What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2024-03-13 compared with 2023-03-08 · 132 added, 1356 removed, 120 unchanged (93% of the section changed)

Controls and Procedures.

Disclosure Controls and Procedures

We maintain disclosure controls

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

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

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

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

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.

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, 2023, 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, 2023, 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.

of December 31, 2023, 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 (2013).

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, 2023, 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.

Other Information.

Disclosure Regarding Foreign Jurisdictions that Prevent

(a) There is no information that was required to be disclosed

in a report on Form 8-K during the fourth quarter of 2023 but was not reported.

(b) In the quarter ended December 31, 2023, none of our directors

or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted or terminated a plan for the purchase or sale of our securities

intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or a non-Rule 10b5-1 trading arrangement for the purchase or

sale of our securities, within the meaning of Item 408 of Regulation S-K.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Directors, Executive Officers and Corporate Governance.

The information required

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

Regarding the Board of Directors and Corporate Governance” in our definitive Proxy Statement for our 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.

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 2023

Annual Meeting of Stockholders to be filed with the SEC on or before April 29, 2024 (our “ Proxy Statement ”)

and is incorporated in this report by reference.

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

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

The Code of Business Conduct and Ethics is available

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

We will promptly disclose

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

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

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

the waiver and the date of the waiver.

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

Executive Compensation.

The information required

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

in this report by reference.

Security Ownership of Certain Beneficial Owners and Management

and Related Stockholder 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

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.

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.

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.

Principal Accountant Fees and Services.

The information required

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

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

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

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

Exhibits and Financial Statement Schedules.

(a) Documents filed as

part of this report.

The following financial

statements of Protara Therapeutics, Inc.

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

in this report:

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)

4 unchanged sentences

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.

List of financial statement schedules:

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

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

See part (b) below.

(b) Exhibits.

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

16 unchanged sentences

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 Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.6 to the Company’s

Annual Report on Form 10-K, filed with the SEC on March 8, 2023).

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

1 unchanged sentence

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).

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

38 unchanged sentences

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

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.

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).

and Restated Executive Employment Agreement, entered into as of June 1, 2023, by and between the Registrant and Patrick Fabbio

(incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 10-Q, filed with the SEC on August 3,

License Agreement, by and between ArTara Subsidiary, Inc.

21 unchanged sentences

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.

(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.

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).

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).

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).

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

(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)

List of Subsidiaries.

5 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:

(i) the Consolidated Balance Sheets as of December 31, 2020 and 2019;

(ii) the Consolidated

Statements of Operations for the years ended December 31, 2020 and 2019;

(iii) the Consolidated Statements of Changes in Stockholders’

Equity (Deficit) for the years ended December 31, 2020 and 2019;

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

December 31, 2020 and 2019;

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

Inline XBRL Instance Document.

Inline XBRL Taxonomy Extension

Schema Document.

Inline XBRL Taxonomy Extension

Calculation Linkbase Document.

Inline XBRL Taxonomy Extension

Definition Linkbase Document

Inline XBRL Taxonomy Extension

Label Linkbase Document.

Inline XBRL Taxonomy Extension

Presentation Linkbase Document.

Cover Page Interactive Data File

(embedded within the Inline XBRL document)

Filed herewith.

Schedules have been omitted

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

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.

Executive Compensation Clawback Policy.

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

the Consolidated Balance Sheets as of December 31, 2023 and 2022;

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

31, 2023 and 2022;

(iii) the Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the years ended December 31,

2023 and 2022;

(iv) the Consolidated Statements of Cash Flows for the years ended December 31, 2023 and 2022;

and (v) the notes to the

Consolidated Financial Statements.

XBRL Instance Document.

XBRL Taxonomy Extension Schema Document.

XBRL Taxonomy Extension Calculation Linkbase Document.

XBRL Taxonomy Extension Definition Linkbase Document

XBRL Taxonomy Extension Label Linkbase Document.

XBRL Taxonomy Extension Presentation Linkbase Document.

