Commitments and Contingencies

12 Months Ended

Dec. 31, 2020

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 7 – COMMITMENTS AND CONTINGENCIES

Lease Agreements

The Company has entered into operating leases for office and laboratory space. On January 1, 2019 ("Effective Date"), the Company adopted ASC Topic 842, Leases ("ASC 842"), which increases transparency and comparability by recognizing a lessee's rights and obligations resulting from leases. ASC 842 requires the recognition of the right-of-use ("ROU") assets and related operating lease liabilities on the balance sheet. The Company adopted the new guidance using the modified retrospective approach on January 1, 2019.

The adoption of ASC 842 on January 1, 2019 did not immediately result in the recognition of ROU assets as the Company did not have any leases at that time with a term of twelve months or more. However, on January 9, 2020, subsequent to the Merger and Private Placements, it became reasonably certain that the Company would maintain its quarter-to-quarter lease with its contract development and manufacturing organization for its manufacturing space for an expected term of approximately eight years, therefore resulting in the recognition of an ROU asset and related operating lease liability.

The Company elected the package of practical expedients permitted within the standard, which allow an entity to forgo reassessing (i) whether a contract contains a lease, (ii) classification of leases, and (iii) whether capitalized costs associated with a lease meet the definition of initial direct costs. Also, the Company elected the expedient to allow the Company to not have to separate lease and non-lease components. The Company has also elected the short-term lease accounting policy under which the Company would not recognize a lease liability or ROU asset for any lease that at the commencement date has a lease term of twelve months or less and does not include a purchase option that the Company is more than reasonably certain to exercise.

On July 1, 2020 and December 1, 2020, the Company entered into additional quarter-to-quarter leases for additional contract development and manufacturing space for expected terms of approximately seven years, therefore resulting in the recognition of additional ROU assets and related operating lease liabilities.

On December 1, 2020, the Company entered into a long-term lease for office space for a term of seven years. This lease was entered into with a related party of the Company, and its terms were determined by management to be on an arms-length basis. The lease will not commence until the second quarter of 2021 when the Company is granted access to the premises. Accordingly, as of December 31, 2020, the Company did not recognize an additional ROU asset and related operating lease liability for this lease.

For contracts entered into on or after the Effective Date, at the inception of a contract, the Company will assess whether the contract is, or contains, a lease. The Company's assessment is based on: (i) whether the contract involves the use of a distinct identified asset, (ii) whether the Company obtained the right to substantially all the economic benefit from the use of the asset throughout the period, and (iii) whether the Company has the right to direct the use of the asset. Leases entered into prior to January 1, 2019, which were accounted for under ASC 840, Leases, were not reassessed for classification.

For operating leases, the lease liability is initially and subsequently measured at the present value of the unpaid lease payments. The Company generally uses its incremental borrowing rate as the discount rate for leases, unless an interest rate is implicitly stated in the lease. The present value of the lease payments is calculated using the incremental borrowing rate for operating leases, which was determined using a rate of interest that the Company would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term. The lease term for the Company's lease includes the noncancellable period of the lease plus any additional periods covered by either a Company option to extend the lease that the Company is reasonably certain to exercise, or an option to extend the lease controlled by the lessor. ROU assets, once recorded, are reviewed for impairment.

Lease expense for operating leases consists of the lease payments plus any initial direct costs and is recognized on a straight-line basis over the lease term.

Balance sheet information related to our leases is presented below:

		As of
Operating leases:	Balance Sheet Location	December 31, 2020		January 9, 2020		December 31, 2019
Right-of-use assets	Other assets	$	1,060	$	403	$	-
Operating lease liability, current	Operating lease liability, current		88		9		-
Operating lease liability, long-term	Operating lease liability, long-term		999		394		-

The following provides details of the Company's lease expense:

Lease cost	For the Year Ended December 31, 2020
Operating lease cost	$	93
Short-term lease cost		215
Total	$	308

Other information related to leases is presented below:

	As of December 31, 2020
Other information
Weighted-average discount rate – operating lease		12.00	%
Weighted-average remaining lease term – operating lease (in months)		87

