What changed in this filing

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Item 1. Financial Statements

2023-08-08 compared with 2023-05-11 · 357 added, 251 removed, 856 unchanged (42% of the section changed)

38 unchanged sentences

900,000,000 shares authorized

as of March 31, 2023 and December 31, 2022, respectively;

as of June 30, 2023 and December 31, 2022, respectively;

440,673,897 and

421,569,115 shares issued and outstanding as of March 31, 2023 and

421,569,115 shares issued and outstanding as of June 30, 2023 and

December 31, 2022, respectively;

excluding treasury stock, 163,800 shares

outstanding as of March 31, 2023 and December 31, 2022, respectively

outstanding as of June 30, 2023 and December 31, 2022, respectively

Additional paid-in capital 1,990,590 1,930,936

11 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Revenue $ 41 $ 35 $ 401 $ 49

8 unchanged sentences

Loss from operations ( 85,145 ) ( 79,622 ) ( 196,725 ) ( 175,594 )

Other income (expense), net:

Interest and investment income, net 673 1,666

Other (expense) income, net:

Interest and investment (expense) income, net ( 61 ) ( 1,800 ) 612 ( 134 )

Interest expense (including amounts with related parties) ( 32,235 ) ( 9,698 ) ( 62,051 ) ( 18,189 )

1 unchanged sentence

Change in fair value of warrant liabilities ( 10,019 ) — 17,535 —

Other expense, net (including amounts

Change in fair value of convertible note ( 6,768 ) — ( 6,768 ) —

Other (expense) income, net (including amounts

with related parties) ( 28 ) 185 ( 1,105 ) 181

15 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Net loss $ ( 138,213 ) $ ( 94,835 ) $ ( 254,796 ) $ ( 197,833 )

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

Net unrealized gains (losses) on available-for-sale securities 4 ( 310 )

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

Net unrealized (losses) gains on available-for-sale securities ( 6 ) 149 ( 2 ) ( 161 )

Reclassification of net realized gains on

1 unchanged sentence

Foreign currency translation adjustments ( 1 ) ( 11 ) ( 227 ) ( 72 )

Total other comprehensive loss ( 216 ) ( 371 )

Total other comprehensive (loss) income ( 7 ) 257 ( 223 ) ( 114 )

Comprehensive loss ( 138,220 ) ( 94,578 ) ( 255,019 ) ( 197,947 )

8 unchanged sentences

(in thousands, except share amounts)

Three Months Ended March 31, 2023

Six Months Ended June 30, 2023

Common Stock Additional

25 unchanged sentences

435,923,104 43 1,965,838 ( 2,494,831 ) ( 33 ) ( 528,983 ) ( 2,733 ) ( 531,716 )

Issuance of common stock “at-the-market”

offering, net of commissions and

offering costs of $ 313

4,605,323 1 13,615 — — 13,616 — 13,616

Stock-based compensation expense

— — 11,062 — — 11,062 — 11,062

Exercise of stock options 26,583 — 135 — — 135 — 135

Vesting of RSUs

140,269 — — — — — — —

Net share settlement for RSUs vesting

( 21,382 ) — ( 60 ) — — ( 60 ) — ( 60 )

Other comprehensive (loss) income, net of tax

— — — — ( 7 ) ( 7 ) — ( 7 )

Net loss — — — ( 137,879 ) — ( 137,879 ) ( 334 ) ( 138,213 )

Balance as of June 30, 2023

440,673,897 $ 44 $ 1,990,590 $ ( 2,632,710 ) $ ( 40 ) $ ( 642,116 ) $ ( 3,067 ) $ ( 645,183 )

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

1 unchanged sentence

and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Deficit

Condensed Consolidated Statements of Stockholders’ Deficit (Continued)

(in thousands, except share amounts)

Three Months Ended March 31, 2022

Six Months Ended June 30, 2022

Common Stock Additional

17 unchanged sentences

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

Stock-based compensation expense — — 10,175 — — 10,175 — 10,175

Vesting of RSUs 116,608 — — — — — — —

Net share settlement for RSUs vesting ( 3,604 ) — ( 15 ) — — ( 15 ) — ( 15 )

Other comprehensive (loss) income, net — — — — 257 257 — 257

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

Balance as of June 30, 2022

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

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

3 unchanged sentences

(in thousands)

Three Months Ended

Six Months Ended

Operating activities:

1 unchanged sentence

Adjustments to reconcile net loss to net cash used in operating activities:

Amortization of related-party notes discounts 23,824 744

Stock-based compensation expense 21,940 20,199

Change in fair value of warrant liabilities ( 17,535 ) —

Transaction costs allocated to warrant liabilities 984 —

Non-cash interest items, net (including amounts with related parties) 2,505 3,028

Amortization of related-party notes discounts 11,536 370

Depreciation and amortization 9,363 8,534

Change in fair value of convertible note 6,768 —

Non-cash interest items, net (including amounts with related parties) 5,026 6,178

Non-cash lease expense related to operating lease right-of-use assets 3,233 2,805

Unrealized (gains) on equity securities ( 135 ) ( 1,419 )

Transaction costs allocated to warrant liabilities 984 —

Unrealized losses on equity securities 258 452

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

Other 123 222

10 unchanged sentences

Purchases of property, plant and equipment ( 16,954 ) ( 43,296 )

Purchase of intangible assets — ( 21,229 )

Purchases of marketable debt securities, available-for-sale ( 236 ) ( 34,207 )

Maturities of marketable debt securities, available for sale — 14,345

Proceeds from sales of marketable debt and equity securities 102 33,657

Maturities of marketable debt securities, available for sale — 113,434

Purchase of intangible assets — ( 21,229 )

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

Net cash used in investing activities

Net cash (used in) provided by investing activities

( 17,088 ) 47,359

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

ImmunityBio, Inc.

and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Continued)

(in thousands)

Six Months Ended

Financing activities:

Proceeds from issuance of related-party promissory notes,

net of issuance costs paid $ 59,700 $ —

Proceeds from equity offerings,

net of discounts and issuance costs 47,178 —

Proceeds from issuance of related-party convertible promissory notes,

net of issuance costs paid 29,850 —

Proceeds from exercises of stock options 126 74

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

offering, net of offering costs 13,616 —

Net share settlement for RSUs vesting ( 417 ) ( 387 )

Proceeds from exercises of stock options 261 74

Principal payments of finance leases ( 38 ) —

10 unchanged sentences

(in thousands)

Three Months Ended

Six Months Ended

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

7 unchanged sentences

Supplemental disclosure of non-cash activities:

Initial measurement of warrants issued in connection with the

registered direct offering accounted for as liabilities

Initial measurement of warrants issued in connection with

registered direct offerings accounted for as liabilities

Property and equipment purchases included in accounts payable,

accrued expenses and due to related parties

11,992 13,454

Unpaid offering costs included in accounts payable and accrued expenses 208 —

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

Although such designations may not lead to a faster development process or regulatory review and may not increase the likelihood that a product candidate will receive approval, Anktiva ™ (N-803), our novel antibody cytokine fusion protein, has received Breakthrough Therapy and Fast Track designations in combination with bacillus Calmette-Guérin ( BCG) from the United States (U.S.) Food and Drug Administration (FDA) for BCG -unresponsive non-muscle invasive bladder cancer (NMIBC) with carcinoma in situ (CIS) .

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

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

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

On May 9, 2023, the FDA delivered a complete response letter to us regarding the BLA.

The company plans to request a meeting with the FDA as soon as possible to address the subject matter of the letter and a response timeline, and plans to diligently address and resolve the issues identified and seek approval as expeditiously as possible.

On May 9, 2023, the FDA delivered a complete response letter (CRL) to us regarding the BLA, indicating that the FDA had determined that it cannot approve the BLA in its present form, and the FDA made recommendations to address the issues raised.

The deficiencies relate to the FDA’s pre-license inspection of the company’s third-party contract manufacturing organizations (CMOs), among other items.

Satisfactory resolution of the observations noted at the pre-license inspection is required before the BLA may be approved.

The FDA further provided recommendations specific to additional Chemistry, Manufacturing and Controls (CMC) issues and assays to be resolved.

The CRL does not request new preclinical studies or Phase 3 clinical trials to evaluate safety or efficacy.

The FDA requested that the company provide updated duration of response data for the efficacy population as identified by the FDA in the company’s resubmission, as well as a safety update.

The company has submitted a formal meeting request and the associated briefing book to the FDA and plans to diligently address and resolve the issues identified in the CRL and seek approval as expeditiously as possible.

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

Our platforms include 13 novel therapeutic agents either in clinical trials or for which we are developing protocols.

We are currently engaged in 15 active clinical trials involving 10 of these agents.

Seven of these trials are being sponsored by ImmunityBio while the remaining eight are investigator-led studies.

Twelve of these trials are in Phase 2 or 3 development across eleven indications in liquid and solid tumors.

We are currently engaged in multiple active clinical trials involving our agents, some of which are being sponsored by ImmunityBio and others are investigator-led studies.

Many of these trials are in Phase 2 or 3 development across several indications in liquid and solid tumors.

These include bladder, pancreatic, and lung cancers, which are among the most frequent and lethal cancer types, and where there are high failure rates for existing standards of care or no available effective treatment.

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 Practice (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.

Summary of Significant Accounting Policies

4 unchanged sentences

The unaudited condensed 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.

Certain items in the prior year’s consolidated financial statements have been reclassified to conform to the current presentation.

These reclassifications had no effect on the reported results of operations.

The unaudited condensed consolidated financial statements do not include all information and notes required by U.S.

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

As of March 31, 2023, the company had an accumulated deficit of $ 2.5 billion.

We also had negative cash flows from operations of $ 84.3 million for the three months ended March 31, 2023.

As of June 30, 2023, the company had an accumulated deficit of $ 2.6 billion.

We also had negative cash flows from operations of $ 164.1 million during the six months ended June 30, 2023.

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.

1 unchanged sentence

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 (the Sale Agreement) with our sales agent (the ATM), of which we had $ 225.4 million available for future issuance as of March 31, 2023, and a February 2023 shelf registration statement, of which we had $ 640.0 million available for future offerings as of March 31, 2023), and our potential ability to borrow from affiliated entities, will be sufficient to fund our operations through at least the next 12 months following the issuance date of the condensed consolidated financial statements based primarily upon our Executive Chairman and Global Chief Scientific and Medical Officer’s intent and ability to support our operations with additional funds, including loans from affiliated entities, as required, which we believe alleviates such doubt.

See Note 12 , Stockholders’ Deficit, for information regarding the ATM and the shelf registration statement.

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 (the Sale Agreement) with our sales agent (the ATM), of which we had $ 211.4 million available for future issuance as of June 30, 2023, and a February 2023 shelf registration statement, of which we had $ 640.0 million available for future offerings as of June 30, 2023), and our potential ability to borrow from affiliated entities, will be sufficient to fund our operations through at least the next 12 months following the issuance date of the condensed consolidated financial statements based primarily upon our Executive Chairman and Global Chief Scientific and Medical Officer’s intent and ability to support our operations with additional funds, including loans from affiliated entities, as required, which we believe alleviates such doubt.

In July 2023, we entered into a registered direct offering and a warrant repricing and extension that changed the amount available under the shelf.

See Note 12 , Stockholders’ Deficit, for information regarding the ATM and the shelf registration statement and Note 15 , Subsequent Events , for further information.

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

17 unchanged sentences

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 change in fair value of warrant liabilities in o ther income (expense), net , on the condensed consolidated statements of operations.

Changes in the estimated fair value of the warrants are recorded as a non-cash change in fair value of warrant liabilities in other (expense) income, net , on the condensed consolidated statements of operations.

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

Fair Value Option (FVO) Election

The company accounts for certain convertible notes issued during the three months ended March 31, 2023 under the fair value option (FVO) election of ASC 825, Financial Instruments (ASC 825), as discussed below.

The convertible notes accounted for under the FVO election are each debt host financial instruments containing embedded features wherein the entire financial instrument is initially measured at its issue-date estimated fair value and then subsequently remeasured at estimated fair value on a recurring basis at each reporting period date.

Changes in the estimated fair value of the convertible notes are recorded as other income (expense), net on the condensed consolidated statements of operations, except that the change in estimated fair value attributable to a change in the instrument-specific credit risks is recognized as a component of other comprehensive income.

Since the underlying financial instrument was issued on March 31, 2023 , we did not recognize any change in estimated fair values during the three months ended March 31, 2023 .

The company accounts for a convertible note issued during the six months ended June 30, 2023 under the FVO election of ASC 825, Financial Instruments (ASC 825), as discussed below.

Our convertible note accounted for under the FVO election is a debt host financial instrument containing embedded features wherein the entire financial instrument is initially measured at its issue-date estimated fair value and then subsequently remeasured at estimated fair value on a recurring basis at each reporting period date.

Changes in the estimated fair value of our convertible note is recorded as other (expense) income, net, on the condensed consolidated statement of operations, except that changes in estimated fair value caused by changes in the instrument-specific credit risks are included in other comprehensive income (loss).

We recognized a loss of $ 6.8 million due to the change in estimated fair value during the six months ended June 30, 2023 .

Basic and Diluted Net Loss per Share of Common Stock

3 unchanged sentences

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

As of March 31,

As of June 30,

Related-party convertible notes 60,340,936 —

4 unchanged sentences

Total 101,174,764 17,952,702

_______________

(1) Amount excludes the shares related to the related-party convertible note with a principal amount of $ 30.0 million issued on March 31, 2023 as the conversion price has not yet been determined.

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

Recent Accounting Pronouncements

10 unchanged sentences

We are currently evaluating the impact of this standard on our condensed consolidated financial statements and related disclosures.

Other recent authoritative guidance issued by the FASB (including technical corrections to the ASC), the American Institute of Certified Public Accountants, and the SEC during the three months ended March 31, 2023 did not, or are not expected to, have a material effect on our condensed consolidated financial statements.

Other recent authoritative guidance issued by the FASB (including technical corrections to the ASC), the American Institute of Certified Public Accountants, and the SEC during the six months ended June 30, 2023 did not, or are not expected to, have a material effect on our condensed consolidated financial statements.

Financial Statement Details

4 unchanged sentences

Prepaid services 3,344 8,013

Prepaid supplies 2,160 2,160

Prepaid insurance 2,150 2,282

Prepaid software license fees 2,309 2,195

Prepaid insurance 1,399 2,282

Insurance claims receivable 1,254 —

Prepaid supplies — 2,160

Insurance premium financing asset — 1,417

12 unchanged sentences

Property, plant and equipment, net $ 151,487 $ 143,659

Depreciation expense related to property, plant and equipment totaled $ 4.2 million and $ 3.8 million for the three months ended March 31, 2023 and 2022, respectively.

Depreciation expense related to property, plant and equipment totaled $ 4.2 million and $ 3.9 million during the three months ended June 30, 2023 and 2022, respectively, and $ 8.3 million and $ 7.7 million during the six months ended June 30, 2023 and 2022, respectively.

Intangible Assets, Net

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

March 31, 2023

June 30, 2023

(in years) Gross Carrying

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

In connection with the acquisition of the Dunkirk facility in 2022, we acquired finite-lived intangibles consisting of favorable leasehold rights and an organized workforce.

We recorded amortization expense of our finite-lived intangibles totaling $ 0.5 million and $ 0.3 million in research and development expense , on the condensed consolidated statements of operations for the three months ended March 31, 2023 and 2022, respectively.

In connection with the acquisition of a leasehold interest in pharmaceutical manufacturing space in western New York (the Dunkirk Facility) in 2022, we acquired finite-lived intangibles consisting of favorable leasehold rights and an organized workforce.

We recorded amortization expense of our finite-lived intangibles totaling $ 0.5 million and $ 0.6 million during the three months ended June 30, 2023 and 2022, respectively, and $ 1.0 million and $ 0.9 million during the six months ended June 30, 2023 and 2022, respectively, in research and development expense , on the condensed consolidated statements of operations.

Future amortization expense associated with our finite-lived intangible assets is as follows (in thousands):

Years ending December 31:

2023 (excluding the three months ended March 31, 2023)

2023 (excluding the six months ended June 30, 2023)

Thereafter 8,413

3 unchanged sentences

2023 December 31,

Accrued research and development costs $ 15,916 $ 1,930

Accrued bonus $ 17,486 $ 12,068

Accrued research and development costs 15,035 1,930

Accrued professional and service fees 7,920 6,685

Accrued preclinical and clinical trial costs 5,523 4,985

Interest payable on related-party notes 7,362 —

Accrued compensation 6,791 6,040

Accrued preclinical and clinical trial costs 5,495 4,985

Accrued construction costs 1,428 7,072

2 unchanged sentences

Accrued expenses and other liabilities $ 62,335 $ 41,825

Interest and Investment Income, Net

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

In June 2023, Nant Capital, LLC (Nant Capital) agreed to a one-month extension of the interest payment date on a portion of the interest payment amount due under certain promissory notes, which totaled approximately $ 7.4 million, with no penalty or incremental interest due.

During July 2023, we paid such interest amount due under these notes.

Interest and Investment (Expense) Income, Net

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

Three Months Ended

Unrealized gains from equity securities $ 135 $ 1,419

June 30, Six Months Ended

2023 2022 2023 2022

(Unaudited) (Unaudited)

Interest income $ 592 $ 644 $ 876 $ 1,940

Unrealized losses from equity securities ( 393 ) ( 1,871 ) ( 258 ) ( 452 )

Investment amortization expense, net ( 260 ) ( 454 ) — ( 1,503 )

Net realized losses on investments — ( 119 ) ( 6 ) ( 119 )

Interest and investment income, net $ 673 $ 1,666

Interest and investment (expense) income, net $ ( 61 ) $ ( 1,800 ) $ 612 $ ( 134 )

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

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

(Unaudited) (Unaudited)

Interest expense on related-party notes $ ( 19,942 ) $ ( 9,319 ) $ ( 38,202 ) $ ( 17,420 )

4 unchanged sentences

Investments in Marketable Debt Securities

As of March 31, 2023, the weighted-average remaining contractual life, amortized cost, gross unrealized gains, gross unrealized losses and fair value of marketable debt securities, which were considered as available-for-sale, by type of security were as follows (in thousands):

March 31, 2023

As of June 30, 2023, the weighted-average remaining contractual life, amortized cost, gross unrealized gains, gross unrealized losses and fair value of marketable debt securities, which were considered as available-for-sale, by type of security were as follows (in thousands):

June 30, 2023

Contractual Life

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Total $ 970 $ — $ ( 94 ) $ 876

At March 31, 2023, 14 of the securities were in an unrealized loss position.

At June 30, 2023, 12 of the securities were in an unrealized loss position.

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

March 31, 2023

June 30, 2023

Less than 12 months More than 12 months

10 unchanged sentences

Marketable Equity Securities

We held investments in marketable equity securities with readily determinable fair values of $ 2.6 million and $ 2.5 million as of March 31, 2023 and December 31, 2022, respectively.

Unrealized gains recorded on these securities totaled $ 0.1 million and $ 1.4 million for the three months ended March 31, 2023 and 2022, respectively, in interest and investment income, net , on the condensed consolidated statements of operations.

We held investments in marketable equity securities with readily determinable fair values of $ 2.2 million and $ 2.5 million as of June 30, 2023 and December 31, 2022, respectively.

Unrealized gains and losses recorded on these securities totaled losses of $ 0.4 million and $ 1.9 million during the three months ended June 30, 2023 and 2022, respectively, and losses of $ 0.3 million and $ 0.5 million during the six months ended June 30, 2023 and 2022, respectively, in interest and investment income, net , on the condensed consolidated statements of operations.

Fair Value Measurements

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

Fair Value Measurements at March 31, 2023

Fair Value Measurements at June 30, 2023

Total Level 1 Level 2 Level 3

Assets at Fair Value:

Cash and cash equivalents $ 43,506 $ 43,506 $ — $ —

4 unchanged sentences

Total assets measured at fair value $ 46,795 $ 45,792 $ 1,003 $ —

Liabilities at Fair Value:

Related-party convertible note payable $ ( 36,618 ) (1) $ — $ — $ ( 36,618 )

4 unchanged sentences

Total Level 1 Level 2 Level 3

Assets at Fair Value:

Cash and cash equivalents $ 104,641 (3) $ 63,860 $ 40,781 $ —

8 unchanged sentences

_______________

(1) As of March 31, 2023, the Level 2 measurements include $ 15.0 million in U.S.

government agency securities with original maturities of less than 90 days.

As of December 31, 2022, the Level 2 measurements include $ 32.0 million in U.S.

government agency securities and $ 8.8 million in corporate debt securities with original maturities of less than 90 days.

(2) As of March 31, 2023, the company has a related-party convertible note payable with a principal amount of $ 30.0 million, which is accounted for under the ASC 825-10-15-4 FVO election.

Under the FVO election, the financial instrument is initially measured at its issue-date estimated fair value and subsequently re-measured at estimated fair value on a recurring basis at each reporting period date.

(1) As of June 30, 2023, the company had a related-party convertible note payable with a principal amount of $ 30.0 million, which is accounted for under the ASC 825-10-15-4 FVO election.

Under the FVO election, the financial instrument was initially measured at its issue-date estimated fair value and subsequently re-measured at estimated fair value on a recurring basis at each reporting period date.

The company’s other related-party notes are not accounted for under the fair value election.

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

The estimated fair value of the convertible note was computed using a discounted cash flow method with the following unobservable assumptions:

March 31, 2023

The estimated fair value of the convertible note was computed using the binomial lattice model with the following unobservable assumptions:

June 30, 2023

Expected market yield 19.5 %

Discount period 0.1 years

Discount factor 0.98

Expected volatility 129.8 %

Risk-free rate 5.5 %

The change in the carrying amount of the related-party convertible note at fair value was as follows (in thousands):

Fair value at issuance date, March 31, 2023 $ 29,850

Change in fair value 6,768

Ending fair value, at June 30, 2023

(2) Third-Party Warrant Liabilities

1 unchanged sentence

In connection with the December 12, 2022 registered direct offering of common stock, the company issued 9,090,909 warrants (December 2022 Warrants).

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

As of March 31, 2023, all warrants were outstanding.

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

As of June 30, 2023, all warrants were outstanding.

The estimated fair value of the warrants was computed using the Black-Scholes option pricing model with the following unobservable assumptions at the following date:

March 31, 2023

June 30, 2023

Exercise price per share $ 6.60

6 unchanged sentences

Change in fair value ( 12,273 )

Ending fair value, at March 31, 2023

Ending fair value, at June 30, 2023

February 2023 Warrants

In connection with the February 15, 2023 registered direct offering of common stock, the company issued 14,072,615 warrants (February 2023 Warrants).

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

As of March 31, 2023, all warrants were outstanding.

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

As of June 30, 2023, all warrants were outstanding.

The estimated fair value of the warrants was computed using the Black-Scholes option pricing model with the following unobservable assumptions at the following dates:

March 31, 2023 Issuance Date

June 30, 2023

Issuance Date

February 15, 2023

4 unchanged sentences

Risk-free interest rate 5.0 % 4.6 %

Changes in the carrying amount of the February 2023 Warrants were as follows (in thousands):

Fair value at the issuance date $ 23,698

The change in the carrying amount of the February 2023 Warrants was as follows (in thousands):

Fair value at issuance date, February 17, 2023 $ 23,698

Change in fair value ( 5,262 )

Ending fair value, at March 31, 2023

Ending fair value, at June 30, 2023

On July 25, 2023, the company reduced the exercise price of the outstanding February 2023 Warrants from $ 4.2636 per share to $ 3.2946 per share.

See Note 15 , Subsequent Events , for further information.

(3) As of December 31, 2022, the Level 2 measurements include $ 32.0 million in U.S.

government agency securities and $ 8.8 million in corporate debt securities with original maturities of less than 90 days.

Nonrecurring Valuations

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

We used discounted cash flow analyses for promissory notes without a holder conversion option and 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.

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.

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

Collaboration and License Agreements and Acquisition

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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 $ 2.3 million and $ 0.2 million, respectively, in other income (expense), net , on the condensed consolidated statements of operations for the three months ended March 31, 2023 and 2022.

Such losses incurred during the three months ended March 31, 2023 were attributed to expenses incurred by us on behalf of the joint venture.

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 $ 6.3 million and $ 4.1 million during the six months ended June 30, 2023 and 2022, respectively, in other (expense) income, net, on the condensed consolidated statements of operations.

Such losses incurred during the six months ended June 30, 2023 and 2022 were attributed to expenses incurred by us on behalf of the joint venture.

We are not obligated to fund the joint venture’s potential future losses.

As of March 31, 2023, the carrying amount of our equity investment in the joint venture was zero .

As of June 30, 2023, the carrying amount of our equity investment in the joint venture was zero .

License Agreements

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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 $ 0.4 million for the three months ended March 31, 2023, in research and development expense , on the condensed consolidated statement of operations.

In June 2023, we made an annual license maintenance fee payment of $ 2.25 million.

We expensed $ 0.9 million and $ 0.1 million during the six months ended June 30, 2023 and 2022, respectively, in research and development expense , on the condensed consolidated statements of operations.

AAHI License Agreements

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

No milestone fees were incurred for the three months ended March 31, 2023.

No milestone fees were incurred during the six months ended June 30, 2023 and 2022, respectively.

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 a one-time, non-creditable, non-refundable, upfront payment to AAHI of $ 1.5 million and a license maintenance fee of $ 3.0 million in June 2022.

The company is required to pay license maintenance fees to AAHI of $ 5.5 million annually from 2023 through 2030.

The company is

required to pay license maintenance fees to AAHI of $ 5.5 million annually from 2023 through 2030.

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

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

We recorded $ 0.8 million in research and development expense, on the condensed consolidated statement of operations during the three months ended March 31, 2023.

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.

No expenses were incurred for the three months ended March 31, 2023.

As of June 30, 2023, we recorded $ 0.5 million of license payable in accrued expenses and other liabilities , on the condensed consolidated balance sheet.

We recorded $ 1.7 million and $ 0.3 million during the six months ended June 30, 2023 and 2022, respectively, in research and development expense, on the condensed consolidated statements of operations related to the license agreement.

In connection with the license agreements, in May 2021 we also entered into a sponsored research agreement with 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.

We recorded $ 0.2 million during the six months ended June 30, 2023 in research and development expense, on the condensed consolidated statement of operations related to the sponsored research agreement.

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), which we believe will provide us with a state-of-the-art biotech production center that will substantially expand and diversify our manufacturing capacity in the U.S.

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

(Athenex) (the Seller), which we believe will provide us with a state-of-the-art biotech production center that will substantially expand and diversify our manufacturing capacity in the U.S.

and ability to scale production associated with certain of our product candidates.

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 company accounted for the transaction as an asset acquisition because the Dunkirk Facility’s integrated set of assets and activities did 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.

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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.

Our annual lease payment is $ 2.00 per year for an initial 10-year term, with one 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 the 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 one additional 10-year term.

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

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

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.

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 March 31, 2023, 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.

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 June 30, 2023, 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.

Further, on May 14, 2023, Athenex, together with certain of its subsidiaries, filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Court for the Southern District of Texas (the Athenex Proceedings).

We do not know what, if any, impact the Athenex Proceedings will have on any portion of the potential governmental funding remaining for the Dunkirk Facility.

Commitments and Contingencies

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VivaBioCell develops bioreactors and products based on cell culture and tissue engineering in Italy.

In connection with our acquisition of VBC, we are obligated to pay the former owners contingent consideration upon the achievement of certain milestones related to the GMP-in-a-Box technology.

In connection with our acquisition of VBC, we are obligated to pay the former owners contingent consideration upon the achievement of certain milestones related to the Good Manufacturing Practice (GMP)-in-a-Box technology.

A clinical milestone totaling $ 0.8 million was earned by the former owners of VivaBioCell, of which $ 0.4 million was paid during 2021, with the remaining clinical obligation settled in September 2022.

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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 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 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.

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 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.

On May 9, 2023, the FDA delivered a complete response letter to us regarding the BLA.

On May 9, 2023, the FDA delivered a CRL to us regarding the BLA.

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

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

With respect to the net sales milestone CVR agreement, as of March 31, 2023, Dr.

With respect to the net sales milestone CVR agreement, as of June 30, 2023 Dr.

Soon-Shiong and his related party hold approximately $ 139.8 million of net sales CVRs, and they have both irrevocably agreed to receive shares of the company’s common stock in satisfaction of their CVRs.

We may be required to pay the other prior Altor stockholders up to $ 164.2 million for their net sales CVRs should they choose to have their CVRs paid in cash instead of common stock.

We may 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 shares of the company’s common stock.

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

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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.

Trial had been set to commence in Sorrento’s Superior Court action on August 7, 2023, but on July 24, 2023 the Superior Court vacated the August 7, 2023 trial date at the parties’ request in light of the pending settlement discussed below.

Also in 2019, the company and Dr.

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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 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.

As of March 31, 2023, we have not determined the amount we are likely to recover, and thus have not recorded any receivables in relation to the judgments.

The Superior Court action remains pending, and it remains to be determined how, if at all, the award in the arbitration will affect the 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.

23-90085 (DRJ), Docket Entry 810.

Should the settlement discussed below not be approved, 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 from Sorrento, but we make no assurances that we will receive any amount or with respect to the timing of our receipt of any funds.

On June 6, 2023, Sorrento filed a motion in its Chapter 11 proceeding for entry of an order approving and implementing a mediation settlement reached with the company and other entities.

The settlement motion is currently set for hearing before the bankruptcy court on August 14, 2023, and the settlement is subject to bankruptcy court approval.

If approved, the settlement will involve two possible scenarios:

Either, if Sorrento raises an amount needed to pay its debtor in possession lender and its unsecured creditors by August 31, 2023, Sorrento will pay those obligations, including the judgments held by NantCell and NANTibody, by 2:00 p.m.

ET on August 31, 2023 and will be free to proceed with pending litigation;

or, failing that, the judgments will be released, the litigation claims will be released, including, without limitation, the Superior Court action discussed above, Sorrento will relinquish its interests in NANTibody and certain other entities, Sorrento will forfeit its rights to any payments from NantCell arising out of its antibody exclusive license agreement with NantCell (rights to PD-L1), and certain other provisions not impacting the company will be implemented as described in the motion.

As referenced above, the settlement is subject to bankruptcy court approval, and there can be no assurance that such approval will be obtained.

Should the settlement not be approved, 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 from Sorrento, but we make no assurances that we will receive any amount or with respect to the timing of our receipt of any funds.

As of June 30, 2023, consistent with prior periods, the company has not determined the amount it is likely to recover, and thus has not recorded any receivables in relation to the judgments.

Further, should the settlement not be approved, an estimate of the possible loss or range of loss resulting from the Superior Court action cannot be made at this time.

Shenzhen Beike Biotechnology Co.

(Beike) Arbitration

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

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On March 20, 2023, we terminated the standstill agreement, and on April 11, 2023, Beike served an amended Request for Arbitration.

We have until May 19, 2023 to file a response.

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

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

We served an Answer and Counterclaims on May 19, 2023.

Beike served a Reply to our counterclaims on June 21, 2023.

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

We believe the claims asserted against the company lack merit and intend to defend the case, and to pursue or counterclaims, vigorously.

Securities Class Action

On June 30, 2023, a putative securities class action complaint, captioned Salzman v.

ImmunityBio, Inc.

3:23-cv-01216-BEN-WVG, was filed in the U.S.

District Court for the Southern District of California against the company and three of its officers and/or directors, asserting violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (Exchange Act).

Stemming from the company’s disclosure on May 11, 2023 that it had received an FDA CRL stating, among other things, that it could not approve the company’s BLA for its 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 its present form due to deficiencies related to its pre-license inspection of the company’s third-party CMOs, the complaint alleges that the defendants had previously made materially false and misleading statements and/or omitted material adverse facts regarding its third-party clinical manufacturing organizations and the prospects for regulatory approval of the BLA.

The company believes the lawsuit is without merit and intends to defend the case vigorously.

The company is unable to estimate a range of loss, if any, that could result were there to be an adverse final decision in this action.

If an unfavorable outcome were to occur, it is possible that the impact could be material to the company’s results of operations in the period(s) in which any such outcome becomes probable and estimable.

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.

We did not enter into any significant contracts during the three months ended March 31, 2023, other than those disclosed in these condensed consolidated financial statements.

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

We did not enter into any significant contracts during the six months ended June 30, 2023, other than those disclosed in these condensed consolidated financial statements.

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

There have been no material changes in unconditional purchase commitments from those disclosed in Note 7, Commitments and Contingencies, of the “Notes to Consolidated Financial Statements” that appears in Part II, Item 8.

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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.

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

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Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

(Unaudited) (Unaudited)

Operating lease costs $ 2,922 $ 2,942 $ 5,843 $ 5,250

Short-term lease costs 979 — 2,029 —

Finance lease costs (including amortization and

interest costs) 23 —

Finance lease costs (including right-of-use asset

amortization and interest expense) 22 — 45 —

Variable lease costs 975 934 1,945 2,116

Total lease costs $ 4,964 $ 3,490

Total lease expense $ 4,898 $ 3,876 $ 9,862 $ 7,366

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

Three Months Ended

Six Months Ended

Cash paid for operating leases (excluding variable lease costs) $ 5,842 $ 5,091

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Operating cash flow from finance leases 7 —

Future minimum lease payments as of March 31, 2023, 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).

Future minimum lease payments as of June 30, 2023, including $ 11.5 million related to options to extend lease terms that are reasonably certain of being exercised, are presented in the following table (in thousands).

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

Years ending December 31:

2023 (excluding the three months ended March 31, 2023)

2023 (excluding the six months ended June 30, 2023)

$ 3,930 $ 44 $ 3,974

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Interest 19,399 7 19,406

Tenant improvement allowance receivable 2,941 — 2,941

Present value of lease liabilities $ 50,542 $ 103 $ 50,645

There have been no other material changes related to our existing lease agreements from those disclosed in Note 8, Lease Arrangements , of the Notes to Consolidated Financial Statements of our Annual Report on Form 10-K filed with the SEC on March 1, 2023.

There have been no material changes related to our existing lease agreements from those disclosed in Note 8, Lease Arrangements , of the Notes to Consolidated Financial Statements of our Annual Report on Form 10-K filed with the SEC on March 1, 2023.

Related-Party Debt

Related-Party Convertible Note at Fair Value

On March 31, 2023, the company executed a $ 30.0 million promissory note with Nant Capital, LLC (Nant Capital), an affiliated entity under common control of our Executive Chairman, Global Chief Scientific and Medical Officer, and principal stockholder.

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

The outstanding principal amount and any accrued and unpaid interest are due on December 31, 2023 or upon the occurrence and continuation of an Event of Default (as defined in the note).

The interest on this note will be paid on a quarterly basis beginning on June 30, 2023.

On March 31, 2023, the company executed a $ 30.0 million promissory note with Nant Capital, an affiliated entity under common control of our Executive Chairman, Global Chief Scientific and Medical Officer, and principal stockholder.

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

The outstanding principal amount and any accrued and unpaid interest are due on the earlier of December 31, 2023 or upon the occurrence and continuation of an Event of Default (as defined in the note).

The interest on this note shall be paid on a quarterly basis beginning on June 30, 2023.

The company may prepay the outstanding promissory note, at any time, in whole or in part, without penalty.

The noteholder may convert the balance of the convertible promissory note and accrued interest in whole at its option following the Conversion Price Date, which is the trading day prior to the opening of the next open trading window, as determined by the company’s board of directors in accordance with the company’s Insider Trading Policy.

The conversion price is equal to the greater of (i) the NASDAQ Official Closing Price and (ii) the consolidated closing bid price of the company’s common stock on the Conversion Price Date.

There is no floor on the conversion price for this convertible note, therefore, as of March 31, 2023 we cannot determine the total number of shares issuable upon conversion that may occur in the future.

The company received net proceeds of $ 29.9 million from this financing, net of a $ 0.1 million origination fee paid to the lender.

Upon receipt of a written notice of prepayment from the company, the note holder has the right, at its option, to convert the outstanding principal amount to be prepaid and the accrued and unpaid interest thereon (as specified in the notice of prepayment) into shares of the company’s common stock at a price of $ 2.28 per share.

Additionally, the promissory note and accrued interest may be converted into shares of the company’s common stock at a conversion price of $ 2.28 per share (subject to appropriate adjustment from time to time for any stock dividend, stock split, combination of shares, reorganization, recapitalization, reclassification or other similar event), at the option of the note holder.

The company received net proceeds of $ 29.9 million from this financing, net of a $ 0.1 million origination fee paid to the note holder.

The note is accounted for under ASC 825-10-15-4 FVO election.

Under the FVO election, the note is initially measured at its issue-date estimated fair value and subsequently remeasured at estimated fair value on a recurring basis at each reporting period date.

With each such remeasurement, the note will be adjusted to fair value, with the change in fair value recognized in other income (expense), net , on the condensed consolidated statement of operations, except that the change in the fair value resulting from a change in the instrument-specific credit risks are recognized as a component of other comprehensive income .

As of March 31, 2023, we had a balance of $ 29.9 million in a related-party convertible note at fair value , on the condensed consolidated balance sheets related to the convertible promissory note measured at fair value.

With each such remeasurement, the note will be adjusted to fair value, with the change in fair value recorded in other (expense) income, net , on the condensed consolidated statement of operations, except that the change in fair value resulting from a change in the instrument-specific credit risks is recorded as a component of other comprehensive income (loss) .

As of June 30, 2023, we had a balance of $ 36.6 million in related-party convertible note at fair value , on the condensed consolidated balance sheet related to the convertible promissory note measured at fair value.

The increase in fair value of $ 6.8 million was recorded in other (expense) income, net , on the condensed consolidated statement of operations during the six months ended June 30, 2023.

There was no change in fair value related to the instrument-specific credit risks.

Related-Party Convertible Notes

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No other material terms or conditions of these fixed-rate promissory notes were modified as part of the August 31, 2022 amendments and restatements.

As of March 31, 2023 and December 31, 2022, the carrying value of the fixed-rated convertible promissory notes of $ 245.6 million and $ 241.3 million, respectively, was recorded in related-party convertible notes and accrued interest, net of discount, on the condensed consolidated balance sheets.

During the three months ended March 31, 2023 and 2022, the company made interest payments of $ 0.6 million and $ 0.6 million, respectively, related to our $ 40.0 million promissory note.

As of June 30, 2023 and December 31, 2022, the carrying value of the fixed-rated convertible promissory notes of $ 250.1 million and $ 241.3 million, respectively, was recorded in related-party convertible notes and accrued interest, net of discount, on the condensed consolidated balance sheets.

During the six months ended June 30, 2023 and 2022, the company made interest payments totaling $ 0.6 million and $ 1.2 million, respectively, related to our $ 40.0 million promissory note.

Related-Party Nonconvertible Notes

As of March 31, 2023, the company had a promissory note outstanding with Nant Capital for $ 300.0 million in principal and a carrying balance of $ 272.2 million, net of unamortized discount of $ 27.8 million.

On June 13, 2023, the company executed a $ 30.0 million promissory note with Nant Capital, an entity affiliated with Dr.

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

The company was able to request up to three (3) advances of $ 10.0 million each, pursuant to the note.

The principal amount of each advance bears interest at Term SOFR plus 8.0 % per annum.

The accrued interest on any advance is payable on a quarterly basis.

The outstanding principal amount and any accrued and unpaid interest on advances are due on the earlier of (i) December 31, 2023 or (ii) upon the occurrence and during the continuance of an Event of Default (as defined in the note).

We may prepay the outstanding principal amount, together with any accrued interest, on any then-outstanding advances, at any time, in whole or in part, without premium or penalty, and without the prior consent of the Investor, upon five (5) days written notice to the Investor.

We received net proceeds of approximately $ 29.9 million from this promissory note, net of a $ 0.1 million origination fee paid to Nant Capital.

As of June 30, 2023, the company had a promissory note outstanding with Nant Capital for $ 300.0 million in principal and a carrying balance of $ 280.9 million, net of unamortized discount of $ 19.1 million.

The note bears an interest rate of Term SOFR plus 8.0 % per annum, payable on a quarterly basis.

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 conversion price per share equal to $ 5.67 .

The company made interest payments of $ 9.4 million and $ 4.4 million during the three months ended March 31, 2023 and 2022, respectively.

As of March 31, 2023, the company had a promissory note outstanding with Nant Capital for $ 125.0 million in principal and a carrying balance of $ 119.6 million, net of unamortized discount of $ 5.4 million.

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 has the right, at its sole option, to convert the outstanding principal amount and accrued and unpaid interest due under this note into shares of the company’s common stock at a price of $ 5.67 per share.

During the six months ended June 30, 2023 and 2022, the company made interest payments totaling $ 19.1 million and $ 9.9 million, respectively, related to this note.

As of June 30, 2023, the company had a promissory note outstanding with Nant Capital for $ 125.0 million in principal and a carrying balance of $ 121.3 million, net of unamortized discount of $ 3.7 million.

The note bears an interest rate of Term SOFR plus 8.0 % per annum, payable on a quarterly basis.

The company may prepay the outstanding promissory note, at any time, in whole or in part, without penalty.

The company made an interest payment of $ 3.9 million during three months ended March 31, 2023.

As of March 31, 2023, the company had a promissory note outstanding with Nant Capital for $ 50.0 million in principal and a carrying balance of $ 49.8 million, net of unamortized discount of $ 0.2 million.

During the six months ended June 30, 2023, the company made interest payments totaling $ 4.2 million related to this note.

As of June 30, 2023, the company had a promissory note outstanding with Nant Capital for $ 50.0 million in principal and a carrying balance of $ 49.9 million, net of unamortized discount of $ 0.1 million.

The note bears an interest rate of Term SOFR plus 8.0 % per annum, payable on a quarterly basis.

The company may prepay the outstanding promissory note, at any time, in whole or in part, without penalty.

In the event of a Specified Transaction (as defined in the loan agreement), the noteholder can request the outstanding principal and interest due on the loan be repaid in full upon consummation of such Specified Transaction.

The company made a cash payment of $ 1.6 million during three months ended March 31, 2023.

In the event of a Specified Transaction (as defined in the note), the note holder can request the outstanding principal and interest due on the loan be repaid in full upon consummation of such Specified Transaction.

During the six months ended June 30, 2023, the company made interest payments totaling $ 1.6 million related to this note.

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

Balances at March 31, 2023

Balances at June 30, 2023

Year Interest

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Amount Accrued

(PIK) Interest

Discounts Total

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Nant Capital 2025 6.0 % 40,000 — 2,159 37,841

NantMobile, LLC 2025 3.0 % 55,000 5,554 5,482 55,072

NantMobile, LLC (NantMobile) 2025 3.0 % 55,000 6,004 4,968 56,036

NantCancerStemCell, LLC (NCSC) 2025 5.0 % 33,000 8,673 2,708 38,965

Total related-party convertible notes $ 233,226 $ 34,301 $ 17,425 $ 250,102

Total related-party debt $ 738,226 $ 31,713 $ 52,671 $ 717,118

_______________

(1) The interest rate on our related-party variable-rate notes as of March 31, 2023 was 12.89 %.

(1) As of June 30, 2023, the interest rate on the $ 30.0 million nonconvertible promissory note entered on June 13, 2023 was 13.11 %, and the interest rate on the remaining related-party nonconvertible notes was 13.25 %.

(2) As of June 30, 2023, the interest rate on the related-party convertible note at fair value was 13.25 %.

Balances at December 31, 2022

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Rate Principal

Amount Accrued

Amount Accrued PIK

Discounts Total

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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 %.

The following table summarizes the estimated future contractual obligations for our related-party debt as of March 31, 2023 (unaudited;

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

The following table summarizes the estimated future contractual obligations for our related-party debt as of June 30, 2023 (unaudited;

in thousands):

Principal Payments Interest Payments (1)

Notes Non-convertible

Notes Nonconvertible

Notes Convertible

Notes Non-convertible

2023 (excluding the three months ended

March 31, 2023)

2023 (excluding the six months ended

June 30, 2023)

$ 30,000 $ 505,000 $ 4,813 $ 39,465 $ 579,278

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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 March 31, 2023 was 12.89 %.

As of June 30, 2023, the interest rate on the $ 30.0 million nonconvertible promissory note entered on June 13, 2023 was 13.11 %, and the interest rate on the remaining related-party nonconvertible notes and convertible note at fair value was 13.25 %.

Related-Party Agreements

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Due from related party–NantBio, Inc.

$ 1,294 $ 1,294

Due from related party–Brink Biologics 35 271

(NantBio) $ 1,294 $ 1,294

Due from related party–NantWorks 573 —

Due from related party–Brink Biologics, Inc.

(Brink Biologics) 36 271

Due from related parties–Various 122 325

Total due from related parties $ 2,025 $ 1,890

Due to related party–Duley Road, LLC $ 1,356 $ 1,431

Due to related party–NantBio, Inc.

Due to related party–NantWorks 592 986

Due to related party–NantBio $ 943 $ 943

Due to related party–Duley Road, LLC (Duley Road) 153 1,431

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

(the Clinic) 37 109

Due to related party–NantWorks — 986

Due to related party–Various 26 —

Total due to related parties $ 1,159 $ 3,469

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

During June 2023, we net settled certain due from/due to related party balances with NantWorks and related affiliates that were outstanding as of December 31, 2022.

NantWorks, LLC

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

For the three months ended March 31, 2023 and 2022, we recorded $ 1.0 million and $ 1.3 million, respectively, in selling, general and administrative expense , and $ 0.4 million of expense reimbursements and an immaterial amount, respectively, under this arrangement in research and development expense , on the condensed consolidated statements of operations.

During the six months ended June 30, 2023 and 2022, we recorded $ 1.9 million and $ 2.3 million, respectively, in selling, general and administrative expense , and $ 1.0 million and $ 0.3 million of expense reimbursements, respectively, under this arrangement in research and development expense , on the condensed consolidated statements of operations.

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

As of March 31, 2023 and December 31, 2022, we owed NantWorks net amounts of $ 0.6 million and $ 1.0 million, respectively, for all agreements between the two affiliates, which are included in due to related parties, on the condensed consolidated balance sheets.

We also recorded $ 2.1 million and $ 2.0 million of prepaid expenses for services that have been passed through to the company from NantWorks as of March 31, 2023 and December 31, 2022, respectively, which are included in prepaid expenses and other current assets , on the condensed consolidated balance sheets.

As of June 30, 2023 and December 31, 2022, we had a receivable of $ 0.6 million and a payable of $ 1.0 million, respectively, for all agreements with NantWorks, which are included in due from/due to related parties, on the condensed consolidated balance sheets.

We also recorded $ 1.9 million and $ 2.0 million of prepaid expenses for various services that we expect will be passed through to the company from NantWorks as of June 30, 2023 and December 31, 2022, respectively, which are included in prepaid expenses and other current assets , on the condensed consolidated balance sheets.

Facility License Agreement

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

We recorded license fee expense for this facility totaling $ 0.8 million and $ 0.2 million for the three months ended March 31, 2023 and 2022, respectively, in research and development expense , on the condensed consolidated statements of operations.

We recorded license fee expense for this facility totaling $ 1.7 million and $ 0.8 million during the six months ended June 30, 2023 and 2022, respectively, in research and development expense , on the condensed consolidated statements of operations.

Immuno-Oncology Clinic, Inc.

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

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

We have entered into multiple agreements with t he 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.

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

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

We continue productive negotiations with potential partners around alternative structures, but there can be no assurance that we will be successful.

We recorded $ 0.6 million and $ 0.4 million for the three months ended March 31, 2023 and 2022, respectively, in research and development expense , on the condensed consolidated statements of operations related to clinical trial and transition services provided by the Clinic.

As of March 31, 2023 and December 31, 2022 , we owed the Clinic an immaterial amount and $ 0.1 million, respectively .

We recorded $ 1.4 million and $ 1.3 million during the six months ended June 30, 2023 and 2022, respectively, in research and development expense , on the condensed consolidated statements of operations related to clinical trial and transition services provided by the Clinic.

As of June 30, 2023 and December 31, 2022 , we owed the Clinic an immaterial amount and $ 0.1 million, respectively, which are included in due to related parties, on the condensed consolidated balance sheets .

NantBio, Inc.

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

We recognized no revenue for the three months ended March 31, 2023 and no revenue for the three months ended March 31, 2022.

We recorded $ 0.1 million and $ 0.1 million of deferred revenue for bioreactors that were delivered but not installed in accrued expenses and other liabilities , on the condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022, respectively.

As of March 31, 2023 and December 31, 2022, we recorded $ 0.9 million in due to related parties , on the condensed consolidated balance sheets related to this agreement.

We recognized no revenue during the six months ended June 30, 2023 and 2022, respectively.

We recorded $ 0.1 million of deferred revenue for bioreactors that were delivered but not installed in accrued expenses and other liabilities , on the condensed consolidated balance sheets as of June 30, 2023 and December 31, 2022, respectively.

As of June 30, 2023 and December 31, 2022, we recorded a payable of $ 0.9 million, respectively, in due to related parties , on the condensed consolidated balance sheets related to this agreement.

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

In April 2019, we agreed with NantBio to transfer certain NantBio employees and associated research and development projects to the company.

As of March 31, 2023 and December 31, 2022, we recorded a net receivable from NantBio of $ 1.3 million for amounts we paid on behalf of NantBio during the year ended December 31, 2019.

As of June 30, 2023 and December 31, 2022, we recorded a receivable of $ 1.3 million in due from related parties , respectively, on the condensed consolidated balance sheets for amounts we paid on behalf of NantBio during the year ended December 31, 2019.

605 Doug St, LLC

In September 2016, we entered into a lease agreement with 605 Doug St, LLC, an entity owned by our Executive Chairman and Global Chief Scientific and Medical Officer, for approximately 24,250 rentable square feet in El Segundo, California, which has been converted to a research and development laboratory and a cGMP manufacturing facility.

The lease runs from July 2016 through July 2023.

We have the option to extend the lease for one additional three-year term through July 2026.

The lease term was from July 2016 through July 2023.

In June 2023, we exercised the option to extend the lease for one additional three-year term through July 2026.

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

We recorded lease expense for this facility of $ 0.2 million and $ 0.2 million for the three months ended March 31, 2023 and 2022, respectively, in research and development expense , on the condensed consolidated statements of operations.

We recorded lease expense for this facility of $ 0.4 million during the six months ended June 30, 2023 and 2022, respectively, in research and development expense , on the condensed consolidated statements of operations.

Duley Road, LLC

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The base rent for the two leases is approximately $ 35,800 per month, with annual increases of 3 %.

As of March 31, 2023 and December 31, 2022, respectively, we recorded $ 0.9 million and $ 0.9 million of leasehold improvement payables, and $ 0.5 million and $ 0.6 million of lease-related payables, to Duley Road, which were included in due to related parties , on the condensed consolidated balance sheets.

We recorded rent expense for these leases totaling $ 0.2 million and $ 0.2 million for the three months ended March 31, 2023 and 2022, respectively, in research and development expense , on the condensed consolidated statements of operations.

We recorded rent expense for these leases totaling $ 0.4 million during the six months ended June 30, 2023 and 2022, respectively, in research and development expense , on the condensed consolidated statements of operations.

As of June 30, 2023 and December 31, 2022, we recorded $ 0.2 million and $ 1.4 million of lease-related payables to Duley Road, respectively, in due to related parties , on the condensed consolidated balance sheets.

605 Nash, LLC

In February 2021 , but effective on January 1, 2021 , we entered into a lease agreement with 605 Nash, a related party, whereby we leased approximately 6,883 rentable square feet (the Initial Premises) i n a two story mixed use building containing approximately 64,643 rentable square feet on 605-607 Nash Street in El Segundo, California.

In February 2021 , but effective on January 1, 2021 , we entered into a lease agreement with 605 Nash, a related party, whereby we leased approximately 6,883 rentable square feet (the Initial Premises) i n a two-story mixed-use building containing approximately 64,643 rentable square feet at 605-607 Nash Street in El Segundo, California.

This facility is used primarily for pharmaceutical development and manufacturing purposes.

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

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.

The amendment expanded the leased square feet by approximately 57,760 rentable square feet (the Expansion Premises).

The lease term of the Expansion Premises commenced in April 2021 and expires in March 2028, whereby the company has the option to extend the initial term for three years .

The lease term of the Expansion Premises commenced in April 2021 and expires in March 2028, whereby the company has one option to extend the initial term for three years .

Per the terms of the amendment, the term of the Initial Premises lease was extended for an additional three months and now expires on March 31, 2028.

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We are responsible for the build out of the facility space and associated costs.

We received a rent abatement for the first seven months .

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

We recorded rent expense for the Initial and Expansion Premises leases totaling $ 0.5 million and $ 0.5 million for the three months ended March 31, 2023 and 2022, respectively, i n research and development expense, on the condensed consolidated statements of operations.

We recorded rent expense for the Initial and Expansion Premises leases totaling $ 1.1 million during the six months ended June 30, 2023 and 2022, respectively, i n research and development expense, on the condensed consolidated statements of operations.

The terms of the initial and amended leases provided for tenant improvement allowances totaling $ 2.9 million for costs and expenses related to improvements made by us to the Initial and Expansion Premises, which were received from the landlord during the three months ended June 30, 2023.

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.

We recorded $ 0.1 million and $ 0.1 million of rent expense related to this lease for the three months ended March 31, 2023 and 2022, respectively, in research and development expense , on the condensed consolidated statements of operations.

We recorded $ 0.3 million of rent expense for this lease during the six months ended June 30, 2023 and 2022, respectively, in research and development expense , on the condensed 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.

Under the terms of the agreement, the lease term began 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.

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

We recorded $ 0.4 million of rent expense for this lease for the three months ended March 31, 2023 in research and development expense , on the condensed consolidated statement of operations.

We recorded $ 0.9 million and $ 0.3 million of rent expense for this lease during the six months ended June 30, 2023 and 2022, respectively, in research and development expense , on the condensed consolidated statements of operations.

Warrant Liabilities

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The fair value of the warrants was estimated at $ 35.1 million at the issuance date.

Of the total placement agent fees and other offering costs of $ 3.0 million, $ 1.1 million were allocated to the warrants and recorded to other income (expense), net on the date of the transaction.

As of March 31, 2023, all 9,090,909 underlying warrants were outstanding, As of March 31, 2023 and December 31, 2022, the estimated fair value of the warrants were $ 5.8 million and $ 21.6 million, respectively .

The decrease in fair value of $ 15.8 million was recognized in other income (expense), net , on the condensed consolidated statement of operations for the three months ended March 31, 2023.

Of the total placement agent fees and other offering costs of $ 3.0 million, $ 1.1 million was allocated to the warrants and recorded in other (expense) income, net , on the condensed consolidated statement of operations on the date of the transaction.

As of June 30, 2023, all 9,090,909 underlying warrants were outstanding, As of June 30, 2023 and December 31, 2022, the estimated fair value of the warrants were $ 9.4 million and $ 21.6 million, respectively .

The decrease in fair value of $ 12.3 million was recorded in other (expense) income, net , on the condensed consolidated statement of operations during the six months ended June 30, 2023.

February 2023 Warrants

On February 15, 2023, in connection with the sale of 14,072,615 shares of our common stock to institutional investors, we entered into a warrant agreement that allows such investors to purchase up to 14,072,615 shares at an exercise price of $ 4.2636 per share.

Pursuant to the terms of the securities purchase agreement dated July 25, 2023, the company reduced the exercise price of the outstanding February 2023 Warrants from $ 4.2636 per share to $ 3.2946 per share.

See Note 15 , Subsequent Events , for further information.

We classified the warrants as a liability at their fair value determined using the Black-Scholes option pricing model.

The fair value of warrants were estimated at $ 23.7 million at the issuance date.

Of the total placement agent fees and other offering costs of $ 3.0 million , $ 1.0 million were allocated to the warrants and recorded to other income (expense), net, on the date of the transaction .

As of March 31, 2023, all 14,072,615 underlying warrants were outstanding, with an estimated fair value of $ 12.0 million .

The decrease in fair value of $ 11.7 million is recognized in other income (expense), net , on the condensed consolidated statement of operations for the three months ended March 31, 2023.

The fair value of warrants was estimated at $ 23.7 million at the issuance date.

Of the total placement agent fees and other offering costs of $ 3.0 million , $ 1.0 million was allocated to the warrants and recorded in other (expense) income, net , on the condensed consolidated statement of operations on the date of the transaction .

As of June 30, 2023, all 14,072,615 underlying warrants were outstanding, with an estimated fair value of $ 18.4 million .

The decrease in fair value of $ 5.3 million was recorded in other (expense) income, net , on the condensed consolidated statement of operations during the six months ended June 30, 2023.

Stockholders’ Deficit

Stock Repurchases

No shares of our common stock were repurchased during the three months ended March 31, 2023 and 2022 under the company’s 2015 Share Repurchase Program.

As of March 31, 2023, $ 18.3 million remained authorized to use for share repurchases under the program.

No shares of our common stock were repurchased during the six months ended June 30, 2023 and 2022 under the company’s 2015 Share Repurchase Program.

As of June 30, 2023, $ 18.3 million remained authorized to use for share repurchases under the program.

Shelf Registration Statement

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In February 2023, we sold shares of our common stock and warrants valued at $ 110.0 million under the shelf.

As of March 31, 2023, we had $ 640.0 million available for use under the shelf.

See “ —Registered Direct Offerings ” below.

As of June 30, 2023, we had $ 640.0 million available for use under the shelf.

This available shelf is in addition to the Open Market Sale Agreement described below.

In July 2023, we entered into a registered direct offering and a warrant repricing and extension that changed the amount available under the shelf.

See “ —Registered Direct Offerings ” below and Note 15 , Subsequent Events , for further information.

Open Market Sale Agreement

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

We issued no shares under the ATM during the three months ended March 31, 2023.

As of March 31, 2023, we had $ 225.4 million available for future stock issuances under the ATM.

During the three months ended June 30, 2023, we received net proceeds totaling $ 13.6 million from the issuance of 4,605,323 shares under the ATM.

As of June 30, 2023, we had $ 211.4 million available for future stock issuances under the ATM.

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

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Registered Direct Offerings

On December 12, 2022, we entered into a securities purchase agreement with an institutional investor for the sale of 9,090,909 shares of our common stock, as well as warrants that allow such investor 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.

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

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 that allow such investors to purchase an additional 14,072,615 shares of common stock at an exercise price of $ 4.26 per share, for an aggregate purchase price of $ 3.55 per share and accompanying warrant.

This transaction generated net proceeds of approximately $ 47.0 million, after deducting placement agent fees and other estimated offering costs of $ 3.0 million, of which $ 2.0 million was allocated to the sale of our common stock and recognized in additional-paid-in capital, on the condensed consolidated statement of stockholders’ deficit for the three months ended March 31, 2023.

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

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

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.

See Note 11 , Warrant Liabilities, for further information.

2022 Offering

This transaction generated 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 recorded in additional-paid-in capital , on the consolidated statement of stockholders’ deficit during the year ended December 31, 2022.

The warrants became immediately exercisable on December 12, 2022 and expire two years after the initial issuance date on December 12, 2024.

2023 Offerings

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 that allow such investors 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.

This transaction generated net proceeds of approximately $ 47.0 million, after deducting placement agent fees and other offering costs of $ 3.0 million, of which $ 2.0 million was allocated to the sale of our common stock and recorded in additional-paid-in capital, on the condensed consolidated statement of stockholders’ deficit during the six months ended June 30, 2023.

The warrants became immediately exercisable on February 17, 2023 and expire two years after the initial issuance date on February 17, 2025.

See Note 11 , Warrant Liabilities, and No te 15 , Subsequent Events , for further information.

On July 20, 2023, we entered into a securities purchase agreement with certain institutional investors for the purchase and sale of 14,569,296 shares of the company’s common stock, as well as warrants that allow such investors to purchase an additional 14,569,296 shares of common stock at an exercise price of $ 3.2946 per share, for a purchase price of $ 2.7455 per share and accompanying warrant, generating gross proceeds from the offering of approximately $ 40.0 million before deducting placement agent fees and other estimated offering costs.

See Note 15 , Subsequent Events , for further information.

Stock-Based Compensation

2015 Equity Incentive Plan

As of March 31, 2023, approximately 18.6 million shares were available for future grants under the 2015 Plan.

As of June 30, 2023, approximately 17.7 million shares were available for future grants under the ImmunityBio, Inc.

2015 Equity Incentive Plan (2015 Plan).

Stock-Based Compensation

The following table presents stock-based compensation included on the condensed consolidated statements of operations (in thousands):

The following table presents stock-based compensation included in the condensed consolidated statements of operations (in thousands):

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

(Unaudited) (Unaudited)

Stock-based compensation expense:

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Stock Options

The following table summarizes stock option activity and related information for the three months ended March 31, 2023:

The following table summarizes stock option activity and related information for the six months ended June 30, 2023:

(in thousands)

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Forfeited/expired ( 102,162 ) $ 5.30

Outstanding at March 31, 2023

Outstanding at June 30, 2023

10,002,722 $ 9.35 $ 640 7.1

Vested and exercisable at March 31, 2023

Vested and exercisable at June 30, 2023

5,963,111 $ 11.38 $ 640 5.8

As of March 31, 2023, the unrecognized compensation cost related to outstanding stock options was $ 16.7 million, which is expected to be recognized over a remaining weighted-average period of 1.6 years.

The total intrinsic value of stock options exercised during the three months ended March 31, 2023 was $ 0.2 million.

Cash proceeds received from stock option exercises during the three months ended March 31, 2023 and 2022 totaled $ 0.1 million and $ 0.1 million, respectively.

As of June 30, 2023, the unrecognized compensation cost related to outstanding stock options was $ 15.6 million, which is expected to be recognized over a remaining weighted-average period of 1.4 years.

The total intrinsic value of stock options exercised during the six months ended June 30, 2023 was $ 0.2 million.

Cash proceeds received from stock option exercises during the six months ended June 30, 2023 and 2022 totaled $ 0.3 million and $ 0.1 million, respectively.

As of December 31, 2022, a total of 3,445,499 vested and exercisable shares were outstanding.

Restricted Stock Units

The following table summarizes RSU activity during the three months ended March 31, 2023:

The following table summarizes RSU activity during the six months ended June 30, 2023:

Nonvested balance at December 31, 2022

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Forfeited/canceled ( 352,347 ) $ 4.71

Nonvested balance at March 31, 2023

Nonvested balance at June 30, 2023

6,029,582 $ 18.61

As of March 31, 2023, there was $ 61.9 million of unrecognized stock-based compensation expense related to RSUs that is expected to be recognized over a weighted-average period of 2.6 years.

The total intrinsic value of RSUs vested during the three months ended March 31, 2023 was $ 0.9 million.

As of June 30, 2023, there was $ 53.9 million of unrecognized stock-based compensation expense related to RSUs that is expected to be recognized over a weighted-average period of 2.4 years.

The total intrinsic value of RSUs vested during the six months ended June 30, 2023 was $ 1.3 million.

RSUs awarded to employees and consultants of affiliated companies are accounted for as stock-based compensation in accordance with ASU 2018-07, Compensation—Stock Compensation (Topic 718) , as the compensation was in exchange for continued support or services expected to be provided to the company over the vesting periods under the NantWorks shared services agreement discussed in Note 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 on March 4, 2021 and recorded $ 0.1 million and $ 0.1 million of deemed dividends for the three months ended March 31, 2023 and 2022 in additional paid-in capital, on the condensed 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 on March 4, 2021 and recorded $ 0.2 million and $ 0.3 million of deemed dividends during the six months ended June 30, 2023 and 2022 in additional paid-in capital, on the condensed 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.

After applying the Exchange Ratio at the Effective Time of the Merger, a total of 1,638,000 warrants with an exercise price of $ 3.24 per share were outstanding as of March 31, 2023.

In connection with the March 2021 merger between NantKwest, Inc.

(NantKwest) and NantCell, warrants issued to NantWorks, a related party, in connection with NantCell’s acquisition of Altor were assumed by the company.

A total of 1,638,000 warrants with an exercise price of $ 3.24 per share were outstanding as of June 30, 2023.

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

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

From inception through March 31, 2023, we have not been required to pay U.S.

From inception through June 30, 2023, we have not been required to pay U.S.

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

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The Italian and South Korea returns for tax years 2017 through 2021 remain open to examination.

Carryforward attributes that were generated in years where the statute of limitations is closed may still be adjusted upon examination by the Internal Revenue Service or other respective tax authorities.

Carryforward attributes that were generated in years where the statute of limitations is closed may still be adjusted upon examination by the Internal Revenue Service (IRS) or other respective tax authorities.

No income tax returns are currently under examination by taxing authorities.

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 Inflation Reduction Act of 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.

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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.

enacted the Coronavirus Aid, Relief and Economic Security Act (the CARES Act).

The Cares Act is an emergency economic stimulus package that includes spending and tax breaks to strengthen the U.S.

economy and fund a nationwide effort to curtail the effect of COVID-19.

The CARES Act provides sweeping tax changes in response to the COVID-19 pandemic.

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.

During the three months ended March 31, 2023 and 2022, 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 three months ended March 31, 2023 and 2022.

State of California Assembly Bill No.

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85 (AB 85) suspending California NOL utilization and imposing a cap on the amount of business incentive tax credits companies can utilize, effective for tax years 2020, 2021 and 2022.

There was no material impact from the provisions of AB 85 for the three months ended March 31, 2022.

There was no material impact from the provisions of AB 85 for the years ended December 31, 2022, 2021, and 2020.

On February 9, 2022, Senate Bill No.

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.

Subsequent Events

Registered Direct Offering

On July 20, 2023, we entered into a securities purchase agreement with certain institutional investors for the purchase and sale of 14,569,296 shares of the company’s common stock, as well as warrants that allow such investors to purchase an additional 14,569,296 shares of common stock at an exercise price of $ 3.2946 per share, for a purchase price of $ 2.7455 per share and accompanying warrant, generating gross proceeds from the offering of approximately $ 40.0 million, before deducting placement agent fees and other estimated offering costs.

The warrants became immediately exercisable on July 25, 2023 and expire three years after the issuance date on July 24, 2026.

February 2023 Warrant Amendment

The company reduced the exercise price of the outstanding warrants issued on February 17, 2023 pursuant to the terms of the securities purchase agreement dated July 25, 2023 from $ 4.2636 per share to $ 3.2946 per share (the Reduced Exercise Price, as defined in the amendment agreement).

In addition, the expiration date of the warrants was extended to July 24, 2026.

As of July 25, 2023, 14,072,615 warrants were outstanding.

As a result of the Reduced Exercise price, the net proceeds that the company may receive from the exercise of the February 2023 Warrants (assuming all warrants are exercised in cash) decreased from approximately $ 60.0 million to approximately $ 46.4 million.

Other than the reduction in the per share exercise price and extension of the expiration date of the warrants, all other terms and provisions of the February 2023 Warrants remain unchanged.

After the February 2023 Warrant amendment and the July 25, 2023 offering, we have $ 565.6 million available for use under the shelf registration statement.

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

What changed 10-Q

Item 1. Financial Statements