Stock-Based Compensation

9 Months Ended

Sep. 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 September 30, 2020, 507,350 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 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 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 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 September 30, 2020, 232,850 shares remain available to be issued under the Amended 2014 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 September 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 nine months ended September 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 Amended 2014 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 anniversary of the date of 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 anniversary of the date of 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 Chief Executive Officer of the Company. These RSUs vest in four equal annual installments beginning on the first anniversary of the date of grant. The grant date fair value of these RSUs was $1,500,000.

On July 1, 2020, the Compensation Committee of the Company granted 7,500 RSUs to a new hire of the Company under the 2014 Equity Incentive Plan. These RSUs will vest 25% on the one, two, three and four year anniversary of the date of grant. The grant date fair value of these RSUs was $211,500.

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

	Restricted Stock Units			Weighted Average Grant Date Fair Value
Non-vested 1/1/2020		-		$	-
Granted		479,325			29.97
Forfeited		(56,375	)		30.00
Vested		(119,896	)		30.00
Non-vested 9/30/2020		303,054		$	29.96

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 September 30, 2020, the unamortized value of RSUs was $7,604,720. As of September 30, 2020, the weighted average remaining amortization period was 1.96 years. As of September 30, 2020 and 2019, 104,271 and 0 RSUs, respectively, have vested that have not yet been settled into shares of the Company's Common Stock.

On July 10, 2020, the Company issued 5,245 shares of Common Stock from the settlement of RSUs.

On July 29, 2020, the Company issued 9,938 shares of Common Stock from the settlement of RSUs.

On August 8, 2020, the Company issued 5,687 shares of Common Stock from the settlement of RSUs.

Restricted Stock Units Modification

On July 23, 2020, in connection with Dr. Casoy's separation, the Company agreed to accelerate the vesting of 5,687 RSUs. The Company recorded a charge of $151,843 during the three months ended September 30, 2020 to research and development expense within the Company's condensed consolidated statements of operations in connection with the modification of this award (See Note 6).

Stock Option Grants

During the first quarter of 2020, the Board of Directors granted stock options to purchase an aggregate of 205,250 shares of the Company's Common Stock. These options had an exercise price ranging from $30.00 to $37.30. The options expire ten years from their respective dates of grant and 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. The grant date fair value of these options was $5,453,691.

During the second quarter of 2020, the Board of Directors granted stock options to purchase an aggregate of 113,450 shares of the Company's Common Stock. These options had an exercise price ranging from $24.02 to $51.12. The options expire ten years from their respective dates of grant. Options representing the purchase of 59,450 shares of the Company's Common Stock vest 25% on the one year anniversary of the date of grant and the remainder of the underlying shares vest in thirty-six equal monthly installments thereafter. Options representing the purchase of 54,000 shares of the Company's Common Stock vest monthly over one year. The grant date fair value of these options was $2,547,829.

During the third quarter of 2020, the Board of Directors granted stock options to purchase an aggregate of 194,700 shares of the Company's Common Stock. These options had an exercise price ranging from $20.51 to $28.20. The options expire ten years from their respective dates of grant. Options representing the purchase of 168,450 shares of the Company's Common Stock vest 25% on the one year anniversary of the date of grant and the remainder of the underlying shares vest in thirty-six equal monthly installments thereafter. Options representing the purchase of 8,250 shares of the Company's Common Stock vest monthly over one year. Options representing the purchase of 18,000 shares of the Company's Common Stock vest monthly over three years. The grant date fair value of these options was $3,922,772.

Stock Option Modifications

Effective July 20, 2020, Scott Braunstein, M.D. notified the Company of his resignation from the Company's Board of Directors. In connection with Dr. Braunstein's resignation, the Compensation Committee approved the accelerated vesting of all stock options issued to Dr. Braunstein prior to the Merger, and to extend the post-termination exercise period of vested options to 12 months from the date of resignation. Due to the modification of Dr. Braunstein's options, the Company recorded the incremental value of $500,563 during the three months ended September 30, 2020 to general and administrative expense within the Company's condensed consolidated statements of operations.

Stock Options

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

	For the Nine Months Ended September 30,
	2020			2019
Stock price	$	20.51 - $ 51.12		$	6.81 - $8.65
Exercise price	$	20.51 - $ 51.12		$	9.18
Dividend yield		0	%		0	%
Expected volatility		95% - 101	%		97	%
Risk-free interest rate		0.28% - 1.69	%		1.71% - 2.37	%
Expected life (in years)		5.27 - 6.08			5.58 - 6.02

Following is a summary of stock option activities for the nine months ended September 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		513,400			23.23		30.01		-		-
Exercised		(57,767	)		6.72		9.18
Forfeited		(52,886	)		14.08		18.91		-		-
Outstanding 9/30/2020		622,339		$	20.93	$	25.53		9.25	$	1,049,496
Exercisable as of 9/30/2020		86,583		$	9.70	$	13.24		8.31	$	552,391

The weighted average grant date fair value of the options granted during the nine months ended September 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 September 30, 2020, the unamortized value of stock options was $10,151,722. As of September 30, 2020, the weighted average remaining amortization period was 3.12 years.

Summary of Stock-Based Compensation Expense

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

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
Restricted stock	$	-	$	22,500	$	-	$	67,500
RSUs		1,307,173		-		5,051,513		-
Stock options		1,473,629		116,640		2,355,818		250,984
Total	$	2,780,802	$	139,140	$	7,407,331	$	318,484

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

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
Research and development	$	158,040	$	81,645	$	568,678	$	175,197
General and administrative		2,622,762		57,495		6,838,653		143,287
Total	$	2,780,802	$	139,140	$	7,407,331	$	318,484