UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-38191

MUSTANG BIO, INC.

(Exact name of registrant as specified in its charter)

Delaware		47-3828760
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

377 Plantation Street

Worcester, MA 01605

(Address including zip code of principal executive offices)

(781) 652-4500

(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
Common Stock, par value $0.0001 per share	MBIO	NASDAQ Capital Market

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. Yes ☒ No ☐

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). Yes ☒ No ☐

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	☐	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 ☐ No ☒

Class of Common Stock		Outstanding Shares as of August 10, 2023
Class A Common Stock, $0.0001 par value		845,385
Common Stock, $0.0001 par value		7,359,218

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MUSTANG BIO, INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION		6

Item 1.	Unaudited Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3.	Quantitative and Qualitative Disclosures About Market Risks	35

Item 4.	Controls and Procedures	36

PART II. OTHER INFORMATION		36

Item 1.	Legal Proceedings	36

Item 1A	Risk Factors	36

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	81

Item 3.	Defaults Upon Senior Securities	81

Item 4.	Mine Safety Disclosures	81

Item 5.	Other Information	81

Item 6.	Exhibits	82

Signatures		84

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SUMMARY OF RISK FACTORS

Our business is subject to risks of which you should be aware before making an investment decision. The risks described below are a summary of the principal risks associated with an investment in us and are not the only risks we face. You should carefully consider these risk factors, the risk factors described in Item 1A, and the other reports and documents that we have filed with the Securities and Exchange Commission (“SEC”).

Risks Related to our Finances and Capital Requirements

●

We have incurred significant losses since our inception and anticipate that we will incur continued losses for the foreseeable future.

●

There is substantial doubt regarding our ability to continue as a going concern. We will need to raise additional financing in upcoming periods, which may not be available on acceptable terms to the Company, or at all. Failure to obtain necessary capital when needed may force us to delay, limit or terminate our commercial readiness efforts, activities to support a potential commercial launch following any approval of our product candidates, or other operations.

●

Our short operating history makes it difficult to evaluate our business and prospects.

●

Our success is contingent upon raising additional capital, which efforts may fail. Even if successful, our future capital raising activities may dilute our current stockholders, restrict our operations, or cause us to relinquish proprietary rights.

Risks Pertaining to our Business Strategy, Structure and Organization

●

Our future growth and success depend on our ability to successfully develop and commercialize our product candidates, which we have yet to do.

●

Our future success is highly dependent on the successful development of our chimeric antigen receptor (“CAR”) engineered T cell (“CAR T”) technology and gene therapy product candidates.

Risks Inherent in Drug Development and Commercialization

●

Preclinical development is highly speculative and carries a high failure risk.

●

We may not receive the required regulatory approvals for any of our product candidates on our projected timelines, if at all, which may result in increased costs and delay our ability to generate revenue.

●

We may not obtain the desired labeling claims or intended uses for product promotion, or favorable scheduling classifications, to successfully promote our products.

●

If a product candidate demonstrates adverse side effects, we may need to abandon or limit the development of such product candidate.

●

Even if a product candidate is approved, it may be subject to various post-marketing requirements, including studies or clinical trials, and increased regulatory scrutiny.

●

Our competitors may develop treatments for our products’ target indications, which could limit our product candidates’ commercial opportunity and profitability.

●

If our products are not broadly accepted by the healthcare community, the revenues from any such product will likely be limited.

●

Any successful products liability claim related to any of our current or future product candidates may cause us to incur substantial liability and limit the commercialization of such products.

●

Our gene therapy product candidates are based on a novel technology, which makes it difficult to predict the time and cost of product candidate development and subsequently obtaining regulatory approval.

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Risks Related to Reliance on Third Parties

●

We rely, and expect to continue to rely, on third parties to conduct our preclinical studies and clinical trials, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such trials or complying with applicable regulatory requirements.

●

We contract with third parties for the manufacture of our product candidates for preclinical and clinical testing and may also do so for commercialization, if and when our product candidates are approved.

●

We rely on clinical data and results obtained by third parties, which may prove inaccurate or unreliable.

●

We may need to license certain intellectual property from third parties, and such licenses may not be available or may not be available on commercially reasonable terms.

