561 $ 7.54 7.95 $ 167 Exercisable as of June 30, 2024 1,769,285 12.63 6.70 - (1) Aggregate intrinsic value represents the difference between the exercise price of the option and the closing market price of our common stock on December 31, 2023 and June 30, 2024, respectively. The intrinsic value of options exercised during the six months ended June 30, 2024 was $ 23 and 47,580 options were exercised. The weighted average grant date fair value per share of the options granted during the six months ended June 30, 2024 and 2023 was $ 1.58 and $ 2.40 respectively. As of June 30, 2024, there was approximately $ 4,980 of unrecognized share-based compensation for unvested stock option grants, which is expected to be recognized over a weighted average period of 2.72 years. The total unrecognized stock-based compensation cost will be adjusted for actual forfeitures as they occur. Summary of Stock-Based Compensation Expense The following tables summarize total stock-based compensation costs recognized: For the Three Months Ended June 30, For the Six Months Ended June 30, 2024 2023 2024 2023 Restricted stock units $ 111 $ 326 $ 262 $ 640 Stock options 953 1,292 2,028 2,553 Total $ 1,064 $ 1,618 $ 2,290 $ 3,193 Stock-based compensation expense was reflected within the condensed consolidated statements of operations and comprehensive loss as: For the Three Months ended June 30, For the Six Months Ended June 30, 2024 2023 2024 2023 Research and development $ 237 $ 414 $ 611 $ 814 General and administrative 827 1,204 1,679 2,379 Total $ 1,064 $ 1,618 $ 2,290 $ 3,193 15 Protara Therapeutics, Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements (amounts in thousands, except share and per share data) 12. Net Income (Loss) per Common Share The following table sets forth the computation of the net income (loss) per share attributable to common stockholders, basic and diluted: For the Three Months ended June 30, For the Six Months Ended June 30, 2024 2023 2024 2023 Numerator Net income (loss) attributable to common stockholders $ ( 9,513 ) $ ( 11,294 ) $ ( 20,608 ) $ ( 20,339 ) Denominator Weighted-average shares of common stock outstanding, basic and diluted 21,233,163 11,307,842 16,327,056 11,305,867 Net income (loss) per share attributable to common stockholders, basic and diluted $ ( 0.45 ) $ ( 1.00 ) $ ( 1.26 ) $ ( 1.80 ) The Pre-Funded Warrants for the purchase of 1,700,000 shares of common stock with an exercise price of $ 0.001 per share have been included in the computation of the net loss per share attributable to common stockholders – basic and diluted, as the exercise price was deemed non-substantive. Since the Company was in a net loss position for all periods presented, net income (loss) per share attributable to common stockholders was the same, on a basic and diluted basis, as the inclusion of all potential common equivalent shares outstanding would have been anti-dilutive. The Company excluded the following potential shares of common stock, presented based on amounts outstanding at each period end, from the computation of diluted net income (loss) per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect: As of June 30, 2024 2023 Stock options issued and outstanding 3,851,561 3,074,128 Restricted stock units issued and outstanding 585,414 584,852 Series 1 Convertible Preferred Stock issued and outstanding 7,993,217 8,029,039 Common Warrants, issued and outstanding 10,843,380 - Total potentially dilutive shares 23,273,572 11,688,019 16