Stock Based Compensation

6 Months Ended

Jun. 30, 2020

Share-based Payment Arrangement [Abstract]

STOCK BASED COMPENSATION

NOTE 8 – 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 June 30, 2020, 560,550 shares remain available to be issued under the 2020 Inducement Plan.

2017 Equity Incentive Plan

On August 10, 2017, Private ArTara, its Board of Directors of the Company ("Board") and its shareholders approved the ArTara Therapeutics, Inc. 2017 Equity Incentive Plan (the "2017 Equity Incentive Plan") to enable Private ArTara and its affiliates to recruit and retain highly qualified personnel and to incentivize personnel for productivity and growth.

The 2017 Equity Incentive Plan provided for the grant of a total of 2,000,000 shares for the issuance of stock options, stock appreciation rights, restricted stock and restricted stock units to among others, members of the board of directors, employees, consultants and service providers to the Company and its affiliates. As of January 9, 2020, in connection with the reverse merger, no additional awards will be made under the 2017 Equity Incentive Plan.

2014 Equity Incentive Plan

On October 3, 2014, the stockholders approved the 2014 Equity Incentive Plan (the "2014 Plan").

On June 20, 2017, the Company's Board of Directors amended the 2014 Plan (the "Amended 2014 Plan"). On July 31, 2017, the stockholders approved this amendment.

The Amended 2014 Plan provides for the grant of incentive and non-statutory stock options, stock appreciation rights, restricted stock and stock unit awards, performance units, stock grants and qualified performance-based awards. The 2014 Plan provides that the number of shares reserved and available for issuance under the 2014 Plan will automatically increase each January 1, beginning January 1, 2015 by four percent of the outstanding shares of Common Stock on the immediately preceding December 31 or such lesser number of shares as determined by the Company's Board of Directors prior to each such January 1st. The Amended 2014 Plan clarifies that the number of shares for purposes of calculating the evergreen feature includes the number of shares of Common Stock issuable upon conversion of any security that the Company may issue that is convertible into or exchangeable for Common Stock, including, but not limited to, preferred stock or warrants. Pursuant to a special meeting of the Proteon stockholders held on January 9, 2020, the number of shares available for issuance under the Amended 2014 Plan increased by 900,002 shares from 148,298 shares to 1,048,300 shares on January 1, 2020. As of June 30, 2020, 317,114 shares remain available to be issued under the 2014 Equity Incentive Plan.

Terms of the stock awards, including vesting requirements, are determined by the Board of Directors, subject to the provisions of the Plans. Certain awards provide for accelerated vesting if there is a change in control as defined in the Plans.

2014 Employee Stock Purchase Plan

On October 3, 2014, the stockholders approved the 2014 Employee Stock Purchase Plan (the "2014 ESPP"). The 2014 ESPP initially authorized the issuance of up to 3,513 shares of Common Stock. The number of shares increases each January 1, commencing on January 1, 2015 and ending on (and including) January 1, 2024, by an amount equal to the lesser of one percent of the outstanding shares as of the end of the immediately preceding fiscal year, 7,025 shares or any lower amount determined by the Company's Board of Directors prior to each such January 1st. As of June 30, 2020, the authorized number of shares under the 2014 ESPP is 18,012 and the number of shares available for issuance is 13,340. During the six months ended June 30, 2020 and 2019, no shares were issued under the 2014 ESPP.

Restricted Stock Units

Awards to Directors

The following RSUs were granted pursuant to the Company's 2014 Equity Incentive Plan. Settlement for the RSUs is deferred until the earliest to occur of (i) the director's termination of service, (ii) death, (iii) disability and (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.

On January 10, 2020, the Board of Directors granted an aggregate of 254,000 RSUs to directors of the Company. These RSUs vest 12.5% on the date of grant and in twenty-one equal monthly installments thereafter. The grant date fair value of these RSUs was $7,620,000.

On January 10, 2020, the Board of Directors granted an aggregate of 62,000 RSUs to directors of the Company. These RSUs vest 50% on the one year anniversary of the grant date, and the remainder vest in 12 equal monthly installments thereafter. The grant date fair value of these RSUs was $1,860,000.

Awards to Others

On January 10, 2020, the Board of Directors granted an aggregate of 91,000 RSUs to officers of the Company. These RSUs vest in four equal installments beginning on the first year anniversary of the grant. The grant date fair value of these RSUs was $2,730,000.

On January 10, 2020, the Board of Directors granted an aggregate of 14,825 RSUs to employees of the Company. These RSUs vest in four equal annual installments beginning on the first year anniversary of the grant. The grant date fair value of these RSUs was $444,750.

On January 10, 2020, the Board of Directors granted 50,000 RSUs to the CEO of the Company. These RSUs vest in four equal annual installments beginning on the first year anniversary of the date of grant. The grant date fair value of these RSUs was $1,500,000.

Following is a summary of restricted stock unit activities for the six months ended June 30, 2020:

	Restricted Stock Units			Weighted Average Grant Date Fair Value
Non-vested 1/1/2020		-		$	-
Granted		471,825			30.00
Vested		(84,668	)		30.00
Non-vested 6/30/2020		387,157		$	30.00

The fair value of restricted stock units is amortized on a straight line basis over the requisite service periods of the respective awards. As of June 30, 2020 the unamortized value of RSUs was $10,414,800. As of June 30, 2020, the weighted average remaining amortization period was 2.22 years. As of June 30, 2020 and 2019, 89,913 and 0 RSUs, respectively, have vested that have not yet been settled into shares of the Company's Common Stock.