Risks Relating to Legislation and Regulation Affecting the Biopharmaceutical and Other Industries

●

We operate in a heavily regulated industry, and we cannot predict the impact that any future legislation or administrative or executive action may have on our operations.

●

We may be subject to anti-kickback, fraud and abuse, false claims, transparency, health information privacy and security and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm, administrative burdens and diminished profits and future earnings.

●

We are subject to numerous environmental, health and safety laws and regulations and could become subject to fines or penalties or incur costs that could harm our business.

Risks Pertaining to Intellectual Property and Potential Disputes with Licensors Thereof

●

If we are unable to obtain and maintain sufficient patent protection for our technology and products, our competitors could develop and commercialize products similar or identical to ours and our ability to successfully commercialize our technology and products could be impaired.

●

We depend on our licensors to maintain and enforce the intellectual property covering certain of our product candidates.

●

We or our licensors may be subject to costly and time-consuming litigation for infringement of third-party intellectual property rights or to enforce our or our licensors’ patents.

●

Any dispute with our licensors may affect our ability to develop or commercialize our product candidates.

Risks Relating to Our Control by Fortress Biotech, Inc. (“Fortress”)

●

Fortress controls a voting majority of our common stock and has the right to receive significant share grants annually, which will result in dilution of our other stockholders and could reduce the value of our common stock.

●

We have entered into certain agreements with Fortress and may have received better terms from unaffiliated third parties.

Risks Related to Conflicts of Interest

●

We share certain directors with Fortress, which could create conflicts of interest between us and Fortress.

Risks Relating to the Sale of the Company’s Manufacturing Facility

●

We may be unable to complete the transaction as contemplated if the Committee on Foreign Investment in the United States determines to implement mitigation measures, including the potential divestment of some or all of the transferred assets by the buyer, which may limit our ability to realize the anticipated cost savings of the sale of the facility and may have a material adverse effect on our financial condition.

●

Our receipt of the contingent portion of the consideration for the sale of the manufacturing facility is subject to receipt of the consent of the landlord of the facility to the transfer of such lease to the buyer and our ability to raise additional capital.

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●

If the landlord does not consent to the transfer of the lease within 120 days of the closing date of the transaction and the lease of the facility is not transferred to the buyer, we may be obligated to negotiate the repurchase of the facility from the buyer.

●

The buyer may provide us with notice of its intentions to enter into negotiations for our repurchase of the facility if the lease of the facility is not transferred to the buyer within 120 days of the closing date, and we may be unable to successfully negotiate such repurchase.

●

The landlord may object to certain aspects of the transaction which could result in expensive and time-consuming litigation and could prevent us from realizing the intended benefits of the transaction.

●

If the sale of the facility is fully consummated, we will rely on the buyer for the manufacture of our lead product candidates which may subject us to additional manufacturing risks.

●

We may incur substantial expenses related to the transaction and the consummation of the sale of the facility.

●

Certain key personnel may depart the Company upon the completion of the sale of the facility which may adversely affect our ability to realize the anticipated benefits of the transaction.

●

Our strategic pivot to our lead product candidate, MB-106, and our disposal of non-core assets, including our facility, may not result in the anticipated cost savings and could result in total costs and expenses that are greater than expected.

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PART I. FINANCIAL INFORMATION

Item 1. Unaudited Financial Statements

MUSTANG BIO, INC.

Balance Sheets (Unaudited)

(in thousands, except share and per share amounts)


	June 30,		December 31,
	2023		2022

ASSETS
Current Assets:
Cash and cash equivalents	$	15,385	$	75,656
Other receivables - related party		—		36
Prepaid expenses and other current assets		2,843		3,160
Property, plant and equipment, held for sale		4,348		—
Total current assets		22,576		78,852

Property, plant and equipment, net		3,786		8,440
Fixed assets - construction in process		—		951
Restricted cash		750		1,000
Other assets		253		261
Operating lease right-of-use asset, net		1,721		2,918
Total Assets	$	29,086	$	92,422

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable and accrued expenses	$	11,684	$	13,731
Payables and accrued expenses - related party		771		766
Operating lease liabilities - short-term		409		612
Total current liabilities		12,864		15,109

Deferred income		270		270
Note payable, long-term, net		—		27,436
Operating lease liabilities - long-term		2,239		3,334
Total Liabilities		15,373		46,149

