Item 7.Management’s Discussion and Analysis of the Results of Operations

Statements in the following discussion and throughout this report that are not historical in nature are “forward-looking statements.” You can identify forward-looking statements by the use of words such as “expect,” “anticipate,” “estimate,” “may,” “will,” “should,” “intend,” “believe,” and similar expressions. Although we believe the expectations reflected in these forward-looking statements are reasonable, such statements are inherently subject to risk and we can give no assurances that our expectations will prove to be correct. Actual results could differ from those described in this report because of numerous factors, many of which are beyond our control. These factors include, without limitation, those described under Item 1A “Risk Factors.” We undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this report or to reflect actual outcomes. Please see “Forward-Looking Statements” at the beginning of this Form 10-K.

The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes thereto and other financial information appearing elsewhere in this Form 10-K. We undertake no obligation to update any forward-looking statements in the discussion of our financial condition and results of operations to reflect events or circumstances after the date of this report or to reflect actual outcomes.

Overview

Mustang Bio, Inc. (“Mustang,” “We,” “Us” or the “Company”) is a clinical-stage biopharmaceutical company focused on translating today’s medical breakthroughs in cell and gene therapies into potential cures for hematologic cancers, solid tumors and rare genetic 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 three core areas: 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 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 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”).

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Gene Therapies

In partnership with St. 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 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, in order 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). Phase 1 clinical trials sponsored by COH for MB-102 and MB-104 and by Fred Hutch for MB-106 are underway. 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. 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.

We are also developing CAR T therapies for solid tumors in partnership with COH targeting IL13Rα2 (MB-101), HER2 (MB-103) and PSCA (MB-105). In addition, we have partnered with Nationwide for the C134 oncolytic virus (MB-108) in order to enhance the activity of MB-101 for the treatment of patients with glioblastoma multiforme (“GBM”). 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 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

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

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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): DL1: 3.3x105, DL2: 1x106, DL3: 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 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.

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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 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.

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. 333-249657 on Form S-3 (the “2020 S-3”), which was declared effective on December 4, 2020. Under the 2020 S-3, the Company may sell up to a total of $100.0 million of its securities. As of December 31, 2021, approximately $14.6 million of the 2020 S-3 remains available for sales of securities.

Term Loan

On March 29, 2019 (the “Closing Date”), the Company entered into a $20.0 million Loan Agreement with Horizon (the “Loan Agreement”), the proceeds of which were used to provide the Company with additional working capital to continue development of its gene and cell therapies. In accordance with the Loan Agreement, $15.0 million of the $20.0 million loan was funded on the Closing Date, with the remaining $5.0 million fundable upon the Company achieving certain predetermined milestones. On September 30, 2020, the Company repaid in full all amounts that were outstanding under the Loan Agreement.

At-the-Market Offering

On July 13, 2018, the Company filed a shelf registration statement No. 333-226175 on Form S-3, as amended on July 20, 2018 (the “2018 S-3”), which was declared effective in August 2018. Under the 2018 S-3, the Company may sell up to a total of $75.0 million of its securities. In connection with the 2018 S-3, the Company entered into an At-the-Market Issuance Sales Agreement (the “ATM Agreement”) with B. Riley Securities, Inc. (formerly B. Riley FBR, Inc.), Cantor Fitzgerald & Co., National Securities Corporation, and Oppenheimer & Co. Inc. (each an “Agent” and collectively, the “Agents”), relating to the sale of shares of common stock. Under the ATM Agreement, the Company pays the Agents a commission rate of up to 3.0% of the gross proceeds from the sale of any shares of common stock. On December 31, 2020, the ATM Agreement was amended to add H.C. Wainwright & Co., LLC as an Agent.

During the year ended December 31, 2021, the Company issued approximately 19.4 million shares of common stock at an average price of $3.70 per share for gross proceeds of $71.9 million under the ATM Agreement. In connection with these sales, we paid aggregate fees of approximately $1.3 million for net proceeds of approximately $70.6 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 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.

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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. 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. As of December 31, 2021, we have an accumulated deficit of $251.8 million.

We are a majority-controlled subsidiary of Fortress Biotech, Inc. (“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.

Critical Accounting Policies and Use of Estimates

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

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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:

Level 1: Quoted prices in active markets for identical assets or liabilities.

Level 2: Observable inputs other than Level 1 prices for similar assets or liabilities that are directly or indirectly observable in the marketplace.

Level3: 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.

Income Taxes

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

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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

Comparison of the Years Ended December 31, 2021 and 2020

For the year ended December 31, Change

Operating expenses:

Research and development – licenses acquired 5,842 10,064 (4,222) (42) %

Other income (expense)

Research and Development Expenses

Research and development expenses primarily consist of personnel related expenses, including salaries, benefits, travel, and other related expenses, stock-based compensation, payments made to third parties for license, sponsored research 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, costs associated with regulatory filings, laboratory costs and other supplies.

Research and development expense increased by approximately $12.6 million from $37.2 million for the year ended December 31, 2020 to $49.8 million for the year ended December 31, 2021. The increase in research and development expense for the year ended December 31, 2021 was primarily attributable to the following:

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● $3.9 million for increased laboratory supply costs;

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;

● $1.4 million related to our licenses with COH;

● $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 LentiBOOSTTM license with SIRION; and

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:

● employee-related expenses, which include salaries and benefits;

● facility expenses, which include rent, utilities and maintenance costs;

● the cost of acquiring and manufacturing clinical trial materials; and

● costs associated with non-clinical activities, and regulatory approvals.

General and Administrative Expenses

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 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:

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● $0.8 million for increased state taxes;

● $0.3 million for increased audit and accounting fees;

● 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:

● stock compensation granted to key employees and non-employees;

● support of business development activities; and

Other Income (Expense)

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, 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

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 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, 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. The Company currently anticipates that its cash and cash equivalents balances at December 31, 2021, are sufficient to fund its anticipated operating cash requirements for at least one year from the date of this Form 10-K.

From January 1, 2022 through March 18, 2022, the Company issued approximately 2.4 million shares of common stock at an average price of $0.99 per share for gross proceeds of $2.4 million under the ATM Agreement.

The Company will be required to expend significant funds in order to advance the development of its product candidates. The Company will require additional financings through equity and debt offerings, collaborations and licensing arrangements or other sources to fully develop, prepare regulatory filings, obtain regulatory approvals and commercialize its existing and any new product candidates. If the Company is unable to arrange for such financings, or unable to arrange for them on terms acceptable to the Company, the Company’s current development plans and plans for expansion of its facility and general and administrative infrastructure will be curtailed.

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Cash Flows for the Years Ended December 31, 2021 and 2020

For the year ended December 31,

Statement of cash flows data:

Total cash (used in) provided by:

Net change in cash, cash equivalents and restricted cash $ 11,814 $ 36,391

Operating Activities

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.

Investing Activities

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 $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.

Item 7A.Quantitative and Qualitative Disclosures About Market Risks

Not applicable.

Item 8.Financial Statements and Supplementary Data.

The information required by this Item is set forth in the financial statements and notes thereto beginning at page F-1 of this Annual Report on Form 10-K.

Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Not applicable.

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Item 9A.Controls and Procedures.

Disclosure Controls and Procedures

Controls and Procedures

Disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) are designed only to provide reasonable assurance that they will meet their objectives. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness, as of December 31, 2021, of the design and operation of our disclosure controls and procedures, as such term is defined in Exchange Act Rules 13a-15(e) and 15d-15(e). Based on this evaluation, our principal executive officer and principal financial officer have concluded that, as of such date, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Internal Control over Financial Reporting

Management’s Report on Internal Control over Financial Reporting.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Internal control over financial reporting refers to the process designed by, or under the supervision of, our principal executive officer and principal financial officer, and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:

Internal control over financial reporting has inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2021. In making the assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control - Integrated Framework (2013).

Based on our assessment, our management has concluded that, as of December 31, 2021, our internal controls over financial reporting were effective based upon those criteria.

Changes in Internal Controls over Financial Reporting.

There were no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Item 9B.Other Information

None.