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Item 9A. Controls and Procedures

2023-03-08 compared with 2022-03-09 · 786 added, 851 removed, 690 unchanged (70% of the section changed)

Controls and Procedures.

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.

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, 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 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.

Disclosure Controls and Procedures

We maintain disclosure controls

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

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

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

executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

As of December 31, 2022,

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

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

Our management recognizes

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

objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Our principal executive officer and principal financial officer have concluded based upon the evaluation described above that, as of

December 31, 2022, our disclosure controls and procedures were effective at the reasonable assurance level.

We continue to review and

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

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

Management’s Annual 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 of America.

As of December 31, 2022,

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, 2022, 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.

That evaluation 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.

Disclosure Regarding Foreign Jurisdictions that Prevent

Directors, Executive Officers and Corporate Governance.

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.

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 2022 Annual Meeting of Stockholders

to be filed with the SEC on or before May 2, 2023 (our “ Proxy Statement ”) and is incorporated in this report

by reference.

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.

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 info@protaratx.com.

Executive Compensation.

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

The information required

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

in this report by reference.

Security Ownership of Certain Beneficial Owners and Management

and Related Stockholder 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 ” in our Proxy Statement

and is incorporated in this report by reference.

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

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.

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.

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.

Principal Accountant Fees and Services.

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.

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.

Exhibits and Financial Statement Schedules.

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)

(a) Documents filed as

part of this report.

The following financial

statements of Protara Therapeutics, Inc.

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

in this report:

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

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.

Consolidated Balance Sheets

Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statements of Changes in Stockholders’ Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

List of financial statement

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.

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).

Acquisition, Inc.

(filed as Exhibit 2.1 to the Registrant’s Current Report on Form 8-K as filed on September 24, 2019, and

incorporated herein by reference).

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

1 unchanged sentence

(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).

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).

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

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

Certificate of Amendment to the Sixth Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.3

to the Registrant’s Quarterly Report on Form 10-Q, filed with the SEC on May 13, 2020).

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

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

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

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

September 23, 2020).

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

Composite Amended and Restated Certificate of Incorporation of the Registrant

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

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

filed with the SEC on January 10, 2020).

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

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

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

with the SEC on January 10, 2020).

Description of securities registered under Section 12 of the Exchange Act of 1934 (incorporated by reference to Exhibit 4.2 of the Registrant’s Annual Report on Form 10-K, filed with the SEC on March 11, 2021).

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

by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K, filed with the SEC on September 24, 2019).

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.

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

333-198777)).

1 unchanged sentence

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).

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).

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

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).

1 to the Company’s Registration Statement

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

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).

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

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

and Restated 2014 Equity Incentive Plan of the Registrant (incorporated by reference to Exhibit 10.1 to the Registrant’s Current

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

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).

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).

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).

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).

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).

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).

Executive Employment Agreement, dated as of December 17, 2019, by and between 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).

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).

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).

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).

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

(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).

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,

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).

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).

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

Executive Employment Agreement, effective as of January 10, 2022, by and between the Registrant and Jathin Bandari, M.D.

(incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q, filed with the SEC on May 5, 2022).

Executive Employment Agreement, effective as of January 30, 2023 by and between the Registrant and Patrick Fabbio.

License Agreement, by and between ArTara Subsidiary, Inc.

Buchman, M.D.

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).

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

(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).

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,

License Agreement, by and between ArTara Subsidiary, Inc.

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,

Agreement, by and between ArTara Subsidiary, Inc.

by and between ArTara Subsidiary, Inc.

and Chugai Pharmaceutical Co., Ltd.

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).

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).

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

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

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

(incorporated by reference

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

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).

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

(incorporated by reference to Exhibit 10.8

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

Restated Non-Employee Director Compensation Policy (incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q, filed with the SEC on May 5, 2022).

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.

(incorporated by reference to Exhibit 10.25 to the Registrant’s Annual Report on Form 10-K, filed with the SEC on March 11, 2021)

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).

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.

Separation Agreement and Release, dated as of June 20, 2022, by and between the Registrant and Blaine Davis (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on June 21, 2022).

List of Subsidiaries.

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

Consent of Marcum LLP, independent registered public accounting firm.

Power of Attorney (Included in signature pages)

3 unchanged sentences

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

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

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;

(iv) the Consolidated Statements of Cash Flows for the years ended 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.

