Note 9 - Stockholders’ Equity

Common Stock

The Company, in accordance with its certificate of incorporation, as amended in November 2020, which was retroactively applied, is authorized to issue (i) 125,000,000 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. 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, Section A 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.

On November 11, 2020, 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, Section A thereof in order to effect an increase in the authorized number of shares of the Company’s common stock, par value $0.0001, from 85,000,000 to 125,000,000 (the “Amendment”). On November 11, 2020, 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 125,000,000 became effective on December 4, 2020.

At-the-Market Offering of Common Stock

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 S-3”), which was declared effective in August 2018. Under the 2018 S-3, the Company may sell up to a total of $75.0 million of its securities. In connection with the 2018 S-3, the Company entered into an At-the-Market Issuance Sales Agreement (the “ATM Agreement”) with B. Riley Securities, Inc. (formerly 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 ATM Agreement, 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 ATM Agreement was amended to add H.C. Wainwright & Co., LLC as an Agent.

During the year ended December 31, 2020, the Company issued approximately 17.6 million shares of common stock at an average price of $3.40 per share for gross proceeds of $59.8 million under the ATM Agreement. In connection with these sales, the Company paid aggregate fees of approximately $1.1 million for net proceeds of approximately $58.7 million.

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 ATM Agreement. In connection with these sales, the Company paid aggregate fees of approximately $0.5 million for net proceeds of approximately $22.0 million.

Public Offering of Common Stock

On June 11, 2020, we entered into an underwriting agreement (the “Underwriting Agreement”) with Cantor Fitzgerald & Co., as representative of the underwriters named therein (each, an “Underwriter” and collectively with Cantor Fitzgerald & Co., the “Underwriters”). In connection with the Underwriting Agreement, we issued 10,769,231 shares of common stock (plus a 30-day option to purchase up to an additional 1,615,384 shares of common stock, of which 686,373 were exercised) at a price of $3.25 per share for gross proceeds of approximately $37.2 million, before deducting underwriting discounts and commissions and offering expenses. In connection with the public offering, we paid aggregate fees of approximately $2.4 million for net proceeds of approximately $34.8 million. The shares were sold under our S-3 registrations filed with the Securities and Exchange Commission. The offering closed on June 15, 2020, and the over-allotment closed on June 25, 2020.

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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 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

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. As of December 31, 2020, approximately $85.7 million of the 2020 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 S-3”), which was declared effective on September 30, 2019. Under the 2019 S-3, the Company may sell up to a total of $75.0 million of its securities. As of December 31, 2020, the 2019 S-3 is no longer available for sales of securities.

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.

For the year ended December 31, 2020, the Company issued 342,773 shares of common stock and recorded 101,632 shares issuable to Fortress, which equaled 2.5% of the gross proceeds of $59.8 million from the sale of shares of common stock under Mustang’s At-the-Market Offering.

For the year ended December 31, 2020, the Company issued 286,390 shares of common stock to Fortress, which equaled 2.5% of the gross proceeds of $37.2 million from the sale of shares of common stock, before deducting underwriting discounts and commissions and offering expenses under Mustang’s Public Offering.

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For the year ended December 31, 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.

For the year ended December 31, 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.

For the year ended December 31, 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.

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 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.

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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 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 1,180,085 shares at December 31, 2020.

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Stock Options

The following table summarizes stock option activities for the year ended December 31, 2020 and 2019:

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As of December 31, 2020, the Company had unrecognized stock-based compensation expense related to options of $0.1 million, which is expected to be recognized over a weighted average period of approximately 0.8 year . 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 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 year ended December 31, 2020 and 2019:

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As of December 31, 2020, the Company had unrecognized stock-based compensation expense related to restricted stock of $0.3 million, which is expected to be recognized over a weighted average period of approximately 2.2 years.

Restricted Stock Units

The following table summarizes restricted stock units’ activities for the year ended December 31, 2020 and 2019:

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As of December 31, 2020, the Company had unrecognized stock-based compensation expense related to restricted stock units of approximately $2.6 million, which is expected to be recognized over a weighted average period of approximately 1.9 years.

The following table summarizes stock-based compensation expense for the years ended December 31, 2020 and 2019 (in thousands).

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Stock 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, 2020 and 2019, 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, 2020, 140,856 shares have been purchased and 259,144 shares are available for future sale under the Company’s ESPP.