13. Stock Plans and Stock-Based Compensation

In 2007, the Company’s board of directors adopted and stockholders approved the Coronado Biosciences, Inc. 2007 Stock Incentive Plan (the “Plan”) authorizing the Company to grant up to 6,000,000 shares of common stock to eligible employees, directors, and consultants in the form of restricted stock, stock options and other types of grants. The amount, terms, and exercisability provisions of grants are determined by the Board of Directors.

The purpose of the Plan is to provide the Company with the flexibility to use shares, options or other awards based on the Company’s common stock as part of an overall compensation package to provide performance-based rewards to attract and retain qualified personnel. Such awards include, without limitation, options, stock appreciation rights, sales or bonuses of restricted stock, restricted stock units or dividend equivalent rights, and an award may consist of one such security or benefit, or two or more of them in any combination or alternative. Vesting of awards may be based upon the passage of time, the occurrence of one or more events, or the satisfaction of performance criteria or other conditions. There are 6,000,000 shares of common stock reserved for issuance under the Plan, of which 4,175,070 were granted, net of cancellations, and 1,824,930 shares were available for issuance as of December 31, 2012.

Incentive and nonstatutory stock options are granted pursuant to option agreements adopted by the plan administrator. Options generally have 10-year contractual terms and vest in three equal annual installments commencing on the grant date.

The Company estimates the fair value of stock option grants using a Black-Scholes option pricing model. In applying this model, the Company uses the following assumptions:

The fair value of each option award was estimated on the grant date using the Black Scholes option-pricing model and expensed under the straight line method. The following assumptions were used:

The fair value for non-employee stock based awards are mark-to-marketed on each valuation date until vested using the Black Scholes pricing model.

The following table summarizes the stock-based compensation expense from stock option, employee stock purchase programs and restricted common stock awards and warrants for the years ended December 31, 2012, 2011 and 2010, and from the period June 28, 2006 (Date of Inception) to date:

The following table summarizes stock option activity:

As of December 31, 2012, the Company had unrecognized stock-based compensation expense related to all unvested stock options of $4.4 million, which is expected to be recognized over the remaining weighted-average vesting period of 1.4 years.

Employee Stock Purchase Plan

On December 19, 2011, the Board Of Directors approved the 2012 Coronado Employee Stock Purchase Plan the (“ESPP”) for the issuance of up to 200,000 shares of Common stock to eligible employees. Eligible employees can purchase the Company’s common stock at the end of a predetermined offering period at 85% of the lower of the fair market value at the beginning or end of the offering period. The first period commenced February 1, 2012 and ended on November 30, 2012. Thereafter offerings will be six months in duration and will commence on each December 1 and June 1. Employee contributions will be made through payroll deductions over the offering period and subject to certain limitations will be used to purchase shares at the end of each offering period. The ESPP is compensatory and will result in stock-based compensation expense. 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. As of December 31, 2012, 21,644 have been purchased and 178,356 are available for future sale under the ESPP. The Company recognized share-based compensation expense of $95,000 for the year ended December 31, 2012. No prior expense was recognized.

On November 30, 2012, the Company issued 21,644 shares of common stock in connection with the first ESPP offering period. Common shares were issued at $4.02, which represents 85% of the closing price of common stock on November 30, 2012.