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

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

management contract or compensatory plan or arrangement.

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.

Form 10-K Summary.

Pursuant to the requirements

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

by the undersigned, thereunto duly authorized.

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

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

Therapeutics, Inc.

1 unchanged sentence

JESSE SHEFFERMAN

Jesse Shefferman

President and Chief Executive Officer

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

Principal Executive Officer)

and Chief Executive Officer

behalf of the registrant and as the registrant’s Principal Executive Officer)

March 13, 2024

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.

Financial Officer

behalf of the registrant and as the registrant’s Principal Financial Officer)

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.

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

President and Chief Executive

Officer and Director

March 8, 2023

(Principal Executive Officer)

PATRICK FABBIO

Chief Financial Officer

March 8, 2023

and Chief Executive Officer and Director

Executive Officer)

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.

March 8, 2023

Financial Officer

Financial Officer)

President, Controller

Accounting Officer)

of the Board of Directors

BARRY FLANNELLY, PHARM.D.

ROGER GARCEAU, M.D.

March 8, 2023

Flannelly, Pharm.D.

ROGER GARCEAU, M.D.

JANE HUANG, M.D.

March 8, 2023

Garceau, M.D.

JANE HUANG, M.D.

March 8, 2023

RICHARD LEVY, M.D.

March 8, 2023

CYNTHIA SMITH

March 8, 2023

Cynthia Smith

SOLOMON, PH.D.

March 8, 2023

MICHAEL SOLOMON, PH.D.

Protara Therapeutics,

Index to Consolidated Financial Statements

Protara Therapeutics, Inc.

for the Years Ended December 31, 2022 and 2021 Page No.

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets as of December 31, 2022 and 2021 F-3

Consolidated Statements of Operations and Comprehensive Loss for the Years Ended December 31, 2022 and 2021 F-4

Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2022 and 2021 F-5

Consolidated Statements of Cash Flows for the Years Ended December 31, 2022 and 2021 F-6

Notes to Consolidated Financial Statements F-7

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 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, 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

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 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 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

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

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

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

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

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

/s/ Ernst & Young LLP

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

New York, New York

March 8, 2023

Protara Therapeutics, Inc.

Consolidated Balance Sheets

(in thousands, except share and per share data)

Current assets:

Cash and cash equivalents

Marketable debt securities

Prepaid expenses and other current assets

Total current assets

Restricted cash, non-current

Marketable debt securities, non-current

Property and equipment, net

Operating lease right-of-use asset

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

Accrued expenses

Operating lease liability

Total current liabilities

Operating lease liability, non-current

Total liabilities

Commitments and contingencies (Note 9)

Stockholders’ Equity

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

Series 1 convertible preferred stock, 8,028 shares authorized at December 31, 2022 and 2021, respectively 8,027 shares issued and outstanding as of December 31, 2022 and 2021, respectively.

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

Common stock, 11,267,389 and 11,235,731 shares issued and outstanding as of December 31, 2022 and 2021, respectively.

Additional paid in capital

Accumulated deficit

Accumulated other comprehensive income (loss)

Total stockholders’ equity

Total liabilities and stockholders’ equity

See accompanying notes to consolidated financial

Protara Therapeutics, Inc.

Consolidated Statements of Operations

and Comprehensive Loss

(in thousands, except share and per

Years Ended December 31,

Operating expenses:

Research and development

General and administrative

Loss on impairment of goodwill

Total operating expenses

Loss from operations

Other income (expense), net

Interest and investment income

Other income (expense), net

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

Weighted average shares outstanding, basic and diluted

Other comprehensive income (loss):

Net unrealized (loss) gain on marketable debt securities

Other comprehensive income (loss)

Comprehensive Loss

See accompanying notes to consolidated financial

Protara Therapeutics, Inc.

Consolidated Statements of Changes

in Stockholders’ Equity

(in thousands, except share and per

Series 1 Convertible

Preferred Stock

Comprehensive

Stockholders’

Balance at December 31, 2020

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 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

Protara Therapeutics, Inc.

