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Item 9A. Controls and Procedures

2021-03-11 compared with 2020-03-20 · 1502 added, 1043 removed, 177 unchanged (93% of the section changed)

Controls and Procedures.

Disclosure Controls

and Procedures

We maintain disclosure

controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act) that are designed to ensure that information

required to be disclosed in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized, and

reported within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management,

including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding

required disclosure.

Disclosure Controls and Procedures

We maintain disclosure controls

and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act) that are designed to ensure that information

required to be disclosed in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized,

and reported within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our

management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions

regarding required disclosure.

As of December 31, 2020,

2019, our management, with the participation of our principal executive officer and principal financial officer, evaluated the

effectiveness of our disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K.

Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable

assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship

of possible controls and procedures.

Our principal executive officer and principal financial officer have concluded based upon

the evaluation described above that, as of December 31, 2019, our disclosure controls and procedures were effective at the reasonable

assurance level.

We continue to review

and document our disclosure controls and procedures, including our internal controls and procedures for financial reporting, and

may from time to time make changes aimed at enhancing their effectiveness and to ensure that our systems evolve with our business.

Report on Internal Control Over Financial Reporting

Our management is

responsible for establishing and maintaining adequate internal control over financial reporting.

Internal control over financial

reporting is a process designed under the supervision and with the participation of our management, including our Chief Executive

Officer and Chief Financial Officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation

our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness

of our disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K.

Our management

recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of

achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible

controls and procedures.

Our principal executive officer and principal financial officer have concluded based upon the evaluation

described above that, as of December 31, 2020, our disclosure controls and procedures were effective at the reasonable assurance

We continue to review and

document our disclosure controls and procedures, including our internal controls and procedures for financial reporting, and may

from time to time make changes aimed at enhancing their effectiveness and to ensure that our systems evolve with our business.

Management’s Report on Internal Control

Over Financial Reporting

Our management is responsible

for establishing and maintaining adequate internal control over financial reporting.

Internal control over financial reporting

is a process designed under the supervision and with the participation of our management, including our Chief Executive Officer

and Chief Financial Officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation

of financial statements for external purposes in accordance with accounting principles generally accepted in the United States

As of December 31, 2020,

2019, our management assessed the effectiveness of our internal control over financial reporting using the criteria set forth by

the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013).

our management assessed the effectiveness of our internal control over financial reporting using the criteria set forth by the

Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2017).

on this assessment, management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial

Officer, concluded that, as of December 31, 2020, our internal control over financial reporting was effective based on those criteria.

Changes in Internal

Control Over Financial Reporting

An evaluation was

also performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief

Financial Officer, of any changes in our internal control over financial reporting that occurred during our last fiscal quarter

and that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

That evaluation did not identify any change in our internal control over financial reporting that occurred during our latest fiscal

quarter and that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Changes in Internal Control Over Financial

An evaluation was performed

under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial

Officer, of any changes in our internal control over financial reporting that occurred during our last fiscal quarter that has

materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

That evaluation

did not identify any change in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15(d)-15(f)

promulgated under the Securities Exchange Act of 1934, that occurred during our latest fiscal quarter and that has materially

affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Other Information

Directors, Executive Officers and Corporate Governance.

The information required

by this Item and not set forth below will be set forth in the section headed “—Election of Directors” and “Information

Regarding the Board of Directors and Corporate Governance” in our definitive Proxy Statement for our 2020 Annual Meeting

of Stockholders to be filed with the SEC on or before April 29, 2020 (our “ Proxy Statement ”) and is incorporated

in this report by reference.

The information required by this Item and not set forth below

will be set forth in the section headed “—Election of Directors”

and “Information Regarding the Board of

Directors and Corporate Governance”

in our definitive Proxy Statement for our 2021 Annual Meeting of Stockholders to be filed

with the SEC on or before April 30, 2021 (our “

Proxy Statement ”) and is incorporated in this report by

We have adopted a

2 unchanged sentences

The Code of Business Conduct and Ethics is available

on our website at http://www.artaratx.com under the Corporate Governance section of our Investors page.

on our website at http://www.protaratx.com under the Corporate Governance section of our Investors page.

We will promptly

4 unchanged sentences

Stockholders may request a free copy of the Code of Business

Conduct and Ethics by emailing the Company at inquiries@artaratx.com.

Conduct and Ethics by emailing the Company at info@protaratx.com.

Executive Compensation.

The information required

by this Item will be set forth in the section headed “ Executive Compensation ” in our Proxy Statement

and is incorporated in this report by reference.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder

by this Item will be set forth in the section headed “

Executive Compensation ”

in our Proxy Statement and is

incorporated in this report by reference.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required

by this Item will be set forth in the section headed “ Security Ownership of Certain Beneficial Owners and Management ”

by this Item will be set forth in the section headed “

Security Ownership of Certain Beneficial Owners and Management ”

in our Proxy Statement and is incorporated in this report by reference.

Information regarding

our equity compensation plans will be set forth in the section headed “ Executive Compensation ” in our

Proxy Statement and is incorporated in this report by reference.

our equity compensation plans will be set forth in the section headed “

Executive Compensation ”

Statement and is incorporated in this report by reference.

Certain Relationships and Related Transactions, and Director Independence.

The information required

by this Item will be set forth in the section headed “ Transactions With Related Persons ” in our Proxy

Statement and is incorporated in this report by reference.

by this Item will be set forth in the section headed “

Transactions With Related Persons ”

in our Proxy Statement

and is incorporated in this report by reference.

Principal Accountant Fees and Services.

The information required

by this Item will be set forth in the section headed “—Ratification of Selection of Independent Registered Public Accounting

Firm” in our Proxy Statement and is incorporated in this report by reference.

by this Item will be set forth in the section headed “—Ratification of Selection of Independent Registered Public

Accounting Firm”

in our Proxy Statement and is incorporated in this report by reference.

Exhibits and Financial Statement Schedules.

2 unchanged sentences

The following financial

statements of ArTara Therapeutics, Inc.

and Report of Ernst & Young LLP, Independent Registered Public Accounting Firm, are

included in this report:

statements of Protara Therapeutics, Inc.

and Report of Marcum LLP, Independent Registered Public Accounting Firm, are included

in this report:

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets

Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statements of Stockholders’ Equity

Consolidated Statements of Operations

Consolidated Statements of Changes in Stockholders’

Equity (Deficit)

Consolidated Statements of Cash Flows

8 unchanged sentences

(b) Exhibits.

Agreement and Plan of Merger and Reorganization, dated September 23, 2019, by and among the Registrant, ArTara Therapeutics, Inc.

and REM 1 Acquisition, Inc.

(filed as Exhibit 2.1 to the Registrant’s Current Report on Form 8-K as filed on September 24, 2019, and incorporated herein by reference).

Amendment No.

1 to Agreement and Plan of Merger and Reorganization, dated November 19, 2019, by and among the Registrant, ArTara Therapeutics, Inc.

and Plan of Merger and Reorganization, dated September 23, 2019, by and among the Registrant, ArTara Therapeutics, Inc.

REM 1 Acquisition, Inc.

(filed as Exhibit 2.1 to the Registrant’s Current Report on Form 8-K as filed on September 24,

2019, and incorporated herein by reference).

1 to Agreement and Plan of Merger and Reorganization, dated November 19, 2019, by and among the Registrant, ArTara Therapeutics,

and REM 1 Acquisition, Inc.

(filed as Exhibit 2.2 to the Registrant’s Registration Statement on Amendment No.

to Form S-4 as filed on December 4, 2019, and incorporated herein by reference).

Form of the ArTara Therapeutics, Inc.’s Support Agreement, dated September

23, 2019, by and between the Registrant, ArTara Therapeutics, Inc.

and each of the parties named in each agreement therein

(filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K as filed on September 24, 2019, and incorporated

herein by reference).

Form of Registrant’s Support Agreement, dated September 23, 2019, by and between the Registrant, ArTara Therapeutics, Inc.

and each of the parties named in each agreement therein (filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K as filed on September 24, 2019, and incorporated herein by reference).

Form of Lock-Up Agreement, dated September 23, 2019, by each of the parties named in each agreement therein (filed as Exhibit 10.3 to the Registrant’s Current Report on Form 8-K as filed on September 24, 2019, and incorporated herein by reference).

Sixth Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on October 27, 2014).

Certificate of Amendment to the Sixth Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on January 10, 2020).

Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock, dated August 1, 2017 (incorporated by reference to Exhibit 3.1 of Current Report on Form 8-K, filed on August 3, 2017).

Certificate of Designation of Preferences, Rights and Limitations of Series 1 Convertible Preferred Stock (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K, filed with the SEC on January 10, 2020).

Second Amended and Restated By-laws of Proteon Therapeutics, Inc.

(incorporated by reference to Exhibit 3.2 of Current Report on Form 8-K, filed on August 3, 2017).

Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to Amendment No.

1 to the Company’s Registration Statement on Form S-1 filed on October 7, 2014).

Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on January 10, 2020).

Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s

Current Report on Form 8-K filed on October 27, 2014).

of Amendment to the Sixth Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the

Registrant’s Current Report on Form 8-K, filed with the SEC on January 10, 2020).

Second Certificate of Amendment to the Sixth Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.3 to the Registrant’s Quarterly Report on Form 10-Q, filed with the SEC on May 13, 2020).

of Designation of Preferences, Rights and Limitations of Series 1 Convertible Preferred Stock (incorporated by reference to

Exhibit 3.2 to the Registrant’s Current Report on Form 8-K, filed with the SEC on January 10, 2020).

of Amendment to the Certificate of Designation of Preferences, Rights and Limitations of Series 1 Convertible Non-Voting Preferred

Stock (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on

September 23, 2020).

Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 of Current Report on Form 8-K, filed on August 3, 2017).

of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K,

filed with the SEC on January 10, 2020).

Description of securities registered under Section 12 of the Exchange Act of 1934

Fifth Amended and Restated Investors’ Rights Agreement, dated June 22, 2017, by and among Proteon Therapeutics, Inc.

and the stockholders party thereto (incorporated by reference to Exhibit 4.18 of Current Report on Form 8-K, filed on June 23, 2017).

Registration Rights Agreement, dated as of August 2, 2017 by and between Proteon Therapeutics, Inc.

and the Investors party thereto (incorporated by reference to Exhibit 4.1 of Current Report on Form 8-K, filed on August 3, 2017).

Registration Rights Agreement, dated as of September 23, 2019, by and among the Registrant and the institutional investors named therein (incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K, filed with the SEC on September 24, 2019).

Rights Agreement, dated as of September 23, 2019, by and among the Registrant and the institutional investors named therein

(incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K, filed with the SEC on September

Equity Incentive Plan, as amended and restated August 21, 2014 (incorporated by reference to Exhibit 10.1 to Amendment No.

1 to the Company’s Registration Statement on Form S-1 filed on October 7, 2014 (File No.

333-198777)).

Letter Agreement by and between the Company and F.

Nicholas Franano, dated August 22, 2014 (incorporated by reference to Exhibit

10.8 to the Company’s Registration Statement on Form S-1 filed on September 16, 2014).

Lease Agreement by and between the Company and Boston Properties Limited Partnership, dated July 13, 2009, as amended by that Amendment No.

1 dated September 14, 2012, as amended by that Amendment No.

2 dated October 17, 2013, as amended by that Amendment No.

3 dated August 4, 2014 (incorporated by reference to Exhibit 10.10 to the Company’s Registration Statement on Form S-1 filed on September 16, 2014).

of Stock Option Grant Notice and Stock Option Agreement under the Company’s 2006 Equity Incentive Plan, as amended (incorporated

by reference to Exhibit 10.16 to the Company’s Registration Statement on Form S-1 filed on September 16, 2014).

Assignment of Rights/License Agreement, effective as of February 4, 2002, by and between Johns Hopkins University and F.

Nicholas Franano (incorporated by reference to Exhibit 10.11 to the Company’s Registration Statement on Form S-1 filed on September 16, 2014).

Assignment of Patent made and entered into as of December 30, 2002, by and between F.

Nicholas Franano and Proteon Therapeutics, L.L.C.

(incorporated by reference to Exhibit 10.12 to the Company’s Registration Statement on Form S-1 filed on September 16, 2014).

Letter Agreement, dated October 1, 2010, among the National Institutes of Health, F.

Nicholas Franano and the Company (incorporated by reference to Exhibit 10.13 to the Company’s Registration Statement on Form S-1 filed on September 16, 2014).

Nicholas Franano (incorporated by reference to Exhibit 10.11 to the Company’s Registration Statement on Form S-1 filed on September 16, 2014).

Letter Agreement, dated January 12, 2009, by and between F.

Nicholas Franano and the Company (as successor-in-interest to Proteon Therapeutics, L.L.C.) (incorporated by reference to Exhibit 10.14 to the Company’s Registration Statement on Form S-1 filed on September 16, 2014).

Quitclaim Deed, dated January 17, 2011, by F.

Nicholas Franano to the Company (incorporated by reference to Exhibit 10.15 to the Company’s Registration Statement on Form S-1 filed on September 16, 2014).

Form of Stock Option Grant Notice and Stock Option Agreement under the Company’s 2006 Equity Incentive Plan, as amended

(incorporated by reference to Exhibit 10.16 to the Company’s Registration Statement on Form S-1 filed on September 16, 2014).

2014 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.25 to Amendment No.

1 to the Company’s Registration

Statement on Form S-1 filed on October 7, 2014).

Amended and Restated Employment Agreement by and between the Company and Timothy P.

Noyes, dated October 1, 2014 (incorporated

by reference to Exhibit 10.26 to Amendment No.

1 to the Company’s Registration Statement on Form S-1 filed on October 7,

Amended and Restated Employment Agreement by and between the Company and Steven Burke, dated October 1, 2014 (incorporated by

reference to Exhibit 10.27 to Amendment No.

1 to the Company’s Registration Statement on Form S-1 filed on October 7, 2014).

Amended and Restated Employment Agreement by and between the Company and George Eldridge, dated October 1, 2014 (incorporated

by reference to Exhibit 10.28 to Amendment No.

1 to the Company’s Registration Statement on Form S-1 filed on October 7,

Amended and Restated Employment Agreement by and between the Company and Daniel Gottlieb, dated October 1, 2014 (incorporated

by reference to Exhibit 10.29 to Amendment No.

1 to the Company’s Registration Statement on Form S-1 filed on October 7,

Form of Amended and Restated Indemnification Agreement (incorporated by reference to Exhibit 10.30 to Amendment No.

1 to the Company’s Registration Statement on Form S-1/A filed on October 7, 2014).

Manufacturing Services Agreement by and between the Company and Lonza Ltd, dated as of June 30, 2015 and signed July 9, 2015 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015 filed on November 12, 2015).

Amendment to Manufacturing Services Agreement by and between the Company and Lonza LTD entered into on January 21, 2016 (incorporated

by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 filed on

May 9, 2016).

Amendment No.

1 to Employment Agreement by and between the Company and George Eldridge dated as of March 15, 2017 (incorporated

by reference to Exhibit 10.19 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 filed

on March 16, 2017).

