14. Commitments and Contingencies

Leases

The Company’s lease portfolio includes leases for our corporate headquarters, office spaces, and a cell manufacturing facility. Most of the Company’s lease liabilities result from the lease of its New York City, NY office, which expires in 2031 and Mustang’s Worcester, MA cell processing facility lease, which expires in 2026 (see Note 20). Such leases do not require any contingent rental payments, impose any financial restrictions, or contain any residual value guarantees. Certain of the Company’s leases include renewal options and escalation clauses; renewal options have not been included in the calculation of the lease liabilities and right of use assets as the Company is not reasonably certain to exercise the options. The Company does not act as a lessor or have any leases classified as financing leases.

For the year ended December 31, 2024, Mustang identified triggering events that required an impairment of the asset group consisting of its right-of-use asset and associated leasehold improvements, and the impairment loss was allocated to leasehold improvements and the right-of-use assets based on the relative arrying amounts of the assets (see Note 5), with $0.4 million of the impairment allocated to the right-of-use asset group. At December 31, 2024, the Company had operating lease liabilities of $17.4 million and right of use assets of $13.9 million, which are included in the Company’s Consolidated Balance Sheet.

The Company recognizes rent expense on a straight-line basis over the non-cancellable lease term. Rent expense for the years ended December 31, 2024 and 2023 was $1.5 million and $1.9 million, respectively. The components of lease cost are as follows:

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The following tables summarize quantitative information about the Company’s operating leases:

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License Agreements

The Company has undertaken to make contingent development and commercial milestone payments to the licensors of its portfolio of drug products and candidates. In addition, the Company shall pay royalties to such licensors based on a percentage of net sales of each drug candidate following regulatory marketing approval. For additional information on future milestone payments and royalties, (see Note 7).

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Indemnification

In accordance with its certificate of incorporation, bylaws and indemnification agreements, the Company has indemnification obligations to its officers and directors for certain events or occurrences, subject to certain limits, while they are serving at the Company’s request in such capacity. There have been no claims to date, and the Company has director and officer insurance to address such claims. The Company and its subsidiaries and partner companies also provide indemnification of contractual counterparties (sometimes without monetary caps) to clinical sites, service providers and licensors.

Legal Proceedings

In the ordinary course of business, the Company and its subsidiaries may be subject to both insured and uninsured litigation. Suits and claims may be brought against the Company by customers, suppliers, partners and/or third parties (including tort claims for personal injury arising from clinical trials of the Company’s product candidates and property damage) alleging deficiencies in performance, breach of contract, etc., and seeking resulting alleged damages.

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University of Tennessee Research Foundation v. Caelum Biosciences, Inc.

Caelum Biosciences, Inc. (“Caelum”), a former subsidiary of Fortress that was sold to AstraZeneca’s Alexion Pharmaceuticals, Inc. subsidiary (“Alexion”) in October 2021, was the defendant in a lawsuit brought by The University of Tennessee Research Foundation (“UTRF”) captioned as University of Tennessee Research Foundation v. Caelum Biosciences, Inc., No. 19-cv-00508, which was formerly pending in the United States District Court for the Eastern District of Tennessee (the “UTRF Litigation”). UTRF brought claims against Caelum, for, inter alia, trade secret misappropriation. UTRF primarily alleged that Caelum unauthorizedly used non-patent trade secrets owned by UTRF in the development of Caelum’s 11-1F4 monoclonal antibody, known as CAEL-101. Under the agreement pursuant to which Alexion acquired Caelum (as amended, the “DOSPA”), Fortress had certain indemnification obligations of Caelum pertaining to the UTRF litigation and maintained a consent right over any potential settlements of the UTRF litigation by Caelum.

On September 16, 2024, Caelum and UTRF entered into a stipulation with the court pursuant to which UTRF’s claims were dismissed without prejudice; on October 16, 2024, Caelum and UTRF entered into a definitive settlement agreement (the “UTRF-Caelum Settlement Agreement”) pursuant to which UTRF’s claims were dismissed with prejudice and Caelum agreed to make an upfront payment and additional potential milestone-based payments to UTRF.  Fortress and the other sellers under the DOSPA are explicit releasees and third party beneficiaries under the UTRF-Caelum Settlement Agreement.  In connection with the execution of the UTRF-Caelum Settlement Agreement, Caelum, Alexion and Fortress

entered into an amendment to the DOSPA (the “DOSPA Amendment”), which, inter alia: (1) terminated any continuing indemnification by Fortress and the other sellers under the DOSPA in respect of the UTRF Litigation; (2) reduced the amounts of the potential future earn-out payments potentially owing to the sellers under the DOSPA (including Fortress) from an aggregate amount up to $350 million to an aggregate amount up to $295 million; (3) released to Caelum all amounts remaining in an escrow fund that had been established at the time of the Alexion acquisition to backstop potential indemnifiable damages, including those incurring under the UTRF Litigation (with 100% of such released amount constituting reimbursement for legal fees and other expenses incurred by Caelum in defending the UTRF Litigation); and (4) memorialized Fortress’ consent for Caelum to settle the UTRF Litigation.  Neither the UTRF-Caelum Settlement Agreement nor the DOSPA Amendment implicates any out-of-pocket payment by Fortress or any other seller under the DOSPA.  Fortress remains eligible to receive approximately $19 million upon regulatory approval of CAEL-101 and approximately $125 million in the aggregate across all remaining regulatory and sales milestones.

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Journey Loss Recovery

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In September 2021, Journey was the victim of a business email compromise cybersecurity incident, that affected its accounts payable function and led to approximately $9.5 million in wire transfers being misdirected to fraudulent accounts. Journey recorded the loss as a separate component of operating expenses in its 2021 consolidated financial statements. The FBI was able to trace and seize a portion of the fraudulently transferred cryptocurrency. Subsequently, pursuant to a stipulation and order signed by Journey on September 19, 2024, the United Stated District Court Southern District of New York through the United States Marshalls recovered funds of approximately $4.6 million on December 4, 2024. The proceeds from the recovery were recorded and classified within Journey’s Consolidated Statements of Operations as a separate component of operating expenses, consistent with the initial recognition of the loss in 2021.