Commitments and Contingencies

Significant Contracts and Agreements

February 2002,

the Company entered into an agreement to license certain intellectual property with Johns Hopkins University. The agreement calls for payments to be made by the Company upon the commencement of product sales, in the form of a royalty of

2.5%

on net sales of the product. As of

December 31, 2019

the Company has

not

commenced product sales and therefore has recognized

royalties on product sales.

Operating Leases

The Company’s operating leases for facilities and office equipment all expired or were terminated during the year ended

December 31, 2019.

During the years ended

December 31, 2019

and

2018

the company recognized operating lease expense of

$0.2

million and

$0.3

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

Restricted cash related to certificate of deposit

November 2019

the Company took out a certificate of deposit in the amount of

$50,000

related to a letter of credit that the Company posted with World Customs Brokers so that they could import materials from Lonza an international vendor into the US and cover future import fees that might be due. At

December 31, 2019

and

2018

the Company had

$50,000

and

zero

which is included in current assets.

Restricted cash related to facilities leases

December 31, 2019

and

2018,

the Company had

zero

and

$22,000,

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

December 31, 2018

and

2017,

the Company pledged an aggregate of

$22,000

to the bank as collateral for the letter of credit, which is included in other non-current assets.

Litigation

From time to time, ArTara

may

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

Between

November 15

and

December 23, 2019,

four

lawsuits were filed in federal court against Proteon, ArTara, Merger Sub and the individual members of the Proteon Board (captioned

Patrick Plumley v. Proteon Therapeutics, Inc., et al.

, Case

No.

1:19

-cv-

02143

-UNA (D. Del. filed

11/15/19

));

Jeffrey Teow v. Proteon Therapeutics, Inc., et al.

, Case

No.

1:19

-cv-

06745

(E.D.N.Y., filed

11/30/19

);

Neil Lanteigne v. Proteon Therapeutics, et al.

, Case

No.

1:19

-cv-

12436

(D. Mass., filed

12/03/19

);

Stephen Wagner v. Proteon Therapeutics, Inc., et al.

, Case

No.

1:19

-cv-

02343

(D. Del., filed

12/23/19

). The

Plumley

complaint is brought as a purported class action lawsuit. All

four

lawsuits alleged that the definitive proxy statement in the preliminary registration statement on Form S-

filed by Proteon on

November 7, 2019

with the SEC in connection with the proposed Merger (the “Proxy Statement”) omitted material information with respect to the transactions contemplated by the Merger Agreement, rendering it false and misleading in violation of Sections

(a) (and Rule

14a

promulgated thereunder) and

(a) of the Exchange Act. The plaintiffs in each of the

four

lawsuits sought, among other things, injunctive relief, rescission, declaratory relief and unspecified monetary damages. On

December 31, 2019,

Proteon filed an amendment to the Proxy Statement on Form

-K, which contained certain supplemental disclosures intended to moot the plaintiffs’ disclosure claims. On

January 9, 2019,

Proteon held a special meeting of its stockholders, at which the Company’s stockholders approved the Merger. On

January 27, 2020,

plaintiff in the

Lanteigne

action voluntarily dismissed his case. On

February 3, 2020,

plaintiff in the

Plumley

action voluntarily dismissed his case. On

February 7, 2020,

plaintiff in the

Teow

action voluntarily dismissed his case. On

February 10, 2020,

plaintiff in the

Wagner

action dismissed his case.

The Company believes that it is probable that it will incur a loss related to these matters. However, the Company is unable to reasonably estimate the loss, and as such the Company has

not

recorded a loss contingency.