Consolidated Statements of Cash Flows

(in thousands)

Years Ended December 31,

Cash flows from operating activities:

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

Loss on impairment of goodwill

Stock based compensation

Operating lease right-of-use asset

Amortization of premium on marketable debt securities

Changes in operating assets and liabilities:

Prepaid expenses and other current assets

Accounts payable

Accrued expenses

Operating lease liabilities

Net cash used in operating activities

Cash flows from investing activities:

Purchase of marketable debt securities

Proceeds from maturity and redemption of marketable debt securities

Purchase of property and equipment

Net cash (used in)/provided by investing activities

Cash flows from financing activities:

Repurchase of shares in connection with settlement of RSUs

Net cash (used in)/provided by financing activities

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

Cash and cash equivalents and restricted cash - beginning of year

Cash and cash equivalents and restricted cash - end of period

Supplemental disclosure of cash flow information:

Cash paid for:

See accompanying notes to consolidated financial

Protara Therapeutics, Inc.

Notes to Consolidated Financial Statements

(amounts in thousands, except share and per

Organization and Nature of the Business

Protara Therapeutics, Inc., and its consolidated

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

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

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

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

and Reorganization, dated September 23, 2019, (the “Merger Agreement”) by and among Protara Therapeutics, Inc., Private ArTara

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

Thereupon, Merger Sub

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

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

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

Therapeutics, 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.

The Company believes that its current financial

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

of these consolidated financial statements.

Impact of 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.

Notes to Consolidated Financial Statements

(amounts in thousands, except share and per

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.

Principles of Consolidation

The consolidated financial statements include

the accounts of the Company and its wholly owned subsidiaries.

All intercompany balances and transactions have been eliminated in the

accompanying consolidated financial statements.

Use of Estimates

The preparation of financial statements in conformity

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

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

Significant items subject

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

contingencies.

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.

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

of the period in which the change becomes evident.

Reclassification

Certain amounts in prior periods related to the classification of 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

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

Cash and cash equivalents are held in depository

and money market accounts and are reported at fair value.

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

letter of credit obligations.

Protara Therapeutics, Inc.

Notes to Consolidated Financial Statements

(amounts in thousands, except share and per

The following table provides a reconciliation

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

of cash flows:

Cash and cash equivalents

Restricted cash, non-current

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

Fair Value Measurements

Accounting Standards Codification (“ASC”)

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

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

The hierarchy gives the highest priority to unadjusted quoted prices

in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3

measurements).

Fair value is defined as the exchange price,

or an exit price, representing the amount that would be received upon the sale of an asset or payment to transfer a liability in an orderly

transaction between market participants.

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

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

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

The Company classifies investments in marketable

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

Investments with a remaining

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

The cost of securities sold is based on the specific identification

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

The Company records investments at fair value

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

comprehensive loss until realized.

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.

Notes to Consolidated Financial Statements

(amounts in thousands, except share and per

Concentrations of Credit Risk

Financial instruments, which potentially subject

the Company to concentrations of credit risk, consists principally of cash, 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,

are recorded at cost less accumulated depreciation and amortization.

Depreciation is computed using the straight-line method over the

estimated useful life of the asset.

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

Leasehold improvements are amortized

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

Repairs and maintenance

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

The estimated useful lives for significant property

and equipment categories are as follows:

Classification

fixtures and other

Shorter of the useful life of asset or the lease term

The Company enters into contracts in the normal

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

The Company determines if an arrangement is a lease at inception

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

Under ASC 842, lease expense

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

The lease term consists of non-cancelable periods

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

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

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

to the lease component only.

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

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

Variable lease payments are included in lease operating

The Company recognizes costs associated with

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

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.

Notes to Consolidated Financial Statements

(amounts in thousands, except share and per

Segment Information

The Company identifies its operating segments

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

Operating segments

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

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

The Company’s

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

of allocating resources.

