Ikemen Go is the most likely spiritual successor to Mugen.
Most of the original Elecbyte Devs have long quit and only a few still lurk on some forums such as <insert banned sitename>
It still is quite far from being a 100% replacement for Mugen 1.1 as there are many bugs still slowly being ironed out, also many of the smallest basic features from 1.1 like alternate resolution in window mode still haven't been added.

I would mention another ambitious project called unrealfighter 2D which uses the Unreal engine, however that will never replace mugen because the author charges monthly for using it, which will only suit a small number of people willing to pay or make commercial games.

But the closest thing to a true Mugen 1.2 we have, is Mugenhook by ermaccer, because it is still using the core 1.1 engine and has potential to add a large variety of things to it.

https://www.newagemugen.com/t4046-mugenhook-version-0-5-7-released-14-06-21

it works the same way as API loaders (i forget the correct term) work in some PC games like GTA which are heavily modded by the fanbase.
It is quite impressive and i encourage any Mugen 1.1 fans to look into it if you have not already