What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-07-31 compared with 2020-05-13 · 774 added, 654 removed, 599 unchanged (70% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

and cash equivalents

offering costs

expenses and other current assets

current assets

Cash and cash equivalents

Restricted cash

Deferred offering costs

Prepaid expenses and other current assets

Total current assets

Non-current assets:

Property and equipment, net

Right-of-use asset

Liabilities and Stockholders’

and equipment, net

and Stockholders’

Equity (Deficit)

liability, current

current liabilities

Accounts payable

Accrued expenses

Short-term debt

Right-of-use liability, current

Total current liabilities

Non-current liabilities:

Right-of-use liability, long-term

Total liabilities

Commitments and Contingencies (Note 6)

liability, long-term

and Contingencies (Note 6)

Stockholders’

Equity (Deficit)

Preferred Stock, $0.001 par value, authorized 10,000,000 shares:

Series 1 Convertible Preferred Stock, 3,880

and 0 shares authorized at March 31, 2020 and December 31, 2019, respectively, 3,879 and 0 shares issued and outstanding as

of March 31, 2020 and December 31, 2019, respectively.

Common Stock, $0.001 par value, authorized 100,000,000 shares:

Common Stock, 5,843,203 and 2,627,533 common

shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively.

Additional Paid in Capital

Accumulated Deficit

Preferred Stock,

$0.001 par value, authorized 10,000,000 shares:

1 Convertible Preferred Stock, 3,880 and 0 shares authorized at June 30, 2020 and December 31, 2019, respectively, 3,879 and

0 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively.

Common Stock,

$0.001 par value, authorized 100,000,000 shares:

Stock, 5,843,203 and 2,627,533 common shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively.

Paid in Capital

(29,981,947 )

(12,781,660 )

Total Stockholders’

Stockholders’

Equity (Deficit)

Total Liabilities and Stockholders’

Liabilities and Stockholders’

Equity (Deficit)

accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

PROTARA THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF

For the Three Months

Ended March 31,

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

the Three Months

Ended June 30,

the Six Months Ended

Operating expense:

Research & development

General & administrative

Total operating expenses

Operating loss

& development

& administrative

operating expenses

(17,425,500 )

Other (income) expense,

(income) expense, net

other (income) expense, net

Interest (income) expense, net

Total other (income) expense, net

$ (7,140,030 )

$ (1,428,675 )

Weighted Average Shares Outstanding, basic and diluted

Net loss per share, basic and diluted

accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

PROTARA THERAPEUTICS, INC.

STATEMENT OF CHANGES IN STOCKHOLDERS’

$ (17,200,287 )

$ (2,956,731 )

Weighted Average

Shares Outstanding, basic and diluted

loss per share, basic and diluted

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

THERAPEUTICS, INC.

OF CHANGES IN STOCKHOLDERS’

EQUITY (DEFICIT)

Series 1 Convertible Preferred Stock

THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019

1 Convertible Preferred Stock

Stockholders’

Balance at January 1, 2020

at January 1, 2020

$ (12,781,660 )

$ (2,127,959 )

Issuance of Series 1 Convertible Preferred Stock, net of

offering costs

Issuance of Common Stock in ArTara Private Placement, net

of offering costs

Issuance of Common Stock in Proteon Private Placement,

net of offering costs

Reverse business combination

Stock-based compensation - stock options

Stock-based compensation - restricted stock units

of Series 1 Convertible Preferred Stock, net of offering costs

of Common Stock in ArTara Private Placement, net of offering costs

of Common Stock in Proteon Private Placement, net of offering costs

business combination

compensation - stock options

compensation - restricted stock units

(10,060,257 )

Balance at March

at March 31, 2020

$ (22,841,917 )

Balance at January 1, 2019

compensation - stock options

compensation - restricted stock units

at June 30, 2020

$ (29,981,947 )

Stock-based compensation - stock options

Stock-based compensation - restricted stock

Balance at March

at January 1, 2019

$ (4,952,443 )

accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

PROTARA THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF

For the Three Months

Ended March 31,

Cash flows from operating activities:

compensation - stock options

compensation - restricted stock

at March 31, 2019

$ (6,480,499 )

compensation - stock options

compensation - restricted stock

at June 30, 2019

$ (7,909,174 )

Adjustments to reconcile net loss to net

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

the Six Months Ended

Cash flows from operating

$ (17,200,287 )

$ (2,956,731 )

to reconcile net loss to Net cash used in operating activities:

based compensation

of operating lease right-of-use asset

Changes in operating

assets and liabilities:

expenses and other current assets

cash used in operating activities

Stock based compensation

Amortization of operating lease right-of-use asset

Changes in operating assets and liabilities:

Prepaid expenses and other current assets

Accounts payable

Accrued expenses

Net cash used in operating activities

Cash flows from investing activities:

Cash and restricted cash acquired in connection

with the reverse merger with ArTara Therapeutics, Inc.

Purchase of property and equipment

Net cash provided by/(used in) investing activities

Cash flows from financing activities:

Proceeds from - ArTara Private Placement, net of offering costs

Proceeds from - Proteon Private Placement, net of offering costs

Proceeds from - Series 1 Convertible Preferred Stock, net of offering

Repayments under short-term debt

Net cash provided by financing activities

Net increase/(decrease) in cash and cash equivalents and restricted cash

Cash and cash equivalents and restricted cash -

beginning of year

Cash and cash equivalents and restricted cash - end

Supplemental cash flow information

(12,879,090 )

Cash flows from investing

and restricted cash acquired in connection with the reverse merger with ArTara Therapeutics, Inc.

of property and equipment

cash provided by/(used in) investing activities

Cash flows from financing

from - ArTara Private Placement, net of offering costs

from - Proteon Private Placement, net of offering costs

from - Series 1 Convertible Preferred Stock, net of offering costs

under short-term debt

cash provided by financing activities

Net increase/(decrease)

in cash and cash equivalents and restricted cash

and cash equivalents and restricted cash - beginning of year

and cash equivalents and restricted cash - end of year

cash flow information

Cash paid for:

Non-cash investing and financing activities:

Deferred offering costs recognized that were previously

recorded in accrued expenses

Purchase of insurance agreement with notes payable

Common stock issued in connection

with the reverse merger with ArTara Therapeutics, Inc.

accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Non-cash investing

and financing activities:

offering costs recognized that were previously recorded in accrued expenses

of insurance agreement with notes payable

stock issued in connection with the reverse merger with ArTara Therapeutics, Inc.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Therapeutics, Inc.

2 unchanged sentences

BUSINESS, LIQUIDITY AND CAPITAL RESOURCES

Therapeutics, Inc.

and its consolidated subsidiaries (“Protara”

or the “Company”) is focused on

identifying and advancing transformative therapies for people with rare and specialty diseases.

Protara’s portfolio

includes its lead program, TARA-002, an investigational cell based therapy being developed for the treatment of lymphatic

malformations, and Intravenous (IV) Choline Chloride, an investigational phospholipid substrate replacement therapy initially

in development for patients receiving parenteral nutrition (PN) who have intestinal failure associated liver disease

Protara Therapeutics, Inc.

and its consolidated subsidiaries

(“Protara”

or the “Company”) is focused on identifying and advancing transformative therapies for people

with rare and specialty diseases.

Protara’s portfolio includes its lead program, TARA-002, an investigational cell based

therapy being developed for the treatment of lymphatic malformations (LMs).

In addition to LMs, the Company is also evaluating

the potential of TARA-002 in oncologic indications.

The second program in the portfolio is Intravenous (IV) Choline Chloride, an

investigational phospholipid substrate replacement therapy initially in development for patients receiving parenteral nutrition

(PN) who have intestinal failure associated liver disease (IFALD).

January 9, 2020, privately-held ArTara Subsidiary, Inc.

18 unchanged sentences

In addition, immediately following the closing

of the Private Placements (defined below), all of the outstanding shares of Protara Therapeutic, Inc.’s Series A Preferred

of the Private Placements (defined below), all of the outstanding shares of Protara Therapeutics, Inc.’s Series A Preferred

Stock were converted into shares of Protara Therapeutics, Inc.’s Common Stock.

4 unchanged sentences

Capital Resources and Management Plans

of March 31, 2020 and December 31, 2019, the Company’s cash and cash equivalents on hand was $36,068,736 and $564,124, respectively.

The Company has not generated revenues since its inception and has incurred net losses of $10,060,257 and $1,528,056 for the three

months ended March 31, 2020 and 2019, respectively.

As of March 31, 2020, the Company had working capital of $34,713,864 and stockholder’s

equity of $64,741,841.

During the three months ended March 31, 2020, cash flows used in operating activities were $7,145,959,

consisting primarily of a net loss of $10,060,257, which includes non-cash stock-based compensation charges of $2,797,807.

inception, the Company has met its liquidity requirements principally through the sale of its Common Stock in private placements.

As of June 30, 2020 and December 31, 2019, the Company’s

cash and cash equivalents on hand was $29,970,617 and $564,124, respectively.

The Company has not generated revenues since its

inception and has incurred net losses of $17,200,287 and $2,956,731 for the six months ended June 30, 2020 and 2019, respectively.

As of June 30, 2020, the Company had working capital of $29,402,629 and stockholder’s equity of $59,430,533.

six months ended June 30, 2020, cash flows used in operating activities were $12,879,090, consisting primarily of a net loss of

$17,200,287, which includes non-cash stock-based compensation charges of $4,626,529.

Since inception, the Company has met its

liquidity requirements principally through the sale of its Common Stock and Series 1 Convertible Preferred Stock in private placements.

connection with the Merger, the Company consummated the Private Placements, raising gross proceeds of $42.5 million and proceeds,

5 unchanged sentences

to fully realize management’s plans.

The Company believes that its current financial resources, as

of the date of the issuance of these consolidated financial statements, are sufficient to satisfy the Company’s estimated

liquidity needs for at least twelve months from the issuance of these unaudited consolidated financial statements.

The Company believes that its current financial resources,

as of the date of the issuance of these consolidated financial statements, are sufficient to satisfy the Company’s estimated

liquidity needs for at least twelve months from the date of issuance of these unaudited consolidated financial statements.

Therapeutics, Inc.

3 unchanged sentences

of Presentation

accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles

generally accepted in the United States (“U.S.

GAAP”) for interim financial information and Article 10 of Regulation

Accordingly, they do not include all of the information and footnotes required by U.S.

The accompanying unaudited condensed consolidated financial

statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S.

for interim financial information and Article 8 Section 3 of Regulation S-X.

Accordingly, they do not include all of the information

and footnotes required by U.S.

GAAP for complete financial statements.

All adjustments (consisting of normal accruals) considered necessary for a fair presentation have

been included.

Operating results for the three months ended March 31, 2020 are not necessarily indicative of the results that

may be expected for the year ending December 31, 2020.

