What changed in this filing

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Item 1. Financial Statements

2020-08-07 compared with 2020-05-11 · 295 added, 149 removed, 510 unchanged (47% of the section changed)

3 unchanged sentences

(in thousands, except share and per share amounts)

March 31, 2020

June 30, 2020

December 31, 2019

23 unchanged sentences

107,764,158 and

98,460,404 issued and outstanding as of March 31, 2020 and December 31, 2019

98,460,404 issued and outstanding as of June 30, 2020 and December 31, 2019

Additional paid-in capital

7 unchanged sentences

(in thousands, except share and per share amounts)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Operating expenses:

Research and development (including amounts with related parties)

Selling, general and administrative (including amounts with related parties)

Research and development (including amounts with

related parties)

Selling, general and administrative (including amounts

with related parties)

Total operating expenses

6 unchanged sentences

Loss before income taxes

Income tax benefit

Income tax (expense) benefit

Net loss per share:

6 unchanged sentences

(in thousands)

Three Months Ended March 31,

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

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

Reclassification of net realized losses on available-for-sale securities included in net

Total other comprehensive (loss) income

Three Months Ended June 30,

Six Months Ended June 30,

Other comprehensive income, net of income taxes:

Net unrealized gains on available-for-sale securities

Reclassification of net realized gains on available-for-sale

securities included in net loss

Total other comprehensive income

Comprehensive loss

4 unchanged sentences

Comprehensive

Balance at December 31, 2019

Three Months Ended June 30, 2020

Balance at March 31, 2020

Issuance of common stock, net of

$ 4,392 in offering costs

Stock-based compensation expense

Exercise of stock options

Vesting of restricted stock units (RSUs)

1 unchanged sentence

vesting of RSUs

Other comprehensive loss, net

Other comprehensive income, net

Balance at June 30, 2020

Comprehensive

Six Months Ended June 30, 2020

Balance at December 31, 2019

Issuance of common stock, net of

$ 4,392 in offering costs

Stock-based compensation expense

Exercise of stock options

Vesting of RSUs

Employee payroll taxes withheld related to

vesting of RSUs

Other comprehensive income, net

Balance at June 30, 2020

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

NantKwest, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except for share amounts)

Comprehensive

Three Months Ended June 30, 2019

Balance at March 31, 2019

Stock-based compensation expense

Vesting of RSUs

Employee payroll taxes withheld related to

vesting of RSUs

Repurchase of common stock

Other comprehensive income, net

Balance at June 30, 2019

Comprehensive

Six Months Ended June 30, 2019

Balance at December 31, 2018

5 unchanged sentences

vesting of RSUs and exercise of stock

Repurchase of common stock

Cumulative effect of the adoption of the

1 unchanged sentence

Other comprehensive income, net

Balance at March 31, 2019

Balance at June 30, 2019

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

2 unchanged sentences

(in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Operating activities:

3 unchanged sentences

Stock-based compensation expense

Amortization of net premiums and discounts on marketable debt securities

Non-cash interest items, net

Loss on sales of marketable debt securities

Amortization of net premiums and discounts on marketable debt securities

Loss on impairment of fixed assets

Changes in operating assets and liabilities:

8 unchanged sentences

Purchases of property, plant and equipment

Purchase of Viracta common stock

Purchases of marketable debt securities, available-for-sale

2 unchanged sentences

Financing activities:

Proceeds from exercises of stock options and warrants

Proceeds from equity offering, net of issuance costs paid

Proceeds from exercises of stock options

Proceeds from exercises of warrants

Repurchase of common stock

Net share settlement for restricted stock unit vesting and option exercises

Net cash (used in) provided by financing activities

Net cash provided by financing activities

Net increase in cash, cash equivalents, and restricted cash

5 unchanged sentences

(in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Reconciliation of cash, cash equivalents, and restricted cash at end of

6 unchanged sentences

Property and equipment purchases included in accounts payable, accrued

expenses, and other liabilities

expenses, due to related parties and other liabilities

Unpaid offering costs included in accounts payable and accrued expenses

Conversion of Viracta convertible notes and accrued interest into investment in

equity securities of Viracta (Note 4)

Unrealized (losses) gains on marketable debt securities

Unrealized gains on marketable debt securities

Cashless exercise of stock options

8 unchanged sentences

In these notes, the terms “we,” “our,” “the company” and “us” refer to NantKwest.

We are focused on harnessing the power of the innate immune system by using its natural killer cells, or NK cells, to treat cancer and viral infectious diseases.

We are focused on harnessing the power of the innate immune system by using our natural killer cells, or NK cells, to treat cancer and viral infectious diseases.

A critical aspect of our strategy is to invest significantly in innovating new therapeutic candidates, based upon our proprietary activated NK, or aNK, cell platform, and conducting clinical testing and scale manufacturing of our most promising biologic product candidates.

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We have non-exclusively licensed or sub-licensed our high-affinity CD16 bearing aNK cell platform and corresponding intellectual property to numerous pharmaceutical and biotechnology companies for such non-clinical uses.

As of March 31, 2020, the company had an accumulated deficit of approximately $680.6 million.

We also had negative cash flow from operations of approximately $12.6 million during the three months ended March 31, 2020.

On June 29, 2020, the company closed an underwritten public offering of an aggregate of 8,521,500 shares of common stock, which included 4,811,500 shares issued to the public at a price of $ 9.50 per share (which includes 1,111,500 shares sold to the public upon full exercise of the underwriters’ option to purchase additional shares at a public offering price of $ 9.50 per share), less underwriting discounts and commissions, and 3,710,000 shares issued to our Chairman, CEO and principal stockholder, Dr.

Patrick Soon-Shiong, at a price of $ 12.12 per share, less underwriting discounts and commissions.

All of the shares were offered by the company.

Including the underwriters’ option exercise, the aggregate gross proceeds from the offering were approximately $ 90.7 million, before deducting underwriting discounts, commissions and other offering expenses payable by the company of approximately $ 4.4 million.

Estimated issuance cost totaling $ 0.5 million were unpaid as of June 30, 2020 and have been included in accounts payable and accrued expenses on the company’s condensed consolidated balance sheets as of such date.

As of June 30, 2020, the company had an accumulated deficit of $ 700.7 million.

We also had negative cash flow from operations of $ 29.1 million during the six months ended June 30, 2020.

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

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Additional financing may not be available to us when needed and, if available, financing may not be obtained on terms favorable to the company or its stockholders.

While we expect our existing cash, and cash equivalents and marketable debt securities, together with the ability to borrow from affiliated entities, will enable us to fund operations and capital expenditure requirements for at least the next 12 months, we may not have sufficient funds to reach commercialization.

While we expect our existing cash, and cash equivalents and marketable debt securities will enable us to fund operations and capital expenditure requirements for at least the next 12 months, we may not have sufficient funds to reach commercialization.

Failure to obtain adequate financing when needed may require us to delay, reduce, limit, or terminate some or all of our development programs or future commercialization efforts or grant rights to develop and market product candidates that we might otherwise prefer to develop and market ourselves, which could adversely affect our ability to operate as a going concern.

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The condensed 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 discussed in the Liquidity section of Note 1.

We believe our existing cash, cash equivalents, and investments in marketable debt securities, and our ability to borrow from affiliated entities, will be sufficient to fund operations through at least the next 12 months following the issuance date of the financial statements based upon our Chairman and CEO’s intent and ability to support the company’s operations with additional funds, including loans from affiliated entities, as required.

We believe our existing cash, cash equivalents, and investments in marketable debt securities, will be sufficient to fund operations through at least the next 12 months following the issuance date of the financial statements.

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

2 unchanged sentences

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

To date, the company’s primary sources of capital were its initial public offering and the concurrent private placement of common shares.

In addition, during the year ended December 31, 2019, our Chairman and CEO exercised warrants and options resulting in aggregate cash proceeds of $39.2 million.

The unaudited condensed consolidated financial statements do not include all information and notes necessary for a complete presentation of results of income, comprehensive income, financial position, and cash flows in conformity with U.S.

12 unchanged sentences

Our ability to exercise significant influence is generally indicated by ownership of 20 to 50 percent interest in the voting securities of the entity.

All other unconsolidated equity investments on which we are not able to exercise significant influence will be subsequently measured at fair value wit h unrealized holding gains and losses included in other income, net on the condensed consolidated statements of operations.

In the instance the equity investment does not have a readily determinable fair value and does not qualify for the practical expedie nt to estimate fair value in accordance with ASC 820, Fair Value Measurement , or ASC 820, we will apply the measurement alternative under ASC 321, Investments—Equity Securities , or ASC 321 , pursuant to which we will measure the investment at its cost less impairment, adjusted for observable price changes in an orderly market for an identical or similar investment of the same issuer.

All other unconsolidated equity investments on which we are not able to exercise significant influence will be subsequently measured at fair value with unrealized holding gains and losses included in other income, net , on the condensed consolidated statements of operations.

In the instance the equity investment does not have a readily determinable fair value and does not qualify for the practical expedient to estimate fair value in accordance with ASC 820, Fair Value Measurement , or ASC 820, we will apply the measurement alternative under ASC 321, Investments—Equity Securities , or ASC 321 , pursuant to which we will measure the investment at its cost less impairment, adjusted for observable price changes in an orderly market for an identical or similar investment of the same issuer.

We own non-marketable equity securities that are accounted for using the measurement alternative under ASC 321 because the preferred stock held by us is not considered in-substance common stock and such preferred stock does not have a readily determinable fair value.

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However, we cannot at this time predict the specific extent, duration, or full impact that the COVID‑19 outbreak may have on our financial condition and results of operations, including ongoing and planned clinical trials.

More specifically, the recent uptick of COVID‑19 outbreaks worldwide and in particular across the U.S.

may result in prolonged impacts that we cannot predict at this time and we expect that such uncertainties will continue to exist until such time a vaccine is available.

The impact of the COVID‑19 coronavirus outbreak on the financial performance of the company will depend on future developments, including the duration and spread of the outbreak and related governmental advisories and restrictions.

19 unchanged sentences

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

As of March 31,

As of June 30,

Outstanding options

8 unchanged sentences

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

Although our adoption of ASU 2019‑12 did not have a material impact on our consolidated financial statements during the first quarter of 2020, it may have a material impact on our consolidated financial statements in future periods due to the removal of the exceptions discussed above.

Although our adoption of ASU 2019‑12 did not have a material impact on our consolidated financial statements during the three and six months ended June 30, 2020, it may have a material impact on our consolidated financial statements in future periods due to the removal of the exceptions discussed above.

The amendments related to intraperiod tax allocation were applied prospectively, and the amendment related to calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year will be applied prospectively.

11 unchanged sentences

With certain exceptions, adjustments are to be applied using a modified-retrospective approach by reflecting adjustments through a cumulative-effect impact on retained earnings as of the beginning of the fiscal year of adoption.

We are currently evaluating the impact that this new standard and its related amendments will have on our consolidated financial statements and we have not yet determined when we will adopt this new standard.

Other recent authoritative guidance issued by the FASB (including technical corrections to the ASC), the American Institute of Certified Public Accountants, and the Securities and Exchange Commission durin g the three months ended March 31, 2020 did not, or are not expected to, have a material effect on our consolidated financial statements.

We continue to evaluate the impact that this new standard and its related amendments will have on our consolidated financial statements and we have not yet determined when we will adopt this new standard.

Other recent authoritative guidance issued by the FASB (including technical corrections to the ASC), the American Institute of Certified Public Accountants, and the Securities and Exchange Commission during the three months ended June 30, 2020 did not, or are not expected to, have a material effect on our consolidated financial statements.

Financial Statement Details

Prepaid expenses and other current assets

As of March 31, 2020 and December 31, 2019, prepaid expenses and other current assets were made up of (in thousands):

March 31, 2020

As of June 30, 2020 and December 31, 2019, prepaid expenses and other current assets were made up of (in thousands):

June 30, 2020

December 31, 2019

1 unchanged sentence

related party (Note 9)

Prepaid supplies - with related party (Note 9)

Insurance premium financing asset

Prepaid services

Prepaid supplies - with related party (Note 9)

Prepaid insurance

Prepaid equipment maintenance

Interest receivable - marketable debt securities

Prepaid license fees

Interest receivable - marketable debt securities

Due from related parties

Insurance premium financing asset

Insurance claim receivables

Property, plant and equipment, net

As of March 31, 2020 and December 31, 2019, property, plant and equipment, net, was made up of (in thousands):

March 31, 2020

As of June 30, 2020 and December 31, 2019, property, plant and equipment, net, was made up of (in thousands):

June 30, 2020

December 31, 2019

2 unchanged sentences

Accumulated depreciation

Depreciation expense related to property, plant and equipment was $2.2 million and $1.8 million for the three months ended March 31, 2020 and 2019, respectively.

Depreciation expense related to property, plant and equipment was $ 2.3 million and $ 2.2 million for the three months ended June 30, 2020 and 2019, respectively, and $ 4.5 million and $ 4.0 million for the six months ended June 30, 2020 and 2019, respectively.

Other a ssets

As of March 31, 2020 and December 31, 2019, other assets were made up of (in thousands):

March 31, 2020

As of June 30, 2020 and December 31, 2019, other assets were made up of (in thousands):

June 30, 2020

December 31, 2019

5 unchanged sentences

Accrued expenses

As of March 31, 2020 and December 31, 2019, accrued expenses were made up of (in thousands):

March 31, 2020

As of June 30, 2020 and December 31, 2019, accrued expenses were made up of (in thousands):

June 30, 2020

December 31, 2019

1 unchanged sentence

Accrued compensation

Accrued professional and service fees

Accrued laboratory equipment, supplies and related services

Accrued professional and service fees

Accrued preclinical and clinical trial costs

Accrued franchise, sales/use and property taxes

Accrued franchise and sales/use taxes

Other current liabilities

As of March 31, 2020 and December 31, 2019, other current liabilities were made up of (in thousands):

March 31, 2020

As of June 30, 2020 and December 31, 2019, other current liabilities were made up of (in thousands):

June 30, 2020

December 31, 2019

1 unchanged sentence

amounts with related parties, Note 9)

Due to broker - marketable debt securities

Financing obligation - current portion

Investment income, net

Net investment income is as follows for the three months ended March 31, 2020 and 2019 (in thousands):

Three Months Ended March 31,

Net investment income is as follows for the three and six months ended June 30, 2020 and 2019 (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Interest income

Investment amortization expense, net

Investment amortization expense (accretion income), net

Net realized losses on investments

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

We did not recognize an impairment loss on any investments during the three months ended March 31, 2020 and 2019 .