Stock Options

On January 10, 2020, the Board of Directors approved the grant of two options under the 2014 Equity Incentive Plan for the purchase of an aggregate 222,500 shares of the Company's Common Stock to Mr. Shefferman. The first option, granted on January 10, 2020, is for the purchase of 111,250 shares of the Company's Common Stock and has an exercise price of $30 per share. This option expires ten years from the date of grant and vests 25% on the one year anniversary of the grant date and the remainder of the underlying shares vest in thirty-six equal monthly installments thereafter. The grant date fair value of this option was $2,662,135.

The second option, which was granted on July 10, 2020, is for the purchase of 111,250 shares of the Company's Common Stock. The option has an exercise price of $27.42 per share. This option will expire ten years from the date of grant and will vest 25% on the one year anniversary of the grant date and the remainder of the underlying shares vest in thirty-six equal monthly installments thereafter.

On February 4, 2020, pursuant to the hiring of the Company's CFO, the Board of Directors approved the grant of a stock option under the 2014 Equity Incentive Plan to purchase 94,000 shares of the Company's Common Stock with an exercise price of $37.30 per share. This option will expire ten years from the date of grant and will vest 25% on the one year anniversary of the grant date and the remainder of the underlying shares vest in thirty-six equal monthly installments thereafter. Mr. Davis will be eligible for future equity awards under such plan on an annual basis. The grant date fair value of this option was $2,791,556.

On February 26, 2020, the Compensation Committee of the Company pre-approved the grants of stock options under the Inducement Plan to new hires of the Company. On April 1, 2020, these employees were granted options to purchase an aggregate of 51,650 shares of the Company's Common Stock with an exercise price of $24.25 per share. These options will expire ten years from the date of grant and will each vest 25% between March 9, 2021 and March 23, 2021 (depending on the specific grant) and the remainder of the underlying shares shall vest in thirty-six equal monthly installments thereafter. The grant date fair value of these options was $954,053.

On April 27, 2020, the Compensation Committee of the Company approved the grant of stock options under the 2020 Inducement Plan to new hires of the Company. On May 1, 2020, these employees were granted options to purchase an aggregate of 4,100 shares of the Company's Common Stock with an exercise price of $24.02 per share. These options expire ten years from the date of grant and vests 25% between April 20, 2021 and April 27, 2021 (depending on the specific grant) and the remainder of the underlying shares shall vest in thirty-six equal monthly installments thereafter. The grant date fair value of these options was $75,019.

On May 19, 2020, the Compensation Committee of the Company approved the grant of a stock option under the 2020 Inducement Plan to a new hire of the Company. On June 1, 2020, this employee was granted an option to purchase 3,700 shares of the Company's Common Stock with an exercise price of $51.12 per share. This option expires ten years from the date of grant and vests 25% on May 11, 2021 and the remainder of the underlying shares shall vest in thirty-six equal monthly installments thereafter. The grant date fair value of this option was $144,025.

On June 9, 2020, the Company issued to directors of the Company stock options to purchase an aggregate of 54,000 shares of the Company's common stock. These stock options has an exercise price of $35.00, expire 10 years from the date of grant, and vest monthly over 12 months. The grant date fair value of these options was $1,374,732.

The Company determined the fair value of stock options granted based upon the assumptions as provided below.

	For the Six Months Ended June 30,
	2020			2019
Stock price	$	24.02 - $ 51.12		$	8.65
Exercise price	$	24.02 - $ 51.12		$	9.18
Dividend yield		0	%		0	%
Expected volatility		95% - 101	%		97	%
Risk-Free interest rate		0.40% - 1.69	%		2.37	%
Expected life (in years)		5.27 - 6.08			6.02

Following is a summary of stock option activities for the six months ended June 30, 2020:

	Options			Weighted Average Grant Date Fair Value		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Outstanding 1/1/2020		219,592		$	7.29	$	9.18		9.72	$	-
Granted		318,700			25.11		32.24		-		-
Forfeited		(20,000	)		18.47		24.25		-		-
Outstanding 6/30/2020		518,292		$	17.57	$	22.78		9.16	$	4,604,778
Exercisable as of 6/30/2020		94,220		$	6.75	$	9.18		8.41	$	1,897,591

The weighted average grant date fair value of the options granted during the six months ended June 30, 2019 was $6.71. The fair value of stock options is amortized on a straight line basis over the requisite service periods of the respective awards. As of June 30, 2020 the unamortized value of stock options was $7,751,851. As of June 30, 2020, the weighted average remaining amortization period was 2.92 years.

Summary of Stock Based Compensation Expense

The following tables summarize total stock-based compensation costs recognized:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2020		2019		2020		2019
Restricted stock	$	-	$	22,500	$	-	$	45,000
RSUs		1,314,668		-		3,744,340		-
Stock options		514,054		79,962		882,189		134,344
Total	$	1,828,722	$	102,462	$	4,626,529	$	179,344

Stock based compensation expense was reflected within the statements of operations as:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2020		2019		2020		2019
Research and development	$	201,872	$	52,479	$	410,637	$	93,552
General and administrative		1,626,850		49,983		4,215,892		85,792
Total	$	1,828,722	$	102,462	$	4,626,529	$	179,344