Proteon Therapeutics, Inc.
Notes to Financial Statements (Continued)
2. Summary of Significant Accounting Policies (Continued)
with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, the Company's
management evaluates its estimates, which include, but are not limited to, estimates related to convertible notes, stock-based compensation expense, clinical trial accruals, and reported amounts of
revenues and expenses during the reported period. The Company bases its estimates on historical experience and other market-specific or other relevant assumptions that it believes to be reasonable
under the circumstances. Actual results may differ from those estimates or assumptions.
Company utilizes significant estimates and assumptions in determining the fair value of its common stock ("Common Stock"). The Company utilized various valuation methodologies in
accordance with the framework of the 2004 and 2013 American Institute of Certified Public Accountants Technical Practice Aids, Valuation of Privately-Held Company Equity
Securities Issued as Compensation, to estimate the fair value of its Common Stock. Each valuation methodology includes estimates and assumptions that require the Company's
judgment. These estimates and assumptions include a number of objective and subjective factors, including external market conditions affecting the biotechnology industry sector, the prices at which
the Company sold shares of preferred stock, the superior rights and preferences of securities senior to the Company's Common Stock at the time and the likelihood of achieving a liquidity event, such
as an initial public offering or a sale of the Company. Significant changes to the key assumptions used in the valuations could result in different fair values of Common Stock at each valuation date
and materially affect the financial statements.
On October 1, 2014, the Board of Directors and, on October 3, 2014, the stockholders approved a 1-for-15.87 reverse stock split of the Company's Common Stock and a
proportional adjustment to the existing conversion ratios for each series of Preferred Stock. The effective date of the reverse stock split is October 6, 2014. All share, share equivalent and
per share amounts have been adjusted to reflect the reverse stock split. The ratios by which shares of Preferred Stock are convertible into shares of Common Stock have been adjusted to reflect the
effects of the reverse stock split.
Recent Accounting Pronouncements
In June 2014, the FASB issued authoritative guidance regarding disclosure requirements of development stage companies in GAAP and
International Financial Reporting Standards. This newly issued accounting standard removes all incremental financial reporting requirements, including inception-to-date information, for development
stage entities. This guidance is effective for annual periods beginning after December 15, 2014. However, the Company early adopted this guidance effective with the publication of its 2013
May 2014, the Financial Accounting Standards Board (FASB) issued a new standard on revenue recognition providing a single, comprehensive revenue recognition model for all contracts
with customers. The new revenue standard is based on the principle that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard is effective beginning January 1, 2017, with no early adoption permitted. The
amendments may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of initial application. We are currently evaluating the
impact of the new guidance on our financial statements, if any.