9. Common Stock

 

At Market Issuance Sales Agreement

 

On April 29, 2013, the Company entered into an At Market Issuance Sales Agreement with MLV & Co. LLC (“2013 ATM”) whereby it could issue and sell up to $45.0 million of its Common Stock pursuant to its Form S-3 filed in September 2012. During the three month period ended March 31, 2014, although the Company did not issue any shares of its Common Stock nor receive any proceeds in connection with the 2013 ATM, the Company did incur approximately $32,000 of cost for an audit consent in connection with the 2013 ATM.

 

Stock-based Compensation

 

As of March 31, 2014, the Company had three equity compensation plans: the Coronado Biosciences, Inc. 2007 Stock Incentive Plan, the Coronado Biosciences, Inc. 2013 Stock Incentive Plan, and the Coronado Biosciences, Inc. 2012 Employee Stock Purchase Plan.

 

The following table summarizes the stock-based compensation expense from stock option awards, restricted common stock awards, employee stock purchase programs and warrants for the three months ended March 31, 2014 and 2013, and from the period June 28, 2006 (date of inception) to date:

 

		For the three months ended March 31,						Period from June 28, 2006 (date of inception) to March 31,
($ in thousands)		2014			2013			2014
Employee awards		$	1,122		$	972		$	9,194
Non-employee awards			13			434			4,323
Non-employee warrants			—			117			1,032
Total stock-based compensation expense		$	1,135		$	1,523		$	14,549

 

For the three months ended March 31, 2014 and 2013, $0.4 million was included in research and development expenses and $0.8 million was included in general and administrative expenses and $0.8 million was included in research and development expenses and $0.7 million was included in general and administrative expenses, respectively. Since inception $7.9 million was in included in research and development expenses and $6.6 million was included in general and administrative expenses.

 

The following table summarizes stock option activity:

 

		Outstanding Options									Weighted
($ in thousands except per share amounts)		Number of Shares			Weighted Average Exercise Price			Total Weighted Average Intrinsic Value			Average Remaining Contractual Life (in years)
At December 31, 2013			3,117,777		$	4.31		$	—			8.36
Options granted			—			—			—
Options exercised			(256,745)			1.88			26
Options cancelled			(600,000)			4.39			—
At March 31, 2014			2,261,032		$	4.57		$	—			8.20
Options vested and expected to vest			2,261,032		$	4.57		$	—			8.20
Options vested and exercisable			1,492,699		$	4.24		$	—			7.82

 

The following table summarizes restricted stock activity:

 

		Restricted Stock
		Number of Shares			Weighted Average Grant Date Fair Value
Unvested balance at December 31, 2013			3,958,692		$	1.93
Restricted stock granted			4,343,692			2.69
Unvested balance at March 31, 2014			8,302,384		$	2.33

 

As of March 31, 2014, the Company had unrecognized stock-based compensation expense related to unvested stock options and restricted stock awards of $2.4 million and $18.5 million, respectively, which is expected to be recognized over the remaining weighted-average vesting period of 1.2 years and 3.8 years, respectively.

 

Michael Weiss

 

Mr. Michael Weiss has served as a director of the Company since December 19, 2013 and from that time until February 19, 2014 served as the Co-Vice Chairman of the board of directors. On February 20, 2014, Mr. Weiss was appointed Executive Vice Chairman, Strategic Development.   The Company does not intend to enter into any employment contract with Dr. Weiss addressing his officer positions with the Company and the Company will pay Mr. Weiss an annual base salary of $28,275, the lowest salary permissible under New York State law.   Mr. Weiss will also be eligible for a discretionary bonus based on his achievement of performance goals and objectives as established by the board of directors. On December 19, 2013, the Company issued Mr. Weiss 1,979,346 shares of restricted stock for services to be rendered to the Company. The fair value was $3.8 million based upon a value of $1.93 per share calculated using a bi-nominal model, this award vests based upon the passage of time and certain pre-defined market conditions. In addition, on February 20, 2014, the Company issued Mr. Weiss 3,958,692 shares of restricted stock as an inducement to employment and for services to be rendered to the Company.  The fair value was $10.6 million and was based on a closing common stock price of $2.69 on the date of grant. Such shares shall vest at a rate of 16.67% for the first three annual anniversaries and  10% will vest in five equal installments upon certain events occurring.

 

Malcolm Hoenlein

 

On February 20, 2014, the Company appointed Mr. Malcolm Hoenlein to the vacant seat on its board of directors.   Mr. Hoenlein was granted 30,000 shares of restricted stock, of which one-third vests on each annual anniversary of grant. The fair value was $80,700 and was based on a closing Common Stock price of $2.69 per share on the date of grant.

 

Warrants to Purchase Common Stock

For the three months ended March 31, 2014, the Company did not issue any shares of Common Stock pursuant to the exercise of warrants. For the three months ended March 31, 2013, the Company issued 8,415 shares of Common Stock pursuant to the cashless exercise of 18,724 warrants at a weighted-average exercise price of $4.97  per share.

 

Strategic Transaction Committee

 

On February 20, 2014, The Company established a Strategic Transaction Committee of the board of directors.  Messrs. Lobell (Chairman) and Barrett, and Drs. Harvey and Rowinsky were appointed to the Committee.   Each member was granted 50,000 shares of restricted stock, of which one third will vest on each annual anniversary of grant. The fair value was $0.5 million and was based on a closing Common Stock price of $2.69 per share on the date of grant.

 

Shareholders’ Agreement

 

On February 20, 2014, Drs. Harvey, Rosenwald and Rowinsky and Messrs. Barrett, Lobell and Weiss, entered into a Shareholders’ Agreement, pursuant to which they agreed that, until the end of the Company’s annual meeting held in calendar year 2016 and so long as Dr. Rosenwald and Mr. Weiss are on the proposed slate of directors to be nominated, they each will vote all of their shares of Common Stock in favor of electing those individuals, and only those individuals, to the board of directors whom the Company’s Nominating and Corporate Governance Committee proposes. Until that time, they also agreed to not publicly or otherwise advocate for or encourage in any way (outside of fulfilling their director duties) the election of any individual to our board whom is not proposed by the Nominating and Corporate Governance Committee.