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SEC Filings

PROTEON THERAPEUTICS INC filed this Form 10-Q on 11/07/2017
Entire Document

Available-for-sale securities consist of the following (in thousands):


   Amortized Cost  Unrealized Gains  Unrealized Losses  Fair Value
September 30, 2017                    
Government securities                    
(Due within 1 year)  $27,450   $1   $(7)  $27,444 
   $27,450   $1   $(7)  $27,444 
December 31, 2016                    
Government securities                    
(Due within 1 year)  $4,924   $1   $-   $4,925 
   $4,924   $1   $-   $4,925 


4. Derivative Financial Instruments


Beginning in May 2015 and through 2016, the Company has purchased Swiss Francs and enters into a series of forward foreign currency contracts to mitigate its exposure to fluctuations in the U.S. dollar value of forecasted transactions denominated in Swiss Franc. The latter are considered derivative financial instruments that the Company records on the consolidated balance sheet at fair value. The Company elected not to apply hedge accounting to these instruments. As a result, during the nine months ended September 30, 2016, the Company experienced unrealized gains within other income (expense), net, in the consolidated statements of operations from the mark-to-market of outstanding forward foreign currency contracts. As of December 31, 2016, all forward foreign currency contracts had been settled and are no longer outstanding.


5. Commitments and Contingencies


In July 2015, the Company entered into a manufacturing services agreement with Lonza Ltd, or (“Lonza”) for the processing, development and manufacturing of the active pharmaceutical ingredient (“API”) in its lead product candidate, vonapanitase. Under the agreement, the Company will issue purchase orders authorizing Lonza to manufacture API batches and will pay for the services and batches in accordance with terms and assumptions in the agreement and to be set forth in a project plan. As of September, 30, 2017, the Company has issued a purchase order for 7.6 million Swiss Francs, approximately $7.8 million at current exchange rates, for the manufacturing of three batches that commenced in July 2017 and one batch to commence by the end of 2019. As of September 30, 2017, nearly all of the services related to the three batches that commenced in July 2017 have been rendered under this purchase order.


Future minimum payments required under operating leases as of September 30, 2017 are summarized as follows (in thousands):


  Year Ending December 31:    Amount  
  2017     44   
  2018     270   
  2019     207   
  Total minimum lease payments    $521   


In addition to the base rent, the Company is also responsible for its share of operating expenses and real estate taxes, in accordance with the terms of the lease agreement. In August 2017, the Company extended its lease until September 30, 2019. Pursuant to the lease amendment, the Company has provided a security deposit in the amount of $22,000 to the lessor.


Restricted cash related to facilities leases


As of September, 30, 2017 and December 31, 2016, the Company had $22,000 in an outstanding letter of credit to be used as collateral for leased premises. As of September, 30, 2017 and December 31, 2016, the Company pledged an aggregate of $22,000 to the bank as collateral for the letter of credit, which is included in long-term assets.


6. Series A Preferred Financing


 On August 2, 2017, the Company issued and sold 22,000 shares of the Company’s Series A Convertible Preferred Stock, par value of $0.001 per share (the “Series A Preferred”), for a purchase price of $1,000 per share, or aggregate purchase price and gross proceeds of $22.0 million, all upon the terms and conditions set forth in the Securities Purchase Agreement dated as of June 22, 2017. The Company incurred $0.5 million of issuance costs in connection with the transaction. Each share of Series A Preferred is convertible into approximately 1,005 shares of the Company’s Common Stock at a conversion price of $0.9949 per share, in each case subject to adjustment for any stock splits, stock dividends and similar events, provided that any conversion of Series A Preferred by a holder into shares of Common Stock is 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 (the “Exchange Act”), would beneficially own more than 9.985% of the total number of shares of Common Stock issued and outstanding after giving effect to such conversion.


Upon issuance, each share of Series A Preferred included an embedded beneficial conversion feature as the market price of the Company’s Common Stock on the date of issuance of the Series A Preferred was $1.30 per share. As a result, the Company recorded the intrinsic value of the beneficial conversion feature of $6.7 million as a discount on the Series A Preferred at issuance. As the Series A Preferred is immediately convertible upon issuance and does not include a stated redemption date, the discount on the Series A Preferred was immediately accreted.