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Item 9A. Controls and Procedures

2022-03-09 compared with 2021-03-11 · 1229 added, 1367 removed, 312 unchanged (89% 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

Controls and Procedures

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,

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

of December 31, 2021, 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.

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,

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

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.

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

above that, as of December 31, 2021, our disclosure controls and procedures were effective at the reasonable assurance level.

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

Annual Report on Internal Control Over Financial Reporting

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 of America.

As of December 31, 2021, 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, or COSO, in Internal Control-Integrated Framework (2017).

Based 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, 2021, our internal

control over financial reporting was effective based on those criteria.

in Internal Control Over Financial Reporting

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.

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

under the Exchange Act, 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.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

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 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

code of ethics for directors, officers (including our principal executive officer, principal financial officer and principal accounting

officer) and employees, known as the Code of Business Conduct and Ethics.

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 2022

Annual Meeting of Stockholders to be filed with the SEC on or before May 2, 2022 (our “ Proxy Statement ”) and

is incorporated in this report by reference.

have adopted a code of ethics for directors, officers (including our principal executive officer, principal financial officer and principal

accounting officer) and employees, known as the Code of Business Conduct and Ethics.

The Code of Business Conduct and Ethics is available

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

We will promptly

disclose on our website (i) the nature of any amendment to the policy that applies to our principal executive officer, principal

financial officer, principal accounting officer or controller, or persons performing similar functions and (ii) the nature of any

waiver, including an implicit waiver, from a provision of the policy that is granted to one of these specified individuals, the

name of such person who is granted the waiver and the date of the waiver.

Stockholders may request a free copy of the Code of Business

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

We will promptly disclose

on our website (i) the nature of any amendment to the policy that applies to our principal executive officer, principal financial officer,

principal accounting officer or controller, or persons performing similar functions and (ii) the nature of any waiver, including an implicit

waiver, from a provision of the policy that is granted to one of these specified individuals, the name of such person who is granted

the waiver and the date of the waiver.

Stockholders may request a free copy of the Code of Business Conduct and Ethics by emailing 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.

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 Matters.

The information required

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 ”

information required 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.

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.

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.

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.

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.

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.

Exhibits and Financial Statement Schedules.

(a) Documents filed

as part of this report.

The following financial

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

Consolidated Statements of Changes in Stockholders’

Equity (Deficit)

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

List of financial

statement schedules:

All schedules have

been omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.

List of Exhibits

required by Item 601 of Regulation S-K.

Documents filed as part of this report.

The following financial statements of Protara Therapeutics, Inc.

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

and Report of Ernst & Young LLP, Independent Register Public Accounting Firm, are included in this report:

of Independent Registered Public Accounting Firm (PCAOB ID:42)

Report of Independent Registered Public Accounting Firm (PCAOB ID:688)

Balance Sheets

Statements of Operations and Comprehensive Loss

Statements of Changes in Stockholders’ Equity

Statements of Cash Flows

to Consolidated Financial Statements

List of financial statement schedules:

schedules have been omitted because they are not applicable or the required information is shown in the financial statements or notes

List of Exhibits required by Item 601 of Regulation S-K.

See part (b) below.

(b) Exhibits.

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 unchanged sentence

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).

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).

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

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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)).

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).

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).

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).

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).

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;

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

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).

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).

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;

(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).

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).

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).

10.15&dagger;

(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).

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

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;

(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).

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).

10.19&dagger;&dagger;

(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).

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).

10.20&dagger;&dagger;

(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).

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).

10.21&dagger;&dagger;

(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).

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).

10.22&dagger;&dagger;

(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).

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).

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;

(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 10.1 to the Registrant’s Quarterly Report on Form 10-Q, filed with the SEC on July 31, 2020).

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

Consulting Agreement, dated as of October 16, 2021, by and between the Company and Martín Sebastian Olivo, M.D.

(incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on October 18, 2021).

Separation Agreement and Release, dated as of October 15, 2021, by and between the Company and Martín Sebastian Olivo, M.D.

(incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K, filed with the SEC on October 18, 2021.

List of Subsidiaries.

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

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.

Power of Attorney (Included in signature pages)

Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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

1 unchanged sentence

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

(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;

(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;

and (v) the notes

to the Consolidated Financial Statements.

and (v) the notes to the Consolidated Financial Statements.

Inline XBRL Instance Document.

Inline XBRL Taxonomy Extension Schema Document.

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

Inline XBRL Taxonomy Extension Definition Linkbase Document

Inline XBRL Taxonomy Extension Label Linkbase Document.

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

Cover Page Interactive Data File (embedded within the Inline XBRL document)

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.

&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.

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 is of the type the Registrant customarily and actually treats as private or confidential.

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.

Pursuant to the requirements

of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its

behalf by the undersigned thereunto duly authorized.

to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused this report to

be signed on its behalf by the undersigned, thereunto duly authorized.

Therapeutics, Inc.

1 unchanged sentence

Jesse Shefferman

President and Chief Executive Officer

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

Principal Executive Officer)

KNOW ALL PERSONS BY

THESE PRESENTS, that each individual whose signature appears below constitutes and appoints Stephen Davis, his true and lawful

attorney-in-fact and agent with full power of substitution, for him and in his or her name, place and stead, in any and all capacities,

to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto and all documents

in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power

and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully

to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact

and agent, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements

of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant

and in the capacities and on the dates indicated.

President and Chief

Executive Officer and Director

and Chief Executive Officer

behalf of the registrant and as the registrant’s

Executive Officer)

March 9, 2022

Financial Officer

behalf of the registrant and as the registrant’s

Financial and Accounting Officer)

ALL PERSONS BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints Jesse Shefferman and Blaine

Davis his or her true and lawful attorney-in-fact and agent with full power of substitution, for him or her and in his or her name, place

and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all

exhibits thereto and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact

and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the

premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said

attorney-in-fact and agent, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf

of the registrant and in the capacities and on the dates indicated.

JESSE SHEFFERMAN

and Chief Executive Officer and Director

(Principal Executive Officer)

Chief Financial Officer

March 11, 2021

(Principal Financial and Accounting Officer)

/s/ LUKE BESHAR

Chairman of the Board of Directors

March 11, 2021

FLANNELLY, PHARMD

March 11, 2021

Barry Flannelly, PharmD

GARCEAU, M.D.

