UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
OR
For the transition period from to
Commission File Number
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address including zip code of principal executive offices)
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer | ☐ | ☒ | |
Non-accelerated filer | ☐ | Smaller reporting company | |
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Class of Common Stock |
| Outstanding Shares as of August 9, 2020 |
Class A Common Stock, $0.0001 par value |
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Common Stock, $0.0001 par value |
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MUSTANG BIO, INC.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
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Condensed Balance Sheets as of June 30, 2020 (Unaudited) and December 31, 2019 | 3 | |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | 20 | |
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2
PART I. FINANCIAL INFORMATION
Item 1. Unaudited Condensed Financial Statements
MUSTANG BIO, INC.
Condensed Balance Sheets
($ in thousands, except for share and per share amounts)
June 30, | December 31, | |||||
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ASSETS |
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Current Assets: |
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Cash and cash equivalents | $ | | $ | | ||
Other receivables - related party |
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Prepaid expenses and other current assets |
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Total current assets |
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Property, plant and equipment, net |
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Fixed assets - construction in process |
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Restricted cash |
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Other assets |
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Operating lease right-of-use asset, net | | | ||||
Total Assets | $ | | $ | | ||
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current Liabilities: |
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Short-term notes payable | $ | | $ | | ||
Accounts payable and accrued expenses | | | ||||
Payables and accrued expenses - related party |
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Operating lease liabilities - short-term | | | ||||
Total current liabilities |
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Notes payable | | | ||||
Operating lease liabilities - long-term | | | ||||
Total Liabilities |
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Commitments and Contingencies |
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Stockholders’ Equity |
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Preferred stock ($ |
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Common Stock ($ |
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Class A common shares, |
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Common shares, |
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Common stock issuable, |
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Additional paid-in capital |
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Accumulated deficit |
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Total Stockholders’ Equity |
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Total Liabilities and Stockholders’ Equity | $ | | $ | |
The accompanying notes are an integral part of these condensed financial statements.
3
MUSTANG BIO, INC.
Condensed Statements of Operations
($ in thousands, except for share and per share amounts)
(Unaudited)
For the three months ended June 30, | For the six months ended June 30, | |||||||||||
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Operating expenses: |
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Research and development | $ | | $ | | $ | | $ | | ||||
Research and development – licenses acquired |
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General and administrative |
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Total operating expenses |
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Loss from operations |
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Other income (expense) |
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Interest income |
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Interest expense |
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Total other income (expense) |
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Net Loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||
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Net loss per common share outstanding, basic and diluted | $ | ( | $ | ( | $ | ( | $ | ( | ||||
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Weighted average number of common shares outstanding, basic and diluted |
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The accompanying notes are an integral part of these condensed financial statements.
4
MUSTANG BIO, INC.
