Note 9 - Stockholders’ Equity

Common Stock

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 note. The Company recorded an expense of approximately $0.4 million in general and administrative expenses related to these shares during the nine months ended September 30, 2019.

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. The Company recorded an expense of approximately $0.5 million in general and administrative expenses related to these shares during the nine months ended September 30, 2019.

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 underwritten public offering. The Company recorded an expense of approximately $0.8 million in general and administrative expenses related to these shares during the nine months ended September 30, 2019.

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.

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 50.0 million to 85.0 million (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 85.0 million 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 nine months ended September 30, 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, we 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, we 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 September 30, 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 September 30, 2019, no securities have been sold under the 2019 Mustang S-3.

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, 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 1,926,379 shares at September 30, 2019.

The following table summarizes stock option activities for the nine months ended September 30, 2019:

 

 

As of September 30, 2019, the Company had unrecognized stock-based compensation expense related to options of $0.9 million, which is expected to be recognized over the remaining weighted average vesting period of approximately 1.2 years. This amount does not include, as of September 30, 2019, 155,209 stock options outstanding which are performance-based and vest upon achievement of certain corporate milestones. Stock-based compensation for milestone awards will be measured and recorded if and when it is probable that the milestone will be achieved. During the nine months ended September 30, 2019, stock-based compensation for 155,210 milestone awards were measured and recorded when it was probable that the milestone will be achieved.

Restricted Stock

The following table summarizes restricted stock award activities for the nine months ended September 30, 2019:

 

 

As of September 30, 2019, the Company had unrecognized stock-based compensation expense related to restricted stock of $1.5 million, which is expected to be recognized over the remaining weighted average vesting period of approximately 2.2 years. This amount does not include, as of September 30, 2019, 68,160 shares of restricted stock outstanding which are performance-based and vest upon achievement of certain corporate milestones. Stock-based compensation for milestone awards will be measured and recorded if and when it is probable that the milestone will be achieved.

Restricted Stock Units

Certain employees and consultants have been awarded restricted stock units with time-based vesting. The following table summarizes restricted stock units activities for the nine months ended September 30, 2019:

 

 

As of September 30, 2019, the Company had unrecognized stock-based compensation expense related to restricted stock units of approximately $2.4 million, which is expected to be recognized over the remaining weighted average vesting period of approximately 1.8 years.

The following table summarizes stock-based compensation expense for the three and nine months ended September 30, 2019 and 2018 (in thousands).

 

 

Warrants

A summary of warrant activities for nine months ended September 30, 2019 is presented below:

 

 

Upon the exercise of warrants, the Company will issue new shares of common stock.