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SEC Filings

PROTEON THERAPEUTICS INC filed this Form S-1 on 09/16/2014
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Proteon Therapeutics, Inc.

Notes to Financial Statements (Continued)

5. Convertible Notes (Continued)

        As of September 4, 2013 and December 31, 2013, the Company ascribed a probability to the mandatory conversion feature upon a financing of not less than $7.0 million of 85% and 100%, respectively. As of September 4, 2013 and December 31, 2013 the Company ascribed a probability to the call feature upon a change in control of 15% and 0%, respectively. For all other features included in the combined embedded derivative, the Company estimated a 0% probability of occurrence as of September 4, 2013 and December 31, 2013. From December 31, 2013 to the conversion of the convertible notes into Series D Preferred Stock, as described below, the estimates of these probabilities did not change. The Company classified the liability within Level 3 of the fair value hierarchy as the probability factor is an unobservable input and significant to the valuation model.

        On May 13, 2014, we received net proceeds of approximately $25.0 million from the issuance of Series D convertible preferred stock to new and existing investors at a price per share of $0.588656. In aggregate, we issued 52,813,827 shares of Series D preferred stock including 10,344,201 shares for the conversion of $4.6 million of convertible notes and accrued interest at a conversion price of $0.4414 per share. In connection with the conversion, the compound embedded derivative liability, which had a fair value of $1.5 million, was written-off. As a result, there was no gain or loss recognized upon conversion of the Convertible Notes.

6. Accrued expenses

        Accrued expenses consist of the following (in thousands):

  December 31,    
  June 30,
  2012   2013  

Payroll and employee-related costs

  $ 81   $ 419   $ 291  

Contracted service costs

    544     360     773  

Professional fees

    95     202     940  


    15     3     2  


  $ 735   $ 984   $ 2,006  

7. Option to Acquire Company

        In March 2009, the Company entered into an option agreement with a major pharmaceutical entity that provides an exclusive option to acquire the Company under a pre-negotiated merger agreement. The Company received a $10.0 million non-refundable payment as consideration for the agreement. The fair value of the option to acquire the Company was estimated using the Black-Scholes option-pricing model with the following assumptions:

Expected volatility


Expected option expiration date

    June 30, 2013  

Expected dividends


Expected term (years)


Risk-free rate