March 11, 2021

Financial Officer

Financial and Accounting Officer)

of the Board of Directors

BARRY FLANNELLY, PHARM.D.

Flannelly, Pharm.D.

ROGER GARCEAU, M.D.

March 11, 2021

Garceau, M.D.

JANE HUANG, M.D.

RICHARD LEVY, M.D.

March 11, 2021

SOLOMON, PH.D.

March 11, 2021

Michael Solomon, Ph.D.

/s/ CYNTHIA SMITH

March 11, 2021

CYNTHIA SMITH

MICHAEL SOLOMON, PH.D.

Solomon, Ph.D.

Protara Therapeutics, Inc.

1 unchanged sentence

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

for the Years Ended December 31, 2021 and 2020 Page No.

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Report of Independent Registered Public Accounting Firm (PCAOB ID:688) F-3

Consolidated Balance Sheets as of December 31, 2021 and 2020 F-4

Consolidated Statements of Operations and Comprehensive Loss for the Years Ended December 31, 2021 and 2020 F-5

Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2021 and 2020 F-6

Consolidated Statements of Cash Flows for the Years Ended December 31, 2021 and 2020 F-7

Notes to Consolidated Financial Statements F-8

of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors

of Protara Therapeutics, Inc.

Opinion on the Financial Statements

We have audited the accompanying

consolidated balance sheet of Protara Therapeutics, Inc.

(the “Company”) as of December 31, 2021, the related consolidated

statements of operations and comprehensive loss, changes in stockholders’ equity and cash flows for the year ended December 31,

2021, 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, 2021, and the

results of its operations and its cash flows for the period ended December 31, 2021, in conformity with U.S.

generally accepted accounting

Basis for Opinion

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 audit.

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 audit

in accordance with the standards of the PCAOB.

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 audit 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 audit 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 statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management,

as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for

Critical Audit Matters

The critical audit matter communicated below is

a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the

audit committee and that:

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

challenging, subjective or complex judgments.

The communication of critical audit matter does not alter in any way our opinion on the

consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate

opinion on the critical audit matter or on the account or disclosure to which it relates.

Valuation of Goodwill

Description of the Matter

As of December 31, 2021, the Company’s goodwill

was $29.5 million.

As discussed in Note 2 to the consolidated financial statements, goodwill is assessed annually for impairment as of

December 31, or more frequently if an event occurs or circumstances change that would indicate that it is more likely than not that the

fair value of a reporting unit has declined below its carrying value.

Auditing the Company’s quantitative

impairment test for goodwill was especially complex and judgmental due to the significant estimation required in determining the fair

value of the reporting unit.

In particular, the fair value estimate was sensitive to the significant assumptions that require judgment

including the amount and timing of expected future cash flows and the related discount rate.

These assumptions are affected by such factors

as expected future market or economic conditions and clinical trial and regulatory events.

How We Addressed the Matter in Our Audit

To test the estimated fair value of the reporting unit, our audit procedures included, among others, assessing the valuation methodology, evaluating the significant assumptions used to develop the projected financial information, and testing the underlying data used by the Company in its analysis.

For example, we compared the projected financial information developed by management to current industry benchmarks and economic trends and evaluated the expected impacts of the Company’s ongoing operating strategies to develop its portfolio of therapies on the significant assumptions.

We performed sensitivity analyses of the significant assumptions to evaluate the change in the fair value of the reporting unit resulting from changes in the assumptions.

We also considered the relationship between the fair value of the reporting unit to the market capitalization of the Company.

In addition, we involved our internal valuation specialists to assist in evaluating the methodology and significant assumptions applied in developing the fair value estimate.

/s/ Ernst & Young LLP

We have served as the Company’s auditor

New York, New York

March 9, 2022

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 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.

We have audited the accompanying consolidated

balance sheet of Protara Therapeutics, Inc.

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

operations, stockholders’ equity and cash flows for the year 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 the results of its operations and its cash flows for the year 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 management.

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

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

of the Company’s management.

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

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 audit in accordance with the

standards of the PCAOB.

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.

1 unchanged sentence

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.

As part of our audit 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

Our audit 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

Our audits also included evaluating the accounting principles used and significant estimates made by management, as

well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis

for our opinion.

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

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating

the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

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

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

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

2 unchanged sentences

/s/ Marcum LLP

We have served as the Company’s auditor

New York, New York

We served as the Company’s auditor from 2019 to 2021.

March 11, 2021

Protara Therapeutics, Inc.

Consolidated Balance Sheets

(in thousands, except share and per share

As of December 31,

(in thousands, except share and per share data)

Current assets:

1 unchanged sentence

Restricted cash

Deferred offering costs

Marketable debt securities

Prepaid expenses and other current assets

Total current assets

Non-current assets:

Restricted cash, long-term

Restricted cash, non-current

Marketable debt securities, non-current

Property and equipment, net

Liabilities and Stockholders’

Operating lease right-of-use asset

Liabilities and Stockholders’ Equity

Current liabilities:

1 unchanged sentence

Accrued expenses

Operating lease liability, current

Operating lease liability

Total current liabilities

Non-current liabilities:

Operating lease liability, long-term

Operating lease liability, non-current

Total liabilities

Commitments and contingencies (Note 11)

Stockholders’

Equity (Deficit)

Stockholders’ Equity

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.

Series 1 convertible preferred stock, 8,028 shares authorized at December 31, 2021 and 2020, respectively 8,027 shares issued and outstanding as of December 31, 2021 and 2020, respectively.

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

2 unchanged sentences

Accumulated deficit

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

Accumulated other comprehensive income (loss)

Total stockholders’ equity

Total liabilities and stockholders’ equity

See accompanying notes to consolidated financial statements.

Protara Therapeutics, Inc.

Consolidated Statements of Operations

and Comprehensive Loss

(in thousands, except share and per

Years Ended December 31,

Operating expenses:

Research and development

General and administrative

Total operating expenses

Operating loss

Other income, net

Interest income, net

Total other income, net

Loss from operations

Other income (expense), net

Interest and investment income

Interest expense

Other income (expense), net

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

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.

Other comprehensive income (loss):

Net unrealized (loss) gain on marketable debt securities

Other comprehensive income (loss)

Comprehensive Loss

See accompanying notes to 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 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

Consolidated Statements of Changes

in Stockholders’ Equity

(in thousands, except share and per

Preferred Stock

Comprehensive

Stockholders’

Balance at December 31, 2019

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

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

Issuance of Common Stock

in public offering, net of offering costs

Issuance of Series 1 Convertible

Preferred in public offering, net of offering costs

Issuance of Common Stock

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

Settlement of restricted

Exercise of stock options

Stock-based compensation - restricted stock units

Stock-based compensation - stock options

Stock-based compensation

Balance at December 31,

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

Settlement of restricted

Stock-based compensation

Other comprehensive loss

Balance at December 31,

See accompanying notes to consolidated financial statements.

Protara Therapeutics, Inc.

1 unchanged sentence

(in thousands)

For the Years Ended

Years Ended December 31,

Cash flows from operating activities:

Adjustments to reconcile net loss to net cash used

in operating activities:

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

Stock based compensation

Amortization of operating lease right-of-use asset

Operating lease right-of-use asset

Amortization of premium on marketable debt securities

Changes in operating assets and liabilities:

2 unchanged sentences

Accrued expenses

Right-of-use liability

Operating lease liabilities

Net cash used in operating activities

1 unchanged sentence

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

Purchase of marketable debt securities

Proceeds from maturity and redemption of marketable debt securities

Purchase of property and equipment

Net cash provided by/(used in) investing activities

Net cash (used in)/provided by investing activities

Cash flows from financing activities:

7 unchanged sentences

Proceeds from the exercise of stock options

Proceeds from private placements

Net cash provided by financing activities

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

Repurchase of shares in connection with settlement of RSUs

Net cash (used in)/provided by financing activities

Net (decrease)/increase 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 and cash equivalents and restricted cash - end of period

Supplemental disclosure of cash flow information:

Cash paid for:

Non-cash investing and financing activities:

Deferred offering costs recorded in accrued expenses

Supplemental schedule of non-cash activities:

Deferred offering costs recognized that were previously recorded in accrued expenses

1 unchanged sentence

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)

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, 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.

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).

See accompanying notes to consolidated financial statements.

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)

(amounts in thousands, except share and per

Organization and Nature

of the Business

Protara Therapeutics, Inc., and its consolidated

subsidiaries (“Protara” or the “Company”), is a clinical-stage biopharmaceutical company 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”).

On January 9, 2020, privately-held ArTara Subsidiary,

(“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”).

Thereupon, Merger Sub

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

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,

On January 9, 2020, in connection with and prior

to the completion 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,

Inc” 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.

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.

See Note 3 for the full discussion regarding the Merger, Exchange

Ratio and recapitalization

Liquidity, Capital Resources and Management

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

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

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

The Company believes that its current financial

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

of these consolidated financial statements.

Impact of COVID-19

The ultimate impact of the current COVID-19 pandemic

is highly uncertain and subject to change.

The Company has experienced delays and may experience additional future delays that impact

the business, research and development activities, the healthcare systems in which the Company operates and the global economy as a whole.

Due to the continued evolution o f the COVID-19 pandemic and the global responses to curb

its spread, the Company is not able to estimate the ongoing effects on the Company’s results of operations, financial condition,

or liquidity.

The Company will continue to monitor the COVID-19 public health crisis closely including whether the effects would

have a material impact on the Company’s operations, liquidity and capital resources

Protara Therapeutics, Inc.

Notes to Consolidated Financial Statements

(amounts in thousands, except share and per

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”).

The accompanying consolidated financial

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

GAAP” or “GAAP”).

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

The Company considers all highly liquid instruments with an

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

The consolidated financial statements include

the accounts of the Company and its wholly owned subsidiaries.

All intercompany balances and transactions have been eliminated in the

accompanying consolidated financial statements.

The preparation of financial statements in conformity

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

and related disclosure of contingent assets and liabilities at the date of the consolidated financial statements.

Significant items subject

to such estimates include but are not limited to income taxes, the valuation of deferred tax assets, recoverability of goodwill, and contingencies.

an ongoing basis, the Company’s management evaluates its estimates based on historical and anticipated results, trends, and various

other assumptions believed to be reasonable .

results could differ from those estimates.

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

of the period in which the change becomes evident.

Reclassification

Certain amounts in prior periods related to the

classification of operating right-of-use assets have been reclassified to conform to current period presentation.

These reclassifications

to adjust prior period presentation had no impact on consolidated statements of operations and comprehensive loss or consolidated statements

of cash flows.

Business Combinations

The purchase price of the assets acquired and

the liabilities assumed are measured at their fair values and recognized at the acquisition date, including identifiable intangible assets

that either arise from a contractual or legal right or are separable from goodwill.

The excess purchase

price over the value of net tangible and identifiable intangible assets acquired is recorded as goodwill .

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.

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

Cash, Cash Equivalents and Restricted Cash

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

The Company’s restricted cash balances consist of cash deposits to collateralize

letter of credit obligations.

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

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).

(amounts in thousands, except share and per

The following table provides a reconciliation

of cash, cash equivalents, and restricted cash in the consolidated balance sheets to the total amount shown in the consolidated statements

of cash flows:

Cash and cash equivalents

Restricted cash

Restricted cash, non-current

Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows

Fair Value Measurements

Accounting Standards Codification (“ASC”)

Topic 820 “Fair Value Measurements” provides the framework for measuring fair value and establishes a fair value hierarchy

that prioritizes the inputs used in pricing the asset or liability.

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 the exchange price, or

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.

As a basis for considering market participant assumptions in fair value measurements, the three-tier

fair value hierarchy is used to prioritize the inputs in measuring fair value as follows:

Ø Level 1 Quoted prices in active markets for identical

assets or liabilities.

Ø 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.

Ø Level 3 Significant unobservable inputs that

cannot be corroborated by market data.

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.

Marketable Debt Securities

The Company classifies investments in marketable

debt securities with remaining maturities when purchased of greater than three months as available-for-sale.

Investments with a remaining

maturity date greater than one year are classified as non-current.

The cost of securities sold is based on the specific identification

Interest and dividends on securities classified as available-for-sale are included in investment income.