Securities Purchase Agreement, dated as of June 23, 2017, by and among the Company and the purchasers party thereto (incorporated by reference to Exhibit 10.20 of Current Report on Form 8-K, filed on June 23, 2017).

Fourth Amendment to Lease by and between Proteon Therapeutics, Inc.

and Boston Properties Limited Partnership, dated August 17, 2009 (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017 filed on November 7, 2017).

Amendment No.

3 to Manufacturing Services Agreement by and between the Company and Lonza LTD dated as of May 4, 2018 (incorporated

by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018 filed on

August 7, 2018).

Subscription Agreement, dated September 23, 2019, by and among the Registrant and the institutional investors named therein (incorporated

by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K, filed with the SEC on September 24, 2019).

First Amendment to Subscription Agreement, dated November 19, 2019, by and among the Registrant and the institutional investors

named therein (incorporated by reference to Exhibit 99.12 to the Registrant’s Registration Statement on Form S-4).

and Restated 2014 Equity Incentive Plan of Proteon Therapeutics, Inc.

(incorporated by reference to Exhibit 10.1 to the

Registrant’s Current Report on Form 8-K, filed on August 3, 2017).

1 to the Company’s Registration Statement on Form S-1 filed on October 7, 2014).

Subscription Agreement, dated September 23, 2019, by and among the Registrant and the institutional investors named therein (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K, filed with the SEC on September 24, 2019).

First Amendment to Subscription Agreement, dated November 19, 2019, by and among the Registrant and the institutional investors named therein (incorporated by reference to Exhibit 99.12 to the Registrant’s Registration Statement on Form S-4).

Amended and Restated 2014 Equity Incentive Plan of the Registrant (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed on January 10, 2020).

Forms of Stock Option Agreement, Option Exercise, Restricted Stock Unit Grant and Restricted Stock Unit Agreement under the Amended and Restated 2014 Equity Incentive Plan of the Registrant, as amended (incorporated by reference to Exhibit 10.25 to the Registrant’s Annual Report on form 10-K on form 10-K for the fiscal year ended December 31, 2019 filed on March 20, 2020).

10.10&dagger;

2017 Equity Incentive Plan of ArTara Subsidiary, Inc.

(incorporated by reference to Exhibit 10.11 to the Registrant’s Current

Report on Form 8-K, filed with the SEC on January 10, 2020).

Executive Employment Agreement, dated as of November 5, 2019, as amended on December 4, 2019, by and between ArTara Subsidiary,

(incorporated by reference to Exhibit 10.11 to the Registrant’s Current Report on Form 8-K, filed with the SEC on January 10, 2020).

10.11&dagger;

Inducement Plan of the Registrant (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on March 30, 2020).

10.12&dagger;

Form of Stock Option Grant Notice and Stock Option Agreement under the Inducement Plan of the Registrant (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K, filed with the SEC on March 30, 2020).

10.13&dagger;

Forms of Restricted Stock Unit Grant Notice and Restricted Stock Unit Agreement under the Inducement Plan of the Registrant (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K, filed with the SEC on March 30, 2020).

10.14&dagger;

Executive Employment Agreement, dated as of November 5, 2019, as amended on December 4, 2019, by and between ArTara Subsidiary, Inc.

and Jesse Shefferman.

(incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K, filed

with the SEC on January 10, 2020).

(incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K, filed with the SEC on January 10, 2020).

10.15&dagger;

Executive Employment Agreement, dated as of December 17, 2019, by and between ArTara Subsidiary, Inc.

and Jacqueline Zummo, Ph.D.,

(incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K, filed with the SEC

on January 10, 2020).

Executive Employment Agreement, dated as of February 6, 2020, by and between the Registrant and Julio Casoy, M.D.

Executive Employment Agreement, effective as of February 11, 2020 by and between the Registrant and Blaine Davis.

and Jacqueline Zummo, Ph.D., MPH, MBA.

(incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K, filed with the SEC on January 10, 2020).

10.16&dagger;^

Separation Agreement and Release, dated as of July 23, 2020, by and between the Registrant and Julio Casoy (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q, filed with the SEC on July 31, 2020).

10.17&dagger;

Executive Employment Agreement, effective as of February 11, 2020 by and between the Registrant and Blaine Davis (incorporated by reference to Exhibit 10.30 to the Registrant’s Annual Report on Form 10-K, filed with the SEC on March 19, 2020).

10.18&dagger;&dagger;

Choline License Agreement, by and between ArTara Subsidiary, Inc.

1 unchanged sentence

dated as of September 27, 2017.

(incorporated

by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K, filed with the SEC on January 10, 2020).

(incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K, filed with the SEC on January 10, 2020).

10.19&dagger;&dagger;

Sponsored Research and License Agreement, by and between ArTara Subsidiary, Inc.

and The University of Iowa dated as of November 28, 2018.

(incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K, filed with the SEC

on January 10, 2020).

(incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K, filed with the SEC on January 10, 2020).

10.20&dagger;&dagger;

License Agreement, by and between ArTara Subsidiary, Inc.

and The Feinstein Institute for Medical Research dated as of December 22, 2017.

(incorporated by reference to Exhibit 10.6 to the Registrant’s Current Report on Form 8-K, filed with the SEC

on January 10, 2020).

(incorporated by reference to Exhibit 10.6 to the Registrant’s Current Report on Form 8-K, filed with the SEC on January 10, 2020).

10.21&dagger;&dagger;

Agreement, by and between ArTara Subsidiary, Inc.

1 unchanged sentence

dated as of June 17, 2019.

(incorporated

by reference to Exhibit 10.7 to the Registrant’s Current Report on Form 8-K, filed with the SEC on January 10, 2020).

(incorporated by reference to Exhibit 10.7 to the Registrant’s Current Report on Form 8-K, filed with the SEC on January 10, 2020).

10.22&dagger;&dagger;

Amendment to Agreement, by and between Chugai Pharmaceutical Co., Ltd.

and the Registrant, dated as of July 14, 2020 and effective as of June 30, 2020 (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q, filed with the SEC on November 12, 2020).

10.23&dagger;

Form of Indemnity Agreement between the Registrant and each of its directors and officers.

(incorporated by reference to Exhibit

10.8 to the Registrant’s Current Report on Form 8-K, filed with the SEC on January 10, 2020).

Restated Non-Employee Director Compensation Policy.

(incorporated by reference to Exhibit 10.8 to the Registrant’s Current Report on Form 8-K, filed with the SEC on January 10, 2020).

10.24&dagger;

Restated Non-Employee Director Compensation Policy (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q, filed with the SEC on July 31, 2020).

10.25&dagger;&dagger;

Lease by and between 345 PAS HOLDING LLC, and the Registrant, dated as of December 7, 2020.

List of Subsidiaries.

Consent of Ernst & Young LLP, independent registered public accounting firm.

Certification of Principal Executive Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934,

Certification of Principal Financial Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934,

Consent of Marcum LLP, independent registered public accounting firm.

Certification of Principal Executive Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended.

Certification of Principal Financial Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended.

Principal Executive Officer Certification and Principal Financial Officer Certification Pursuant to 18 U.S.C.

Section 1350, as

Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Interactive Data Files Pursuant to Rule 405 of Regulation S-T:

(i) the Consolidated Balance Sheets as of December 31, 2018 and

(ii) the Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2018, 2017, and 2016;

(iii) the Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity for the years ended December 31,

(i) the Consolidated

Balance Sheets as of December 31, 2020 and 2019;

(ii) the Consolidated Statements of Operations for the years ended December 31,

2020 and 2019;

(iii) the Consolidated Statements of Changes in Stockholders’

Equity (Deficit) for the years ended December

31, 2020 and 2019;

(iv) the Consolidated Statements of Cash Flows for the years ended December 31, 2020 and 2019;

(v) the notes to the Consolidated Financial Statements.

and (v) the notes

to the Consolidated Financial Statements.

+ Filed herewith.

** Schedules have been omitted pursuant

to Item 601(b)(2) of Regulation S-K.

** Schedules have been omitted pursuant to Item 601(b)(2)

of Regulation S-K.

A copy of any omitted schedules will be furnished to the SEC upon request.

† Indicates management contract or

compensatory plan or arrangement.

†† Certain portions of this

exhibit (indicated by “[***]”) have been omitted as the Registrant has determined (i) the omitted information is not

material and (ii) the omitted information would likely cause harm to the Registrant if publicly disclosed.

Indicates management contract or compensatory plan

or arrangement.

&dagger;&dagger;

Certain portions of this exhibit (indicated by “[***]”)

have been omitted as the Registrant has determined (i) the omitted information is not material and (ii) the omitted information

would likely cause harm to the Registrant if publicly disclosed.

^ Certain exhibits and schedules have been omitted pursuant

to Item 601(a)(5) of Regulation S-K.

The Registrant hereby undertakes to furnish supplementally a copy of any omitted exhibit

or schedule upon request by the SEC.

Form 10-K Summary

2 unchanged sentences

behalf by the undersigned thereunto duly authorized.

ArTara Therapeutics, Inc.

Therapeutics, Inc.

March 11, 2021

/s/ Jesse Shefferman

Jesse Shefferman

President and Chief Executive Officer

(on behalf of the registrant and as the

(on behalf of the registrant and as the registrant’s

Principal Executive Officer)

10 unchanged sentences

and in the capacities and on the dates indicated.

President and Chief Executive Officer and Director

(Principal Executive Officer)

President and Chief

Executive Officer and Director

March 11, 2021

Jesse Shefferman

(Principal Executive Officer)

Chief Financial Officer

(Principal Financial and Accounting Officer)

March 11, 2021

(Principal Financial and Accounting Officer)

/s/ LUKE BESHAR

1 unchanged sentence

March 11, 2021

BRAUNSTEIN, M.D.

FLANNELLY, PHARMD

March 11, 2021

Scott Braunstein, M.D.

Barry Flannelly, PharmD

GARCEAU, M.D.

7 unchanged sentences

Michael Solomon, Ph.D.

Report of Independent

Registered Public Accounting Firm

To the Shareholders and the Board of Directors of ArTara Therapeutics,

/s/ CYNTHIA SMITH

March 11, 2021

Cynthia Smith

Protara Therapeutics, Inc.

Index to Consolidated Financial Statements

Protara Therapeutics, Inc.

for the Years

Ended December 31, 2020 and 2019

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2020 and 2019

Consolidated Statements of Operations for the Years Ended December 31, 2020 and 2019

Consolidated Statement of Changes in Stockholders’

(Deficit) Equity for the Years Ended December 31, 2020 and 2019

Consolidated Statements of Cash Flows for the Years Ended December 31, 2020 and 2019

Notes to Consolidated Financial Statements

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of

Protara Therapeutics, Inc.

New York, New York

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Proteon

Therapeutics, Inc (the Company) as of December 31, 2019 and 2018, the related consolidated statements of operations and comprehensive

loss, stockholders’

equity and cash flows for each of the years then ended, and the related notes (collectively referred to

as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly,

in all material respects, the financial position of the Company at December 31, 2019 and 2018, and the results of its operations

and its cash flows for the years then ended, in conformity with U.S.

generally accepted accounting principles.

We have audited the accompanying consolidated balance

sheets of Protara Therapeutics, Inc.

(the “Company”) as of December 31, 2020 and 2019, the related consolidated statements

of operations, stockholders’

equity (deficit) and cash flows for each of the years in the period ended December 31, 2020,

and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements

present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results

of its operations and its cash flows for each of the years in the period ended December 31, 2020, in conformity with accounting

principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's

These financial statements are the responsibility

of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required

to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and

regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements

are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform,

an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of

internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)

and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable

rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards

of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial

statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged

to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding

of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s

internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks

of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to

Our audits included performing procedures to assess

the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond

to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial

3 unchanged sentences

for our opinion.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2008.

Boston, Massachusetts

March 19, 2020

Proteon Therapeutics, Inc.

Critical Audit Matters

Critical audit matters are matters arising from the

current period audit of the financial statements that were communicated or required to be communicated to the audit committee and

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,

subjective, or complex judgments.

We determined that there are no critical audit matters.

/s/ Marcum LLP

We have served as the Company’s auditor

New York, New York

PROTARA THERAPEUTICS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share

As of December 31,

Current assets:

1 unchanged sentence

Restricted cash

Available-for-sale investments

Deferred offering costs

Prepaid expenses and other current assets

Total current assets

Non-current assets:

Restricted cash, long-term

Property and equipment, net

Restricted cash

Liabilities and stockholders’ equity

Liabilities and Stockholders’

Current liabilities:

1 unchanged sentence

Accrued expenses

Operating lease liability, current

Total current liabilities

Non-current liabilities:

Operating lease liability, long-term

Total liabilities

Commitments and Contingencies (Note 7)

Stockholders’ equity:

Preferred stock, $0.001 par value per share;

10,000,000 shares authorized at December 31, 2019 and 2018:

Series A convertible preferred stock 22,000 shares authorized at December 31, 2019 and December 31, 2018;

18,954 and 22,000 issued and outstanding at December 31, 2019 and at December 31, 2018, respectively

Common stock, $0.001 par value, 100,000,000 shares authorized at December 31, 2019 and 2018;

557,631 and 481,091 shares issued and outstanding at December 31, 2019 and 2018, respectively

Stockholders’

Equity (Deficit)

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

Series 1 Convertible Preferred Stock, 8,028 and 0 shares authorized at December 31, 2020 and 2019, respectively, 8,027 and 0 shares issued and outstanding as of December 31, 2020 and 2019, respectively.

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

Common Stock, 11,211,840 and 2,627,533 shares issued and outstanding as of December 31, 2020 and 2019, respectively.

Additional Paid in Capital

Accumulated Deficit

Accumulated other comprehensive income

Total stockholders’ equity

Total liabilities and stockholders’ equity

See accompanying notes to these consolidated

financial statements.

Proteon Therapeutics, Inc.

Consolidated Statements of Operations

and Comprehensive Loss

(in thousands, except share and per share

Year Ended December 31,

Operating expenses:

Research and development

General and administrative

Total Stockholders’

Equity (Deficit)

Total Liabilities and Stockholders’

Equity (Deficit)

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

PROTARA THERAPEUTICS,

CONSOLIDATED STATEMENTS

OF OPERATIONS

(in thousands, except

share and per share data)

For the Years Ended

Operating expense:

Research & development

General & administrative

Total operating expenses

Loss from operations

Other income:

Investment income

Operating loss

Other income, net

Total other income

Net loss and net loss attributable to common stockholders

Foreign currency translation adjustment

Unrealized gain on available-for-sale investments

Comprehensive loss

Net loss per share attributable to common stockholders - basic and diluted

Weighted-average common shares outstanding used in net loss per share attributable to common stockholders - basic and diluted

See accompanying notes to these consolidated

financial statements.

Proteon Therapeutics, Inc.

