What changed in this filing

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Item 9A. Controls and Procedures

2022-02-25 compared with 2021-03-30 · 443 added, 284 removed, 664 unchanged (52% of the section changed)

Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO) (our principal executive officer and principal financial officer, respectively), evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2020.

The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based upon our evaluation of the Company’s disclosure controls and procedures, as of December 31, 2020, the CEO and the CFO concluded that the disclosure controls were not effective, due to the material weaknesses in internal control over financial reporting described below, to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to management, including the CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure and were not effective to provide reasonable assurance that such information is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms.

Internal Control Over Financial Reporting

Management’s Report on Internal Control Over Financial Reporting

This Annual Report on Form 10-K does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our independent registered public accounting firm due to a transition period established by rules of the SEC for newly public companies.

Disclosure Controls and Procedures

Our “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, are designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.

Disclosure controls and procedures are designed to ensure that information required to be disclosed is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, to allow timely decisions regarding required disclosure.

The Chief Executive Officer (CEO) and the Chief Financial Officer (CFO), with assistance from other members of management, have reviewed the effectiveness of our disclosure controls and procedures as of December 31, 2021 and, based on their evaluation, have concluded that the disclosure controls and procedures were effective as of such date.

Management’s Annual Report on Internal Control Over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal controls over financial reporting for the Company as defined in Rule 13a-15(f) under the Exchange Act.

The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s CEO and CFO, overseen by the Company’s Board of Directors and implemented by the Company’s management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with U.S.

generally accepted accounting principles, and the requirements of the SEC.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with policies and procedures may deteriorate.

Under the supervision of and with the participation of our management, we assessed the effectiveness of our internal control over financial reporting as of December 31, 2021, using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework (2013).

As disclosed in Part II Item 9A Controls and Procedures in our Annual Report on Form 10-K for the year ended December, 31, 2020, a material weakness in internal control over financial reporting was identified in prior periods which was the result of a material adjustment in our financial statements, due to an overstatement of lease liability upon adoption of ASU 2016-02, as well as certain other adjustments as of and for the years ended December 31, 2018 and 2019.

During 2021, to remediate the previously reported material weakness in internal controls over financial reporting, we designed and implemented new controls, enhanced existing controls, hired additional accounting and finance resources with public company and US GAAP experience, improved reporting processes, and enhanced related supporting technology.

During the fourth quarter of 2021, we completed our testing of the operating effectiveness of the implemented controls and found them to be effective.

As a result, the CEO and CFO have concluded that the material weakness has been remediated as of December 31, 2021.

Attestation Report of Independent Registered Public Accounting Firm

The effectiveness of our internal control over financial reporting as of December 31, 2021 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report included elsewhere in this Annual Report on Form 10-K.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d 15(f) under the Exchange Act) that occurred during the period covered by this annual report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Ongoing Remediation of Material Weakness in Internal Control over Financial Reporting

As previously disclosed in our Registration Statement on Form S-1 (File No.

333-250838), which was declared effective by the SEC on December 10, 2020, and in connection with the preparation and audits of our financial statements as of and for the years ended December 31, 2018 and 2019, a material weakness (as defined under the Exchange Act and by the auditing standards of the U.S.

Public Company Accounting Oversight Board, or “PCAOB”), was identified in our internal control over financial reporting.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual financial statements will not be prevented or detected on a timely basis.

Specifically, there was a material adjustment in our financial statements required due to an overstatement of lease liability upon adoption of ASU 2016-02, Leases (Topic 842), as well as certain other adjustments to our financial statements as of and for the years ended December 31, 2018 and 2019.

In the aggregate, such adjustments amounted to a material weakness.

The material weakness resulted from a lack of resources and experience within our finance function with respect to our transition to U.S.

GAAP, and our change in measurement currency from Canadian dollars to U.S.

The material weakness has not been remediated as of December 31, 2020.

There were no material adjustments required in the 2020 annual consolidated financial statements due this material weakness.

We have begun taking significant measures, and plan to continue to take measures, to remediate this material weakness.

These measures include hiring and engaging additional accounting personnel with familiarity with reporting under U.S.

GAAP, and implementing and adopting additional controls and procedures.

These remediation measures may be time consuming, costly, and might place significant demands on our financial and operational resources.

Although we have made enhancements to our control procedures in this area, the material weaknesses will not be remediated until the necessary controls have been implemented and are operating effectively.

“Risk Factors.

Except for changes in connection with the implementation of our remediation efforts, described above, there have been no other changes to internal control over financial reporting, that occurred during the fourth quarter of 2021 that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Other Information.

Disclosure Regarding Foreign Ju risdictions that Prevent Inspections .

Not applicable.

Directors, Executive Officers and Corporate Governance.

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Principal Accounting Fees and Services.

Our independent public accounting firm is KPMG LLP, Vancouver, BC, Canada, PCAOB Auditor ID 85 .

The information required by this item will be included in our definitive proxy statement with respect to our 2021 Annual Meeting of Shareholders to be filed with the SEC, and is incorporated herein by reference.

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Exhibit Index.

Articles of the Registrant, as currently in effect.

Articles of the Registrant, as currently in effect (incorporated by reference to Exhibit 3.1 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2020 filed on March 30, 2021).

Amended and Restated Investors Rights Agreement among the Registrant and certain of its shareholders, dated March 23, 2020 (incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statement on Form S-1, as amended (File No.

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333-250838) filed on December 7, 2020).

Description of Securities.

Description of Securities (incorporated by reference to Exhibit 4.3 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2020 filed on March 30, 2021).

Lease between 0775021 BC Ltd.

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Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

Inline XBRL Taxonomy Extension Schema Document

Inline XBRL Taxonomy Extension Calculation Linkbase Document

Inline XBRL Taxonomy Extension Definition Linkbase Document

Inline XBRL Taxonomy Extension Label Linkbase Document

Inline XBRL Taxonomy Extension Presentation Linkbase Document

Cover Page Interactive Data File (embedded within the Inline XBRL document)

Filed herewith

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ABCELLERA BIOLOGICS INC.

March 30, 2021

February 25, 2022

Hansen, Ph.D.

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Chief Executive Officer and Director ( Principal Executive Officer )

March 30, 2021

February 25, 2022

Hansen, Ph.D.

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Chief Financial Officer ( Principal Financial Officer and Principal Accounting Officer )

March 30, 2021

February 25, 2022

/s/ Véronique Lecault

March 30, 2021

February 25, 2022

Véronique Lecault, Ph.D.

/s/ John Edward Hamer

March 30, 2021

John Edward Hamer, Ph.D.

/s/ Andrew Lo

February 25, 2022

Andrew Lo, Ph.D.

/s/ Michael Hayden

March 30, 2021

February 25, 2022

Michael Hayden, Ph.D.

March 30, 2021

February 25, 2022

/s/ Peter Thiel

March 30, 2021

February 25, 2022

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

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generally accepted accounting principles.

Change in Accounting Principle

As discussed in Note 4 to the consolidated financial statements, the Company has changed its accounting policy for leases as of January 1, 2019 due to the adoption of Accounting Standards Codification Topic 842, Leases .

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 25, 2022 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

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Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Initial measurement of the fair value of contingent consideration and acquired intangible assets related to a business combination

As discussed in Note 21 to the consolidated financial statements, the purchase consideration associated with the business combination with TetraGenetics, Inc.

(TetraGenetics) included potential milestone payments based on the achievement of specified technical milestones and additional development and commercial milestone payments related to successfully developed therapeutics (contingent consideration).

The aggregate fair value of the purchase consideration is allocated across the estimated net tangible assets acquired, intangible assets with the residual amount allocated to goodwill.

The Company estimated the fair value of the contingent consideration to be $35,100 thousand, and estimated the fair value of the intangible assets, which includes technology and in process research and development intangibles, to be $43,300 thousand (acquired intangible assets).

We identified the assessment of the initial measurement of the fair value of contingent consideration and the acquired intangible assets in the TetraGenetics business combination as a critical audit matter.

Evaluating the key assumptions, including certain non-observable inputs, such as the probabilities of successful achievement of technical, development, and commercial milestones, forecasted revenues and discount rates involved a high degree of auditor judgment.

Changes in these key

assumptions could have a significant impact on the measurement of the contingent consideration and of the acquired intangible assets recognized on acquisition .

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s process for determining the fair value of the contingent consideration and of the acquired intangible assets.

These included an internal control related to the development of the key assumptions.

We evaluated the probabilities of successful achievement of technical, development, and commercial milestones assumptions used in the Company’s model by comparing them to relevant and reliable publicly available third-party data and studies.

We evaluated the Company’s forecasted revenues by comparing them to relevant and reliable third-party industry data.

We performed sensitivity analyses and assessed the impact of possible changes to the key assumptions on the fair value of the contingent consideration and the acquired intangible assets.

We involved valuation professionals with specialized skills and knowledge, who assisted in evaluating the Company’s discount rates by comparing them against discount rate ranges that were independently developed using publicly available market data for comparable entities.

Chartered Professional Accountants

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Vancouver, Canada

March 25, 2021

February 25, 2022

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

AbCellera Biologics Inc.:

Opinion on Internal Control Over Financial Reporting

We have audited AbCellera Biologics Inc.’s and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of income (loss) and comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes (collectively, the consolidated financial statements), and our report dated February 25, 2022 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed 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.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Chartered Professional Accountants

Vancouver, Canada

February 25, 2022

AbCellera Biologics Inc.

