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SEC Filings

PROTEON THERAPEUTICS INC filed this Form S-1/A on 10/07/2014
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Determination of the Fair Value of Common Stock on Grant Dates

        Following the consummation of this offering, the fair value of our common stock will be determined based on the quoted market price of our common stock. We have historically granted stock options at exercise prices not less than the fair value of our common stock. Our board of directors determined the fair value of our common stock considering, in part, the work of an independent third-party valuation specialist. The board determined the estimated per share fair value of our common stock at various dates considering contemporaneous valuations performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation, also known as the "Practice Aid".

        In conducting the valuations, the independent third-party valuation specialist considered all objective and subjective factors that it believed to be relevant for each valuation conducted in accordance with the Practice Aid, including our best estimate of our business condition, prospects and operating performance at each valuation date. Other significant factors included:

    the prices of our preferred stock sold to outside investors in arm's length transactions, and the rights, preferences and privileges of our preferred stock as compared to those of our common stock, including the liquidation preferences of our preferred stock;
    the provisions of an option agreement to acquire Proteon that has since terminated;
    our results of operations, financial position and the status of research and development efforts;
    the composition of, and changes to, our management team and board of directors;
    the lack of liquidity of our common stock;
    our stage of development and business strategy and the material risks related to our business and industry;
    the valuation of publicly traded companies in the life sciences sector, as well as recently completed mergers and acquisitions of guideline companies;
    any external market conditions affecting the life sciences industry sector; and
    the likelihood of achieving a liquidity event for the holders of our common stock and stock options, such as an initial public offering, or IPO, or a sale of our company, given prevailing market conditions, and the state of the IPO market for similarly situated privately held life sciences companies.

        The dates of our contemporaneous and retrospective valuations have not always coincided with the dates of our stock option grants. In determining the exercise prices of the stock options set forth in the table above, our board of directors considered, among other things, the most recent contemporaneous and retrospective valuation of our common stock and their assessment of additional objective and subjective factors that were relevant as of the grant dates. The additional factors considered when determining whether any changes in the fair value of our common stock had occurred between the most recent contemporaneous valuation and the grant dates included our stage of research and development, our operating and financial performance and current business conditions.

        The estimates of fair value of our common stock are highly complex and subjective. There are significant judgments and estimates inherent in the determination of the fair value of our common stock. These judgments and estimates include assumptions regarding our future operating performance, the time to completing an IPO or other liquidity event, the related valuations associated with these events, and the determinations of the appropriate valuation methods at each valuation date. If we had made different assumptions, our stock-based compensation expense, net loss and net loss per share applicable to common stockholders could have been materially different.

Common Stock Valuation Methodologies

        The valuations we obtained were prepared in accordance with the guidelines in the Practice Aid, which prescribes several valuation approaches for setting the value of an enterprise, such as the cost,