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

On January 9, 2020, in connection with the Merger,

the Company separately valued the assets and liabilities acquired, and then determined goodwill as the residual of the purchase price

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

Goodwill represents the excess of purchase price

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

Goodwill has an indefinite useful life.

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

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

declined below its carrying value.

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

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

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

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

The Company has determined that it operates

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

As of December 31, 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

Research and development expenses consist primarily

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

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

Research and development costs are expensed as incurred.

Before a compound receives regulatory approval,

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

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

Nonrefundable advance payments to vendors for

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

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

Where milestone payments are due to third parties under

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

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

Protara Therapeutics, Inc.

Notes to Consolidated Financial Statements

(amounts in thousands, except share and per

Once a compound receives regulatory approval,

the Company records any milestone payments in identifiable intangible assets, less accumulated amortization and, unless the

asset is determined to have an indefinite life, the Company amortizes the payments on a straight-line basis over the remaining agreement

term or the expected product life cycle, whichever is shorter.

Certain third-party costs are included as a component

of research and development expense.

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

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

Depending upon the timing of payments to

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

These accrued or prepaid expenses

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

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

All patent-related costs incurred in connection

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

Amounts incurred are classified as general and administrative expenses.

Interest and Investment Income

Investment income consists primarily of interest

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”).

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

The Company measures all stock options and other

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

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

The Company recognizes

forfeitures at the time forfeitures occur.

The fair value of each option is estimated on

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

Expected volatility for the Company’s common stock is determined

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

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

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

The assumed dividend yield is based upon the Company’s

expectation of not paying dividends in the foreseeable future.

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

Treasury yield curve

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

The stock-based compensation expense associated

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

period and recognized over that offering period.

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

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

The fair values of RSUs are based on the fair

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

The RSUs are granted to directors pursuant to

the Company’s equity plan.

Settlement for the RSUs is deferred until the earliest to occur of (i) the director’s termination

of service, (ii) death, (iii) disability or (iv) a change in control of the Company.

In the event of a change in control of the Company,

the RSUs will vest in full.

The fair value of all stock-based awards is recognized

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

four years for stock options.

The Company classifies stock-based compensation

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

the related stock-based award recipients.

Protara Therapeutics, Inc.

Notes to Consolidated Financial Statements

(amounts in thousands, except share and per

Deferred tax assets and liabilities are recognized

for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets

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

Deferred tax assets and liabilities are

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

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

to be realized, and a corresponding valuation allowance is established.

In making such a determination, the Company considers all available

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

tax-planning strategies, and results of recent operations.

Tax benefits are recognized only for tax positions

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

The amount recognized is measured as the largest amount

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

A liability for unrecognized tax benefits is recorded

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

The Company’s

policy is to record interest and penalties on uncertain tax positions as a component of income tax expense in the consolidated statement

of operations and comprehensive loss.

Net Loss Per Share Attributable to Common

Basic net loss per share is computed by dividing

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

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

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

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

Recently Adopted Accounting Pronouncements

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,

Income Taxes (Topic 740):

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

The amendments in ASU 2019-12

remove certain exceptions to the general principles in Topic 740.

The amendments also clarify and amend existing guidance to improve

consistent 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 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

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

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

Protara Therapeutics, Inc.

Notes to Consolidated Financial Statements

(amounts in thousands, except share and per

Subsequent Events

The Company evaluated subsequent events and transactions

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

Other than as described

in Note 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 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 (a)

Corporate bonds (a)

Restricted cash, non-current

Money market funds (b)

Marketable debt securities

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

provided by reputable dealers or pricing services.

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

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

In determining the value of a particular investment,

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

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

There were no transfers of financial

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

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

Marketable debt securities, all of which were

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

December 31, 2022

Corporate bonds - presented in marketable debt securities

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

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 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.