Consolidated Balance Sheets

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Cash and cash equivalents

Accounts receivable

Accrued accounts receivable

Marketable securities

Total cash, cash equivalents, and marketable securities

Accounts and accrued receivable

Restricted cash

Other current assets

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Property and equipment, net

Intangible assets

Equity investee

Intangible assets, net

Investments in and loans to equity accounted investees

Other long-term assets

Loans to related parties

Total long-term assets

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Current liabilities:

Accounts payable and accrued liabilities

Accounts payable and other liabilities

Current portion of contingent consideration payable

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Deferred revenue

Current portion of long-term debt

Total current liabilities

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Operating lease liability

Long-term debt

Deferred revenue and grant funding

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269,497,768 and 283,257,104 shares issued and outstanding at December 31, 2020 and 2021 respectively

Convertible preferred shares unlimited authorized shares at December 31, 2019 and 2020:

2,105,264 and nil issued and outstanding at December 31, 2019 and 2020 respectively

Additional paid-in capital

Accumulated earnings (deficit)

Accumulated other comprehensive income

Accumulated earnings

Total shareholders' equity

Total liabilities and shareholders' equity

Subsequent events

The accompanying notes are an integral part of these consolidated financial statements.

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Research fees

Licensing revenue

Milestone payments

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Net earnings (loss) before income tax

Provision for income tax

Net earnings (loss) and comprehensive income (loss) for the period

Income tax expense

Net earnings (loss)

Foreign currency translation adjustment

Comprehensive income (loss)

Net earnings (loss) per share attributable to common shareholders

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Common Shares

Accumulated Other Comprehensive

Shareholders'

Balances as at December 31, 2017

Shares issued for cash

Shares issued under stock option plan

Preferred shares issued

Stock-based compensation expense

Balances as at December 31, 2018

December 31, 2018

Shares issued under stock option plan

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Stock-based compensation expense

Balances as at December 31, 2019

December 31, 2019

Issuance of Series A2 preferred shares

Shares issued under stock option plan

Share-based compensation expense

Issuance of common shares upon initial public offering, net of issuance costs of $32,609 (net of tax $8,462)

Conversion of Series A1 and A2 preferred shares

Stock-based compensation expense

Issuance of common shares upon initial

public offering, net of issuance costs

of $ 32,609 (net of tax $ 8,462 )

Conversion of Series A1 and A2 preferred

Conversion of convertible note

Balances as at December 31, 2020

December 31, 2020

Shares issued under stock option plan and other

Stock-based compensation expense

Reclassification of liability classified options

Foreign currency translation adjustment

December 31, 2021

The accompanying notes are an integral part of these consolidated financial statements.

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Cash flows from operating activities:

Net income (loss)

Net earnings (loss)

Cash flows from operating activities:

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Stock-based compensation

Extinguishment of long-term debt

Accretion and other

Deferred tax expense

Unrealized foreign exchange gains and losses

Changes in operating assets and liabilities:

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Accrued royalties receivable

Investment tax credit receivable

Income taxes payable

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Accrued royalties payable

Deferred grant revenue

Other operating assets and liabilities

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Repayment (issuance) of related party loans

Acquisition of Trianni

Investment in equity investees

Purchase of marketable securities

Proceeds from marketable securities

Receipt of grant funding

Acquisitions, net of cash acquired

Long-term investments and other assets

Investment in and loans to equity accounted investees

Net cash used in investing activities

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Proceeds from convertible debentures

Payment of contingent consideration

Payment of liability for in-licensing agreement

Short-term borrowings

Issuance of common shares pursuant to exercise of stock options

Issuance of common shares pursuant to exercise of stock options and other

Net proceeds from issuance of common shares

Proceeds from issuance of preferred shares - series A1 financing

Proceeds from issuance of preferred shares - series A2 financing

Net cash provided by financing activities

Proceeds from issuance of preferred shares - series A1 and A2 financing

Net cash provided by (used in) financing activities

Effect of exchange rate changes on cash and cash equivalents

Increase (decrease) in cash and cash equivalents

Cash and cash equivalents, beginning of year

Cash and cash equivalents, end of year

Cash and cash equivalents and restricted cash, beginning of year

Cash and cash equivalents and restricted cash, end of year

Supplemental disclosure of non-cash investing and financing activities:

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The Company aims to become the centralized operating system for next generation antibody discovery.

The Company’s full-stack, AI-powered drug discovery platform searches and analyzes the database of natural immune systems to find antibodies that can be developed as drugs.

The Company believes its technology increases the speed and the probaiblity of success of theraputic antibody discovery, including enabling discovery against targets that may otherwise be intractable.

The Company’s full-stack, AI-powered antibody discovery platform searches and analyzes the database of natural immune systems to find antibodies that can be developed as drugs.

The Company believes its technology increases the speed and the probability of success of therapeutic antibody discovery, including enabling discovery against targets that may otherwise be intractable.

Rather than advancing its own clinical pipeline of drug candidates, the Company forges partnerships with drug developers of all sizes, from large cap pharmaceutical to small biotechnology companies.

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dollars and have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S.

GAAP”) and include the accounts of the Company and its wholly owned subsidiaries.

All intercompany transactions and balances have been eliminated.

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dollars and references to “C$” and “CAD” are to Canadian dollars.

On December 4, 2020, the Board of Directors of the Company approved a 1-for-10 forward stock split of its issued and outstanding common shares and stock options, which was affected on December 4, 2020.

All share and per share information in these consolidated financial statements has been retroactively restated to reflect the stock split.

Initial public offering

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Immediately prior to the completion of the IPO, all convertible preferred stock and notes then outstanding converted into an equivalent number of shares of common shares.

On December 4, 2020, the Board of Directors of the Company approved a 1 -for-10 forward stock split of its issued and outstanding common shares and stock options, which was affected on December 4, 2020.

All share and per share information in these consolidated financial statements has been retroactively restated to reflect the stock split.

Significant accounting policies

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and variable interest entities (“VIE”) when the Company possesses both (1) the power to direct the economically significant activities of the entity and (2) the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to that entity.

Intercompany accounts and transactions have been eliminated.

In 2021, the Company entered into a participation agreement with a segregated accounts company for purposes of Director and Officer’s insurance.

The Company contributed $ 25.0 million to the segregated account, representing the Company’s maximum loss exposure under the participation agreement, for security for a letter of credit issued to a third-party insurer.

As the funds cannot be transferred to other parts of the Company, the funds are presented as Restricted Cash.

Use of estimates

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GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Areas of significant estimates include, but are not limited to, revenue recognition including estimated timing of completion of performance obligations and determining whether an option for additional goods or services represents a material right, recoverability of investment tax credits receivable, value of contingent consideration payable and the fair value of stock-based compensation awards.

Areas of significant estimates include, but are not limited to, revenue recognition including estimated timing of completion of performance obligations and

determining whether an option for additional goods or services represents a material right, the fair value of acquired intangible assets, and contingent consideration payable , and the estimates of stock-based compensation awards.

The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances.

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The Company accounts for revenue from contracts with customers, which includes the identification and assessment of the goods and/or services promised within a contract to evaluate which promises are distinct from each other.

The terms of our arrangements generally include the payment of one or more of the following:

(i) non-refundable, up-front fixed fees, (ii) fixed fees for ‘discovery’ research support, (iii) fixed technology assignment fees, (iv) fixed payments based on the achievement of specified development and/or commercial milestones, (v) royalties on net sales by the customer of licensed products, and in some cases, (vi) early termination penalties, and (vii) reimbursements for costs incurred to fulfill the contract with the customer at cost or at cost plus an agreed upon mark-up.

Promises that are not distinct at contract inception are combined into a single performance obligation.

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If not, the option is considered a marketing offer and is accounted for as a separate contract upon the customer’s election.

The Company applied ASC 606 to all arrangements to date.

The terms of our arrangements generally include the payment of one or more of the following:

The transaction price generally includes fixed fees due at contract inception as well as fixed fees payable at the beginning and end of different phases of the discovery research support services performed.

Where a fixed fee due at contract inception is an option to obtain additional goods or services and is considered to be a material right, we allocate the transaction price to the optional goods or services we expect to provide to the corresponding consideration we expect to receive.

The Company utilizes either the expected value method or the most likely amount method to estimate the amount of variable consideration to include in the transaction price, as most appropriate in the circumstances.

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In determining the transaction price the Company constrains the transaction price for variable consideration to limit its inclusion so that it only includes the amount that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

The Company allocates the transaction price to each performance obligation identified in the contract on a relative standalone selling price basis.

The Company allocates the transaction price to each performance obligation identified in the contract based on relative observable standalone selling prices.

Revenue is recognized based on the amount of the transaction price that is allocated to each respective performance obligation when or as the performance obligation is satisfied by transferring a promised good and/or service to the customer.

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Royalty revenue is recognized in the period in which the obligation is satisfied and the corresponding sales by our corporate partners occur.

For the licenses to our intellectual property the Company recognizes revenue from non-refundable, up-front fees when the license is transferred to the customer and the customer is able to use and benefit from the license.

Collaborative Arrangements

We may enter into collaborative and other similar arrangements with respect to the development and commercialization of potential drug candidates.

Collaborative arrangements are contractual agreements with third parties that involve a joint operating activity, typically a research and/or commercialization effort, where both we and our partner are active participants in the activity and are exposed to the significant risks and rewards of the activity.

Our rights and obligations under our collaborative arrangements vary and typically involve the partners to jointly perform research and development activities and/or participate together in commercializing, marketing, promoting, manufacturing and/or distributing a drug product.

These arrangements typically include milestone as well as royalty or profit-share payments, contingent upon the occurrence of certain future events linked to the success of the asset in development, as well as expense reimbursements from or payments to the collaboration partner .

The Company considers the nature and contractual terms of arrangements and assesses whether an arrangement involves a joint operating activity pursuant to which the Company is an active participant and is exposed to significant risks and rewards dependent on the commercial success of the activity as described under ASC 808, Collaborative Arrangements ( ASC 808).

For arrangements determined to be within the scope of ASC 808 where a collaborative partner is not a customer for certain research and development activities, the Company accounts for payments received for the reimbursement of research and development costs as a contra-expense in the period such expenses are incurred.

If payments from the collaborative partner to the Company represent consideration from a customer in exchange for distinct goods and services provided, then the Company accounts for those payments within the scope of ASC 606.

The Company applied ASC 606 to all arrangements to date.

Segmented and Enterprise-wide information

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The Company’s revenues from external customers in which the services originated were in Canada in 2019 and 2020.

The Company’s long-term assets excluding financial instruments were in Canada in 2018 and 2019, and at December 31, 2020, $133.7 million was in the U.S.

In 2021, $ 353.4 million and $ 21.8 million of revenues originated from services in Canada and the U.S., respectively.

Of the Company’s long-term assets at December 31, 2020, $ 133.7 million was in the U.S.

and $ 58.5 million was in Canada.

Of the Company’s long-term assets at December 31, 2021, $ 200.3 million was in the US, $ 159.5 million in Canada, and $ 28.9 million in other foreign countries.

Government grants and credits

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Reimbursements of eligible expenditures pursuant to government assistance programs are recorded when the related costs have been incurred and there is reasonable assurance regarding collection of the claim.

The Company receives payments from the government of Canada as investment tax credits for scientific research and experimental development expenditures.

The benefits of investment tax credits are recognized in the year the qualifying expenditure is made providing there is reasonable assurance of recoverability.

The Company recognizes the benefits of refundable government investment tax credits for scientific research and development expenditures in the year the qualifying expenditure is made providing there is reasonable assurance of recoverability.

The Company records the investment tax credits based on its estimates of amounts expected to be recovered.

Government grants and credits received for expenditures on eligible research, development and capital expenditures are recognized ratably over the benefit period of the related expenditure for which the grants are intended to compensate in other income.

Grant claims not settled by the balance sheet date are recorded as receivables provided their receipt is reasonably assured.

Grant claims not settled by the balance sheet date are recorded as receivables provided their receipt is probable.

The determination of the amount of the claim and the corresponding receivable amount requires management judgement and interpretation of eligible expenditures in accordance with the terms of the programs.

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The Company has used its best judgement and understanding of the related program agreements in determining the receivable amount.

The benefit of below-market rate government loans is treated as a government grant.

The government grant benefit is measured as the difference between the fair value of the government loan estimated by discounting future principal and interest amounts at interest rates expected to be available to the Company and the proceeds for the below-market government loan.

The weighted-average interest rates estimated to be available to the Company for below-market loans received was 5.5% and 8.0% in the years ended December 31, 2019 and 2020, respectively.

Deferred financing fees

Deferred financing fees include amounts charged by attorneys, accountants and service providers that are directly attributable to future financing transactions.

These costs are deferred and subsequently charged against the gross proceeds of the related financing transaction upon closing of such transaction.

As of December 31, 2019 and 2020, the Company had no deferred financing fees.

Functional currency

The functional currency and reporting currency of the Company and its subsidiaries is the U.S.

The reporting currency of the Company and its subsidiaries is the U.S.

The functional currency of the Company and its subsidiaries is the U.S.

dollar, and for the Dayhu JV and Beedie JV, is the Canadian Dollar.

Transactions in foreign currencies are translated to the functional currency at exchange rates at the date of the transactions.

Period end balances of monetary assets and liabilities in foreign currencies are translated to the functional currency using the period end foreign currency rates.

Foreign currency gains and losses are recognized in the consolidated statements of income (loss) and comprehensive income (loss).

Cash and cash equivalents

Foreign currency gains and losses are recognized in the consolidated statements of income (loss).

The functional currency of the Dayhu JV and Beedie JV is Canadian dollars and are translated into US dollars using the period-end exchange rate for assets and liabilities and the average exchange rates during the period for revenues, expenses, gains and losses.

Foreign exchange gains or losses arising from the translation of these joint ventures’ assets and liabilities are included in “Other comprehensive income”.

Cash and cash equivalents and restricted cash

Cash and cash equivalents are defined as cash on hand and deposits held with banks with maturity dates of less than three months.

Cash and cash equivalents that are restricted as to withdrawal or usage, in accordance with specific commercial arrangements, are presented as restricted cash on the consolidated balance sheet.

At December 31, 2020 we had $ 593.7 million cash, $ 0.4 million cash equivalents, and $ nil restricted cash.

At December 31, 2021 we had $ 100.5 million cash, $ 375.6 million cash equivalents and $ 25.0 million restricted cash.

Marketable Securities

The Company’s marketable securities consist of U.S.

government agency securities, certificates of deposit, commercial paper, non-U.S.

government agency securities, and asset-backed securities.

The Company has classified and accounted for these marketable securities as held-for-trading and they are reported at fair value with unrealized gains and losses reported as other (income) expense on the consolidated statement of income (loss) and comprehensive income (loss).

Accounts receivable

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Expenditures for major additions and improvements to property and equipment are capitalized and repairs and maintenance costs are expensed as incurred.

Property and equipment are amortized using the straight-line method over the estimated useful lives of the property and equipment as follows:

Excluding land and assets not yet placed into service, p roperty and equipment are amortized using the straight-line method over the estimated useful lives of the property and equipment as follows:

Computer equipment

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In process research and development (IPR&D) will be amortized on completion of IPR&D activities.

Intangible assets are amortized using the straight-line method over the estimated useful lives of the assets as follows:

Acquired IPR&D represent the fair value assigned to research and development assets that have not reached technological feasibility.

IPR&D is classified as an indefinite-lived intangible asset and is not amortized.

All research and development costs incurred subsequent to the acquisition of IPR&D are expensed as incurred.

Definite lived intangible assets are amortized using the straight-line method over the estimated useful lives of the assets as follows:

Impairment of long-lived assets

The Company assesses the recoverability of its long-lived assets, including property and equipment and intangible assets subject to amortization, for indicators of impairment.

The Company assesses the recoverability of its long-lived assets, including property and equipment and intangible assets subject to amortization, for indicators of impairment on each reporting date.

If events or changes in circumstances indicate impairment, the Company measures recoverability by a comparison of the asset’s carrying amount to the estimated undiscounted future cash flows expected to be generated by the asset.

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No indicators of impairment were identified at the respective balance sheet dates.

Indefinite-lived intangible assets are evaluated for impairment on an annual basis as of October 1 or more frequently if an indicator of impairment is present.

Indefinite-lived intangible assets are tested annually for impairment as of October 1, and between annual tests if indicators of potential impairment exist.

The Company has the option of performing a qualitative assessment to first determine whether the quantitative impairment test is necessary.

This involves an assessment of qualitative factors to determine the existence of events or circumstances that would indicate whether it is more likely than not that the carrying amount of the indefinite-lived intangible asset is less than its fair value.

If the qualitative assessment indicates it is not more likely than not that the carrying amount is less than its fair value, a quantitative impairment test is not required.

Where a quantitative impairment test is required, the procedure is to compare the indefinite-lived intangible asset’s fair value with its carrying amount.

An impairment loss is recognized as the difference between the indefinite-lived intangible asset’s carrying amount and its fair value.

Based on our qualitative assessment, the Company determined there were no potential indicators of impairment of our indefinite-lived intangible assets.

The Company determines if an arrangement is a lease at its inception.

After determination of lease arrangement, the Company identifies whether the lease arrangement consists of any non-lease component.

The company account for lease components (e.g., rental payments) separately from non-lease components (e.g., common area maintenance costs).

Lease component is considered in operating leases, whereas non-lease component is accounted for separately in profit and loss.

Such non-lease component is accounted for ratably over a straight-line basis over the duration of lease period.

Operating leases are included in operating lease right-of-use assets, accrued liabilities, and long-term operating lease liabilities in our consolidated balance sheet.

Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

Operating lease liabilities and right-of-use assets are recognized at commencement date based on the present value of lease payments over the lease term.

The Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments if an explicit rate is not available.

Rent expense, included as part of general and administrative expense, for lease payments is recognized on a straight-line basis over the lease term.

The operating lease right-of-use assets also includes any rent prepayments, lease incentives upon receipt, and straight-line rent expense impacts, which represent the differences between its operating lease liabilities and right-of-use assets.

The initial recognition of the lease obligation and right-of-use asset excludes leases that have a remaining lease term of 12 months or less on the date of acquisition .

For the years ended December 31, 2020 and December 31, 2021, all of our leases are classified as operating leases.

Research and development costs

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Royalty fees are recorded when the third-party sale occurs.

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets (“DTAs”) and deferred tax liabilities (“DTLs”) for the expected future tax consequences of events that have been included in

the financial statements.

Under this method, DTAs and DTLs are determined on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse.

The effect of a change in tax rates on DTAs and DTLs is recognized in income in the period that includes the enactment date.

The Company recognizes DTAs to the extent that these assets are more likely than not to be realized.

In making such a determination, all available positive and negative evidence are considered, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations.

If it is determined that the DTAs in the future in excess of their net recorded amount can be realized, an adjustment to the DTA valuation allowance will be made, which would reduce the provision for income taxes.

The Company records uncertain tax positions in accordance with Accounting Standards Codification (“ASC”) 740 on the basis of a two-step process in which (1) determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority is realized.

A valuation allowance against deferred tax assets is recorded if, based on the weight of the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

The Company recognizes uncertain tax positions in accordance with Accounting Standards Codification (“ASC”) 740 on the basis of a two-step process in which (1) the Company determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, they are measured as the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

Income tax credit (“ITC”) policy

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If this qualitative assessment indicates that it is more likely than not that the fair value of the reporting unit that includes the goodwill is less than its carrying value, then a quantitative impairment test would be prepared to compare this fair value to the carrying value and record an impairment charge if the carrying value exceeds the fair value.

At October 1, 2021, the Company performed a qualitative assessment for its annual impairment test of goodwill after concluding that it was not more likely than not that the fair value of the reporting unit was less than its carrying value.

Consequently, the quantitative impairment test was not required.

The Company concluded that there were no impairment indicators related to goodwill during the remainder of 2021.

Equity method investments

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If the estimated fair value is less than the carrying value, the carrying value is written down to its estimated fair value and the resulting impairment is recorded in the Company’s consolidated statements of income (loss).

During 2020, the Company entered into a joint venture related to the construction of our future office headquarters.

To date, the equity investment balance represents the cash contribution made since inception.

Net earnings (loss) per share

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For purpose of this calculation, outstanding stock options and convertible preferred shares and notes are considered potential dilutive common shares.

The Company’s convertible preferred shares contractually entitle the holders of such shares to participate in dividends but do not contractually require the holders of such shares to participate in losses of the Company.

The Company’s convertible preferred shares, all of which converted prior to the completion of our IPO in 2020, contractually entitle the holders of such shares to participate in dividends but do not contractually require the holders of such shares to participate in losses of the Company.

Accordingly, in periods in which the Company reports a net loss attributable to common shareholders, such losses are not allocated to such participating securities.

In periods in which the Company reported a net loss attributable to common shareholders, diluted net loss per share attributable to common shareholders is the same as basic net loss per share attributable to common shareholders, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.

Emerging Growth Company Status

The Company is an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act, or JOBS Act, and may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies.

Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards.

The Company has elected to use the extended transition period for complying with new or revised accounting standards and as a result of this election, its consolidated financial statements may not be comparable to companies that comply with public company effective dates.

The Company may take advantage of these exemptions up until December 31, 2025 or such earlier time that it is no longer an emerging growth company.

Changes in significant accounting policies

Recent accounting pronouncements not yet adopted

On January 1, 2020, the Company adopted the new ASU 2016-13, issued by the Financial Accounting Standards Board (“FASB”), and all related amendments under ASC Topic 326, Financial Instruments—Credit Losses .

Adoption of this new accounting standard did not have a significant impact as on the Company’s consolidated financial statements.

Recent accounting pronouncements adopted

There was no adoption of any new accounting standards that had a significant impact on the consolidated financial statements.

Recent accounting pronouncements not yet adopted

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Convertible Preferred Shares

Stock options

Stock options and RSUs

Weighted-average common shares outstanding - diluted

Net earnings (loss) per share attributable to common shareholders - diluted

The Company’s potentially dilutive securities, which include convertible preferred shares and stock options have been excluded from the computation of diluted net loss per share for the year ended December 31, 2019 as the effect would be to reduce the net loss per share.

Therefore, the weighted-average number of common shares outstanding for the year ended December 31, 2019 used to calculate both basic and diluted net loss per share attributable to common shareholders is the same.

1 The Company’s preferred shares were all converted prior to the IPO in 2020.

The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net earnings (loss) per share attributable to common shareholders for the periods indicated because including them would have had an anti-dilutive effect:

Year Ended December 31,

Options to purchase common shares

Options to purchase common shares and RSUs

Convertible preferred shares

Total potential common shares excluded

Other Current Assets

Other current assets consisted of the following:

Tax and investment tax credit receivable

Prepaid expenses

Taxes receivable

Prepaid expenses and other

Materials and supplies

Total other current assets

Other long-term assets consisted of the following:

Investments - other

Prepaid expenses

Security deposit

Deferred tax asset

Total other long-term assets

Property and equipment, net

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Laboratory equipment

Furniture and fixtures

Leasehold improvements

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Property and equipment, net

Depreciation expense on property and equipment for the years ended December 31, 2018, 2019 and 2020 was $918, $1,604 and $2,317, respectively.

At December 31, 2020 and December 31, 2021, leasehold improvements include tenant improvements in progress that have not commenced depreciation in the amount of $nil and $ 19.8 million, respectively.

Depreciation expense on property and equipment for the years ended December 31, 2019, 2020 and 2021 was $ 1.6 million, $ 2.3 million and $ 4.4 million, respectively.

Intangible assets and goodwill

Intangible Assets

1 unchanged sentence

December 31, 2020

Gross carrying

Net book value

There was no balance of intangible assets, or related amortization expense, for the years ended December 31, 2018 and 2019.

Amortization expense related to intangible assets was $2,520 for the year ended December 31, 2020 and is reflected within Depreciation and amortization expense on the consolidated statement of income (loss) and comprehensive income (loss).

December 31, 2021

There was no balance of intangible assets, or related amortization expense, for the year ended 2019.

Amortization expense related to intangible assets was $ 2.5 million and $ 10.1 million for the years ended December 31, 2020 and 2021, respectfully, and is reflected within Depreciation and amortization expense on the consolidated statement of income (loss) and comprehensive income (loss).

At December 31, 2021, amortization expense on intangible assets is estimated to be as follows for each of the next five years:

Amortization Expense

In March 2020, the Company entered into an agreement with Alloy Therapeutics (Alloy) to use the ATX-Gx™ humanized mice platform to enable in vivo human antibody discovery for its partner programs.

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The asset will be amortized on a straight-line basis over the 10 -year term of the license agreement with Alloy.

The acquisition of $14,060 consists of an initial cash payment of $5,000, with two additional $5,000 installment payments paid in twelve and twenty-four months, respectively.

The acquisition of $ 14.1 million consists of an initial cash payment of $ 5.0 million, with two additional $ 5.0 million installment payments paid in twelve and twenty-four months , respectively.

The estimated fair value of the non-current portion of the financial obligation was determined by discounting future principal and interest amounts at estimated interest rates expected to be available to the Company with an interest rate of 10.98 %.

Amortization expense is reflected within Depreciation and amortization expense on the consolidated statement of income (loss).

Goodwill consisted of the following:

Balance at December 31, 2019

Balance at December 31, 2020 1

Balance at December 31, 2021 1

1 Accumulated impairment as at December 31, 2020 and 2021 was $nil.

Investments in and loans to equity accounted investees

The Company has entered into two joint ventures as part of the construction of future office and laboratory headquarters.

During 2020, the Company entered into a joint venture with Dayhu (Dayhu JV).

At December 31, 2021, the equity investment balance of $ 19.6 million represents the contributions made since inception.

In March, 2021, the Company entered into the Beedie joint venture (Beedie JV).

To date the equity investment balance of $ 12.7 million represents contributions made since inception into the Beedie JV.

To date, the Company has recorded immaterial amounts of proportionate income or loss with respect to either venture.

In March, 2021, th e Company made a commitment of up to CAD $ 82.7 million ($ 61.5 million) to the Dayhu JV to fund the construction at a rate referenced to an applicable Canadian bank prime rate plus 0.6 %, and repayment on the earlier of thirty months from the date of initial advancement and September 1, 2023 , or upon the trigger of certain liquidity events as defined in the agreement.

The loan is secured by the underlying land and future assets of the joint venture.

At December 31, 2021, the outstanding related party loan balance was $ 18.0 million to the joint venture.

Accounts payable and other liabilities

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Liability for in-licensing agreement

Bank indebtedness

Operating lease liability

Liability classified options

Government remittances payable

Payroll liabilities

Current portion of deferred grant funding

Total accounts payable and other liabilities

Long-term debt

Long-term debt consisted of the following:

Non-revolving BMO loan

WD Canada - WINN Loan A

WD Canada - WINN Loan B

WD Canada - BSP loan

current portion of long-term debt

Total long-term debt

Non-revolving BMO loan

The non-revolving loan from Bank of Montreal (BMO), along with interest accrued, was paid off in full in March 2020.

Other long term liabilities

OrbiMed Debt Facility

In March 2020, the Company entered into a senior secured credit agreement (the “Credit Agreement”) with OrbiMed Royalty & Credit Opportunities III, LP (“OrbiMed”), which provided for term debt in an aggregate amount of $30,000, which matures on March 23, 2025 (a 5 year term).

As of June 30, 2020, the Company had $15,000 of borrowings outstanding under the Credit Agreement.

In March 2020, the Company entered into a senior secured credit agreement (the “Credit Agreement”) with OrbiMed Royalty & Credit Opportunities III, LP (“OrbiMed”), which provided for term debt in an aggregate amount of $ 30.0 million, which matures on March 23, 2025 (a 5 year term).

As of June 30, 2020, the Company had $ 15.0 million of borrowings outstanding under the Credit Agreement.

Borrowings under the Credit Agreement bear interest at a rate per annum equal to an applicable margin of 6.00 % plus the higher of (a) the London Inter-bank Offered Rate (LIBOR) for the applicable interest period and (b) 1.75 %.

In July 2020, the outstanding loan was repaid in full, the Credit Agreement retired, and all associated security with the Credit Agreement was released.

The Company incurred approximately $3,700 in combined cancellation fees and legal fees on early retirement of the Credit Agreement which has been classified in interest and other (income) expense on the consolidated statements of income (loss) and comprehensive income (loss).

The Company incurred approximately $ 3.7 million in combined cancellation fees and legal fees on early retirement of the Credit Agreement which has been classified in interest and other (income) expense on the consolidated statements of income (loss) and comprehensive income (loss).

The Company was in compliance with all covenants under the Credit Agreement up to the date of retirement.

WD Canada – WINN Loan A

The Company secured contribution-based, shared cost, non-interest-bearing funding from the Ministry of Western Economic Diversification under the Western Innovation Initiative (WINN), towards capital equipment and expenses for a project based in Vancouver, BC.

The funding commenced on April 1, 2015 and was completed on March 31, 2018.

The maximum amount of funding under the agreement was $458.

The contribution is repayable to the Ministry by 59 monthly installments of $8 starting from June 1, 2018, and one final instalment of $27.

WD Canada – WINN Loan B

The Company secured contribution-based, shared cost, non-interest-bearing funding from the Ministry of Western Economic Diversification under the WINN towards capital equipment and expenses for a project based in Vancouver, BC.

The funding commenced on July 1, 2017 and was completed on August 1, 2019.

The maximum amount of funding under the agreement is $1,347 subject to annual maximums of:

The contribution is repayable to the Ministry by 59 monthly instalments of $22 starting January 1, 2021 and one final instalment of $21.

WD Canada—Business Scale Up and Productivity (BSP) Loan

The Company secured contribution-based, shared cost, non-interest-bearing funding from the Ministry of Western Economic Diversification under the BSP towards capital equipment and expenses for a project based in Vancouver, BC.

This represents the third project for which we have received funding.

The maximum amount of funding under the agreement is $3,846 subject to the following maximum annual amounts based on government funding years ending March 31:

The contribution is repayable to the Ministry by 59 monthly instalments of $64 starting April 1, 2023 and one final instalment of $64.

At December 31, 2020 the Company has made draws amounting to $1,491 with respect to WD Canada loans.

Principal repayments required on the Western Economic Diversification loans over the next five years and thereafter are as follows:

Shareholders’ Equity

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December 31, 2021

Shares issued

and outstanding

Shares issued

and outstanding

Shares authorized

Shares issued and outstanding

Shares authorized

Shares issued and outstanding

Common shares

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On August 3, 2018, the Company entered into an investment agreement with DCVC Bio, L.P.

for gross proceeds of CAD $10,000 ($7,702) in exchange for 2,105,264 shares.

Total proceeds received net of financing costs were $7,557.

for gross proceeds of CAD $ 10.0 million ($ 7.7 million) in exchange for 2,105,264 shares.

Total proceeds received net of financing costs were $ 7.6 million.

The Series A1 preferred shares are voting and are convertible, at any time and from time to time at the option of its holder, into fully paid and non-assessable common shares at a 1:10 ratio, subject to appropriate adjustment for splits, dividends, other similar recapitalization and the like.

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The holders of the Series A1 preferred shares are entitled to receive noncumulative dividends, as and if declared by the board of directors (the “Preferred Dividend”).

The Company may not pay any dividends on common shares of the Company unless the holders of Preferred Shares then outstanding first receive, or simultaneously receive, the Preferred Dividend on each outstanding Series A1 preferred share and a dividend on each outstanding Series A1 preferred share in an amount at least equal to the product of the dividend payable on each share of such class or series determined, if applicable, as if all shares of such class or series had been converted into common shares.

Through December 31, 2020, no cash dividends had been declared or paid by the Company.

payable on each share of such class or series determined, if applicable, as if all shares of such class or series had been converted into common shares.

To the date of conversion , no cash dividends had been declared or paid by the Company.

In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company or Deemed Liquidation Event, the holders of Series A1 Preferred Shares then outstanding are entitled to a 1x non-participating liquidation preference.

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Series A2 preferred shares

On March 23, 2020, the Company entered into an investment agreement with certain shareholders for gross proceeds of $75,000 in exchange for 6,017,784 shares.

Total proceeds received net of financing costs were $74,662.

On March 23, 2020, the Company entered into an investment agreement with certain shareholders for gross proceeds of $ 75.0 million in exchange for 6,017,784 shares.

Total proceeds received net of financing costs were $ 74.7 million.

The Series A2 preferred shares are voting and are convertible, at any time and from time to time at the option of its holder, into fully paid and non-assessable common shares at a 1:10 ratio, subject to appropriate adjustment for splits, dividends, other similar recapitalization and the like.

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The Company may not pay any dividends on common shares of the Company unless the holders of Preferred Shares then outstanding first receive, or simultaneously receive, the Preferred Dividend on each outstanding Series A2 preferred share and a dividend on each outstanding Series A2 preferred share in an amount at least equal to the product of the dividend payable on each share of such class or series determined, if applicable, as if all shares of such class or series had been converted into common shares.

Through December 31, 2020, no cash dividends had been declared or paid by the Company.

To the date of conversion, no cash dividends had been declared or paid by the Company.

In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company or Deemed Liquidation Event, the holders of Series A2 Preferred Shares then outstanding are entitled to a 1x non-participating liquidation preference.

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Due to the various rights and privileges within the existing Series A2 Preferred and Common shareholder agreements, the Company concluded triggering a deemed liquidation event is within the control of the Company, and therefore the Series A2 Preferred Shares are classified as permanent equity.

Immediately prior to the completion of our IPO, all Series A1 and A2 Preferred shares converted to an equal amount of common shares.

As of each balance sheet date, preferred shares consisted of the following:

December 31, 2019

December 31, 2020

Shares issued

and outstanding

Shares issued

and outstanding

Series A1 preferred shares

Immediately prior to the completion of our IPO, all Series A1 and A2 Preferred shares converted to an equal number of common shares.

Stock-based compensation

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Any awards granted under the Pre-IPO Plan will remain subject to the terms of our Pre-IPO Plan and applicable award agreements.

As of December 31, 2020, options to purchase 53,204,810 common shares were outstanding under the Pre-IPO Plan.

Options granted under the Company’s Pre-IPO Plan are denominated in Canadian dollars and are translated into U.S dollars using the period end rate or the average foreign exchange rate for the period, as applicable, and have been noted for information purposes.

Options were granted under the Company’s Pre-IPO Plan in Canadian dollars and were converted to U.S dollars for administrative convenience in 2021.

In March 2021, substantially all employee option holders whose awards were liability-classified elected to convert the currency of their option exercise price from Canadian dollars to U.S.

dollars for administrative convenience.

As a result of the modification, $ 5.7 million was reclassified from liability to equity.

2020 Share Option and Incentive Plan:

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The maximum aggregate number of common shares that may be issued as incentive share options may not exceed the Initial Limit cumulatively increased on January 1, 2022, and on each January 1 thereafter by the lesser of (i) the Annual Increase for such year or (ii) 21,280,000 common shares.

The following table summarizes the Company’s stock options granted in Canadian dollars under the Pre-IPO Plan since December 31, 2018:

Average Exercise

As of December 31, 2021, the number of shares available for issuance under the 2020 Plan was 15,154,407 , which includes awards granted and outstanding under the Pre-IPO Plan that are forfeited after December 10, 2020.

Restricted Share Units

During the year ended December 31, 2021, the Company granted Restricted Share Units (RSUs) to certain employees that vest over a period of four years , in the amount of one-quarter each year on the anniversary of the grant date.

RSUs are equity-settled on each vesting date, subject to the grantee’s continued employment with the Company on the vesting date.

The fair value of RSUs granted was calculated by using the Company’s closing stock price on the grant date.

The following table summarizes the Company’s stock options granted under the Pre-IPO Plan:

Average Exercise

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Outstanding as of December 31, 2021

Outstanding as of December 31, 2020

Options exercisable as of December 31, 2021

The aggregate intrinsic value of options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common shares for those options that had exercise prices lower than the fair value of the Company’s common shares.

The intrinsic value for stock options exercised during the years ended December 31, 2019 and 2020 was $Nil and $6,784, respectively.

1 Pre-IPO plan options were historically granted in CAD.

In 2021, all Pre-IPO employee option holders converted the currency of their option exercise price from Canadian dollars to U.S.

dollars for administrative convenience.

The following table summarizes the Company’s stock options granted under the 2020 Plan:

Average Exercise

Outstanding, December 31, 2019

Outstanding as of December 31, 2020

Outstanding as of December 31, 2021

Options exercisable as of December 31, 2021

The weighted average grant date fair value per share of options granted during 2019, 2020, and 2021 was $ 0.26 , $ 3.95 and $ 12.31 , respectively.

The intrinsic value of options exercised during 2019, 2020, and 2021 was $nil, $ 6.8 million and $ 295.6 million, respectively.

As of December 31, 2021, there was $ 100.3 million of unrecognized compensation cost related to unvested stock options granted under the Plans, which is expected to be recognized over a weighted average period of 1.84 years.

The following table summarizes the Company’s RSUs granted under the 2020 Plan:

Grant Date Fair Value

Outstanding as of December 31, 2020

Vested and settled

Outstanding as of December 31, 2021

As of December 31, 2021, there was $ 22.0 million of unamortized RSU expense that will be recognized over a weighted average period of 3.65 years.

Stock-based compensation expense was classified in the consolidated statements of income (loss) and comprehensive income (loss) as follows:

1 unchanged sentence

Research and development expenses

General and administrative expenses

Sales and marketing expenses

Total stock-based compensation expense related to the new plan is nil during the year ended December 31, 2019 and $24 during the year ended December 31, 2020.

As of December 31, 2019, and 2020, there was $5,915 and $48,440 of total unrecognized compensation cost related to nonvested stock-based compensation arrangements granted under the employee share option plan.

That cost is expected to be recognized over a weighted average period of 1.9 years.

General and administrative expenses

The fair value of each option award is determined on the date of grant using the Black-Scholes option pricing model.

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Management estimated the fair value of its common shares based on a number of objective and subjective factors, including internal valuations, external market considerations affecting the biotechnology industry and the historic prices at which the Company sold common shares.

At December 31, 2020, there were 1,012,000 liability classified options outstanding, of which $ 4.3 million was included in other liabilities.

At December 31, 2021 there were no liability classified options outstanding.

At December 31, 2020, there were 1,012,000 liability classified options outstanding, of which $4,270 was included in other liabilities.

The disaggregated revenue categories are presented on the face of the statement of income (loss) and comprehensive income (loss).

Contract liabilities

Contract liabilities represent payments received for performance obligations not yet satisfied and relate to deferred revenue, and are presented as current or long-term in the accompanying balance sheets based on the expected timing of satisfaction of the underlying goods and/or services.

Deferred revenue outstanding at December 31, 2018, 2019 and 2020 were $4,518, $4,511 and $26,321, respectively.

During the years ended December 31, 2018, 2019 and 2020, the Company recognized $1,271, $2,098 and $2,982, respectively, as revenue that had been included in deferred revenue in the previous year.

The disaggregated revenue categories are presented on the face of the statements of income (loss) and comprehensive income (loss).

Deferred Revenue

Deferred revenue represents payments received for performance obligations not yet satisfied and are presented as current or long-term in the accompanying balance sheets based on the expected timing of satisfaction of the underlying goods and/or services.

Deferred revenue outstanding at each respective period is as follows:

Deferred revenue

During the years ended December 31, 2019, 2020 and 2021, the Company recognized $ 2.1 million, $ 3.0 million and $ 4.7 million, respectively, of revenue that had been included in deferred revenue in the previous year.

In March of 2020, the Company entered into a research collaboration and license agreement with Eli Lilly pursuant to which the Company will perform discovery research for several targets for Eli Lilly to develop and commercialize.

The agreement resulted in upfront payment s of $26,700, of which $ 2 1 , 94 0 was included in deferred revenue at December 3 1 , 2020.

Un der the agreement, the Company is entitled to receive an aggregate of up to $29,000 of milestone payments as well as royalties in the low single digits based on net sales for non-COVID-19 targets and in the low- to mid-teens for aggregate sales below $125 ,000 and mid-teens to mid-twenties on aggregate sales above $125 ,000 .

The Company expects to recognize approximately $ 5,801 in revenue in the next 12 months related to th is agreement.

Of the remaining deferred revenue balance of $4,289, which amount is related to various other agreements, approximately $696 is expected to be recognized in revenue in the next 12 months.

Under the agreement, the Company is entitled to receive an aggregate of up to $ 29.0 million of milestone payments as well as royalties in the low single digits based on net sales for non-COVID-19 targets and in the low- to mid-teens for aggregate sales below $ 125.0 million and mid-teens to mid-twenties on aggregate sales above $ 125.0 million.

The agreement resulted in an initial upfront payment of $ 26.7 million, of which $ 21.9 million was included in deferred revenue at December 31, 2020.

For the year ended December 31, 2021, the Company received an additional $ 1.7 million in payments, for total payments received in respect of this agreement of $ 28.4 million.

The Company recognized $ 3.2 million of revenue in the year ended December 31, 2021.

The Company expects to recognize approximately $ 4.9 million in revenue in the next 12 months related to these payments under the agreement.

Of the remaining deferred revenue balance of $ 14.5 million, which is related to various other agreements, approximately $ 2.7 million is expected to be recognized in revenue in the next 12 months.

License Revenue

For the years ended December 31, 2020 and December 31, 2021, the Company recognized $nil and $ 20.8 million, respectively, from license revenue relating to license of the Trianni platform.

Government Funding

In 2020 the Company received a funding commitment from the Government of Canada under Innovation, Science and Economic Development’s (ISED) Strategic Innovation Fund (SIF) for a total of CAD $175,631 ($125,600) which is intended to support research and development efforts related to the discovery of antibodies for use drugs to treat COVID-19, and to build technology and manufacturing infrastructure for antibody therapies against future pandemic threats.

To December 31, 2020 the Company incurred $12,420 in expenditures in respect of the SIF grant funding.

This amount relates primarily to spending under phase 1 of the agreement and such amounts are not repayable.

An immaterial amount was claimed in respect of phase 2 of the funding commitment which includes a non-probable repayable condition that is not estimable at this time.

Of the total spend during the year ended December 31, 2020, $5,336 relates to research and development expenditures and is reflected in other income on the consolidated statement of income (loss) and comprehensive income (loss).

The remaining $7,084 is attributable to capital asset expenditures and is amortized into other income over the average asset life of five years.

Unamortized amounts are included in other liabilities and other long-term liabilities on the consolidated balance sheet.

In 2020 the Company received a funding commitment from the Government of Canada under Innovation, Science and Economic Development’s (ISED) Strategic Innovation Fund (SIF) for a total of CAD $ 175.6 million ($ 125.6 million) which is intended to support research and development efforts related to the discovery of antibodies for use drugs to treat COVID-19, and to build technology and manufacturing infrastructure for antibody therapies against future pandemic threats.

Since inception, the Company incurred $ 59.5 million in expenditures in respect of the SIF grant funding.

$ 37.9 million relates to spending under phase 1 of the agreement and such amounts are not repayable, and $ 21.6 million was claimed in respect of phase 2 of the funding commitment.

Repayment on phase 2 of the funding is conditional on achieving certain revenue thresholds over a specified period of time as prescribed in the agreement.

The funding and its associated conditional repayment is not and will not be secured by any of the Company’s assets, and includes certain non-financial covenants and restrictive covenants on dividend payments or other shareholder distributions that would prevent the Company in satisfying its obligations under the arrangement.

As of December 31, 2021, no amounts have been accrued related to the repayment terms as the conditions are estimated to be non-probable at December 31, 2021.

For the year ended December 31, 2021, the Company incurred $ 47.1 million in expenditures in respect of the SIF grant funding.

Of the total spend during the year, $ 13.8 million relates to research and development expenditures and is reflected in other income on the consolidated statements of income (loss) and comprehensive income (loss).

The remaining $ 33.3 million is attributable to capital asset expenditures and is amortized into other income over the average asset life of five years .

Unamortized amounts are included in other liabilities and other long-term liabilities on the consolidated balance sheets.

The balance of SIF grant funding included in the balance of accounts and accrued receivable is $ 12.9 million and $ 14.8 million at December 31, 2020 and 2021, respectively.

For financial reporting purposes, income before income taxes includes the following components:

The expense (benefit) for income taxes consists of:

Deferred and other:

Income tax expense

Current tax expense (benefit)

Current tax expense

Deferred tax expense (benefit)

Total tax expense

The consolidated effective income tax rate differs from the expected Canadian statutory tax rate of 27% (2019 and 2018:

The consolidated effective income tax rate differs from the expected Canadian statutory tax rate of 27% (2019, 2020, 2021:

Reconciliation between the expected tax rate on income from operations and the statutory tax rate was as follows:

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Change in valuation allowance

Change for (over) under accrual

Change for under accrual

Change due to SR&ED

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Income tax expense

Deferred income tax assets and liabilities result from the temporary differences between assets and liabilities recognized for financial statement and income tax purposes.

Deferred income tax assets (“DTAs”) and liabilities (“DTLs”) result from the temporary differences between assets and liabilities recognized for financial statement and income tax purposes.

The significant components of the Company’s deferred income tax assets and liabilities were as follows:

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Operating lease liability

Deferred revenue

Net operating losses carried forward

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Net deferred tax assets (liability)

Amounts recognized in the Company's consolidated balance sheet as of December 31, 2019 and 2020 comprise of $Nil and $5.9 million, respectively, included in Other long-term assets and $Nil and $26.2 million, respectively, as Deferred tax liability.

Amounts recognized in the Company's consolidated balance sheet as of December 31, 2020 and 2021 comprise of $ 5.9 and $ 7.4 million, respectively, included in other long-term assets and $ 26.2 and $ 37.4 million, respectively, as deferred tax liability.

Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing DTAs.

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Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth.

On the basis of this evaluation, valuation allowances of $555, $1,480 and $767 as of December 31, 2018, 2019 and 2020, respectively, have been recorded to recognize only the portion of the DTA that is more likely than not to be realized against DTL that reverses in carryforward period.

On the basis of this evaluation, valuation allowances of $ 0.8 million and $ 9.2 million as of December 31, 2020 and 2021, respectively, have been recorded to recognize only the portion of the DTA that is more likely than not to be realized against DTL that reverses in carryforward period.

The amount of the DTA considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is longer present and additional weight is given to subjective evidence such as our projections for growth.

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The Company had no unclaimed tax deductions for scientific research and experimental development.

The Company had operating losses carried forward related to foreign operations of approximately $1,285, $1,547 and $1,456 as of December 31, 2018, 2019 and 2020 respectively.

The Company had operating losses carried forward related to foreign operations of approximately $ 1.5 million, $ 1.5 million and $ 18.2 million as of December 31, 2019, 2020 and 2021 respectively.

Certain tax attributes are subject to an annual limitation as a result of the acquisitions of Lineage and TetraGenetics which constitute a change of ownership as defined under IRC Section 382.

Certain operating losses available for the foreign subsidiary deferred tax assets can be carried forward indefinitely while the rest expire ranging from 2034 to 2037.

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Other than routine audits done by tax authorities for tax credits and tax refunds that the Company has claimed, management is not aware of any other material income tax examination currently in progress by any taxing jurisdiction.

The Company leases office and laboratory facilities in Vancouver, Canada and Sydney, Australia, with terms expiring within two to seven years.

The balance sheet classification of the Company's lease liabilities was as follows:

The Company leases office and laboratory facilities in Vancouver, Canada and Sydney, Australia, and Cambridge, United Kingdom and Boston, USA.

The majority of the Company's operating leases have a fixed term with a remaining life between one month and 20 years, with renewal options included in the contracts.

The leases have varying contract terms, escalation clauses and renewal options.

Generally, there are no restrictions placed upon the lessee by entering into these leases, other than restrictions on use of property, sub-letting and alterations.

At the inception of a lease, the Company determines whether it is reasonably certain to exercise a renewal option and includes the options in the determination of the lease term and the lease liability where it is reasonably certain to exercise the option.

If the Company's intention is to exercise an option subsequent to the commencement of the lease, the Company will re-assess the lease term.

T he balance sheet classification of the Company's lease liabilities was as follows:

Operating lease liabilities:

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At December 31, 2021, the future minimum lease payments of the Company’s operating lease liabilities were as follows:

The initial recognition of the lease obligation and right-of-use asset excludes leases acquired as part of a business combination that have a remaining lease term of 12 months or less on the date of acquisition .

As of December 31, 2021, the weighted-average remaining lease term is 9.3 years and the discount rate used to determine the operating lease liabilities was approximately 3.3 %.

The Company incurred total operating lease expenses, including fixed lease payments and non-lease components, of $625, $638 and $1,086 during the years ended December 31, 2018, 2019 and 2020, respectively.

The Company incurred total operating lease expenses, including fixed lease payments and non-lease components, of $ 0.6 million, $ 1.1 million and $ 4.1 million during the years ended December 31, 2019, 2020 and 2021, respectively.

Financial Instruments

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and Level 3 inputs are not observable in the market.

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, loans to related parties, accounts payable and accrued liabilities and royalties payable, bank indebtedness, operating lease obligations, long-term debt, and contingent consideration payable.

The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, and bank indebtedness approximate their fair values due to the immediate and short-term maturity of these financial instruments.

The fair value of loans to related party approximate the carrying value as the interest rates approximate the rates applicable for non-related party loans.

The estimated fair value of long-term debt of $3,400 and $2,338 at December 31, 2019 and December 31, 2020, respectively, are classified as Level 2.

The estimated fair value has been determined by discounting future principal and interest amounts at estimated interest rates expected to be available to the Company at period end.

Details of the fair value of the contingent consideration payable utilizing the Level 3 inputs is detailed in Note 19.

The Company’s financial instruments consist of cash and cash equivalents, restricted cash, marketable securities, accounts receivable, loans to related parties, accounts payable and accrued liabilities and royalties payable, and contingent consideration payable.

The carrying values of cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities, royalties payable, and related party loans approximate their fair values.

Contingent Consideration

Contingent consideration related to business acquisitions is recorded at fair value on the acquisition date and adjusted on a recurring basis for changes in its fair value.

Changes in the fair value of contingent consideration liabilities can result from changes in anticipated payments and changes in assumed discount periods and rates.

These inputs are unobservable in the market and are therefore categorized as Level 3 inputs.

Further information related to the Trianni and TetraGenetics contingent consideration is disclosed in Note 21.

There were no changes to the valuation technique and inputs used in these fair value measurements since acquisition.

The following table presents the changes in fair value of the liability for contingent consideration:

December 31, 2021 (in thousands)

(decrease) in fair

value of liability

for contingent

consideration

Repayment of contingent

consideration

TetraGenetics

Contingent consideration balance as of December 31, 2020 was $ 22.6 million with immaterial fair value changes for the year ended December 31, 2020.

Marketable Securities

In the third quarter of 2021, the Company purchased high credit quality marketable securities as part of the Company’s cash management strategy, as these securities are viewed as being available to support the Company’s current operations.

Level 2 marketable securities in the fair value hierarchy were based on quoted market prices to the extent available or alternative pricing sources and models utilizing market observable inputs to determine fair value.

There were no transfers between Level 1, Level 2 and Level 3 during the period.

The following table presents information about the Company’s marketable securities that are measured at fair value on a recurring basis and indicates the level of the fair value hierarchy used to determine such fair values:

Fair Value Measurements at December 31, 2021:

Marketable securities

government agencies

Certificate of deposit

Commercial paper

Corporate bonds

government agencies

Asset backed securities

Commitments and contingencies

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Pursuant to the agreements, the Company may be obligated to make research and development and regulatory milestone payments upon the occurrence of certain events and upon receipt of royalty payments in the low single-digits to mid-twenties based on certain net sales targets.

During 2020, the Company has expensed approximately $32,300 related to such obligations, of which $27,200 is included in current liabilities.

During 2020, the Company expensed approximately $ 27.1 million related to such obligations, of which $ 27.1

million is included in current liabilities.

For the year ended December 31, 2021, the Company expensed $ 45.5 million related to such obligations, of which $ 22.5 million is included in current liabilities.

There were no such payments prior to 2020.

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Concentration of Credit Risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist primarily of cash and cash equivalents and accounts receivable.

Cash and cash equivalents are invested with the primary objective being the preservation of capital and maintenance of liquidity.

Financial instruments that potentially subject the Company to a concentration of credit risk consist primarily of cash and cash equivalents, restricted cash, and accounts and accrued receivable.

Cash and cash equivalents and restricted cash are invested with the primary objective being the preservation of capital and maintenance of liquidity.

The guidelines on the quality of financial instruments that the Company believes minimizes the exposure to concentration of credit risk.

The Company limits its exposure to credit loss by placing its cash and cash equivalents with high credit quality financial institutions.

The Company limits its exposure to credit loss by placing its cash and cash equivalents with multiple high credit quality financial institutions.

The Company’s exposure to credit risk for accounts and accrued receivables is indicated by the carrying value of its accounts receivable and accrued receivables.

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Any adjustments made to our historical loss experience reflect current differences in asset-specific risk characteristics and current economic conditions.

At December 31, 2019 and 2020, accounts and accrued royalty receivable amounts were due from five and seven customers, respectively.

For the year ended December 31, 2020 we recognized our first milestone and royalty revenue streams, totaling $213,307, exclusively from our partnership with Lilly, of which $198,307 was a receivable at December 31, 2020 and collected subsequent to year end.

At December 31, 2020 and 2021, accounts and accrued royalty receivable amounts were due from seven and thirteen customers, respectively.

For the year ended December 31, 2020, we recognized milestone and royalty revenue totaling $ 213.3 million, exclusively from our partnership with Lilly, of which $ 198.3 million was receivable at December 31, 2020.

For the year ended December 31, 2021 we recognized milestone payments of $ 7.0 million and royalty revenue totaling $ 327.3 million, exclusively from our partnership with Lilly, of which $ 138.4 million was a receivable at December 31, 2021.

Interest Rate Risk

The Company’s interest rate risk is primarily attributable to its cash and cash equivalents, long term contingent consideration payable, long term operating lease liability and long-term debt.

The Company believes that it does not have material exposure to changes in the fair value of cash and cash equivalents because of changes in interest rates due to the short-term nature of cash and cash equivalents.

The Company’s interest rate risk is primarily attributable to its cash and cash equivalents, restricted cash, marketable securities, long term contingent consideration payable and long term operating lease liability.

As of December 31, 2021, the Company had cash and cash equivalents of $ 476.1 million, restricted cash of $ 25.0 million, and marketable securities of $ 246.8 million, a majority of which was maintained in high credit quality and liquid held for trading marketable securities, bank accounts and term deposits.

The Company’s interest rate risk is affected by changes in the general level of interest rates, particularly because the majority the Company’s investments are short-term in nature.

Due to record low interest rates and the short-term duration of the Company’s cash and cash equivalent holdings and marketable securities and the low risk profile of the marketable securities, a 10 % change in interest rates would not have a material effect on the fair market value of cash, cash equivalents, restricted cash, and marketable securities.

The Company also has the ability to hold the marketable securities until maturity, and therefore, the Company would not expect the Company’s operating results or cash flows to be affected to any significant degree by the effect of a sudden change in market interest rates.

The Company does not enter into investments for trading or speculative purposes and has not used any derivative financial instruments to manage interest rate exposure.

The Company is exposed to the risk that the fair value or future cash flows of the contingent consideration payable, operating lease liability and long-term debt will vary as a result of changes in market interest rates.

In order to manage funding needs or capital structure goals, the Company enters into debt or lease agreements that are subject to either fixed market interest rates set at the time of issue or floating rates determined by ongoing market conditions.

Debt subject to variable interest rates exposes the Company to variability in interest expense, while debt subject to fixed interest rates exposes the Company to variability in the fair value of debt.

The Company is further exposed to the risk that the fair value of the contingent consideration payable and operating lease liability will vary as a result of changes in market interest rates.

In order to manage funding needs or capital structure goals, the Company may enter into arrangements that are subject to either fixed market interest rates set at the time of issue or floating rates determined by ongoing market conditions.

Debt subject to variable interest rates exposes the Company to variability in interest

expense, while debt subject to fixed interest rates exposes the Company to variability in the fair value of debt.

To manage interest rate exposure, the Company accesses various sources of financing and manages borrowings in line with debt ratings, liquidity needs, maturity schedule, and currency and interest rate profiles.

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and Canadian dollars.

The Company had Canadian denominated cash and cash equivalents of CAD $5,845 and CAD $905 at December 31, 2019 and 2020, respectively.

The Company had Canadian denominated cash and cash equivalents of CAD $ 0.9 million and CAD $ 8.2 million at December 31, 2020 and 2021, respectively.

The Company incurs certain operating expenses and accounts payable in currencies other than the U.S.

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The fluctuation of the U.S.

dollar relative to the Canadian dollar will have an impact on the reported balances for net assets, net loss and shareholders’ equity in the Company’s consolidated financial statements.

Liquidity Risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset.

The Company’s short-term cash requirements are primarily to settle its financial liabilities, which consist primarily of accounts payable and accrued liabilities falling due on average within 30 days and current portion of contingent consideration payable, lease obligations and long term debt falling due within the next 12 months, with medium term requirements to invest in property and equipment and research and development.

The Company’s principal sources of liquidity to settle its financial liabilities are cash, cash equivalents and, collection of accounts and accrued receivables relating to research collaboration and license agreements, royalties and additional government grant funding as required.

The Company believes that these principal sources of liquidity are sufficient to fund its operations for at least the next 12 months.

dollar relative to the Canadian dollar will have an impact on the reported balances for net assets, net earnings (loss) and shareholders’ equity in the Company’s consolidated financial statements.

Counterparty Risk

In 2018, a significant portion of revenue was recognized from one customer representing 61%.

In 2019, a significant portion of revenue was recognized from three customers representing 47%, 15% and 12%, respectively.

For the year ended December 31, 2020, three of our partners accounted for 35 %, 25 % and 14 % of our research fees revenue.

Our partnership with Lilly constituted one of the partnerships that generated 10 % or more of our consolidated revenues.

For the year ended December 31, 2021, four of our partners accounted for 29 %, 17 %, 11 %, and 10 % of our research fee revenue.

Our partnership with Lilly constituted one of the partnerships that generated 10 % or more of our consolidated revenues.

Related party transactions

The Company utilizes its network of investors, directors, and advisors in executing business.

As such, the Company had transactions with related parties including the following:

The Chief Commercial Officer of StemCell Technologies Inc.

(Stemcell) was a director for the Company until September 11, 2019.

Stemcell provices reagents, tools and services for life science research.

The Company incurred expenditures of $26 and $29 from transactions with Stemcell during the years ended December 31, 2019 and 2020, respectively.

The amounts charged were subject to normal trade terms.

As of December 31, 2020, StemCell was no longer a related party of the Company.

Chief Executive Officer (“CEO”) of the Company was the recipient of a personal loan of CAD $2,000 ($1,540) from the, Company during the year ended December 31, 2019 for the purposes of financing the purchase of a residential property.

Other than the related party loan between the Company and the Dayhu JV disclosed in Note 9, the Company had the following transactions with related parties:

Chief Executive Officer (“CEO”) of the Company was the recipient of a personal loan of CAD $ 2.0 million ($ 1.5 million) from the, Company during the year ended December 31, 2019 for the purposes of financing the purchase of a residential property.

The loan is interest bearing at an annual interest rate of 3.54 %.

The loan was repaid in full in 2020 .

The General Counsel of the Company was the recipient of a loan of $200 during the year ended December 31, 2019.

The General Counsel of the Company was the recipient of a loan of $ 0.2 million during the year ended December 31, 2019.

The loan is interest bearing at an annual interest rate of 3.95 % and has a term to maturity of 3.33 years.

The loan was repaid in full in 2020 .

In June 2020, the Company acquired rights to the OrthoMab bispecific platform from Dualogics, LLC for $4,000.

In June 2020, the Company acquired rights to the OrthoMab bispecific platform from Dualogics, LLC for $ 4.0 million.

The acquisition represents a group of similar assets sourced from the agreement.

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The Company does not reasonably expect the platform acquired will be used to receive economic benefit in an alternative manner, nor does the acquisition agreement provide for any future economic benefit to the Company from the rights retained by Dualogics, LLC.

therefore accounted for the right to the Dualogics, LLC platform acquired under the agreement as an acquisition of an asset and recognized $4,000 as research and development expenses under ASC 730.

The Company therefore accounted for the right to the Dualogics, LLC platform acquired under the agreement as an acquisition of an asset and recognized $ 4.0 million as research and development expenses under ASC 730 .

On November 3, 2020 , the Company completed a business combination with Trianni, Inc.

(“Trianni”), a biotechnology company with a humanized rodent platform, in which we were the acquirer.

To fund the merger, on October 30, 2020 AbCellera entered into convertible note agreement wherein AbCellera issued convertible notes in consideration of $90,000.

To fund the merger, on October 30, 2020 AbCellera entered into convertible note agreement wherein AbCellera issued convertible notes in consideration of $ 90.0 million.

Issuance costs associated with the convertible notes was immaterial.

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Interest is payable annually starting twenty-four months from the date of issuance until maturity.

Upon a liquidity event, such as an IPO, if occurred within 6 months of the issue date, then immediately prior to the liquidity event, noteholders may convert the principal amount of the note into common shares of the company at 85% of the IPO issue price of common shares.

common shares.

The convertible notes are also convertible at the option of the holders on the interest commencement date, which is 12 months after the issuance date.

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The convertible note was fully extinguished upon conversion and the carrying value of the convertible note was reclassified into common shares.

The acquisition date fair value of the preliminary purchase price consideration transferred consisted of the following:

The acquisition date fair value of the final purchase price consideration transferred consisted of the following:

Estimated Purchase Price Consideration

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Goodwill also reflects the requirement to record deferred tax balances for the difference between the assigned values and the tax bases of assets acquired and liabilities assumed in the business combination.

As of December 31, 2020, the Company had not yet fully completed the analysis to assign fair values to all assets acquired and liabilities assumed, and therefore the purchase price allocation is preliminary.

The remaining items include the finalization of working capital adjustments, income taxes, and resulting impact to goodwill.

The preliminary purchase price allocation will be subject to

further refinement as the Company continues to refine its estimates and assumptions based on information available at the acquisition date.

These refinements may result in material changes to the estimated fair value of assets acquired and liabilities assumed.

The purchase price allocation adjustments can be made throughout the end of the Company’s measurement period, which is not to exceed one year from the acquisition date.

Total transaction costs expensed in the statement of income (loss) and comprehensive income (loss) was immaterial.

The following table summarizes the preliminary purchase price allocation for the Trianni transaction as of November 3, 2020:

During the period ended December 31, 2021, the Company has recorded immaterial adjustments to the preliminary allocation of the purchase price for the finalization of working capital adjustments, income taxes, and the resulting impact to goodwill.

The following table summarizes the final purchase price allocation for the Trianni transaction:

Fair value of assets and liabilities acquired

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The significant assumptions inherent in the development of the values, from the perspective of a market participant, include the amount and timing of projected future cash flows (including revenue, regulatory success and profitability), and the discount rate selected to measure the risks inherent in the future cash flows, which was between 19 %- 22 %.

These fair values are based on the most recent estimate of the fair value available and will be updated as we obtain more information.

The estimate of the useful life was based on an analysis of the expected use of the asset by us, any legal, regulatory or contractual provisions that may limit the useful life, the effects of obsolescence, competition and other relevant economic factors, and consideration of the expected cash flows used to measure the fair value of the intangible asset

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Net income (loss)

Subsequent events

In January 2021, the Company entered into an agreement with a partner whereby we will invest $11,700 in equal shares of a Vancouver building development in Vancouver Canada to be leased by AbCellera for additional office and laboratory facilities.

TetraGenetics

On September 10, 2021, the Company completed a business combination with TetraGenetics, Inc.

(“TetraGenetics”), a biotechnology company with a proprietary platform for generating recombinant human ion channels and other transmembrane proteins.

The Company acquired 100 % of the issued and outstanding shares of TetraGenetics in exchange for:

upfront cash consideration of $ 12.5 million adjusted for certain closing amounts;

potential milestone payments up to $ 37.5 million based on the achievement of technical milestones, and additional development and commercial milestone payments related to successfully developed therapeutics.

The Company deposited an additional $ 12.5 million in escrow included as part of other long-term assets subject to release to the former shareholders of TetraGenetics upon the achievement of certain technical milestones.

The estimated fair value of the potential milestone payouts have been included in the preliminary purchase price consideration.

The acquisition date fair value of the preliminary purchase price consideration consisted of the following:

Closing consideration

Contingent consideration

Pursuant to the merger agreement, the initial cash consideration adjusted for certain preliminary closing adjustments.

Represents the estimated fair value of the contingent consideration related to potentially successful milestone events.

The estimated fair value was categorized within Level 3 of the fair value hierarchy and determined by estimating the expected future cash flows associated with the potential milestone events.

The significant assumptions inherent in estimating the fair value include the amount and timing of projected future cash flows, risk adjusted for various factors including probability of success and discounted at an 8.0 % discount rate to estimate the present value of the risk adjusted future cash flows.

In accordance with the acquisition method of accounting, the purchase price of TetraGenetics has been allocated to the acquired assets and assumed liabilities based on their estimated acquisition date fair values.

The fair value estimates were based on income, estimates and other analyses.

The excess of the total consideration over the estimated fair value of the amounts initially assigned to the identifiable assets acquired and liabilities assumed has been recorded as goodwill, which is not deductible for income tax purposes.

The goodwill balance represents the assembled workforce acquired, the combined company’s expectations of the strategic opportunities available as a result of the merger, and other synergies that will be derived from the merger.

As of December 31, 2021, the Company had not yet fully completed the analysis to assign fair values to all assets acquired and liabilities assumed, and therefore the purchase price allocation is preliminary.

The remaining items include the finalization of working capital adjustments, income taxes, and resulting impacts to goodwill.

The preliminary purchase price allocation will be subject to further refinement as the Company continues to refine its estimates and assumptions based on information available at the acquisition date.

These refinements may result in material changes to the estimated fair value of assets acquired and liabilities assumed.

The purchase price allocation adjustments can be made throughout the end of the Company’s measurement period, which is not to exceed one year from the acquisition date.

Total transaction costs expensed in the statement of income (loss) and comprehensive income (loss) were immaterial.

During the three-months ended December 31, 2021, the Company has refined immaterial adjustments to the preliminary allocation of the purchase price for finalization of intangible assets, working capital adjustments, income taxes, and the resulting impact to goodwill.

The following table summarizes the preliminary purchase price allocation for the TetraGenetics transaction as of September 10, 2021:

Fair value of assets and liabilities acquired

Other assets, including cash of $ 955

Other liabilities

Deferred tax liability

Total liabilities

Estimated fair value of net identifiable assets acquired and liabilities assumed

The estimated fair value and useful lives of the intangible assets acquired is as follows:

fair value (a)

Estimated useful

lives in years (b)

The estimated fair values were categorized within Level 3 of the fair value hierarchy and were determined using an income-based approach, which was based on the present value of the future estimated after-tax cash flows attributable to each intangible asset.

The significant assumptions inherent in estimating the fair values, from the perspective of a market participant, include the amount and timing of projected future after-tax cash flows including revenue, operating costs, milestone and regulatory success, obsolescence, and profitability.

The discount rate selected to present value the future after-tax cash flows attributable to the Technology is a 20.1 % fully risked discount rate.

A de-risked discount rate of 8.0 % was used to present value the probability of success risk adjusted after-tax cash flows attributable to the IPR&D.

The estimate of the useful life was based on an analysis of the expected use of the asset by the Company, any legal, regulatory or contractual provisions that may limit the useful life, the effects of obsolescence, competition and other relevant economic factors, and consideration of the expected cash flows used to measure the fair value of the intangible asset.

IPR&D assets are indefinite life intangible assets at the time of acquisition and will be amortized upon completion of IPR&D activities.

Goodwill represents the excess of the estimated purchase price over the estimated fair value of TetraGenetics’ identifiable assets acquired and liabilities assumed.

The Company has not provided post acquisition and pro forma information relating to the pre-acquisition period as it is not material.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures