1. Organization and Description of Business

Coronado Biosciences, Inc. (the “Company”), incorporated in Delaware on June 28, 2006 (date of inception), is a biopharmaceutical company focused on the development of novel immunotherapy biologic agents for the treatment of autoimmune diseases and cancer.

Development-Stage Risks and Liquidity

The Company is a development-stage enterprise. Activities to date include development of key compounds, establishing pre-commercial relationships, hiring qualified personnel and raising capital to fund operations. The Company continues to report as a development stage enterprise since planned principal operations have not yet commenced. Since inception, no revenue has been recognized.

On October 14, 2013 the Company reported that the TRUST-I study, its phase 2 randomized, double-blind, placebo-controlled, U.S. multi-centered study to evaluate the safety and efficacy of TSO in Crohn’s disease, did not meet its primary endpoint of improving response, defined as a 100-point decrease in the Crohn’s Disease Activity Index (CDAI), nor the key secondary endpoint of remission, defined as achieving CDAI < 150 points. In the overall patient population, response rate of patients on TSO did not separate from that of placebo.

The Company’s development partner for TSO in Crohn’s disease, Dr. Falk Pharma GmbH, is conducting TRUST-II, a phase 2, double-blind, randomized, placebo-controlled, multi-center study in Europe to evaluate the efficacy and safety of three different dosages of TSO in active Crohn’s disease. The results from a second interim analysis are expected in the fourth quarter of 2013.

The Company has incurred losses and experienced negative operating cash flows since inception and has an accumulated deficit of $111.5 million as of September 30, 2013. The Company anticipates incurring additional losses until such time, if ever, that it can generate significant sales from its product candidates. To date, the Company’s operations have been funded primarily by issuing equity and debt securities. For the nine months ended September 30, 2013, the Company issued 10,352,219 shares of Common Stock for total net proceeds of $88.0 million under the Company’s 2012 and 2013 ATMs (See Note 9). Since September 30, 2013 through October 2, 2013, the Company sold an additional 206,203 shares of Common Stock for net proceeds of $1.4 million under its 2013 ATM. (See Note 9.) The Company expects to incur substantial expenditures in the foreseeable future for the research, development and potential commercialization of its product candidates. The Company is continuing to evaluate the data from the TRUST-I trial and other current data on TSO and is awaiting the results of the TRUST-II trial to determine the future development plan for TSO. Until it has completed that process and made a determination regarding the future development for TSO, it does not expect its current level of expenditures to increase in the next 12 months. However, the Company believes that cash and cash equivalents on hand are sufficient to sustain operations at least for the next 12 months. The Company would require additional financing to fully develop and obtain regulatory approvals for its product candidates, fund operating losses, establish manufacturing, and, if deemed appropriate, sales and marketing capabilities. The Company expects that it would need to seek funds through public or private equity or debt financings, collaborative or other arrangements with corporate sources, or through other sources of financing. Adequate additional funding may not be available to the Company on acceptable terms or at all. The Company’s failure to raise capital as and when needed would have a negative impact on its financial condition and its ability to pursue its business strategies. If adequate funds are not available to the Company, the Company will be required to delay, reduce or eliminate research and development programs, and pursue merger or acquisition strategies, if possible.

Operations of the Company are subject to other risks and uncertainties, including, but not limited to, uncertainty of product candidate development; technological uncertainty; dependence on collaborative partners; uncertainty regarding patents and proprietary rights; regulatory approvals and other comprehensive government regulations; having no commercial manufacturing, marketing or sales capability or experience; and dependence on key personnel. Any significant delays in the development of product candidates, failures of product candidates to successfully meet clinical-trial goals or delays in marketing of products could have a material adverse effect on the Company’s business and financial results.

The Company sources certain critical components from single source suppliers. If the Company is required to purchase these components from an alternative source, it could adversely affect development of the Company’s product candidates.