What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-10 compared with 2021-11-12 · 205 added, 195 removed, 215 unchanged (65% of the section changed)

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The following discussion and analysis should be read together with our condensed consolidated financial statements and the notes to those statements included elsewhere in this Quarterly Report on Form 10-Q.

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”) that are based on our management’s beliefs and assumptions and on information currently available to our management.

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (Securities Act) and Section 21E of the Exchange Act that are based on our management’s beliefs and assumptions and on information currently available to our management.

The forward-looking statements are contained in this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-looking statements include, but are not limited to:

• our ability to pioneer immunotherapy, harness the power of the innate immune system, implement precision cancer medicine and change the current paradigm of cancer care;

• our ability to implement and support our COVID ‑ 19 vaccine and therapeutic programs;

• our ability to develop next-generation therapies and vaccines that complement, harness, and amplify the immune system to defeat cancers and infectious diseases;

• our ability to implement and support our SARS-CoV-2 vaccine and therapeutic programs;

• any impact of the coronavirus pandemic, or responses to the pandemic, on our business, clinical trials or personnel;

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• our beliefs regarding the benefits and perceived limitations of competing approaches, and the future of competing technologies and our industry;

• details regarding our strategic vision and planned product candidate pipeline, including that we eventually plan to advance therapies for virally induced infectious diseases;

• our beliefs regarding the success, cost and timing of our product candidate development activities and current and future clinical trials and studies, including study design;

• our expectations regarding our ability to utilize the Phase I and II aNK and haNK clinical trials data to support the development of our product candidates, including our haNK, taNK, t‑haNK, MSC and M-ceNK product candidates;

• our expectations regarding the development, application, commercialization, marketing, prospects and use generally of our product candidates, including Anktiva™, hAd5 constructs and aldoxorubicin;

• the timing or likelihood of regulatory filings or other actions and related regulatory authority responses, including any planned investigational new drug (“IND”), Biologics License Application (“BLA”) or New Drug Application (“NDA”) filings or pursuit of accelerated regulatory approval pathways or orphan drug status and Breakthrough Therapy designations;

• details regarding our strategic vision and planned product candidate pipeline, including that we eventually plan to advance vaccines and therapies for virally-induced infectious diseases;

• our beliefs regarding the success, cost and timing of our product candidate development activities and current and future clinical trials and studies, including study design and the enrollment of patients;

• our expectations regarding our ability to utilize the Phase 1/2 aNK and haNK ® clinical trials data to support the development of our product candidates, including our haNK, taNK, t‑haNK ™ , MSC, and M-ceNK ™ product candidates;

• our expectations regarding the development, application, commercialization, marketing, prospects and use generally of our product candidates, including Anktiva, self-amplifying RNA (saRNA), hAd5 and yeast constructs, recombinant sub-unit proteins, EDV constructs, toll-like receptor-activating adjuvants, and aldoxorubicin;

• the timing or likelihood of regulatory filings or other actions and related regulatory authority responses, including any planned investigational new drug (IND), BLA or New Drug Application (NDA) filings including, without limitation, the anticipated timing of filing a BLA for BCG-unresponsive NMIBC CIS or pursuit of accelerated regulatory approval pathways or orphan drug status and Breakthrough Therapy designations;

• our ability to implement an integrated discovery ecosystem and the operation of that planned ecosystem, including being able to regularly add neoepitopes and subsequently formulate new product candidates;

• the ability and willingness of strategic collaborators, including certain affiliates of NantWorks, LLC (“NantWorks”) to share our vision and effectively work with us to achieve our goals;

• the ability and willingness of strategic collaborators to share our vision and effectively work with us to achieve our goals;

• the ability and willingness of various third parties to engage in research and development activities involving our product candidates, and our ability to leverage those activities;

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• our expectations regarding the ease of administration associated with our product candidates;

• our expectations regarding the patient compatibility associated with our product candidates;

• the ability to transition our clinical trials at the Clinic to a new structure on the anticipated timeline, if at all;

• our ability to finalize and execute definitive agreements with third parties with whom we have entered into term sheets or reached agreements in principle on various potential transactions;

• our expectations regarding patient compatibility associated with our product candidates;

• our beliefs regarding the potential markets for our product candidates and our ability to serve those markets;

• our ability to produce an “off-the-shelf” therapy;

• our expectations regarding the timing of enrollment and submission of our clinical trials, and protocols related to such trials;

• our ability to produce an antibody cytokine fusion protein, a DNA, RNA, or recombinant protein vaccine, a toll-like receptor-activating adjuvant, an NK-cell therapy, or a damage-associated molecular patterns (DAMP) inducer therapy;

• our beliefs regarding the potential manufacturing and distribution benefits associated with our product candidates, and our ability to scale up the production of our product candidates;

• our plans regarding our manufacturing facilities and our belief that our manufacturing is capable of being conducted in‑house;

• our belief in the potential of our antibody cytokine fusion proteins, vaccine technologies and NK-92 and M-ceNK cell therapy technology, and the fact that our business is based upon the success individually and collectively of our platforms;

• our antibody cytokine fusion proteins, vaccine technologies and NK-92 and M-ceNK cell therapy technology along with other product candidate families, will require significant additional clinical testing;

• even if we successfully develop and commercialize specific product candidates like our Anktiva™ or haNK and t‑haNK, our ability to develop and commercialize our other product candidates either alone or in combination with other therapeutic agents;

• our belief in the potential of our antibody cytokine fusion proteins, DNA, RNA or recombinant protein vaccines, toll-like receptor-activating adjuvants, NK-cell therapy, or DAMP inducer platforms, and the fact that our business is based upon the success individually and collectively of these platforms;

• our belief regarding the magnitude or duration for additional clinical testing of our antibody cytokine fusion proteins, DNA, RNA or recombinant protein vaccines, toll-like receptor-activating adjuvants, NK-cell therapy, or DAMP inducers along with other product candidate families;

• even if we successfully develop and commercialize specific product candidates like our Anktiva or PD-L1 t‑haNK, our ability to develop and commercialize our other product candidates either alone or in combination with other therapeutic agents;

• the ability to obtain and maintain regulatory approval of any of our product candidates, and any related restrictions, limitations and/or warnings in the label of any approved product candidate;

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• the terms and conditions of licenses granted to us and our ability to license additional intellectual property relating to our product candidates and technology;

• the impact on us, if any, if the contingent value rights (“CVRs”) held by former Altor BioScience Corporation (“Altor”) stockholders become due and payable in accordance with their terms;

• regulatory developments in the United States (“U.S.”) and foreign countries.

• the impact on us, if any, if the CVRs held by former Altor stockholders become due and payable in accordance with their terms;

• regulatory developments in the U.S.

and foreign countries;

• the timing of the development and commercialization of our product candidates.

Forward-looking statements include statements that are not historical facts and can be identified by terms such as “anticipates,” “believes,” “could,” “seeks,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would,” or similar expressions and the negatives of those terms.

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You should read this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect.

Anktiva, ceNK, Conkwest, GlobeImmune, GlobeImmune (logo), haNK, haNK (Chinese characters), ImmunityBio, NantKwest, NK-92, Outsmart your disease, taNK, Tarmogen, and VivaBioCell are trademarks or registered trademarks of ImmunityBio, Inc., its subsidiaries, or its affiliates.

This Quarterly Report on Form 10-Q contains references to our trademarks and trademarks belonging to other entities.

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and its subsidiaries.

We established ImmunityBio to advance next-generation immunotherapies and address unmet needs within the clinical fields of oncology and infectious disease.

We are developing treatments based on a proprietary immunotherapy platform that is designed to overcome limitations of the current standards of T cell-based immunotherapies, including checkpoint inhibitors and CAR-T cells.

Our platform is based on four key modalities:

(1) activating natural killer (“NK”), and T cells using antibody cytokine fusion proteins, (2) activating tumoricidal macrophages using low-dose synthetic immuno-modulators, (3) generating memory T cells using vaccine candidates developed with our second-generation adenovirus (“hAd5”), yeast and saRNA technologies, and (4) off-the-shelf NK cells from the NK‑92 cell line and memory-like cytokine-enriched NK cells (“M‑ceNK”) from allogenic and autologous donors.

ImmunityBio’s immunotherapy pipeline includes an antibody cytokine fusion protein (an IL-15 superagonist (N-803) known as Anktiva™), an albumin-associated anthracycline synthetic immuno-modulator (aldoxorubicin), hAd5 and yeast vaccine technologies (targeting the novel strain of coronavirus disease (“SARS‑CoV‑2”) , tumor-associated antigens and neoepitopes), off-the-shelf genetically engineered natural killer cell lines inducing cancer and virally infected cell death through a variety of concurrent mechanisms (including innate killing, antibody-mediated killing, and CAR-directed killing), patient specific NK cell product for cancer (M-ceNK), macrophage polarizing peptides, and bi-specific fusion proteins targeting CD20, PD-L1, TGF-b and IL -12.

Our immunotherapy clinical pipeline consists of 20 actively recruiting clinical trials in Phase I, II, or III development.

There are 13 active clinical trials in Phase II or III development across 12 indications in solid and liquid cancers (including bladder, pancreatic and lung cancers) and infectious diseases (including SARS‑CoV‑2 and the human immunodeficiency virus (“HIV”)).

We have an expansive clinical-stage pipeline and intellectual property portfolio with 16 first-in-human assets.

In December 2019, the U.S.

Food and Drug Administration (“FDA”) granted Breakthrough Therapy designation to Anktiva™ for bacillus Calmette-Guérin (“BCG”) unresponsive non-muscle invasive bladder cancer carcinoma in situ (“CIS”).

Based on patient readout data that was submitted with our application to obtain our Breakthrough Therapy designation, Anktiva™ achieved its primary endpoint of complete response rate at any time in the ongoing registrational Phase II/III trial.

Other indications currently with registration-potential studies include BCG unresponsive papillary bladder cancer, lung cancer, and metastatic pancreatic cancer.

On December 21, 2020 , we and NantCell, Inc.

(formerly known as ImmunityBio, Inc., a private company) (“NantCell”) entered into an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which we and NantCell agreed to combine our businesses.

The Merger Agreement provided that a wholly-owned subsidiary of the company would merge with and into NantCell (the “Merger”), with NantCell surviving the Merger as a wholly-owned subsidiary of the company.

ImmunityBio, Inc.

is a clinical-stage biotechnology company developing next-generation therapies and vaccines that complement, harness, and amplify the immune system to defeat cancers and infectious diseases.

We strive to be a vertically-integrated immunotherapy company designing and manufacturing our products so they are more effective, accessible, more conveniently stored, and more easily administered to patients.

Our broad immunotherapy and cell therapy platforms are designed to attack cancer and infectious pathogens by activating both the innate immune system—NK cells, dendritic cells, and macrophages—and the adaptive immune system—B cells and T cells—in an orchestrated manner.

The goal of this potentially best-in-class approach is to generate immunogenic cell death thereby eliminating rogue cells from the body whether they are cancerous or virally infected.

Our ultimate goal is to employ this approach to establish an “immunological memory” that confers long-term benefit for the patient.

Our business is based on the foundation of multiple platforms that collectively act on the entire immune response with the goal of targeted, durable, coordinated, and safe immunity against disease.

These platforms and their associated product candidates are designed to overcome the limitations of the current standards of care in oncology and infectious diseases, such as checkpoint inhibitors and antiretroviral therapies.

We believe that we have established one of the most comprehensive portfolios of immunotherapy and vaccine platforms, which includes:

Our platforms include 8 first-in-human therapeutic agents that are currently being studied in 27 clinical trials—18 of which are in Phase 2 or 3 development—across 13 indications in liquid and solid tumors, including bladder, pancreatic and lung cancers.

These are among the most frequent and lethal cancer types for which there are high failure rates for existing standards of care or, in some cases, no available effective treatment.

In infectious disease, our pipeline currently targets such pathogens as SARS-CoV-2 and HIV.

We believe SARS-CoV-2 currently lacks a vaccine that provides long-term protection against the virus, particularly its variants, while HIV affects tens of millions of people globally and currently has no known cure.

We believe that our innovative approach to orchestrate and combine therapies for optimal immune system response will become a therapeutic foundation across multiple clinical indications.

Additionally, we believe that data from multiple clinical trials indicates Anktiva has broad potential to enhance the activity of therapeutic monoclonal antibodies (mAbs), including checkpoint inhibitors (e.g., Keytruda), across a wide range of tumor types.

Anktiva is currently being studied in 21 clinical trials (both ImmunityBio and investigator-sponsored) across 13 indications.

Although such designations may not lead to a faster development process or regulatory review and may not increase the likelihood that a product candidate will receive approval, N-803, ImmunityBio’s novel antibody cytokine fusion protein, has received Breakthrough Therapy and Fast Track designations in combination with BCG from the FDA for BCG -unresponsive NMIBC CIS .

Based on the reported results of our Phase 2/3 trial (QUILT 3.032), we have initiated discussions with the FDA to file a BLA for N-803 plus BCG for BCG-unresponsive NMIBC CIS.

We held a pre-BLA meeting with the FDA in May and reached agreement with the agency with regard to the content and plan to submit our BLA for N-803 plus BCG for BCG-unresponsive NMIBC CIS.

We anticipate that the final internal quality review of the BLA will be completed within the next ten days upon which we will submit our BLA.

We have established GMP manufacturing capacity at scale with cutting-edge cell manufacturing expertise and ready-to-scale facilities, as well as extensive and seasoned R&D, clinical trial, and regulatory operations, and development teams.

On December 21, 2020 , NantKwest and NantCell entered into the Merger Agreement pursuant to which NantKwest and NantCell agreed to combine their businesses.

The Merger Agreement provided that a wholly-owned subsidiary of the company would merge with and into NantCell, with NantCell surviving the Merger as a wholly-owned subsidiary of the company.

On March 9, 2021 , we completed the Merger pursuant to the terms of the Merger Agreement.

Under the terms of the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each share of NantCell common stock , par value $0.001 per share, issued and outstanding immediately prior to the Effective Time, subject to certain exceptions as set forth in the Merger Agreement, was converted automatically into a right to receive 0.8190 (the “Exchange Ratio”) newly issued shares of common stock, par value $0.0001 per share, of the company (“Company Common Stock”), with cash paid in lieu of any fractional shares.

Under the terms of the Merger Agreement, at the Effective Time, each share of NantCell common stock , par value $0.001 per share, issued and outstanding immediately prior to the Effective Time, subject to certain exceptions as set forth in the Merger Agreement, was converted automatically into a right to receive 0.8190 newly issued shares of Company Common Stock, with cash paid in lieu of any fractional shares.

At the Effective Time, each share of the company’s common stock issued and outstanding immediately prior to the Effective Time, remained an issued and outstanding share of the combined company.

At the Effective Time, each outstanding option, warrant or restricted stock unit to purchase NantCell common stock was converted using the Exchange Ratio into an option, warrant or restricted stock unit, respectively, on the same terms and conditions immediately prior to the Effective Time, to purchase shares of Company Common Stock.

Immediately following the Effective Time, the former stockholders of NantCell held approximately 71.5% of the outstanding shares of Company Common Stock and the stockholders of the company as of immediately prior to the Merger held approximately 28.5% of the outstanding shares of Company Common Stock.

At the Effective Time, each outstanding option, RSU or warrant to purchase NantCell common stock was converted using the Exchange Ratio into an option, RSU or warrant, respectively, on the same terms and conditions immediately prior to the Effective Time, to purchase shares of Company Common Stock.

Immediately following the Effective Time, the former stockholders of NantCell held approximately 71.5% of the outstanding shares of Company Common Stock and the stockholders of NantKwest as of immediately prior to the Merger held approximately 28.5% of the outstanding shares of Company Common Stock.

As a result of the Merger and immediately following the Effective Time, Dr.

Patrick Soon-Shiong, our Executive Chairman and Global Chief Scientific and Medical Officer, and his affiliates beneficially owned, in the aggregate, approximately 81.8% of the outstanding shares of Company Common Stock.

Following the consummation of the Merger, shares of the company’s common stock were listed on the Nasdaq Global Select Market under the symbol “IBRX.”

We incurred costs totaling $23.3 million in connection with the Merger, consisting of financial advisory, legal and other professional fees, of which $13.0 million was recorded during the nine months ended September 30, 2021.

Following the consummation of the Merger, the symbol for shares of the company’s common stock was changed to “IBRX.”

Accounting Treatment of the Merger

The Merger represents a business combination pursuant to Financial Accounting Standards Board Accounting Standards Codification Topic 805-50, Mergers , which is accounted for as a transaction between entities under common control as Dr.

The Merger represents a business combination pursuant to FASB ASC Topic 805-50, which is accounted for as a transaction between entities under common control as Dr.

Soon‑Shiong and his affiliates were the controlling stockholders of both the company and NantCell for all of the periods presented in this report.

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All material intercompany accounts and transactions have been eliminated in consolidation.

Coronavirus Pandemic

In March 2020, the World Health Organization declared COVID-19 a pandemic.

To date, our operations have not been significantly disadvantaged by the pandemic.

However, we cannot at this time predict the specific extent, duration, or full impact that this pandemic may have on our financial condition and results of operations, including ongoing and planned clinical trials.

COVID-19 Pandemic

The COVID-19 pandemic continues to present a substantial public health and economic challenge around the world.

Through the date of this Quarterly Report on Form 10-Q, we have not seen a material adverse impact to our business from the pandemic.

However, given the unprecedented and continuously evolving nature of the pandemic, we cannot at this time predict the specific extent, duration, or full impact that this pandemic may have on our financial condition and results of operations, including ongoing and planned clinical trials.

More specifically, the pandemic may result in prolonged impacts that we cannot predict at this time and we expect that such uncertainties will continue to exist for the foreseeable future.

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If the financial markets and/or the overall economy are impacted for an extended period, our results may be adversely affected.

Given the unprecedented and continuously evolving nature of the pandemic, the future impact of these changes and potential changes on the company are unknown at this time.

To date, we have seen no material adverse impact to our business from the pandemic.

We anticipate, however, that enrollment of patients in certain studies will likely take longer than forecasted in prior Securities and Exchange Commission (“SEC”) filings and that our clinical trials may require additional time to complete which would in turn impact the timeline in which we were previously forecasting BLA submissions of our product candidates and subsequent revenue generation.

In addition, we anticipate that enrollment of patients in certain studies will likely take longer than previously forecasted and that our clinical trials may require additional time to complete which would in turn impact the timeline of BLA submissions of our product candidates and subsequent revenue generation.

These factors have been accounted for in the company’s anticipated upcoming milestones.

During any such delays in our clinical trials, we will continue to incur fixed costs such as selling, general and administrative expenses and operating expenses related to our laboratory, Good Manufacturing Practice (“GMP”) manufacturing, and office facilities.

Many of our office-based employees have been working from home since mid-March 2020.

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We have addressed this in part by ensuring that we have sufficient supplies on hand to weather interruptions in our supply chain.

There is significant uncertainty about the progression and ultimate impact of the pandemic on our business and operations.

While the pandemic did not materially impact our results during the periods presented in this Quarterly Report on Form 10-Q, we anticipate that it could impact our business in the future due to factors such as fewer patients accessing treatment for cancer.

We continue to monitor the impact of the COVID-19 pandemic on our business, including our clinical trials, manufacturing facilities and capabilities, and ability to access necessary resources.

For a discussion of the risks presented by the COVID-19 pandemic to our results of operations and financial condition, see Part I I , Item 1A.

“Risk Factors.

Operating Results

To date, we have generated minimal revenue from non-exclusive license agreements related to our cell lines, the sale of our bioreactors and related consumables and grant programs.

From inception through the date of this Quarterly Report on Form 10-Q, we have generated minimal revenue from non-exclusive license agreements related to our cell lines, the sale of our bioreactors and related consumables, and grant programs.

We have no clinical products approved for commercial sale and have not generated any revenue from therapeutic and vaccine product candidates that are under development.

We have incurred net losses in each year since our inception and, as of September 30, 2021, we had an accumulated deficit of $1.9 billion.

Our net losses attributable to ImmunityBio common stockholders were $255.5 million and $154.1 million for the nine months ended September 30, 2021 and 2020, respectively.

We have incurred net losses in each year since our inception and, as of March 31, 2022, we had an accumulated deficit of $2.1 billion.

Our net losses attributable to ImmunityBio common stockholders were $102.8 million and $79.6 million for the three months ended March 31, 2022 and 2021, respectively.

Substantially all of our net losses resulted principally from costs incurred in connection with our ongoing clinical trials and operations, our research and development programs, and from selling, general and administrative costs associated with our operations, including stock-based compensation expense.

As of September 30, 2021, we had 538 employees.

As of March 31, 2022, we had 688 employees.

Personnel of related companies who provide corporate, general and administrative, manufacturing strategy, research and development, regulatory and clinical trial strategy and other support services under our shared services agreement with NantWorks are not included in this number.

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Collaboration Agreements

As we continue the development of our pipeline, we anticipate that strategic collaborations with established biopharma companies and other research-based entities will become integral to our operations and the development of novel combination therapies.

These collaborations would provide ImmunityBio with a range of opportunities to leverage our partners’ expertise and capabilities to further expand the potential of our technologies and product candidates.

We are currently pursuing this aspect of our business in seven clinical trials studying our IL-15 receptor agonist Anktiva™ in combination with complementary, approved therapies to determine if Anktiva™ may have broad potential to enhance the activity of those therapies, including therapeutic monoclonal antibodies and other standard-of-care therapeutics across a wide range of tumor types.

We believe we are well positioned to become a leader in immunotherapy through the combined strength of our broad and vertically integrated platform and complementary strategic partnerships.

We anticipate that strategic collaborations will continue to be an integral part of our operations, providing opportunities to leverage our partners’ expertise and capabilities to gain access to new technologies and further expand the potential of our technologies and product candidates across relevant platforms.

We believe we are well positioned to become a leader in immunotherapy due to our broad and vertically-integrated platforms and through complementary strategic partnerships.

We believe that our innovative approach to orchestrate and combine therapies for optimal immune system response will become a therapeutic foundation across multiple clinical indications.

Additionally, we believe that data from multiple clinical trials indicates Anktiva has broad potential to enhance the activity of therapeutic mAbs, including checkpoint inhibitors (e.g., Keytruda), across a wide range of tumor types.

Anktiva is currently being studied in 21 clinical trials (both ImmunityBio and investigator-sponsored) across 13 indications.

We may also enter into supply arrangements for various investigational agents to be used in our clinical trials.

See Note 6 , Collaboration and License Agreements , of the “Notes to Unaudited Condensed Consolidated Financial Statements” that appears in Item 1.

“Financial Statements” of this Quarterly Report on Form 10-Q for a more detailed discussion regarding our existing collaboration and license agreements.

See Part I, Item 1.

“ Business—Collaboration and License Agreements ”, of our Annual Report on Form 10-K filed with the SEC on March 1, 2022 for a more detailed discussion regarding our collaboration and license agreements.

Agreements with Related Parties

We conduct business with several affiliates under written and informal arrangements.

Our Executive Chairman, Global Chief Scientific and Medical Officer and our principal stockholder, founded and has a controlling interest in NantWorks, which is a collection of companies in the healthcare and technology space.

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Affiliates of NantWorks are also affiliates of the company due to the common control by and/or common ownership interest of our Executive Chairman and Global Chief Scientific and Medical Officer.

Related-Party Notes Payable

As of September 30, 2021, we have outstanding promissory notes with certain entities affiliated with Dr.

Related-Party Promissory Notes

As of March 31, 2022, we have outstanding fixed-rate promissory notes with entities affiliated with Dr.

Soon-Shiong in an aggregate amount of $309.4 million, including accrued interest.

The notes bear interest at a per annum rate ranging from 3.0% to 6.0%.

As of September 30, 2021, the notes provide that all outstanding principal is due and payable on September 30, 2025, and accrued and unpaid interest is payable on either the maturity date or, with respect to one of the notes, on a quarterly basis beginning June 30, 2021.

These notes bear interest at a per annum rate ranging from 3.0% to 6.0%, provide that the outstanding principal is due and payable on September 30, 2025, and accrued and unpaid interest is payable on either upon maturity or, with respect to one of the notes, on a quarterly basis beginning June 30, 2021.

We may prepay the outstanding amount of any advance under such notes, together with accrued and unpaid interest, at any time, in whole or in part, without premium or penalty.

In addition, as of March 31, 2022 we have a $300.0 million variable-rate promissory note with an entity affiliated with Dr.

Soon-Shiong that is due and payable on December 17, 2022.

This loan bears interest at Term SOFR + 5.4%, which is compounded annually and payable quarterly commencing on March 17, 2022.

As of March 31, 2022, the interest rate on this loan was 5.92%.

In the event of a default on the loan (as defined in the promissory note), including if we do not repay the loan at maturity, the company has the right, at its sole option, to convert the outstanding principal amount and accrued and unpaid interest due under this note into shares of the company’s common stock at price of $5.67 per share.

There can be no assurance that we can refinance this promissory note or what terms will be available in the market at the time of refinancing.

Furthermore, if prevailing interest rates or other factors at the time of refinancing result in higher interest rates upon refinancing, then the interest expense relating to the refinanced indebtedness would increase.

These risks could materially adversely affect our financial condition, cash flows and results of operations.

Immuno-Oncology Clinic, Inc.

We entered into multiple agreements with Immuno-Oncology Clinic, Inc.

(the “Clinic”) to conduct clinical trials related to certain of our product candidates.

We entered into multiple agreements with the Clinic to conduct clinical trials related to certain of our product candidates.

The Clinic is a related party as it is owned by an officer of the company and NantWorks manages the administrative operations of the Clinic.

B ased on a review of our updated clinical trial programs post-Merger, we updated our estimates of the investigator fees for the clinical trials currently underway or planned at the Clinic.

As certain programs costs are excluded from and certain services are subject to credit adjustments under the Clinic Agreement, we determined the expected future fees for services to be performed are less than the carrying value of the prepaid asset on the condensed consolidated balance sheets.

As a result, we partially wrote down the value of our prepayments under the Clinic Agreement and recorded approximately $1.9 million in research and development expense , on the condensed consolidated statements of operations for the nine months ended September 30, 2021 .

In addition, we reclassified $0.8 million of prepaid assets from prepaid expenses and other current assets to other current assets , on the condensed consolidated balance sheets during the three months ended September 30, 2021 based on the additional time expected for them to be realized than initially estimated.

605 Nash, LLC

In February 2021, but effective on January 1, 2021, we entered into a lease agreement with 605 Nash, LLC, a related party, for a facility primarily used for pharmaceutical development and manufacturing purposes.

In May 2021, but effective on April 1, 2021, we entered into an amendment to our lease agreement with 605 Nash, LLC.

557 Doug St, LLC

In September 2021, we entered into a sale transaction with Nant Capital, a related party, for a real estate property located at 557 South Douglas Street, El Segundo, California.

We subsequently leased back the building for an initial seven-year lease term with an option to extend the lease for two additional seven-year periods.

In 2021, we completed a review of alternative structures that could support our more complex clinical trial requirements and made a decision to explore a potential transition of clinical trials at the Clinic to a new structure (including contracting with a new, non-affiliated professional corporation) to be determined and agreed upon by all parties and currently planned for the first half of 2022.

Based on this decision to explore a potential transition, we determined that it was more likely than not that the previously recorded prepaid asset would not result in the collection of fees for services performed by the Clinic as contemplated in the original agreements.

As a result, we wrote down the remaining value of our prepaid asset and recorded approximately $4.4 million in research and development expense , on the condensed consolidated statement of operations for the year ended December 31, 2021 .

For the three months ended March 31, 2022 and 2021, we incurred $0.4 million and $0.3 million in research and development expense , on the condensed consolidated statements of operations related to clinical trial and transition services provided by the Clinic.

NantWorks, LLC

On May 6, 2022, we amended our facility license agreement with NantWorks, a related party, to expand the licensed premises to an aggregate total of 46,330 rentable square feet.

See Subsequent Events for more information.

23 Alaska, LLC

On May 6, 2022, we entered into a lease agreement with 23 Alaska, LLC, a related party, for a 47,265 rentable square foot facility located at 2335 Alaska Ave., El Segundo, California, to be used primarily for pharmaceutical development and manufacturing, research and development, and office space.

See Subsequent Events for more information.

See Note 9 , Related-Party Agreements , of the “Notes to Unaudited Condensed Consolidated Financial Statements” that appears in Item 1.

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Components of our Results of Operations

To date, we have generated minimal revenue from non-exclusive license agreements related to our cell lines, the sale of our bioreactors and related consumables and grant programs.

We have no clinical products approved for commercial sale and have not generated any revenue from therapeutic and vaccine product candidates that are under development.

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• the efficacy and safety profile of the product candidate.

We do not expect any of our product candidates to be commercially available for the foreseeable future, if ever.

We have only one product candidate, N-803, currently planned for a BLA submission to the FDA in the near future.

However, there can be no assurance that it will be approved for commercial sale in the near term, if ever.

We do not expect any of our other product candidates to be commercially available for the foreseeable future, if ever.

See “ —Ou r Business ” above for an update on the anticipated timing of a BLA submission.

Selling, General and Administrative

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Other Income and Expense

Other income and expense consists primarily of interest income, interest expense, unrealized gains and losses on investments in equity securities, realized gains and losses on both debt and equity securities, and gains and losses on foreign currency transactions.

The company is subject to taxation in the United States, various state, and foreign jurisdictions.

Earnings from non-U.S.

activities are subject to local country income tax.

To date, we have not been required to pay U.S.

federal income taxes or foreign income taxes because of our or our subsidiaries’ current and accumulated net operating losses.

Results of Operations

Comparison of the three months ended September 30, 2021 and 2020

Other income and expense consists primarily of interest income, interest expense, unrealized gains and losses on investments in equity securities and equity-method investments, realized gains and losses on both debt and equity securities, and gains and losses on foreign currency transactions.

We are subject to U.S.

federal income tax, as well as income tax in Italy, South Korea, California and other states.

From inception through March 31, 2022, we have not been required to pay U.S.

federal and state income taxes because of current and accumulated NOLs.

Discussion of Condensed Consolidated Results of Operations

Comparison of the Three Months Ended March 31, 2022 and 2021

Three Months Ended

September 30, $ Change % Change

(Unaudited, $ in thousands)

Revenue $ 66 $ 151 $ (85) (56 %)

Operating expenses:

Research and development (including amounts

with related parties) 49,277 35,772 13,505 38 %

Selling, general and administrative (including amounts

with related parties) 29,625 19,596 10,029 51 %

Impairment of intangible assets — 10,660 (10,660) (100 %)

Total operating expenses 78,902 66,028 12,874 19 %

Loss from operations (78,836) (65,877) (12,959) 20 %

Other expense, net:

Interest and investment (expense) income, net (5,941) 149 (6,090) (4087 %)

Interest expense (including amounts with related parties) (3,614) (2,226) (1,388) 62 %

Other (expense) income, net (including amounts

with related parties) (38) 84 (122) (145 %)

Total other expense, net (9,593) (1,993) (7,600) 381 %

Loss before income taxes and noncontrolling interests (88,429) (67,870) (20,559) 30 %

Income tax expense — 1,700 (1,700) (100 %)

Net loss $ (88,429) $ (66,170) $ (22,259) 34 %

Research and Development Expense

Research and development expense increased $13.5 million during the three months ended September 30, 2021, as compared to the three months ended September 30, 2020.

The increase in research and development expense was primarily driven by a $9.7 million increase in compensation expense, including a $4.9 million increase in personnel costs due to higher headcount to support our continued research and development efforts and a $4.8 million increase in stock compensation expense as a result of awards granted to new hires, a $2.5 million increase in license and research agreement costs, primarily driven by new license agreements entered into in the third quarter of 2021, a $1.9 million increase in facilities expense, primarily related to the expansion of our manufacturing facility in El Segundo, California during 2021, and a $1.5 million increase in consulting costs.

These increases were partially offset by a $1.9 million reduction in laboratory supply expenses related to our COVID-19 programs and a $0.2 million decrease in other research and development costs.

We expect our research and development expense to increase significantly for the foreseeable future as we advance our product candidates through clinical development and conduct our ongoing and planned clinical trials.

Selling, General and Administrative Expense

Selling, general and administrative expense increased $10.0 million during the three months ended September 30, 2021, as compared to the three months ended September 30, 2020.

The increase in selling, general and administrative expense was primarily attributable to a $ 9.5 million increase in compensation expense, including an $8.3 million increase in stock compensation expense driven awards granted to new hires and a $1.2 million increase in personnel costs related to higher headcount to support our business growth, and a $0.5 million increase in shared services needs with our growth.

Impairment of Intangible Assets

During the three months ended September 30, 2020, the company recorded an impairment charge totaling $10.7 million to write down the carrying value of indefinite-lived in-process research and development intangible assets associated with the acquisition of Receptome, LLC to zero in connection with the decision to discontinue certain programs based on results gathered from preclinical data.

Other Expense, Net

Other expense, net increased $7.6 million during the three months ended September 30, 2021, as compared to the three months ended September 30, 2020.

The increase in other expense, net was mainly due to a $6.1 million increase in net unrealized losses related to our marketable equity securities, a $1.4 million increase in interest expense driven by higher related-party borrowings and a $0.1 million reduction in other income.

Comparison of the nine months ended September 30, 2021 and 2020

Nine Months Ended

September 30, $ Change % Change

March 31, $ Change % Change

(Unaudited, $ in thousands)

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with related parties) 40,608 45,275 (4,667) (10 %)

Impairment of intangible assets — 10,660 (10,660) (100 %)

Total operating expenses 95,986 86,403 9,583 11 %

Loss from operations (95,972) (86,264) (9,708) 11 %

Other expense, net:

Other (expense) income, net:

Interest and investment income, net 1,666 8,944 (7,278) (81 %)

Interest expense (including amounts with related parties) (8,491) (3,168) (5,323) 168 %

Other income, net (including amounts

Loss on equity method investment (197) — (197) n/a

Other (expense) income, net (including amounts

with related parties) (4) 13 (17) (131 %)

Total other expense, net (7,281) (3,756) (3,525) 94 %

Total other (expense) income, net (7,026) 5,789 (12,815) (221 %)

Loss before income taxes and noncontrolling interests (102,998) (80,475) (22,523) 28 %

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Net loss $ (102,998) $ (80,481) $ (22,517) 28 %

Revenue decreased $0.1 million for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021.

The decrease was primarily driven by warranty revenue in 2021.

Research and Development Expense

Research and development expense increased $48.1 million during the nine months ended September 30, 2021, as compared to the nine months ended September 30, 2020.

The increase in research and development expense was primarily driven by a $25.0 million increase in compensation expense, including a $16.2 million increase in stock compensation expense due to new grants issued to new hires and executives and an $8.8 million increase in personnel costs due to higher headcount in support of our continued research and development efforts, a $4.6 million increase in license and research agreement costs, a $4.5 million increase in clinical trial expenses and regulatory costs related to our Anktiva™ and COVID ‑ 19 programs, including a $1.9 million expense associated with the write down of a prepaid asset with the Clinic, a $4.5 million increase in quality control and research and development-related technology expense, a $4.3 million increase in facilities expense, primarily related to the expansion of our manufacturing facility in El Segundo, California during 2021 and increased maintenance costs at our various facilities, a $2.8 million increase in consulting costs, a $1.5 million increase in shared services to support our growth, and a $0.9 million increase in laboratory supply expenses related to our COVID-19 programs ramp up and NK-92 and M-ceNK cell therapy research.

Research and development expense increased $14.3 million during the three months ended March 31, 2022, as compared to the three months ended March 31, 2021.

The increase in research and development expense was primarily driven by a $6.0 million increase in compensation expense due to higher headcount to support our continued research and development efforts, a $3.9 million increase in facilities and equipment expense, primarily related to the expansion of our manufacturing facility in El Segundo, California and the Dunkirk Facility leasehold acquisition, a $2.0 million increase in regulatory and consulting costs, a $2.0 million increase in research agreement and contract manufacturing costs, and a $0.4 million increase in shared services costs.

Selling, General and Administrative Expense

Selling, general and administrative expense increased $59.9 million during the nine months ended September 30, 2021, as compared to the nine months ended September 30, 2020.

The increase in selling, general and administrative expense was primarily attributable to a $31.9 million increase in compensation expense, including a $29.3 million increase in stock compensation expense driven by awards granted to new hires and executives and option modifications resulting in incremental stock-based compensation expense in 2021 and a $2.6 million increase in salaries and bonuses related to higher headcount needed to support our business activities, a $24.9 million increase in professional services fees related to merger costs, SOX compliance, combined company audit, recruitment and business growth strategy, various legal matters, and new system implementations, and a $3.3 million increase in insurance costs, primarily due to higher directors’ and officers’ insurance renewal rates and increased insurance coverage.

These increases were partially offset by a $0.2 million decrease in other general and administrative expenses.

Impairment of Intangible Assets

During the nine months ended September 30, 2020, the company recorded an impairment charge totaling $10.7 million to write down the carrying value of indefinite-lived in-process research and development intangible assets associated with the acquisition of Receptome, LLC to zero in connection with the decision to discontinue certain programs based on results gathered from preclinical data.

Selling, general and administrative expense decreased $4.7 million during the three months ended March 31, 2022, as compared to the three months ended March 31, 2021.

The decrease in selling, general and administrative expense was primarily attributable to a $12.6 million decrease in consulting and professional fees mainly due to Merger costs incurred during 2021, a $5.4 million decrease in stock compensation expense mainly driven by option modifications and certain RSU awards granted during 2021, a $1.6 million reduction in shared services costs and a $1.0 million reduction in insurance and other operating costs.

These decreases were partially offset by a $10.4 million increase in accruals for a legal settlement, $4.7 million in personnel related costs due to higher headcount and increase international travel, and $0.8 million in higher equipment and license expense.

Other Expense, Net

Other expense, net increased $3.5 million during the nine months ended September 30, 2021, as compared to the nine months ended September 30, 2020.

The increase was due to a $4.1 million increase in interest expense driven primarily by higher related-party borrowings and a $1.0 million increase in other expense, which were partially offset by a $1.6 million increase in interest and investment income, driven primarily by a $1.9 million increase in net unrealized gains related to our marketable equity securities, a $0.5 million decrease in interest income, and a $0.2 million increase in realized gains from the sale of equity investments.

Liquidity and Capital Resources

Other expense, net increased $12.8 million during the three months ended March 31, 2022, as compared to the three months ended March 31, 2021.

The increase in other expense, net was mainly due to a $7.3 million reduction in net unrealized gains related to our marketable equity securities, a $5.3 million increase in interest expense driven by higher related-party borrowings and a $0.2 million loss on equity method investment.

Financial Condition, Liquidity and Capital Resources

Sources of Liquidity

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The general condition of the financial markets and the economy may increase those risks and may affect the value and liquidity of investments and restrict our ability to access the capital markets.

As of September 30, 2021, we had cash and cash equivalents, and marketable securities of $81.2 million compared to $97.0 million as of December 31, 2020.

On April 30, 2021, we entered into an Open Market Sale Agreement (the “Sale Agreement”) with respect to an at-the-market (the “ATM”) offering program under which we may offer and sell, from time to time at our sole discretion, shares of our common stock, having an aggregate offering price of up to $500.0 million through our sales agent.

For the nine months ended September 30, 2021, we received net proceeds totaling $136.9 million from the issuance of 10,216,978 shares under the ATM, which we expect to use for general corporate purposes, including to progress our clinical development programs, fund other research and development activities, make capital expenditures and fund working capital.

We may also use a portion of the net proceeds to license intellectual property or to make acquisitions or investments.

As of September 30, 2021, we had $359.0 million available for future stock issuances under the ATM.

As of March 31, 2022, we had cash and cash equivalents, and marketable securities of $193.2 million compared to $317.9 million as of December 31, 2021.

On April 30, 2021, we entered into a Sale Agreement with respect to an ATM offering program under which we may offer and sell, from time to time at our sole discretion, shares of our common stock, having an aggregate offering price of up to $500.0 million through our sales agent.

We issued no shares under the ATM during the three months ended March 31, 2022.

Although we made a decision to pause our ATM offering in the fourth quarter of 2021 after our $300.0 million promissory note financing with Nant Capital and do not have an active issuance notice with our sales agent, we expect to re-initiate activity at any time based on market dynamics and/or capital requirements.

As of March 31, 2022, we had $330.8 million available for future stock issuances under the ATM.

In order to complete the development of our current product candidates, and implement our business plan, we will require substantial additional funding.

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In addition to the cash used to fund our operating activities discussed in “ —Future Funding Requirements ” below, we will require cash to settle the following obligations:

As of September 30, 2021, we had related-party notes payable together with accrued interest thereon of $303.2 million compared to $254.4 million as of December 31, 2020.

During the nine months ended September 30, 2021, we received a $40.0 million advance pursuant to a related-party promissory note.

Such notes bear interest at 3.0% to 6.0% per year and may be prepaid by us without penalty.

The notes allow for additional advances as we may request with the consent of the applicable lender.

With the exception of interest on the recent $40.0 million advance, all outstanding principal and accrued and unpaid interest on these notes are due and payable on September 30, 2025.

In connection with our acquisition of Altor, we issued CVRs under which we have agreed to pay the prior stockholders of Altor approximately $304.0 million upon successful approval of the BLA, or foreign equivalent, for Anktiva™ by December 31, 2022 and approximately $304.0 million upon the first calendar year prior to December 31, 2026 in which worldwide net sales of Anktiva™ exceed $1.0 billion (with payments payable in cash or shares of our common stock or a combination thereof).

• As of March 31, 2022, our indebtedness totals $609.0 million (consisting of related-party promissory notes and accrued and unpaid interest, less unamortized debt issuance costs), held by entities affiliated with Dr.

Of this amount, $300.0 million is due and payable on December 17, 2022.

There can be no assurance that we can refinance this promissory note or what terms will be available in the market at the time of refinancing.

These risks could materially adversely affect our financial condition, cash flows and results of operations.

The remaining $309.4 million is due and payable on September 30, 2025, including any accrued and unpaid interest.

We may prepay the outstanding amount of any advance under such notes, together with accrued and unpaid interest, at any time, in whole or in part, without premium or penalty.

• In connection with our acquisition of Altor, we issued CVRs under which we have agreed to pay the prior stockholders of Altor approximately $304.0 million upon successful approval of the BLA, or foreign equivalent, for N-803 by December 31, 2022 and approximately $304.0 million upon the first calendar year prior to December 31, 2026 in which worldwide net sales of N-803 exceed $1.0 billion (with payments payable in cash or shares of our common stock or a combination thereof).

Soon-Shiong and his related party hold approximately $279.5 million in the aggregate of CVRs, and they have both irrevocably agreed to receive shares of common stock in satisfaction of their CVRs.

We may be required to pay the other prior Altor stockholders up to $164.2 million in settlement of the CVRs relating to the regulatory milestone and up to $164.2 million of the CVRs relating to the sales milestone should they choose to have the CVRs paid in cash instead of common stock.

We may need to seek additional sources of capital to satisfy the CVR obligations if they are achieved.

The following table sets forth our primary sources and uses of cash for periods indicated:

Nine Months Ended

September 30,

(Unaudited, in thousands)

• In connection with our acquisition of VivaBioCell, we are obligated to pay the former owners approximately $2.2 million of contingent consideration upon the achievement of a regulatory milestone relating to the GMP-in-a-Box technology.

Discussion of Condensed Consolidated Cash Flows

The following discussion of ImmunityBio’s cash flows is based on the condensed consolidated statements of cash flows in Item 1.

“Financial Statements” and is not meant to be an all‑inclusive discussion of the changes in its cash flows for the periods presented below.

The following table sets forth our primary sources and uses of cash for periods indicated (in thousands):

Three Months Ended

Cash (used in) provided by:

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Operating Activities

For the nine months ended September 30, 2021, net cash used in operating activities of $202.8 million consisted of a net loss of $258.3 million and $12.3 million of cash used in net working capital changes, partially offset by $67.8 million in adjustments for non-cash items.

The changes in net working capital consisted primarily of decreases of $4.8 million in other assets, $4.7 million with related parties, $3.6 million in operating lease liabilities and $0.2 million in accounts payable, partially offset by increases of $0.6 million in accrued expenses and other liabilities and $0.4 million in prepaid and other current assets.

Adjustments for non-cash items primarily consisted of $47.0 million in stock compensation expense, $10.6 million in depreciation and amortization expense, $9.1 million in non-cash interest related primarily to related-party promissory notes, $3.5 million in non-cash lease expense related to operating lease right-of-use assets, and $0.3 million in amortization of net premiums and discounts on marketable debt securities, reduced by $2.4 million in unrealized gains on equity securities driven primarily by an increase in the value of our investments, $0.2 million in realized gains on sales of equity securities, and a $0.1 million change in the fair value of contingent consideration.

For the nine months ended September 30, 2020, net cash used in operating activities of $114.1 million consisted of a net loss of $155.6 million, partially offset by $28.2 million in adjustments for non-cash items and $13.3 million of cash provided by net working capital changes.

Adjustments for non-cash items primarily consisted of an impairment of intangible assets totaling $10.7 million, $10.5 million in depreciation and amortization, $5.7 million in non-cash interest items, $3.4 million in non-cash lease expense related to operating lease right-of-use assets, $1.5 million in stock compensation expense and $0.4 million in amortization of net premiums and discounts on marketable debt securities, partially offset by a $2.7 million change in deferred tax liability, an $0.8 million change in the fair value of contingent consideration and a $0.5 million unrealized gain on equity securities.

The changes in net working capital consisted primarily of increases related to $11.2 million in accrued expenses and other liabilities, $7.3 million in accounts payable and $4.7 million with related parties, partially offset by decreases related to $6.8 million in prepaid expenses and other current assets and $3.1 million in operating lease liabilities.

For the three months ended March 31, 2022, net cash used in operating activities of $74.9 million consisted of a net loss of $103.0 million, partially offset by $18.5 million in adjustments for non-cash items and $9.6 million of cash provided by net working capital changes.

Adjustments for non-cash items primarily consisted of $10.0 million in stock-based compensation expense, $4.1 million in depreciation and amortization expense, $3.4 million in non-cash interest related primarily to related-party promissory notes, $1.3 million in non-cash lease expense related to operating lease right-of-use assets, $0.9 million in other non-cash items, and a $0.2 million loss on equity method investment, reduced by $1.4 million in unrealized gains on equity securities driven by an increase in the value of our investments.

The changes in net working capital consisted primarily of increases of $10.9 million in accrued expenses and other liabilities and $0.8 million in accounts payable and a decrease of $0.1 million in other assets, partially offset by decreases of $1.6 million with related parties and $0.4 million in operating lease liabilities, and an increase of $0.2 million in prepaid and other current assets.

For the three months ended March 31, 2021, net cash used in operating activities of $60.5 million consisted of a net loss of $80.5 million, partially offset by $14.5 million in adjustments for non-cash items and $5.5 million of cash provided by net working capital changes.

Adjustments for non-cash items primarily consisted of $15.3 million in stock-based compensation expense, $3.4 million in non-cash interest primarily related to related-party loans, $3.0 million in depreciation and amortization, and $1.6 million in non-cash lease expense related to operating lease right-of-use assets, reduced by $8.8 million in unrealized gains on marketable equity securities driven by an increase in the value of our investments.

The change in net working capital consisted primarily of increases in accounts payable of $6.5 million and amounts with related parties of $2.6 million and decreases in other assets of $0.7 million.

The increases in net working capital were partially offset by decreases in accrued expenses and other liabilities of $1.9 million, and operating lease liabilities of $1.5 million, and increases in prepaid expenses and other current assets of $0.9 million, including changes related to insurance claim receivables and prepaid manufacturing services.

We have historically experienced negative cash flows from operating activities, with such negative cash flows likely to continue for the foreseeable future.

Investing Activities

For the nine months ended September 30, 2021, net cash provided by investing activities was $52.9 million, which included cash inflows of $58.3 million from maturities and sales of marketable debt and equity securities and $20.5 million in net proceeds from sales of property, plant and equipment, mainly due to the sale of 557 Doug St, LLC, partially offset by $23.2 million of purchases of property, plant and equipment and $2.7 million of purchases of marketable debt securities.

For the three months ended March 31, 2022, net cash used in investing activities was $69.3 million, which included $34.1 million of purchases of marketable debt securities, $27.3 million of purchases of property, plant and equipment (including construction in process and depreciable property acquired in the Dunkirk acquisition), $21.2 million for purchase of intangible assets (related to the Dunkirk acquisition), and a $1.0 million investment in the joint venture, partially offset by cash inflows of $14.3 million from maturities and sales of marketable debt and equity securities.

Our investments in property, plant and equipment are primarily related to acquisitions of equipment that will be used for the manufacturing of our product candidates and expenditures related to the build out of our manufacturing facilities.

For the nine months ended September 30, 2020, net cash used in investing activities was $27.4 million, which included $85.7 million of purchases of marketable debt securities and $2.4 million of purchases of property, plant and equipment, partially offset by cash inflows of $60.7 million from maturities and sales of marketable debt securities.

For the three months ended March 31, 2021, net cash provided by investing activities was $31.8 million, which included cash inflows of $39.0 million from maturities and sales of marketable debt securities, partially offset by $7.1 million of purchases of property, plant and equipment and $0.1 million in purchases of marketable debt securities.

Our investments in property, plant and equipment were related primarily to acquisitions of equipment that will be used for the manufacturing of our product candidates and expenditures related to the build out of our manufacturing facilities.

We expect to accelerate our capital spending as we scale our GMP manufacturing capabilities, which will require significant capital for the foreseeable future.

Financing Activities

For the nine months ended September 30, 2021, net cash provided by financing activities was $179.5 million, which consisted of $137.0 million in net proceeds from the ATM offering, $40.0 million in proceeds from issuances of related-party promissory notes, $5.1 million in proceeds from exercises of stock options and a $1.4 million capital contribution related to the sale of 557 Doug St, LLC to an entity under common control.

Net cash used in financing activities consisted of $3.6 million related to net share settlement of vested RSUs for payment of payroll tax withholding and a $0.4 million payment for contingent consideration.

For the nine months ended September 30, 2020, net cash provided by financing activities was $150.4 million, which consisted primarily of $86.3 million in net proceeds from an equity offering, $63.7 million in proceeds from issuances of related-party promissory notes and $0.9 million in proceeds from exercises of stock options, partially offset by $0.5 million related to net share settlement of vested RSUs for payment of payroll tax withholding.

For the three months ended March 31, 2022, net cash used in financing activities was $0.3 million, which consisted of $0.4 million related to net share settlement of vested RSUs for payment of payroll tax withholding, partially offset by $0.1 million in proceeds from exercises of stock options.

For the three months ended March 31, 2021, net cash provided by financing activities was $38.5 million, which consisted of $40.0 million in net proceeds from issuances of related-party promissory notes and $1.1 million in proceeds from exercises of stock options, partially offset by $2.6 million related to net share settlement of vested RSUs for payment of payroll tax withholding.

Future Funding Requirements

To date, we have generated minimal revenue, and we have no clinical products approved for commercial sale and have not generated any revenue from therapeutic and vaccine product candidates that are under development.

From inception through the date of this Quarterly Report on Form 10-Q, we have generated minimal revenue, and we have no clinical products approved for commercial sale and have not generated any revenue from therapeutic and vaccine product candidates that are under development.

We do not expect to generate significant revenue unless and until we obtain regulatory approval of and commercialize any of our product candidates, and we do not know when, or if, this will occur.

In addition, we expect our expenses to significantly increase in connection with our ongoing development activities, particularly as we continue the research, development and clinical trials of, and seek regulatory approval for, our product candidates.

In addition, we expect our operating expenses to significantly increase in connection with our ongoing development activities, particularly as we continue the research, development and clinical trials of, and seek regulatory approval for, our product candidates.

We have also incurred and expect that we will continue to incur in the future additional costs associated with operating as a public company as well as costs related to future fundraising efforts.

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We anticipate that we will need substantial additional funding in connection with our continuing operations.

We expect that our expenses will increase substantially if and as we:

We expect that our operating expenses will increase substantially if and as we:

• continue research and development, including preclinical and clinical development of our existing product candidates;

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We may also seek to sell additional equity, through one or more follow-on public offerings, or in separate financings, or obtain a credit facility.

However, we may not be able to secure such financing in a timely manner or on favorable terms.

However, we may not be able to secure such external financing in a timely manner or on favorable terms.

Without additional funds, we may choose to delay or reduce our operating or investment expenditures.

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• revenue from product candidates that we may commercialize, if any, including the selling prices for such potential products and the availability of adequate third-party coverage and reimbursement for patients;

• cost of building, staffing and validating our own manufacturing facilities in the United States, including having a product candidate successfully manufactured consistent with FDA and European Medicines Agency regulations;

• cost of building, staffing and validating our own manufacturing facilities in the U.S., including having a product candidate successfully manufactured consistent with FDA and European Medicines Agency (EMA) regulations;

• terms, timing and costs of our current and any potential future collaborations, business or product acquisitions, CVRs, milestones, royalties, licensing or other arrangements that we have established or may establish;

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However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms, or at all, including but not limited to the offering, issuance and sale by us of up to a maximum aggregate amount of $500.0 million of our common stock that may be issued and sold under the ATM.

See Note 9 , Stockholders’ Deficit , of the “Notes to Unaudited Condensed Consolidated Financial Statements” that appear in Item 1.

As of March 31, 2022, we had $330.8 million available for future stock issuances under the ATM.

See Note 10 , Stockholders’ Deficit , of the “Notes to Unaudited Condensed Consolidated Financial Statements” that appears in Item 1.

“Financial Statements” of this Quarterly Report on Form 10-Q.

To the extent that we raise additional capital through the sale of equity or convertible debt securities including through the ATM or other offerings, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder.

To the extent that we raise additional capital through the sale of equity or equity-linked securities, including convertible debt or through the ATM or other offerings, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder.

The incurrence of additional indebtedness would result in increased fixed payment obligations and could involve certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business.

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As a result, we may seek to access the public or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time.

Contractual Obligations, Commitments and Contingencies

Contractual Obligations and Commitments

See Note 7 , Commitments and Contingencies – Lease Arrangements , and Note 8 , Related-Party Agreements , of the “Notes to Unaudited Condensed Consolidated Financial Statements” that appear in Item 1.

Contractual Obligations

We have material cash requirements to pay related party affiliates and third parties under various contractual obligations discussed below:

• We are obligated to make payments to several related party affiliates under written agreements and other informal arrangements.

We are also obligated to pay interest and to repay principal under our related-party promissory notes.

For information regarding our financing obligations, see Note 9 , Related-Party Agreements—Related-Party Promissory Notes, of the “Notes to Unaudited Condensed Consolidated Financial Statements” that appears in Item 1.

“Financial Statements” of this Quarterly Report on Form 10-Q.

Contingencies

From time to time, we may be involved in various claims and legal proceedings relating to claims arising out of our operations.

We are not currently a party to any legal proceedings that, in the opinion of our management, are likely to have a

material adverse effect on our business.

We are aware of complaints that have been filed regarding the Merger, but we have not been served with any of such complaints.

If we are served with any such complaints, we will assess at that time any contingencies for which we may need to reserve.

Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

Off-Balance Sheet Arrangements

During the periods presented, we did not have, nor do we currently have, any off-balance sheet arrangements as defined under SEC rules.

Critical Accounting Policies and Significant Judgments

In the Notes to Combined Consolidated Financial Statements included in the Combined Consolidated Financial Statements of ImmunityBio, Inc.

as of December 31, 2020 and December 31, 2019 (including NantCell, Inc.) filed as Exhibit 99.2 and the Management’s Discussion and Analysis of Financial Condition and Results of Operations of ImmunityBio, Inc.

filed as Exhibit 99.3 to our Current Report on Form 8-K/A filed with the SEC on April 22, 2021, we have disclosed those accounting policies that we consider to be significant in determining our results of operations and financial condition.

There have been no material changes to those policies that we consider to be significant since the filing of our Current Report on Form 8-K/A on April 22, 2021.

The accounting principles used in preparing our condensed consolidated financial statements conform in all material respects with accounting principles generally accepted in the United States of America (“U.S.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S.

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

• We are obligated to make payments under our operating leases, which primarily consist of facility leases.

For information regarding our lease obligations, see Note 8 , Lease Arrangements, and Note 9 , Related-Party Agreements, of the “Notes to Unaudited Condensed Consolidated Financial Statements” that appear in Item 1.

“Financial Statements” of this Quarterly Report on Form 10-Q.

• In connection with the acquisitions of Altor and VivaBioCell, we are obligated to pay contingent consideration upon the achievement of certain milestones.

For information regarding our contingent consideration obligations, see Note 7 , Commitments and Contingencies—Contingent Considerations Related to Business Combinations, of the “Notes to Unaudited Condensed Consolidated Financial Statements” that appears in Item 1.

“Financial Statements” of this Quarterly Report on Form 10-Q.

• We have contractual obligations to make payments to related-party affiliates and third parties under our unconditional purchase arrangements.

For information on these unconditional purchase obligations, see Note 7 , Commitments and Contingencies, of the “Notes to Unaudited Condensed Consolidated Financial Statements” that appears in Item 1.

“Financial Statements” of this Quarterly Report on Form 10-Q.

• We have certain contractual commitments that are expected to be paid within one year, depending on the progress of build outs, completion of services, and the realization of milestones associated with third-party agreements.

This amount totals $102.7 million and is primarily related to capital expenditures, open purchase orders as of March 31, 2022 for the acquisition of goods and services in the ordinary course of business, and near term up-front milestone payments to third parties.

• In addition, we have contractual commitments that are expected to be paid in fiscal year 2023 and beyond based on the achievement of various development, regulatory and commercial milestones for agreements with third parties.

These payments may not be realized or may be modified and are contingent upon the occurrence of various future events, substantially all of which have a high degree of uncertainty of occurring.

As of March 31, 2022, the maximum amount that may be payable related to these commitments is $574.6 million.

• In connection with our leasehold interest in the Dunkirk Facility, we committed to spend an aggregate of $1.52 billion on operational expenses during the initial 10-year term, and an additional $1.50 billion on operational expenses if we elect to renew the lease for the additional 10-year term.

These amounts are not included in the discussion above.

See Note 6 , Collaboration and License Agreements and Acquisition , of the “Notes to Unaudited Condensed Consolidated Financial Statements” that appears in Item 1.

“Financial Statements” of this Quarterly Report on Form 10-Q for additional information.

Critical Accounting Policies and Estimates

In Part II, Item 7.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K filed with the SEC on March 1, 2022, we disclose those accounting policies that we consider to be significant in determining our results of operations and financial condition.

There have been no material changes to those policies that we consider to be significant as of the date of this Quarterly Report on Form 10-Q.

Our discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with U.S.

The preparation of our condensed consolidated financial statements requires us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses for the reporting period.

On an ongoing basis, we evaluate our estimates, including those related to the valuation of equity-based awards, deferred income taxes and related valuation allowances, preclinical and clinical trial accruals, impairment assessments, contingent value right measurement and assessments, the measurement of right-of-use assets and lease liabilities, useful lives of long-lived assets, loss contingencies, fair value measurements, and the assessment of our ability to fund our operations for at least the next 12 months from the date of issuance of these financial statements.

We base our estimates on historical experience and on various other market-specific and relevant assumptions that we believe to be reasonable under the circumstances.

Estimates are assessed each period and updated to reflect current information, such as the economic considerations related to the impact that the ongoing coronavirus pandemic could have on our significant accounting estimates.

Actual results could differ from those estimates.

Stock-Based Compensation

We account for stock-based compensation under the provisions of FASB ASC Topic 718, Compensation—Stock Compensation (“ASC 718”).

We measure the fair value of an equity-classified award at the grant date and recognize the stock-based compensation expense over the period of vesting on the straight-line basis for our outstanding share awards that do not contain a performance condition.

For awards subject to performance-based vesting conditions, we assess the probability of the individual milestones under the award being achieved and stock-based compensation expense is recognized over the service period using the graded vesting method once management believes the performance criteria is probable of being met.

For awards with service or performance conditions, we recognize the effect of forfeitures in compensation cost in the period that the award was forfeited.

Recent Accounting Pronouncements

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“Financial Statements” of this Quarterly Report on Form 10-Q for a discussion of recent accounting pronouncements or changes in accounting pronouncements that are of significance, or potential significance, to us.

Subsequent Events

Second Amendment to NantWorks Facility License Agreement

On May 6, 2022, we amended our facility license agreement with NantWorks, a related party, to expand the licensed premises by 36,830 rentable square feet to an aggregate total of 46,330 rentable square feet.

Effective May 1, 2022, the license fee is approximately $273,700 per month, which is subject to a 3% increase commencing on January 1 of each year.

The space continues to be rented on a month-to-month basis, which can be terminated by either party with at least 30 days’ prior written notice to the other party.

23 Alaska, LLC Lease Agreement

Under the terms of the agreement, the lease term begins on May 1, 2022 and expires on April 30, 2027.

The base rent is approximately $139,400 per month with an annual increase of 3% on May 1 of each year beginning in 2023 during the initial term.

We will receive a rent abatement for the second through sixth month of the lease.

We are also required to pay $7,600 per month for parking during the initial term and extension term, if exercised.

The company is responsible for the payment of real property taxes, repairs and maintenance, improvements, insurance, and operating expenses during the term of the lease.

The company is responsible for the costs associated with the build-out of the premises and will received a one-time tenant improvement allowance of $945,300 from the landlord.

The company has an option to extend the lease term for one additional consecutive five-year period.

At the beginning of the option term, the initial monthly base rent will be adjusted to market rent (as defined in the lease agreement) with an annual increase of 3% during the option term.

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What changed 10-Q

Item 2. Management’s Discussion and Analysis