Quarterly report pursuant to Section 13 or 15(d)

Common Stock

v2.4.0.6
Common Stock
 9 Months Ended
Sep. 30, 2012
Common Stock [Abstract]  
Common Stock

8. Common Stock

Underwritten Offering

On June 27, 2012, the Company completed an underwritten public offering of 5,750,000 shares of our Common Stock, including 750,000 shares subject to an over-allotment option exercised by the underwriters, at a price of $5.00 per share for proceeds, net of underwriting commissions and other offering expenses, of approximately $26.4 million.

Stock-based Compensation Plans

As of September 30, 2012, the Company had two equity compensation plans, the Coronado Biosciences, Inc. 2007 Stock Incentive Plan, for employees, non-employees and outside directors and the Coronado Biosciences, Inc. 2012 Employee Stock Purchase Plan (the “ESPP”). The ESPP was approved by stockholders at the Company’s Annual Meeting on August 16, 2012. Eligible employees began to participate in the ESPP effective February 1, 2012.

Compensation Expense. The following table summarizes the stock-based compensation expense from awards, including stock options and restricted Common Stock awards to employees and non-employees, compensation expense for the ESPP and warrants to non-employees for the nine months ended September 30, 2012 and 2011, and from the period June 28, 2006 (date of inception) to date.

 

                         
    For the nine months ended
September 30,		    

Period from

June 28, 2006

(date of

inception) to

September 30,

  
($ in thousands)   2012     2011     2012  

Employee awards

   $ 1,336     $ 359     $ 2,071  

Non-employee awards

     412       192       3,225  

Non-employee warrants

     425       231       752  
   

 

 

    

 

 

    

 

 

  

Total stock-based compensation expense

   $ 2,173     $ 782     $ 6,048  
   

 

 

    

 

 

    

 

 

  

The following table summarizes stock option activity:

 

                                 
    Outstanding Options     Weighted
Average
Remaining
Contractual
Life (in
years)		  
($ in thousands except per share amounts)   Number of
Shares		     Weighted
Average
Exercise
Price		     Total
Weighted
Average
Intrinsic
Value		    

At December 31, 2011

     1,814,070     $ 2.17     $ 7,852       9.2  

Options granted

     620,000       6.86                  

Options exercised

     —                            

Options cancelled

     25,000                          
   

 

 

                          

At September 30, 2012

     2,409,070     $ 3.28     $ 4,573       8.7  
   

 

 

                          

Options vested and expected to vest

     2,409,070     $ 3.28     $ 4,573       8.7  

Options vested and exercisable

     578,023     $ 1.96     $ 1,873       8.4  

As of September 30, 2012, the Company had unrecognized stock-based compensation expense related to unvested stock options and warrants granted to employees and non-employees of $5.2 million, which is expected to be recognized over the remaining weighted-average vesting period of 1.6 years.

Warrants to Purchase Common Stock

On August 16, 2012, the Company issued a fully vested warrant to purchase 25,000 shares of Common Stock at a purchase price of $5.72 as compensation for consulting services provided by a non-employee. The warrant expires on the fifth anniversary of its issuance date. The fair value of the warrant was calculated using a Black-Scholes option-pricing model with the following assumptions: five-year contractual term; 110.33% volatility; 0% dividend rate; and a risk-free interest rate of 0.83%. The fair value of the warrants was determined to be $112,000 and was recorded as additional paid-in capital in the consolidated balance sheets and as a component of general and administrative expense in the consolidated statements of operations.

On August 16, 2012, the Company issued a fully vested warrant to purchase 20,000 shares of Common Stock at a purchase price of $5.72 as compensation for consulting services provided by a non-employee. The warrant expires on the sixth anniversary of its issuance date. The fair value of the warrants was calculated using a Black-Scholes option-pricing model with the following assumptions: six-year contractual term; 104.51% volatility; 0% dividend rate; and a risk-free interest rate of 1.06%. The fair value of the warrant was determined to be $92,000 and was recorded as additional paid-in capital in the consolidated balance sheets and as a component of general and administrative expense in the consolidated statements of operations.

On August 28, 2012, the Company issued a fully vested warrant to purchase 73,009 shares of Common Stock at a purchase price of $5.65 per share to Hercules in connection with the Loan Agreement. (See Note 4.)

2011 Special Dividend Declaration

In May 2011, the Company’s Board of Directors declared a dividend for an aggregate of 2,178,917 shares of Common Stock to the holders of Series A Convertible Preferred Stock (“Series A Shares”) in satisfaction of the Special Dividend that would have been due April 26, 2012. In connection with such issuance, the Company (i) eliminated the provision for a Series A Special Dividend on April 26, 2012 and (ii) amended the event that triggered an automatic conversion of Series A Shares into shares of Common Stock to be the effective date of a registration statement covering the resale of the underlying Common Stock. The Special Dividend was declared and paid in May 2011. The estimated fair value of the Common Stock was $5.9 million, or $2.69 per share.

Warrants to Purchase Series C Shares

In connection with the Company’s Series C Share offering, the Company (i) paid to National Securities Corporation (“NSC”), a related party, as consideration for its services as the placement agent, a fee equal to 10% of the gross proceeds of the issuance, or $2.6 million, and (ii) issued warrants to NSC to purchase an aggregate of 461,263 shares of the Company’s Series C Shares at an exercise price of $5.59 per share. The warrants are fully vested and exercisable for five years commencing May 31, 2011.

The fair value of the warrants was $1.3 million as measured on the date of issuance and was recorded as a reduction in the carrying value of the Series C Shares and a warrant liability. The warrants are marked-to-market each reporting period, which resulted in $115,000 decrease in the warrant liability at September 30, 2011 from the balance at June 30, 2011. The estimated fair value of $1,170,000 at September 30, 2011 was determined using an option pricing model assuming 90.9% volatility, a 1.76% risk-free rate of interest, a term of five years and an estimated fair value of the Company’s Series C Shares of $5.59 per share.

Upon the effectiveness of the Company’s Form S-1 on November 15, 2011, these warrants became exercisable for Common Stock and a final mark-to-market valuation was performed.