What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-03-01 compared with 2022-03-01 · 655 added, 605 removed, 1107 unchanged (53% of the section changed)

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generally accepted accounting principles.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 1, 2022 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 1, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

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Description of the

Matter As discussed in Note 8 to the consolidated financial statements, the Company’s Executive Chairman and Global Chief Scientific and Medical Officer has a controlling interest in certain entities with which the Company has entered into material transactions including shared services agreement with NantWorks and related party notes payable with NantWorks, Nant Capital, NantMobile, and NantCancerStemCell.

Affiliates of such entities are also affiliates of the Company due to the common control of the Company’s Executive Chairman and Global Chief Scientific and Medical Officer.

Assessing the sufficiency of procedures performed to identify related parties and related party transactions and determining the identified related party transactions were properly recorded, presented and disclosed was challenging due to the nature, volume and the significance of related party transactions.

Matter As described in Notes 9 and 10 to the consolidated financial statements, the Company’s Executive Chairman, Global Chief Scientific and Medical Officer and principal stockholder Dr.

Patrick Soon-Shiong has a controlling interest in certain entities with which the Company has entered into material transactions including related party debt transactions with Nant Capital, LLC, NantWorks, NantMobile, LLC and NantCancerStemCell.

Affiliates of such entities are also affiliates of the Company due to the common control of the Company’s Executive Chairman, Global Chief Scientific and Medical Officer and principal stockholder.

Assessing the sufficiency of procedures performed to identify related parties and significant related party transactions and determining the identified significant related party transactions were properly recorded, presented and disclosed was challenging due to the nature, volume and the significance of related party transactions.

How We Addressed

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Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls over the Company’s related party process.

This included testing controls over management’s identification, review and disclosure of related party transactions.

We tested management’s controls over the completeness and accuracy of the related party disclosures in the consolidated financial statements.

The audit procedures we performed included, among others, testing the completeness and accuracy of the listing of significant related parties identified and related party transactions provided by management, and testing the manner in which related party transactions were recorded, presented and disclosed.

We performed journal entry searches of identified related parties to verify completeness and accuracy of the Company’s related party transactions.

We also inspected questionnaires received from the Company’s directors and officers, read minutes of the meetings of Board of Directors and its various Committees, read employment and compensation contracts, proxy statements and other relevant filings with the Securities and Exchange Commission and other regulatory agencies that relate to the Company’s financial relationships and transactions with the Company’s executive officers and with other entities controlled by the Company’s Executive Chairman and Global Chief Scientific and Medical Officer.

We confirmed the transactions and/or balances, as applicable, with the related parties including amounts payable to NantWorks under the shared service agreement and related party notes payable to Nant Capital, NantMobile, NantWorks and NantCancerStemCell.

We also obtained the underlying agreements and assessed the associated accounting and disclosures.

We designed and executed our tests of account balances and transaction details to assess potential effects on the Company’s identified related parties and related party transactions.

We inquired of management and members of the Company’s audit committee regarding the completeness of the related party transactions identified.

We have evaluated the Company’s related party disclosures included in Note 8 in relation to these matters.

This included testing controls over management’s identification, review, recognition and disclosure of significant related party transactions.

The audit procedures we performed included, among others, testing the completeness and accuracy of the listing of related parties identified and significant related party transactions provided by management, and testing the manner in which significant related party transactions were recorded, presented and disclosed.

We performed journal entry searches of identified related parties to verify completeness and accuracy of the Company’s significant related party transactions.

We inquired of management and members of the Company’s audit committee regarding the completeness of the significant related party transactions identified.

We also inspected questionnaires received from the Company’s directors and officers, read minutes of the meetings of Board of Directors and its various Committees, read employment and compensation contracts, proxy statements and other relevant filings with the Securities and Exchange Commission that relate to the Company’s financial relationships and transactions with the Company’s executive officers and with other entities controlled by the Company’s Executive Chairman, Global Chief Scientific and Medical Officer and principal stockholder.

We confirmed the significant transactions and/or balances, as applicable, with the related parties.

We also obtained the underlying agreements for significant related party transactions and assessed the associated accounting and recognition.

We involved a valuation specialist to assist in evaluating the appropriateness of the valuation methodologies and reasonableness of the assumptions used in the valuation of the related party debt, as described in Note 9 to the consolidated financial statements.

/s/ Ernst & Young LLP

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Property, plant and equipment, net 143,659 82,863

Non-marketable equity investment — 7,849

Intangible asset, net 20,003 1,420

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Accrued expenses and other liabilities 41,825 51,387

Related-party notes payable 299,236 —

Related-party promissory notes, net of discounts and deferred issuance costs 431,901 299,236

Due to related parties 3,469 3,943

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Total current liabilities 500,861 368,995

Related-party notes payable, less current portion 306,349 254,353

Related-party promissory notes, less current portion ( Note 9 )

Related-party convertible notes and accrued interest, net of discount, less current portion ( Note 9 )

Operating lease liabilities, less current portion (including amounts with related parties) 47,951 37,068

Deferred tax liability 162 170

Warrant liability 21,636 —

Other liabilities 457 411

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Common stock, $ 0.0001 par value;

500,000,000 shares authorized;

397,830,044 and

382,243,142 shares issued and outstanding as of December 31, 2021 and

2020, respectively;

excluding treasury stock, 163,800 shares

outstanding as of December 31, 2021 and 2020, respectively

900,000,000 and 500,000,000 shares authorized

as of December 31, 2022 and 2021, respectively;

421,569,115 and 397,830,044 shares

issued and outstanding as of December 31, 2022 and 2021, respectively;

excluding treasury stock, 163,800 shares outstanding as of December 31, 2022 and 2021,

Additional paid-in capital 1,930,936 1,719,704

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Loss on equity method investment ( 12,107 ) ( 803 ) —

Other income (expense), net (including amounts with related parties) 193 1,486 ( 534 )

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

Other (expense) income, net (including amounts

with related parties) ( 736 ) 193 1,486

Total other expense, net ( 65,988 ) ( 19,559 ) ( 5,153 )

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Net loss attributable to ImmunityBio common stockholders $ ( 416,567 ) $ ( 346,790 ) $ ( 221,851 )

Net loss per ImmunityBio common share – basic $ ( 0.89 ) $ ( 0.59 ) $ ( 0.43 )

Net loss per ImmunityBio common share – diluted $ ( 0.89 ) $ ( 0.59 ) $ ( 0.43 )

Net loss per ImmunityBio common share – basic and diluted $ ( 1.04 ) $ ( 0.89 ) $ ( 0.59 )

Weighted-average number of common shares used in computing

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Net loss $ ( 417,320 ) $ ( 349,848 ) $ ( 224,187 )

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

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

Net unrealized (losses) gains on available-for-sale securities ( 183 ) ( 13 ) 140

Reclassification of net realized losses on

Reclassification of net realized gains on

available-for-sale securities included in net loss 124 — 9

Foreign currency translation adjustments 238 ( 105 ) 60

Total other comprehensive (loss) income ( 118 ) 209 127

Total other comprehensive income (loss) 179 ( 118 ) 209

Comprehensive loss ( 417,141 ) ( 349,966 ) ( 223,978 )

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Comprehensive

(Loss) Income Total

Stockholders’

Equity (Deficit) Noncontrolling

(Deficit) Noncontrolling

Interests Total

Stockholders’

Equity (Deficit)

Shares Amount

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371,976,995 $ 37 $ 1,406,002 $ ( 1,393,280 ) $ ( 87 ) $ 12,672 $ 3,654 $ 16,326

Issuance of common stock for equity investment 2,047,500 — 30,000 — — 30,000 — 30,000

Issuance of common stock, net of

offering costs of $ 4,373

8,521,500 1 86,301 — — 86,302 — 86,302

Stock-based compensation expense — — 2,187 — — 2,187 — 2,187

Exercise of warrants 19,664,050 2 41,862 — — 41,864 — 41,864

Exercise of stock options 1,272,273 — 1,176 — — 1,176 — 1,176

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Net share settlement for RSUs vesting ( 175,962 ) — ( 503 ) — — ( 503 ) — ( 503 )

and warrant exercises ( 124,345 ) — ( 127 ) — — ( 127 ) — ( 127 )

Repurchase of common stock ( 678,336 ) — — ( 2,501 ) — ( 2,501 ) — ( 2,501 )

Cumulative effect of adoption of lease standard — — — ( 682 ) — ( 682 ) — ( 682 )

Deconsolidation of Precision Biologics — — — — — — 18,353 18,353

Other comprehensive income (loss), net of tax — — — — 209 209 — 209

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

Issuance of common stock, net of

Issuance of common stock “at-the-market”

offering, net of commissions and

offering costs of $ 4,674

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Net share settlement for RSUs vesting ( 277,611 ) — ( 4,064 ) — — ( 4,064 ) — ( 4,064 )

Sales of assets to an entity under common control — — 1,435 — — 1,435 — 1,435

Other comprehensive income (loss), net of tax — — — — ( 118 ) ( 118 ) — ( 118 )

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Comprehensive

(Loss) Income Total

Stockholders’

Equity (Deficit) Noncontrolling

(Deficit) Noncontrolling

Interests Total

Stockholders’

Equity (Deficit)

Shares Amount

Conversion of related-party convertible note and

accrued interest, net of unamortized debt discount,

into equity 9,986,920 1 51,946 — — 51,947 — 51,947

Issuance of shares in a registered direct offering,

net of discount and offering costs of $ 1,897

and value ascribed to associated warrants ( Note 11 )

9,090,909 1 13,006 — — 13,007 — 13,007

Issuance of common stock “at-the market”

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Net share settlement for RSUs vesting ( 156,011 ) — ( 616 ) — — ( 616 ) — ( 616 )

Sales of assets to an entity under common control — — 1,435 — — 1,435 — 1,435

Shares issued pursuant to litigation settlement 2,229,296 — 10,656 — — 10,656 — 10,656

Gain on extinguishment of debt with related parties

under common control — — 82,858 — — 82,858 — 82,858

Other comprehensive income (loss), net of tax — — — — 179 179 — 179

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Stock-based compensation expense 40,179 57,181 2,187

Change in fair value of warrant liability ( 13,460 ) — —

Transaction costs allocated to warrant liability 1,082 — —

Depreciation and amortization 18,260 14,238 12,739

Non-cash interest items, net (including amounts with related parties) 11,746 12,417 8,531

Amortization of related-party notes discounts 16,282 62 —

Non-cash lease expense related to operating lease right-of-use assets 5,932 4,884 5,155

Amortization of premiums, net of discounts, on marketable

debt securities 1,318 403 794

Unrealized losses (gains) on equity securities 4,190 4,615 ( 2,876 )

Unrealized loss on non-marketable equity investment — — 1,405

Loss on equity method investment 803 — —

Impairment of intangible assets 681 — 10,660

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Net cash used in operating activities

( 337,509 ) ( 274,419 ) ( 171,724 )

Investing activities:

Purchases of property, plant and equipment ( 78,162 ) ( 33,563 ) ( 1,669 )

Purchase of intangible assets ( 21,229 ) — —

Proceeds from sales of property, plant and equipment — 20,498 —

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Proceeds from sales of marketable debt and equity securities 33,812 13,763 8,272

Payment to Precision Biologics to facilitate deconsolidation — — ( 2,500 )

Purchase of non-marketable equity investment — — ( 3 )

Net cash (used in) provided by investing activities ( 84,886 ) ( 19,812 ) 18,552

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

Net cash provided by (used in) investing activities

27,297 ( 84,886 ) ( 19,812 )

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

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Financing activities:

Proceeds from equity offering, net of issuance costs paid $ 164,530 $ 86,302 $ 30,000

Proceeds from issuance of related-party promissory notes,

net of issuance costs paid $ 174,125 $ 338,500 $ 63,700

Proceeds from equity offerings,

net of discounts and issuance costs 60,427 164,530 86,302

Proceeds from exercises of stock options 74 5,461 1,176

Sale of assets to an entity under common control — 1,435 —

Net share settlement for RSUs vesting and warrant exercise ( 4,064 ) ( 503 ) ( 127 )

Net share settlement for RSUs vesting ( 616 ) ( 4,064 ) ( 503 )

Principal payments of finance leases ( 58 ) — —

Payment for contingent consideration ( 339 ) ( 419 ) —

Proceeds from exercises of warrants — — 35,151

Repurchase of common stock — — ( 2,501 )

Net cash provided by financing activities

233,613 505,443 150,675

Effect of exchange rate changes on cash, cash equivalents, and

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Supplemental disclosure of non-cash activities:

Gain on extinguishment of debt with related parties under

common control $ 82,858 $ — $ —

Conversion of related-party convertible note and accrued interest,

net of unamortized discount, into equity 51,947 — —

Initial measurement of warrants issued in connection with the

registered direct offering accounted for as liabilities 35,096 — —

Right-of-use assets obtained in exchange for operating

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accrued expenses and due to related parties 12,693 11,654 220

Unrealized (losses) gains on marketable debt securities ( 13 ) ( 17 ) 258

Common stock issued pursuant to litigation settlement 10,656 — —

Right-of-use assets obtained in exchange for finance

lease liabilities 199 — —

Unrealized losses on marketable debt securities, net ( 59 ) ( 13 ) ( 17 )

Cashless exercise of stock options — 1,035 1,233

Accrued investment in joint venture — 1,000 —

Issuance of equity for warrant exercise via reduction of

related-party promissory notes — — 6,713

Conversion of convertible notes and accrued interest into

non-marketable equity investment — — 751

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

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The goal of this potentially best-in-class approach is to generate immunogenic cell death thereby eliminating rogue cells from the body whether they are cancerous or virally infected and to ultimately establish an “immunological memory” that confers long-term benefit for the patient.

Although such designations may not lead to a faster development process or regulatory review and may not increase the likelihood that a product candidate will receive approval, Anktiva ™ , our novel antibody cytokine fusion protein, has received Breakthrough Therapy and Fast Track designations in combination with BCG from the U.S.

Food and Drug Administration (FDA) for bacillus Calmette-Guérin (BCG) -unresponsive non-muscle invasive bladder cancer (NMIBC) carcinoma in situ (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.

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 ™ (N-803), our novel antibody cytokine fusion protein, has received Breakthrough Therapy and Fast Track designations in combination with BCG from the U.S.

Food and Drug Administration (FDA) for bacillus Calmette-Guérin (BCG) -unresponsive non-muscle invasive bladder cancer (NMIBC) with carcinoma in situ (CIS) .

I n May 2022, we announced the submission of a Biologics License Application (BLA) to the FDA for our product candidate, 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 Prescription Drug User Fee Act (PDUFA) action date of May 23, 2023.

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

Our platforms, which include 9 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 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 the novel strain of the coronavirus (SARS-CoV-2) and human immunodeficiency virus (HIV).

In infectious diseases, our pipeline currently targets such pathogens as the novel strain of the coronavirus (SARS-CoV-2) and human immunodeficiency virus (HIV).

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

On December 21, 2020 , NantKwest, Inc.

(NantKwest) 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 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 (the Merger ), with NantCell surviving the Merger as a wholly-owned subsidiary of the company.

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

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

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 % o f 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 % o f 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 (FASB) Accounting Standards Codification (ASC) 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 financial statements presented.

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.

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

The following tables provide the impact of the change in reporting entity on our unaudited condensed consolidated statements of operations for the three months ended March 31, 2021 and our consolidated statements of operations for the years ended December 31, 2020 and 2019, respectively (in thousands):

The following tables provide the impact of the change in reporting entity on our unaudited condensed consolidated statement of operations for the three months ended March 31, 2021 and our consolidated statement of operations for the year ended December 31, 2021 (in thousands):

Three Months Ended

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Net loss $ ( 131,377 ) $ ( 92,383 ) $ ( 427 ) $ ( 224,187 )

Year ended December 31, 2019

NantCell NantKwest Intercompany

Eliminations ImmunityBio,

Revenue $ 2,994 $ 43 $ ( 835 ) $ 2,202

Operating expenses:

Research and development (including amounts

with related parties) 62,253 49,785 ( 41 ) 111,997

Selling, general and administrative (including amounts

with related parties) 28,391 18,065 — 46,456

Loss from operations ( 87,650 ) ( 67,807 ) ( 794 ) ( 156,251 )

Other (expense) income, net (including amounts

with related parties) ( 6,162 ) 1,921 229 ( 4,012 )

Income tax benefit 8 97 — 105

Net loss $ ( 93,804 ) $ ( 65,789 ) $ ( 565 ) $ ( 160,158 )

Summary of Significant Accounting Policies

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The consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of our financial position and results of operations.

As of December 31, 2021, the company had an accumulated deficit of $ 2.0 billion.

We also had negative cash flows from operations of $ 274.4 million for the year ended December 31, 2021.

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

The consolidated financial statements have been prepared assuming the company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business, and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or amounts and classification of liabilities that may result from the outcome of the uncertainty of our ability to continue as a going concern.

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

However, we believe our existing cash, cash equivalents, and investments in marketable securities, together with capital to be raised through equity offerings (including but not limited to the offering, issuance and sale by us of our common stock that may be issued and sold under an “at-the-market” sales agreement with Jefferies LLC (the ATM), of which we had $ 330.8 million available for future issuance as of December 31, 2021), and our potential ability to borrow from affiliated entities, will be sufficient to fund our operations through at least the next 12 months following the issuance date of the consolidated financial statements based primarily upon our Executive Chairman and Global Chief Scientific and Medical Officer’s intent and ability to support our operations with additional funds, including loans from affiliated entities, as required, which we believe alleviates such doubt.

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

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

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

Further, because of the risk and uncertainties associated with the potential commercialization of our product candidates in development, we may need additional funds to meet our needs sooner than planned.

Principles of Consolidation

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The consolidated financial statements also include certain variable interest entities in which we are the primary beneficiary (as described in more detail below).

For consolidated entities where we have less than 100% of ownership, we record net loss attributable to noncontrolling interest on the consolidated statements of operations equal to the percentage of the ownership interest retained in such entities by the respective noncontrolling parties.

For consolidated entities where we have less than 100% of ownership, we record net loss attributable to noncontrolling interest on the consolidated statement of operations equal to the percentage of the ownership interest retained in such entities by the respective noncontrolling parties.

Any material intercompany transactions and balances have been eliminated upon consolidation.

We assess whether we are the primary beneficiary of a VIE at the inception of the arrangement and at each reporting date.

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

If the entity is within the scope of the variable interest model and meets the definition of a variable interest entity (VIE), we consider whether we must consolidate the VIE or provide additional disclosures regarding our involvement with the VIE.

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For entities we hold as an equity investment that are not consolidated under the VIE model, we consider whether our investment constitutes a controlling financial interest in the entity and therefore should be considered for consolidation under the voting interest model.

As of December 31, 2022, the company had an accumulated deficit of $ 2.4 billion.

We also had negative cash flows from operations of $ 337.5 million for the year ended December 31, 2022.

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

However, we believe our existing cash, cash equivalents, and investments in marketable securities, together with capital to be raised through equity offerings (including but not limited to the offering, issuance and sale by us of our common stock that may be issued and sold under an “at-the-market” sales agreement with Jefferies LLC (the ATM), of which we had $ 225.4 million available for future issuance as of December 31, 2022), and our potential ability to borrow from affiliated entities, will be sufficient to fund our operations through at least the next 12 months following the issuance date of the consolidated financial statements based primarily upon our Executive Chairman and Global Chief Scientific and Medical Officer’s intent and ability to support our operations with additional funds, including loans from affiliated entities, as required, which we believe alleviates such doubt.

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

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

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

Use of Estimates

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

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, 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.

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Actual results could differ from those estimates.

We make certain judgments to determine whether transactions should be accounted for as acquisitions of assets or as business combinations.

If it is determined that substantially all of the fair value of gross assets acquired in a transaction is concentrated in a single asset (or a group of similar assets), the transaction is treated as an acquisition of assets.

We evaluate the inputs, processes, and outputs associated with the acquired set of activities and assets.

If the assets in a transaction include an input and a substantive process that together significantly contribute to the ability to create outputs, the transaction is treated as an acquisition of a business.

We account for business combinations using the acquisition method of accounting, which requires that assets acquired and liabilities assumed generally be recorded at their fair values as of the acquisition date.

Excess of consideration over the fair value of net assets acquired is recorded as goodwill.

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

We perform impairment testing of goodwill annually or more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired.

In transactions accounted for as asset acquisitions, the cost of an asset acquisition, including transaction costs, are allocated to identifiable assets acquired and liabilities assumed based on a relative fair value basis.

Goodwill is not recognized in an asset acquisition.

Any difference between the cost of an asset acquisition and the fair value of the net assets acquired is allocated to the non-monetary identifiable assets based on their relative fair values.

In an asset acquisition, upfront payments allocated to in-process research and development projects at the acquisition date are expensed unless there is an alternative future use.

In addition, product development milestones are expensed upon achievement.

Any contingent consideration, such as payments upon achievement of various developmental, regulatory and commercial milestones, generally is not recognized at the acquisition date.

Contingencies

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If we determine that a material loss is reasonably possible, we disclose the possible loss or range of loss, or that the amount of loss cannot be estimated at this time.

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.

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.

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Restricted cash includes a certificate of deposit held as a substitute letter of credit for one of our leased properties.

This certificate of deposit is included in other assets, on the consolidated balance sheets as the landlord is the beneficiary of the account and we are not able to access the funds during the term of the lease.

This certificate of deposit is included in other assets, on the consolidated balance sheet as the landlord is the beneficiary of the account and we are not able to access the funds during the term of the lease.

A reconciliation of cash, cash equivalents, and restricted cash is included on the consolidated statements of cash flows as of December 31, 2022, 2021 and 2020.

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Marketable debt securities with remaining maturities of 12 months or less are classified as short-term and marketable securities with remaining maturities greater than 12 months are classified as long-term.

All marketable debt securities are reported at fair value and any unrealized gains and losses are reported as a component of accumulated other comprehensive loss, on the consolidated statements of stockholders’ deficit, with the exception of unrealized losses believed to be other-than-temporary, which are recorded in interest and investment income, net , on the consolidated statements of operations.

All marketable debt securities are reported at fair value and any unrealized gains and losses are reported as a component of accumulated other comprehensive loss, on the consolidated statement of stockholders’ deficit, with the exception of unrealized losses believed to be other-than-temporary, which are recorded in interest and investment income, net , on the consolidated statement of operations.

Realized gains and losses from sales of securities and the amounts, net of tax, reclassified out of accumulated other comprehensive loss , if any, are determined on a specific identification basis.

Marketable Equity Securities

Investments in mutual funds and equity securities, other than equity method investments, are recorded at fair market value, if fair value is readily determinable and any unrealized gains and losses are included in other income (expense), net, on the consolidated statements of operations.

Realized gains and losses from the sale of the securities are determined on a specific identification basis and the amounts are included in other income (expense), net, on the consolidated statement of operations.

Non-Marketable Equity Securities

Prior to March 31, 2021, we owned non-marketable equity securities that were accounted for using the measurement alternative under ASC Topic 321, Investments—Equity Securities (ASC 321), because the preferred stock held by us was not considered in-substance common stock and such preferred stock did not have a readily determinable fair value.

We measured the non-marketable equity investment at cost, less impairment, adjusted for observable price changes in an orderly market for an identical or similar investment of the same issuer, with such changes recognized on the consolidated statements of operations.

Some factors we may consider in the impairment analysis include the extent to which the security has been in an unrealized loss position, the change in the financial condition and near-term prospects of the issuer, as well as security and industry-specific economic conditions.

Evaluating Investments for Other-than-Temporary Impairments

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In assessing whether we exercise significant influence, we consider the nature and magnitude of our investment, the voting and protective rights we hold, any participation in the governance of the other company and other relevant factors such as the presence of a collaborative or other business relationship.

Under the equity method of accounting, we record our share of the income or loss of the other company as g ain (loss) on equity method investment , in our consolidated statements of operations.

Under the equity method of accounting, we record our share of the income or loss of the other company as g ain (loss) on equity method investment , in our consolidated statement of operations.

Property, Plant and Equipment, Net

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Leasehold improvements The lesser of the lease term or life of the asset

Upon disposal of property, plant and equipment, the cost and related accumulated depreciation are removed from the consolidated financial statements and the net amount, less any proceeds, is included in other income (expense), net , on the consolidated statements of operations.

We review impairment of property, plant and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

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Any difference between the carrying value and consideration recognized is treated as a capital transaction.

Cash consideration up to the carrying value of the net assets acquired or transferred is presented as an investing activity in our consolidated statements of cash flows.

Cash consideration in excess of the carrying value of the net assets acquired or transferred is presented as a financing activity in our consolidated statements of cash flows.

Cash consideration up to the carrying value of the net assets acquired or transferred is presented as an investing activity in our consolidated statement of cash flows.

Cash consideration in excess of the carrying value of the net assets acquired or transferred is presented as a financing activity in our consolidated statement of cash flows.

Intangible Assets, Net

Intangible assets acquired in a business combination are initially recognized at their fair value on the acquisition date.

The in-process research and development (IPR&D) assets are required to be classified as indefinite-lived assets and are not amortized until they become definite-lived assets, upon the successful completion of the associated research and development effort.

At that time, we will evaluate whether recorded amounts are impaired and make any necessary adjustments, and then determine the useful life of the asset and begin amortization.

If the associated research and development effort is abandoned, the related IPR&D assets will be written-off and an impairment charge recorded.

Intangible assets are tested for impairment at least annually or more frequently if indicators of potential impairment exist.

Intangible assets acquired in a business combination or an asset acquisition are initially recognized at their fair value on the acquisition date.

Acquired indefinite-lived assets, such as in-process research and development (IPR&D), are not amortized until they become definite-lived assets, upon the successful completion of the associated research and development effort.

At that time, we evaluate whether the recorded amounts are impaired and make any necessary adjustments, and then determine the useful life of the asset and begin amortization.

If the associated research and development effort is abandoned, the related IPR&D assets is written-off and an impairment charge recorded.

Acquired definite-lived intangible assets are amortized using the straight-line method over their respective estimated useful lives.

Intangible assets, which consisted of the cost of reacquiring a technology license during 2015, were amortized using the straight-line method over an estimated useful life of 4 years.

As of December 31, 2019, our definite-lived intangible assets were fully amortized.

Patent costs, including related legal costs, are expensed as incurred and recorded in selling, general and administrative expense on the consolidated statements of operations.

The amortization of these intangible assets is included in amortization expense, on the consolidated statement of operations.

Intangible assets are tested for impairment at least annually or more frequently if indicators of potential impairment exist.

In connection with a workforce reduction at the Dunkirk Facility, we wrote off the remaining unamortized organized workforce intangible asset totaling $ 0.7 million during the year ended December 31, 2022 in impairment of intangible assets, on the consolidated statement of operations.

See Note 6 , Collaboration and License Agreements and Acquisition, for further information.

Patent costs, including related legal costs, are expensed as incurred and recorded in selling, general and administrative expense on the consolidated statement of operations.

Fair Value of Financial Instruments

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These equipment purchases do not have an alternative use and are therefore expensed as incurred within research and development expense.

Our collaboration arrangements are further discussed in Note 6 , Collaboration and License Agreements .

Our collaboration arrangements are further discussed in Note 6 , Collaboration and License Agreements and Acquisition .

Preclinical and Clinical Trial Accruals

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Transactions with Related Parties

As outlined in Note 8 , Related-Party Agreements , we have various agreements with related parties.

Some are billed and settled in cash monthly.

Others are billed quarterly and settled in cash the following month.

As outlined in Note 9 , Related-Party Debt , and Note 10 , Related-Party Agreements , we have various agreements with related parties.

These arrangements can be billed and settled in cash monthly, billed quarterly and settled in cash the following month, or estimated in advance and collected or paid upfront based on expected utilization.

Monthly accruals are made for all quarterly billing arrangements.

Lease Obligations

For all leases other than short-term leases, at the lease commencement date, a right-of-use asset and a lease liability are recognized and included in operating lease right-of-use assets, net , and current and non-current operating lease liabilities , respectively, on the consolidated balance sheets.

The right-of-use asset represents the right to use the leased asset for the lease term.

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The depreciable life of operating right-of-use-assets and leasehold improvements is limited by the expected lease term.

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.

We recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities, as well as for operating loss and tax credit carryforwards.

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These agreements generally include upfront fees and annual research license fees for such use, as well as commercial license fees for sales of the licensee products developed or manufactured using our intellectual property and cell lines.

We have generated revenues from product sales of our proprietary GMP-in-a-Box bioreactors and related consumables to related parties.

We have generated revenues from product sales of our proprietary GMP-in-a-Box bioreactors and related consumables, primarily to related parties.

Additionally, we also generated revenues from grant programs.

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Costs incurred in research and development are expensed as incurred.

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.

Included in research and development costs are clinical trial and research expenses based on the services performed pursuant to contracts with research institutions and clinical research organizations and other vendors that conduct clinical trials and research on our behalf.

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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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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.

There is no purchase option at the end of the lease term.

There was no purchase option at the end of the lease term.

Since we transferred the legal title and all benefits and risks incidental to the ownership of the property to Nant Capital, we accounted for the transfer as a sale.

We have classified the leaseback of the building as an operating lease and accordingly, a right-of-use asset and an operating lease liability were established on the lease commencement date that will be amortized through the end of the lease term.

Effective May 31, 2022, we executed a termination agreement on this lease.

See Note 10 , Related-Party Agreements , for further information.

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Comprehensive income or loss is composed of net income (loss) and other comprehensive income (loss).

Our other comprehensive income or loss consists of net unrealized gains (losses) on marketable debt securities classified as available-for-sale, net of income taxes.

and foreign currency translation adjustments.

Our other comprehensive income or loss consists of net unrealized gains (losses) on marketable debt securities classified as available-for-sale, net of income taxes and foreign currency translation adjustments.

Noncontrolling Interests

Noncontrolling interests are recorded for the entities that we consolidate but are not wholly-owned by the company.

Noncontrolling interests are classified as a separate component of equity on the consolidated balance sheets and consolidated statements of stockholders’ deficit.

Additionally, net loss attributable to noncontrolling interests is reflected separately from consolidated net loss on the consolidated statements of operations and the consolidated statements of stockholders’ deficit.

Noncontrolling interests are classified as a separate component of equity on the consolidated balance sheet and consolidated statement of stockholders’ deficit.

Additionally, net loss attributable to noncontrolling interests is reflected separately from consolidated net loss on the consolidated statement of operations and the consolidated statement of stockholders’ deficit.

We record the noncontrolling interests’ share of loss based on the percentage of ownership interest retained by the respective noncontrolling interest holders.

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As of December 31, 2022 and 2021, there were no outstanding advances due from GlobeImmune under the promissory note agreement.

GlobeImmune recognized $ 0.2 million of revenues for the year ended December 31, 2019, and recognized $ 0.7 million, $ 2.0 million and $ 7.7 million of operating expenses for the years ended December 31, 2021, 2020 and 2019, respectively.

The consolidated balance sheets include approximately $ 0.8 million and $ 0.5 million of total assets and $ 0.0 million and $ 0.3 million of total liabilities as of December 31, 2021 and 2020, respectively, related to GlobeImmune.

In addition, the company held a 68.5 % ownership interest in Precision Biologics, Inc.

(Precision) arising from a preferred stock investment.

The company ended its investment in Precision pursuant to a final settlement agreement approved by the court in 2019.

Under the terms of the settlement agreement, the company deconsolidated the related assets, liabilities and noncontrolling interests of Precision.

The disposition of this investment resulted in a reduction of $ 18.4 million in noncontrolling interests for the year ended December 31, 2019.

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

GlobeImmune recognized no revenue for the years ended December 31, 2022, 2021, and 2020, respectively, and recognized $ 0.5 million, $ 0.7 million and $ 2.0 million of operating expenses for the years ended December 31, 2022, 2021 and 2020, respectively.

The consolidated balance sheets include approximately $ 1.4 million and $ 0.8 million of total assets and no liabilities as of December 31, 2022 and 2021, respectively, related to GlobeImmune.

Foreign Currencies

We have operations and holds assets in Italy and South Korea.

We have operations and hold assets in Italy and South Korea.

The functional currency of the subsidiary in Italy is the Euro, based on the nature of the transactions occurring within this entity, and accordingly, assets and liabilities of this subsidiary are translated into U.S.

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Adjustments resulting from translating the financial statements of the foreign subsidiary into U.S.

dollars are recorded as a component of other comprehensive income (loss) , on the consolidated statements of comprehensive loss.

Transaction gains and losses are recorded in other income (expense), net, on the consolidated statements of operations.

dollars are recorded as a component of other comprehensive income (loss) , on the consolidated statement of comprehensive loss.

Transaction gains and losses are recorded in other income (expense), net, on the consolidated statement of operations.

Basic and Diluted Net Loss per Share of Common Stock

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Outstanding stock options 9,262,926 4,124,930 4,996,284

Outstanding third-party warrants 9,090,909 — —

Outstanding RSUs 6,551,388 6,515,889 466,842

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Amounts in the table above reflect the common stock equivalents of the noted instruments, including awards issued under the NantKwest 2015 Equity Incentive Plan (the 2015 Plan), the NantKwest 2014 Equity Incentive Plan (the 2014 Plan), and awards issued under the NantCell, Inc.

2015 Stock Incentive Plan (the NC 2015 Plan) that, in the case of December 31, 2021, were outstanding immediately prior to the Effective Time of the Merger and in the case of December 31, 2020 and 2019 have been adjusted to include the combined NC 2015 Plan and NantCell warrants then outstanding (in both cases adjusted using the Exchange Ratio of 0.8190 ).

2015 Stock Incentive Plan (the NC 2015 Plan) that, in the case of December 31, 2021, were outstanding immediately prior to the Effective Time of the Merger and in the case of December 31, 2020 have been adjusted to include the combined NC 2015 Plan and NantCell warrants then outstanding (in both cases adjusted using the Exchange Ratio of 0.8190 ).

See Note 13 , Stock-Based Compensation , for further information.

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Consistent with this decision-making process, our CEO uses consolidated, single-segment financial information for purposes of evaluating performance, forecasting future-period financial results, allocating resources and setting incentive targets.

We generate a portion of its revenues from outside of the U.S.

Information about our revenues from the different geographic regions is as follows (in thousands):

We generate a portion of our revenues from outside of the U.S.

Information about our revenues by geographic region is as follows (in thousands):

Year Ended December 31,

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Application of New or Revised Accounting Standards – Adopted

In November 2018, the FASB issued Accounting Standards Update, or ASU, No.

2018-18, Collaborative Arrangements (Topic 808):

Clarifying the Interaction between Topic 808 and Topic 606 (ASU 2018-18), which clarifies when certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606, “ Revenue from Contracts with Customers” when the counterparty is a customer.

In addition, the update precludes an entity from presenting consideration from a transaction in a collaborative arrangement as customer revenue if the counterparty is not a customer for that transaction.

We adopted ASU 2018-18 in the quarter ended March 31, 2020 on a prospective basis.

The adoption did not have an impact on our consolidated financial statements.

In December 2019, the FASB issued ASU 2019‑12, Simplifying the Accounting for Income Taxes, or ASU 2019‑12.

The amendments removed the exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items (e.g., discontinued operations or other comprehensive income), and the exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year.

ASU 2019‑12 also amends other aspects of accounting for income taxes to help simplify and promote consistent application of U.S.

We early adopted ASU 2019‑12 effective January 1, 2020, and it did not have a material impact on our consolidated financial statements

In June 2016, the FASB issued Accounting Standards Update (ASU) 2016‑13, Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (ASU 2016-13), which requires credit losses on most financial instruments measured at amortized cost and certain other financial instruments be measured using an expected credit loss model.

Under this model, entities are required to estimate credit losses over the entire contractual term of the financial instrument from the date of initial recognition of the instrument.

The company adopted this guidance on the first day of the company’s fourth quarter of fiscal 2021.

The adoption of ASU 2016-13 did not have any impact on our consolidated financial statements.

In May 2021, the FASB issued Accounting Standards Update (ASU) 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40).

This update provides guidance to clarify and reduce diversity in an accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that is not within the scope of another Topic.

An entity should treat a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as an exchange of the original instrument for a new instrument.

This update additionally provides further guidance on measuring the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange on the basis of the substance of the transaction, in the same manner as if cash had been paid as consideration.

This guidance is effective for the fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

The company adopted this guidance on January 1, 2022 on a prospective basis.

In August 2020, the FASB issued ASU 2020-06, A ccounting for Convertible Instruments and Contracts in an Entity’s Own Equity , which simplifies and clarifies certain calculation and presentation matters related to convertible equity and debt instruments.

Specifically, ASU 2020-06 removes requirements to separately account for conversion features as a derivative under ASC Topic 815 and removes the requirement to account for beneficial conversion features on such instruments.

In addition, ASU 2020-06 eliminates the treasury stock method when calculating diluted earnings per share for convertible instruments that can be settled in whole or in part with equity and requires the use of the if-converted method.

The guidance is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

The company adopted this guidance on January 1, 2022 on a modified prospective basis.

Application of New or Revised Accounting Standards – Not Yet Adopted

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity , which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity.

Among other changes, ASU 2020-06 removes the separation models for convertible instruments with cash or beneficial conversion features.

Instead, entities will account for convertible debt instruments wholly as debt, unless certain other conditions are met.

In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820):

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions , which amends the guidance in Topic 820, Fair Value Measurement , to clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value.

The amendments also clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction.

In addition, ASU 2022-03 introduces new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value.

ASU 2022-03 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.

The adoption of the new standard is not expected to have a material impact on the company’s financial position or results of operations upon adoption.

Other recent authoritative guidance issued by the FASB (including technical corrections to the ASC), the American Institute of Certified Public Accountants, and the SEC during the three months ended December 31, 2021 did not, or are not expected to, have a material effect on our consolidated financial statements.

We are currently evaluating the impact of this standard on our consolidated financial statements.

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

Financial Statement Details

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following (in thousands):

As of December 31,

Prepaid research and development costs $ 11,704 $ 692

Prepaid services 8,013 6,274

Prepaid insurance 2,282 2,266

Prepaid software license fees 2,195 1,111

Prepaid supplies 2,160 —

Insurance premium financing asset 1,417 2,598

Other 3,732 2,957

Prepaid expenses and other current assets $ 31,503 $ 15,898

Property, Plant and Equipment, Net

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Furniture & fixtures 1,906 1,052

Building — 22,690

Gross property, plant and equipment 212,911 135,937

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Property, plant and equipment, net $ 143,659 $ 82,863

In September 2021, we entered into a sale transaction with Nant Capital, a related party, for a building 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.

The net proceeds from the transaction totaled $ 21.9 million and the net carrying value of the building was $ 20.5 million at the time of the transaction.

We accounted for the transfer as a sale of an asset to an entity under common control, recorded the transfer at book value and recognized the excess of net consideration over carrying book value of $ 1.4 million as a capital contribution received from Nant Capital.

See Note 8 , Related-Party Agreements , for further information.

Depreciation and amortization expense related to property, plant and equipment totaled $ 14.2 million, $ 12.7 million and $ 14.0 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Depreciation expense related to property, plant and equipment totaled $ 16.3 million, $ 14.2 million and $ 12.7 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Intangible Assets, Net

As of December 31, 2021 and 2020, the company only had indefinite-lived IPR&D intangible assets, which were obtained from business acquisitions.

During 2020, we determined to discontinue the LMP1 and LMP/IPS programs based on the results gathered from the preclinical data during the third quarter of 2020.

The gross carrying amounts and accumulated amortization of intangible assets are as follows at the dates indicated (in thousands):

December 31, 2022

(in years) Gross Carrying

Amount Accumulated

Amortization Impairment Net Carrying

Favorable leasehold rights 9.1 $ 20,398 $ ( 1,785 ) $ — $ 18,613

Organized workforce 831 ( 150 ) ( 681 ) —

Total definite-lived intangible assets 21,229 ( 1,935 ) ( 681 ) 18,613

Indefinite-lived:

IPR&D 1,390 — — 1,390

Total intangible assets $ 22,619 $ ( 1,935 ) $ ( 681 ) $ 20,003

Definite-Lived Intangibles

Definite-lived intangible assets subject to amortization include favorable leasehold rights and an organized workforce acquired from the asset acquisition of the Dunkirk facility in February 2022.

During the year ended December 31, 2022, we wrote off the entire unamortized organized workforce intangible asset totaling $ 0.7 million in impairment of intangible assets , on the consolidated statement of operations.

See Note 6 , Collaboration and License Agreements and Acquisition, for further information.

We recorded amortization expense of $ 1.9 million, in research and development expense , on the consolidated statement of operations for the year ended December 31, 2022.

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

$ 2.0 million for each of the years from 2023 to 2027 and $ 8.4 million thereafter.

Indefinite-Lived Intangibles

During the year ended December 31, 2020, we determined to discontinue the LMP1 and LMP/IPS programs based on results gathered from preclinical data.

As a result, the carrying value of the IPR&D relating to the LMP1 and LMP/IPS program was written down to zero and we recorded an impairment charge of $ 10.7 million on the consolidated statement of operations.

No such charges were recorded during the years ended December 31, 2021 and 2019.

No such impairments were recorded during the years ended December 31, 2022 and 2021.

As of December 31, 2022 and 2021, the company had indefinite-lived IPR&D intangible assets of $ 1.4 million, which were obtained from business acquisitions.

Convertible Note Receivable

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Accrued construction costs 7,072 8,145

Accrued dissenting shares ( Note 7 )

Accrued professional and service fees 6,685 6,909

Accrued preclinical and clinical trial costs 5,842 4,339

Accrued compensation 6,040 5,613

Accrued preclinical and clinical trial costs 4,985 5,842

Accrued research and development costs 1,930 2,107

Financing obligation – current portion 1,417 2,598

Accrued laboratory equipment, supplies and related services 303 2,144

Accrued dissenting shares ( Note 7 )

Other 1,325 2,595

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Investment (amortization expense) accretion income, net ( 1,486 ) ( 488 ) ( 858 )

Net realized gains (losses) on investments 167 ( 9 ) ( 4 )

Net realized (losses) gains on investments ( 122 ) 167 ( 9 )

Interest and investment (loss) income, net $ ( 3,090 ) $ ( 4,100 ) $ 2,435

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

Interest expense

Interest expense consists of the following (in thousands):

Year Ended December 31,

2022 2021 2020

Interest expense on related-party notes payable $ ( 47,145 ) $ ( 14,695 ) $ ( 9,033 )

Amortization of related-party notes discounts ( 16,282 ) ( 62 ) —

Other interest expense ( 88 ) ( 92 ) ( 41 )

Interest expense $ ( 63,515 ) $ ( 14,849 ) $ ( 9,074 )

Financial Instruments

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(in years) Amortized

Corporate debt securities 0.5 $ 129,190 $ 10 $ ( 36 ) $ 129,164

Foreign bonds 0.4 116 — ( 1 ) 115

Mutual funds $ 38 $ — $ ( 2 ) $ 36

Current portion 129,341 13 ( 37 ) 129,317

Foreign bonds 4.5 932 — ( 92 ) 840

Noncurrent portion 719 103 — 822

Total $ 970 $ — $ ( 94 ) $ 876

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Corporate debt securities $ 129,190 $ 10 $ ( 36 ) $ 129,164

Foreign bonds 116 — ( 1 ) 115

Mutual funds 35 3 — 38

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Losses Estimated

Corporate debt securities $ 86,158 $ ( 36 ) $ — $ —

Mutual funds $ — $ — $ 36 $ ( 2 )

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Corporate debt securities $ 86,158 $ ( 36 ) $ — $ —

Mutual funds — — 34 ( 2 )

Foreign bonds 115 ( 1 ) 113 ( 1 )

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

We evaluated our securities for other-than-temporary impairment, and we did not recognize any other-than-temporary impairment losses for the years ended December 31, 2022, 2021 and 2020.

Realized gains and losses on sales of available-for-sale marketable debt securities were not significant for the years ended December 31, 2021, 2020 and 2019.

Marketable Equity Securities

We held investments in marketable equity securities with readily determinable fair values of $ 6.7 million and $ 6.3 million as of December 31, 2021 and 2020, respectively.

Unrealized losses recorded on these securities totaled $ 4.6 million and $ 0.3 million for the years ended December 31, 2021 and 2019, and an unrealized gain recorded on these securities totaled $ 1.6 million for the year ended December 31, 2020, respectively, in interest and investment (loss) income, net , on the consolidated statements of operations.

We recorded a realized gain totaling $ 0.2 million from sales of marketable equity securities in interest and investment (loss) income, net , on the consolidated statement of operations for the year ended December 31, 2021.

Non-Marketable Equity Securities

In 2017, we participated in a Series B convertible preferred stock financing and invested $ 8.5 million in Viracta Therapeutics, Inc.

(Viracta), a clinical-stage drug development company with whom we have an exclusive worldwide license to develop and commercialize one of their proprietary drug candidates, which was initially recorded at cost.

In 2018, we purchased additional convertibles notes totaling $ 0.7 million, which could be converted into preferred stock of Viracta under certain circumstances.

Effective in early 2019, the notes, together with accrued interest then outstanding, were converted to Series B preferred stock resulting in an increase to our investment in Viracta’s Series B convertible preferred stock of $ 0.8 million.

In 2019, we exercised warrants to acquire 253,120 shares of Viracta common stock.

We have elected to apply the measurement alternative under ASC 321, pursuant to which we measure our investment in Viracta at cost, less impairment, adjusted for observable price changes in an orderly market for an identical or similar investment of the same issuer, with such changes recognized on the consolidated statements of operations.

On December 31, 2020, we reduced the carrying value by $ 1.4 million due to the observable price change, which was included in other income (expense), net , on the consolidated statements of operations.

As of December 31, 2020, the carrying value of our investment in Viracta, which is reflected in non-marketable equity investment, on the consolidated balance sheets, totaled $ 7.8 million.

In February 2021, Viracta merged with Sunesis Pharmaceuticals, Inc.

(Sunesis), a public company.

In connection with this transaction, our preferred stock investment in Viracta was converted into 1,562,604 shares of Viracta common stock effective February 25, 2021.

The fair value of investment is accounted as marketable equity securities and is reflected in marketable securities, on the consolidated balance sheets, totaled $ 5.7 million as of December 31, 2021.

Fair Value Measurements

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Equity securities 2,507 2,507 — —

Corporate debt securities 129,164 — 129,164 —

Foreign bonds 115 115 — —

Mutual funds 36 36 — —

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Total assets measured at fair value $ 108,024 $ 66,403 $ 41,621 $ —

Contingent consideration $ ( 409 ) (3) $ ( 388 ) $ — $ ( 21 )

Contingent consideration obligations $ ( 19 ) (2) $ — $ — $ ( 19 )

Warrant liability ( 21,636 ) (3) — — ( 21,636 )

Total liabilities measured at fair value $ ( 21,655 ) $ — $ — $ ( 21,655 )

Fair Value Measurements at December 31, 2021

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Cash and cash equivalents $ 181,101 (1) $ 51,421 $ 129,680 $ —

Corporate debt securities 54,772 — 54,772 —

Equity securities 6,698 6,698 — —

Corporate debt securities 129,164 — 129,164 —

Foreign bonds 115 115 — —

Mutual funds 38 38 — —

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

(2) Our equity securities include a $ 5.7 million investment in Viracta.

As of December 31, 2020, the carrying value of our investment in Viracta, which was reflected in non-marketable equity investment , on the consolidated balance sheets, was $ 7.8 million.

(1) Amounts shown as a Level 2 measurement include government-sponsored securities of $ 32.0 million and $ 75.0 million, corporate debt securities of $ 8.8 million and $ 54.2 million, and no commercial paper and $ 0.5 million of commercial paper, with original maturities of less than 90 days, as of December 31, 2022 and 2021, respectively.

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

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

For the Year Ended December 31,

Year Ended December 31,

2022 2021 2020

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Fair value, end of year $ ( 19 ) $ ( 409 ) $ ( 972 )

(3) On December 12, 2022, we issued a total of 9,090,909 warrants for a period of two years with an exercise price of $ 6.60 per share in connection with a registered direct offering of common stock.

See Note 11 , Warrant Liability , for further information.

The warrants were classified as a liability at its fair value upon the issuance.

As of December 31, 2022, all warrants were outstanding.

We utilized the Black-Scholes option pricing model to value warrants with the following assumptions:

December 31, 2022

Expected term 1.96 years

Expected average volatility 99.4 %

Expected dividend yield —

Risk-free interest rate 4.4 %

Changes in the carrying amount of warrant liability in connection with the issuance of equity instrument were as follows (in thousands):

December 31, 2022

Fair value, at issuance $ 35,096

Net decrease in fair value ( 13,460 )

Fair value, end of year $ 21,636

Non-Recurring Valuations

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There were no material non-financial assets and liabilities deemed to be other-than-temporarily impaired and measured at fair value on a non-recurring basis for the years ended December 31, 2022, 2021 and 2020.

Collaboration and License Agreements

We measured the fair value of the fixed-rate promissory notes and variable-rate promissory notes before and after amendments that were entered on August 31, 2022, as they were accounted for under the debt extinguishment accounting model.

We used the discounted cash flow analyses for promissory notes without a holder conversion option and used a binomial lattice convertible note model for the fixed-rate promissory notes with a holder conversion option.

Since certain of the factors analyzed are considered to be unobservable inputs, both the discounted cash flow model and the lattice model are considered to be a Level 3 valuation.

See Note 9 , Related-Party Debt, for additional information.

Collaboration and License Agreements and Acquisition

Collaboration Agreements

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In May 2015, Etubics Corporation (Etubics) entered into a Cooperative Research and Development Agreement (CRADA) with the U.S.

Department of Health and Human Services (HHS) as represented by the National Cancer Institute (NCI) of the National Institutes of Health (NIH) to collaborate on the preclinical and clinical development of an adenovirus technology expressing tumor-associated antigens for cancer immunotherapy.

In January 2016, we acquired all of the outstanding equity interests in Etubics and Etubics became a wholly-owned subsidiary.

Effective January 2018, our subsidiary NantCell assumed the CRADA and it was amended to cover a collaboration for the preclinical and clinical development of our proprietary yeast-based Tarmogens expressing tumor-associated antigens and proprietary adenovirus technology expressing tumor-associated antigens for cancer immunotherapy.

Effective January 2018, our subsidiary NantCell assumed the CRADA and it was amended to cover a collaboration for the preclinical and clinical development of our proprietary yeast-based Tarmogens expressing TAAs and proprietary adenovirus technology expressing TAAs for cancer immunotherapy.

Pursuant to the CRADA, the NCI provides scientific staff and other support necessary to conduct research and related activities as described in the CRADA.

During the term of the CRADA, we were required to make annual payments of $ 0.6 million to the NCI for support of research activities.

We made payments of $ 0.6 million in each of the years ended December 31, 2021 and 2020, respectively, and recorded $ 0.6 million in research and development expense , on the consolidated statements of operations for the years ended December 31, 2021 and 2020.

In November 2021, NantCell entered into a third amendment to the CRADA, which was effective as of March 16, 2021.

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and (iv) an increase in funding for a total of $ 1.3 million per year, payable in semi-annual installments from 2022 through 2025.

Pursuant to the updated CRADA research plan, NCI and ImmunityBio will collaborate on the preclinical and clinical development of ImmunityBio’s proprietary adenovirus platform expressing tumor-associated antigens;

proprietary yeast platform expressing tumor-associated antigens;

proprietary agent Anktiva and derivatives, agent N-808 and derivatives, and/or TxM product candidates;

We recorded R&D expense of $ 1.2 million, $ 1.1 million and $ 0.6 million in research and development expense on the consolidated statements of operations for the year ended December 31, 2022, 2021 and 2020, respectively.

Pursuant to the updated CRADA research plan, NCI and ImmunityBio will collaborate on the preclinical and clinical development of ImmunityBio’s proprietary adenovirus platform expressing TAAs;

proprietary yeast platform expressing TAAs;

proprietary agent N-803 and derivatives, agent N-809 and derivatives, and/or TxM product candidates;

proprietary recombinant NK cells and mAbs;

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and other proprietary agents owned or controlled by ImmunityBio as contemplated in the research plan, for cancer immunotherapy.

In accordance with the terms of the amended CRADA, the company is required to make an additional $ 0.7 million payment within 30 days of the execution date in addition to a $ 0.6 million payment to the NCI for support of research activities during 2021.

We made a payment of $ 0.7 million and recorded an additional $ 0.5 million for the third amendment in research and development expense , on the consolidated statement of operations for the year ended December 31, 2021.

National Institute of Deafness and Communication Disorders

2021 NIDCD CRADA

In February 2021, we entered into a CRADA with HHS as represented by the National Institute of Deafness and Communication Disorders (NIDCD) of the NIH to conduct collaborative analysis of human clinical trial samples from clinical trials using our proprietary recombinant NK cells and/or mAbs for preclinical development in monotherapy and in combination immunotherapies.

The CRADA has a two-year term commencing on February 22, 2021 and expiring on February 22, 2023.

During the term of the agreement, we are required to provide $ 0.1 million per year to the NIDCD for support of the research activities.

We made a payment of $ 0.1 million during the year ended December 31, 2021.

Under any of the CRADAs, any party may unilaterally terminate the agreement by providing timely advance written notice to the other party before the desired termination date.

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In December 2021, ImmunityBio and Amyris, Inc.

(Amyris) entered into a 50:50 joint venture arrangement and formed a new limited liability company to conduct the business of the joint venture, to accelerate the commercialization of a next-generation COVID-19 vaccine utilizing IDRI’s RNA vaccine platform to which Amyris holds a license.

As part of the limited liability agreement, we agreed to contribute $ 1.0 million in cash and priority access to our manufacturing capacity for the joint venture product.

Amyris contributed $ 1.0 million in cash and rights to its license agreement with IDRI for the IDRI RNA platform for the field of COVID-19.

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

Both parties agreed to enter into a separate manufacturing and supply agreement and a sublicense agreement within 90 days of the execution of the joint venture agreement.

Both parties agreed to make additional capital contributions in cash, in proportion to their respective interests, as determined by the board of directors of the joint venture (two members appointed by us and two members appointed by Amyris).

(Amyris) entered into a 50:50 joint venture arrangement and formed a new limited liability company to conduct the business of the joint venture.

The purpose of the joint venture is to accelerate commercialization of a next-generation COVID-19 vaccine utilizing an RNA vaccine-platform license.

As part of the limited liability agreement, Amyris contributed $ 1.0 million in cash and rights to its license agreement with AAHI for an RNA platform for the field of COVID-19.

ImmunityBio contributed $ 1.0 million in cash and priority access to our manufacturing capacity for the joint venture product.

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

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

The joint venture is managed by a board of directors consisting of four directors:

two appointed by the company and two appointed by Amyris.

Both parties agreed to make additional capital contributions in cash, in proportion to their respective interests, as determined by the board of directors of the joint venture.

We considered the joint venture entity as a VIE and determined that we are not the primary beneficiary of the VIE.

We accounted for the joint venture using the equity method of accounting, and recorded our 50 % share of the net loss from the joint venture totaling $ 0.8 million in other expense, net , on the consolidated statement of operations for the year ended December 31, 2021.

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

We account for our investment in the joint venture using the equity method of accounting, and recorded our 50 % share of the net loss from the joint venture totaling $ 12.1 million and $ 0.8 million in other expense, net , on the consolidated statements of operations for the years ended December 31, 2022 and 2021, respectively.

Such losses include $ 11.9 million of expenses incurred by us on behalf of the joint venture during the year ended December 31, 2022.

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

As of December 31, 2022, the carrying amount of our equity investment in the joint venture was zero .

License Agreements

EnGeneIC Licensing Agreement

During the fourth quarter of 2021, we signed a binding term sheet with EnGeneIC for an exclusive, worldwide license to develop, manufacture and commercialize their patented 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.

The companies have agreed to a 50:50 split of the net profit from worldwide sales of EDV-based products, and we have agreed to pay certain periodic license fees.

Infectious Disease Research Institute

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

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

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

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

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

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

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

In June 2022, we made a payment of $ 1.75 million for the annual license maintenance fee.

We expensed $ 1.0 million and $ 0.5 million in research and development expense , on the consolidated statements of operations, for the years ended December 31, 2022 and 2021, respectively.

AAHI License Agreements

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

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

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

Under these agreements, we made a $ 2.0 million upfront payment and recognized $ 2.0 million in research and development expense , on the consolidated statement of operations, and no milestone fees were incurred for the year ended December 31, 2021.

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

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

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

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

No milestone fees were incurred for the year ended December 31, 2022.

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

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

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

$ 3.0 million in 2022 and $ 5.5 million annually from 2023 through 2030.

The company may terminate the restated agreement without cause by paying IDRI a $ 10.0 million one-time early termination fee.

In addition, the milestone payments to IDRI based on the achievement of certain development and regulatory milestones for the first licensed product were amended to a total of up to $ 4.0 million.

The company may terminate the restated agreement without cause by paying AAHI a $ 10.0 million one-time early termination fee.

In addition, the milestone payments to AAHI based on the achievement of certain development and regulatory milestones for the first licensed product were amended to a total of up to $ 4.0 million.

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

We made a payment of $ 1.5 million and recorded in research and development expense , on the consolidated statement of operations for the year ended December 31, 2021.

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

For the year ended December 31, 2021, we recorded $ 1.2 million in research and development expense , on the consolidated statement of operations related to the SRA.

In June 2022, we made a payment of $ 3.0 million for the annual license maintenance fee.

We recorded $ 1.8 million and $ 1.5 million in research and development expense , on the consolidated statements of operations during the years ended December 31, 2022 and 2021, respectively.

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

Viracta License Agreement

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To date, we have not had incurred any royalty or milestone payment obligations under this agreement, including during the years ended December 31, 2022, 2021 and 2020.

Dunkirk Facility Leasehold Interest

On February 14, 2022, we completed the acquisition of a leasehold interest in approximately 409,000 rentable square feet of current Good Manufacturing Practice (cGMP) ISO Class 5 pharmaceutical manufacturing space in western New York (the Dunkirk Facility) from Athenex, Inc.

(the Seller).

We believe this facility will provide us with a state-of-the-art biotech production center that will substantially expand and diversify our existing manufacturing capacity in the U.S.

and the ability to scale production across all of our key platforms.

The company accounted for the transaction as an asset acquisition because the Dunkirk Facility’s integrated set of assets and activities does not meet the definition of a business.

The total consideration for the acquisition was approximately $ 40.5 million, including a cash payment of $ 40.0 million, and transaction costs of approximately $ 0.5 million.

The following table summarizes the fair value of assets acquired as of the acquisition date (in thousands):

Construction in progress $ 10,043

Leasehold improvements 6,253

Definite-lived intangible assets (1)

Other depreciable assets and prepaid expenses 2,983

Total consideration $ 40,508

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

Upon the closing of the Dunkirk transaction, the company became the tenant of the Dunkirk Facility under the Fort Schuyler Management Corporation Lease, dated October 1, 2021 and as amended as of the February 14, 2022 closing date (as amended, the Dunkirk Lease), with Fort Schuyler Management Corporation, a not-for-profit corporation affiliated with the State of New York (FSMC) as landlord.

The Dunkirk Facility, as well as certain equipment, is owned by FSMC and is leased to us under the Dunkirk Lease.

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 certain of the Seller’s obligations under various third-party agreements (the Facility Agreements), subject to the terms and conditions of the purchase agreement by and between the company and Seller dated as of January 7, 2022, and committed to spend an aggregate of $ 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 5 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.

Failure to satisfy the obligations over the lease term may give rise to certain rights and remedies of governmental authorities including, for example, termination of the Dunkirk Lease and other Facility Agreements and potential recoupment of a percentage of the grant funding received by the Seller for construction of the facility and other benefits received, subject to the terms and conditions of the applicable agreements.

In connection with the ongoing partnership with the State of New York (the State) to construct the Dunkirk Facility, we received funds from the State as reimbursement for certain expenses incurred related to such construction totaling $ 1.1 million for the year ended December 31, 2022.

Although we believe that governmental funding will assist in funding a portion of the further build-out of the Dunkirk Facility, which we estimate to be approximately $ 8.0 million to $ 10.0 million of governmental funding remaining available as of December 31, 2022, there can be no assurance as to the final acceptance and timing of the requests for governmental funding that we submit, and we will need to plan and fund most of the additional build-out of, and purchase additional equipment for, the Dunkirk Facility in connection with our planned full operations.

In addition, any future governmental funding will be subject to the eligibility of submitted expenses, as well as our compliance with the obligations that we are subject to pursuant to the agreements with parties regarding the Dunkirk Facility as described above.

Dunkirk Facility Workforce Reduction

In September 2022, the company initiated a workforce reduction at the Dunkirk Facility as a result of upcoming construction at the project, which we believe may take approximately 12 to 18 months.

In connection with the workforce reduction, we recorded severance and retention benefits for the terminated employees totaling $ 1.0 million during the year ended December 31, 2022 in selling, general and administrative expense , on the consolidated statement of operations.

The terminated employees were not required to render service through their termination date in December 2022 to receive these benefits.

Commitments and Contingencies

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A clinical milestone totaling $ 0.8 million was earned by the former owners of VivaBioCell, of which $ 0.4 million was paid during the year ended December 31, 2021.

The remaining $ 0.4 million was accrued as of December 31, 2021 and is expected to be paid in 2022.

If the regulatory milestone is achieved, we are obligated to pay approximately $ 2.3 million.

The remaining $ 0.3 million, net of foreign exchange adjustment, was paid during the year ended December 31, 2022.

If a government agency unconditionally approves the GMP-in-a-Box technology for commercial sale (the regulatory milestone) in the future, we will be obligated to pay an additional approximately $ 2.1 million to the former owners.

Altor BioScience Corporation

In connection with the 2017 acquisition of Altor BioScience Corporation (Altor), we issued contingent value rights (CVRs) under which we agreed to pay the prior stockholders of Altor approximately $ 304.0 million upon successful approval of the Biologics License Application (BLA) or foreign equivalent, for Anktiva by December 31, 2022 and approximately $ 304.0 million upon the first calendar year before December 31, 2026 in which worldwide net sales of Anktiva exceed $ 1.0 billion (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.

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.

As the transaction was recorded as an asset acquisition, future CVR payments will be recorded when the corresponding events are probable of achievement or the consideration becomes payable.

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 if 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.

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

We are not currently a party to any legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business.

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

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

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Subsequent to the close of the merger, in 2017 the plaintiffs (joined by two additional minority stockholders, Barbara Sturm Waldman and Douglas E.

Henderson (Henderson)) filed a second amended complaint, asserting claims for (1) appraisal;

(2) quasi-appraisal;

(3) breach of fiduciary duty;

and (4) aiding and abetting breach of fiduciary duty.

The defendants moved to dismiss the second amended complaint, raising grounds that included a “standstill” agreement under which defendants maintained that Gray and Adam R.

Waldman and Barbara Strum Waldman (the Waldmans) agreed not to bring the lawsuit.

Henderson (Henderson)) filed a second amended complaint, including appraisal claims, and which the defendants subsequently moved to dismiss.

In a second action, Dyad Pharmaceutical Corporation (Dyad) filed a petition in Delaware Chancery Court for appraisal in connection with the merger.

Respondent moved to dismiss the appraisal petition in 2018, arguing in part that the petition was barred by the same “standstill” agreement.

In 2018, the court heard oral arguments on the motions to dismiss in both consolidated cases and converted the motions to dismiss into motions for summary judgment with regard to the “standstill” agreement argument (the Converted Motions).

The defendants moved to dismiss the appraisal petition in 2018.

The court issued an oral ruling in 2019 that dismissed certain claims and dismissed Altor BioScience from the action.

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(a) the appraisal claims by all plaintiffs and Dyad (against Altor BioScience, LLC), and (b) Henderson’s claims for breach of fiduciary duty and aiding and abetting breach of fiduciary duty.

In 2019, the court issued a written order implementing its ruling on the Converted Motions (the Implementing Order).

In 2019, the court issued a written order implementing its ruling on the defendants’ motions (the Implementing Order).

In the Implementing Order, the court confirmed that all fiduciary duty claims brought by Gray, both individually and as trustee of the Gordon Gray Trust f/b/o C.

Boyden Gray, were dismissed.

Gray and the Waldmans filed answers denying the counterclaims and asserting defenses.

The plaintiffs then moved for leave to file a third amended complaint to add two former Altor stockholders as plaintiffs and a fiduciary duty claim on behalf of a purported class of former Altor stockholders, which the defendants opposed.

In 2020, the court granted the plaintiffs’ motion, and the plaintiffs filed the third amended complaint.

In 2020, the defendants answered the third amended complaint and asserted counter claims against the plaintiffs.

The defendants are seeking damages for attorneys’ fees and costs incurred as a result of the breaches of the “standstill” agreements discussed above and of stockholder releases.

In 2020, the defendants answered the third amended complaint and asserted counterclaims against the plaintiffs.

The defendants sought damages for attorneys’ fees and costs incurred as a result of the breaches of “standstill” agreements and of stockholder releases.

The plaintiffs filed an answer denying the counterclaims and asserting defenses.

Trial was set to commence on August 8, 2022, but the parties have received notice that the Vice Chancellor assigned to the case is retiring, and there may be a new trial date.

The shares of the former Altor stockholders seeking appraisal met the definition of dissenting shares under the merger agreement and were not entitled to receive any portion of the merger consideration at the closing date.

However, these dissenting shares will automatically be converted to receive the portion of the merger consideration they were entitled to, on the later of the closing date or when the stockholder withdraws or loses the right to demand appraisal rights.

Payment for dissenting shares will be on the same terms and conditions originally stated in the merger agreement.

As of December 31, 2021 and 2020, we had accrued $ 7.1 million and $ 6.8 million, respectively, related to the dissenting share obligations.

The accrued amount represents the estimated low-end of the range of currently estimated payout amounts in accordance with ASC Topic 450, Contingencies , after considering the reasonable outcomes for settling the dissenting stockholder dispute along with any accrued statutory interest.

We cannot reasonably estimate a range of loss or likelihood of loss beyond the amounts recorded for dissenting shares as of December 31, 2021, as the dissenting stockholders have not yet provided a quantified value of their claim and, therefore, an upper end of the range of loss cannot be determined.

Discovery is ongoing, and the class certification motion relating to the putative class has not yet been decided.

We reassess the reasonableness of the recorded amount at each reporting period.

We believe the claims lack merit and intend to continue defending the case vigorously.

In late March 2022, the company agreed to the terms of a settlement with the appraisal petitioners, without any admission of liability or fault.

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

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

On July 9, 2022, the company issued 2,229,296 shares of its common stock with an aggregate market value of $ 10.7 million, based on the closing price of its common stock on the Nasdaq as of July 8, 2022, to the appraisal petitioners pursuant to the court-approved settlement agreement.

As of December 31, 2021, we had accrued $ 7.1 million related to the dissenting share obligation.

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

In exchange for class-wide releases, the company committed to make a settlement payment of $ 5.0 million in cash by December 31, 2022.

On December 8, 2022, the Delaware Court of Chancery entered a final judgment approving the settlement, and the company timely made the $ 5.0 million settlement payment.

Sorrento Therapeutics, Inc.

(Sorrento), derivatively on behalf of NANTibody, filed an action in the Superior Court of California, Los Angeles County (the Superior Court) against the company, Dr.

(Sorrento), derivatively on behalf of NANTibody, filed an action in the Superior Court of California, Los Angeles County (the Superior Court) against the company’s subsidiary NantCell, Dr.

Soon-Shiong, and Charles Kim.

The action alleged that the defendants improperly caused NANTibody to acquire IgDraSol, Inc.

from our affiliate NantPharma, LLC (NantPharma) and sought to have the transaction undone and the purchase amount returned to NANTibody.

from NantPharma, LLC (NantPharma) and sought to have the transaction undone and the purchase amount returned to NANTibody.

In 2019, we filed a demurrer to several causes of action alleged in the Superior Court action, and Sorrento filed an amended complaint, eliminating Mr.

Kim as a defendant and dropping the causes of action we had challenged in our demurrer.

Sorrento filed a related arbitration proceeding (the Cynviloq arbitration) against Dr.

Soon-Shiong and NantPharma;

the company is not named in the Cynviloq arbitration.

In 2020, the Superior Court granted Dr.

Soon-Shiong’s request for a preliminary injunction barring Sorrento from pursuing claims against him in the Cynviloq arbitration.

Sorrento then filed the claims it had previously asserted in arbitration against Dr.

Soon-Shiong in the Superior Court, and at Sorrento’s request, the arbitrator entered an order dismissing Sorrento’s claims against Dr.

Soon-Shiong in the Cynviloq arbitration.

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

The parties are now engaged in post-hearing briefing, and it is expected that summations will be scheduled in mid-July 2022.

The company believes the case is without merit and intends to vigorously defend against the claims asserted.

Trial has been set to commence in Sorrento’s Superior Court action on July 17, 2023.

Also in 2019, the company and Dr.

Soon-Shiong filed cross-claims in the Superior Court action against Sorrento and its Chief Executive Officer Henry Ji, asserting claims for fraud, breach of contract, breach of the covenant of good faith and fair dealing, tortious interference with contract, unjust enrichment, and declaratory relief.

Our claims allege that Dr.

Our claims alleged that Dr.

Ji and Sorrento breached the terms of an exclusive license agreement between the company and Sorrento related to Sorrento’s antibody library and that Sorrento did not perform its obligations under the exclusive license agreement.

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Ji asserting our claims relating to the exclusive license agreement.

In 2020, Sorrento sent letters purporting to terminate the exclusive license agreement with the company, and an exclusive license agreement with NANTibody and demanding the return of its confidential information and transfer of all regulatory filings and related materials.

As required pursuant to the exclusive license agreements, both parties must engage in good-faith negotiations before attempting to invoke any termination provision contained in the agreement.

Notwithstanding such negotiations, Sorrento sent a letter purporting to terminate the exclusive license agreements, maintaining the negotiations did not reach a successful resolution.

We believe we have cured any perceived breaches during the 90-day contractual cure period provided under the agreements.

Sorrento filed counterclaims against the company and NANTibody in the arbitration and requested leave to file a dispositive motion.

Sorrento filed counterclaims against the company and NANTibody in the arbitration.

The hearings in the NANTibody arbitration commenced in April 2021 and concluded in early August 2021.

After post-hearing briefing was concluded, the parties were notified on November 30, 2021 that the arbitrator in the NANTibody arbitration had passed away.

A substitute arbitrator was appointed on February 25, 2022, and the parties will work with the substitute arbitrator to conclude the proceedings.

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

An estimate of the possible loss or range of loss cannot be made at this time.

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

Additional hearing sessions were held in May and July 2022, and summations took place on August 2, 2022.

On December 2, 2022, the arbitrator issued a final award finding that Sorrento had breached the two exclusive license agreements with NantCell and NANTibody.

The arbitrator awarded NantCell approximately $ 156.8 million and NANTibody approximately $ 16.7 million, plus post-award interest accruing at a daily rate.

On December 21, 2022, NantCell and NANTibody filed petitions in the Superior Court to confirm the arbitration award;

on January 16, 2023, Sorrento filed a response to the petitions and moved to vacate the award.

On February 7, 2023, after a hearing, the Superior Court entered orders confirming the arbitration award and denying Sorrento’s motion to vacate.

The Superior Court entered judgments against Sorrento in the aggregate amount of approximately $ 176.4 million plus 10 % post-judgment interest, of which approximately $ 159.4 million is payable to NantCell, and the remainder of which is payable to NANTibody.

On February 13, 2023, Sorrento informed counsel to the company that it had filed a Chapter 11 proceeding in the U.S.

District Court for the Southern District of Texas, In re:

Sorrento Therapeutics, Inc., et al., Case No.

23-bk-90085 (Bankr.

The company intends to continue to pursue vigorously, consistent with its rights in light of Sorrento’s Chapter 11 filing, the collection of the judgments and 10% post-judgment interest from Sorrento, but we make no assurances that we will receive the full amount or with respect to the timing of our receipt of any funds.

The Superior Court actions remain pending, and it remains to be determined how, if at all, the awards in the arbitrations will affect the Superior Court actions.

A July 17, 2023 trial date has been set in the first-filed Superior Court action.

An estimate of the possible loss or range of loss resulting from the Superior Court litigation cannot be made at this time.

Shenzhen Beike Biotechnology Co.

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

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

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

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

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

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

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

Fox Chase Cancer Center Foundation Litigation

In, 2020, ImmunityBio filed a declaratory judgment lawsuit in the Superior Court for San Diego County, California, naming Fox Chase Cancer Center Foundation and Institute for Cancer Research (ICR) as the defendants (hereafter collectively Fox Chase).

This litigation relates to the license with Fox Chase and includes various intellectual property rights (the 2004 License).

Our initial court filing requested the Court to find that we have not breached material obligations under the 2004 License and that Fox Chase has not and cannot terminate the 2004 License.

Fox Chase filed a Cross-Complaint raising a patent inventorship challenge and moved the case to federal court.

On June 4, 2021, the federal court separated the parties’ claims, and returned ImmunityBio’s declaratory judgment claims back to the San Diego County court but retained the patent inventorship challenge.

On November 18, 2021, we reached a settlement with Fox Chase related to the 2004 License and agreed to a mechanism for addressing the patent inventorship dispute.

There was no financial impact to the company with respect to this settlement.

Litigation Related to the Merger with ImmunityBio, Inc.

In connection with the Merger with NantCell, Inc.

(formerly known as ImmunityBio, Inc., a private company), a Delaware corporation, via a wholly-owned subsidiary of NantKwest (the Merger Sub), seven complaints have been filed as individual actions in United States District Courts.

Three complaints have been filed in the United States District Court for the District of Delaware against NantKwest and its directors and are captioned Hargett v.

NantKwest, Inc., et al.

, 1:21‑cv‑00197 (filed February 11, 2021) (the Hargett Complaint), Franchi v.

NantKwest, Inc., et al.

, 1:21‑cv‑00218 (filed February 16, 2021) (the Franchi Complaint), and Gross v.

NantKwest, Inc., et al.

, 1:21‑cv‑00223 (filed February 17, 2021) (the Gross Complaint).

One complaint has been filed in the United States District Court for the Southern District of New York and is captioned Leaman v.

NantKwest, Inc., et al.

, 1:21‑cv‑01351 (filed February 16, 2021) (the Leaman Complaint).

Two complaints have been filed in the United States District Court for the Southern District of California and are captioned Weiss v.

NantKwest, Inc., et al.

, 3:21‑cv‑00280 (filed February 16, 2021) (the Weiss Complaint) and Carlisle v.

NantKwest, Inc., et al.

, 3:21‑cv‑00304 (filed February 19, 2021) (the Carlisle Complaint).

One complaint has been filed in the United States District Court for the Eastern District of New York and was captioned Shenk v.

NantKwest, Inc., et al.

, 1:21‑cv‑00871 (filed February 18, 2021) (the Shenk Complaint, and collectively with the Hargett Complaint, the Franchi Complaint, the Gross Complaint, the Leaman Complaint, the Weiss Complaint, and the Carlisle Complaint, the Merger Actions).

The Shenk Complaint was voluntarily dismissed on March 10, 2021.

The Franchi Complaint was voluntarily dismissed on May 6, 2021.

The Leaman Complaint was voluntarily dismissed on May 7, 2021.

The Hargett Complaint and the Gross Complaint were both voluntarily dismissed on May 18, 2021.

The Hargett Complaint and the Gross Complaint also brought claims against ImmunityBio, Inc.

and Merger Sub.

The Merger Actions generally allege that the Definitive Proxy Statement filed with the SEC on February 2, 2021 misrepresents and/or omits certain purportedly material information relating to financial projections, analysis performed by the financial advisor to NantKwest’s Special Committee, alleged past engagements of the Special Committee’s financial advisor and industry consultant, and the terms of the engagement of such consultant.

The Merger Actions assert violations of Section 14(a) of the Securities Exchange Act of 1934, as amended (the Exchange Act), and Rule 14a-9 promulgated thereunder against all defendants and violations of Section 20(a) of the Exchange Act against NantKwest’s directors.

The Merger Actions seek, among other things, an injunction enjoining the stockholder vote on the Merger and the consummation of the Merger unless and until certain additional information is disclosed to NantKwest’s stockholders, costs of the action, including plaintiffs’ attorneys’ fees and experts’ fees, and other relief the Court may deem just and proper.

Neither the stockholder vote on the Merger nor the Merger were enjoined and occurred on March 8 and March 9, 2021, respectively.

The company cannot predict the outcome of the Merger Actions.

The company believes the Merger Actions are without merit and the company and the individual defendants intend to vigorously defend against the Merger Actions and any subsequently filed similar actions.

If additional similar complaints are filed, absent new or significantly different allegations, the company will not necessarily disclose such additional filings.

Securities Litigation

In 2016, a putative securities class action complaint captioned Sudunagunta v.

NantKwest, Inc., et al ., 16-cv-01947 was filed in federal district court for the Central District of California related to our restatement of certain interim financial statements for the periods ended June 30, 2015 and September 30, 2015.

A number of similar putative class actions were filed in federal and state courts in California.

The plaintiffs asserted causes of action for alleged violations of Sections 11 and 15 of the Securities Act of 1933 and Sections 10(b) and 20(a) of the Exchange Act, and Rule 10b-5 promulgated thereunder.

The plaintiffs sought unspecified damages, costs and attorneys’ fees, and equitable/injunctive or other relief on behalf of putative classes of persons who purchased or acquired our securities during various time periods from July 28, 2015 through March 11, 2016.

In 2018, the district court granted the plaintiffs’ motions for class certification and to strike plaintiffs’ claims under the Exchange Act and Rule 10b-5.

The parties informed the Ninth Circuit that they had reached a settlement in principle, moved to stay in appellate proceedings , and notified the district court that they had reached a settlement in principle.

The plaintiffs then filed an unopposed motion for preliminary approval of the settlement and notice to class members.

A final approval hearing was held, and the district court granted final approval and entered judgment on May 31, 2019.

Under the terms of the settlement, we paid $ 12.0 million to the plaintiffs as a full and complete settlement of the litigation.

The company was responsible for $ 1.2 million of the settlement amount, which was recognized in selling, general and administrative expense, on the consolidated statement of operations for the year ended December 31, 2018, while the remaining $ 10.8 million was funded by our insurance carriers under our directors’ and officers’ insurance policy.

The settlement amount was deposited into a settlement fund during the year ended December 31, 2019.

(formerly known as ImmunityBio, Inc., a private company), a Delaware corporation, via a wholly-owned subsidiary of NantKwest, several complaints were filed as individual actions in the United States District Courts, and subsequently were voluntarily dismissed (the Merger Actions).

The Merger Actions generally alleged that the Definitive Proxy Statement filed with the SEC on February 2, 2021 misrepresented and/or omitted certain purportedly material information relating to financial projections, analysis performed by the financial advisor to NantKwest’s Special Committee, alleged past engagements of the Special Committee’s financial advisor and industry consultant, and the terms of the engagement of such consultant.

The Merger Actions asserted violations of Section 14(a) of the Securities Exchange Act of 1934, as amended (the Exchange Act), and Rule 14a-9 promulgated thereunder against all defendants and violations of Section 20(a) of the Exchange Act against NantKwest’s directors.

The Merger Actions sought, among other things, an injunction enjoining the stockholder vote on the Merger and the consummation of the Merger unless and until certain additional information was disclosed to NantKwest’s stockholders, costs of the action, including plaintiffs’ attorneys’ fees and experts’ fees, and other relief the Court may deem just and proper.

Neither the stockholder vote on the Merger nor the Merger were enjoined and both occurred on March 8 and March 9, 2021, respectively.

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

Stipulation of Settlement

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Pursuant to the Stipulation of Settlement, we provided stockholders with notice of the settlement and the final settlement hearing.

Under the terms of the Stipulation of Settlement, which received final approval by the court on August 9, 2019, the company paid attorney fees of $ 0.5 million to the plaintiffs as part of the settlement.

Of that amount, we were responsible for half, which was recognized in selling, general and administrative expense, on the consolidated statement of operations for the year ended December 31, 2019, while the other half was funded by our insurance carrier.

The settlement amount was deposited into a settlement fund during the year ended December 31, 2019.

Precision Biologics, Inc.

In 2015, the company invested $ 50.0 million in cash in Precision in exchange for 41.0 million shares of Precision’s series A preferred stock (representing a 68.5 % ownership interest in Precision at the time of the investment).

In 2017, a Precision stockholder filed a complaint captioned Feldman v.

Soon-Shiong, et al.

(individually and derivatively on behalf of Precision), and filed an amended complaint against the company and other defendants asserting claims for breach of contract (including the implied covenant of good faith and fair dealing), tortious interference with contract, breach of the fiduciary duty of loyalty, the appointment of a custodian, fraud in the inducement, and violation of state “Blue Sky” laws.

The defendants moved to dismiss the amended complaint.

In 2018, the court heard oral arguments and issued an opinion granting in part, and denying in part, defendants’ motion.

In 2019, the parties completed fact discovery other than depositions (and certain document discovery subsequently ordered by the court).

The parties agreed in principle to the terms of a settlement and filed a settlement stipulation with the court.

A settlement hearing before the court was held, and the court approved the settlement, which was finalized on July 20, 2019.

Under the terms of the settlement, the company ended its investment in Precision.

As part of the deconsolidation, we withdrew $ 29.3 million in cash from the investment on our books and transferred $ 2.5 million to Precision.

In addition to $ 20.2 million of accumulated losses recorded in prior years, which represented the expected losses associated with giving up our preferred stock ownership and absorbing losses arising from the deconsolidation, we recorded a $ 0.9 million loss associated with the final settlement for the year ended December 31, 2019.

Unconditional Purchase Obligations

Unconditional purchase obligations are defined as an agreement to purchase goods or services that are enforceable and legally binding (non-cancelable, or cancelable only in certain circumstances).

In the normal course of business, we enter into unconditional purchase obligation arrangements with a CMO to reserve manufacturing slots in its cGMP manufacturing facility for the manufacture and supply of cGMP batches per FDA and European Medicines Agency (EMA) regulations for commercial use.

The total amount of future non-cancelable purchase commitments related to the manufacture of cGMP batches is $ 19.5 million and $ 5.6 million for the years ending December 31, 2023 and 2024, respectively.

We did not enter into any significant contracts or material unconditional purchase commitments during the year ended December 31, 2022, other than those disclosed in these consolidated financial statements.

Lease Arrangements

We lease property in multiple facilities across the U.S.

and Italy, including facilities located in El Segundo and Culver City, CA that are leased from related parties.

(including the Dunkirk Facility in upstate New York) and Italy, including facilities located in El Segundo, CA, which are leased from related parties.

Substantially all of our operating lease right-of-use assets and operating lease liabilities relate to facilities leases.

All of our finance leases are related to equipment rental at the Dunkirk Facility.

See Note 10 , Related-Party Agreements , for additional information about our related-party leases.

Our leases generally have initial terms ranging from two to ten years and often include one or more options to renew.

These renewal terms can extend the lease term from one to seven years , and are included in the lease term when it is reasonably certain that we will exercise the option.

Information regarding our leases is as follows:

These renewal terms can extend the lease term from one to ten years , and are included in the lease term when it is reasonably certain that we will exercise the option.

Supplemental balance sheet information related to our leases is as follows (in thousands):

As of December 31,

Weighted average remaining lease term 7.8 years 3.9 years

Classification 2022 2021

Operating lease assets Operating lease right-of-use assets $ 45,788 $ 36,304

Finance lease assets Other assets 135 —

Total lease assets $ 45,923 $ 36,304

Operating lease liabilities Operating lease liabilities $ 2,650 $ 3,011

Finance lease liabilities Accrued expenses and other liabilities 77 —

Operating lease liabilities Operating lease liabilities, less current portion 47,951 37,068

Finance lease liabilities Other liabilities 64 —

Total lease liabilities $ 50,742 $ 40,079

Information regarding our lease terms is as follows:

Year Ended December 31,

Weighted-average remaining lease term:

Operating leases 6.6 years 7.8 years

Finance leases 1.8 years —

Weighted-average discount rate:

Operating leases 10.5 % 9.6 %

Finance leases 11.7 % —

The components of lease expense consist of the following (in thousands):

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Operating lease costs $ 11,093 $ 7,977 $ 5,668

Short-term lease costs 3,060 — —

Finance lease costs (including amortization and

interest costs) 80 — —

Variable lease costs 3,880 2,862 3,564

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Year Ended December 31,

2021 2020 2019

Cash paid for operating leases (excluding variable lease costs) $ 10,241 $ 9,034

Financing cash flow from finance leases 58 —

Operating cash flow from finance leases 15 —

Future minimum lease payments as of December 31, 2022, including $ 14.8 million related to options to extend lease terms that are reasonably certain of being exercised, are presented in the following table (in thousands).

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Years ending December 31:

2023 $ 9,539 $ 88 $ 9,627

2024 12,118 66 12,184

2025 12,145 — 12,145

2026 10,289 — 10,289

2027 8,209 — 8,209

Thereafter 23,247 — 23,247

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Present value of operating lease liabilities $ 50,601 $ 141 $ 50,742

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.

See Note 8 , Related-Party Agreements , for further information.

Unconditional Purchase Obligations

Unconditional purchase obligations are defined as an agreement to purchase goods or services that are enforceable and legally binding (non-cancelable, or cancelable only in certain circumstances).

The total amount of future non-cancelable purchase commitments related to the manufacture of cGMP batches is $ 3.5 million and $ 3.5 million for the years ending December 31, 2022 and 2023, respectively.

We estimate our total unconditional purchase obligation commitment (for contracts with terms in excess of one year) as of December 31, 2021, at $ 2.6 million.

Payments by year are estimated as follows:

2022 ($ 2.1 million) and 2023 ($ 0.5 million).

These commitments relate primarily to hosted software license subscription fees and related implementation costs and our pro-rata share is passed-through to us without any markup under the shared services agreement with NantWorks, as further discussed in Note 8 , Related-Party Agreements .

The purchase obligation amounts do not represent the entire anticipated purchases in the future, but represent only those items for which we are contractually obligated.

The majority of our goods and services are purchased as needed, with no unconditional commitment.

For this reason, these amounts do not provide an indication of our expected future cash outflows related to purchases.

We did not enter into any significant contracts or material unconditional purchase commitments during the year ended December 31, 2021, other than those disclosed in these consolidated financial statements.

3530 John Hopkins Court

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

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

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

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

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

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

In addition to the lease described above, we also acquired a leasehold interest at the Dunkirk Facility discussed in Note 6 , Collaboration and License Agreements and Acquisition , and entered into new related-party leases and terminated an existing related-party lease discussed in Note 10 , Related-Party Agreements, during the year ended December 31, 2022.

Related-Party Debt

$ 125.0 million Variable-Rate Promissory Note

On August 31, 2022, the company executed a $ 125.0 million promissory note with Nant Capital, an affiliated entity of the company due to the common control of 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 September 30, 2022.

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

The company may prepay this note 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.

The interest paid in cash amounted to $ 5.2 million for the year ended December 31, 2022.

$ 300.0 million Variable-Rate Promissory Note

On August 31, 2022, the company amended and restated its $ 300.0 million variable-rate promissory note with Nant Capital.

Prior to the amendment and restatement, the outstanding balance due under the promissory note was due and payable on December 17, 2022, the loan bore interest at Term SOFR + 5.4 %, which was payable quarterly commencing on March 17, 2022, and the company could and can continue to prepay the outstanding principal (together with accrued and unpaid interest), in whole or in part, upon five business days’ prior written notice to the lender.

The terms of this promissory note were amended and restated to extend the maturity date of the loan to December 31, 2023, increase the interest rate on the loan to Term SOFR + 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 the August 31, 2022 amendment and restatement.

The interest paid in cash amounted to $ 27.4 million for the year ended December 31, 2022.

In the event of a default on the loan (as defined in both the original and amended and restated promissory notes), including if the company does not repay the loan at maturity, the company had and continues to have the right, at its sole option, to convert the outstanding principal amount and accrued and unpaid interest due under this note into fully paid and non-assessable shares of the company’s common stock at a price per share equal to $ 5.67 .

Fixed-Rate Convertible Promissory Notes

On August 31, 2022, the company also amended and restated an aggregate of $ 315.1 million (including outstanding principal and accrued and unpaid interest) of fixed-rate promissory notes held by entities affiliated with Dr.

Prior to the amendments and restatements, these notes bore and continue to bear interest at a per annum rate ranging from 3.0 % to 6.0 %, provide that the outstanding principal was and continues to be due and payable on September 30, 2025, and accrued and unpaid interest was or continues to be payable either upon maturity or, with respect to one of the notes, on a quarterly basis.

Prior to the amendments and restatements, the company could and can continue to prepay the outstanding principal (together with accrued and unpaid interest), either in whole or in part, at any time without premium or penalty and without the prior consent of the lender, 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 the company’s common stock, as part of the amendment and restatement described below.

The terms of these fixed-rate promissory notes 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 the August 31, 2022 amendments and restatements.

Since all of the above promissory notes were entered into or amended at the same time and with entities under common control, the company determined that the promissory notes were required to be evaluated collectively to accurately capture the economics of the transactions entered in contemplation of each other and contemporaneously.

ASC 470-50, Debt – Modifications and Extinguishments, provides that a modification or an exchange that adds or eliminates a substantive conversion option as of the conversion date would always be considered substantial and require extinguishment accounting.

Accordingly, as a result of the addition of the conversion feature to the fixed-rate promissory notes, the fixed-rate promissory notes and the variable-rate promissory notes were determined to be extinguished given the contemporaneous nature of the amendments.

The company performed a valuation of the fixed-rate promissory notes and variable-rate promissory notes before and after amendments.

Under this model, the company calculated a gain on extinguishment of $ 82.9 million, representing the difference between the fair value of the new and amended promissory notes and the carrying value of the extinguished debt, net of any unamortized related-party notes discounts plus the cash proceeds from the new promissory note.

Since the debt was obtained from entities under common control, such gain was recorded in additional paid-in capital , on the consolidated statement of stockholders’ deficit for the year ended December 31, 2022.

Also, the difference between face values of the new and amended promissory notes (and accrued interest on the date of the amendment) and the fair values of the new and restated promissory notes was recorded as a debt discount to be amortized as interest expense over the remaining term (or until conversion in the case of fixed-rate promissory notes) of the respective promissory notes.

The company recorded amortization of related-party notes discounts totaling $ 16.3 million in interest expense, on the consolidated statement of operations during the year ended December 31, 2022.

The fair values of the promissory notes without a holder conversion option were estimated using discounted cash flow analyses, based on market rates available to the company for similar debt at issuance after consideration of default and credit risk and the level of subordination.

The fair values of the fixed-rate promissory notes, which were each modified to include a holder conversion option, were determined based on a binomial lattice convertible note model.

The analysis involved the construction of various intermediate lattices:

stock price tree, conversion value tree, conversion probability tree, and discount rate tree.

Since certain of the factors analyzed are considered to be unobservable inputs, both the discounted cash flow model and the lattice model are considered to be Level 3 valuations.

Significant unobservable inputs used for the discounted cash flow analysis included market yields from 18.0 % to 24.8 % and a risk free rate of 4.1 %, and the significant unobservable inputs used for the binomial lattice model included a volatility of 84.9 %, a market yield of 17.4 % and a risk free rate of 3.5 %.

$ 50.0 million Variable-Rate Promissory Note

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

This note bears interest at 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.

The interest paid in cash amounted to $ 0.3 million for the year ended December 31, 2022.

Our related-party debt is summarized below (in thousands):

Balances at December 31, 2022

Year Interest

Rate Outstanding

Advances Accrued

Discounts Total

Related-Party Notes:

Nant Capital (1) 2023 Term SOFR + 8.0 %

$ 475,000 $ — $ 43,099 $ 431,901

Related-Party Convertible Notes:

Nant Capital 2025 5.0 % 55,226 9,320 5,188 59,358

Nant Capital 2025 6.0 % 50,000 7,039 4,068 52,971

Nant Capital 2025 6.0 % 40,000 — 2,580 37,420

NantMobile, LLC 2025 3.0 % 55,000 5,110 5,978 54,132

NantCancerStemCell, LLC 2025 5.0 % 33,000 7,684 3,294 37,390

Total related-party convertible notes 233,226 29,153 21,108 241,271

Total related-party debt $ 708,226 $ 29,153 $ 64,207 $ 673,172

_______________

(1) The interest rate on our related-party variable-rate notes as of December 31, 2022 was 12.59 %.

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, net of unamortized discount, was approximately $ 51.9 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.

Balances at December 31, 2021

Year Interest

Rate Outstanding

Advances Accrued

Debt Issuance

Related-Party Note:

Nant Capital (1) 2022 Term SOFR + 5.4 %

$ 300,000 $ 674 $ 1,438 $ 299,236

Related-Party Convertible Notes:

Nant Capital 2025 5.0 % 55,226 6,141 — 61,367

Nant Capital 2025 6.0 % 50,000 3,810 — 53,810

Nant Capital 2025 6.0 % 40,000 — — 40,000

NantMobile 2025 3.0 % 55,000 3,359 — 58,359

NantWorks 2025 5.0 % 43,418 10,649 — 54,067

NCSC 2025 5.0 % 33,000 5,746 — 38,746

Total related-party convertible notes 276,644 29,705 — 306,349

Total related-party debt $ 576,644 $ 30,379 $ 1,438 $ 605,585

_______________

(1) The interest rate on our related-party variable-rate note as of December 31, 2021 was 5.47 %.

The following table summarizes the estimated future contractual obligations for our related-party debt as of December 31, 2022 (in thousands):

Principal Payments Interest Payments (1)

Notes Non-convertible

Notes Convertible

Notes Non-convertible

$ — $ 475,000 $ 2,400 $ 59,622 $ 537,022

— — 2,407 — 2,407

233,226 — 61,050 — 294,276

Total principal and estimated interest

due on related-party debt $ 233,226 $ 475,000 $ 65,857 $ 59,622 $ 833,705

_______________

(1) Interest payments on our fixed-rate convertible notes are calculated based on contractual interest rates and scheduled maturity dates.

Interest payments on our variable-rate notes are calculated based on Term SOFR plus the contractual spread per the loan agreements.

The rate on our variable-rate notes as of December 31, 2022 was 12.59 %.

Related-Party Agreements

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$ 1,294 $ 1,294

Due from related party–NantOmics LLC — 591

Due from related party–Brink Biologics 271 —

Due from related parties–Various 325 39

Total due from related parties $ 1,890 $ 1,333

Due to related party–NantWorks $ 1,113 $ 10,650

Due to related party–Duley Road, LLC $ 1,431 $ 1,380

Due to related party–NantWorks 986 1,113

Due to related party–NantBio, Inc.

Due to related party–605 Nash, LLC — —

Due to related party–Immuno-Oncology Clinic, Inc.

Due to related party–Various — 187

Total due to related parties $ 3,469 $ 3,943

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

As described below, we have entered into arrangements with NantWorks, and certain affiliates of NantWorks, to facilitate the development of new genetically modified NK cells for our product pipeline.

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.

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.

As described below, we have entered into arrangements with NantWorks and certain affiliates of NantWorks, including NantBio, Inc., Duley Road, LLC, and 605 Nash, LLC.

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

Shared Services Agreement

Under the amended and restated shared services agreement with NantWorks dated as of June 2016, but effective as of August 2015, NantWorks, a related party, provides corporate, general and administrative, certain research and development, and other support services.

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

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

As of December 31, 2021 and 2020, we owed NantWorks a net amount of $ 1.1 million and $ 10.7 million, respectively, for all agreements between the two affiliates, which is included in due to related parties, on the consolidated balance sheets.

As of December 31, 2022 and 2021, we owed NantWorks net amounts of $ 1.0 million and $ 1.1 million, respectively, for all agreements between the two affiliates, which are included in due to related parties, on the consolidated balance sheet.

We also recorded $ 2.0 million and $ 2.2 million of prepaid expenses for services that have been passed through to the company from NantWorks as of December 31, 2022 and 2021, respectively, which are included in prepaid expenses and other current assets , on the consolidated balance sheets.

Facility License Agreement

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

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

Commencing January 1, 2021, the base rent increased by 3 % to approximately $ 54,500 per month.

Subsequent to December 31, 2021, the lease term will automatically renew on a month-to-month basis, terminable by either party with at least 30 days’ prior written notice to the other party.

Lease expense for this facility totaling $ 0.7 million, $ 0.6 million and $ 0.6 million for the years ended December 31, 2021, 2020 and 2019, respectively, was recorded in research and development expense , on the consolidated statements of operations.

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

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

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

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

License fee expense for this facility totaling $ 2.4 million, $ 0.7 million and $ 0.6 million for the years ended December 31, 2022, 2021 and 2020, respectively, was recorded in research and development expense , on the consolidated statements of operations.

Immuno-Oncology Clinic, Inc.

Beginning in 2017, we entered into multiple agreements with Immuno-Oncology Clinic, Inc.

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

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

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.

Prior to June 30, 2019, one of our officers was an investigator or sub-investigator for all of our trials conducted at the Clinic.

In July 2019, we entered into a new agreement with the Clinic (the Clinic Agreement), which became effective on July 1, 2019.

The Clinic Agreement, as amended on March 31, 2020, covers clinical trial and research-related activities on a non-exclusive basis relating to existing clinical trials, commenced prior to July 1, 2019, and prospective clinical trials and research projects.

The Clinic Agreement also specifies certain services and related costs that are excluded from the Clinic Agreement.

Prior to commencing any work under the Clinic Agreement, the parties have agreed to execute written work orders setting forth the terms and conditions related to specific services to be performed, including financial terms.

For clinical trials that commenced prior to July 1, 2019, excluding certain NantCell trials not covered by the agreement, fees incurred for services performed after July 1, 2019 are covered under the Clinic Agreement and applied towards the below-mentioned prepayments.

The Clinic Agreement allows for automatic renewal and additional extensions beyond the initial one-year term.

In consideration of the services to be performed under the Clinic Agreement, as amended on March 31, 2020, we agreed to make payments of up to $ 7.5 million to the Clinic, of which $ 3.8 million and $ 1.9 million were paid in July 2019 and October 2019, respectively.

As amended, a conditional payment of $ 1.9 million shall be due and payable at such time, if any, that the payments made in July 2019 and October 2019 have been earned by the Clinic through the performance of services.

On a quarterly basis, our prepayment is increased by a nominal interest credit computed in accordance with terms specified in the Clinic Agreement.

The Clinic may terminate this agreement upon each anniversary date upon 60 days prior written notice and reimbursement in full to us of any outstanding unearned balance of the prepayments, provided that any such termination by the Clinic will not apply with respect to any work orders still in effect at the time of such termination.

We executed a clinical trial work order under the Clinic Agreement for an open-label, Phase 1 study of PD‑L1 t‑haNK ™ for infusion in subjects with locally advanced or metastatic solid cancers.

In July 2020, but effective on June 22, 2020, we and NantCell executed a clinical trial work order under our existing master agreement with the Clinic for an open-label, randomized, comparative Phase 2 study of our proprietary IL‑15 superagonist (Anktiva) and aldoxorubicin hydrochloride (aldoxorubicin) and our PD‑L1 t‑haNK with standard-of-care chemotherapy versus standard-of-care chemotherapy for patients with locally advanced or metastatic pancreatic cancer treated as first-line, second-line, or third-line or greater, in three separate cohorts, respectively.

During the year ended December 31, 2021, ImmunityBio executed multiple work orders under an existing master agreement with the Clinic.

Under these work orders, the parties agreed that the Clinic would serve as a site for the following multi-site clinical trials:

• A Phase 1B open-label study of the safety, reactogenicity, and immunogenicity of prophylactic vaccination with second-generation E1/E2B/E3-deleted adenoviral-COVID-19 in normal healthy volunteers;

• A Phase 1B open-label study of the safety, reactogenicity, and immunogenicity of subcutaneously and orally administered prophylactic vaccination with second-generation E1/E2B/E3-deleted adenoviral-COVID-19 in normal healthy volunteers;

• A Phase 1 study of the safety, reactogenicity, and immunogenicity of subcutaneously- and orally-administered supplemental spike & nucleocapsid-targeted COVID‑19 vaccine to enhance T cell-based immunogenicity in participants who have already received a vaccine authorized for emergency use;

• A Phase 1 study of the safety, reactogenicity, and immunogenicity of a supplemental spike & nucleocapsid-targeted COVID‑19 vaccine to enhance T cell-based immunogenicity in participants who have already received a vaccine authorized for emergency use;

• A Phase 1 open-label study of M‑ceNK cells in subjects with locally advanced or metastatic solid tumors.

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.

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

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

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

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

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 years ended December 31, 2022, 2021 and 2020, we incurred $ 2.4 million, $ 1.6 million and $ 0.9 million in research and development expense , on the consolidated statements of operations related to the Clinic Agreement.

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

As of December 31, 2020, we had prepaid balances related to the Clinic Agreement of $ 4.7 million.

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) whereby we granted to Brink worldwide exclusive licenses to 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.

We recognized revenue of $ 0.4 million for the year ended December 31, 2021 related to this license.

We recognized revenue of an immaterial amount, $ 0.4 million and $ 0.1 million for the year ended December 31, 2022, 2021 and 2020, respectively, related to this license.

NantBio, Inc.

In March 2016, NantBio and the NCI entered into a CRADA.

The initial five-year agreement covered NantBio and its affiliates, including us.

Under the agreement, the parties collaborated on the preclinical and clinical development of proprietary recombinant NK cells and mAbs in monotherapy and combination immunotherapies.

In each of the contractual years under the agreement, we paid $ 0.6 million to the NCI for services under the agreement.

We recognized expenses related to this agreement ratably over a 12-month period for each funding year.

This CRADA expired in March 2021.

In November 2021, we entered into a third amendment to the 2015 NCI CRADA, which was effective as of March 16, 2021, and transferred the research plan from this expired CRADA into the research plan of the amended 2015 NCI CRADA.

We made a payment of $ 0.7 million and recorded $ 0.5 million in research and development expense , on the consolidated statements of operations related to the third amendment for the year ended December 31, 2021.

See Note 6 , Collaboration and License Agreements—National Cancer Institute, for further information.

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

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

We recognized revenue of $ 0.3 million for the year ended December 31, 2021 .

We recognized no revenue for the years ended December 31, 2022 and 2020, and $ 0.3 million of revenue for the year ended December 31, 2021.

We recorded $ 0.1 million and $ 0.1 million of deferred revenue for bioreactors that were delivered but not installed as of December 31, 2022 and 2021, respectively.

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

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

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

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As of December 31, 2022 and 2021, we recorded a net receivable from NantBio of $ 1.3 million, which included $ 1.0 million for employee bonuses and $ 0.3 million for vendor costs we paid on behalf of NantBio.

NantOmics, LLC

In 2019, we made a strategic decision and transferred certain employees from NantOmics, a related party that is controlled by our Executive Chairman and Global Chief Scientific and Medical Officer, to the company.

After the transfer, we settled certain employee bonuses and benefits that were accrued by NantOmics for the year ended December 31, 2020.

We recorded no receivable and a $ 0.6 million receivable from NantOmics as of December 31, 2021 and 2020, respectively.

605 Doug St, LLC

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

As of December 31, 2021 and 2020, we recorded rent payable to Duley Road of $ 0.2 million and $ 1.3 million, respectively.

For the years ended December 31, 2021 and 2020, we recorded rent expense of $ 0.6 million and $ 0.5 million, respectively, which is reflected in research and development expense , on the consolidated statements of operations.

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

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As of December 31, 2022 and 2021, we recorded $ 0.9 million and $ 0.9 million of leasehold improvement payables, respectively, and $ 0.6 million and $ 0.5 million of lease-related payables to Duley Road, which were included in due to related parties , on the consolidated balance sheets.

For the years ended December 31, 2021 and 2020, we recorded $ 0.4 million and $ 0.3 million of rent expense for the two leases, respectively, which was included in research and development expense , on the consolidated statements of operations.

For the years ended December 31, 2022, 2021 and 2020, we recorded $ 0.8 million, $ 1.0 million and $ 0.8 million of rent expense for the two leases, respectively, which was included in research and development expense , on the consolidated statements of operations.

605 Nash, LLC

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We have included the first option to extend the lease term for three years as part of the initial lease term as it is reasonably certain that we will exercise the option.

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

During the year ended December 31, 2021, we recorded rent expense of $ 0.2 million, which is reflected in research and development expense, on the consolidated statement of operations.

We received a rent abatement for the first seven months .

The lease also provides a tenant improvement incentive of $ 0.3 million for costs and expenses associated with the construction of tenant improvements for the Initial Premises.

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

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

During the year ended December 31, 2021, we incurred $ 1.5 million of rent expense related to the Expansion Premises lease agreement.

We recorded rent expense for the Initial and Expansion Premises leases totaling $ 2.2 million and $ 1.7 million for the years ended December 31, 2022 and 2021, respectively, i n research and development expense, on the consolidated statements of operations.

557 Doug St, LLC

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The lease is classified as an operating lease.

As of December 31, 2021, we recorded $ 0.3 million of rent expense for the lease, which was included in research and development expense , on the consolidated statements of operations.

For the year ended December 31, 2021, we recorded $ 0.3 million of rent expense for the lease, which was included in research and development expense , on the consolidated statement of operations.

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.

We recorded year-to-date rent expense of $ 0.4 million prior to the termination of the lease, in research and development expense , on the consolidated statement of operations.

We recognized a gain of $ 0.6 million on the disposal of this lease for the year ended December 31, 2022 in other income, net , on the consolidated statement of operations.

420 Nash, LLC

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

As of December 31, 2021, we recorded $ 0.1 million of rent expense for the lease, which was included in research and development expense , on the consolidated statement of operations.

Related-Party Notes Payable

Our related-party notes payable consist of the following (in thousands):

Total Notes and Interest Payable

as of December 31,

Related-Party Notes Payable Note

Year Outstanding

Advances Interest

Rate 2021 2020

Nant Capital (1)

2021 $ 300,000 SOFR + 5.4 %

$ 299,236 (1) $ —

Nant Capital (2)

2015 55,226 5.0 % 61,367 (3) 58,482 (3)

Nant Capital (2)

2020 50,000 6.0 % 53,810 (4) 50,764 (4)

Nant Capital (5)

2021 40,000 6.0 % 40,000 (5) —

NantMobile (2)

2019 55,000 3.0 % 58,359 (6) 56,660 (6)

NantWorks (2)

2017 43,418 5.0 % 54,067 (7) 51,546 (7)

2018 33,000 5.0 % 38,746 (8) 36,901 (8)

Total related-party notes payable $ 576,644 $ 605,585 $ 254,353

_______________

(1) The outstanding advance 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 %.

Accrued and unpaid interest on this note totaled $ 0.7 million as of December 31, 2021.

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

Debt issuance cost of $ 1.5 million paid to the lender in December 31, 2021 was recorded as a reduction of the principal amount of the note.

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

Interest on related-party notes payable is compounded annually.

We may prepay the outstanding principal at any time without premium, penalty or the prior consent of the issuer.

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

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

(3) Accrued and unpaid interest on this note totaled $ 6.1 million and $ 3.3 million as of December 31, 2021 and 2020, respectively.

(4) Accrued and unpaid interest on this note totaled $ 3.8 million and $ 0.8 million as of December 31, 2021 and 2020, respectively.

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

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

We paid $ 2.0 million in interest on this loan during the year ended December 31, 2021.

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

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

(6) Accrued and unpaid interest on this note totaled $ 3.4 million and $ 1.7 million as of December 31, 2021 and 2020, respectively.

(7) Accrued and unpaid interest on this note totaled $ 10.6 million and $ 8.1 million as of December 31, 2021 and 2020, respectively.

(8) Accrued and unpaid interest on this note totaled $ 5.7 million and $ 3.9 million as of December 31, 2021 and 2020, respectively.

The following table summarizes our estimated future contractual obligations for related-party notes payable as of December 31, 2021 (in thousands):

Payments Interest

2022 $ 300,000 $ 18,808 (2) $ 318,808

2023 — 2,400 2,400

2024 — 2,407 2,407

2025 276,644 85,823 (3) 362,467

Total principal and estimated interest due on related-party notes $ 576,644 $ 109,438 $ 686,082

_______________

(1) Interest payments on our fixed-rate debt are calculated based on contractual interest rates and scheduled maturity dates.

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

The rate on this debt as of December 31, 2021 was 5.47 %.

(2) Interest shown includes $ 0.7 million of accrued and unpaid interest as of December 31, 2021 related to the $ 300.0 million variable-rate loan.

Interest on our $ 300.0 million variable-rate loan and our $ 40.0 million fixed-rate loan are payable on a monthly and quarterly basis, respectively.

(3) Interest shown includes $ 29.7 million of accrued and unpaid interest of December 31, 2021.

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

For the years ended December 31, 2022 and 2021, we recorded $ 0.5 million and $ 0.1 million of rent expense for the lease, respectively, which was included in research and development expense , on the consolidated statements of operations.

23 Alaska, LLC

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

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

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

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

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

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

The company is responsible for the costs associated with the build-out of the premises and will received a one-time tenant improvement allowance of approximately $ 0.9 million from the landlord.

As of December 31, 2022, we re-evaluated plan of the future development of the facility and deemed it unlikely to claim any of the allowance during the reimbursement time frame.

As such, we wrote off the entire allowance receivable of $ 0.9 million during the year ended December 31, 2022.

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

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

We recorded $ 1.2 million of rent expense for this lease for the year ended December 31, 2022 in research and development expense , on the consolidated statement of operations.

Warrant Liability

On December 12, 2022, in connection with the sale of 9,090,909 shares of our common stock to an institutional investor, we entered into a warrant agreement that offers purchase of up to 9,090,909 shares at an exercise price of $ 6.60 per share.

The warrants are accounted for in accordance with ASC 815-40.

Such guidance provides that because the warrants do not meet the criteria for equity treatment thereunder, such warrant must be recorded as a liability.

The warrant agreement contains a provision that in the event of a “fundamental transaction” (as defined in the warrant agreement), in certain circumstances the holder of warrants may choose to require the company, or its successor, to redeem the warrants for cash at a value based on the Black-Scholes option pricing model obtained from the Bloomberg Financial Markets with inputs as defined in the warrant agreement.

We determined that the defined input in the warrant agreement for the exercise price per share in the Black-Scholes option pricing model will result in a settlement value which may not be considered a fair value, and therefore the warrants do not meet the criteria for equity treatment.

We classified the warrants as a liability at their fair value determined using the Black-Scholes option pricing model, and the warrants were allocated a portion of the proceeds from the issuance of the common stock equal to $ 35.1 million on the date of the transaction .

The $ 1.1 million of transaction costs allocated to the warrant liability was recognized in other expense, net, on the consolidated statement of operations for the year ended December 31, 2022.

The warrant liability is subject to remeasurement at each balance sheet date.

With each such remeasurement, the warrant liability will be adjusted to fair value, with the change in fair value recognized in other expense, net , on the consolidated statement of operations.

As of December 31, 2022 , there were 9,090,909 third-party w arrants outstanding, with a fair value of $ 21.6 million.

Stockholders’ Deficit

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As of December 31, 2022, there were 421,569,115 shares of our common stock outstanding (excluding 163,800 shares held by a majority owned subsidiary of the company that are treated as treasury shares for accounting purposes).

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

The number of shares of preferred stock that the company is authorized to issue remains unchanged at 20,000,000 shares.

See Note 13 , Subsequent Events .

Common Stock Issued in Connection with the Merger

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

Since the Merger was accounted for as a transaction between entities under common control, the outstanding shares presented on the consolidated financial statements assume that NantCell outstanding common stock was converted into shares of Company Common Stock for all periods presented, and in connection with the conversion, those shares of common stock were recorded at the company’s par value of $ 0.0001 per share.

Since the Merger was accounted for as a transaction between entities under common control, the outstanding shares presented on the consolidated financial statements assume that NantCell outstanding common stock was converted into shares of Company Common Stock for the periods ending December 31, 2021 and 2020, and in connection with the conversion, those shares of common stock were recorded at the company’s par value of $ 0.0001 per share.

Stock Repurchases

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No shares of our common stock were repurchased during the years ended December 31, 2022, 2021 and 2020 under the program.

During the year ended December 31, 2019, we repurchased 473,586 shares at a cost of $ 0.5 million.

Since the plan’s inception, we have repurchased a total of 6,403,489 shares at a total cost of $ 31.7 million.

As of December 31, 2021, $ 18.3 million remained authorized for repurchase under the program.

Other Repurchase

During the year ended December 31, 2019, we entered into a stock transfer agreement with a stockholder and purchased 204,750 shares of our common stock at a price of $ 9.77 per share for an aggregate purchase price of $ 2.0 million in cash.

All shares repurchased in this transaction were retired and reduced the number of shares issued and outstanding.

As of December 31, 2022, $ 18.3 million remained authorized to use for share repurchases under the program.

Open Market Sale Agreement

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.

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 initial 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 described below.

See “ —Other Sales of Common Stock.

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

During 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.

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

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

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

The Sale Agreement may be terminated by us at any time given written notice to the sales agent for any reason or by the sales agent at any time by giving written notice to us for any reason or immediately under certain circumstances, and shall automatically terminate upon the issuance and sale of all of the shares.

Other Sales of Common Stock

During the year ended December 31, 2020, the company closed an underwritten public offering of an aggregate of 8,521,500 shares of common stock, which included 4,811,500 shares issued to the public at a price of $ 9.50 per share (including 1,111,500 shares sold to the public upon full exercise of the underwriters’ option to purchase additional shares at a public offering price of $ 9.50 per share), less underwriting discounts and commissions, and 3,710,000 shares issued to Dr.

Registered Direct Offering

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 of $ 3.0 million, of which $ 1.9 million was allocated to the sale of our common stock and recognized as additional-paid-in capital, on the consolidated statement of stockholders’ deficit for the year ended December 31, 2022.

See Note 11 , Warrant Liability, for further information.

Underwritten Public Offering

During the year ended December 31, 2020, we closed an underwritten public offering of an aggregate of 8,521,500 shares of common stock, which included 4,811,500 shares issued to the public at a price of $ 9.50 per share (including 1,111,500 shares sold to the public upon full exercise of the underwriters’ option to purchase additional shares at a public offering price of $ 9.50 per share), less underwriting discounts and commissions, and 3,710,000 shares issued to Dr.

Soon-Shiong, our Executive Chairman and Global Chief Scientific and Medical Officer, at a price of $ 12.12 per share, less underwriting discounts and commissions.

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Including the underwriters’ option exercise, the aggregate gross proceeds from the offering were $ 90.7 million, before deducting underwriting discounts, commissions and other offering costs of $ 4.4 million.

During the year ended December 31, 2019, the company sold 2,047,500 shares of common stock at a price of $ 14.66 per share to a private party and received net proceeds totaling $ 30.0 million.

Conversion of Fixed-Rate Promissory Note into Common Stock

On December 12, 2022, the company received written notice from NantWorks, the holder of 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 of approximately $ 56.6 million and an unamortized debt discount of $ 4.7 million 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.

We recorded a net increase of $ 51.9 million in additional paid-in capital, on the consolidated balance sheet related to this transaction.

Stock-Based Compensation

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As of December 31, 2022, the 2015 Plan is the only equity plan available for grant of equity awards to employees, directors and consultants of the company.

As of December 31, 2021, a total of approximately 5.0 million shares were available for future grants under the 2015 Plan.

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

As of December 31, 2022, approximately 18.4 million shares were available for future grants under the 2015 Plan.

Stock-Based Compensation

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$ 40,179 $ 57,181 $ 2,187

On March 18, 2021, the Board of Directors approved to modify certain non-qualified stock options that were assumed in the Merger and otherwise would have expired during a period when the grantees were legally restricted from exercising these awards.

The expiration date of these options was extended to thirty (30) days following the effective date of Post-Effective Amendment No.

1 on Form S-3 to our Form S-4 Registration Statement.

We recorded an incremental stock-based compensation expense of approximately $ 2.7 million for this stock option modification.

On March 29, 2021, in connection with the resignation of two former independent directors, the Board of Directors approved the acceleration of vesting of 83,333 shares of unvested stock options of the former directors on the date of their respective resignations.

The modified options are exercisable for ninety ( 90 ) days after the date of the modification.

We recorded an incremental stock-based compensation expense of approximately $ 2.3 million for this stock option modification.

The stock option modifications were measured as the excess of the fair value of the modified awards over the fair value of the original awards immediately before the modifications.

The incremental stock-based compensation was recorded in selling, general and administrative expense , on the consolidated statement of operations for the year ended December 31, 2021.

Stock Options

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3,445,499 $ 14.75 $ 2,742 3.8

On February 5, 2021, the Compensation Committee of the Board of Directors granted Richard Adcock, our chief executive officer, a stock option award (the Option Grant) to purchase 750,000 shares of our common stock pursuant to our 2015 Plan.

The Option Grant has an exercise price of $ 23.72 per share, the closing price as reported on the Nasdaq on the date of grant.

In addition, the Option Grant shall vest according to the following vesting schedule:

one-third of the Option Grant (i.e., 250,000 options) shall vest in equal installments on each of the first, second, and third anniversaries of the date of grant, such that all shares shall be fully vested on the third anniversary of the date of grant, subject to Mr.

Adcock remaining in continuous service as defined in the 2015 Plan through the applicable vesting dates.

This grant of equity awards to Mr.

Adcock was made in connection with his appointment as chief executive officer of the company, which was effective as of October 26, 2020, and was modified from the recommended equity grant described in Mr.

Adcock’s offer of employment as of that date.

On May 3, 2021, the Compensation Committee of the Board of Directors granted each of our newly-appointed independent directors a non-qualified stock option award to purchase 21,873 shares of our common stock pursuant to the 2015 Plan at an exercise price of $ 17.24 per share, the closing price as reported on the Nasdaq on the date of grant.

The shares subject to the award will vest in three ( 3 ) equal installments on each of the first, second and third anniversary date of their appointment to the Board of Directors, such that the award will be fully vested on the third anniversary date in 2024, subject to the director continuing to be a service provider as defined in the 2015 Plan through the applicable vesting dates.

On June 10, 2021, the Compensation Committee of the Board of Directors granted our Chairman and each of the independent members of our Board of Directors a non-qualified stock option award to purchase 26,064 shares of our common stock pursuant to the 2015 Plan at an exercise price of $ 14.91 per share, the closing price as reported on the Nasdaq on the date of grant.

The shares subject to the award will vest 100 % on the earlier to occur of June 10, 2022 or the date immediately preceding the 2022 annual meeting of stockholders, subject to the recipient continuing to be a service provider as defined in the 2015 Plan through the applicable vesting date.

These grants were made in connection with the re-election of our Executive Chairman (who then later also became our Global Chief Scientific and Medical Officer), and independent directors to the Board of Directors at the 2021 Annual Meeting of Stockholders.

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

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

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

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

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

As of December 31, 2022, the unrecognized compensation cost related to outstanding stock options was $ 20.4 million, which is expected to be recognized over a remaining weighted-average period of 1.8 years.

The total intrinsic value of stock options exercised during the year ended December 31, 2021 was $ 21.3 million.

The total intrinsic value of stock options exercised during the year ended December 31, 2022 was immaterial.

Cash proceeds received from stock option exercises during the year ended December 31, 2022 was $ 0.1 million.

As of December 31, 2020, a total of 4,345,497 vested and exercisable shares were outstanding.

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

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

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2022 2021 2020

Expected life (in years) 5.9 years 5.5 years N/A

Risk-free interest rate 0.7 % 0.4 % N/A

Volatility factor 101.0 % 96.8 % N/A

Dividend yield 0.0 % 0.0 % N/A

Weighted-average grant date fair value $ 16.80 $ 4.64 N/A

Expected term 5.69 years 5.90 years 5.50 years

Risk-free interest rate 2.6 % 0.7 % 0.4 %

Expected volatility 101.8 % 101.0 % 96.8 %

Dividend yield 0.0 % 0.0 % 0.0 %

Weighted-average grant date fair value $ 4.20 $ 16.80 $ 4.64

The expected term was estimated using the average of the contractual term and the weighted-average vesting term of the options.

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The grant date fair value of an RSU equals the closing price of our common stock on the date of grant.

On February 5, 2021, the Compensation Committee of the Board of Directors granted Mr.

Adcock two awards totaling 400,000 RSUs (each an RSU Award and collectively, the RSU Awards) of our common stock pursuant to the 2015 Plan.

The RSU Awards are comprised of two separate awards, one settled by issuing 150,000 shares of our common stock and the other to be settled by issuing 250,000 shares of our common stock upon vesting.

The first RSU Award vested immediately on the date of grant with the company retaining shares equal in value to the company’s tax withholding obligations.

The second RSU Award will vest according to the following schedule:

one-third (i.e., 83,333 ) of the shares subject to the RSU Award shall vest in equal annual installments on each of the first, second and third anniversaries of the date of grant, such that all shares shall be fully vested on the third anniversary of the date of grant, subject to Mr.

Adcock remaining in continuous service as defined in the 2015 Plan through the applicable vesting dates.

This grant of equity awards to Mr.

Adcock’s offer of employment as of that date.

On March 4, 2021, prior to the Merger, NantCell awarded 7,121,110 RSUs (adjusted for the Exchange Ratio of 0.8190 ) to certain employees, consultants and/or service providers of NantCell and its affiliates, pursuant to the NC 2015 Plan.

These RSU awards were subject to a performance condition in connection with a “Liquidity Event”, defined as either (i) NantCell’s registration of shares for issuance on a securities offering or (ii) the closing of a corporate transaction.

In addition, the vesting of certain performance-based RSU grants accelerates upon obtaining approval by the FDA of a BLA or equivalent application for approval of Anktiva for use in the treatment of non-muscle-invasive bladder cancer.

These performance-based RSUs are also subject to service conditions and are scheduled to cliff vest on the last date of each tranche as defined by the individual grant agreements.

On March 9, 2021, we completed the Merger with NantCell, and the performance condition related to the Liquidity Event was met.

The fair value of the RSUs was estimated based on a third-party valuation as of the grant date of March 4, 2021 and was derived primarily from the estimated probabilities of the Merger close on March 9, 2021 and the other exit assumptions.

Once the liquidity event related performance condition was met as of March 9, 2021 due to the Merger, compensation expense for these RSUs began to be recognized on a graded vesting attribution approach over the requisite service period for each participant, which ranges from six-month to seventy ( 70 )-month vesting periods.

During the year ended December 31, 2021, we recorded approximately $ 40.5 million of stock-based compensation expense related to these awards, of which approximately $ 18.9 million was recorded in research and development expense and approximately $ 21.6 million was recorded in selling, general and administrative expense , on the consolidated statement of operations.

The RSUs awarded to employees and consultants of affiliated companies were accounted for as stock-based compensation in accordance with ASU 2018-07, Compensation—Stock Compensation (Topic 718) , as the compensation was in exchange for continued support or services expected to be provided to the company over the vesting periods under the NantWorks shared services agreement discussed in Note 8 , Related-Party Agreements .

RSUs awarded to employees and consultants of affiliated companies are accounted for as stock-based compensation in accordance with ASU 2018-07, Compensation—Stock Compensation (Topic 718) , as the compensation was in exchange for continued support or services expected to be provided to the company over the vesting periods under the NantWorks shared services agreement discussed in Note 10 , Related-Party Agreements .

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

We estimated such benefit at the grant date fair value of $ 4.0 million and recorded $ 0.9 million of deemed dividends for the year ended December 31, 2021 in additional paid-in capital, on the consolidated balance sheets, with a corresponding credit to stock-based compensation expense.

We estimated such benefit at the grant date fair value of $ 4.0 million and recorded $ 0.4 million and $ 0.9 million of deemed dividends for the years ended December 31, 2022 and 2021 in additional paid-in capital, on the consolidated balance sheets, with a corresponding credit to stock-based compensation expense.

Related-Party Warrants

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

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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.

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

Our federal returns for tax years 2019 through 2021 remain open to examination, and our state returns remain subject to examination for tax years 2018 through 2021.

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

Our loss before taxes is as follows (in thousands):

Our loss before income taxes is as follows (in thousands):

Year Ended December 31,

2022 2021 2020

loss before taxes $ ( 347,226 ) $ ( 223,519 ) $ ( 159,089 )

Foreign loss before taxes ( 2,613 ) ( 2,514 ) ( 1,174 )

loss before income taxes $ ( 413,653 ) $ ( 347,226 ) $ ( 223,519 )

Foreign loss before income taxes ( 3,633 ) ( 2,613 ) ( 2,514 )

Loss before income taxes $ ( 417,286 ) $ ( 349,839 ) $ ( 226,033 )

Income tax (expense) benefit consists of the following (in thousands):

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Total income tax (expense) benefit $ ( 34 ) $ ( 9 ) $ 1,846

The components that comprise our net deferred tax assets consist of the following (in thousands):

The components that comprise our net deferred tax liability consist of the following (in thousands):

As of December 31,

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Net operating loss carryforwards $ 362,360 $ 314,612

Stock-based compensation 23,116 13,305

Section 174 R&E capitalization 50,571 —

Research and development credits 40,954 17,716

Operating lease liabilities 10,316 5,456

Stock-based compensation 20,927 23,116

Interest expense 19,974 8,531

Amortization 4,407 5,860

Depreciation — 5,523

Operating lease liabilities 12,986 10,316

Investments 5,886 3,227

Amortization 3,969 4,407

Accrued compensation 3,398 2,525

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Deferred tax liabilities:

Debt discount ( 16,527 ) —

Operating lease right-of-use assets ( 11,747 ) ( 9,345 )

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Stock-based compensation ( 0.5 ) % 0.5 % 1.3 %

Section 162(m) limitation ( 2.1 ) % — % — %

Other 1.5 % ( 0.9 ) % ( 0.2 ) %

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This interest can be carried forward indefinitely and will be deductible when the company generates sufficient adjusted taxable income.

A summary of changes to the amount of unrecognized tax benefits is as follows (in thousands):

Year Ended December 31,

2022 2021 2020

Unrecognized tax benefits, beginning of year $ 13,504 $ 20,413 $ 15,656

Additions based on tax positions related to the current year 1,710 536 4,763

Additions based on tax positions related to prior years 1,038 — —

Reductions for tax positions of prior years — ( 7,445 ) ( 6 )

Unrecognized tax benefits, end of year $ 16,252 $ 13,504 $ 20,413

Included in the balance of unrecognized tax benefits as of December 31, 2022 is $ 13.8 million that, if recognized, would not impact our income tax benefit or effective tax rate as long as the deferred tax asset remains subject to a full valuation allowance.

We do not expect that the unrecognized tax benefits will change within 12 months of December 31, 2022.

Due to the existence of the valuation allowance, future changes in our unrecognized tax benefits will not impact our effective tax rate.

We have not incurred any material interest or penalties as of the current reporting date with respect to income tax matters.

Inflation Reduction Act of 2022

The Inflation Reduction Act 2022, which incorporates a Corporate Alternative Minimum Tax (CAMT), was signed on August 16, 2022.

The changes are effective for the tax years beginning after December 31, 2022.

The new tax will require companies to compute two separate calculations for federal income tax purposes and pay the greater of the new minimum tax or their regular tax liability.

The company will be monitoring the impact of the act to determine if it will have an impact on the company for years beginning after December 31, 2022.

We currently do not expect this act will have a material effect on our consolidated financial statements.

Coronavirus Aid, Relief and Economic Security Act

On March 27, 2020, the U.S.

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Under the CARES Act, some of the more significant provisions are NOL carrybacks for five years to offset previous years’ income, or can be carried forward indefinitely to offset 100% of taxable income for the tax year beginning before 2021 and 80% of taxable income for tax years 2021 and thereafter, increasing the ability to deduct interest expense, as well as amending certain provisions of the previously enacted Tax Cuts and Jobs Act.

As of December 31, 2021 and 2020, we did not record any income tax (provision) benefit resulting from the CARES Act, mainly due to our history of net operating losses generated and the maintenance of a full valuation allowance against our net deferred tax assets.

During the years ended December 31, 2022, 2021, and 2020, we did not record any income tax (expense) benefit resulting from the CARES Act, mainly due to our history of net operating losses generated and the maintenance of a full valuation allowance against our net deferred tax assets.

There was no material impact from the provisions of the Cares Act for the years ended December 31, 2022 and 2021.

State of California Assembly Bill No.

On June 29, 2020, the state of California enacted Assembly Bill No.

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113 was enacted that removed the limitations on the use of NOLs and the cap on the business incentive tax credits that were suspended in accordance with AB 85 effective for tax year 2022.

A summary of changes to the amount of unrecognized tax benefits is as follows (in thousands):

Year Ended December 31,

2021 2020 2019

Unrecognized tax benefits, beginning of year $ 20,413 $ 15,656 $ 11,983

Additions based on tax positions related to the current year 536 4,763 3,680

Reductions for tax positions of prior years ( 7,445 ) ( 6 ) ( 7 )

Unrecognized tax benefits, end of year $ 13,504 $ 20,413 $ 15,656

Included in the balance of unrecognized tax benefits as of December 31, 2021 is $ 11.4 million that, if recognized, would not impact our income tax benefit or effective tax rate as long as the deferred tax asset remains subject to a full valuation allowance.

We do not expect that the unrecognized tax benefits will change within 12 months of December 31, 2021.

Due to the existence of the valuation allowance, future changes in our unrecognized tax benefits will not impact our effective tax rate.

We have not incurred any material interest or penalties as of the current reporting date with respect to income tax matters.

Prior to the adoption of ASU 2019‑12 in the first quarter of 2020, intra-period tax allocation rules required us to allocate the provision for income taxes between continuing operations and other categories of earnings, such as other comprehensive (loss) income.

In periods in which we had a year-to-date pre-tax loss from continuing operations and pre-tax income in other categories of earnings, such as other comprehensive (loss) income, we had to allocate the tax provision to the other categories of earnings.

We then recorded a related tax benefit in continuing operations.

However, with the adoption of ASU 2019‑12, we are no longer required to allocate the tax provision to the other categories of earnings and related benefits to continuing operations under these circumstances.

Employee Benefits

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Therefore, we do not record an accrual for paid leave related to these employees since we are unable to reasonably estimate the compensated absences that these employees will take.

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 (the Dunkirk Facility) from Athenex, Inc.

This 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 operations.

Subsequent Event

Registered Direct Offering

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 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.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

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 8. Financial Statements and Supplementary Data