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SEC Filings

PROTEON THERAPEUTICS INC filed this Form S-1 on 09/16/2014
Entire Document

Proteon Therapeutics, Inc.

Notes to Financial Statements (Continued)

4. Property and equipment, net

        Property and equipment, net, consists of the following (in thousands):

  December 31,    
  June 30,
  2012   2013  

Computer equipment and software

  $ 86   $ 96   $ 124  

Furniture, fixtures, and other

    85     84     83  

Laboratory equipment

    410     236     245  

    581     416     452  

Accumulated depreciation

    (502 )   (354 )   (367 )

Property and equipment, net

  $ 79   $ 62   $ 85  

        Depreciation expense for the years ended December 31, 2012 and 2013, and for the six months ended June 30, 2013 and 2014 (unaudited) was $57,000, $27,000, $15,000 and $13,000, respectively.

        During 2013, the Company sold fully depreciated fixed assets with an original cost basis of $0.2 million and a net book value of $0, recognizing a gain on sale of $0.1 million, of which, $4,000 was recognized during the six months ended June 30, 2013. The Company did not sell or dispose of any fixed assets during 2012 or the six months ended June 30, 2014 (unaudited).

5. Convertible Notes

        On April 29, 2013, the Company entered into a Convertible Note Purchase Agreement ("the Note Agreement") with certain existing Preferred Stockholders. Under the terms of the Note Agreement, the Company had the option, but not the obligation, to borrow up to $4.3 million from the issuance of the Convertible Notes, subject to meeting at least one of two pre-determined conditions. On September 4, 2013, upon satisfying one of the conditions, the Company issued the Convertible Notes with total aggregate proceeds of $4.3 million. All of the Convertible Notes were purchased by current Preferred Stockholders. The Convertible Notes accrue interest at 8% per annum and mature on or after March 31, 2014 upon written notice from a majority of the outstanding Convertible Note holders (the "Maturity Date").

        In connection with the issuance of the Convertible Notes, the Company incurred $36,000 of financing costs which were recorded in other current assets. The Company also reimbursed the lenders $10,000 for financing costs which has been recorded as a discount on the Convertible Notes. The Convertible Notes included various embedded conversion and redemption features as further described below. The Company recorded approximately $1.4 million as the fair value of the combined embedded derivative liability on September 4, 2013, with a corresponding amount recorded as debt discount. The debt discount has been amortized to interest expense over the life of the Convertible Notes. As of December 31, 2013 and June 30, 2014 (unaudited), the fair value of the combined embedded derivative liability was $1.4 million and $0, respectively. Amounts recorded for issuance costs and embedded features are being amortized to interest expense over the life of the Convertible Notes, approximately seven months. Changes in the estimated fair value of the embedded features are recorded in earnings in the period in which they occur.

        The Convertible Notes provide for conversion upon maturity at the holder's option and mandatory conversion upon a reverse acquisition. Both of these features provide for the conversion of the outstanding principal of the Convertible Notes, plus accrued interest into Series C Preferred Stock at $1.15 per share.