Statements of Stockholders' Equity

Interest income, net

Total other income, net

Weighted Average Shares Outstanding, basic and diluted

Net loss per share, basic and diluted

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

PROTARA THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN

STOCKHOLDERS’

EQUITY (DEFICIT)

FOR THE YEARS ENDED DECEMBER 31, 2020

(in thousands, except share and per share

Series A Convertible

Preferred Stock

Comprehensive

(Loss) Income

Stockholders'

Balance at December 31, 2017

Issuance of common stock upon ESPP purchase

Issuance of common stock, net of issuance costs

Stock-based compensation expense

Other comprehensive gain/(loss)

Series 1 Convertible Preferred Stock

Stockholders’

Equity (Deficit)

Balance at January 1, 2019

Stock-based compensation - stock options

Stock-based compensation - restricted stock

Stock-based compensation - restricted stock units

Issuance of common stock in September capital raise

Balance at December 31, 2019

Conversion of Series A convertible preferred stock into Common Stock

Stock-based compensation expense

Other comprehensive gain/(loss)

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

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

Issuance of Series 1 Convertible Preferred Stock in Proteon Private Placement, net of offering costs

Reverse business combination

Issuance of Common Stock in Common Offering, net of offering costs

Issuance of Series 1 Convertible Preferred Stock in Preferred Offering, net of offering costs

Issuance of Common Stock in Common Offering (Underwriters Overallotment Option), net of offering costs

Settlement of restricted stock units

Exercise of stock options

Stock-based compensation - restricted stock units

Stock-based compensation - stock options

Balance at December 31, 2020

See accompanying notes to these consolidated

financial statements.

Proteon Therapeutics, Inc.

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

PROTARA THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Year Ended December 31,

Operating activities

Reconciliation of net loss to net cash used in operating activities:

Amortization of premium/discount on available-for-sale securities

Foreign currency remeasurement (loss)

For the Years Ended

Cash flows from operating activities:

Adjustments to reconcile net loss to net cash used

in operating activities:

Stock based compensation

Prepaid expenses and other assets

Operating lease right-of-use asset

Interest receivable

Accounts payable and accrued expenses

Operating lease liability

Amortization of operating lease right-of-use asset

Changes in operating assets and liabilities:

Prepaid expenses and other current assets

Accounts payable

Accrued expenses

Right-of-use liability

Net cash used in operating activities

Investing activities

Purchases of available-for-sale investments

Proceeds from maturities of available-for-sale investments

Proceeds from sale of available-for-sale investments

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

Financing activities

Proceeds from issuance of common stock, net of issuance costs

Proceeds from issuance of common stock under ESPP

Cash flows from financing activities:

Proceeds from - ArTara Private Placement, net of offering costs

Proceeds from - Common Stock in Proteon Private Placement, net of offering costs

Proceeds from - Series 1 Convertible Preferred Stock in Proteon Private Placement, net of offering costs

Proceeds from Common Offering, net of offering costs

Proceeds from Preferred Offering, net of offering costs

Proceeds from Underwriters Overallotment Option

Repayments under short-term debt

Proceeds from the exercise of stock options

Proceeds from private placements

Net cash provided by financing activities

Effect of exchange rate changes on cash

Decrease in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash, beginning of period

Cash, cash equivalents and restricted cash, end of period

See accompanying notes to these consolidated

financial statements.

ArTara Therapeutics, Inc.

(formerly Proteon

Therapeutics, Inc.)

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 of year

Reconciliation of cash and cash equivalents and restricted cash to the consolidated balance sheets:

Cash and cash equivalents

Restricted cash

Restricted cash, long-term

Cash and cash equivalents and restricted cash

Supplemental cash flow information

Cash paid for:

Non-cash investing and financing activities:

Deferred offering costs recorded in accrued expenses

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.

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

Protara Therapeutics, Inc.

and Consolidated

Notes to Consolidated Financial Statements

(amounts in thousands, except share and

per share data)

Organization and Operations

ArTara Therapeutics,

Inc (formerly Proteon Therapeutics, Inc., the “Company”) is a biopharmaceutical company that has historically focused

on the development of novel, first-in-class pharmaceuticals to address the medical needs of patients with kidney and vascular disease.

The Company was formed in June 2001 and incorporated on March 24, 2006.

2019, the Company announced that its second Phase 3 trial, PATENCY-2, for vonapanitase did not meet its co-primary endpoints

of fistula use for hemodialysis (p=0.328) and secondary patency (p=0.932).

The PATENCY-2 clinical trial was the second of two

randomized, double-blind Phase 3 trials, comparing a 30 microgram dose of investigational vonapanitase to placebo in patients

with chronic kidney disease, or CKD, undergoing creation of a radiocephalic fistula for hemodialysis.

Following the release

of top-line data from the PATENCY-2 clinical trial of vonapanitase on March 28, 2019, the Company began to evaluate its

strategic alternatives focusing on enhancing stockholder value.

On September 23, 2019, the Company entered into a merger

agreement with ArTara Subsidiary, Inc.

(formerly ArTara Therapeutics, Inc.

“Private ArTara”).

As of December 31,

2019, the Company had discontinued substantially all its research and development activities, including a reduction in

As of December 31, 2019, the Company had terminated all of its legacy Proteon Therapeutics, Inc.

Company has recorded severance costs of $2.9 million for the year ended December 31, 2019.

The Company remains subject to a number of risks similar to other

companies in the biotechnology industry, including compliance with government regulations, protection of proprietary

technology, dependence on third parties and product liability.

Reverse Merger with Private ArTara

On January 9,

2020, the Company and Private ArTara 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 the Company, Private ArTara and REM 1 Acquisition, Inc., a wholly owned subsidiary of the

Company (the “Merger Sub”), whereby Merger Sub merged with and into Private ArTara, with Private ArTara surviving

as a wholly owned subsidiary of the Company.

(amounts in thousands, except share and per share data)

NOTE 1 –

BUSINESS, LIQUIDITY AND CAPITAL RESOURCES

Protara Therapeutics, Inc.

and its consolidated subsidiaries

(“Protara”

or the “Company”) is committed to identifying and advancing transformative therapies for the

treatment of cancer and rare diseases with significant unmet needs.

Protara’s portfolio includes two development programs

utilizing TARA-002, an investigational cell therapy in development for the treatment of lymphatic malformations (LMs) and non-muscle

invasive bladder cancer (NMIBC).

The third 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).

The fourth program in the portfolio is Vonapanitase, a recombinant human elastase.

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, Inc., Private

ArTara and REM 1 Acquisition, Inc., a wholly owned subsidiary of Protara Therapeutics, Inc (“Merger Sub”).

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

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.

On January 9, 2020, in connection with and prior to the completion

of, the Merger, the Company effected a 1-for-40 reverse stock split of its common stock, (the “Reverse Stock Split”),

Private ArTara changed its name from “ArTara Therapeutics, Inc.”

to “ArTara Subsidiary, Inc.”, and the

Company changed its name from “Proteon Therapeutics, Inc.”

to “ArTara Therapeutics, Inc.”

All share and

per share amounts presented in these financial statements have been adjusted to reflect the Reverse Stock Split.

immediately following the closing of the Private Placements (defined below), all of the outstanding shares of the Company’s

Series A Preferred Stock were converted into shares of the Company’s common stock.

Shares of the Company’s common stock

commenced trading on The Nasdaq Capital Market under the new name and ticker symbol “TARA”

of the Merger, Protara Therapeutics, Inc.

effected a 1-for-40 reverse stock split of its common stock (the “Protara Reverse

Stock Split”), Private ArTara changed its name from “ArTara Therapeutics, Inc.”

to “ArTara Subsidiary,

Inc.”, and ArTara Therapeutics, Inc.

changed its name from “Proteon Therapeutics, Inc.”

to “ArTara Therapeutics,

then subsequently changed its name from “ArTara Therapeutics, Inc”

to “Protara Therapeutics, Inc.”

All share and per share amounts presented in this annual report on Form 10-K have been adjusted to reflect the Protara Reverse

Stock Split and the Exchange Ratio (defined below).

In addition, immediately following the closing 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 (defined below).

Shares of the Company’s 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.

Under the terms of

the Merger Agreement, the Company issued shares of its common stock (“Common Stock”) to Private ArTara’s stockholders,

at an exchange ratio of 0.190756 shares of Common Stock, after taking into account the Reverse Stock Split, for each share of Private

ArTara common stock outstanding immediately prior to the Merger.

Proteon assumed all of the outstanding and unexercised stock options

of Private ArTara, with such stock options now representing the right to purchase 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 stock options.

The Company also 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.

On January 9, 2020, the Company completed certain private placements

pursuant to a subscription agreement entered into on September 23, 2019.

On September 23, 2019, the Company and Private ArTara

entered into a subscription agreement (as amended on November 19, 2019, the "Subscription Agreement") with certain institutional

investors (the "Investors") pursuant to which, among other things, (i) the Company agreed to issue to certain Investors

shares of Proteon Series 1 Convertible Non-Voting Preferred Stock and/or Proteon common stock immediately following the Merger

in a private placement transaction for an aggregate purchase price of approximately $40.5 million (the "Proteon Private Placement")

and (ii) Private ArTara agreed to issue to an Investor (that is an existing investor in ArTara) shares of ArTara common stock (the

"ArTara Private Placement Shares") immediately prior to the Merger in a private placement transaction for an aggregate

purchase price of approximately $2.0 million (together with the Proteon Private Placement, the "Private Placements").

Immediately after the Proteon Private Placement, the Company converted all outstanding shares of Proteon's Series A Convertible

Preferred Stock into shares of Proteon common stock (the "Series A Preferred Automatic Conversion").

On January 9, 2020,

the Company received approximately $39.6 million, net of offering costs related to the Private Placements.

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 Agreement.

The Merger will be accounted for as a business combination

as of the effective date of the Merger.

The financial information

included in the financial statements is that of the Company prior to the Merger because the Merger was consummated after the period

covered by these financial statements.

As of December 31,

2019, the Company had cash and cash equivalents of $6.2 million.

The Company had an accumulated deficit of $225.5 million as of

December 31, 2019.

In connection with the Merger, the Company consummated the Private Placements, raising gross

proceeds of $42.5 million.

The Company expects there will be no further material near term cash expenditures to fund the Company’s

vonapanitase clinical trials.

From the date of the Merger, the activities of the Company will become those of Private ArTara.

The Company is in

the business of developing biopharmaceuticals, has no current or near term revenues.

The Company is incurring substantial clinical

and other costs in its drug development efforts.

The Company expects it will need to raise additional capital in order 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 fund its current twelve month operating budget, alleviating any substantial doubt raised by our historical operating results

and satisfying our estimated liquidity needs for at least twelve months from the issuance of these consolidated financial statements.

The accompanying

financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction

of liabilities in the ordinary course of business.

The financial statements do not include any adjustments relating to the recoverability

and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome

of the uncertainties described above.

At-The-Market Equity Offering Program

On November 12, 2015, the Company filed a shelf registration

statement on Form S-3 (the “Registration Statement”), and entered into a Sales Agreement with Cowen and Company, LLC

(the “Sales Agreement”) to establish an at-the-market (“ATM”) equity offering program pursuant to which

they are able, with the Company’s authorization, to offer and sell up to $40 million of the Company’s Common Stock

at prevailing market prices from time to time.

The Registration Statement became effective on January 12, 2016.

The Company paid

Cowen a commission equal to 3% of the gross proceeds of the sales price of all shares sold through it as sales agent under the

Sales Agreement.

The offering costs were offset against proceeds from the sale of common stock under this agreement.

filed a prospectus supplement on March 16, 2017 because the Company is currently subject to General Instruction I.B.6 of Form S-3,

which limits the amounts that the Company may sell under the Registration Statement.

The Company’s ATM program was terminated

effective as of February 7, 2019, when its new shelf registration statement on Form S-3, File No.

333-228865, was declared effective

For the year ended December 31, 2018, the Company sold 1,494,579 shares of Common Stock under the Sales Agreement for

aggregate gross proceeds of $3.0 million.

For the year ended December 31, 2018, total offering costs of $46,000, were offset against

the proceeds from the sale of common stock.

The 1,494,579 shares of Common Stock sold under the ATM program during the year ended

December 31, 2018 were all sold on September 25, 2018 to New Leaf Venture Partners LLC.

Summary of Significant Accounting Policies

Basis of Presentation, Principles

of Consolidation and Use of Estimates

The accompanying consolidated

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

All intercompany balances and transactions

have been eliminated in consolidation.

These consolidated financial statements have been prepared in conformity with accounting

principles generally accepted in the United States of America (“GAAP”).

Any reference in these notes to applicable

guidance is meant to refer to the authoritative United States generally accepted accounting principles as found in the Accounting

Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards

Board (“FASB”).

The preparation of

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

in the financial statements and accompanying notes.

On an ongoing basis, the Company’s management evaluates its estimates,

which include, but are not limited to, estimates related to stock-based compensation expense, clinical trial accruals and reported

amounts of expenses during the reported period.

The Company bases its estimates on historical experience and other market-specific

or other relevant assumptions that it believes to be reasonable under the circumstances.

Actual results may differ from those estimates

or assumptions.

Segment Information

Operating segments

are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating

decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance.

The Company and the

Company's chief operating decision maker view the Company's operations and manage its business in one operating segment, which

is the business of developing and commercializing vonapanitase for the treatment of renal and vascular disease.

Currently, the

Company operates in only one geographic segment.

Fair Value of Financial Instruments

The Company’s

financial instruments consist of cash and cash equivalents, available-for-sale investments, forward foreign currency contracts

(see Note 3), accounts payable, and accrued liabilities.

The Company is required to disclose information on all assets and liabilities

reported at fair value that enables an assessment of the inputs used in determining the reported fair values.

FASB ASC Topic 820,

Fair Value Measurement and Disclosures , established a hierarchy of inputs used in measuring fair value that maximizes the

use of observable inputs and minimizes the use of unobservable inputs by requiring that the observable inputs be used when available.

Observable inputs are inputs that market participants would use in pricing the financial instrument based on market data obtained

from sources independent of the Company.

Unobservable inputs are inputs that reflect the Company’s assumptions about the

inputs that market participants would use in pricing the financial instrument and are developed based on the best information available

under the circumstances.

The fair value hierarchy applies only to the valuation inputs used in determining the reported or disclosed

fair value of the financial instruments and is not a measure of the investment credit quality.

Fair value measurements are classified

and disclosed in one of the following three categories:

Level 1—Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2—Valuations based on quoted prices for similar assets or liabilities in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

Level 3—Valuations that require inputs that reflect the Company’s own assumptions that are both significant to the fair value measurement and unobservable.

To the extent that

valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value

requires more judgment.

Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for

instruments categorized in Level 3.

A financial instrument’s level within the fair value hierarchy is based on the lowest

level of any input that is significant to the fair value measurement.

Financial instruments measured at fair value on a recurring basis include

cash equivalents and available-for-sale investments (see Note 3).

There have been no changes to the valuation methods utilized

by the Company during the years ended December 31, 2019 and 2018.

The Company evaluates transfers between levels at the end of

each reporting period.

There were no transfers of financial instruments between levels during the years ended December 31, 2019

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“ASU

2014-09”), a new standard on revenue recognition providing a single, comprehensive revenue recognition model for all contracts

with customers.

