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Table of Contents

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, 2024

OR

    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 9, 2024

Class A Common Stock, $0.0001 par value

 

845,385

Common Stock, $0.0001 par value

 

36,387,236

Table of Contents

MUSTANG BIO, INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

5

Item 1.

Unaudited Financial Statements

5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

25

Item 3.

Quantitative and Qualitative Disclosures About Market Risks

38

Item 4.

Controls and Procedures

39

PART II. OTHER INFORMATION

39

Item 1.

Legal Proceedings

39

Item 1A

Risk Factors

39

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

77

Item 3.

Defaults Upon Senior Securities

77

Item 4.

Mine Safety Disclosures

77

Item 5.

Other Information

77

Item 6.

Exhibits

78

Signatures

80

2

Table of Contents

SUMMARY OF RISK FACTORS

Our business is subject to risks of which you should be aware before making an investment decision in our securities. 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 of this Quarterly Report on Form 10-Q (this “Form 10-Q”), and the other reports and documents that we have filed with the Securities and Exchange Commission.  

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 us, or at all. Failure to obtain necessary capital when needed may force us to delay, limit or terminate our potential product candidates.
We have not generated any revenue from our development stage products, and we do not know when, or if, we will generate any revenue.
Our short operating history makes it difficult to evaluate our business and prospects.
Our success is contingent on raising additional capital, and our efforts to do so 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, if approved, 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 product candidates.
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 cost savings we anticipate and could result in total costs and expenses that are greater than expected.

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 product candidates, if approved.
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 product candidates, if approved, are not broadly accepted by the healthcare community, the revenues from any such product will likely be limited.
Any successful products’ liability claims related to any of our current or future product candidates may cause us to incur substantial liability and limit the commercialization of any such products.

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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 therefore be impaired.
We depend on our licensors to maintain and enforce the intellectual property rights 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’ intellectual property rights against third-party infringers.
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.
We share certain directors with Fortress, which could create conflicts of interest between us and Fortress.

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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, 

    

2024

    

2023

ASSETS

 

  

 

  

Current Assets:

 

  

 

  

Cash and cash equivalents

$

4,268

$

6,234

Other receivables

728

3,879

Prepaid expenses and other current assets

 

114

 

1,233

Property, plant and equipment, held for sale

 

2,209

 

Total current assets

 

7,319

 

11,346

 

  

 

  

Property, plant and equipment, net

 

472

 

3,247

Restricted cash

 

375

 

750

Other assets

 

250

 

833

Operating lease right-of-use asset, net

103

1,566

Total Assets

$

8,519

$

17,742

 

  

 

  

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

  

 

  

Current Liabilities:

 

  

 

  

Accounts payable and accrued expenses

$

13,190

$

14,017

Payables and accrued expenses - related party

2,304

834

Operating lease liabilities - short-term

429

520

Total current liabilities

 

15,923

 

15,371

 

  

 

  

Deferred income

 

270

 

270

Operating lease liabilities - long-term

656

1,978

Total Liabilities

 

16,849

 

17,619

 

 

  

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, 2024 and December 31, 2023, respectively

 

 

Common stock ($0.0001 par value), 200,000,000 shares authorized as of June 30, 2024 and December 31, 2023, respectively

 

  

 

  

Class A common shares, 845,385 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively

 

 

Common shares, 34,098,059 and 8,374,869 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively

 

3

 

1

Common stock issuable, zero and 419,089 shares as of June 30, 2024 and December 31, 2023, respectively

 

 

591

Additional paid-in capital

 

386,028

 

380,502

Accumulated deficit

 

(394,361)

 

(380,971)

Total Stockholders’ Equity

 

(8,330)

 

123

Total Liabilities and Stockholders’ Equity

$

8,519

$

17,742

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, 

    

2024

    

2023

    

2024

    

2023

    

Operating expenses:

 

  

 

  

 

  

 

  

 

Research and development

$

4,360

$

10,836

$

8,164

$

24,836

Asset impairment

2,649

 

2,649

General and administrative

 

1,531

 

3,055

 

2,958

 

5,376

Total operating expenses

 

8,540

 

13,891

 

13,771

 

30,212

Loss from operations

 

(8,540)

 

(13,891)

 

(13,771)

 

(30,212)

 

  

 

  

 

  

 

  

Other income (expense)

 

  

 

 

  

 

  

Other income

314

429

314

780

Interest income

 

29

 

159

 

70

 

612

Interest expense

 

(2)

 

(2,932)

 

(3)

 

(4,108)