Notes to Consolidated Financial Statements

(amounts in thousands, except share and per

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 consist of the following:

Prepaid insurance

Prepaid research and development

Prepaid software

Accrued interest on marketable debt securities

Other prepaid expenses

Other current assets

Property and Equipment, net

Property and equipment,

net consists of the following:

Computer equipment

Furniture, fixtures and other

Laboratory equipment

Leasehold improvements

Property and equipment not yet placed into service

Total property and equipment

Accumulated depreciation

Total property and equipment, net

Depreciation expense was $ 247 and $ 117 for the

years ended December 31, 2022 and 2021, respectively.

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.

As of December 31, 2022 and 2021, 100 %

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

Protara Therapeutics, Inc.

Notes to Consolidated Financial Statements

(amounts in thousands, except share and per

Accrued Expenses

Accrued expenses consist

of the following:

Employee Costs

Research and development costs

Other expenses

Operating leases

In December 2020, the Company entered into an

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

in April 2021.

Annual rent is approximately $1,117.

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,

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

when incurred.

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

balances included in restricted cash.

In June 2021, the Company amended the existing

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

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

included in measurement of lease liabilities.

Leases classified as operating leases are included

in operating lease 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.

Notes to Consolidated Financial Statements

(amounts in thousands, except share and per

The components of lease expense were as follows:

For the year ended

Lease expense

Operating lease expense

Short-term lease expense

Variable lease expense for the years ended December

31, 2022 and 2021, respectively were not material.

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

For the year ended

Weighted-average discount rate

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

The total remaining operating lease payments

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

For the year ending December 31:

Operating Lease Payments

Total future operating lease payments

imputed interest

Present value of future minimum lease payments

Commitments and Contingencies

Employment Agreements

Executive Employment Agreements

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

Collaborations and License Agreements

Choline License Agreement

On September 27, 2017, the Company entered into

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

Buchman (“Dr.

Pursuant to the Choline

License Agreement, the Company received from Dr.

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

the “Licensed IND”, “Existing Study Data” and the “Licensed Know-How” for one or more of the licensed

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.

Notes to Consolidated Financial Statements

(amounts in thousands, except share and per

License Agreement

On December 22, 2017, the Company entered into

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

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

Pursuant to the Feinstein Agreement, the Company

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

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

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

sales thereafter.

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

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

agreements entered into thereafter.

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

license maintenance payments and for meeting milestone events.

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

2021, the Company recorded research and development expense of $ 17 and $ 15 , respectively, in connection with the Feinstein Agreement.

Sponsored Research and License Agreement

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

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

Pursuant to the Iowa Agreement, the University of

Iowa, which is engaged in clinical research to improve the diagnosis and treatment of lymphangioma using a pharmaceutical product (OK-432),

would assist the Company in collecting case reports, forms, source data, and safety data available to the University of Iowa in support

of the development of the Company’s proprietary Streptococcus Pyogenes investigational product, TARA-002 for the LMs indication.

During the term of the services, the Company would 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:

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, 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.

Notes to Consolidated Financial Statements

(amounts in thousands, except share and per

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

enters into contracts in which it makes representations and warranties regarding the performance of its services and that its services

will not infringe on third-party intellectual rights.

There have been no significant events related to such representations and warranties

in which the Company believes the outcome could result in losses or penalties in the future.

Stockholders’ Equity

As of December 31, 2022, the Company had 100,000,000

shares of common stock authorized for issuance, $ 0.001 par value per share, of which 11,267,389 and 11,235,731 shares were issued and

outstanding as of December 31, 2022 and 2021, respectively.

The holders of the Company’s common stock

are entitled to one vote per share.

Preferred Stock

In connection with the Preferred Offering (defined

below) on September 22, 2020, the Company filed a Certificate of Amendment to the Certificate of Designation of Preferences, Rights and

Limitations of Series 1 Convertible Preferred Stock of the Company (the “Amendment”) with the State of Delaware to increase

the authorized number of shares of the Company’s Series 1 Convertible Preferred Stock that may be issued from 3,880 to 8,028 .