Commitments and Contingencies (Note 12)

Stockholders’ Equity
Preferred stock ($0.0001 par value), 2,000,000 shares authorized, 250,000 shares of Class A preferred stock issued and outstanding as of June 30, 2023 and December 31, 2022, respectively		—		—
Common stock ($0.0001 par value), 200,000,000 shares authorized as of June 30, 2023 and December 31, 2022, respectively
Class A common shares, 845,385 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively		—		—
Common shares, 7,320,444 and 7,100,111 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively		1		11
Common stock issuable, zero and 187,134 shares as of June 30, 2023 and December 31, 2022, respectively		—		1,109
Additional paid-in capital		376,009		374,522
Accumulated deficit		(362,297)		(329,369)
Total Stockholders’ Equity		13,713		46,273
Total Liabilities and Stockholders’ Equity	$	29,086	$	92,422

The accompanying notes are an integral part of these unaudited financial statements.

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MUSTANG BIO, INC.

Statements of Operations (Unaudited)

(in thousands, except share and per share amounts)


	For the three months ended June 30,				For the six months ended June 30,
	2023		2022		2023		2022
Operating expenses:
Research and development	$	10,836	$	15,164	$	24,836	$	31,453
General and administrative		3,055		3,077		5,376		6,426
Total operating expenses		13,891		18,241		30,212		37,879
Loss from operations		(13,891)		(18,241)		(30,212)		(37,879)

Other income (expense)
Other income		429		—		780		—
Interest income		159		77		612		150
Interest expense		(2,932)		(935)		(4,108)		(1,165)
Total other expense		(2,344)		(858)		(2,716)		(1,015)
Net Loss	$	(16,235)	$	(19,099)	$	(32,928)	$	(38,894)

Net loss per common share outstanding, basic and diluted	$	(2.00)	$	(2.50)	$	(4.06)	$	(5.20)

Weighted average number of common shares outstanding, basic and diluted		8,127,473		7,652,170		8,110,661		7,485,355

The accompanying notes are an integral part of these unaudited financial statements.

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MUSTANG BIO, INC.

Statements of Stockholders’ Equity (Unaudited)

(in thousands, except share amounts)


	For the Three Months Ended June 30, 2023
										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, 2023	250,000	$	—	845,385	$	—	7,293,242	$	1	$	—	$	375,876	$	(346,062)	$	29,815
Issuance of common shares under ESPP	—		—	—		—	12,642		—		—		88		—		88
Stock-based compensation expenses	—		—	—		—	16,193		—		—		45		—		45
Fractional share adjustment	—		—	—		—	(1,633)		—		—		—		—		—
Net loss	—		—	—		—	—		—		—		—		(16,235)		(16,235)
Balances at June 30, 2023	250,000	$	—	845,385	$	—	7,320,444	$	1	$	—	$	376,009	$	(362,297)	$	13,713


	For the Six Months Ended June 30, 2023
										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, 2022	250,000	$	—	845,385	$	—	7,100,111	$	11	$	1,109	$	374,522	$	(329,369)	$	46,273
Issuance of common shares - Founders Agreement	—		—	—		—	187,134		—		(1,109)		1,109		—		—
Issuance of common shares under ESPP	—		—	—		—	12,642		—		—		88		—		88
Stock-based compensation expenses	—		—	—		—	22,097		—		—		280		—		280
Exercise of warrants	—		—	—		—	93		—		—		—		—		—
Reverse Split (15:1)	—		—	—		—	—		(10)		—		10		—		—
Fractional share adjustment							(1,633)
Net loss	—		—	—		—	—		—		—		—		(32,928)		(32,928)
Balances at June 30, 2023	250,000	$	—	845,385	$	—	7,320,444	$	1	$	—	$	376,009	$	(362,297)	$	13,713

The accompanying notes are an integral part of these unaudited financial statements.

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MUSTANG BIO, INC.