We did no t recognize an impairment loss on any investments during the three and six months ended June 30, 2020 and 2019 .

Viracta Investment

1 unchanged sentence

In May 2017, we executed an exclusive worldwide license with Viracta to develop and commercialize Viracta’s proprietary histone deacetylase inhibitor drug candidate for use in combination with natural killer cell therapy and possibly additional therapies.

At March 31, 2020, our investment in Viracta totaled $9.3 million.

At June 30, 2020, our investment in Viracta totaled $ 9.3 million.

Our investment in Viracta is reflected in equity investment on the condensed consolidated balance sheets.

12 unchanged sentences

As the preferred stock does not have a readily determinable fair value and does not qualify for the practical expedient to estimate fair value in accordance with ASC 820, we have elected to apply the measurement alternative under ASC 321, pursuant to which we measure our investment in Viracta at cost, less impairment, adjusted for observable price changes in an orderly market for an identical or similar investment of the same issuer.

As of March 31, 2020, our qualitative impairment assessment did not indicate there were events or changes in circumstances that may have had a significant adverse effect on the fair value of the investment.

We have not recorded any impairments as of March 31, 2020, or on a cumulative basis.

Further, we have not identified any downward or upward adjustments due to observable price changes in the investment as of March 31, 2020, or on a cumulative basis.

As of June 30, 2020, our qualitative impairment assessment did not indicate there were events or changes in circumstances that may have had a significant adverse effect on the fair value of the investment.

We have not recorded any impairments as of June 30, 2020, or on a cumulative basis.

Further, we have not identified any downward or upward adjustments due to observable price changes in the investment as of June 30, 2020, or on a cumulative basis.

Financial Instruments – Investments in Marketable Debt Securities

At March 31, 2020, our investments in available-for-sale debt securities are detailed below (in thousands):

March 31, 2020

At June 30, 2020, our investments in available-for-sale debt securities, excluding $ 1.2 million of corporate debt securities and commercial paper included in cash and cash equivalents, are detailed below (in thousands):

June 30, 2020

Corporate debt securities

Foreign government bonds

Government sponsored securities

Current portion

As of March 31, 2020, the weighted-average remaining contractual life of our available-for-sale securities was approximately 0.2 years.

As of June 30, 2020, the weighted-average remaining contractual life of our available-for-sale securities was approximately 0.1 years.

At December 31, 2019, our investments in available-for-sale debt securities are detailed below (in thousands):

6 unchanged sentences

Noncurrent portion

Accumulated unrealized losses on debt securities classified as available-for-sale that have been in a continuous loss position for less than 12 months and for more than 12 months at March 31, 2020 and December 31, 2019 were as follows (in thousands):

March 31, 2020

Accumulated unrealized losses on debt securities classified as available-for-sale that have been in a continuous loss position for less than 12 months and for more than 12 months at June 30, 2020 and December 31, 2019 were as follows (in thousands):

June 30, 2020

Less than 12 months

6 unchanged sentences

Government sponsored securities

At March 31, 2020, 23 of the securities were in an unrealized loss position.

At June 30, 2020, 1 of the securities was in an unrealized loss position.

We evaluated our securities for other-than-temporary impairment and concluded that the decline in value was primarily caused by current economic and market conditions.

We do not intend to sell the investments and it is not more likely than not that we will be required to sell the investments before recovery of their amortized cost bases.

Therefore, we did not recognize any other-than-temporary impairment loss during the three months ended March 31, 2020.

Realized gains and losses on sales of available-for-sale debt securities during the three months ended March 31, 2020 and 2019 were immaterial.

Therefore, we did not recognize any other-than-temporary impairment loss during the six months ended June 30, 2020.

Realized gains and losses on sales of available-for-sale debt securities during the three and six months ended June 30, 2020 and 2019 were immaterial.

Fair Value Measurements

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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 se curities including commercial paper, government sponsored securities and corporate bonds, as well as foreign municipal securities .

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.

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Recurring Valuations

Financial assets and liabilities measured at fair value on a recurring basis are summarized below at March 31, 2020 and December 31, 2019 (in thousands):

Fair Value Measurements at March 31, 2020

Financial assets and liabilities measured at fair value on a recurring basis are summarized below at June 30, 2020 and December 31, 2019 (in thousands):

Fair Value Measurements at June 30, 2020

Cash and cash equivalents

Corporate debt securities

Foreign government bonds

Government sponsored securities

Total assets measured at fair value

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

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

There were no material non-financial assets and liabilities deemed to be other-than-temporarily impaired and measured at fair value on a non-recurring basis for the three months ended June 30, 2020.

Collaboration and License Agreements

2 unchanged sentences

These arrangements involve two or more parties who are (i) active participants in the activity, and (ii) exposed to significant risks and rewards dependent on the commercial success of the activity.

Cost Sharing Agreement

In January 2020, we entered into a Cost Allocation Agreement, or the Agreement, with ImmunityBio, Inc.

and its subsidiaries, or ImmunityBio.

The Agreement became effective on October 1, 2019.

We have entered into the following collaborative arrangements with ImmunityBio, Inc., ImmunityBio, and/or its subsidiaries as described below.

ImmunityBio is a related party, as it is an affiliate of NantWorks (Note 9).

Under the Agreement and related work order, the parties agreed to conduct a joint study for the clinical research trial being conducted pursuant to the protocol titled QUILT 3.063:

J oint Development Agreement for COVID ‑19

In May 2020, we entered into a binding term sheet with ImmunityBio for the joint development, manufacturing and marketing of a vaccine and various therapeutics for COVID‑19, or the Joint COVID-19 Collaboration, pursuant to which we and ImmunityBio will share equally in all costs relating to developing, manufacturing, and marketing of the product candidates globally, starting from and after the effective date of the definitive agreement, and the global net profits from the collaboration products will be shared 60 %/ 40 % in favor of the party contributing the product on which the sales are based.

All net profits from sales of any combined collaboration products will be shared equally as further outlined below.

We are negotiating and finalizing a definitive agreement related to this term sheet and expect to complete this definitive agreement by late August 2020, and our current plans and operations assume that this definitive agreement will be executed to continue the Joint COVID‑19 Collaboration.

Until the definitive agreement is finalized, any investments made by each entity are the responsibility of the contributing party.

As of June 30, 2020, we have incurred operating expenses of $ 5.4 million, which includes allocated personnel costs, laboratory supplies, and other expenses related to readying and operating our GMP laboratory manufacturing facilities in El Segundo and Culver City, California, which has been included in research and development expense on the condensed consolidated statements of operations.

These facilities and related laboratory equipment have been repurposed for the manufacture of two of the collaboration product candidates.

In addition, we also incurred capital expenditures of $ 2.3 million related to laboratory equipment in connection with the Joint COVID-19 Collaboration, which has been included in property, plant and equipment on the condensed consolidated balance sheets.

As of June 30, 2020, we have committed operating and capital expenditures of $ 4.5 million that we will incur in future periods.

The incurred and committed expenditures are primarily associated with the company’s previously ongoing QUILT-COVID-19-MSC product candidate and ImmunityBio’s human adenovirus, or hAd5, vaccine candidate.

In this Joint COVID‑19 Collaboration, we contributed our QUILT‑COVID‑19‑MSC product candidate as a therapeutic candidate for patients with severe symptoms of COVID‑19, to modulate the immune system’s excessive response to COVID‑19 infection, thereby potentially reducing the debilitating and sometimes fatal effects of the disease;

and our QUILT‑ceNK‑COVID‑19 product candidate as a therapeutic candidate for moderate-risk, hospitalized adults with moderate to severe symptoms of COVID‑19.

ImmunityBio contributed its IL‑15 product candidate as a therapeutic candidate for patients with mild symptoms of COVID-19, for use prior to the onset of severe disease by potentially activating natural killer cells to mitigate viral replication;

and human adenovirus, or hAd5, as a vaccine candidate for those individuals in an uninfected state, to prevent the onset of COVID‑19.

In addition to the above programs contributed by each party, we will contribute our manufacturing capabilities in the form of facilities, equipment, personnel and related know-how, including our GMP manufacturing facility in El Segundo, California, and ImmunityBio will contribute certain manufacturing equipment and related technology and know-how.

To date, NantKwest and ImmunityBio have each prepared a GMP-ready manufacturing plant for COVID‑19 vaccine production, which we and ImmunityBio expect will have a combined estimated capacity to produce sufficient clinical supply for our phase I and II studies by year-end 2020.

We have prepared one of our GMP manufacturing facilities previously used to manufacture product for our oncology trials to manufacture and produce the vaccine candidate and we have identified a new, well-equipped location to manufacture and produce clinical products for our oncology trials, which will result in additional facilities and related facility operating costs in future periods.

We have established a clinical product inventory to continue to supply clinical product for our ongoing oncology trials.

In addition, we have repurposed some of our manufacturing facility in Culver City, California, and personnel to support our QUILT‑COVID‑19‑MSC program and have repurposed some of our personnel overseeing quality of our oncology programs to support the Joint COVID‑19 Collaboration.

We also expect to hire additional staff to support the Joint COVID‑19 Collaboration.

We believe the Joint COVID‑19 Collaboration will have no material impact on our current oncology efforts and trials and we expect that we will be able to continue to manufacture adequate product to continue our ongoing oncology trials.

Additionally, with the sole exception of IL‑15 manufacturing, we will have primary responsibility for manufacturing and supplying the COVID‑19 collaboration products for clinical and commercial purposes.

We will also have the primary responsibility in the U.S.

for sales and marketing of the COVID‑19 collaboration products and the parties will share responsibility in the rest of the world for sales and marketing for the COVID‑19 collaboration products.

The Joint COVID‑19 Collaboration binding term sheet outlines how development costs will be shared, how profits will be apportioned for any successfully marketed products, and the structure of the shared governance of the joint effort.

Under the terms of the collaboration, we and ImmunityBio will share equally in all costs relating to developing, manufacturing, and marketing of the product candidates globally, starting from and after the effective date of the definitive agreement, and the global net profits from the collaboration products will be shared 60 %/ 40 % in favor of the party contributing the product on which the sales are based.

All net profits from sales of combined COVID‑19 collaboration products will be shared equally.

The Joint COVID‑19 Collaboration will be supervised by joint committees, comprised of an equal number of representatives from both companies.

The term of the agreement will be five years and it is renewable for an additional five year period upon mutual agreement.

Each party will also have a right to terminate in the event of material breach, bankruptcy, or insolvency.

If the definitive agreement is not entered into by both parties on or prior to August 21, 2020, then either party may thereafter terminate the term sheet upon five business days’ notice.

Cost Sharing Agreement

In January 2020, we entered into a Cost Allocation Agreement with ImmunityBio and its subsidiaries.

Under the Cost Allocation Agreement, which became effective on October 1, 2019, and related work order, the parties agreed to conduct a joint study for the clinical research trial being conducted pursuant to the protocol titled QUILT 3.063:

A phase 2 study of combination therapy with an IL‑15 superagonist (N‑803), off-the-shelf CD16‑targeted natural killer cells (haNK), and avelumab without cytotoxic chemotherapy in subjects with Merkel Cell Carcinoma (MCC) that has progressed on or after treatment with a checkpoint inhibitor .

2 unchanged sentences

Additionally, we are designated as the contracting party to execute agreements with third and related parties relating to the joint study.

We and ImmunityBio will split certain joint study costs equally in accordance with the terms of the Agreement and related work order.

We and ImmunityBio will split certain joint study costs equally in accordance with the terms of the Cost Allocation Agreement and related work order.

Shared joint study costs include cost related to conducting the joint study development activities, such as personnel related costs, as well as all costs associated with regulatory matters.

Costs and expenses incurred in connection with the development, manufacturing, supply, delivery, and pre-patient administration dosing mechanism of each party’s study drug, are excluded from the shared joint study costs.

Under the Agreement, each of ImmunityBio and the company will receive exclusive rights to any new intellectual property developed that relates solely to its respective study drug, and the parties will have joint co-equal rights in any other intellectual property.

The Agreement expires upon the second anniversary of the effective date with the option to renew for additional successive one-year terms, but work orders for any joint studies still in process at the time of termination will continue until the applicable study is completed.

During the three months ended March 31, 2020, we incurred $0.1 million in costs related to the joint study that are subject to joint cost sharing under the Agreement which have been recorded as a reduction in research and development expense on the condensed consolidated statements of operations.

At March 31, 2020, we have recorded a receivable of $0.1 million from ImmunityBio related to ImmunityBio’s share of joint study costs under the Agreement, which is included in prepaid and other current assets on the condensed consolidated balance sheets.

Under the Cost Allocation Agreement, each of ImmunityBio and the company will receive exclusive rights to any new intellectual property developed that relates solely to its respective study drug, and the parties will have joint co-equal rights in any other intellectual property.

The Cost Allocation Agreement expires on June 22, 2022 with the option to renew for additional successive one-year terms, but work orders for any joint studies still in process at the time of termination will continue until the applicable study is completed.

During the three and six months ended June 30, 2020, we incurred $ 29,700 and $ 0.1 million, respectively, in costs related to the joint study that are subject to joint cost sharing under the Cost Allocation Agreement which have been recorded as a reduction in research and development expense on the condensed consolidated statements of operations.

At June 30, 2020, we have recorded a receivable of $ 29,700 from ImmunityBio related to ImmunityBio’s share of joint study costs under the Cost Allocation Agreement.

Exclusive Co-Development Agreement

9 unchanged sentences

We have dosed patients with N‑803, an IL‑15 superagonist, in several phase Ib/II trials.

No charges for supplies by Altor were incurred in association with the above trials during the three months ended March 31, 2020 and 2019.

No charges for supplies by Altor were incurred in association with the above trials during the three and six months ended June 30, 2020 and 2019.

Commitments and Contingencies

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Stipulation of Settlement

In early April 2019, following board approval, which occurred in late March 2019, we entered into a settlement agreement, or the Stipulation of Settlement, with three stockholders of the company, each of whom had submitted a stockholder demand for the board to take action to remedy purported harm to the company resulting from certain alleged wrongful conduct concerning, among other things, disclosures about Dr.

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

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

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This includes instances where 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.

The amount of such receivable recorded at March 31, 2020 and December 31, 2019 was $30,000 and $34,000, respectively, and is included in prepaid expenses and other current assets on our consolidated balance sheets.

The amount of such receivable recorded at June 30, 2020 and December 31, 2019 was $ 0 and $ 34,000 , respectively, and is included in prepaid expenses and other current assets on our consolidated balance sheets.

Contractual Obligations - Leases

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See Note 9 – Related Party Agreements for further information.

For the three months ended March 31, 2020 and 2019, $1.3 million and $1.2 million, respectively, including variable lease costs of $0.3 million and $0.2 million, respectively, was recorded in operating expenses on the condensed consolidated statements of operations.

The weighted-average remaining lease term as of March 31, 2020 and December 31, 2019 was 4.3 years and 4.5 years, respectively.

The weighted-average discount rate as of March 31, 2020 and December 31, 2019 was 9%.

For the three months ended March 31, 2020 and 2019, cash outflows from operating leases, excluding variable lease costs, was $1.0 million and $1.3 million, respectively.

Future minimum lease payments at March 31, 2020 are presented in the following table (in thousands).

For the three months ended June 30, 2020 and 2019, $ 1.3 million and $ 1.3 million, respectively, including variable lease costs of $ 0.3 million and $ 0.3 million, respectively, was recorded in operating expenses on the condensed consolidated statements of operations.

For the six months ended June 30, 2020 and 2019, $ 2.6 million and $ 2.5 million, respectively, including variable lease costs of $ 0.7 million and $ 0.5 million, respectively, was recorded in operating expenses on the condensed consolidated statements of operations.

The weighted-average remaining lease term as of June 30, 2020 and December 31, 2019 was 4.1 years and 4.5 years, respectively.

The weighted-average discount rate as of June 30, 2020 and December 31, 2019 was 9 %.

For the three months ended June 30, 2020 and 2019, cash outflows from operating leases, excluding variable lease costs, was $ 1.1 million and $ 1.0 million, respectively.

For the six months ended June 30, 2020 and 2019, cash outflows from operating leases, excluding variable lease costs, was $ 2.1 million and $ 2.3 million, respectively.

Future minimum lease payments at June 30, 2020 are presented in the following table (in thousands).

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

Years ending December 31:

2020 (excluding the three months ended March 31, 2020)

2020 (excluding the six months ended June 30, 2020)

Total future minimum lease payments

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In March 2016, we entered into a lease agreement for an approximately 7,893 square foot facility in Woburn, Massachusetts, for a research and development laboratory, related office and other related uses.

The initial lease term runs for 48 months from April 29, 2016 through May 31, 2020.

In June 2016, the lease was amended to add 260 square feet , for a total of 8,153 square f eet .

B ase rent for the initial term of the lease is $19,000 per month with a $1 per square foot annual increase on each anniversary date.

In August 2019, we exercised our right pursuant to the lease agreement to extend the term of the lease for an addition al two years through May 31, 2022.

The initial lease term ran for 48 months from April 29, 2016 through May 31, 2020.

In June 2016, the lease was amended to add 260 square feet, for a total of 8,153 square feet.

Base rent for the initial term of the lease was $ 19,000 per month with a $ 1 per square foot annual increase on each anniversary date.

In August 2019, we exercised our right pursuant to the lease agreement to extend the term of the lease for an additional two years through May 31, 2022 .

Consequently, during the third quarter of 2019 we recognized an increase of $ 0.6 million in both operating lease right-of-use assets and operating lease liabilities on the condensed consolidated balance sheets.

Base rent for the extended term of the lease is $ 25,800 per month with an annual increase of 3 % on June 1, 2021.

In November 2015, we entered into a facility license agreement with NantWorks LLC, or NantWorks, a related party (Note 9), for approximately 9,500 square feet of office space in Culver City, California, which has been converted to a research and development laboratory and a cGMP manufacturing facility.

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The base rent is $ 0.2 million per month with 3 % annual increases on each anniversary date.

We did not enter into any significant contracts during the three months ended March 31, 2020, other than those disclosed in these unaudited condensed consolidated financial statements.

We did not enter into any significant contracts during the six months ended June 30, 2020, other than those disclosed in these unaudited condensed consolidated financial statements.

Related Party Agreements

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We are charged for the services at cost plus reasonable allocations for indirect costs that relate to the employees providing the services.

For the three months ended March 31, 2020 and 2019, we recorded $0.7 million and $0.6 million, respectively, to selling, general and administrative expense, and $0.5 million and $0.3 million, respectively, to research and development expense under this arrangement on the condensed consolidated statements of operations.

For the three months ended June 30, 2020 and 2019, we recorded selling, general and administrative expense under this arrangement of $ 0.6 million and $ 0.5 million, respectively.

For the six months ended June 30, 2020 and 2019, we recorded selling, general and administrative expense under this arrangement of $ 1.3 million and $ 1.2 million, respectively.

For the three months ended June 30, 2020 and 2019, we recorded research and development expense under this arrangement of $ 0.4 million and $ 0.3 million, respectively.

For the six months ended June 30, 2020 and 2019, we recorded research and development expense under this arrangement of $ 1.0 million and $ 0.6 million, respectively.

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

In June 2016, we amended the existing shared services agreement with NantWorks whereby we can provide support services to NantWorks and/or any of its affiliates.

For the three months ended March 31, 2020 and 2019, we recorded expense reimbursements of $0.3 million and $0.2 million, respectively, to selling, general and administrative expense and $0.5 million and $0.5 million, respectively, to research and development expense.

We owed NantWorks a net amount of $0.7 million and $0.4 million for all agreements between the two affiliates at March 31, 2020 and December 31, 2019, respectively, which is included in due to related parties on the condensed consolidated balance sheets.

For the three months ended June 30, 2020 and 2019, we recorded selling, general and administrative expense reimbursements of $ 0.4 million and $ 0.2 million, respectively.

For the six months ended June 30, 2020 and 2019, we recorded selling, general and administrative expense reimbursements of $ 0.7 million and $ 0.4 million, respectively.

For the three months ended June 30, 2020 and 2019, we recorded research and development expense reimbursements of $ 0.3 million and $ 0.6 million, respectively.