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Inline XBRL Taxonomy Extension

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Inline XBRL Taxonomy Extension

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Filed herewith.

Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K.

Schedules have been omitted

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

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

Indicates management contract or compensatory plan or arrangement.

Certain portions of this exhibit (indicated by “[***]”) have been omitted as the Registrant has determined (i) the omitted information is not material and (ii) the omitted information 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.

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.

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.

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.

Therapeutics, Inc.

1 unchanged sentence

JESSE SHEFFERMAN

and Chief Executive Officer

behalf of the registrant and as the registrant’s

Executive Officer)

Jesse Shefferman

President and Chief Executive Officer

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

Principal Executive Officer)

March 8, 2023

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.

PATRICK FABBIO

Patrick Fabbio

Chief Financial Officer

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

Principal Financial Officer)

KNOW ALL PERSONS BY THESE

PRESENTS, that each individual whose signature appears below constitutes and appoints Jesse Shefferman and Patrick Fabbio 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.

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.

JESSE SHEFFERMAN

and Chief Executive Officer and Director

President and Chief Executive

Officer and Director

March 8, 2023

(Principal Executive Officer)

Financial Officer

Financial and Accounting Officer)

of the Board of Directors

PATRICK FABBIO

Chief Financial Officer

March 8, 2023

Patrick Fabbio

(Principal Financial

/s/ HANNAH FRY

Vice President, Controller

March 8, 2023

(Principal Accounting

Chairman of the Board of

March 8, 2023

BARRY FLANNELLY, PHARM.D.

Flannelly, Pharm.D.

March 8, 2023

Barry Flannelly, Pharm.D.

ROGER GARCEAU, M.D.

Garceau, M.D.

March 8, 2023

Roger Garceau, M.D.

JANE HUANG, M.D.

March 8, 2023

Jane Huang, M.D.

March 8, 2023

Richard Levy, M.D.

March 8, 2023

CYNTHIA SMITH

MICHAEL SOLOMON, PH.D.

March 8, 2023

Cynthia Smith

SOLOMON, PH.D.

Protara Therapeutics, Inc.

March 8, 2023

Michael Solomon, Ph.D.

Protara Therapeutics,

Index to Consolidated Financial Statements

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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, 2022 and 2021 F-3

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Notes to Consolidated Financial Statements F-7

of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors

of Protara Therapeutics, Inc.

Report of Independent Registered Public Accounting

To the Stockholders and the Board of Directors of Protara Therapeutics,

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,

We have audited the accompanying consolidated

balance sheets of Protara Therapeutics, Inc.

(the “Company”) as of December 31, 2022 and 2021, the related consolidated statements

of operations and comprehensive loss, changes in stockholders’ deficit and cash flows for each of the two years ended December 31,

2022, 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

financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021,

and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with

generally accepted accounting principles.

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.

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

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 audit to obtain reasonable assurance about whether the

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

The Company is not required to have, nor were we

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

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

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

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.

Our audits included performing procedures

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

respond to those risks.

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

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 audits provide a reasonable basis for our opinion.

Critical Audit Matter

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.

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.

a result of the annual impairment test, the Company determined the estimated fair value of the reporting unit was less than the carrying

value and recorded a non-cash goodwill impairment expense in the statements of operations and comprehensive loss of $29.5 million.

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

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/s/ Ernst & Young LLP

We have served as the Company’s auditor

We have served as the Company’s auditor since 2021.

New York, New York

March 8, 2023

of Independent Registered Public Accounting Firm

To the Shareholders and 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, 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 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.

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 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

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

subjective, or complex judgments.

We determined that there are no critical audit matters.

/s/ Marcum LLP

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

March 11, 2021

Protara Therapeutics, Inc.

Consolidated Balance Sheets

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Cash and cash equivalents

Restricted cash

Marketable debt securities

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Total liabilities and stockholders’ equity

See accompanying notes to consolidated financial statements.

See accompanying notes to consolidated financial

Protara Therapeutics, Inc.

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General and administrative

Loss on impairment of goodwill

Total operating expenses

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Interest and investment income

Interest expense

Other income (expense), net

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Comprehensive Loss

See accompanying notes to consolidated financial statements.