Amendment was approved by a committee of the Company’s Board of Directors and the requisite holders of outstanding shares of Series

1 Convertible Preferred Stock.

No approval of the holders of the Company’s common stock was required to effectuate the Amendment.

As of December 31, 2022 and 2021, the Company

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

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

Description of Series 1 Convertible Preferred

Each share of Series 1 Convertible Preferred

Stock is convertible into 1,000 shares of the Company’s common stock, at a conversion price initially equal to approximately $ 7.01

per common share, subject to adjustment for any stock splits, stock dividends and similar events, at any time at the option of the holder,

provided that any conversion of Series 1 Convertible Preferred Stock by a holder into shares of the Company’s common stock would

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

ownership of the Company’s common stock would be aggregated with such holder’s for purposes of Section 13(d) of the Securities

Exchange Act of 1934, as amended, would beneficially own more than 9.99 % of the total number of shares of the Company’s common

stock issued and outstanding after giving effect to such conversion.

Upon written notice to the Company, the holder may from time to

time increase or decrease such limitation to any other percentage not in excess of 19.99 % specified in such notice.

In addition, upon

the occurrence of certain transactions that involve the merger or consolidation of the Company, an exchange or tender offer, a sale of

all or substantially all of the assets of the Company or a reclassification of its Common Stock, each share of Series 1 Convertible Preferred

Stock will be convertible into the kind and amount of securities, cash and/or other property that the holder of a number of shares of

Common Stock issuable upon conversion of one share of Series 1 Convertible Preferred Stock would receive in connection with such transaction.

The terms of the Series 1 Convertible Preferred

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

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

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 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 holders of Series 1 Convertible Preferred

Stock are not entitled to vote.

Protara Therapeutics, Inc.

Notes to Consolidated Financial Statements

(amounts in thousands, except share and per

Underwritten Public Offering

On September 24, 2020, pursuant to an underwriting

agreement dated September 22, 2020, the Company issued and sold in an underwritten public offering (the “Common Offering”)

an aggregate of 4,600,000 shares of its common stock at an offering price of $ 16.87 per share, for gross and net proceeds of approximately

$ 77.6 million and $ 73.6 million, respectively.

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

the Company’s common stock at the public offering price, less the underwriting discount.

On October 6, 2020, the underwriters exercised

their overallotment option in full, purchasing an additional 690,000 shares, resulting in the receipt of gross and net proceeds of $ 11.6

million and $ 11.1 million, respectively.

On September 24, 2020, pursuant to an underwriting

agreement (dated September 22, 2020), the Company issued and sold in an underwritten public offering (the “Preferred Offering”)

an aggregate of 4,148 shares of its Series 1 Convertible Preferred Stock at an offering price of $ 16,873.54 per share, for gross and

net proceeds of approximately $ 70.0 million and $ 66.3 million, respectively.

Stock-Based Compensation

2020 Inducement Plan

On March 26, 2020, the Compensation Committee

of the Board of Directors (the “Compensation Committee”) approved the ArTara Therapeutics, Inc.

Inducement Plan (the “2020

Inducement Plan”) in order to award nonstatutory stock options, restricted stock awards, restricted stock unit awards and other

stock-based awards to persons not previously an employee or director of the Company, or following a bona fide period of non-employment,

as an inducement material to such persons entering into employment with the Company.

The 2020 Inducement Plan provides for a total

of 600,000 shares for the issuance of the Company’s common stock.

The Compensation Committee also adopted a form of stock option

grant notice and stock option agreement and forms of restricted stock unit grant notice and restricted stock unit agreement for use with

the Inducement Plan.

As of December 31, 2022, 446,639 shares remain

available to be issued under the 2020 Inducement Plan.

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

grant of a total of 2,000,000 shares for the issuance of stock options, stock appreciation rights, restricted stock and restricted stock

units to among others, members of the Board of Directors, employees, consultants and service providers to the Company and its affiliates.