Total other income (expense)

 

341

 

(2,344)

 

381

 

(2,716)

Net Loss

$

(8,199)

$

(16,235)

$

(13,390)

$

(32,928)

 

 

  

 

 

  

Net loss per common share outstanding, basic and diluted

$

(0.35)

$

(2.00)

$

(0.78)

$

(4.06)

 

  

 

  

 

  

 

  

Weighted average number of common shares outstanding, basic and diluted

 

23,123,178

 

8,127,473

 

17,090,705

 

8,110,661

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, 2024

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, 2024

 

250,000

$

 

845,385

$

 

9,545,541

$

1

$

$

381,218

$

(386,162)

$

(4,943)

Issuance of common shares - Founders Agreement

 

 

 

 

 

575,191

 

 

 

163

 

 

163

Issuance of common shares, net of offering costs - Public Offerings

 

 

 

 

4,185,000

 

 

 

5,265

 

 

5,265

Issuance of common shares under ESPP

 

 

 

 

 

5,689

 

 

 

 

 

Stock-based compensation expenses

 

 

 

 

 

 

 

 

(619)

 

 

(619)

Exercise of warrants

 

 

 

 

 

19,786,638

 

2

 

 

1

 

 

3

Net loss

 

 

 

 

 

 

 

 

 

(8,199)

 

(8,199)

Balances at June 30, 2024

 

250,000

$

 

845,385

$

 

34,098,059

$

3

$

$

386,028

$

(394,361)

$

(8,330)

For the Six Months Ended June 30, 2024

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, 2023

 

250,000

$

 

845,385

$

 

8,374,869

$

1

$

591

$

380,502

$

(380,971)

$

123

Issuance of common shares - Founders Agreement

 

 

 

 

 

928,277

 

 

(477)

 

640

 

 

163

Issuance of common shares, net of offering costs - Public Offerings

 

 

 

 

 

4,251,003

 

 

(114)

 

5,379

 

 

5,265

Issuance of common shares under ESPP

 

 

 

 

 

47,463

 

 

 

48

 

 

48

Stock-based compensation expenses

 

 

 

 

 

5,573

 

 

 

(542)

 

 

(542)

Exercise of warrants

 

 

 

 

 

20,490,874

 

2

 

 

1

 

 

3

Net loss

 

 

 

 

 

 

 

 

 

(13,390)

 

(13,390)

Balances at June 30, 2024

 

250,000

$

 

845,385

$

 

34,098,059

$

3

$

$

386,028

$

(394,361)

$

(8,330)

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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) adjustment

 

 

 

 

 

(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 Cash Flows (Unaudited)

(in thousands)

For the six months ended June 30, 

    

2024

    

2023

Cash Flows from Operating Activities:

 

  

 

  

Net loss

$

(13,390)

$

(32,928)

Adjustments to reconcile net loss to net cash used in operating activities:

Issuance of common shares - Equity fee on public offerings to Fortress Biotech

 

163

 

Stock-based compensation expenses

 

(542)

 

280

Depreciation expense

 

569

 

1,291

Amortization of debt discount

118

Amortization of operating lease right-of-use assets

128

204

Loss on disposal of property and equipment

29

Asset impairment

2,649

Loss on extinguishment of debt

2,796

Gain on lease modification

(314)

(220)

Changes in operating assets and liabilities:

 

Prepaid expenses and other assets

 

672

 

325

Other receivables

167

Other receivables - related party

36

Accounts payable and accrued expenses

 

981

 

(2,022)

Payable and accrued expenses - related party

 

1,470

 

5

Lease liabilities

(238)

(85)

Net cash used in operating activities

 

(7,656)

 

(30,200)

 

  

 

  

Cash Flows from Investing Activities:

 

  

 

  

Purchase of fixed assets

 

 

(34)

Net cash from investing activities

 

 

(34)

 

  

 

  

Cash Flows from Financing Activities:

 

  

 

  

Payment of debt

 

 

(30,375)

Proceeds from issuance of common shares - public offerings

5,944

Offering costs for the issuance of common shares - public offerings

(680)

Proceeds from exercise of warrants

3

Proceeds from issuance of common shares under ESPP

48

88

Net cash provided by financing activities

 

5,315

 

(30,287)

 

  

 

  

Net change in cash, cash equivalents and restricted cash

 

(2,341)

 

(60,521)

Cash, cash equivalents and restricted cash, beginning of the period

 

6,984

 

76,656

Cash, cash equivalents and restricted cash, end of the period

$

4,643

$

16,135

 

 

  

Supplemental disclosure of cash flow information:

 

 

  

Cash paid for interest

$

$

1,340

 

  

 

  

Supplemental disclosure of noncash activities:

 

  

 

  

Issuance of common shares - Founders Agreement and Equity fee to Fortress

$

591

$

1,109

Transfer of assets classified as held for sale

$

$

4,348

Supplemental disclosure of noncash activities related to the uBriGene Repurchase Transaction (see Note 5):

Fair value of assets received

$

2,209

$

Fair value of supplies received expensed to research and development

$

2,509

$

Accounts receivable written off

$

(6,967)

$

Accounts payable written off

$

3,644

$

Net purchase consideration of assets recorded to accrued other

$

(1,395)

$

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 medical breakthroughs in cell and gene therapy into potential cures for hematologic cancers and solid tumors. 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, 2024, the Company had an accumulated deficit of $394.4 million.

The Company has funded its operations to date primarily through the sale of equity and via debt raises. The Company expects to continue to use the proceeds from its previous financing transactions and asset sale primarily for working capital and general corporate purposes.

The Company will require substantial 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 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 unaudited 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 unaudited 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 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 financial statements are issued. The Company made strategic decisions, including a significant reduction in the workforce by approximately 81% in April 2024, and also in April 2024, terminated certain license agreements with St. Jude and Leiden University Medical Centre, and with Mayo Clinic in June 2024, to preserve capital and prioritize the allocation of resources. The Company continues to pursue 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

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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.

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 under the Securities Exchange Act of 1934, as amended (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, 2023, which were included in the Company’s Annual Report on Form 10-K and filed with the Securities and Exchange Commission (“SEC”) on March 11, 2024 (the “2023 Form 10-K”). 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, 2024, and 2023:

June 30, 

($ in thousands)

2024

2023

Cash and cash equivalents

$ 4,268

$ 15,385

Restricted cash

375

750

Total cash, cash equivalents and restricted cash

$ 4,643

$ 16,135

Assets Held for Sale

Assets held for sale represent assets 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, 2024, there were $2.2 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 part of the repurchase of assets from uBriGene (see Note 6).

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Impairment of Long-Lived Assets

The Company reviews long-lived assets, including tangible assets and other intangible assets with definitive lives, for impairment whenever events or changes in circumstances indicate that the asset’s carrying amount may not be recoverable. The Company conducts its long-lived asset impairment analyses in accordance with ASC 360-10, "Impairment or Disposal of Long-Lived Assets. ASC 360-10-15 requires the Company to group assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluate the asset group against the sum of the undiscounted future cash flows. If the undiscounted cash flows do not indicate the carrying amount of the asset group is recoverable, an impairment charge is measured as the amount by which the carrying amount of the asset group exceeds its fair value based on discounted cash flow analysis or appraisals. 

Significant Accounting Policies

There have been no material changes to the Company’s significant accounting policies previously disclosed in the 2023 Form 10-K.

Recently Issued Accounting Standards

As of June 30, 2024, there were no new accounting pronouncements or updates to recently issued accounting pronouncements disclosed in the 2023 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, 2024 and 2023, the Company recorded the following expenses in research and development for sponsored research and clinical trial agreements in the Unaudited Statements of Operations pursuant to the terms of these agreements:

For the three months ended June 30, 

For the six months ended June 30, 

($ in thousands)

    

2024

    

2023

    

2024

    

2023

    

City of Hope National Medical Center

IL13Rα2

111

326

391

636

CS1(1)

139

188

PSCA(1)

22

44

Fred Hutchinson Cancer Center - CD20

312

544

312

1,098

St. Jude Children's Research Hospital - XSCID(2)

216

(434)

634

Leiden University Medical Center - RAG1 SCID

121

112

241

224

Mayo Clinic(3)

(275)

275

(275)

551

Total

$

268

$

1,634

$

235

$

3,375

(1) Licenses and associated sponsored research agreements were terminated in May 2023.

(2) License and associated Data Transfer Agreement were terminated in April 2024.

(3) License and associated sponsored research agreement were terminated in June 2024.

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Ongoing Clinical Trial and Sponsored Research Agreements

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). 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.

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

Terminated Clinical Trial and Sponsored Research Agreements

CS1 (MB-104) Clinical Research Support Agreement

Beginning in June 2020, the Company was 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.

PSCA (MB-105) Clinical Research Support Agreement

Beginning in October 2020, the Company was 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.