Condensed Statements of Stockholders’ Equity
($ in thousands, except for share amounts)
(Unaudited)
For the Three Months Ended June 30, 2020 | |||||||||||||||||||||||||||
Common | Additional | Total | |||||||||||||||||||||||||
Class A Preferred Stock | Class A Common Shares | Common Shares | Stock | Paid-in | Accumulated | Stockholders' | |||||||||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Issuable |
| Capital |
| Deficit |
| Equity | ||||||||
Balances at March 31, 2020 |
| | $ | — |
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| $ | | $ | — | $ | | $ | ( | $ | | ||||||||
Issuance of common shares, net of offering costs - At-the-Market Offering |
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Issuance of common shares, equity fee on At-the-Market Offering |
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Issuance of common shares, net of offering costs - Public Offering |
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Issuance of common shares, equity fee on Public Offering |
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Stock-based compensation expenses |
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Exercise of warrants |
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Net loss |
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Balances at June 30, 2020 |
| | $ | — |
| | $ | — |
| | $ | | $ | — | $ | | $ | ( | $ | |
For the Six Months Ended June 30, 2020 | |||||||||||||||||||||||||||
Common | Additional | Total | |||||||||||||||||||||||||
Class A Preferred Stock | Class A Common Shares | Common Shares | Stock | Paid-in | Accumulated | Stockholders' | |||||||||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Issuable |
| Capital |
| Deficit |
| Equity | ||||||||
Balances at December 31, 2019 |
| | $ | |
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| | $ | | $ | | $ | | $ | ( | $ | | |||||||
Issuance of common shares - Founders Agreement |
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Issuance of common shares, net of offering costs - At-the-Market Offering |
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Issuance of common shares, equity fee on At-the-Market Offering |
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Issuance of common shares, net of offering costs - Public Offering |
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Issuance of common shares, equity fee on Public Offering |
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Issuance of common shares under ESPP |
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Stock-based compensation expenses |
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Exercise of warrants |
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Net loss |
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Balances at June 30, 2020 |
| | $ | — |
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| | $ | | $ | ( | $ | | $ | ( | $ | |
5
For the Three Months Ended June 30, 2019 | |||||||||||||||||||||||||||
Common | Additional | Total | |||||||||||||||||||||||||
Class A Preferred Stock | Class A Common Shares | Common Shares | Stock | Paid-in | Accumulated | Stockholders' | |||||||||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Issuable |
| Capital |
| Deficit |
| Equity | ||||||||
Balances at March 31, 2019 |
| | $ | — |
| | $ | — |
| | $ | | $ | — | $ | | $ | ( | $ | | |||||||
Conversion of Class A common shares to common shares | — | — | ( | — | | — | — | — | — | — | |||||||||||||||||
Issuance of common shares, net of offering costs -At-the-Market Offering | — | — | — | — | | — | — | | — | | |||||||||||||||||
Issuance of common shares - Equity fee on At-the-Market Offering | — | — | — | — | | — | — | | — | | |||||||||||||||||
Issuance of common shares, net of offering costs - Public Offering | — | — | — | — | | | — | | — | | |||||||||||||||||
Issuance of common shares - Equity fee on Public Offering | — | — | — | — | | — | — | | — | | |||||||||||||||||
Stock-based compensation expenses |
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Exercise of warrants |
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Net loss |
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Balances at June 30, 2019 |
| | $ | — |
| | $ | — |
| | $ | | $ | — | $ | | $ | ( | $ | |
For the Six Months Ended June 30, 2019 | |||||||||||||||||||||||||||
Common | Additional | Total | |||||||||||||||||||||||||
Class A Preferred Stock | Class A Common Shares | Common Shares | Stock | Paid-in | Accumulated | Stockholders' | |||||||||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Issuable |
| Capital |
| Deficit |
| Equity | ||||||||
Balances at December 31, 2018 |
| | $ | — |
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| | $ | | $ | | $ | | $ | ( | $ | | |||||||
Issuance of common shares - Founders Agreement |
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Issuance of common shares- Equity fee on Horizon Notes to Fortress Biotech | — | — | — | — | | — | — | | — | | |||||||||||||||||
Issuance of warrants- Horizon Notes |
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Conversion of Class A Common shares to common shares | — | — | ( | — | | — | — | — | — | — | |||||||||||||||||
Issuance of common shares, net of offering shares -At-the-Market Offering | — | — | — | — | | — | — | | — | | |||||||||||||||||
Issuance of common shares - Equity fee on At-the-Market Offering | — | — | — | — | | — | — | | — | | |||||||||||||||||
Issuance of common shares, net of offering costs- Public Offering | — | — | — | — | | | — | | — | | |||||||||||||||||
Issuance of common shares- Equity fee on Public Offering | — | — | — | — | | — | — | | — | | |||||||||||||||||
Stock-based compensation expenses | — | — | — | — | | — | — | | — | | |||||||||||||||||
Exercise of warrants |
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Net loss |
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Balances at June 30, 2019 |
| | $ | — |
| | $ | — |
| | $ | | $ | — | $ | | $ | ( | $ | |
The accompanying notes are an integral part of these condensed financial statements.