As of January 9, 2020, in connection with the Merger, no additional awards will be made under the 2017 Equity Incentive Plan.

Protara Therapeutics, Inc.

Notes to Consolidated Financial Statements

(amounts in thousands, except share and per

2014 Equity Incentive Plan

On October 3, 2014, the stockholders approved

the 2014 Equity Incentive Plan.

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,

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.

2014 Employee Stock

Purchase Plan

On October 3, 2014, the stockholders approved

the 2014 Employee Stock Purchase Plan (the “2014 ESPP”).

The 2014 ESPP initially authorized the issuance of up to 3,513 shares

of 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

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

The following table summarizes restricted stock unit activity:

Average Grant

Date Fair Value

Non-vested 12/31/2021

Non-vested 12/31/2022

Protara Therapeutics, Inc.

Notes to Consolidated Financial Statements

(amounts in thousands, except share and per

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

basis over the requisite service period of the respective awards.

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

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

shares of the Company’s common stock from the net settlement of 48,806 RSUs.

The Company paid $ 90 in connection with the net share

settlement of these RSUs.

Stock Options

The Company determined the fair value of stock

options granted based upon the assumptions as provided below.

For the Years Ended

Exercise price

$ 2.77 - $ 6.90

$ 6.56 - $ 19.82

Dividend yield

Expected volatility

92.00 % - 99.00 %

89.00 % - 98.00 %

Risk-free interest rate

1.46 % - 4.23 %

0.45 % - 1.33 %

Expected life (in years)

The following table summarizes stock option activities

for the year ended December 31, 2022:

Outstanding 12/31/2021

Outstanding at December 31, 2022

Vested or expected to vest at December 31, 2022

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, 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.

Notes to Consolidated Financial Statements

(amounts in thousands, except share and per

Summary of Stock-Based Compensation Expense

The following tables summarize total stock-based compensation costs

For the Years Ended

Stock options

Stock-based compensation expense was reflected within the consolidated

statements of operations and comprehensive loss as:

For the Years Ended

Research and development

General and administrative

Federal and State income tax expense is as follows:

For the Years Ended

Total current

Total deferred

Change in valuation allowance

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.

Protara Therapeutics, Inc.

Notes to Consolidated Financial Statements

(amounts in thousands, except share and per

The tax effects of temporary differences that

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

Deferred tax assets:

Net operating loss carry forwards

Capitalized research and development

Stock option expense

Research and development credits

Operating lease liability

Total deferred tax assets

Valuation allowance

Deferred tax assets, net of valuation allowance

Deferred tax liabilities:

Operating right-of-use asset

Total deferred tax liabilities

Deferred tax assets, net of valuation allowance and deferred tax liabilities

A reconciliation of the provision for income

taxes with the amounts computed by applying the statutory Federal income tax to income before provision for income taxes is as follows:

For the Years Ended

federal statutory rate

State taxes, net of federal benefit

Research and development credits

True-up to prior years return

State rate change

Stock-based compensation

Goodwill impairment

Change in valuation allowance

Effective tax rate

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 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.

Notes to Consolidated Financial Statements

(amounts in thousands, except share and per

The Company remains subject to examination by

tax authorities for all tax years.

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

of operations for the years ended December 31, 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

tax positions in future periods to determine if measurement and recognition in its financial statements is necessary.

The Company does

not believe there will be any material changes in its unrecognized tax positions over the next year.

Employee Benefit Plan

The Company maintains a defined contribution

benefit plan under section 401(k) of the Internal Revenue Code covering substantially all qualified employees of the Company (the “401(k)

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

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

Net loss attributable to common stockholders

Weighted-average common shares outstanding – basic and diluted

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

Since the Company was in a net loss position

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

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

The Company excluded the following potential common

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

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

Stock options issued and outstanding

Restricted stock units issued and outstanding

Conversion of Series 1 Convertible Preferred Stock

Total potentially dilutive shares

Solomon, Ph.D.

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