As of December 31, 2020, the expected annual minimum lease payments of our operating lease liabilities and other short-term leases were as follows (includes long-term lease entered into on December 1, 2020 that does not commence until the second quarter of 2021):

For Years Ending December 31,	Operating lease
2021	$	1,111
2022		1,333
2023		1,338
2024		1,342
2025		1,423
Thereafter		3,277
Total future minimum lease payments, undiscounted		9,824
Less: Imputed interest for leases in excess of one year		8,676
Present value of future minimum lease payments	$	1,148
Present value of future minimum lease payments for our operating lease liabilities	$	1,087
Present value of future minimum lease payments, short-term leases	$	61

Employment Agreements

Executive Employment Agreements

The Company's executive officers have entered into at-will employment agreements.

Temporary Employment Agreement

On December 6, 2018, the Company entered into a temporary employment agreement (the "Temporary Employment Agreement") with an individual who assisted with certain corporate development activities. Pursuant to the Temporary Employment Agreement, the individual was entitled to receive an annual base salary of $90. In addition, the individual would be entitled to a performance-based success fee which would be adjusted based on amounts of funding achieved and timing of when such funding was received. On January 9, 2020, the Company's capital raise triggered a performance-based compensation obligation and accordingly this individual was paid $462, which was included in general and administrative expenses within the Company's consolidated statements of operations for the year ended December 31, 2020.

Collaborations and License Agreements

Choline License Agreement

On September 27, 2017, the Company entered into a license agreement (the "Choline License Agreement") with Alan L. Buchman ("Dr. Buchman"). Pursuant to the Choline License Agreement, the Company received from Dr. Buchman the license rights in and to the "Licensed Orphan Designations", the "Licensed IND", "Existing Study Data" and the "Licensed Know-How" for one or more of the licensed indications. In consideration for the rights and licenses granted, Dr. Buchman received a payment of $50 on October 2, 2017, and license payments of $50 and $50 on December 12, 2018 and January 8, 2019, respectively, upon the Company meeting the criteria for certain meetings to be held with the Federal Drug Administration (the "FDA"). Pursuant to the Choline License Agreement, effective October 2017, the Company incurred a fixed obligation to Dr. Buchman of $400 (the "Choline License Fee"). Upon the Company receiving $5,000 in cumulative funding (as defined), Dr. Buchman would be entitled to receive payment of the Choline License Fee as a lump sum if the funds are received by April 15, 2019 and the Choline License Fee shall be increased to a one-time payment of $600 if the funds are received by October 15, 2019. On October 2, 2019, the Company made a payment of $50 to Dr. Buchman. On January 22, 2020, in connection with the closing of the Merger and concurrent financing, Dr. Buchman was paid $550 which was included in accrued expenses as of December 31, 2019.

During the years ended December 31, 2020 and 2019, the Company recorded research and development expense of $0 and $200 (representing the increase in the Choline License Fee obligation), respectively, for expenditures to Dr. Buchman in connection with obligations under the Choline License Agreement.

License Agreement

On December 22, 2017, the Company entered into an agreement (the "Feinstein Agreement") with The Feinstein Institute for Medical Research (the "Feinstein Institute"), a not-for-profit corporation with 50 research labs and 2,500 clinical research studies. Pursuant to the Feinstein Agreement, the Company acquired an exclusive license relating to treatment of fatty liver diseases in humans for which Choline may be an effective therapeutic. In consideration for the rights and license granted, the Feinstein Institute would receive a royalty of one percent (1%) of the first one hundred million dollars ($100,000) of net sales of IV Choline Chloride and a royalty of one and one-half percent (1.5%) of all net sales thereafter. In addition, the Company would pay the Feinstein Institute twelve and one-half percent (12.5%) of net proceeds resulting from agreements entered within 2 years from the effective date, and seven and one-half percent (7.5%) of net proceeds resulting from agreements entered into thereafter. Pursuant to the Feinstein Agreement additional payments would be due to the Feinstein Institute for license maintenance payments and for meeting milestone events. On January 9, 2020, the Company's raising of over $5,000 triggered a financing milestone obligation and accordingly the Feinstein Institute was paid $100. Pursuant to the Feinstein Agreement, upon the achievement of certain future new drug application milestones, the Company would be obligated to remit an aggregate of $275.