6
MUSTANG BIO, INC.
Condensed Statements of Cash Flows
($ in thousands)
(Unaudited)
For the six months ended June 30, | ||||||
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| 2019 | ||
Cash Flows from Operating Activities: |
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Net loss | $ | ( | $ | ( | ||
Accretion of debt discount |
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Issuance of common shares - Equity fee on At-the-Market Offering to Fortress Biotech |
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Issuance of common shares - Equity fee on Public Offering to Fortress Biotech | | | ||||
Issuance of common shares - Equity fee on Horizon Notes to Fortress Biotech | | | ||||
Research and development - licenses acquired | | | ||||
Stock-based compensation expenses |
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Depreciation expense |
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Amortization of operating lease right-of-use assets |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Changes in operating assets and liabilities: |
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Prepaid expenses and other current assets |
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Other receivables - related party | ( | ( | ||||
Accounts payable and accrued expenses |
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Payable and accrued expenses - related party |
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Lease liabilities | | ( | ||||
Net cash used in operating activities |
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Cash Flows from Investing Activities: |
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Maturity of certificate of deposit |
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Purchase of research and development licenses |
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Purchase of fixed assets |
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Net cash (used in) provided by investing activities |
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Cash Flows from Financing Activities: |
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Proceeds from Horizon Notes |
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Debt issuance costs | | ( | ||||
Proceeds from issuance of common shares - At-the-Market Offering | | | ||||
Offering costs for the issuance of common shares - At-the-Market Offering | ( | ( | ||||
Proceeds from issuance of common shares - Public Offering | | | ||||
Offering costs for the issuance of common shares - Public Offering | ( | ( | ||||
Proceeds from issuance of common shares under ESPP | | | ||||
Net cash provided by financing activities |
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Net change in cash, cash equivalents and restricted cash |
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Cash, cash equivalents and restricted cash, beginning of the period |
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Cash, cash equivalents and restricted cash, end of the period | $ | | $ | | ||
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Supplemental disclosure of cash flow information: |
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Cash paid for interest | $ | | $ | | ||
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Supplemental disclosure of noncash investing and financing activities: |
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Fixed assets (acquired but not paid) | $ | | $ | | ||
Issuance of common shares - Founders Agreement | $ | | $ | | ||
Research and development licenses included in accounts payable and accrued expenses | $ | | $ | | ||
Offering costs for the issuance of common shares - Public Offering, in accounts payable and accrued expenses | $ | | $ | | ||
Issuance of warrants - Horizon Notes | $ | | $ | |
The accompanying notes are an integral part of these condensed financial statements
7
Note 1 - Organization, Description of Business and Liquidity and Capital Resources
Mustang Bio, Inc. (the “Company” or “Mustang”) was incorporated in Delaware on March 13, 2015. Mustang is as a clinical-stage biopharmaceutical company focused on translating today’s medical breakthroughs in cell and gene therapy into potential cures for hematologic cancers, solid tumors and rare genetic diseases. The Company may acquire rights to these technologies by licensing the rights or otherwise acquiring an ownership interest in the technologies, funding their research and development and eventually either out-licensing or bringing the technologies to market.
The Company is a majority-controlled subsidiary of Fortress Biotech, Inc. (“Fortress” or “Parent”).
Liquidity and Capital Resources
The Company has incurred substantial operating losses and expects to continue to incur significant operating losses for the foreseeable future and may never become profitable. As of June 30, 2020, the Company had an accumulated deficit of $
The Company has funded its operations to date primarily through the sale of equity and its venture debt financing agreement (the “Loan Agreement”) with Horizon Technology Finance Corporation (“Horizon”), herein referred to as the “Horizon Notes.” The Company expects to continue to use the proceeds from previous financing transactions primarily for general corporate purposes, including financing the Company’s growth, developing new or existing product candidates, and funding capital expenditures, acquisitions and investments. The Company currently anticipates that its cash and cash equivalents balances at June 30, 2020, are sufficient to fund its anticipated operating cash requirements for at least one year from the date of this Form 10-Q.