The Company records investments at fair value

with unrealized gains and losses recorded as a component of other comprehensive loss in the consolidated statements of operations and

comprehensive loss until realized.

Fair value is determined based on quoted market rates when observable

or utilizing data points that are observable, such as quoted prices, interest rates and yield curves.

To determine whether an other-than-temporary

impairment exists, the Company considers whether it has the ability and intent to hold the investment until a market price recovery, and

whether evidence indicating the recoverability of the cost of the investment outweighs evidence to the contrary.

The Company has the ability

to hold such securities with an unrealized loss until its forecasted recovery.

The Company determined that there was no material change

in the credit risk of these investments.

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

(amounts in thousands, except share and per

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.

Financial instruments that potentially subject

the Company to concentrations of credit risk include amounts held as cash, cash equivalents, restricted cash, and marketable debt securities.

The Company uses high quality, accredited financial institutions to maintain its balances, and accordingly, such funds are subject to

minimal credit risk.

The Company has not experienced any losses in such accounts and management believes that the Company is not exposed

to significant credit risk due to the financial position of the depository institutions in which those deposits are held.

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

Property and Equipment, net

Property and equipment, including leasehold improvements,

are recorded at cost less accumulated depreciation and amortization.

Depreciation is computed using the straight-line method over the

estimated useful life of the asset.

Depreciation begins at the time the asset is placed in service.

Leasehold improvements are amortized

using the straight-line method over the shorter of the lease term or estimated useful life of the asset.

Repairs and maintenance

costs are expensed as incurred, whereas major improvements are capitalized as additions to property and equipment.

The estimated useful lives for significant property

and equipment categories are as follows:

Asset Classification

Estimated Useful Life

Computer equipment

Furniture, fixtures and other

Laboratory equipment

Leasehold improvements

Shorter of the useful life of asset or the lease term

Impairment of Long-Lived Assets

Long-lived assets are reviewed for impairment

whenever events or changes in circumstances indicate that the carrying amount of the asset or asset group may not be recoverable or that

the useful life is shorter than originally estimated.

When such events occur, the Company compares the carrying amounts of the asset or

asset group to the undiscounted expected future cash flows.

If this comparison indicates that the asset or asset group is impaired, the

amount of impairment is measured as the difference between the carrying value and fair value of the asset or asset group.

If the useful

life is shorter than originally estimated, the Company will amortize the remaining carrying value over the new shorter useful life.

date, no such impairment loss has been recognized.

The Company enters into contracts in the normal

course of business and assesses whether any such contracts contain a lease.

The Company determines if an arrangement is a lease at inception

if it conveys the right to control the identified asset for a period of time in exchange for consideration.

Under ASC 842, lease expense

is recognized as a single lease cost on a straight-line basis over the lease term.

The lease term consists of non-cancelable periods and

may include options to extend or terminate the lease term, when it is reasonably certain such options will be exercised.

classified as operating leases are included in operating lease right-of-use (“ROU”) assets, current operating lease liabilities

and noncurrent operating lease liabilities in our consolidated balance sheet.

Finance leases are included in property and equipment and

finance lease obligations, in our consolidated balance sheet.

ROU assets represent the right to use an underlying asset for the lease

Lease liabilities represent the present value of future lease payments, net of lease incentives, discounted using an incremental

borrowing rate, which is a management estimate based on the information available at the commencement date of a lease arrangement.

assets and lease liabilities are recognized at the lease commencement date .

The Company has elected to account for the lease

and non-lease components for leases as a single component for classes of all underlying assets and allocate all the contract consideration

to the lease component only.

Lease cost for operating leases is recognized on a straight-line basis over the lease term and is included

in operating expenses on the statements of operations and comprehensive loss.

Variable lease payments are included in lease operating

The Company recognizes costs associated with lease

arrangements having an initial term of 12 months or less (“short-term leases”) on a straight-line basis over the lease term;

such short-term leases are not recorded on the balance sheet.

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

(amounts in thousands, except share and per

Segment Information

The Company identifies its operating segments

in accordance with Accounting Standards Codification (“ASC”) 280, Segment Reporting (“ASC 280”).

Operating segments

are defined as components of an enterprise about which separate discrete financial 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’s

chief operating decision maker, its Chief Executive Officer, manages the Company’s operations on a consolidated basis for the purposes

of allocating resources.

Accordingly, the Company has determined it operates and manages its business in a single reportable operating

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.

The carrying value of goodwill is $ 29.5 million at December 31, 2021 and 2020, respectively.

Goodwill represents the excess of purchase price

over the fair value of identifiable net assets acquired in a business combination.

Goodwill has an indefinite useful life.

assessed annually for impairment as of December 31, or more frequently if an event occurs or circumstances change that would indicate

that it is more likely than not that the fair value of a reporting unit or the fair value of an indefinite-lived intangible asset has

declined below its carrying value.

In performing its annual goodwill impairment assessment, the Company has the option under GAAP to qualitatively

assess whether it is more likely than not that the fair value of a reporting unit is less than its carrying value;

if the conclusion of

the qualitative assessment is that there are no indicators of impairment, the Company does not perform a quantitative assessment.

a quantitative assessment is performed and the fair value of the reporting unit is determined.

Goodwill is evaluated for impairment at the reporting

unit level, which is defined as an operating segment, or one level below an operating segment.

The Company has determined that it operates

as one reporting unit and has selected December 31 as the date to perform its annual impairment test.

As of December 31, 2021,

the Company elected to forego the qualitative screen and performed a quantitative annual goodwill impairment test for the reporting unit.

As of December 31, 2020, the Company elected to perform a qualitative impairment assessment of goodwill impairment and considered qualitative

indicators of the fair value of the reporting unit.

Based upon the results of our annual goodwill impairment test, no adjustments to the

carrying value of goodwill were necessary during the years ended December 31, 2021 and 2020.

Research and Development

Research and development expenses consist primarily

of third-party costs incurred to develop drug candidates, employee-related expenses, including salaries, benefits, travel and stock-based

compensation expense, depreciation and other allocated overhead costs, which include rent and maintenance of facilities and other supplies.

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.

Before a compound receives regulatory approval,

the Company records upfront and milestone payments made to third parties under licensing arrangements as expense provided that there is

no alternative future use of the rights in other research and development projects.

