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Item 7. Management’s Discussion and Analysis

2023-03-01 compared with 2022-03-01 · 194 added, 153 removed, 308 unchanged (53% of the section changed)

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

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

We have established one of the most comprehensive portfolios of immunotherapy and vaccine platforms, which include:

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

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, our novel antibody cytokine fusion protein, has received Breakthrough Therapy and Fast Track designations in combination with BCG from the FDA for BCG -unresponsive NMIBC CIS .

B ased on the reported results of the trial, we have initiated discussions with the FDA to file a BLA for Anktiva (to be branded VesAnktiva for intravesical administration) plus BCG for BCG-unresponsive NMIBC CIS.

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

Our platforms, which include 17 first-in-human therapeutic agents, are being studied in 26 actively recruiting clinical trials—17 of which are in Phase 2 or 3 development—across 13 indications in liquid and solid tumors, including bladder, pancreatic and lung cancers.

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

Our portfolio includes:

Our platforms include 9 first-in-human therapeutic agents that are currently being studied in 26 clinical trials—17 of which are in Phase 2 or 3 development—across 12 indications in liquid and solid tumors, including bladder, pancreatic and lung cancers.

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

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

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

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

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

Additionally, we believe that data from multiple clinical trials indicates N-803 has broad potential to enhance the activity of therapeutic mAbs, including checkpoint inhibitors (e.g., Keytruda ® ), across a wide range of tumor types.

N-803 is currently being studied in 21 clinical trials (both ImmunityBio and investigator-sponsored) across 12 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, Anktiva, ImmunityBio’s novel antibody cytokine fusion protein, has received Breakthrough Therapy and Fast Track designations in combination with BCG from the FDA for the treatment of patients with BCG -unresponsive NMIBC 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 that the FDA had 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.

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

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

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

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

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

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

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

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

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

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

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

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

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

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Accounting Treatment of the Merger

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

The Merger represents a business combination pursuant to Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 805-50, Mergers , which was 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 consolidated financial statements presented in Part II, Item 8.

We recast our prior period financial statements for the years ended December 31, 2021 and 2020 to reflect the conveyance of NantCell’s common shares as if the Merger had occurred as of the earliest date of the consolidated financial statements presented in Part II, Item 8.

“Financial Statements and Supplementary Data” of this Annual Report.

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As of December 31, 2022, we had 725 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.

Personnel of related companies who provide corporate, general and administrative, certain research and development, a nd 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 Consolidated Financial Statements” that appears in Part II, Item 8.

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Collaboration Agreements

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

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

We are currently pursuing this aspect of our business in 13 clinical trials studying our IL-15 superagonist fusion protein Anktiva in combination with complementary, approved therapies to determine if Anktiva may have broad potential to enhance the activity of those therapies, including mAbs and other standard-of-care therapeutics across a wide range of tumor types.

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

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

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

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

N-803 is currently being studied in 21 clinical trials (both ImmunityBio and investigator-sponsored) across 12 indications.

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

See Note 6 , Collaboration and License Agreements , of the “Notes to Consolidated Financial Statements” that appears in Part II, Item 8.

See Note 6 , Collaboration and License Agreements and Acquisition , of the “Notes to Consolidated Financial Statements” that appears in Part II, Item 8.

“Financial Statements and Supplementary Data” of this Annual Report for a more detailed discussion regarding our collaboration and license agreements.

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

We have entered into arrangements with NantWorks, and certain affiliates of NantWorks, to facilitate the development of new immunotherapies for our product pipeline.

We have entered into arrangements with NantWorks, and certain affiliates of NantWorks.

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 December 31, 2021, we have outstanding fixed-rate promissory notes with entities affiliated with Dr.

Soon-Shiong in an aggregate amount of $306.3 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 beginning June 30, 2021.

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

In addition, as of December 31, 2021 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 December 31, 2021, the interest rate on this loan was 5.47%.

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 discussion 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 I V , Item 15 .

“ Exhibits and F inancial S tatement S chedules ” of this Annual Report.

$50.0 million Variable-Rate Promissory Note

On December 12, 2022, the company executed a $50.0 million promissory note with Nant Capital, an entity affiliated with Dr.

Soon-Shiong, our Executive Chairman and Global Chief Scientific and Medical Officer.

This note bears interest at Term Secured Overnight Financing Rate (Term SOFR) plus 8.0% per annum.

The accrued interest on this note shall be payable quarterly on the last business day of March, June, September and December, commencing on December 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 must prepay the outstanding principal amount, together with any accrued interest, if requested by the holder, following the successful closing of a strategic collaboration transaction with a large biopharmaceutical company.

The company received net proceeds of $49.7 million, net of a $0.3 million origination fee paid to the lender, which the company intends to use for pre-commercialization efforts and clinical development programs, other research and development activities, capital expenditures, and other general corporate purposes.

Conversion of Fixed-Rate Promissory Note due 2025

On December 12, 2022, the company received written notice from NantWorks, the holder of the existing convertible promissory note of NantCell, Inc., a wholly-owned subsidiary of the company (the Existing Note), of its election to convert the entire outstanding principal and accrued interest under the Existing Note into shares of the company’s common stock.

As of such date, the entire outstanding principal amount and accrued and unpaid interest due under the Existing Note was approximately $56.6 million, which were converted into 9,986,920 shares of the company’s common stock at a price of $5.67 per share in accordance with the terms of the Existing Note.

$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 pre-commercialization efforts and clinical development programs, working capital and other general corporate purposes.

$300.0 million Variable-Rate Promissory Note

As of December 31, 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 December 31, 2022, the company has outstanding fixed-rate promissory notes with entities affiliated with Dr.

Soon-Shiong in an aggregate amount of $262.4 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.

I mmuno-Oncology Clinic, Inc.

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

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

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

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

In the second quarter of 2021, b ased on a review of our then updated clinical trial programs post-Merger, we updated our estimates of the investigator fees for the clinical trials that were underway or planned at the Clinic.

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

As a result, we partially wrote down the value of our prepayments under the Clinic agreements and recorded approximately $1.9 million in research and development expense , on the consolidated statement of operations for the three months ended June 30,2021.

In November 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 performe d by the Clinic as contemplated in the original agreements.

As a r esult, we wrote down the remaining value of our prepaid asset and recorded approximately $2.5 million in research and development expense , on the consolidated statement of operations for the three months ended December 31, 2021.

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.

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.

NantBio, Inc.

In 2018, we entered into a supply agreement with NantCancerStemCell, LLC (NCSC), a 60% owned subsidiary of NantBio (with the other 40% owned by Sorrento).

Under this agreement, we agreed to supply VivaBioCell’s proprietary GMP-in-a-Box bioreactors and related consumables, made according to specifications mutually agreed to with both companies.

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.

Duley Road, LLC

In 2017, Altor BioScience Corporation (succeeded by our wholly-owned subsidiary Altor BioScience, LLC), through its wholly-owned subsidiary, entered into a lease agreement with Duley Road, a related party that is indirectly controlled by our Executive Chairman and Global Chief Scientific and Medical Officer, for office and cGMP manufacturing facility space in El Segundo, California.

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

Both floors of the building are used for research and development and office space.

605 Nash, LLC

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

In May 2021, but effective on April 1, 2021, we entered into an amendment to our lease agreement with 605 Nash, LLC to expand the rentable leased square feet.

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.

We continue productive negotiations with potential partners around alternative structures and expect to complete the process during the year ending December 31, 2023, but there can be no assurance that we will be successful.

For the year ended December 31, 2022 , we incurred $2.4 million in research and development expense , on the consolidated statement of operations related to clinical trial and transition services provided by the Clinic.

Related-Party Leases

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 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

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

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

Brink Biologics, Inc.

In 2015, we entered into an agreement with Brink Biologics, Inc.

(Brink) whereby we granted to Brink worldwide exclusive licenses to the use of certain cell lines and intellectual property for non-clinical laboratory testing.

Brink is a related party as our Executive Chairman, Global Chief Scientific and Medical Officer and our principal stockholder, and our Chief Corporate Affairs Officer and member of our board of directors, collectively own more than 50% of Brink’s outstanding shares.

420 Nash, LLC

In September 2021, we entered into a lease agreement with 420 Nash, LLC, a related party, for a facility located at 420 Nash Street, El Segundo, California, to be used primarily for the warehousing and storage of drug manufacturing supplies, products and equipment and ancillary office space.

The company has options to extend the lease term for two additional consecutive periods of five years each.

See Note 8 , Related-Party Agreements , of the “Notes to Consolidated Financial Statements” that appears in Part II, Item 8.

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 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 Consolidated Financial Statements” that appear in Part II, Item 8.

“Financial Statements and Supplementary Data” of this Annual Report for a more detailed discussion regarding our related-party agreements.

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• facility expenses dedicated to research and development.

We typically use our employee, consultant and infrastructure resources across our development programs.

We track outsourced development costs by product candidate or development program, but we do not allocate personnel costs, other internal costs or external consultant costs to specific product candidates or development programs.

The company classifies its research and development expenses as either external or internal.

The company’s external research and development expenses support its various preclinical and clinical programs.

The company’s internal research and development expenses include payroll and benefits expenses, facilities and equipment expense, and other indirect research and development expenses incurred in support of its research and development activities.

The company’s external and internal resources are not directly tied to any one research or drug discovery program and are typically deployed across multiple programs and are not allocated to specific product candidates or development programs.

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

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• the duration of patient follow-up;

• the efficacy and safety profile of the product candidate.

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

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

• the safety profile and efficacy of the product candidate.

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 that the FDA had 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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From inception through December 31, 2022, we have not been required to pay U.S.

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

Discussion of Results of Operations

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

Discussion of Consolidated Results of Operations

Comparison of the Years Ended December 31, 2022 and 2021

For the Year Ended December 31,

Year Ended December 31,

2022 2021 $ Change % Change

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Loss on equity method investment (12,107) (803) (11,304) 1408 %

Other income, net (including amounts

Change in fair value of warrant liability 13,460 — 13,460 — %

Other (loss) income, net (including amounts

with related parties) (736) 193 (929) (481) %

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Net loss $ (417,320) $ (349,848) $ (67,472) 19 %

Revenue increased $0.3 million for the year ended December 31, 2021, as compared to the year ended December 31, 2020.

The increase was primarily driven by royalty revenue in 2021 from a sublicense agreement.

Revenue decreased $0.7 million for the year ended December 31, 2022, as compared to the year ended December 31, 2021.

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

Research and Development Expense

Research and development expense increased $56.5 million for the year ended December 31, 2021, as compared to the year ended December 31, 2020.

The increase in research and development expense was primarily driven by a $32.1 million increase in compensation expense, including an $18.6 million increase in stock-based compensation expense due to new grants issued to employees and executives and a $13.5 million increase in personnel costs due to higher headcount in support of our continued research and development efforts, a $6.9 million increase in clinical trial expenses and regulatory costs related to our Anktiva and COVID-19 programs, including a $4.4 million expense associated with the write down of a prepaid asset with the Clinic, a $6.6 million increase in facilities expense, primarily related to the expansion of one of our manufacturing facilities in El Segundo, California during 2021 and increased maintenance costs at our various facilities, a $5.5 million increase in quality control and research and development-related technology expense, a $3.5 million increase in laboratory supply expense related to our COVID-19 programs ramp up and NK-92 and M-ceNK cell therapy research, and a $2.4 million increase in shared services costs to support our growth.

These increases were partially offset by a $0.5 million decrease in consulting costs.

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

Research and development expenses were $248.1 million for the year ended December 31, 2022, compared to $196.0 million for the year ended December 31, 2021.

The following table summarizes our research and development expenses for the years ended December 31, 2022 and 2021, together with the changes in those items (in thousands):

Year Ended December 31,

2022 2021 $ Change

External research and development expenses $ 59,993 $ 36,985 $ 23,008

Internal research and development expenses:

Personnel-related costs 96,357 82,546 13,811

Equipment, depreciation, and facility costs 53,920 35,631 18,289

Other research and development costs 37,879 40,796 (2,917)

Total internal research and development expenses 188,156 158,973 29,183

Total research and development expenses $ 248,149 $ 195,958 $ 52,191

Research and development expense increased $52.2 million primarily attributable to the following:

• A $23.0 million increase in external research and development expenses that was primarily due to a rise in CMO fees and drug materials purchased used in manufacturing, an increase in regulatory and compliance costs resulting from the BLA submission for our product candidate Anktiva, and higher equipment validation and qualification costs;

• A $13.8 million increase in personnel-related costs that was primarily the result of higher headcount additions for personnel involved in our quality control, clinical operations and drug discovery and development activities;

• An $18.3 million increase in equipment, depreciation, and facility costs that was primarily due to the expansion of our manufacturing facilities in California and New York, which resulted in increases in lease expense, maintenance costs, and depreciation expense;

• A $2.9 million decrease in other research and development costs that was primarily attributable to greater nonclinical collaboration expenses in the current period allocated to our joint venture, partially offset by an increase in application costs associated with submitting the BLA for our product candidate Anktiva, an increase in impairment costs associated with a group of long-lived assets, and an increase in license fees.

We expect our research and development expenses to increase significantly for the foreseeable future as we continue to invest in research and development activities related to developing our product candidates and conduct our ongoing and planned clinical trials.

Selling, General and Administrative Expense

Selling, general and administrative expense increased $63.9 million for the year ended December 31, 2021, as compared to the year ended December 31, 2020.

The increase in selling, general and administrative expense was primarily attributable to a $42.2 million increase in compensation expense, including a $36.4 million increase in stock-based compensation expense driven by awards granted to employees and executives and option modifications resulting in incremental stock-based compensation expense in 2021 and a $5.8 million increase in personnel costs related to higher headcount needed to support our business activities, a $19.3 million increase in professional services fees related to Merger costs, SOX compliance, the combined company audit, our recruitment and business growth strategy, various legal matters, and new system implementations, and a $3.2 million increase in insurance costs, primarily due to higher directors’ and officers’ insurance renewal rates and increased insurance coverage.

These increases were partially offset by an $0.8 million decrease in shared service costs and other general and administrative expense.

Selling, general and administrative expense decreased $32.5 million for the year ended December 31, 2022, as compared to the year ended December 31, 2021.

The reduction in selling, general and administrative expense was primarily driven by a $29.5 million net decline in legal expenses as a result of greater insurance reimbursements received in the current period that offset current-period legal expenses, as well as $11.0 million in lower general consulting costs and insurance costs primarily due to Merger-related expenses incurred in the prior period.

These decreases were partially offset by an increase of $4.7 million in personnel costs, including shared services costs and stock compensation costs as a result of a rise in headcount, recruiting costs and travel-related expenses, as well as an increase of $1.8 million in software license fees and an increase of $1.5 million in facility costs and other general administrative expenses.

Impairment of Intangible Assets

During the year ended December 31, 2020, the company recorded an impairment charge totaling $10.7 million to write down the carrying value of indefinite-lived in-process research and development intangible assets associated with the acquisition of Receptome, LLC to zero in connection with the decision to discontinue certain programs based on results gathered from preclinical data.

Impairment of intangible assets increased $0.7 million for the year ended December 31, 2022, compared to the year ended December 31, 2021, due to the write off of the organized workforce with definite lives as a result of the workforce reduction at the Dunkirk Facility.

Other Expense, Net

Other expense, net increased $14.4 million for the year ended December 31, 2021, as compared to the year ended December 31, 2020.

The increase was due to a $6.5 million decrease in interest and investment income, driven primarily by a $6.2 million net unrealized loss from equity securities and a $0.9 million decrease in interest income, partially offset by a $0.4 million decrease in accretion of investment premiums and $0.2 million of net realized gains on investments ;

a $5.8 million increase in interest expense driven primarily by higher related-party borrowings;

an $0.8 million loss on equity method investment;

and a $1.3 million decrease in other income in our subsidiaries and foreign exchanges losses.

Other expense, net increased $46.4 million during the year ended December 31, 2022, as compared to the year ended December 31, 2021.

The increase was due to a $48.7 million increase in interest expense driven by an increase in related ‑ party borrowings along with an increase in SOFR rates and a mortization of debt discounts related to a gain on debt extinguishments , as well as an $11.3 million loss on our equity method investment in a joint venture, and an additional $0.9 million increase in other costs as a result of issuance costs allocated to the warrant liability.

These increases were partially offset by a $13.5 million decrease in the fair value of our warrant liability and a $1.0 million decrease in net interest and investment losses as a result of higher interest income and lower unrealized losses related to marketable equity securities partially offset by amortization of premiums on our marketable debt securities.

Comparison of the Years Ended December 31, 2021 to 2020

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations” in the Management’s Discussion and Analysis of Financial Condition and Results of Operations of ImmunityBio, Inc.

filed as Exhibit 99.3 to our Current Report on Form 8-K/A filed with the SEC on April 22, 2021 for a discussion of the company’s results of operations for the year ended December 31, 2020 compared to the year ended December 31, 2019.

See Part II, Item 7, “ Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations ” of our Annual Report on Form 10-K filed with the SEC on March 1, 2022 for a discussion of the company’s results of operations for the year ended December 31, 2021 compared to the year ended December 31, 2020.

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.

Cash and Marketable Securities on Hand

As of December 31, 2022, we had cash and cash equivalents, and marketable securities of $108.0 million compared to $317.9 million as of December 31, 2021.

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

For the year ended December 31, 2021, we received net proceeds totaling $164.5 million from the issuance of 13,295,817 shares under the ATM, which we expect to use for general corporate purposes, including to progress our clinical development programs, fund other research and development activities, make capital expenditures and fund working capital.

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

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

On April 30, 2021, we entered into an open market sale agreement (the 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, which was subsequently reduced by $92.0 million during December 2022 in connection with a sale of our common stock.

As of December 31, 2022, we had $225.4 million available for future stock issuances under the ATM.

See Note 12 , Stockholders’ Deficit , of the “Notes to Consolidated Financial Statements” that appears in Part II, Item 8.

“Financial Statements and Supplementary Data” of this Annual Report.

Proceeds from the ATM

For the year ended December 31, 2022, we received net proceeds totaling $13.1 million from the issuance of 2,051,894 shares under the ATM.

We currently intend to use the net proceeds from this offering for pre-commercialization efforts and clinical development programs, other research and development activities, capital expenditures, and other general corporate purposes.

Proceeds from Registered Direct Offerings

On December 12, 2022, we entered into a securities purchase agreement with an institutional investor for the sale of 9,090,909 shares of our common stock, as well as warrants to purchase an additional 9,090,909 shares of common stock at an exercise price of $6.60 per share, for a purchase price of $5.50 per share and accompanying warrant, generating net proceeds of approximately $47.0 million, after deducting placement agent fees and other offering costs.

We currently intend to use the net proceeds from this offering, together with other available funds, to progress our pre-commercialization efforts and clinical development programs, fund other research and development activities, for capital expenditures, and for other general corporate purposes.

On February 15, 2023, we entered into a securities purchase agreement with certain institutional investors for the sale of 14,072,615 shares of our common stock, as well as warrants to purchase an additional 14,072,615 shares of common stock at an exercise price of $4.2636 per share, for a purchase price of $3.5530 per share and accompanying warrant, generating net proceeds of approximately $47.0 million, after deducting placement agent fees and other estimated offering costs.

The closing of the offering occurred on February 17, 2023.

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

See “ Subsequent Event ” for further information.

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 December 31, 2021, our indebtedness totals $605.6 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 December 31, 2022, our indebtedness payable at maturity totals $737.4 million (excluding unamortized related-party notes discounts), held by entities affiliated with Dr.

Of this amount, $475.0 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 $262.4 million is due and payable on September 30, 2025, including any accrued and unpaid interest.

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

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

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

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

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 of contingent consideration upon the successful regulatory approval of a BLA by the FDA, or foreign equivalent, for N-803 by December 31, 2022, and approximately $304.0 million of contingent consideration 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.

With respect to the regulatory milestone CVR agreement, in May 2022 we announced the submission of a BLA to the FDA for our product candidate, Anktiva (N-803) in combination with BCG for the treatment of patients with BCG-unresponsive NMIBC with CIS with or without Ta or T1 disease .

I n July 2022 we announced that the FDA had 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.

The FDA did not approve our BLA on or before December 31, 2022, and therefore the regulatory milestone was not met, and the regulatory milestone CVR agreement terminated in accordance with its terms.

With respect to the net sales milestone CVR agreement, as of December 31, 2022, Dr.

Soon-Shiong and his related party hold approximately $139.8 million of net sales 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 for their net sales CVRs should they choose to have their 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.

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

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

For the Year Ended December 31,

(in thousands)

Cash provided by (used in):

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

Year Ended December 31,

Cash (used in) provided by:

Operating activities $ (337,509) $ (274,419)

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Operating Activities

For the year ended December 31, 2021, net cash used in operating activities of $274.4 million consisted of a net loss of $349.8 million and $19.1 million of cash used in net working capital changes, partially offset by $94.5 million in adjustments for non-cash items.

The changes in net working capital consisted primarily of decreases of $10.2 million with related parties, $4.2 million in operating lease liabilities, $4.0 million in investment and other assets, $3.7 million in accounts payable, and $2.2 million in prepaid and other current assets, partially offset by an increase of $5.2 million in accrued expenses and other liabilities.

Adjustments for non-cash items primarily consisted of $57.2 million in stock-based compensation expense, $14.2 million in depreciation and amortization expense, $12.5 million in non-cash interest related primarily to related-party promissory notes, $4.9 million in non-cash lease expense related to operating lease right-of-use assets, $4.6 million in unrealized losses on equity securities driven primarily by a decrease in the value of our investments, $0.8 million loss on our equity investment in the joint venture and $0.3 million in other non-cash items.

For the year ended December 31, 2020, net cash used in operating activities of $171.7 million consisted of a net loss of $224.2 million, partially offset by $36.1 million in adjustments for non-cash items and $16.4 million of cash provided by net working capital changes.

Adjustments for non-cash items primarily consisted of $12.7 million in depreciation and amortization, an impairment of intangible assets totaling $10.7 million, $8.5 million in non-cash interest items related primarily to related-party promissory notes, $5.2 million in non-cash lease expense related to operating lease right-of-use assets, $2.2 million in stock-based compensation expense, a $1.4 million unrealized loss on non-marketable equity investment, and $1.2 million in other non-cash items, partially offset by a $2.9 million change in deferred tax liability, and a $2.9 million unrealized gain on equity securities.

The changes in net working capital consisted primarily of increases related to $12.5 million in accrued expenses and other liabilities, $3.4 million with related parties, and $2.6 million in accounts payable, and a decrease related to $4.2 million in prepaid expenses and other current assets, partially offset by decreases related to $5.6 million in operating lease liabilities and $0.7 million in investment and other assets.

For the year ended December 31, 2022, net cash used in operating activities of $337.5 million consisted of a net loss of $417.3 million and $8.0 million of cash used in net working capital, partially offset by $87.8 million in adjustments for non-cash items.

The changes in net working capital consisted primarily of an increase of $16.6 million in prepaid expenses and other current assets, and decreases of $4.3 million in operating lease liabilities and $1.2 million with related parties, partially offset by an increase of $8.0 million in accounts payable, an increase of $4.1 million in accrued expenses and other liabilities, and a decrease of $2.0 million in investment and other assets.

Adjustments for non-cash items primarily consisted of $40.2 million in stock-based compensation expense, $18.3 million in depreciation and amortization expense, $16.3 million in amortization of debt issuance costs and accretion of discounts, $11.7 million in non-cash interest primarily related to related-party promissory notes, $5.9 million in non-cash lease expense related to operating lease right‑of‑use assets, $4.2 million in unrealized loss on equity securities driven by a decrease in the value of our investments, $1.3 million in loss on impairment of fixed assets, $1.3 million in amortization of premiums, net of discounts, on marketable debt securities, $1.1 million in transaction costs allocable to warrant liability, a non-cash $0.7 million loss on the impairment of intangible assets, and $0.3 million in other non-cash items, reduced by a $13.5 million change in fair value of warrant liability.

For the year ended December 31, 2021, net cash used in operating activities of $274.4 million consisted of a net loss of $349.8 million and $19.1 million of cash used in net working capital, partially offset by $94.5 million in adjustments for non-cash items.

The change in net working capital consisted primarily of decreases of $10.2 million with related parties and $4.2 million in operating lease liabilities, an increase of $4.0 million in investment and other assets, a decrease of $3.7 million in accounts payable, and an increase of $2.2 million in prepaid and other current assets, partially offset by an increase of $5.2 million in accrued expenses and other liabilities.

Adjustments for non-cash items primarily consisted of $57.2 million in stock-based compensation expense, $14.2 million in depreciation and amortization, $12.4 million in non-cash interest primarily related to related-party loans, $4.9 million in non ‑ cash lease expense related to operating lease right-of-use assets, $4.6 million in unrealized losses on equity securities driven primarily by a decrease in the value of our investments, $0.8 million in other non-cash items, and $0.4 million in amortization of premiums, net of discounts, on marketable debt securities.

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 year ended December 31, 2021, net cash used in investing activities was $84.9 million, which included $141.8 million of purchases of marketable debt securities and $33.6 million of purchases of property, plant and equipment, partially offset by cash inflows of $70.0 million from maturities and sales of marketable debt and equity securities, and $20.5 million in proceeds from the sale of 557 Doug St, LLC that were allocated to the book value of the property.

For the year ended December 31, 2022, net cash provided by investing activities was $27.3 million, which included cash inflows of $162.0 million from maturities and sales of marketable debt and equity securities, partially offset by $78.2 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 year ended December 31, 2020, net cash used in investing activities was $19.8 million, which included $91.8 million of purchases of marketable debt securities and $1.7 million of purchases of property, plant and equipment, partially offset by cash inflows of $73.7 million from maturities and sales of marketable debt securities.

For the year ended December 31, 2021, net cash used in investing activities was $84.9 million, which included $141.8 million in purchases of marketable debt securities and $33.6 million of purchases of property, plant and equipment, partially offset by cash inflows of $70.0 million from maturities and sales of marketable debt and equity securities and $20.5 million in proceeds from the sale of 557 Doug St, LLC that were allocated to the book value of the property.

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

Financing Activities

For the year ended December 31, 2022, net cash provided by financing activities was $233.6 million, which consisted of $174.1 million in net proceeds from issuances of related-party promissory notes, $47.3 million in net proceeds from a registered direct offering, and $13.1 million in net proceeds from the ATM offering, partially offset by $0.6 million related to net share settlement of vested RSUs for payment of payroll tax withholding and $0.3 million used in other financing activities.

For the year ended December 31, 2021, net cash provided by financing activities was $505.4 million, which consisted of $338.5 million in net proceeds from issuances of related-party promissory notes, $164.5 million in net proceeds from the ATM offering, $5.5 million in proceeds from exercises of stock options and a $1.4 million capital contribution representing excess proceeds received over book value from the sale of 557 Doug St, LLC to an entity under common control.

Net cash used in financing activities consisted of $4.1 million related to net share settlement of vested RSUs for payment of payroll tax withholding and a $0.4 million payment for contingent consideration.

For the year ended December 31, 2020, net cash provided by financing activities was $150.7 million, which consisted primarily of $86.3 million in net proceeds from an equity offering, $63.7 million in proceeds from issuances of related-party promissory notes and $1.2 million in proceeds from exercises of stock options, partially offset by $0.5 million related to net share settlement of vested RSUs for payment of payroll tax withholding.

Comparison of the Years Ended December 31, 2021 to 2020

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Consolidated Cash Flows” in the Management’s Discussion and Analysis of Financial Condition and Results of Operations of ImmunityBio, Inc.

filed as Exhibit 99.3 to our Current Report on Form 8-K/A filed with the SEC on April 22, 2021 for a discussion of the company’s consolidated cash flows for the year ended December 31, 2020 compared to the year ended December 31, 2019.

See Part II, Item 7, “ Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations ” of our Annual Report on Form 10-K filed with the SEC on March 1, 2022 for a discussion of the company’s consolidated cash flows for the year ended December 31, 2021 compared to the year ended December 31, 2020.

Future Funding Requirements

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

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

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

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Unless and until we can generate a sufficient amount of revenues, we may finance future cash needs through public or private equity offerings, license agreements, debt financings, collaborations, strategic alliances and marketing or distribution arrangements.

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 December 31, 2022, we had $225.4 million available for future stock issuances under the ATM.

See Note 9 , Stockholders’ Deficit , of the “Notes to Consolidated Financial Statements” that appear in Part II, Item 8.

See Note 12 , Stockholders’ Deficit , of the “Notes to Consolidated Financial Statements” that appears in Part II, Item 8.

“Financial Statements and Supplementary Data” of this Annual Report.

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

For information regarding our financing obligations, see Note 8 , Related-Party Agreements—Related-Party Notes Payable, of the “Notes to Consolidated Financial Statements” that appears in Part II, Item 8.

For information regarding our financing obligations, see Note 9 , Related-Party Debt, of the “Notes to Consolidated Financial Statements” that appears in Part II, Item 8.

“Financial Statements and Supplementary Data” of this Annual Report.

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

For information regarding our lease obligations, see Note 7 , Commitments and Contingencies—Lease Arrangements, and Note 8 , Related-Party Agreements, of the “Notes to Consolidated Financial Statements” that appear in Part II, Item 8.

For information regarding our lease obligations, see Note 8 , Lease Arrangements, and Note 10 , Related-Party Agreements, of the “Notes to Consolidated Financial Statements” that appear in Part II, Item 8.

“Financial Statements and Supplementary Data” of this Annual Report.

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

For information regarding our contingent consideration obligations, see Note 7 , Commitments and Contingencies—Contingent Considerations Related to Business Combinations, of the “Notes to Consolidated Financial Statements” that appears in Part II, Item 8.

For information regarding our contingent consideration obligations, see Note 7 , Commitments and Contingencies—Contingent Consideration Related to Business Combinations, of the “Notes to Consolidated Financial Statements” that appears in Part II, Item 8.

“Financial Statements and Supplementary Data” of this Annual Report.

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

For information on these unconditional purchase obligations, see Note 7 , Commitments and Contingencies—Contingent Consideration Related to Business Combinations, of the “Notes to Consolidated Financial Statements” that appears in Part II, Item 8.

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

For information on these unconditional purchase obligations, see Note 7 , Commitments and Contingencies—Unconditional Purchase Obligations, of the “Notes to Consolidated Financial Statements” that appears in Part II, Item 8.

“Financial Statements and Supplementary Data” of this Annual Report.

• 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 $72.7 million and is primarily related to capital expenditures, open purchase orders as of December 31, 2021 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 $121.1 million and is primarily related to capital expenditures, open purchase orders as of December 31, 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 2024 and beyond based on the achievement of various development, regulatory and commercial milestones for agreements with third parties.

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As of December 31, 2022, the maximum amount that may be payable related to these commitments is $780.3 million.

On February 14, 2022 , we acquired a leasehold interest in the Dunkirk Facility.

In connection with this lease , w e 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.

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

These amounts are not included in the discussion above.

See “— Subse quent Events —Acquisition of cGMP ISO Class 5 Manufacturing Facility”.

See Note 6 , Collaboration and License Agreements and Acquisition , of the “Notes to Consolidated Financial Statements” that appears in Part II, Item 8.

“Financial Statements and Supplementary Data” of this Annual Report.

Critical Accounting Policies and Estimates

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

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

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

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

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

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

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

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

Actual results could differ from those estimates.

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Upfront payments and fees are recorded as deferred revenue upon receipt and recognized as revenue when we satisfy our performance obligations under these arrangements.

Grant revenue is typically paid for reimbursable costs incurred over the duration of the associated research project or clinical trial and is recognized when expenses reimbursable under the grants have been incurred and payments under the grants become contractually due.

The company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC Topic 480, Distinguishing Liabilities from Equity (ASC 480), and ASC Topic 815, Derivatives and Hedging (ASC 815).

The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the company’s own stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the company’s control, among other conditions for equity classification.

This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

For warrants that meet all criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance.

For warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and on each balance sheet date thereafter.

Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss in o ther income (expense), net , on the consolidated statement of operations.

The fair value of the warrants was estimated using the Black-Scholes option pricing model.

Business Combinations

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Acquisition costs are expensed as incurred.

Estimating fair value requires us to make significant judgments and assumptions.

Contingent consideration obligations incurred in connection with a business combination are recorded at their fair values on the acquisition date and re-measured at their fair values each subsequent reporting period until the related contingencies are resolved.

The resulting changes in fair values are recorded as research and development expense, on the consolidated statements of operations and comprehensive loss.

Contingent consideration incurred in connection with a business combination are recorded at their fair values on the acquisition date and re-measured at their fair values each subsequent reporting period until the related contingencies are resolved.

The resulting changes in fair values are recorded as research and development expense, on the consolidated statements of operations and comprehensive income (loss).

Changes in fair values reflect changes to our assumptions regarding probabilities of successful achievement of related milestones, the timing in which the milestones are expected to be achieved, and the discount rate used to estimate the fair value of the obligation.

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We estimate fair value of each stock option award on the date of grant using the Black-Scholes option pricing model.

The Black-Scholes model requires the use of highly subjective assumptions, including, but not limited to, expected stock price volatility over the term of the awards and the expected term of the stock options.

The Black-Scholes option pricing model requires the use of highly subjective assumptions, including, but not limited to, expected stock price volatility over the term of the awards and the expected term of the stock options.

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

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Upon the final resolution of such matters, it is possible that there may be a loss in excess of the amount recorded, and such amounts could have a material adverse effect on our results of operations, cash flows or financial position.

We evaluate, on a quarterly basis, developments in legal proceedings and other matters that could cause a change in the potential amount of the liability recorded or of the range of potential losses disclosed.

As of December 31, 2021, we recorded an accrual of $7.1 million contingency related to the dissenting share obligations in accrued and other current liabilities, on our consolidated balance sheets.

See further information in Note 7 , Commitments and Contingencies, of the “Notes to Consolidated Financial Statements” included in Part II, Item 8.

We evaluate, on a quarterly basis, developments in legal proceedings and other matters that could cause a change in the potential amount of the liability recorded or the range of potential losses disclosed.

Moreover, we record gain contingencies only when they are realizable and the amount is known.

Additionally, we record our rights to insurance recoveries, limited to the extent of incurred or probable losses, as a receivable when such recoveries have been agreed to with our third-party insurers and when receipt is deemed probable.

This includes instances when our third-party insurers have agreed to pay, on our behalf, certain legal defense costs and settlement amounts directly to applicable law firms and a settlement fund.

See further information in Note 7 , Commitments and Contingencies, of the “Notes to Consolidated Financial Statements” that appears in Part II, Item 8.

“Financial Statements and Supplementary Data” of this Annual Report.

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“Financial Statements and Supplementary Data” of this Annual Report for a discussion of recent accounting pronouncements or changes in accounting pronouncements that are of significance, or potential significance, to us.

Subsequent Events

Increase in Shares of Common Stock Authorized for Issuance

Effective February 1, 2022, ImmunityBio amended its Amended and Restated Certificate of Incorporation to increase the number of shares that the company is authorized to issue from 500,000,000 shares of common stock, $0.0001 par value per share, to 900,000,000 shares of common stock, $0.0001 par value per share.

The number of shares of preferred stock, $0.0001 par value per share, that the company is authorized to issue remained unchanged at 20,000,000 shares.

Acquisition of cGMP ISO Class 5 Manufacturing Facility

On February 14, 2022, we acquired a leasehold interest in approximately 409,000 rentable square feet of cGMP ISO Class 5 pharmaceutical manufacturing space in western New York from Athenex.

The facility provides us with a state-of-the-art biotech production center that substantially expands and diversifies our existing manufacturing capacity in the U.S.

We paid approximately $40.0 million to Athenex, and the leasehold interest in the Dunkirk Facility was transferred to us.

Our annual lease payment will be $2.00 per year for an initial 10-year term, with an option to renew the lease under substantially the same terms and conditions for an additional 10-year term.

As part of the transaction, we assumed obligations under various third-party agreements, and committed to spend $1.52 billion on operational expenses during the initial term, and an additional $1.50 billion on operational expenses if we elect to renew the lease for the additional 10-year term.

We also committed to hiring 450 employees at the Dunkirk Facility within the first five years of operations, with 300 such employees to be hired within the first 2.5 years of operation.

We are eligible for certain sales-tax exemption savings during the development of the Dunkirk Facility, and certain property tax savings over the next 20 years, subject to certain terms and conditions, including performance of certain of the obligations described above.

Subsequent Event

Registered Direct Offering

The warrants are immediately exercisable after the issuance date and expire two years after the initial issuance date.

The closing of the offering occurred on February 17, 2023.

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

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

What changed 10-K

Item 7. Management’s Discussion and Analysis