Statements of Stockholders’ Equity (Unaudited)

(in thousands, except share amounts)


	For the Three Months Ended June 30, 2022
										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, 2022	250,000	$	—	845,385	$	—	6,685,856	$	10	$	27	$	368,933	$	(271,639)	$	97,331
Issuance of common shares, net of offering shares -At-the-Market Offering	—		—	—		—	265,286		—		—		3,051		—		3,051
Issuance of common shares - Equity fee on At-the-Market Offering	—		—	—		—	5,614		—		1		74		—		75
Stock-based compensation expenses	—		—	—		—	10,657		—		—		650		—		650
Net loss	—		—	—		—	—		—		—		—		(19,099)		(19,099)
Balances at June 30, 2022	250,000	$	—	845,385	$	—	6,967,413	$	10	$	28	$	372,708	$	(290,738)	$	82,008


	For the Six Months Ended June 30, 2022
										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, 2021	250,000	$	—	845,385	$	—	6,238,866	$	9	$	4,329	$	359,906	$	(251,844)	$	112,400
Issuance of common shares - Founders Agreement	—		—	—		—	169,107		—		(4,212)		4,212		—		—
Issuance of common shares, net of offering shares -At-the-Market Offering	—		—	—		—	450,206		1		—		5,789		—		5,790
Issuance of common shares - Equity fee on At-the-Market Offering	—		—	—		—	11,905		—		(89)		237		—		148
Issuance of common shares under ESPP	—		—	—		—	10,485		—		—		116		—		116
Stock-based compensation expenses	—		—	—		—	23,182		—		—		1,314		—		1,314
Issuance of common shares - Equity fee on RWG debt	—		—	—		—	63,662		—		—		750		—		750
Issuance of warrants for RWG debt	—		—	—		—	—		—		—		384		—		384
Net loss	—		—	—		—	—		—		—		—		(38,894)		(38,894)
Balances at June 30, 2022	250,000	$	—	845,385	$	—	6,967,413	$	10	$	28	$	372,708	$	(290,738)	$	82,008

The accompanying notes are an integral part of these unaudited financial statements.

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MUSTANG BIO, INC.

Statements of Cash Flows (Unaudited)

(in thousands)


	For the six months ended June 30,
	2023		2022
Cash Flows from Operating Activities:
Net loss	$	(32,928)	$	(38,894)
Adjustments to reconcile net loss to net cash used in operating activities:
Issuance of common shares - Equity fee on at-the-market offering to Fortress Biotech		-		147
Common shares issuable for Founders Agreement				1
Issuance of common shares - Equity fee on note payable to Fortress Biotech		-		750
Stock-based compensation expenses		280		1,314
Depreciation expense		1,291		1,298
Amortization of debt discount		118		185
Reduction in the carrying amount of operating lease right-of-use assets		204		80
Loss on disposal of property and equipment		-		239
Loss on extinguishment of debt		2,796		—
Gain on lease modification		(220)
Changes in operating assets and liabilities:
Prepaid expenses and other assets		325		67
Other receivables - related party		36		17
Accounts payable and accrued expenses		(2,022)		1,376
Payable and accrued expenses - related party		5		(275)
Lease liabilities		(85)		(169)
Net cash used in operating activities		(30,200)		(33,864)

Cash Flows from Investing Activities:
Purchase of fixed assets		(34)		(1,640)
Net cash used in investing activities		(34)		(1,640)

Cash Flows from Financing Activities:
Payment of debt		(30,375)		—
Proceeds from issuance of common shares - at-the-market offering		—		5,900
Offering costs for the issuance of common shares -at-the-market offering		—		(110)
Proceeds from debt issuance		—		30,000
Fees paid on the issuance of debt		—		(2,651)
Proceeds from issuance of common shares under ESPP		88		116
Net cash provided by (used in) financing activities		(30,287)		33,255

Net change in cash, cash equivalents and restricted cash		(60,521)		(2,249)
Cash, cash equivalents and restricted cash, beginning of the period		76,656		110,618
Cash, cash equivalents and restricted cash, end of the period	$	16,135	$	108,369

Supplemental disclosure of cash flow information:
Cash paid for interest	$	1,340	$	845

Supplemental disclosure of noncash activities:
Fixed assets (acquired but not paid)	$	—	$	315
Issuance of common shares - Founders Agreement	$	1,109	$	4,212
Note payable final payment fee (incurred but not paid)	$	—	$	1,050
Issuance of warrants - note payable	$	—	$	384
Transfer of assets classified as held for sale	$	4,348	$	—

The accompanying notes are an integral part of these unaudited financial statements

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MUSTANG BIO, INC.

