ImmunityBio, Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) 157 Consolidated Balance Sheets as of December 31, 2024 and 2023 159 Consolidated Statements of Operations for the years ended December 31, 2024, 2023 and 2022 160 Consolidated Statements of Comprehensive Loss for the years ended December 31, 2024, 2023 and 2022 161 Consolidated Statements of Stockholders’ Deficit for the years ended December 31, 2024, 2023 and 2022 162 Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023 and 2022 165 Notes to Consolidated Financial Statements 168 156 Table of Conten t s Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of ImmunityBio, Inc. and Subsidiaries Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of ImmunityBio, Inc. and Subsidiaries (the Company) as of December 31, 2024 and 2023, 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, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with U.S. 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, 2024, 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 3, 2025 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company’s management. 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. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. 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. 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. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (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 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 account or disclosure to which it relates. 157 Table of Conten t s Related party transactions and disclosures Description of the Matter As described in Notes 12 and 13 to the consolidated financial statements, the Company’s Founder, Executive Chairman and Global Chief Scientific and Medical Officer Dr. Patrick Soon-Shiong has a controlling interest in certain entities with which the Company has entered into material transactions including related-party debt transactions with Nant Capital, LLC. Affiliates of such entities are also affiliates of the Company due to the common control of the Company’s Founder, Executive Chairman and Global Chief Scientific and Medical Officer. Assessing the sufficiency of procedures performed to identify related parties and significant related-party transactions and determining the identified significant related-party transactions were properly recorded, presented and disclosed was challenging due to the nature, volume and the significance of related-party transactions. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls over the Company’s related-party process. This included testing controls over management’s identification, review, recognition and disclosure of significant related-party transactions. The audit procedures we performed included, among others, testing the completeness and accuracy of the listing of related parties identified and significant related-party transactions provided by management, and testing the manner in which significant related party transactions were recorded, presented and disclosed. We performed journal entry searches of identified related parties to verify completeness and accuracy of the Company’s significant related-party transactions. We inquired of management, 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 Founder, Executive Chairman and Global Chief Scientific and Medical Officer. We confirmed the significant transactions and/or balances, as applicable, with the related parties. We also obtained the underlying agreements for significant related-party transactions and assessed the associated accounting and recognition. We involved 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, as described in Note 12 to the consolidated financial statements. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2016. Los Angeles, California March 3, 2025 158 Table of Conten t s ImmunityBio, Inc. and Subsidiaries Consolidated Balance Sheets (in thousands, except share and per share amounts) As of December 31, 2024 2023 ASSETS Current assets: Cash and cash equivalents $ 143,428 $ 265,453 Marketable securities 6,381 1,009 Accounts receivable, net 2,360 — Inventories 8,272 — Due from related parties 293 2,019 Prepaid expenses and other current assets (including amounts with related parties) 23,852 25,603 Total current assets 184,586 294,084 Marketable securities, noncurrent — 891 Property, plant and equipment, net 137,094 146,082 Goodwill and intangible assets, net 15,933 17,093 Convertible note receivable 7,130 6,879 Operating lease right-of-use assets, net (including amounts with related parties) 33,363 36,543 Other assets (including amounts with related parties) 4,827 2,880 Total assets $ 382,933 $ 504,452 LIABILITIES AND STOCKHOLDERS’ DEFICIT Current liabilities: Accounts payable $ 6,725 $ 9,195 Accrued expenses and other liabilities 40,580 42,708 Due to related parties 173 1,136 Operating lease liabilities (including amounts with related parties) 7,466 5,244 Total current liabilities 54,944 58,283 Related-party nonconvertible note, net of discount ( Note 12 ) — 104,586 Related-party convertible notes and accrued interest, net of discount ( Note 12 ) — 576,951 Related-party convertible note payable, at fair value ( Note 7 and Note 12 ) 461,877 — Revenue interest liability ( Note 11 ) 284,404 155,415 Derivative liabilities ( Note 11 and Note 12 ) 25,800 35,333 Operating lease liabilities, less current portion (including amounts with related parties) 34,823 39,942 Warrant liabilities 8,575 118,770 Other liabilities 639 1,109 Total liabilities 871,062 1,090,389 Commitments and contingencies ( Note 9 ) Stockholders’ deficit: Common stock, $ 0.0001 par value; 1,350,000,000 shares authorized as of December 31, 2024 and 2023; 852,904,340 and 670,867,344 shares issued and outstanding as of December 31, 2024 and 2023, respectively; excluding 163,800 treasury stock shares outstanding as of December 31, 2024 and 2023 85 67 Additional paid-in capital 2,884,867 2,374,620 Accumulated deficit ( 3,375,248 ) ( 2,961,684 ) Accumulated other comprehensive income 1,198 10 Total ImmunityBio stockholders’ deficit ( 489,098 ) ( 586,987 ) Noncontrolling interests 969 1,050 Total stockholders’ deficit ( 488,129 ) ( 585,937 ) Total liabilities and stockholders’ deficit $ 382,933 $ 504,452 The accompanying notes are an integral part of these consolidated financial statements. 159 Table of Conten t s ImmunityBio, Inc. and Subsidiaries Consolidated Statements of Operations (in thousands, except per share amounts) Year Ended December 31, 2024 2023 2022 Revenue Product revenue, net $ 14,150 $ — $ — Other revenues 595 622 240 Total revenue 14,745 622 240 Operating costs and expenses Cost of sales — — — Research and development (including amounts with related parties) 190,144 232,366 248,149 Selling, general and administrative (including amounts with related parties) 168,783 129,620 102,708 Impairment of intangible assets — 886 681 Total operating costs and expenses 358,927 362,872 351,538 Loss from operations ( 344,182 ) ( 362,250 ) ( 351,298 ) Other income (expense), net: Interest and investment income (loss), net 7,975 1,131 ( 3,090 ) Interest expense (including amounts with related parties) ( 114,670 ) ( 128,934 ) ( 63,515 ) Change in fair value of related-party convertible notes 43,472 ( 36,203 ) — Interest expense related to revenue interest liability ( 39,657 ) ( 264 ) — Change in fair value of warrant liabilities 19,955 ( 47,600 ) 13,460 Change in fair value of derivative liabilities 13,477 — — Loss on equity method investment — ( 7,549 ) ( 12,107 ) Other expense, net (including amounts with related parties) ( 15 ) ( 2,223 ) ( 736 ) Total other income (expense), net ( 69,463 ) ( 221,642 ) ( 65,988 ) Loss before income taxes and noncontrolling interests ( 413,645 ) ( 583,892 ) ( 417,286 ) Income tax benefit (expense) — 40 ( 34 ) Net loss ( 413,645 ) ( 583,852 ) ( 417,320 ) Net loss attributable to noncontrolling interests, net of tax ( 81 ) ( 656 ) ( 753 ) Net loss attributable to ImmunityBio common stockholders $ ( 413,564 ) $ ( 583,196 ) $ ( 416,567 ) Net loss per ImmunityBio common share – basic $ ( 0.59 ) $ ( 1.15 ) $ ( 1.04 ) Net loss per ImmunityBio common share – diluted $ ( 0.62 ) $ ( 1.15 ) $ ( 1.04 ) Weighted-average number of common shares used in computing net loss per share – basic 697,312 508,636 399,900 Weighted-average number of common shares used in computing net loss per share – diluted 700,443 508,636 399,900 The accompanying notes are an integral part of these consolidated financial statements. 160 Table of Conten t s ImmunityBio, Inc. and Subsidiaries Consolidated Statements of Comprehensive Loss (in thousands) Year Ended December 31, 2024 2023 2022 Net loss $ ( 413,645 ) $ ( 583,852 ) $ ( 417,320 ) Other comprehensive income (loss), net of income taxes: Change in fair value of related-party convertible note related to instrument-specific credit risk 1,221 — — Net unrealized gains (losses) on available-for-sale securities 15 60 ( 183 ) Reclassification of net realized gains (losses) on available-for-sale securities included in net loss 42 ( 15 ) 124 Foreign currency translation adjustments ( 90 ) ( 218 ) 238 Total other comprehensive income (loss) 1,188 ( 173 ) 179 Comprehensive loss ( 412,457 ) ( 584,025 ) ( 417,141 ) Less: Comprehensive loss attributable to noncontrolling interests 81 656 753 Comprehensive loss attributable to ImmunityBio common stockholders $ ( 412,376 ) $ ( 583,369 ) $ ( 416,388 ) The accompanying notes are an integral part of these consolidated financial statements. 161 Table of Conten t s ImmunityBio, Inc. and Subsidiaries Consolidated Statements of Stockholders’ Deficit (in thousands, except share amounts) Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income Total ImmunityBio Stockholders’ Deficit Noncontrolling Interests Total Stockholders’ Deficit Shares Amount Balance as of December 31, 2021 397,830,044 $ 40 $ 1,719,704 $ ( 1,961,921 ) $ 4 $ ( 242,173 ) $ ( 1,740 ) $ ( 243,913 ) Issuance of common stock “at-the-market” offering, net of commissions and offering costs of $ 302 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 9,986,920 1 51,946 — — 51,947 — 51,947 Issuance of shares in an RDO, net of discount and offering costs of $ 1,897 and value ascribed to associated warrants 9,090,909 1 13,006 — — 13,007 — 13,007 Stock-based compensation expense — — 40,179 — — 40,179 — 40,179 Exercise of stock options 14,767 — 74 — — 74 — 74 Vesting of RSUs 521,296 — — — — — — — Net share settlement for RSUs vesting ( 156,011 ) — ( 616 ) — — ( 616 ) — ( 616 ) Shares issued pursuant to litigation settlement 2,229,296 — 10,656 — — 10,656 — 10,656 Gain on extinguishment of debt with related parties under common control — — 82,858 — — 82,858 — 82,858 Other comprehensive income (loss), net of tax — — — — 179 179 — 179 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 ) The accompanying notes are an integral part of these consolidated financial statements. 162 Table of Conten t s ImmunityBio, Inc. and Subsidiaries Consolidated Statements of Stockholders’ Deficit (Continued) (in thousands, except share amounts) Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income Total ImmunityBio Stockholders’ Deficit Noncontrolling Interests Total Stockholders’ Deficit Shares Amount Issuance of common stock “at-the market” offering, net of commissions and offering costs of $ 457 5,605,323 1 16,105 — — 16,106 — 16,106 Issuance of common stock in exchange for notes payable 209,291,936 21 269,966 — — 269,987 — 269,987 Issuance of shares in RDOs, net of discounts and offering costs of $ 3,535 and value ascribed to associated warrants 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 2,432,894 — 11,581 — — 11,581 — 11,581 Gain on debt extinguishment with related-parties under common control — — 36,110 — — 36,110 — 36,110 Increase in fair value of embedded conversion feature from debt modification with entities under common control — — 31,179 — — 31,179 — 31,179 Stock-based compensation expense — — 49,163 — — 49,163 — 49,163 Exercise of stock options 184,362 — 294 — — 294 — 294 Vesting of RSUs 4,545,644 — — — — — — — Net share settlement for RSUs vesting ( 1,403,841 ) — ( 3,443 ) — — ( 3,443 ) — ( 3,443 ) Change in ownership interest in a joint venture due to legal settlement — — ( 4,199 ) — — ( 4,199 ) 4,199 — Other comprehensive income (loss), net of tax — — — — ( 173 ) ( 173 ) — ( 173 ) Net loss — — — ( 583,196 ) — ( 583,196 ) ( 656 ) ( 583,852 ) Balance as of December 31, 2023 670,867,344 67 2,374,620 ( 2,961,684 ) 10 ( 586,987 ) 1,050 ( 585,937 ) The accompanying notes are an integral part of these consolidated financial statements. 163 Table of Conten t s ImmunityBio, Inc. and Subsidiaries Consolidated Statements of Stockholders’ Deficit (Continued) (in thousands, except share amounts) Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income Total ImmunityBio Stockholders’ Deficit Noncontrolling Interests Total Stockholders’ Deficit Shares Amount Issuance of common stock “at-the-market” offering, net of commissions and offering costs of $ 660 427,368 — 3,625 — — 3,625 — 3,625 Conversion of related-party convertible notes and accrued interest into equity 117,185,260 11 188,526 — — 188,537 — 188,537 Issuance of shares in an equity offering, net of offering costs of $ 8,073 38,333,334 4 106,923 — — 106,927 — 106,927 Gain on debt extinguishment with related-parties under common control — — 10,418 — — 10,418 — 10,418 Stock-based compensation expense — — 34,432 — — 34,432 — 34,432 Exercise of stock options 308,959 — 715 — — 715 — 715 Vesting of RSUs 4,269,864 — — — — — — — Net share settlement for RSUs vesting ( 1,589,519 ) — ( 5,465 ) — — ( 5,465 ) — ( 5,465 ) Exercise of warrants 22,242,740 3 163,519 — — 163,522 — 163,522 Exercise of Oberland stock option, net of commissions of $ 150 858,990 — 7,554 — — 7,554 — 7,554 Other comprehensive income (loss), net of tax — — — — 1,188 1,188 — 1,188 Net loss — — — ( 413,564 ) — ( 413,564 ) ( 81 ) ( 413,645 ) Balance as of December 31, 2024 852,904,340 $ 85 $ 2,884,867 $ ( 3,375,248 ) $ 1,198 $ ( 489,098 ) $ 969 $ ( 488,129 ) The accompanying notes are an integral part of these consolidated financial statements. 164 Table of Conten t s ImmunityBio, Inc. and Subsidiaries Consolidated Statements of Cash Flows (in thousands) Year Ended December 31, 2024 2023 2022 Operating activities: Net loss $ ( 413,645 ) $ ( 583,852 ) $ ( 417,320 ) Adjustments to reconcile net loss to net cash used in operating activities: Change in fair value of convertible note ( 43,472 ) 36,203 — Non-cash interest expense related to the revenue interest liability 38,004 264 — Stock-based compensation expense 34,432 49,163 40,179 Amortization of related-party notes discounts 22,587 42,396 16,282 Change in fair value of warrant liabilities ( 19,955 ) 47,600 ( 13,460 ) Depreciation and amortization 17,554 18,512 18,260 Change in fair value of derivative liabilities ( 13,477 ) — — Non-cash lease expense related to operating lease right-of-use assets 5,756 6,112 5,932 Accretion of discounts on marketable debt securities ( 1,489 ) ( 137 ) 1,318 Non-cash interest items, net (including amounts with related parties) 1,150 8,925 11,746 Unrealized losses on equity securities 632 1,591 4,190 Transaction costs allocated to warrant liabilities — 2,010 1,082 Impairment of intangible assets — 886 681 Impairment of fixed assets — — 1,333 Other 109 ( 407 ) 269 Changes in operating assets and liabilities: Accounts receivable ( 2,360 ) — — Inventories ( 8,272 ) — — Prepaid expenses and other current assets 1,703 5,958 ( 16,557 ) Other assets ( 1,108 ) 1,913 1,998 Accounts payable ( 3,167 ) ( 6,476 ) 8,000 Accrued expenses and other liabilities ( 1,508 ) 6,689 4,102 Related parties 763 ( 1,129 ) ( 1,225 ) Operating lease liabilities ( 5,473 ) ( 2,978 ) ( 4,319 ) Net cash used in operating activities ( 391,236 ) ( 366,757 ) ( 337,509 ) Investing activities: Purchases of marketable debt securities, available-for-sale ( 140,218 ) ( 10,358 ) ( 34,312 ) Proceeds from maturities of marketable debt securities, available-for-sale 115,586 10,100 128,188 Proceeds from sales of marketable debt and equity securities 21,021 372 33,812 Purchases of property, plant and equipment ( 6,888 ) ( 30,584 ) ( 78,162 ) Acquisition of a business, net of transaction costs ( 1,000 ) — — Cash paid for other investments ( 747 ) — — Purchase of intangible assets — — ( 21,229 ) Investment in joint venture – an equity method investment — — ( 1,000 ) Net cash (used in) provided by investing activities ( 12,246 ) ( 30,470 ) 27,297 The accompanying notes are an integral part of these consolidated financial statements. 165 Table of Conten t s ImmunityBio, Inc. and Subsidiaries Consolidated Statements of Cash Flows (Continued) (in thousands) Year Ended December 31, 2024 2023 2022 Financing activities: Proceeds from equity offerings, net of discounts and issuance costs $ 111,357 $ 100,561 $ 60,427 Proceeds from the RIPA, net of issuance costs 96,956 192,764 — Proceeds from exercises of warrants 73,281 — — Net share settlement for RSUs vesting ( 5,465 ) ( 3,443 ) ( 616 ) Proceeds from exercise of Oberland stock option, net of commissions 4,850 — — Proceeds from exercises of stock options 715 294 74 Principal payments of finance leases ( 64 ) ( 77 ) ( 58 ) Proceeds from issuance of related-party promissory notes net of issuance costs paid — 258,700 174,125 Proceeds from stock issuance in connection with the RIPA, net of transaction costs — 9,542 — Payment for contingent consideration — — ( 339 ) Net cash provided by financing activities 281,630 558,341 233,613 Effect of exchange rate changes on cash and cash equivalents, and restricted cash ( 23 ) ( 292 ) 284 Net change in cash and cash equivalents, and restricted cash ( 121,875 ) 160,822 ( 76,315 ) Cash and cash equivalents, and restricted cash, beginning of year 265,787 104,965 181,280 Cash and cash equivalents, and restricted cash, end of year $ 143,912 $ 265,787 $ 104,965 The accompanying notes are an integral part of these consolidated financial statements. 166 Table of Conten t s ImmunityBio, Inc. and Subsidiaries Consolidated Statements of Cash Flows (Continued) (in thousands) Year Ended December 31, 2024 2023 2022 Reconciliation of cash and cash equivalents, and restricted cash, end of year: Cash and cash equivalents $ 143,428 $ 265,453 $ 104,641 Restricted cash (Note 2 ) 484 334 324 Cash and cash equivalents, and restricted cash, end of year $ 143,912 $ 265,787 $ 104,965 Supplemental disclosure of cash flow information: Cash paid during the year for: Interest $ 92,318 $ 77,192 $ 35,442 Income taxes $ 15 $ 8 $ 2 Supplemental disclosure of non-cash activities: Conversion of related-party convertible notes and accrued interest, net of unamortized discount, into equity $ 188,537 $ 269,987 $ 51,947 Gain on debt extinguishment with related-parties under common control $ 10,418 $ 36,110 $ 82,858 Right-of-use assets obtained in exchange for operating lease liabilities $ 2,576 $ — $ 14,798 Unpaid offering and transaction costs included in accounts payable and accrued expenses $ 805 $ 255 $ 277 Property and equipment purchases included in accounts payable, accrued expenses and due to related parties $ 748 $ 1,156 $ 12,693 Initial measurement of warrants issued in connection with RDOs accounted for as liabilities $ — $ 49,534 $ 35,096 Increase in fair value of embedded conversion feature from debt modification $ — $ 31,179 $ — Change in ownership interest in a joint venture due to legal settlement $ — $ 4,199 $ — Right-of-use assets disposed in exchange for operating lease liabilities $ — $ ( 3,777 ) $ — Common stock issuance discount related to the revenue interest liability $ — $ 2,039 $ — Common stock issued pursuant to litigation settlement $ — $ — $ 10,656 The accompanying notes are an integral part of these consolidated financial statements. 167 Table of Conten t s ImmunityBio, Inc. and Subsidiaries Notes to Consolidated Financial Statements 1. Description of Business In these notes to the consolidated financial statements, the terms “ImmunityBio,” “the company,” “we,” “us,” and “our” refer to ImmunityBio and subsidiaries. Our Business ImmunityBio is a vertically-integrated commercial stage biotechnology company developing next-generation therapies that bolster the natural immune system to defeat cancers and infectious diseases. The company’s range of immunotherapy platforms, alone and together, act to drive an immune response with the goal of creating durable immune memory generating safe protection against disease. We are applying our science and platforms to treating cancers, including the development of potential cancer vaccines, as well as developing immunotherapies and cell therapies that we believe sharply reduce or eliminate the need for standard high-dose chemotherapy. These platforms and their associated product candidates are designed to be more effective, accessible, and easily administered than current standards of care in oncology and infectious diseases. Our platforms and their associated product and 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 CPIs, by turning immunologically cold, MHC-deficient tumors hot and/or reducing the need for standard high-dose chemotherapy in cancer by employing a coordinated approach to establish “immunological memory” that confers long-term benefit for the patient. Our proprietary platforms for the development of biologic products and product candidates include: (i) cytokine fusion proteins, (ii) vaccine vectors, and (iii) cell therapies. Specifically, our core clinical focus is on bladder and lung cancers with additional clinical efforts in prostate and colorectal cancers, hematologic malignancies 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 product ANKTIVA is a novel first-in-class IL-15 receptor superagonist antibody-cytokine fusion protein. On April 22, 2024, the FDA approved our product, ANKTIVA with BCG for the treatment of adult patients with BCG-unresponsive NMIBC with CIS with or without papillary tumors. ANKTIVA was approved with a label indicating an immunological mechanism of action which proliferates and activates NK, CD8+ and memory T cells without the proliferation of immunosuppressive T-reg cells. We began commercial distribution of our approved product in May 2024. 2. Summary of Significant Accounting Policies Basis of Presentation 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 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 accompanying 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. 168 Table of Conten t s 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 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. This analysis is performed at the initial investment in the entity or upon any reconsideration event. For entities we hold as an equity investment that are not consolidated under the VIE model, we consider whether our investment constitutes a controlling financial interest in the entity and therefore should be considered for consolidation under the voting interest model. Liquidity As of December 31, 2024, the company had an accumulated deficit of $ 3.4 billion. We also had negative cash flows from operations of $ 391.2 million during the year ended December 31, 2024. The company will need to obtain additional financing to fund our future operations, including the commercialization of our approved product and the development and commercialization of our other product candidates. The consolidated financial statements have been prepared assuming the company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business, and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or amounts and classification of liabilities that may result from the outcome of the uncertainty of our ability to continue as a going concern. As a result of continuing anticipated operating cash outflows as we commercialize our approved product and accelerate our development efforts, 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 and cash equivalents, and investments in marketable securities; sales of our approved product; capital to be raised through equity offerings; 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 Founder, Executive Chairman and Global Chief Scientific and Medical Officer’s intent and ability to support our operations with additional funds, including loans from affiliated entities, as required, which we believe alleviates such doubt. In addition to funds from the future sales of our approved product, which we expect to take time to establish, 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. Without significant sales of our approved product or additional funds, we may choose to delay or reduce our operating or investment expenditures. Further, because of the risk and uncertainties associated with the commercialization of our approved product and our other product candidates, we may need additional funds to meet our needs sooner than planned. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. 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 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 and anticipated future events, and accordingly, actual results may ultimately differ materially from those estimates. 169 Table of Conten t s Revenue Recognition Product Revenue, Net After FDA approval in April 2024, the company began recognizing revenue from the sale of ANKTIVA in accordance with ASC 606. The provisions of ASC 606 require the following steps to determine revenue recognition: (i) identification of contract with the customers; (ii) identification of performance obligations; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations based on estimated selling prices; and (v) recognition of revenue when (or as) we satisfy each performance obligation. At contract inception, we assess the goods or services promised within each contract, determine whether each promised good or service is distinct and identify those that are performance obligations. We recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. The company entered into a third-party logistics agreement to engage a 3PL Agent to distribute the company’s products to its customers. The 3PL Agent provides services to the company that include storage, shipping and distribution, processing product returns, as well as customer service, order to cash, and logistics support. The company’s customers are currently limited to pharmaceutical specialty distributors and specialty pharmacy. The company primarily sells ANKTIVA to specialty distributors through a drop-ship arrangement under which orders from various healthcare institutions such as hospitals, medical facilities, physician practices, pharmacies and government agencies are processed through and controlled by specialty distributors. Under the drop-ship arrangement, the 3PL Agent ships the product to various health care institutions without the specialty distributor ever taking physical possession of the product. The company recognizes product revenue when ANKTIVA is delivered to the end user as instructed and controlled by specialty distributors. The company also sells ANKTIVA directly to a specialty pharmacy who then subsequently distributes ANKTIVA to physicians, clinics, and certain medical centers, hospitals or other healthcare institutions. The company recognizes product revenue when ANKTIVA is delivered to the specialty pharmacy location. Product revenue is recorded with each sale at wholesale acquisition cost, net of: (a) consideration payable to customers; and (b) variable considerations. The company pays fees to the specialty distributors for certain administrative services associated with the distribution of the product wherein the terms of which are also detailed in its contracts. Such fees are not for a distinct good or service and, accordingly, are recorded as a reduction of revenue, as well as a reduction of accounts receivable (trade discounts) or as a component of accrued expenses (distributor fees). The variable consideration components include, but are not limited to, prompt payment discounts, product returns, chargebacks, rebates, and co-payment assistance, which are collectively referred to as “Gross-to-Net Adjustments.” In accordance with ASC 606, the company must make significant judgments to determine the estimates for certain variable considerations. Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. The company utilizes the expected value method when estimating the amount of variable consideration to include in the transaction price with respect to each of the foregoing variable consideration components. Where appropriate, these estimates are based on factors such as industry and forecasted customer buying and payment patterns, our experience, current contractual and statutory requirements, and specific known market events and trends. Variable considerations are reassessed each reporting period, and adjustments are recorded on a cumulative catch-up basis, which affects product revenue and net income in the period of adjustment. The actual amounts of variable consideration ultimately received may differ from our estimates. If actual results in future periods vary from our estimates, we adjust these estimates accordingly. As we gain more experience, estimates will be more heavily based on the expected utilization from historical data we have accumulated since the ANKTIVA product launch. The consideration payable to customers and contingent considerations reflect our best estimates of the amount of consideration to which we are entitled based on the terms of the contracts. Other Revenues Prior to the approval of ANKTIVA for commercial sale, we primarily generated revenues from non-exclusive license agreements related to our cell lines, the sale of our bioreactors and related consumables, and grant programs. The company expects to continue to generate revenue from these programs. 170 Table of Conten t s We sell our proprietary GMP-in-a-Box bioreactors and related consumables to affiliated companies and third parties. The arrangements typically include delivery of bioreactors, consumables, and providing installation service and perpetual software licenses for using the equipment. We recognize revenue when customers obtain control and can benefit from the promised goods or services, generally upon installation of the bioreactors, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. 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 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. License Agreements with Third Parties The company has nonexclusive license agreements with a limited number of pharmaceutical and biotechnology companies that grant them the right to use our cell lines and intellectual property for non-clinical use. These agreements generally include upfront fees and annual research license fees for such use, as well as commercial license fees for sales of the licensee products developed or manufactured using our intellectual property and cell lines. Under our license agreements with customers, we typically promise to provide a license to use certain cell lines and related patents, the related know-how, and future research and development data that affect the license. We have concluded that these promises represent a single performance obligation due to the highly interrelated nature of the promises. We provide the cell lines and know-how immediately upon entering into the contracts. Research and development data are provided throughout the term of the contract when and if available. 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. Our license agreements may include non-refundable upfront payments, event-based milestone payments, sales-based royalty payments, or some combination of these. The event-based milestone payments represent variable consideration, and we use the most likely amount method to estimate this variable consideration. Given the high degree of uncertainty around the achievement of these milestones, we do not recognize revenue from these milestone payments until the uncertainty associated with these payments is resolved. 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 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. Cost of Sales Cost of sales consists primarily of third-party manufacturing costs, distribution, and overhead costs related to sales of approved product subsequent to receiving regulatory approval. Cost of sales may also include costs related to excess or obsolete inventory adjustment charges, abnormal costs, unabsorbed manufacturing and overhead costs, and manufacturing variances. All costs associated with the production of ANKTIVA prior to receiving regulatory approval were expensed in research and development expense , on the consolidated statement of operations in the period incurred and therefore are not reflected in cost of sales. Accounts Receivable, Net Accounts receivable is recorded net of allowances for prompt payment discounts, product returns, chargebacks, and credit losses. The company estimates an allowance for credit losses by considering factors such as credit quality, the age of the accounts receivable balances, and current economic conditions that may affect a customer’s ability to pay. As of December 31, 2024, the credit profile for the company’s counterparty was deemed to be in good standing, and as such an allowance for credit losses was not recorded. 171 Table of Conten t s Inventories Inventories are stated at the lower of cost or net realizable value. Cost, which includes amounts related to materials, labor and overhead, is determined in a manner that approximates the first-in, first-out method. Net realizable value is the estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal and transportation. See Note 4 “ Inventories” for more information. Contingencies We record accruals for loss contingencies to the extent that we conclude it is probable that a liability has been incurred, and the amount of the related loss can be reasonably estimated. We accrue for the best estimate of a loss within a range; however, if no estimate in the range is better than any other, then we accrue the minimum amount in the range. If we determine that a material loss is reasonably possible, we disclose the possible loss or range of loss, or that the amount of loss cannot be estimated at this time. We evaluate, on a quarterly basis, developments in legal proceedings and other matters that could cause a change in the potential amount of the liability recorded or the range of potential losses disclosed. Moreover, we record gain contingencies only when they are realizable, and the amount is known. Additionally, we record our rights to insurance recoveries, limited to the extent of incurred or probable losses, as a receivable when such recoveries have been agreed to with our third-party insurers and when receipt is deemed probable. This includes instances when our third-party insurers have agreed to pay, on our behalf, certain legal defense costs and settlement amounts directly to applicable law firms and a settlement fund. Concentration of Major Customers The company relies heavily on the limited number of customers to market and distribute ANKTIVA to various healthcare institutions or end users through the drop-ship arrangement. For the year ended December 31, 2024, approximately 92 % of our total gross revenue was from our top three customers. The largest customer accounted for 38 % of our total revenue, while the second and third largest accounted for 29 % and 25 %, respectively. As of December 31, 2024, our accounts receivable, net are mainly from sales of ANKTIVA, and the majority are from specialty distributors. Our dependency on a few key customers exposes us to several risks, including the potential for disruptions in our distribution network, changes in customers’ business strategies, or financial difficulties faced by these customers. Any significant disruption or change in our relationship with these customers could materially and adversely affect our ability to effectively reach other potential end users and maintain our market position. Additionally, we maintain regular communication and strong relationships with our existing customers to ensure alignment with our business objectives. While we believe our relationships with these customers are strong and mutually beneficial, there can be no assurance that we will be able to maintain these relationships or that we will be able to replace them with new specialty distributors if necessary. Concentration of Credit Risk and Other Risks and Uncertainties Financial instruments that potentially subject us to concentration of risk consist principally of cash and cash equivalents, marketable securities, accounts receivable and a convertible note receivable. We attempt to minimize credit risk associated with our cash and cash equivalents by periodically evaluating the credit quality of our primary financial institutions. Our investment portfolio is maintained in accordance with our investment policy. While we maintain cash deposits in FDIC insured financial institutions in excess of federally insured limits, we do not believe that we are exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held. We have not experienced any losses on such accounts. We also monitor the creditworthiness of the borrower of the convertible note receivable. We believe that any concentration of credit risk in its convertible note receivable was mitigated in part by our ability to convert, if necessary, at the qualifying financing event or upon a payment default into shares of the senior class of equity securities of the borrower. Product candidates developed by us will require approvals or clearances from the FDA or international regulatory agencies prior to commercial sales. There can be no assurance that any of our product candidates will receive any of the required approvals or clearances. If we were to be denied approval or clearance or any such approval or clearance was to be delayed, it would have a material adverse impact on us. 172 Table of Conten t s Cash, Cash Equivalents, and Restricted Cash Cash equivalents include highly liquid investments with an original maturity of three months or less from the date of purchase. Restricted cash includes a certificate of deposit held as a substitute letter of credit for one of our leased properties. This certificate of deposit is included in other assets, on the consolidated balance sheet as the landlord is the beneficiary of the account and we are not able to access the funds during the term of the lease. A reconciliation of cash, cash equivalents, and restricted cash is included on the consolidated statements of cash flows as of December 31, 2024, 2023 and 2022. Marketable Securities and Other Investments Marketable Debt Securities 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 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. Evaluating Investments for Other-than-Temporary Impairments We periodically evaluate whether declines in fair values of our investments below their book value are other-than-temporary. This evaluation consists of several qualitative and quantitative factors regarding the severity and duration of the unrealized loss, as well as our ability and intent to hold the investment until a forecasted recovery occurs. Additionally, we assess whether we have plans to sell the security or whether it is more likely than not we will be required to sell any investment before recovery of its amortized cost basis. Factors considered include quoted market prices, recent financial results and operating trends, implied values from any recent transactions or offers of investee securities, credit quality of debt instrument issuers, other publicly available information that may affect the value of our investments, duration and severity of the decline in value, and our strategy and intentions for holding the investment. There were no other-than-temporary impairments recorded during the years ended December 31, 2024, 2023 and 2022. Equity Method of Accounting In circumstances where we have the ability to exercise significant influence over the operating and financial policies of a company in which we have an investment, we utilize the equity method of accounting for recording investment activity. 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 loss on equity method investment , on the consolidated statement of operations. 173 Table of Conten t s Property, Plant and Equipment, Net Property, plant and equipment are stated at historical cost less accumulated depreciation. Historical cost includes expenditures that are directly attributable to the acquisition of the items. 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: Buildings 39 years Software 3 years Laboratory equipment 5 to 7 years Furniture & fixtures 5 years IT equipment 3 years 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. 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. Recoverability is measured by a comparison of the carrying amount to the future net cash flows that the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the projected undiscounted future cash flows arising from the assets using a discount rate determined by management to be commensurate with the risk inherent to our current business model. Asset Acquisitions and Business Combinations We make certain judgments to determine whether transactions should be accounted for as acquisitions of assets or as business combinations. If it is determined that substantially all of the fair value of gross assets acquired in a transaction is concentrated in a single asset (or a group of similar assets), the transaction is treated as an acquisition of assets. We evaluate the inputs, processes, and outputs associated with the acquired set of activities and assets. If the assets in a transaction include an input and a substantive process that together significantly contribute to the ability to create outputs, the transaction is treated as an acquisition of a business. In transactions accounted for as asset acquisitions, the cost of an asset acquisition, including transaction costs, are allocated to identifiable assets acquired and liabilities assumed based on a relative fair value basis. Goodwill is not recognized in an asset acquisition. Any difference between the cost of an asset acquisition and the fair value of the net assets acquired is allocated to the non-monetary identifiable assets based on their relative fair values. In an asset acquisition, upfront payments allocated to in-process research and development projects at the acquisition date are expensed unless there is an alternative future use. In addition, product development milestones are expensed upon achievement. Any contingent consideration, such as payments upon achievement of various developmental, regulatory, and commercial milestones, generally is not recognized at the acquisition date. Business combinations are accounted for using the acquisition method of accounting, which requires that assets acquired and liabilities assumed generally be recorded at their fair values as of the acquisition date. Excess of consideration over the fair value of net assets acquired is recorded as goodwill. Estimating fair value requires us to make significant judgments and assumptions. We perform impairment testing of goodwill annually or more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. Acquisition costs related to a business combination are expensed as incurred. 174 Table of Conten t s Contingent consideration incurred in connection with a business combination are recorded at their fair values on the acquisition date and re-measured at their fair values each subsequent reporting period until the related contingencies are resolved. The resulting changes in fair value are recorded as research and development expense, on the consolidated statements of operations and comprehensive loss. Changes in fair value reflect changes to our assumptions regarding probabilities of successful achievement of related milestones, the timing in which the milestones are expected to be achieved, and the discount rate used to estimate the fair value of the obligation. Common Control Transactions Transactions between us and entities where Dr. Soon-Shiong and his affiliates are the controlling stockholders are accounted for as common control transactions whereby the net assets acquired or transferred are accounted at their carrying value. 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 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 IPR&D acquired in a business combination, 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. IPR&D acquired in an asset acquisition is expensed immediately. 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 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. Patents Patent costs, including related legal costs, are expensed as incurred and recorded in selling, general and administrative expense, on the consolidated statement of operations. Cloud Computing Arrangement The company capitalizes implementation costs under a cloud computing arrangement that is a service contract in line with its policy for internal-use software. Costs incurred during the application development stage related to the implementation of the hosting arrangement are capitalized and included in prepaid expenses and other current assets and other assets, on the consolidated balance sheet. Amortization of capitalized implementation costs is recognized on a straight-line basis over the shorter of the estimated useful life or the terms of the underlying hosting arrangement when it is ready for its intended use. Costs related to preliminary project activities and post-implementation activities are expensed as incurred. 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. We use a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires us to use observable inputs when available, and to minimize the use of unobservable inputs, when determining fair value. The three tiers are defined as follows: • Level 1—Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets at the measurement date. Since valuations are based on quoted prices that are readily and regularly available in an active market, the valuation of these products does not entail a significant degree of judgment. Our Level 1 assets consist of bank deposits, money market funds, and marketable equity securities. 175 Table of Conten t s • Level 2—Observable inputs other than quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities. Our Level 2 assets consist of corporate debt securities including commercial paper, government-sponsored securities, and corporate bonds, as well as foreign municipal securities. • Level 3—Valuations based on inputs that are unobservable and significant to the overall fair value measurement. We utilize a third-party pricing service to assist in obtaining fair value pricing for our investments in marketable debt securities. Inputs are documented in accordance with the fair value disclosure hierarchy. The fair values of financial instruments other than marketable securities and cash and cash equivalents are determined through a combination of management estimates and third-party valuations. During the years ended December 31, 2024, 2023 and 2022, no transfers were made into or out of the Level 1, 2 or 3 categories. We will continue to review the fair value inputs on a quarterly basis. Collaboration Arrangements 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 joint operating activity. These arrangements involve two or more parties who are active participants in the activity and are exposed to significant risks and rewards dependent on the commercial success of the activity. This assessment is performed throughout the life of the arrangement based on changes in the responsibilities of all parties in the arrangement. 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 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. The amounts owed to a collaboration partner are classified as research and development expense. Our collaboration arrangements require us to acquire certain equipment for exclusive use in the joint operating activities. These equipment purchases do not have an alternative use and are therefore expensed as incurred within research and development expense. Our collaboration arrangements are further discussed in Note 8 “Collaboration and License Agreements and Acquisition.” Preclinical and Clinical Trial Accruals As part of the process of preparing the consolidated financial statements, we are required to estimate expenses resulting from obligations under contracts with vendors, clinical research organizations and consultants. The financial terms of these contracts vary and may result in payment flows that do not match the periods over which materials or services are provided under such contracts. We estimate clinical trial and research agreement-related expenses based on the services performed, pursuant to contracts with research institutions and clinical research organizations and other vendors that conduct clinical trials and research on our behalf. In accruing clinical and research-related fees, we estimate the time period over which services will be performed and activity expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate, we will adjust the accrual accordingly. Payments made under these arrangements in advance of the receipt of the related services are recorded as prepaid expenses until the services are rendered. Transactions with Related Parties As outlined in Note 12 “Related-Party Debt” and Note 13 “Related-Party Agreements,” we have various agreements with related parties. These arrangements can be billed and settled in cash monthly, billed quarterly and settled in cash the following month, or estimated in advance and collected or paid upfront based on expected utilization. Monthly accruals are made for all quarterly billing arrangements. 176 Table of Conten t s 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. The right-of-use asset represents the right to use the leased asset for 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. 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. Prospectively, we will remeasure the lease liability at the net present value of the remaining lease payments using the same incremental borrowing rate that was in effect as of the lease commencement or transition date. Operating lease right-of-use assets also include any rent paid prior to the commencement date, less any lease incentives received, and initial direct costs incurred. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. We determine the lease term by assuming the exercise of renewal options that are reasonably assured. The exercise of lease renewal options is at our sole discretion. 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. Lease expense also includes amounts relating to variable lease payments. Variable lease payments include amounts relating to common area maintenance and real estate taxes. We do not recognize right-of-use assets and lease liabilities for qualifying short-term leases with an initial lease term of 12 months or less at lease inception. Such leases are expensed on a straight-line basis over the lease term. The lease term includes the non-cancellable period of the lease and any additional periods covered by either options to renew or not to terminate when the company is reasonably certain to exercise. The depreciable life of operating right-of-use-assets and leasehold improvements is limited by the expected lease term. Warrants 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 480 and 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, 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 recorded as a non-cash gain or loss in other income (expense), net , on the consolidated statement of operations. The fair value of the warrants was estimated using the Black-Scholes option pricing model. 177 Table of Conten t s Fair Value Option Election The company elected to apply the FVO method of accounting in accordance with ASC 825 and accounts for certain of its notes and embedded derivatives at fair value as a single instrument in accordance with ASC 815. The notes for which the FVO is elected are recorded at fair value upon the date of issuance and subsequently remeasured to fair value at each reporting period. Changes in the fair value of the notes accounted for at fair value are recorded as a component of other income (expense), net, on the consolidated statement of operations. Any changes in fair value caused by instrument-specific credit risk are recorded separately in other comprehensive income (loss), on the consolidated statement of comprehensive loss. The cumulative amount previously recorded in other comprehensive income (loss) resulting from changes in the instrument-specific credit risk for extinguished notes are reclassified and reported in current earnings on the consolidated statement of operations. All costs associated with the issuance of the convertible promissory note accounted for using the FVO were expensed upon issuance. The company has applied the FVO on the $ 505.0 million December 2024 Promissory Note and $ 30.0 million March 2023 Promissory Note prior to its extinguishment on December 29, 2023. During the year ended December 31, 2024, the company recorded $ 1.2 million of changes in fair value related to instrument-specific credit risk. See Note 12 “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. 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. Income Taxes 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. Deferred tax assets and liabilities are measured using the tax rates that are expected to apply to taxable income for the years in which those tax assets and liabilities are expected to be realized or settled. We record valuation allowances to reduce deferred tax assets to the amount we believe is more likely than not to be realized. 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 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, 2024 and 2023. Stock Repurchases 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 (as defined in the RIPA) from us for a gross purchase price of $ 200.0 million paid on closing and acquired additional Revenue Interests from us for a gross purchase price of $ 100.0 million paid on May 13, 2024. Under the 178 Table of Conten t s 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 was initially measured at fair value and is remeasured to fair value at each reporting date until the derivative is settled. On December 10, 2024, the company and Nant Capital entered into a second amended and restated promissory note (the $ 505.0 million December 2024 Promissory Note) for which the FVO method of accounting was elected. As such, the bifurcation of the embedded derivative is not required. The embedded derivative is now included within the fair value of the second amended and restated promissory note recorded within related-party convertible note payable at fair value , on the consolidated balance sheet. 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 income (expense), net , on the consolidated statement of operations. 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 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. The company classifies its research and development expenses as either external or internal. The company’s external research and development expenses support its various preclinical and clinical programs. The company’s internal research and development expenses include payroll and benefits expenses, facilities and equipment expense, and other indirect research and development expenses incurred in support of its research and development activities. The company’s external and internal resources are not directly tied to any one research or drug discovery program and are typically deployed across multiple programs and are not allocated to specific product candidates or development programs. Included in research and development costs are clinical trial and research expenses based on the services performed pursuant to contracts with research institutions and clinical research organizations and other vendors that conduct clinical trials and research on our behalf. We record accruals for estimated costs under these contracts. When evaluating the adequacy of the accrued liabilities, we analyze the progress of the preclinical studies or clinical trials, including the phase or completion of events, invoices received, contracted costs and purchase orders. Significant judgments and estimates are made in determining the accrued balances at the end of any reporting period based on the facts and circumstances known at that time. Although we do not expect the estimates to be materially different from the amounts actually incurred, if the estimates of the status and timing of services performed differ from the actual status and timing of services performed, we may report amounts that are too high or too low in any particular period. Actual results could differ from our estimates. We adjust the accruals in the period when actual costs become known. 179 Table of Conten t s Stock-Based Compensation 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 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. For awards subject to performance-based vesting conditions, we assess the probability of the individual milestones under the award being achieved and stock-based compensation expense is recognized over the service period using the graded vesting method once management believes the performance criteria is probable of being met. 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 16 “Stock-Based Compensation” for more information. 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, the change in fair value of convertible note resulting from a change in the instrument-specific credit risk, net of income taxes and foreign currency translation adjustments. Noncontrolling Interests Noncontrolling interests are recorded for the entities that we consolidate but are not wholly-owned by the company. Noncontrolling interests are classified as a separate component of equity on the consolidated balance sheet and consolidated statement of stockholders’ deficit. Additionally, net loss attributable to noncontrolling interests is reflected separately from consolidated net loss on the consolidated statement of operations and the consolidated statement of stockholders’ deficit. We record the noncontrolling interests’ share of loss based on the percentage of ownership interest retained by the respective noncontrolling interest holders. 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, 2024, 2023 and 2022, respectively, and NANTibody, of which we controlled 100.0 % as of December 31, 2024 and 2023, and 60.0 % as of December 31, 2022, 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, 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, 2024 and 2023, there were no outstanding advances due from GlobeImmune under the promissory note agreement. During the years ended December 31, 2024, 2023, and 2022, GlobeImmune recognized no revenue and recognized operating expenses of $ 0.3 million during the years ended December 31, 2024 and 2023, and $ 0.5 million during the year ended December 31, 2022. As of both December 31, 2024 and 2023, the consolidated balance sheets included approximately $ 1.4 million of total assets that can only be used to settle obligations of GlobeImmune, and immaterial liabilities, respectively, related to GlobeImmune. The creditors of GlobeImmune do not have recourse to the general credit of the primary beneficiary. Foreign Currencies We have operations and hold assets in Italy and South Korea. The functional currency of the subsidiary in Italy is the Euro, based on the nature of the transactions occurring within this entity, and accordingly, assets and liabilities of this subsidiary are translated into U.S. dollars at exchange rates prevailing as of the balance sheet dates, while the operating results are translated into U.S. dollars using the average exchange rates for the period correlating with those operating results. Adjustments resulting from translating the financial statements of the foreign subsidiary into U.S. 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 income (expense), net, on the consolidated statement of operations. 180 Table of Conten t s Basic and Diluted Net Loss per Share of Common Stock Basic net loss per share is calculated by dividing the net loss attributable to ImmunityBio common stockholders by the weighted-average number of common shares outstanding for the period. Diluted loss per share is computed by dividing net loss attributable to ImmunityBio common stockholders by the weighted-average number of common shares, including the number of additional shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. The following table reflects the calculation of basic and diluted loss per common share (in thousands, except per share data): Year Ended December 31, 2024 2023 2022 Net loss per ImmunityBio common share – basic Numerator: Net loss attributable to ImmunityBio common stockholders $ ( 413,564 ) $ ( 583,196 ) $ ( 416,567 ) Denominator: Weighted-average number of common shares outstanding – basic 697,312 508,636 399,900 Net loss per ImmunityBio common share – basic $ ( 0.59 ) $ ( 1.15 ) $ ( 1.04 ) Net loss per ImmunityBio common share – diluted Numerator: Net loss $ ( 413,645 ) $ ( 583,852 ) $ ( 417,320 ) Less: Net loss attributable to noncontrolling interests, net of tax ( 81 ) ( 656 ) ( 753 ) Add: Decrease in fair value of warrant liabilities ( 19,921 ) — — Numerator for net loss per ImmunityBio common share – diluted $ ( 433,485 ) $ ( 583,196 ) $ ( 416,567 ) Denominator: Weighted-average number of common shares outstanding – basic 697,312 508,636 399,900 Add: Dilutive effect of assumed exercise of “in-the-money” third-party warrants 3,131 — — Denominator for net loss per ImmunityBio common share – diluted 700,443 508,636 399,900 Net loss per ImmunityBio common share – diluted $ ( 0.62 ) $ ( 1.15 ) $ ( 1.04 ) Potentially dilutive securities, whose effect would have been antidilutive, were excluded from the computation of diluted net loss per share. The following table details the number of shares of common stock underlying those securities that were excluded from the computation of weighted-average number of common shares outstanding – diluted (shares in thousands): As of December 31, 2024 2023 2022 Related-party convertible notes 93,053 162,472 46,275 Outstanding stock options 15,408 9,820 9,263 Outstanding RSUs 5,945 7,504 6,551 Outstanding related-party warrants 1,638 1,638 1,638 Outstanding third-party warrants — 37,733 9,091 Total 116,044 219,167 72,818 The potentially dilutive securities shown in the table above exclude an option to purchase up to approximately $ 5.0 million of the company’s common stock pursuant to the SPOA entered in connection with the RIPA, as the exercise price cannot be determined until the date of exercise. See Note 15 “Stockholders’ Deficit” for more information. 181 Table of Conten t s Recent Accounting Pronouncements Application of New or Revised Accounting Standards – Adopted In June 2022, the FASB issued ASU 2022-03 , Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions , which clarifies 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. This ASU also clarifies that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction and introduces certain disclosure requirements for equity securities subject to such restrictions. We adopted this ASU on January 1, 2024 on a prospective basis with no impact on our consolidated financial statements. In March 2023, the FASB issued ASU 2023-01, Leases – Common Control Arrangements (Topic 842). This ASU provides updated guidance for accounting for leasehold improvements associated with common control leases. We adopted this ASU on January 1, 2024 on a prospective basis with no impact on our consolidated financial statements. 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 adopted this ASU on December 31, 2024 on a retrospective basis. See Note 19 “Segment and Geographic Information” for more information. Application of New or Revised Accounting Standards – Not Yet Adopted 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 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 this 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). This ASU is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the impact of this standard on our disclosures. In November 2024, the FASB issued ASU 2024-03, Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses , which requires that public business entities disclose additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods. This ASU is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. This ASU may be applied either on a prospective or retrospective basis. We are currently evaluating the impact of this standard on our disclosures. In November 2024, the FASB issued ASU 2024-04, Debt-Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments , which clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. This ASU is effective for fiscal years beginning after December 15, 2025 and interim reporting periods within those annual reporting periods, with early adoption permitted. We are currently evaluating the impact of this standard on our disclosures. Other recent authoritative guidance issued by the FASB (including technical corrections to the ASC) and the SEC during the year ended December 31, 2024 did not, or are not expected to, have a material effect on our consolidated financial statements. 182 Table of Conten t s 3. Revenues As discussed in Note 2 “Summary of Significant Accounting Policies , ” revenues are recognized in accordance with ASC 606. The following table presents our disaggregated revenue for the periods presented (in thousands): Year Ended December 31, 2024 2023 2022 Product revenue, net $ 14,150 $ — $ — Other revenues 595 622 240 Total revenue $ 14,745 $ 622 $ 240 Product Revenue, Net During the year ended December 31, 2024, our only source of product revenue has been from U.S. sales of ANKTIVA, which we began shipping to customers in May 2024. During the year ended December 31, 2024, approximately $ 1.6 million of gross-to-net adjustments have been recorded as a reduction of revenue on the consolidated statement of operations . As of December 31, 2024, approximately $ 0.2 million of allowances for prompt payment discounts, product returns and chargebacks were included in accounts receivable, net, and approximately $ 0.5 million related to accrued rebates, distributor fees and co-payment assistance were included in accrued expenses and other current liabilities, on the consolidated balance sheet. Other Revenues During the years ended December 31, 2024, 2023 and 2022, our primary sources of other revenues were bioreactors and related consumable product sales. 4. Inventories Inventories consist of the following (in thousands): As of December 31, 2024 2023 Raw materials $ — $ — Work-in-progress 7,505 — Finished goods 767 — Inventories $ 8,272 $ — We began capitalizing inventory costs associated with ANKTIVA after receiving FDA approval in April 2024 when it was determined that the inventory had a probable future economic benefit. Inventory is stated at the lower of cost or net realizable value and consists of raw materials, work-in-progress and finished goods. Cost is determined using a standard cost method, which approximates actual cost, and assumes a FIFO flow of goods. Inventory that is used for clinical development purposes is expensed in research and development expense , on the consolidated statement of operations when consumed. Cost of sales consists primarily of third-party manufacturing costs, distribution, and overhead costs related to sales of approved product subsequent to receiving regulatory approval. Cost of sales may also include costs related to excess or obsolete inventory adjustment charges, abnormal costs, unabsorbed manufacturing and overhead costs, and manufacturing variances. All costs associated with the production of ANKTIVA prior to receiving regulatory approval were expensed in research and development expense , on the consolidated statement of operations in the period incurred and therefore are not reflected in cost of sales. 183 Table of Conten t s The work-in-progress materials consists of bulk drug substance and drug product, which have a multi-year shelf life. When the bulk drug substance is manufactured into ANKTIVA drug product, those goods have a shelf life of two years from the date of manufacture. During September 2024, the shelf life of ANKTIVA drug product was extended to three years. The work-in-progress drug product gets converted to finished goods at the time of labeling. Our expectation is to sell finished goods at least twelve months prior to expiration. Due to our long manufacturing lead time, it was necessary to build up inventory in support of ANKTIVA forecasted sales. As a result of being in the early stages of the ANKTIVA product launch, the company is continuing to evaluate the length of its operating cycle. On a quarterly basis, the company analyzes its inventory levels for excess quantities and obsolescence (expiration), taking into account factors such as historical and anticipated future sales compared to quantities on hand and the remaining shelf life. As of December 31, 2024, we determined that a reserve related to ANKTIVA inventory for excess quantities and obsolescence was not required. In addition, since the FDA approval of ANKTIVA the company has not recorded any inventory write downs. 5. Financial Statement Details Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consist of the following (in thousands): As of December 31, 2024 2023 Prepaid services $ 7,762 $ 5,869 Prepaid research and development costs 5,815 7,847 Prepaid software license fees 2,687 2,100 Prepaid insurance 2,057 2,242 Prepaid rent 1,532 1,113 Prepaid equipment maintenance 1,448 1,183 Insurance premium financing asset 1,248 1,475 ERP system implementation cost 187 1,087 Insurance claims receivable — 1,149 Other 1,116 1,538 Prepaid expenses and other current assets $ 23,852 $ 25,603 Property, Plant and Equipment, Net Property, plant and equipment, net, consist of the following (in thousands): As of December 31, 2024 2023 Leasehold improvements $ 73,126 $ 72,552 Equipment 73,578 69,915 Construction in progress 86,417 84,436 Software 1,697 1,666 Furniture & fixtures 1,865 1,889 Gross property, plant and equipment 236,683 230,458 Less: Accumulated depreciation and amortization 99,589 84,376 Property, plant and equipment, net $ 137,094 $ 146,082 184 Table of Conten t s During the years ended December 31, 2024, 2023 and 2022, depreciation expense related to property, plant and equipment totaled $ 15.5 million, $ 16.5 million and $ 16.3 million, respectively. Goodwill and Intangible Assets, Net The gross carrying amounts, accumulated amortization and impairment of goodwill and intangible assets, net are as follows at the dates indicated (in thousands): December 31, 2024 Weighted- Average Life (in years) Gross Carrying Amount Accumulated Amortization Accumulated Impairment Net Carrying Amount Definite-lived: Favorable leasehold rights 7.1 $ 20,398 $ ( 5,864 ) $ — $ 14,534 Indefinite-lived: Goodwill 910 — — 910 IPR&D 1,375 — ( 886 ) 489 Total indefinite-lived assets 2,285 — ( 886 ) 1,399 Goodwill and intangible assets, net $ 22,683 $ ( 5,864 ) $ ( 886 ) $ 15,933 December 31, 2023 Weighted- Average Life (in years) Gross Carrying Amount Accumulated Amortization Accumulated Impairment Net Carrying Amount Definite-lived: Favorable leasehold rights 8.1 $ 20,398 $ ( 3,825 ) $ — $ 16,573 Indefinite-lived: IPR&D 1,406 — ( 886 ) 520 Goodwill and intangible assets, net $ 21,804 $ ( 3,825 ) $ ( 886 ) $ 17,093 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 8 “Collaboration and License Agreements and Acquisition” for more information. We recorded amortization expense of our definite-lived intangible assets of $ 2.0 million during the years ended December 31, 2024 and 2023, respectively, and $ 1.9 million, during the year ended December 31, 2022 in research and development expense , on the consolidated statements of operations. Indefinite-Lived Intangible Assets Goodwill In September 2024, we entered into an asset purchase agreement with an unrelated party pursuant to which the company acquired the rights to hire its workforce and purchase certain office equipment in exchange for consideration of $ 1.0 million, net of transaction costs. The transaction was accounted for as a business combination. The fair value of the acquired identifiable net assets was $ 0.1 million. We recognized the remaining $ 0.9 million as goodwill. No goodwill impairment was recognized for the year ended December 31, 2024. IPR&D 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 write down of the carrying value of 185 Table of Conten t s Tarmogen to zero . No such impairments were recorded during the years ended December 31, 2024 and 2022. As of December 31, 2024 and 2023, the company had indefinite-lived IPR&D intangible assets of $ 0.5 million, which were obtained from business acquisitions. Future amortization expense associated with our definite-lived intangible assets, net is as follows (in thousands): Years ending December 31: Definite-lived Intangible Assets 2025 $ 2,040 2026 2,040 2027 2,040 2028 2,040 2029 2,040 Thereafter 4,334 Total $ 14,534 Convertible Note Receivable 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 %). 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. We are required to pay a single-digit royalty on net sales of the licensed products on a country-by-country basis. 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 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; and (b) when we accelerate the maturity of the note upon the occurrence of an event of default. No other terms and conditions of the promissory note were modified. Concurrently, we also entered into a first amendment to the exclusive license agreement with Riptide and extended the achievement dates for certain clinical trial milestones related to the licensed products. 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. The convertible note receivable balance was $ 7.1 million and $ 6.9 million, which included accrued interest of $ 2.1 million and $ 1.9 million as of December 31, 2024 and 2023, respectively. Accrued Expenses and Other Liabilities Accrued expenses and other liabilities consist of the following (in thousands): As of December 31, 2024 2023 Accrued professional and service fees $ 16,849 $ 9,829 Accrued bonus 10,346 11,350 Accrued compensation 4,679 6,241 Accrued research and development costs 3,002 7,700 Accrued preclinical and clinical trial costs 2,876 4,218 Financing obligation – current portion 1,248 1,475 Accrued construction costs 628 1,179 Other 952 716 Accrued expenses and other liabilities $ 40,580 $ 42,708 186 Table of Conten t s Interest and Investment Income (Loss), Net Interest and investment income (loss), net consists of the following (in thousands): Year Ended December 31, 2024 2023 2022 Investment accretion income (amortization expense), net $ 6,249 $ 1,844 $ ( 1,486 ) Interest income 2,400 863 2,708 Unrealized losses from equity securities ( 632 ) ( 1,591 ) ( 4,190 ) Net realized (losses) gains on investments ( 42 ) 15 ( 122 ) Interest and investment income (loss), net $ 7,975 $ 1,131 $ ( 3,090 ) Interest income includes interest from marketable securities, convertible note receivable, other assets, and on bank deposits. Investment accretion income (amortization expense), net includes accretion of discounts (amortization of premiums) from securities classified as cash equivalents and marketable debt securities. Interest expense Interest expense consists of the following (in thousands): Year Ended December 31, 2024 2023 2022 Interest expense on related-party notes payable $ 92,001 $ 86,453 $ 47,145 Amortization of related-party notes discounts 22,587 42,396 16,282 Other interest expense 82 85 88 Interest expense (including amounts with related parties) $ 114,670 $ 128,934 $ 63,515 6. Financial Instruments Investments in Marketable Debt Securities As of December 31, 2024, 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, 2024 Weighted- Average Remaining Contractual Life (in years) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Current: U.S. Treasury securities 0.3 $ 6,094 $ 2 $ — $ 6,096 As of December 31, 2024, no marketable debt securities were in an unrealized loss position. 187 Table of Conten t s As of December 31, 2023, the weighted-average remaining contractual life, amortized cost, gross unrealized gains, gross unrealized losses, and fair value of marketable debt securities, which were considered as available-for-sale, by type of security were as follows (in thousands): December 31, 2023 Weighted- Average Remaining Contractual Life (in years) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Current: Foreign bonds 0.8 $ 54 $ — $ — $ 54 Mutual funds 40 — ( 1 ) 39 Current portion 94 — ( 1 ) 93 Noncurrent: Foreign bonds 3.3 939 — ( 48 ) 891 Total $ 1,033 $ — $ ( 49 ) $ 984 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 as of December 31, 2023 were as follows (in thousands): December 31, 2023 Less than 12 months More than 12 months Estimated Fair Value Gross Unrealized Losses Estimated Fair Value Gross Unrealized Losses Mutual funds $ 39 $ ( 1 ) $ — $ — Foreign bonds 891 ( 48 ) — — Total $ 930 $ ( 49 ) $ — $ — During the years ended December 31, 2024, 2023 and 2022, we evaluated our securities for other-than-temporary impairment and did not recognize any other-than-temporary impairment losses. Investments in Marketable Equity Securities As of December 31, 2024 and 2023, we held investments in marketable equity securities with readily determinable fair values of $ 0.3 million and $ 0.9 million, respectively. During the years ended December 31, 2024, 2023 and 2022, unrealized losses recorded on these securities totaled $ 0.6 million, $ 1.6 million, and $ 4.2 million, respectively, in interest and investment income (loss), net , on the consolidated statements of operations. Investment in Other Equity Security In August 2024, the company entered into a SAFE with an unrelated party in exchange for the right to acquire certain shares of the investee. Upon the closing of equity financing by the investee prior to the termination of the SAFE, the SAFE will convert into preferred shares. We elected to apply the measurement alternative under FASB ASC Topic 321, Investments—Equity Securities (ASC 321), pursuant to which we measure our investment in the SAFE at cost, less impairment. As of December 31, 2024, we recorded an investment in the SAFE of $ 0.7 million in other assets , on the consolidated balance sheet. We evaluate this investment for any indications of impairment in value on a quarterly basis. No factors indicative of impairment were identified during the year ended December 31, 2024. 188 Table of Conten t s 7. Fair Value Measurements Recurring Valuations Financial assets and liabilities measured at fair value on a recurring basis are summarized below (in thousands): Fair Value Measurements at December 31, 2024 Total Level 1 Level 2 Level 3 Assets at Fair Value: Current: Cash and cash equivalents $ 143,428 $ 143,428 $ — $ — U.S. Treasury securities 6,096 6,096 — — Equity securities 285 285 — — Total assets measured at fair value $ 149,809 $ 149,809 $ — $ — Liabilities at Fair Value: Current: Contingent consideration $ ( 19 ) (1) $ — $ — $ ( 19 ) Noncurrent: Related-party convertible note payable at fair value ( Note 12 ) ( 461,877 ) — — ( 461,877 ) Derivative liabilities ( Note 11 ) ( 25,800 ) — — ( 25,800 ) Warrant liabilities ( Note 14 ) ( 8,575 ) — — ( 8,575 ) Stock option purchase liability ( Note 11 ) ( 320 ) — — ( 320 ) Total liabilities measured at fair value $ ( 496,591 ) $ — $ — $ ( 496,591 ) Fair Value Measurements at December 31, 2023 Total Level 1 Level 2 Level 3 Assets at Fair Value: Current: Cash and cash equivalents $ 265,453 $ 265,453 $ — $ — Equity securities 916 916 — — Foreign bonds 54 — 54 — Mutual funds 39 39 — — Noncurrent: Foreign bonds 891 — 891 — Total assets measured at fair value $ 267,353 $ 266,408 $ 945 $ — Liabilities at Fair Value: Current: Contingent consideration $ ( 20 ) (1) $ — $ — $ ( 20 ) Noncurrent: Warrant liabilities ( Note 14 ) ( 118,770 ) — — ( 118,770 ) Derivative liabilities ( Note 11 and Note 12 ) ( 35,333 ) — — ( 35,333 ) Stock option purchase liability ( Note 11 ) ( 819 ) — — ( 819 ) Total liabilities measured at fair value $ ( 154,942 ) $ — $ — $ ( 154,942 ) 189 Table of Conten t s _______________ (1) 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 9 “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): Year Ended December 31, 2024 2023 2022 Fair value, beginning of year $ ( 20 ) $ ( 19 ) $ ( 409 ) Consideration paid — — 339 Net decrease (increase) in fair value 1 ( 1 ) 51 Fair value, end of year $ ( 19 ) $ ( 20 ) $ ( 19 ) 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. Except for the impairments discussed in Note 5 “Financial Statement Details—Goodwill and 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, 2024, 2023 and 2022. We measured the fair value of the promissory notes and the embedded conversion features as of December 10, 2024, December 29, 2023 and September 11, 2023, respectively, upon debt amendments to determine the accounting treatment, using a “with and without” method. We used binomial lattice models for the “with” scenario and discounted cash flow analyses for the “without” scenario. Since certain of the factors analyzed are considered to be unobservable inputs, both the lattice model and the discounted cash flow model are considered to be a Level 3 valuation. See Note 12 “Related-Party Debt” for more information. 8. Collaboration and License Agreements and Acquisition Collaboration Agreements National Cancer Institute The company and its subsidiaries began their relationship with HHS, as represented by the NCI of the NIH in 2015. Pursuant to the CRADAs, the NCI provides scientific staff and other support necessary to conduct research and related activities as described in the CRADAs. During the term of the initial and amended CRADAs, we collaborated with the NCI on the preclinical and clinical development of our proprietary adenovirus technology expressing TAAs for cancer immunotherapy. In 2021, the CRADA was amended and the research plan was modified to include the preclinical and clinical development of ImmunityBio’s proprietary adenovirus platform expressing TAAs, proprietary agent ANKTIVA and derivatives, an antibody-based cytokine fusion protein and derivatives and/or TxM product candidates, proprietary recombinant NK cells and mAbs, proprietary adjuvants, and other proprietary agents owned or controlled by ImmunityBio for cancer immunotherapy. The term of the CRADA was extended through May 2026. Under this agreement, we agreed to pay NCI funding totaling $ 1.3 million per year, payable in semi-annual installments each year through 2025. During the years ended December 31, 2024 and 2023 we recorded $ 1.3 million, and $ 1.2 million during the year ended December 31, 2022 in research and development expense, on the consolidated statements of operations. 190 Table of Conten t s 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, ANKTIVA and derivatives, an antibody-based cytokine fusion protein and derivatives and/or TxM product candidates, proprietary recombinant NK cells and mAbs, and other proprietary agents owned or controlled by ImmunityBio as contemplated in the research plan for cancer immunotherapy. Under the CRADA, any party may unilaterally terminate the agreement by providing timely advance written notice to the other party before the desired termination date. Pursuant to the terms of the CRADA, we have an option to elect to negotiate an exclusive or non-exclusive commercialization license to any inventions discovered in the performance of the CRADA. The parties jointly own any inventions and materials that are jointly produced by employees of both parties in the course of performing activities under the CRADA. Amyris Joint Venture In 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 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. The joint venture agreement stipulates the initial terms for equal representation in the management of the newly-formed joint venture. The joint venture is managed by a board of directors consisting of four directors: two appointed by the company and two appointed by Amyris. Both parties agreed to make additional capital contributions in cash, in proportion to their respective interests, as determined by the board of directors of the joint venture. We considered the joint venture entity as a VIE and determined that we are not the primary beneficiary of the VIE. We account for our investment in the joint venture using the equity method of accounting. During the years ended December 31, 2023 and 2022, we recorded our 50 % share of net losses from the joint venture totaling $ 7.5 million and $ 12.1 million, respectively, in other income (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, 2024, the carrying amount of our equity investment in the joint venture was zero . License Agreements 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 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 receptor superagonist. 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. We made annual license maintenance fee payments of $ 2.25 million in 2024 and 2023, and $ 1.75 million in 2022. During the years ended December 31, 2024, 2023 and 2022, we recorded $ 2.3 million, $ 2.0 million, and $ 1.0 million, respectively, in research and development expense , on the consolidated statements of operations. 191 Table of Conten t s AAHI Agreements In 2021, ImmunityBio and AAHI entered into several agreements, including an RNA vaccine platform license agreement, an adjuvant formulation license agreement, and a sponsored research agreement (collectively, the “AAHI Agreements”). ImmunityBio is no longer pursuing development of the AAHI RNA platform and related technology it had licensed from AAHI in 2021. During the second half of 2024, the parties reached an agreement whereby ImmunityBio would owe no future payments to AAHI under the AAHI Agreements, ImmunityBio would return the licenses to AAHI, the AAHI Agreements were terminated, and each party mutually released and had no continuing obligations to the other. With respect to the license agreements, we recorded $ 2.3 million, $ 4.5 million, and $ 1.8 million, respectively, in research and development expense , on the consolidated statements of operations during the years ended December 31, 2024, 2023 and 2022. With respect to the sponsored research agreement, we recorded no expense and $ 1.2 million, respectively, in research and development expense , and $ 3.7 million in loss on equity method investment , on the consolidated statements of operations related to the sponsored research agreement during the years ended December 31, 2024, 2023 and 2022. Acquisition Dunkirk Facility Leasehold Interest On February 14, 2022, we completed the acquisition of the Dunkirk Facility (approximately 409,000 rentable square feet) from Athenex, which we believe has the potential to 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. The total consideration for the acquisition was approximately $ 40.5 million, including a cash payment of $ 40.0 million, and transaction costs of approximately $ 0.5 million. The following table summarizes the fair value of assets acquired as of the acquisition date (in thousands): Construction in progress $ 10,043 Leasehold improvements 6,253 Definite-lived intangible assets (1) 21,229 Other depreciable assets and prepaid expenses 2,983 Total consideration $ 40,508 _______________ (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 the FSMC as landlord. 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 192 Table of Conten t s 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. In addition, and related to the delayed completion of the facility as described above, in November 2024 we received written notice from our landlord alleging non-compliance with the initial employee headcount requirement of our lease for the Dunkirk Facility. While we are seeking to resolve this matter expeditiously, there can be no assurance that we will succeed in doing so, and we may lose access to the Dunkirk Facility. Although we believe that governmental funding will assist in funding a portion of the further buildout 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, 2024, 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 buildout 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 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. 9. Commitments and Contingencies Contingent Consideration Related to Business Combinations VivaBioCell, S.p.A. 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. VivaBioCell develops bioreactors and products based on cell culture and tissue engineering in Italy. In connection with our acquisition of VBC, we are obligated to pay the former owners contingent consideration upon the achievement of certain milestones related to the GMP-in-a-Box technology. If a government agency unconditionally approves the GMP-in-a-Box technology for commercial sale (the regulatory milestone) in the future, we will be obligated to pay an additional approximately $ 2.1 million to the former owners. Altor BioScience, 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 ANKTIVA 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. As of December 31, 2024, Dr. Soon-Shiong, our Founder, 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. Litigation From time to time, we may be involved in various claims and legal proceedings relating to claims arising out of our operations. We are not currently a party to any legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business. If we are served with any such complaints, we will assess at that time any contingencies for which we may need to reserve. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors. 193 Table of Conten t s Altor BioScience, LLC Litigation In 2017, NantCell announced it had entered into a definitive merger agreement to acquire Altor. An action captioned Gray v. Soon-Shiong, et al. was filed in the Delaware Court of Chancery by plaintiffs Clayland Boyden Gray (Gray) and Adam R. Waldman. The plaintiffs, two minority stockholders, asserted claims against the company and other defendants for (1) breach of fiduciary duty and (2) aiding and abetting breach of fiduciary duty and filed a motion to enjoin the merger. The court denied the motion and permitted the merger to close. Subsequent to the close of the merger, in 2017 the plaintiffs (joined by two additional minority stockholders, Barbara Sturm Waldman and Douglas E. Henderson (Henderson)) filed a second amended complaint, including appraisal claims, and which the defendants subsequently moved to dismiss. In a second action, Dyad Pharmaceutical Corporation (Dyad) filed a petition in the Delaware Court of Chancery for appraisal in connection with the merger. 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 from the action. The following claims remained: (a) the appraisal claims by all plaintiffs and Dyad (against Altor BioScience, LLC), and (b) Henderson’s claims for breach of fiduciary duty and aiding and abetting breach of fiduciary duty. In 2019, the court issued a written order implementing its ruling on the defendants’ motions (the Implementing Order). In the Implementing Order, the court confirmed that all fiduciary duty claims brought by Gray, both individually and as trustee of the Gordon Gray Trust f/b/o C. Boyden Gray, were dismissed. The plaintiffs then moved for leave to file a third amended complaint to add two former Altor stockholders as plaintiffs and a fiduciary duty claim on behalf of a purported class of former Altor stockholders, which the defendants opposed. In 2020, the court granted the plaintiffs’ motion, and the plaintiffs filed the third amended complaint. In 2020, the defendants answered the third amended complaint and asserted counterclaims against the plaintiffs. The defendants sought damages for attorneys’ fees and costs incurred as a result of the breaches of “standstill” agreements and of stockholder releases. The plaintiffs filed an answer denying the counterclaims and asserting defenses. The shares of the former Altor stockholders seeking appraisal met the definition of dissenting shares under the merger agreement and were not entitled to receive any portion of the merger consideration at the closing date, given that those shares were the subject of the above-described appraisal claims. In late March 2022, the company agreed to the terms of a settlement with the appraisal petitioners, without any admission of liability or fault. The settlement provided that in exchange for complete releases, the appraisal petitioners, who as a group held 3,167,565 dissenting Altor shares, collectively would receive an aggregate of 2,229,296 shares of the company’s common stock issued in a private placement, plus an aggregate of $ 21.13 in cash in lieu of fractional shares. The company’s Board of Directors approved the settlement and stock issuance in April 2022, and the court approved the settlement and dismissed the appraisal petitioners’ claims on July 9, 2022. On July 9, 2022, the company issued 2,229,296 shares of its common stock with an aggregate market value of $ 10.7 million, based on the closing price of its common stock on the Nasdaq as of July 8, 2022, to the appraisal petitioners pursuant to the court-approved settlement agreement. In late April 2022, the company also agreed to the terms of a settlement with the putative class plaintiffs without any admission of liability or fault. In exchange for class-wide releases, the company committed to make a settlement payment of $ 5.0 million in cash by December 31, 2022. On December 8, 2022, the Delaware Court of Chancery entered a final judgment approving the settlement, and the company timely made the $ 5.0 million settlement payment. Sorrento Therapeutics, Inc. Litigation 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 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. 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. 194 Table of Conten t s Also in 2019, the company and Dr. Soon-Shiong filed cross-claims in the Superior Court action against Sorrento and its Chief Executive Officer Henry Ji, asserting claims for fraud, breach of contract, breach of the covenant of good faith and fair dealing, tortious interference with contract, unjust enrichment, and declaratory relief. Our claims alleged that Dr. Ji and Sorrento breached the terms of an exclusive license agreement between the company and Sorrento related to Sorrento’s antibody library and that Sorrento did not perform its obligations under the exclusive license agreement. The Superior Court ruled that the company’s claims should be pursued in arbitration and that Dr. Soon-Shiong’s claims could be pursued in Superior Court. In 2019, the company, along with NANTibody, filed an arbitration against Sorrento and Dr. Ji asserting our claims relating to the exclusive license agreement. Sorrento filed counterclaims against the company and NANTibody in the arbitration. The hearings in the NANTibody arbitration commenced in April 2021 and concluded in early August 2021. After post-hearing briefing was concluded, the parties were notified on November 30, 2021 that the arbitrator in the NANTibody arbitration had passed away. A substitute arbitrator was appointed on February 25, 2022, and the parties worked with the substitute arbitrator to conclude the proceedings. Additional hearing sessions were held in May and July 2022, and summations took place on August 2, 2022. On December 2, 2022, the arbitrator issued a final award finding that Sorrento had breached the two exclusive license agreements with NantCell and NANTibody. The arbitrator awarded NantCell approximately $ 156.8 million and NANTibody approximately $ 16.7 million, plus post-award interest accruing at a daily rate. On December 21, 2022, NantCell and NANTibody filed petitions in the Superior Court to confirm the arbitration award; on January 16, 2023, Sorrento filed a response to the petitions and moved to vacate the award. On February 7, 2023, after a hearing, the Superior Court entered orders confirming the arbitration award and denying Sorrento’s motion to vacate. The Superior Court entered judgments against Sorrento in the aggregate amount of approximately $ 176.4 million plus 10 % post-judgment interest, of which approximately $ 159.4 million 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 United States District Court for the Southern District of Texas, In re: Sorrento Therapeutics, Inc., et al., Case No. 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 2 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. Ltd. Arbitration In 2020, we received a Request for Arbitration before the International Chamber of Commerce, International Court of Arbitration. The arbitration relates to a license, development, and commercialization agreement that Altor entered into with Beike in 2014, which agreement was amended and restated in 2017, pursuant to which Altor granted to Beike an exclusive license to use, research, develop and commercialize products based on ANKTIVA in China for human therapeutic uses. In the arbitration, Beike is asserting a claim for breach of contract under the license agreement. Among other things, Beike alleges that we failed to 195 Table of Conten t s use commercially reasonable efforts to deliver to Beike materials and data related to ANKTIVA. Beike is seeking specific performance and declaratory relief for the alleged breaches. On September 25, 2020, the parties entered into a standstill and tolling agreement (standstill 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 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 served its Statement of Claim on March 22, 2024, and the company served its Statement of Defense and Counterclaim on June 21, 2024, and Beike served its Statement of Defense to the Counterclaim on August 2, 2024. After the parties completed discovery, Beike served its Reply and Defense to Counterclaim on January 17, 2025. The hearing in the arbitration is scheduled to begin on June 9, 2025. Given that the proceeding is in the pre-hearing stages, 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 our counterclaims, vigorously. Securities Class Action On June 30, 2023, a putative securities class action complaint, captioned Salzman v. ImmunityBio, Inc. et al. , No. 3:23-cv-01216-GPC-VET, was filed in the United States 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 then product candidate, ANKTIVA with BCG for the treatment of adult patients with BCG-unresponsive NMIBC with CIS with or without papillary tumors, 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 CMOs and the prospects for regulatory approval of the BLA. The complaint did not specify the amount of damages being sought. 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, the lead plaintiff filed an amended complaint, which named the same defendants and asserted the same claims as the previous complaint. On January 8, 2024, the defendants filed a motion to dismiss the amended complaint. On June 20, 2024, the court issued an order granting in part and denying in part the motion to dismiss. On July 16, 2024, the lead plaintiff notified the court that he would proceed with his current pleading, and the defendants answered the complaint on August 29, 2024. On January 25, 2025, following a mediation and the parties’ agreement in principle to settle the securities class action for $ 10.5 million, the lead plaintiff filed an unopposed motion for preliminary approval of class action settlement. The settlement is subject to preliminary and final approval by the U.S. District Court for the Southern District of California. A preliminary approval hearing is scheduled for March 7, 2025. As a result of the foregoing, the company recorded legal settlement expense of $ 10.5 million in selling, general and administrative expense, on the consolidated statement of operations during the year ended December 31, 2024 and a corresponding amount in accrued expenses and other liabilities , on the consolidated balance sheet. The company believes that approximately $ 6.0 million of this amount will be paid by the company’s insurers, which will be recorded upon receipt. To the extent the court does not grant final approval of the settlement described above, 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. In this event and 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. Van Luven, Barbieri and Shin Derivative Actions On October 29, 2024, a shareholder derivative action was filed in the United States District Court for the Southern District of California against the members of our Board of Directors and certain officers, captioned Van Luven v. Soon-Shiong et al. , Case No. 3:24-cv-02014-GPC-VET. The plaintiff purports to bring the action derivatively on behalf of ImmunityBio, and ImmunityBio is a nominal defendant to the action. Stemming from the company’s May 11, 2023 disclosure that it had received an FDA CRL stating, among other things, that it could not approve the company’s BLA for its then product candidate, ANKTIVA with BCG for the treatment of adult patients with BCG-unresponsive NMIBC with CIS with or without papillary tumors, in its present form due to deficiencies related to its pre-license inspection of the company’s third-party CMOs, the derivative complaint 196 Table of Conten t s alleges that the individual defendants authorized or permitted materially false and misleading statements and/or omitted material adverse facts regarding ImmunityBio’s third-party CMOs and the prospects for regulatory approval of the ANKTIVA BLA. The derivative complaint asserts claims for violations of Section 14(a) of the Exchange Act as well as claims for breach of fiduciary duty, unjust enrichment, and waste of corporate assets. The derivative complaint seeks unspecified damages on behalf of the company, disgorgement or restitution, declaratory relief, and an award of costs and expenses to the derivative plaintiff, including attorneys’ fees. The court entered an order extending the defendants’ deadline to respond to the complaint to April 18, 2025. On February 25, 2025, a second shareholder derivative action was filed in the United States District Court for the Southern District of California against certain members of our Board of Directors and certain officers, captioned Barbieri v. Soon-Shiong, et al ., Case No. 3:25-cv-00416-AGS-JLB. The plaintiff purports to bring the action derivatively on behalf of ImmunityBio, and ImmunityBio is a nominal defendant in the action. This lawsuit asserts substantially similar claims and allegations as Van Luven . On February 26, 2025, a third shareholder derivative action was filed in the United States District Court for the Southern District of California against certain current and former members of our Board of Directors and certain officers, captioned Shin v. Soon-Shiong, et al. , Case No. 3:25-cv-00423-JAH-DDL. The plaintiff purports to bring the action derivatively on behalf of ImmunityBio, and ImmunityBio is a nominal defendant in the action. This lawsuit asserts substantially similar claims and allegations as Van Luven . Carlson Derivative Action On November 20, 2024, a shareholder derivative action was filed in the Delaware Court of Chancery against the company’s Founder, Executive Chairman, Global Chief Scientific and Medical Officer and principal stockholder, Dr. Soon-Shiong, certain affiliates of Dr. Soon-Shiong, certain other members of management, and members of the company’s Board of Directors who serve on the Board of Directors’ Related Party Transaction Committee, captioned Carlson v. Soon-Shiong, et al., Case No. 2024-1195-VCL. The plaintiff purports to bring the action derivatively on behalf of ImmunityBio, and ImmunityBio is a nominal defendant to the action. The plaintiff alleges that the previously disclosed September 2023 financing transactions between the company and Dr. Soon-Shiong and his affiliates were not fair to the company. In particular, the plaintiff alleges that the transactions were timed to benefit Dr. Soon-Shiong and his affiliates during a temporary decline in the company’s stock price, resulting in an artificially low conversion price for certain convertible promissory notes that were among the transactions, when defendants knew the company’s stock price would increase following the company’s imminent resubmission of a BLA for, and the subsequent FDA approval of, ANKTIVA with BCG for the treatment of adult patients with BCG-unresponsive NMIBC with CIS with or without papillary tumors. The complaint alleges that defendants breached their fiduciary duties by entering into these transactions at that time and on those terms, thereby unjustly enriching Dr. Soon-Shiong and his affiliates. The derivative complaint seeks unspecified damages on behalf of the company, corporate governance changes with respect to related-party transactions, and an award of costs and expenses to the derivative plaintiff, including attorneys’ fees. On February 17, 2025, the defendants filed a motion to dismiss the complaint. 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 cancellable only in certain circumstances). Estimated future minimum unconditional purchase obligations as of December 31, 2024 are as follows (in thousands): Years Ending December 31, 2025 2026 2027 2028 2029 Software license fees and installation costs $ 2,658 $ 2,675 $ 844 $ 159 $ 106 Reserved cGMP manufacturing capacity at third-party CMO facilities 1,606 — — — — Laboratory clean room services 716 — — — — Commercial launch services 136 — — — — 197 Table of Conten t s 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. Commitments During the year ended December 31, 2024, we did not enter into any significant contracts, other than those disclosed in these consolidated financial statements. 10. Lease Arrangements We lease property in multiple facilities across the U.S. 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 were related to equipment rental at the Dunkirk Facility. See Note 13 “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. These renewal terms can extend the lease term from one to ten years and are included in the lease term when it is reasonably certain that we will exercise the option. Supplemental balance sheet information related to our leases is as follows (in thousands): As of December 31, Classification 2024 2023 Assets Operating lease assets Operating lease right-of-use assets $ 33,363 $ 36,543 Finance lease assets Other assets — 58 Total lease assets $ 33,363 $ 36,601 Liabilities Current: Operating lease liabilities Operating lease liabilities $ 7,466 $ 5,244 Finance lease liabilities Accrued expenses and other liabilities — 64 Noncurrent: Operating lease liabilities Operating lease liabilities, less current portion 34,823 39,942 Total lease liabilities $ 42,289 $ 45,250 Information regarding our lease terms is as follows: Year Ended December 31, 2024 2023 Weighted-average remaining lease term: Operating leases 4.8 years 6.2 years Finance leases — 0.8 years Weighted-average discount rate: Operating leases 9.9 % 10.9 % Finance leases — % 11.7 % 198 Table of Conten t s The components of lease expense consist of the following (in thousands): Year Ended December 31, 2024 2023 2022 Operating lease costs $ 10,277 $ 11,123 $ 11,093 Short-term lease costs 4,277 4,088 3,060 Finance lease costs (including right-of-use asset amortization and interest expense) 59 88 80 Variable lease costs 3,947 3,521 3,880 Total lease expense $ 18,560 $ 18,820 $ 18,113 Cash paid for amounts included in the measurement of lease liabilities is as follows (in thousands): Year Ended December 31, 2024 2023 2022 Cash paid for operating leases (excluding variable lease costs) $ 10,642 $ 9,538 $ 10,241 Financing cash flow from finance leases 64 77 58 Operating cash flow from finance leases 2 11 15 Future minimum lease payments as of December 31, 2024, including $ 11.5 million related to options to extend lease terms that are reasonably certain of being exercised, are presented in the following table (in thousands). Common area maintenance costs and taxes are not included in these payments. Years Ending December 31: Operating Leases 2025 $ 11,588 2026 9,728 2027 8,983 2028 9,248 2029 8,598 Thereafter 7,459 Total future minimum lease payments 55,604 Less: Interest 13,186 Less: Tenant improvement allowance receivable 129 Present value of operating lease liabilities $ 42,289 There have been no material changes related to our existing lease agreements during the year ended December 31, 2024. 11. Revenue Interest Purchase Agreement Revenue Interest Liability On December 29, 2023, we entered into the RIPA with Infinity and Oberland. Pursuant to the RIPA, Oberland acquired certain initial Revenue Interests from us for a gross purchase price of $ 200.0 million paid on closing, less $ 7.5 million of issuance costs. Oberland had the option to purchase additional Revenue Interests from us in exchange for a $ 100.0 million Second Payment upon satisfaction of certain conditions in the RIPA, including receipt of approval from the FDA of our BLA for ANKTIVA on or before June 30, 2024. 199 Table of Conten t s On April 22, 2024, the FDA approved our product ANKTIVA and as a result, on May 13, 2024 Oberland purchased additional Revenue Interests from us for a gross purchase price of $ 100.0 million, less $ 3.1 million of issuance costs. The issuance costs incurred are being amortized to interest expense over the estimated term of the debt. 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 are tiered payments ranging from 4.5 % to 10.0 % (before funding of the Second Payment, 3.0 % to 7.0 %) 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 (Test Date) equal or exceed the Cumulative Purchaser Payments ($ 300.0 million) as of that date, the initially tiered revenue interest rate will be decreased to a single rate of 2.25 % (before the funding of the Second Payment, 1.50 %) 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 (subject to certain Call/Put Option scenarios as described below). 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. 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, 2024, the company was in compliance with all covenants. The RIPA is considered a sale of future revenues and is accounted for as long-term debt recorded at amortized cost using the effective interest rate method. 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. On December 10, 2024, the company entered into an amendment to the RIPA to add additional conditions to the payment of certain existing indebtedness. Such amendment did not have an impact on the valuation of the revenue interest liability or the embedded derivative liabilities related to the RIPA. During the years ended December 31, 2024 and 2023, we recorded $ 39.7 million and $ 0.3 million of interest expense, respectively, related to this arrangement. 200 Table of Conten t s The following table summarizes the revenue interest liability activity during the years ended December 31, 2024 and 2023 (in thousands): Revenue interest liability at inception $ — Proceeds from First Payment, net of issuance costs 192,509 Embedded contingent derivative liability related to First Payment ( 34,500 ) Issuance of common stock ( 2,039 ) Fair value of stock purchase option ( 819 ) Interest expense recognized 264 Revenue interest liability, at December 31, 2023 155,415 Proceeds from Second Payment, net of issuance costs 96,956 Embedded contingent derivative liability related to Second Payment ( 6,150 ) Revenue interest payment ( 1,474 ) Interest expense recognized 39,657 Revenue interest liability, at December 31, 2024 $ 284,404 Embedded Derivative Liabilities 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 aforementioned Call and Put Options are considered 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. The company recorded $ 34.5 million for the initial fair value of the derivative liability upon the closing of the initial $ 200.0 million Revenue Interests acquired by Oberland. The company recorded an incremental $ 6.2 million for the fair value of the derivative liability upon the closing of the additional $ 100.0 million Revenue Interests acquired by Oberland in May 2024. The initial and incremental fair value allocated to the derivative liability is recorded against the RIPA as a debt discount, which is being amortized in interest expense, on the consolidated statement of operations over the expected term of the debt using the effective interest method. The embedded derivative is subsequently remeasured at fair value each reporting period, with the change in fair value being recorded in change in fair value of derivative liabilities , on the consolidated statement of operations. 201 Table of Conten t s 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, 2024 and 2023, the discount rate used for valuation of the derivative liability was 10.4 % and 12.1 %, respectively. The change in fair value of the derivative liabilities is as follows (in thousands): Fair value, at December 31, 2023 $ 34,500 Change in fair value ( 14,850 ) Embedded contingent derivative liability related to Second Payment 6,150 Fair value, at December 31, 2024 $ 25,800 Stock Purchase and Option Agreement 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 had 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 initial $ 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 as of December 31, 2023. In April 2024, Oberland exercised part of their option and purchased 858,990 shares of our common stock at an exercise price of $ 5.8208 per share generating net proceeds of approximately $ 4.9 million. In relation to this transaction, we recorded $ 7.6 million in additional paid-in capital, on the statement of stockholders’ deficit during the year ended December 31, 2024. Following such exercise, approximately $ 5.0 million remains available for future exercise under the SPOA as of December 31, 2024. This stock purchase option is classified in accrued expenses and other liabilities , on the consolidated balance sheet at its fair value and is subsequently remeasured at fair value each reporting period, with the change in fair value being recorded in change in fair value of derivative liabilities , on the consolidated statement of operations. The estimated fair value of the stock option purchase liability was computed using the calculated exercise price and discounted back to a present value at the risk-free rate with the following unobservable assumptions at the following dates: As of December 31, 2024 2023 Expected volatility 127.0 % 135.0 % Risk-free rate 4.3 % 5.1 % The change in fair value of the stock option purchase liability is as follows (in thousands): Fair value, at December 31, 2023 $ 819 Change in fair value 2,206 Exercise of stock option ( 2,705 ) Fair value, at December 31, 2024 $ 320 202 Table of Conten t s 12. Related-Party Debt Our related-party debt is summarized below (in thousands): Balance as of December 31, 2024 Fair Value Maturity Year Interest Rate Principal Amount Amount Leveling Related-Party Convertible Note at Fair Value: $ 505 million December 2024 Promissory Note (4) 2027 Term SOFR + 8.0 % $ 505,000 $ 461,877 Level 3 Balances as of December 31, 2023 Maturity Year Interest Rate Principal Amount Less: Unamortized Discounts Total Related-Party Nonconvertible Note: $ 505 million December 2023 Promissory Note - Tranche 1 (1), (2), (3) 2025 Term SOFR + 8.0 % $ 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 (1) 2025 Term SOFR + 7.5 % 380,000 33,049 346,951 $ 30 million March 2023 Promissory Note (2), (4) 2025 Term SOFR + 8.0 % 30,000 — 30,000 $ 200 million September 2023 Promissory Note (2), (4) 2026 Term SOFR + 8.0 % 200,000 — 200,000 Total related-party convertible notes $ 610,000 $ 33,049 $ 576,951 $ 505 million December 2024 Promissory Note On December 10, 2024 in connection with an equity offering, the company and Nant Capital entered into a second amended and restated promissory note. Pursuant to the terms of the second amended and restated promissory note, Tranche 1 of the December 2023 Promissory Note with a principal amount of $ 125.0 million and Tranche 2 of the December 2023 Promissory Note with a principal amount of $ 380.0 million were combined into one convertible promissory note with a principal amount of $ 505.0 million with a maturity date of December 31, 2027. The $ 505.0 million December 2024 Promissory Note bears an interest rate of Term SOFR plus 8.0 % per annum, payable on a quarterly basis. Pursuant to the terms of the second amended and restated promissory note, the noteholder, in its sole discretion, may convert all of the outstanding principal amount into shares of common stock at a conversion price of $ 5.4270 per share. In addition, the noteholder can request up to $ 50.0 million of the outstanding principal amount and accrued interest to be repaid upon consummation of a specified transaction. In connection with the RIPA transaction, the outstanding related party convertible note was subordinated to the RIPA payment obligations. 203 Table of Conten t s The following table summarizes the estimated future contractual obligations of our related-party debt as of December 31, 2024 (in thousands): Principal Payments Interest Payments (1) Total 2025 $ — $ 62,168 $ 62,168 2026 — 62,168 62,168 2027 505,000 62,168 567,168 Total $ 505,000 $ 186,504 $ 691,504 _______________ (1) Interest payments on our promissory note are calculated based on Term SOFR plus the contractual spread per the loan agreement. The weighted-average interest rate on our promissory note as of December 31, 2024 was 12.34 %. Mandatory Prepayment Feature The embedded derivative related to a contingently exercisable prepayment feature, 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) was recorded as a derivative liability on the consolidated balance sheet and measured at fair value prior to the second amended and restated promissory note. The fair value of the derivative liability was determined at each period end using the with-and-without method, which assessed the likelihood and timing of a specified transaction that if triggered could have resulted in a repayment. Changes in the fair value of the derivative liability were reported in change in fair value of derivative liabilities , on the consolidated statement of operations. Since the company elected the fair value option to account for the $ 505.0 million December 2024 Promissory Note, the embedded derivative is no longer required to be recorded separately but is considered when estimating the fair value of the $ 505.0 million December 2024 Promissory Note. The change in fair value of the contingently exercisable prepayment feature embedded derivative through December 10, 2024, the date of the $ 505.0 million December 2024 Promissory Note amendment, was $ 0.8 million and $ 0.8 million during the year ended December 31, 2023. $ 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 Founder, Executive Chairman and Global Chief Scientific and Medical Officer. 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, could 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. 204 Table of Conten t s $ 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 could 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 could 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, could 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 could 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 bore 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 could 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 could 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. On December 10, 2024 in connection with an equity offering, the company received a written notice from Nant Capital, the holder of the $ 30.0 million promissory note due December 31, 2025, 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 total outstanding principal amount and accrued and unpaid interest due under the existing note were converted into shares of the company’s common stock. See Note 15 “Stockholders’ Deficit” for more information. 205 Table of Conten t s $ 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 could 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. 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, could 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 bore interest at Term SOFR plus 8.0 % per annum, payable on a monthly basis. The outstanding principal amount and any accrued and unpaid interest were due on September 11, 2026. We could 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 had 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. On December 10, 2024 in connection with an equity offering, the company received a written notice from Nant Capital, the holder of the $ 200.0 million promissory note due September 11, 2026 of its election to convert the entire outstanding principal and accrued interest due under the existing note into shares of the company’s common stock. As of such date, the total outstanding principal amount and accrued and unpaid interest due under the note were converted into shares of the company’s common stock. See Note 15 “Stockholders’ Deficit” for more information. 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. Soon-Shiong. 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. 206 Table of Conten t s 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 provides that a modification or an exchange that adds or eliminates a substantive conversion option as of the conversion date would always be considered substantial and require extinguishment accounting. Accordingly, as a result of the addition of the conversion feature to the fixed-rate promissory notes, the fixed-rate promissory notes and the variable-rate promissory notes were determined to be extinguished given the contemporaneous nature of the amendments. The company performed a valuation of the fixed-rate promissory notes and variable-rate promissory notes before and after amendments. Under this model, the company calculated a gain on extinguishment of $ 82.9 million, representing the difference between the fair value of the new and amended promissory notes and the carrying value of the extinguished debt, net of any unamortized related-party notes discounts plus the cash proceeds from the new promissory note. Since the debt was obtained from entities under common control, such gain was recorded in additional paid-in capital , on the consolidated statement of stockholders’ deficit 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 years ended December 31, 2023 and 2022, we recorded amortization of related-party notes discounts totaling $ 42.4 million and $ 16.3 million, respectively, 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. The fair values of the fixed-rate promissory notes, which were each modified to include a holder conversion option, were determined based on a binomial lattice convertible note model. The analysis involved the construction of various intermediate lattices: stock price tree, conversion value tree, conversion probability tree, and discount rate tree. Since certain of the factors analyzed are considered to be unobservable inputs, both the discounted cash flow model and the lattice model are considered to be Level 3 valuations. Significant unobservable inputs used for the discounted cash flow analysis included market yields from 18.0 % to 24.8 % and a risk-free rate of 4.1 %, and the significant unobservable inputs used for the binomial lattice model included a volatility of 84.9 %, a market yield of 17.4 % and a risk-free rate of 3.5 %. 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 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 and the $ 30.0 million March 2023 Promissory Note 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. 207 Table of Conten t s 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 became 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 was 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 allowed 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 was 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): Principal Amount Maturity Year Conversion Price Interest Rate Related-Party Nonconvertible Note: $ 125 million August 2022 Promissory Note $ 125,000 2024 Term SOFR + 8.0 % Related-Party Convertible Notes: $ 300 million December 2021 Promissory Note $ 300,000 2024 Term SOFR + 8.0 % $ 50 million December 2022 Promissory Note 50,000 2024 Term SOFR + 8.0 % $ 30 million June 2023 Promissory Note 30,000 2024 Term SOFR + 8.0 % $ 30 million March 2023 Promissory Note 30,000 2024 $ 2.2800 Term SOFR + 8.0 % $ 200 million September 2023 Promissory Note 200,000 2026 $ 1.9350 Total related-party promissory notes before amendments $ 735,000 208 Table of Conten t s The following table summarizes the Nant Capital promissory notes after the amendments on December 29, 2023 (principal amount in thousands): Principal Amount Maturity Year Conversion Price Interest Rate Related-Party Nonconvertible Note: $ 505 million December 2023 Promissory Note – Tranche 1 $ 125,000 2025 Term SOFR + 8.0 % Related-Party Convertible Notes: $ 300 million December 2021 Promissory Note $ 300,000 $ 50 million December 2022 Promissory Note 50,000 $ 30 million June 2023 Promissory Note 30,000 $ 505 million December 2023 Promissory Note – Tranche 2 380,000 2025 $ 8.2690 Term SOFR + 7.5 % Total $ 505 million December 2023 Promissory Note 505,000 $ 30 million March 2023 Promissory Note 30,000 2025 $ 2.2800 Term SOFR + 8.0 % $ 200 million September 2023 Promissory Note 200,000 2026 $ 1.9350 Term SOFR + 8.0 % 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 modification was substantially different, as the September 11, 2023 modification was within a year of the 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, a 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. 209 Table of Conten t s 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 allowed 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 was contingently 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. The estimated fair value was computed with the following unobservable assumptions: As of Amendment Date December 29, 2023 Expected market yield 23.2 % Expected volatility 118.0 % Risk-free rate 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. 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 was 23.65 % and 18.04 %, respectively. The estimated fair value was computed with the following unobservable assumptions: As of Amendment Date December 29, 2023 Expected market yield 23.2 % Expected volatility 118.0 % Risk-free rate 4.4 % The fair value of the $ 200.0 million September 2023 promissory note was determined using the binomial lattice model with the following unobservable assumptions: As of Amendment Date December 29, 2023 Expected market yield 23.3 % Expected volatility 119.3 % Risk-free rate 5.2 % 210 Table of Conten t s 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 unobservable assumptions before it was modified on December 29, 2023. After the debt extinguishment, the note was accounted for under the amortized cost basis. As of Amendment Date December 29, 2023 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 (4) December 10, 2024 Debt Extinguishment On December 10, 2024 in connection with an equity offering, the company and Nant Capital entered into a second amended and restated promissory note. Pursuant to the terms of the second amended and restated promissory note, Tranche 1 of the December 2023 Promissory Note with a principal amount of $ 125.0 million and Tranche 2 of the December 2023 Promissory Note with a principal amount of $ 380.0 million were combined into one convertible promissory note with a principal amount of $ 505.0 million with a maturity date of December 31, 2027. The $ 505.0 million December 2024 Promissory Note bears an interest rate of Term SOFR plus 8.0 % per annum, payable on a quarterly basis. Pursuant to the terms of the second amended and restated promissory note, the noteholder, in its sole discretion, may convert all of the outstanding principal amount into shares of common stock at a conversion price of $ 5.4270 per share. In addition, the noteholder can request up to $ 50.0 million of the outstanding principal amount and accrued interest to be repaid upon consummation of a specified transaction. Also, on the same date, the company received a written notice from Nant Capital, the holder of the $ 30.0 million March 2023 Promissory Note due on December 31, 2025 and the $ 200.0 million September 2023 Promissory Note due on September 11, 2026 of its election to convert the entire outstanding principal and accrued interests of the such promissory notes into shares of the company’s common stock (the “Converted Promissory Notes”). As of such date, the total outstanding principal amount and accrued and unpaid interests due under the Converted Promissory Notes were converted into shares of the company’s common stock. Since the $ 505.0 million December 2024 Promissory Note, together with the Converted Promissory Notes, were executed contemporaneously and in contemplation with one another with entities under common control, the company evaluated these transactions collectively as a single unit of account to accurately capture the economics of the transactions. The company determined the fair value of the conversion feature before and after the above transactions to assess whether there is a substantial change in fair value. The company used binomial lattice models for the “with” scenario and discounted cash flow model for the “without” scenario. The company determined that the fair value of the conversion feature before modification is substantially different than the fair value after modification, and as such, these transactions were accounted for as debt extinguishment in accordance with ASC 470-50. Under this model, the company calculated a gain on debt extinguishment of $ 10.4 million, which represents the difference between the: (a) fair value of the December 2024 Promissory Note and the reacquisition price of the Converted Promissory Notes on the date of conversion; and (b) carrying value of the extinguished debt, net of any unamortized related party notes discounts plus, the debt premium previously recognized in additional paid-in capital , on the consolidated statement of stockholders’ deficit as a result of the December 29, 2023 Debt Extinguishment. Since the debt was obtained from entities under common control, such gain on extinguishment was recorded in additional paid-in capital , on the consolidated statement of stockholders’ deficit. 211 Table of Conten t s Due to the conversion of the Converted Promissory Notes, the Company also recorded $ 188.5 million in additional paid-in capital , on the consolidated statement of stockholders’ deficit as of December 31, 2024. This represents the difference between the reacquisition price of the Converted Promissory Notes on the date of conversion and the debt premium previously recognized in additional paid-in capital , on the consolidated statement of stockholders’ deficit as a result of the December 29, 2023 Debt Extinguishment. See Note 15 “Stockholders’ Deficit” for more information. The estimated fair value of the Converted Promissory Notes were computed with the following unobservable assumptions at the amendment date on December 10, 2024: $ 30 million March 2023 Promissory Note $ 200 million September 2023 Promissory Note Binomial lattice model: Expected market yield 18.5 % 18.6 % Expected volatility 103.2 % 118.6 % Risk-free rate 4.2 % 4.2 % Discounted cash flow model: Discount rate 18.5 % 18.6 % The company elected the fair value option for recognizing the $ 505.0 million December 2024 Promissory Note under ASC 825-10-15-4. Under the FVO election, the note was initially measured at estimated fair value upon issuance and is 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 following unobservable assumptions at the following dates: Immediately Before the Amendment on December 10, 2024 Immediately After the Amendment on December 10, 2024 As of December 31, 2024 Binomial lattice model: Expected market yield 18.5 % 18.7 % 19.3 % Expected volatility 103.6 % 115.1 % 125.6 % Risk-free rate 4.2 % 4.1 % 4.3 % Discounted cash flow model: Discount rate 18.5 % 18.7 % 19.3 % The change in the carrying value of this note was as follows (in thousands): Fair value at issuance date, December 10, 2024 $ 518,378 Interest payment ( 11,808 ) Change in fair value, including $ 1.2 million related to instrument-specific credit risk ( 44,693 ) Ending fair value, at December 31, 2024 $ 461,877 212 Table of Conten t s The following tables summarize the interest expense for our related-party promissory notes during the years ended December 31, 2024 and 2023 (in thousands): Year Ended December 31, 2024 Interest Expense Debt Discount Amortization $ 505 million December 2024 Promissory Note $ 3,585 $ — $ 505 million December 2023 Promissory Note Tranche 1 15,281 8,454 $ 505 million December 2023 Promissory Note Tranche 2 44,658 14,133 $ 30 million March 2023 Promissory Note 3,667 — $ 200 million September 2023 Promissory Note 24,810 — Total $ 92,001 $ 22,587 Year Ended December 31, 2023 Interest Expense Debt Discount Amortization $ 300 million December 2021 Promissory Note (1) $ 39,653 $ 27,967 $ 125 million August 2022 Promissory Note (1) 16,521 5,962 $ 50 million December 2022 Promissory Note (1) 6,609 478 $ 30 million March 2023 Promissory Note (1) 4,590 — $ 30 million June 2023 Promissory Note 2,096 258 $ 200 million September 2023 Promissory Note 8,185 2,586 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. 213 Table of Conten t s 13. Related-Party Agreements We conduct business with several affiliates under written agreements and informal arrangements. Below is a summary of outstanding balances and a description of significant relationships (in thousands): As of December 31, 2024 2023 Due from related party–NantBio $ — $ 1,294 Due from related party–NantWorks 161 541 Due from related party–Brink 59 62 Due from related parties–Various 73 122 Total due from related parties $ 293 $ 2,019 Due to related party–NantBio $ — $ 943 Due to related party–Duley Road 134 136 Due to related party–the Clinic 21 57 Due to related parties–Various 18 — Total due to related parties $ 173 $ 1,136 Our Founder, Executive Chairman and Global Chief Scientific and Medical Officer also founded and has a controlling interest in NantWorks, which is a collection of companies in the healthcare and technology space. As described below, we have entered into arrangements with NantWorks, and certain affiliates of NantWorks, to facilitate the development of new immunotherapies for our product pipeline. Affiliates of NantWorks are also affiliates of the company due to the common control by and/or common ownership interest of our Founder, 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 to us, and we provide certain of such services to them. The receiving party is 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. During the years ended December 31, 2024, 2023 and 2022, we recorded $ 2.6 million, $ 3.3 million and $ 3.8 million, respectively, in selling, general and administrative expense , and $ 3.3 million, $ 2.2 million, and $ 0.9 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, 2024 and 2023, we had a receivable of $ 0.2 million and $ 0.5 million, respectively, for all agreements with NantWorks, which are included in due from related parties, on the consolidated balance sheets. We also recorded $ 3.0 million and $ 1.0 million of prepaid expenses for various services that we expect will be passed through to the company from NantWorks as of December 31, 2024 and 2023, respectively, which are included in prepaid expenses and other current assets , on the consolidated balance sheets. Facility License Agreement 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. 214 Table of Conten t s On May 6, 2022, we amended our facility license agreement with NantWorks to expand the licensed premises by 36,830 rentable square feet to an aggregate total of 46,330 rentable square feet. Effective May 1, 2022, the license fee is approximately $ 273,700 per month, which is subject to a 3 % increase commencing on January 1 of each year. The space continues to be rented on a month-to-month basis, which can be terminated by either party with at least 30 days’ prior written notice to the other party. During the years ended December 31, 2024, 2023 and 2022, we recorded license fee expense for this facility totaling $ 3.5 million, $ 3.4 million, and $ 2.4 million, respectively, in research and development expense , on the consolidated statements of operations. Immuno-Oncology Clinic, Inc. 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. In 2021, we completed a review of alternative structures that could support our more complex clinical trial requirements and made a decision to explore a potential transition of clinical trials at the Clinic to a new structure (including contracting with a new, non-affiliated professional corporation) to be determined and agreed upon by all parties. We continue discussions with potential partners around such alternative structures. Related to clinical trial and transition services provided by the Clinic, during the years ended December 31, 2024, 2023 and 2022, we recorded $ 2.6 million, $ 2.2 million, and $ 2.4 million, respectively, in research and development expense , on the consolidated statements of operations. As of December 31, 2024 and 2023, we owed the Clinic an immaterial amount and $ 0.1 million, respectively, 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 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 Founder, Executive Chairman and Global Chief Scientific and Medical Officer, 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, 2024, 2023, and 2022, we recognized revenue of an immaterial amount related to this license. NantBio, Inc. 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 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, 2024, 2023 and 2022, we recognized no revenue. As of December 31, 2024 and 2023, 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, we recorded a payable of $ 0.9 million in due to related parties, on the consolidated balance sheet related to this agreement. The payable was settled as of June 30, 2024. 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 to the company. As of December 31, 2023, we recorded a receivable of $ 1.3 million in due from related parties, on the consolidated balance sheet for amounts we paid on behalf of NantBio during the year ended December 31, 2019. The receivable was settled as of June 30, 2024. 605 Doug St, LLC In 2016, we entered into a lease agreement with 605 Doug St, LLC, an entity owned by our Founder, 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 215 Table of Conten t s 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. During the years ended December 31, 2024, 2023 and 2022, we recorded lease expense for this facility of $ 0.9 million in research and development expense , on the consolidated statements of operations. Duley Road, LLC In 2017, we entered into a lease agreement with Duley Road, a related party that is indirectly controlled by our Founder, 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 was originally from February 2017 through October 2024. We had and continue to have the option to extend the initial term for two consecutive five-year periods through October 2034. The base rent is approximately $ 40,700 per month, with annual increases of 3 %. 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 January 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 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 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, with annual increases of 3 %. During the years ended December 31, 2024, 2023 and 2022, we recorded rent expense for these leases totaling $ 1.0 million, $ 0.9 million, and $ 0.8 million, respectively, in research and development expense , on the consolidated statements of operations. As of December 31, 2024 and 2023, we recorded $ 0.1 million of lease-related payables to Duley Road 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 at 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 was originally set to expire in December 2027 and included 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 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. 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 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 buildout of the facility space and associated costs. During the years ended December 31, 2024, 2023, and 2022, we recorded rent expense for the Initial and Expansion Premises leases totaling $ 2.2 million 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 was received from the landlord in 2023 . 557 Doug St, LLC After transferring all outstanding membership interests in 557 Doug St, LLC to Nant Capital (a related party controlled by Dr. Soon-Shiong) in September 2021, we entered into a lease agreement with Nant Capital for the improved property located at 557 South Douglas Street, El Segundo, California with a building area of approximately 36,434 rentable square feet (the Douglas Property). Pursuant to the terms of the agreement, we leased back the Douglas Property for an initial lease term of 216 Table of Conten t s seven years , which commenced on September 27, 2021. 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 execution of the lease. 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. 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 income (expense), net , on the consolidated statement of operations. 420 Nash, LLC On September 27, 2021, we entered into a lease agreement with 420 Nash, LLC, a related party, whereby we leased an approximately 19,125 rentable square foot property located at 420 Nash Street, El Segundo, California, to be used primarily for the warehousing and storage of drug manufacturing supplies, products and equipment, and ancillary office space. Under the terms of the lease agreement, the lease term began on October 1, 2021 and expires on September 30, 2026. The base rent is approximately $ 38,250 per month with an annual increase of 3 % on October 1 of each year beginning in 2022 during the initial term. 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 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. At the beginning of each 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 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. During the years ended December 31, 2024, 2023, and 2022 we recorded rent expense for this lease totaling $ 0.5 million 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 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 buildout 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 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. 217 Table of Conten t s 14. Warrant Liabilities December 2022 Warrants In connection with the December 12, 2022 RDO, the company issued 9,090,909 warrants with an exercise price of $ 6.60 per share. The warrants became immediately exercisable on December 12, 2022 and expired in full on December 12, 2024. 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 income (expense), net , on the consolidated statement of operations on the date of the transaction. February 2023 Warrants In connection with the February 15, 2023 RDO, the company issued 14,072,615 warrants with an exercise price of $ 4.2636 per share. The warrants became immediately exercisable on February 17, 2023 and expire two years after the initial issuance date. 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. 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 income (expense), net , on the consolidated statement of operations on the date of the transaction . 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. July 2023 Warrants In connection with the July 20, 2023 RDO, the company issued 14,569,296 warrants with an exercise price of $ 3.2946 per share. These warrants became immediately exercisable on July 25, 2023 and expire on July 24, 2026. 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 income (expense), net , on the consolidated statement of operations on the date of the transaction . Warrant Liabilities The following table summarizes the change in carrying amount of warrant liabilities measured at fair value during the years ended December 31, 2024, 2023, and 2022 (in thousands): Total December 2022 Warrants February 2023 Warrants July 2023 Warrants Fair value at issuance, December 12, 2022 $ 35,096 $ 35,096 $ — $ — Change in fair value ( 13,460 ) ( 13,460 ) — — Fair value, at December 31, 2022 21,636 21,636 — — Fair value at issuance 49,534 — 23,698 25,836 Change in fair value 47,600 ( 4,545 ) 26,260 25,885 Fair value, at December 31, 2023 118,770 17,091 49,958 51,721 Warrant exercises ( 90,240 ) — ( 46,083 ) ( 44,157 ) Change in fair value ( 19,955 ) ( 17,091 ) ( 103 ) ( 2,761 ) Fair value, at December 31, 2024 $ 8,575 $ — $ 3,772 $ 4,803 218 Table of Conten t s Warrant Exercises The following table summarizes warrant exercise activity during the years ended December 31, 2024, 2023, and 2022: Total December 2022 Warrants February 2023 Warrants July 2023 Warrants Warrants issued, December 12, 2022 9,090,909 9,090,909 — — Warrant exercises — — — — Warrants outstanding, at December 31, 2022 9,090,909 9,090,909 — — Warrant exercises — — — — Warrant issuances 28,641,911 — 14,072,615 14,569,296 Warrants outstanding, at December 31, 2023 37,732,820 9,090,909 14,072,615 14,569,296 Warrant exercises ( 22,242,740 ) — ( 11,258,092 ) ( 10,984,648 ) Warrant expirations ( 9,090,909 ) ( 9,090,909 ) — — Warrants outstanding, at December 31, 2024 6,399,171 — 2,814,523 3,584,648 Warrant Valuation Assumptions 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: December 2022 Warrants February and July 2023 Warrants December 31, 2024 December 31, 2023 December 31, 2022 December 31, 2024 December 31, 2023 Exercise price per share — $ 6.60 $ 6.60 $ 3.2946 $ 3.2946 Expected term — 1.0 year 2.0 years 1.6 years 2.6 years Expected average volatility — 119.0 % 99.4 % 125.0 % 107.3 % Expected dividend yield — — — — — Risk-free interest rate — 4.7 % 4.4 % 4.2 % 4.1 % The expected term is the time remaining until the expiration of the warrants. The expected average volatility was estimated based on the historical and implied volatility of our common stock. The expected dividend yield was based on our expectation of not paying dividends for the foreseeable future. The risk-free interest rate was based on the U.S. Treasury’s rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the expected term of the award being valued. 15. Stockholders’ Deficit Stock Authorized for Issuance As of December 31, 2024, the company was authorized to issue up to 1,350,000,000 shares of its common stock, par value $ 0.0001 per share, and 20,000,000 shares of our preferred stock, par value $ 0.0001 per share. As of December 31, 2024, there were 852,904,340 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). Stock Repurchases 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. The 2015 Share Repurchase Program does not require the purchase of any minimum number of shares and may be suspended, modified, or discontinued at any time without prior notice. We have financed, and expect to continue to finance, the purchases with existing cash balances. Shares repurchased under this program are formally retired through approval of the Board of Directors upon repurchase. 219 Table of Conten t s During the years ended December 31, 2024, 2023 and 2022, no shares of our common stock were repurchased under the program. Since the program’s inception, we have repurchased a total of 6,403,489 shares at a total cost of $ 31.7 million. As of December 31, 2024, $ 18.3 million remained authorized to use for share repurchases under the program. Shelf Registration Statements During 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 our common stock and warrants valued at $ 184.4 million under the shelf. As of December 31, 2024 and 2023, we had $ 565.6 million available for use under this shelf. In April 2024, we filed a shelf registration statement with the SEC on Form S-3ASR pursuant to which we may, from time to time, sell an indeterminate amount of our common stock, preferred stock, debt securities, depositary shares, warrants, subscription rights, purchase contracts, or units, and an associated prospectus related to the ATM. During December 2024, we sold 38,333,334 shares of our common stock at $ 3.00 per share under the shelf generating net proceeds of approximately $ 106.9 million. Open Market Sale Agreement 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, 2024, 2023 and 2022, we received net proceeds of approximately $ 3.6 million, $ 16.1 million, and $ 13.1 million, respectively, from the issuance of shares under the ATM. We are not obligated to sell any shares and may at any time suspend solicitation and offers under the ATM. The ATM 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 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 14 “Warrant Liabilities” for more information. July 2023 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. 220 Table of Conten t s 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. Exercises of Warrants During the year ended December 31, 2024, institutional holders exercised a total of 11,258,092 warrants pursuant to the February 2023 Warrant agreement at an exercise price of $ 3.2946 per share resulting in the issuance of 11,258,092 shares of the company’s common stock for proceeds totaling $ 37.1 million. We recorded $ 83.2 million in additional paid-in capital, on the consolidated statement of stockholders’ deficit during the year ended December 31, 2024 related to these exercises of warrants. During the year ended December 31, 2024, institutional holders exercised a total of 10,984,648 warrants pursuant to the July 2023 Warrant agreement at an exercise price of $ 3.2946 per share resulting in the issuance of 10,984,648 shares of the company’s common stock for proceeds totaling $ 36.2 million. We recorded $ 80.3 million in additional paid-in capital, on the consolidated statement of stockholders’ deficit during the year ended December 31, 2024 related to these exercises of warrants. Stock Purchase and Option Agreement On December 29, 2023 and in connection with the RIPA, we entered into an SPOA with Oberland. Under this agreement, Oberland had an option to purchase up to $ 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. The option is exercisable by Oberland any time 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. Pursuant to the SPOA, in April 2024 Oberland exercised its option to purchase 858,990 shares of our common stock at an exercise price of $ 5.8208 per share generating net proceeds of approximately $ 4.9 million. In relation to this transaction, we recorded $ 7.6 million in additional paid-in capital, on the statement of stockholders’ deficit during the year ended December 31, 2024. Following such exercise, approximately $ 5.0 million remains available for future exercise under the SPOA as of December 31, 2024. Conversion of Promissory Notes into Common Stock In connection with our December 2024 equity offering, the company received written notice from Nant Capital, the holder of the $ 30.0 million promissory note due December 31, 2025, 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 total outstanding principal amount and accrued and unpaid interest due under the existing note of approximately $ 30.7 million were converted into 13,475,172 shares of the company’s common stock at a price of $ 2.28 per share in accordance with the terms of the promissory note. We recorded a net increase of $ 26.2 million in additional paid-in capital , on the consolidated balance sheet related to this transaction. See Note 12 “Related-Party Debt” for more information. Also, in connection with our December 2024 equity offering, the company received written notice from Nant Capital, the holder of the $ 200.0 million promissory note due September 11, 2026, 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 total outstanding principal amount and accrued and unpaid interest due under the existing note of approximately $ 200.7 million were converted into 103,710,088 shares of the company’s common stock at a price of $ 1.9350 per share in accordance with the terms of the promissory note. We recorded a net increase of $ 162.3 million in additional paid-in capital , on the consolidated balance sheet related to this transaction. See Note 12 “Related-Party Debt” for more information. 221 Table of Conten t s 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 and unpaid interest under the existing note into shares of the company’s common stock. As of such date, the entire outstanding principal amount and accrued and unpaid interest due under the existing note of approximately $ 56.6 million and an unamortized debt discount of $ 4.7 million were converted into 9,986,920 shares of the company’s common stock at a price of $ 5.67 per share in accordance with the terms of the existing note. We recorded a net increase of $ 51.9 million in additional paid-in capital, on the consolidated balance sheet related to this transaction. 16. Stock-Based Compensation 2015 Equity Incentive Plan In 2015, the Board of Directors adopted, and our stockholders approved, the 2015 Plan. The 2015 Plan, as amended, permits the grant of incentive stock options to the company’s employees, and the grant of non-statutory stock options, restricted stock, RSUs, stock appreciation rights, performance units and performance shares to the company’s employees, directors, and consultants. 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 110,020 shares as of December 31, 2024). As of December 31, 2024, the 2015 Plan is the only equity plan available for grant of equity awards to employees, directors, and consultants of the company. As of December 31, 2024, approximately 25.4 million shares were available for future grants under the 2015 Plan. Stock-Based Compensation The following table presents stock-based compensation included on the consolidated statements of operations (in thousands): Year Ended December 31, 2024 2023 2022 Stock-based compensation expense: Stock options $ 15,679 $ 13,884 $ 13,280 RSUs 18,753 35,279 26,899 $ 34,432 $ 49,163 $ 40,179 Stock-based compensation expense in operating expenses: Research and development $ 12,005 $ 17,341 $ 11,669 Selling, general and administrative 22,427 31,822 28,510 $ 34,432 $ 49,163 $ 40,179 222 Table of Conten t s Stock Options The following table summarizes stock option activity and related information for the year ended December 31, 2024: Number of Options Weighted- Average Exercise Price Aggregate Intrinsic Value (in thousands) Weighted- Average Remaining Contractual Life (in years) Outstanding as of December 31, 2023 9,820,435 $ 9.46 $ 6,046 6.6 Granted 6,336,675 $ 5.29 Exercised ( 308,959 ) $ 2.31 Expired/forfeited ( 440,563 ) $ 5.48 Outstanding as of December 31, 2024 15,407,588 $ 8.00 $ 90 7.1 Vested and exercisable as of December 31, 2024 8,038,537 $ 10.39 $ 90 5.5 As of December 31, 2024, the unrecognized compensation cost related to outstanding stock options was $ 20.1 million, which is expected to be recognized over a remaining weighted-average period of 1.7 years. During the year ended December 31, 2024, 2023 and 2022, the total intrinsic value of stock options exercised was $ 0.9 million, $ 0.3 million, and immaterial , respectively. During the years ended December 31, 2024, 2023 and 2022, cash proceeds received from stock option exercises were $ 0.7 million, $ 0.3 million, and $ 0.1 million, respectively. As of December 31, 2023, a total of 5,867,252 vested and exercisable stock options were outstanding. The fair value of stock options issued was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions: Year Ended December 31, 2024 2023 2022 Expected term 5.96 years 5.50 years 5.69 years Risk-free interest rate 4.3 % 4.0 % 2.6 % Expected volatility 116.8 % 116.2 % 101.8 % Dividend yield — % — % — % Weighted-average grant date fair value $ 4.58 $ 2.53 $ 4.20 The expected term was estimated using the average of the contractual term and the weighted-average vesting term of the options. The risk-free interest rate was based on the U.S. Treasury’s rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the expected term of the award being valued. The expected volatility was estimated based on the historical volatility of our common stock. The assumed dividend yield was based on our expectation of not paying dividends for the foreseeable future. 223 Table of Conten t s Restricted Stock Units The following table summarizes RSU activity during the year ended December 31, 2024: Number of Units Weighted- Average Grant Date Fair Value Nonvested balance as of December 31, 2023 7,503,979 $ 12.01 Granted 3,323,868 $ 4.77 Vested ( 4,269,864 ) $ 7.11 Forfeited/canceled ( 612,562 ) $ 12.76 Nonvested balance as of December 31, 2024 5,945,421 $ 11.41 As of December 31, 2024, there was $ 27.3 million of unrecognized stock-based compensation expense related to RSUs that is expected to be recognized over a weighted-average period of 1.9 years. During the years ended December 31, 2024, 2023 and 2022, the total fair value of RSUs vested was $ 14.6 million, $ 11.1 million, and $ 2.6 million, respectively. 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) 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 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 13 “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. During the year ended December 31, 2024, We recorded deemed dividends of $ 0.2 million during the year ended December 31, 2024 and $ 0.4 million during the years ended December 31, 2023 and 2022, respectively, in additional paid-in capital, on the consolidated balance sheets, with a corresponding credit to stock-based compensation expense. Related-Party Warrants A total of 1,638,000 warrants issued to an affiliate of Dr. Soon-Shiong with an exercise price of $ 3.24 per share were outstanding as of December 31, 2024. The fair value of $ 18.0 million assigned to the warrants will be recognized in equity upon achievement of a performance-based vesting condition pertaining to building manufacturing capacity to support supply requirements for ANKTIVA (which has not yet been satisfied). The warrants become exercisable 30 days following the achievement of the performance-based vesting condition (the “initial exercise date”) and expire on the 10th anniversary of the initial exercise date. 224 Table of Conten t s 17. Income Taxes We are subject to U.S. federal income tax, as well as income tax in Italy, South Korea, California, and other states. From inception through December 31, 2024, we have not been required to pay U.S. federal and state income taxes because of current and accumulated NOLs. Our federal returns for tax years 2021 through 2023 remain open to examination, and our state returns remain subject to examination for tax years 2020 through 2023. The Italian and South Korean returns for tax years 2019 through 2023 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. There are no cumulative earnings in our Italian and South Korean subsidiaries as of December 31, 2024 that would be subject to U.S. income tax or foreign withholding tax. We plan to indefinitely reinvest any future earnings of our foreign subsidiaries. Our loss before income taxes is as follows (in thousands): Year Ended December 31, 2024 2023 2022 U.S. loss before income taxes $ ( 410,458 ) $ ( 581,136 ) $ ( 413,653 ) Foreign loss before income taxes ( 3,187 ) ( 2,756 ) ( 3,633 ) Loss before income taxes $ ( 413,645 ) $ ( 583,892 ) $ ( 417,286 ) Income tax (expense) benefit consists of the following (in thousands): Year Ended December 31, 2024 2023 2022 Current: Federal $ — $ — $ — State — 26 ( 38 ) Foreign — — — Total current — 26 ( 38 ) Deferred: Federal — 5 2 State — 9 2 Foreign — — — Total deferred — 14 4 Total income tax (expense) benefit $ — $ 40 $ ( 34 ) 225 Table of Conten t s The components that comprise our net deferred tax liabilities consist of the following (in thousands): As of December 31, 2024 2023 Deferred tax assets: Net operating loss carryforwards $ 475,130 $ 420,782 Section 174 R&E capitalization 111,598 87,721 Interest expense 69,681 39,859 Research and development credits 68,070 56,610 Stock-based compensation 20,799 22,554 Operating lease liabilities 10,886 11,605 Valuation discount 6,641 9,095 Other 32,604 34,496 Total deferred tax assets 795,409 682,722 Deferred tax liabilities: Debt discount ( 9,735 ) ( 23,365 ) Operating lease right-of-use assets ( 8,589 ) ( 9,380 ) Depreciation — ( 1,533 ) Indefinite-lived intangible assets ( 139 ) ( 148 ) Total deferred tax liabilities ( 18,463 ) ( 34,426 ) Net deferred tax assets 776,946 648,296 Valuation allowance ( 777,085 ) ( 648,444 ) Net deferred tax liabilities $ ( 139 ) $ ( 148 ) As of December 31, 2024, we have federal NOLs of $ 1.8 billion, state NOLs of $ 2.1 billion, and foreign NOLs of $ 16.3 million. Of the $ 1.8 billion in federal NOLs, $ 1.4 billion do not expire and will be able to be used to offset 80% of taxable income in future years. Of the $ 2.1 billion in state NOLs, $ 64.3 million do not expire and will be able to be used to offset 80% of taxable income in future years. The remaining federal NOL carryforwards expire beginning in 2025, the remaining state NOL carryforwards expire beginning in 2025, the South Korean NOL carryforwards expire beginning in 2025, and the Italian NOLs do not expire. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some or all of our deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. 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 recorded a valuation allowance of $ 777.1 million and $ 648.4 million as of December 31, 2024 and 2023, respectively. During the years ended December 31, 2024 and 2023, the valuation allowance increased by $ 128.7 million and $ 156.6 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. 226 Table of Conten t s A reconciliation of the federal statutory income tax rate to our effective income tax rate is as follows: Year Ended December 31, 2024 2023 2022 Federal statutory tax rate 21.0 % 21.0 % 21.0 % State income taxes, net of federal tax benefit 5.2 % 6.8 % 9.5 % Change in fair value of warrants 1.0 % ( 1.8 ) % 0.5 % Change in fair value of convertible notes 2.2 % ( 1.3 ) % — % Investment loss — % 2.1 % — % Other permanent items — % — % ( 0.1 ) % Tax rate adjustment 3.9 % 1.4 % ( 0.4 ) % Research and development credits 2.5 % 3.1 % 3.6 % Stock-based compensation ( 1.1 ) % ( 1.0 ) % ( 0.5 ) % Section 162(m) limitation ( 0.5 ) % ( 0.4 ) % ( 2.1 ) % Other ( 4.5 ) % 0.3 % 1.5 % Valuation allowance ( 29.7 ) % ( 30.2 ) % ( 33.0 ) % Effective income tax rate — % — % — % 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 $ 266.5 million from our deferred tax asset schedules as of December 31, 2024 due to Section 382/383 limitations. There is no impact to tax expense for the derecognition of net operating losses, and federal and state research and development credits due to the valuation allowance recorded against our deferred tax assets. As of December 31, 2024, we also had federal research tax credit carryforwards of $ 55.6 million and state research tax credits of $ 35.7 million. The federal research tax credit carryforwards expire beginning in 2032 and certain state research tax credit carryforwards expire beginning in 2030. Our California research tax credits can be carried forward indefinitely. As of December 31, 2024, 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. The 80% limitation also applies to SRLY NOL carryovers and tax credits. 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, 2024 and 2023, we have $ 287.5 million and $ 164.6 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. A summary of changes to the amount of unrecognized tax benefits is as follows (in thousands): Year Ended December 31, 2024 2023 2022 Unrecognized tax benefits, beginning of year $ 35,470 $ 16,252 $ 13,504 Additions based on tax positions related to the current year 1,251 18,976 1,710 Additions based on tax positions related to prior years — 242 1,038 Reductions for tax positions of prior years ( 2,178 ) — — Unrecognized tax benefits, end of year $ 34,543 $ 35,470 $ 16,252 227 Table of Conten t s Included in the balance of unrecognized tax benefits as of December 31, 2024 is $ 16.4 million that, if recognized, would not impact our income tax benefit or effective tax rate as long as the deferred tax asset remains subject to a full valuation allowance. We do not expect that the unrecognized tax benefits will change within 12 months of December 31, 2024. Due to the existence of the valuation allowance, future changes in our unrecognized tax benefits will not impact our effective tax rate. We have not incurred any material interest or penalties as of the current reporting date with respect to income tax matters. Inflation Reduction Act of 2022 The IRA, 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. The new tax will require companies to compute two separate calculations for federal income tax purposes and pay the greater of the new minimum tax or their regular tax liability. The company is not an applicable corporation for the year ended December 31, 2024. 18. Employee Benefits 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. During the years ended December 31, 2024, 2023 and 2022, we made contributions totaling $ 3.0 million, $ 2.8 million, and $ 2.7 million, respectively, to the 401(k) Plan. Compensated Absences Under our vacation policy, salaried employees are provided unlimited vacation leave. 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. 19. Segment Information We operate in one business segment, and therefore have one reportable segment, focused on developing next-generation therapies that bolster the natural immune system while addressing serious unmet needs within urologic and other cancers as well as infectious diseases. 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. The measure of segment performance is net income (loss) as reflected in the consolidated statement of operations. The CODM uses net income (loss) to allocate resources on a consolidated basis, which enables the CODM to assess both the overall level of resources available and optimize distribution of resources across functions, therapeutic areas, regions and research and development programs in line with our long-term corporate-wide strategic goals. As the company manages its assets on a consolidated basis, the measure of segment assets is total assets, as reflected in the consolidated balance sheet. 228 Table of Conten t s Net loss for our segment is as follows (in thousands): Year Ended December 31, 2024 2023 2022 Revenue Product revenue, net $ 14,150 $ — $ — Other revenues 595 622 240 Total revenue 14,745 622 240 Operating costs and expenses Cost of sales — — — Research and development – external (including amounts with related parties) (1) 29,268 67,124 61,807 Research and development – internal (including amounts with related parties) (2) 160,876 165,242 186,342 Selling, general and administrative expense (including amounts with related parties) 168,783 129,620 102,708 Impairment of intangible assets — 886 681 Other segment items (3) 69,463 221,602 66,022 Total operating costs and expenses 428,390 584,474 417,560 Net loss $ ( 413,645 ) $ ( 583,852 ) $ ( 417,320 ) _______________ (1) Our external research and development expenses support our various preclinical and clinical programs. (2) Our internal research and development expenses include payroll and benefits expenses, facilities and equipment expense, and other indirect research and development expenses incurred in support of its research and development activities. (3) Other segment items include interest and investment income (loss), net; interest expense (including amounts with related parties); changes in the fair value of warrant liabilities, related-party convertible notes and derivative liabilities; interest expense related to revenue interest liability; loss on equity method investment; other (expense) income, net (including amounts with related parties); and income tax benefit (expense). We generate a portion of our revenues from outside of the U.S. Information about our revenue by geographic region is as follows (in thousands): Year Ended December 31, 2024 2023 2022 U.S. $ 14,214 $ 31 $ 42 Europe 531 591 198 Total segment revenue $ 14,745 $ 622 $ 240 229 Table of Conten t s ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None.