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

Notes to Financial Statements (Continued)

7. Option to Acquire Company (Continued)

        Expected volatility was based on historical volatility of companies within the biotechnology industry. The exercise price of the option to acquire all outstanding shares of Company stock, prior to the payment of contingent program milestones, was $240.0 million. The fair value of the option to acquire all of the outstanding shares of the Company was estimated to be $7.1 million, which was recorded as additional paid-in capital during 2009. The $2.9 million difference between the $10.0 million non-refundable payment and the fair value of the option was recorded as deferred revenue during 2009, representing the value of certain residual rights in the event the acquisition option is not exercised (e.g., a right, under certain circumstances, to license the Company's underlying technology). The acquisition option expired unexercised in 2013. This amount will not be recognized as revenue until the residual rights lapse, which will occur during the second half of 2014.

8. Commitments and Contingencies

Significant Contracts and Agreements

        In February 2002, the Company entered into an agreement to license certain intellectual property from Johns Hopkins University. The agreement calls for payments to be made by the Company upon the commencement of product sales, in the form of a royalty of 2.5% on net sales of the product. As the Company has not commenced product sales, during the years ended December 31, 2012 and 2013 and the six months ended June 30, 2014 (unaudited), the Company has recognized no royalties on product sales.

Operating Leases

        The Company has various non-cancellable operating leases for facilities and office equipment that expire at various dates through 2018. The facility leases require the Company to pay all electricity costs. In August 2014, the Company amended the Massachusetts office lease to extend the term of the lease by 42 months. The lease expires in June 2018 with one optional one-year extension period. Rental expense for the years ended December 31, 2012 and 2013, and six months ended June 30, 2013 and 2014 (unaudited) was $0.3 million, $0.2 million, $0.1 million and $0.1 million, respectively.

        Future minimum payments required under the leases as of June 30, 2014, are summarized as follows (in thousands):

Year Ending December 31:
   
 

2014

  $ 87  

Restricted cash related to facilities leases

        At December 31, 2012 and 2013, and June 30, 2014 (unaudited), the Company had $38,000 in an outstanding letter of credit to be used as collateral for leased premises. At December 31, 2012 and 2013 and June 30, 2014 (unaudited), the Company has pledged an aggregate of $39,000 to the bank as collateral for the letter of credit, which is included in short-term deposits.

9. Redeemable Convertible Preferred Stock

        As of June 30, 2014 (unaudited), the total authorized capital stock of the Company was 364,568,592 shares, which included 22,638,465 shares of Series A Preferred Stock, $0.001 par value per share; 10,909,091 shares of Series A-1 Preferred Stock, $0.001 par value per share; 20,754,461 shares of

F-21