Stockholders' Transactions

3 Months Ended

Mar. 31, 2012

Stockholders' Transactions

Note 4 — Stockholders’ Transactions:

Common Stock Transactions:

On January 31, 2012, the Company filed a shelf registration statement with the Securities and Exchange Commission under which it may offer shares of its common stock and preferred stock, various series of debt securities and/or warrants to purchase any of such securities, either individually or in units, in one or more offerings, up to a total dollar amount of $100,000,000. The registration statement became effective as of February 10, 2012. As part of the shelf registration statement, the Company included a prospectus for a possible at-the-market common equity sales program for the sale of up to $20,000,000 of common stock. As of March 31, 2012, no securities have been offered or sold pursuant to the shelf registration statement.

Common Stock Options and Warrants:

In connection with the Company’s financings in 2007, 2008, 2009 and 2010, the Company issued warrants to investors and/or placement agents to purchase shares of common stock as well as certain consulting warrants.

A summary of the Company’s warrant activity and related information is as follows:

	Period  Ended
	March  31, 2012
			Weighted Average
	Shares		Exercise Price
Outstanding at beginning of period		956,443	$	7.61
Granted		-	$	-
Exercised		-	$	-
Outstanding at end of period		956,443	$	7.61
Warrants exercisable at end of period		956,443	$	7.61

All outstanding warrants have vested and no additional expense is expected to be recorded in the future years.

In August 2010, the Company’s stockholders approved the 2010 Equity Incentive Plan (the “2010 Plan”). In May 2011, the Company’s stockholders approved an amendment to the 2010 Plan to increase the shares reserved for issuance from 2,467,200 to 3,967,200 shares of the Company’s common stock. The 2010 Plan authorizes the Company to issue equity incentive awards in the form of shares, options or other awards based on Ventrus common stock as part of an overall compensation package to provide performance-based compensation to attract and retain qualified personnel.

In November 2010, the Company granted options to non-employee directors to purchase an aggregate of 160,000 shares under the 2010 Plan. In addition, under Dr. Ellison’s and Mr. Barrett’s respective employment agreements, the Company granted to Dr. Ellison and Mr. Barrett options under the 2010 plan to purchase 573,599 shares and 305,920 shares, respectively, at a price of $6.00 per share.

In January 2012, the Company granted options to purchase 35,000 shares to one of its directors and 168,000 options to purchase shares to seven employees. Additionally, the company granted options to purchase an aggregate of 127,740 shares to seven consultants all pursuant to the 2010 Plan. The exercise prices of the options granted were at the then market value of the Company’s common stock ($8.10 - $10.62 per share).

A summary of the Company’s option activity and related information is as follows:

	Period Ended March 31, 2012
	Shares		Weighted Average Exercise Price		Aggregate Intrinsic Value
Outstanding at beginning of period		2,046,455	$	6.40	$	-
Granted		330,740	$	8.44	$	-
Exercised		38,240	$	6.24	$	173,227
Outstanding at end of period		2,338,955	$	6.69	$	7,817,824
Options exercisable at end of period		1,715,715

The Company expects that all outstanding unvested options will vest. The fair value of the options granted for the three month periods ended March 31, 2012, was based on the following assumptions, respectively:

	2012
Risk-free interest rate		1.31% - 1.44	%
Expected volatility		76.37	%
Expected life of options		7 years
Expected dividend yield		0	%

Estimated future stock-based compensation expense relating to unvested stock options (for non-employees, based on the fair value at March 31, 2012) is as follows:

Calendar Years Ending December 31,	Future Stock Option Compensation Expense
2012	$	2,504,223
2013		1,576,231
2014		651,674
Total estimated future stock-based compensation expense – stock options	$	4,732,128

The weighted average remaining contractual life of options outstanding at March 31, 2012 is approximately 8.5 years and the cost is expected to be recognized over a weighted-average period of 1.61 years.

Stock-based compensation expensed to research and development expense for the three months ended March 31, 2012 and 2011 was $258,494, and $154,457, respectively. Stock-based compensation expensed to general and administrative expense for the three months ended March 31, 2012 and 2011 was $681,374 and $998,329, respectively.