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Item 7. Management’s Discussion and Analysis

2022-03-23 compared with 2021-03-24 · 174 added, 93 removed, 129 unchanged (67% of the section changed)

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Our pipeline is currently focused in three core areas:

gene therapy programs for rare genetic disorders, chimeric antigen receptor (“CAR”) engineered T cell (“CAR T”) therapies for hematologic malignancies and CAR T therapies for solid tumors.

gene therapies for rare genetic disorders, chimeric antigen receptor (“CAR”) engineered T cell (“CAR T”) therapies for hematologic malignancies and CAR T therapies for solid tumors.

For each therapy we have partnered with world class research institutions.

For our gene therapy program, we have partnered with St.

For our gene therapies, we have partnered with St.

Jude Children’s Research Hospital (“St.

Jude”) in the development of a first-in-class ex vivo lentiviral treatment of X-linked severe combined immunodeficiency (“XSCID”) and for our CAR T therapies we have partnered with the City of Hope National Medical Center (“COH”), Fred Hutchinson Cancer Research Center (“Fred Hutch”) and Nationwide Children’s Hospital (“Nationwide”).

Jude”) in the development of a first-in-class ex vivo lentiviral treatment of X-linked severe combined immunodeficiency (“XSCID”) and with Leiden University Medical Centre (“LUMC”) for RAG1 severe combined immunodeficiency (“RAG1-SCID”).

For our CAR T therapies we have partnered with the City of Hope National Medical Center (“COH”), Fred Hutchinson Cancer Research Center (“Fred Hutch”), Nationwide Children’s Hospital (“Nationwide”) and the Mayo Foundation for Medical Education and Research (“Mayo Clinic”).

Gene Therapies

In partnership with St.

Jude and the National Institutes of Health (“NIH”), our gene therapy program is being conducted under an exclusive license to develop a potentially curative treatment for XSCID, a rare genetic immune system condition also known as bubble boy disease in which affected patients do not live beyond infancy without treatment.

Jude, our XSCID gene therapy programs (MB-107 and MB-207) are being conducted under an exclusive license to develop a potentially curative treatment for XSCID, a rare genetic immune system condition in which affected patients do not live beyond infancy without treatment.

This first-in-class ex vivo lentiviral gene therapy is currently in two Phase 1/2 clinical trials involving two different autologous cell products:

a multicenter trial of the MB-107 product in newly diagnosed infants sponsored by St.

Jude and a single-center trial of the MB-207 product in previously transplanted patients sponsored by the NIH.

In May 2020, we submitted an Investigational New Drug (“IND”) application with the FDA to initiate a registrational multicenter Phase 2 clinical trial of MB-107 in newly diagnosed infants with XSCID who are under the age of two.

In response, the FDA identified Chemistry, Manufacturing, and Control (“CMC”) hold issues that Mustang satisfactorily addressed in a December 2020 submission to the FDA, and the CMC hold was removed in January 2021.

The trial is expected to enroll 10 patients who, together with 15 patients enrolled in the current multicenter trial led by St.

Jude, will be compared with 25 matched historical control patients who have undergone hematopoietic stem cell transplant (“HSCT”).

The primary efficacy endpoint will be event-free survival and we are targeting topline data from the trial in the second half of 2022.

We further expect to file an IND in the second quarter of 2021 for a registrational multicenter Phase 2 clinical trial of lentiviral gene therapy in previously transplanted XSCID patients (MB-207).

We anticipate enrolling 20 patients, and we are targeting topline data for this trial in the first half of 2023.

Jude and a single-center trial of the MB-207 product in previously transplanted patients sponsored by the National Institutes of Health (“NIH”).

In January 2021 we received approval to proceed with our Investigational New Drug (“IND”) application with the U.S.

Food and Drug Administration (“FDA”) to initiate a pivotal non-randomized multicenter Phase 2 clinical trial of MB-107 in newly diagnosed infants with XSCID who are under the age of two.

We expect to enroll the first patient in a pivotal multicenter Phase 2 clinical trial in the second half of 2022.

In January 2022, the FDA issued a hold, pending Chemistry, Manufacturing and Controls (“CMC”) clearance, on our IND application to conduct a pivotal non-randomized multicenter Phase 2 clinical trial of MB-207 in previously transplanted XSCID patients.

In order to lift this hold and receive FDA clearance for the IND, we believe the most critical activities will be to (1) perform process validation manufacturing runs using healthy donor material and (2) ensure qualification of all assays related to the product release.

We estimate that these activities will take 3-6 months to complete, and we therefore expect to enroll the first patient in a pivotal multicenter Phase 2 clinical trial in the first quarter of 2023.

CAR T Therapies

Our pipeline of CAR T therapies is being developed under exclusive licenses from several world class research institutions.

