Proteon Therapeutics, Inc.
Notes to Financial Statements (Continued)
2. Summary of Significant Accounting Policies (Continued)
Deferred Public Offering Costs
Deferred public offering costs, which primarily consist of direct, incremental legal and accounting fees relating to the IPO, are
capitalized within other assets. The deferred issuance costs will be offset against IPO proceeds upon the consummation of the offering. In the event the offering is terminated, deferred offering costs
will be expensed. The Company has incurred $1.2 million in IPO costs as of June 30, 2014 (unaudited).
Deferred Financing Costs
Deferred financing costs related to the Convertible Notes as of December 31, 2013 were included in prepaid expenses and other
current assets and have been fully amortized as of June 30, 2014 (unaudited) (Note 5). Deferred financing costs are amortized over the life of the related debt using the effective
interest method. For the years ended December 31, 2012 and 2013, and for the six months ended June 30, 2013 and 2014 (unaudited), deferred financing costs of $0, $18,000, $0 and $18,000,
respectively, were amortized to interest expense.
of June 30, 2014, the Company incurred $437,000 (unaudited) of costs related to the issuance of the Series D Preferred Stock. The Series D Preferred Stock
issuance costs were allocated to the various tranches resulting in $360,000 allocated to the first tranche and $77,000 allocated to the second and third tranche rights. The amount allocated to the
first tranche was offset against the proceeds upon
closing of the issuance of the first tranche of Series D Preferred Stock (Note 9). The amount allocated to the future tranche rights has been recorded against the tranche right
Fair Value of Financial Instruments
The Company's financial instruments consist of cash and cash equivalents, short-term investments, accounts payable, accrued
liabilities, Convertible Notes and features embedded in the Convertible Notes (see Note 5). The Company is required to disclose information on all assets and liabilities reported at fair value
that enables an assessment of the inputs used in determining the reported fair values. FASB ASC Topic 820, Fair Value Measurement and Disclosures,
established a hierarchy of inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the observable inputs be used
when available. Observable inputs are inputs that market participants would use in pricing the financial instrument based on market data obtained from sources independent of the Company. Unobservable
inputs are inputs that reflect the Company's assumptions about the inputs that market participants would use in pricing the financial instrument and are developed based on the best information
available in the circumstances. The fair value hierarchy applies only to the valuation inputs used in determining the reported or disclosed fair value of the financial instruments and is not a measure
of the investment credit quality. Fair value measurements are classified and disclosed in one of the following three categories:
- Level 1Valuations based on unadjusted quoted prices in active markets for identical assets or
liabilities that the Company has the ability to access at the measurement date.
- Level 2Valuations based on quoted prices for similar assets or liabilities in markets that are
active or for which all significant inputs are observable, either directly or indirectly.
- Level 3Valuations that require inputs that reflect the Company's own assumptions that
significant to the fair value measurement and unobservable.