Note 9 - Stockholders’ Equity

Common Stock

The Company, in accordance with its certificate of incorporation, as amended in July 2016, which was retroactively applied, is authorized to issue 50,000,000 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 15,000,000 shares are designated as “Class B Common 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. Dividends, if and when declared, are to be distributed pro-rata to the Class A, B and Common Stockholders.

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.

The Class B Common Stockholders are entitled, for each share of Class B Common Stock held, to a number of votes equal to 1.1 times a fraction, the numerator of which is the sum of (A) the shares of outstanding Common Stock and (B) the whole shares of Common Stock into which the shares of outstanding Class A Common Stock and the Class B Common Stock are convertible and the denominator of which is the number of shares of outstanding Class B common shares.

In April 2019, COH converted 137,608 shares of the Company’s Class A common stock to 137,608 shares of the Company’s common stock. In November 2019, COH converted 17,007 shares of the Company’s Class A common stock to 17,007 shares of the Company’s common stock for a total of 154,615 Class A common stock converted into the Company’s common stock in 2019.

On August 16, 2019, the Company’s Board adopted resolutions of the Board to ratify, approve and recommend stockholder approval of an amendment to the Company’s Amended and Restated Certificate of Incorporation, as amended, to revise Article IV, Authorized Stock thereof in order to effect an increase in the authorized number of shares of the Company’s common stock, par value $0.0001, from 50,000,000 to 85,000,000 (the “Amendment”). On August 16, 2019, the Company received approval of the Amendment by written consent in lieu of a meeting from the holders of a majority of issued and outstanding shares of the Company’s common and preferred stock. The increase in authorized shares to 85,000,000 became effective on September 30, 2019.

At-the-Market Offering

On July 13, 2018, the Company filed a shelf registration statement No. 333-226175 on Form S‑3 , as amended on July 20, 2018 (the " 2018 Mustang S‑3"), which was declared effective in August 2018. Under the 2018 Mustang S‑3, the Company may sell up to a total of $75.0 million of its securities. In connection with the 2018 Mustang S‑3, the Company entered into an At-the-Market Issuance Sales Agreement (the " Mustang ATM") with B. Riley FBR, Inc., Cantor Fitzgerald & Co., National Securities Corporation, and Oppenheimer & Co. Inc. (each an "Agent" and collectively, the "Agents"), relating to the sale of shares of common stock. 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.

During the year ended December 31, 2019, the Company issued approximately 3.5 million shares of common stock at an average price of $6.42 per share for gross proceeds of $22.5 million under the Mustang ATM. In connection with these sales, the Company paid aggregate fees of approximately $0.5 million for net proceeds of approximately $22.0 million. No sales were made under the 2018 Mustang ATM in 2018.

Public Offering of Common Stock

On April 30, 2019, the Company announced the pricing of an underwritten public offering, whereby we sold 6,875,000 shares of common stock, (plus a 30-day option to purchase up to an additional 1,031,250 shares of common stock, which was fully exercised) at a price of $4.00 per share for gross proceeds of approximately $31.6 million, before deducting underwriting discounts and commissions and offering expenses. In connection with the public offering, the Company paid aggregate fees of approximately $2.1 million for net proceeds of approximately $29.5 million. The shares were sold under the 2018 Mustang S-3, filed with the Securities and Exchange Commission. The offering closed on May 2, 2019, and the over-allotment closing was on May 8, 2019.

Registration Statements

As of December 31, 2019, approximately $20.9 million of the 2018 Mustang S-3 remains available for sales of securities.

On August 16, 2019, the Company filed a shelf registration statement No. 333-233350 on Form S-3 (the "2019 Mustang S-3"), which was declared effective on September 30, 2019. Under the 2019 Mustang S-3, the Company may sell up to a total of $75.0 million of its securities. As of December 31, 2019, no securities have been sold under the 2019 Mustang S-3.

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. On March 29, 2019, the Company issued 108,069 shares of common stock to Fortress, which equaled 2.5% of the gross funded amount of the Horizon Notes. 

In April 2019, the Company issued 87,656 shares of common stock to Fortress, which equaled 2.5% of the gross proceeds of $22.5 million from the sale of shares of common stock under Mustang’s At-the-Market Offering.

In May 2019, the Company issued 197,656 shares of common stock to Fortress, which equaled 2.5% of the gross proceeds of $31.6 million from the sale of shares of common stock under Mustang’s Public Offering.

Stock Awards

Stock Options

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 2,000,000 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. In June 2018, the Company’s stockholders approved an amendment to the Incentive Plan to increase the number of authorized shares issuable by 3,000,000 shares, for a total of 5,000,000 shares. Total shares available for the issuance of stock-based awards under the Incentive Plan was 1,931,015 shares at December 31, 2019.

 

The following table summarizes stock option activities for the year ended December 31, 2019 and 2018:

 

 

As of December 31, 2019, the Company had unrecognized stock-based compensation expense related to options of $0.7 million, which is expected to be recognized over a weighted average period of approximately 1.2 years . Effective on January 1, 2017, the Company elected to account for forfeited awards as they occur as permitted by ASU 2016‑09. Ultimately, the actual expenses recognized over the vesting period will be for those shares that vested. Prior to making this election, the Company estimated a forfeiture rate for awards at 0%, as the Company did not have a significant history of forfeitures.

Restricted Stock

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 year ended December 31, 2019 and 2018:

 

 

As of December 31, 2019, the Company had unrecognized stock-based compensation expense related to restricted stock of $0.7 million, which is expected to be recognized over a weighted average period of approximately 1.9 years. This amount does not include, as of December 31, 2019, 68,158 shares of restricted stock outstanding which are performance-based and vest upon achievement of certain corporate milestones. Stock-based compensation expense for milestone awards will be measured and recorded if and when it is probable that the milestone will be achieved.

Restricted Stock Units

The following table summarizes restricted stock units’ activities for the year ended December 31, 2019 and 2018:

 

 

As of December 31, 2019, the Company had unrecognized stock-based compensation expense related to restricted stock units of approximately $2.8 million, which is expected to be recognized over a weighted average period of approximately 2.0 years. This amount does not include, as of December 31, 2019, 230,000 shares of restricted stock units outstanding issued to non-employees, the expense for which is determined each reporting period at the measurement date. The expense is recognized over the vesting period of the award.

The following table summarizes stock-based compensation expense for the years ended December 31, 2019 and 2018 (in thousands).

 

 

Warrants

In connection with the Company’s offering of shares of common stock in a private placement, each investor received a warrant equal to 25% of the common shares purchased in connection with the offering. Further, National Securities Corporation received Placement Agent Warrants.

A summary of warrant activities for years ended December 31, 2019 and 2018, is presented below:

 

 

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