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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. In April 2024, the Company terminated its license agreement and the associated Data Transfer Agreement with St. Jude, in exchange for a mutual release of liability and forgiveness by St. Jude of all amounts previously owed by the Company.

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. In April 2024, the Company delivered a termination notice to LUMC, pursuant to which it terminated the license agreement underpinning the MB-110 product candidate; the Company is currently in discussions with LUMC regarding the terms that will govern such termination.

Sponsored Research Support Agreement with Mayo Clinic  

From June 2021 until June 2024, the Company was party to an SRA with the Mayo Clinic under which the Company would 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 supported technology the Company 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. In June 2024, the Company terminated its license agreement and associated SRA with the Mayo Clinic, in exchange for a mutual release of liability and forgiveness by Mayo Clinic of all amounts previously owed by the Company.

Note 4 - Related Party Agreements

Founders Agreement and Management Services Agreement with Fortress

With respect to the Company’s Management Services Agreement (the “Management Services Agreement”) with Fortress for the three and six months ended June 30, 2024 and 2023, 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, 2024 and 2023, the Company recorded expense of $0.1 million and $0.1 million, respectively, related to the MSA. For the six months ended June 30, 2024 and 2023, the Company recorded expense of $0.3 million and $0.3 million, respectively.

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 the Company’s 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, 2024, the Company issued 575,191 shares to Fortress in connection with the equity financings. For the three months ended June 30, 2024 and 2023, the Company recorded expense of approximately $163,000 and zero, respectively, in general and administrative expenses related to these shares. For the six months ended June 30, 2024 and 2023, the Company recorded expense of approximately $163,000 and zero, respectively, in general and administrative expenses related to these shares.

Annual Stock Dividend

Pursuant to the Company’s Amended and Restated Certificate of Incorporation, as amended (the “Certificate of Incorporation”), the Company issued 353,086 shares of common stock to Fortress as the Annual Stock Dividend (as such term is defined in the Certificate of Incorporation), representing 2.5% of the fully-diluted outstanding equity of Mustang

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on January 2, 2024. This was recorded in the Statement of Stockholders’ Equity at December 31, 2023, as Common stock issuable – Founders Agreement. The Company recorded an expense of approximately $0.5 million in research and development – licenses acquired related to these issuable shares during the year ended December 31, 2023.

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 typically reimbursed to Fortress in the normal course of business.

Note 5 – Assets Purchase Agreements

Agreements with uBriGene

On May 18, 2023, the Company entered into an Asset Purchase Agreement (the “Original Asset Purchase Agreement”) with uBriGene (Boston) Biosciences, Inc., a Delaware corporation (“uBriGene”), pursuant to which the Company agreed to sell its leasehold interest in its cell processing facility located in Worcester, Massachusetts (the “Facility”), and associated assets relating to the manufacturing and production of cell and gene therapies at the Facility to uBriGene (the “Transaction”). The Company and uBriGene subsequently entered into Amendment No. 1 to the Original Asset Purchase Agreement, dated as of June 29, 2023 (“Amendment No. 1”), and Amendment No. 2 to the Original Asset Purchase Agreement, dated as of July 28, 2023 (“Amendment No. 2,” and together with the Original Asset Purchase Agreement and Amendment No. 1, the “Prior Asset Purchase Agreement”).

 

On July 28, 2023, pursuant to the Prior Asset Purchase Agreement, the Company completed the sale of all of its assets that primarily relate to the manufacturing and production of cell and gene therapies at the Facility (such operations, the “Transferred Operations” and such assets, the “Transferred Assets”) to uBriGene for upfront consideration of $6 million cash (the “Base Amount”). The Transferred Assets included all of the Company’s assets, except for the Company’s lease and related leasehold improvements of the Facility and contracts that are primarily used in the Transferred Operations. The Company recorded a gain of $1.4 million in connection with the sale of the Transferred Assets, and recorded approximately $0.3 million of the base consideration as deferred income, that was to be recognized upon the transfer of the lease. 

 

In connection with the Prior Asset Purchase Agreement, the Company and uBriGene submitted a voluntary joint notice to the U.S. Committee on Foreign Investment in the United States (“CFIUS”). Following CFIUS’s review and subsequent investigation of the transactions related to the Prior Asset Purchase Agreement, on May 13, 2024, the Company, together with uBriGene and CFIUS, executed a National Security Agreement (the “NSA”), pursuant to which the Company and uBriGene agreed to abandon the transactions related to the Prior Asset Purchase Agreement and the agreements entered into in connection therewith. The NSA obligated uBriGene and the Company to terminate agreements between the two parties, including the Manu