Organization and Operations

The Company

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

first

-in-class pharmaceuticals to address the medical needs of patients with kidney and vascular disease. The Company was formed in

June 2001

and incorporated on

March 24, 2006.

March 28, 2019,

the Company announced that its

second

Phase

trial, PATENCY-

for vonapanitase did

not

meet its co-primary endpoints of fistula use for hemodialysis (

p=0.328

) and secondary patency (

p=0.932

). The PATENCY-

clinical trial was the

second

two

randomized, double-blind Phase

trials, comparing a

microgram dose of investigational vonapanitase to placebo in patients with chronic kidney disease, or CKD, undergoing creation of a radiocephalic fistula for hemodialysis. Following the release of top-line data from the PATENCY-

clinical trial of vonapanitase on

March 28, 2019,

the Company began to evaluate its strategic alternatives focusing on enhancing stockholder value. On

September 23, 2019,

the Company entered into a merger agreement with ArTara Subsidiary, Inc. (formerly ArTara Therapeutics, Inc. “Private ArTara”). As of

December 31, 2019,

the Company had discontinued substantially all its research and development activities, including a reduction in workforce. As of

December 31, 2019,

the Company had terminated all of its legacy Proteon Therapeutics, Inc. employees. The Company has recorded severance costs of

$2.9

million for the year ended

December 31, 2019.

The Company remains subject to a number of risks similar to other companies in the biotechnology industry, including compliance with government regulations, protection of proprietary technology, dependence on

third

parties and product liability.

Reverse Merger with Private ArTara

January 9, 2020,

the Company and Private ArTara completed the merger and reorganization (the “Merger”) in accordance with the terms of the Agreement and Plan of Merger and Reorganization, dated

September 23, 2019 (

the “Merger Agreement”), by and among the Company, Private ArTara and REM

Acquisition, Inc., a wholly owned subsidiary of the Company (the “Merger Sub”), whereby Merger Sub merged with and into Private ArTara, with Private ArTara surviving as a wholly owned subsidiary of the Company.

January 9, 2020,

in connection with, and prior to the completion of, the Merger, the Company effected a

-for-

reverse stock split of its common stock, (the “Reverse Stock Split”), Private ArTara changed its name from “ArTara Therapeutics, Inc.” to “ArTara Subsidiary, Inc.”, and the Company changed its name from “Proteon Therapeutics, Inc.” to “ArTara Therapeutics, Inc.” All share and per share amounts presented in these financial statements have been adjusted to reflect the Reverse Stock Split. In addition, immediately following the closing of the Private Placements (defined below), all of the outstanding shares of the Company’s Series A Preferred Stock were converted into shares of the Company’s common stock. Shares of the Company’s common stock commenced trading on The Nasdaq Capital Market under the new name and ticker symbol “TARA” as of market open on

January 10, 2020.

Under the terms of the Merger Agreement, the Company issued shares of its common stock (“Common Stock”) to Private ArTara’s stockholders, at an exchange ratio of

0.190756

shares of Common Stock, after taking into account the Reverse Stock Split, for each share of Private ArTara common stock outstanding immediately prior to the Merger. Proteon assumed all of the outstanding and unexercised stock options of Private ArTara, with such stock options now representing the right to purchase a number of shares of Common Stock equal to

0.190756

multiplied by the number of shares of Private ArTara common stock previously represented by such Private ArTara stock options. The Company also assumed all of the unvested Private ArTara restricted stock awards, which were exchanged for a number of shares of Common Stock equal to

0.190756

multiplied by the number of shares of Private ArTara common stock previously represented by such Private ArTara restricted stock awards and unvested to the same extent as such Private ArTara restricted stock awards and subject to the same restrictions as such Private ArTara restricted stock awards.

January 9, 2020,

the Company completed certain private placements pursuant to a subscription agreement entered into on

September 23, 2019.

September 23, 2019,

the Company and Private ArTara entered into a subscription agreement (as amended on

November 19, 2019,

the "Subscription Agreement") with certain institutional investors (the "Investors") pursuant to which, among other things, (i) the Company agreed to issue to certain Investors shares of Proteon Series

Convertible Non-Voting Preferred Stock and/or Proteon common stock immediately following the Merger in a private placement transaction for an aggregate purchase price of approximately

$40.5

million (the "Proteon Private Placement") and (ii) Private ArTara agreed to issue to an Investor (that is an existing investor in ArTara) shares of ArTara common stock (the "ArTara Private Placement Shares") immediately prior to the Merger in a private placement transaction for an aggregate purchase price of approximately

$2.0

million (together with the Proteon Private Placement, the "Private Placements"). Immediately after the Proteon Private Placement, the Company converted all outstanding shares of Proteon's Series A Convertible Preferred Stock into shares of Proteon common stock (the "Series A Preferred Automatic Conversion"). On

January 9, 2020,

the Company received approximately

$39.6

million, net of offering costs related to the Private Placements.

The Merger was structured as a reverse merger and Private ArTara was determined to be the accounting acquirer based on the terms of the Merger Agreement. The Merger will be accounted for as a business combination as of the effective date of the Merger.

The financial information included in the financial statements is that of the Company prior to the Merger because the Merger was consummated after the period covered by these financial statements.

Liquidity

As of

December 31, 2019,

the Company had cash and cash equivalents of

$6.2

million. The Company had an accumulated deficit of

$225.5

million as of

December 31, 2019.

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

$42.5

million. The Company expects there will be

further material near term cash expenditures to fund the Company’s vonapanitase clinical trials. From the date of the Merger, the activities of the Company will become those of Private ArTara.

The Company is in the business of developing biopharmaceuticals, has

current or near term revenues. The Company is incurring substantial clinical and other costs in its drug development efforts. The Company expects it will need to raise additional capital in order to fully realize management’s plans.

The Company believes that its current financial resources, as of the date of the issuance of these consolidated financial statements, are sufficient to fund its current

twelve

month operating budget, alleviating any substantial doubt raised by our historical operating results and satisfying our estimated liquidity needs for at least

twelve

months from the issuance of these consolidated financial statements.

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The financial statements do

not

include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described above.

At-The-Market Equity Offering Program

November 12, 2015,

the Company filed a shelf registration statement on Form S-

(the “Registration Statement”), and entered into a Sales Agreement with Cowen and Company, LLC (the “Sales Agreement”) to establish an at-the-market (“ATM”) equity offering program pursuant to which they are able, with the Company’s authorization, to offer and sell up to

$40

million of the Company’s Common Stock at prevailing market prices from time to time. The Registration Statement became effective on

January 12, 2016.

The Company paid Cowen a commission equal to

of the gross proceeds of the sales price of all shares sold through it as sales agent under the Sales Agreement. The offering costs were offset against proceeds from the sale of common stock under this agreement. The Company filed a prospectus supplement on

March 16, 2017

because the Company is currently subject to General Instruction

I.B.6

of Form S-

which limits the amounts that the Company

may

sell under the Registration Statement. The Company’s ATM program was terminated effective as of

February 7, 2019,

when its new shelf registration statement on Form S-

File

No.

333

228865,

was declared effective by the SEC. For the year ended

December 31, 2018,

the Company sold

1,494,579

shares of Common Stock under the Sales Agreement for aggregate gross proceeds of

$3.0

million. For the year ended

December 31, 2018,

total offering costs of

$46,000,

were offset against the proceeds from the sale of common stock. The

1,494,579

shares of Common Stock sold under the ATM program during the year ended

December 31, 2018

were all sold on

September 25, 2018

to New Leaf Venture Partners LLC.