These unaudited condensed consolidated financial statements should be read

in conjunction with the consolidated financial statements for the year ended December 31, 2019 and related notes thereto included

as Exhibit 99-1, within Form 8-K/A filed on March 20, 2020 with the United States Securities and Exchange Commission (“SEC”).

All adjustments (consisting of normal accruals) considered

necessary for a fair presentation have been included.

Operating results for the six months ended June 30, 2020 are not necessarily

indicative of the results that may be expected for the year ending December 31, 2020.

These unaudited condensed consolidated financial

statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2019 and related

notes thereto included as Exhibit 99-1, within Form 8-K/A filed on March 20, 2020 with the United States Securities and Exchange

Commission (“SEC”).

of Consolidation

The unaudited condensed consolidated financial statements include

the accounts of the Company and its wholly-owned subsidiaries.

All inter-company balances and transactions have been eliminated

in the accompanying unaudited condensed consolidated financial statements.

preparation of financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect

the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial

statements, and also that affect the amount of expenses reported for each period.

Actual results could differ from those which

result from using such estimates.

Management also utilizes various other estimates, including but not limited to income taxes,

the valuation of deferred tax assets, determining the fair value of business combination considerations, determining the fair

value of goodwill and intangibles, determining the fair value of the Company’s Common Stock, and the valuation of securities

and assumptions underlying stock-based compensation.

The results of any changes in accounting estimates are reflected in the financial

statements of the period in which the changes become evident.

Estimates and assumptions are reviewed periodically and the effects

of revisions are reflected in the period that they are determined to be necessary.

unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.

inter-company balances and transactions have been eliminated in the accompanying unaudited condensed consolidated financial statements.

The preparation of financial statements in conformity with

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and

the disclosure of contingent assets and liabilities as of the date of the financial statements, and also that affect the amount

of expenses reported for each period.

Actual results could differ from those which result from using such estimates.

also utilizes various other estimates, including but not limited to income taxes, the valuation of deferred tax assets, determining

the fair value of business combination considerations, determining the fair value and evaluation for impairment of goodwill and

intangibles, determining the fair value of the Company’s Common Stock, and the valuation of securities and assumptions underlying

stock-based compensation.

The results of any changes in accounting estimates are reflected in the financial statements of the

period in which the change becomes evident.

Estimates and assumptions are reviewed periodically and the effects of revisions are

reflected in the period that they are determined to be necessary.

and cash equivalents

1 unchanged sentence

Cash and cash equivalents are held in depository and money market accounts and are reported at fair value.

cash as of March 31, 2020 and December 31, 2019 was $50,000 and $0, respectively.

As of March 31, 2020, restricted cash consists

cash as of June 30, 2020 and December 31, 2019 was $50,000 and $0, respectively.

As of June 30, 2020, restricted cash consists

of a cash deposit of $50,000 to collateralize a letter of credit obligation.

11 unchanged sentences

straight-line method over the respective estimated useful lives of the Company’s assets.

expense was $49,808 and $0 for the three months ended March 31, 2020 and 2019, respectively, and was included in research and

development expense within the consolidated statements of operations.

represents the excess of purchase price over the fair value of identifiable net assets of companies acquired.

10 unchanged sentences

value, including goodwill.

the event the estimated fair value of the Company is less than the carrying value, additional analysis would be required.

additional analysis would compare the carrying amount of the reporting unit’s goodwill with the implied fair value of that

The implied fair value of goodwill is the excess of the fair value of the reporting unit over the fair value amounts

assigned to all of the assets and liabilities of that unit as if the reporting unit was acquired in a business combination and

the fair value of the reporting unit represented the purchase price.

If the carrying value of goodwill exceeds its implied fair

value, an impairment loss equal to such excess would be recognized, which could significantly and adversely impact reported results

of operations and stockholders’

In the event the estimated fair value of the Company is less

than the carrying value, the Company would recognize a goodwill impairment equal to the difference between the carrying value

and its fair value, not to exceed the carrying value of goodwill.

January 9, 2020, in connection with the Merger, the Company separately valued the assets and liabilities acquired, and then determined

goodwill as the residual of the purchase price less identified net assets (See Note 3).

Therapeutics, Inc.

and Consolidated Subsidiaries

to Unaudited Condensed Consolidated Financial Statements

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Loss per Common Share

4 unchanged sentences

have been anti-dilutive:

For the Three and Six Months

Ended June 30,

Stock options

Restricted stock units

Conversion of Series 1 Convertible

Preferred Stock

Conversion of Series 1 Convertible Preferred Stock

Total potentially dilutive shares

Therapeutics, Inc.

and Consolidated Subsidiaries

to Unaudited Condensed Consolidated Financial Statements

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Concentrations

5 unchanged sentences

The Company has not experienced any loss as a result of these deposits.

Company accounts for stock-based compensation in accordance with FASB Accounting Standards Codification, or ASC, Topic 718, “Compensation

- Stock Compensation”

The Company accounts for stock-based compensation in accordance

with FASB Accounting Standards Codification, or ASC, Topic 718, “Compensation - Stock Compensation”

(“ASC 718”).

ASC 718 establishes accounting for stock-based awards exchanged for employee

and consultant services.

Under the provisions of ASC 718, stock-based compensation cost is measured at the grant date, based on

the fair value of the award, and is recognized as expense over the employee’s requisite service period (generally the vesting

period of the equity grant).

The fair value of the Company’s stock options are estimated using the Black Scholes option-pricing

model with the following assumptions:

fair value of the Company’s Common Stock, expected volatility, dividend rate, risk

free interest rate and the expected life.

The Company calculates the expected volatility using the historical volatility for a

pool of peer companies over the most recent period equal to the expected term and evaluates the extent to which available information

indicate that future volatility may differ from historical volatility.

The expected dividend rate is zero as the Company does

not expect to pay or declare any cash dividends on its Common Stock.

The risk-free rates for the expected terms of the stock options

are based on the U.S.

Treasury yield curve in effect at the time of the grant.

The Company has not experienced significant exercise

activity on stock options.

Due to the lack of historical information, the Company determined the expected term of its stock option

awards issued using the simplified method.

The simplified method assumes each vesting tranche of the award has a term equal to

the midpoint between when the award vests and when the award expires.

Restricted stock awards generally vest over the requisite

service periods with typical amortization periods of 24 months (vesting on a straight–line basis).

The fair value of a stock

award is equal to the fair market value of a share of the Company’s Common Stock on the grant date.

The Company accounts

for the forfeiture of equity awards as they occur.

ASC 718 establishes accounting for stock-based awards exchanged for employee and consultant services.

Under the provisions of

ASC 718, stock-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized

as expense over the employee’s requisite service period (generally the vesting period of the equity grant).

The fair value

of the Company’s stock options are estimated using the Black Scholes option-pricing model with the following assumptions:

fair value of the Company’s Common Stock, expected volatility, dividend rate, risk free interest rate and the expected life.

The Company calculates the expected volatility using the historical volatility for a pool of peer companies over the most recent

period equal to the expected term and evaluates the extent to which available information indicate that future volatility may

differ from historical volatility.

The expected dividend rate is zero as the Company does not expect to pay or declare any cash

dividends on its Common Stock.

The risk-free rates for the expected terms of the stock options are based on the U.S.

yield curve in effect at the time of the grant.

The Company has not experienced significant exercise activity on stock options.

Due to the lack of historical information, the Company determined the expected term of its stock option awards issued using the

simplified method.

The simplified method assumes each vesting tranche of the award has a term equal to the midpoint between when

the award vests and when the award expires.

Restricted stock awards generally vest over the requisite service periods (vesting

on a straight–line basis).

The fair value of a stock award is equal to the fair market value of a share of the Company’s

Common Stock on the grant date.

The Company accounts for the forfeiture of equity awards as they occur.

Therapeutics, Inc.

and Consolidated Subsidiaries

to Unaudited Condensed Consolidated Financial Statements

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Value Measurements

carrying amounts of cash and cash equivalents, prepaid expenses and accounts payable approximate their fair values due to the

short-term nature of these instruments.

ASC Topic 820 “Fair Value Measurements and Disclosures”

provides the framework

for measuring fair value.

That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used

to measure fair value.

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets

or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements).

carrying amounts of cash and cash equivalents, prepaid expenses, accounts payable and short-term debt approximate their fair values

due to the short-term nature of these instruments.

Topic 820 “Fair Value Measurements and Disclosures”

provides the framework for measuring fair value.

That framework

provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.

The hierarchy

gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements)

and the lowest priority to unobservable inputs (level 3 measurements).

value is defined as an exit price, representing the amount that would be received upon the sale of an asset or payment to transfer

9 unchanged sentences

3 Significant unobservable inputs that cannot be corroborated by market data.

Therapeutics, Inc.

and Consolidated Subsidiaries

to Unaudited Condensed Consolidated Financial Statements

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

and Development Costs

5 unchanged sentences

Upfront payments

are recorded when incurred, and milestone payments are recorded when the specific milestone has been achieved.

Once a compound

receives regulatory approval, the Company records any milestone payments in identifiable intangible assets, less accumulated

amortization and, unless the asset is determined to have an indefinite life, the Company amortizes the payments on a straight-line

basis over the remaining agreement term or the expected product life cycle, whichever is shorter.

the three months ended March 31, 2020 and 2019, the Company incurred $3,064,793 and $1,077,846 in research and development costs,

are recorded when incurred, and milestone payments are recorded when the specific milestone or progress has been achieved.

a compound receives regulatory approval, the Company records any milestone payments in identifiable intangible assets, less

accumulated amortization and, unless the asset is determined to have an indefinite life, the Company amortizes the payments

on a straight-line basis over the remaining agreement term or the expected product life cycle, whichever is shorter.

Research and development expenses were $2,469,720 and $986,716

for the three months ended June 30, 2020 and 2019, and $5,534,513 and $2,064,562 for the six months ended June 30, 2020 and 2019,

respectively.

a business combination, the assets acquired and the liabilities assumed are recognized at the acquisition date, measured at their

fair values as of that date.

In a business combination achieved in stages, the identifiable assets and liabilities are recognized

at their fair values.

In a bargain purchase in which the total acquisition-date fair value of the identifiable net assets acquired

exceeds the fair value of the consideration transferred plus any non-controlling interest in the acquiree, that excess in earnings

are recognized as a gain attributable to the Company.

For a business combination, the assets acquired and the liabilities

assumed are recognized at the acquisition date, measured at their fair values as of that date.

In a business combination achieved

in stages, the identifiable assets and liabilities are recognized at their fair values.

In a bargain purchase in which the total

acquisition-date fair value of the identifiable net assets acquired exceeds the fair value of the consideration transferred plus

any non-controlling interest in the acquiree, that excess in fair value is recognized as a gain.

tax liabilities and assets are recognized for the deferred tax consequences of differences between the tax bases and the recognized

2 unchanged sentences

See Note 3 for the Company’s accounting for the reverse merger.

Therapeutics, Inc.

and Consolidated Subsidiaries

to Unaudited Condensed Consolidated Financial Statements

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Accounting Pronouncements Adopted

11 unchanged sentences

or cash flows.

Company evaluated subsequent events and transactions that occurred after the balance sheet date up to May 12, 2020, the

date that the financial statements were available to be issued.

Other than as described in Note 1, 6 and 9 the Company did not

identify any subsequent events that would have required adjustment or disclosure in the financial statements.

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.

Other than as described in Note 6, 8 and 11, the Company did not identify any subsequent

events that would have required adjustment or disclosure in the financial statements.

Therapeutics, Inc.

6 unchanged sentences

shares of Protara Therapeutics, Inc.

the terms of the Merger Agreement, Protara Therapeutics, Inc.

issued shares of its common stock (“Common Stock”) to

the Company’s stockholders, at an exchange ratio of 0.190756 (the “Exchange Ratio”) shares of Common Stock,

after taking into account the Protara Reverse Stock Split, for each share of Private Protara common stock outstanding immediately

prior to the Merger.

Under the terms of the Merger Agreement, Protara Therapeutics,

issued shares of its common stock (“Common Stock”) to the Company’s stockholders, at an exchange ratio

of 0.190756 (the “Exchange Ratio”) shares of Common Stock, after taking into account the Protara Reverse Stock Split,

for each share of Private ArTara common stock outstanding immediately prior to the Merger.

Protara Therapeutics, Inc.

assumed all of the unvested Private ArTara restricted stock awards, which were

exchanged for a number of shares of Common Stock equal to 0.190756 multiplied by the number of shares of Private ArTara common

stock previously represented by such Private ArTara restricted stock awards and unvested to the same extent as such Private ArTara

restricted stock awards and subject to the same restrictions as such Private ArTara restricted stock awards.

The effect of the

Exchange Ratio resulted in the shareholders of the Company being issued 2,627,533 shares of Protara Common Stock.

all of the unvested Private ArTara restricted stock awards, which were exchanged for a number of shares of Common Stock equal

to 0.190756 multiplied by the number of shares of Private ArTara common stock previously represented by such Private ArTara restricted

stock awards and unvested to the same extent as such Private ArTara restricted stock awards and subject to the same restrictions

as such Private ArTara restricted stock awards.

The effect of the Exchange Ratio resulted in the shareholders of the Company being

issued 2,627,533 shares of Protara Common Stock.

Therapeutics, Inc.

25 unchanged sentences

(the “SEC”) on January 30, 2020.

Immediately following the closing of the Proteon Private Placement,

18,954 shares of Protara Therapeutics, Inc.’s Series A Convertible Preferred Stock outstanding were converted into 476,276

shares of Protara Therapeutics, Inc.’s Common Stock.

These shares, combined with the 557,631 pre-merger shares of Protara

Therapeutics, Inc.

outstanding after the Protara Reverse Stock Split, resulted in an aggregate of 1,033,907 shares of Common Stock

issued in connection with the Merger.

Immediately after the consummation of the Merger and prior

to the consummation of the Private Placement, the former stockholders and option holders of Private ArTara owned, or held rights

to acquire, approximately 75.2% of the fully-diluted Common Stock of Protara, with Protara Therapeutics, Inc.’s stockholders

and option holders immediately prior to the Merger owning approximately 24.8% of the fully-diluted Common Stock of Protara.

following the closing of the Proteon Private Placement, 18,954 shares of Protara Therapeutics, Inc.’s Series A Convertible

Preferred Stock outstanding were converted into 476,276 shares of Protara Therapeutics, Inc.’s Common Stock.

These shares,

combined with the 557,631 pre-merger shares of Protara Therapeutics, Inc.

outstanding after the Protara Reverse Stock Split, resulted

in an aggregate of 1,033,907 shares of Common Stock issued in connection with the Merger.

after the consummation of the Merger and prior to the consummation of the Private Placement, the former stockholders and option

holders of Private ArTara owned, or held rights to acquire, approximately 75.2% of the fully-diluted Common Stock of Protara,

with Protara Therapeutics, Inc.’s stockholders and option holders immediately prior to the Merger owning approximately 24.8%

of the fully-diluted Common Stock of Protara.

Therapeutics, Inc.

2 unchanged sentences

REVERSE MERGER WITH PROTARA AND RECAPITALIZATION (Continued)

on the terms of the Merger, the transaction will be treated as a reverse merger of Protara Therapeutics, Inc.

Based on the terms of the Merger, the transaction was treated

as a reverse merger of Protara Therapeutics, Inc.

by Private ArTara.

The Merger was accounted for using acquisition accounting under ASC Topic 805 “Business Combinations”.

Under acquisition

accounting, the assets and liabilities (including executory contracts, commitments and other obligations) of Protara Therapeutics,

as of the effective time of the Merger were recorded at their respective fair values and added to those of Private ArTara.

Any excess of purchase price consideration over the fair values of the identifiable net assets is recorded as goodwill.

The Merger was accounted for using acquisition accounting

under ASC Topic 805 “Business Combinations”.

Under acquisition accounting, the assets and liabilities (including executory

contracts, commitments and other obligations) of Protara Therapeutics, Inc.

as of the effective time of the Merger were recorded

at their respective fair values and added to those of Private ArTara.

Any excess of purchase price consideration over the fair

values of the identifiable net assets is recorded as goodwill.

following details the preliminary allocation of the purchase price consideration:

2 unchanged sentences

Accrued Expenses

Purchase Price Consideration

Total Purchase Price Consideration

total fair value of the net assets of Protara Therapeutics Inc.

4 unchanged sentences

the amount of goodwill acquired in the reverse merger, no portion is deductible for tax purposes.

The primary reasons for the reverse merger:

the increased access

to sources of capital and a broader range of investors to support the clinical development of the Company’s product candidates,

the potential to provide current stockholders with greater liquidity by owning stock in a public company, the potential for a

more cost-effective means to access capital and the registration of Protara Common Stock issued to Private ArTara’s stockholders.

In addition, Protara assumed existing 2014 Equity Incentive Plan (the “2014 Plan”), and all outstanding stock options

In addition, no additional shares may be issued under the 2017 Equity Incentive Plan (See Note 8).

primary reasons for the reverse merger:

the increased access to sources of capital and a broader range of investors to support

the clinical development of the Company’s product candidates, the potential to provide current stockholders with greater

liquidity by owning stock in a public company, the potential for a more cost-effective means to access capital and the registration

of Protara Common Stock issued to Private ArTara’s stockholders.

In addition, Protara assumed the existing 2014 Equity Incentive

Plan (the “2014 Plan”), and all outstanding stock options thereunder.

In addition, no additional shares may be issued

under the 2017 Equity Incentive Plan (See Note 8).

Therapeutics, Inc.

and Consolidated Subsidiaries

to Unaudited Condensed Consolidated Financial Statements

REVERSE MERGER WITH PROTARA AND RECAPITALIZATION (Continued)

following presents the unaudited pro forma combined financial information as if the reverse merger had occurred as of January

For the Three Months

Ended March 31,

Since the merger was consummated on January 9, 2020, the results of the merger are fully incorporated into the condensed

consolidated financial information for the three months ended June 30, 2020.

For the Six Months Ended

$ (6,743,675 )

$ (16,975,287 )

$ (14,802,731 )

Pro forma loss per common share, basic and diluted

8 unchanged sentences

Research and development

Legal settlement

SHORT-TERM DEBT

5 unchanged sentences

of $189,161, which includes both principal and interest.

As of March 31, 2020 the balance under this debt was $1,297,777.

As of June 30, 2020 the balance under this debt was $926,983.

COMMITMENTS AND CONTINGENCIES

6 unchanged sentences

The Company adopted the new guidance using the modified retrospective approach on January 1,

The adoption of ASC 842 on January 1, 2019 did not 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.

on January 9, 2020, subsequent to the reverse 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 a term of approximately eight years, therefore resulting in the recognition of an ROU asset and related operating lease liability.

adoption of ASC 842 on January 1, 2019 did not 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 reverse 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 a term of approximately eight years, therefore resulting in the recognition of an

ROU asset and related operating lease liability.

contracts entered into on or after the Effective Date, at the inception of a contract the Company will assess whether the contract

6 unchanged sentences

2019, which were accounted for under ASC 840, were not reassessed for classification.

Therapeutics, Inc.

and Consolidated Subsidiaries

to Unaudited Condensed Consolidated Financial Statements

COMMITMENTS AND CONTINGENCIES (Continued)

Agreements (Continued)

operating leases, the lease liability is initially and subsequently measured at the present value of the unpaid lease payments.

8 unchanged sentences

ROU assets, once recorded, are reviewed for impairment.

Therapeutics, Inc.

and Consolidated Subsidiaries

to Unaudited Condensed Consolidated Financial Statements

COMMITMENTS AND CONTINGENCIES (Continued)

Agreements (Continued)

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

9 unchanged sentences

Right-of-use lease liability, long-term

March 1, 2020, the Company entered into new month-to-month lease agreements for three additional office spaces at monthly rents

of $4,890, $1,270 and $7,200.

1, 2020, the Company entered into new month-to-month lease agreements for three additional office spaces at monthly rents of

$4,890, $1,270 and $7,200.

On June 30, 2020, the Company terminated the lease agreements for these office spaces and entered

into a new three-month agreement for a smaller office space at a monthly rent of $810.

following provides details of the Company’s lease expense:

For the three months ended March 31, 2020

Operating lease cost

Short-term lease cost

Therapeutics, Inc.

and Consolidated Subsidiaries

to Unaudited Condensed Consolidated Financial Statements

COMMITMENTS AND CONTINGENCIES (Continued)

Agreements (Continued)

information related to leases is presented below:

7 unchanged sentences

maintain its quarter-to-quarter lease for its manufacturing space for a term of approximately eight years.

Therapeutics, Inc.

and Consolidated Subsidiaries

to Unaudited Condensed Consolidated Financial Statements

COMMITMENTS AND CONTINGENCIES (Continued)

Agreements (Continued)

of March 31, 2020, the expected annual minimum lease payments of our operating lease liability was as follows:

of June 30, 2020, the expected annual minimum lease payments of our operating lease liability was as follows:

For Years Ending December 31,

Operating lease

2020 (excluding the three months ended March 31, 2020)

2020 (excluding the six months ended June 30, 2020)

Total future minimum lease payments, undiscounted

2 unchanged sentences

Employment Agreements

connection with the consummation of the Merger, Jesse Shefferman, the Company’s Chief Executive Officer, had his base salary

increased from $365,000 to $510,000 and Jacqueline Zummo, the Company’s Head of Operations and Medical Affairs, had her

base salary increased from $305,000 to $325,000.

The Company also entered into an employment agreement with Blaine Davis to become

the Company’s Chief Financial Officer on January 31, 2020, effective as of February 11, 2020, for a base salary of $385,000,

and with Julio Casoy to become the Company’s Chief Medical Officer, on February 6, 2020, for a base salary of $400,000.

During the three months ended March 31, 2020, Mr.

Shefferman, Dr.

In connection with the consummation of the Merger, Jesse Shefferman,

the Company’s Chief Executive Officer, had his base salary increased from $365,000 to $510,000 and Jacqueline Zummo, the

Company’s Head of Operations and Medical Affairs, had her base salary increased from $305,000 to $325,000.

The Company also

entered into an employment agreement with Blaine Davis to become the Company’s Chief Financial Officer on January 31, 2020,

effective as of February 11, 2020, for a base salary of $385,000, and with Julio Casoy to become the Company’s Chief Medical

Officer, on February 6, 2020, for a base salary of $400,000 (See Note 11).

During the six months ended June 30, 2020, Mr.

Zummo and Dr.

Casoy received bonus payments of $259,688, $95,313,

$115,500, respectively, which were included in research and development expenses of $210,813 and in general and administrative

expenses of $259,688, in such period.

Employment Agreement

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 $90,000.

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.

9, 2020, the Company’s capital raise triggered a performance-based compensation obligation and accordingly this individual

was paid $462,500.

Casoy received bonus payments of $259,688, $95,313 and $115,500, respectively, which were included in research

and development expenses of $210,813 and in general and administrative expenses of $259,688, in such period.

Therapeutics, Inc.

2 unchanged sentences

COMMITMENTS AND CONTINGENCIES (Continued)

Agreements (Continued)

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

Pursuant to the Temporary Employment Agreement, the individual was entitled to receive an annual base salary of $90,000.

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 $462,500, which was included in general and administrative expenses

within the Company’s unaudited condensed consolidated statements of operations for the six months ended June 30, 2020.

License and Clinical Services Agreements

19 unchanged sentences

funds are received by October 15, 2019.

On October 2, 2019, the Company

made a payment of $50,000 to Dr.

On January 22, 2020, in connection with the closing of the Merger and concurrent financing,

Buchman was paid $550,000 which was included in accrued expenses as of December 31, 2019.

the three months ended March 31, 2020 and 2019, the Company recorded R&D expense of $0 and $0, respectively, for expenditures

Buchman in connection with obligations under the Choline License Agreement.

Feinstein Institute for Medical Research

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

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 ($100,000,000) 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 October 2, 2019, the Company made a payment of $50,000 to Dr.

On January 22,

the Company’s raising of over $5,000,000 triggered a financing milestone obligation and accordingly the Feinstein Institute

was paid $100,000.

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 $275,000.

the years three months ended March 31, 2020 and 2019, in connection with the Feinstein Agreement, the Company recorded Research

and Development expense of $100,000 and $0, respectively.

2020, in connection with the closing of the Merger and concurrent financing, Dr.

Buchman was paid $550,000 which was included

in accrued expenses as of December 31, 2019.

During the three months ended June 30, 2020 and 2019, the Company

recorded Research and Development expense of $0 and $200,000, respectively, and during the six months ended June 30, 2020 and

2019, the Company recorded Research and Development expense of $0 and $200,000, respectively, for expenditures to Dr.

in connection with obligations under the Choline License Agreement.

Therapeutics, Inc.

3 unchanged sentences

License and Clinical Services Agreements (Continued)

Feinstein Institute for Medical Research

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 ($100,000,000) 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 $5,000,000 triggered a financing

milestone obligation and accordingly the Feinstein Institute was paid $100,000.

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 $275,000.

During the three months ended June 30, 2020 and 2019, the Company

recorded Research and Development expense of $0 and $0, respectively, and during the six months ended June 30, 2020 and 2019,

the Company recorded Research and Development expense of $100,000 and $0, respectively, in connection with the Feinstein Agreement.

University of Iowa

18 unchanged sentences

and for annual net sales of product of up to $100,000,000;

the three months ended March 31, 2020 and 2019, in connection with the Iowa Agreement, the Company recorded Research and Development

expense of $7,500 and $7,500, respectively.

During the three months ended June 30, 2020 and 2019, the Company

recorded Research and Development expense of $7,500 and $7,500, respectively, and during the six months ended June 30, 2020 and

2019, the Company recorded Research and Development expense of $15,000 and $15,000, respectively, in connection with the Iowa

Therapeutics, Inc.

and Consolidated Subsidiaries

to Unaudited Condensed Consolidated Financial Statements

COMMITMENTS AND CONTINGENCIES (Continued)

License and Clinical Services Agreements (Continued)

Pharmaceutical Co., LTD

6 unchanged sentences

would be entitled to the use of Chugai materials and technical support as necessary.

The Company is obligated to Chugai for certain

payments upon the completion of agreed upon milestones.

As of December 31, 2019, Chugai fulfilled its performance obligation upon

which the Company recorded an obligation of $500,000.

The Company has agreed to pay Chugai a portion for performance in July 2020,

and the remaining majority of the payments will come upon the FDA’s approval of the product.

the three months ended March 31, 2020 and 2019, the Company recorded Research and Development expense of $0 and $0, respectively.

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, Chugai fulfilled a performance obligation upon which the Company recorded an obligation

of $500,000, which the Company paid on July 27, 2020.

During the three months ended June 30, 2020 and 2019, the Company

recorded Research and Development expense of $0 and $0, respectively, and during the six months ended June 30, 2020 and 2019,

the Company recorded Research and Development expense of $0 and $0, respectively, in connection with the Chugai Agreement, as

Hopkins University

3 unchanged sentences

product sales, in the form of a royalty of 2.5% on net sales of the product.

As of March 31, 2020 the Company has not commenced

As of June 30, 2020 the Company has not commenced

vonapanitase product sales and therefore has recognized no royalties on product sales.

4 unchanged sentences

time to time, Protara may be subject to various legal proceedings and claims that arise in the ordinary course of its business

November 15 and December 23, 2019, four lawsuits were filed in federal court against Proteon, ArTara, Merger Sub and the individual

members of the Proteon Board (captioned Patrick Plumley v.

November 15 and December 23, 2019, four lawsuits were filed in federal court against Proteon, ArTara, Merger Sub and the

individual members of the Proteon Board (captioned Patrick Plumley v.

Proteon Therapeutics, Inc., et al., Case No.

3 unchanged sentences

Proteon Therapeutics, Inc., et al., Case No.

1:19-cv-06745 (E.D.N.Y., filed 11/30/19);

1:19-cv-06745

(E.D.N.Y., filed 11/30/19);

Neil Lanteigne v.

1 unchanged sentence

1:19-cv-12436 (D.

Mass., filed 12/03/19);

Stephen Wagner v.

Proteon Therapeutics,

Inc., et al., Case No.

Proteon Therapeutics, Inc., et al., Case No.

1:19-cv-02343 (D.

Del., filed 12/23/19).

The Plumley complaint was brought as a purported class action

All four lawsuits alleged that the definitive proxy statement in the preliminary registration statement on Form S-4 filed

by Proteon on November 7, 2019 with the SEC in connection with the proposed Merger (the “Proxy Statement”) omitted

material information with respect to the transactions contemplated by the Merger Agreement, rendering it false and misleading

in violation of Sections 14(a) (and Rule 14a-9 promulgated thereunder) and 20(a) of the Exchange Act.

The plaintiffs in each of

the four lawsuits sought, among other things, injunctive relief, rescission, declaratory relief and unspecified monetary damages.

On December 31, 2019, Proteon filed an amendment to the Proxy Statement on Form 8-K, which contained certain supplemental disclosures

intended to moot the plaintiffs’

Plumley complaint was brought as a purported class action lawsuit.

All four lawsuits alleged that the definitive proxy

statement in the preliminary registration statement on Form S-4 filed by Proteon on November 7, 2019 with the SEC in

connection with the proposed Merger (the “Proxy Statement”) omitted material information with respect to the

transactions contemplated by the Merger Agreement, rendering it false and misleading in violation of Sections 14(a) (and Rule

14a-9 promulgated thereunder) and 20(a) of the Exchange Act.

The plaintiffs in each of the four lawsuits sought, among other

things, injunctive relief, rescission, declaratory relief and unspecified monetary damages.

On December 31, 2019, Proteon

filed an amendment to the Proxy Statement on Form 8-K, which contained certain supplemental disclosures intended to moot the

plaintiffs’

disclosure claims.

On January 9, 2020, Proteon held a special meeting of its stockholders,

at which the Company’s stockholders approved the Merger.

On January 9, 2020, Proteon held a special meeting of its stockholders, at which the

Company’s stockholders approved the Merger.

On January 27, 2020, plaintiff in the Lanteigne action voluntarily

3 unchanged sentences

plaintiff in the Teow action voluntarily dismissed his case.

On February 10, 2020, plaintiff in the Wagner action dismissed his

Counsel for plaintiffs have requested, and the parties have

engaged in negotiations regarding, an award of attorney’s fees in connection with the supplemental disclosures filed by the

Company to moot plaintiffs’

claims in these actions.

For the three months ended March 31, 2020, the Company recorded a charge

of $170,000 related to the fee demand, which is included in general and administrative expenses within the Company’s unaudited

condensed consolidated statements of operations.

On February 10, 2020, plaintiff in the Wagner action dismissed

Thereafter, in connection with the supplemental disclosures that were filed by the Company to moot

plaintiffs’

claims in these actions, counsel for plaintiffs demanded an award of attorney’s fees, which the

parties recently resolved.

Company is involved in various claims and legal actions arising in the ordinary course of business.

11 unchanged sentences

STOCKHOLDERS’

of March 31, 2020 and December 31, 2019, the Company has 100,000,000 shares of Common Stock authorized for issuance, $0.001 par

of June 30, 2020 and December 31, 2019, the Company has 100,000,000 shares of Common Stock authorized for issuance, $0.001 par

value per share, of which 5,843,203 and 2,627,533 shares were issued and outstanding, respectively.

As of March 31, 2020 and December

As of June 30, 2020 and December

31, 2019, the Company has 10,000,000 shares of preferred stock authorized for issuance, $0.001 par value per share of which 3,880

20 unchanged sentences

The Company’s Series 1 Convertible Preferred Stock are

The terms of the Series 1 Convertible Preferred Stock provide

that, in the event of a fundamental transaction (as such term is described in the certificate of designation of preferences, rights

and limitations of series 1 convertible non-voting preferred stock), each share of Series 1 Convertible Preferred Stock outstanding

shall thereafter be convertible into the kind and amount of securities, cash and/or other property which a holder of the number

of shares of Common Stock of the Company issuable upon conversion of one share of Series 1 Convertible Preferred Stock immediately

prior to such fundamental transaction would have been entitled to receive pursuant to such fundamental transaction, provided that,

if the value of the aggregate of such securities, cash and/or other property the which the holder of one share of Series 1 Convertible

Preferred Stock would be entitled to upon conversion thereof would be less than the stated value, then each outstanding share of

Series 1 Convertible Preferred Stock shall instead be convertible into such kind of securities, cash and/or other property with

an aggregate value equal to the stated value.

terms of the Series 1 Convertible Preferred Stock provide that, in the event of a fundamental transaction (as such term is described

in the certificate of designation of preferences, rights and limitations of series 1 convertible non-voting preferred stock),

each share of Series 1 Convertible Preferred Stock outstanding shall thereafter be convertible into the kind and amount of securities,

cash and/or other property which a holder of the number of shares of Common Stock of the Company issuable upon conversion of one

share of Series 1 Convertible Preferred Stock immediately prior to such fundamental transaction would have been entitled to receive

pursuant to such fundamental transaction, provided that, if the value of the aggregate of such securities, cash and/or other property

the which the holder of one share of Series 1 Convertible Preferred Stock would be entitled to upon conversion thereof would be

less than the stated value, then each outstanding share of Series 1 Convertible Preferred Stock shall instead be convertible into

such kind of securities, cash and/or other property with an aggregate value equal to the stated value.

Therapeutics, Inc.

and Consolidated Subsidiaries

to Unaudited Condensed Consolidated Financial Statements

STOCK BASED COMPENSATION

10 unchanged sentences

notice and restricted stock unit agreement for use with the Inducement Plan.

of March 31, 2020, 600,000 shares remain available to be issued under the 2020 Inducement Plan.

of June 30, 2020, 560,550 shares remain available to be issued under the 2020 Inducement Plan.

Equity Incentive Plan

8 unchanged sentences

awards will be made under the 2017 Equity Incentive Plan.

Therapeutics, Inc.

and Consolidated Subsidiaries

to Unaudited Condensed Consolidated Financial Statements

STOCK BASED COMPENSATION (Continued)

Equity Incentive Plan

2 unchanged sentences

2017, the stockholders approved this amendment.

Plan 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 2014 Plan provides that the number of

shares reserved and available for issuance under the 2014 Plan will automatically increase each January 1, beginning January 1,

2015 by four percent of the outstanding shares of Common Stock on the immediately preceding December 31 or such lesser number

of shares as determined by the Company’s Board of Directors prior to each such January 1st.

The Amended 2014 Plan clarifies

that the number of shares for purposes of calculating the evergreen feature includes the number of shares of Common Stock issuable

upon conversion of any security that the Company may issue that is convertible into or exchangeable for Common Stock, including,

but not limited to, preferred stock or warrants.

Pursuant to a special meeting of the Proteon stockholders held on January 9,

2020, the number of shares available for issuance under the Amended 2014 Plan increased by 900,002 shares from 148,298 shares

to 1,048,300 shares on January 1, 2020.

As of March 31, 2020, 371,114 shares remain available to be issued under the 2014 Equity

Incentive Plan.

Amended 2014 Plan 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 2014 Plan provides

that the number of shares reserved and available for issuance under the 2014 Plan will automatically increase each January 1,

beginning January 1, 2015 by four percent of the outstanding shares of Common Stock on the immediately preceding December 31

or such lesser number of shares as determined by the Company’s Board of Directors prior to each such January 1st.

Amended 2014 Plan clarifies that the number of shares for purposes of calculating the evergreen feature includes the number

of shares of Common Stock issuable upon conversion of any security that the Company may issue that is convertible into or

exchangeable for Common Stock, including, but not limited to, preferred stock or warrants.

Pursuant to a special meeting of

the Proteon stockholders held on January 9, 2020, the number of shares available for issuance under the Amended 2014 Plan

increased by 900,002 shares from 148,298 shares to 1,048,300 shares on January 1, 2020.

As of June 30, 2020, 317,114 shares

remain available to be issued under the 2014 Equity Incentive Plan.

of the stock awards, including vesting requirements, are determined by the Board of Directors, subject to the provisions of the

Certain awards provide for accelerated vesting if there is a change in control as defined in the Plans.

Therapeutics, Inc.

and Consolidated Subsidiaries

to Unaudited Condensed Consolidated Financial Statements

STOCK BASED COMPENSATION (Continued)

Employee Stock Purchase Plan

6 unchanged sentences

Board of Directors prior to each such January 1st.

As of March 31, 2020, the authorized number of shares under the 2014 ESPP is

As of June 30, 2020, the authorized number of shares under the 2014 ESPP is

18,012 and the number of shares available for issuance is 13,340.

During the three months ended March 30, 2020 and 2019, no shares

During the six months ended June 30, 2020 and 2019, no shares

were issued under the 2014 ESPP.

Therapeutics, Inc.

and Consolidated Subsidiaries

to Unaudited Condensed Consolidated Financial Statements

STOCK BASED COMPENSATION (Continued)

following RSUs were granted pursuant to the Company’s 2014 Equity Incentive Plan.

7 unchanged sentences

The grant date fair value of these RSUs was $7,620,000.

On January 10, 2020, the Board of Directors granted an aggregate

of 62,000 RSUs to directors of the Company.

These RSUs vest 50% on the one year anniversary of the grant date, and the remainder

vests in 12 equal monthly installments thereafter.

The grant date fair value of these RSUs was $1,860,000.

January 10, 2020, the Board of Directors granted an aggregate of 62,000 RSUs to directors of the Company.

These RSUs vest 50%

on the one year anniversary of the grant date, and the remainder vest in 12 equal monthly installments thereafter.

The grant date

fair value of these RSUs was $1,860,000.

January 10, 2020, the Board of Directors granted an aggregate of 91,000 RSUs to officers of the Company.

9 unchanged sentences

beginning on the first year anniversary of the date of grant.

The grant date fair value of this RSU was $1,500,000.

is a summary of restricted stock unit activities for the three months ended March 31, 2020:

Restricted Stock Units

The grant date fair value of these RSUs was $1,500,000.

is a summary of restricted stock unit activities for the six months ended June 30, 2020:

Non-vested 1/1/2020

1 unchanged sentence

fair value of restricted stock units is amortized on a straight line basis over the requisite service periods of the respective

As of March 31, 2020 the unamortized value of RSUs was $12,091,273.

As of March 31, 2020, the weighted average remaining

As of June 30, 2020 the unamortized value of RSUs was $10,414,800.

As of June 30, 2020, the weighted average remaining

amortization period was 2.22 years.

As of March 31, 2020 and 2019, 58,162 and 0 RSUs, respectively, have vested that have not

yet been settled into shares of the Company’s Common Stock.

As of June 30, 2020 and 2019, 89,913 and 0 RSUs, respectively, have vested that have not yet

been settled into shares of the Company’s Common Stock.

Therapeutics, Inc.

9 unchanged sentences

The grant date fair value of this option was

second option, expected to be granted on July 10, 2020, is for the purchase of 111,250 shares of the Company’s Common Stock.

The exercise price will be determined based upon the close of the market on July 10, 2020.

This option will expire ten years from

the date of grant and will vest 25% on the one year anniversary of the grant date and the remainder of the underlying shares vest

in thirty-six equal monthly installments thereafter.

second option, which was granted on July 10, 2020, is for the purchase of 111,250 shares of the Company’s Common Stock.

The option has an exercise price of $27.42 per share.

This option will expire ten years from the date of grant and will vest 25%

on the one year anniversary of the grant date and the remainder of the underlying shares vest in thirty-six equal monthly installments

February 4, 2020, pursuant to the hiring of the Company’s CFO, the Board of Directors approved the grant of a stock option

5 unchanged sentences

The grant date fair value of this option was $2,791,556.

February 26, 2020, the Compensation Committee of the Company pre-approved the grants of stock options under the Inducement Plan

to new hires of the Company.

On April 1, 2020, these employees were granted options to purchase an aggregate of 51,650 shares

of the Company’s Common Stock with an exercise price of $24.25 per share.

These options will expire ten years from the date

of grant and will each vest 25% between March 9, 2021 and March 23, 2021 (depending on the specific grant) and the remainder of

the underlying shares shall vest in thirty-six equal monthly installments thereafter.

The grant date fair value of these options

was $954,053.

April 27, 2020, the Compensation Committee of the Company approved the grant of stock options under the 2020 Inducement Plan to

new hires of the Company.

On May 1, 2020, these employees were granted options to purchase an aggregate of 4,100 shares of the

Company’s Common Stock with an exercise price of $24.02 per share.

These options expire ten years from the date of grant

and vests 25% between April 20, 2021 and April 27, 2021 (depending on the specific grant) and the remainder of the underlying

shares shall vest in thirty-six equal monthly installments thereafter.

The grant date fair value of these options was $75,019.

May 19, 2020, the Compensation Committee of the Company approved the grant of a stock option under the 2020 Inducement Plan to

a new hire of the Company.

On June 1, 2020, this employee was granted an option to purchase 3,700 shares of the Company’s

Common Stock with an exercise price of $51.12 per share.

This option expires ten years from the date of grant and vests 25% on

May 11, 2021 and the remainder of the underlying shares shall vest in thirty-six equal monthly installments thereafter.

date fair value of this option was $144,025.

June 9, 2020, the Company issued to directors of the Company stock options to purchase an aggregate of 54,000 shares of the Company’s

common stock.

These stock options has an exercise price of $35.00, expire 10 years from the date of grant, and vest monthly over

The grant date fair value of these options was $1,374,732.

Therapeutics, Inc.

and Consolidated Subsidiaries

to Unaudited Condensed Consolidated Financial Statements

STOCK BASED COMPENSATION (Continued)

Options (Continued)

Company determined the fair value of stock options granted based upon the assumptions as provided below.

For the three months ended

For the Six Months Ended

Exercise price

3 unchanged sentences

Expected life (in years)

is a summary of stock option activities for the three months ended March 31, 2020:

is a summary of stock option activities for the six months ended June 30, 2020:

Outstanding 1/1/2020

1 unchanged sentence

Exercisable as of 6/30/2020

weighted average grant date fair value of the options granted during the three months ended March 31, 2019 was $6.71.

value of stock options is amortized on a straight line basis over the requisite service periods of the respective awards.

March 31, 2020 the unamortized value of stock options was $6,459,007.

As of March 31, 2020, the weighted average remaining amortization

weighted average grant date fair value of the options granted during the six months ended June 30, 2019 was $6.71.

The fair value

of stock options is amortized on a straight line basis over the requisite service periods of the respective awards.

30, 2020 the unamortized value of stock options was $7,751,851.

As of June 30, 2020, the weighted average remaining amortization

period was 2.92 years.

6 unchanged sentences

For the Three Months Ended

For the Six Months Ended

Restricted stock

2 unchanged sentences

For the Three Months Ended

For the Six Months Ended

Research and development

General and administrative

SUBSEQUENT EVENTS

of Stock Options

February 26, 2020, the Compensation Committee of the Company pre-approved the grants of stock options under the Inducement Plan

to new hires of the Company.

On April 1, 2020, these employees were granted options to purchase an aggregate of 51,650 shares

of the Company’s Common Stock with an exercise price of $24.25 per share.

These options will expire ten years from the date

of grant and will each vest 25% between March 9, 2021 and March 23, 2021 (depending on the specific grant) and the remainder of

the underlying shares shall vest in thirty-six equal monthly installments thereafter.

April 27, 2020, the Compensation Committee of the Company approved the grant of stock options under the 2020 Inducement Plan to

new hires of the Company.

On May 1, 2020, these employees were granted options to purchase an aggregate of 4,100 shares of the

Company’s Common Stock with an exercise price of $24.02 per share.

These options expire ten years from the date of grant

and vests 25% between April 20, 2020 and April 27, 2020 (depending on the specific grant) and the remainder of the underlying

shares shall vest in thirty-six equal monthly installments thereafter.

Company maintains a defined contribution benefit plant under section 401(k) of the Internal Revenue Code covering substantially

all qualified employees of the Company (the “401(k) Plan”).

Under the 401(k) Plan, the Company matches 100% up to

a 4% contribution.

The plan was not implemented until the second quarter of 2020.

Therapeutics, Inc.

1 unchanged sentence

to Unaudited Condensed Consolidated Financial Statements

SUBSEQUENT EVENTS (Continued)

EMPLOYEE BENEFIT PLAN

Company maintains a defined contribution benefit plan under section 401(k) of the Internal Revenue Code covering substantially

all qualified employees of the Company (the “401(k) Plan”).

Under the 401(k) Plan, the Company matches 100% up to

a 4% contribution.

The plan was implemented in June of 2020.

For the three and six months ended June 30, 2020, the Company recorded

expense of $7,956 under the 401(k) Plan.

ultimate impact of the current COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change.

2 unchanged sentences

However, the effects could have a material impact on the Company’s operations,

liquidity and capital resources and the Company will continue to monitor

the COVID-19 situation closely.

liquidity and capital resources and the Company will continue to monitor the COVID-19 situation closely.

response to public health directives and orders, the Company has implemented work-from-home policies for its employees and temporarily

20 unchanged sentences

from the spread of COVID-19 could materially affect the Company’s business and the value of its common stock.

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

SUBSEQUENT EVENTS

of Stock Options

June 30, 2020, the Compensation Committee of the Company approved the grant of stock options under the 2020 Inducement Plan to

new hires of the Company.

On July 1, 2020, these employees were granted options to purchase an aggregate of 25,700 shares of the

Company’s Common Stock with an exercise price of $28.20 per share.

These options expire ten years from the date of grant

and vests 25% on June 29, 2021 and the remainder of the underlying shares shall vest in thirty-six equal monthly installments

On July 1, 2020, the Compensation Committee of the Company

granted 7,500 RSUs to a new hire of the Company under the 2014 Equity Incentive Plan.

These RSUs will vest 25% on the one, two,

three and four year anniversary of the date of grant.

July 9, 2020, the Company issued 5,245 shares of common stock from the settlement of RSUs.

Therapeutics, Inc.

and Consolidated Subsidiaries

to Unaudited Condensed Consolidated Financial Statements

SUBSEQUENT EVENTS (Continued)

Departure of Executive

On July 23, 2020, effective July 31, 2020, the Company and

Casoy entered into a Separation Agreement and Release (the “Separation Agreement”), whereupon Dr.

no longer be employed by the Company as Chief Medical Officer, effective August 3, 2020.

Pursuant to the Separation Agreement, in consideration of a general release of all claims against the Company and certain

representations, warranties, covenants and agreements, Dr.

Casoy is entitled to receive (i) his base salary for a period of

nine months paid in a lump sum, (ii) a one-time lump sum payment equal to nine months of his bonus at target, (iii)

reimbursement of all business expenses for which he is entitled, (iv) reimbursement of COBRA premium costs for nine months,

or until he has secured other employment, whichever comes first and (v) pro-rata vesting of his outstanding equity award

given that he was not employed through the one-year anniversary of the applicable grant date of such outstanding equity

On July 20, 2020, Scott Braunstein, M.D.

notified the Company of his resignation from the Company’s Board of Directors, effective immediately.

In connection with

Braunstein’s resignation, the compensation committee approved the accelerated vesting of all stock options issued to

Braunstein prior to the Merger, and to extend the post-termination exercise period of vested options to 12 months from the

date of resignation.

July 23, 2020, the Company’s Board of Directors appointed Barry Flannelly, Pharm.D, MBA as a director to fill the vacancy

created by Dr.

Braunstein’s resignation, to serve in such capacity until the Company’s 2023 annual meeting of stockholders.

On July 23, 2020, the Company issued to Dr.

Flannelly a stock

option to purchase 18,000 shares of the Company’s common stock.

This stock option has an exercise price of $26.70 per share,

expires 10 years from the date of grant, and will vest in equal monthly installments following the date of grant over a three year

On July 23, 2020, the Company issued to Dr.

Flannelly a stock

option to purchase 8,250 shares of the Company’s common stock.

This stock option has an exercise price of $26.70 per share,

expires 10 years from the date of grant, and will vest in equal monthly installments following the date of grant over a one year

period, and in any event will be fully vested on the date of the Company’s 2021 annual meeting of stockholders.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

MANAGEMENT’S

DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

You should read the

following discussion and analysis of our financial condition and results of operations together with the unaudited condensed consolidated

financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q.

Our actual results

and timing of certain events may differ materially from the results discussed, projected, anticipated, or indicated in any forward-looking

We caution you that forward-looking statements are not guarantees of future performance and that our actual results

of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially

from the forward-looking statements contained in this Quarterly Report.

In addition, even if our results of operations, financial

condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements

contained in this Quarterly Report, they may not be predictive of results or developments in future periods.

We are a New York City based clinical-stage

biopharmaceutical company focused on identifying and advancing transformative therapies for people with rare and specialty diseases.

We prioritize creativity, diverse perspectives, integrity and tenacity to expedite our goal of bringing life-changing therapies

to people with limited treatment options.

Our lead program, TARA-002 is an

investigational cell based therapy currently being developed for the treatment of lymphatic malformations (LMs).

to LMs, the Company is also evaluating the potential of TARA-002 in oncologic indications.

TARA-002 was developed from the

same master cell bank of genetically distinct group A Streptococcus pyogenes as OK-432 (marketed as Picibanil®

and Taiwan by Chugai Pharmaceutical Co., Ltd.

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

should read the following discussion and analysis of our financial condition and results of operations together with the unaudited

condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q.

actual results and timing of certain events may differ materially from the results discussed, projected, anticipated, or indicated

in any forward-looking statements.

We caution you that forward-looking statements are not guarantees of future performance and

that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate

may differ materially from the forward-looking statements contained in this Quarterly Report.

In addition, even if our results

of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with

the forward-looking statements contained in this Quarterly Report, they may not be predictive of results or developments in future

are a New York City based clinical-stage biopharmaceutical company focused on identifying and advancing transformative therapies

for people with rare and specialty diseases.

We prioritize creativity, diverse perspectives, integrity and tenacity to expedite

our goal of bringing life-changing therapies to people with limited treatment options.

Our lead program, TARA-002 is an investigational

cell based therapy currently being developed for the treatment of lymphatic malformations (LMs).

In addition to LMs, the Company

is also evaluating the potential of TARA-002 in oncologic indications.

TARA-002 was developed from the same master cell bank of

genetically distinct group A Streptococcus pyogenes as OK-432 (marketed as Picibanil®

in Japan and Taiwan by Chugai

Pharmaceutical Co., Ltd.

(Chugai Pharmaceutical)).

We plan to engage the U.S.

Food and Drug

Administration (FDA) in 2020 to determine the requirements for a biologics license application (BLA) submission, including

agreement on requirements to demonstrate the comparability of the two products.

We plan to discuss with the FDA whether

OK-432’s more than 25-year safety database in LMs, as well as the efficacy and safety database from the clinical trials

conducted in the US and led by the University of Iowa are sufficient for a BLA submission for TARA-002.

Based on the guidance

from the FDA, we plan to conduct additional clinical trials as required.

Our second program, Intravenous (IV) Choline

Chloride, is an investigational, Phase 3-ready, phospholipid substrate replacement therapy initially in development for patients

receiving parenteral nutrition (PN) who have intestinal failure associated liver disease (IFALD).

IV Choline Chloride has been

granted Orphan Drug Designation (ODD) by the FDA for this indication.

Our third program, vonapanitase, is a recombinant

human elastase.

We are reviewing the research and preclinical and clinical data of vonapanitase and have not yet determined whether

to pursue further development of this product candidate in the future.

We have devoted substantial efforts in

the development of these programs.

We do not have any approved products and have not generated any revenue from product sales.

The lead program, TARA-002, is in later stage development and has not yet been approved for use for treatment of LMs or any other

The Company does not expect to generate any significant revenues prior to 2021, if ever.

To finance the Company’s

current strategic plans, including the conduct of ongoing and future clinical trials and further research and development costs,

the Company will need to raise additional capital.

The ultimate impact of the current COVID-19

pandemic or a similar health epidemic is highly uncertain and subject to change.

We do not yet know the full extent of potential

delays or impacts on our business, our research and development activities, healthcare systems or the global economy as a whole.

However, the effects could have a material impact on our operations, liquidity and capital resources and we will continue to monitor

the COVID-19 situation closely.

In response to public health directives

and orders, we have implemented work-from-home policies for our employees and temporarily modified our operations to comply with

applicable social distancing recommendations.

Similar health directives and orders are affecting third parties with whom we do

business, including the third party that we have contracted with to conduct comparability studies for TARA-002.

The effects of

the orders and our related adjustments in our business is likely to negatively impact productivity, disrupt our business and delay

our timelines, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations

on our ability to conduct our business in the ordinary course.

Severe and/or long-term disruptions in

our operations will negatively impact our business, operating results and financial condition in other ways, as well.

Specifically,

we anticipate that the stress of COVID-19 on healthcare systems around the globe will negatively impact our ability to conduct

clinical trials in the near term due primarily to the lack of resources at clinical trial sites and the resulting inability to

enroll patients in the trials.

We also anticipate that the global impact of COVID-19 will negatively impact our ability to conduct

nonclinical studies due primarily to laboratory closures and limited availability of personnel.

In addition, while the potential

economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, it has significantly disrupted

global financial markets, and may limit our ability to access capital, which could in the future negatively affect our liquidity.

A recession or market correction resulting from the spread of COVID-19 could materially affect our business and the value of our

common stock.

As further described in Note 3 of the financial

statements included in Part I, Item I of this quarterly report on Form 10-Q, on January 9, 2020, privately-held ArTara Subsidiary,

We have engaged the U.S.

Food and Drug Administration (FDA) to determine the

requirements for a biologics license application (BLA) submission for the treatment of LMs, including agreement on requirements

to demonstrate the comparability of the two products.

