Note 9 - Stockholders’ Equity

Common Stock

The Company, in accordance with its certificate of incorporation, as amended in November 2020 and June 2021, which was retroactively applied, and July 2022, is authorized to issue (i) 200,000,000 common shares with a par value of $0.0001 per share, of which 1,000,000 shares are designated as Class A Common Stock and the remainder are undesignated Common Stock, and (ii) 2,000,000 shares of Preferred Stock, 250,000 of which are designated as Class A Preferred Stock and the remainder are undesignated Preferred Stock (see below Stock Issuances to Fortress and Note 4).

In connection with the Company’s formation, Fortress subscribed for 7,000,000 shares of the Class B Common Stock and 2,000,000 shares of the Company’s Common Stock, pursuant to the Founders Agreement. Fortress paid the par value of $900 in 2016. The fair value of the Company’s common shares approximated par value as no licenses had been transferred at that time. In July 2016, the Class B Common Stock held by Fortress was exchanged for Class A Preferred Stock, and the Company amended and restated its Certificate of Incorporation to eliminate the Class B Common Stock and authorized a new series of Class A Preferred Stock. Dividends, if and when declared, are to be distributed pro-rata to the Class A Common Stock, Common Stock and Class A Preferred Common Stock.

The holders of Common Stock are entitled to one vote per share of Common Stock held. The holders of Class A Common Stock are entitled to the number of votes equal to the number of whole shares of Common Stock into which the shares of Class A Common Stock held by such holder are convertible and for a period of ten years from its issuance, the holders of the Class A Common Stock have the right to appoint one member of the board of directors of Mustang; to date, the holders of Class A Common Stock have not yet appointed such director.

At-the-Market Offering of Common Stock

In July 2018, the Company entered into an At-the-Market Issuance Sales Agreement (the “Mustang ATM”) with B. Riley Securities, Inc. (formerly B. Riley FBR, Inc.), Cantor Fitzgerald & Co., National Securities Corporation, (now B. Riley FBR, Inc.), and Oppenheimer & Co. Inc. (each an “Agent” and collectively, the “Agents”), relating to the sale of shares of common stock pursuant to the 2020 S-3. Under the Mustang ATM, the Company pays the Agents a commission rate of up to 3.0% of the gross proceeds from the sale of any shares of common stock. On December 31, 2020, the Mustang ATM was amended to add H.C. Wainwright & Co., LLC as an Agent. On April 14, 2023, the Mustang ATM was amended to add the limitations imposed by General Instruction I.B.6 to Form S-3 and remove Oppenheimer & Co., Inc. as an Agent.

During the year ended December 31, 2023, the Company issued approximately 52,000 shares of common stock at an average price of $3.15 per share for gross proceeds of $163,000 under the ATM Agreement. In connection with these sales, the Company paid aggregate fees of approximately $3,000 for net proceeds of approximately $160,000.

During the year ended December 31, 2022, the Company issued approximately 0.5 million shares of common stock at an average price of $12.61 per share for gross proceeds of $6.6 million under the ATM Agreement. In connection with these sales, the Company paid aggregate fees of approximately $0.1 million for net proceeds of approximately $6.5 million.

Pursuant to the Founders Agreement, the Company did not issue any shares of its common stock to Fortress for the year ended December 31, 2023, and recorded the value of 1,297 shares issuable to Fortress in connection with the Mustang ATM. Pursuant to the Founders Agreement, Mustang issued 13,131 shares of common stock to Fortress at a weighted average price of $13.56 per share for the year ended December 31, 2022, in connection with the Mustang ATM.

Registered Direct Offering

On October 26, 2023, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with a single institutional accredited investor (the “Investor”) pursuant to which the Company agreed to issue and sell, in a registered direct offering priced at-the-market under the rules of The Nasdaq Stock Market (the “Registered Offering”), (i) 920,000 shares of common stock, $0.0001 par value per share, at a price per Share of $1.70 and (ii) pre-funded warrants (the “Pre-funded Warrants”) to purchase up to 1,668,236 shares of its common stock, at a price per Pre-funded Warrant equal to $1.699, the price per Share, less $0.001. The Pre-funded Warrants have an exercise price of $0.001 per share, became exercisable upon issuance and remain exercisable until exercised in full.

In a concurrent private placement, pursuant to the terms of the Purchase Agreement, the Company also agreed to issue and sell unregistered warrants (the “Warrants”) to purchase up to 2,588,236 shares of Common Stock, at an offering price of $0.125 per Warrant to purchase one share of common stock (the “Private Placement” and, together with the Registered Offering, the “Offerings”) (which offering price is included in the purchase price per Share or Pre-funded warrant). The Warrants have an exercise price of $1.58 per share (subject to customary adjustments as set forth in the Warrants), are exercisable upon issuance and will expire five and one-half years from the date of issuance. The Warrants contain customary anti-dilution adjustments to the exercise price, including for share splits, share dividends, rights offering and pro rata distributions.

The Registered Direct Offering and Private Placement closed on October 30, 2023. The Company received approximately $4.4 million in gross proceeds from the Offerings, before deducting placement agency fees and offering expenses of approximately $0.5 million.

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Pursuant to the Founders Agreement, the Company did not issue any shares of its common stock to Fortress and recorded the value of 64,706 shares issuable to Fortress in connection with the Registered Direct Offering as of December 31, 2023.

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Registration Statements

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On December 12, 2023, we filed registration statement No. 333-275997 on Form S-1, which registered the offer and sale of common stock on behalf of the Selling Stockholders, of up to 2,743,530 shares of our common stock, issuable upon the exercise of certain warrants held by the Selling Stockholders.

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On October 23, 2020, the Company filed a shelf registration statement No. 333-249657 on Form S-3 (the “2020 S-3”), which was declared effective on December 4, 2020. Under the 2020 S-3, the Company may sell up to a total of $100.0 million of its securities. The 2020 S-3 expired on October 23, 2023.

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On April 23, 2021, the Company filed a shelf registration statement No. 333-255476 on Form S-3 (the “2021 S-3”), which was declared effective on May 24, 2021. Under the 2021 S-3, the Company may sell up to a total of $200.0 million of its securities. As of December 31, 2023, approximately $195.6 million of the 2021 S-3 remains available for sale of securities.

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Stock Issuances to Fortress

Under the terms of the Second Amended and Restated Founders Agreement, which became effective July 22, 2016, Fortress will receive a grant of shares of our common stock equal to two and one-half percent (2.5%) of the gross amount of any equity or debt financing. Additionally, pursuant to the Amended and Restated Articles of Incorporation, Fortress receives and Annual Stock Dividend on January 1^st, representing 2.5% of the fully-diluted outstanding equity of Mustang.

For the year ended December 31, 2023, the Company recorded the value of 353,086 shares of common stock to Fortress for the Annual Stock Dividend, as Common stock issuable – Annual Stock Dividend in the Statement of Stockholders’ Equity. The Company recorded an expense of approximately $0.5 million in research and development – licenses acquired related to these issuable shares during the year ended December 31, 2023.

For the year ended December 31, 2022, the Company recorded the value of 187,134 shares of common stock to Fortress for the Annual Stock Dividend, as Common stock issuable – Annual Stock Dividend in the Statement of Stockholders’ Equity. The Company recorded an expense of approximately $1.1 million in research and development – licenses acquired related to these issuable shares during the year ended December 31, 2022.

For the year ended December 31, 2023, the Company did not issue any shares of common stock and recorded the value of 1,297 shares issuable to Fortress, which equaled 2.5% of the gross proceeds of $0.2 million from the sale of shares of common stock under Mustang’s At-the-Market Offering. In connection with the Registered Direct Offering, the Company recorded 64,706 shares issuable to Fortress, which equaled 2.5% of the gross proceeds of $4.4 million.

For the year ended December 31, 2022, the Company issued 13,131 shares of common stock to Fortress at a weighted average price of $13.56 per share, the value of which equaled 2.5% of the gross proceeds of $6.6 million from the sale of shares of common stock under the Mustang ATM.

Equity Incentive Plan

The Company has in effect the 2016 Incentive Plan (the “Incentive Plan”). The Incentive Plan was adopted in 2016 by our stockholders and the compensation committee of the Company’s board of directors and is authorized to grant stock-based awards to directors, officers, employees and consultants. The plan initially authorized grants to issue up to 133,333 shares of authorized but unissued common stock and expires 10 years from adoption and limits the term of each option to no more than 10 years from the date of grant.

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In June 2018, the Company’s stockholders approved an amendment to the Incentive Plan to increase the number of authorized shares issuable by 200,000 shares, for a total of 333,333 shares. In June 2021, the Company’s stockholders approved an amendment to the Incentive Plan to increase the number of authorized shares issuable by 200,000 shares, for a total of 533,333 shares. In June 2022, the Company’s stockholders approved an amendment to the Incentive Plan to increase the number of authorized shares issuable by 200,000 shares, for a total of 733,333 shares

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As of December 31, 2023, 282,334 shares are available for issuance of stock-based awards under the Incentive Plan.

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Stock Options

The following table summarizes stock option activities for the years ended December 31, 2023 and 2022:

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As of December 31, 2023, the Company had no unrecognized stock-based compensation expense related to options. The Company accounts for forfeited awards as they occur as permitted.

Restricted Stock Awards

Certain employees and directors have been awarded restricted stock. The restricted stock vesting consists of milestone and time-based vesting. The following table summarizes restricted stock award activities for the years ended December 31, 2023 and 2022:

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As of December 31, 2023, the Company had unrecognized stock-based compensation expense related to restricted stock of $0.4 million, which is expected to be recognized over a weighted average period of approximately 2.1 years.

Restricted Stock Units

The following table summarizes restricted stock units’ activities for the year ended December 31, 2023 and 2022:

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As of December 31, 2023, the Company had unrecognized stock-based compensation expense related to restricted stock units of approximately $0.5 million, which is expected to be recognized over a weighted average period of approximately 2.1 years.

The following table summarizes stock-based compensation expense for the years ended December 31, 2023 and 2022 (in thousands).

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Stock Warrants

In connection with the Company’s Registered Direct Offering on October 26, 2023, the Company issued pre-funded warrants to purchase up to 1,668,236 shares of common stock, and in a concurrent private placement, the Company issued unregistered warrants to purchase up to 2,588,236 shares of common stock. In connection with these offerings, H.C. Wainwright received Placement Agent Warrants to purchase up to 155,294 shares of common stock.

In connection with the Term Loan on March 4, 2022, the Company issued a warrant to the Lender to purchase 49,869 shares of the Company's common stock with an exercise price of $12.03, see Note 8.

A summary of warrant activities for years ended December 31, 2023 and 2022, is presented below:

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Upon the exercise of warrants, the Company will issue new shares of Common Stock.

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Employee Stock Purchase Plan

In connection with our Employee Stock Purchase Plan (“ESPP”), eligible employees of Mustang and Fortress 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.

As of December 31, 2023, 86,578 shares have been purchased and 380,089 shares are available for future sale under the Company’s ESPP.