The Company will be required to expend significant funds in order to advance the development of its product candidates. The Company will require additional financings through equity and debt offerings, collaborations and licensing arrangements or other sources to fully develop, prepare regulatory filings, obtain regulatory approvals and commercialize its existing and any new product candidates. In addition to the foregoing, based on the Company’s current assessment, the Company does not expect any material impact on its long-term development timeline and its liquidity due to the worldwide spread of the COVID-19 virus. However, the Company is continuing to assess the effect on its operations by monitoring the spread of COVID-19 and the actions implemented to combat the virus throughout the world.
Note 2 - Significant Accounting Policies
Basis of Presentation
The accompanying unaudited interim condensed financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X of the Exchange Act. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the unaudited interim condensed financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. They may not include all of the information and footnotes required by GAAP for complete financial statements. Therefore, these financial statements should be read in conjunction with the Company's audited financial statements and notes thereto for the year ended December 31, 2019, which were included in the Company’s Form 10-K and filed with the SEC on March 16, 2020. The results of operations for any interim periods are not necessarily indicative of the results that may be expected for the entire fiscal year or any other interim period.
8
Use of Estimates
The Company’s unaudited condensed financial statements include certain amounts that are based on management’s best estimates and judgments. The Company’s significant estimates include, but are not limited to, assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Due to the uncertainty inherent in such estimates actual results could differ from those estimates.
Net Loss per Share
Net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding during the period less unvested restricted stock. Since dividends are declared, paid and set aside among the holders of shares of common stock and Class A common shares pro-rata on an as-if-converted basis, the two-class method of computing net loss per share is not required. Diluted net loss per share does not reflect the effect of shares of common stock to be issued upon the exercise of warrants or outstanding Class A preferred shares, as their inclusion would be anti-dilutive.
The table below summarizes potentially dilutive securities that were not considered in the computation of diluted net loss per share because they would be anti-dilutive.
For the six months ended June 30, | ||||
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| 2019 |
Warrants |
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Options |
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Class A Preferred Shares |
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Unvested restricted stock awards |
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Unvested restricted stock units |
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Total |
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Significant Accounting Policies
There have been no material changes to the Company’s significant accounting policies previously disclosed in the Company’s Form 10-K filed with the SEC on March 16, 2020.
Recently Issued Accounting Standards
In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. The ASU removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the impact of this standard on its financial statements and related disclosures.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires that expected credit losses relating to financial assets are measured on an amortized cost basis and available-for-sale debt securities be recorded through an allowance for credit losses. ASU 2016-13 limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and also requires the reversal of previously recognized credit losses if fair value increases.
9
Recently, the FASB issued the final ASU to delay adoption for smaller reporting companies to calendar year 2023. The Company is currently assessing the impact of the adoption of this ASU on its financial statements.
Recently Adopted Accounting Standards
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), - Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, which makes a number of changes meant to add, modify or remove certain disclosure requirements associated with the movement amongst or hierarchy associated with Level 1, Level 2 and Level 3 fair value measurements. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company’s adoption of this standard on January 1, 2020, did not have a material impact on its condensed financial statements and related disclosures.
Note 3 - License, Clinical Trial and Sponsored Research Agreements
Research and Development Expenses - All Licenses
For the three and six months ended June 30, 2020 and 2019, the Company recorded the following expense in research and development for licenses acquired:
For the three months ended June 30, | For the six months ended June 30, | |||||||||||
($ in thousands) |
| 2020 |
| 2019 |
| 2020 |
| 2019 | ||||
City of Hope National Medical Center | ||||||||||||
CD123 | $ | | $ | | $ | | $ | | ||||
CS1 | | | | | ||||||||
IL13Rα2 | | | |