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. In March 2020, the Company issued 31,220 shares of common stock to Fortress, which equaled 2.5% of the gross proceeds of $5.0 million from the sale of shares of common stock under Mustang’s At-the-Market Offering. The Company recorded an expense of approximately $0.1 million in general and administrative expenses related to these shares during the nine months ended September 30, 2020.

In June 2020, the Company issued 22,170 shares of common stock to Fortress, which equaled 2.5% of the gross proceeds of $3.0 million from the sale of shares of common stock under Mustang’s At-the-Market Offering. The Company recorded an expense of approximately $0.1 million in general and administrative expenses related to these shares during the nine months ended September 30, 2020.

In June 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. The Company recorded an expense of approximately $0.9 million in general and administrative expenses related to these shares during the nine months ended September 30, 2020.

In September 2020, the Company issued 64,015 shares of common stock and recorded 65,810 shares issuable to Fortress, which equaled 2.5% of the gross proceeds of $18.0 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, 2020.

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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.

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.

During the nine months ended September 30, 2020, we issued approximately 7.2 million shares of common stock at an average price of $3.56 per share for gross proceeds of $25.6 million under the Mustang ATM. In connection with these sales, we paid aggregate fees of approximately $0.5 million for net proceeds of approximately $25.1 million. During the nine months ended September 30, 2019, we 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, Mustang paid aggregate fees of approximately $0.5 million for net proceeds of approximately $22.0 million.

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Pursuant to the Founders Agreement, we issued 183,215 shares of common stock to Fortress at a weighted average price of $3.56 per share for the nine months ended September 30, 2020, in connection with the Mustang ATM. During the nine months ended September 30, 2019, we issued 87,656 shares of common stock to Fortress at a weighted average price of $6.42 per share in connection with the Mustang ATM.

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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”).

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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 as of September 30, 2020) 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 $2.3 million for net proceeds of approximately $34.9 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.

As of September 30, 2020, approximately $32.6 million of the 2019 Mustang S-3 remains available for sales of securities. Mustang may offer the securities under the 2019 Mustang S-3 from time to time in response to market conditions or other circumstances if it believes such a plan of financing is in the best interests of its stockholders. As of September 30, 2020, the 2018 Mustang S-3 is no longer available for sales of securities.

Stock Awards

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 1,267,960 shares at September 30, 2020.

Stock Options

The following table summarizes stock option activities for the nine months ended September 30, 2020:

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As of September 30, 2020, the Company had unrecognized stock-based compensation expense related to options of $0.2 million, which is expected to be recognized over the remaining weighted average vesting period of approximately 0.9 years.

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Restricted Stock

The following table summarizes restricted stock award activities for the nine months ended September 30, 2020:

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As of September 30, 2020, the Company had unrecognized stock-based compensation expense related to restricted stock of $0.4 million, which is expected to be recognized over the remaining weighted average vesting period of approximately 2.1 years.

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, 2020:

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As of September 30, 2020, the Company had unrecognized stock-based compensation expense related to restricted stock units of approximately $2.9 million, which is expected to be recognized over the remaining weighted average vesting period of approximately 1.9 years.

The following table summarizes stock-based compensation expense for the three and nine months ended September 30, 2020 and 2019 (in thousands).

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Employee Stock Purchase Plan

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Eligible employees 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.  The Employee Stock Purchase Plan (“ESPP”) is compensatory and results in stock-based compensation expense.

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For the three and nine months ended September 30, 2020, 72,505 and 140,856 shares, respectively, have been purchased and 259,144 shares are available for future sale under the Company’s ESPP.  The Company received proceeds of $0.2 million and $0.3 million, respectively, for the three and nine months ended September 30, 2020.

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Warrants

A summary of warrant activities for nine months ended September 30, 2020 is presented below:

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