What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-09 compared with 2022-08-08 · 107 added, 92 removed, 352 unchanged (36% of the section changed)

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• 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 N-803, 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 submissions or other actions and related regulatory authority responses and approvals, including any planned investigational new drug (IND), BLA or New Drug Application (NDA) submissions to the FDA, including, without limitation, the progress of our BLA submission for N-803 in combination with BCG for the treatment of patients with BCG-unresponsive NMIBC with CIS with or without Ta or T1 disease submitted to the FDA in May 2022 or the pursuit of accelerated regulatory approval pathways or orphan drug status and Breakthrough Therapy designations for applicable product candidates;

• our expectations regarding the development, application, commercialization, marketing, prospects and use generally of our product candidates, including Anktiva (N-803), self-amplifying RNA (saRNA), hAd5 and yeast constructs, recombinant sub-unit proteins, toll-like receptor-activating adjuvants, and aldoxorubicin;

• the timing or likelihood of regulatory submissions or other actions and related regulatory authority responses and approvals, including any planned investigational new drug (IND), BLA or New Drug Application (NDA) submissions to the FDA, including, without limitation, the progress of our BLA submission for our product candidate, Anktiva in combination with BCG for the treatment of patients with BCG-unresponsive NMIBC with CIS with or without Ta or T1 disease, submitted to the FDA in May 2022 or the pursuit of accelerated regulatory approval pathways or orphan drug status and Breakthrough Therapy designations for applicable product candidates;

• 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;

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N-803 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 from the FDA in combination with BCG for the treatment of patients with BCG -unresponsive NMIBC with CIS with or without Ta or T1 disease .

I n May 2022, we announced the submission of a 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 PDUFA target action date of May 23, 2023.

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, Anktiva, ImmunityBio’s novel antibody cytokine fusion protein, has received Breakthrough Therapy and Fast Track designations from the FDA in combination with BCG for the treatment of patients with BCG -unresponsive NMIBC with CIS with or without Ta or T1 disease .

I n May 2022, we announced the submission of a BLA to the FDA for our product candidate, Anktiva 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 target PDUFA action date of May 23, 2023.

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

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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 June 30, 2022, we had an accumulated deficit of $2.2 billion.

Our net losses attributable to ImmunityBio common stockholders were $197.4 million and $167.9 million for the six months ended June 30, 2022 and 2021, respectively.

We have incurred net losses in each year since our inception and, as of September 30, 2022, we had an accumulated deficit of $2.3 billion.

Our net losses attributable to ImmunityBio common stockholders were $308.4 million and $255.5 million for the nine months ended September 30, 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 June 30, 2022, we had 740 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.

As of September 30, 2022, we had 760 employees.

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

For additional information, see Note 10 , Related-Party Agreements, of the “Notes to Unaudited Condensed Consolidated Financial Statements” that appears in Item 1.

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“ 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.

The company was previously party to a term sheet with EnGeneIC executed during the fourth quarter of 2021 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.

However, prior to the execution of definitive agreements, the parties recently decided not to pursue the transaction.

Agreements with Related Parties

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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 Promissory Notes

As of June 30, 2022, we have outstanding fixed-rate promissory notes with entities affiliated with Dr.

Soon-Shiong in an aggregate amount of $312.5 million, including accrued interest.

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.

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

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.

Related-Party Debt

The following description of the company’s related-party promissory notes does not purport to be complete and is qualified in its entirety by reference to the full text of the notes, copies of which are filed in Part II, Item 6.

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

$125.0 million Variable-Rate Promissory Note

On August 31, 2022, the company executed a $125.0 million promissory note with Nant Capital that bears interest at Term SOFR plus 8.0% per annum.

The accrued interest is payable quarterly on the last business day of March, June, September and December, commencing on September 30, 2022.

The outstanding principal amount and any accrued and unpaid interest are due on December 31, 2023.

The company may prepay the outstanding principal amount, together with any accrued interest at any time, in whole or in part, without premium or penalty.

The company received net proceeds of $124.4 million, net of a $0.6 million origination fee paid to the lender, which the company intends to use for commercialization efforts, clinical trials, working capital and general corporate purposes.

$300.0 million Variable-Rate Promissory Note

As of September 30, 2022, the company has a $300.0 million variable-rate promissory note with Nant Capital.

On August 31, 2022, the terms of this promissory note were amended and restated to extend the maturity date of the loan from December 17, 2022 to December 31, 2023, increase the spread on the loan from Term SOFR plus 5.4% per annum to Term SOFR plus 8.0% per annum, and reset the quarterly interest payment date from the 17th of the month to the last business day of March, June, September and December, commencing on September 30, 2022.

No other material terms or conditions of this variable-rate promissory note were modified as part of this amendment and restatement.

In the event of a default on the loan (as defined in the promissory note), including if the company does 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 a price of $5.67 per share.

There can be no assurance that the company can refinance the variable-rate promissory notes described above 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.

These risks could materially adversely affect the company’s financial condition, cash flows and results of operations.

Fixed-Rate Convertible Promissory Notes

As of September 30, 2022, the company has outstanding fixed-rate promissory notes held by entities affiliated with Dr.

Soon-Shiong in an aggregate amount of $315.7 million (consisting of principal and accrued and unpaid interest).

The company 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, now subject to an advance notice period of at least five business days, during which the lender can convert the amount requested to be prepaid by the company into shares of company common stock, as part of the amendment and restatement described below.

On August 31, 2022, the terms of each fixed-rate promissory note were amended and restated to include a conversion feature that gives each lender the right at any time, including upon notice of prepayment, at its sole option, to convert the entire outstanding principal amount and accrued and unpaid interest due under each note at the time of conversion into shares of the company’s common stock at a price of $5.67 per share.

No other material terms or conditions of these fixed-rate promissory notes were modified as part of these amendments.

Immuno-Oncology Clinic, Inc.

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

For the nine months ended September 30, 2022 and 2021, we incurred $2.0 million and $1.4 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.

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

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 quality control and process science activities.

On May 6, 2022, we entered into a lease agreement with 23 Alaska, LLC for a 47,265 rentable square foot facility located at 2335 Alaska Ave., El Segundo, California, to be used primarily for quality control and process science activities.

557 Doug St, LLC

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.

See Note 9 , Related-Party 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 related-party agreements.

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

See Note 9 , Related-Party Debt, and Note 10 , 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 for more detailed discussions of our related-party agreements.

Components of our Results of Operations

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• the efficacy and safety profile of the product candidate.

We have only one 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, for which we submitted a BLA to the FDA in May 2022.

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

However, there can be no assurance that our product candidate will be approved for commercial sale by the PDUFA target action date, if ever.

We have only one product candidate, Anktiva in combination with BCG for the treatment of patients with BCG-unresponsive NMIBC with CIS with or without Ta or T1 disease, for which we submitted a BLA to the FDA in May 2022.

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

However, there can be no assurance that our product candidate will be approved for commercial sale by the target PDUFA action date, if ever.

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

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

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 NOLs.

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

federal and state income taxes because of current losses from operations.

Discussion of Condensed Consolidated Results of Operations

Comparison of the Three Months Ended June 30, 2022 and 2021

Comparison of the Three Months Ended September 30, 2022 and 2021

Three Months Ended

June 30, $ Change % Change

September 30, $ Change % Change

(Unaudited, $ in thousands)

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Other expense, net:

Interest and investment loss, net (1,800) (177) (1,623) 917 %

Interest and investment income (loss), net 857 (5,941) 6,798 (114 %)

Interest expense (including amounts with related parties) (16,764) (3,614) (13,150) 364 %

Loss on equity method investment (4,456) — (4,456) N/A

Other income, net (including amounts

Other income (loss), net (including amounts

with related parties) 6 (38) 44 (116 %)

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Loss before income taxes and noncontrolling interests (111,161) (88,429) (22,732) 26 %

Income tax expense — (2) 2 (100 %)

Income tax expense — — — N/A

Net loss $ (111,161) $ (88,429) $ (22,732) 26 %

Revenue decreased $0.3 million for the three months ended June 30, 2022, as compared to the three months ended June 30, 2021.

The decrease was primarily driven by less warranty revenue received from a related party in 2022.

Revenue increased $0.1 million for the three months ended September 30, 2022, as compared to the three months ended September 30, 2021.

The increase was primarily driven by bioreactor revenue received in 2022.

Research and Development Expense

Research and development expense increased $9.3 million during the three months ended June 30, 2022, as compared to the three months ended June 30, 2021.

The increase in research and development expense was primarily driven by a $5.0 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 $4.9 million increase in regulatory and consulting costs related to the BLA submission for our N-803 program, a $4.8 million increase in personnel costs due to higher headcount in support of our continued research and development efforts and the acquisition of the Dunkirk facility, and a $0.9 million increase in conference costs.

These increases were partially offset by a $5.3 million decrease in stock-based compensation expense due to reduced grant activity during 2022 and a $1.0 million decrease in clinical trial costs.

Research and development expense increased $22.3 million during the three months ended September 30, 2022, as compared to the three months ended September 30, 2021.

The increase in research and development expense was driven by $11.8 million of higher drug manufacturing costs, including costs for our product candidate, Anktiva in combination with BCG for the treatment of patients with BCG-unresponsive NMIBC with CIS with or without Ta or T1 disease, a $6.4 million increase in personnel costs due to increased headcount, a $5.5 million increase in facilities and equipment expense primarily related to the expansion of our manufacturing facilities in California and New York that caused increases in lease expense, a $1.3 million increase in clinical trial costs driven by higher drug costs for our N-803 program, a $0.9 million increase in other operating expenses, primarily related to the impairment write-down of the Dunkirk Facility workforce intangible asset and increased property tax expense, and a $0.5 million increase in regulatory and consulting costs.

These increases were partially offset by a $2.0 million reduction in lab supplies, a $1.1 million reduction of collaboration costs and a $1.0 million decrease in stock-based compensation expense.

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 decreased $15.9 million during the three months ended June 30, 2022, as compared to the three months ended June 30, 2021.

The decrease in selling, general and administrative expense was primarily attributable to an $18.7 million decrease in legal expense related to the Merger completed in the first quarter of 2021 and an insurance reimbursement, a $2.4 million decrease in stock compensation expense, mainly driven by reduced grant activity during 2022, and a $1.2 million reduction in shared services costs.

These decreases were partially offset by a $5.4 million increase in personnel-related costs due to higher headcount and increased international travel, and an increase of $1.0 million of other costs.

Selling, general and administrative expense decreased $10.3 million during the three months ended September 30, 2022, as compared to the three months ended September 30, 2021.

The reduction in selling, general and administrative expense was primarily driven by a $13.7 million net decline in legal expenses that included litigation-related insurance reimbursements received during the quarter that offset current-period legal expenses, and a $2.2 million decrease in stock-based compensation expense.

These decreases were partially offset by a $4.2 million increase in personnel costs due to higher headcount and increased travel costs, and a $1.4 million increase in other expenses.

Other Expense, Net

Other expense, net increased $11.7 million during the three months ended June 30, 2022, as compared to the three months ended June 30, 2021.

The increase in other expense, net was mainly due to a $6.1 million increase in interest expense driven by higher related-party borrowings, a $3.9 million loss on our equity method investment in the Amyris joint venture, a $1.6 million increase in net unrealized losses related to our marketable equity securities, and a $0.1 million decrease in other income, net.

Comparison of the Six Months Ended June 30, 2022 and 2021

Six Months Ended

June 30, $ Change % Change

Other expense, net increased $10.8 million during the three months ended September 30, 2022, as compared to the three months ended September 30, 2021.

The increase in other expense, net was mainly due to a $13.2 million increase in interest expense driven by higher related-party borrowings and a mortization of related-party notes discounts , and a $4.5 million loss on our equity method investment.

These increases in other expense, net were partially offset by a $6.8 million increase in net unrealized gains related to our marketable equity securities, and a $0.1 million increase in other income, net.

Comparison of the Nine Months Ended September 30, 2022 and 2021

Nine Months Ended

September 30, $ Change % Change

(Unaudited, $ in thousands)

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Loss from operations (266,398) (251,006) (15,392) 6 %

Other (expense) income, net:

Interest and investment (loss) income, net (134) 8,767 (8,901) (102 %)

Other expense, net:

Interest and investment income, net 723 2,826 (2,103) (74 %)

Interest expense (including amounts with related parties) (34,953) (10,359) (24,594) 237 %

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with related parties) 187 252 (65) (26 %)

Total other (expense) income, net (22,239) 2,312 (24,551) (1062 %)

Total other expense, net (42,596) (7,281) (35,315) 485 %

Loss before income taxes and noncontrolling interests (308,994) (258,287) (50,707) 20 %

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Net loss $ (308,994) $ (258,295) $ (50,699) 20 %

Revenue decreased $0.4 million for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021.

The decrease was primarily driven by less warranty revenue received from a related party in 2022.

Revenue decreased $0.4 million for the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021.

The decrease was primarily driven by less bioreactor revenue received in 2022.

Research and Development Expense

Research and development expense increased $23.5 million during the six months ended June 30, 2022, as compared to the six months ended June 30, 2021.

The increase in research and development expense was primarily driven by a $10.7 million increase in personnel costs due to higher headcount in support of our continued research and development efforts, an increase of $9.1 million in regulatory costs related to the BLA submission for our N-803 program, research agreements, and consulting fees, a $9.0 million increase in facilities and equipment expense, primarily related to the expansion of our manufacturing facility in El Segundo, California and the Dunkirk Facility during 2022, and a $1.0 million increase in conference costs.

These increases were partially offset by a $5.2 million decrease in stock-based compensation expense due to reduced grant activity during 2022 and a $1.1 million decrease in clinical trial and other expense.

Research and development expense increased $45.9 million during the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021.

The increase in research and development expense was primarily driven by a $17.3 million increase in personnel costs due to increased headcount and the acquisition of the Dunkirk Facility, $16.9 million of higher drug manufacturing costs, including costs for our product candidate, Anktiva in combination with BCG for the treatment of patients with BCG-unresponsive NMIBC with CIS with or without Ta or T1 disease, a $14.6 million increase in facilities and equipment expense primarily related to the expansion of our manufacturing facilities in California and New York which caused increases in lease expenses, a $7.8 million increase in regulatory and consulting costs primarily related to the BLA submission of our product candidate, Anktiva in combination with BCG for the treatment of patients with BCG-unresponsive NMIBC with CIS with or without Ta or T1 disease, and a $1.9 million increase in other operating costs.

These increases were partially offset by a $6.2 million decrease in stock-based compensation expense, a $4.0 million reduction in collaboration costs and a $2.4 million reduction in lab supplies.

Selling, General and Administrative Expense

Selling, general and administrative expense decreased $20.5 million during the six months ended June 30, 2022, as compared to the six months ended June 30, 2021.

The decrease in selling, general and administrative expense was primarily attributable to a $21.5 million decrease in legal, consulting and insurance costs related to the Merger completed in the first quarter of 2021 and an insurance reimbursement, a $7.7 million decrease in stock-based compensation expense due to reduced grant activity during 2022, and a $2.8 million reduction in shared services costs.

These decreases were partially offset by a $10.2 million increase in personnel-related costs due to higher headcount and increased international travel, and an increase of $1.3 million of license fee and other expense.

Selling, general and administrative expense decreased $30.9 million during the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021.

The reduction in selling, general and administrative expense was primarily driven by a $24.2 million net decline in legal expenses that included year-to-date litigation-related insurance reimbursements received that offset year-to-date legal expenses, a $9.9 million decrease in stock-based compensation expense, and a $9.0 million decrease in consulting costs, primarily due to Merger-related expenses incurred in the prior period.

These decreases were partially offset by an $11.5 million increase in personnel costs due to higher headcount and travel-related costs, and a $0.7 million increase in other costs.

Other Expense, Net

Other expense, net increased $24.6 million during the six months ended June 30, 2022, as compared to the six months ended June 30, 2021.

The increase was due to a $11.4 million increase in interest expense driven primarily by higher related-party borrowings, an increase of $8.9 million in net unrealized losses related to our marketable equity securities, a $4.1 million loss on our equity method investment in the Amyris joint venture, and a $0.1 million decrease in other income, net.

Other expense, net increased $35.3 million during the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021.

The increase was due to a $24.6 million increase in interest expense driven by higher related ‑ party borrowings and a mortization of related-party notes discounts , an $8.6 million loss on our equity method investment, and a decrease of $2.1 million in net unrealized gains related to our marketable equity securities.

Financial Condition, Liquidity and Capital Resources

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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 June 30, 2022, we had cash and cash equivalents, and marketable securities of $83.9 million compared to $317.9 million as of December 31, 2021.

As of September 30, 2022, we had cash and cash equivalents, and marketable securities of $111.9 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 six months ended June 30, 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 may re-initiate activity at any time based on market dynamics and/or capital requirements.

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

We issued no shares under the ATM during the nine months ended September 30, 2022.

As of September 30, 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 June 30, 2022, our indebtedness totals $612.6 million (consisting of related-party promissory notes and accrued and unpaid interest, less unamortized debt issuance costs), held by entities affiliated with Dr.

• As of September 30, 2022, our indebtedness payable at maturity totals $740.7 million (excluding unamortized related-party notes discounts), held by entities affiliated with Dr.

Of this amount, $425.0 million is due and payable on December 31, 2023.

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.

In the event of a default on the $300.0 million 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 the company can refinance these promissory notes 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.

These risks could materially adversely affect the company’s financial condition, cash flows and results of operations.

The remaining $315.7 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 contingent upon successful approval of a 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 common stock in satisfaction of their CVRs.

The company can prepay the outstanding principal (together with accrued and unpaid interest), in whole or in part, at any time without premium or penalty and without the prior consent of the lender.

• In connection with our 2017 acquisition of Altor, we issued CVRs under which we agreed to pay the prior stockholders of Altor approximately $304.0 million contingent upon successful approval of a 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).

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.

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.

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

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

If the FDA does not approve our BLA by December 31, 2022, prior to its established target PDUFA action date, the $304.0 million related to the regulatory milestone will not be payable and the holders of these CVRs will not receive any cash or shares of our common stock on account of the regulatory milestone CVRs.

• In connection with our acquisition of VivaBioCell, we are obligated to pay the former owners approximately $2.0 million of contingent consideration upon the achievement of a regulatory milestone relating to the GMP-in-a-Box technology.

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

Six Months Ended

Nine Months Ended

September 30,

Cash (used in) provided by:

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Operating Activities

For the six months ended June 30, 2022, net cash used in operating activities of $166.2 million consisted of a net loss of $197.8 million, partially offset by $44.3 million in adjustments for non-cash items and $12.7 million of cash used in net working capital.

Adjustments for non-cash items primarily consisted of $20.2 million in stock-based compensation expense, $8.5 million in depreciation and amortization expense, $6.9 million in non-cash interest related primarily to related-party promissory notes, a $4.1 million loss on equity method investment, $2.8 million in non-cash lease expense related to operating lease right-of-use assets, $1.3 million in other non-cash items, and $0.5 million in unrealized losses on equity securities driven by a decrease in the value of our investments.

The changes in net working capital consisted primarily of an increase of $14.5 million in prepaid and other current assets and decreases of $3.9 million with related parties and $2.2 million in operating lease liabilities, partially offset by increases of $6.5 million in accounts payable and $0.6 million in accrued expenses and other liabilities and a decrease of $0.7 million in other assets.

For the six months ended June 30, 2021, net cash used in operating activities of $130.1 million consisted of a net loss of $169.9 million, partially offset by $40.2 million in adjustments for non-cash items and $0.4 million of cash used in net working capital.

Adjustments for non-cash items primarily consisted of $33.2 million in stock-based compensation expense, $7.0 million in depreciation and amortization, $6.2 million in non-cash interest primarily related to related-party loans, and $2.3 million in non-cash lease expense related to operating lease right-of-use assets, reduced by $8.4 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 other assets of $4.2 million and decreases in accrued expenses and other liabilities of $3.8 million and operating lease liabilities of $3.0 million, partially offset by decreases of $5.4 million in other current assets including changes related to insurance claim receivables and prepaid manufacturing services and increases in accounts payable of $2.6 million, and amounts with related parties of $2.6 million.

For the nine months ended September 30, 2022, net cash used in operating activities of $246.8 million consisted of a net loss of $309.0 million and $1.4 million of cash used in net working capital, partially offset by $63.6 million in adjustments for non-cash items.

The changes in net working capital consisted primarily of an increase of $14.4 million in prepaid and other current assets, and decreases of $2.3 million in operating lease liabilities and $1.6 million with related parties, partially offset by an increase of $7.6 million in accounts payable, $7.2 million in accrued expenses and other liabilities, and decreases of $2.1 million in other assets.

Adjustments for non-cash items primarily consisted of $30.8 million in stock-based compensation expense, $13.8 million in non-cash interest and debt discount amortization primarily related to related-party promissory notes, $13.0 million in depreciation and amortization expense, $4.3 million in non-cash lease expense related to operating lease right‑of‑use assets, $1.3 million in other non-cash items, and a non-cash $0.7 million loss on the impairment of intangible assets, reduced by $0.2 million in unrealized gains on equity securities driven by an increase in the value of our investments and $0.1 million of other.

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, partially offset by $67.8 million in adjustments for non-cash items.

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

Adjustments for non-cash items primarily consisted of $47.0 million in stock-based compensation expense, $10.6 million in depreciation and amortization, $9.1 million in non-cash interest primarily related to related-party loans, $3.5 million in non ‑ cash lease expense related to operating lease right-of-use assets, and $0.3 million of non-cash amortization of net premiums and discounts on marketable debt securities reduced by $2.4 million in unrealized gains on marketable equity securities driven by an increase in the value of our investments and $0.3 million in other non-cash items.

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 six months ended June 30, 2022, net cash provided by investing activities was $47.4 million, which included cash inflows of $147.1 million from maturities and sales of marketable debt and equity securities, partially offset by $43.3 million of purchases of property, plant and equipment (including construction in process and depreciable property acquired in the Dunkirk acquisition), $34.2 million of purchases of marketable debt securities, $21.2 million for purchase of intangible assets (related to the Dunkirk acquisition), and a $1.0 million investment in the joint venture.

For the nine months ended September 30, 2022, net cash provided by investing activities was $46.2 million, which included cash inflows of $162.0 million from maturities and sales of marketable debt and equity securities, partially offset by $59.3 million of purchases of property, plant and equipment (including construction in process and depreciable property acquired in the Dunkirk acquisition), $34.3 million of purchases of marketable debt securities, $21.2 million for purchase of intangible assets (related to the Dunkirk acquisition), and a $1.0 million investment in a joint venture.

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 six months ended June 30, 2021, net cash provided by investing activities was $42.3 million, which included cash inflows of $57.7 million from maturities and sales of marketable debt securities, partially offset by $15.1 million of purchases of property, plant and equipment and $0.3 million in purchases of marketable debt securities.

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 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 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.

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Financing Activities

For the six months ended June 30, 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 six months ended June 30, 2021, net cash provided by financing activities was $136.8 million, which consisted of $95.0 million in net proceeds from the ATM offering, $40.0 million in net proceeds from issuances of related-party promissory notes and $4.4 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.

For the nine months ended September 30, 2022, net cash provided by financing activities was $123.7 million, which consisted of $124.4 million in net proceeds from issuances of related-party promissory notes, partially offset by $0.4 million related to net share settlement of vested RSUs for payment of payroll tax withholding and $0.3 million payment for contingent consideration.

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 net 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, partially offset by $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.

Future Funding Requirements

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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.

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

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

See Note 11 , Stockholders’ Deficit , of the “Notes to Unaudited Condensed Consolidated Financial Statements” that appears in Item 1.

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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.

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

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

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• 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 $100.6 million and is primarily related to capital expenditures, open purchase orders as of June 30, 2022 for the acquisition of goods and services in the ordinary course of business, and near term up-front milestone payments to third parties.

This amount totals $126.5 million and is primarily related to capital expenditures, open purchase orders as of September 30, 2022 for the acquisition of goods and services in the ordinary course of business, and near term upfront 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 June 30, 2022, the maximum amount that may be payable related to these commitments is $578.2 million.

As of September 30, 2022, the maximum amount that may be payable related to these commitments is $594.7 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.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis