What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-03-19 compared with 2023-03-01 · 922 added, 624 removed, 1138 unchanged (58% of the section changed)

1 unchanged sentence

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Reports of Independent Registered Public Accounting Firm (PCAOB ID:

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets as of December 31, 2023 and 2022

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generally accepted accounting principles.

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

Basis for Opinion

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Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

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(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Related party transactions and disclosures

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

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

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

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

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

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

We involved valuation specialists to assist in evaluating the appropriateness of the valuation methodologies and reasonableness of the assumptions used in the valuation of the related party debt including underlying conversion features and embedded derivatives, as deemed necessary, as described in Note 10 to the consolidated financial statements.

/s/ Ernst & Young LLP

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March 19, 2024

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of ImmunityBio, Inc.

and Subsidiaries

Opinion on Internal Control Over Financial Reporting

We have audited ImmunityBio, Inc.

and Subsidiaries’ internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, ImmunityBio, Inc.

and Subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive loss, stockholders’ deficit and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and our report dated March 1, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements .

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate .

/s/ Ernst & Young LLP

Los Angeles, California

March 1, 2023

ImmunityBio, Inc.

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Property, plant and equipment, net 146,082 143,659

Intangible asset, net 20,003 1,420

Intangible assets, net 17,093 20,003

Convertible note receivable 6,879 6,629

Operating lease right-of-use assets, net (including amounts with related parties) 36,543 45,788

Investment and other assets (including amounts with related parties) 4,860 6,775

Other assets (including amounts with related parties) 2,880 4,860

Total assets $ 504,452 $ 362,356

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Accrued expenses and other liabilities 42,708 41,825

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

Related-party promissory notes, net of discounts and deferred issuance costs ( Note 10 )

Due to related parties 1,136 3,469

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Total current liabilities 58,283 500,861

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

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

Related-party nonconvertible note, net of discount ( Note 10 )

Related-party convertible notes and accrued interest, net of discount ( Note 10 )

576,951 241,271

Revenue interest liability ( Note 9 )

Derivative liabilities ( Note 9 and Note 10 )

Operating lease liabilities, less current portion (including amounts with related parties) 39,942 47,951

Warrant liability 21,636 —

Warrant liabilities 118,770 21,636

Other liabilities 1,109 457

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Other expense, net:

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

Interest and investment income (loss), net 1,131 ( 3,090 ) ( 4,100 )

Interest expense (including amounts with related parties) ( 129,198 ) ( 63,515 ) ( 14,849 )

Loss on equity method investment ( 7,549 ) ( 12,107 ) ( 803 )

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

Change in fair value of warrant liabilities ( 47,600 ) 13,460 —

Change in fair value of related-party convertible note ( 36,203 ) — —

Other (expense) income, net (including amounts

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Loss before income taxes and noncontrolling interests ( 583,892 ) ( 417,286 ) ( 349,839 )

Income tax (expense) benefit ( 34 ) ( 9 ) 1,846

Income tax benefit (expense) 40 ( 34 ) ( 9 )

Net loss ( 583,852 ) ( 417,320 ) ( 349,848 )

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Net loss $ ( 583,852 ) $ ( 417,320 ) $ ( 349,848 )

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

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

Reclassification of net realized gains on

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

Net unrealized gains (losses) on available-for-sale securities 60 ( 183 ) ( 13 )

Reclassification of net realized gains (losses) on

available-for-sale securities included in net loss ( 15 ) 124 —

Foreign currency translation adjustments ( 218 ) 238 ( 105 )

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

Total other comprehensive (loss) income ( 173 ) 179 ( 118 )

Comprehensive loss ( 584,025 ) ( 417,141 ) ( 349,966 )

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

Issuance of common stock, net of

offering costs of $ 4,373

Issuance of common stock “at-the-market”

offering, net of commissions and

offering costs of $ 4,674 ( Note 13 )

13,295,817 2 164,528 — — 164,530 — 164,530

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Exercise of stock options 1,695,638 — 5,461 — — 5,461 — 5,461

Vesting of restricted stock units (RSUs) 648,336 — — — — — — —

Vesting of RSUs 873,058 — — — — — — —

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

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

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

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

Net loss — — — ( 346,790 ) — ( 346,790 ) ( 3,058 ) ( 349,848 )

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offering, net of commissions and

offering costs of $ 4,674

offering costs of $ 302 ( Note 13 )

2,051,894 — 13,129 — — 13,129 — 13,129

Conversion of related-party convertible note and

accrued interest, net of unamortized debt discount,

into equity ( Note 10 )

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

Issuance of shares in a registered direct offering,

net of discount and offering costs of $ 1,897

and value ascribed to associated warrants ( Note 12 )

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

Stock-based compensation expense — — 40,179 — — 40,179 — 40,179

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

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

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

Net loss — — — ( 346,790 ) — ( 346,790 ) ( 3,058 ) ( 349,848 )

Balance as of December 31, 2021

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

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

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

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Shares Amount

Conversion of related-party convertible note and

accrued interest, net of unamortized debt discount,

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

Issuance of shares in a registered direct offering,

net of discount and offering costs of $ 1,897

and value ascribed to associated warrants ( Note 11 )

Gain on extinguishment of debt with related parties

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

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

Net loss — — — ( 416,567 ) — ( 416,567 ) ( 753 ) ( 417,320 )

Balance as of December 31, 2022

421,569,115 42 1,930,936 ( 2,378,488 ) 183 ( 447,327 ) ( 2,493 ) ( 449,820 )

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offering, net of commissions and

offering costs of $ 302

offering costs of $ 457 ( Note 13 )

5,605,323 1 16,105 — — 16,106 — 16,106

Issuance of common stock in exchange for notes

payable ( Note 10 )

209,291,936 21 269,966 — — 269,987 — 269,987

Issuance of shares in a registered direct offerings,

net of discounts and offering costs of $ 3,535

and value ascribed to associated warrants ( Note 12 )

28,641,911 3 36,928 — — 36,931 — 36,931

Issuance of common stock in connection with the RIPA,

net of transaction costs of $ 473 ( Note 13 )

2,432,894 — 11,581 — — 11,581 — 11,581

Gain on debt extinguishment with related-parties

under common control ( Note 10 )

— — 36,110 — — 36,110 — 36,110

Increase in fair value of embedded conversion feature

from debt modification with entities under common

control ( Note 10 )

— — 31,179 — — 31,179 — 31,179

Stock-based compensation expense — — 49,163 — — 49,163 — 49,163

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Net share settlement for RSUs vesting ( 1,403,841 ) — ( 3,443 ) — — ( 3,443 ) — ( 3,443 )

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

Gain on extinguishment of debt with related parties

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

Change in ownership interest in a joint venture due to

legal settlement ( Note 7 )

— — ( 4,199 ) — — ( 4,199 ) 4,199 —

Other comprehensive income (loss), net of tax — — — — ( 173 ) ( 173 ) — ( 173 )

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Stock-based compensation expense 49,163 40,179 57,181

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

Transaction costs allocated to warrant liability 1,082 — —

Change in fair value of warrant liabilities 47,600 ( 13,460 ) —

Amortization of related-party notes discounts 42,396 16,282 62

Change in fair value of convertible note 36,203 — —

Depreciation and amortization 18,512 18,260 14,238

Non-cash interest items, net (including amounts with related parties) 9,189 11,746 12,417

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

Non-cash lease expense related to operating lease right-of-use assets 6,112 5,932 4,884

Transaction costs allocated to warrant liabilities 2,010 1,082 —

Unrealized losses on equity securities 1,591 4,190 4,615

Impairment of intangible assets 886 681 —

Amortization of premiums, net of discounts, on marketable

debt securities ( 137 ) 1,318 403

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

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

Impairment of intangible assets 681 — 10,660

Impairment of fixed assets — 1,333 —

Deferred tax ( 4 ) ( 8 ) ( 2,938 )

Other ( 407 ) 269 741

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Prepaid expenses and other current assets 5,958 ( 16,557 ) ( 2,249 )

Investment and other assets 1,998 ( 3,977 ) ( 684 )

Other assets 1,913 1,998 ( 3,977 )

Accounts payable ( 6,476 ) 8,000 ( 3,717 )

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

Net cash provided by (used in) investing activities

Net cash (used in) provided by investing activities

( 30,470 ) 27,297 ( 84,886 )

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net of issuance costs paid $ 258,700 $ 174,125 $ 338,500

Proceeds from the RIPA, net of transaction costs 192,764 — —

Proceeds from equity offerings,

net of discounts and issuance costs 100,561 60,427 164,530

Proceeds from stock issuance in connection with the RIPA,

net of transaction costs 9,542 — —

Proceeds from exercises of stock options 294 74 5,461

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

Net share settlement for RSUs vesting ( 3,443 ) ( 616 ) ( 4,064 )

Principal payments of finance leases ( 77 ) ( 58 ) —

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

Payment for contingent consideration — ( 339 ) ( 419 )

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Supplemental disclosure of non-cash activities:

Conversion of related-party convertible notes and accrued interest,

net of unamortized discount, into equity $ 269,987 $ 51,947 $ —

Initial measurement of warrants issued in connection with

registered direct offerings accounted for as liabilities $ 49,534 $ 35,096 $ —

Gain on extinguishment of debt with related parties under

common control $ 36,110 $ 82,858 $ —

Conversion of related-party convertible note and accrued interest,

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

Initial measurement of warrants issued in connection with the

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

Right-of-use assets obtained in exchange for operating

lease liabilities 14,798 23,069 2,394

Increase in fair value of embedded conversion feature from

debt modification $ 31,179 $ — $ —

Common stock issuance discount related to the revenue interest liability $ 2,039 $ — $ —

Property and equipment purchases included in accounts payable,

accrued expenses and due to related parties $ 1,156 $ 12,693 $ 11,654

Right-of-use assets obtained in exchange for

operating lease liabilities $ — $ 14,798 $ 23,069

Right-of-use assets disposed in exchange for

operating lease liabilities $ ( 3,777 ) $ — $ —

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

Right-of-use assets obtained in exchange for finance

lease liabilities 199 — —

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

Unpaid offering and transaction costs included in accounts payable

and accrued expenses $ 255 $ 277 $ —

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

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In these notes to the consolidated financial statements, the terms “ImmunityBio,” “the company,” “the combined company,” “we,” “us,” and “our” refer to ImmunityBio and subsidiaries.

ImmunityBio, Inc.

is a clinical-stage biotechnology company developing next-generation therapies and vaccines that complement, harness, and amplify the immune system to defeat cancers and infectious diseases.

We strive to be a vertically-integrated immunotherapy company designing and manufacturing our products so they are more effective, accessible, more conveniently stored, and more easily administered to patients.

Our broad immunotherapy and cell therapy platforms are designed to attack cancer and infectious pathogens by activating both the innate immune system—natural killer (NK) cells, dendritic cells, and macrophages—and the adaptive immune system—B cells and T cells—in an orchestrated manner.

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

Although such designations may not lead to a faster development process or regulatory review and may not increase the likelihood that a product candidate will receive approval, Anktiva ™ (N-803), our novel antibody cytokine fusion protein, has received Breakthrough Therapy and Fast Track designations in combination with BCG from the U.S.

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

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

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

We are an integrated clinical-stage biotechnology company discovering, developing, and commercializing next-generation immuno- and cellular therapies that bolster the natural immune system to drive and sustain an immune response.

Using our proprietary platforms that amplify both the innate and adaptive branches of the immune system, our teams of clinical, scientific, and manufacturing experts, advance novel therapies and vaccines aimed at defeating urologic and other cancers, as well as infectious diseases.

Although such designations may not lead to a faster development process or regulatory review and may not increase the likelihood that a product candidate will receive approval, N-803 (Anktiva), our lead biologic commercial product candidate, has received Breakthrough Therapy and Fast Track designations and is currently under review by the FDA for treatment in combination with BCG of patients with BCG-unresponsive NMIBC with CIS with or without Ta or T1 disease and has a new user fee goal date (PDUFA date) of April 23, 2024.

Our platforms and their associated product candidates are designed to attack cancer and infectious pathogens by activating both the innate immune system, including—NK cells, dendritic cells, and macrophages, as well as—the adaptive immune system comprising—B and T cells,—in an orchestrated manner.

The goal of this potentially best-in-class approach is to generate immunogenic cell death thereby eliminating rogue cells from the body whether they are cancerous or virally-infected.

Our ultimate goal is to overcome the limitations of current treatments, such as checkpoint inhibitors, and/or reduce the need for standard high-dose chemotherapy in cancer by employing this coordinated approach to establish “immunological memory” that confers long-term benefit for the patient.

Our proprietary platforms for the development of biologic product candidates include:

(i) antibody-cytokine fusion proteins, (ii) DNA, RNA, and recombinant protein vaccines, and (iii) cell therapies.

These platforms have generated 9 novel therapeutic agents for which clinical trials are either underway or planned in solid and liquid tumors.

Specifically, our clinical focus includes bladder, lung, and colorectal cancers and GBM, 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.

Our lead biologic commercial product candidate Anktiva is an IL-15 superagonist antibody-cytokine fusion protein.

In May 2022, we announced the submission of a BLA to the FDA for Anktiva in combination with BCG for the treatment of patients with BCG-unresponsive NMIBC with CIS with or without Ta or T1 disease .

On May 9, 2023, the FDA delivered a CRL to us regarding the BLA filed in May 2022, indicating that the FDA had determined that it could not approve the original BLA submission in its initial form, and the FDA made recommendations to address the issues raised.

The deficiencies in the CRL related to the FDA’s pre-license inspection of the company’s third-party CMOs, among other items.

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

At the time, the FDA further provided recommendations specific to additional CMC issues and assays to be resolved.

The CRL did not request new preclinical studies or Phase III 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.

On October 23, 2023, we announced that we had completed the resubmission of the BLA addressing the issues in the CRL.

As part of our resubmission, we provided an update of the duration of response regarding the responders identified by the FDA in the efficacy population for BCG unresponsive subjects with high-risk CIS disease.

On October 26, 2023, we announced that the FDA had accepted our BLA resubmission for review and considered it as a complete response to the CRL.

The FDA has set a new user fee goal date (PDUFA date) of April 23, 2024.

While we believe the BLA resubmission addresses the issues identified in the CRL, there is no guarantee that the FDA will ultimately agree that such issues have been successfully addressed and resolved.

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

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

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

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

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

On December 21, 2020 , NantKwest, Inc.

(NantKwest) and NantCell, Inc.

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

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

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

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

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

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

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Following the consummation of the Merger, the symbol for shares of the company’s common stock was changed to “IBRX.”

We incurred costs tota ling $ 23.3 million in connection with the Merger, consisting of financial advisory, legal and other professional fees, of which $ 13.0 million and $ 10.3 million were recorded for the years ended December 31, 2021 and 2020, respectively.

Merger-related costs are reported in selling, general and administrative expense , on the consolidated statements of operations.

During the year ended December 31, 2021, w e recorded $ 13.0 million of costs i n connection with the Merger in selling, general and administrative expense , on the consolidated statement of operations, consisting of financial advisory, legal and other professional fees.

Accounting Treatment of the Merger

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

The Merger represents a business combination pursuant to ASC 805-50, which was accounted for as a transaction between entities under common control as Dr.

Soon-Shiong and his affiliates were the controlling stockholders of both the company and NantCell for all of the periods presented in this report.

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

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

We recast our prior period financial statements for the year ended December 31, 2021 to reflect the conveyance of NantCell’s common shares as if the Merger had occurred as of the earliest date of the consolidated financial statements presented.

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

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

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

Three Months Ended

13 unchanged sentences

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

Year ended December 31, 2020

NantCell NantKwest Intercompany

Eliminations ImmunityBio,

Revenue $ 1,695 $ 111 $ ( 1,201 ) $ 605

Operating expenses:

Research and development (including amounts

with related parties) 75,763 64,483 ( 739 ) 139,507

Selling, general and administrative (including amounts

with related parties) 44,099 27,254 ( 35 ) 71,318

Impairment of intangible assets 10,660 — — 10,660

Loss from operations ( 128,827 ) ( 91,626 ) ( 427 ) ( 220,880 )

Other (expense) income, net (including amounts

with related parties) ( 4,401 ) ( 752 ) — ( 5,153 )

Income tax benefit (expense) 1,851 ( 5 ) — 1,846

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

Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S.

The consolidated financial statements have been prepared in accordance with U.S.

GAAP and pursuant to the rules and regulations of the SEC.

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

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

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

Principles of Consolidation

The consolidated financial statements include the accounts of the company and its subsidiaries in which the company has a controlling financial interest.

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

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

The consolidated financial statements include the accounts of the company, its wholly-owned subsidiaries, and a VIE for which the company is the primary beneficiary.

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

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

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

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

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

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

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

If we determine that we are the primary beneficiary of the VIE, we will consolidate the VIE.

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As of December 31, 2023, the company had an accumulated deficit of $ 3.0 billion.

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

We also had negative cash flows from operations of $ 366.8 million during the year ended December 31, 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.

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

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

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

However, we 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 under the ATM, of which we had $ 208.8 million available for future issuance as of December 31, 2023, and a February 2023 shelf registration statement, of which we had $ 565.6 million available for future offerings as of December 31, 2023), a potential $ 100.0 million Second Payment upon satisfaction of certain conditions specified in the RIPA, including upon approval of N-803 before June 30, 2024, and our potential ability to borrow from affiliated entities, will be sufficient to fund our operations through at least the next 12 months following the issuance date of the consolidated financial statements based primarily upon our Executive Chairman and Global Chief Scientific and Medical Officer’s intent and ability to support our operations with additional funds, including loans from affiliated entities, as required, which we believe alleviates such doubt.

We may also seek to sell additional equity, through one or more follow-on offerings, or in separate financings, or obtain incremental subordinated debt in compliance with our existing revenue interest liability.

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

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

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

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

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

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

Estimates are assessed each period and updated to reflect current information.

Actual results could differ from those estimates.

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Marketable Debt Securities

We invest our excess funds in investment grade short- to intermediate-term corporate debt securities, government-sponsored securities, and foreign government bonds and classify these investments as available-for-sale.

We have typically invested our cash in a variety of financial instruments, including investment-grade short- to intermediate-term corporate debt securities, government-sponsored securities and European bonds;

however, after our entry into the RIPA, we can no longer invest our excess funds in corporate or European bonds.

Certain of our investments are subject to credit, liquidity, market, and interest-rate risks.

The general condition of the financial markets and the economy may increase those risks and may affect the value and liquidity of investments and restrict our ability to access the capital markets.

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

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

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

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

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

Marketable Equity Securities

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

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

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

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

Evaluating Investments for Other-than-Temporary Impairments

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

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

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

Property, Plant and Equipment, Net

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Historical cost includes expenditures that are directly attributable to the acquisition of the items.

All repairs and maintenance are charged to net loss during the financial period in which they are incurred.

All repairs and maintenance are charged to operating expenses during the financial period in which they are incurred.

Depreciation of property, plant and equipment is calculated using the straight-line method over the estimated useful lives of the assets, as follows:

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

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

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

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

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Business Combinations

Business combinations are accounted for using the acquisition method of accounting in accordance with ASC Topic 805, B usiness Combinations (ASC 805).

Business combinations are accounted for using the acquisition method of accounting in accordance with ASC 805-50.

These standards require that the total cost of acquisition be allocated to the tangible and intangible assets acquired and liabilities assumed based on their respective fair values at the date of acquisition, with the excess purchase price recorded as goodwill.

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

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

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

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

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

Intangible Assets, Net

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

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

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

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

At that time, we evaluate whether the recorded

amounts are impaired and make any necessary adjustments, and then determine the useful life of the asset and begin amortization.

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

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

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

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

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

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

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

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

Fair Value of Financial Instruments

Fair Value Measurements

Fair value is defined as an exit price that would be received from the sale of an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

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Collaboration Arrangements

We analyze our collaboration arrangements to assess whether they are within the scope of ASC Topic 808, Collaborative Arrangements (ASC 808).

We analyze our collaboration arrangements to assess whether they are within the scope of FASB ASC Topic 808, Collaborative Arrangements (ASC 808).

A collaborative arrangement is a contractual arrangement that involves a joint operating activity.

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To the extent the collaboration agreement is within the scope of ASC 808, we also assess whether the arrangement contains multiple elements that are within the scope of other accounting literature.

If we conclude that some or all aspects of the agreement are distinct and represent a transaction with a customer, we account for those aspects of the arrangement within the scope of ASC Topic 606, Revenue from Contracts with Customers (ASC 606).

If we conclude that some or all aspects of the agreement are distinct and represent a transaction with a customer, we account for those aspects of the arrangement within the scope of FASB ASC Topic 606, Revenue from Contracts with Customers (ASC 606).

Amounts that are owed by collaboration partners within the scope of ASC 808 are recognized as an offset to research and development expense as such amounts are incurred by the collaboration partner.

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Lease Obligations

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

For all leases other than short-term leases, at the lease commencement date, a right-of-use asset and a lease liability are recognized.

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

At the commencement date, operating lease right-of-use assets and operating lease liabilities are determined based on the present value of lease payments to be made over the lease term.

At the commencement date, lease right-of-use assets and lease liabilities are determined based on the present value of lease payments to be made over the lease term.

Leases are classified as either finance leases or operating leases.

We do not currently have any leases classified as finance leases.

As the rate implicit in lease contracts are not readily determinable, we utilize its incremental borrowing rate as a discount rate for purposes of determining the present value of lease payments, which is based on the estimated interest rate at which we could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment.

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The exercise of lease renewal options is at our sole discretion.

Several of our leases have renewal options, however, the exercise of renewal is only assured for five of our current Good Manufacturing Practices (cGMP) facilities where we have made significant improvements or extended the lease.

Several of our leases have renewal options, however, the exercise of renewal is only assured for five of our cGMP facilities where we have made significant improvements or extended the lease.

We combine our lease components (e.g., fixed payments including rent, real estate taxes and insurance costs) with non-lease components (e.g., common-area maintenance costs and equipment maintenance costs) and as such, we account for lease and non-lease components as a single component.

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

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

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

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

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

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

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

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

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

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

Fair Value Option Election

The company accounted for a convertible note issued on March 31, 2023 under the FVO election of ASC 825 until it was amended and restated on December 29, 2023.

Prior to its extinguishment on December 29, 2023 , the convertible note was a debt host financial instrument containing embedded features wherein the entire financial instrument was initially measured at its issuance-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 this convertible note were recorded in other expense, net, on the consolidated statement of operations, except that changes in estimated fair value caused by changes in the instrument-specific credit risk were recorded in other comprehensive (loss) income .

In accordance with ASC 470-50, when the convertible note was extinguished on December 29, 2023 , the cumulative amount previously recorded in other comprehensive (loss) income resulting from changes in the instrument-specific credit risk were reclassified and reported in current earnings on the consolidated statement of operations.

See Note 10 , Related-Party Debt , for more information.

Debt Modification and Extinguishment

The company evaluates amendments to its debt instruments in accordance with ASC 470-50.

This evaluation includes comparing (1) if applicable, the net present value of future cash flows of the amended debt to that of the original debt and (2) the change in fair value of an embedded conversion feature to that of the carrying amount of the debt immediately prior to amendment to determine, in each case, if a change greater than 10% occurred.

In instances where the net present value of future cash flows or the fair value of an embedded conversion feature, if any, changed more than 10%, the company applies extinguishment accounting.

In instances where the net present value of future cash flows and the fair value of an embedded conversion feature, if any, changed less than 10%, the company accounts for the amendment to the debt as a debt modification.

Gains and losses on debt amendments that are considered extinguishments are recognized in current earnings or in additional paid-in capital if the transactions are with entities under common control.

Debt amendments that are considered debt modifications are accounted for prospectively through yield adjustments, based on the revised terms.

The increase in fair value of the embedded conversion feature from the debt modification was accounted for as an increase in debt discount with a corresponding increase in additional paid-in capital.

Legal fees and other costs incurred with third parties that are directly related to debt modifications are expensed as incurred.

Amounts paid by the company to the lenders, are reflected as additional debt discount and amortized as an adjustment of interest expense over remaining term of modified debt using the effective interest rate method.

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

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We recognize uncertain tax positions when the position will more likely than not be upheld on examination by the taxing authorities based solely upon the technical merits of the positions.

We recognize interest and penalties, if any, related to unrecognized income tax uncertainties in income tax (expense) benefit, on the consolidated statement of operations.

We recognize interest and penalties, if any, related to unrecognized income tax uncertainties in income tax benefit (expense), on the consolidated statement of operations.

We did not have any accrued interest or penalties associated with uncertain tax positions as of December 31, 2023 and 2022.

Stock Repurchases

In 2015, the Board of Directors approved a share repurchase program (the 2015 Share Repurchase Program).

In 2015, the Board of Directors approved the 2015 Share Repurchase Program.

As it is our intent for the repurchased shares to be retired, we have elected to account for the shares repurchased using the constructive retirement method.

For shares repurchased in excess of par, we record the purchase price in excess of par value in accumulated deficit , on the consolidated balance sheet.

Revenue Interest Liability

On December 29, 2023, we entered into the RIPA with Infinity and Oberland.

Pursuant to the RIPA, Oberland acquired certain Revenue Interests from us for a gross purchase price of $ 200.0 million paid on closing.

In addition, Oberland may purchase additional Revenue Interests from us in exchange for the $ 100.0 million Second Payment upon satisfaction of certain conditions specified in the RIPA.

Under the RIPA, Oberland has the right to receive quarterly payments from us based on, among other things, a certain percentage of our worldwide net sales, excluding those in China, during such quarter.

The RIPA is considered a sale of future revenues and is accounted for as a liability net of a debt discount comprised of deferred issuance costs, the fair value of a freestanding option agreement related to the SPOA, and the fair value of embedded derivatives requiring bifurcation on the consolidated balance sheet.

The company imputes interest expense associated with this liability using the effective interest rate method.

The effective interest rate is calculated based on the rate that would enable the debt to be repaid in full over the anticipated life of the arrangement.

Interest expense is recognized over the estimated term on the consolidated statement of operations.

The interest rate on this liability may vary during the term of the agreement depending on a number of factors, including the level of actual and forecasted net sales.

The company evaluates the interest rate quarterly based on actual and forecasted net sales utilizing the prospective method.

A significant increase or decrease in actual or forecasted net sales will materially impact the revenue interest liability, interest expense, and the time period for repayment.

Derivative Liabilities

Embedded derivatives that are required to be bifurcated from the underlying debt instrument that do not meet the derivative scope exception and equity classification criteria are accounted for and valued as separate financial instruments.

The terms of an embedded derivative related to a contingent exercisable prepayment feature of a convertible note have been evaluated and deemed to require bifurcation.

This embedded derivative will be initially measured at fair value and will be remeasured to fair value at each reporting date until the derivative is settled.

In addition, the RIPA contains certain features that meet the definition of being an embedded derivative requiring bifurcation as a separate compound financial instrument apart from the RIPA.

The derivative liability is initially measured at fair value upon issuance and is subject to remeasurement at each reporting period with changes in fair value recognized in other expense, net, on the consolidated statement of operations.

Revenue Recognition

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Additionally, we also generated revenues from grant programs.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in ASC 606.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer.

A contract’s transaction price is allocated to each distinct performance obligation based on relative standalone selling price and recognized as revenue when, or as, the performance obligation is satisfied.

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We currently estimate variable consideration related to milestone payments to be zero and, as such, no revenue has been recognized for milestone payments.

We recognize revenue from sales-based royalty payments when or as the sales occur.

We recognize revenue from sales-based royalty payments when or as sales occur.

On a quarterly basis, we re-evaluate our estimate of milestone variable consideration to determine whether any amount should be included in the transaction price and recorded in revenue prospectively.

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

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

Grant revenue is typically paid for reimbursable costs incurred over the duration of the associated research project or clinical trial and is recognized either when expenses reimbursable under the grants have been incurred and payments under the grants become contractually due or when cash is received, depending on the certainty of payment and other factors specific to each grant.

From inception through December 31, 2023, we have generated minimal revenue from non-exclusive license agreements related to our cell lines, the sale of our bioreactors and related consumables, and grant programs.

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Research and Development Costs

Major components of research and development costs include cash compensation and other personnel-related expenses, stock-based compensation, depreciation and amortization expense on research and development property and equipment and intangible assets, costs of preclinical studies, clinical trials costs, including contract research organizations (CROs) and related clinical manufacturing, including contract manufacturing organizations (CMOs), costs of drug development, costs of materials and supplies, facilities cost, overhead costs, regulatory and compliance costs, and fees paid to consultants and other entities that conduct certain research and development activities on our behalf.

Major components of research and development costs include cash compensation and other personnel-related expenses, stock-based compensation, depreciation and amortization expense on research and development property and equipment and intangible assets, costs of preclinical studies, clinical trials costs, including CROs and related clinical manufacturing, including third-party CMOs, costs of drug development, costs of materials and supplies, facilities cost, overhead costs, regulatory and compliance costs, and fees paid to consultants and other entities that conduct certain research and development activities on our behalf.

Costs incurred in research and development are expensed as incurred.

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Stock-Based Compensation

We account for stock-based compensation under the provisions of ASC Topic 718, Compensation—Stock Compensation (ASC 718).

We account for stock-based compensation under the provisions of ASC 718.

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

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

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

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

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For awards with service or performance conditions, we recognize the effect of forfeitures in compensation cost in the period that the award was forfeited.

See Note 13 , Stock-Based Compensation .

See Note 14 , Stock-Based Compensation , for more information.

Sale-Leaseback Transaction

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The seller then becomes the lessee and the buyer becomes the lessor.

When entering into a sale-leaseback transaction as a seller-lessee, the requirements in ASC Topic 606, Revenue from Contracts with Customers , and all related accounting standards updates to such Topic are applied in determining whether the transfer of an asset shall be accounted for as a sale of the asset by assessing whether it satisfies a performance obligation under the contract by transferring control of an asset.

When entering into a sale-leaseback transaction as a seller-lessee, the requirements in ASC 606, and all related ASUs to such Topic are applied in determining whether the transfer of an asset shall be accounted for as a sale of the asset by assessing whether it satisfies a performance obligation under the contract by transferring control of an asset.

If the company transfers control of an asset to the buyer-lessor, the transfer is accounted for as a sale and the company derecognizes the transferred asset.

The subsequent leaseback of the asset is accounted for in accordance with ASC Topic 842, Leases , in the same manner as any third-party lease.

The subsequent leaseback of the asset is accounted for in accordance with FASB ASC Topic 842, Leases , in the same manner as any third-party lease.

If the company does not transfer control of an asset to the buyer-lessor, the sale-leaseback transaction is accounted for as a financing arrangement.

In September 2021, we entered into a sale transaction with Nant Capital, LLC (Nant Capital), a related party, for a building located at 557 South Douglas Street, El Segundo, California.

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

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

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

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

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

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

Comprehensive Income (Loss)

Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources.

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

Comprehensive Loss

Comprehensive loss is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources.

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

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

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

Noncontrolling interests recorded on the consolidated financial statements result from the company’s share of GlobeImmune, Inc.

(GlobeImmune), of which we controlled 69.1 %, and Immunotherapy NANTibody, LLC (NANTibody), of which we controlled 60.0 % as of December 31, 2022, 2021 and 2020.

Noncontrolling interests recorded on the consolidated financial statements result from the company’s share of GlobeImmune, of which we controlled 69.1 % as of December 31, 2023, 2022 and 2021, respectively, and NANTibody, of which we controlled 100.0 % as of December 31, 2023 and 60.0 % as of December 31, 2022 and 2021, respectively.

Noncontrolling interest stockholders are common stockholders.

GlobeImmune was determined to be a VIE as it does not have sufficient equity investment at risk to finance its operations without additional subordinated financial support and we are deemed the primary beneficiary of GlobeImmune and, accordingly, consolidates GlobeImmune into the consolidated financial statements under the VIE model.

GlobeImmune was determined to be a VIE as it does not have sufficient equity investment at risk to finance its operations without additional subordinated financial support and we are deemed the primary beneficiary of GlobeImmune and, accordingly, consolidate GlobeImmune into the company’s consolidated financial statements under the VIE model.

The company also supports GlobeImmune through a promissory note agreement, in which the company provides advances to GlobeImmune from time to time up to $ 6.0 million with a per annum interest rate of five percent ( 5 %).

As of December 31, 2023 and 2022, there were no outstanding advances due from GlobeImmune under the promissory note agreement.

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

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

During the years ended December 31, 2023, 2022, and 2021, GlobeImmune recognized no revenue, respectively, and recognized $ 0.3 million, $ 0.5 million, and $ 0.7 million of operating expenses, respectively, during the years ended December 31, 2023, 2022 and 2021.

As of both December 31, 2023 and 2022, the consolidated balance sheets included approximately $ 1.4 million of total assets that can only be used to settle obligations of GlobeImmune, and no liabilities, respectively, related to GlobeImmune.

The creditors of GlobeImmune do not have recourse to the general credit of the primary beneficiary.

Foreign Currencies

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

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

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

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

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

Basic and Diluted Net Loss per Share of Common Stock

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2023 2022 2021

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

Related-party convertible notes 162,471,837 46,274,965 —

Outstanding third-party warrants 37,732,820 9,090,909 —

Outstanding stock options 9,820,435 9,262,926 4,124,930

Outstanding RSUs 7,503,979 6,551,388 6,515,889

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Total 219,167,071 72,818,188 12,278,819

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

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

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

The dilutive securities exclude the option to purchase up to $ 10.0 million of the company’s common stock pursuant to the SPOA entered in connection with the RIPA, as the exercise price is not yet determined.

See Note 13 , Stockholders’ Deficit, for more information.

Segment and Geographic Information

We operate in one reporting segment focused on creating the next generation of immunotherapies to address serious unmet needs within oncology and infectious diseases.

Our chief executive officer (CEO) is the chief operating decision-maker (CODM) of the company, and manages and allocates resources to our operations on a company-wide basis.

Our CEO is the chief operating decision-maker of the company, and manages and allocates resources to our operations on a company-wide basis.

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

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Recent Accounting Pronouncements

Application of New or Revised Accounting Standards – Adopted

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

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

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

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

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

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

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

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

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

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

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

Application of New or Revised Accounting Standards – Not Yet Adopted

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

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

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

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

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

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

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

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures , to improve its income tax disclosure requirements.

Under the ASU, entities must annually (1) disclose specific categories in the rate reconciliation, (2) provide additional information for reconciling items that meet a quantitative threshold, and (3) disclose more detailed information about income taxes paid, including by jurisdiction;

pretax income (or loss) from continuing operations;

and income tax expense (or benefit).

The ASU is effective for fiscal years beginning after December 15, 2024, and interim periods beginning after December 15, 2025, with early adoption permitted.

We are currently evaluating the impact of this standard on our disclosures.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , which requires disclosure of incremental segment information on an annual and interim basis.

This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 on a retrospective basis.

We are currently evaluating the impact of this standard on our disclosures.

In August 2023, the FASB issued ASU 2023-05, Business Combinations-Joint Venture Formations (Subtopic 805-60):

Recognition and Initial Measurement , which requires a joint venture to initially measure all contributions received upon its formation at fair value.

This ASU is applicable to joint venture entities with a formation date on or after January 1, 2025 on a prospective basis.

We will apply this guidance prospectively in future reporting periods after the guidance is effective to any future arrangements meeting the definition of a joint venture.

In March 2023, the FASB issued ASU 2023-01, Leases (Topic 842):

Common Control Arrangements , which requires that leasehold improvements associated with common control leases be amortized over the useful life of the leasehold improvements to the common control group, regardless of the lease term.

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

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

Other recent authoritative guidance issued by the FASB (including technical corrections to the ASC) and the SEC during the year ended December 31, 2023 did not, or are not expected to, have a material effect on our consolidated financial statements.

Financial Statement Details

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Prepaid software license fees 2,100 2,195

Prepaid supplies 2,160 —

Insurance premium financing asset 1,475 1,417

Insurance claims receivable 1,149 —

Prepaid equipment maintenance 1,183 833

ERP system implementation cost 1,087 920

Prepaid supplies — 2,160

Other 2,651 1,979

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Property, plant and equipment, net $ 146,082 $ 143,659

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

During the years ended December 31, 2023, 2022 and 2021, depreciation expense related to property, plant and equipment totaled $ 16.5 million, $ 16.3 million and $ 14.2 million, respectively.

Intangible Assets, Net

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Amortization Impairment Net Carrying

Definite-lived:

Favorable leasehold rights 8.1 $ 20,398 $ ( 3,825 ) $ — $ 16,573

Indefinite-lived:

IPR&D 1,406 — ( 886 ) 520

Total intangible assets $ 21,804 $ ( 3,825 ) $ ( 886 ) $ 17,093

December 31, 2022

(in years) Gross Carrying

Amount Accumulated

Amortization Impairment Net Carrying

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

Organized workforce 831 ( 150 ) ( 681 ) —

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

Definite-Lived Intangibles

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

Definite-Lived Intangible Assets

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

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

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

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

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

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

Indefinite-Lived Intangibles

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

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

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

During the years ended December 31, 2023 and 2022, we recorded amortization expense of definite-lived intangible assets totaling $ 2.0 million and $ 1.9 million, respectively, in research and development expense , on the consolidated statements of operations.

Indefinite-Lived Intangible Assets

During the year ended December 31, 2023, we discontinued the research and development program associated with the Tarmogen platform based on results gathered from clinical data.

We recorded a charge totaling $ 0.9 million in impairment of intangible assets , on the consolidated statement of operations in connection with the writedown of the carrying value of Tarmogen to zero.

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

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

As of December 31, 2023 and 2022, the company had indefinite-lived IPR&D intangible assets of $ 0.5 million and $ 1.4 million, respectively, which were obtained from business acquisitions.

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

Years ending December 31:

Definite-lived

Thereafter 6,373

Total $ 16,573

Convertible Note Receivable

In 2016, we executed a convertible promissory note with Riptide Bioscience, Inc., or Riptide, and advanced Riptide a principal amount of $ 5.0 million.

In 2016, we executed a convertible promissory note pursuant to which we advanced Riptide a principal amount of $ 5.0 million.

The note bears interest at a per annum rate of five percent ( 5 %).

The original term of the promissory note requires that the entire unpaid principal amount and all unpaid accrued interest shall become fully due and payable upon the earlier of (i) the three (3) year anniversary of the issuance date, and (ii) when we accelerate the maturity of the note upon the occurrence of an event of default.

In the event of qualified financing, the outstanding principal amount and unpaid accrued interest automatically convert into the most senior class of preferred stock sold in such qualified financing at a 25% discount to the price per share paid for such preferred stock.

In addition, in the event of a change in control, we have the option to be paid in cash or to convert, immediately prior to the closing of such transaction, the outstanding indebtedness into Riptide’s most senior class of equity securities at a 25% discount to the price per share paid for such equity securities in such transaction.

Concurrent with the transaction, we entered into an exclusive license agreement with Riptide to obtain worldwide exclusive rights, with the right to sublicense, certain know-how related to RP-182, RP-233 and RP-183.

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Pursuant to the license agreement, we are also required to make cash milestone payments upon successful completion of certain clinical, regulatory and commercial milestones up to an aggregate amount of $ 47.0 million for the first three indications of the licensed product with a maximum payment amount of $ 100.0 million.

In 2019, we and Riptide entered into a first amendment to the convertible promissory note.

In 2019, we entered into a first amendment to the convertible promissory note with Riptide.

Under the agreement, we extended the maturity of the promissory note to the earlier of (a) the later of (i) the completion of non-clinical IND enabling studies by the company, or (ii) December 31, 2020;

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This option for receiving a 25 % discount was determined to have an immaterial value at inception and life-to-date of the note, as the probability of a future qualifying event is remote.

All other terms and conditions of the license agreement continued in full force and effect.

This promissory note is still outstanding as of December 31, 2022.

The convertible note receivable balance was $ 6.9 million and $ 6.6 million, which included accrued interest of $ 1.9 million and $ 1.6 million as of December 31, 2023 and 2022, respectively.

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Accrued bonus $ 11,350 $ 12,068

Accrued construction costs 7,072 8,145

Accrued professional and service fees 9,829 6,685

Accrued research and development costs 7,700 1,930

Accrued compensation 6,241 6,040

Accrued preclinical and clinical trial costs 4,218 4,985

Accrued research and development costs 1,930 2,107

Financing obligation – current portion 1,475 1,417

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

Accrued dissenting shares ( Note 7 )

Accrued construction costs 1,179 7,072

Other 716 1,628

Accrued expenses and other liabilities $ 42,708 $ 41,825

Interest and Investment (Loss) Income, Net

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

Interest and Investment Income (Loss), Net

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

Year Ended December 31,

2023 2022 2021

Unrealized (losses) gains from equity securities $ ( 4,190 ) $ ( 4,615 ) $ 1,577

Unrealized losses from equity securities $ ( 1,591 ) $ ( 4,190 ) $ ( 4,615 )

Interest income 863 2,708 836

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

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

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

Investment accretion income (amortization expense), net 1,844 ( 1,486 ) ( 488 )

Net realized gains (losses) on investments 15 ( 122 ) 167

Interest and investment income (loss), net $ 1,131 $ ( 3,090 ) $ ( 4,100 )

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

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(in years) Amortized

Foreign bonds 0.8 $ 54 $ — $ — $ 54

Mutual funds 40 — ( 1 ) 39

Current portion 94 — ( 1 ) 93

Foreign bonds 3.3 939 — ( 48 ) 891

Total $ 1,033 $ — $ ( 49 ) $ 984

As of December 31, 2021, the 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):

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

December 31, 2022

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

Foreign bonds 116 — ( 1 ) 115

Contractual Life

(in years) Amortized

Mutual funds $ 38 $ — $ ( 2 ) $ 36

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

Foreign bonds 4.5 932 — ( 92 ) 840

Noncurrent portion 719 103 — 822

Total $ 970 $ — $ ( 94 ) $ 876

As of December 31, 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):

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Losses Estimated

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

Mutual funds $ — $ — $ 36 $ ( 2 )

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Total $ — $ — $ 876 $ ( 94 )

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

During the years ended December 31, 2023, 2022 and 2021, we evaluated our securities for other-than-temporary impairment and did not recognize any other-than-temporary impairment losses.

Marketable Equity Securities

As of December 31, 2023 and 2022, we held investments in marketable equity securities with readily determinable fair values of $ 0.9 million and $ 2.5 million, respectively.

During the years ended December 31, 2023, 2022 and 2021, unrealized losses recorded on these securities totaled $ 1.6 million, $ 4.2 million, and $ 4.6 million, respectively, in interest and investment income (loss), net , on the consolidated statements of operations.

Fair Value Measurements

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Total Level 1 Level 2 Level 3

Assets at Fair Value:

Cash and cash equivalents $ 265,453 $ 265,453 $ — $ —

Equity securities 916 916 — —

Foreign bonds 54 — 54 —

Mutual funds 39 39 — —

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Total assets measured at fair value $ 267,353 $ 266,408 $ 945 $ —

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

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

Liabilities at Fair Value:

Contingent consideration $ ( 20 ) (1) $ — $ — $ ( 20 )

Stock option purchase liability ( 819 ) (2) — — ( 819 )

Derivative liabilities ( 35,333 ) (3) — — ( 35,333 )

Warrant liabilities ( 118,770 ) (4) — — ( 118,770 )

Total liabilities measured at fair value $ ( 154,942 ) $ — $ — $ ( 154,942 )

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Total Level 1 Level 2 Level 3

Assets at Fair Value:

Cash and cash equivalents $ 104,641 (5) $ 63,860 $ 40,781 $ —

Equity securities 2,507 2,507 — —

Corporate debt securities 129,164 — 129,164 —

Foreign bonds 115 115 — —

Mutual funds 36 36 — —

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

Liabilities at Fair Value:

Contingent consideration $ ( 19 ) (1) $ — $ — $ ( 19 )

Warrant liability ( 21,636 ) (4) — — ( 21,636 )

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

_______________

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

(1) Contingent Consideration

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

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

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

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

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

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Consideration paid — 339 419

Net decrease in fair value 51 144 753

Net (increase) decrease in fair value ( 1 ) 51 144

Fair value, end of year $ ( 20 ) $ ( 19 ) $ ( 409 )

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

See Note 11 , Warrant Liability , for further information.

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

(2) Stock Option Purchase Liability

In connection with the RIPA, we entered into an SPOA pursuant to which Oberland has an option to purchase up to an additional $ 10.0 million of our common stock, at a price to be determined by reference to the 30-day trailing volume weighted-average price of our common stock calculated from the date of exercise.

This stock purchase option was classified as a liability at its fair value upon issuance.

The fair value was estimated using probability-weighted scenarios over the likelihood of this option being exercised.

As of December 31, 2023, the stock purchase option was outstanding.

The fair value of the stock purchase option was estimated at $ 0.8 million at issuance.

Due to the proximity of the inception date of the SPOA to December 31, 2023, the change in fair value was immaterial.

See Note 9 , Revenue Interest Purchase Agreement , for more information.

(3) Derivative Liabilities

The debt incurred pursuant to the RIPA entered on December 29, 2023 contains embedded derivatives requiring bifurcation as a single compound derivative instrument.

The company estimated the fair value of the derivative liability using a “with-and-without” method.

The with-and-without methodology involves valuing the whole instrument on an as-is basis and then valuing the instrument without the individual embedded derivative.

The difference between the entire instrument with the embedded derivative compared to the instrument without the embedded derivative is the fair value of the derivative liability, which is estimated at $ 34.5 million as of December 31, 2023.

The estimated probability and timing of underlying events triggering the exercisability of the Put Option contained in the RIPA, forecasted cash flows and the discount rate are significant unobservable inputs used to determine the estimated fair value of the entire instrument with the embedded derivative.

As of December 31, 2023, the discount rate used for valuation of the derivative liability was 12.1 %.

See N ote 9 , Revenue Interest Purchase Agreement, for more information.

In connection with the December 2023 debt extinguishment, the company identified an embedded derivative related to a contingently exercisable prepayment feature of the amended $ 505.0 million December 2023 promissory note, which allows the noteholder to request up to a $ 50.0 million prepayment and accrued interest upon occurrence of a specified transaction (defined in the promissory note).

This embedded derivative is recorded as a derivative liability on the consolidated balance sheet and is measured at fair value.

Changes in the fair value of the derivative liability are reported as change in fair value of derivative, on the consolidated statement of operations.

The fair value of the derivative liability is determined at each period end using a with and without method, which assesses the likelihood and timing of a specified transaction that if triggered could result in a repayment.

The fair value of the embedded derivative is estimated at $ 0.8 million as of December 31, 2023, and will be remeasured to fair value at each reporting date until the derivative is settled.

(4) Third-Party Warrant Liabilities

December 2022 Warrants

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 issuance.

As of December 31, 2023 and 2022, 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:

Year Ended December 31,

Exercise price per share $ 6.60 $ 6.60

Expected term 1.0 years 2.0 years

Expected average volatility 119.0 % 99.4 %

Expected dividend yield — % — %

Risk-free interest rate 4.7 % 4.4 %

February 2023 Warrants

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

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

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

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

December 31, 2022

Expected term 1.96 years

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:

2023 Issuance Date

Exercise price per share $ 3.2946 $ 4.2636

Expected term 2.6 years 2.0 years

Expected average volatility 107.3 % 97.0 %

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Risk-free interest rate 4.1 % 4.6 %

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

December 31, 2022

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 and extended the expiration date of the warrants until July 24, 2026.

The effect of amending the terms of the warrants is reflected in a change in the fair value of warrant liability of $ 7.3 million.

July 2023 Warrants

In connection with the July 20, 2023 registered direct offering of common stock, the company issued 14,569,296 warrants (July 2023 Warrants).

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

As of December 31, 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:

2023 Issuance Date

Exercise price per share $ 3.2946 $ 3.2946

Expected term 2.6 years 3.0 years

Expected average volatility 107.3 % 121.0 %

Expected dividend yield — % — %

Risk-free interest rate 4.1 % 4.5 %

The change in the carrying amount of the warrant liabilities was as follows (in thousands):

Total December 2022

Warrants February 2023

Warrants July 2023

Fair value, December 31, 2022 $ 21,636 $ 21,636 $ — $ —

Fair value at issuance 49,534 — 23,698 25,836

Net decrease in fair value ( 13,460 )

Fair value, end of year $ 21,636

Change in fair value 47,600 ( 4,545 ) 26,260 25,885

Fair value, December 31, 2023 $ 118,770 $ 17,091 $ 49,958 $ 51,721

December 2022

Fair value at issuance, December 12, 2022 $ 35,096

Change in fair value ( 13,460 )

Fair value, December 31, 2022 $ 21,636

(5) 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.

Non-Recurring Valuations

Non-financial assets and liabilities are recognized at fair value subsequent to initial recognition when they are deemed to be other-than-temporarily impaired.

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

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

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

Except for the impairments discussed in Note 3 , Financial Statement Details—Intangible Assets, Net , there were no other material non-financial assets or liabilities deemed to be other-than-temporarily impaired and measured at fair value on a non-recurring basis during the years ended December 31, 2023, 2022 and 2021.

We measured the fair value of the promissory notes before and after amendments that were entered on December 29, 2023 and 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 used binomial lattice models for 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.

See Note 10 , Related-Party Debt, for more information.

Collaboration and License Agreements and Acquisition

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2015 NCI CRADA

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

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

In May 2015, Etubics entered into a CRADA with the HHS as represented by the NCI of the NIH to collaborate on the preclinical and clinical development of an adenovirus technology expressing TAAs for cancer immunotherapy.

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

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

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

During the years ended December 31, 2023, 2022 and 2021, we recorded R&D expense of $ 1.3 million, $ 1.2 million, and $ 1.1 million, respectively, in research and development expense on the consolidated statements of operations.

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

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Amyris Joint Venture

In December 2021, ImmunityBio and Amyris, Inc.

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

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

In December 2021, ImmunityBio and Amyris entered into a 50:50 joint venture arrangement and formed a new limited liability company to conduct the business of the joint venture.

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

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

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

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

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

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

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

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

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

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

We account for our investment in the joint venture using the equity method of accounting.

During the years ended December 31, 2023, 2022 and 2021, we recorded our 50 % share of net losses from the joint venture totaling $ 7.5 million, $ 12.1 million, and $ 0.8 million, respectively, in other expense, net , on the consolidated statements of operations.

During the years ended December 31, 2023 and 2022, such losses incurred included $ 7.5 million and $ 11.9 million, respectively, attributable to expenses incurred by us on behalf of the joint venture.

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

In August 2023, Amyris announced that it filed for Chapter 11 bankruptcy protection.

The Amyris bankruptcy case remains ongoing, and there can be no assurance that we will receive any recovery on account of our claims against Amyris, including for Amyris’ portion of expenses incurred by the joint venture.

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

License Agreements

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

3M IPC and AAHI License Agreement

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

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

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

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

In consideration for the license, we agreed to make certain periodic license payments, including $ 2.25 million each year through June 2025.

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

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

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

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

In June 2023 and 2022, we made annual license maintenance fee payments of $ 2.25 million and $ 1.75 million, respectively.

During the years ended December 31, 2023, 2022 and 2021, we expensed $ 2.0 million, $ 1.0 million, and $ 0.5 million, respectively, in research and development expense , on the 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 year ended December 31, 2022.

During the years ended December 31, 2023 and 2022, no milestone fees were incurred.

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

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

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

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

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 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.

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

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

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

During the years ended December 31, 2023, 2022 and 2021, we recorded $ 4.5 million, $ 1.8 million, and $ 1.5 million, respectively, in research and development expense , on the consolidated statements of operations.

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.

As of December 31, 2023, $ 0.5 million payable to AAHI in connection with the sponsored research agreement was recorded in accrued expenses and other liabilities , on the consolidated balance sheet.

During the year ended December 31, 2023, we recorded $ 1.2 million in research and development expense , and $ 3.7 million in loss on equity method investment, during the year ended December 31, 2022, respectively, on the consolidated statements of operations related to the sponsored research agreement.

Viracta License Agreement

In 2017, we entered into an agreement with Viracta under which we were granted exclusive worldwide rights to Viracta’s Phase 2 drug candidate, VRx-3996 (nanatinostat), for use in combination with our platform of NK cell therapies.

In 2017, we entered into an agreement with Viracta under which we were granted exclusive worldwide rights to Viracta’s Phase II drug candidate, VRx-3996 (nanatinostat), for use in combination with our platform of NK cell therapies.

In consideration for the license, we are obligated to pay Viracta mid-single digit percentage royalties on net sales of licensed products for therapeutic use and milestone payments ranging from $ 10.0 million to $ 25.0 million up to an aggregate maximum of $ 100.0 million for various regulatory approvals and cumulative net sales levels.

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Dunkirk Facility Leasehold Interest

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

(the Seller).

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

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

On February 14, 2022, we completed the acquisition of the Dunkirk Facility (approximately 409,000 rentable square feet) from Athenex, which we believe will provide us with a state-of-the-art biotech production center that will substantially expand and diversify our existing manufacturing capacity in the U.S.

and the ability to scale production 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.

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

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

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

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

As part of the transaction, we assumed certain of the Seller’s obligations under various third-party agreements (the Facility Agreements), subject to the terms and conditions of the purchase agreement by and between the company and Seller dated as of January 7, 2022, and committed to spend an aggregate of $ 1.52 billion on operational expenses during the initial term, and an additional $ 1.50 billion on operational expenses if we elect to renew the lease for the additional 10-year term.

We also committed to hiring 450 employees at the Dunkirk Facility within the first 5 years of operations, with 300 such employees to be hired within the first 2.5 years of operation.

The Dunkirk Facility, as well as certain equipment, is owned by the 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 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 Athenex’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 Athenex 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 following the Commencement Date, with 300 such employees to be hired within the first 2.5 years following the Commencement Date.

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

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

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

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 Athenex 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 December 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.

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.

Dunkirk Facility Workforce Reduction

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

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

In September 2022, the company initiated a workforce reduction at the Dunkirk Facility and recorded severance and retention benefits for the terminated employees totaling $ 1.0 million during the year ended December 31, 2022 in selling, general and administrative expense , on the consolidated statement of operations.

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

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VivaBioCell, S.p.A.

In April 2015, NantWorks, LLC (NantWorks), a related party, acquired a 100 % interest in VivaBioCell, S.p.A.

(VivaBioCell) through its wholly-owned subsidiary, VBC Holdings, LLC, (VBC Holdings) for $ 0.7 million, less working capital adjustments.

In April 2015, NantWorks, a related party, acquired a 100 % interest in VivaBioCell through its wholly-owned subsidiary, VBC Holdings for $ 0.7 million, less working capital adjustments.

In June 2015, NantWorks contributed its equity interest in VBC Holdings to the company, in exchange for cash consideration equal to its cost basis in the investment.

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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.

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

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

A clinical milestone totaling $ 0.8 million was earned by the former owners of VivaBioCell, of which $ 0.4 million was paid during the year ended December 31, 2021, with the remaining $ 0.3 million clinical obligation, net of foreign exchange adjustment, settled during the year ended December 31, 2022.

If a government agency unconditionally approves the GMP-in-a-Box technology for commercial sale (the regulatory milestone) in the future, we will be obligated to pay an additional approximately $ 2.2 million to the former owners.

Altor BioScience Corporation

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

Altor BioScience, LLC

In connection with our 2017 acquisition of Altor, we issued CVRs under which we agreed to pay the prior stockholders of Altor approximately $ 304.0 million of contingent consideration upon calendar-year worldwide net sales of N-803 exceeding $ 1.0 billion prior to December 31, 2026, with amounts payable in cash or shares of our common stock or a combination thereof.

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

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

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

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

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

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

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

As of December 31, 2023, Dr.

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

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Altor BioScience, LLC Litigation

In 2017, NantCell announced it had entered into a definitive merger agreement to acquire Altor BioScience Corporation.

In 2017, NantCell announced it had entered into a definitive merger agreement to acquire Altor.

An action captioned Gray v.

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The defendants moved to dismiss the appraisal petition in 2018.

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

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

The following claims remained:

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

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

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

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Sorrento Therapeutics, Inc.

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

Soon-Shiong, and Charles Kim.

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

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

The action alleged that the defendants improperly caused NANTibody to acquire IgDraSol from NantPharma and sought to have the transaction undone and the purchase amount returned to NANTibody.

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

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

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

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

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

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

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

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

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

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

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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 and 10% post-judgment interest from Sorrento, but we make no assurances that we will receive the full amount or with respect to the timing of our receipt of any funds.

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

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

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

23-90085 (DRJ), Docket Entry 810.

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 involved two possible scenarios:

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

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

or, failing that, the judgments would be released, the litigation claims would be released, including, without limitation, the Superior Court action discussed above, Sorrento would relinquish its interests in NANTibody and certain other entities, Sorrento would 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 would be implemented as described in the motion.

On August 14, 2023, the United States Bankruptcy Court for the Southern District of Texas issued an order approving the settlement described above, such that the settlement became binding on the parties.

As of 2:00 p.m.

ET on August 31, 2023, Sorrento had not paid the judgments held by NantCell and NANTibody.

Accordingly, in relevant part to the company and NantCell, a mutual release of claims became effective such that the aforementioned judgments were released, the litigation claims were released including, without limitation, the derivative litigation against NantCell described above, Sorrento relinquished its interests in NANTibody, and Sorrento forfeited its rights to any payments from NantCell arising out of its antibody exclusive license agreement with NantCell, including any royalties associated with the company’s engineered NK cell therapy in Phase II clinical trials, PD-L1 t-haNK.

As a result of the settlement, the parties filed dismissals of the litigation matters discussed above.

After the settlement, the company’s ownership in NANTibody increased from 60 % to 100 %, and, as a result, the carrying amount of the noncontrolling interest of $ 4.2 million was adjusted and recognized in additional paid-in capital attributable to the company, on the consolidated statement of stockholders’ deficit.

Shenzhen Beike Biotechnology Co.

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

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

On September 25, 2020, the parties entered into a standstill and tolling agreement under which, among other things, the parties affirmed they will perform certain of their obligations under the license agreement by specified dates and agreed that all deadlines in the arbitration are indefinitely extended.

The standstill agreement may be terminated by any party on ten calendar days’ notice, and upon termination, the parties will have the right to pursue claims arising from the license agreement in any appropriate tribunal.

The parties have been providing periodic updates to the International Chamber of Commerce confirming a stay of all proceedings during the standstill.

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.

Litigation Related to the Merger with ImmunityBio, Inc.

In connection with the Merger with NantCell, Inc.

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

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

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

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

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

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

Stipulation of Settlement

In 2019, following approval by our Board of Directors, we entered into a settlement agreement (the Stipulation of Settlement) with three stockholders of the company, each of whom had submitted a stockholder demand for the Board of Directors to take action to remedy purported harm to the company resulting from certain alleged wrongful conduct concerning, among other things, disclosures about Dr.

Soon-Shiong’s compensation and a related-party lease agreement.

The Stipulation of Settlement called for us to adopt certain governance changes, and for the three stockholders to file a stockholder derivative action in the Superior Court of the State of California, County of San Diego, followed by an application for court approval of the Stipulation of Settlement.

The court entered an order preliminarily approving the Stipulation of Settlement.

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

Beike is seeking specific performance and declaratory relief for the alleged breaches.

On September 25, 2020, the parties entered into a standstill agreement under which, among other things, the parties affirmed they would perform certain of their obligations under the license agreement by specified dates and agreed that all deadlines in the arbitration were indefinitely extended.

The standstill agreement could be terminated by any party on ten calendar days’ notice, and upon termination, the parties had the right to pursue claims arising from the license agreement in any appropriate tribunal.

On March 20, 2023, we terminated the standstill agreement, and on

April 11, 2023, Beike served an amended Request for Arbitration.

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

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

Beike’s Statement of Claim is due on March 22, 2024, and the company’s Statement of Defense and Counterclaim is due on June 21, 2024.

The hearing in the arbitration is scheduled to begin on June 9, 2025.

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 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.

On September 27, 2023, the court appointed a lead plaintiff, approved their selection of lead counsel, and re-captioned the case In re.

ImmunityBio, Inc.

Securities Litigation, No.

3:23-cv-01216.

On November 17, 2023, lead plaintiff filed an amended complaint, which named the same defendants and asserted the same claims as the previous complaint.

On January 8, 2024, defendants filed a motion to dismiss the amended complaint.

A hearing on the motion is currently scheduled for April 23, 2024.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.

Unconditional Purchase Obligations

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

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

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

The total amount of future non-cancelable purchase commitments related to the manufacture of cGMP batches is $ 2.0 million and $ 0.9 million for the years ending December 31, 2024 and 2025, respectively.

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

We estimate our total unconditional purchase obligation related to hosted software license subscription fees and implementation costs at $ 5.2 million as of December 31, 2023.

Payments by year are estimated as follows:

2024 ($ 1.6 million), 2025 ($ 1.8 million) and 2026 ($ 1.8 million).

Additionally, our total unconditional purchase obligation for laboratory cleanroom service costs are estimated at $ 1.9 million as of December 31, 2023.

Payments by year are estimated as follows:

2024 ($ 0.5 million) and 2025 ($ 1.4 million).

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

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

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

During the year ended December 31, 2023, we did not enter into any significant contracts or material unconditional purchase commitments, other than those disclosed in these consolidated financial statements.

Lease Arrangements

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

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

and Italy, including facilities located in El Segundo, CA and the Dunkirk Facility in upstate New York.

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

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

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

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

See Note 11 , Related-Party Agreements , for more 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.

15 unchanged sentences

Operating leases 6.2 years 6.6 years

Finance leases 1.8 years —

Finance leases 0.8 years 1.8 years

Weighted-average discount rate:

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Short-term lease costs 4,088 3,060 —

Finance lease costs (including amortization and

interest costs) 80 — —

Finance lease costs (including right-of-use asset

amortization and interest expense) 88 80 —

Variable lease costs 3,521 3,880 2,862

Total lease costs $ 18,113 $ 10,839 $ 9,232

Total lease expense $ 18,820 $ 18,113 $ 10,839

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

Year Ended December 31,

2023 2022 2021

Cash paid for operating leases (excluding variable lease costs) $ 9,538 $ 10,241 $ 9,034

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Present value of operating lease liabilities $ 45,186 $ 64 $ 45,250

3530 John Hopkins Court

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

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

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

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

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

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

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

During the year ended December 31, 2023, we extended some existing related-party leases and terminated an existing related-party lease.

See Note 11 , Related-Party Agreements, for more information regarding our related-party leases.

Revenue Interest Purchase Agreement

On December 29, 2023, we entered into the RIPA with Infinity and Oberland, to support the commercialization of Anktiva, our lead product candidate, to further the development of our product platforms, and to provide for other working capital needs.

Pursuant to the RIPA, Oberland acquired certain Revenue Interests from us for a gross purchase price of $ 200.0 million paid on closing, less certain transaction expenses.

In addition, Oberland may purchase additional Revenue Interests from us in exchange for the $ 100.0 million Second Payment upon satisfaction of certain conditions specified in the RIPA, including following the receipt of approval by the FDA of the company’s BLA for Anktiva in combination with BCG for the treatment of patients with BCG-unresponsive NMIBC with CIS with or without Ta or T1 disease on or before June 30, 2024.

As consideration for the aforementioned payments, Oberland has the right to receive quarterly Revenue Interest Payments from us based on, among other things, a certain percentage of our net sales during such quarter, which will be tiered payments initially ranging from 3.00 % to 7.00 % (or after funding of the Second Payment, 4.50 % to 10.00 %) of the company’s worldwide net sales, excluding those in China.

If the aggregate Revenue Interest Payments made to Oberland as of December 31, 2029 equal or exceed the Cumulative Purchaser Payments as of that date, the initially tiered revenue interest rate will be decreased to a single rate of 1.50 % (or after the funding of the Second Payment, 2.25 %) of the company’s worldwide net sales, excluding those in China.

If the aggregate Revenue Interest Payments made to Oberland as of the Test Date are less than the aggregate amount of Cumulative Purchaser Payments as of the Test Date, then following the Test Date the initially tiered revenue interest rate will increase to a rate that, had such increased rate applied during the period from December 29, 2023 through December 31, 2029, it would have resulted in Oberland receiving aggregate Revenue Interest Payments (excluding certain payments detailed in the RIPA) equal to the Cumulative Purchaser Payments as of the Test Date.

In addition, if aggregate Revenue Interest Payments made to Oberland as of the Test Date are less than the aggregate amount of Cumulative Purchaser Payments as of the Test Date, then the company must make the True-Up Payment.

Oberland’s rights to receive Revenue Interest Payments under the RIPA shall terminate when Oberland has received payments (including any True-Up Payment) equal to 195.0 % of the then Cumulative Purchaser Payments unless the RIPA is terminated prior to such date.

If Oberland has not received total payments (including any True-Up Payment) equal to 195.0 % of the then Cumulative Purchaser Payments on or before the twelfth anniversary of the RIPA, then the company shall be obligated to pay to Oberland an amount equal to 195.0 % of the then Cumulative Purchaser Payments less the aggregate payments (including any True-Up Payments) made as of such date.

Under the RIPA, the company has a Call Option to terminate the RIPA and repurchase the Revenue Interests at any time upon advance written notice, subject to certain limitations set forth in the RIPA.

Additionally, Oberland has a Put Option enabling them to terminate the RIPA and to require the company to repurchase the Revenue Interests upon enumerated events, such as a bankruptcy event, failure to make a payment, an uncured material breach, default in certain third-party agreements, a breach or default under any subordination agreements with respect to indebtedness to existing stockholders, or subordinated notes during certain time periods, judgments in excess of certain amounts against the company, a material adverse effect, the loss of regulatory approval of our product candidates or a change of control.

The required purchase price with respect to the Call Option and/or Put Option, as applicable, shall be (a) 120.0 % of the Cumulative Purchaser Payments as of such date, if Oberland exercises the Put Option (other than in connection with a change of control) on or prior to the first anniversary the Closing Date, (b) 135.0 % of the Cumulative Purchaser Payments as of such date, if the Put Option or the Call Option is exercised in connection with a change of control on or prior to the date that is eighteen (18) months after the Closing Date, and (c) in all other cases, (i) 175.0 % of the Cumulative Purchaser Payments as of such date, if the Put Option or the Call Option is exercised no later than the date that is thirty six (36) months after the Closing Date, and (ii) 195.0 % of the Cumulative Purchaser Payments as of such date, if the Put Option or the Call Option is exercised later than the date that is thirty six (36) months after the Closing Date, minus, in each case, the total payments made to Oberland on or prior to such date.

The company’s obligations under the RIPA are guaranteed by certain of its subsidiaries meeting materiality thresholds set forth in the RIPA.

To secure the company’s obligations under the RIPA and the subsidiary guarantors’ obligations under the guarantees, each of the company and the subsidiary guarantors has granted a security interest in substantially all its assets, subject to certain exceptions and limitations.

The RIPA contains affirmative and negative covenants and events of default, including covenants and restrictions that, among other things, restrict our ability to incur additional liens, incur additional indebtedness, make loans and investments, enter into transactions with affiliates, engage in mergers and acquisitions, engage in asset sales and exclusive licensing arrangements, and declare dividends to our stockholders, in each case, subject to certain exceptions set forth in the RIPA.

As of December 31, 2023, the company was in compliance with all covenants.

The RIPA is considered a sale of future revenues and accounted for as long-term debt recorded at amortized cost using the effective interest rate method.

Also, on December 29, 2023 and in connection with the RIPA, we entered into an SPOA with Oberland pursuant to which we sold an aggregate of approximately $ 10.0 million of our common stock at $ 4.1103 per share in a private placement.

Oberland also has an option to purchase up to an additional $ 10.0 million of our common stock, at a price per share to be determined by reference to the 30-day trailing volume weighted-average price of our common stock calculated from the date of exercise.

This stock purchase option was classified as a liability estimated at fair value at issuance.

The $ 200.0 million received pursuant to the RIPA and $ 10.0 million received pursuant to the SPOA were allocated among the resulting financial instruments on a relative fair value basis, with $ 197.1 million allocated to the debt under the RIPA, $ 12.0 million allocated to the common stock issued under the SPOA, and $ 0.8 million allocated to the stock purchase option.

The Put Option under the RIPA that is exercisable by Oberland upon certain contingent events and the Call Option that is exercisable by the company upon a change of control were determined to be embedded derivatives requiring bifurcation and separately accounted for as a single compound derivative instrument.

The company recorded the initial fair value of the derivative liability of $ 34.5 million as a debt discount, which will be amortized to interest expense over the expected term of the debt using the effective interest rate method.

In connection with the RIPA, as of December 31, 2023 $ 155.4 million was recorded as revenue interest liability, on the consolidated balance sheet.

The company imputes interest expense associated with this liability using the effective interest rate method.

The effective interest rate is calculated based on the rate that would enable the debt to be repaid in full over the anticipated life of the arrangement.

The interest rate on this liability may vary during the term of the agreement depending on a number of factors, including the level of forecasted net sales.

The company evaluates the interest rate quarterly based on its current net sales forecasts utilizing the prospective method.

A significant increase or decrease in actual or forecasted net sales may materially impact the revenue interest liability, interest expense, other income, and the time period for repayment.

During the year ended December 31, 2023, we recorded $ 0.3 million of interest expense related to this arrangement.

The company incurred $ 7.5 million of issuance costs in connection with the RIPA, which will be amortized to interest expense over the estimated term of the debt.

The following table summarizes the revenue interest liability activity during the year ended December 31, 2023 (in thousands):

Revenue interest liability at inception $ —

Proceeds from the RIPA, gross 200,000

Issuance costs 7,491

Proceeds from the RIPA, net 192,509

Debt discount from:

Embedded contingent derivative liability ( 34,500 )

Issuance of common stock ( 2,039 )

Fair value of stock purchase option ( 819 )

Interest expense recognized 264

Revenue interest liability as of December 31, 2023 $ 155,415

Related-Party Debt

$ 125.0 million Variable-Rate Promissory Note

On August 31, 2022, the company executed a $ 125.0 million promissory note with Nant Capital, an affiliated entity of the company due to the common control of our Executive Chairman and Global Chief Scientific and Medical Officer.

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

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

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

The company may prepay this note at any time, in whole or in part, without premium or penalty.

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

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

$ 300.0 million Variable-Rate Promissory Note

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

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

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

No other material terms or conditions of this variable-rate promissory note were modified as part of the August 31, 2022 amendment and restatement.

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

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

Fixed-Rate Convertible Promissory Notes

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

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

Prior to the amendments and restatements, the company could and can continue to prepay the outstanding principal (together with accrued and unpaid interest), either in whole or in part, at any time without premium or penalty and without the prior consent of the lender, now subject to an advance notice period of at least five business days during which the lender can convert the amount requested to be prepaid by the company into shares of the company’s common stock, as part of the amendment and restatement described below.

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

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

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

Balances as of December 31, 2023

Year Interest

Rate Principal

Discounts Total

Related-Party Nonconvertible Note:

$ 505 million December 2023 Promissory Note –

Tranche 1 (1), (2), (3)

$ 125,000 $ 20,414 $ 104,586

Related-Party Convertible Notes:

$ 300 million December 2021 Promissory Note (1), (2), (3)

$ 300,000 $ 26,091 $ 273,909

$ 50 million December 2022 Promissory Note (1), (2), (3)

50,000 4,349 45,651

$ 30 million June 2023 Promissory Note (2), (3)

30,000 2,609 27,391

$ 505 million December 2023 Promissory Note Tranche 2

380,000 33,049 346,951

$ 30 million March 2023 Promissory Note (2), (3)

30,000 — 30,000

$ 200 million September 2023 Promissory Note (2), (3)

200,000 — 200,000

Total related-party convertible notes $ 610,000 $ 33,049 $ 576,951

Balances as of December 31, 2022

Year Interest

Rate Principal

Amount Accrued PIK

Discounts Total

Related-Party Nonconvertible Notes:

$ 300 million December 2021

Promissory Note (1), (2), (3)

$ 300,000 $ — $ 35,822 $ 264,178

$ 125 million August 2022

Promissory Note (1), (2), (3)

125,000 — 7,039 117,961

$ 50 million December 2022

Promissory Note (1), (2), (3)

50,000 — 238 49,762

Total related-party nonconvertible notes $ 475,000 $ — $ 43,099 $ 431,901

Related-Party Convertible Notes:

Nant Capital 2015 Note Payable (1), (2)

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

Nant Capital 2020 Note Payable (1), (2)

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

Nant Capital 2021 Note Payable (1), (2)

2025 6.0 % 40,000 — 2,580 37,420

NantMobile Note Payable (1), (2)

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

NCSC Note Payable (1), (2)

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

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

$ 300.0 million December 2021 Promissory Note

On December 17, 2021, the company executed a $ 300.0 million promissory note with N ant Capital, an af filiated entity under common control of our Executive Chairman, Global Chief Scientific and Medical Officer, and principal stockholder.

The note bore an interest rate of Term SOFR plus 5.4 % per annum, payable on a quarterly basis.

The outstanding principal amount and any accrued and unpaid interest on advances were due on December 17, 2022.

In the event of a default on the loan (as defined in both the original and amended and restated promissory notes), including if the company does not repay the loan at maturity, the company had 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.

On August 31, 2022, the company and Nant Capital entered into an amended and restated promissory note, pursuant to which the maturity date of the promissory note was extended to December 31, 2023 and the interest rate was amended to Term SOFR plus 8.0 % per annum.

On September 11, 2023, the company and Nant Capital entered into a letter amendment pursuant to which the maturity date of the promissory note was further extended to December 31, 2024.

On December 29, 2023 in connection with the RIPA, the company and Nant Capital entered into an amended and restated promissory note pursuant to which this existing promissory note was amended to be included in the Tranche 2 principal amount of the amended $ 505.0 million December 2023 promissory note, with a maturity date of December 31, 2025, and an interest rate of Term SOFR plus 7.5 % per annum.

Based on the terms of the amended and restated promissory note, the noteholder, at its sole discretion, may convert all of the Tranche 2 $ 380.0 million principal amount into shares of common stock at a conversion price of $ 8.2690 per share.

$ 125.0 million August 2022 Promissory Note

On August 31, 2022, the company executed a $ 125.0 million promissory note with Nant Capital.

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.

On September 11, 2023, the company and Nant Capital entered into a letter amendment pursuant to which the maturity date of the promissory note was extended to December 31, 2024.

On December 29, 2023 in connection with the RIPA, the company and Nant Capital entered into an amended and restated promissory note letter agreement pursuant to which the existing promissory note was amended to be included in the Tranche 1 principal amount of the amended $ 505.0 million December 2023 promissory note, with a maturity date of December 31, 2025 and an interest rate of Term SOFR plus 8.0 % per annum.

$ 50.0 million December 2022 Promissory Note

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

The note bore 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 note), the noteholder can request the outstanding principal and interest due on the loan to be repaid in full upon consummation of such specified transaction.

On September 11, 2023, the company and Nant Capital entered into a letter amendment pursuant to which the maturity date of the promissory note was further extended to December 31, 2024.

On December 29, 2023 in connection with the RIPA, the company and Nant Capital entered into an amended and restated promissory note pursuant to which the existing promissory note was amended to be included in the Tranche 2 principal amount of the amended $ 505.0 million December 2023 promissory note, with a maturity date of December 31, 2025, and an interest rate of Term SOFR plus 7.5 % per annum.

Pursuant to the terms of the amended and restated promissory note, the investor, in its sole discretion may convert all of the outstanding Tranche 2 principal amount into shares of common stock at a conversion price of $ 8.2690 per share.

The noteholder can request up to $ 50.0 million of the Tranche 2 principal amount and accrued interest to be repaid upon consummation of such specified transaction.

$ 30.0 million March 2023 Promissory Note

On March 31, 2023, the company executed a $ 30.0 million promissory note with Nant Capital.

This note bears interest at Term SOFR plus 8.0 % per annum, payable on a quarterly basis.

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

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

Upon receipt of a written notice of prepayment from the company, the noteholder may choose to convert the outstanding principal amount to be prepaid and the accrued and unpaid interest thereon into shares of the company’s common stock at a price of $ 2.28 per share.

Additionally, the noteholder may at its option convert the entire outstanding principal amount of the promissory note and accrued interest into shares of the company’s common stock at a conversion price of $ 2.28 per share, at the option of the noteholder.

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

On September 11, 2023, the company and Nant Capital entered into a letter agreement pursuant to which the maturity date of the $ 30.0 million promissory note described above was extended from December 31, 2023 to December 31, 2024.

On December 29, 2023 in connection with the RIPA, the company and Nant Capital entered into a letter agreement pursuant to which the maturity date of this promissory note was extended to December 31, 2025.

$ 30.0 million June 2023 Promissory Note

On June 13, 2023, the company executed a $ 30.0 million promissory note with Nant Capital, pursuant to which, the company could request up to three (3) advances of $ 10.0 million each.

The principal amount of each advance bore interest rate at Term SOFR plus 8.0 % per annum, payable on a quarterly basis.

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

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 noteholder upon five (5) days written notice to the noteholder.

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.

On September 11, 2023, the company and Nant Capital entered into a letter amendment pursuant to which the maturity date of the promissory note was further extended to December 31, 2024.

Pursuant to the terms of the amended and restated promissory note the investor, in its sole discretion may convert all of the Tranche 2 $ 380.0 million principal amount into shares of common stock at a conversion price of $ 8.2690 per share.

$ 200.0 million September 2023 Promissory Note

On September 11, 2023, the company executed a $ 200.0 million convertible promissory note with Nant Capital.

The note bears interest at Term SOFR plus 8.0 % per annum, payable on a monthly basis.

The outstanding principal amount and any accrued and unpaid interest are due on September 11, 2026.

We may prepay the outstanding principal amount, together with any accrued interest, at any time, in whole or in part, without premium or penalty upon five (5) days written notice to the noteholder.

The noteholder has the sole option to convert all (but not less than all) of the outstanding principal amount and accrued but unpaid interest into shares of the company’s common stock at a conversion price of $ 1.9350 per share.

The company received net proceeds of approximately $ 199.0 million from this financing, net of a $ 1.0 million origination fee paid to the noteholder.

Footnotes to Related-Party Debt Tables

Debt Modification and Debt Extinguishments

(1) August 2022 Debt Extinguishment

On August 31, 2022, the company amended and restated the above fixed-rate notes payables held by Nant Capital, NantWorks, NantMobile and NCSC, which are entities affiliated with Dr.

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

Prior to the amendments and restatements, the company could and thereafter continued to be able to prepay the outstanding principal (together with accrued and unpaid interest), either in whole or in part, at any time without premium or penalty and without the prior consent of the noteholder, subject to an advance notice period of at least five business days during which the noteholder could convert the amount requested to be prepaid by the company into shares of the company’s common stock, as part of the amendment and restatement.

The terms of these fixed-rate promissory notes were amended and restated to include a conversion feature that gave each noteholder, at its sole option, at any time (other than when the noteholder is in receipt of a written notice of prepayment from the borrower), the right to convert the entire outstanding principal amount and accrued and unpaid interest due under each note at the time of conversion into shares of the company’s common stock at a price of $ 5.67 per share.

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

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

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

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

1 unchanged sentence

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

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

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

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

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

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

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

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

4 unchanged sentences

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

$ 50.0 million Variable-Rate Promissory Note

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

This note bears interest at Term SOFR plus 8.0 % per annum.

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

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

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

The company must prepay the outstanding principal amount, together with any accrued interest, if requested by the holder, following the successful closing of a strategic collaboration transaction with a large biopharmaceutical company.

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

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

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

Balances at December 31, 2022

Year Interest

Rate Outstanding

Advances Accrued

Discounts Total

Related-Party Notes:

Nant Capital (1) 2023 Term SOFR + 8.0 %

$ 475,000 $ — $ 43,099 $ 431,901

On December 12, 2022, the company received written notice from NantWorks, the holder of an existing convertible promissory note of NantCell, a wholly-owned subsidiary of the company, of its election to convert the NantCell promissory note into shares of the company’s common stock.

As of such date, the holder of the NantCell note converted the entire $ 56.6 million of outstanding principal and accrued and unpaid interest due under the note into 9,986,920 shares of the company’s common stock at a price of $ 5.67 per share in accordance with the terms of the promissory note.

(2) September 11, 2023 Debt Modification

On September 11, 2023, the company entered into a stock purchase agreement with Nant Capital, NantMobile and NCSC pursuant to which the holders exchanged promissory notes totaling approximately $ 270.0 million in aggregate principal amount and accrued and unpaid interest for an aggregate of 209,291,936 shares of common stock at an exchange price of $ 1.29 per share.

As a result of the exchange, the company was forever released and discharged from all its obligations and liabilities under the notes.

On September 11, 2023, the company and Nant Capital entered into a series of letter agreements pursuant to which the maturity date of the related-party nonconvertible notes described above totaling $ 505.0 million in principal was extended from December 31, 2023 to December 31, 2024.

In addition, the company entered into the $ 200.0 million September 2023 promissory note with Nant Capital.

No other material terms or conditions of these promissory notes were modified.

Since all of the above promissory notes were entered into or amended at the same time on September 11, 2023 and with entities under common control, the company determined that the promissory notes were required to be evaluated collectively to accurately capture the economics of the transactions entered in contemplation of each other and contemporaneously.

Pursuant to ASC 470-50, as the terms of the amendment were not substantially different than the terms of the promissory notes prior to the amendment, the amendment was accounted for as a debt modification.

The unamortized debt discounts from the promissory notes are being amortized as an adjustment to interest expense over the remaining term of modified promissory notes that are not recorded at fair value using the effective interest rate method.

Also, a $ 29.6 million increase in fair value of the embedded conversion feature from the debt modification was accounted for as a debt discount to the $ 200.0 million convertible note that is not recorded at fair value, and a $ 1.6 million increase in fair value of the embedded conversion feature related to the promissory note recorded at fair value was accounted for as interest expense during the year ended December 31, 2023.

Such increase in fair values of the embedded conversion features totaling $ 31.2 million has been recorded with a corresponding increase in additional paid-in capital , on the consolidated statement of stockholders’ deficit.

(3) December 29, 2023 Debt Extinguishment

On December 29, 2023 in connection with the RIPA, the company and Nant Capital entered into an amended and restated promissory note and a letter amendment for the following outstanding promissory notes.

Pursuant to the terms of the amended and restated promissory note, the amended $ 505.0 million December 2023 promissory note is comprised of a Tranche 1 with principal amount of $ 125.0 million which was previously the $ 125.0 million August 2022 promissory note before amendment, and a Tranche 2 with principal amount of $ 380.0 million, which is made up of the previous $ 300.0 million December 2021 promissory note, $ 50.0 million December 2022 promissory note and $ 30.0 million June 2023 promissory note.

In addition, the amendment allows Nant Capital, in its sole discretion, to convert all the Tranche 2 principal amount of $ 380.0 million of the amended promissory note into shares of common stock.

The conversion price was subsequently determined at $ 8.2690 per share based on the agreement.

The maturity date of the amended promissory note is December 31, 2025.

Pursuant to the terms of the letter amendment, the maturity date of the $ 30.0 million March 2023 promissory note was extended from December 31, 2024 to December 31, 2025.

Also, in connection with the RIPA transaction, all outstanding related-party promissory notes became subordinated to the RIPA payment obligations.

The following table summarizes the Nant Capital promissory notes before the amendments on December 29, 2023 (principal amount in thousands):

Amount Maturity

Date Conversion

Price Interest

Related-Party Nonconvertible Note:

$ 125 million August 2022 Promissory Note

$ 125,000 12/31/2024 Term

Related-Party Convertible Notes:

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

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

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

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

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

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

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

_______________

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

Conversion of Fixed-Rate Promissory Note due 2025

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

As of such date, the entire outstanding principal amount and accrued and unpaid interest due under the Existing Note, net of unamortized discount, was approximately $ 51.9 million, which were converted into 9,986,920 shares of the company’s common stock at a price of $ 5.67 per share in accordance with the terms of the Existing Note.

Balances at December 31, 2021

Year Interest

Rate Outstanding

Advances Accrued

Debt Issuance

Related-Party Note:

Nant Capital (1) 2022 Term SOFR + 5.4 %

$ 300 million December 2021 Promissory Note

$ 300,000 12/31/2024 Term

$ 50 million December 2022 Promissory Note

50,000 12/31/2024 Term

$ 30 million June 2023 Promissory Note

30,000 12/31/2024 Term

$ 30 million March 2023 Promissory Note

30,000 12/31/2024 $ 2.2800 Term

$ 200 million September 2023 Promissory Note

200,000 9/11/2026 $ 1.9350

Total related-party promissory notes

before amendments $ 735,000

The following table summarizes the Nant Capital promissory notes after the amendments on December 29, 2023 (principal amount in thousands):

Amount Maturity

Date Conversion

Price Interest

Related-Party Nonconvertible Note:

$ 505 million December 2023 Promissory Note –

$ 125,000 12/31/2025 Term

Related-Party Convertible Notes:

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

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

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

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

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

NCSC 2025 5.0 % 33,000 5,746 — 38,746

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

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

$ 300 million December 2021 Promissory Note

$ 50 million December 2022

Promissory Note

$ 30 million June 2023 Promissory Note

$ 505 million December 2023 Promissory Note –

380,000 12/31/2025 $ 8.2690 Term

Total $ 505 million December 2023 Promissory Note

$ 30 million March 2023 Promissory Note

30,000 12/31/2025 $ 2.2800 Term

$ 200 million September 2023 Promissory Note

200,000 9/11/2026 $ 1.9350 Term

Total related-party promissory notes

after amendments $ 735,000

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

Also, in accordance with ASC 470-50 the company used the debt terms that existed before the September 11, 2023 modification to determine whether the current modification is substantially different, as the September 11, 2023 modification was within a year of the current transaction, and the promissory notes, at that time, had been modified without being deemed to be substantially different.

As the modifications (September 11, 2023 and December 29, 2023 on a cumulative basis) added a substantive conversion feature to the promissory notes, these promissory notes were determined to be extinguished given the contemporaneous nature of the amendments.

The company performed a valuation of all the promissory notes before and after amendments.

Under this model, the company calculated a loss on extinguishment of $ 318.8 million, representing the difference between the fair value of the amended promissory notes and the carrying value of the extinguished debt, net of any unamortized related-party notes discounts.

Since the debt was obtained from entities under common control, such loss was recorded in additional paid-in capital.

In addition, a debt premium totaling $ 354.9 million, calculated as the difference between the fair values of certain promissory notes after modifications and their respective face values, was also recorded in additional paid-in capital.

Collectively, net gain on debt extinguishment of $ 36.1 million was recorded in additional paid-in capital, on the consolidated statement of stockholders’ deficit for the year ended December 31, 2023.

Also, the difference between face values of certain new and amended promissory notes and their respective fair values of $ 53.1 million was recorded as a debt discount to be amortized as interest expense over the remaining term.

During the year ended December 31, 2023, we recorded amortization of related-party notes discounts totaling $ 0.5 million in interest expense, on the consolidated statement of operations related to the new and amended promissory notes.

In regard to the Tranche 2 principal amount of the $ 505.0 million December 2023 promissory note, the company identified an embedded derivative related to a contingent exercisable prepayment feature of the promissory note, which allows the noteholder to request up to a $ 50.0 million prepayment of the promissory note and accrued interest upon the occurrence of a specified transaction.

After the debt extinguishment, the company concluded that this promissory note was issued at a substantial discount, so the embedded derivative that is contingent exercisable was required to be bifurcated and accounted separately from the debt host instrument.

The fair value of the embedded derivative was estimated at $ 0.8 million as of December 31, 2023, using a with and without method, which assesses the likelihood and timing of the specified transaction to be triggered and result in a repayment.

Significant unobservable inputs used for the valuation included a volatility of 118.0 %, a market yield of 23.2 % and a risk-free rate of 4.8 %.

The fair value of Tranche 1 principal amount of the amended $ 505.0 million December 2023 promissory note, which had no noteholder conversion option, was estimated using discounted cash flow analyses, based on market rates available to the company for similar debt at issuance after consideration of default and credit risk and the level of subordination.

The fair value of Tranche 2 of the amended promissory note, which was modified to include a noteholder conversion option, was determined based on a binomial lattice convertible note model.

The analysis involved the construction of various intermediate lattices:

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

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

Significant unobservable inputs used for the discounted cash flow analysis included a market yield of 23.2 % and the significant unobservable inputs used for the binomial lattice model included a volatility of 118.0 %, a market yield of 23.2 % and a risk-free rate of 4.4 %.

The effective unamortized debt discount rate of the amended Tranche 1 and Tranche 2 principal amount of the $ 505.0 million December 2023 promissory note is 23.65 % and 18.04 %, respectively.

The fair value of the $ 200.0 million September 2023 promissory note was determined using the binomial lattice model.

Significant unobservable inputs used for the valuation included a volatility of 119.3 %, a market yield of 23.3 % and a risk-free rate of 5.2 %.

Prior to December 29, 2023, the $ 30.0 million March 2023 promissory note was accounted for under the ASC 825-10-15-4 FVO election.

Under the FVO election, the note was 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.

The estimated fair value of the convertible note was computed using the binomial lattice model with the following observable assumptions before it was modified on December 29, 2023.

After the debt extinguishment, the note is accounted for under the amortized cost basis.

Expected market yield 23.5 %

Expected volatility 138.0 %

Risk-free rate 5.2 %

The change in the carrying value of this note was as follows (in thousands):

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

Change in fair value 36,203

Gain on debt extinguishment with entities under common control ( 36,053 )

Carrying value, December 29, 2023 $ 30,000

The following table summarizes the interest expense for our related-party promissory notes during the year ended December 31, 2023 (in thousands):

Year Ended December 31, 2023

$ 300 million December 2021 Promissory Note (1)

$ 39,653 $ 27,967

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

$ 125 million August 2022 Promissory Note (1)

$ 50 million December 2022 Promissory Note (1)

$ 30 million March 2023 Promissory Note (1)

$ 30 million June 2023 Promissory Note

$ 200 million September 2023 Promissory Note

Related-Party Fixed-Rate Promissory Notes 8,799 5,145

Total $ 86,453 $ 42,396

_______________

(1) Balances include the amortization of debt discount totaling $ 0.5 million recorded during the period from December 29, 2023 to December 31, 2023.

The interest expense recorded during this period was $ 0.4 million.

The following table summarizes the estimated future contractual obligations for our related-party debt as of December 31, 2023 (in thousands):

Principal Payments Interest Payments (1)

Notes Non-convertible

Notes Nonconvertible

Notes Convertible

Notes Non-convertible

Notes Nonconvertible

$ — $ — $ 79,778 $ 16,708 $ 96,486

1 unchanged sentence

200,000 — 18,590 — 218,590

Total principal and estimated interest

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

Total $ 610,000 $ 125,000 $ 177,924 $ 33,371 $ 946,295

_______________

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

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

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

(1) Interest payments on our promissory notes are calculated based on Term SOFR plus the contractual spread per the loan agreements.

The weighted-average interest rate on our promissory notes as of December 31, 2023 was 13.09 %.

Related-Party Agreements

2 unchanged sentences

As of December 31,

Due from related party–NantBio, Inc.

$ 1,294 $ 1,294

Due from related party–Brink Biologics 271 —

Due from related party–NantBio $ 1,294 $ 1,294

Due from related party–NantWorks 541 —

Due from related party–Brink 62 271

Due from related parties–Various 122 325

Total due from related parties $ 2,019 $ 1,890

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

Due to related party–NantBio $ 943 $ 943

Due to related party–Duley Road 136 1,431

Due to related party–the Clinic 57 109

Due to related party–NantWorks — 986

Due to related party–NantBio, Inc.

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

Total due to related parties $ 1,136 $ 3,469

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

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

As described below, we have entered into arrangements with NantWorks, and certain affiliates of NantWorks.

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

NantWorks, LLC

Shared Services Agreement

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

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

For the years ended December 31, 2022, 2021 and 2020, we recorded $ 3.8 million, $ 4.4 million and $ 6.0 million, respectively, in selling, general and administrative expense , and $ 0.9 million, $ 0.4 million and $ 2.0 million, respectively, of expense reimbursements under this arrangement in research and development expense , on the consolidated statements of operations.

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

We are charged for these 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.

During the years ended December 31, 2023, 2022 and 2021, we recorded $ 3.3 million, $ 3.8 million, and $ 4.4 million, respectively, in selling, general and administrative expense , and $ 2.2 million, $ 0.9 million, and $ 0.4 million, respectively, of expense reimbursements under this arrangement in research and development expense , on the 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 December 31, 2022 and 2021, we owed NantWorks net amounts of $ 1.0 million and $ 1.1 million, respectively, for all agreements between the two affiliates, which are included in due to related parties, on the consolidated balance sheet.

As of December 31, 2023 and 2022, we had a receivable of $ 0.5 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 consolidated balance sheets.

We also recorded $ 1.0 million and $ 2.0 million of prepaid expenses for services that have been passed through to the company from NantWorks as of December 31, 2023 and 2022, respectively, which are included in prepaid expenses and other current assets , on the consolidated balance sheets.

Facility License Agreement

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

The initial license was effective from May 2015 through December 2020.

The base rent for the initial lease term was $ 47,000 per month, with annual increases of 3 % beginning in January 2017.

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

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

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

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

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

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

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

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

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

During the years ended December 31, 2023, 2022 and 2021, we recorded license fee expense for this facility totaling $ 3.4 million, $ 2.4 million, and $ 0.7 million, respectively, in research and development expense , on the 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.

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

In 2021, we completed a review of alternative structures that could support our more complex clinical trial requirements and made a decision to explore a potential transition of clinical trials at the Clinic to a new structure (including contracting with a new, non-affiliated professional corporation) to be determined and agreed upon by all parties.

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

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

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

For the years ended December 31, 2022, 2021 and 2020, we incurred $ 2.4 million, $ 1.6 million and $ 0.9 million in research and development expense , on the consolidated statements of operations related to the Clinic Agreement.

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

Based on this decision to explore a potential transition, we determined that it was more likely than not that a 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, during the year ended December 31, 2021, we wrote down the remaining value of our prepaid asset and recorded approximately $ 4.4 million in research and development expense , on the consolidated statement of operations.

While we have not yet finalized the potential transition, we continue discussions with potential partners around such alternative structures.

During the years ended December 31, 2023, 2022 and 2021, we recorded $ 2.2 million, $ 2.4 million, and $ 1.6 million, respectively, in research and development expense , on the consolidated statements of operations related to clinical trial and transition services provided by the Clinic.

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

Brink Biologics, Inc.

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

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

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

We recognized revenue of an immaterial amount, $ 0.4 million and $ 0.1 million for the year ended December 31, 2022, 2021 and 2020, respectively, related to this license.

In 2015, we entered into an agreement with Brink whereby we granted Brink worldwide exclusive licenses for the use of certain cell lines and intellectual property in non-clinical laboratory testing.

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

During the years ended December 31, 2023 and 2022, we recognized revenue of an immaterial amount, respectively, and $ 0.4 million during the year ended December 31, 2021 related to this license.

NantBio, Inc.

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

In August 2018, we entered into a supply agreement with NCSC, a 100% owned subsidiary of NantBio.

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

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 years ended December 31, 2022 and 2020, and $ 0.3 million of revenue for the year ended December 31, 2021.

We recorded $ 0.1 million and $ 0.1 million of deferred revenue for bioreactors that were delivered but not installed as of December 31, 2022 and 2021, respectively.

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

The agreement had 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.

During the years ended December 31, 2023 and 2022 , we recognized no revenue, respectively, and $ 0.3 million of revenue during the year ended December 31, 2021.

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

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

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

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

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

After the transfer, we settled certain employee bonuses and benefits that were accrued by NantBio for 2018.

As of December 31, 2022 and 2021, we recorded a net receivable from NantBio of $ 1.3 million, which included $ 1.0 million for employee bonuses and $ 0.3 million for vendor costs we paid on behalf of NantBio.

As of December 31, 2023 and 2022, we recorded a receivable from NantBio of $ 1.3 million in due from related parties on the 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.

We have included the first option to extend the lease term for three years as part of the initial lease term as it is reasonably certain that we will exercise the option, which implies lease expiration in July 2026.

In 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 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.

Lease expense for this facility totaling $ 0.9 million for the years ended December 31, 2022, 2021 and 2020, respectively, was recorded in research and development expense , on the consolidated statements of operations.

During the years ended December 31, 2023, 2022 and 2021, we recorded lease expense for this facility of $ 0.9 million, respectively, in research and development expense , on the consolidated statements of operations.

Duley Road, LLC

In February 2017, Altor BioScience Corporation (succeeded by our wholly-owned subsidiary Altor BioScience, LLC), through its wholly-owned subsidiary, entered into a lease agreement with Duley Road, a related party that is indirectly controlled by our Executive Chairman and Global Chief Scientific and Medical Officer, for approximately 11,980 rentable square feet of office and cGMP manufacturing facility space in El Segundo, California.

In 2017, we entered into a lease agreement with Duley Road, a related party that is indirectly controlled by our Executive Chairman and Global Chief Scientific and Medical Officer, for approximately 11,980 rentable square feet of office and cGMP manufacturing facility space in El Segundo, California.

The lease term is from February 2017 through October 2024.

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

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

Effective October 3, 2023, we exercised the first option to extend the lease for one additional five-year term through October 31, 2029.

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

The first lease is for the first floor of the building with approximately 5,650 rentable square feet.

The lease has a seven-year term commencing in September 2019.

The lease has a seven-year term that commenced in September 2019.

The second lease is for the second floor of the building with approximately 6,488 rentable square feet.

The lease has a seven-year term commencing in July 2019.

The lease has a seven-year term that commenced in July 2019.

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

We have options to extend the initial terms of both leases for two consecutive five-year periods through 2036.

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

As of December 31, 2022 and 2021, we recorded $ 0.9 million and $ 0.9 million of leasehold improvement payables, respectively, and $ 0.6 million and $ 0.5 million of lease-related payables to Duley Road, which were included in due to related parties , on the consolidated balance sheets.

For the years ended December 31, 2022, 2021 and 2020, we recorded $ 0.8 million, $ 1.0 million and $ 0.8 million of rent expense for the two leases, respectively, which was included in research and development expense , on the consolidated statements of operations.

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

During the years ended December 31, 2023, 2022 and 2021, we recorded rent expense for these leases totaling $ 0.9 million, $ 0.8 million, and $ 1.0 million, respectively, in research and development expense , on the consolidated statements of operations.

As of December 31, 2023 and 2022, we recorded $ 0.1 million and $ 1.4 million of lease-related payables to Duley Road, respectively, in due to related parties , on the 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) in a two story mixed use building containing approximately 64,643 rentable square feet on 605-607 Nash Street in El Segundo, California.

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

The lease term commenced in January 2021 and expires in December 2027 , and includes an option to extend the lease for one three-year term through December 2030 .

The base rent is approximately $ 20,300 per month with an annual increase of 3 % on January 1 of each year during the lease term.

The base rent is approximately $ 20,300 per month with an annual increase of 3 % on January 1 of each year during the initial term, and if applicable, during the option term.

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

We have included the first option to extend the lease term for three years as part of the initial lease term as it is reasonably certain that we will exercise the option.

We 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 .

Per the terms of the amendment, the term of the Initial Premises lease was extended for an additional three months and now expires in March 2031.

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.

Base rent for the Expansion Premises is approximately $ 170,400 per month with annual increases of 3 % on April 1 of each year.

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

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

We recorded rent expense for the Initial and Expansion Premises leases totaling $ 2.2 million and $ 1.7 million for the years ended December 31, 2022 and 2021, respectively, i n research and development expense, on the consolidated statements of operations.

We have included the options to extend the lease term of both the Initial and Expansion Premises for three years as part of the initial term of the leases as it is reasonably certain that we will exercise the options, which implies expiration of both leases in December 2030.

During the years ended December 31, 2023, 2022, and 2021, we recorded rent expense for the Initial and Expansion Premises leases totaling $ 2.2 million, respectively, i n research and development expense, on the consolidated statements of operations.

The terms of 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 year ended December 31, 2023.

557 Doug St, LLC

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

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

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

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

We accounted for the transfer as a sale of an asset to an entity under common control, recorded the transfer at book value and recognized the excess of net consideration over carrying book value of $ 1.4 million as a capital contribution received from Nant Capital in additional paid-in capital , on the consolidated statement of stockholders’ deficit for the year ended December 31, 2022.

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

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

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

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

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

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

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

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

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

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

The lease is classified as an operating lease.

For the year ended December 31, 2021, we recorded $ 0.3 million of rent expense for the lease, which was included in research and development expense , on the consolidated statement of operations.

The lease was classified as an operating lease.

During the year ended December 31, 2021, we recorded $ 0.3 million of rent expense for the lease, in research and development expense , on the consolidated statement of operations.

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

We recorded year-to-date rent expense of $ 0.4 million prior to the termination of the lease, in research and development expense , on the consolidated statement of operations.

We recognized a gain of $ 0.6 million on the disposal of this lease for the year ended December 31, 2022 in other income, net , on the consolidated statement of operations.

Prior to the termination of the lease, we recorded rent expense of $ 0.4 million during the year ended December 31, 2022 in research and development expense , on the consolidated statement of operations.

During the year ended December 31, 2022, we recognized a gain of $ 0.6 million on the disposal of this lease in other expense, net , on the consolidated statement of operations.

420 Nash, LLC

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The company is responsible for the payment of real property taxes, repairs and maintenance, improvements, insurance, and operating expenses during the term of the lease.

We will receive a rent abatement for the first month of the lease, and a one-time improvement allowance of $ 15,000 from the landlord that will be credited against base rent obligations for the second month of the lease.

We received a rent abatement for the first month of the lease, and a one-time improvement allowance of $ 15,000 from the landlord that was credited against base rent obligations for the second month of the lease.

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

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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.

For the years ended December 31, 2022 and 2021, we recorded $ 0.5 million and $ 0.1 million of rent expense for the lease, respectively, which was included in research and development expense , on the consolidated statements of operations.

During the years ended December 31, 2023 and 2022, we recorded rent expense for this lease totaling $ 0.5 million, respectively, and $ 0.1 million during the year ended December 31, 2021 in research and development expense , on the consolidated statements of operations.

23 Alaska, LLC

On May 6, 2022, we entered into a lease agreement with 23 Alaska, LLC, a related party, for a 47,265 rentable square foot facility located at 2335 Alaska Ave., El Segundo, California, to be used primarily for pharmaceutical development and manufacturing, research and development, and office space.

Under the terms of the agreement, the lease term begins on May 1, 2022 and expires on April 30, 2027.

The base rent is approximately $ 139,400 per month with an annual increase of 3 % on May 1 of each year beginning in 2023 during the initial term.

We will receive a rent abatement for the second through sixth month of the lease.

We are also required to pay $ 7,600 per month for parking during the initial term and extension term, if exercised.

The company is responsible for the payment of real property taxes, repairs and maintenance, improvements, insurance, and operating expenses during the term of the lease.

The company is responsible for the costs associated with the build-out of the premises and will received a one-time tenant improvement allowance of approximately $ 0.9 million from the landlord.

As of December 31, 2022, we re-evaluated plan of the future development of the facility and deemed it unlikely to claim any of the allowance during the reimbursement time frame.

As such, we wrote off the entire allowance receivable of $ 0.9 million during the year ended December 31, 2022.

The company has an option to extend the lease term for one additional consecutive five-year period.

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

We recorded $ 1.2 million of rent expense for this lease for the year ended December 31, 2022 in research and development expense , on the consolidated statement of operations.

Warrant Liability

On December 12, 2022, in connection with the sale of 9,090,909 shares of our common stock to an institutional investor, we entered into a warrant agreement that offers purchase of up to 9,090,909 shares at an exercise price of $ 6.60 per share.

The warrants are accounted for in accordance with ASC 815-40.

Such guidance provides that because the warrants do not meet the criteria for equity treatment thereunder, such warrant must be recorded as a liability.

The warrant agreement contains a provision that in the event of a “fundamental transaction” (as defined in the warrant agreement), in certain circumstances the holder of warrants may choose to require the company, or its successor, to redeem the warrants for cash at a value based on the Black-Scholes option pricing model obtained from the Bloomberg Financial Markets with inputs as defined in the warrant agreement.

We determined that the defined input in the warrant agreement for the exercise price per share in the Black-Scholes option pricing model will result in a settlement value which may not be considered a fair value, and therefore the warrants do not meet the criteria for equity treatment.

We classified the warrants as a liability at their fair value determined using the Black-Scholes option pricing model, and the warrants were allocated a portion of the proceeds from the issuance of the common stock equal to $ 35.1 million on the date of the transaction .

The $ 1.1 million of transaction costs allocated to the warrant liability was recognized in other expense, net, on the consolidated statement of operations for the year ended December 31, 2022.

The warrant liability is subject to remeasurement at each balance sheet date.

With each such remeasurement, the warrant liability will be adjusted to fair value, with the change in fair value recognized in other expense, net , on the consolidated statement of operations.

As of December 31, 2022 , there were 9,090,909 third-party w arrants outstanding, with a fair value of $ 21.6 million.

Under the terms of the agreement, the lease term began on May 1, 2022 and was to expire on April 30, 2027.

The base rent was approximately $ 139,400 per month with an annual increase of 3 % on May 1 of each year beginning in 2023 during the initial term.

We were also required to pay $ 7,600 per month for parking during the initial term.

The company was responsible for the payment of real property taxes, repairs and maintenance, improvements, insurance, and operating expenses during the term of the lease.

The company was responsible for the costs associated with the build-out of the premises and was to receive a one-time tenant improvement allowance of approximately $ 0.9 million from the landlord.

As of December 31, 2022, we re-evaluated plans for the future development of the facility and deemed it unlikely to claim any of the allowance during the reimbursement time frame.

As such, during the year ended December 31, 2022 we wrote off the entire allowance receivable of $ 0.9 million.

Effective August 31, 2023, we executed a lease termination agreement with the lessor under which we received a full refund of the security deposit totaling $ 0.1 million that we paid upon execution of the lease.

During the years ended December 31, 2023 and 2022, we recorded $ 1.2 million of rent expense for this lease, respectively, in research and development expense , on the consolidated statements of operations.

During the year ended December 31, 2023, we recognized a gain of $ 0.6 million on the disposal of this lease in research and development expense , on the consolidated statement of operations.

Warrant Liabilities

December 2022 Warrants

On December 12, 2022, in connection with the sale of 9,090,909 shares of our common stock to an institutional investor, we entered into a warrant agreement that allows such investor to purchase up to 9,090,909 shares at an exercise price of $ 6.60 per share.

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

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

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

As of December 31, 2023 and 2022, all 9,090,909 underlying warrants were outstanding.

As of December 31, 2023 and 2022, the estimated fair value of the warrants were $ 17.1 million and $ 21.6 million, respectively .

During the year ended December 31, 2023, a decrease in fair value of $ 4.5 million was recorded in other expense, net , on the consolidated statement of operations.

February 2023 Warrants

On February 15, 2023, in connection with the sale of 14,072,615 shares of our common stock to certain 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.

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

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

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

On July 25, 2023, the company amended the terms of the warrant, reducing the exercise price of the warrants from $ 4.2636 per share to $ 3.2946 per share and extending the expiration date of the warrants until July 24, 2026.

Since the warrants were classified as liabilities and measured at fair value, we recognized the change of $ 7.3 million in fair value of warrant liability in earnings due to the warrant modification.

As of December 31, 2023, all 14,072,615 underlying warrants were outstanding, with an estimated fair value of $ 50.0 million.

During the year ended December 31, 2023, an increase in fair value of $ 26.3 million was recorded in other expense, net , on the consolidated statement of operations.

July 2023 Warrants

On July 20, 2023, in connection with the sale of 14,569,296 shares of our common stock to certain institutional investors, we entered into a warrant agreement that allows such investors to purchase up to 14,569,296 shares at an exercise price of $ 3.2946 per share.

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

The fair value of warrants was estimated at $ 25.8 million at the issuance date.

Of the placement agent fees and other offering costs totaling $ 2.5 million, $ 1.0 million was allocated to the warrants and recorded in other expense, net , on the consolidated statement of operations on the date of the transaction .

As of December 31, 2023, all 14,569,296 underlying warrants were outstanding, with an estimated fair value of $ 51.7 million.

During the year ended December 31, 2023, an increase in fair value of $ 25.9 million was recorded in other expense, net , on the consolidated statement of operations.

Stockholders’ Deficit

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As of December 31, 2023, there were 670,867,344 shares of our common stock outstanding (excluding 163,800 shares held by a majority owned subsidiary of the company that are treated as treasury shares for accounting purposes).

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

The number of shares of preferred stock that the company is authorized to issue remains unchanged at 20,000,000 shares.

Effective October 18, 2023, we amended and restated our Amended and Restated Certificate of Incorporation to increase the number of shares that the company is authorized to issue from 900,000,000 shares of common stock, $ 0.0001 par value per share, to 1,350,000,000 shares of common stock, $ 0.0001 par value per share.

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

Common Stock Issued in Connection with the Merger

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

Since the Merger was accounted for as a transaction between entities under common control, the outstanding shares presented on the consolidated financial statements assume that NantCell outstanding common stock was converted into shares of Company Common Stock for the periods ending December 31, 2021 and 2020, and in connection with the conversion, those shares of common stock were recorded at the company’s par value of $ 0.0001 per share.

Since the Merger was accounted for as a transaction between entities under common control, the outstanding shares presented on the consolidated financial statements assume that NantCell outstanding common stock was converted into shares of Company Common Stock during the period ended December 31, 2021, and in connection with the conversion, those shares of common stock were recorded at the company’s par value of $ 0.0001 per share.

Stock Repurchases

2015 Share Repurchase Program

In 2015, the Board of Directors approved the 2015 Share Repurchase Program, which allows our CEO or chief financial officer (CFO), to repurchase on behalf of the company, from time to time in the open market or in privately negotiated transactions, up to $ 50.0 million of our outstanding shares of common stock, exclusive of any commissions, markups or expenses.

In 2015, the Board of Directors approved the 2015 Share Repurchase Program, which allows our CEO or CFO, to repurchase on behalf of the company, from time to time in the open market or in privately negotiated transactions, up to $ 50.0 million of our outstanding shares of common stock, exclusive of any commissions, markups, or expenses.

The timing and amounts of any purchases were and will continue to be based on market conditions and other factors, including price, regulatory requirements, and other corporate considerations.

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Shares repurchased under this program are formally retired through approval of the Board of Directors upon repurchase.

No shares of our common stock were repurchased during the years ended December 31, 2022, 2021 and 2020 under the program.

During the years ended December 31, 2023, 2022 and 2021, no shares of our common stock were repurchased under the program.

Since the plan’s inception, we have repurchased a total of 6,403,489 shares at a total cost of $ 31.7 million.

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

Shelf Registration Statement

During February 2023, we filed a $ 750.0 million shelf registration statement with the SEC on Form S-3 for the offering and sale of equity and equity-linked securities, including common stock, preferred stock, debt securities, depositary shares, warrants to purchase common stock, preferred stock or debt securities, subscription rights, purchase contracts, and units.

During the year ended December 31, 2023, we sold shares of our common stock and warrants valued at $ 184.4 million under the shelf.

As of December 31, 2023, we had $ 565.6 million available for use under the shelf.

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

Open Market Sale Agreement

On April 30, 2021, we entered into an open market sale agreement (the Sale Agreement) with respect to an ATM offering program under which we may offer and sell, from time to time at our sole discretion, shares of our common stock, having an initial aggregate offering price of up to $ 500.0 million through our sales agent, which was subsequently reduced by $ 92.0 million during December 2022 in connection with a sale of our common stock described below.

See “ —Other Sales of Common Stock.

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

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

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

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

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

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

In April 2021, we entered into the ATM under which we may offer and sell, from time to time at our sole discretion, shares of our common stock through our sales agent.

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 ATM, and also have provided them with customary indemnification and contribution rights.

During the years ended December 31, 2023, 2022 and 2021, we received net proceeds of approximately $ 16.1 million, $ 13.1 million, and $ 164.5 million, respectively, from the issuance of shares under the ATM.

As of December 31, 2023, we had $ 208.8 million available for future 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.

The Sale Agreement may be terminated by us at any time given written notice to the sales agent for any reason or by the sales agent at any time by giving written notice to us for any reason or immediately under certain circumstances and shall automatically terminate upon the issuance and sale of all of the shares.

Registered Direct Offering

On December 12, 2022, we entered into a securities purchase agreement with an institutional investor for the sale of 9,090,909 shares of our common stock, as well as warrants to purchase an additional 9,090,909 shares of common stock at an exercise price of $ 6.60 per share, for a purchase price of $ 5.50 per share and accompanying warrant, generating net proceeds of approximately $ 47.0 million, after deducting placement agent fees and other offering costs of $ 3.0 million, of which $ 1.9 million was allocated to the sale of our common stock and recognized as additional-paid-in capital, on the consolidated statement of stockholders’ deficit for the year ended December 31, 2022.

See Note 11 , Warrant Liability, for further information.

Underwritten Public Offering

During the year ended December 31, 2020, we closed an underwritten public offering of an aggregate of 8,521,500 shares of common stock, which included 4,811,500 shares issued to the public at a price of $ 9.50 per share (including 1,111,500 shares sold to the public upon full exercise of the underwriters’ option to purchase additional shares at a public offering price of $ 9.50 per share), less underwriting discounts and commissions, and 3,710,000 shares issued to Dr.

Soon-Shiong, our Executive Chairman and Global Chief Scientific and Medical Officer, at a price of $ 12.12 per share, less underwriting discounts and commissions.

All of the shares were offered by the company.

Including the underwriters’ option exercise, the aggregate gross proceeds from the offering were $ 90.7 million, before deducting underwriting discounts, commissions and other offering costs of $ 4.4 million.

Conversion of Fixed-Rate Promissory Note into Common Stock

Registered Direct Offerings

2023 Offerings

February 2023

On February 15, 2023, we entered into a securities purchase agreement with certain institutional investors for the purchase and 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 consolidated statement of stockholders’ deficit during the year ended December 31, 2023.

The warrants became immediately exercisable on February 17, 2023.

On July 25, 2023, pursuant to the terms of a letter amendment, the company and the investors agreed to reduce the exercise price of the outstanding February 2023 Warrants from $ 4.2636 per share to $ 3.2946 per share and extend the expiration date of the warrants to July 24, 2026.

See Note 12 , Warrant Liabilities, for more 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 our 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.

This transaction generated net proceeds of approximately $ 37.5 million, after deducting placement agent fees and other estimated offering costs of $ 2.5 million, of which $ 12.7 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, 2023.

The warrants became immediately exercisable on July 25, 2023 and expire on July 24, 2026.

2022 Offering

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

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.

Stock Purchase and Option Agreement

On December 29, 2023 and in connection with the RIPA, we entered into an SPOA with Oberland pursuant to which we sold an aggregate of approximately $ 10.0 million of our common stock at $ 4.1103 per share in a private placement, which resulted in the issuance of 2,432,894 shares of common stock.

We received net proceeds of approximately $ 9.5 million, after deducting offering costs of $ 0.5 million, which were 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, 2023.

The option is exercisable by Oberland any time after the closing of the SPOA, until the earliest of

(i) December 29, 2028, (ii) a change of control of the company, or (iii) a sale of substantially all of the company’s assets.

Among other limitations, the option may only be exercised to the extent that the common stock issuable pursuant to such exercise would not exceed 19.9 % of the common stock outstanding immediately after giving effect to such exercise.

We have agreed to file a shelf registration statement allowing for the resale of the common stock acquired under the SPOA and to cause the registration statement to be effective no later than May 15, 2024, or if the SEC decides to review such registration statement, no later than June 30, 2024.

Conversion of Promissory Notes into Common Stock

On September 11, 2023, the company entered into a stock purchase agreement with Nant Capital, NantMobile and NCSC pursuant to which the related-party purchasers exchanged all such fixed-rate promissory notes, representing approximately $ 270.0 million in aggregate principal amount and accrued and unpaid interest, in exchange for an aggregate of 209,291,936 shares of common stock at an exchange price of $ 1.29 per share.

On December 12, 2022, the company received written notice from NantWorks, the holder of the existing note, of its election to convert the entire outstanding principal and accrued interest under the existing note into shares of the company’s common stock.

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In addition, the number of shares reserved for future grant under the 2015 Plan include shares subject to stock options granted under the 2014 Plan that expire or terminate without having been exercised in full and shares issued pursuant to awards granted under the 2014 Plan that are forfeited to or repurchased by us (provided that the maximum number of shares that may be added to the 2015 Plan pursuant to this provision is approximately 346,840 shares as of December 31, 2023).

Pursuant to the Merger, we assumed 7,121,110 RSUs (adjusted for the Exchange Ratio of 0.8190 ) issued under the 2015 NC Plan.

Pursuant to the Merger, we assumed 7,121,110 RSUs (adjusted for the Exchange Ratio) issued under the NC 2015 Plan.

As of December 31, 2023, the 2015 Plan is the only equity plan available for grant of equity awards to employees, directors, and consultants of the company.

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

As of December 31, 2023, approximately 13.1 million shares were available for future grants under the 2015 Plan.

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(in thousands)

Outstanding at December 31, 2021

Outstanding as of December 31, 2022

9,262,926 $ 9.87 $ 4,848 7.2

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Expired/forfeited ( 207,707 ) $ 5.53

Outstanding at December 31, 2022

Outstanding as of December 31, 2023

9,820,435 $ 9.46 $ 6,046 6.6

Vested and exercisable at December 31, 2022

Vested and exercisable as of December 31, 2023

5,867,252 $ 11.54 $ 4,118 5.4

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

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

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

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

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

As of December 31, 2023, the unrecognized compensation cost related to outstanding stock options was $ 8.4 million, which is expected to be recognized over a remaining weighted-average period of 1.0 years.

The total intrinsic value of stock options exercised during the year ended December 31, 2022 was immaterial.

Cash proceeds received from stock option exercises during the year ended December 31, 2022 was $ 0.1 million.

During the year ended December 31, 2023, the total intrinsic value of stock options exercised was $ 0.3 million.

During the years ended December 31, 2023, 2022 and 2021, cash proceeds received from stock option exercises were $ 0.3 million, $ 0.1 million, and $ 5.4 million, respectively.

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

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The following table summarizes RSU activity during the year ended December 31, 2023:

Nonvested balance at December 31, 2021

Nonvested balance as of December 31, 2022

6,551,388 $ 18.27

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Forfeited/canceled ( 909,197 ) $ 7.99

Nonvested balance at December 31, 2022

Nonvested balance as of December 31, 2023

7,503,979 $ 12.01

As of December 31, 2023, there was $ 38.2 million of unrecognized stock-based compensation expense related to RSUs that is expected to be recognized over a weighted-average period of 2.2 years.

The total intrinsic value of RSUs vested during the year ended December 31, 2022 was $ 2.6 million.

We may grant RSUs to both employees and directors of the company and to employees of related parties that provide shared services to the company under our shared services agreement with NantWorks as discussed in Note 10 , Related-Party Agreements .

The grant date fair value of an RSU equals the closing price of our common stock on the date of grant.

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 .

During the year ended December 31, 2023, the total intrinsic value of RSUs vested was $ 11.1 million.

Effective as of August 25, 2023, the Compensation Committee of the Board of Directors granted 5,727,159 RSUs to eligible employees of the company, with the intention of retaining such employees (the “retention award”).

The retention award vests according to the following schedule:

½ (one-half) was to vest and vested on September 1, 2023 and ½ (one-half) will vest on January 31, 2024, subject to the recipients continuing to be a “service provider” (as defined in the 2015 Plan) through each applicable vesting date.

With respect to RSUs granted, compensation cost was measured using the grant date fair value of $ 1.65 per share, the closing price of the company’s common stock on August 25, 2023.

RSUs awarded to employees and consultants of affiliated companies are accounted for as stock-based compensation in accordance with FASB 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 11 , Related-Party Agreements .

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

We estimated such benefit at the grant date fair value of $ 4.0 million and recorded $ 0.4 million and $ 0.9 million of deemed dividends for the years ended December 31, 2022 and 2021 in additional paid-in capital, on the consolidated balance sheets, with a corresponding credit to stock-based compensation expense.

We estimated such benefit at the grant date fair value of $ 4.0 million.

During the years ended December 31, 2023 and 2022, we recorded $ 0.4 million, respectively, and $ 0.9 million of deemed dividends during the year ended December 31, 2021 in additional paid-in capital, on the consolidated balance sheets, with a corresponding credit to stock-based compensation expense.

Related-Party Warrants

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

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

federal and state income taxes because of current and accumulated NOLs.

Our federal returns for tax years 2020 through 2022 remain open to examination, and our state returns remain subject to examination for tax years 2019 through 2022.

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 (IRS) or other respective tax authorities.

The Italian and South Korean returns for tax years 2018 through 2022 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 IRS or other respective tax authorities.

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

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The Merger is accounted for as a transaction between entities under common control, and is considered a nontaxable transaction for U.S.

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

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

Our loss before income taxes is as follows (in thousands):

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Loss before income taxes $ ( 583,892 ) $ ( 417,286 ) $ ( 349,839 )

Income tax (expense) benefit consists of the following (in thousands):

Income tax benefit (expense) consists of the following (in thousands):

Year Ended December 31,

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Federal 5 2 —

State 2 — 664

Foreign — — —

Total deferred 14 4 —

Total income tax (expense) benefit $ ( 34 ) $ ( 9 ) $ 1,846

The components that comprise our net deferred tax liability consist of the following (in thousands):

Total income tax benefit (expense) $ 40 $ ( 34 ) $ ( 9 )

The components that comprise our net deferred tax liabilities consist of the following (in thousands):

As of December 31,

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Research and development credits 56,610 40,954

Stock-based compensation 20,927 23,116

Interest expense 39,859 19,974

Stock-based compensation 22,554 20,927

Capital loss 16,192 —

Operating lease liabilities 11,605 12,986

Valuation discount 9,095 —

Investments 7,544 5,886

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Valuation allowance ( 648,444 ) ( 491,755 )

Net deferred tax liability $ ( 158 ) $ ( 162 )

As of December 31, 2022, we have federal net operating losses (NOLs) of $ 1.4 billion, state NOLs of $ 1.5 billion, and foreign NOLs of $ 10.1 million.

Of the $ 1.4 billion in federal NOLs, $ 967.3 million do not expire and will be able to be used to offset 80% of taxable income in future years.

Net deferred tax liabilities $ ( 148 ) $ ( 158 )

As of December 31, 2023, we have federal NOLs of $ 1.6 billion, state NOLs of $ 2.0 billion, and foreign NOLs of $ 14.3 million.

Of the $ 1.6 billion in federal NOLs, $ 1.2 billion do not expire and will be able to be used to offset 80% of taxable income in future years.

Of the $ 2.0 billion in state NOLs, $ 50.7 million do not expire and will be able to be used to offset 80% of taxable income in future years.

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Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.

Based on the level of historical operating results and the uncertainty of economic conditions, we have recorded a valuation allowance of $ 491.8 million and $ 375.2 million as of December 31, 2022 and 2021, respectively.

The change in the valuation allowance for the years ended December 31, 2022 and 2021 were increases of $ 116.6 million and $ 113.7 million, respectively, which were mainly driven by losses from which we cannot benefit.

Based on the level of historical operating results and the uncertainty of economic conditions, we recorded a valuation allowance of $ 648.4 million and $ 491.8 million as of December 31, 2023 and 2022, respectively.

During the years ended December 31, 2023 and 2022, the valuation allowance increased by $ 156.6 million and $ 116.6 million, respectively, which was mainly driven by losses from which we cannot benefit.

The portion of the valuation allowance for deferred tax assets for which subsequently recognized tax benefits will be credited directly to contributed capital is $ 0.2 million.

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State income taxes, net of federal tax benefit 6.8 % 9.5 % 7.0 %

Change in fair value of warrants ( 1.8 ) % 0.5 % — %

Change in fair value of convertible notes

( 1.3 ) % — % — %

Investment loss 2.1 % — % — %

Other permanent items — % ( 0.1 ) % ( 0.1 ) %

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Effective income tax rate — % — % — %

Pursuant to Code Sections 382 and 383, annual use of our net operating loss and research and development credit carryforwards may be limited in the event a cumulative change in ownership of more than 50% occurs within a three-year period.

Pursuant to Sections 382 and 383 of the Code, annual use of our net operating loss and research and development credit carryforwards may be limited in the event a cumulative change in ownership of more than 50% occurs within a three-year period.

We have not recognized the deferred tax assets for federal and state NOLs and credits of $ 274.1 million from our deferred tax asset schedules as of December 31, 2023 due to Section 382/383 limitations.

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Our California research tax credits can be carried forward indefinitely.

Net operating losses and tax credits also are limited when there is a separate return limitation year (SRLY).

As of December 31, 2023, we also had federal other tax credits carryforwards of $ 1.3 million and the tax credit carryforwards expire beginning in 2036

Net operating losses and tax credits also are limited when there is a SRLY.

These rules generally limit the use of the acquired or departing members’ net operating loss and tax credit carryovers to the amount of taxable income such entity contributes to consolidated taxable income.

1 unchanged sentence

Therefore, any SRLY NOLs and tax credits will be subject to this limitation, as well as Section 382 and 383 limitations.

As of December 31, 2022 and 2021, we have $ 77.6 million and $ 33.1 million of interest, respectively, that is temporarily disallowed pursuant to IRC Section 163(j).

As of December 31, 2023 and 2022, we have $ 164.6 million and $ 77.6 million of interest, respectively, that is temporarily disallowed pursuant to Section 163(j) of the Code.

This interest can be carried forward indefinitely and will be deductible when the company generates sufficient adjusted taxable income.

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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 2022, which incorporates a corporate alternative minimum tax, was signed on August 16, 2022.

The changes are effective for the tax years beginning after December 31, 2022.

2 unchanged sentences

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 years ended December 31, 2022, 2021, and 2020, we did not record any income tax (expense) benefit resulting from the CARES Act, mainly due to our history of net operating losses generated and the maintenance of a full valuation allowance against our net deferred tax assets.

There was no material impact from the provisions of the Cares Act for the years ended December 31, 2022 and 2021.

State of California Assembly Bill No.

On June 29, 2020, the state of California enacted Assembly Bill No.

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 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.

Employee Benefits

Defined Contribution Benefit Plan

In December 2015, we adopted a 401(k) retirement and savings plan (the 401(k) Plan) covering all employees.

Defined Contribution Plan

In December 2015, we adopted a 401(k) Plan covering all employees.

The 401(k) Plan allows employees to make pre- and post-tax contributions up to the maximum allowable amount set by the IRS.

The company, at its discretion, may make certain contributions to the 401(k) Plan.

We made contributions totaling $ 2.7 million, $ 1.7 million and $ 1.1 million to the 401(k) Plan for the years ended December 31, 2022, 2021 and 2020, respectively.

During the years ended December 31, 2023, 2022 and 2021, we made contributions totaling $ 2.8 million, $ 2.7 million, and $ 1.7 million, respectively, to the 401(k) Plan.

Compensated Absences

1 unchanged sentence

Therefore, we do not record an accrual for paid leave related to these employees since we are unable to reasonably estimate the compensated absences that these employees will take.

Subsequent Event

Registered Direct Offering

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

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

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

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

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data