For the six months ended June 30, 2020 and 2019, we recorded research and development expense reimbursements of $ 0.8 million and $ 1.1 million, respectively.

We owed NantWorks a net amount of $ 0.8 million and $ 0.4 million for all agreements between the two affiliates at June 30, 2020 and December 31, 2019, respectively, which is included in due to related parties on the condensed consolidated balance sheets.

In November 2015, we entered into a facility license agreement with NantWorks, which became effective May 2015, for approximately 9,500 square feet in Culver City, California, which has been converted to a research and development laboratory and a cGMP manufacturing facility.

Lease expense for this facility is recorded in research and development expense on the condensed consolidated statements of operations and was $0.1 million for each of the three months ended March 31, 2020 and 2019.

Lease expense for this facility is recorded in research and development expense on the condensed consolidated statements of operations and was $ 0.2 million and $ 0.3 million for each of the three and six months ended June 30, 2020 and 2019, respectively.

Immuno-Oncology Clinic, Inc.

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

The new agreement also specifies certain servi ces and related costs that are excluded from the new agreement.

The new agreement also specifies certain services and related costs that are excluded from the new agreement.

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

For existing clinical trials, commenced prior to July 1, 2019, fees incurred for services performed after July 1, 2019 are covered under the new agreement and applied towards the below-mentioned prepayments.

The initial term of the new agreement is for one year , but the agreement allows for an automatic renewal and additional extensions beyond the initial term.

The initial term of the new agreement was for one year , but the agreement allows for an automatic renewal and additional extensions beyond the initial term.

In July 2019, we executed a clinical trial work order under the new agreement with the Clinic for an open-label, phase I study of PD‑L1.t‑haNK for infusion in subjects with locally advanced or metastatic solid cancers.

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

During the three months ended March 31, 2020 and 2019, $0.1 million and $0.4 million, respectively, has been recognized in research and development expense on the condensed consolidated statements of operations related to our agreements with the Clinic.

At March 31, 2020 and December 31, 2019, we owed the Clinic $0.1 million and $0.1 million, respectively, for services excluded from the new agreement, which are included in due to related parties on the condensed consolidated balance sheets.

At March 31, 2020 and December 31, 2019, we had a prepaid balance with the Clinic of $5.0 million and $5.1 million, respectively, which are included in prepaid expenses and other currents assets, and other assets, on the condensed consolidated balance sheets.

We anticipate that the remaining prepayment amount as of March 31, 2020 will be utilized in future periods as the Clinic provides additional services pursuant to the new agreement.

During the three months ended June 30, 2020 and 2019, $ 0.1 million and $ 0.2 million, respectively, has been recognized in research and development expense on the condensed consolidated statements of operations related to our agreements with the Clinic.

During the six months ended June 30, 2020 and 2019, $ 0.2 million and $ 0.5 million, respectively, has been recognized in research and development expense on the condensed consolidated statements of operations related to our agreements with the Clinic.

At June 30, 2020 and December 31, 2019, we owed the Clinic $ 0.1 million and $ 0.1 million, respectively, for services excluded from the new agreement, which are included in due to related parties on the condensed consolidated balance sheets.

At June 30, 2020 and December 31, 2019, we had a prepaid balance with the Clinic of $ 4.9 million and $ 5.1 million, respectively, which are included in prepaid expenses and other currents assets, and other assets, on the condensed consolidated balance sheets.

We anticipate that the remaining prepayment amount as of June 30, 2020 will be utilized in future periods as the Clinic provides additional services pursuant to the new agreement.

ImmunityBio, Inc., or ImmunityBio, is a related party, as it is an affiliate of NantWorks.

Until the definitive agreement is finalized, any investments made by each entity are the responsibility of the contributing party.

These facilities and related laboratory equipment have been repurposed for the manufacture of two of the collaboration product candidates.

As of June 30, 2020, we have committed operating and capital expenditures of $ 4.5 million that we will incur in future periods.

In January 2020, we entered into a cost sharing agreement with ImmunityBio as further described in Note 7 – Collaboration and License Agreements .

During the three months ended March 31, 2020, we incurred $0.1 million in costs related to the joint study being conducted that are subject to joint cost sharing under the Agreement which have been recorded as a reduction in research and development expense on the condensed consolidated statements of operations.

At March 31, 2020, we have a receivable of $0.1 million from ImmunityBio related to this agreement, which is included in prepaid expenses and other current assets on the condensed consolidated balance sheets.

During the three and six months ended June 30, 2020, we incurred $ 29,700 and $ 0.1 million, respectively, in costs related to the joint study being conducted that are subject to joint cost sharing under the Cost Allocation Agreement which have been recorded as a reduction in research and development expense on the condensed consolidated statements of operations.

At June 30, 2020, we have a receivable of $ 29,700 from ImmunityBio related to this agreement.

In August 2016, we entered into an exclusive Co‑Development Agreement with Altor as described in Note 7 – Collaboration and License Agreements .

Altor is a related party as it is a wholly owned subsidiary of ImmunityBio.

No charges for supplies by Altor were incurred in association with the trials during the three months ended March 31, 2020 and 2019.

No charges for supplies by Altor were incurred in association with the trials during the three and six months ended June 30, 2020 and 2019.

In June 2015, we entered into a supply agreement with ImmunityBio pursuant to which we have the right to purchase ImmunityBio’s proprietary bioreactors, made according to specifications mutually agreed to with ImmunityBio.

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The agreement has an initial term of five years and renews automatically for successive one-year periods unless terminated earlier.

At each of March 31, 2020 and December 31, 2019, we had $ 1.8 million in capitalized equipment purchased from ImmunityBio, which is included in property, plant and equipment, net, on the condensed consolidated balance sheets.

During each of the three months ended March 31, 2020 and 2019, we recorded research and development expense associated with reagents and consumables purchased from ImmunityBio of $ 0.1 million on the conden sed consolidated statement s of operations .

At March 31, 2020 and December 31, 2019 we had $0.4 million and $0.5 million, respectively, included in prepaid expenses and other current assets on the condensed consolidated balance sheets related to consumables purchased from ImmunityBio.

At March 31, 2020 and December 31, 2019, no other balances were due between the parties.

At June 30, 2020 and December 31, 2019, we had $ 3.1 million and $ 1.8 million, respectively, in capitalized equipment purchased from ImmunityBio, which is included in property, plant and equipment, net, on the condensed consolidated balance sheets.

During the three months ended June 30, 2020 and 2019, we recorded research and development expense associated with reagents and consumables purchased from ImmunityBio of $ 0.1 million and $ 5,000 , respectively, on the condensed consolidated statements of operations.

During the six months ended June 30, 2020 and 2019, we recorded research and development expense associated with reagents and consumables purchased from ImmunityBio of $ 0.1 million and $ 0.1 million, respectively, on the condensed consolidated statements of operations.

At June 30, 2020 and December 31, 2019 we had $ 0.3 million and $ 0.5 million, respectively, included in prepaid expenses and other current assets on the condensed consolidated balance sheets related to consumables purchased from ImmunityBio.

At June 30, 2020, we owed ImmunityBio $ 1.3 million related primarily to purchases of equipment during the second quarter of 2020.

At December 31, 2019, no other balances were due between the parties.

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

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The monthly rent is $ 0.1 million with annual increases of 3 % beginning in July 2017 .

Lease expense for this facility is recorded in research and development expense on the condensed consolidated statements of operations and was $0.2 million for each of the three months ended March 31, 2020 and 2019, respectively.

At March 31, 2020 and December 31, 2019, no balances were due between the parties.

Lease expense for this facility is recorded in research and development expense on the condensed consolidated statements of operations and was $ 0.2 million and $ 0.4 million for each of the three and six months ended June 30, 2020 and 2019, respectively.

At June 30, 2020 and December 31, 2019, no balances were due between the parties.

In August 2018, NantBio assigned an agreement to us for the use of a third-party research facility, which provides us with the exclusive right to use and access to a portion of the third party’s laboratory and vivarium premises.

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At December 31, 2019, NantBio owed us $ 8,400 , which is included in prepaid expenses and other current assets on the condensed consolidated balance sheets.

At March 31, 2020, no balances were due between the parties.

At June 30, 2020, no balances were due between the parties.

In March 2016, NantBio and the National Cancer Institute entered into a cooperative research and development agreement.

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We benefited from the preclinical and clinical research conducted during the first four years under this agreement.

In each of April 2016, April 2017, August 2018 and May 2019, we paid $0.6 million to the National Cancer Institute as a prepayment for services under the agreement.

We recognize research and development expense related to this agreement ratably over a 12‑month period for each funding year and recorded $0.1 million and $0.1 million of expense associated with the agreement in each of the three months ended March 31, 2020 and 2019.

At March 31, 2020, we have accrued $25,000 in anticipation of funding an additional $0.6 million related to the fifth year of the agreement in April 2020.

As of December 31, 2019, we had a balance of $0.1 million included in prepaid expenses and other current assets related to this agreement, on the condensed consolidated balance sheets.

In each of April 2016, April 2017, August 2018, May 2019 and April 2020, we paid $ 0.6 million to the National Cancer Institute as a prepayment for services under the agreement.

We recognize research and development expense related to this agreement ratably over a 12‑month period for each funding year and recorded $ 0.2 million and $ 0.3 million of expense associated with the agreement in each of the three and six months ended June 30, 2020 and 2019, respectively.

As of June 30, 2020 and December 31, 2019, we had a balance of $ 0.4 million and $ 0.1 million, respectively, included in prepaid expenses and other current assets related to this agreement, on the condensed consolidated balance sheets.

Stockholders’ Equity

Equity Offering – On June 29, 2020, the company closed an underwritten public offering of an aggregate of 8,521,500 shares of common stock, which included 4,811,500 shares issued to the public at a price of $ 9.50 per share (which includes 1,111,500 shares sold to the public upon full exercise of the underwriters’ option to purchase additional shares at a public offering price of $ 9.50 per share), less underwriting discounts and commissions, and 3,710,000 shares issued to our Chairman, CEO and principal stockholder, Dr.

Patrick Soon-Shiong, at a price of $ 12.12 per share, less underwriting discounts and commissions.

All of the shares were offered by the company.

Estimated issuance cost totaling approximately $ 0.5 million were unpaid as of June 30, 2020 and have been included in accounts payable and accrued expenses on the company’s condensed consolidated balance sheets as of such date.

Stock Repurchase – In November 2015, the board of directors approved a share repurchase program, or the 2015 Share Repurchase Program, allowing the CEO or CFO, on behalf of the company, to repurchase 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.

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We have financed, and expect to continue to finance, the purchases with existing cash balances.

At March 31, 2020, $18.3 million remained authorized for repurchase under the 2015 Share Repurchase Program and no shares were repurchased during the three months ended March 31, 2020.

At June 30, 2020, $ 18.3 million remained authorized for repurchase under the 2015 Share Repurchase Program.

No shares were repurchased during the three and six months ended June 30, 2020.

During the three and six months ended June 30, 2019, we repurchased 473,586 shares of our common stock at prices ranging between $ 0.95 per share and $ 1.09 per share for a total cost of $ 0.5 million.

In addition, we paid $ 14,200 of broker commissions on these repurchases.

The shares are formally retired through board approval upon repurchase.

In July 2015, the company's board of directors adopted and the company’s stockholders approved the 2015 Equity Incentive Plan, or the 2015 Plan.

The 2015 Plan is the only equity plan of the company available for grant of equity awards to employees, directors and consultants of the company.

In April 2019, the company’s board of directors adopted, and in June 2019 the company’s stockholders approved, a first amendment to the 2015 Plan to reserve a further 3,000,000 shares of common stock for issuance pursuant to the 2015 Plan.

In March 2020, the company’s board of directors adopted, and in June 2020 the company’s stockholders approved, a second amendment to the 2015 Plan to reserve a further 3,000,000 shares of common stock for issuance pursuant to the 2015 Plan.

Following approval of these amendments, a total of 10,249,857 shares of common stock were reserved for issuance pursuant to the 2015 Plan.

Stock-Based Compensation

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Stock-based compensation expense:

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Stock Options

The following table summarizes stock option activity under all equity incentive plans for the three months ended March 31, 2020:

The following table summarizes stock option activity under all equity incentive plans for the six months ended June 30, 2020:

(in thousands)

Outstanding at December 31, 2019

Outstanding at March 31, 2020

Vested and Exercisable at March 31, 2020

The total unrecognized compensation cost related to non-vested stock options as of March 31, 2020 is $1.0 million, which is expected to be recognized over a weighted-average period of 2.4 years.

During the three months ended March 31, 2019, we recognized proceeds of $4.1 million from exercises of stock options by our Chairman and CEO.

There were no option exercises during the three months ended March 31, 2020.

Options granted

Options exercised

Options forfeited

Outstanding at June 30, 2020

Vested and Exercisable at June 30, 2020

The total unrecognized compensation cost related to non-vested stock options as of June 30, 2020 is $ 2.4 million, which is expected to be recognized over a weighted-average period of 1.3 years.

During the three and six months ended June 30, 2020, we recognized proceeds of $ 0.6 million and $ 0.6 million, respectively, from exercises of stock options.

The aggregate intrinsic value of stock options exercised during the three and six months ended June 30, 2020, was $ 1.9 million and $ 1.9 million, respectively.

During the three and six months ended June 30, 2019, we recognized proceeds of $ 0 and $ 4.1 million, respectively, from exercises of stock options by our Chairman and CEO.

The company uses a Black-Scholes option-pricing model to determine the fair value of stock-based compensation under U.S.

The assumptions used for employee stock options granted during the periods presented in these condensed consolidated financial statements are presented in the table below for the three and six months ended June 30, 2020 (Unaudited):

Expected term (in years)

Risk-free interest rate

Expected volatility

Dividend yield

Weighted-average measurement date fair value

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 assumption 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.

E xpected volatility was estimated based on the historical volatility of our c ommon stock.

The assumed dividend yield was based on the company’s expectation of not paying divide nds for the foreseeable future.

Restricted Stock Units

The following table summarizes the restricted stock units, or RSUs, activity under the 2015 Plan for the three months ended March 31, 2020:

The following table summarizes the restricted stock units, or RSUs, activity under the 2015 Plan for the six months ended June 30, 2020:

Unvested balance at December 31, 2019

Unvested balance at March 31, 2020

During the three months ended March 31, 2020, we granted 33,500 RSUs to employees.

As of March 31, 2020, there was $1.3 million of unrecognized stock-based compensation expense related to RSUs that is expected to be recognized over a weighted-average period of 2.0 years.

Of that amount, $1.2 million of unrecognized expense is related to employee grants with a remaining weighted-average period of 2.1 years and $0.1 million of unrecognized expense is related to non-employee grants with a remaining weighted-average period of 0.6 years.

During the three months ended March 31, 2019, we recognized proceeds of $35.2 million upon the exercise of warrants by our Chairman and CEO.

As of December 31, 2019 there were no warrants outstanding, and no warrants were issued during the three months ended March 31, 2020.

Unvested balance at June 30, 2020

As of June 30, 2020, there was $ 0.9 million of unrecognized stock-based compensation expense related to RSUs that is expected to be recognized over a weighted-average period of 2.1 years.

Of that amount, $ 0.9 million of unrecognized expense is related to employee grants with a remaining weighted-average period of 2.2 years and $ 37,100 of unrecognized expense is related to non-employee grants with a remaining weighted-average period of 0.5 years.

During the three and six months ended June 30, 2019, we recognized proceeds of $ 0 and $ 35.2 million, respectively, upon the exercise of warrants by our Chairman and CEO.

As of December 31, 2019 there were no warrants outstanding, and no warrants were issued during the six months ended June 30, 2020.

The difference between the federal statutory tax rate of 21 % and our 0 % tax rate is due to losses in jurisdictions from which we cannot benefit.

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However, with the adoption of ASU 2019‑12, we are no longer required to allocate the tax provision to the other categories of earnings and related benefit to continuing operations under these circumstances.

We recorded unrealized gains on marketable debt securities during the three months ended March 31, 2019.

As a result, we recorded a tax benefit of $36,000 for the three months ended March 31, 2019 on the condensed consolidated statements of operations.

We also recorded an increase to other comprehensive income of $0.1 million for the three months ended March 31, 2019 on the condensed consolidated balance sheets.

We recorded unrealized gains on marketable debt securities in other comprehensive income during the three and six months ended June 30, 2019.

As a result, we recorded a tax expense of $ 2,000 for the three months ended June 30, 2019 and a tax benefit of $ 34,000 for the six months ended June 30, 2019 on the condensed consolidated statements of operations.

We also recorded an increase to other comprehensive income of $ 0.1 million, for the six months ended June 30, 2019 on the condensed consolidated balance sheets.

No increase to other comprehensive income was recorded for the three months ended June 30, 2019.

We are operating in Korea.

During the three months ended March 31, 2020 and 2019, there was no tax expense or benefit related to Korea.

During the three and six months ended June 30, 2020 and 2019, there was no tax expense or benefit related to Korea.

We currently file federal and state income tax returns in the U.S.

and in Korea.

and file Korean statutory tax returns.

Income tax expense consists of U.S.

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To date, we have not been required to pay U.S.

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

On March 27, 2020, the U.S.

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

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

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

On March 27, 2020, the U .

enacted the Coronavirus Aid, Relief and Economic Security Act , or the C ARES Act.

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

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

While the CARES Act provides sweeping tax changes in response to the COVID‑19 pandemic, some of the more significant provisions which are expected to impact our financial statements include removal of certain limitations on utilization of net operating losses, increasing the loss carryback period for certain losses to five years, and increasing the ability to deduct interest expense, as well as amending certain provisions of the previously enacted Tax Cuts and Jobs Act.

While the CARES Act provides sweeping tax changes in response to the COVID ‑ 19 pandemic , some of the more significant provisions which are expected to impact our financial statements i nclud e removal of certain limitations on utilization of net operating losses, increasing the loss carryback period for certain losses to five years, and increasing the ability to deduct interest expense, as well as amending certain provisions of the previously enacted Tax Cuts and Jobs Act.

Consistent with previous years, we expect to continue to generate net losses in the foreseeable future.

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As we have never generated taxable income, the CARES Act feature allowing net operating losses originating in 2018, 2019 or 2020 to be carried back five years is not expected to have a significant impact.

Management does not expect any other provisions of the CARES Act to have a material impact on our financial position, results of operations or cash flows during 2020.

Management does not expect any other provisions of the CARES Act to have a material impact on our financial position, results of operations or cash flows d uring 2020.

Subsequent Events

ImmunityBio Agreemen t

In July 2020, but effective June 22, 2020, we executed Work Order Number Two with ImmunityBio, pursuant to that certain Cost Allocation Agreement, as described in further detail in Note 7 – Collaboration and License Agreements .

Under the second work order, the parties agreed to conduct a joint study for the clinical research trial being conducted pursuant to the protocol titled QUILT 88:

Open-label, randomized, comparative phase 2 study of combination immunotherapy with standard-of-care chemotherapy versus standard-of-care chemotherapy for first and second line treatment of locally or advanced metastatic pancreatic cancer .

The ImmunityBio study drugs included in the joint study are ImmunityBio’s proprietary IL‑15 superagonist (N‑803) and Aldoxorubicin Hydrochloride (Aldoxorubicin), and our study drug is PD‑L1.t‑haNK.

ImmunityBio will act as the sponsor of this joint study for purposes of regulatory matters, including submissions, correspondence, and communications with the FDA.

Additionally, ImmunityBio is designated as the contracting party to execute agreements with third and related parties relating to the joint study.

We and ImmunityBio will split certain joint study costs equally in accordance with the terms of the Cost Allocation Agreement and related work order.

Shared joint study costs include cost related to conducting the joint study development activities, such as personnel related costs, as well as all costs associated with regulatory matters.

We expect to share approximately $ 11.8 million of joint study costs under Work Order Number Two, subject to changes dependent on clinical trial enrollments and progress.

Minimal costs were incurred related to this work order as of June 30, 2020.

Immuno-Oncology Clinic, Inc.

In July 2020, but effective June 22, 2020, we and ImmunityBio executed a clinical trial work order under our existing master agreement with the Clinic.

Under this work order, the parties agreed that the Clinic would serve as a site for our multi-site clinical trial for the protocol titled QUILT 88, as described above.

Pursuant to our existing agreement with the Clinic, our share of qualifying expenses shall be deducted from amounts previously paid to the Clinic as described in further detail in Note 9 – Related Party Agreements .

We expect to incur up to $ 3.7 million of qualifying clinical trial expenses under this work order, subject to changes dependent on clinical trial enrollments and progress.

Minimal costs were incurred related to this work order as of June 30, 2020.

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

What changed 10-Q

Item 1. Financial Statements