Through this engagement with the FDA, we are evaluating whether OK-432’s

more than 25-year safety database in LMs, as well as the efficacy and safety database from the clinical trials conducted in the

US and led by the University of Iowa are sufficient for a BLA submission for TARA-002.

Based on the guidance from the FDA, we may

be required to conduct additional clinical trials as necessary.

TARA-002 has been granted Rare Pediatric Disease designation (RPD)

by the FDA for the LMs indication.

Our second program, Intravenous (IV)

Choline Chloride, is an investigational, Phase 3-ready, phospholipid substrate replacement therapy initially in development for

patients receiving parenteral nutrition (PN) who have intestinal failure associated liver disease (IFALD).

IV Choline Chloride

has been granted Orphan Drug Designation (ODD) and Fast Track designation (FTD) by the FDA for this indication.

Our third program, vonapanitase, is a

recombinant human elastase.

We are reviewing the research and preclinical and clinical data of vonapanitase and have not yet determined

whether to pursue further development of this product candidate.

We do not have any approved products and have not generated

any revenue from product sales.

The lead program, TARA-002, is in later stage development and has not yet been approved for use

for treatment of LMs or any other indications.

The Company does not expect to generate any significant revenues prior to 2022,

To finance the Company’s current strategic plans, including the conduct of ongoing and future clinical trials and

further research and development costs, the Company will need to raise additional capital.

ultimate impact of the current COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change.

not yet know the full extent of potential delays or impacts on our business, our research and development activities, healthcare

systems or the global economy as a whole.

However, the effects could have a material impact on our operations, liquidity and capital

resources and we will continue to monitor the COVID-19 situation closely.

response to public health directives and orders, we have implemented work-from-home policies for our employees and temporarily

modified our operations to comply with applicable social distancing recommendations.

Similar health directives and orders are

affecting third parties with whom we do business, including the third party that we have contracted with to conduct comparability

studies for TARA-002.

The effects of the orders and our related adjustments in our business is likely to negatively impact productivity,

disrupt our business and delay our timelines, the magnitude of which will depend, in part, on the length and severity of the restrictions

and other limitations on our ability to conduct our business in the ordinary course.

and/or long-term disruptions in our operations will negatively impact our business, operating results and financial condition

in other ways, as well.

Specifically, we anticipate that the stress of COVID-19 on healthcare systems around the globe will negatively

impact our ability to conduct clinical trials in the near term due primarily to the lack of resources at clinical trial sites

and the resulting inability to enroll patients in the trials.

We also anticipate that the global impact of COVID-19 will negatively

impact our ability to conduct nonclinical studies due primarily to laboratory closures and limited availability of personnel.

In addition, while the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict,

it has significantly disrupted global financial markets, and may limit our ability to access capital, which could in the future

negatively affect our liquidity.

A recession or market correction resulting from the spread of COVID-19 could materially affect

our business and the value of our common stock.

As further described in Note 3 of the

financial statements included in Part I, Item I of this quarterly report on Form 10-Q, on January 9, 2020, privately-held ArTara

Subsidiary, Inc.

(“Private ArTara”) and Protara Therapeutics, Inc.

(formerly ArTara Therapeutics, Inc., formerly Proteon Therapeutics,

Inc.) completed the merger and reorganization (the “Merger”), in accordance with the terms of the Agreement and Plan

of Merger and Reorganization, dated September 23, 2019, (the “Merger Agreement”) by and among Protara Therapeutics,

(formerly ArTara Therapeutics, Inc., formerly Proteon

Therapeutics, Inc.) completed the merger and reorganization (the “Merger”), in accordance with the terms of the Agreement

and Plan of Merger and Reorganization, dated September 23, 2019, (the “Merger Agreement”) by and among Protara Therapeutics,

Inc., Private ArTara and REM 1 Acquisition, Inc., a wholly owned subsidiary of Protara Therapeutics, Inc.

Thereupon, Merger Sub

merged with and into Private ArTara, with Private ArTara surviving as a wholly owned subsidiary of Protara Therapeutics, Inc.

The Merger was structured as a reverse merger and Private ArTara was determined to be the accounting acquirer based on the terms

of the Merger and other factors, and the post-merger company retained the name ArTara Therapeutics, Inc., which on May 11, 2020

was changed to Protara Therapeutics, Inc.

(“Merger Sub”).

Thereupon, Merger Sub merged with and into Private ArTara, with Private ArTara surviving as a wholly owned subsidiary of Protara

Therapeutics, Inc.

The Merger was structured as a reverse merger and Private ArTara was determined to be the accounting acquirer

based on the terms of the Merger and other factors, and the post-merger company retained the name ArTara Therapeutics, Inc.

on May 11, 2020, was changed to Protara Therapeutics, Inc.

On January 9, 2020, in connection with,

7 unchanged sentences

All share and per share amounts presented in this quarterly report on Form 10-Q have been adjusted to reflect the

Reverse Stock Split and the Exchange Ratio.

In addition, immediately following the closing of the Private Placements (described

below), all of the outstanding shares of Protara Therapeutic, Inc.’s Series A Preferred Stock were converted into shares

of Protara Therapeutics, Inc.’s Common Stock.

Shares of our Common Stock commenced trading on The Nasdaq Capital Market

under the new name and ticker symbol “TARA”

Reverse Stock Split.

In addition, immediately following the closing of the Private Placements (described below), all of the outstanding

shares of Protara Therapeutic, Inc.’s Series A Preferred Stock were converted into shares of Protara Therapeutics, Inc.’s

Common Stock.

Shares of our Common Stock commenced trading on The Nasdaq Capital Market under the new name and ticker symbol “TARA”

as of market open on January 10, 2020.

Financial Overview

and Development

and development expenses consist primarily of costs incurred for the development of TARA-002 and IV Choline Chloride, which include

employee-related expenses, including salaries, benefits, travel and stock-based compensation expense, expenses incurred under

agreements with clinical research organizations, or CROs, contract development and manufacturing organizations, or CDMOs, the

cost of acquiring, developing and manufacturing clinical trial materials, costs associated with regulatory operations and facilities,

depreciation and other expenses, which include expenses for rent and maintenance of facilities and other supplies.

and Administrative

and administrative expenses consist principally of employee-related expenses, including salaries, benefits, travel and stock-based

compensation expense, in executive and other administrative functions.

Other general and administrative expenses also include

professional fees for legal, patent review, consulting and accounting services as well as facility related costs, as well as expenses

related to audit, legal, regulatory and tax-related services associated with maintaining compliance with our NASDAQ listing and

SEC requirements, director and officer liability insurance premiums and investor relations costs associated with being a public

(Income) Expense, Net

(income) expense, net, consists of interest income earned on our cash, cash equivalents and restricted cash and interest expenditures

related to our short-term debt.

Accounting Policies and Significant Judgments and Estimates

management’s discussion and analysis of our financial position and results of operations is based on our financial statements,

which have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP.

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the

amounts reported in the financial statements and accompanying notes.

On an ongoing basis, we evaluate estimates, which include

estimates related to clinical trial accruals, stock-based compensation expense, and reported amounts of revenues and expenses

during the reported period.

We base our estimates on historical experience and other market-specific or other relevant assumptions

that we believe to be reasonable under the circumstances.

Actual results may differ materially from those estimates or assumptions.

critical accounting policies are accounting for research and development expenses and stock-based compensation.

It is important

that the discussion of our operating results that follow be read in conjunction with these critical accounting policies which

have been disclosed in the Annual Report of Private ArTara for the year ended December 31, 2019 as Exhibit 99.1 within the Form

8-K/A, as filed with the SEC on March 20, 2020.

of Operations

of the Three Months Ended June 30, 2020 and 2019

following table summarizes our results of operations for the three months ended June 30, 2020 and 2019:

Three Months Ended June 30,

Period-to-Period

Operating expenses:

Research and development

Research and development expenses consist

primarily of costs incurred for the development of TARA-002 and IV Choline Chloride, which include employee-related expenses,

including salaries, benefits, travel and stock-based compensation expense, expenses incurred under agreements with clinical research

organizations, or CROs, contract development and manufacturing organizations, or CDMOs, the cost of acquiring, developing and

manufacturing clinical trial materials, costs associated with regulatory operations and facilities, depreciation and other expenses,

which include expenses for rent and maintenance of facilities and other supplies.

General and administrative

General and administrative expenses consist

principally of employee-related expenses, including salaries, benefits, travel and stock-based compensation expense, in executive

and other administrative functions.

Other general and administrative expenses also include professional fees for legal, patent

review, consulting and accounting services as well as facility related costs, as well as expenses related to audit, legal, regulatory

and tax-related services associated with maintaining compliance with our NASDAQ listing and SEC requirements, director and officer

liability insurance premiums and investor relations costs associated with being a public company.

Total operating expenses

Operating loss

Other income:

Interest (income) expense, net

Interest (income) expense, net, consists

of interest income earned on our cash, cash equivalents and restricted cash and interest expenditures related to our short-term

Critical Accounting Policies and Significant

Judgments and Estimates

Our management’s discussion and analysis

of our financial position and results of operations is based on our financial statements, which have been prepared in accordance

with accounting principles generally accepted in the United States of America, or GAAP.

The preparation of financial statements

in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported in the financial statements

and accompanying notes.

On an ongoing basis, we evaluate estimates, which include estimates related to clinical trial accruals,

stock-based compensation expense, and reported amounts of revenues and expenses during the reported period.

We base our estimates

on historical experience and other market-specific or other relevant assumptions that we believe to be reasonable under the circumstances.

Actual results may differ materially from those estimates or assumptions.

Our critical accounting policies are accounting

for research and development expenses and stock-based compensation.

It is important that the discussion of our operating results

that follow be read in conjunction with these critical accounting policies which have been disclosed in the Annual Report of Private

ArTara for the year ended December 31, 2019 as Exhibit 99.1 within the Form 8-K/A, as filed with the SEC on March 20, 2020.

Results of Operations

Comparison of the Three Months Ended

March 31, 2020 and 2019

The following table

summarizes our results of operations for the three months ended March 31, 2020 and 2019:

Three Months Ended

Total other (income) expense

$ (7,140,030 )

$ (1,428,675 )

$ (5,711,355 )

Research and Development Expenses .

During the three months ended June 30, 2020, our research and development expenses were $2.5 million which represented an increase

of $1.5 million as compared to the three months ended June 30, 2019.

This increase was primarily due to an increase of $0.7 million

in consulting and studies related to TARA-002, an increase of $0.5 million related to the manufacturing and testing of TARA-002,

an increase of $0.2 million in headcount cost due to the hiring of additional employees and an increase of $0.1 million in stock-based

compensation.

General and Administrative Expenses .

During the three months ended June 30, 2020, our general and administrative expenses were $4.8 million which represented an increase

of $4.4 million as compared to the three months ended June 30, 2019.

The increase was primarily due to an increase of $1.6 million

in stock-based compensation, an increase of $1.0 million in professional fees in conjunction with being a public company, an increase

of $0.6 million in insurance, an increase of $0.5 million in headcount cost due to the hiring of additional employees and an increase

of $0.3 million in recruiting fees.

Interest (Income) Expense, Net .

During the three months ended June 30, 2020, interest (income) expense was $0.1 million higher as compared to the three months

ended June 30, 2019.

The increase was primarily due to the Company earning interest on the funds received in the Private Placements

(as defined below).

of the Six Months Ended June 30, 2020 and 2019

following table summarizes our results of operations for the six months ended June 30, 2020 and 2019:

Six Months Ended June 30,

Period-to-Period

Operating expenses:

4 unchanged sentences

(17,425,500 )

(14,468,769 )

Other income:

5 unchanged sentences

Research and Development Expenses .

During the three months ended March 31, 2020, our research and development expenses were $3.1 million which represented an increase

of $2.0 million as compared to the three months ended March 31, 2019.

During the six months ended June 30, 2020, our research and development expenses were $5.5 million which represented an increase

of $3.5 million as compared to the six months ended June 30, 2019.

This increase was primarily due to an increase of $1.3 million

in consulting and product studies related to TARA-002, an increase of $0.6 million related to the manufacturing and testing of

TARA-002, an increase of $0.4 million in data management for TARA-002 and an increase of $0.2 million in stock-based compensation.

related to the manufacturing and testing of TARA-002, an increase of $1.0 million in consulting and studies related to TARA-002,

an increase of $0.5 million in data management for TARA-002 an increase of $0.5 million in headcount cost due to bonuses earned

upon the merger, and the hiring of additional employees and an increase of $0.3 million in stock-based compensation.

General and Administrative Expenses .

During the three months ended March 31, 2020, our general and administrative expenses were $7.1 million which represented an increase

of $6.6 million as compared to the three months ended March 31, 2019.

During the six months ended June 30, 2020, our general and administrative expenses were $11.9 million which represented an increase

of $11.0 million as compared to the six months ended June 30, 2019.

The increase was primarily due to an increase of $4.2 million

1 unchanged sentence

of $0.6 million in professional fees directly related to the merger, an increase of $1.2 million in insurance, an increase of

$0.5 million in recruiting fees and an increase of $0.5 million in headcount cost due to the hiring of five additional employees.

$0.9 million in recruiting fees and an increase of $1.0 million in headcount cost due to the hiring of additional employees.

Interest (Income) Expense, Net.

During the three months ended March 31, 2020, interest (income) expense was $0.1 million higher as compared to the three months

ended March 31, 2019.

Liquidity and Capital Resources

As of March 31, 2020 and December 31,

During the six months ended June 30, 2020, interest (income) expense was $0.2 million higher as compared to the six months ended

June 30, 2019.

The increase was primarily due to the Company earning interest on the funds received in the Private Placements.

and Capital Resources

As of June 30, 2020 and December 31, 2019,

our cash on hand was $29,970,617 and $564,124, respectively.

We have not generated revenues since our inception and have

incurred net losses of $10,060,257 and $1,528,056 for the three months ended March 31, 2020 and 2019, respectively.

31, 2020, we had working capital of $34,713,864 and stockholder’s equity of $64,741,841.

During the three months ended March

31, 2020, cash flows used in operating activities were $7,145,959, consisting primarily of a net loss of $10,060,257, which includes

non-cash stock-based compensation charges of $2,797,807.

Since inception, we have met our liquidity requirements principally through

the sale of our equity in private placements.

We have not generated revenues since our inception and have incurred

net losses of $17,200,287 and $2,956,731 for the six months ended June 30, 2020 and 2019, respectively.

As of June 30, 2020, we

had working capital of $29,402,629 and stockholder’s equity of $59,430,533.

During the six months ended June 30, 2020, cash

flows used in operating activities were $12,879,090, consisting primarily of a net loss of $17,200,287, which includes non-cash

stock-based compensation charges of $4,626,529.

Since inception, we have met our liquidity requirements principally through the

sale of our equity in private placements.

In connection with the Merger, we consummated

the Private Placements (as defined below), raising gross proceeds of $42.5 million and proceeds, net of offering costs, of $39.6

the Private Placements, raising gross proceeds of $42.5 million and proceeds, net of offering costs, of $39.6 million.

Concurrently with the execution of the

9 unchanged sentences

in a private placement immediately prior to the Merger (the “ArTara Private Placement”), 284,875 shares of Private

ArTara common stock (post-Exchange Ratio basis) at a purchase price of approximately $7.01 per share (post-Exchange Ratio basis)

(together with the Proteon Private Placement, the “Private Placements”) for gross proceeds of $1,999,999 and proceeds,

net of issuance costs, of $1,867,580.

The shares issued in the Proteon Private Placement were registered for resale on a registration

statement on Form S-3 filed and declared effective by the U.S.

Securities and Exchange Commission (the “SEC”) on January

We are in the business of developing biopharmaceuticals

and have no current or near term revenues.

We have incurred substantial clinical and other costs in our drug development efforts.

We will need to raise additional capital in order to fully realize management’s plans.

We believe that our current financial resources,

as of the date of the issuance of these condensed consolidated financial statements, are sufficient to satisfy our estimated liquidity

needs for at least twelve months from the issuance of these condensed consolidated financial statements.

As a result of economic conditions, general

global economic uncertainty, political change, global pandemics, and other factors, we do not know whether additional capital

will be available when needed, or that, if available, we will be able to obtain additional capital on reasonable terms.

are unable to raise additional capital due to the volatile global financial markets, general economic uncertainty or other factors,

we may need to curtail planned development activities.

Specifically, the COVID-19 pandemic has significantly disrupted global

financial markets, and may limit our ability to access capital, which could in the future negatively affect our liquidity.

or market correction resulting from the spread of COVID-19 could materially affect our business and the value of our common stock.

The following table

summarizes our sources and uses of cash for the three months ended March 31, 2020 and 2019:

Three Months Ended

ArTara common stock (post-Exchange Ratio (as defined in the Merger Agreement) basis) at a purchase price of approximately $7.01

per share (post-Exchange Ratio basis) (together with the Proteon Private Placement, the “Private Placements”) for

gross proceeds of $1,999,999 and proceeds, net of issuance costs, of $1,867,580.

The shares issued in the Proteon Private Placement

were registered for resale on a registration statement on Form S-3 filed and declared effective by the U.S.

Securities and Exchange

Commission (the “SEC”) on January 30, 2020.

are in the business of developing biopharmaceuticals and have no current or near term revenues.

We have incurred substantial clinical

and other costs in our drug development efforts.

We will need to raise additional capital in order to fully realize management’s

believe that our current financial resources, as of the date of the issuance of these condensed consolidated financial statements,

are sufficient to satisfy our estimated liquidity needs for at least twelve months from the issuance of these condensed consolidated

financial statements.

The Company currently has an effective

shelf registration statement on Form S-3 (“2020 Shelf Registration Statement”) on file with the Securities and Exchange

Commission (“SEC”), which expires in May 2023.

The 2020 Shelf Registration Statement currently permits the offering,

issuance and sale by the Company of up to an aggregate in offering price of $150.0 million of common stock, preferred

stock, debt securities and warrants in one or more offerings and in any combination.

No securities have been sold under the 2020

Shelf Registration Statement.

a result of economic conditions, general global economic uncertainty, political change, global pandemics, and other factors, we

do not know whether additional capital will be available when needed, or that, if available, we will be able to obtain additional

capital on reasonable terms.

If we are unable to raise additional capital due to the volatile global financial markets, general

economic uncertainty or other factors, we may need to curtail planned development activities.

Specifically, the COVID-19 pandemic

has significantly disrupted global financial markets, and may limit our ability to access capital, which could in the future negatively

affect our liquidity.

A recession or market correction resulting from the spread of COVID-19 could materially affect our business

and the value of our common stock.

following table summarizes our sources and uses of cash for the:

Six Months Ended June 30,

Net cash used in operating activities

5 unchanged sentences

$ (2,813,485 )

Comparison of the Three

Months Ended March 31, 2020 and 2019

of the Six Months Ended June 30, 2020 and 2019

Net cash used in operating activities was

$7.1 million for the three months ended March 31, 2020 compared to $1.4 million for the three months ended March 31, 2019.

increase of $5.7 million in cash used in operating activities was primarily driven by an increased net loss of $8.5 million and

change in accrued expenses of $2.0 million, off-set by a change of $2.7 million of stock-based compensation and a change of $2.1

million in accounts payable.

$12.9 million for the six months ended June 30, 2020 compared to $2.7 million for the six months ended June 30, 2019.

of $10.2 million in cash used in operating activities was primarily driven by an increased net loss of $14.2 million and change

in accrued expenses of $1.4 million, off-set by a change of $4.4 million of stock-based compensation and a change of $0.7 million

in prepaid expenses and other current assets.

Net cash provided by investing activities

was $3.5 million for the three months ended March 31, 2020 compared to net cash used in investing activities of $27,113 in the

three months ended March 31, 2019.

The increase of $3.5 million was primarily due to the cash and restricted cash acquired in

connection with the reverse merger with Protara Therapeutics, Inc.

was $3.5 million for the six months ended June 30, 2020 compared to net cash used in investing activities of $0.1 million in the

six months ended June 30, 2019.

The increase of $3.6 million was primarily due to the cash and restricted cash acquired in connection

with the Merger with Protara Therapeutics, Inc.

of $3.7 million.

Net cash provided by financing was $39.2

million for the three months ended March 31, 2020 compared to $0 for the three months ended March 31, 2019.

The increase of $39.2

million was primarily due to proceeds, net of offering costs, from the ArTara Private Placement of $1.9 million, proceeds from

the Proteon Private Placement, net of offering costs of $12.4 million, proceeds from the issuance of Series 1 Convertible Preferred

Stock, net of offering costs of $25.3 million, and repayments of short-term debt of $0.4 million.

Off-Balance Sheet Arrangements

We did not have during the periods presented,

and we do not currently have, any off-balance sheet arrangements, as defined under the applicable regulations of the SEC.

Qualitative and Quantitative

Disclosures about Market Risk

Not applicable.

Net cash provided by financing was $38.9 million for the six

months ended June 30, 2020 compared to $0 for the six months ended June 30, 2019.

The increase of $38.9 million was primarily

due to proceeds, net of offering costs, from the ArTara Private Placement of $1.9 million, proceeds from the Proteon Private Placement,

net of offering costs of $12.4 million, proceeds from the issuance of Series 1 Convertible Preferred Stock, net of offering costs

of $25.3 million, offset by repayments of short-term debt of $0.7 million.

Sheet Arrangements

did not have, during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under

the applicable regulations of the SEC.

Qualitative and Quantitative Disclosures about Market Risk

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements