What changed in this filing

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Item 1. Financial Statements

2022-08-08 compared with 2022-05-10 · 256 added, 219 removed, 778 unchanged (38% of the section changed)

36 unchanged sentences

398,069,766 and

397,830,044 shares issued and outstanding as of March 31, 2022 and

397,830,044 shares issued and outstanding as of June 30, 2022 and

December 31, 2021, respectively;

excluding treasury stock, 163,800 shares

outstanding as of March 31, 2022 and December 31, 2021, respectively

outstanding as of June 30, 2022 and December 31, 2021, respectively

Additional paid-in capital 1,739,590 1,719,704

11 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Revenue $ 35 $ 339 $ 49 $ 478

9 unchanged sentences

Other (expense) income, net:

Interest and investment income, net 1,666 8,944

Interest and investment (loss) income, net ( 1,800 ) ( 177 ) ( 134 ) 8,767

Interest expense (including amounts with related parties) ( 9,698 ) ( 3,577 ) ( 18,189 ) ( 6,745 )

Loss on equity method investment ( 3,900 ) — ( 4,097 ) —

Other (expense) income, net (including amounts

Other income, net (including amounts

with related parties) 185 277 181 290

5 unchanged sentences

Net loss attributable to ImmunityBio common stockholders $ ( 94,588 ) $ ( 88,288 ) $ ( 197,414 ) $ ( 167,902 )

Net loss per ImmunityBio common share – basic $ ( 0.26 ) $ ( 0.21 )

Net loss per ImmunityBio common share – diluted $ ( 0.26 ) $ ( 0.21 )

Net loss per ImmunityBio common share – basic and diluted $ ( 0.24 ) $ ( 0.23 ) $ ( 0.50 ) $ ( 0.44 )

Weighted-average number of common shares used in computing

7 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Net loss $ ( 94,835 ) $ ( 89,385 ) $ ( 197,833 ) $ ( 169,866 )

Other comprehensive loss, net of income taxes:

Net unrealized losses on available-for-sale securities ( 310 ) ( 1 )

Reclassification of net realized losses on

Other comprehensive income (loss), net of income taxes:

Net unrealized gains (losses) on available-for-sale securities 149 18 ( 161 ) 17

Reclassification of net realized gains (losses) on

available-for-sale securities included in net loss

119 ( 3 ) 119 —

Foreign currency translation adjustments ( 11 ) 60 ( 72 ) ( 102 )

Total other comprehensive loss ( 371 ) ( 160 )

Total other comprehensive income (loss) 257 75 ( 114 ) ( 85 )

Comprehensive loss ( 94,578 ) ( 89,310 ) ( 197,947 ) ( 169,951 )

8 unchanged sentences

(in thousands, except share amounts)

Three Months Ended March 31, 2022 Common Stock Additional

Three Months Ended June 30, 2022

Common Stock Additional

Deficit Accumulated

Comprehensive

Income (Loss)

Stockholders’

3 unchanged sentences

Shares Amount

Balance as of December 31, 2021

Balance as of March 31, 2022

397,956,762 $ 40 $ 1,729,430 $ ( 2,064,747 ) $ ( 367 ) $ ( 335,644 ) $ ( 1,912 ) $ ( 337,556 )

6 unchanged sentences

( 3,604 ) — ( 15 ) — — ( 15 ) — ( 15 )

Other comprehensive income, net of tax

— — — — 257 257 — 257

Net loss — — — ( 94,588 ) — ( 94,588 ) ( 247 ) ( 94,835 )

Balance as of June 30, 2022

398,069,766 $ 40 $ 1,739,590 $ ( 2,159,335 ) $ ( 110 ) $ ( 419,815 ) $ ( 2,159 ) $ ( 421,974 )

Six Months Ended June 30, 2022

Common Stock Additional

Deficit Accumulated

Comprehensive

Income (Loss)

Stockholders’

Noncontrolling

Interests Total

Stockholders’

Shares Amount

Balance as of December 31, 2021

397,830,044 $ 40 $ 1,719,704 $ ( 1,961,921 ) $ 4 $ ( 242,173 ) $ ( 1,740 ) $ ( 243,913 )

Stock-based compensation expense

— — 20,199 — — 20,199 — 20,199

Exercise of stock options 14,767 — 74 — — 74 — 74

Vesting of RSUs 294,391 — — — — — — —

Net share settlement for RSUs vesting

( 69,436 ) — ( 387 ) — — ( 387 ) — ( 387 )

Other comprehensive loss, net of tax

1 unchanged sentence

Net loss — — — ( 197,414 ) — ( 197,414 ) ( 419 ) ( 197,833 )

Balance as of March 31, 2022

Balance as of June 30, 2022

398,069,766 $ 40 $ 1,739,590 $ ( 2,159,335 ) $ ( 110 ) $ ( 419,815 ) $ ( 2,159 ) $ ( 421,974 )

4 unchanged sentences

(in thousands, except share amounts)

Three Months Ended March 31, 2021 Common Stock Additional

Three Months Ended June 30, 2021

Common Stock Additional

Deficit Accumulated

Comprehensive

Income (Loss)

(Loss) Income

Stockholders’

3 unchanged sentences

Shares Amount

Balance as of March 31, 2021

383,067,321 $ 38 $ 1,508,958 $ ( 1,694,745 ) $ ( 38 ) $ ( 185,787 ) $ 451 $ ( 185,336 )

Issuance of common stock under “at-the-market”

offering, net of commissions and

offering costs of $ 3,077

6,420,441 1 94,886 — — 94,887 — 94,887

Stock-based compensation expense

— — 17,863 — — 17,863 — 17,863

Exercise of stock options 759,639 — 3,311 — — 3,311 — 3,311

Vesting of RSUs 100,359 — — — — — — —

Net share settlement for RSUs vesting

( 20 ) — — — — — — —

Other comprehensive income, net of tax

— — — — 75 75 — 75

Net loss — — — ( 88,288 ) — ( 88,288 ) ( 1,097 ) ( 89,385 )

Balance as of June 30, 2021

390,347,740 $ 39 $ 1,625,018 $ ( 1,783,033 ) $ 37 $ ( 157,939 ) $ ( 646 ) $ ( 158,585 )

Six Months Ended June 30, 2021

Common Stock Additional

Deficit Accumulated

Comprehensive

Stockholders’

Noncontrolling

Interests Total

Stockholders’

Shares Amount

Balance as of December 31, 2020

382,243,142 $ 38 $ 1,495,163 $ ( 1,615,131 ) $ 122 $ ( 119,808 ) $ 1,318 $ ( 118,490 )

Issuance of common stock under “at-the-market”

offering, net of commissions and

offering costs of $ 3,077

6,420,441 1 94,886 — — 94,887 — 94,887

Stock-based compensation expense

7 unchanged sentences

Net loss — — — ( 167,902 ) — ( 167,902 ) ( 1,964 ) ( 169,866 )

Balance as of March 31, 2021

Balance as of June 30, 2021

390,347,740 $ 39 $ 1,625,018 $ ( 1,783,033 ) $ 37 $ ( 157,939 ) $ ( 646 ) $ ( 158,585 )

4 unchanged sentences

(in thousands)

Three Months Ended

Six Months Ended

Operating activities:

2 unchanged sentences

Stock-based compensation expense 20,199 33,161

Unrealized gains on equity securities ( 1,419 ) ( 8,834 )

Depreciation and amortization 8,534 6,956

Non-cash interest items, net (including amounts with related parties) 6,922 6,248

Non-cash lease expense related to operating lease right-of-use assets 1,318 1,555

Loss on equity method investment 4,097 —

Non-cash lease expense related to operating lease right-of-use assets 2,805 2,269

Amortization of net premiums and discounts on marketable debt securities 1,308 248

Unrealized losses (gains) on equity securities 452 ( 8,391 )

Other 25 ( 291 )

12 unchanged sentences

Maturities of marketable debt securities, available for sale 113,434 44,159

Investment in joint venture – an equity method investment ( 1,000 ) —

Proceeds from sales of marketable debt and equity securities 33,657 13,569

Net cash (used in) provided by investing activities ( 69,313 ) 31,845

Investment in joint venture – an equity method investment ( 1,000 ) —

Net cash provided by investing activities 47,359 42,334

Financing activities:

Proceeds from equity offering, net of issuance costs paid — 95,026

Proceeds from issuance of related-party promissory notes,

12 unchanged sentences

(in thousands)

Three Months Ended

Six Months Ended

Reconciliation of cash, cash equivalents, and restricted cash, end of period:

7 unchanged sentences

Supplemental disclosure of non-cash activities:

Right-of-use assets obtained in exchange for operating lease liabilities $ 13,986 $ 12,361

Property and equipment purchases included in accounts payable,

accrued expenses and due to related parties

$ 1,061 $ 4,267

Right-of-use assets obtained in exchange for operating lease liabilities 911 1,388

Unrealized (losses) gains on marketable debt securities, net ( 42 ) 17

Unpaid offering costs included in accounts payable and accrued expenses — 140

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

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

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 (Anktiva ™ ), our novel antibody cytokine fusion protein, has received Breakthrough Therapy and Fast Track designations in combination with bacillus Calmette-Guérin ( BCG) from the United States (U.S.) Food and Drug Administration (FDA) for BCG -unresponsive non-muscle invasive bladder cancer (NMIBC) carcinoma in situ (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.

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, our novel antibody cytokine fusion protein, has received Breakthrough Therapy and Fast Track designations in combination with bacillus Calmette-Guérin ( BCG) from the United States (U.S.) Food and Drug Administration (FDA) for BCG -unresponsive non-muscle invasive bladder cancer (NMIBC) with carcinoma in situ (CIS) .

I n May 2022, we announced the submission of a Biologics License Application (BLA) to the FDA for our product candidate, N-803 in combination with BCG for the treatment of patients with BCG-unresponsive NMIBC with CIS with or without Ta or T1 disease.

In July 2022, we announced the FDA has accepted our BLA for review and set a Prescription Drug User Fee Act (PDUFA) target action date of May 23, 2023.

It is unclear when the FDA will approve our BLA, if at all.

Our platforms include 9 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.

14 unchanged sentences

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 (FASB) Accounting Standards Codification (ASC) Topic 805-50, Mergers , 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.

As a result, all of the assets and liabilities of NantCell were combined with ours at their historical carrying amounts on the closing date of the Merger.

We have recast our prior period financial statements to reflect the conveyance of NantCell’s common shares as if the Merger had occurred as of the earliest date of the financial statements presented.

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

The following table provides the impact of the change in reporting entity on our condensed consolidated statements of operations (in thousands):

Three Months Ended

March 31, 2021

NantCell NantKwest Intercompany

Eliminations ImmunityBio,

Revenue $ 183 $ — $ ( 44 ) $ 139

Operating expenses:

Research and development (including amounts

with related parties) 21,509 19,725 ( 106 ) 41,128

Selling, general and administrative (including amounts

with related parties) 24,382 20,903 ( 10 ) 45,275

Loss from operations ( 45,708 ) ( 40,628 ) 72 ( 86,264 )

Other (expense) income, net (including amounts

with related parties) ( 848 ) 6,637 — 5,789

Income tax expense — ( 6 ) — ( 6 )

Net loss $ ( 46,556 ) $ ( 33,997 ) $ 72 $ ( 80,481 )

Summary of Significant Accounting Policies

13 unchanged sentences

This assessment is based on our power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and our obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.

As of March 31, 2022, the company had an accumulated deficit of $ 2.1 billion.

We also had negative cash flows from operations of $ 74.9 million for the three months ended March 31, 2022.

As of June 30, 2022, the company had an accumulated deficit of $ 2.2 billion.

We also had negative cash flows from operations of $ 166.2 million for the six months ended June 30, 2022.

The company will likely need additional capital to further fund the development of, and to seek regulatory approvals for, our product candidates, and to begin to commercialize any approved products.

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As a result of continuing anticipated operating cash outflows, we believe that substantial doubt exists regarding our ability to continue as a going concern without additional funding or financial support.

However, we believe our existing cash, cash equivalents, and investments in marketable securities, together with capital to be raised through equity offerings (including but not limited to the offering, issuance and sale by us of our common stock that may be issued and sold under an “at-the-market” sales agreement with Jefferies LLC (the ATM), of which we had $ 330.8 million available for future issuance as of March 31, 2022), and our potential ability to borrow from affiliated entities, will be sufficient to fund our operations through at least the next 12 months following the issuance date of the condensed consolidated financial statements based primarily upon our Executive Chairman and Global Chief Scientific and Medical Officer’s intent and ability to support our operations with additional funds, including loans from affiliated entities, as required, which we believe alleviates such doubt.

However, we believe our existing cash, cash equivalents, and investments in marketable securities, together with capital to be raised through equity offerings (including but not limited to the offering, issuance and sale by us of our common stock that may be issued and sold under an “at-the-market” sales agreement with Jefferies LLC (the ATM), of which we had $ 330.8 million available for future issuance as of June 30, 2022), and our potential ability to borrow from affiliated entities, will be sufficient to fund our operations through at least the next 12 months following the issuance date of the condensed consolidated financial statements based primarily upon our Executive Chairman and Global Chief Scientific and Medical Officer’s intent and ability to support our operations with additional funds, including loans from affiliated entities, as required, which we believe alleviates such doubt.

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.

31 unchanged sentences

The following table details those securities that have been excluded from the computation of potentially dilutive securities:

As of March 31,

As of June 30,

Outstanding stock options 9,447,190 4,330,318

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The adoption did not have a material impact on the company’s condensed consolidated financial statements.

Other recent authoritative guidance issued by the FASB (including technical corrections to the ASC), the American Institute of Certified Public Accountants, and the SEC during the three months ended March 31, 2022 did not, or are not expected to, have a material effect on our condensed consolidated financial statements.

Other recent authoritative guidance issued by the FASB (including technical corrections to the ASC), the American Institute of Certified Public Accountants, and the SEC during the six months ended June 30, 2022 did not, or are not expected to, have a material effect on our condensed consolidated financial statements.

Financial Statement Details

3 unchanged sentences

Prepaid services $ 16,958 $ 6,966

Insurance claims receivable 5,005 —

Prepaid supplies 2,160 —

Prepaid software license fees 1,849 1,111

Prepaid insurance 1,630 2,266

Prepaid license fees 1,552 1,111

Other 2,999 5,555

11 unchanged sentences

Property, plant and equipment, net $ 119,445 $ 82,863

Depreciation and amortization expense related to property, plant and equipment totaled $ 3.8 million and $ 3.0 million for the three months ended March 31, 2022 and 2021, respectively.

Depreciation expense related to property, plant and equipment totaled $ 3.9 million and $ 4.0 million for the three months ended June 30, 2022 and 2021, respectively, and $ 7.7 million and $ 7.0 million for the six months ended June 30, 2022 and 2021, respectively.

Accrued Expenses and Other Liabilities

4 unchanged sentences

Accrued construction costs 8,931 8,145

Accrued professional and service fees 8,836 6,909

Accrued preclinical and clinical trial costs 5,888 5,842

Accrued laboratory equipment, supplies and related services 5,499 2,144

Accrued research and development costs 5,033 2,107

Accrued compensation 4,281 5,613

Accrued bonus 5,754 8,316

Accrued professional and service fees 5,744 6,909

Accrued compensation 5,635 5,613

Accrued research and development costs 2,521 2,107

Accrued laboratory equipment, supplies and related services 577 2,144

Other 1,645 5,193

Accrued expenses and other liabilities $ 52,351 $ 51,387

Interest and Investment Income, Net

Interest and investment income, net consists of the following (in thousands):

Interest and Investment (Loss) Income, Net

Interest and investment (loss) income, net consists of the following (in thousands):

Three Months Ended

Unrealized gains from equity securities $ 1,419 $ 8,833

June 30, Six Months Ended

2022 2021 2022 2021

(Unaudited) (Unaudited)

Unrealized (losses) gains from equity securities $ ( 1,871 ) $ ( 442 ) $ ( 452 ) $ 8,391

Interest income 644 112 1,940 451

Investment amortization expense, net ( 454 ) ( 23 ) ( 1,503 ) ( 248 )

Net realized losses on investments — ( 3 )

Interest and investment income, net $ 1,666 $ 8,944

Net realized (losses) gains on investments ( 119 ) 176 ( 119 ) 173

Interest and investment (loss) income , net $ ( 1,800 ) $ ( 177 ) $ ( 134 ) $ 8,767

Interest income includes interest from marketable securities, convertible notes receivable, other assets, and interest from bank deposits.

1 unchanged sentence

Investments in Marketable Debt Securities

As of March 31, 2022, the weighted-average remaining contractual life, amortized cost, gross unrealized gains, gross unrealized losses and fair value of marketable debt securities, which were considered as available-for-sale, by type of security were as follows (in thousands):

March 31, 2022

As of June 30, 2022, the weighted-average remaining contractual life, amortized cost, gross unrealized gains, gross unrealized losses and fair value of marketable debt securities, which were considered as available-for-sale, by type of security were as follows (in thousands):

June 30, 2022

Contractual Life

1 unchanged sentence

Corporate debt securities 0.1 $ 14,764 $ — $ ( 9 ) $ 14,755

Foreign bonds 0.1 114 — ( 1 ) 113

Mutual funds 34 9 ( 6 ) 37

15 unchanged sentences

Accumulated unrealized losses on marketable debt securities that have been in a continuous loss position for less than 12 months and more than 12 months were as follows (in thousands):

March 31, 2022

June 30, 2022

Less than 12 months More than 12 months

11 unchanged sentences

Total $ 86,273 $ ( 37 ) $ 147 $ ( 3 )

Realized gains and losses on sales of available-for-sale marketable debt securities were not material for the three months ended March 31, 2022 and 2021.

Realized gains and losses on sales of available-for-sale marketable debt securities were not material for the three and six months ended June 30, 2022 and 2021.

Marketable Equity Securities

We held investments in marketable equity securities with readily determinable fair values of $ 8.1 million and $ 6.7 million as of March 31, 2022 and December 31, 2021, respectively.

Unrealized gains recorded on these securities totaled $ 1.4 million and $ 8.8 million in interest and investment income, net , on the condensed consolidated statements of operations for the three months ended March 31, 2022 and 2021, respectively.

We held investments in marketable equity securities with readily determinable fair values of $ 6.2 million and $ 6.7 million as of June 30, 2022 and December 31, 2021, respectively.

Unrealized losses recorded on these securities totaled $ 1.9 million and $ 0.4 million for the three months ended June 30, 2022 and 2021, respectively, and unrealized losses and gains totaled a $ 0.5 million loss and an $ 8.4 million gain for the six months ended June 30, 2022 and 2021, respectively, in interest and investment income loss (income), net , on the condensed consolidated statements of operations.

Fair Value Measurements

14 unchanged sentences

Financial assets and liabilities measured at fair value on a recurring basis are summarized below (in thousands):

Fair Value Measurements at March 31, 2022

Fair Value Measurements at June 30, 2022

Total Level 1 Level 2 Level 3

2 unchanged sentences

Corporate debt securities 14,755 — 14,755 —

Foreign bonds 113 113 — —

Mutual funds 37 37 — —

2 unchanged sentences

Accrued litigation payable $ 10,656 (1) $ 10,656 $ — $ —

Contingent consideration 401 (2) 380 — 21

Total liabilities measured at fair value $ 12,908 $ 12,887 $ — $ 21

Fair Value Measurements at December 31, 2021

7 unchanged sentences

Total assets measured at fair value $ 317,938 $ 59,094 $ 258,844 $ —

Contingent consideration $ 409 (2) $ 388 $ — $ 21

_______________

(1) The accrued litigation payable was measured at fair value as the liability will be settled by the issuance of 2,229,296 shares of the company’s common stock.

The closing price of our common stock was used to calculate the fair value of the liability as of March 31, 2022, which will be remeasured each period until settlement.

(1) The accrued litigation payable as of June 30, 2022 was measured at the fair value of the company’s common stock to be issued pursuant to the terms of the court-approved settlement agreement related to the Altor BioScience, LLC litigation.

On July 9, 2022, the company issued 2,229,296 shares of its common stock with an aggregate market value of $ 10.7 million, based on the closing price of its common stock as of July 8, 2022.

See Note 7 , Commitments and Contingencies—Litigation , for further information.

(2) Contingent consideration is recorded at estimated fair value and revalued each reporting period until the related contingency is resolved.

The fair value measurement is based on inputs that are unobservable and significant to the overall fair value measurement (i.e., a Level 3 measurement within the fair value hierarchy) and are reviewed periodically by management.

See Note 7 , Commitments and Contingencies—Contingent Consideration Related to Business Combinations, for further information.

(2) Amounts shown as a Level 2 measurement as of December 31, 2021 include government-sponsored securities of $ 75.0 million, corporate debt securities of $ 54.2 million, and commercial paper of $ 0.5 million with original maturities of less than 90 days.

Changes in the carrying amount of contingent consideration were as follows (in thousands):

Three Months Ended

Fair value, beginning of period $ 409 $ 972

Net decrease in fair value ( 8 ) ( 128 )

Fair value, end of period $ 401 $ 844

Collaboration and License Agreements and Acquisition

6 unchanged sentences

Amyris agreed to contribute $ 1.0 million in cash and rights to its license agreement with the Access to Advanced Health Institute (AAHI) (formerly known as the Infectious Disease Research Institute, or IDRI) for an RNA platform for the field of COVID-19.

The value of the manufacturing access right and the license right was determined by the board of directors of the joint venture to be $ 9.0 million each, respectively.

Both parties agreed to enter into a separate manufacturing and supply agreement and a sublicense agreement within 150 days of the execution of the joint venture agreement.

Both parties agreed to enter into a separate manufacturing and supply agreement and a sublicense agreement following the execution of the joint venture agreement.

The joint venture agreement stipulates the initial terms for equal representation in the management of the newly-formed joint venture.

4 unchanged sentences

In February 2022, we made a cash investment totaling $ 1.0 million in the joint venture’s common stock.

We accounted for the joint venture using the equity method of accounting, and recorded our 50 % share of the net loss from the joint venture totaling $ 0.2 million in other expense, net , on the condensed consolidated statement of operations for the three months ended March 31, 2022.

We are not obligated to fund the joint venture’s potential future losses, and therefore will not record equity method losses that would result in our equity investment in the joint venture to fall below zero.

As of March 31, 2022, the carrying amount of our equity investment in the joint venture was zero, and we have a receivable totaling $ 2.5 million from the joint venture in due from related parties , on the condensed consolidated balance sheet for research and development costs that we paid on behalf of the joint venture during the three months ended March 31, 2022.

We account for our investment in the joint venture using the equity method of accounting, and recorded our 50 % share of the net loss from the joint venture totaling $ 3.9 million and $ 4.1 million, respectively, in other expense, net , on the condensed consolidated statement of operations for the three and six months ended June 30, 2022.

Such losses include $ 3.9 million of expenses incurred by us on behalf of the joint venture during the six months ended June 30, 2022.

We are not obligated to fund the joint venture’s potential future losses, and therefore will not record additional equity method losses that would result in our equity investment in the joint venture to fall below zero.

As of June 30, 2022, the carrying amount of our equity investment in the joint venture was zero .

License Agreements

The Access to Advanced Health Institute

In May 2021, we entered into two license agreements with the AAHI pursuant to which we received a license to certain patents and know-how relating to AAHI’s (i) adjuvant formulations for the treatment, prevention and/or diagnosis of SARS-CoV-2 (the AAHI Adjuvant Formulation License Agreement) and (ii) RNA vaccine platform as further described below (the AAHI RNA License Agreement).

3M Innovative Properties Company (3M IPC) and the Access to Advanced Health Institute (AAHI) License Agreement

We have licensed rights to 3M-052, a synthetic TLR7/8 agonist, 3M-052 formulations and related technology from 3M IPC and its affiliates and AAHI.

In November 2021 we obtained nonexclusive rights in the field of SARS-CoV-2 and in June 2022 we modified those rights and expanded the scope of the license to include (1) SARS-CoV-2 and other infectious diseases including malaria, HIV, tuberculosis, hookworm and varicella zoster on an exclusive basis in countries other than low- and middle-income countries (LMIC), and (2) oncology applications, when used in combination with our proprietary technology and/or IL-15 agonists.

In consideration for the license, we agreed to make certain periodic license payments, including $ 2.25 million each year through June 2025, with the June 2022 payment being partially offset by the $ 0.5 million previously paid under the initial November 2021 license agreement.

We have also agreed to make payments upon the achievement of certain regulatory milestone events and tiered royalties ranging from the low to high single-digits as a percentage of net sales.

Beginning in April 2026, the annual minimum licensing payment is $ 1.0 million, which can be credited against any royalty payments due under this agreement.

We made a payment of $ 1.75 million for the annual license maintenance fee and recorded $ 0.2 million in research and development expense , on the condensed consolidated statements of operations during the three and six months ended June 30, 2022.

AAHI License Agreements

In May 2021, we entered into two license agreements with AAHI pursuant to which we received a license to certain patents and know-how relating to AAHI’s (i) adjuvant formulations for the treatment, prevention and/or diagnosis of SARS-CoV-2 (the AAHI Adjuvant Formulation License Agreement) and (ii) RNA vaccine platform as further described below (the AAHI RNA License Agreement).

Under both agreements, we were obligated to pay one-time, non-creditable, non-refundable upfront cash payments totaling $ 2.0 million.

In addition, under the AAHI Adjuvant Formulation License Agreement we owe milestone payments to a total of up to $ 2.5 million based on the achievement of certain development and regulatory milestones for the first licensed product and royalties on annual net sales of licensed products on a country-by-country and product-by-product basis of a low-single digit percentage, subject to certain royalty-reduction provisions.

No milestone fees were incurred for the three months ended March 31, 2022.

No milestone fees were incurred for the six months ended June 30, 2022.

In September 2021, we amended and restated the AAHI RNA License Agreement, pursuant to which AAHI granted us an exclusive, worldwide, sublicensable license to AAHI’s rights to an RNA vaccine platform for the development and commercialization of certain therapeutic, diagnostic or prophylactic products for the prevention, treatment or diagnosis of any indication, other than those subject to pre-existing third-party license grants, including, without limitation, SARS-CoV-2.

Pursuant to the terms of the amended and restated AAHI RNA License Agreement, we made an additional one-time,

non-creditable, non-refundable, upfront payment to AAHI of $ 1.5 million.

Pursuant to the terms of the amended and restated AAHI RNA License Agreement, we made an additional one-time, non-creditable, non-refundable, upfront payment to AAHI of $ 1.5 million.

The company is also required to pay license maintenance fees to AAHI as follows:

3 unchanged sentences

We are required to pay royalties on annual net sales of licensed products on a country-by-country and product-by-product basis of a low to mid-single digit percentage.

We recorded $ 0.2 million in research and development expense , on the condensed consolidated statements of operations for the three months ended March 31, 2022.

We made a payment of $ 3.0 million for the annual license maintenance fee and recorded $ 0.3 million in research and development expense , on the condensed consolidated statements of operations during the three and six months ended June 30, 2022.

In connection with the license agreements, in May 2021 we also entered into a sponsored research agreement with the AAHI pursuant to which we will fund continued research of at least $ 2.0 million per year, payable in four equal quarterly installments each year until May 2024, or such year of earlier termination.

During the three months ended March 31, 2022, $ 1.2 million of research and development activities that we funded were related to our Amyris joint venture and thus were charged to the joint venture for reimbursement.

EnGeneIC Licensing Agreement

EnGeneIC License Agreement

During the fourth quarter of 2021, we signed a binding term sheet with EnGeneIC for an exclusive, worldwide license to develop, manufacture and commercialize their patented endosomal delivery vector (EDV ™ ) nanocell technology as a single agent in certain cancer fields and with respect to the treatment and prevention of COVID-19 and in combination with our COVID-19 vaccine and anti-cancer drugs in a more broadly defined field of use.

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(1) Definite-lived intangible assets consist of favorable leasehold rights totaling $ 20.4 million and organized workforce totaling $ 0.8 million as of the acquisition date.

We recorded amortization expense of $ 0.3 million in research and development expense , on the condensed consolidated statement of operations for the three months ended March 31, 2022.

As of March 31, 2022, the remaining weighted-average amortization period for our definite-lived intangible assets was approximately 9.7 years.

We recorded amortization expense of $ 0.6 million and $ 0.9 million, respectively, in research and development expense , on the condensed consolidated statement of operations for the three and six months ended June 30, 2022.

As of June 30, 2022, the remaining weighted-average amortization period for our definite-lived intangible assets was approximately 9.4 years.

Future amortization expense for the favorable leasehold rights is as follows:

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A clinical milestone totaling $ 0.8 million was earned by the former owners of VivaBioCell, of which $ 0.4 million was paid during 2021.

The remaining $ 0.4 million was accrued as of March 31, 2022 and is expected to be paid in 2022.

The remaining $ 0.4 million was accrued as of June 30, 2022 and is expected to be paid in 2022.

If the regulatory milestone is achieved, we are obligated to pay approximately $ 2.1 million.

Altor BioScience Corporation

In connection with the 2017 acquisition of Altor BioScience Corporation (Altor), we issued contingent value rights (CVRs) under which we 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 before December 31, 2026 in which worldwide net sales of N-803 exceed $ 1.0 billion (with amounts payable in cash or shares of our common stock or a combination thereof).

In connection with the 2017 acquisition of Altor BioScience Corporation (Altor), we issued contingent value rights (CVRs) under which we agreed to pay the prior stockholders of Altor approximately $ 304.0 million contingent upon successful approval of the BLA, or foreign equivalent, for N-803 by December 31, 2022 and approximately $ 304.0 million contingent upon calendar-year worldwide net sales of N-803 exceeding $ 1.0 billion prior to December 31, 2026 (with amounts payable in cash or shares of our common stock or a combination thereof).

We have submitted the BLA, and in July 2022, we announced the FDA has accepted our BLA for review and set a PDUFA target action date of May 23, 2023.

It is unclear when the FDA will approve our BLA, if at all.

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 the company’s common stock in satisfaction of their CVRs.

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The settlement provides that in exchange for complete releases, the appraisal petitioners, who as a group held 3,167,565 dissenting Altor shares, collectively will receive an aggregate of 2,229,296 shares of the company’s common stock issued in a private placement, plus an aggregate of $ 21.13 in cash in lieu of fractional shares.

The company’s Board of Directors approved the settlement and stock issuance in April 2022, and the parties are in the process of documenting and obtaining court approval of the settlement.

Prior to finalization and court approval, there can be no assurance as to when the settlement will be finalized and approved, and the shares issued.

As of March 31, 2022 and December 31, 2021, we had accrued a total of $ 12.5 million and $ 7.1 million, respectively, related to the dissenting share obligation.

The accrued litigation payable was measured at fair value based on the total 2,229,296 shares of common stock and the closing price of our common stock at March 31, 2022.

Prior to reaching an agreement on the settlement terms, the accrued amount represented the low-end of the range of the then estimated payout amounts in accordance with ASC Topic 450, Contingencies , after considering the reasonable outcomes for settling the dissenting stockholder dispute along with any accrued statutory interest.

The company’s Board of Directors approved the settlement and stock issuance in April 2022, and the court approved the settlement and dismissed the appraisal petitioners’ claims on July 9, 2022.

On July 9, 2022, the company issued 2,229,296 shares of its common stock with an aggregate market value of $ 10.7 million, based on the closing price of its common stock as of July 8, 2022.

As of June 30, 2022 and December 31, 2021, we had accrued $ 10.7 million and $ 7.1 million, respectively, related to the dissenting share obligation.

In late April 2022, the company also agreed to the terms of a settlement with the putative class plaintiffs without any admission of liability or fault.

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Prior to finalization and court approval, there can be no assurance as to when the settlement will be finalized and approved.

As of March 31, 2022, we have included $ 5.0 million of accrued litigation expense related to this settlement on the condensed consolidated balance sheet.

Should either settlement not be approved by the court, we cannot reasonably estimate a range of loss or likelihood of loss beyond the amounts recorded.

As of June 30, 2022, we have included $ 5.0 million of accrued litigation expense related to this settlement on the condensed consolidated balance sheet.

Should the settlement with the class plaintiffs not be approved by the court, we cannot reasonably estimate a range of loss or likelihood of loss beyond the amounts recorded.

The company intends to defend the case vigorously should that prove necessary.

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The hearing in the Cynviloq arbitration commenced in June 2021, and continued with breaks until early October 2021.

The parties completed post-hearing briefing in early May 2022, and summations are scheduled for mid-July 2022.

The parties completed post-hearing briefing in early May 2022, and summations will likely be scheduled for September 2022.

Also in 2019, the company and Dr.

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A substitute arbitrator was appointed on February 25, 2022, and the parties have been working with the substitute arbitrator to conclude the proceedings.

Additional hearing sessions were held in May and July 2022, and summations are scheduled for August 2022.

We intend to prosecute our claims, and to defend the claims asserted against us, vigorously.

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In 2020, we received a Request for Arbitration before the International Chamber of Commerce, International Court of Arbitration.

The arbitration relates to a license, development, and commercialization agreement that Altor entered into with Beike in 2014, which agreement was amended and restated in 2017, pursuant to which Altor granted to Beike an exclusive license to use, research, develop and commercialize products based on Anktiva in China for human therapeutic uses.

In the arbitration, Beike is asserting a claim for breach of contract under the license agreement.

Among other things, Beike alleges that we failed to use commercially reasonable efforts to deliver to Beike materials and data related to Anktiva.

Among other things, Beike alleges that we failed to use commercially reasonable efforts to deliver to Beike materials and data related to N-803.

Beike is seeking specific performance, or in the alternative, damages for the alleged breaches.

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Given that this action remains at the pleading stage and no discovery has occurred, it remains too early to evaluate the likely outcome of the case or to estimate any range of potential loss.

We believe the claims lack merit and intend to defend the case vigorously and that we may have counterclaims.

We believe the claims lack merit and intend to defend the case vigorously and further believe that we may have counterclaims.

Litigation Related to the Merger with ImmunityBio, Inc.

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The Merger Actions were voluntarily dismissed on March 25, 2022.

We did not enter into any significant contracts during the three months ended March 31, 2022, other than those disclosed in these condensed consolidated financial statements.

We did not enter into any significant contracts during the six months ended June 30, 2022, other than those disclosed in these condensed consolidated financial statements.

In addition, we are also a party to various contracts with contract research organizations and contract manufacturers that generally provide for termination on notice, with the exact amounts in the event of termination to be based on the timing of the termination and the terms of the agreement.

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Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

(Unaudited) (Unaudited)

Operating lease costs $ 2,942 $ 1,717 $ 5,250 $ 3,864

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Cash paid for amounts included in the measurement of lease liabilities is as follows (in thousands):

Three Months Ended

Six Months Ended

Cash paid for operating leases (excluding variable lease costs) $ 5,091 $ 4,004

Future minimum lease payments as of March 31, 2022, including $ 24.1 million related to options to extend lease terms that are reasonably certain of being exercised, are presented in the following table (in thousands).

Future minimum lease payments as of June 30, 2022, including $ 14.8 million related to options to extend lease terms that are reasonably certain of being exercised, are presented in the following table (in thousands).

Common area maintenance costs and taxes are not included in these payments.

Years ending December 31:

2022 (excluding the three months ended March 31, 2022)

2022 (excluding the six months ended June 30, 2022)

Thereafter 31,457

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Present value of operating lease liabilities $ 52,052

Other than the acquisition of a leasehold interest at the Dunkirk Facility discussed in Note 6 , Collaboration and License Agreements and Acquisition , above, there have been no other material changes related to our existing lease agreements from those disclosed in Note 8 of the Notes to Consolidated Financial Statements of our Annual Report on Form 10-K filed with the SEC on March 1, 2022.

3530 John Hopkins Court

In April 2022, we extended our existing lease for 44,681 rentable square feet at 3530 John Hopkins Court in San Diego, California from July 31, 2023 to July 31, 2030 (the Extended Lease Term).

This facility is used primarily as a research laboratory and our corporate offices.

The Extended Lease Term will commence on August 1, 2023, and includes an option to extend the lease for one five-year term through July 31, 2035.

The base rent effective during the Extended Lease Term will be approximately $ 323,937 per month with an annual increase of 3 % beginning on August 1, 2024.

At the beginning of the option term, the initial monthly base rent will be adjusted to market rent (as defined in the lease agreement).

We will receive a rent abatement for the first seven months of the Extended Lease Term beginning on August 1, 2023, and a tenant improvement allowance of $ 0.7 million from the landlord for costs and expenses associated with the construction of tenant improvements that can be used during the 12-month period ending on August 1, 2024 .

Other than the lease described above, the acquisition of a leasehold interest at the Dunkirk Facility discussed in Note 6 , Collaboration and License Agreements and Acquisition , the entry into new related-party leases, and the termination of an existing related-party lease discussed in Note 9 , Related-Party Agreements , there have been no other material changes related to our existing lease agreements from those disclosed in Note 8 of the Notes to Consolidated Financial Statements of our Annual Report on Form 10-K filed with the SEC on March 1, 2022.

Related-Party Agreements

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Advances Interest

Rate March 31,

Rate June 30,

2022 December 31,

Nant Capital, LLC (1)

2022 $ 300,000 SOFR + 5.4 %

2022 $ 300,000 Term SOFR + 5.4 %

$ 300,084 (1) $ 299,236 (1)

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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 %.

We paid $ 4.4 million in interest on this loan during the three months ended March 31, 2022.

Accrued and unpaid interest on this note totaled $ 0.7 million as of March 31, 2022.

As of June 30, 2022, the interest rate on this loan was 7.29 %.

We paid $ 9.9 million in interest on this loan during the six months ended June 30, 2022.

Accrued and unpaid interest on this note totaled $ 0.8 million as of June 30, 2022.

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 fully paid and non-assessable shares of the company’s common stock at a price per share equal to $ 5.67 .

Total amortization on the debt issuance cost of $ 1.5 million paid to the lender was $ 0.4 million as of March 31, 2022 and was recorded as a reduction of the principal amount of the note.

Total amortization on the debt issuance cost of $ 1.5 million paid to the lender was $ 0.8 million as of June 30, 2022 and was recorded as a reduction of the principal amount of the note.

(2) All outstanding advances and accrued and unpaid interest is due and payable on September 30, 2025.

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There are no equity or equity-linked convertible rights related to these promissory notes.

(3) Accrued and unpaid interest on this note totaled $ 6.9 million and $ 6.1 million as of March 31, 2022 and December 31, 2021, respectively.

(4) Accrued and unpaid interest on this note totaled $ 4.6 million and $ 3.8 million as of March 31, 2022 and December 31, 2021, respectively.

(3) Accrued and unpaid interest on this note totaled $ 7.6 million and $ 6.1 million as of June 30, 2022 and December 31, 2021, respectively.

(4) Accrued and unpaid interest on this note totaled $ 5.4 million and $ 3.8 million as of June 30, 2022 and December 31, 2021, respectively.

(5) The outstanding principal is due and payable on September 30, 2025.

Interest on this related-party promissory note is compounded annually and payable quarterly commencing on June 30, 2021.

We paid $ 0.6 million in interest on this loan during the three months ended March 31, 2022.

We paid $ 1.2 million in interest on this loan during the six months ended June 30, 2022.

All outstanding amounts under the note become due and payable upon certain bankruptcy and insolvency-related events.

There are no equity or equity-linked convertible rights related to this promissory note.

(6) Accrued and unpaid interest on this note totaled $ 3.8 million and $ 3.4 million as of March 31, 2022 and December 31, 2021, respectively.

(7) Accrued and unpaid interest on this note totaled $ 11.3 million and $ 10.6 million as of March 31, 2022 and December 31, 2021, respectively.

(8) Accrued and unpaid interest on this note totaled $ 6.2 million and $ 5.7 million as of March 31, 2022 and December 31, 2021, respectively.

The following table summarizes our estimated future contractual obligations for related-party promissory notes as of March 31, 2022 (unaudited;

(6) Accrued and unpaid interest on this note totaled $ 4.2 million and $ 3.4 million as of June 30, 2022 and December 31, 2021, respectively.

(7) Accrued and unpaid interest on this note totaled $ 12.0 million and $ 10.6 million as of June 30, 2022 and December 31, 2021, respectively.

(8) Accrued and unpaid interest on this note totaled $ 6.7 million and $ 5.7 million as of June 30, 2022 and December 31, 2021, respectively.

The following table summarizes our estimated future contractual obligations for related-party promissory notes as of June 30, 2022 (unaudited;

in thousands):

Payments Interest

2022 (excluding the three months ended March 31, 2022)

2022 (excluding the six months ended June 30, 2022)

$ 300,000 $ 12,169 $ 312,169

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Interest payments on our variable-rate promissory note are calculated based on schedule maturity dates and the Term SOFR rate plus the contractual spread per the loan agreement.

The rate on our variable-rate promissory note as of March 31, 2022 was 5.92 %.

(2) Interest shown includes $ 0.7 million of accrued and unpaid interest as of March 31, 2022 related to the $ 300.0 million variable-rate loan.

Interest on our $ 300.0 million variable-rate promissory note and our $ 40.0 million fixed-rate promissory notes are payable on a quarterly basis.

(3) Interest shown includes $ 32.8 million of accrued and unpaid interest of March 31, 2022.

Interest on these promissory notes is payable at maturity on September 30, 2025.

The rate on our variable-rate promissory note as of June 30, 2022 was 7.29 %.

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

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2022 December 31,

Due from related party–Amyris joint venture ( Note 6 )

Due from related party–NantBio, Inc.

$ 1,294 $ 1,294

Due from related parties–Various 157 39

Total due from related parties $ 1,451 $ 1,333

Due to related party–NantWorks, LLC $ 2,555 $ 1,113

Due to related party–Duley Road, LLC $ 1,807 $ 1,380

Due to related party–NantWorks, LLC 1,179 1,113

Due to related party–NantBio, Inc.

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NantWorks, LLC

Under the NantWorks shared services agreement executed in November 2015, but effective August 2015, NantWorks, a related party, provides corporate, general and administrative, manufacturing strategy, research and development, regulatory and clinical trial strategy, and other support services.

Shared Services Agreement

Under the NantWorks shared services agreement executed in November 2015, but effective August 2015, NantWorks, a related party, provides corporate, general and administrative, certain research and development, and other support services.

We are charged for the services at cost plus reasonable allocations of employee benefits, facilities and other direct or fairly allocated indirect costs that relate to the employees providing the services.

For the three months ended March 31, 2022 and 2021, we recorded $ 1.3 million and $ 1.8 million, respectively, in selling, general and administrative expense, on the condensed consolidated statements of operations .

For the three months ended March 31, 2022 and 2021, we recorded immaterial and $ 0.3 million of expense reimbursements under this arrangement in research and development expense , on the condensed consolidated statements of operations.

For the six months ended June 30, 2022 and 2021, we recorded $ 2.3 million and $ 3.0 million, respectively, in selling, general and administrative expense , and $ 0.3 million and $ 0.4 million, respectively, of expense reimbursements under this arrangement in research and development expense , on the condensed consolidated statements of operations.

These amounts exclude certain general and administrative expenses provided by third-party vendors directly for our benefit, which were reimbursed to NantWorks based on those vendors’ invoiced amounts without markup by NantWorks.

As of March 31, 2022 and December 31, 2021, we owed NantWorks a net amount of $ 2.6 million and $ 1.1 million, respectively, for all agreements between the two affiliates, which is included in due to related parties, on the condensed consolidated balance sheets.

We also recorded $ 2.8 million and $ 2.2 million of prepaid expenses for services that have been passed through to the company from NantWorks as of March 31, 2022 and December 31, 2021, respectively, which are included in prepaid expenses and other current assets , on the condensed consolidated balance sheets.

As of June 30, 2022 and December 31, 2021, we owed NantWorks a net amount of $ 1.2 million and $ 1.1 million, respectively, for all agreements between the two affiliates, which is included in due to related parties, on the condensed consolidated balance sheets.

We also recorded $ 2.8 million and $ 2.2 million of prepaid expenses for services that have been passed through to the company from NantWorks as of June 30, 2022 and December 31, 2021, respectively, which are included in prepaid expenses and other current assets , on the condensed consolidated balance sheets.

Facility License Agreement

In 2015, we entered into a facility license agreement with NantWorks for approximately 9,500 square feet of office space in Culver City, California, which was converted to a research and development laboratory and a cGMP manufacturing facility.

In 2020, we amended this agreement to extend the term of this license agreement through December 31, 2021.

Commencing on January 1, 2022, the license fee increased by 3 % to approximately $ 56,120 per month, and the space is being 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.

License fee expense for this facility totaling $ 0.2 million and $ 0.2 million for the three months ended March 31, 2022 and 2021, respectively, was recorded in research and development expense , on the condensed consolidated statements of operations.

In May 2022, this facility license agreement was amended to increase the square feet rented at this location.

See Note 13 , Subsequent Events , for more information.

Commencing on January 1, 2022, the license fee increased by 3 % to approximately $ 56,120 per month.

On May 6, 2022, we amended our facility license agreement with NantWorks 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.

We recorded license fee expense for this facility totaling $ 0.8 million and $ 0.3 million for the six months ended June 30, 2022 and 2021, respectively, in research and development expense , on the condensed consolidated statements of operations.

Immuno-Oncology Clinic, Inc.

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Pursuant to the terms of the Clinic agreement (as amended), we made payments totaling $ 5.6 million in consideration of future services to be performed by the Clinic.

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.

As of March 31, 2022 and December 31, 2021, we owed the Clinic $ 0.1 million and $ 0.5 million, respectively, for services excluded from the Clinic Agreement.

We recorded $ 1.3 million and $ 0.8 million for the six months ended June 30, 2022 and 2021, respectively, in research and development expense , on the condensed consolidated statements of operations related to clinical trial and transition services provided by the Clinic.

As of June 30, 2022, we have no balances due from or to the Clinic.

NantBio, Inc.

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The agreement has an initial term of five years and renews automatically for successive one-year terms unless terminated by either party in the event of material default upon prior written notice of such default and the failure of the defaulting party to remedy the default within 30 days of the delivery of such notice, or upon 90 days’ prior written notice by NCSC.

We recognized no revenue for the three months ended March 31, 2022 and 2021 .

We recorded $ 0.1 million of deferred revenue for bioreactors that were delivered but not installed in accrued expenses and other liabilities , on the condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021.

As of March 31, 2022 and December 31, 2021, we recorded $ 0.9 million in due to related parties , on the condensed consolidated balance sheets related to this agreement.

We recognized no revenue for the six months ended June 30, 2022 and $ 0.3 million of revenue for the six months ended June 30, 2021.

As of June 30, 2022 and December 31, 2021, we recorded $ 0.9 million in due to related parties , on the condensed consolidated balance sheets related to this agreement.

In 2018, we entered into a shared service agreement pursuant to which we are charged for services at cost, without mark-up or profit by NantBio, but including reasonable allocations of employee benefits that relate to the employees providing the services.

In April 2019, we agreed with NantBio to transfer certain NantBio employees and associated research and development projects, comprising the majority of NantBio’s business, to the company.

As of March 31, 2022 and December 31, 2021, we recorded a net receivable from NantBio of $ 1.3 million for amounts we paid on behalf of NantBio during the year ended December 31, 2019.

As of June 30, 2022 and December 31, 2021, we recorded a net receivable from NantBio of $ 1.3 million for amounts we paid on behalf of NantBio during the year ended December 31, 2019.

605 Doug St, LLC

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The base rent is approximately $ 72,385 per month, with annual increases of 3 % that began in July 2017.

Lease expense of $ 0.2 million for this facility for the three months ended March 31, 2022 and 2021, respectively, was recorded in research and development expense , on the condensed consolidated statements of operations.

We recorded lease expense for this facility of $ 0.4 million for the six months ended June 30, 2022 and 2021, respectively, in research and development expense , on the condensed consolidated statements of operations.

Duley Road, LLC

3 unchanged sentences

The base rent is approximately $ 40,700 per month, with annual increases of 3 % that began in November 2018.

As of March 31, 2022 and December 31, 2021, we recorded rent payable to Duley Road of $ 0.4 million and $ 0.2 million, respectively.

For the three months ended March 31, 2022 and 2021, we recorded rent expense of $ 0.1 million and $ 0.4 million, respectively, which is reflected in research and development expense , on the condensed consolidated statements of operations.

As of June 30, 2022 and December 31, 2021, we recorded rent payable to Duley Road of $ 0.3 million and $ 0.2 million, respectively.

We recorded rent expense for this lease of $ 0.2 million and $ 0.3 million for the six months ended June 30, 2022 and 2021, respectively, in research and development expense , on the condensed consolidated statements of operations.

Effective in January 2019, we entered into two lease agreements with Duley Road for a second building located in El Segundo, California.

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The base rent for the two leases is approximately $ 35,800 per month that increases at a rate of 3 % per year.

As of March 31, 2022 and December 31, 2021, we recorded $ 0.8 million and $ 0.9 million of leasehold improvement payables, respectively, and $ 0.5 million and $ 0.3 million of lease-related payables to Duley Road, which were included in due to related parties , on the condensed consolidated balance sheets.

For the three months ended March 31, 2022 and 2021, we recorded $ 0.1 million and $ 0.1 million of rent expense for the two leases, respectively, which was included in research and development expense , on the condensed consolidated statements of operations.

As of June 30, 2022 and December 31, 2021, we recorded $ 0.9 million and $ 0.9 million of leasehold improvement payables, respectively, and $ 0.6 million and $ 0.3 million of lease-related payables to Duley Road, which were included in due to related parties , on the condensed consolidated balance sheets.

We recorded rent expense for this lease of $ 0.2 million for the six months ended June 30, 2022 and 2021, respectively, in research and development expense , on the condensed consolidated statements of operations.

605 Nash, LLC

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In addition, under the agreement, we are required to pay our share of estimated property taxes and operating expenses.

We will receive a rent abatement for the first seven months , and a tenant improvement incentive of $ 0.3 million from the landlord for costs and expenses associated with the construction of tenant improvements for the Initial Premises.

During the three months ended March 31, 2022 and 2021 , we recorded rent expense of $ 0.1 million and $ 0.1 million, respectively, which is reflected in research and development expense, on the condensed consolidated statements of operations.

We received a rent abatement for the first seven months , and a tenant improvement incentive of $ 0.3 million from the landlord for costs and expenses associated with the construction of tenant improvements for the Initial Premises.

W e recorded rent expense for this lease of $ 0.1 million for the six months ended June 30, 2022 and 2021 , respectively, in research and development expense, on the condensed consolidated statements of operations.

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

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The amended lease provides for a rent abatement for the first seven months , and for a tenant improvement allowance of approximately $ 2.6 million for costs and expenses related to improvements made by us to the Expansion Premises.

During the three months ended March 31, 2022, we incurred $ 0.5 million of rent expense related to the Expansion Premises lease agreement.

We recorded rent expense related to the Expansion Premises lease agreement of $ 1.0 million and $ 0.5 million for the six months ended June 30, 2022 and 2021, respectively, i n research and development expense, on the condensed consolidated statements of operations

557 Doug St, LLC

On September 27, 2021, we entered into a Membership Interest Purchase Agreement with Nant Capital, LLC (Nant Capital) (the Purchase Agreement).

Nant Capital is a related party controlled by Dr.

Patrick Soon-Shiong.

The Purchase Agreement transferred all outstanding membership interests in 557 Doug St, LLC from the company to Nant Capital.

The only asset owned by 557 Doug St, LLC is the improved property located at 557 South Douglas Street, El Segundo, California with a building area of approximately 36,434 rentable square feet (the Douglas Property).

The purchase price under the Purchase Agreement was $ 22.0 million, and after the offset prorated property taxes of $ 0.1 million, the net proceeds from the sale were $ 21.9 million.

An independent appraisal of the Douglas Property assigned the Douglas Property a value of $ 22.0 million.

The net carrying value of the property was $ 20.5 million as of the closing date.

We accounted for the transfer as a sale of an asset to an entity under common control, recorded the transfer at book value and recognized the excess of net consideration over carrying book value of $ 1.4 million as a capital contribution received from Nant Capital in additional paid-in capital , on the condensed consolidated statements of stockholders’ deficit in 2021.

In September 2021, we entered into a lease agreement with Nant Capital under which we leased back 557 South Douglas Street for an initial lease term of seven years , which commenced on September 27, 2021.

The monthly base rent under the lease is approximately $ 81,976 per month with an annual increase of 3 % on October 1 of each year beginning in 2022 during the initial term and, if applicable, during the option term .

For the first two years under the lease we will not be charged rent;

we will begin paying rent on October 1, 2023 at the current monthly base rent.

We prepaid the first month rent and security deposit totaling $ 0.2 million upon the execution of the lease.

We have an option to extend the lease for two additional seven-year periods when the prior term expires.

We have included the first option to extend the lease term for seven years as part of the initial lease term as it is reasonably certain that we will exercise the option, which implies lease expiration on September 30, 2035.

The lease is classified as an operating lease.

During the three months ended March 31, 2022, we recorded $ 0.3 million of rent expense for the lease, which was included in research and development expense , on the condensed consolidated statements of operations.

Effective September 27, 2021, we entered into a lease agreement with Nant Capital under which we leased 557 South Douglas Street in El Segundo, California.

Effective May 31, 2022, we executed a lease termination agreement with Nant Capital under which we will receive a full refund of the first month’s rent and security deposit totaling $ 0.2 million that we paid upon execution of the lease.

We recorded rent expense related to this lease of $ 0.4 million for the six months ended June 30, 2022 in research and development expense , on the condensed consolidated statement of operations.

We recognized a gain of $ 0.6 million on the disposal of this lease for the three months ended June 30, 2022 in other income, net , on the condensed consolidated statement of operations.

420 Nash, LLC

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We have included the first option to extend the lease term for five years as part of the initial term of the lease as it is reasonably certain that we will exercise the option, which implies lease expiration in September 2031.

During the three months ended March 31, 2022, we recorded $ 0.1 million of rent expense for the lease, which was included in research and development expense , on the condensed consolidated statement of operations.

We recorded $ 0.3 million of rent expense related to this lease for the six months ended June 30, 2022 in research and development expense , on the condensed consolidated statement of operations.

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.

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.

We recorded $ 0.3 million of rent expense for this lease for the six months ended June 30, 2022 in research and development expense , on the condensed consolidated statement of operations.

Stockholders’ Deficit

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Stock Repurchases

No shares of our common stock were repurchased during the three months ended March 31, 2022 and 2021 under the company’s 2015 Share Repurchase Program.

As of March 31, 2022, $ 18.3 million remained authorized for repurchase under the program.

No shares of our common stock were repurchased during the six months ended June 30, 2022 and 2021 under the company’s 2015 Share Repurchase Program.

As of June 30, 2022, $ 18.3 million remained authorized for repurchase under the program.

Open Market Sale Agreement

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We pay our sales agent a commission of up to 3.0 % of the gross sales proceeds of any shares of our common stock sold through them under the Sale Agreement, and also have provided them with customary indemnification and contribution rights.

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

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

We issued no shares under the ATM during the six months ended June 30, 2022.

As of June 30, 2022, we had $ 330.8 million available for future stock issuances under the ATM.

We are not obligated to sell any shares and may at any time suspend solicitation and offers under the Sale Agreement.

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2015 Equity Incentive Plan

As of March 31, 2022, approximately 0.3 million shares were available for future grants under the 2015 Plan.

At the company’s 2022 Annual Meeting of Stockholders held on June 14, 2022, stockholders approved an amendment to increase the number of shares of common stock authorized for issuance under the 2015 Plan by 19,900,000 shares.

As of June 30, 2022, approximately 18.5 million shares were available for future grants under the 2015 Plan.

Stock-Based Compensation

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Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

(Unaudited) (Unaudited)

Stock-based compensation expense:

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Stock Options

The following table summarizes stock option activity and related information for the three months ended March 31, 2022:

The following table summarizes stock option activity and related information for the six months ended June 30, 2022:

(in thousands)

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Forfeited/expired ( 399,229 ) $ 6.02

Outstanding at March 31, 2022

Outstanding at June 30, 2022

9,447,190 $ 9.79 $ 2,239 7.7

Vested and exercisable at March 31, 2022

Vested and exercisable at June 30, 2022

3,464,277 $ 14.70 $ 1,483 4.3

As of March 31, 2022, the unrecognized compensation cost related to outstanding stock options was $ 31.5 million, which is expected to be recognized over a remaining weighted-average period of 2.5 years.

The total intrinsic value of stock options exercised during the three months ended March 31, 2022 was immaterial.

Cash proceeds received from stock option exercises during the three months ended March 31, 2022 and 2021 totaled $ 0.1 million and $ 1.1 million, respectively.

On March 23, 2022, the Compensation Committee of the Board of Directors granted option awards to purchase a total of 4,728,634 shares of our common stock pursuant to the 2015 Plan at an exercise price of $ 5.83 per share, the closing price reported on the Nasdaq on the date of grant.

Of the option awards granted, 3,903,634 shares subject to such option awards were awarded to employees of the company (of which 825,000 options were awarded to the company’s named executive officers (NEOs)).

The shares subject to the option shall vest in equal annual installments of 1/3rd on each of the first, second and third anniversaries of March 23, 2022 (the “vesting commencement date”), such that all shares shall be fully vested on the third anniversary of the vesting commencement date, subject to the recipient continuing to be a “service provider” as defined in the 2015 Plan through each applicable vesting date.

The remaining 825,000 shares subject to such option awards were awarded to the company’s NEOs.

Subject to the company’s attainment of a financial goal for the fiscal year ending December 31, 2022, 1/3rd of the shares subject to the option shall vest in equal annual installments on each of the first, second and third anniversaries of the vesting commencement date, such that all shares shall be fully vested on the third anniversary of the vesting commencement date, subject to the recipient continuing to be a “service provider” through each applicable vesting date.

As of June 30, 2022, the unrecognized compensation cost related to outstanding stock options was $ 28.6 million, which is expected to be recognized over a remaining weighted-average period of 2.2 years.

The total intrinsic value of stock options exercised during the six months ended June 30, 2022 was immaterial.

Cash proceeds received from stock option exercises during the six months ended June 30, 2022 and 2021 totaled $ 0.1 million and $ 4.4 million, respectively.

As of December 31, 2021, a total of 3,038,322 vested and exercisable shares were outstanding.

The fair value of stock options issued was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:

Three Months Ended

Six Months Ended

Expected term 5.7 years

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Restricted Stock Units

The following table summarizes RSU activity during the three months ended March 31, 2022:

The following table summarizes RSU activity during the six months ended June 30, 2022:

Nonvested balance at December 31, 2021

6,515,889 $ 21.88

Granted 1,185,177 $ 3.21

Vested ( 294,391 ) $ 11.70

Forfeited/canceled ( 539,163 ) $ 20.90

Nonvested balance at March 31, 2022

Nonvested balance at June 30, 2022

6,867,512 $ 19.17

As of March 31, 2022, there was $ 99.8 million of unrecognized stock-based compensation expense related to RSUs that is expected to be recognized over a weighted-average period of 3.3 years.

The total intrinsic value of RSUs vested during the three months ended March 31, 2022 was $ 1.0 million.

As of June 30, 2022, there was $ 89.9 million of unrecognized stock-based compensation expense related to RSUs that is expected to be recognized over a weighted-average period of 3.1 years.

The total intrinsic value of RSUs vested during the six months ended June 30, 2022 was $ 1.1 million.

RSUs awarded to employees and consultants of affiliated companies are accounted for as stock-based compensation in accordance with ASU 2018-07, Compensation—Stock Compensation (Topic 718) , as the compensation was in exchange for continued support or services expected to be provided to the company over the vesting periods under the NantWorks shared services agreement discussed in Note 9 , Related-Party Agreements .

We have evaluated the associated benefit of these awards to the affiliated companies under common control and determined that the benefit is limited to the retention of their employees.

We estimated such benefit at the grant date fair value of $ 4.0 million and recorded $ 0.1 million and $ 0.1 million of deemed dividends for the three months ended March 31, 2022 and 2021 in additional paid-in capital, on the consolidated balance sheets, with a corresponding credit to stock-based compensation expense.

We estimated such benefit at the grant date fair value of $ 4.0 million and recorded $ 0.3 million and $ 0.5 million of deemed dividends for the six months ended June 30, 2022 and 2021 in additional paid-in capital, on the condensed consolidated balance sheets, with a corresponding credit to stock-based compensation expense.

In connection with the Merger, warrants issued to NantWorks, a related party, in connection with NantCell’s acquisition of Altor were assumed by the company.

After applying the Exchange Ratio at the Effective Time of the Merger, a total of 1,638,000 warrants with an exercise price of $ 3.24 per share were outstanding as of March 31, 2022.

After applying the Exchange Ratio at the Effective Time of the Merger, a total of 1,638,000 warrants with an exercise price of $ 3.24 per share were outstanding as of June 30, 2022.

The fair value of $ 18.0 million assigned to the warrants will be recognized in equity upon achievement of a performance-based vesting condition pertaining to building manufacturing capacity to support supply requirements for one of our product candidates.

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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.

From inception through June 30, 2022, we have not been required to pay U.S.

federal and state income taxes because of current and accumulated net operating losses (NOLs).

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income tax purposes, as it is intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the Code).

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