Our strategy is to license these technologies, support preclinical and clinical research activities by our partners and transfer the underlying technology to our cell processing facility located in Worcester, Massachusetts, to conduct our own clinical trials.

We are developing CAR T therapies for hematologic malignancies in partnership with COH targeting CD123 (MB-102) and CS1 (MB-104) and with Fred Hutch targeting CD20 (MB-106).

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In the third quarter of 2019 the FDA approved our IND application to initiate a multi-center Phase 1/2 clinical trial of MB-102, and our clinical trial began enrollment in 2020 for the treatment of patients with blastic plasmacytoid dendritic cell neoplasm.

We expect to file an IND for MB-106 in the first quarter of 2021 and to initiate our own Phase 1/2 clinical trial shortly thereafter for the treatment of patients with non-Hodgkin lymphoma and chronic lymphocytic leukemia.

In May 2021, the FDA approved our IND application to initiate a multi-center Phase 1/2 clinical trial of MB-106, and we expect to begin the treatment of patients with non-Hodgkin lymphoma and chronic lymphocytic leukemia in the first half of 2022.

We plan to file an IND for a multicenter Phase 1/2 trial for MB-104 for the treatment of patients with multiple myeloma once COH has established a safe and effective dose.

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Phase 1 clinical trials sponsored by COH for MB-101, MB-103 and MB-105 are underway.

A Phase 1 clinical trial sponsored by the University of Alabama at Birmingham (“UAB”) for MB-108 began during the third quarter of 2019 and, in the fourth quarter of 2021, we plan to file an IND for the combination of MB-101 and MB-108 for the treatment of patients with GBM.

A Phase 1 clinical trial sponsored by the University of Alabama at Birmingham (“UAB”) for MB-108 began during the third quarter of 2019 and, in the second half of 2022, we plan to file an IND for the combination of MB-101 and MB-108 – which is referred to as MB-109 – for the treatment of patients with relapsed or refractory GBM and anaplastic astrocytoma.

We also plan to file INDs and initiate our own clinical trials for MB-103 for the treatment of patients with metastatic breast cancer to brain and for MB-105 for the treatment of patients with prostate and pancreatic cancer.

The Company is also collaborating with the Mayo Clinic to develop a novel technology that may be able to transform the administration of CAR T therapies and potentially be used as an off-the-shelf therapy.

Mustang plans to file an IND application for a multicenter Phase 1 clinical trial once a lead construct has been identified.

Recent Events

MB-106 (CD20 CAR T for Non-Hodgkin Lymphoma and Chronic Lymphocytic Leukemia)

In February 2020, we announced that the first subject treated with the optimized MB-106 (CD20-targeted, autologous CAR T cell therapy) manufacturing process, developed in collaboration with Fred Hutch, achieved a complete response at the lowest starting dose in an ongoing Phase 1/2 clinical trial.

The trial is evaluating the safety and efficacy of MB-106 in subjects with relapsed or refractory B-cell non-Hodgkin lymphomas and chronic lymphocytic leukemia.

In December 2020, at the 62 nd American Society of Hematology Annual Meeting, Mustang and Fred Hutch announced interim data in patients with relapsed or refractory B-cell NHL from the ongoing Phase 1/2 clinical trial of MB-106 at Fred Hutch.

Data presented by Fred Hutch reported on an initial seven patients treated without response and without significant CAR T cell expansion or persistence.

Among these 7 patients there was one occurrence of cytokine release syndrome (CRS;

grade 3 – unexplained alkaline phosphatase elevation in the setting of fever), and there were no occurrences of immune effector cell-associated neurotoxicity syndrome (ICANS).

Subsequently the trial was put on hold while Fred Hutch collaborated with Mustang to undertake a major modification in the cell manufacturing process.

Following IND amendment to implement this modified cell processing, 9 patients – 7 with follicular lymphoma and 2 with mantle cell lymphoma – were treated at 4 different dose levels ranging from 1 x 10 5 CAR T cells/kg to 3.3 x 10 6 CAR T cells/kg.

The overall response rate was 89% (8/9), the complete response rate was 44% (4/9), and there was good expansion and persistence of CAR T cells.

All complete responses were ongoing at the time of data disclosure.

One patient experienced a grade 1 episode of CRS, and no patients experienced ICANS.

Mustang plans to file an IND at the end of the first quarter of 2021 to enable the initiation of a multicenter Phase 1/2 trial of MB-106.

Leiden University Medical Centre License

On November 10, 2021, the Company announced that it has executed an exclusive license agreement with Leiden University Medical Centre (“LUMC”) for a first-in-class ex vivo lentiviral gene therapy for the treatment of RAG1 severe combined immunodeficiency (“RAG1-SCID”).

The therapy, which includes low-dose conditioning prior to reinfusion of the patients’ own gene-modified blood stem cells, is currently being evaluated in a Phase 1/2 multicenter clinical trial in Europe.

The ongoing clinical trial recently enrolled its first patient, and additional clinical sites are expected to be added in the near future.

The RAG1-SCID program has been granted Orphan Drug Designation by the European Medicines Agency.

The Company also established an ongoing partnership with Frank J.

Staal, Ph.D., professor of Molecular Stem Cell Biology and molecular immunologist at LUMC, whose laboratory developed the therapy.

Staal will continue the development of additional lentiviral gene therapies in his lab, to which we have rights under the agreement.

The RAG1-SCID therapy expands the pipeline of ex vivo lentiviral gene therapies we are currently developing.

The lead programs, MB-107 and MB-207, are being investigated for the treatment of XSCID.

A pivotal multicenter trial studying MB-107 is expected to enroll its first patient in the first quarter of 2022.

Combined, XSCID and RAG1-SCID make up almost 60% of all SCID cases combined.

MB-106 (CD20-targeted CAR T for Non-Hodgkin Lymphoma and Chronic Lymphocytic Leukemia)

On November 4, 2021, the Company announced that interim Phase 1/2 data on MB-106 have been selected for a poster presentation at the 63rd American Society of Hematology Annual Meeting (“ASH2021”), which was held from December 11-14, 2021.

The abstract posted on the ASH2021 website reported on 16 patients [12 follicular lymphoma (FL), 2 mantle cell lymphoma (MCL), 1 CLL and 1 diffuse large B-cell lymphoma (DLBCL)] treated following a major cell manufacturing process modification.

CAR T cells are administered at one of 4 dose levels (DL):

3.3x105, DL2:

3.3x106, DL4:

1x107 CAR T cells/kg.

All DLs were reached, with no dose-limiting toxicities observed to date.

The overall response rate (ORR) was 94% (15/16) with a complete response (CR) rate of 62% (10/16).

In patients with FL (n=12), ORR was 92% (11/12) and CR rate was 75% (9/12).

Among patients with FL who received DL 3 or 4, the CR rate was 86%.

The patient with CLL had a PET-negative CR and undetectable measurable residual disease in peripheral blood and bone marrow by flow cytometry at a sensitivity of 10-4 (uMRD4) on day 28.

The patient with DLBCL achieved a partial response (PR) on day 28, and a repeat PET on day ~90 showed deepening of the PR.

Among patients who achieved a CR, only one patient with FL relapsed after 9 months.

All other CRs are ongoing (range:

3-18 months).

CAR T persistence was lost at day 95 in one patient who had progression and proceeded to other anti-lymphoma treatment;

2 other patients lost CAR T engraftment by day 181 and 201 with B-cell recovery.

All other patients continue to have detectable CAR T cells as of last follow-up (maximum of 13 months post-infusion).

Among the 16 total patients reported in the abstract, there were seven occurrences of cytokine release syndrome (4 patients with Grade 1 and 3 patients with Grade 2) and one occurrence of Grade 2 immune effector cell-associated neurotoxicity syndrome.

One patient with CLL developed Grade 3 temporary neuropathic pain which, in the absence of other explanation, was attributed to CAR T therapy.

No patients had tumor lysis syndrome or Grade 3-4 infections.

Thrombocytopenia (Grade 3-4:

19%) and neutropenia (Grade 3-4:

94%) were common, but there were no bleeding complications, and the rate of febrile neutropenia was 19%.

NIH Grant For MB-106 CD20-Targeted CAR T Cell Therapy

On November 1, 2021, we announced that the Company was awarded a grant of approximately $2 million from the National Cancer Institute.

This two-year grant will partially fund the Phase 1, Open Label, Multicenter Trial to Assess the Safety, Tolerability and Efficacy of MB-106, a CD20-targeted, autologous CAR T cell therapy for patients with relapsed or refractory NHL or CLL.

Mayo Clinic License

In August 2021, we announced an exclusive license agreement with the Mayo Foundation for Medical Education and Research (the “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.

The technology, developed by Larry R.

Pease, Ph.D., principal investigator and former director of the Center for Immunology and Immune Therapies at Mayo Clinic, is a new platform to administer CAR T therapy using a two-step approach.

First, a peptide is administered to the patient to drive the proliferation of the patient’s resident T cells.

This is followed by the administration of a viral CAR construct directly into the lymph nodes of the patient.

In turn, the viral construct infects the activated T cells and effectively forms CAR T cells in vivo in the patient.

Successful implementation may lead to an off-the-shelf product with no need to isolate and expand patient T cells ex vivo .

Preclinical proof-of-concept has been established, and the ongoing development of this technology will take place at Mayo Clinic.

Mustang plans to file an Investigational New Drug (“IND”) application for a multicenter Phase 1 clinical trial once a lead construct has been identified.

MB-107 and MB-207 (Ex vivo Lentiviral Therapy for X-linked Severe Combined Immunodeficiency (XSCID))

In May 2020, we submitted an IND application with the FDA to initiate a registrational multi-center Phase 2 clinical trial of MB-107 in newly diagnosed infants with XSCID who are under the age of two.

In response, the FDA identified CMC hold issues that we satisfactorily addressed in a December 2020 submission to the FDA, and the CMC hold was removed in January 2021.

The trial is expected to enroll 10 patients who, together with 15 patients enrolled in the current multicenter trial led by St.

Jude, will be compared with 25 matched historical control patients who have undergone hematopoietic stem cell transplant (“HSCT”).

The primary efficacy endpoint will be event-free survival and potential topline data from the trial are expected in the fourth quarter of 2022.

In August 2020, we announced that the FDA has granted Rare Pediatric Disease Designation to MB-107 and MB-207.

The FDA previously granted Regenerative Medicine Advanced Therapy designation to MB-107 for the treatment of XSCID in newly-diagnosed infants in August 2019.

Additionally, the European Medicines Agency granted Advanced Therapy Medicinal Product classification to MB-107 in April 2020.

In August 2021, we announced that the European Medicines Agency (“EMA”) granted Priority Medicines (“PRIME”) designation to MB-107, a lentiviral gene therapy for the treatment of XSCID in newly diagnosed infants.

In addition to PRIME designation, the EMA granted Advanced Therapy Medicinal Product (“ATMP”) classification to MB-107 in April 2020 and Orphan Drug designation in November 2020.

MB-107 has also received Orphan Drug, Rare Pediatric Disease and Regenerative Medicine Advanced Therapy (“RMAT”) designations from the U.S.

Food and Drug Administration (“FDA”).

The FDA grants Rare Pediatric Disease Designation for serious and life-threatening diseases that primarily affect children ages 18 years or younger and affect fewer than 200,000 people in the United States.

If Mustang’s BLA is approved, the company may be eligible to receive a priority review voucher, which can be redeemed to obtain priority review for any subsequent marketing application and may be sold or transferred.

If Mustang’s BLA for MB-107 is approved, the Company may be eligible to receive a priority review voucher, which can be redeemed to obtain priority review for any subsequent marketing application and may be sold or transferred.

This program is intended to encourage development of new drugs and biologics for the prevention and treatment of rare pediatric diseases.

In September 2020, we announced that the FDA has granted Orphan Drug Designation to MB-107 and MB-207.

The FDA grants Orphan Drug Designation to drugs and biologics that are intended for the safe and effective treatment, diagnosis or prevention of rare diseases or disorders that affect fewer than 200,000 people in the U.S.

Orphan Drug Designation provides certain incentives, such as tax credits toward the cost of clinical trials and prescription drug user fee waivers.

If a product holding Orphan Drug Designation receives the first FDA approval for the disease in which it has such designation, the product is entitled to seven years of market exclusivity, which is independent from intellectual property protection.

In October 2020, we in-licensed LentiBOOST™ technology from SIRION Biotech GmbH for the development of MB-207.

In November 2020, we signed an agreement with Minaris Regenerative Medicine GmbH to enable technology transfer and GMP clinical manufacturing of the MB-107 lentiviral gene therapy program for the treatment of XSCID in Europe.

Also in November 2020, we announced that the European Commission issued a positive opinion on its application for Orphan Drug Designation for the MB-107 lentiviral gene therapy for the treatment of XSCID.

MB-102 (CD123-targeted CAR T cell therapy)

In October 2020, we announced that the first patient has been dosed in a Mustang-sponsored, open label, multicenter Phase 1/2 clinical trial to evaluate the safety and efficacy of MB-102 in patients with relapsed or refractory BPDCN.

Study sites include City of Hope, where the CAR T cell therapy was initially developed and where the clinical data were generated to support Mustang’s current multicenter trial, Dana-Farber Cancer Institute, Duke University and MD Anderson Cancer Center.

The Phase 1 portion of the trial will determine the maximum tolerated dose of MB-102 for the Phase 2 portion of the trial.

Safety will be assessed at each dose level before proceeding to the next.

Depending on the efficacy and safety profile of MB-102 in the Phase 1 portion of the trial, relapsed or refractory AML and demethylation resistant hrMDS may be added to the later dose escalation cohorts.

The Phase 2 portion of the trial may be divided into as many as three arms to evaluate the efficacy of MB-102 in relapsed or refractory BPDCN (Arm 1), relapsed or refractory AML (Arm 2) and demethylation resistant hrMDS (Arm 3).

The primary outcome that will be studied is the response rate at day 28 post infusion in all arms.

Secondary outcome measures include duration of response, progression-free survival, overall survival and incidence of treatment-emergent adverse events, which will be followed for up to three years.

MB-101 (IL13Rα2-targeted CAR T cell therapy)

In December 2020, we announced that a Phase 1 single-center, two-arm clinical trial was initiated to establish the safety and feasibility of administering MB-101 to patients with leptomeningeal brain tumors (e.g., glioblastoma, ependymoma or medulloblastoma).

MB-105 (PSCA CAR T for Prostate & Pancreatic Cancers)

In October 2020, we announced that one patient’s experience on the Phase 1 trial of MB-105 was presented at the virtual 27 th Annual Prostate Cancer Foundation Scientific Retreat.

In a 73-year-old male patient with PSCA-positive metastatic castrate-resistant prostate cancer who was treated with MB-105 and lymphodepletion (a standard CAR T pre-conditioning regimen) after failing eight prior therapies, MB-105 demonstrated on day 28 a 94 percent reduction in prostate-specific antigen (PSA), near complete reduction of measurable soft tissue metastasis by computerized tomography, and improvement in bone metastases by magnetic resonance imaging.

The therapy was associated with cytokine release syndrome, which was clinically managed with tocilizumab (anti-IL-6 receptor antibody), and hemorrhagic cystitis requiring transfusion which clinically resolved in 30 days.

SIRION Biotech GmbH – LentiBOOST TM

On September 30, 2020, Mustang entered into an exclusive, worldwide licensing agreement with SIRION Biotech (“SIRION”) for the rights to SIRION’s LentiBOOST TM technology for the development of MB-207, Mustang’s lentiviral gene therapy for the treatment of previously transplanted XSCID patients (the “SIRION Technology License”).

Pursuant to the SIRION Technology License, the Company paid a one-time upfront fee of €0.1 million ($0.1 million) during the year ended December 31, 2020.

In addition, five future development milestone payments totaling up to approximately €4.7 million ($5.5 million) in the aggregate are due upon achievement of certain milestones.

Additional milestone payments totaling up to €3.5 million ($4.1 million) in the aggregate are due in connection with the achievement of three commercial milestones, and low single digit royalties are due on aggregate cumulative worldwide net sales of licensed products .

The FDA has also granted Rare Pediatric Disease Designation for MB-207.

If Mustang’s BLA for MB-207 is approved, the Company may be eligible to receive a priority review voucher for this product as well, which can also be redeemed to obtain priority review for any subsequent marketing application and may be sold or transferred.

MB-207 has also received Orphan Drug designation from the FDA and has received Orphan Drug designation and ATMP classification from the EMA.

Registration Statements

On April 23, 2021, the Company filed a shelf registration statement No.

333-255476 on Form S-3 (the “2021 S-3”), which was declared effective on May 24, 2021.

Under the 2021 S-3, the Company may sell up to a total of $200.0 million of its securities.

As of December 31, 2021, there have been no sales of securities under the 2021 S-3.

On October 23, 2020, the Company filed a shelf registration statement No.

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In connection with these sales, we paid aggregate fees of approximately $1.3 million for net proceeds of approximately $70.6 million.

Public Offering of Common Stock

On June 11, 2020, we announced the pricing of an underwritten public offering, whereby we sold 10,769,231 shares of common stock, (plus a 30-day option to purchase up to an additional 1,615,384 shares of common stock, which was partially exercised) at a price of $3.25 per share for gross proceeds of approximately $37.2 million, before deducting underwriting discounts and commissions and offering expenses.

In connection with the public offering, the Company paid aggregate fees of approximately $2.4 million for net proceeds of approximately $34.8 million .

During the year ended December 31, 2020, the Company issued approximately 17.6 million shares of common stock at an average price of $3.40 per share for gross proceeds of $59.8 million under the ATM Agreement.

In connection with these sales, we paid aggregate fees of approximately $1.1 million for net proceeds of approximately $58.7 million.

Authorized Shares

On November 11, 2020, the Company’s Board adopted resolutions of the Board to ratify, approve and recommend stockholder approval of an amendment to the Company’s Amended and Restated Certificate of Incorporation, as amended, to revise Article IV, Section A thereof in order to effect an increase in the authorized number of shares of the Company’s common stock, par value $0.0001, from 85 million to 125 million (the “Amendment”).

On November 11, 2020, the Company received approval of the Amendment by written consent in lieu of a meeting from the holders of a majority of issued and outstanding shares of the Company’s common and preferred stock.

The increase in authorized shares to 125 million became effective on December 4, 2020.

On June 17, 2021, the stockholders of the Company voted at the 2021 Annual Meeting to approve an amendment to Mustang’s Amended and Restated Certificate of Incorporation to increase the number of shares of common stock authorized for issuance by 25 million shares, bringing the total number of authorized shares of common stock to 150 million shares.

To date, we have not received approval for the sale of our product candidates in any market and, therefore, have not generated any product sales from our product candidates.

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Critical Accounting Policies and Use of Estimates

See Note 2 to our Financial Statements.

The Company’s 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, useful lives assigned to long-lived assets and amortizable intangible assets, fair value of stock options and warrants, stock-based compensation, accrued expenses, provisions for income taxes and contingencies.

Due to the uncertainty inherent in such estimates, actual results may differ from these estimates.

Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates under different assumptions or conditions.

We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

While our significant accounting policies are described in the notes to our financial statements included elsewhere in this Report, we believe that the following critical accounting policies are most important to understanding and evaluating our reported financial results.

Research and Development

Research and development costs are expensed as incurred.

Advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made.

Upfront and milestone payments due to third parties that perform research and development services on the Company’s behalf will be expensed as services are rendered or when the milestone is achieved.

Research and development costs primarily consist of personnel related expenses, including salaries, benefits, travel, and other related expenses, stock-based compensation, payments made to third parties for license and milestone costs related to in-licensed products and technology, payments made to third party contract research organizations for preclinical and clinical studies, investigative sites for clinical trials, consultants, the cost of acquiring and manufacturing clinical trial materials, and costs associated with regulatory filings, laboratory costs and other supplies.

In accordance with ASC 730 10 25 1, Research and Development , costs incurred in obtaining technology licenses are charged to research and development expense if the technology licensed has not reached commercial feasibility and has no alternative future use.

In each case, we evaluate if the license agreement results in the acquisition of an asset or a business.

Such licenses purchased by the Company require substantial completion of research and development, regulatory and marketing approval efforts in order to reach commercial feasibility and has no alternative future use.

Accordingly, the total purchase price for the licenses acquired during the period was reflected as research and development - licenses acquired on the Statements of Operations for the years ended December 31, 2021 and 2020.

Accrued Research and Development Expense

We record accruals for estimated costs of research, preclinical, clinical and manufacturing development within accrued expenses which are significant components of research and development expenses.

A substantial portion of our ongoing research and development activities is conducted by third-party service providers.

We accrue the costs incurred under agreements with these third parties based on estimates of actual work completed in accordance with the respective agreements.

We determine the estimated costs through discussions with internal personnel and external service providers as to the progress, or stage of completion or actual timeline (start-date and end-date) of the services and the agreed-upon fees to be paid for such services.

Payments made to third parties under these arrangements in advance of the performance of the related services are recorded as prepaid expenses until the services are rendered.

If the actual timing of the performance of services or the level of effort varies from the estimate, we adjust accrued expenses or prepaid expenses accordingly, which impact research and development expenses.

Although we do not expect our estimates to be materially different

from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low in any particular period.

Fair Value Measurement

The Company follows accounting guidance on fair value measurements for financial assets and liabilities measured at fair value on a recurring basis.

Under the accounting guidance, fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability.

The accounting guidance requires fair value measurements be classified and disclosed in one of the following three categories:

Quoted prices in active markets for identical assets or liabilities.

Observable inputs other than Level 1 prices for similar assets or liabilities that are directly or indirectly observable in the marketplace.

Unobservable inputs which are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability.

Certain of the Company’s financial instruments are not measured at fair value on a recurring basis but are recorded at amounts that approximate their fair value due to their liquid or short-term nature, such as accounts payable, accrued expenses and other current liabilities.

Stock-Based Compensation

The Company expenses stock-based compensation to employees and non-employees over the requisite service period based on the estimated grant-date fair value of the awards and forfeitures, which are recorded upon occurrence.

The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model.

The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment.

We will continue to use judgment in evaluating the expected volatility, expected terms and interest rates utilized for our stock-based compensation expense calculations on a prospective basis.

The assumptions underlying these valuations represent our management’s best estimate, which involve inherent uncertainties and the application of management judgment.

As a result, if factors or expected outcomes change and we use significantly different assumptions or estimates, our stock-based compensation expense could be materially different.

We expect to continue to grant options and other stock-based awards in the future, and to the extent that we do, our stock-based compensation expense recognized in future periods will likely increase.

The Company accounts for income taxes under ASC 740, Income Taxes (“ASC 740”).

ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards.

ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.

Judgments concerning the recognition and measurement of a tax benefit might change as new information becomes available.

Our unrecognized tax benefits, if recognized, would not have an impact on our effective tax rate assuming we continue to maintain a full valuation allowance position.

We do not expect our unrecognized tax benefits to change significantly over the next 12 months.

ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities.

ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim period, disclosure and transition.

Based on the Company’s evaluation, it has been concluded that there are no significant uncertain tax positions

requiring recognition in the Company’s financial statements.

The 2018 through 2020 tax years are the only periods subject to examination upon filing of appropriate tax returns.

The Company believes that its income tax positions and deductions would be sustained on audit and does not anticipate any adjustments that would result in a material change to its financial position.

The Company’s policy for recording interest and penalties associated with audits is to record such expense as a component of income tax expense.

There were no amounts accrued for penalties or interest as of or during the years ended December 31, 2021 and 2020.

Management is currently unaware of any issues under review that could result in significant payments, accruals or material deviations from its position.

Recent Accounting Pronouncements

See Note 2 to the Financial Statements.

Smaller Reporting Company Status

We are a “smaller reporting company,” meaning that the market value of our shares held by non-affiliates is less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal year.

We may continue to be a smaller reporting company if either (i) the market value of our shares held by non-affiliates is less than $250 million or (ii) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our shares held by non-affiliates is less than $700 million.

As a smaller reporting company, we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K , have reduced disclosure obligations regarding executive compensation, and smaller reporting companies are permitted to delay adoption of certain recent accounting pronouncements discussed in Note 2 to our consolidated financial statements located in “Part IV, Item 15., Exhibits and Financial Statement Schedules” in this Annual Report on Form 10-K.

Results of Operations

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● $4.5 million for increased research and development employee compensation costs, including stock compensation, as we continue to increase research and development headcount to support development of our clinical programs;

● $2.5 million for increased lentiviral vector manufacturing to support Mustang-sponsored clinical trials;

● $1.6 million for increased costs for sponsored research and clinical trial agreements with our academic partners;

● approximately $1.4 million for increased other costs including consulting, outside services, laboratory supplies and depreciation;

● offset by approximately $1.2 million for decreased costs for third-party contract research organizations.

Research and development expenses - licenses acquired increased by $3.8 million from $6.3 million for the year ended December 31, 2019 to $10.1 million for the year ended December 31, 2020.

The increase in research and development expenses - licenses acquired for the year ended December 31, 2020 was primarily attributable to the following:

● $3.9 million for increased laboratory supply costs;

● $2.3 million for increased consulting costs primarily to support Mustang-sponsored clinical trials;

● approximately $3.0 million for increased other costs including third-party contract research organizations, outside services, vector manufacturing and depreciation;

● offset by approximately $1.1 million for decreased costs for sponsored research and clinical trial agreements.

Research and development expenses - licenses acquired decreased by $4.2 million from $10.1 million for the year ended December 31, 2020 to $5.9 million for the year ended December 31, 2021.

The decrease in research and development expenses - licenses acquired for the year ended December 31, 2021 was primarily attributable to the following:

● Approximately $3.4 million for the annual stock dividend to Fortress;

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● $0.3 million related to our CD20 license with Fred Hutch;

● $0.1 million related to our CSL Behring (Calimmune);

● $0.1 million related to our LentiBOOST TM license with SIRION;

● offset by approximately $0.5 million for decreased costs related to our licenses with Nationwide, UCLA and CSL Behring (Calimmune).

● offset by approximately $1.1 million for increased costs related to our licenses with Mayo Clinic and Leiden University Medical Centre.

We expect our research and development activities to increase as we develop our existing product candidates and potentially acquire new product candidates, reflecting increasing costs associated with the following:

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General and administrative expenses consist primarily of salaries and related expenses, including stock-based compensation, for executives and other administrative personnel, recruitment expenses, professional fees and other corporate expenses, including investor relations, legal activities including patent fees, and facilities-related expenses.

General and administrative expense decreased by approximately $0.1 million from $9.6 million for the year ended December 31, 2019 to $9.5 million for the year ended December 31, 2020.

The decrease in general and administrative expense for the year ended December 31, 2020 was primarily attributable to the following:

● $0.9 million for increased general and administrative employee compensation costs, including stock compensation, due primarily to additional headcount to support the Company’s continued growth;

● offset by approximately $1.0 million for decreased costs primarily for legal and professional fees, consulting fees and state taxes.

General and administrative expense increased by approximately $1.5 million from $9.5 million for the year ended December 31, 2020 to $11.0 million for the year ended December 31, 2021.

The increase in general and administrative expense for the year ended December 31, 2021 was primarily attributable to the following:

● $0.6 million for increased general and administrative employee compensation costs due primarily to additional headcount to support the Company’s continued growth;

● $0.8 million for increased state taxes;

● $0.3 million for increased audit and accounting fees;

● $0.9 million for increased other costs, including consulting and professional fees, outside services and insurance;

● offset by approximately $1.1 million for decreased stock-based costs.

We anticipate general and administrative expenses will increase in future periods, reflecting continued and increasing costs associated with:

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Other income (expense) consists primarily of interest income earned on cash balances and short-term investments and interest expense on the Company’s notes payable.

For the year ended December 31, 2020 and 2019, total other income (expense) were approximately $3.2 million and $0.5 million of expense, respectively.

The $2.7 million increase in other income (expense) for the year ended December 31, 2020 was primarily attributable to $1.6 million of debt discount amortization, debt prepayment penalties of $0.6 million and lower interest income of $0.6 million.

For the year ended December 31, 2021 and 2020, total other income (expense) were approximately $0.4 million of income and $3.2 million of expense, respectively.

The $3.6 million increase in other income (expense) for the year ended December 31, 2021 was primarily attributable to lower interest expense of $3.9 million partially offset by lower interest income of $0.3 million.

Liquidity and Capital Resources

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As of December 31, 2021, the Company had an accumulated deficit of $251.8 million.

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."

In September 2020, we repaid the Horizon Notes in full all amounts that were outstanding under the loan agreement, which was comprised of $15.0 million face value of the outstanding notes, $112,500 accrued and unpaid interest, a $750,000 loan termination fee and prepayment penalties of $550,000.

The Company has funded its operations to date primarily through the sale of equity, its Loan Agreement with Runway and its venture debt financing agreement (the "Horizon Loan Agreement") with Horizon Technology Finance Corporation ("Horizon"), herein referred to as the "Horizon Notes."

In September 2020, we repaid the Horizon Notes in full all amounts that were outstanding under the Horizon Loan Agreement, which was comprised of $15.0 million face value of the outstanding notes, $112,500 accrued and unpaid interest, a $750,000 loan termination fee and prepayment penalties of $550,000.

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.

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Net cash used in operating activities was $53.7 million for the year ended December 31, 2021, compared to $37.3 million for the year ended December 31, 2020.

Net cash used in operating activities for the year ended December 31, 2021, was primarily due to approximately $66.4 million in net loss, partially offset by $4.2 million of common shares issuable for Founders shares, $3.3 million of non-cash stock compensation expenses, $2.2 million of depreciation expense, $1.9 million of equity fee on issuance of common shares to Fortress and $1.6 million of research and development-licenses acquired.

Net cash used in operating activities for the year ended December 31, 2020, was primarily due to approximately $60.0 million in net loss, partially offset by $7.6 million of common shares issuable for Founders shares, $3.1 million change in operating assets and liabilities, $3.0 million of non-cash stock compensation expenses, $2.5 million of research and development-licenses acquired, $2.4 million of equity fee on issuance of common shares to Fortress, $2.3 million of accretion of debt discount and $1.7 million of depreciation expense.

Net cash used in operating activities for the year ended December 31, 2019, was primarily due to approximately $46.4 million in net loss, partially offset by $4.9 million of common shares issuable for Founders shares, $2.7 million of non-cash stock compensation expenses, $1.7 million of equity fee on issuance of common shares to Fortress, $1.4 million of research and development-licenses acquired, $1.3 million of depreciation expense and $0.7 million of accretion of debt discount.

Investing Activities

Net cash used in investing activities was $4.4 million for the year ended December 31, 2020, representing $2.5 million in purchases of research and development licenses and $1.9 million in purchases of fixed assets.

Net cash provided by investing activities was $13.9 million for the year ended December 31, 2019, representing our $17.6 million in maturities of certificates of deposits, offset by $1.4 million in purchases of research and development licenses and $2.3 million in purchases of fixed assets.

Net cash used in investing activities was $5.4 million for the year ended December 31, 2021, representing $4.0 million in purchases of fixed assets and $1.4 million in purchases of research and development licenses.

Net cash provided by investing activities was $4.4 million for the year ended December 31, 2020, representing $2.5 million in purchases of research and development licenses and $1.9 million in purchases of fixed assets.

Financing Activities

Net cash provided by financing activities was $78.1 million during the year ended December 31, 2020, gross proceeds of $59.8 million, net of offering costs of $1.1 million, from the Mustang ATM;

Net cash provided by financing activities was $70.8 million during the year ended December 31, 2021, representing gross proceeds of $71.9 million, net of offering costs of $1.4 million, from the Mustang ATM and $0.3 million raised from the issuance of the Company’s common shares in connection with the ESPP.

Net cash provided by financing activities was $78.1 million during the year ended December 31, 2020, representing gross proceeds of $59.8 million, net of offering costs of $1.1 million, from the Mustang ATM;

gross proceeds of $37.2 million, net of offering costs of $2.4 million, from our June 2020 underwritten public offering and $0.3 million raised from the issuance of the Company’s common shares in connection with the ESPP, partially offset by the prepayment of the Horizon Notes of $15.7 million.

Net cash provided by financing activities was $65.1 million during the year ended December 31, 2019, due to net proceeds of $13.6 million from the Horizon Notes;

gross proceeds of $22.5 million, net of offering costs of $0.5 million, from the Mustang ATM;

and gross proceeds of $31.6 million, net of offering costs of $2.1 million, from our May 2019 underwritten public offering.

Quantitative and Qualitative Disclosures About Market Risks

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What changed 10-K

Item 7. Management’s Discussion and Analysis