Nonrefundable advance payments to vendors for

goods or services that will be used or received in future research and development activities are deferred and recognized as expense in

the period in which the related goods are delivered or services are performed.

Where milestone payments are due to third parties under

research and development collaboration arrangements or other contractual agreements, the milestone payment obligations are expensed when

the milestone conditions are met and the amount of payment is reasonably estimable.

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

(amounts in thousands, except share and per

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.

Certain third-party costs are included as a component

of research and development expense.

These expenses include fees paid to contract research organizations (“CROs”) and other

clinical trial costs, contractual services costs and costs for supply of its drug candidates.

Depending upon the timing of payments to

the service providers, the Company recognizes prepaid expenses or accrued expenses related to these costs.

These accrued or prepaid expenses

are based on management’s estimates of the work performed under service agreements, milestones achieved and experience with similar

The Company monitors each of these factors and adjusts estimates accordingly.

All patent-related costs incurred in connection

with filing and prosecuting patent applications are expensed as incurred due to the uncertainty about the recovery of the expenditure.

Amounts incurred are classified as general and administrative expenses.

Investment Income

Investment income consists primarily of interest

income and accretion income earned and amortization expense incurred related to our marketable debt securities and interest

income related to cash, cash equivalents and restricted cash.

Stock-Based Compensation

The Company’s stock-based compensation programs

include stock options, restricted stock units (“RSUs”), and an employee stock purchase program (“ESPP”).

accounts for stock-based compensation using the fair value method.

The Company measures all stock options and other

stock-based awards granted to employees and directors based on the fair value on the date of the grant and recognizes compensation expense

of those awards over the requisite service period, which is generally the vesting period of the respective award.

The Company recognizes

forfeitures at the time forfeitures occur.

The fair value of each option is estimated on

the date of grant using the Black-Scholes option-pricing model.

Expected volatility for the Company’s common stock is determined

based on an average of the historical volatility of the Company and the historical volatility of a peer-group of similar public companies.

The expected term of options granted to employees is calculated using the simplified method, which represents the average of the contractual

term of the option and the weighted-average vesting period of the option.

The assumed dividend yield is based upon the Company’s

expectation of not paying dividends in the foreseeable future.

The risk-free interest rate is based upon the U.S.

Treasury yield curve

commensurate with the expected term at the time of grant or remeasurement.

The stock-based compensation expense associated

with purchase rights under the ESPP is measured at fair-value using a Black-Scholes option-pricing model at commencement of each offering

period and recognized over that offering period.

The Black-Scholes option pricing assumptions are similar to those used for stock options

with the exception of the expected term of purchase rights for the ESPP which is based on the duration of an offering period.

The fair values of RSUs are based on the fair

market value of the Company’s common stock on the date of the grant.

The RSUs are granted to directors pursuant to

the Company’s equity 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.

The fair value of all stock-based awards is recognized

as stock-based compensation expense on a straight-line basis over the vesting period, which is typically one to four years for RSUs and

four years for stock options.

The Company classifies stock-based compensation

expense in its statement of operations and comprehensive loss in the same way the payroll costs or service payments are classified for

the related stock-based award recipients.

Protara Therapeutics, Inc.

Notes to Consolidated Financial Statements

(amounts in thousands, except share and per

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.

In making such a determination, the Company considers all available

positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income,

tax-planning strategies, and results of recent operations.

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 standards.

The Company’s policy is to record interest and penalties on uncertain tax positions

as a component of income tax expense in the consolidated statement of operations and comprehensive loss.

Net Loss Per Share Attributable to

Common Stockholders

Basic net loss per share is computed by dividing

the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period.

Diluted net loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares

of common stock outstanding during the period plus the common equivalent shares for the period including any dilutive effect from unvested

restricted common stock, outstanding stock options and potential shares issuable under the ESPP.

Recently Adopted Accounting Pronouncements

2018, the Financial Accounting Standards Board, or the FASB, issued ASU No.

2018-15, Intangibles

– Goodwill and Other – Internal-Use Software (Subtopic 350-40):

Customer’s Accounting for Implementation

Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”).

designed to reduce complexity for accounting for costs of implementing a cloud computing service arrangement.

This standard aligns the

accounting for implementation costs of hosting arrangements, regardless of whether they convey a license to the hosted software.

became effective for the first interim period within annual reporting periods beginning after December 15, 2020.

1, 2021, the Company adopted ASU 2018-15.

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

position, results of operations, or cash flows.

In December 2019, the FASB issued ASU 2019-12,

Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes (“ASU 2019-12”).

The amendments in ASU 2019-12

remove certain exceptions to the general principles in Topic 740.

The amendments also clarify and amend existing guidance to improve consistent

The amendments became effective for annual reporting periods beginning after December 15, 2020.

On January 1, 2021, the Company

adopted ASU 2019-12.

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 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.

Recent Accounting Pronouncements Not

In June 2016, the FASB issued ASU 2016-13, Measurement

of Credit Losses on Financial Statements (“ASU 2016-13”).

The new standard requires that expected credit losses relating

to financial assets measured on an amortized cost basis and available-for-sale debt securities be recorded through an allowance for credit

It also limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying

value exceeds fair value and also requires the reversal of previously recognized credit losses if fair value increases.

In November 2019,

the FASB issued ASU 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases

Effective Dates (ASU 2019-10), which amended the effective date for certain companies.

The standard is effective for

public companies eligible to be smaller reporting companies for annual and interim periods beginning after December 15, 2022.

Early adoption

is available.

The Company is currently evaluating the potential impact ASU 2016-13, and related updates, will have on its consolidated

financial statements and disclosures.

Protara Therapeutics, Inc.

and Consolidated

Notes to Consolidated Financial Statements

(amounts in thousands, except share and

per share data)

NOTE 3 –

(amounts in thousands, except share and per

The Company has evaluated other recently issued

accounting pronouncements and has concluded that the impact of recently issued standards that are not yet effective will not have a material

impact on the Company’s financial position or results of operations upon adoption.

Subsequent Events

The Company evaluated subsequent events and transactions

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

Other than as described

in Note 13, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.

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.

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, Inc.

issued shares of its 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.

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

for a number of shares of Protara Therapeutics, Inc.’s 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.

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 Protara Therapeutics, Inc.’s 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,

amended its Amended and Restated 2014 Equity Incentive Plan (the “Amended 2014 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

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

Inc.’s 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.

(amounts in thousands, except share and per

Based on the terms of the Merger, the transaction

was treated as a reverse merger of Protara Therapeutics, Inc.

by Private ArTara.

The Merger was accounted for using acquisition accounting under ASC Topic

805 “Business Combinations”.

Under acquisition accounting, the assets and liabilities (including executory contracts,

commitments and other obligations) of Protara Therapeutics, Inc.

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:

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.

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

2 unchanged sentences

Total purchase price consideration

The total fair value of the net assets of Protara Therapeutics

The total fair value of the net assets of Protara

Therapeutics Inc.

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.

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

Of the amount of goodwill acquired in the reverse

merger, no portion is deductible for tax purposes.

The primary reasons for the reverse merger were

to increase 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, and all outstanding stock options thereunder.

The following presents the unaudited pro forma combined financial information

as if the reverse merger had occurred as of January 1, 2020.

For the Year 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,

The pro forma combined results of operations are

not necessarily indicative of the results of operations that would have occurred had the reverse merger been completed as of January 1,

2020, 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 –

(amounts in thousands, except share and per

Fair Value of Financial Instruments

The table below presents information about the

Company’s financial instruments that are measured at fair value on a recurring basis as of December 31, 2021 and indicates the fair

value hierarchy of the valuation techniques the Company utilized to determine such fair value, as described under Note 2, Summary of

Significant Accounting Policies.

At December 31, 2021, the Company has classified

financial instruments measured at fair value on a recurring basis as follows:

December 31, 2021

Cash Equivalents

Money market funds

Restricted cash, non-current

Money market funds

Marketable debt securities

Corporate bonds

Money market funds are classified as Level 1

within the fair value hierarchy, because they are valued using quoted prices in active markets.

Corporate debt securities classified as

Level 2 within the fair value hierarchy are valued on the basis of prices from an orderly transaction between market participants

provided by reputable dealers or pricing services.

Prices of these securities are obtained through independent, third-party pricing services

and include market quotations that may include both observable and unobservable inputs.

In determining the value of a particular investment,

pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrices

and market transactions in comparable investments and various relationships between investments.

There were no transfers of financial

instruments among Level 1, Level 2, and Level 3 during the period presented.

As of December 31, 2020, the Company did not have

any marketable debt securities or money market funds.

Cash equivalents, prepaid expenses and other current

assets, accounts payable and accrued expenses at December 31, 2021 and 2020 are carried at amounts that approximate fair value due to

their short-term maturities.

Marketable Debt Securities

Marketable debt securities, all of which were

classified as available-for-sale, consist of the following:

December 31, 2021

Corporate bonds - presented in marketable debt securities

Corporate bonds - presented in marketable debt securities, non-current

As of December 31, 2020, the Company did not have

any marketable debt securities.

The amount of realized gains and losses reclassified

into earnings have not been material to the Company’s consolidated statements of operations.

There were no sales of securities in

the periods presented.

Protara Therapeutics, Inc.

Notes to Consolidated Financial Statements

(amounts in thousands, except share and per

The contractual maturities

of all securities held at December 31, 2020 was 23 months or less.

Of the 40 securities in a loss position held by the Company, there

were no securities with an other-than-temporary impairment at December 31, 2021.

There were no securities in a continuous unrealized loss

position for greater than twelve months at December 31, 2021.

Investment Income

Investment income consists of the following:

Interest income

Accretion/(amortization) of discount/premium, net

Total interest and investment income

Prepaid Expenses and

Other Current Assets

Prepaid expenses and

other current assets consist of the following:

Prepaid insurance

Prepaid research and development

Prepaid software

Accrued interest on marketable debt securities

Other prepaid expenses

Other current assets

Property and Equipment,

equipment consists of the following:

As of December 31,

Property and equipment,

net consists of the following:

Computer equipment

2 unchanged sentences

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

Total property and equipment

Accumulated depreciation

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 –

Depreciation expense was $ 117 and $ 103 for the

years ended December 31, 2021 and 2020, respectively.

During the year ended December 31, 2021, $ 36 and $ 81 was included in research and

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

For 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 and comprehensive loss.

As of December 31, 2021 and 2020, 100 %

of the Company’s total property and equipment, net was attributable to the United States.

Protara Therapeutics, Inc.

Notes to Consolidated Financial Statements

(amounts in thousands, except share and per

Accrued Expenses

Included in the Company’s

accrued expenses within the consolidated financial statements are:

As of December 31,

Employee bonus

Accrued expenses consist

of the following:

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.

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.

2 unchanged sentences

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

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

31, 2021 and 2020, the balance under this debt was $ 0 .

The Company recorded interest expense of $ 0 and $ 34 for the year ended December

31, 2021 and 2020, respectively, under this financing agreement.

Operating leases

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

In December 2020, the Company entered into an

agreement to lease approximately 10.3 square feet of office space in New York, New York (“Office Lease”), which commenced

in April 2021.

The office space is owned by an affiliate of Deerfield Management Company, L.P., which together with its affiliates beneficially

owned more than 5% of the Company’s voting securities at the time the lease was executed.

Annual rent is approximately $1,117.

Office Lease has a term of approximately seven years and contains provisions for a free-rent period, annual rent increases and an allowance

for tenant improvements.

The Company has an option to extend the term by five years, however, the Company determined at the lease commencement

date that it was not reasonably certain to exercise the renewal option and such renewal was excluded from the operating lease right-of-use,

or ROU, asset and operating lease liability recorded for this lease.

The Company is responsible for real estate taxes,

maintenance and other operating expenses applicable to the leased premises which are recognized as variable lease expense in the period

when incurred.

In conjunction with the Office Lease, the Company established a letter of credit of approximately $ 745 secured by cash

balances included in restricted cash.

In June 2021, the Company amended the existing

agreement with its contract development and manufacturing organization, or CDMO, establishing a term of eight-years from the amendment

Prior to the amendment, the leased spaces met the short-term lease exception under a quarter-to quarter arrangement and were not

included in measurement of lease liabilities.

Leases classified as operating leases are included

in operating lease ROU assets, operating lease liabilities and operating lease liabilities, non-current, in the Company’s consolidated

balance sheets.

The Office Lease and the CDMO leased spaces are included in operating lease ROU assets and operating lease liabilities.

Cash paid for operating lease liabilities was $ 1,009 and $ 66 during the years ended December 31, 2021 and 2020, respectively, which is

included in operating cash flows.

The ROU asset obtained in exchange for operating lease liabilities related to the Office Lease was $ 6,549 .

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

(amounts in thousands, except share and per

The components of lease expense were as follows:

For the year ended

Lease expense

Operating lease expense

Short-term lease expense

Variable lease expense for the years ended December

31, 2021 and 2020 was not material.

average remaining lease term and the weighted average discount rate for operating leases were:

For the year ended

Weighted-average discount rate

Weighted-average remaining lease term – operating lease (in months)

The total remaining operating lease payments included in the measurement

of lease liabilities on the Company’s consolidated balance sheet as of December 31, 2021, was as follows:

For the year ending December 31:

Operating Lease Payments

Total gross operating lease payments

imputed interest

Total lease liabilities, reflecting present value of future minimum lease payments

Commitments and Contingencies

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.

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

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.

On September 27, 2017, the Company entered into

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

Buchman (“Dr.

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

Pursuant to the agreement there were no research

and development expenses recognized during the years ended December 31, 2021 and 2020.

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)

(amounts in thousands, except share and per

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”),

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.

Pursuant to the Feinstein Agreement, the Company

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

In consideration for the rights and license granted, the Feinstein Institute would receive a royalty of one percent (1%) of the first

one hundred million dollars ($100,000) of net sales of IV Choline Chloride and a royalty of one and one-half percent (1.5%) of all net

sales thereafter.

In addition, the Company would pay the Feinstein Institute twelve and one-half percent (12.5%) of net proceeds resulting

from agreements entered within 2 years from the effective date, and seven and one-half percent (7.5%) of net proceeds resulting from agreements

entered into thereafter.

Pursuant to the Feinstein Agreement additional payments would be due to the Feinstein Institute for license maintenance

payments and for meeting milestone events.

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, 2021 and 2020,

the Company recorded research and development expense of $ 15 and $ 115 , 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.

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 generally pay the University of Iowa thirty thousand dollars

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

More specifically, upon forty-five

(45) days of an approval of TARA-002 by the FDA, the Company would pay up to $1,750 to the University of Iowa for meeting these milestones.

Furthermore, the Company would pay the University of Iowa royalties of up to 1.75% for net sales ranging from $0 - $25,000, 2.25% for

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

Pursuant to the Iowa Agreement, the University

of Iowa, 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

of Iowa would be entitled to additional payments for the Company achieving annual net sales of product according to the milestones.

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, 2021 and 2020, the Company recorded

research and development expense of $ 0 and $ 30 respectively, in connection with the Iowa Agreement.

Chugai Agreement

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

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

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.

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.

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.

Pursuant to the agreement there were no research and development expenses

recognized during the years ended December 31, 2021 and 2020.

Protara Therapeutics, Inc.

and Consolidated

Notes to Consolidated Financial Statements

(amounts in thousands, except share and

per share data)

NOTE 8 –

STOCKHOLDERS’

EQUITY (Continued)

(amounts in thousands, except share and per

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.

Stockholders’ Equity

As of December 31, 2021, the Company had 100,000,000

shares of common stock authorized for issuance, $ 0.001 par value per share, of which 11,235,731 and 11,211,840 shares were issued and

outstanding as of December 31, 2021 and 2020, respectively.

The holders of the Company’s common stock

are entitled to one vote per share.

Preferred Stock

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 .

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, 2021 and 2020, the Company

had 10,000,000 shares of preferred stock authorized for issuance, $ 0.001 par value per share of which 8,028 shares of Series 1 Convertible

Preferred Stock are authorized for issuance and 8,027 shares were issued and outstanding, respectively.

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.

Each share of Series 1 Convertible Preferred Stock

is convertible into 1,000 shares of the Company’s 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 the Company’s 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 Company’s 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 of the Company’s common stock

issued and outstanding after giving effect to such conversion.

Upon 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.

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 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

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.

The Company’s Series 1 Convertible Preferred Stock are non-voting.

Protara Therapeutics, Inc.

and Consolidated

Notes to Consolidated Financial Statements

(amounts in thousands, except share and

per share data)

NOTE 8 –

STOCKHOLDERS’

EQUITY (Continued)

(amounts in thousands, except share and per

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

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

The underwriters were granted an option to purchase up to 690,000 additional shares of

the Company’s 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 –

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.

Stock-Based Compensation

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.

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, 2021, 420,500 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.

On August 10, 2017, Private ArTara, its Board

of Directors and its shareholders approved the ArTara Therapeutics, Inc.

2017 Equity Incentive Plan to enable Private ArTara and its affiliates

to recruit and retain highly qualified personnel and to incentivize personnel for productivity and growth.

The 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)

(amounts in thousands, except share and per

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”).

the 2014 Equity Incentive Plan.

On June 20, 2017, the Company’s Board of Directors amended the 2014 Equity Incentive Plan (the “Amended

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.

The Amended 2014 Plan clarifies that the number of shares for purposes of calculating

the evergreen feature includes the number of shares of Common Stock issuable upon conversion of any security that the Company may

issue that is convertible into or exchangeable for Common Stock, including, but not limited to, preferred stock or warrants.

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.

On January 1, 2020, Protara Therapeutics, Inc.

its Amended and Restated 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.

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 Amended 2014 Plan provides that the number of shares reserved and available for issuance

will automatically increase each January 1, by four percent of the Company’s common stock on the immediately preceding December

31, adjusted for the number of shares of the Company’s common stock issuable upon conversion of any security that the Company may

issue that is convertible into or exchangeable for the Company’s common stock, or such lesser number of shares as determined by

the Company’s Board of Directors.

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 shares.

As of December 31, 2021, 398,604

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.

On January 1, 2022, pursuant to the Amended 2014

Plan’s annual evergreen feature, the number of shares authorized under the Amended 2014 Plan was increased by 840,181 shares to

1,238,785 shares available to be issued.

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.

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.

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 the Company’s 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, 7,025 shares or any lower amount determined by the Company’s Board of Directors prior to each such January 1st.

January 1, 2021, pursuant to the increase per the 2014 ESPP, the number of shares authorized under the 2014 ESPP was increased by 7,025

shares to 25,037 shares.

As of December 31, 2021, the authorized number of shares under the 2014 ESPP is 25,037 and the number of shares

available for issuance is 20,365 .

During the years ended December 31, 2021 and 2020, 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:

On January 1, 2022, pursuant to the increase per

the 2014 ESPP, the number of shares authorized under the 2014 ESPP was increased by 7,025 shares to 32,062 shares.

Restricted Stock Units

The following table summarizes restricted stock unit activity:

Average Grant

3 unchanged sentences

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.

(amounts in thousands, except share and per

The fair value of RSUs is amortized on a straight-line

basis over the requisite service period of the respective awards.

As of December 31, 2021, the unamortized value of RSUs was $ 1,835 .

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.

of December 31, 2021, the weighted average remaining amortization period was 2.39 years.

As of December 31, 2021 and 2020, 286,918 and

132,709 RSUs, respectively, have vested that have not yet been settled into shares of the Company’s common stock.

During the year ended December 31, 2021, the Company issued 23,891

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.

shares of the Company’s common stock from the net settlement of 34,706 RSUs.

The Company paid $ 228 in connection with the net share

settlement of these RSUs.

Stock Options

The Company determined the fair value of stock options granted

based upon the assumptions as provided below.

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

$ 6.81 - $ 8.65

Exercise price

$ 6.56 - $ 19.82

$ 17.84 - $ 51.12

Dividend yield

1 unchanged sentence

89.00 % - 98.00 %

95.00 % - 101.00 %

Risk-free interest rate

2 unchanged sentences

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

The following table summarizes stock option activities

for the year ended December 31, 2021:

Outstanding 12/31/2020

Outstanding at December 31, 2021

Vested or expected to vest at December 31, 2021

Exercisable as of 12/31/2021

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.

(1) Aggregate intrinsic value represents the difference

between the exercise price of the option and the closing market price of our common stock on December 31, 2021.

The intrinsic

value of options exercised during the year ended December 31, 2021 was $0 as no options were exercised.

The intrinsic value

of options exercised during the year ended December 31, 2020 was $ 696 .

The weighted average grant date fair value per

share of the options granted during the years ended December 31, 2021 and 2020 was $ 12.60 and $ 22.61 , respectively of December 31, 2021,

there was approximately $ 12,664 of unrecognized share-based compensation for unvested stock option grants which is expected to be recognized

over a weighted average period of 2.71 years.

The total unrecognized share-based compensation cost will be adjusted for actual forfeitures

as they occur.

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)

(amounts in thousands, except share and per

Summary of Stock-Based Compensation

The following tables summarize total stock-based compensation

costs recognized:

The following tables summarize total stock-based compensation costs

For the Years Ended

Restricted stock

Stock options

4 unchanged sentences

General and administrative

NOTE 10 –

Federal and State income tax expense is as follows:

4 unchanged sentences

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.

Protara Therapeutics, Inc.

Notes to Consolidated Financial Statements

(amounts in thousands, except share and per

The tax effects of temporary differences that give rise to significant

2 unchanged sentences

Net operating loss carry forwards

Organization costs/legal fees

Stock option expense

1 unchanged sentence

Operating lease liability

Restricted stock expense

Charitable contributions

Total deferred tax assets

5 unchanged sentences

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:

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

1 unchanged sentence

State taxes, net of federal benefit

Research and development credits

Option expense

True-up to prior years return

State rate change

Change in valuation allowance

Effective tax rate

For the year ended December 31, 2020, the Company’s effective

tax rate was 0%, which consisted principally of a federal rate of 21% and the Company’s estimate of state taxes, net of federal

benefit, of 9.4%, offset by a valuation allowance 25.5%.

For the year ended December 31, 2021, the Company’s effective tax rate

was 0%, which consisted principally of a federal rate of 21%, and the Company’s estimate of state taxes, net of federal benefit,

of 0.6%, offset by a valuation allowance 12.9% and true-up to the prior years tax return of 8.2%.

As of December 31, 2021 for U.S.

federal and state income tax reporting

purposes, the Company has approximately $ 100.2 million and $ 29.6 million, respectively, of unused net operating losses (“NOLs”)

available for carry forward to future years.

As a result of the Tax Cuts and Jobs Act of 2017 (“TCJA”), for U.S.

purposes, NOLs generated in tax years beginning before January 1, 2018 can still be carried forward for up to 20 years, but net operating

losses generated for tax years beginning after December 31, 2017 carryforward indefinitely and can be used to offset taxable income.

the total Federal NOL, $ 0.6 million can be carried forward until 2037;

and $ 99.6 million can be carried forward indefinitely.

York state and city NOLs may be carried forward through the year 2041 and may be applied against future 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.

The Company has not performed a study to determine whether or not

there is such a limitation.

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.

(amounts in thousands, except share and per

The Company remains subject to examination by

tax authorities for all tax years.

Based on a history of cumulative losses at the

Company and the results of operations for the years ended December 31, 2021 and 2020, 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

1 unchanged sentence

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 –

As a result of the analysis, the Company determined that a full valuation allowance against the deferred

tax assets, net, was required.

As of December 31, 2021 and 2020, the Company has recorded a valuation allowance of $ 27.8 million and $ 21.7

million, respectively.

As of December 31, 2021 and 2020, 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.

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”).

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)

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.

For the years ended December 31, 2021 and 2020, the Company recorded expense of $215 and $69, respectively, representing employer contributions

under the 401(k) Plan.

Net Loss per Common

The following table sets forth the computation

of the net loss per share attributable to common stockholders, basic and diluted:

Net loss attributable to common stockholders

Weighted-average common shares outstanding – basic and diluted

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

Since the Company was in a net loss position for

all periods presented, net loss per share attributable to common stockholders was the same on a basic and diluted basis, as the inclusion

of all potential common equivalent shares outstanding would have been anti-dilutive.

The Company excluded the following potential common

shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to

common stockholders for the periods indicated because including them would have had an anti-dilutive effect:

Stock options issued and outstanding

Restricted stock units issued and outstanding

Conversion of Series 1 Convertible Preferred Stock

Total potentially dilutive shares

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