See accompanying notes to consolidated financial

Protara Therapeutics, Inc.

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(in thousands, except share and per

Series 1 Convertible

Preferred Stock

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Balance at December 31, 2020

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 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

Settlement of restricted stock units

Stock-based compensation - restricted stock units

Stock-based compensation - stock options

Other comprehensive loss

Balance at December 31, 2021

Settlement of restricted

Stock-based compensation

Settlement of restricted stock units

Stock-based compensation - restricted stock units

Stock-based compensation - stock options

Other comprehensive loss

Balance at December 31, 2022

See accompanying notes to consolidated financial statements.

See accompanying notes to consolidated financial

Protara Therapeutics, Inc.

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

Loss on impairment of goodwill

Stock based compensation

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Cash flows from investing activities:

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

Purchase of marketable debt securities

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Cash flows from financing activities:

Proceeds from - ArTara Private Placement, net of offering costs

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

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

Proceeds from Common Offering, net of offering costs

Proceeds from Preferred Offering, net of offering costs

Proceeds from Underwriters Overallotment Option

Repayments under short-term debt

Proceeds from the exercise of stock options

Repurchase of shares in connection with settlement of RSUs

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Cash paid for:

Supplemental schedule of non-cash activities:

Deferred offering costs recognized that were previously recorded in accrued expenses

Purchase of insurance agreement with notes payable

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

See accompanying notes to consolidated financial statements.

See accompanying notes to consolidated financial

Protara Therapeutics, Inc.

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(amounts in thousands, except share and per

Organization and Nature

of the Business

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”).

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

transformative therapies for the treatment of cancer and rare diseases.

Protara’s portfolio includes two development programs utilizing

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

bladder cancer, or NMIBC.

The third program in the portfolio is Intravenous, or IV Choline Chloride, an investigational phospholipid

substrate replacement therapy initially in development for patients receiving parenteral nutrition, or PN who have intestinal failure

associated liver disease, or IFALD.

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

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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 efforts.

other factors, and the post-merger company retained the name ArTara Therapeutics, Inc., which on May 11, 2020 was changed to Protara

Therapeutics, Inc.

In addition, concurrently with the execution of the Merger Agreement,

Protara issued a private placement, whereby 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.

Liquidity, Capital Resources and Management Plans

The Company is in the business of developing

biopharmaceuticals and has no current or near-term revenues.

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

development efforts.

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

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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

Impact of the COVID-19

As a result of the impacts of the COVID-19 pandemic,

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 impact of the COVID-19 pandemic,

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 impact of the COVID-19 pandemic and its related macroeconomic effects closely including whether

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

Protara Therapeutics, Inc.

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(amounts in thousands, except share and per

Summary of Significant

Accounting Policies

Summary of Significant Accounting Policies

Basis of Presentation

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”).

The accompanying consolidated financial statements

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

Principles of Consolidation

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accompanying consolidated financial statements.

Use of Estimates

The preparation of financial statements in conformity

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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 .

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

contingencies.

On an ongoing basis, the Company’s management

evaluates its estimates based on historical and anticipated results, trends, and various other assumptions believed to be reasonable.

results could differ from those estimates.

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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

Certain amounts in prior periods related to the classification of accrued

expenses and income taxes 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.

Cash, Cash Equivalents

and Restricted Cash

The Company considers all highly liquid instruments

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Cash and cash equivalents

Restricted cash

Restricted cash, non-current

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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

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.

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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.

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.

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

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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.

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

The Company records investments at fair value

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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.

Realized gains and losses are reflected in interest and investment income in the consolidated statements

of operations and comprehensive loss and are determined using the specific identification method with transactions recorded on a settlement

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.

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Concentrations of Credit Risk

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

Financial instruments, which potentially subject

the Company to concentrations of credit risk, consists principally of cash, cash equivalents, restricted cash, and marketable debt securities.

The Company currently invests its excess cash

primarily in money market funds and high quality, investment grade marketable debt securities of corporations.

The Company has adopted

an investment policy that includes guidelines relative to credit quality, diversification and maturities to preserve principal and liquidity.

Property and Equipment,

Property and equipment, including leasehold improvements,

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and equipment categories are as follows:

Asset Classification

Estimated Useful Life

Computer equipment

Furniture, fixtures and other

Laboratory equipment

Leasehold improvements

Classification

fixtures and other

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

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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 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.

Leases 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 term.

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.

ROU assets and lease liabilities are recognized at

the lease commencement date.

The Company has elected to account for the lease

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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;

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

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

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.

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

To date, no such impairment loss has been recognized.

Protara Therapeutics, Inc.

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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.

less identified net assets, resulting in the initial recording of $ 29.5 million in goodwill.

Goodwill represents the excess of purchase price

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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.

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;

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

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

Goodwill is evaluated for impairment at the reporting

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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.

As of December 31, 2022 and 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, 2022, the Company’s stock price and market

capitalization declined 60 % from December 31, 2021, which reflects the overall decline of similar companies with less than $ 250 million

in market capitalizations, or microcap companies.

The life sciences sector, which includes pre-commercialization and therefore net operating

loss generating companies, relies heavily on the capital markets to finance their operations and fund pre-clinical and clinical trials

for their existing development programs.

As a result of a shift in risk appetite in the overall financial markets, the availability of

capital for life science sector companies decreased significantly in 2022.

The challenging financing conditions had a negative impact

on stock prices and respective market capitalizations, particularly for microcap companies.

The Company considered the heightened financing

risk that impacted the life sciences sector during 2022 to be one of the key macroeconomic factors that led to a sustained decrease in

the Company’s stock price and market capitalization leading up to its annual goodwill impairment assessment date in late 2022.

upon the results of our 2022 annual goodwill impairment test, the Company recorded a loss on impairment of goodwill of $ 29.5 million during

the year ended December 31, 2022.

The following table provides a roll forward of the Company’s

goodwill and accumulated impairment losses.

Goodwill, gross amount as of December 31, 2021

Accumulated impairment loss, as of December 31, 2021

Goodwill as of December 31, 2021

Additions to goodwill

Loss on impairment

Goodwill as of December 31, 2022

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

to the carrying value of goodwill were necessary during the year ended December 31, 2021.

Research and Development

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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.

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.

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

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Amounts incurred are classified as general and administrative expenses.

Investment Income

Interest and 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.

income, accretion income earned and amortization expense incurred and realized gains or losses 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’s stock-based compensation

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

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

The Company measures all stock options and other

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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.

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,

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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

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

Basic net loss per share is computed by dividing

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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 August 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”).

This ASU is 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.

The standard became effective for the first interim period within

annual reporting periods beginning after December 15, 2020.

On January 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,

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remove certain exceptions to the general principles in Topic 740.

The amendments also clarify and amend existing guidance to improve consistent

The amendments also clarify and amend existing guidance to improve

consistent application.

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.

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.

Notes to Consolidated Financial Statements

(amounts in thousands, except share and per

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.

Recent Accounting Pronouncements

Not Yet Adopted

In June 2016, the Financial Accounting Standards

Board, or the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Statements .

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 losses.

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

In November 2019, the FASB issued ASU 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and

Hedging (Topic 815), and Leases (Topic 842):

Effective Dates , which amended the effective date for certain companies.

is effective for public companies eligible to be smaller reporting companies for annual and interim periods beginning after December

Early adoption is available.

The Company has evaluated the impact of the adoption of ASU 2016-13, and related updates, and

has determined that the impact will not be material to its consolidated financial statements and disclosures.

The Company has evaluated other recently issued

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

Protara Therapeutics, Inc.

Notes to Consolidated Financial Statements

(amounts in thousands, except share and per

Subsequent Events

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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, 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 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 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 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.

Notes to Consolidated Financial Statements

(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.

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.

adjustment was comprised of a decrease of $ 78 in prepaid expenses and other current assets, and an increase of $ 77 in accrued expenses,

resulting in a final purchase price allocation as follows:

Restricted cash

Prepaid expenses and other current assets

Accrued expenses

Total purchase price consideration

The total fair value of the net assets of Protara

Therapeutics 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.

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 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 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.

Notes to Consolidated Financial Statements

(amounts in thousands, except share and per

in Note 11 and, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial

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:

The tables below present information about the

Company’s financial instruments that are measured at fair value on a recurring basis as of December 31, 2022 and 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.

The following tables present the Company’s

financial assets and liabilities that are measured and carried at fair value and indicate the level within the fair value hierarchy of

the valuation techniques it utilizes to determine such fair value:

December 31, 2022

Cash Equivalents

Money market funds

Money market funds (a)

Corporate bonds (a)

Restricted cash, non-current

Money market funds

Money market funds (b)

Marketable debt securities

Corporate bonds

Corporate bonds (c)

December 31, 2021

Cash Equivalents

Money market funds (a)

Restricted cash, non-current

Money market funds (b)

Marketable debt securities

Corporate bonds (c)

(a) Money market funds and corporate debt securities with original maturities of 90 days or less are included within Cash and cash equivalents in the Consolidated Balance Sheets.

(b) Restricted Money market funds are included within Restricted Cash, non-current in the Consolidated Balance Sheets.

(c) Corporate debt securities with original maturities greater than 90 days are included within Marketable securities in the Consolidated Balance Sheets and classified as current or noncurrent based upon whether the maturity of the financial asset is less than or greater than 12 months.

Protara Therapeutics, Inc.

Notes to Consolidated Financial Statements

(amounts in thousands, except share and per

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

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.

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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.

Cash equivalents, prepaid expenses and other

current assets, accounts payable and accrued expenses at December 31, 2022 and 2021 are carried at amounts that approximate fair value

due to their short-term maturities.

Non-Recurring Fair Value Measurements

During the fourth quarter of 2022, the Company recorded a goodwill

impairment loss of $ 29.5 million, refer to Note 2 for additional details on the impairment of goodwill.

The fair value of our reporting

unit was determined using an income approach based on discounted cash flows, or DCF.

Determining fair value using a DCF analysis requires

the exercise of significant judgment with respect to several assumptions and estimates, including the amount and timing of expected future

cash flows and appropriate discount rate to be applied.

The expected cash flows used in the DCF analysis are based on our most recent

internal long-range forecast and budget and, for years beyond the budget, our estimates, which are based, in part, on industry benchmarks

and forecasted growth rates.

The discount rate used in the DCF analysis is intended to reflect the risks inherent in the expected future

cash flows of the respective programs within our portfolio.

The inputs to the DCF model are Level 3 valuation inputs.

Marketable Debt Securities

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

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

any marketable debt securities.

December 31, 2021

Corporate bonds - presented in marketable debt securities

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

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.

into earnings for the year ended December 31, 2022 was $ 17 included in investment income within the consolidated statements of operations

and comprehensive loss.

There were no sales of securities in the periods presented.

Protara Therapeutics, Inc.

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(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:

The contractual maturities of all securities

held at December 31, 2022 was 16 months or less.

Of the 34 securities in a loss position held by the Company, there were 16 securities

in a continuous unrealized loss position for greater than twelve months at December 31, 2022.

The total unrealized loss related to these

securities was $ 358 and was not material.

The Company has the ability to hold such securities with an unrealized loss until its forecasted

The Company determined that there was no material change in the credit risk of the above investments.

No other than temporary impairment

loss has been recorded on the securities as of December 31, 2022, as the Company believes that any decrease in fair value of these securities

is temporary and the Company expects to recover at least up to the initial cost of the investment for these securities.

Interest and Investment Income

Interest and investment income consists of the following:

Interest income

Accretion/(amortization) of discount/premium, net

Realized gain/(loss)

Total interest and investment income

Prepaid Expenses and

Other Current Assets

Prepaid Expenses and Other Current Assets

Prepaid expenses and

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Other current assets

Property and Equipment,

Property and Equipment, net

Property and equipment,

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years ended December 31, 2022 and 2021, 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

During the year ended December 31, 2022, $ 137 and $ 110 was included in research

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

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 loss.

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of the following:

Employee Costs

Research and development costs

Other expenses

Short-Term Debt

Financing Agreement

On February 19, 2020, the Company entered into

a nine-month financing agreement with AFCO Credit Corporation for its directors and officers (“D&O”) liability insurance

in the amount of $2,225.

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

The financing bore interest at

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

As of December

31, 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

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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 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

The Company is responsible for real estate taxes,

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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 .

in operating lease right-of-use, or 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

Cash paid for operating lease liabilities was $ 1,327 and $ 1,009 during the years ended December 31, 2022 and 2021, 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.

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Variable lease expense for the years ended December

31, 2021 and 2020 was not material.

31, 2022 and 2021, respectively were not material.

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

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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:

The total remaining operating lease payments

included in the measurement of lease liabilities on the Company’s consolidated balance sheet as of December 31, 2022, was

For the year ending December 31:

Operating Lease Payments

Total gross operating lease payments

Total future operating lease payments

imputed interest

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

Present value of future minimum lease payments

Commitments and Contingencies

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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.

During the years ended December 31, 2022 and

2021, the Company recorded research and development expense of $ 2 and $ 0 , in connection with the Choline License Agreement.

Protara Therapeutics, Inc.

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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.

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, 2022 and

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Sponsored Research and License Agreement

On November 28, 2018, the Company entered into

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

Pursuant to the Iowa Agreement,

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

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

of Iowa in support of the development of the Company’s proprietary Streptococcus Pyogenes investigational product, TARA-002

for the LMs indication.

During the term of the services, the Company would 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 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;

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 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, 2021 and 2020, the Company recorded

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

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

Pursuant to the Iowa Agreement there were no

research and development expenses recognized during the years ended December 31, 2022 and 2021.

Chugai Agreement

On June 17, 2019, the Company entered into an

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

firm with offices and operations in Japan.

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

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

product (the “Existing Product”).

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

support as necessary.

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

Pharmaceutical Agreement.

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

The Chugai Amendment extended the date through which

Chugai will exclusively provide the Existing Product and materials to the Company from June 30, 2020 to June 30, 2021, extended the date

through which Chugai will not provide materials or technical support to any third-party for the purpose of development and commercialization

in a given area from the fifth anniversary to the eleventh anniversary of the original effective date and provides that, in addition to

the designated fee provided upon the initial indication approval in the Chugai Pharmaceutical Agreement, the Company will pay Chugai a

designated fee for each additional indication approval.

The Company is obligated to Chugai for certain payments upon the completion of

agreed upon milestones.

Pursuant to the agreement there were no research and development expenses

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

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, with an effective date of June 30, 2020.

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 for further such extensions on the occurrence of certain events and

The amendment further 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.

Company is obligated to Chugai for certain payments upon the completion of agreed upon milestones.

As consideration for

Chugai’s performance under the Chugai Pharmaceutical Agreement, the Company agreed to pay Chugai a payment in the low,

single-digit millions related to such initial indication approval, which payment will be made in two installments with an initial

payment in July 2020, and the remaining majority of the payment payable upon FDA approval of the New Product.

Pursuant to the agreement there were no research

and development expenses recognized during the years ended December 31, 2022 and 2021.

Protara Therapeutics, Inc.

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(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.

Contingencies

From time to time, the Company may be subject

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

Management is of the opinion that

the ultimate outcome of these matters would not have a material adverse impact on the financial position of the Company or the results

of its operations.

In the normal course of business, the Company

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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 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,

Description of Series 1 Convertible Preferred

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

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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.

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

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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

will 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

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 will instead be convertible into such kind of securities, cash and/or other property with an aggregate value equal to

the stated value.

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.

The holders of Series 1 Convertible Preferred

Stock are not entitled to vote.

Protara Therapeutics, Inc.

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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.

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

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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 to enable Private ArTara and its affiliates

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

2017 Equity Incentive

On August 10, 2017, Private ArTara, (a predecessor

of the Company), its Board of Directors and its stockholders approved the ArTara Therapeutics, Inc.

2017 Equity Incentive Plan to enable

Private ArTara and its affiliates to recruit and retain highly qualified personnel and to incentivize personnel for productivity and

The 2017 Equity Incentive Plan provided for the

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the 2014 Equity Incentive Plan.

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

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

Amended and Restated 2014 Plan.

On July 31, 2017, the stockholders approved this amendment.

On January 1, 2020, Protara Therapeutics, Inc.

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, 2020, Protara Therapeutics,

amended 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 and Restated 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 and Restated 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.

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.

As of December 31, 2022, 603,218 shares remain available to be issued under the Amended 2014 Plan.

On January 1, 2023, pursuant to the Amended 2014

Plan’s annual evergreen feature, the number of shares authorized under the Amended 2014 Plan was increased by 861,933 shares to

1,465,151 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

2014 Employee Stock

Purchase Plan

On October 3, 2014, the stockholders approved

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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, 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.

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

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.

As of December

31, 2022, the authorized number of shares under the 2014 ESPP is 32,062 and the number of shares available for issuance is 32,062 .

the years ended December 31, 2022 and 2021, no shares were issued under the 2014 ESPP.

On January 1, 2023, pursuant to the increase

per the 2014 ESPP, the number of shares authorized under the 2014 ESPP was increased by 7,025 shares to 39,087 shares.

Restricted Stock Units

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As of December 31, 2022, the unamortized value of RSUs was $ 1,412 .

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.

As of December 31, 2022, the weighted average remaining amortization period was 1.53 years.

As of December 31, 2022 and 2021, 289,500

and 286,918 RSUs, respectively, have vested that have not yet been settled into shares of the Company’s common stock.

During the year ended December 31, 2022, the Company issued 31,658

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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

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Vested or expected to vest at December 31, 2022

Exercisable as of 12/31/2021

(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 .

Exercisable as of December, 31 2022

(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,

The intrinsic value of options exercised during the years ended December 31, 2022 and 2021 was $0 as no options

were exercised.

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.

share of the options granted during the years ended December 31, 2022 and 2021 was $ 4.80 and $ 12.60 , respectively.

As of December 31,

2022, there was approximately $ 8,333 of unrecognized share-based compensation for unvested stock option grants which is expected to be

recognized over a weighted average period of 2.50 years.

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

forfeitures as they occur.

Protara Therapeutics, Inc.

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(amounts in thousands, except share and per

Summary of Stock-Based Compensation

Summary of Stock-Based Compensation Expense

The following tables summarize total stock-based compensation costs

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Stock options

Stock-based compensation expense was reflected within the statements

of operations as:

Stock-based compensation expense was reflected within the consolidated

statements of operations and comprehensive loss as:

For the Years Ended

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Total income tax expense (benefit)

Deferred income taxes, if applicable, are provided for the differences

between the basis of assets and liabilities for financial reporting and income tax purposes.

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.

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(amounts in thousands, except share and per

The tax effects of temporary differences that give rise to significant

portions of the deferred tax assets are as follows:

The tax effects of temporary differences that

give rise to significant portions of the deferred tax assets are as follows:

Deferred tax assets:

Net operating loss carry forwards

Capitalized research and development

Stock option expense

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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

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Research and development credits

Option expense

True-up to prior years return

State rate change

Stock-based compensation

Goodwill impairment

Change in valuation allowance

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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.

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

For the year ended December

31, 2022, the Company’s effective tax rate was 0%, which consisted principally of a federal rate of 21%, the Company’s estimate

of state taxes, net of federal benefit, of 2.2%, research and development credits of 3.3% and a true-up to the prior year’s tax

return of 0.7%, offset by goodwill impairment of 10.4% and a valuation allowance 17.0%.

As of December 31, 2022 and 2021 for U.S.

and state income tax reporting purposes, the Company has approximately $ 114,800 and $ 100,200 , 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”),

income tax 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.

Of the total Federal NOL, $ 600 can be carried forward until 2037;

and $ 114,200 can be carried forward indefinitely.

New York state and city NOLs may be carried forward through the year 2042 and may be applied against future taxable income.

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.

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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

statements until it is determined that it is more likely than not that the Company will generate sufficient taxable income to realize

the deferred income tax assets.

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

tax assets, 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.

Based on a history of cumulative losses at the Company and the results

of operations for the years ended December 31, 2022 and 2021, the Company determined that it is more likely than not that it will not

realize benefits from the net deferred tax assets.

The Company will not record income tax benefits in the financial statements until it

is determined that it is more likely than not that the Company will generate sufficient taxable income to realize the deferred income

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, 2022 and 2021, the Company has recorded a valuation allowance of $ 39.0 million and $ 27.8 million, respectively.

As of December 31, 2022 and 2021, 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

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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)

Under the 401(k) Plan, the Company matches 100% up to a 4% contribution.

The 401(k) Plan was implemented in June of 2020.

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 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 % of employee contributions up to 4 % of employee compensation.

For the years

ended December 31, 2022 and 2021, the Company recorded expense of $ 223 and $ 215 , respectively, representing employer contributions under

the 401(k) Plan.

Net Loss per Common Share

The following table sets forth the computation

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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

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.

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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