During the years ended December 31, 2020 and 2019, the Company recorded research and development expense of $115 and $1, respectively, in connection with the Feinstein Agreement.

Sponsored Research and License Agreement

On November 28, 2018, the Company entered into a sponsored research and license agreement (the "Iowa Agreement") with the University of Iowa. Pursuant to the Iowa Agreement, the University of Iowa, which is engaged in clinical research to improve the diagnosis and treatment of lymphangioma using a pharmaceutical product (OK-432), would assist the Company in collecting case reports, forms, source data, and safety data available to the University of Iowa in support of the development of the Company's proprietary Streptococcus Pyogenes investigational product, TARA-002 for the LMs indication. During the term of the services, the Company would pay the University of Iowa thirty thousand dollars ($30) per year to fund the project, plus additional amounts upon the realization of certain milestones. More specifically, upon forty-five (45) days of an approval of TARA-002 by the FDA, the Company would pay up to $1,750 to the University of Iowa for meeting these milestones. Furthermore, the Company would pay the University of Iowa royalties of up to 1.75% for net sales ranging from $0 - $25,000, 2.25% for net sales ranging from $25,000 to $50,000, and 2.50% for net sales in excess of $50,000. Pursuant to the Iowa Agreement, the University of Iowa would be entitled to additional payments for the Company achieving annual net sales of product according to the milestones. For annual net sales of product up to $25,000; $62; for annual net sales of product of up to $50,000; $62; and for annual net sales of product of up to $100,000; $125.

During the years ended December 31, 2020 and 2019, the Company recorded research and development expense of $30 and $30 respectively, in connection with the Iowa Agreement.

Chugai Agreement

On June 17, 2019, the Company entered into an agreement (the "Chugai Pharmaceutical Agreement") with Chugai Pharmaceutical Co., LTD ("Chugai"), a drug manufacturing firm with offices and operations in Japan. Pursuant to the Chugai Pharmaceutical Agreement, Chugai would help the Company in its goals to develop and commercialize a therapeutic product (the "New Product") which is comparable to the Chugai existing therapeutic product (the "Existing Product"). In addition, the Company would be entitled to the use of Chugai materials and technical support as necessary. On July 14, 2020, the Company and Chugai entered into an amendment (the "Chugai Amendment") to the Chugai Pharmaceutical Agreement. The Chugai Amendment is effective as of June 30, 2020. The Chugai Amendment extended the date through which Chugai will exclusively provide the Existing Product and materials to the Company from June 30, 2020 to June 30, 2021, extended the date through which Chugai will not provide materials or technical support to any third party for the purpose of development and commercialization in a given area from the fifth anniversary to the eleventh anniversary of the original effective date and provides that, in addition to the designated fee provided upon the initial indication approval in the Chugai Pharmaceutical Agreement, the Company will pay Chugai a designated fee for each additional indication approval. The Company is obligated to Chugai for certain payments upon the completion of agreed upon milestones. As of December 31, 2019, the Company recorded an obligation of $500 upon Chugai having completed an agreed upon milestone, which the Company paid on July 27, 2020.

During the years ended December 31, 2020 and 2019, the Company recorded research and development expense of $0 and $500, respectively, respectively, in connection with the Chugai Agreement, as amended.

Johns Hopkins University

In February 2002, Proteon entered into an agreement to license certain intellectual property in connection with vonapanitase with Johns Hopkins University. The agreement calls for payments to be made by the Company upon the commencement of vonapanitase related product sales, in the form of a royalty of 2.5% on net sales of the product. As of December 31, 2020, the Company has not commenced vonapanitase product sales and therefore has recognized no royalties on product sales.

Litigation

From time to time, Protara 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.