Notes to Unaudited Financial Statements

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 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”).

The Company’s common stock is listed on the NASDAQ Capital Market and trades under the symbol “MBIO.”

Reverse Stock Split

On March 3, 2023, the Board of Directors of the Company (the “Board”) unanimously adopted resolutions to approve and recommend stockholder approval of a form amendment to the Company’s Amended and Restated Certificate of Incorporation, as amended, to effect a reverse stock split of our issued and outstanding Common Stock within a range of between 5-for-1 and 20-for-1 (with our Board being authorized to determine the exact ratio), with such reverse stock split to be effected at such time and date before January 31, 2024, if at all, as determined by the Board in its sole discretion (such reverse stock split, the “Reverse Stock Split” and such amendment, the “Amendment”). On March 3, 2023, the holders of a majority in voting power of issued and outstanding shares of our Common Stock and issued and outstanding shares of our Class A Preferred Stock, par value $0.0001 (together, the “Majority Holders”) approved the Amendment by written consent in lieu of a meeting (the “Written Consent”). On March 15, 2023, the Board selected the 15-for-1 reverse stock split ratio.

Pursuant to rules adopted by the Securities and Exchange Commission (“SEC”) under the Securities Exchange Act of 1934, a Schedule 14C information statement was filed with the SEC and provided to the stockholders of the Company. The Reverse Stock Split became effective on April 3, 2023, or twenty (20) days from the mailing of the information statement to the common stockholders of record.

All share and per share information has been retroactively adjusted to give effect to the Reverse Stock Split for all periods presented, unless otherwise indicated. Proportionate adjustments were made to the per share exercise price and/or the number of shares issuable upon the exercise or vesting of all stock options, restricted stock and warrants outstanding at April 3, 2023, which resulted in a proportional decrease in the number of shares of the Company’s common stock reserved for issuance upon exercise or vesting of such stock options, restricted stock and warrants, and, in the case of stock options and warrants, a proportional increase in the exercise price of all such stock options and warrants.

No fractional shares were issued in connection with the Reverse Stock Split and stockholders who would otherwise be entitled to a fraction of one share received a proportional cash payment.

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, 2023, the Company had an accumulated deficit of $362.3 million.

The Company has funded its operations to date primarily through the sale of equity and via debt raises, which included its loan and financing agreement with Runway Growth Finance Corporation (the "Lender"), herein referred to as the "Term Loan." On April 11, 2023, the Company repaid the Term Loan, see Note 8. The Company expects to continue to use the proceeds from its other 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.

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On May 18, 2023, the Company entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with uBriGene (Boston) Biosciences, Inc. (“uBriGene”), pursuant to which the Company agreed to sell its leasehold interest in its cell processing facility located in Worcester, MA (the “Facility”) and associated assets relating to the manufacturing and production of cell and therapies at the Facility to uBriGene. The Company and uBriGene subsequently entered into Amendment No. 1, dated as of June 29, 2023, and Amendment No. 2, dated as of July 28, 2023, to the Asset Purchase Agreement (the Asset Purchase Agreement, as so amended, the “Amended Asset Purchase Agreement”). On July 28, 2023, pursuant to the terms and conditions of the Amended Asset Purchase Agreement, the Company completed the sale of all of the Company’s assets primarily relating to the Company’s operations primarily relating to the manufacturing and production of cell and gene therapies to uBriGene for a base consideration of $6.0 million. uBriGene will be obligated to pay to the Company a contingent amount of $5.0 million less certain severance obligations and payments payable in connection with the transfer of certain contracts related to the transferred assets, if the Company, within two years of the closing date, (i) completes an issuance of equity securities in an amount equal to or greater than $10.0 million after the closing and (ii) obtains consent of the landlord to the proposed lease transfer within two years of the closing date. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Recent Developments.”

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. The continuation of our business as a going concern is dependent upon raising additional capital and eventually attaining and maintaining profitable operations.

In accordance with Accounting Standards Codification (“ASC”) 205-40, Going Concern, the Company evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern within one year after the date that these consolidated financial statements are issued. This evaluation initially does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented as of the date the financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that these consolidated financial statements are issued. In performing its evaluation, management excluded certain elements of its operating plan that cannot be considered probable. Under ASC 205-40, the future receipt of potential funding from future equity or debt issuances, and the potential sale of priority review vouchers cannot be considered probable at this time because these plans are not entirely within the Company’s control nor have been approved by the Board of Directors as of the date of these financial statements.

