Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

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

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Special Cautionary Note Regarding Forward-Looking Statements

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You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our financial statements and the related notes included elsewhere in this Form 10-Q. Our financial statements have been prepared in accordance with U.S. GAAP. The following discussion and analysis contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which are often indicated by terms such as "anticipate," "believe," "could," "estimate," "expect," "goal," "intend," "look forward to," "may," "plan," "potential," "predict," "project," "should," "will," "would" and similar expressions, include, but are not limited to, any statements relating to our growth strategy and product development programs, including the Company's expectations with respect to the consummation of the sale of its manufacturing facility, the timing of and our ability to make regulatory filings such as Investigational New Drug ("IND") applications and other applications and to obtain regulatory approvals for our product candidates, statements concerning the potential of therapies and product candidates, and any other statements that are not historical facts. All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. Our business and financial performance are subject to substantial risks and uncertainties. Actual results could differ materially from those projected in the forward-looking statements. In evaluating our business, you should carefully consider the information set forth under Part II, Item 1A "Risk Factors" herein.

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Overview

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We are a clinical-stage biopharmaceutical company focused on translating today's medical breakthroughs into potential cures for difficult-to-treat cancers and autoimmune diseases. We aim to acquire rights to these technologies by licensing 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.

Our pipeline is currently focused in two core areas: CAR T therapies for hematologic malignancies and autoimmune diseases and CAR T therapies for solid tumors. For these therapies we have partnered with world class research institutions, including the City of Hope National Medical Center ("COH" or "City of Hope"), Fred Hutchinson Cancer Center ("Fred Hutch"), and Nationwide Children's Hospital ("Nationwide").

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We expect to incur substantial expenses for the foreseeable future relating to research, development and commercialization of our potential products. However, there can be no assurance that we will be successful in securing additional resources when needed, on terms acceptable to us, if at all. Therefore, there exists substantial doubt about our ability to continue as a going concern. The unaudited financial statements do not include any adjustments related to the recoverability of assets that might be necessary despite this uncertainty.

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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 or our contract manufacturer's cell processing facility in order to conduct our own clinical trials.

We are developing CAR T therapy for solid tumors in partnership with COH targeting IL13Rα2 (MB-101). In addition, we have partnered with Nationwide on the development of a herpes simplex virus type 1 ("HSV-1") oncolytic virus (MB-108) in order to enhance the activity of MB-101 for the treatment of patients with high-grade malignant brain tumors. A Phase 1 clinical trial sponsored by COH for MB-101 (ClinicalTrials.gov Identifier: NCT02208362) has completed the treatment phase and patients continue to be assessed for long-term safety. A Phase 1 clinical trial sponsored by the University of Alabama at Birmingham ("UAB") for MB-108 (ClinicalTrials.gov Identifier: NCT03657576) has also completed the treatment phase and patients continue to be assessed for long-term safety. In October 2023, we announced that the FDA accepted our IND application for the combination of MB-101 and MB-108 - which is referred to as MB-109 - for the treatment of patients with IL13Rα2+ relapsed or refractory glioblastoma ("GBM") and high-grade astrocytoma. Pursuant to termination of the lease for our cell processing center in Worcester, MA, we are exploring with COH and Nationwide the possibility of initiating this clinical trial as an investigator-sponsored single-institution study at COH in the second quarter of 2026.

We are also developing a CAR T therapy for hematologic malignancies and autoimmune diseases in partnership with Fred Hutch targeting CD20 (MB-106) pursuant to a license agreement originally executed with Fred Hutch in 2017 (the "CD20 License"). In May 2021, we announced that the U.S. Food and Drug Administration ("FDA") accepted our IND Application for MB-106. As of June 30, 2025, 53 patients have been treated in an ongoing Phase 1 clinical trial sponsored by Fred Hutch (ClinicalTrials.gov Identifier: NCT03277729) and 20 patients have been treated in the Phase 1 clinical trial sponsored by us (ClinicalTrials.gov Identifier: NCT05360238). Each clinical trial has completed its respective treatment phase, and patients continue to be assessed for long-term safety.

In September 2025, we received notice from Fred Hutch of its intent to terminate the CD20 License for cause in connection with unpaid patent expenses and maintenance fees. A 90-day cure period is applicable under the CD20 License. We intend to negotiate the terms of an arrangement with Fred Hutch pursuant to which the CD20 License is terminated (together with related agreements) in exchange for potential consideration remunerable to us.

MB-109 (Combination of MB-101 CAR T Therapy with MB-108 Oncolytic Virus Therapy for Malignant Brain Tumors)

On November 7, 2024, we announced that the FDA granted Orphan Drug Designation to Mustang for MB-108, a herpes simplex virus type 1 ("HSV-1") oncolytic virus, for the treatment of malignant glioma. On July 7, 2025, we announced that the FDA granted Orphan Drug Designation to Mustang for MB-101, IL13Ra2-targeted CAR T-cells, for the treatment of recurrent diffuse and anaplastic astrocytoma (astrocytomas) and glioblastoma. The Orphan Drug Designation provides certain incentives, such as tax credits toward the cost of clinical trials upon approval and prescription drug user fee waivers. If a product receives Orphan Drug Status from the FDA, that product is entitled to seven years of market exclusivity for the disease in which it has Orphan Drug Designation, which is independent from intellectual property protection.

We are currently exploring with COH and Nationwide the possibility of conducting an investigator-sponsored single-institution trial under the COH IND to treat patients with IL13Rα2+ recurrent GBM and high-grade astrocytoma with MB-109 that could potentially be initiated in the second quarter of 2026. Because cell processing for MB-101 will revert back to COH - where the product continues to be manufactured today for other investigator-sponsored clinical trials being conducted by COH in malignant brain tumors (ClinicalTrials.gov Identifiers: NCT04003649, NCT04661384, NCT04510051), we believe that it is reasonable to assume that the FDA will not require a lead-in cohort, wherein a cohort of patients would have to be treated with MB-101 alone prior to treatment of subsequent cohorts with the combination of MB-108 followed by MB-101. Should this, indeed, be the case, the first patient enrolled will receive combination therapy, which will represent a considerable savings of time and money - as well as afford the potential benefit of both therapies to every patient treated on study.

MB-106 (CD20-targeted CAR T cell therapy for Autoimmune Diseases)

We are currently pursuing the development of MB-106, in collaboration with Fred Hutch, for autoimmune diseases. As described above, however, we are in ongoing discussions with Fred Hutch regarding potential termination of this program.

To date, we have not received approval for the sale of any of our product candidates in any market and, therefore, have not generated any product sales from our product candidates. In addition, we have incurred substantial operating losses since our inception and expect to continue to incur significant operating losses for the foreseeable future and may never become profitable.

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All share and per share amounts of our common stock listed in this Form 10-Q have been adjusted to give effect to our 1-for-50 reverse stock split effective January 15, 2025.

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Financing Developments

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July 2025 Warrant Exercises

In July 2025, certain investors from the February 2025 Equity Offering (as defined below) exercised outstanding Pre-Funded and Series C-2 warrants resulting in us issuing approximately 2.9 million shares of our common stock and receiving proceeds of approximately $7.1 million.

February 2025 Equity Offering

On February 5, 2025, we commenced a best efforts public offering (the "February 2025 Equity Offering") of an aggregate of (i) 495,000 shares (the "Shares") of our common stock, (ii) pre-funded warrants (the "Pre-Funded Warrants") to purchase up to an aggregate of 2,162,807 shares of common stock (the "Pre-Funded Warrant Shares"), (iii) Series C-1 warrants (the "Series C-1 Warrants") to purchase up to an aggregate of 2,657,807 shares of common stock (the "Series C-1 Warrant Shares"), and (iv) Series C-2 warrants (the "Series C-2 Warrants," and together with the Series C-1 Warrants, the "Warrants") to purchase up to an aggregate of 2,657,807 shares of common stock (the "Series C-2 Warrant Shares," and together with the Series C-1 Warrant Shares, the "Warrant Shares"). Each Share or Pre-Funded Warrant was sold together with one Series C-1 Warrant to purchase one share of common stock and one Series C-2 Warrant to purchase one share of common stock. The combined public offering price for each Share and accompanying Warrants was $3.01, and the combined public offering price for each Pre-Funded Warrant and accompanying Warrants was $3.0099.

The Pre-Funded Warrants had an exercise price of $0.0001 per share, were exercisable immediately upon issuance and will expire when exercised in full. Each Warrant has an exercise price of $3.01 per share and will be exercisable beginning on the effective date of the Warrant Stockholder Approval. The Series C-1 warrants will expire five years from the Warrant Stockholder Approval and the Series C-2 warrants will expire twenty-four months from the Warrant Stockholder Approval. The Warrant Stockholder Approval was obtained on March 23, 2025.

The net proceeds of the Offering, after deducting the fees and expenses of the Placement Agent, and other offering expenses payable by us, but excluding the net proceeds, if any, from the exercise of the Warrants, was approximately $6.8 million. We intend to use the net proceeds from the offering for working capital and general corporate purposes. The February 2025 Equity Offering closed on February 10, 2025.

In July 2025, the remaining approximately 0.5 million of the Pre-Funded Warrants and approximately 2.4 million of the Series C-2 Warrants were exercised. In connection with these exercises, the Company received approximately $7.1 million in proceeds and issued approximately 2.9 million shares of its common stock. As of September 30, 2025, all of the Series C-1 Warrants and 284,452 of the Series C-2 Warrants remain outstanding.

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May 2024 At the Market Offering Agreement

On May 31, 2024, we entered into an At the Market Offering Agreement (the "ATM Agreement") with H.C. Wainwright & Co., LLC (the "Manager") under which we may offer and sell, from time to time at our sole discretion, shares of our common stock (the "ATM Shares"), through or to the Manager. The offer and sale, if any, of ATM Shares by us under the ATM Agreement will be made pursuant to our registration statement on Form S-3 (File No. 333-279891) (the "Registration Statement") under the Securities Act, and the related prospectus included therein, filed with the SEC on May 31, 2024, and declared effective on June 12, 2024.

Under the ATM Agreement, the Manager may sell ATM Shares by any method permitted by law deemed to be an "at the market offering" as defined in Rule 415(a)(4) under the Securities Act. The Manager will use commercially reasonable efforts to sell the ATM Shares from time to time, based upon instructions from us (including any price, time or size limits or other customary parameters or conditions we may impose). We will pay the Manager a commission of 3.0% of the gross proceeds from the sales of ATM Shares sold through the Manager under the ATM Agreement and have provided the Manager with customary indemnification and contribution rights. We will also reimburse the Manager for certain expenses incurred in connection with the ATM Agreement. Together with the Manager, we may each terminate the ATM Agreement at any time upon specified prior written notice.

The offering of ATM Shares pursuant to the ATM Agreement will terminate upon the earlier of (i) the sale of all ATM Shares subject to the ATM Agreement or (ii) the termination of the ATM Agreement in accordance with its terms.

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During the nine months ended September 30, 2025, we issued approximately 54,000 shares of common stock at an average price of $11.55 for gross proceeds of $0.6 million under the ATM Agreement. In connection with these sales, we paid aggregate fees of approximately $27,000.

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The amount of securities we are able to sell pursuant to the registration statements on Form S-3 is limited due to General Instruction I.B.6 of Form S-3. See "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources."

Critical Accounting Policies and Use of Estimates

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Our discussion and analysis of our financial condition and results of operations are based on our financial statements, which we have prepared in accordance with accounting principles generally accepted in the United States. Applying these principles requires our judgment in determining the appropriateness of acceptable accounting principles and methods of application in diverse and complex economic activities. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of expenses, assets and liabilities, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and other assumptions that we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

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For a discussion of our critical accounting estimates, see the MD&A in the 2024 Form 10-K. There were no material changes in our critical accounting estimates or accounting policies from December 31, 2024.

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Accounting Pronouncements

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During the nine months ended September 30, 2025, there were no new accounting pronouncements or updates to recently issued accounting pronouncements disclosed in the 2024 Form 10-K that are expected to materially affect our present or future financial statements.

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Smaller Reporting Company Status

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We are a "smaller reporting company," within the meaning of federal securities laws, 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 Reports on Form 10-K, have reduced disclosure obligations regarding executive compensation and certain other matters, and smaller reporting companies are permitted to delay adoption of certain recent accounting pronouncements discussed in Note 2 to our financial statements in this Form 10-Q.

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Controlled Company Status

We are a majority-controlled subsidiary of Fortress. As a "Controlled Company" we rely on the exemption provided by Nasdaq Listing Rule 5615(c)(2), which permits us to maintain less than a majority of independent directors on our board.

Results of Operations

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Comparison of the Three Months Ended September 30, 2025 and 2024

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Research and Development Expenses

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For the three months ended September 30, 2025 and 2024, research and development expenses were approximately $(0.3) million and $0.1 million, respectively. The decrease of approximately $0.4 million is primarily attributed to:

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Additionally, we have been actively negotiating settlements of aged payables, and recognized savings of approximately $0.6 million, which resulted in a credit for research and development expenses during the three months ended September 30, 2025. This credit is not indicative of our research and development expenses going forward.

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General and Administrative Expenses

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For the three months ended September 30, 2025, and 2024, general and administrative expenses were $1.0 million and $1.4 million, respectively. The decrease of approximately $0.4 million is primarily attributed to a $0.1 million decrease in personnel related expenses, $0.2 million decrease in legal and patent protection expenses, $0.1 million decrease in consulting costs and $0.1 million decrease in other expenses, offset by $0.1 million increase in non-cash stock-based compensation expenses, primarily the equity fee to Fortress.

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Total Other Income

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For the three months ended September 30, 2025, and 2024, other income was $0.2 million and $47,000, respectively. The increase of approximately $0.1 million reflects an increase in interest income.

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Comparison of the Nine Months Ended September 30, 2025 and 2024

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Research and Development Expenses

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For the nine months ended September 30, 2025 and 2024, research and development expenses were approximately $(1.2) million and $8.2 million, respectively. The decrease of approximately $9.4 million is primarily attributed to actions taken in 2024, including the reduction in the workforce, closing the MB-106 clinical trial, and the termination of our transaction with uBriGene. These activities resulted in decreases in the following expenses:

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Additionally, we have been actively negotiating settlements of aged payables, and recognized savings of approximately $1.4 million and recognized a net gain of approximately $0.4 million due to the termination of the Plantation Street Facility lease, which resulted in a credit for research and development expenses for the nine months ended September 30, 2025. This credit is not indicative of our research and development expenses going forward.

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Asset Impairment

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For the nine months ended September 30, 2024, we incurred impairment charges of $2.6 million attributable to our assessment of the recoverability of the asset group consisting of leasehold improvements and associated right-of-use asset. No impairment was recorded in the nine months ended September 30, 2025.

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General and Administrative Expenses

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For the nine months ended September 30, 2025, and 2024, general and administrative expenses were $3.0 million and $4.4 million, respectively. The decrease of approximately $1.4 million is primarily attributed to a $0.4 million decrease in personnel costs, $0.5 million decrease in legal and patent protection expenses, $0.4 million decrease in consulting expenses, and $0.3 million decrease across various other general and administrative expenses, offset by $0.2 million increase in non-cash stock-based compensation expenses, primarily the equity fee to Fortress.

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Total Other Income

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Other income for the nine months ended September 30, 2025, was $0.4 million relating to interest income. Other income for the nine months ended September 30, 2024, was $0.3 million relating to the non-repeat gain on the termination of the Mercantile Center lease in June 2024 and $0.1 million of interest income.

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Liquidity and Capital Resources

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At September 30, 2025, we had cash and cash equivalents of $19.0 million. We have funded our operations to date primarily with the proceeds from various public and private offerings of our common stock. We have incurred substantial operating losses and expect to continue to incur significant operating losses for the foreseeable future and may never become profitable. We will continue to seek additional funding through corporate partnerships and capital markets fundraising. As of September 30, 2025, we had an accumulated deficit of $398.1 million.

The continuation of our business as a going concern is dependent upon raising additional capital and eventually attaining and maintaining profitable operations. As of September 30, 2025, there is substantial doubt about our ability to continue as a going concern for the next 12 months from the date of issuance of these unaudited financial statements. The financial statements included in this Form 10-Q do not include any adjustments that might be necessary should operations discontinue.

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In addition, the amount of proceeds we may be able to raise pursuant to our existing shelf registration statements on Form S-3 may be limited. As of the filing of this Form 10-Q, we are subject to General Instruction I.B.6 to Form S-3 known as the "baby shelf rules." Under these instructions, the amount of funds we can raise through primary offerings of securities in any 12-month period using our registration statements on Form S-3 is limited to one-third of the aggregate market value of the shares of our common stock held by our non-affiliates. Therefore, we will be limited in the amount of proceeds we are able to raise by selling securities using our Form S-3 until such time as our public float exceeds $75 million.

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Contractual Obligations

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We enter into contracts in the normal course of business with licensors, clinical research organizations ("CROs"), contract manufacturing organizations ("CMOs") and other third parties for the procurement of various products and services, including without limitation biopharmaceutical development, biologic assay development, commercialization, clinical and preclinical development, clinical trials management, pharmacovigilance and manufacturing and supply. These contracts typically do not contain minimum purchase commitments and are generally terminable by us upon written notice. Payments due upon termination or cancelation/delay consist of payments for services provided or expenses incurred, including non-cancelable obligations of our service providers, up to the date of cancellation; in certain cases, our contractual arrangements with CROs and CMOs include cancelation and/or delay fees and penalties.

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During the three and nine months ended September 30, 2025, there were no material changes in our contractual obligations and commitments, as described in our 2024 Form 10-K.

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Cash Flows for the Nine Months Ended September 30, 2025 and 2024

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Operating Activities

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Net cash used in operating activities was $3.5 million for the nine months ended September 30, 2025, compared to $9.4 million for the nine months ended September 30, 2024.

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Net cash used in operating activities for the nine months ended September 30, 2025, was primarily due to approximately $1.4 million in net loss, $0.9 million change in operating assets and liabilities, $1.3 million non-cash savings from the settlement of payables and $0.4 million gain on the termination of the Plantation Street Facility lease, partially offset by $0.5 million of non-cash items, primarily related to the $0.4 million equity fee to Fortress for financing activity and $0.1 million of non-cash stock based compensation expenses.

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Net cash used in operating activities for the nine months ended September 30, 2024, was primarily due to approximately $14.8 million in net loss, partially offset by $2.8 million of non-cash items, primarily related to the $2.6 million asset impairment charge, and a $2.6 million positive change in operating assets and liabilities.

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Investing Activities

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During the nine months ended September 30, 2025, net cash provided by investing activities was $1.2 million, which primarily reflects the proceeds from the sale of equipment to AbbVie. No cash was used in or provided by investing activities during the nine months ended September 30, 2024.

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Financing Activities

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Net cash provided by financing activities was $14.5 million during the nine months ended September 30, 2025, primarily reflecting the proceeds from the February 2025 Equity Offering, the ATM Agreement and the July 2025 warrant exercises.

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Net cash provided by financing activities was $6.3 million during the nine months ended September 30, 2024, primarily reflecting proceeds from the May 2024 Offering, June 2024 Offering and the ATM Agreement.

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