The new revenue standard is based on the principle that revenue should be recognized to depict the transfer of

promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled

in exchange for those goods or services.

The new standard was effective beginning January 1, 2018, with early adoption permitted.

The Company adopted ASU 2014-09 during the quarter ended March 31, 2018.

The adoption did not have a material impact on the consolidated

financial statements.

In February 2016, the FASB issued ASU

2016-02, Leases (Topic 842):

Amendments to FASB Codification (“ASU 2016-02”), which increases transparency and comparability

among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about

leasing arrangements.

At the lease commencement date, the lessee must recognize a lease liability and right-of-use asset, which

is initially measured at the present value of future lease payments.

The Company adopted ASU 2016-01 at January 1, 2019 using the

optional transition method that allows for a cumulative-effect adjustment in the period of adoption and will not restate prior

It has have also elected to adopt the package of practical expedients permitted in Accounting Standards Codification Topic

842, or ASC 842.

Accordingly, it is continuing to account for its existing operating lease as an operating lease under the new

guidance, without reassessing whether the contract contains a lease under ASC 842 or whether classification of the operating leases

would be different under ASC Topic 842, and to treat lease and non-lease components as a single lease component.

The Company has

also elected the short-term lease accounting policy under which the Company would not recognize a lease liability or ROU asset

for any lease that at the commencement date has a lease term of twelve months or less and does not include a purchase option that

the Company is more than reasonably certain to exercise.

Also, the Company elected the expedient allowing an entity to use hindsight

to determine the lease term and impairment of ROU assets and the expedient to allow the Company to not have to separate lease and

non-lease components.

The Company’s sole lease at the adoption date was an operating lease for facilities and did not include

any non-lease components.

As a result of

the adoption of ASU 2016-02, on January 1, 2019, the Company recognized (a) a lease liability of approximately $0.2 million,

which represents the present value of its remaining lease payments using an estimated incremental borrowing rate of 8%, (b) a

right-of-use asset of approximately $0.2 million that was expensed as operating lease expense over the term of the lease

which ended on September 30, 2019.

Due to the adoption of the standard using the modified retrospective cumulative-effect

adjustment method, there are no changes to previously reported results prior to January 1, 2019.

Lease expense did not change

materially as a result of the adoption of ASU 2016-02.

In June 2018, the FASB

issued ASU No.

2018-07, Compensation - Stock Compensation (Topic 718):

Improvements to Nonemployee Share-Based Payment Accounting

(“ASU 2018-07”).

ASU 2018- 07 aims to simplify the accounting for share-based payments to nonemployees by aligning

it to the accounting for share based payments to employees including determining the fair value of the award on the date of grant

and recognizing the stock-based compensation expense as of the respective vesting date.

The new standard also requires companies

to elect to either measure the awards to nonemployees over an estimated expected term or contractual term as well as elect to estimate

forfeitures or account for forfeitures as incurred.

ASU 2018-07 is effective for fiscal years and interim periods within those

fiscal years beginning after December 15, 2018.

The guidance was effective for the Company on January 1, 2019.

adopted ASU 2018-07 during the quarter ended March 31, 2019.

The adoption did not have an impact on the consolidated financial

statements as all outstanding non-employee share-based awards had vested prior to March 31, 2018.

Cash and Cash Equivalents

The Company considers

all highly liquid investments with maturities of 90 days or less from the purchase date to be cash equivalents.

Note 3 for the full discussion regarding the Merger, Exchange Ratio and recapitalization.

Liquidity, Capital Resources

and Management Plans

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

cash equivalents was $168,598 and $564, respectively.

The Company has not generated revenues since its inception and has incurred

net losses of $33,978 and $7,830 for the years ended December 31, 2020 and 2019, respectively.

As of December 31, 2020, the Company

had working capital of $166,520 and stockholder’s equity of $199,243.

During the year ended December 31, 2020, cash flows

used in operating activities were $23,407, consisting primarily of a net loss of $33,978, which includes non-cash stock-based compensation

charges of $9,746.

Since inception, the Company has met its liquidity requirements principally through the sale of its Common Stock

and Series 1 Convertible Preferred Stock.

In connection with the Merger, the Company consummated the Private

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

On September 22, 2020, the Company entered into underwriting

agreements with Cowen and Company, LLC and Guggenheim Securities, LLC, as representatives of several underwriters for separate,

concurrent underwritten public offerings of the Company’s Common Stock and Series 1 Convertible Preferred Stock.

24, 2020, gross and net proceeds from this offering were $147.6 million and $139.9 million, respectively.

On October 6, 2020, the

underwriters exercised their overallotment option, resulting in the receipt of gross and net proceeds of $11.6 million and $11.1

million, respectively (See Note 8).

Protara Therapeutics, Inc.

and Consolidated

Notes to Consolidated Financial Statements

(amounts in thousands, except share and per share data)

NOTE 1 –

BUSINESS, LIQUIDITY AND CAPITAL RESOURCES

Liquidity, Capital Resources

and Management Plans (Continued)

The Company is in the business of developing biopharmaceuticals

and has no current or near term revenues.

The Company has incurred substantial clinical and other costs in its drug development

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

The Company believes that its current financial resources are

sufficient to satisfy the Company’s estimated liquidity needs for at least twelve months from the date of issuance of these

consolidated financial statements.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying financial statements have been prepared

in accordance with accounting principles generally accepted in the United States of America (“U.S.

GAAP”) and pursuant

to the rules and regulations of the Securities and Exchange Commission (“SEC”).

Principles of Consolidation

The 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

consolidated financial statements.

Use of Estimates

The 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 and evaluation for impairment of goodwill, 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.

Cash and cash equivalents

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

Short-Term Investments

The Company classifies

its investments as available-for-sale and records such assets at estimated fair value in the consolidated balance sheets, with

unrealized gains and losses, if any, reported as a component of other comprehensive income (loss) within the consolidated statements

of operations and comprehensive loss and as a separate component of stockholders' equity (deficit).

The Company invests its excess

cash balances primarily in government debt securities and money market funds with strong credit ratings and maturities of less

than one year.

There have been no realized gains and losses for the years ended December 31, 2019 and 2018.

At each balance sheet

date, the Company assesses available-for-sale securities in an unrealized loss position to determine whether the unrealized loss

is other-than-temporary.

The Company considers factors including:

the significance of the decline in value compared to the cost

basis, underlying factors contributing to a decline in the prices of securities in a single asset class, the length of time the

market value of the security has been less than its cost basis, the security's relative performance versus its peers, sector or

asset class, expected market volatility and the market and economy in general.

When the Company determines that a decline in the

fair value below its cost basis is other-than-temporary, the Company recognizes an impairment loss in the year in which the other-than-temporary

decline occurred.

There have been no other-than-temporary declines in value of short-term investments for the years ended December

31, 2019 and 2018, as it is more likely than not the Company will hold the securities until maturity or a recovery of the cost

Concentrations of Credit Risk and

Off-Balance Sheet Risk

Financial instruments

that potentially subject the Company to concentrations of credit risk are primarily cash, cash equivalents and short-term investments.

The Company's cash and cash equivalents are held in accounts with financial institutions that management believes are creditworthy.

The Company's investment policy includes guidelines on the quality of the institutions and financial instruments and defines allowable

investments that the Company believes minimizes the exposure to concentration of credit risk.

These amounts at times may exceed

federally insured limits.

The Company has not experienced any credit losses in such accounts and does not believe it is exposed

to any significant credit risk on these funds.

The Company has no financial instruments with off-balance sheet risk of loss.

Property and Equipment

The Company considers all highly liquid instruments with an

original maturity of three months or less when acquired to be cash equivalents.

Cash and cash equivalents are held in depository

and money market accounts and are reported at fair value.

Restricted Cash

Restricted cash as of December 31, 2020 and 2019 was $795 and

$0, respectively.

As of December 31, 2020, restricted cash consists of cash deposits of $795 to collateralize letter of credit

Protara Therapeutics, Inc.

and Consolidated

Notes to Consolidated Financial Statements

(amounts in thousands, except share and per share data)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Property and Equipment

is stated at cost, less accumulated depreciation.

Maintenance and repairs that do not improve or extend the lives of the respective

assets are expensed to operations as incurred.

When capitalizing assets for research and development purposes the Company evaluates

whether an alternative future use of the asset exists;

if not, such assets are expensed as research and development.

Upon disposal,

the related cost and accumulated depreciation is removed from the accounts and any resulting gain or loss is included in the results

of operations.

Depreciation is recorded using the straight-line method over the estimated useful lives of the respective assets,

which are as follows:

Estimated Useful Life (in years)

Computer equipment and software

Furniture, fixtures and other

Laboratory equipment

Property and equipment is recorded at cost.

Major property additions,

replacements, and betterments are capitalized, while maintenance and repairs that do not extend the useful lives of an asset or

add new functionality are expensed as incurred.

Property and equipment not placed into service is not depreciated until such time

that it is placed into service.

Depreciation is recorded using the straight-line method over the respective estimated useful lives

of the Company’s assets.

Goodwill represents the excess of purchase price over the fair

value of identifiable net assets acquired in a business combination.

Goodwill and other intangible assets acquired in a business

combination and determined to have an indefinite useful life are not amortized, but instead tested for impairment at least annually.

An entity has the option to first assess qualitative factors to determine whether events or circumstances lead to a conclusion

that is more likely than not that the fair value of a reporting unit is greater than its carrying amount.

If an entity determines

that qualitative factors indicate that it is more likely than not that the fair value of the entity exceeds the carrying amount,

the quantitative evaluation is not necessary.

Under the quantitative impairment test, the evaluation of impairment involves comparing

the current fair value of each reporting unit to its carrying value, including goodwill.

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.

On 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.

On December 31, 2020, in connection with the finalization of the purchase price allocation, the Company

recorded an adjustment of $150 to goodwill related to prepaid expenses and accrued expenses (See Note 3).

Protara Therapeutics, Inc.

and Consolidated

Notes to Consolidated Financial Statements

(amounts in thousands, except share and per share data)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Net Loss per Common Share

Basic loss per common share is computed by dividing net loss

by the weighted average number of common shares outstanding during the period.

Diluted loss per common share is computed by dividing

net loss by the weighted average number of common shares outstanding, plus the impact of common shares, if dilutive, resulting

from the exercise of outstanding stock options.

The following securities are excluded from the calculation of

weighted average dilutive common shares because their inclusion would have been anti-dilutive:

For the Years Ended

Stock options

Restricted stock units

Conversion of Series 1 Convertible Preferred Stock

Total potentially dilutive shares

Concentrations of Credit Risk

Financial instruments which potentially subject the Company

to concentrations of credit risk consists principally of cash amounts on deposit with financial institutions.

At times, the Company’s

cash in banks is in excess of the Federal Deposit Insurance Corporation insurance limit.

The Company has not experienced any loss

as a result of these deposits.

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance

with the Financial Accounting Standards Board (“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 (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.

Protara Therapeutics, Inc.

and Consolidated

Notes to Consolidated Financial Statements

in thousands, except share and per share data)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Fair Value Measurements

The 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).

Fair value is defined as an exit price, representing the amount

that would be received upon the sale of an asset or payment to transfer a liability in an orderly transaction between market participants.

Fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing

an asset or liability.

A three-tier fair value hierarchy is used to prioritize the inputs in measuring fair value as follows:

Level 1 Quoted prices in active markets

for identical assets or liabilities.

Level 2 Quoted prices for similar assets or liabilities in active

markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are

observable, either directly or indirectly.

Level 3 Significant unobservable inputs

that cannot be corroborated by market data.

Deferred tax assets and liabilities are recognized for the estimated

future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities

and their respective tax basis, operating loss and tax credit carryforwards.

Deferred tax assets and liabilities are measured using

enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.

The measurement

of net deferred tax assets is reduced by the amount of any tax benefit that, based on available evidence, is not expected to be

realized, and a corresponding valuation allowance is established.

Tax benefits are recognized only for tax positions that are

more likely than not to be sustained upon examination by tax authorities.

The amount recognized is measured as the largest amount

of benefit that is greater than 50 percent likely to be realized upon settlement.

A liability for “unrecognized tax benefits”

is recorded for any tax benefits claimed in the Company’s tax returns that do not meet these recognition and measurement

As of December 31, 2020 and 2019, no liability for unrecognized tax benefits was required to be recorded.

also discusses the classification of related interest and penalties on income taxes.

The Company’s policy is to record interest

and penalties on uncertain tax positions as a component of income tax expense.

No interest or penalties were recorded during the

years ended December 31, 2020 and 2019.

Research and Development Costs

Research and development

costs are charged to expense as incurred in performing research and development activities.

The costs include employee compensation

costs, facilities and overhead, clinical study and related clinical manufacturing costs, regulatory and other related costs.

Nonrefundable

advanced payments for goods or services to be received in the future for use in research and development activities are deferred

and capitalized.

The capitalized amounts are expensed as the related goods are delivered or the services are performed.

Stock-Based Compensation Expense

The Company accounts

for its stock-based compensation awards to employees and directors in accordance with FASB ASC Topic 718, Compensation-Stock

Compensation (“ASC 718”).

ASC 718 requires all stock-based payments to employees, including grants of employee

stock options and restricted stock, to be recognized in the consolidated statements of operations and comprehensive loss based

on their grant date fair values.

Compensation expense related to awards to employees is recognized on a straight-line basis based

on the grant date fair value over the associated service period of the award, which is generally the vesting term.

payments issued to non-employees are recorded at their fair values and are periodically revalued as the equity instruments vest

and are recognized as expense over the related service period in accordance with the provisions of ASC 718 and are expensed using

an accelerated attribution model.

The Company estimates

the fair value of its stock options using the Black-Scholes option pricing model, which requires the input of subjective assumptions,

including (a) the expected stock price volatility, (b) the expected term of the award, (c) the risk-free interest

rate, (d) expected dividends and (e) the estimated fair value of its Common Stock on the measurement date.

lack of company specific historical and implied volatility data of its Common Stock, the Company has based its estimate of expected

volatility on the historical volatility of a group of similar companies that are publicly traded.

When selecting these public companies

on which it has based its expected stock price volatility, the Company selected companies with comparable characteristics to it,

including enterprise value, risk profiles, position within the industry and with historical share price information sufficient

to meet the expected term of the stock based awards.

The Company computes historical volatility data using the daily closing prices

for the selected companies' shares during the equivalent period of the calculated expected term of the stock-based awards.

2018 the Company began to estimate volatility by using a blend of our stock price history, for the length of time we have market

data for our stock and the historical volatility of similar public companies for the expected term of each grant.

The Company accounts

for forfeitures as they occur.

Due to the lack of Company specific historical option activity, the Company has estimated the expected

term of its employee stock options using the “simplified” method, whereby, the expected term equals the arithmetic

average of the vesting term and the original contractual term of the option.

The expected term for non-employee awards is the remaining

contractual term of the option.

The risk-free interest rates are based on the U.S.

Treasury securities with a maturity date commensurate

with the expected term of the associated award.

The Company has never paid and does not expect to pay dividends in the foreseeable

Refer to Note 2, “ Use of Estimates ,” for a discussion of the Company's estimated fair value of

its Common Stock.

Income taxes are

recorded in accordance with FASB ASC Topic 740, “Income Taxes”

(“ASC 740”), which provides for deferred

taxes using an asset and liability approach.

Under this method, deferred tax assets and liabilities are determined based on the

difference between the financial reporting and tax reporting basis of assets and liabilities and are measured using enacted tax

rates and laws that are expected to be in effect when the differences are expected to reverse.

Valuation allowances are provided

if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not

The Company has evaluated all available evidence and concluded that it is not more likely than not that the Company

will realize the benefit of its deferred tax assets, therefore, a valuation allowance has been established for the full amount

of the deferred tax assets.

The Company accounts

for uncertain tax positions in accordance with the provisions of ASC 740.

When uncertain tax positions exist, the Company recognizes

the tax benefit of tax positions to the extent that the benefit will more likely than not be realized.

The determination as to

whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as

consideration of the available facts and circumstances.

As of December 31, 2019 and 2018, the Company did not have any significant

uncertain tax positions.

The Company's practice is to recognize interest and/or penalties related to income tax matters in income

See Note 10 for further details.

Net Income (Loss) per Share Attributable

to Common Stockholders

Basic net income (loss)

per share is calculated by dividing net income (loss) attributable to common stockholders by the weighted-average number of common

shares outstanding during the period.

Diluted net income per share is calculated by dividing the net income attributable to common

stockholders by the weighted-average number of common equivalent shares outstanding for the period, including any dilutive effect

from outstanding stock options and warrants using the treasury stock method.

The Company follows

the two-class method when computing net income (loss) per share in periods when issued shares that meet the definition of participating

securities are outstanding.

The two-class method determines net income (loss) per share for each class of common and participating

securities according to dividends declared or accumulated and participation rights in undistributed earnings.

The two-class method

requires income available to common stockholders for the period to be allocated between common and participating securities based

upon their respective rights to receive dividends as if all income for the period had been distributed.

Accordingly, in periods

in which the Company reports a net loss attributable to common stockholders when participating securities are outstanding, losses

are not allocated to the participating securities.

For purposes of calculating diluted net income per share attributable to

common shareholders, preferred stock, stock options, warrants and convertible debt are considered common stock equivalents.

Comprehensive Loss

Comprehensive loss

consists of net income or loss and changes in equity during a period from transactions and other events and circumstances generated

from non-owner sources.

The Company's net loss equals comprehensive loss, net of any changes in the unrealized gains and losses

of the Company's short-term investments, held as available-for-sale, and foreign currency translation for all periods presented.

Research and development costs are expensed as incurred.

expenses include the costs of our proprietary research and development efforts, as well as costs incurred in connection with certain

licensing arrangements.

Before a compound receives regulatory approval, the Company records upfront and milestone payments made

to third parties under licensing arrangements as expense.

Upfront payments are recorded when incurred, and milestone payments are

recorded when the specific milestone or progress 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.

Research and development expenses were $11,982 and $3,878 for

the years ended December 31, 2020 and 2019, respectively.

Protara Therapeutics, Inc.

and Consolidated

Notes to Consolidated Financial Statements

in thousands, except share and per share data)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Business Combinations

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.

Deferred tax liabilities and assets are recognized for the deferred

tax consequences of differences between the tax bases and the recognized values of assets acquired and liabilities assumed in a

business combination in accordance with ASC Topic 740-10 “Income Taxes”.

See Note 3 for the Company’s accounting

for the reverse merger.

Recent Accounting Pronouncements Adopted

In January 2017, the FASB issued Accounting Standards Update

(“ASU”) 2017-04 (“ASU 2017-04”), Intangibles-Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill

ASU 2017-04 simplifies the subsequent measurement of goodwill by eliminating the second step of the goodwill impairment

The second step measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill

with the carrying amount of that goodwill.

Under ASU 2017-04, a company will record an impairment charge based on the excess of

a reporting unit’s carrying amount over its fair value.

ASU 2017-04 will be applied prospectively and is effective for annual

or interim goodwill impairment tests in fiscal years beginning after December 15, 2019.

On January 1, 2020, the Company adopted

The adoption of this standard did not have a material effect on the Company’s financial position, results of

operations, or cash flows.

In August 2018, the FASB issued ASU No.

2018-13, Fair Value

Measurement (Topic 820):

Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”),

which removes, adds and modifies certain disclosure requirements for fair value measurements in Topic 820.

The Company will no

longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy

as well as the valuation processes of Level 3 fair value measurements.

The Company will be required to provide additional disclosure

related to the changes in unrealized gains and losses included in other comprehensive loss for recurring Level 3 fair value measurements

and the range and weighted average of assumptions used to develop significant unobservable inputs for Level 3 fair value measurements.

On January 1, 2020, the Company adopted ASU 2018-13.

The adoption of this standard did not have a material effect on the Company’s

financial position, results of operations, or cash flows.

Subsequent Events

The Company evaluated subsequent events and transactions that occurred after the balance

sheet date up to March 19, 2020, the date that the financial statements were available to be issued.

Other than as described

in Notes 1, 9 and 13, the Company did not identify any subsequent events that would have required adjustment or disclosure in the

financial statements.

Fair Value Measurements

Below is a summary

of assets and liabilities measured at fair value (in thousands):

As of December 31, 2019

Quoted Prices

Cash equivalents

As of December 31, 2018

Quoted Prices

Cash equivalents

Government securities

As of December 31, 2019, and 2018, the

Company’s cash equivalents consist principally of money market funds and government debt securities with original maturities

of 90 days or less.

Government securities consist principally of government debt securities and money market funds which are classified

as available-for-sale.

Available-for-sale

securities at December 31, 2019 and 2018 consist of the following (in thousands):

Amortized Cost

Unrealized Gains

Unrealized Losses

December 31, 2019

Government securities

(Due within 1 year)

December 31, 2018

Government securities

(Due within 1 year)

Property and Equipment, net

The Company evaluated subsequent events and transactions that

occurred after the balance sheet date up to the date that the financial statements were available to be issued.

The Company did

not identify any subsequent events that would have required adjustment or disclosure in the financial statements.

Protara Therapeutics, Inc.

and Consolidated

Notes to Consolidated Financial Statements

(amounts in thousands, except share and

per share data)

NOTE 3 –

REVERSE MERGER WITH PROTARA AND RECAPITALIZATION

On January 9, 2020, in connection with, and prior to the completion

of the Merger, Protara Therapeutics, Inc.

effected the Protara Reverse Stock Split, which resulted in 557,631 pre-merger shares

of Protara Therapeutics, Inc.

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”), 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.

On account of the adjustment required pursuant to the Exchange Ratio, there were 2,627,533 shares of Private ArTara

common stock outstanding immediately prior to the Merger.

Protara Therapeutics, Inc.

assumed all of the outstanding and

unexercised stock options of Private ArTara, with such stock options representing the right to purchase 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 stock options.

As a result, 219,699 shares were assumed under Private ArTara’s 2017 Equity Incentive Plan.

No additional

awards will be made under the 2017 Equity Incentive Plan.

On January 1, 2020, Protara Therapeutics, Inc.

amended its Amended and

Restated 2014 Equity Incentive Plan (the “2014 Equity Incentive Plan”) to increase the number of shares of stock available

for issuance under the 2014 Equity Incentive Plan to 1,048,300 shares and made conforming changes and updates pursuant to Section

162(m) of the Code.

Concurrently with the execution of the Merger Agreement, certain

institutional investors (together, the “Investors”) entered into a subscription agreement (as amended on November 19,

2019, the “Subscription Agreement”) with Protara Therapeutics, Inc.

and Private ArTara, pursuant to which (A) Protara

Therapeutics, Inc.

issued in a private placement immediately after the Merger (the “Proteon Private Placement”) (i)

3,879.356 of shares of Protara Therapeutics, Inc.’s Series 1 Convertible Non-Voting Preferred Stock at a purchase price of

approximately $7,011.47 per share for gross proceeds of $27,200 and proceeds, net of issuance costs, of $25,319, (ii) 1,896,888

shares of Protara Therapeutics, Inc.’s Common Stock at a purchase price of approximately $7.01 per share for gross proceeds

of $13,300 and proceeds, net of issuance costs, of $12,413 and (B) Private ArTara issued 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 $2,000 and proceeds, net of issuance costs, of $1,867.

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 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 Proteon 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.

Protara Therapeutics, Inc.

and Consolidated

Notes to Consolidated Financial Statements

(amounts in thousands, except share and

per share data)

NOTE 3 –

REVERSE MERGER WITH PROTARA AND RECAPITALIZATION

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, 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.

During the year ended December 31, 2020, the Company recorded an adjustment

of $150 to goodwill.

This adjustment was comprised of a decrease of $78 in prepaid expenses and other current assets, and an increase

of $77 in accrued expenses, resulting in a final purchase price allocation as follows:

Restricted cash

Prepaid expenses and other current assets

Accrued expenses

Total purchase price consideration

The total fair value of the net assets of Protara Therapeutics

was determined by the Company to be $34,533 based on the consideration transferred.

The total consideration was based on the

enterprise value of Protara Therapeutics Inc.

as of January 9, 2020, based upon the number of common shares deemed outstanding,

multiplied by the closing stock price on January 9, 2020.

Of 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 Private ArTara’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

Protara Therapeutics, Inc.

and Consolidated

Notes to Consolidated Financial Statements

(amounts in thousands, except share and

per share data)

NOTE 3 –

REVERSE MERGER WITH PROTARA AND RECAPITALIZATION

The following presents the unaudited pro forma combined financial

information as if the reverse merger had occurred as of January 1, 2019.

For the Years Ended

Pro forma loss per common share, basic and diluted

Pro forma weighted average number of common shares outstanding, basic and diluted

The pro forma combined results of operations are not necessarily

indicative of the results of operations that actually would have occurred had the reverse merger been completed as of January 1,

2019, nor are they necessarily indicative of future consolidated results.

Protara Therapeutics, Inc.

and Consolidated

Notes to Consolidated Financial Statements

(amounts in thousands, except share and

per share data)

NOTE 4 –

PROPERTY AND EQUIPMENT

net consists of the following (in thousands):

equipment consists of the following:

As of December 31,

Computer equipment and software

Computer equipment

Furniture, fixtures and other

Laboratory equipment

Leasehold improvements

Over the shorter of the useful life or the lease term

Property and equipment not yet placed into service

Total property and equipment, gross

Accumulated depreciation

Property and equipment, net

Depreciation expense

for the years ended December 31, 2019 and 2018 was $0.3 million and $0.1 million, respectively.

During the three months ended March

31, 2019, the Company voluntarily discontinued substantially all research and development activities.

As a result, as of March

31, 2019 the Company performed an impairment assessment of the laboratory equipment used in development of vonapanitase by comparing

the equipment’s carrying value to its estimated fair value, which was determined based on the recoverability of the assets

remaining value as of March 31, 2019.

As of September 30, 2019, the Company performed an additional impairment assessment due to

the expiration of its lease agreement.

The fair value of the remaining assets including office furniture, computer hardware and

software licenses were determined be impaired as the Company determined there to be no future use for the assets.

The Company recorded

impairment charges of $0.2 million and fully wrote off all property and equipment during the year ended December 31, 2019.

Total property and equipment, net

Depreciation expense was $103 and $16 for the years ended December

31, 2020 and 2019, respectively.

During the year ended December 31, 2020, $99 and $4 was included in research and development expense

and general and administrative expense, respectively, within the consolidated statements of operations.

For the year ended December

31, 2019, $16 was included in research and development expense within the consolidated statements of operations.

NOTE 5 –

ACCRUED EXPENSES

Accrued expenses consist of the following

(in thousands):

Included in the Company’s

accrued expenses within the consolidated financial statements are:

As of December 31,

Payroll and employee-related costs

Contracted service costs

Professional fees and other

Employee bonus

Research and development costs

Other expenses

NOTE 6 –

SHORT-TERM DEBT

Financing Agreement

On February 19, 2020, the Company entered into a nine month

financing agreement with AFCO Credit Corporation for its directors and officers (“D&O”) liability insurance in the

amount of $2,225.

The Company made a down payment of $556, leaving a principal balance of $1,669.

The financing bore interest at

a rate of 4.25% per annum, and was repaid in monthly installments of $189, which included both principal and interest.

As of December

31, 2020, the balance under this debt was $0.

The Company recorded interest expense of $34 for the year ended December 31, 2020

under this financing agreement.

Protara Therapeutics, Inc.

and Consolidated

Notes to Consolidated Financial Statements

(amounts in thousands, except share and

per share data)

NOTE 7 –

COMMITMENTS AND CONTINGENCIES

Significant Contracts and Agreements

In February 2002,

the Company entered into an agreement to license certain intellectual property with Johns Hopkins University.

The agreement calls

for payments to be made by the Company upon the commencement of product sales, in the form of a royalty of 2.5% on net sales of

As of December 31, 2019 the Company has not commenced product sales and therefore has recognized no royalties on product

Lease Agreements

The Company has entered into operating leases for office and

laboratory space.

On January 1, 2019 (“Effective Date”), the Company adopted ASC Topic 842, Leases (“ASC 842”),

which increases transparency and comparability by recognizing a lessee’s rights and obligations resulting from leases.

842 requires the recognition of the right-of-use (“ROU”) assets and related operating lease liabilities on the balance

The Company adopted the new guidance using the modified retrospective approach on January 1, 2019.

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

result in the recognition of ROU assets as the Company did not have any leases at that time with a term of twelve months or more.

However, on January 9, 2020, subsequent to the Merger and Private Placements, it became reasonably certain that the Company would

maintain its quarter-to-quarter lease with its contract development and manufacturing organization for its manufacturing space

for an expected term of approximately eight years, therefore resulting in the recognition of an ROU asset and related operating

lease liability.

The Company elected the package of practical expedients permitted

within the standard, which allow an entity to forgo reassessing (i) whether a contract contains a lease, (ii) classification of

leases, and (iii) whether capitalized costs associated with a lease meet the definition of initial direct costs.

Also, the Company

elected the expedient to allow the Company to not have to separate lease and non-lease components.

The Company has also elected

the short-term lease accounting policy under which the Company would not recognize a lease liability or ROU asset for any lease

that at the commencement date has a lease term of twelve months or less and does not include a purchase option that the Company

is more than reasonably certain to exercise.

On July 1, 2020 and December 1, 2020, the Company entered into

additional quarter-to-quarter leases for additional contract development and manufacturing space for expected terms of approximately

seven years, therefore resulting in the recognition of additional ROU assets and related operating lease liabilities.

On December 1, 2020, the Company entered into a long-term lease

for office space for a term of seven years.

This lease was entered into with a related party of the Company, and its terms were

determined by management to be on an arms-length basis.

The lease will not commence until the second quarter of 2021 when the Company

is granted access to the premises.

Accordingly, as of December 31, 2020, the Company did not recognize an additional ROU asset

and related operating lease liability for this lease.

For contracts entered into on or after the Effective Date, at

the inception of a contract, the Company will assess whether the contract is, or contains, a lease.

The Company’s assessment is

(i) whether the contract involves the use of a distinct identified asset, (ii) whether the Company obtained the right

to substantially all the economic benefit from the use of the asset throughout the period, and (iii) whether the Company has the

right to direct the use of the asset.

Leases entered into prior to January 1, 2019, which were accounted for under ASC 840, Leases,

were not reassessed for classification.

Protara Therapeutics, Inc.

and Consolidated

Notes to Consolidated Financial Statements

(amounts in thousands, except share and

per share data)

NOTE 7 –

COMMITMENTS AND CONTINGENCIES (Continued)

Lease Agreements (Continued)

For operating leases, the lease liability is initially and subsequently

measured at the present value of the unpaid lease payments.

The Company generally uses its incremental borrowing rate as the discount

rate for leases, unless an interest rate is implicitly stated in the lease.

The present value of the lease payments is calculated

using the incremental borrowing rate for operating leases, which was determined using a rate of interest that the Company would

have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term.

The lease term for the

Company’s lease includes the noncancellable period of the lease plus any additional periods covered by either a Company option

to extend the lease that the Company is reasonably certain to exercise, or an option to extend the lease controlled by the lessor.

ROU assets, once recorded, are reviewed for impairment.

Lease expense for operating leases consists of the lease payments

plus any initial direct costs and is recognized on a straight-line basis over the lease term.

Balance sheet information related to our leases is presented

Operating leases:

The Company’s operating leases for

facilities and office equipment all expired or were terminated during the year ended December 31, 2019.

During the years ended

December 31, 2019 and 2018 the company recognized operating lease expense of $0.2 million and $0.3 million, respectively including

property taxes and routine maintenance expense, which approximated its cash payments for the period.

Restricted cash related to certificate

In November 2019 the Company took out a

certificate of deposit in the amount of $50,000 related to a letter of credit that the Company posted with World Customs Brokers

so that they could import materials from Lonza an international vendor into the US and cover future import fees that might be due.

At December 31, 2019 and 2018 the Company had $50,000 and zero which is included in current assets.

Restricted cash related to facilities

At December 31, 2019 and 2018, the Company had zero and $22,000,

respectively, in an outstanding letter of credit to be used as collateral for leased premises which is in non-current assets.

December 31, 2018 and 2017, the Company pledged an aggregate of $22,000, to the bank as collateral for the letter of credit, which

is included in other non-current assets.

From time to time, ArTara may be subject

to various legal proceedings and claims that arise in the ordinary course of its business activities.

Between 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.

1:19-cv-02143-UNA (D.

filed 11/15/19));

Proteon Therapeutics, Inc., et al.

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

Neil Lanteigne v.

Therapeutics, et al.

1:19-cv-12436 (D.

Mass., filed 12/03/19);

Stephen Wagner v.

Proteon Therapeutics, Inc., et

1:19-cv-02343 (D.

Del., filed 12/23/19).

The Plumley complaint is 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.

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, 2019, 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

dismissed his case.

On February 3, 2020, plaintiff in the Plumley action voluntarily dismissed his case.

On February 7,

2020, plaintiff in the Teow action voluntarily dismissed his case.

On February 10, 2020, plaintiff in the Wagner

action dismissed his case.

The Company believes that it is probable

that it will incur a loss related to these matters.

However, the Company is unable to reasonably estimate the loss,

and as such the Company has not recorded a loss contingency.

Series A Preferred Financing

On August 2, 2017, the Company issued and sold 22,000 shares of

the Company’s Series A Convertible Preferred Stock, par value of $0.001 per share (the “Series A Preferred”),

for a purchase price of $1,000 per share, or aggregate purchase price and gross proceeds of $22.0 million, all upon the terms and

conditions set forth in the Securities Purchase Agreement dated as of June 22, 2017.

The Company incurred $0.5 million of issuance

costs in connection with the transaction.

Each share of Series A Preferred is convertible into approximately 25 shares of the Company’s

Common Stock at a conversion price of $39.80 per share, in each case subject to adjustment for any stock splits, stock dividends

and similar events, provided that any conversion of Series A Preferred by a holder into shares of Common Stock is prohibited if,

as a result of such conversion, the holder, together with its affiliates and any other person or entity whose beneficial ownership

of the Company’s Common Stock would be aggregated with such holder’s for purposes of Section 13(d) of the Exchange

Act would beneficially own more than 9.985% of the total number of shares of Common Stock issued and outstanding after giving effect

to such conversion.

At December 31, 2019 and 2018, the Company had 22,000 shares of Series A Convertible Preferred Stock authorized.

The Company evaluated the Series A Preferred for liability or equity

classification in accordance with the provisions of ASC 480, Distinguishing Liabilities from Equity, and determined that equity

treatment was appropriate because the Series A Preferred did not meet the definition of the liability instruments defined thereunder

for convertible instruments.

Specifically, the Series A Preferred are not mandatorily redeemable and do not embody an obligation

to buy back the shares outside of the Company’s control in a manner that could require the transfer of assets.

Additionally,

the Company determined that the Series A Preferred would be recorded as permanent equity, not temporary equity, based on the guidance

of ASC 480 given that there is no scenario where the holders of equally and more subordinated equity of the entity would not be

entitled to also receive the same form of consideration upon the occurrence of the event that gives rise to the redemption.

the year ended December 31, 2019, 3,046 shares of the Series A convertible preferred stock were converted into 76,540 shares of

Common Stock.

The Company had issued and outstanding 18,954 and 22,000 share of Series A Convertible Preferred Stock with a par

value of $0.001 at December 31, 2019 and 2018, respectively.

On January 9, 2020, 18,954 shares of Series A Convertible Preferred

Stock were converted into 476,276 shares of Common Stock.

Holders of the Series

A Preferred Stock are entitled to receive dividends, if and when declared by the Board of Directors.

Liquidation Preference

Holders of the Series A

Preferred Stock have preference in the event of a liquidation or dissolution of the Company equal to $0.001 per share, plus any

declared dividends.

Thereafter, the Holders

of the shares of Series A Preferred Stock shall share ratably in any distributions and payments of any remaining assets of the

Company, on an as converted basis, with the holders of Common Stock.

Voting Rights

Except for matters

with specific voting rights as provided in the Series A Preferred Stock Purchase Agreement, the Holders of shares of Series A Preferred

Stock have no voting rights.

At December 31, 2019, the Company has 100,000,000 shares of Common

Stock authorized for issuance, $0.001 par value per share, of which 557,631 shares were issued and outstanding.

for Future Issuance

Company has the following shares of Common Stock reserved for future issuance:

As of December 31,

Conversion of Series A Preferred Stock

Stock-based compensation awards

Employee Stock Purchase Plan

Balance Sheet

January 9, 2020

Right-of-use assets

Operating lease liability, current

Operating lease liability, long-term

The following provides details of the Company’s lease

For the Year Ended

December 31, 2020

Operating lease cost

Short-term lease cost

Protara Therapeutics, Inc.

and Consolidated

Notes to Consolidated Financial Statements

(amounts in thousands, except share and

per share data)

NOTE 7 –

COMMITMENTS AND CONTINGENCIES (Continued)

Lease Agreements (Continued)

Other information related

to leases is presented below:

December 31, 2020

Other information

Weighted-average discount rate –

operating lease

Weighted-average remaining lease term –

operating lease (in months)

As of December 31, 2020, the expected annual minimum lease payments

of our operating lease liabilities and other short-term leases were as follows (includes long-term lease entered into on December

1, 2020 that does not commence until the second quarter of 2021):

For Years Ending December 31,

Operating lease

Total future minimum lease payments, undiscounted

Imputed interest for leases in excess of one year

Present value of future minimum lease payments

Present value of future minimum lease payments for our operating lease liabilities

Present value of future minimum lease payments, short-term leases

Employment Agreements

Executive Employment Agreements

The Company’s executive officers have entered into at-will

employment agreements.

Protara Therapeutics, Inc.

and Consolidated

Notes to Consolidated Financial Statements

(amounts in thousands, except share and

per share data)

NOTE 7 –

COMMITMENTS AND CONTINGENCIES (Continued)

Employment Agreements (Continued)

Temporary Employment Agreement

On December 6, 2018, the Company entered into a temporary employment

agreement (the “Temporary Employment Agreement”) with an individual who assisted with certain corporate development

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

In addition, the individual would be entitled to a performance-based success fee which would be adjusted based on amounts of funding

achieved and timing of when such funding was received.

On January 9, 2020, the Company’s capital raise triggered a performance-based

compensation obligation and accordingly this individual was paid $462, which was included in general and administrative expenses

within the Company’s consolidated statements of operations for the year ended December 31, 2020.

Collaborations and License Agreements

Choline License Agreement

On September 27, 2017, the Company entered into a license agreement

(the “Choline License Agreement”) with Alan L.

Buchman (“Dr.

Buchman”).

Pursuant to the Choline License

Agreement, the Company received from Dr.

Buchman the license rights in and to the “Licensed Orphan Designations”, the

“Licensed IND”, “Existing Study Data”

and the “Licensed Know-How”

for one or more of the licensed

In consideration for the rights and licenses granted, Dr.

Buchman received a payment of $50 on October 2, 2017, and

license payments of $50 and $50 on December 12, 2018 and January 8, 2019, respectively, upon the Company meeting the criteria for

certain meetings to be held with the Federal Drug Administration (the “FDA”).

Pursuant to the Choline License Agreement,

effective October 2017, the Company incurred a fixed obligation to Dr.

Buchman of $400 (the “Choline License Fee”).

Upon the Company receiving $5,000 in cumulative funding (as defined), Dr.

Buchman would be entitled to receive payment of the Choline

License Fee as a lump sum if the funds are received by April 15, 2019 and the Choline License Fee shall be increased to a one-time

payment of $600 if the funds are received by October 15, 2019.

On October 2, 2019, the Company made a payment of $50 to Dr.

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

Buchman was paid $550 which was

included in accrued expenses as of December 31, 2019.

During the years ended December 31, 2020 and 2019, the Company

recorded research and development expense of $0 and $200 (representing the increase in the Choline License Fee obligation), respectively,

for expenditures to Dr.

Buchman in connection with obligations under the Choline License Agreement.

Protara Therapeutics, Inc.

and Consolidated

Notes to Consolidated Financial Statements

(amounts in thousands, except share and

per share data)

NOTE 7 –

COMMITMENTS AND CONTINGENCIES (Continued)

Collaborations and License Agreements (Continued)

License Agreement

On December 22, 2017, the Company entered into an agreement

(the “Feinstein Agreement”) with The Feinstein Institute for Medical Research (the “Feinstein Institute”),

a not-for-profit corporation with 50 research labs and 2,500 clinical research studies.

Pursuant to the Feinstein Agreement, the

Company acquired an exclusive license relating to treatment of fatty liver diseases in humans for which Choline may be an effective

In consideration for the rights and license granted, the Feinstein Institute would receive a royalty of one percent

(1%) of the first one hundred million dollars ($100,000) of net sales of IV Choline Chloride and a royalty of one and one-half

percent (1.5%) of all net sales thereafter.

In addition, the Company would pay the Feinstein Institute twelve and one-half percent

(12.5%) of net proceeds resulting from agreements entered within 2 years from the effective date, and seven and one-half percent

(7.5%) of net proceeds resulting from agreements entered into thereafter.

Pursuant to the Feinstein Agreement additional payments

would be due to the Feinstein Institute for license maintenance payments and for meeting milestone events.

On January 9, 2020,

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

Pursuant to the Feinstein Agreement, upon the achievement of certain future new drug application milestones, the Company

would be obligated to remit an aggregate of $275.

During the years ended December 31, 2020 and 2019, the Company

recorded research and development expense of $115 and $1, respectively, in connection with the Feinstein Agreement.

Sponsored Research and License Agreement

On November 28, 2018, the Company entered into a sponsored research

and license agreement (the “Iowa Agreement”) with the University of Iowa.

Pursuant to the Iowa Agreement, the University

of Iowa, which is engaged in clinical research to improve the diagnosis and treatment of lymphangioma using a pharmaceutical product

(OK-432), would assist the Company in collecting case reports, forms, source data, and safety data available to the University

of Iowa in support of the development of the Company’s proprietary Streptococcus Pyogenes investigational product,

TARA-002 for the LMs indication.

During the term of the services, the Company would pay the University of Iowa thirty thousand

dollars ($30) per year to fund the project, plus additional amounts upon the realization of certain milestones.

More specifically,

upon forty-five (45) days of an approval of TARA-002 by the FDA, the Company would pay up to $1,750 to the University of Iowa for

meeting these milestones.

Furthermore, the Company would pay the University of Iowa royalties of up to 1.75% for net sales ranging

from $0 - $25,000, 2.25% for net sales ranging from $25,000 to $50,000, and 2.50% for net sales in excess of $50,000.

to the Iowa Agreement, the University of Iowa would be entitled to additional payments for the Company achieving annual net sales

of product according to the milestones.

For annual net sales of product up to $25,000;

for annual net sales of product of

up to $50,000;

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

During the years ended December 31, 2020 and 2019, the Company

recorded research and development expense of $30 and $30 respectively, in connection with the Iowa Agreement.

Protara Therapeutics, Inc.

and Consolidated

Notes to Consolidated Financial Statements

(amounts in thousands, except share and

per share data)

NOTE 7 –

COMMITMENTS AND CONTINGENCIES (Continued)

Collaborations and License Agreements

Chugai Agreement

On June 17, 2019, the Company entered into an agreement (the

“Chugai Pharmaceutical Agreement”) with Chugai Pharmaceutical Co., LTD (“Chugai”), a drug manufacturing

firm with offices and operations in Japan.

Pursuant to the Chugai Pharmaceutical Agreement, Chugai would help the Company in its

goals to develop and commercialize a therapeutic product (the “New Product”) which is comparable to the Chugai existing

therapeutic product (the “Existing Product”).

In addition, the Company would be entitled to the use of Chugai materials

and technical support as necessary.

On July 14, 2020, the Company and Chugai entered into an amendment (the “Chugai Amendment”)

to the Chugai Pharmaceutical Agreement.

The Chugai Amendment is effective as of June 30, 2020.

The Chugai Amendment extended the

date through which Chugai will exclusively provide the Existing Product and materials to the Company from June 30, 2020 to June

30, 2021, extended the date through which Chugai will not provide materials or technical support to any third party for the purpose

of development and commercialization in a given area from the fifth anniversary to the eleventh anniversary of the original effective

date and provides that, in addition to the designated fee provided upon the initial indication approval in the Chugai Pharmaceutical

Agreement, the Company will pay Chugai a designated fee for each additional indication approval.

The Company is obligated to Chugai

for certain payments upon the completion of agreed upon milestones.

As of December 31, 2019, the Company recorded an obligation

of $500 upon Chugai having completed an agreed upon milestone, which the Company paid on July 27, 2020.

During the years ended December 31, 2020 and 2019, the Company

recorded research and development expense of $0 and $500, respectively, respectively, in connection with the Chugai Agreement,

Johns Hopkins University

In February 2002, Proteon entered into an agreement to license

certain intellectual property in connection with vonapanitase with Johns Hopkins University.

The agreement calls for payments to

be made by the Company upon the commencement of vonapanitase related product sales, in the form of a royalty of 2.5% on net sales

of the product.

As of December 31, 2020, the Company has not commenced vonapanitase product sales and therefore has recognized

no royalties on product sales.

Protara Therapeutics, Inc.

and Consolidated

Notes to Consolidated Financial Statements

(amounts in thousands, except share and

per share data)

NOTE 7 –

COMMITMENTS AND CONTINGENCIES (Continued)

From time to time, Protara may be subject to various legal proceedings

and claims that arise in the ordinary course of its business activities.

Management is of the opinion that the ultimate outcome

of these matters would not have a material adverse impact on the financial position of the Company or the results of its operations.

In the normal course of business, the Company enters into contracts

in which it makes representations and warranties regarding the performance of its services and that its services will not infringe

on third party intellectual rights.

There have been no significant events related to such representations and warranties in which

the Company believes the outcome could result in losses or penalties in the future.

NOTE 8 –

STOCKHOLDERS’

Authorized Common Stock

As of December 31, 2020, the Company has 100,000,000 shares

of Common Stock authorized for issuance, $0.001 par value per share, of which 11,211,840 and 2,627,533 shares were issued and outstanding

as of December 31, 2020 and 2019, respectively.

The holders of the Company’s Common Stock are entitled

to one vote per share.

Authorized Series 1 Convertible Preferred

In connection with the Preferred Offering (defined below) on

September 22, 2020, the Company filed a Certificate of Amendment to the Certificate of Designation of Preferences, Rights and Limitations

of Series 1 Convertible Preferred Stock of the Company (the “Amendment”) with the State of Delaware to increase the

authorized number of shares of the Company’s Series 1 Convertible Preferred Stock that may be issued from 3,880 to 8,028.

The Amendment was approved by a committee of the Company’s Board of Directors and the requisite holders of outstanding shares

of Series 1 Convertible Preferred Stock.

No approval of the holders of the Company’s Common Stock was required to effectuate

the Amendment.

As of December 31, 2020 and 2019, the Company has 10,000,000

shares of preferred stock authorized for issuance, $0.001 par value per share of which 8,028 shares of Series 1 Convertible Preferred

Stock are authorized for issuance and 8,027 and 0 shares were issued and outstanding, respectively.

Protara Therapeutics, Inc.

and Consolidated

Notes to Consolidated Financial Statements

(amounts in thousands, except share and

per share data)

NOTE 8 –

STOCKHOLDERS’

EQUITY (Continued)

Description of Series 1 Convertible

Preferred Stock

Each share of Series 1 Convertible Preferred Stock is convertible

into 1,000 shares of Common Stock, at a conversion price initially equal to approximately $7.01 per common share, subject to adjustment

for any stock splits, stock dividends and similar events, at any time at the option of the holder, provided that any conversion

of Series 1 Convertible Preferred Stock by a holder into shares of Common Stock would be prohibited if, as a result of such conversion,

the holder, together with its affiliates and any other person or entity whose beneficial ownership of the Common Stock would be

aggregated with such holder’s for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended, would beneficially

own more than 9.99% of the total number of shares Common Stock issued and outstanding after giving effect to such conversion.

written notice to the Company, the holder may from time to time increase or decrease such limitation to any other percentage not

in excess of 19.99% specified in such notice.

Each share of Series 1 Convertible Preferred Stock is entitled to a preference of

$10.00 per share upon liquidation of the Company, and thereafter will share ratably in any distributions or payments on an as-converted

basis with the holders of Common Stock.

In addition, upon the occurrence of certain transactions that involve the merger or consolidation

of the Company, an exchange or tender offer, a sale of all or substantially all of the assets of the Company or a reclassification

of its Common Stock, each share of Series 1 Convertible Preferred Stock will be convertible into the kind and amount of securities,

cash and/or other property that the holder of a number of shares of Common Stock issuable upon conversion of one share of Series

1 Convertible Preferred Stock would receive in connection with such transaction.

The Company’s Series 1 Convertible Preferred

Stock are non-voting.

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.

On September 23, 2019, the Company completed a placement of

69,114 shares of its common stock at a price of $7.23 per share for gross proceeds of $500.

Protara Therapeutics, Inc.

and Consolidated

Notes to Consolidated Financial Statements

(amounts in thousands, except share and

per share data)

NOTE 8 –

STOCKHOLDERS’

EQUITY (Continued)

Underwritten Public Offering

On September 24, 2020, pursuant to an underwriting agreement

dated September 22, 2020, the Company issued and sold in an underwritten public offering (the “Common Offering”) an

aggregate of 4,600,000 shares of its Common Stock at an offering price of $16.87 per share, for gross and net proceeds of approximately

$77.6 million and $73.6 million, respectively.

The underwriters were granted an option to purchase up to 690,000 additional shares

of Common Stock at the public offering price, less the underwriting discount.

On October 6, 2020, the underwriters exercised their

overallotment option in full, purchasing an additional 690,000 shares, resulting in the receipt of gross and net proceeds of $11.6

million and $11.1 million, respectively.

On September 24, 2020, pursuant to an underwriting agreement

(dated September 22, 2020), the Company issued and sold in an underwritten public offering (the “Preferred Offering”)

an aggregate of 4,148 shares of its Series 1 Convertible Preferred Stock at an offering price of $16,873.54 per share, for gross

and net proceeds of approximately $70.0 million and $66.3 million, respectively.

The Common Offering and the Preferred Offering were made pursuant

to the Company’s registration statement on Form S-3, declared effective by the Securities and Exchange Commission on May

26, 2020 (Registration No.

In December 2020, the Company filed a shelf registration statement

on Form S-3, declared effective by the Securities and Exchange Commission on December 18, 2020 (Registration No.

333-251224) (the

“Shelf Registration Statement”).

The Shelf Registration Statement permits:

(i) the offering, issuance and sale by the

Company of up to a maximum aggregate offering price of $300 million of common stock, preferred stock, debt securities and warrants

in one or more offerings and in any combination.

No securities have been sold to date under the Shelf Registration Statement.

NOTE 9 –

STOCK-BASED COMPENSATION

August 21, 2014, the Company’s Board of Directors superseded the 2006 Equity Incentive Plan (the “2006 Plan”)

with the 2014 Equity Incentive Plan (the “2014 Plan”), and the 2014 Employee Stock Purchase Plan (the “2014 ESPP”).

On October 3, 2014, the stockholders approved these plans.

June 20, 2017, the Company’s Board of Directors amended the 2014 Plan (the “Amended 2014 Plan”).

2017, the stockholders approved this amendment.

Plans provide 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.

Under the 2006 Plan, no new stock compensation

awards will be granted subsequent to the completion of the Company’s IPO.

The Company initially reserved 17,600 shares of

Common Stock for issuance under the 2014 Plan.

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

2020 Inducement Plan

On March 26, 2020, the Compensation Committee of the Board of

Directors (the “Compensation Committee”) approved the ArTara Therapeutics, Inc.

Inducement Plan (the “2020 Inducement

Plan”) in order to award nonstatutory stock options, restricted stock awards, restricted stock unit awards and other stock-based

awards to persons not previously an employee or director of the Company, or following a bona fide period of non-employment, as

an inducement material to such persons entering into employment with the Company.

The 2020 Inducement Plan provides for a total of 600,000 shares

for the issuance of the Company’s Common Stock.

The Compensation Committee also adopted a form of stock option grant notice

and stock option agreement and forms of restricted stock unit grant notice and restricted stock unit agreement for use with the

Inducement Plan.

As of December 31, 2020, 460,650 shares remain available to

be issued under the 2020 Inducement Plan.

2017 Equity Incentive Plan

On August 10, 2017, Private ArTara, its Board of Directors and

its shareholders approved the ArTara Therapeutics, Inc.

2017 Equity Incentive Plan (the “2017 Equity Incentive Plan”)

to enable Private ArTara and its affiliates to recruit and retain highly qualified personnel and to incentivize personnel for productivity

The 2017 Equity Incentive Plan provided for the grant of a total

of 2,000,000 shares for the issuance of stock options, stock appreciation rights, restricted stock and restricted stock units to

among others, members of the Board of Directors, employees, consultants and service providers to the Company and its affiliates.

As of January 9, 2020, in connection with the Merger, no additional awards will be made under the 2017 Equity Incentive Plan.

Protara Therapeutics, Inc.

and Consolidated

Notes to Consolidated Financial Statements

(amounts in thousands, except share and

per share data)

NOTE 9 –

STOCK-BASED COMPENSATION (Continued)

2014 Equity Incentive Plan

On October 3, 2014, the stockholders approved

the 2014 Plan.

On June 20, 2017, the Company’s Board of Directors amended the 2014 Plan (the “Amended 2014 Plan”).

On July 31, 2017, the stockholders approved this amendment.

The 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.

2 unchanged sentences

issue that is convertible into or exchangeable for Common Stock, including, but not limited to, preferred stock or warrants.

to the evergreen provision, the number of shares available for issuance under the Amended 2014 Plan will increase by 900,003 shares

from 129,088 shares to 1,074,384 shares on January 1, 2020.

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

Options granted by the Company typically vest over three to four years.

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 December 31, 2020,

227,850 shares remain available to be issued under the Amended 2014 Plan.

On January 1, 2021, pursuant to the Amended 2014 Plan’s

annual evergreen feature, the number of shares authorized under the Amended 2014 Plan was increased by 812,889 shares to 1,861,189

Terms of the stock awards, including vesting requirements, are

determined by the Board of Directors, subject to the provisions of the plans.

Certain awards provide for accelerated vesting if

there is a change in control as defined in the plans.

Stock options outstanding under the 2006 Plan are exercisable from the date

of grant for a period of ten years.

Stock options granted under the Amended 2014 Plan are exercisable only upon vesting.

granted to date, the exercise price equaled the fair value of the Common Stock as determined by the Board of Directors on the date

compensation expense

stock-based compensation expense is recognized for stock options granted to employees and non-employees and has been reported in

the Company’s consolidated statements of operations as follows (in thousands):

Year Ended December 31,

Research and development

General and administrative

The Company estimates the fair value of

each employee stock award on the grant date using the Black-Scholes option-pricing model based on the following assumptions regarding

the fair value of the underlying Common Stock on each measurement date:

Year Ended December 31,

Weighted average expected volatility

Expected term (in years)

Risk free interest rate

Expected dividend yield

2014 Employee Stock Purchase Plan

On October 3, 2014, the stockholders approved the 2014 Employee

Stock Purchase Plan (the “2014 ESPP”).

The 2014 ESPP initially authorized the issuance of up to 3,513 shares of Common

The number of shares increases each January 1, commencing on January 1, 2015 and ending on (and including) January 1, 2024,

by an amount equal to the lesser of one percent of the outstanding shares as of the end of the immediately preceding fiscal year,

7,025 shares or any lower amount determined by the Company’s Board of Directors prior to each such January 1st.

As of December

31, 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 years ended December 31, 2020 and 2019, no shares were issued under the 2014 ESPP.

On January 1, 2021, pursuant to the

increase per the 2014 ESPP, the number of share authorized under the 2014 ESPP was increased by 7,025 shares to 25,037 shares.

Protara Therapeutics, Inc.

and Consolidated

Notes to Consolidated Financial Statements

(amounts in thousands, except share and

per share data)

NOTE 9 –

STOCK-BASED COMPENSATION (Continued)

Restricted Stock Units

Awards to Directors

The following restricted stock units (“RSUs”) were

granted pursuant to the Amended 2014 Plan.

Settlement for the RSUs is deferred until the earliest to occur of (i) the director’s

termination of service, (ii) death, (iii) disability or (iv) a change in control of the Company.

In the event of a change in control

of the Company, the RSUs will vest in full.

During the year ended December 31, 2020, the Board of Directors

granted an aggregate of 316,000 RSUs to directors of the Company.

Of these RSUs, 254,000 vest 12.5% on the date of grant and in

twenty-one equal monthly installments thereafter and the remaining 62,000 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 $9,480.

Awards to Others

During the year ended December 31, 2019, the Board of Directors

granted of 5,245 RSUs to a consultant.

The RSUs were granted under the Company’s 2017 Equity Incentive Plan.

The RSUs vested

in five equal installments of 1,049 units on the 15th and 30th of each month, beginning on October 30, 2019.

The grant date fair

value of this RSU was $36.

During the year December 31, 2020, Board of Directors granted

an aggregate of 163,325 RSUs to employees of the Company.

These RSUs will vest 25% on each of the first, second, third and fourth

year anniversaries of the date of grant.

The grant date fair value of these RSUs was $4,887.

Following is a summary of restricted stock unit activities for

the year ended December 31, 2020:

Restricted Stock Units

Average Grant

Date Fair Value

Non-vested 1/1/2020

Non-vested 12/31/2020

Protara Therapeutics, Inc.

and Consolidated

Notes to Consolidated Financial Statements

(amounts in thousands, except share and

per share data)

NOTE 9 –

STOCK-BASED COMPENSATION (Continued)

Restricted Stock Units (Continued)

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

As of December 31, 2020, the unamortized value of RSUs was $6,299.

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

period was 1.81 years.

As of December 31, 2020 and 2019, 132,709

and 5,245 RSUs, respectively, have vested that have not yet been settled into shares of the Company’s Common Stock.

During the year ended December 31, 2020, the Company issued

20,870 shares of Common Stock from the settlement of RSUs.

Restricted Stock Units Modification

On July 23, 2020, the Company agreed to accelerate the vesting

of 5,687 RSUs of a former executive.

The Company recorded a charge of $152 during the year ended December 31, 2020 to research

and development expense within the Company’s consolidated statements of operations in connection with the modification of

Stock Option Grants

Options to Directors

During the year ended December 31, 2019, the Board of Directors

granted options for the purchase of 47,114 shares of the Company’s common stock to members of the board of directors.

options were granted under the Company’s 2017 Equity Incentive Plan, had an exercise price of $9.18 per share and a term

These options vest ratably over approximately four years.

The options had a grant date fair value of $317.

During the year ended December 31, 2020, the Board of Directors

granted options for the purchase of 80,250 shares of the Company’s common stock to members of the board of directors.

options were granted under the Company’s 2014 Equity Incentive Plan, had an exercise price ranging from $26.70 to $35.00

per share and a term of 10 years.

These options vest ratably over approximately one year.

The options had a grant date fair value

Options to Employees

During the year ended December 31, 2019, the Board of Directors

granted options for the purchase of 50,549 shares of the Company’s common stock to employees of the Company.

These options

were granted under the Company’s 2017 Equity Incentive Plan, had an exercise price of $9.18 per share and a term of 10 years.

These options vest ratably over approximately four years.

The options had a grant date fair value of $322.

During the year ended December 31, 2020, the Board of Directors

granted options for the purchase of 484,850 shares of the Company’s common stock to employees of the Company.

These options

were granted under the Company’s 2014 Equity Incentive Plan, had an exercise price ranging from $17.84 to $51.12 per share

and a term of 10 years.

These options vest ratably over approximately four years.

The options had a grant date fair value of $10,867.

Protara Therapeutics, Inc.

and Consolidated

Notes to Consolidated Financial Statements

(amounts in thousands, except share and

per share data)

NOTE 9 –

STOCK-BASED COMPENSATION (Continued)

Stock Option Modifications

Effective July 20, 2020, a former director notified the Company

of his resignation from the Company’s Board of Directors.

In connection with his resignation, the Compensation Committee

approved the accelerated vesting of all stock options issued to him prior to the Merger, and to extend the post-termination exercise

period of vested options to 12 months from the date of resignation.

Due to the modification of his options, the Company recorded

the incremental value of $501 during the year ended December 31, 2020 to general and administrative expense within the Company’s

consolidated statements of operations.

Stock Options

The following table summarizes

stock option activity for employees and non-employees:

Outstanding at December 31, 2018

Outstanding at December 31, 2019

Exercisable at December 31, 2019

Vested or expected to vest at December 31, 2019 (1)

The Company determined the fair value of stock options granted

based upon the assumptions as provided below.

For the Years Ended

$ 17.84 - $ 51.12

(1) Represents the number of vested options at December 31,

2019 plus the number of unvested options expected to vest based on the unvested options outstanding at December 31, 2019.

During the year ended December 31, 2019, the Company granted stock options to purchase

an aggregate of 29,563 shares of its Common Stock with a weighted-average grant date fair value of $80.00.

During the year ended

December 31, 2018, the Company granted stock options to purchase an aggregate of 51,040 shares of its Common Stock with a weighted-average

grant date fair value of $104.32.

The total intrinsic

value of options exercised in the years ended December 31, 2019 and 2018 was $0 and $0 and respectively.

As of December 31, 2019,

and 2018 there was $0.0 million and $4.6 million, respectively of total unrecognized compensation cost related to employee non-vested

$ 6.81 - $ 8.65

Exercise price

$ 17.84 - $ 51.12

Dividend yield

Expected volatility

95.00% - 101.00%

Risk-free interest rate

0.28% - 1.69%

1.71% - 2.37%

Expected life (in years)

Following is a summary of stock option activities for the year

ended December 31, 2020:

Weighted Average Grant Date Fair Value

Weighted Average Exercise Price

Weighted Average Remaining Contractual Term (years)

Aggregate Intrinsic Value

Outstanding 1/1/2020

Outstanding 12/31/2020

Exercisable as of 12/31/2020

The weighted average grant date fair value of the options granted

during the year ended December 31, 2019 was $6.55 per share.

The fair value of stock options is amortized on a straight line basis

over the requisite service periods of the respective awards.

As of December 31, 2020, the unamortized value of stock options was

As of December 31, 2020, the weighted average remaining amortization period was 3.00 years.

Protara Therapeutics, Inc.

and Consolidated

Notes to Consolidated Financial Statements

(amounts in thousands, except share and

per share data)

NOTE 9 –

STOCK-BASED COMPENSATION (Continued)

Summary of Stock-Based Compensation

The following tables summarize total stock-based compensation

costs recognized:

For the Years Ended

Restricted stock

Stock options

Employee Stock Purchase Plan

The 2014 Employee

Stock Purchase Plan (“ESPP”) initially authorized the issuance of up to 3,513 shares of Common Stock.

The number of

shares increases each January 1, commencing on January 1, 2015 and ending on (and including) January 1, 2024, by an amount equal

to the lesser of one percent of the outstanding shares as of the end of the immediately preceding fiscal year, 281,000 shares or

any lower amount determined by the Company’s Board of Directors prior to each such January 1st.

As of December 31, 2019,

as a result of an increase on January 1, 2019 of one percent of the outstanding shares as of the end of the fiscal year ending

December 31, 2018, the 2014 ESPP authorized the issuance of up to 4,811 shares of Common Stock.

The tenth offering under the 2014

ESPP began on July 1, 2019 and ended on September 30, 2019.

During the years ended December 31, 2019 and 2018, no shares and 1,859

shares, respectively, were issued under the 2014 ESPP.

The Company incurred $0.1 million in stock-based compensation expense related

to the 2014 ESPP for the years ended December 31, 2019, 2018, and 2017.

On January 1, 2020, as a result of the increase of one

percent of the outstanding shares as of the end of the fiscal year ending December 31, 2019, the 2014 ESPP increased the authorized

shares available for issuance by 5,576 shares.

The components of

loss from operations before income taxes are as follows (in thousands):

Year Ended December 31,

Stock-based compensation expense was reflected within the statements

of operations as:

For the Years Ended

December 31, 2019 and 2018, the Company has not recorded a provision for federal or state income taxes as it has had net operating

losses since inception.

A reconciliation of

income taxes computed using the U.S.

federal statutory rate to that reflected in operations is as follows (in thousands):

Year Ended December 31,

Income tax benefit computed at federal statutory tax rate

Permanent differences

Write-off of deferred tax asset

Stock compensation - permanent items

State income taxes, net of federal benefit

Research and development

General and administrative

NOTE 10 –

Federal and State income tax expense is as follows:

For the Years Ended

Total current

Total deferred

Change in valuation allowance

Foreign rate differential

The significant components

of the Company's deferred tax assets are as follows (in thousands):

Year Ended December 31,

Total income tax expense (benefit)

Protara Therapeutics, Inc.

and Consolidated

Notes to Consolidated Financial Statements

(amounts in thousands, except share and

per share data)

NOTE 10 –

INCOME TAXES (Continued)

Deferred income taxes, if applicable, are provided for the differences

between the basis of assets and liabilities for financial reporting and income tax purposes.

The tax effects of temporary differences that give rise to significant

portions of the deferred tax assets are as follows:

Deferred tax assets:

Net operating loss carryforwards

Federal and state tax credits

Accrued expenses

Stock-based compensation

Net operating loss carry forwards

Organization costs/legal fees

Stock option expense

Research and development credits

Operating lease liability

Restricted stock expense

Charitable contributions

Total deferred tax assets

Valuation allowance

Net deferred assets

Management of the

Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets.

Company's history of operating losses, management of the Company has concluded that it is more likely than not that the benefit

of its deferred tax assets will not be realized.

Accordingly, the Company has provided a full valuation allowance for deferred

tax assets as of December 31, 2019 and 2018.

Net operating loss

and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service (the "IRS")

and may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant

shareholders over a three-year period in excess of 50% as defined under Sections 382 and 383 in the Internal Revenue Code.

could substantially limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities.

The amount of the annual limitation is determined based on the Company's value immediately prior to the ownership change.

ownership changes may further affect the limitation in future years.

The Company expects that there will be an ownership change

in excess of 50% in connection with the consummation of the Merger on January 9, 2020.

This will substantially limit the amount

of tax attributes that can be utilized annually to offset future taxable income or tax liabilities, the amount of which has not

yet been determined.

As a result of current

year activity, the valuation allowance increased by approximately $2.4 million during the year ended December 31, 2019.

due primarily to the generation of net operating losses.

In the year ended December 31, 2018, the valuation allowance increased

by approximately $5.4 million.

This was due primarily to the addition of Orphan Drug Tax credits and the generation of net operating

Subject to the limitations

described below, as of December 31, 2019 and 2018 the Company has net operating loss carryforwards of approximately $41.7 million

and $25.7 million, respectively, to offset future federal taxable income.

The pre-2018 federal net operating loss carryforwards

expire at various dates through 2037.

Federal net operating loss carryforwards generated in 2018 and forward will have an unlimited

carryforward period as part of the Tax Cuts and Jobs Act.

The indefinite lived net operating loss carryforwards as of December

31, 2019 are approximately $30.6 million.

As of December 31, 2019 and 2018, the Company has state net operating loss carryforwards

of approximately $37.2 million and $21.5 million, respectively, to offset future state taxable income, which will expire at various

dates through 2039.

As of December 31, 2019 and 2018, the Company has tax credit carryforwards of approximately $3.6 million and

$3.1 million, respectively, to offset future federal and state income taxes, which will expire at various dates through 2039.

The Company had no

unrecognized tax benefits or related interest and penalties accrued during the years ended December 31, 2019 and 2018.

will recognize interest and penalties related to uncertain tax positions in income tax expense.

The Company is subject

federal income tax and primarily Massachusetts state income tax.

The statute of limitations for assessment by the IRS and

state tax authorities is open for tax years ending December 31, 2016 through 2019, although carryforward attributes that were generated

prior to tax year 2016 may still be adjusted upon examination by the IRS or state tax authorities if they either have been or will

be used in a future period.

Currently, no federal or state income tax returns are under examination by the respective taxing authorities.

Net Loss per Share Attributable to Common Stockholders

As described in Note

2, Summary of Significant Accounting Policies, the Company computes basic and diluted loss per share using a methodology that

gives effect to the impact of outstanding participating securities (the “two-class method”).

As the years ended December

31, 2019 and 2018 resulted in net losses, there is no income allocation required under the two-class method or dilution attributed

to weighted-average shares outstanding in the calculation of diluted loss per share.

The following Common

Stock equivalents, presented on an as converted basis, were excluded from the calculation of net loss per share for the periods

presented, due to their anti-dilutive effect:

Year Ended December 31,

Outstanding stock options

Convertible preferred stock

Restructuring Charges

In April 2019, the Board of Directors approved a plan (“2019

Restructuring Program”) to reduce operating expenses as the Company evaluates its strategic alternatives following the release

of top-line data from the PATENCY-2 clinical trial of vonapanitase on March 28, 2019.

The restructuring initiatives are company-wide.

The remainder of the charges were incurred by the end of the fiscal year ended December 31, 2019 (“Fiscal Year 2019”)

and were paid during the year ended December 31, 2019.

Changes in the restructuring accrual during

the year ended December 31, 2019 are summarized below (in thousands):

December 31, 2018

Payment/Other

December 31, 2019

2019 Restructuring Program

Employee Severance

Subsequent Events

Per the discussion

in Note 1 “Organization and Basis of Presentation”, the Company and Private ArTara completed the Merger in accordance

with the terms of the Merger Agreement whereby Merger Sub merged with and into Private ArTara, with Private ArTara surviving as

a wholly owned subsidiary of the Company.

Deferred tax assets, net of valuation allowance

Deferred tax liabilities:

Operating right-of-use asset

Total deferred tax liabilities

Deferred tax assets, net of valuation allowance and deferred tax liabilities

A reconciliation of the provision for income taxes with the

amounts computed by applying the statutory Federal income tax to income before provision for income taxes is as follows:

For the Years Ended

federal statutory rate

State taxes, net of federal benefit

Option expense

True-up to prior years return

Change in valuation allowance

Effective tax rate

Protara Therapeutics, Inc.

and Consolidated

Notes to Consolidated Financial Statements

(amounts in thousands, except share and

per share data)

NOTE 10 –

INCOME TAXES (Continued)

As of December 31, 2020 for U.S.

federal and state income tax

reporting purposes, the Company has approximately $63.7 million of unused net operating losses (“NOLs”) available for

carry forward to future years.

The 2018 - 2020 federal NOLs may be carried forward indefinitely.

The Company does not have the

ability to carry any of these losses back.

The New York state and city NOLs may be carried forward through the year 2040 and may

be applied against future taxable income.

Because United States tax laws limit the time during which NOL carry forwards may be

applied against future taxable income, the Company may be unable to take full advantage of its NOLs for federal and state income

tax purposes when the Company does generate taxable income.

Further, the benefit from utilization of NOL carry forwards could be

subject to limitations due to material ownership changes that could occur as the Company continues to issue additional shares of

common stock pursuant to its capital raising plans.

Based on such limitations, the Company has significant NOLs for which realization

of tax benefits is uncertain.

On January 9, 2020, the Company completed the Merger.

In connection

with the Merger, the Company acquired NOL’s from Proteon of $41.6 million.

These NOLs were determined to be impaired by $12.4

million, with an annual limitation of $0.5 million on the remaining $29.2 million of NOLs.

The general business credits of $3.6

million acquired in the merger were determined to be fully impaired.

As a result of the Merger, the company performed a study to

review the application of IRC §382 to the Company.

It was determined there was an ownership change as of January 9, 2020 and

the Company’s NOLs generated prior to January 9, 2020 would be limited.

The annual limitation of the Company’s NOL’s

after application of the IRC §382 are $1.4 million.

The Company remains subject to examination by tax authorities

for tax years 2018 through 2020.

The Company has identified its federal tax return and its state tax return in New York state and

New York City as its “major”

tax jurisdictions.

Based on a history of cumulative losses at the Company and the

results of operations for the years ended December 31, 2020 and 2019, the Company determined that it is more likely than not that

it will not realize benefits from the net deferred tax assets.

The Company will not record income tax benefits in the financial

statements until it is determined that it is more likely than not that the Company will generate sufficient taxable income to realize

the deferred income tax assets.

As a result of the analysis, the Company determined that a full valuation allowance against the

deferred tax assets was required.

As of December 31, 2020 and 2019, the Company has recorded a valuation allowance of $21.7 million

and $4.2 million, respectively.

As of December 31, 2020 and 2019, management does not believe

that the Company has any material uncertain tax positions that would require it to measure and reflect the potential lack of sustainability

of a position on audit in its consolidated financial statements.

The Company will continue to evaluate its uncertain tax positions

in future periods to determine if measurement and recognition in its financial statements is necessary.

The Company does not believe

there will be any material changes in its unrecognized tax positions over the next year.

Protara Therapeutics, Inc.

and Consolidated

Notes to Consolidated Financial Statements

(amounts in thousands, except share and

per share data)

NOTE 11 –

EMPLOYEE BENEFIT PLAN

The 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 401(k) Plan was implemented in June of 2020.

year ended December 31, 2020, the Company recorded expense of $69 under the 401(k) Plan.

NOTE 12 –

The ultimate impact of the current COVID-19 pandemic or a similar

health epidemic is highly uncertain and subject to change.

The Company has experienced minimal delays, but may experience future

delays that impact its business, research and development activities, healthcare systems and the global economy as a whole.

the Company will continue to monitor the COVID-19 situation closely should the effects have a material impact on its operations,

liquidity and capital resources.

In response to public health directives and orders, the Company

has implemented work-from-home policies for its employees and temporarily modified its operations to comply with applicable social

distancing recommendations.

Similar health directives and orders are affecting third parties with whom the Company does business,

including the third parties that the Company has contracted with to conduct studies for TARA-002.

The effects of the orders and

the Company’s related adjustments in its business are likely to negatively impact productivity, disrupt the Company’s

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

other limitations on the Company’s ability to conduct its business in the ordinary course.

Severe and/or long-term disruptions in the Company’s operations

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

Specifically, the Company

anticipates that the stress of COVID-19 on healthcare systems around the globe will negatively impact its 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.

The Company also anticipates that the global impact of COVID-19 will negatively impact its 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 the Company’s ability to access capital, which could in the future negatively affect its liquidity.

A recession or market correction resulting from the spread of COVID-19 could materially affect the Company’s business and

the value of its Common Stock.

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-K

Item 9A. Controls and Procedures