The Company's expectation to generate operating losses and negative operating cash flows in the future, and the need for additional funding to support its planned operations raise substantial doubt regarding the Company’s ability to continue as a going concern for a period of one year after the date that these unaudited consolidated financial statements are issued. The Company continues to monitor its spending by reducing 2023 expenses, which may include projected savings through delaying the development timelines of certain programs, or termination of such programs and the pursuit of additional cash resources through public or private equity or debt financings. The Company has concluded that substantial doubt exists about the Company’s ability to continue as a going concern for a period of at least 12 months from the date of issuance of these unaudited financial statements.

The accompanying unaudited financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that may be necessary if the Company is unable to continue as a going concern.

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Note 2 - Significant Accounting Policies

Basis of Presentation

The accompanying interim unaudited 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 interim unaudited 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 do 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, 2022, which were included in the Company’s Form 10-K and filed with the SEC on March 30, 2023. 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.

Use of Estimates

The Company’s unaudited 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.

Cash, Cash Equivalents and Restricted Cash

The Company records cash held in an escrow account as a security deposit for the manufacturing facility in Worcester, Massachusetts, as restricted cash.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash from the Unaudited Balance Sheets to the Unaudited Statements of Cash Flows for the six months ended June 30, 2023, and 2022:


	June 30,
($ in thousands)	2023	2022
Cash and cash equivalents	$ 15,385	$ 107,369
Restricted cash	750	1,000
Total cash, cash equivalents and restricted cash	$ 16,135	$ 108,369

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 30, 2023.

Assets Held for Sale

Assets held for sale represent lab equipment that have met the criteria of “held for sale” accounting, as specified by Accounting Standards Codification (“ASC”) 360, “Long-lived Assets.” As of June 30, 2023, there were $4.3 million of lab and cell processing equipment, furniture and fixtures and computer equipment that are recorded as assets held for sale. The effect of suspending depreciation on the assets held for sale is immaterial to the results of operations. The assets held for sale are identified as part of the pending sale of the Company’s leasehold interest in its cell processing facility located in Worcester, Massachusetts and associated assets relating to the manufacturing production of its cell and gene therapies at the facility, and it is the Company’s intention to complete the sales of these assets within the upcoming year. On July

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28, 2023, the Company completed the sale of all held for sale assets. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Recent Developments.”

Recently Issued Accounting Standards

As of June 30, 2023, there were no new accounting pronouncements or updates to recently issued accounting pronouncements disclosed in the 2022 Form 10-K that affect the Company’s present or future results of operations, overall financial condition, liquidity, or disclosures upon adoption.

Note 3 - Clinical Trial and Sponsored Research Agreements

Research and Development Expenses - Sponsored Research and Clinical Trial Agreements

For the three and six months ended June 30, 2023, and 2022, the Company recorded the following expense in research and development for sponsored research and clinical trial agreements in the Unaudited Statements of Operations pursuant to the terms of this agreement:


	For the three months ended June 30,				For the six months ended June 30,
($ in thousands)	2023		2022		2023		2022
City of Hope National Medical Center
CD123	$	—	$	52	$	—	$	103
IL13Rα2		326		234		636		462
CS1		139		50		188		100
HER2		—		271		—		542
PSCA		22		28		44		50
Fred Hutchinson Cancer Center - CD20		544		358		1,098		846
St. Jude Children's Research Hospital - XSCID		216		94		634		218
LUMC - RAG1 SCID		112		138		224		265
Mayo Clinic		275		231		551		462
Total	$	1,634	$	1,456	$	3,375	$	3,048

CD123 (MB-102) Clinical Research Support Agreement

Since February 2017, the Company has been party to a clinical research support agreement for the CD123-directed CAR T program (the “CD123 CRA”) with COH whereby, the Company has agreed to contribute approximately $0.1 million per patient in connection with the ongoing investigator-initiated study. In May 2023, the Company determined to discontinue development of its MB-102 program and terminated the associated CRA and license.

IL13Rα2 (MB-101) Clinical Research Support Agreements

Since February 2017, the Company has been party to a clinical research support agreement for the IL13Rα2-directed CAR T program (the “IL13Rα2 CRA”) with COH, whereby, the Company has agreed to contribute $0.1 million related to patient costs in connection with the on-going investigator-initiated study.

Since October 2020, the Company has been party to a clinical research support agreement for the IL13Rα2-directed CAR T program for adult patients with leptomeningeal glioblastoma, ependymoma or medulloblastoma (the “IL13Rα2 Leptomeningeal CRA”) with COH whereby, the Company has agreed to contribute $0.1 million per patient in connection with the ongoing investigator-initiated study. Further, the Company agreed to fund approximately $0.2 million annually pertaining to the clinical development of the IL13Rα2-directed CAR T program for this patient population.

Since October 2020, the Company has been party to a Sponsored Research Agreement (“SRA”) with COH to conduct combination studies of a potential IL13Rα2 CAR (MB-101) and herpes simplex-1 oncolytic virus therapy (MB-108).

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Pursuant to the SRA, the Company funded research in the amount of $0.3 million for the program. In November 2022, the SRA was amended to include additional funding of $0.6 million.

Since March 2021, the Company has been party to a clinical research support agreement for an Institutional Review Board-approved, investigator-initiated protocol entitled: “Single Patient Treatment with Intraventricular Infusions of IL13Rα2-targeting and HER2-targeting Chimeric Antigen Receptor (CAR)-T cells for a Single Patient (UPN 181) with Recurrent Multifocal Malignant Glioma.” Pursuant to the terms of this agreement, the Company will contribute up to $0.2 million in connection with the ongoing investigator-initiated study.

CS1 (MB-104) Clinical Research Support Agreement

Since June 2020, the Company has been party to a clinical research and support agreement with COH in connection with an investigator-sponsored study conducted under an Institutional Review Board-approved for MB-104, whereby the Company has agreed to reimburse COH for costs associated with this trial, when incurred, not to exceed $2.4 million. The agreement will expire upon the delivery of a final study report or earlier. Since inception, the Company has reimbursed COH $2.2 million. In May 2023, the Company determined to discontinue development of its MB-104 program and terminated the associated CRA and license.

HER2 (MB-103) Clinical Research Support Agreement

Since September 2020, the Company has been party to a clinical research support agreement with COH in connection with an investigator-sponsored study conducted under an Institutional Review Board-approved, investigator-initiated protocol entitled: “Phase I Study of Cellular Immunotherapy using Memory-Enriched T Cells Lentivirally Transduced to Express a HER2-Specific, Hinge-Optimized, 41BB-Costimulatory Chimeric Receptor and a Truncated CD19 for Patients with Recurrent/Refractory Malignant Glioma” for MB-103. Under the terms of the agreement the Company will reimburse COH for costs associated with this trial not to exceed $3.0 million. The agreement will expire upon the delivery of a final study report or earlier. Since inception, the Company has reimbursed COH $3.0 million. In May 2023, the Company determined to discontinue development of its MB-103 program and terminated the associated CRA and license.

PSCA (MB-105) Clinical Research Support Agreement

Since October 2020, the Company has been party to a clinical research support agreement with COH in connection with an investigator-sponsored study conducted under an Institutional Review Board-approved, investigator-initiated protocol entitled: “A Phase 1 Study to Evaluate PSCA-Specific Chimeric Antigen Receptor (CAR)-T Cells for Patients with Metastatic Castration Resistant Prostate Cancer” for MB-105. The Company has agreed to reimburse COH for costs associated with this trial not to exceed $2.3 million. The agreement will expire upon the delivery of a final study report or earlier. Since inception, the Company has reimbursed COH $0.5 million. In May 2023, the Company determined to discontinue development of its MB-105 program and terminated the associated CRA and license.

CD20 (MB-106) Clinical Trial Agreement with Fred Hutchinson Cancer Research Center

Since July 3, 2017, in conjunction with the CD20 Technology License from Fred Hutchinson Cancer Center (“Fred Hutch”), the Company has been party to an investigator-initiated clinical trial agreement (the “CD20 CTA”) to provide partial funding for a Phase 1/2 clinical trial at Fred Hutch evaluating the safety and efficacy of the CD20 Technology in patients with relapsed or refractory B-cell non-Hodgkin lymphomas. In connection with the CD20 CTA, the Company agreed to fund up to $5.3 million of costs associated with the clinical trial, which commenced during the fourth quarter of 2017. In November 2020, the CD20 CTA was amended to include additional funding of approximately $1.8 million, which includes $0.8 million for the treatment of five patients with chronic lymphocytic leukemia. In January 2022, the CD20 CTA was amended to include additional funding of $2.2 million increasing the total payment obligation of the Company in connection with the CD20 CTA not to exceed $9.3 million. Since inception, the Company has reimbursed Fred Hutch $8.3 million.

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XSCID (MB-107) Data Transfer Agreement with St. Jude Children’s Research Hospital

Since June 2020, the Company has been party to a Data Transfer Agreement with St. Jude Children’s Research Hospital (“St. Jude”) under which Mustang will reimburse St. Jude for costs associated with St. Jude’s clinical trial for the treatment of infants with X-linked severe combined immunodeficiency (“XSCID”), whereby the Company will continue to reimburse St. Jude for costs incurred in connection with this trial. Since inception, the Company has reimbursed St. Jude $3.6 million.

RAG1-SCID (MB-110) Sponsored Research Support Agreement (“SRA”) with Leiden University Medical Centre

Since September 8, 2021, in connection with the Leiden License, the Company has been party to a Sponsored Research Support Agreement (“SRA”) with Leiden University Medical Centre (“LUMC”) under which the Company will fund research in the amount of approximately $0.5 million annually over a period of 5 years. The research performed pursuant to this agreement will support technology the Company has licensed from Leiden for the use of a gene therapy under development for the treatment of severe immunodeficiency caused by mutations in the RAG1 gene.

Sponsored Research Support Agreement with Mayo Clinic

Since June 2021, the Company has been party to an SRA with the Mayo Clinic under which the Company will fund research in the amount of $2.1 million over a period of two years. In October 2022, the SRA was amended to include additional funding of approximately $0.1 million. The research performed pursuant to this agreement will support technology the Company has licensed from Mayo Clinic for a novel technology that may be able to transform the administration of CAR T therapies and has the potential to be used as an off-the-shelf therapy. Since inception, the Company has funded $2.2 million.

Note 4 - Related Party Agreements

Founders Agreement and Management Services Agreement with Fortress

In connection with the Company’s Management Services Agreement (the “Management Services Agreement”) with Fortress for the three and six months ended June 30, 2023, and 2022, respectively, expenses related to the MSA are recorded 50% in research and development expenses and 50% in general and administrative expenses in the Unaudited Statements of Operations. For the three months ended June 30, 2023, and 2022, the Company recorded expense of $0.1 million and $0.3 million, respectively, related to the MSA. For the six months ended June 30, 2023, and 2022, the Company recorded expense of $0.3 million and $0.5 million, respectively, related to this agreement.

Under the terms of the Second Amended and Restated Founders Agreement (the “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 six months ended June 30, 2023, the Company issued zero shares of common stock to Fortress under the Founders Agreement. For the three months ended June 30, 2023, and 2022, the Company recorded expense of approximately zero and $0.1 million, respectively, in general and administrative expenses related to these shares. For the six months ended June 30, 2023, and 2022, the Company recorded expense of approximately zero and $0.9 million, respectively, in general and administrative expenses related to these shares.

Annual Stock Dividend

Pursuant to the Amended and Restated Articles of Incorporation, the Company issued 187,134 shares of common stock to Fortress for the Annual Stock Dividend, representing 2.5% of the fully-diluted outstanding equity of Mustang on January 6, 2023. This was shown in the Statement of Stockholders’ Equity at December 31, 2022, as Common stock issuable – Founders Agreement. The Company recorded an expense of approximately $1.1 million in research and development – licenses acquired related to these issuable shares during the year ended December 31, 2022.

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Payables and Accrued Expenses Related Party

In the normal course of business Fortress pays for certain expenses on behalf of the Company. Such expenses are recorded as payables and accrued expenses - related party and are reimbursed to Fortress in the normal course of business.

Note 5 – Assets Held for Sale

At June 30, 2023, and December 31, 2022, assets held for sale consisted of the following: