What changed in this filing

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Item 1. Financial Statements

2021-05-14 compared with 2020-11-09 · 796 added, 595 removed, 225 unchanged (86% of the section changed)

FINANCIAL STATEMENTS.

NantKwest, Inc.

Condensed Consolidated Balance Sheets

ImmunityBio, Inc.

and Subsidiaries

Condensed Combined Consolidated Balance Sheets

(in thousands, except share and per share amounts)

September 30,

Current assets:

Cash and cash equivalents

Marketable securities

Due from related parties

Prepaid expenses and other current assets (including amounts with related parties)

Marketable debt securities, available-for-sale

Total current assets

Marketable debt securities, noncurrent

Property, plant and equipment, net (including amounts with related parties)

Marketable securities, noncurrent

Property, plant and equipment, net

Non-marketable equity investment (Note 4)

Intangible asset, net

Convertible note receivable

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

Equity investment

Other assets (including amounts with related parties)

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES AND STOCKHOLDERS’ DEFICIT

Current liabilities:

Accounts payable

Accrued expenses

Accrued expenses and other liabilities

Due to related parties

Operating lease liabilities (including amounts with related parties)

Other current liabilities

Total current liabilities

Related-party notes payable

Operating lease liabilities, less current portion (including amounts with related parties)

Deferred income tax liability

Other liabilities

Total liabilities

Commitments and contingencies (Note 8)

Stockholders’ equity:

Stockholders’ deficit:

Common stock, $ 0.0001 par value;

500,000,000 shares authorized;

108,592,583 and 98,460,404 issued and outstanding as of September 30, 2020

and December 31, 2019, respectively

383,067,321 and

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

December 31, 2020, respectively;

excluding treasury stock, 163,800 shares

outstanding as of March 31, 2021 and December 31, 2020, respectively

Additional paid-in capital

Accumulated other comprehensive loss

Accumulated deficit

Total stockholders’ equity

Total liabilities and stockholders’ equity

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

NantKwest, Inc.

Condensed Consolidated Statements of Operations

Accumulated other comprehensive (loss) income

Total ImmunityBio stockholders’ deficit

Noncontrolling interests

Total stockholders’ deficit

Total liabilities and stockholders’ deficit

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

ImmunityBio, Inc.

and Subsidiaries

Condensed Combined Consolidated Statements of Operations

(in thousands, except share and per share amounts)

Three Months Ended

September 30,

Nine Months Ended

September 30,

Three Months Ended March 31,

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

1 unchanged sentence

Other income (expense):

Investment income, net

Interest expense

Interest and investment income, net

Interest expense (including amounts with related parties)

Other income, net (including amounts with related parties)

Total other income

Loss before income taxes

Income tax (expense) benefit

Net loss per share:

Basic and diluted

Weighted-average number of shares during the period:

Basic and diluted

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

NantKwest, Inc.

Condensed Consolidated Statements of Comprehensive Loss

Total other income (expense)

Loss before income taxes and noncontrolling interests

Income tax expense

Net loss attributable to noncontrolling interests, net of tax

Net loss attributable to ImmunityBio common stockholders

Net loss per ImmunityBio common share – basic and diluted

Weighted-average number of common shares used in computing

net loss per share – basic and diluted

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

ImmunityBio, Inc.

and Subsidiaries

Condensed Combined Consolidated Statements of Comprehensive Loss

(in thousands)

Three Months Ended

September 30,

Nine Months Ended

September 30,

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 loss

Net unrealized losses on available-for-sale securities

Foreign currency translation adjustments

Reclassification of net realized losses on available-for-sale

securities included in net loss

Total other comprehensive (loss) income

Comprehensive loss

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 September 30, 2020

Balance at June 30, 2020

Issuance of common stock, net of

$ 4,373 in offering costs

Stock-based compensation expense

Exercise of stock options

Vesting of restricted stock units (RSUs)

Employee payroll taxes withheld related to

vesting of RSUs and exercise of stock

Other comprehensive loss, net

Balance at September 30, 2020

Comprehensive loss attributable to noncontrolling interests

Comprehensive loss attributable ImmunityBio common

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

ImmunityBio, Inc.

and Subsidiaries

Condensed Combined Consolidated Statements of (Deficit) Equity

(in thousands, except share amounts)

Comprehensive

Nine Months Ended September 30, 2020

Balance at December 31, 2019

Issuance of common stock, net of

$ 4,373 in offering costs

Stock-based compensation expense

Stockholders’

Noncontrolling

Stockholders’

Three Months Ended March 31, 2021

Income (Loss)

Balance as of December 31, 2020

Stock-based compensation

Exercise of stock options

Vesting of RSUs

Employee payroll taxes withheld related to

vesting of RSUs and exercise of stock

Other comprehensive loss, net

Balance at September 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 September 30, 2019

Balance at June 30, 2019

Stock-based compensation expense

Vesting of RSUs

Employee payroll taxes withheld related to

vesting of RSUs

Other comprehensive income, net

Balance at September 30, 2019

Vesting of restricted stock

Net share settlement for RSUs

Other comprehensive loss

Balance as of March 31, 2021

Comprehensive

Nine Months Ended September 30, 2019

Balance at December 31, 2018

Stock-based compensation expense

Exercise of warrants

Exercise of stock options

Stockholders’

Noncontrolling

Stockholders’

Three Months Ended March 31, 2020

Balance as of December 31, 2019

Stock-based compensation

Vesting of RSUs

Employee payroll taxes withheld related to

vesting of RSUs and exercise of stock

Repurchase of common stock

Cumulative effect of the adoption of the

new lease standard

Other comprehensive income, net

Balance at September 30, 2019

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

NantKwest, Inc.

Condensed Consolidated Statements of Cash Flows

Net share settlement for RSUs

Other comprehensive income

Balance as of March 31, 2020

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

ImmunityBio, Inc.

and Subsidiaries

Condensed Combined Consolidated Statements of Cash Flows

(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Operating activities:

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

Stock-based compensation expense

Unrealized (gains) losses on equity securities

Non-cash interest items, net (including amounts with related parties)

Depreciation and amortization

Non-cash lease expense related to operating lease right-of-use assets

Stock-based compensation expense

Amortization of net premiums and discounts on marketable debt securities

Loss on sales of marketable debt securities

Non-cash interest items, net

Loss on impairment of fixed assets

Changes in operating assets and liabilities:

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Accrued expenses and other liabilities

Due to related parties

Related parties

Operating lease liabilities

2 unchanged sentences

Purchases of property, plant and equipment

Purchase of Viracta common stock

Purchases of marketable debt securities, available-for-sale

Maturities of marketable debt securities

Sales of marketable debt securities

Net cash (used in) provided by investing activities

Proceeds from sales of marketable debt securities

Net cash provided by investing activities

Financing activities:

Proceeds from equity offering, net of issuance costs paid

Proceeds from issuance of related-party promissory notes

Proceeds from exercises of stock options

Proceeds from exercises of warrants

Repurchase of common stock

Net share settlement for restricted stock unit vesting

Net cash provided by financing activities

Net increase in cash, cash equivalents, and restricted cash

Net share settlement for RSUs vesting

Net cash provided by (used in) financing activities

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

Net change in cash, cash equivalents, and restricted cash

Cash, cash equivalents, and restricted cash, beginning of period

Cash, cash equivalents, and restricted cash, end of period

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

NantKwest, Inc.

Condensed Consolidated Statements of Cash Flows (Continued)

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

ImmunityBio , Inc.

and Subsidiaries

Condensed Combined Consolidated Statements of Cash Flows (Continued)

(in thousands)

Nine Months Ended September 30,

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

Three Months Ended March 31,

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

Cash and cash equivalents

Restricted cash

Restricted cash (Note 3)

Cash, cash equivalents, and restricted cash, end of period

2 unchanged sentences

Supplemental disclosure of non-cash activities:

Property and equipment purchases included in accounts payable, accrued

expenses and due to related parties

Cashless exercise of stock options

Property and equipment purchases included in accounts payable, accrued expenses,

and due to related parties

Right-of-use assets obtained in exchange for operating lease liabilities

Conversion of Viracta convertible notes and accrued interest into investment in

equity securities of Viracta (Note 4)

Unrealized (losses) gains on marketable debt securities

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

NantKwest, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Unrealized gains on marketable debt securities

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

ImmunityBio, Inc.

and Subsidiaries

Notes to Unaudited Condensed Combined Consolidated Financial Statements

Description of Business

NantKwest, Inc., or NantKwest, was incorporated in Illinois on October 7, 2002 under the name ZelleRx Corporation.

On January 22, 2010, the company changed its name to Conkwest, Inc., and on July 10, 2015, the company changed its name to NantKwest, Inc.

In March 2014, the company redomesticated from the State of Illinois to the State of Delaware and the Illinois company ceased to exist.

We are a pioneering clinical-stage immunotherapy biotechnology company headquartered in San Diego, California with certain operations in Culver City and El Segundo, California and Woburn, Massachusetts.

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 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.

We hold the exclusive right to commercialize aNK cells, a commercially viable NK cell line, and a wide range of genetically modified derivatives capable of killing cancer and virally infected cells.

We own corresponding United States, or U.S., and foreign composition and methods-of-use patents and applications covering the cells, improvements, methods of expansion and manufacture and use of aNK cells and their improvements as therapeutics to treat a spectrum of clinical conditions.

We also license exclusive commercial rights to a high-affinity CD16 receptor expressing enhancement of our aNK cell platform, covered in a portfolio of U.S.

and foreign composition and methods-of-use patents and applications covering both the clinical use as a therapeutic to treat cancers in combination with antibody products, as well as the non-clinical use in laboratory testing of monoclonal antibodies.

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.

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 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 of approximately $ 4.4 million.

As of September 30, 2020, the company had an accumulated deficit of $ 722.4 million.

We also had negative cash flow from operations of $ 47.4 million during the nine months ended September 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.

We are currently focused primarily on the development of immunotherapeutic treatments for cancers and debilitating viral infections using targeted cancer and viral killing cell lines, and we believe such activities will result in the company’s continued incurrence of significant research and development and other expenses related to those programs.

If the clinical trials for any of the company’s product candidates fail or produce unsuccessful results and those product candidates do not gain regulatory approval, or if any of our product candidates, if approved, fail to achieve market acceptance, we may never become profitable.

Even if the company achieves profitability in the future, it may not be able to sustain profitability in subsequent periods.

We intend to cover our future operating expenses through cash and cash equivalents and marketable debt securities on hand and through a combination of equity offerings, debt financings, government or other third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances, and licensing arrangements.

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 will enable us to fund operations and capital expenditure requirements for at least the next 12 months, we anticipate that we will need additional 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.

If we raise additional funds from the issuance of equity securities, substantial dilution to existing stockholders may result.

If we raise additional funds by incurring debt financing, the terms of the debt may involve significant cash payment obligations , as well as covenants and specific financial ratios that may restrict our ability to operate our business.

We were incorporated in Illinois on October 7, 2002 under the name ZelleRx Corporation.

On January 22, 2010, we changed our name to Conkwest, Inc.

In March 2014, we formed Conkwest, Inc., our wholly-owned subsidiary in the state of Delaware, or Conkwest Delaware, for the purposes of changing the state of our incorporation to the state of Delaware.

In March 2014, we merged with an into Conkwest Delaware, with Conkwest Delaware surviving the merger.

On July 10, 2015, we changed our name to NantKwest, Inc.

On March 9, 2021, we completed a merger with NantCell, Inc.

(formerly known as ImmunityBio, Inc., a private company) and we changed our name to ImmunityBio, Inc.

Our principal executive offices are located in San Diego, California.

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

We established ImmunityBio to advance the next-generation immunotherapies and to address unmet needs within oncology and infectious disease.

Our platform is designed to overcome limitations of the current standards of T cell-based immunotherapies, including checkpoint inhibitors and CAR-T cells and is based on our four key modalities:

(1) activating natural killer, or NK, and T cells using antibody cytokine fusion proteins, (2) activating tumoricidal macrophages using low-dose synthetic immunomodulators, (3) generating memory T cells using vaccine candidates developed with our second-generation adenovirus, or hAd5, technology, and (4) off-the-shelf natural killer cells from the NK‑92 cell line and memory-like cytokine-enhanced natural killer cells (m‑ceNK) from allogenic and autologous donors.

We own a broad, clinical-stage immunotherapy pipeline, including an antibody cytokine fusion protein (an IL‑15 superagonist (N‑803) known as Anktiva), an albumin-associated anthracycline synthetic immunomodulator (aldoxorubicin), second-generation adenovirus (hAd5) and yeast vaccine technologies (targeting tumor-associated antigens and neoepitopes), off-the-shelf genetically engineered natural killer cell lines inducing cancer and virally infected cell death through a variety of concurrent mechanisms (including innate killing, antibody-mediated killing, and CAR-directed killing), patient specific NK cell product for cancer that is an autologous Memory cytokine enhanced Natural Killer cells, macrophage polarizing peptides, and bi-specific fusion proteins targeting CD20, PD‑L1, TGF‑ b and IL‑12.

Our immunotherapy clinical pipeline consists of over 40 clinical trials in Phase 1, 2, or 3 development across 19 indications in solid and liquid cancers and infectious diseases.

We have an expansive clinical-stage pipeline and intellectual property portfolio with 17 first-in-human assets in 25 Phase II to III clinical trials.

In December 2019, the United States, or U.S., Food and Drug Administration , or FDA, granted Breakthrough Therapy designation to Anktiva for bacillus Calmette-Guérin, or BCG, unresponsive carcinoma in situ non-muscle invasive bladder cancer.

Other indications currently with registration-potential studies include BCG unresponsive papillary bladder cancer, first- and second-line lung cancer, and metastatic pancreatic cancer.

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

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

The Merger Agreement provided that a wholly-owned subsidiary of the company would merge with and into NantCell (the “Merger”), with NantCell surviving the Merger as a wholly-owned subsidiary of the company.

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

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

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

At the Effective Time, each outstanding option, warrant or restricted stock unit to purchase NantCell common stock was converted using the Exchange Ratio into an option, warrant or restricted stock unit, respectively, on the same terms and conditions immediately prior to the Effective Time, to purchase shares of Company Common Stock.

Immediately following the Effective Time, the former stockholders of NantCell held approximately 71.5 % of the outstanding shares of Company Common Stock and the stockholders of the company as of immediately prior to the Merger held approximately 28.5 % of the outstanding shares of Company Common Stock.

As a result of the Merger and immediately following the Effective Time, Dr.

Patrick Soon-Shiong, our Executive Chairman, and his affiliates beneficially own, in the aggregate, approximately 81.8 % of the outstanding shares of Company Common Stock.

Following the consummation of the Merger, shares of the company’s common stock are now listed on the Nasdaq Global Select Market under the symbol “IBRX.”

We incurred costs totaling $ 23.2 million in connection with the Merger, consisting of financial advisory, legal and other professional fees, of which $ 12.9 million was recorded during the three months ended March 31, 2021.

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

Accounting Treatment of the Merger

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

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

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

We have recast our prior period financial statements to reflect the conveyance of NantCell’s common shares as if the Merger had occurred as of the earliest date of the financial statements presented.

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

The following table provides the impact of the change in reporting entity on our unaudited condensed combined consolidated statements of operations for the three months ended March 31, 2021 and 2020 (in thousands):

Three Months Ended

March 31, 2021

ImmunityBio, Inc.

Operating expenses:

Research and development (including amounts with

related parties)

Selling, general and administrative (including amounts

with related parties)

Loss from operations

Other (expense) income, net (including amounts with

related parties)

Income tax expense

Three Months Ended

March 31, 2020

ImmunityBio, Inc.

Operating expenses:

Research and development (including amounts with

related parties)

Selling, general and administrative (including amounts

with related parties)

Loss from operations

Other (expense) income, net (including amounts with

related parties)

Income tax expense

Summary of Significant Accounting Policies

There have been no material changes in our significant accounting policies other than the adoption of accounting pronouncements described below under Application of New or Revised Accounting Standards – Adopted , as compared to the significant accounting policies described in our Annual Report on Form 10‑K for the year ended December 31, 2019.

There have been no material changes to our significant accounting policies from those described in the Notes to Combined Consolidated Financial Statements included in the Combined Consolidated Financial Statements of ImmunityBio, Inc.

as of December 31, 2020 and December 31, 2019 (including NantCell, Inc.) filed as Exhibit 99.2 to our Current Report on Form 8‑K/A filed with the Securities and Exchange Commission, or SEC, on April 22, 2021.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or U.S.

GAAP and pursuant to the rules and regulations of the Securities and Exchange Commission.

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

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

The accompanying unaudited condensed combined consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or U.S.

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

The unaudited condensed combined 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.

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

GAAP for annual reports.

Accordingly, these financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the fiscal year ended December 31, 2019 included in our Annual Report on Form 10‑K.

As of March 31, 2021, the company had an accumulated deficit of $ 1.7 billion.

We also had negative cash flows from operations of $ 60.5 million for the three months ended March 31, 2021.

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

The condensed combined consolidated financial statements are derived from the company’s and NantCell’s respective historical consolidated financial statements for each period presented.

Since the entities have been under common control for all periods presented, the condensed combined consolidated financial statements assume that the Merger took place at the beginning of the earliest period for which the condensed combined consolidated financial statements are presented.

Accordingly, these financial statements should be read in conjunction with the audited combined consolidated financial statements and notes thereto for the fiscal year ended December 31, 2020 included in the Combined Consolidated Financial Statements of ImmunityBio, Inc.

as of December 31, 2020 and December 31, 2019 (including NantCell, Inc.) filed as Exhibit 99.2 to our Current Report on Form 8‑K/A filed with the SEC on April 22, 2021.

Interim operating results are not necessarily indicative of operating results for the full year.

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, will be sufficient to fund operations through at least the next 12 months following the issuance date of the financial statements.

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

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

However, we believe our existing cash, cash equivalents, and investments in marketable securities, together with capital to be raised through equity offerings, including but not limited to the offering, issuance and sale by us of up to a maximum aggregate offering of $ 500.0 million of our common stock that may be issued and sold under an “at-the-market” sales agreement with Jefferies LLC, or the ATM, and our potential 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 primarily upon our Executive Chairman’s intent and ability to support our operations with additional funds, including loans from affiliated entities, as required, which we believe alleviates such doubt.

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

1 unchanged sentence

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

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

Principles of Consolidation and Equity Investments

The condensed consolidated financial statements include the accounts of NantKwest and its wholly owned subsidiaries.

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

Principles of Consolidation

The accompanying unaudited condensed combined consolidated financial statements include the accounts of the company and its subsidiaries.

All intercompany amounts have been eliminated.

We apply the variable interest model under Accounting Standards Codification, or ASC, Topic 810, Consolidation , to any entity in which we hold an equity investment or to which we have the power to direct the entity's most significant economic activities and the ability to participate in the entity's economics.

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

We apply the variable interest model under ASC Topic 810, Consolidation , to any entity in which we hold an equity investment or to which we have the power to direct the entity’s most significant economic activities and the ability to participate in the entity’s economics.

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

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Unconsolidated equity investments in the common stock or in-substance common stock of an entity under which we are able to exercise significant influence, but not control, are accounted for using the equity method.

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 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.

All investments are reviewed on a regular basis for possible impairment.

Our ability to exercise significant influence is generally indicated by ownership of 20 % to 50 % 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 with unrealized holding gains and losses included in interest and investment income, net , on the condensed combined 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 Topic 820, Fair Value Measurement , or ASC 820, we will apply the measurement alternative under ASC Topic 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.

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

All investments are reviewed for possible impairment on a regular basis.

If an investment’s fair value is determined to be less than its net carrying value, the investment is written down to its fair value.

5 unchanged sentences

Use of Estimates

The preparation of condensed 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 condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

On an ongoing basis, we evaluate our estimates, including those related to valuation of equity-based awards, deferred income taxes and related valuation allowances, preclinical and clinical trial accruals, impairment assessments, the measurement of right-of-use assets and lease liabilities, useful lives of long-lived assets, loss contingencies, and fair value measurements.

The preparation of condensed combined 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 condensed combined consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

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

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

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Risks and Uncertainties

In March 2020, the World Health Organization declared the novel strain of coronavirus disease (SARS‑CoV‑2) outbreak a pandemic.

To date, our operations have not been significantly impacted by the pandemic.

In March 2020, the World Health Organization declared the novel strain of coronavirus disease (SARS‑CoV‑2) a pandemic.

To date, our operations have not been significantly disadvantaged by the pandemic.

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

More specifically, the pandemic 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 broadly available and in use.

The impact of the pandemic 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.

More specifically, the pandemic may result in prolonged impacts that we cannot predict at this time and we expect that such uncertainties will continue to exist for the foreseeable future.

The impact of the pandemic on our financial performance will depend on future developments, including the duration and spread of the outbreak, impact of potential variants and the related governmental advisories and restrictions.

These developments and the impact of the ongoing pandemic on the financial markets and the overall economy are highly uncertain.

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Concentration of Credit Risk and Other Risks and Uncertainties

Financial instruments that potentially subject us to concentrations of risk consist principally of cash and cash equivalents and marketable debt securities.

Our cash and cash equivalents are held by one major financial institution in the U.S.

and one in Korea.

Product candidates developed by us will require approvals or clearances from the U.S.

Food and Drug Administration , or 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 approval s or clearance s .

If we w ere to be denied approval or clearance or any such approval or clearance w as to be delayed, it would have a material adverse impact on us .

Financial instruments that potentially subject us to concentrations of risk consist principally of cash and cash equivalents, marketable securities, and a convertible note receivable.

Our cash and cash equivalents are held by one major financial institution in the U.S., one in South Korea and one in Italy.

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.

Stock-Based Compensation

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

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.

Basic and Diluted Net Loss per Share of Common Stock

Basic net loss per share is calculated by dividing the net loss by the weighted-average number of common shares outstanding for the period.

Diluted loss per share is computed similarly to basic loss per share except that the denominator is increased to include 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.

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.

For all periods presented, potentially dilutive securities are excluded from the computation of fully diluted loss per share as their effect is anti-dilutive.

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

As of September 30,

Outstanding options

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

As of March 31,

Outstanding stock options

Outstanding RSUs

Amounts in the table above reflect the common stock equivalents of the noted instruments.

Collaboration Arrangements

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

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

These arrangements involve two or more parties who are active participants in the activity, and 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 Topic 606, Revenue from Contracts with Customers , or ASC 606.

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

Where amounts owed to a collaboration partner exceed our collaboration expenses in each quarterly period, such amounts 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 expenses.

Our collaboration arrangements are further discussed within Note 7, Collaboration and License Agreements .

Outstanding related-party warrants

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

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

See Note 11 , Stock-Based Compensation , for further information.

Recent Accounting Pronouncements

Application of New or Revised Accounting Standards – Adopted

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

2018-18, Collaborative Arrangements (Topic 808):

Clarifying the Interaction between Topic 808 and Topic 606 (ASU 2018-18).

ASU 2018-18 clarifies when certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606.

It also specifically addresses when the participant should be considered a customer in the context of a unit of account;

adds unit of account guidance in ASC 808 to align with guidance in ASC 606;

and precludes presenting revenue from a collaborative arrangement together with revenue recognized under ASC 606 if the collaborative arrangement participant is not a customer.

The new standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years with early adoption permitted.

We adopted ASU 2018-18, as required, in the quarter ended March 31, 2020.

We are a party to several collaboration arrangements as further described in Note 7, Collaboration and License Agreements , however, adoption of ASU 2018-18 did not have an impact on our condensed consolidated financial statements because the counterparties to our collaboration agreements do not meet the definition of a customer.

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

The amendments in ASU 2019 ‑ 12 include remov ing the exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gai n from other items (e.g., discontinued operations or other comprehensive income) , and the exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year .

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

The guidance is effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted.

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 three and nine months ended September 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 amendment s related to intraperiod tax allocation were a pplied 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.

Application of New or Revised Accounting Standards – Not Yet Adopted

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

Measurement of Credit Losses on Financial Instruments .

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

Measurement of Credit Losses on Financial Instruments , or ASU 2016-13.

The FASB subsequently issued amendments to ASU 2016‑13, which have the same effective date and transition dates as described below.

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This new standard also requires that credit losses related to available-for-sale debt securities be recorded as an allowance through net income rather than reducing the carrying amount under the current, other-than-temporary-impairment model.

For public business entities that meet the definition of a SEC filer, except entities that are eligible to be a smaller reporting company as defined by the SEC, the standard is effective for annual periods beginning after December 15, 2019, and interim periods therein.

For all other entities, the standard is effective for annual periods beginning after December 15, 2022, and interim periods therein.

For public business entities that meet the definition of an SEC filer, except entities that are eligible to be a smaller reporting company as defined by the SEC, the standard is effective for annual periods beginning after December 15, 2019, and interim periods therein.

For all other entities, including us, the standard is effective for annual periods beginning after December 15, 2022, and interim periods therein.

Early adoption is permitted for all entities for annual periods beginning after December 15, 2018.

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We continue to evaluate the impact that this new standard and its related amendments will have on our consolidated financial statements and we do not intend to early 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 September 30, 2020 did not, or are not expected to, have a material effect on our consolidated financial statements.

Other recent authoritative guidance issued by the FASB (including technical corrections to the ASC), the American Institute of Certified Public Accountants, and the SEC during the three months ended March 31, 2021 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 September 30, 2020 and December 31, 2019, prepaid expenses and other current assets were made up of (in thousands):

September 30,

As of March 31, 2021 and December 31, 2020, prepaid expenses and other current assets consist of the following (in thousands):

Prepaid preclinical and clinical trial services – with

related party (Note 9)

Insurance premium financing asset

Insurance claim receivable

Prepaid services

Prepaid license fees

Prepaid insurance

Insurance premium financing asset

Equipment deposits

Tenant improvement receivables – with

related party (Note 9)

Prepaid equipment maintenance

Interest receivable – marketable debt securities

Prepaid supplies – with related party (Note 9)

Prepaid license fees

Prepaid equipment maintenance

Laboratory equipment deposit

Due from related parties

Insurance claim receivables

Property, p lant and e quipment, n et

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

September 30,

Prepaid expenses and other current assets

We have reflected our right 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 receipt is deemed probable.

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.

Our insurance claims receivable as of March 31, 2021 and December 31, 2020 are the result of the recovery of legal costs, which had been previously charged in prior periods to s elling, general and administrative expense, on the condensed combined consolidated statements of operations.

Property, plant and equipment, net

As of March 31, 2021 and December 31, 2020, property, plant and equipment, net, consist of the following (in thousands):

Leasehold improvements

Construction in progress

Furniture & fixtures

Accumulated depreciation

Depreciation expense related to property, plant and equipment was $ 2.4 million and $ 2.2 million for the three months ended September 30, 2020 and 2019, respectively, and $ 6.9 million and $ 6.2 million for the nine months ended September 30, 2020 and 2019, respectively.

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

September 30,

Gross property, plant and equipment

Accumulated depreciation and amortization

Property, plant and equipment, net

Construction in progress at March 31, 2021 is related primarily to expansion of our hAd5 pharmaceutical development and manufacturing facilities, including construction of a new filling suite at our leased facilities in El Segundo, California .

Depreciation and amortization expense related to property, plant and equipment totaled $ 3.0 million and $ 3.5 million for the three months ended March 31, 2021 and 2020, respectively.

As of March 31, 2021 and December 31, 2020, other assets consist of the following (in thousands):

VAT receivable

Security deposits

Prepaid software license fees

Restricted cash

Due from related party

Prepaid preclinical and clinical trial services – with

related party (Note 9)

Restricted cash

Prepaid software license fees

Security deposit

Restricted cash is comprised of a certificate of deposit that serves as collateral for a letter of credit required by our landlord as a security deposit related to our facility in San Diego, California.

Accrued expenses

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

September 30,

Accrued expenses and other liabilities

As of March 31, 2021 and December 31, 2020, accrued expenses and other liabilities consist of the following (in thousands):

Accrued bonus

Accrued compensation

Accrued dissenting shares (Note 8)

Accrued professional and service fees

Accrued laboratory equipment, supplies and related services

Accrued preclinical and clinical trial costs

Accrued franchise and sales/use taxes

Accrued compensation

Accrued research and development costs

Accrued construction costs

Other c urrent l iabilities

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

September 30,

Accrued contingent consideration payable

Accrued laboratory equipment and supplies

Financing obligation – current portion

Investment income, net

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

Deferred revenue

Accrued franchise, sales, use and property taxes

Accrued capital expenditures

Accrued expenses and other liabilities

Interest and investment income, net

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

Three Months Ended

September 30,

Nine Months Ended

September 30,

Unrealized gains (losses) from equity securities

Interest income

Investment (amortization expense) accretion income, net

Investment amortization expense, 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 no t recognize an impairment loss on any investments during the three and nine months ended September 30, 2020 and 2019.

Viracta Investment

In March 2017, we participated in a Series B convertible preferred stock financing and invested $ 8.5 million in Viracta Therapeutics, Inc., or Viracta, a clinical stage drug development company.

Interest and investment income, net

Interest income includes interest from marketable securities, convertible 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, 2021 and 2020.

Equity Investment in Viracta Therapeutics

In March 2017, we participated in a Series B convertible preferred stock financing and invested $ 8.5 million in Viracta Therapeutics, Inc., or Viracta, a clinical stage drug development company, which was initially recorded at cost.

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 September 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.

In June 2018, Viracta executed a 2018 Note and Warrant Purchase Agreement with existing and new investors, including us.

The initial closing under the Purchase Agreement occurred in June 2018, at which point we purchased a convertible note for $ 0.4 million, which under certain circumstances was convertible into preferred stock of Viracta, and a warrant to purchase Viracta’s common shares.

The convertible note accrued interest at 8 % and had a one-year maturity date.

In September 2018, a milestone closing under the Purchase Agreement occurred, at which point we purchased an additional convertible note for $ 0.4 million, which under certain circumstances was convertible into preferred stock of Viracta, and a warrant to purchase Viracta’s common shares.

The convertible note accrued interest at 8 % and had a one-year maturity date.

We classified the convertible notes as held-to-maturity notes receivable on the consolidated balance sheets.

Effective January 31, 2019, the notes, together with accrued interest then outstanding, were converted to Series B preferred stock resulting in an increase to our investment in Viracta’s Series B convertible preferred stock of $ 0.8 million.

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

At December 31, 2019, our investment in Viracta totaled $ 9.3 million.

Based on the level of equity investment at risk, Viracta is not a VIE and therefore is not consolidated under the VIE model.

In addition, we do not hold a controlling financial interest in Viracta and therefore we do not consolidate Viracta under the voting interest model.

As the preferred stock is not considered in-substance common stock, the investment is not within the scope of accounting for the investment under the equity method.

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 September 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 September 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 September 30, 2020, or on a cumulative basis.

Financial Instruments – Investments in Marketable Debt Securities

At September 30, 2020, our investments in available-for-sale debt securities, excluding $ 10.6 million of corporate debt securities and commercial paper included in cash and cash equivalents, are detailed below (in thousands):

September 30, 2020

Based on the level of equity investment at risk, Viracta was not a VIE and therefore was not consolidated under the VIE model.

In addition, we did not hold a controlling financial interest in Viracta, and therefore we did not consolidate Viracta under the voting interest model.

As the preferred stock was not considered in-substance common stock, the investment was not within the scope of accounting for the investment under the equity method.

As the preferred stock did not have a readily determinable fair value and did not qualify for the practical expedient to estimate fair value in accordance with ASC 820, we had elected to apply the measurement alternative under ASC 321, pursuant to which we measured 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 December 31, 2020, our fair value assessment indicated that the offering of Viracta’s Series E preferred stock in November 2020, at a lower offering price per share than the per share carrying amount of our investment in Viracta, was a directional indicator representing an observable price change in an orderly transaction for a similar investment.

On December 31, 2020, we reduced the carrying value by $ 1.4 million due to the observable price change, which was included in interest and investment income, net , on the condensed combined consolidated statements of operations for the year ended December 31, 2020.

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

On February 24, 2021, Sunesis Pharmaceuticals, Inc., a public company, completed a business combination with Viracta.

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

As of March 31, 2021, the carrying value of our investment in Viracta, which is reflected in marketable securities , on the condensed combined consolidated balance sheets totaled $ 14.5 million (including an unrealized gain of $ 6.6 million).

Financial Instruments

Investments in Marketable Debt Securities

As of March 31, 2021, the amortized cost, gross unrealized gains, gross unrealized losses and fair value of marketable debt securities, which were considered as available-for-sale, by type of security were as follows (in thousands):

March 31, 2021

Contractual Life

Corporate debt securities

Commercial paper

Current portion

Corporate debt securities

Foreign bonds

Noncurrent portion

At September 30, 2020, the weighted-average remaining contractual life of our available-for-sale securities was approximately 0.5 years.

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

As of December 31, 2020, the amortized cost, gross unrealized gains, gross unrealized losses and fair value of marketable debt securities, which were considered as available-for-sale, by type of security were as follows (in thousands):

December 31, 2020

Corporate debt securities

Foreign government bonds

Government sponsored securities

Current portion

Corporate debt securities

Foreign bonds

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 September 30, 2020 and December 31, 2019 were as follows (in thousands):

September 30, 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 as of March 31, 2021 and December 31, 2020 were as follows (in thousands):

March 31, 2021

Less than 12 months

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Corporate debt securities

Government sponsored securities

As of March 31, 2021, a total of 14 of the securities were in unrealized loss positions.

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 nine months ended September 30, 2020 .

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

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

Therefore, we did not recognize any other-than-temporary impairment losses during the three months ended March 31, 2021.

Realized gains and losses on sales of available-for-sale debt securities during the three months ended March 31, 2021 and 2020 were not material.

Marketable Equity Securities

We held investments in marketable equity securities with readily determinable fair values of $ 23.0 million and $ 6.3 million as of March 31, 2021 and December 31, 2020, respectively.

Unrealized gains recognized on equity securities with readily determinable fair values totaled $ 8.8 million for the three months ended March 31, 2021, while unrealized losses recognized on equity securities with readily determinable fair values totaled $ 0.2 million for the three months ended March 31, 2020.

There were no realized gains or losses on sales of equity securities for the three months ended March 31, 2021 and 2020.

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on our principal or, in absence of a principal, most advantageous market for the specific asset or liability.

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.

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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, valuation of these products does not entail a significant degree of judgment.

Our Level 1 assets consist of bank deposits and money market funds.

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.

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.

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Level 3—Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

During the periods presented, 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 quarterly basis.

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.

Recurring Valuations

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

Fair Value Measurements at September 30, 2020

Financial assets and liabilities measured at fair value on a recurring basis are summarized below as of March 31, 2021 and December 31, 2020 (in thousands):

Fair Value Measurements as of March 31, 2021

Cash and cash equivalents

Corporate debt securities

Commercial paper

Equity securities (1)

Corporate debt securities

Foreign bonds

Total assets measured at fair value

Fair Value Measurements at December 31, 2019

Contingent consideration obligations (2)

Fair Value Measurements as of December 31, 2020

Cash and cash equivalents

Corporate debt securities

Foreign government bonds

Government sponsored securities

Corporate debt securities

Equity securities

Foreign bonds

Total assets measured at fair value

Contingent consideration obligations (2)

Our equity securities include our investment in Viracta totaling $ 14.5 million, which was previously accounted for by applying the measurement alternative under ASC 321.

In February 2021, Viracta merged with Sunesis Pharmaceuticals, Inc., a public company.

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

See Note 4 , Equity Investment in Viracta Therapeutics , for additional information.

Contingent consideration obligations are recorded at their estimated fair values and are revalued each reporting period until the related contingencies are resolved.

The fair value measurements of these obligations are 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 8 , Commitments and Contingencies, for additional information.

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

Three Months Ended

Fair value, beginning of period

Net change in fair value

Fair value, end of period

Non-recurring Valuations

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

There were no material non-financial assets and liabilities deemed to be other-than-temporarily impaired and measured at fair value on a non-recurring basis for the three months ended September 30, 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 during the three months ended March 31, 2021 and 2020.

Collaboration and License Agreements

Collaborative Arrangements

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

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.

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).

Joint COVID‑19 Collaboration Development Agreement

On August 21, 2020, we entered into a definitive agreement (the “Collaboration Agreement”) with ImmunityBio to pursue collaborative joint development, manufacturing and marketing of certain COVID‑19 therapeutics and vaccines.

The terms of the Collaboration Agreement supersede and replace the terms of the binding term sheet executed on May 22, 2020, as previously disclosed.

Through their efforts, the parties agreed to jointly develop ceNK, haNK, mesenchymal stem cells (MSC), adenovirus constructs (hAd5), and N‑803, a novel IL‑15 cytokine superagonist, for the prevention and treatment of SARS‑CoV‑2 viral infections and associated conditions in humans, including without limitation, COVID‑19.

Pursuant to the Collaboration Agreement, we have contributed our ceNK, haNK, and MSC product candidates and certain of our manufacturing capabilities, and ImmunityBio has contributed their hAd5 and N‑803 product candidates.

hAd5 has been developed as a vaccine, and ceNK, haNK, MSC and N‑803 have each been developed as therapeutics for treating COVID‑19 at various stages of infection.

From and after the effective date of the Collaboration Agreement, the parties will share equally in all costs relating to developing and manufacturing of the product candidates globally with the exception of certain laboratory equipment purchases that will be borne solely by us.

With the exception of N‑803, we will be primarily responsible for the manufacture of each product.

Each party will be responsible for the regulatory affairs and the commercialization relating to its contributed products.

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 except if the parties mutually agree because of certain circumstances.

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

This collaboration is supervised by a joint steering committee, which is comprised of an equal number of representatives from both parties.

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.

At September 30, 2020, joint research activity under the Collaboration Agreement totaled $ 3.5 million, which has been included in research and development expense on the condensed consolidated statements of operations.

Expenses incurred during the third quarter of 2020 were primarily related to the acquisition of $ 3.2 million of equipment to be utilized in the manufacture of the hAd5 COVID‑19 vaccine candidate, and other net program related costs of $ 0.3 million after applying the eligible cost sharing under the Collaboration Agreement.

Certain equipment purchases made by us during the third quarter of 2020, which are necessary for us to fulfil our manufacturing obligations related to the COVID‑19 program, were borne solely by us.

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

Prior to the effective date of the Collaboration Agreement, COVID‑19 related program costs incurred by us and ImmunityBio, including expenditures related to property, plant and equipment, were the responsibility of each party and not subject to the equal cost sharing.

At September 30, 2020, we owed ImmunityBio $ 0.1 million for net costs incurred under the Collaboration Agreement, which has been included in due to related parties on the condensed consolidated balance sheets.

Cost Sharing Agreement

In January 2020, but effective on October 1, 2019, we entered into a Cost Allocation Agreement with ImmunityBio and its subsidiaries to co-sponsor and conduct certain combination clinical trials (each a Joint Study) pursuant to clinical trial protocols wherein at least one investigational agent is a proprietary therapeutic drug candidate owned or controlled by NantKwest and at least one other investigational agent is a proprietary therapeutic drug candidate owned or controlled by ImmunityBio.

Prior to initiating any activities for a Joint Study the parties agreed to enter into written work orders describing, amongst other things, development and management responsibilities, allocation of Joint Study costs and expenses, regulatory responsibilities, and any other matters relating to the Joint Study.

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.

We and ImmunityBio are splitting certain costs related to these joint studies equally in accordance with the terms of the Cost Allocation Agreement and related work orders.

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.

In January 2020, but effective on October 1, 2019, we executed Work Order Number One with ImmunityBio, pursuant to the Cost Allocation Agreement.

Under Work Order Number One, the parties are conducting a clinical trial 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 .

The ImmunityBio study drug included in this Joint Study is ImmunityBio’s proprietary IL‑15 superagonist known as N‑803, and our study drug is our proprietary “off-the-shelf” CD16-targeted natural killer cell therapy known as haNK.

We are the sponsor of this Joint Study for purposes of regulatory matters, including submissions, correspondence, and communications.

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

In July 2020, but effective on June 22, 2020, we executed Work Order Number Two with ImmunityBio, pursuant to the Cost Allocation Agreement.

Under Work Order Number Two, the parties are conducting a clinical trial 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 is 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 this Joint Study.

During the three and nine months ended September 30, 2020, we incurred net costs of $ 0.3 million and $ 0.5 million, respectively, after applying the eligible costs sharing under the Cost Allocation Agreement, which have been recognized in research and development expense on the condensed consolidated statements of operations.

At September 30, 2020, our balance owed to ImmunityBio related to the Cost Allocation Agreement was not material.

Exclusive Co-Development Agreement

In August 2016, we entered into an exclusive Co‑Development Agreement, or the Co‑Development Agreement, with Altor BioScience, LLC, or Altor.

Altor is a related party, as it is a wholly owned subsidiary of ImmunityBio (Note 9).

Under the Co‑Development Agreement, the parties agreed to exclusively collaborate on the development of certain therapeutic applications combining our proprietary NK cells with Altor's N‑801 and/or N‑803 products with respect to certain technologies and intellectual property rights as may be agreed between the parties for the purpose of jointly developing therapeutic applications of certain effector cell lines.

We are the lead developer for each product developed by the parties pursuant to the Co‑Development Agreement unless otherwise agreed to under a given project plan.

Under the terms of the Co‑Development Agreement, both parties granted a co-exclusive, royalty free, fully paid-up, worldwide license, with the right to sublicense (only to a third-party contractor assisting with research and development activities under this Co‑Development Agreement and subject to prior consent, not to be unreasonably withheld), under the intellectual property, or IP, including the parties interest in the joint IP, solely to conduct any development activities agreed to by the steering committee as set forth in any development plan.

Unless otherwise mutually agreed by the parties in the development plan for a project, we are responsible for all costs and expenses incurred by either party related to conducting clinical trials and other activities under each development program, including costs associated with patient enrollment, materials and supplies, third-party staffing and regulatory filings.

Altor supplies free of charge, sufficient amounts of Altor products for all pre-clinical requirements and certain clinical requirements for up to 400 patients in phase I and/or phase II clinical trials, as required under the development plan for a project per the Co‑Development Agreement.

Each company owns an undivided interest in and to all rights, title and interest in and to the joint product rights.

The Co‑Development Agreement expires upon the fifth anniversary of the effective date.

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 and nine months ended September 30, 2020 and 2019.

National Cancer Institute

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

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

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

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

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

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

We made a payment of $ 0.6 million for the three months ended March 31, 2021.

The CRADA expires in May 2023.

In February 2018, we entered into an amendment to a CRADA with NIH that was originally executed between NIH and Amgen, Inc., or Amgen, in May 2012 and subsequently assigned by Amgen to the company effective as of December 17, 2015.

The research goal of this CRADA, as amended, is for the non-clinical and clinical development of ganitumab, our licensed monoclonal antibody targeting insulin-like growth factor one receptor, to evaluate its safety and efficacy in patients with hematological malignancies and solid tumors.

The CRADA has a five-year term commencing February 20, 2018 and expiring on February 20, 2023.

During the term of the agreement, we are required to make minimum annual payments of $ 0.2 million to NIH for support of research activities and additional payments for the clinical trials based on the scope and phase of the clinical trials.

Unpaid research and development expense was estimated at $ 0.4 million and $ 0.6 million as of March 31, 2021 and December 31, 2020, respectively.

In February 2021, we entered into a CRADA with NIH to conduct collaborative analysis of human clinical trial samples from clinical trials utilizing our proprietary recombinant natural killer (NK) cells and/or monoclonal antibodies (mAbs) alone or in combination for the treatment of cancer and to pre-clinically study such agents.

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

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

We have $ 8,000 payable outstanding as of March 31, 2021 in connection with this CRADA agreement.

All CRADA agreements may be terminated at any time upon the mutual written consent of the company and NIH.

Either party may unilaterally terminate either of the CRADAs at any time by providing written notice to the other party at least 60 days before the desired termination date.

Pursuant to the terms of the CRADAs, we have an option to elect to negotiate an exclusive or non-exclusive commercialization license to any inventions discovered in the performance of either of the CRADAs, whether solely by an NIH employee or jointly with a company employee for which a patent application has been filed.

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 CRADAs.

Royalties and In-licensing Agreements

Exclusive License Agreement

In August 2020, we executed an exclusive license agreement with iosBio Ltd., formerly Stabilitech Biopharma Ltd.

(“iosBio”), pursuant to which we and our affiliates will receive an exclusive, worldwide license to certain of iosBio’s intellectual property rights relating to the SARS-CoV-2 and successor vaccine candidates.

In return, we are required to pay mid-to-high single-digit royalties on net sales of the resulting licensed products.

Concurrently we entered into a non-exclusive license agreement with iosBio, which grants to iosBio and its affiliates a non-exclusive, worldwide license under the intellectual property and technology relating to our adenovirus constructs for the prevention and treatment of shingles and other infectious disease targets to be mutually agreed by the parties in good faith.

As of March 31, 2021 and December 31, 2020, we accrued $ 0.1 million and $ 0.5 million payable, respectively, to iosBio for reimbursable costs related to the clinical trial activities initiated by iosBio.

Commitments and Contingencies

Contingent Consideration Related to Business Combinations

VivaBioCell, S.p.A.

On April 10, 2015, NantWorks, a related party, acquired a 100 % interest in VivaBioCell, S.p.A., or VivaBioCell, through its wholly-owned subsidiary, VBC Holdings, LLC, or VBC Holdings, for $ 0.7 million, less working capital adjustments.

On June 15, 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 this transaction, we are obligated to pay the former owners up to $ 3.7 million upon the achievement of certain sales milestones relating to scaffold technology and certain clinical and regulatory milestones relating to the GMP-in-a-Box technology.

The fair value of the contingent consideration obligation decreased $ 0.1 million during the three months ended March 31, 2021 to $ 0.8 million.

Altor BioScience Corporation

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

Soon-Shiong and his related party hold approximately $ 279.5 million in the aggregate of CVRs and they have both irrevocably agreed to receive shares of the company’s common stock in satisfaction of their CVRs.

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.

Contingencies

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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.

Securities Litigation

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

Altor BioScience, LLC Litigation

The first action, Gray v.

Soon-Shiong, et al.

(Delaware Chancery Court, Case No.

2017-466-JRS), was filed on June 21, 2017, by plaintiffs Clayland Boyden Gray, or Gray, and Adam R.

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 on July 25, 2017, and permitted the merger to close.

On September 1, 2017, plaintiffs (joined by two additional minority stockholders, Barbara Sturm Waldman and Douglas E.

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

(2) quasi-appraisal;

(3) breach of fiduciary duty;

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

On September 18, 2017, defendants moved to dismiss the second amended complaint, raising grounds that included a “standstill” agreement under which defendants maintained that Gray and Adam R.

Waldman and Barbara Strum Waldman, or the Waldman’s, agreed not to bring the lawsuit.

In the second action, Dyad Pharmaceutical Corp.

Altor BioScience, LLC (Delaware Chancery Court, Case No.

2017-848-JRS), commenced November 28, 2017, Dyad Pharmaceutical Corporation, or Dyad, filed a petition for appraisal in connection with the merger.

Respondent moved to dismiss the appraisal petition on January 26, 2018, arguing in part that the petition was barred by the same “standstill” agreement.

On April 23, 2018, the court heard oral arguments on the motions to dismiss in both consolidated cases, and on June 26, 2018, the court converted the motions to dismiss into motions for summary judgment with regard to the “standstill” agreement argument, or the Converted Motions.

The court permitted discovery into the meaning and intended scope of the “standstill” agreements, which the parties completed on December 19, 2018.

The parties completed a briefing on the Converted Motions on March 15, 2019.

The court heard an oral argument on the Converted Motions on May 7, 2019, and issued an oral ruling on May 15, 2019.

The court (1) dismissed all claims brought by Gray and the Waldman’s except for their appraisal claims;

(2) dismissed all plaintiffs’ quasi-appraisal claims;

(3) dismissed the disclosure-based breach of fiduciary duty claims;

and (4) dismissed Altor BioScience from the action.

The following claims remain:

(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.

On June 14, 2019, the defendants answered the second amended complaint, and the respondent answered Dyad’s appraisal petition.

In their answer, defendants asserted counterclaims against Gray and the Waldman’s for breach of the “standstill” agreements and are seeking as damages the attorneys’ fees and costs they were forced to expend as a result of the breach.

On June 20, 2019, the court issued a written order implementing its ruling on the Converted Motions, or 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.

On July 11, 2019, Gray and the Waldman’s filed answers denying the counterclaims and asserting defenses.

On September 30, 2019, plaintiffs moved for leave to file a third amended complaint.

The proposed amendment sought to add two former Altor stockholders as plaintiffs and to add a fiduciary duty claim on behalf of a purported class of former Altor stockholders.

On October 25, 2019, the defendants opposed the motion, and a briefing was completed on February 28, 2020.

The court heard an oral argument on March 12, 2020, and granted the motion.

The plaintiffs filed the third amended complaint on June 8, 2020.

On June 29, 2020, defendants answered the third amended complaint and asserted counter claims against the plaintiffs.

As damages, defendants seek the attorneys’ fees and costs incurred as a result of these breaches.

On July 14, 2020, the plaintiffs filed an answer denying the counterclaims and asserting defenses.

The trial has been set to commence in October 2021.

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

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

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

As of March 31, 2021 and December 31, 2020, we had accrued $ 6.9 million and $ 6.8 million related to these obligations, respectively.

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

We cannot reasonably estimate a range of loss beyond the amounts recorded as of March 31, 2021 and December 31, 2020, as the dissenting stockholders have not yet provided a quantified value of their claim and, therefore, an upper end of the range of loss cannot be determined.

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

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

Sorrento Therapeutics, Inc.

NantCell, Inc., et al.

Sorrento Therapeutics, Inc., or Sorrento, derivatively on behalf of NANTibody, LLC, or NANTibody, filed an action in the Superior Court of California, Los Angeles County, or the Superior Court, against the company, Dr.

Soon-Shiong and Charles Kim.

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

from our affiliate NantPharma, LLC, or NantPharma, and seeks to have the transaction undone, and seeks to have the purchase amount returned to NANTibody.

Sorrento filed a related arbitration proceeding, or the Cynviloq arbitration, against Dr.

Soon-Shiong and NantPharma;

the company is not named in the Cynviloq arbitration.

On May 15, 2019, we filed a demurrer to several causes of action alleged in the Superior Court action.

On July 18, 2019, Sorrento filed an amended complaint, eliminating Charles Kim as a defendant and dropping the causes of action we had challenged in its demurrer.

On May 24, 2019, we 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.

Soon-Shiong allege 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.

On October 9, 2019, the Superior Court ruled that our claims should be pursued in arbitration and that Dr.

Soon-Shiong’s claims could be pursued in Superior Court.

On February 13, 2020, after a full briefing, the Superior Court heard oral argument and granted Dr.

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

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

Soon-Shiong in the Superior Court on March 3, 2020, and at Sorrento’s request, the arbitrator entered an order dismissing Sorrento’s claims against Dr.

Soon-Shiong in the Cynviloq arbitration on March 6, 2020.

The hearing in the Cynviloq arbitration has been scheduled to commence in June 2021.

On October 24, 2019, we, 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 on May 4, 2020, and requested leave to file a dispositive motion on May 1, 2020.

On January 29, 2020, Sorrento sent letters purporting to terminate the exclusive license agreement with the company, and an exclusive license agreement with NANTibody and demanding the return of its confidential information and transfer of all regulatory filings and related materials.

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

Notwithstanding such negotiations, Sorrento sent a letter on April 10, 2020, purporting to terminate the exclusive license agreements, maintaining the negotiations did not reach a successful resolution.

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

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

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

The hearings in the antibody arbitration commenced in April 2021 and are anticipated to be concluded in late July or early August 2021.

Shenzhen Beike Biotechnology Corporation Litigation

In July 2020, we received a Request for Arbitration before the International Chamber of Commerce, International Court of Arbitration, served by Shenzhen Beike Biotechnology Corporation, or Beike.

The arbitration relates to a license, development, and commercialization agreement that Altor (succeeded by our wholly-owned subsidiary Altor BioScience, LLC, or Altor) entered into with Beike in September 2014, which agreement was amended and restated in September 2017, pursuant to which Altor granted to Beike an exclusive license to use, research, develop and commercialize products based on Anktiva in China for human therapeutic uses.

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

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

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

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

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

The parties have been asked to provide an update to the International Chamber of Commerce by May 31, 2021 of any further developments.

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

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

Fox Chase Litigation

On July 21, 2020, ImmunityBio filed a declaratory judgment lawsuit in the Superior Court for San Diego County, California, naming Fox Chase Cancer Center Foundation and Institute for Cancer Research as the defendants (hereafter collectively “Fox Chase”).

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

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

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

See Part II, Item 1A., “ Risk Factors ” of this Quarterly Report on Form 10-Q for a more detailed discussion.

While the litigation is in the early stage, its outcome cannot be predicted.

We do not consider the 2004 License to be material to our business.

Litigation Related to the Merger with ImmunityBio, Inc.

In connection with the Merger with NantCell, Inc.

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

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

NantKwest, Inc., et al.

16‑cv‑01947 was filed in federal district court for the Central District of California related to the company’s restatement of certain interim financial statements for the periods ended June 30, 2015 and September 30, 2015.

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

The actions originally filed in state court were removed to federal court, and the various related actions were consolidated.

Plaintiffs asserted causes of action for alleged violations of Sections 11 and 15 of the Securities Act of 1933 and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b‑5 promulgated thereunder.

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

In September 2017, the court denied defendants' motion to dismiss the third amended consolidated complaint.

On August 13, 2018, the district court granted plaintiffs’ motions for class certification and to strike plaintiffs’ claims under the Securities Exchange Act of 1934 and Rule 10b‑5.

On August 24, 2018, at the district court’s direction, plaintiffs filed a fourth amended consolidated complaint.

On August 27, 2018, defendants petitioned the U.S.

Court of Appeals for the Ninth Circuit to authorize interlocutory appeal of the class certification order.

On September 7, 2018, defendants answered the fourth amended consolidated complaint.

On September 21, 2018, the parties informed the Ninth Circuit that they had reached a settlement in principle, and the parties moved to stay appellate proceedings.

On September 24, 2018, the parties notified the district court that they had reached a settlement in principle.

On November 9, 2018, the plaintiffs filed an unopposed motion for preliminary approval of the settlement and notice to class members.

On January 9, 2019, the district court granted the motion for preliminary approval.

A final approval hearing was held on April 29, 2019, and the district court granted final approval and entered judgment on May 31, 2019.

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

We were responsible for $ 1.2 million of the settlement amount, which was recognized in selling, general and administrative expense during 2018, while the remaining $ 10.8 million was fully funded by our insurance carriers under our directors’ and officers’ insurance policy.

We and the insurance carriers paid the settlement amount into a settlement fund in January 2019.

Subsequent to receiving final approval of the settlement on May 31, 2019, the aforementioned settlement accrual, associated insurance claim receivable and restricted cash were released and are no longer reflected on the accompanying condensed consolidated balance sheets.

Stipulation of Settlement

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.

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

On May 31, 2019, the court entered an order preliminarily approving the Stipulation of Settlement and scheduling the final settlement hearing for August 9, 2019.

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

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

Of that amount, we were responsible for half, which was recognized in selling, general and administrative expense on the condensed consolidated statements of operations during the first quarter of 2019, while the other half was funded by our insurance carrier.

We and the insurance carrier paid the settlement amount into a settlement fund in June 2019.

Subsequent to receiving final approval of the settlement on August 9, 2019, the aforementioned settlement accrual, associated insurance claim receivable and restricted cash were released and are no longer reflected on the accompanying condensed consolidated balance sheets.

Insurance Recoveries

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 December 31, 2019 was $ 34,000 , which is included in prepaid expenses and other current assets on our consolidated balance sheets.

There were no such receivables recorded at September 30, 2020.

Contractual Obligations - Leases

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

NantKwest, Inc., et al.

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

NantKwest, Inc., et al.

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

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

NantKwest, Inc., et al.

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

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

NantKwest, Inc., et al.

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

NantKwest, Inc., et al.

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

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

NantKwest, Inc., et al.

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

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

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

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

The Hargett Complaint and the Gross Complaint also bring claims against ImmunityBio, and Merger Sub.

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

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

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

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

The company cannot predict the outcome of the Merger Actions.

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

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

Lease Arrangements

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

(i) a research facility and office space in San Diego, California;

(ii) a research and manufacturing space in Culver City, California, from a related party;

(iii) research and manufacturing facilities in El Segundo, California, also from related parties;

(iv) a research facility in Torrance, California;

and (v) a research facility in Woburn, Massachusetts.

We have leases in multiple facilities across the U.S.

and Italy, including El Segundo, California (general corporate and administrative activities, research and development and regulatory from related parties);

San Diego, California (research facility and office space);

Culver City, California (research and manufacturing space from a related party);

Torrance, California (a research facility from a related party);

Miramar, Florida (clinical development);

Seattle, Washington (research and development);

Louisville, Colorado (research and development and manufacturing);

Woburn, Massachusetts (research facility);

and Udine and Tavangnacco, Italy (GMP-in-a-Box, research facility and office space).

See Note 9 , Related Party Agreements , for further information.

For the three months ended September 30, 2020 and 2019, $ 1.7 million and $ 1.3 million, respectively, including variable lease costs of $ 0.4 million and $ 0.3 million, respectively, was recorded in operating expenses on the condensed consolidated statements of operations.

For the nine months ended September 30, 2020 and 2019, $ 4.3 million and $ 3.8 million, respectively, including variable lease costs of $ 1.1 million and $ 0.9 million, respectively, was recorded in operating expenses on the condensed consolidated statements of operations.

The weighted-average remaining lease term as of September 30, 2020 and December 31, 2019 was 3.4 years and 4.5 years, respectively.

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

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

For the nine months ended September 30, 2020 and 2019, cash outflows from operating leases, excluding variable lease costs, was $ 3.2 million and $ 3.3 million, respectively.

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

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 five years , and are included in the lease term when it is reasonably certain that we will exercise the option.

Information regarding our leases is as follows:

Weighted average remaining lease term

Weighted average discount rate

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

Three Months Ended

Operating lease costs

Variable lease costs

Total lease costs

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

Three Months Ended

Operating cash flows for operating leases

Future minimum lease payments as of March 31, 2021, including $ 4.9 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:

2020 (excluding the nine months ended September 30, 2020)

2021 (excluding the three months ended March 31, 2021)

Total future minimum lease payments

Present value of operating lease liabilities

Operating lease payments include $ 3.9 million related to options to extend lease terms that are reasonably certain of being exercised.

In September 2020, we entered into a sublease agreement with Altor Bioscience Manufacturing Company, LLC, a related party (Note 9), whereby we leased approximately 6,901 square feet in El Segundo, California, including laboratory space and related furniture, fixtures and equipment.

The agreement also includes certain non-lease components related primarily to the right to use certain common areas within the building and the related furniture and fixtures.

This facility will be used to manufacture and produce clinical products for our oncology product candidate trials.

The lease runs from August 2020 through July 2022, and includes an option to extend the lease for an additional one year term through July 2023.

The monthly fixed charge related to the agreement is $ 0.2 million, a portion of which will be subject to annual increases of 3 % beginning in November 2020 .

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

At inception of the lease we recognized an increase of $ 4.0 million in both operating lease right-of-use assets and operating lease liabilities on the condensed consolidated balance sheets.

In August 2018, NantBio, Inc., or NantBio, a related party (Note 9), 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.

In conjunction with the assignment, we reimbursed NantBio for upfront payments which it had made to the third party of $ 0.9 million, and paid $ 0.5 million directly to the third party for an aggregate value of $ 1.4 million.

The assigned agreement is for a term of ten years and expires in June 2027 .

The agreement may be terminated by us at any time, with or without cause.

In case of termination of the agreement, the third party will reimburse us for a pro-rata amount based upon the passage of time.

In September 2016, we entered into a lease agreement with 605 Doug St, LLC, a related party (Note 9), for approximately 24,250 square feet in El Segundo, California, which has been converted to a research and development laboratory and a current good manufacturing practice, or cGMP, manufacturing facility.

The lease runs from July 2016 through July 2023.

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

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

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 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.

The initial license was effective in May 2015 and extends through December 2020.

Base monthly rent for the initial lease term is $ 47,000 , with annual increases of 3 % beginning in January 2017 .

In September 2020, we entered into an amendment to extend the term of this lease through December 31, 2021 .

Commencing on January 1, 2021 , the monthly rent will increase by 3 % to $ 54,500 .

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

In addition, we will have a one-time option to extend the lease term through December 31, 2022.

If we exercise the option to extend the lease through December 31, 2022, or continue on a month-to-month basis, the monthly rent will increase by 3 % annually commencing on January 1 of each year.

On the date of amendment we recognized an increase of $ 1.2 million in both operating lease right-of-use assets and operating lease liabilities on the consolidated balance sheets, which reflects our belief that we will extend the term of this lease through December 31, 2022.

In June 2015, we entered into a lease agreement for an approximately 44,700 square foot facility in San Diego, California, for a research and development laboratory, related office and other related uses.

The term of the lease extends for seven years commencing on August 1, 2016.

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 nine months ended September 30, 2020, other than those disclosed in these unaudited condensed consolidated financial statements.

In February 2021, but effective on January 1, 2021, we entered into a lease agreement with 605 Nash, LLC, a related party, whereby we leased approximately 6,883 square feet in El Segundo, California.

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

The lease runs from January 2021 through December 2027, and includes an option to extend the lease for an additional three-year term through December 2030.

Base rent for the term of the lease 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.

See Note 9 , Related Party Agreements , for further information.

There have been no other material changes related to our existing lease agreements from those disclosed in Note 8 of the Notes to Combined Consolidated Financial Statements included in the Combined Consolidated Financial Statements of ImmunityBio, Inc.

We did not enter into any significant contracts during the three months ended March 31, 2021, other than those disclosed in these condensed combined consolidated financial statements.

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

There have been no material changes in unconditional purchase commitments from those disclosed in Note 8 of the Notes to Combined Consolidated Financial Statements included in the Combined Consolidated Financial Statements of ImmunityBio, Inc.

Related Party Agreements

Our Chairman founded and has a controlling interest in NantWorks, which is a collection of multiple companies in the healthcare and technology space.

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):

Due from related party – NantBio

Due from related party – NantOmics

Due from related parties – Various

Total due from related parties

Due to related party – NantWorks

Due to related party – Duley Road

Due to related party – NantBio

Due to related party – Immuno-Oncology Clinic

Due to related party – Nant Capital

Due to related party – NantPharma

Total due to related parties

Related-party notes payable – Nant Capital

Related-party notes payable – NantMobile

Related-party notes payable – NantWorks

Related-party notes payable – NCSC

Total related-party notes payable

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

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

Affiliates of NantWorks are also affiliates of the company due to the common control by and/or common ownership interest of our Chairman.

Affiliates of NantWorks are also affiliates of the company due to the common control by and/or common ownership interest of our Executive Chairman.

Under the NantWorks shared services agreement executed in November 2015, but effective August 2015, NantWorks provides corporate, general and administrative, manufacturing strategy, research and development, regulatory and clinical trial strategy, and other support services.

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 September 30, 2020 and 2019, we recorded selling, general and administrative expense under this arrangement of $ 0.5 million and $ 0.5 million, respectively.

For the nine months ended September 30, 2020 and 2019, we recorded selling, general and administrative expense under this arrangement of $ 1.8 million and $ 1.7 million, respectively.

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

For the nine months ended September 30, 2020 and 2019, we recorded research and development expense under this arrangement of $ 1.3 million and $ 1.0 million, respectively.

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

During the three months ended March 31, 2021 and 2020, we recorded $ 1.8 million and $ 1.5 million, respectively, in selling, general and administrative expense , and $ 0.3 million and $ 1.0 million, respectively, of expense reimbursements under this arrangement in research and development expense , on the condensed combined consolidated statements of operations.

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 September 30, 2020 and 2019, we recorded selling, general and administrative expense reimbursements of $ 0.4 million and $ 0.2 million, respectively.

For the nine months ended September 30, 2020 and 2019, we recorded selling, general and administrative expense reimbursements of $ 1.1 million and $ 0.6 million, respectively.

For the three months ended September 30, 2020 and 2019, we recorded research and development expense reimbursements of $ 0.4 million and $ 0.6 million, respectively.

For the nine months ended September 30, 2020 and 2019, we recorded research and development expense reimbursements of $ 1.2 million and $ 1.7 million, respectively.

We owed NantWorks a net amount of $ 0.7 million and $ 0.4 million for all agreements between the two affiliates at September 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.

In September 2020, we amended this agreement to extend the term of this lease through December 31, 2021 , as further described in Note 8 – Commitments and Contingencies .

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 $ 0.1 million for the three months ended September 30, 2020 and 2019, respectively, and $ 0.5 million and $ 0.4 million for the nine months ended September 30, 2020 and 2019, respectively.

As of March 31, 2021 and December 31, 2020, we owed NantWorks a net amount of $ 12.8 million and $ 10.7 million, respectively, for all agreements between the two affiliates, which is included in due to related parties on the condensed combined consolidated balance sheets .

We also recorded $ 1.3 million and $ 1.1 million of prepaid expenses for services that have been passed through to the company from NantWorks as of March 31, 2021 and December 31, 2020, respectively, which are included in prepaid expenses and other current assets on the condensed combined consolidated balance sheets .

In November 2015, we entered into a facility license agreement with NantWorks LLC, or NantWorks, a related party, 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.

The initial license was effective from May 2015 through December 2020.

Base monthly rent for the initial lease term was $ 47,000 , with annual increases of 3% beginning in January 2017.

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

Commencing January 1, 2021, the monthly rent increased by 3% to $ 54,500 .

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

In addition, we have a one-time option to extend the lease term through December 31, 2022.

If we exercise the option to extend the lease through December 31, 2022, or continue on a month-to-month basis, the monthly rent will increase by 3 % annually commencing on January 1 of each year.

On the date of amendment, we recognized an increase of $ 1.2 million in both operating lease right-of-use assets , and operating lease liabilities , on the condensed combined consolidated balance sheets, reflecting our belief that we will extend the term of this lease through December 31, 2022.

Lease expense for this facility totaling $ 0.2 million and $ 0.1 million for the three months ended March 31, 2021 and 2020, respectively, was recorded in research and development expense , on the condensed combined consolidated statements of operations.

Immuno-Oncology Clinic, Inc.

Beginning in 2017, we entered into multiple agreements with Immuno-Oncology Clinic, Inc., or the Clinic (dba Chan Soon-Shiong Institutes for Medicine, in El Segundo, California), to conduct clinical trials related to certain of our product candidates.

The Clinic is a related party as it is owned by one officer of NantKwest and NantWorks manages the administrative operations of the Clinic.

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

The Clinic is a related party as it is owned by one officer of the company and NantWorks manages the administrative operations of the Clinic.

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

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

3 unchanged sentences

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

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

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

In consideration of the services to be performed under the Clinic Agreement, as amended on March 31, 2020, we agreed to make payments of up to $ 7.5 million to the Clinic, of which $ 3.75 million and $ 1.88 million were paid in July 2019 and October 2019, respectively.

As amended, a conditional payment of $ 1.875 million shall be due and payable at such time, if any, that the payments made in July 2019 and October 2019 have been earned by the Clinic through performance of services.

As amended, a conditional payment of $ 1.88 million shall be due and payable at such time, if any, that the payments made in July 2019 and October 2019 have been earned by the Clinic through the performance of services.

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

2 unchanged sentences

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

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 for an open-label, randomized, comparative phase II study of ImmunityBio’s proprietary IL‑15 superagonist (N‑803) and Aldoxorubicin Hydrochloride (Aldoxorubicin) and our PD‑L1.t‑haNK with standard-of-care chemotherapy versus standard-of-care chemotherapy for first and second line treatment of locally or advanced metastatic pancreatic cancer.

During the three months ended September 30, 2020 and 2019, $ 0.1 million and $ 0.3 million, respectively, has been recognized in research and development expense on the condensed consolidated statements of operations related to clinical trial and research related activities conducted for us by the Clinic.

During the nine months ended September 30, 2020 and 2019, $ 0.3 million and $ 0.9 million, respectively, has been recognized in research and development expense on the condensed consolidated statements of operations related to clinical trial and research related activities conducted for us by the Clinic.

At September 30, 2020 and December 31, 2019, we owed the Clinic $ 0.2 million and $ 0.1 million, respectively, for services excluded from the Clinic Agreement, which are included in due to related parties on the condensed consolidated balance sheets.

At September 30, 2020 and December 31, 2019, we had prepaid balances related to the Clinic Agreement of $ 4.8 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 September 30, 2020 will be utilized in future periods as the Clinic provides additional services pursuant to the Clinic Agreement.

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

On August 21, 2020, we entered into a Collaboration Agreement with ImmunityBio as further described in Note 7 – Collaboration and License Agreements .

At September 30, 2020, the joint research activity under the Collaboration Agreement totaled $ 3.5 million, which has been included in research and development expense on the condensed consolidated statements of operations.

Expenses incurred during the third quarter of 2020 were primarily related to the acquisition of $ 3.2 million of equipment to be utilized in the manufacture of the human adenovirus, or hAd5, vaccine candidate, and other net program related costs of $ 0.3 million after applying the eligible cost sharing under the Collaboration Agreement.

Certain equipment purchases made by us during the third quarter of 2020, which are necessary for us to fulfil our manufacturing obligations related to the COVID‑19 program, were borne solely by us.

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

In January 2020, we entered into a Cost Allocation Agreement with ImmunityBio which (together with related work orders) is described further in Note 7 – Collaboration and License Agreements .

At September 30, 2020, our balance owed to ImmunityBio related to the Cost Allocation Agreement was no t material.

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 Co‑Development Agreement during the three and nine months ended September 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.

We also have the right to purchase reagents and consumables associated with such equipment from ImmunityBio.

When an upfront payment is made, it is included in prepaid expenses on the condensed consolidated balance sheets until the product is received.

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

At September 30, 2020 and December 31, 2019, we had $ 3.2 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 September 30, 2020 and 2019, we recorded research and development expense associated with reagents and consumables purchased from ImmunityBio of $ 0.2 million and $ 12,900 , respectively, on the condensed consolidated statements of operations.

During the nine months ended September 30, 2020 and 2019, we recorded research and development expense associated with reagents and consumables purchased from ImmunityBio of $ 0.3 million and $ 0.1 million, respectively, on the condensed consolidated statements of operations.

At September 30, 2020 and December 31, 2019 we had $ 0.1 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.

Altor Bioscience Manufacturing Company, LLC Sublease Agreement

In September 2020, we entered into a sublease agreement with Altor Bioscience Manufacturing Company, LLC, a related party, whereby we leased approximately 6,901 square feet in El Segundo, California, including laboratory space and related furniture, fixtures and equipment.

The agreement also includes certain non-lease components related primarily to the right to use certain common areas within the building and the related furniture and fixtures.

This facility will be used to manufacture and produce clinical products for our oncology product candidate trials.

The lease runs from August 2020 through July 2022, and includes an option to extend the lease for an additional one year term through July 2023.

The monthly fixed charge related to the agreement is $ 0.2 million, a portion of which will be subject to annual increases of 3 % beginning in November 2020.

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

Lease expense for this facility is recorded in research and development expense on the condensed consolidated statements of operations and was $ 0.4 million during the three months ended September 30, 2020.

At September 30, 2020, we owed $ 0.4 million under this agreement related to fixed and variable lease costs covering the period from August 1, 2020 through September 30, 2020.

In September 2016, we entered into a lease agreement with 605 Doug St, LLC, an entity owned by our Chairman, 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.

In July 2020, but effective on June 22, 2020, we and NantCell, Inc.

(formerly known as ImmunityBio, Inc., a private company) executed a clinical trial work order under our existing master agreement with the Clinic for an open-label, randomized, comparative Phase II study of NantCell’s proprietary IL‑15 superagonist (N‑803) and Aldoxorubicin Hydrochloride (Aldoxorubicin) and our PD‑L1.t‑haNK with standard-of-care chemotherapy versus standard-of-care chemotherapy for first and second-line treatment of locally or advanced metastatic pancreatic cancer.

During the three months ended March 31, 2021 and 2020, $ 0.3 million and $ 0.1 million, respectively, was recognized in research and development expense , on the condensed combined consolidated statements of operations related to clinical trial and research-related activities conducted for us by the Clinic.

As of March 31, 2021 and December 31, 2020, we owed the Clinic $ 0.5 million and $ 0.3 million, respectively, for services excluded from the Clinic Agreement.

As of March 31, 2021 and December 31, 2020, we had prepaid balances related to the Clinic Agreement of $ 4.6 million and $ 4.7 million, respectively.

We anticipate that the remaining prepayment amount as of March 31, 2021 will be utilized in future periods as the Clinic provides additional services pursuant to the Clinic Agreement.

NantBio, Inc.

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

The initial five-year agreement covered NantBio and its affiliates, including us.

Under the agreement, the parties collaborated on the preclinical and clinical development of proprietary recombinant natural killer cells and monoclonal antibodies in monotherapy and combination immunotherapies.

In each of the contractual years under the agreement we paid $ 0.6 million to the NCI as a payment for services under the agreement.

We recognized research and development expense related to this agreement ratably over a 12 -month period for each funding year and recorded $ 0.1 million of expense related to this agreement in each of the three months ended March 31, 2021 and 2020.

As of March 31, 2021 and December 31, 2020, we recorded $ 0 and $ 0.1 million, respectively, in prepaid expenses and other current assets , on the condensed combined consolidated balance sheets related to this agreement.

In August 2018, we entered into a supply agreement with NantCancerStemCell, LLC, or NCSC, a 60 % owned subsidiary of NantBio (with the other 40 % owned by Sorrento).

Under this agreement, we agreed to supply VivaBioCell’s proprietary GMP-in-a-Box bioreactors and related consumables, made according to specifications mutually agreed to with both companies.

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

No revenue was recognized during the three months ended March 31, 2021 and 2020.

We recorded $ 0.3 million and $ 0.4 million of deferred revenue for bioreactors that were delivered but not installed as of March 31, 2021 and December 31, 2020, respectively.

As of March 31, 2021 and December 31, 2020, we recorded $ 0.9 million in due to related parties , on the condensed combined consolidated balance sheets related to this agreement.

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

In April 2019, we agreed with NantBio to transfer certain NantBio employees and associated research and development projects, comprising the majority of NantBio’s business, to the company.

After the transfer, NantBio continued to make payments on our behalf for certain employee benefits and vendor costs related to the research and development projects that were transferred to the company.

In addition, we settled certain employee bonuses and benefits that were accrued by NantBio for 2018.

As of March 31, 2021 and December 31, 2020, we recorded a net receivable from NantBio of $ 1.3 million, which included $ 1.0 million for employee bonuses and $ 0.3 million for vendor costs we paid on behalf of NantBio.

In June 2019, we made a strategic decision and transferred certain employees from NantOmics, LLC, or NantOmics, a related party that is controlled by our Executive Chairman, to the company.

After the transfer, we settled certain employee bonuses and benefits that were accrued by NantOmics for the year ended December 31, 2020 and recorded a $ 0.6 million receivable from NantOmics as of March 31, 2021 and December 31, 2020.

605 Doug St, LLC

In September 2016, we entered into a lease agreement with 605 Doug St, LLC, an entity owned by our Executive Chairman, 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.

The lease runs from July 2016 through July 2023.

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

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 and $ 0.7 million for each of the three and nine months ended September 30, 2020 and 2019, respectively.

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

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

The initial five year agreement covers NantBio and its affiliates, including us.

Under the agreement, the parties are collaborating on the preclinical and clinical development of proprietary recombinant natural killer cells and monoclonal antibodies in monotherapy and in combination immunotherapies.

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

In each of the contractual years under the agreement 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 $ 0.5 million of expense associated with the agreement in each of the three and nine months ended September 30, 2020 and 2019, respectively.

As of September 30, 2020 and December 31, 2019, we had a balance of $ 0.3 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 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.

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.

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

Lease expense of $ 0.2 million for this facility for each of the three months ended March 31, 2021 and 2020, respectively, is recorded in research and development expense , on the condensed combined consolidated statements of operations.

As of March 31, 2021 and December 31, 2020, there were no balances due between the parties.

Duley Road, LLC

In February 2017, Altor BioScience Corporation (succeeded by our wholly-owned subsidiary Altor BioScience, LLC), or Altor, through its wholly-owned subsidiary, entered into a lease agreement with Duley Road, LLC, or Duley Road, a related party, that is indirectly controlled by our Executive Chairman, for approximately 12,000 square feet of office and cGMP manufacturing facility space in El Segundo, California.

The lease term is from February 2017 through October 2024.

We have the option to extend the initial term for two consecutive five-year periods through July 2034.

The monthly rent is $ 40,700 with annual increases of 3 % which began in November 2018.

As of March 31, 2021 and December 31, 2020, we recorded rent payable to Duley Road of $ 1.5 million and $ 1.0 million, respectively.

For the three months ended March 31, 2021 and 2020, we recorded rent expense of $ 0.4 million and $ 0.1 million, respectively, which is reflected in research and development expense , on the condensed combined consolidated statements of operations.

Effective in January 2019, we entered into two lease agreements with Duley Road for a second building located in El Segundo, California.

The first lease is for the first floor of the building with approximately 5,650 square feet.

The lease has a seven-year term commencing in September 2019.

The second lease is for the second floor of the building with approximately 6,488 square feet.

The lease has a seven-year term commencing 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 monthly rent for the two leases is $ 35,800 , which increases at a rate of 3 % per year.

As of March 31, 2021 and December 31, 2020, we recorded $ 0.9 million and $ 0.7 million of leasehold improvement payables, respectively, and $ 0.8 million and $ 1.1 million of lease-related payables to Duley Road, which were included in due to related parties , on the condensed combined consolidated balance sheets.

For each of the three months ended March 31, 2021 and 2020, we recorded $ 0.1 million of rent expense for the two leases, which is included in research and development expense , on the condensed combined consolidated statements of operations.

The security deposits for the leases totals $ 0.1 million as of March 31, 2021 and December 31, 2020, which are included in other assets , on the condensed combined consolidated balance sheets.

605 Nash, LLC

In February 2021, but effective on January 1, 2021, we entered into a lease agreement with 605 Nash, LLC, a related party, whereby we leased approximately 6,883 square feet in El Segundo, California.

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

The lease runs from January 2021 through December 2027, and includes an option to extend the lease for an additional three-year term through December 2030.

Base rent for the term of the lease is approximately $ 20,300 per month with an annual increase of 3 % on January 1 of each year during the initial term and, if applicable, during the option term.

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

We are responsible for the build out of the facility space and have incurred costs of approximately $ 7.0 million as of March 31, 2021, which is reflected as construction in progress within property, plant and equipment, net , on the condensed combined consolidated balance sheets.

We are also entitled to a tenant improvement allowance of $ 0.3 million associated with the buildout costs, which is recorded in prepaid expenses and other current assets on the condensed combined consolidated balance sheets.

For the three months ended March 31, 2021, we recorded rent expense of $ 0.1 million, which is reflected in research and development expense on the condensed combined consolidated statements of operations.

In 2018, Altor BioScience, LLC and GlobeImmune, Inc.

purchased a total of $ 0.2 million in laboratory equipment from NantPharma.

As of March 31, 2021 and December 31, 2020, we recorded a $ 0.2 million payable to NantPharma.

Related Party Notes Payable

In December 2015, we executed a demand promissory note with Nant Capital.

The note bears interest at a per annum rate of 5.0 %, compounded annually and computed on the basis of 365 or 366 days.

In July 2020 and August 2020, we borrowed $ 10.0 million and $ 3.7 million from Nant Capital, respectively.

In July 2020, this note was amended and restated to provide that all outstanding principal and accrued and unpaid interest is due and payable on September 30, 2025, and not on demand.

The principal amount of advances made by the related party pursuant to these notes totaled $ 55.2 million, all of which was outstanding as of March 31, 2021 and December 31, 2020, respectively.

Accrued and unpaid interest on this note totaled $ 4.0 million and $ 3.3 million as of March 31, 2021 and December 31, 2020, respectively.

Amounts due under this promissory note are included in related-party notes payable , on the condensed combined consolidated balance sheets.

In June 2017, we executed a demand promissory note with NantWorks.

The note bears interest at a per annum rate of 5.0 %, compounded annually and computed on the basis of 365 or 366 days.

In July 2020, this note was amended and restated to provide that all outstanding principal and accrued and unpaid interest is due and payable on September 30, 2025, and not on demand.

We may prepay the outstanding principal amount at any time without premium or penalty and the prior consent of NantWorks.

All outstanding amounts under the note will also become immediately due and payable upon certain bankruptcy and insolvency-related events.

The principal amount of advances made by the related party pursuant to these notes totaled $ 43.4 million , all of which was outstanding as of March 31, 2021 and December 31, 2020, respectively.

Accrued and unpaid interest on this note totaled $ 8.8 million and $ 8.1 million as of March 31, 2021 and December 31, 2020, respectively.

Amounts due under this promissory note are included in related-party notes payable , on the condensed combined consolidated balance sheets.

In August 2018, we executed a demand promissory note with NCSC.

The note bears interest at a per annum rate of 5.0 %, compounded annually and computed on the basis of 365 or 366 days.

In July 2020, this note was amended and restated to provide that all outstanding principal and accrued and unpaid interest is due and payable on September 30, 2025, and not on demand.

All amounts outstanding under the note will also become immediately due and payable upon certain bankruptcy and insolvency-related events.

The principal amount of advances made by the related party pursuant to these notes totaled $ 33.0 million, all of which was outstanding as of March 31, 2021 and December 31, 2020, respectively.

Accrued and unpaid interest on this note amounted to $ 4.3 million and $ 3.9 million as of March 31, 2021 and December 31, 2020, respectively.

Amounts due under this promissory note are included in related-party notes payable , on the condensed combined consolidated balance sheets.

In December 2019, we executed a demand promissory note with NantMobile.

The note bears interest at a per annum rate of 3.0 %, compounded annually and computed on the basis of 365 or 366 days.

In July 2020, this note was amended and restated to provide that all outstanding principal and accrued and unpaid interest is due and payable on September 30, 2025, and not on demand.

We may prepay the outstanding principal amount at any time without premium or penalty and the prior consent of NantMobile.

All amounts outstanding under the note will also become immediately due and payable upon certain bankruptcy and insolvency-related events.

The principal amount advanced by the related party pursuant to this note was $ 55.0 million, all of which was outstanding as of March 31, 2021 and December 31, 2020, respectively.

Accrued and unpaid interest on this note amounted to $ 2.1 million and $ 1.7 million as of March 31, 2021 and December 31, 2020, respectively.

Amounts due under this promissory note are included in related-party notes payable , on the condensed combined consolidated balance sheets.

In September 2020, we executed a promissory note with Nant Capital for an advance of the principal of $ 50.0 million, all of which was outstanding as of March 31, 2021 and December 31, 2020.

The note bears interest at a per annum rate of 6.0 %, compounded annually and computed on the basis of 365 or 366 days.

The outstanding principal and accrued and unpaid interest are due and payable on September 30, 2025.

Accrued and unpaid interest on this note amounted to $ 1.5 million and $ 0.8 million as of March 31, 2021 and December 31, 2020, respectively.

Amounts due under this promissory note are included in related-party notes payable , on the condensed combined consolidated balance sheets.

In February 2021, we executed a promissory note with Nant Capital.

The outstanding principal amount of each advance made by Nant Capital bears interest at a per annum rate of 6.0 %, compounded annually and computed based on 365 or 366 days.

On February 26, 2021, we received a $ 40.0 million advance pursuant to this promissory note, all of which is outstanding as of March 31, 2021.

The accrued interest shall be paid quarterly commencing on June 30, 2021.

The outstanding principal amount and any accrued and unpaid interest are due on September 30, 2025.

We may prepay the outstanding principal amount and accrued interest at any time without premium or penalty and the prior consent of Nant Capital.

Accrued interest payable on this note amounted to $ 0.2 million as of March 31, 2021, and was included in due to related parties , on the condensed combined consolidated balance sheets.

The principal amount due under this promissory note is included in related-party notes payable , on the condensed combined consolidated balance sheets.

All demand promissory notes have no equity or equity-linked convertible rights.

Stockholders’ Deficit

Merger with NantCell

Under the terms of the Merger Agreement, at the Effective Time of the Merger, each share of NantCell common stock , par value $0.001 per share, issued and outstanding immediately prior to the Effective Time, subject to certain exceptions as set forth in the Merger Agreement, was converted automatically into a right to receive 0.8190 newly issued shares of common stock , par value $ 0.0001 per share, resulting in the issuance of approximately 273.7 million shares of Company Common Stock.

From and after the Effective Time, all of such NantCell shares ceased to be outstanding, were canceled and ceased to exist.

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

Since the Merger has been accounted for as a transaction between entities under common control, the outstanding shares presented on the condensed combined consolidated financial statements assume that NantCell outstanding common stock was converted into shares of Company Common Stock for all periods presented, and in connection with the conversion, those shares of common stock have been recorded at the company’s par value of $ 0.0001 per share.

Stock Repurchases

In November 2015, the board of directors approved a share repurchase program, or the 2015 Share Repurchase Program, allowing the Chief Executive officer, or CEO, or Chief Financial Officer, 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.

The timing and amounts of any purchases were and will continue to be based on market conditions and other factors, including price, regulatory requirements and other corporate considerations.

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

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

No shares were repurchased during the nine months ended September 30, 2020.

During the nine months ended September 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.

As of September 30, 2020, a total of approximately 10.2 million shares of common stock were reserved for issuance pursuant to the 2015 Plan and a total of approximately 7.2 million shares were available for future grant.

Shares repurchased under this program are formally retired through board approval upon repurchase.

No shares were repurchased during the three months ended March 31, 2021 and 2020.

As of March 31, 2021, $ 18.3 million remained authorized for repurchase under the 2015 Share Repurchase Program.

Common Stock Reserved for Future Issuance

As of March 31, 2021, a total of approximately 12.6 million shares of common stock were reserved for issuance, including awards issued under the NC 2015 Plan that were outstanding immediately prior to the Effective Time of the Merger.

At the Effective Time, all outstanding equity awards granted under the NC 2015 Plan to purchase NantCell common stock were converted into equity awards to purchase shares of Company Common Stock (using the Merger Exchange Ratio of 0.8190 ), on the same terms and conditions as immediately prior to the Effective Time.

As of March 31, 2021, there were approximately 7.0 million RSUs and 1.3 million stock options outstanding under the NC 2015 Plan, and there were no additional shares available for future grant.

Stock-Based Compensation

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

2015 Equity Incentive Plan

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

As of March 31, 2021, 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.

As of March 31, 2021, a total of approximately 6.2 million shares were available for future grant under the 2015 Plan.

Stock-based Compensation

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

Three Months Ended

September 30,

Nine Months Ended

September 30,

Stock-based compensation expense:

Employee stock options

Employee RSUs

Non-employee RSUs

Stock options

Stock-based compensation expense in operating expenses:

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Selling, general and administrative

On March 18, 2021, the Board of Directors approved to modify certain non-qualified stock options that were assumed in the Merger and otherwise would have expired during a period when the grantees were legally restricted from exercising these awards.

The expiration date of these options was extended to thirty (30) days following our registration statement effective date.

We recognized incremental stock-based compensation expense of approximately $ 2.7 million for this stock option modification.

On March 29, 2021, in connection with the resignation of two former directors, the Board of Directors approved the acceleration of vesting of 83,333 shares of unvested stock options of each of the former directors on the date of their respective resignations.

The modified options are exercisable for ninety (90) days after the date of the modification.

We recognized incremental stock-based compensation expense of approximately $ 2.3 million for this stock option modification.

The stock option modifications were measured as the excess of the fair value of the modified awards over the fair value of the original awards immediately before the modifications.

The incremental stock-based compensation was recognized in selling, general and administrative expenses , on the condensed combined consolidated statements of operations during the three months ended March 31, 2021.

Stock Options

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

The following table summarizes stock option activity and related information for three months ended March 31, 2021:

(in thousands)

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Options forfeited

Outstanding at September 30, 2020

Vested and Exercisable at September 30, 2020

Unrecognized compensation cost related to unvested stock options at September 30, 2020 was $ 1.9 million, which is expected to be recognized over a weighted-average period of 1.1 years.

During the three and nine months ended September 30, 2020, we recognized proceeds of $ 0.4 million and $ 0.9 million, respectively, from exercises of stock options.

The aggregate intrinsic value of stock options exercised during the three and nine months ended September 30, 2020, was $ 8.7 million and $ 10.6 million, respectively.

During the nine months ended September 30, 2019, we recognized proceeds of $ 4.1 million from exercises of stock options by our Chairman during March 2019.

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 nine months ended September 30, 2020 (Unaudited):

Outstanding at March 31, 2021

Vested and exercisable at March 31, 2021

On February 5, 2021, the compensation committee of the board of directors of the c ompany granted Richard Adcock, our c hief e xecutive o fficer, a stock option award (the “ Option Grant”) to purchase 750,000 shares of our common stock pursuant to our 2015 Plan.

The Option Grant has an exercise price of $ 23.72 per share, the closing price as reported on the Nasdaq on the date of grant.

In addition, the Option Grant shall vest according to the following vesting schedule:

one-third of the Option Grant (i.e., 250,000 options) shall vest in equal installments on each of the first, second, and third anniversaries of the date of grant, such that all shares shall be fully vested on the third anniversary of the date of grant , subject to Mr.

Adcock remaining in c ontinuous s ervice as defined in the 2015 Plan through the applicable vesting dates.

This grant of equity awards to Mr.

Adcock was made in connection with his appointment as c hief e xecutive o fficer of the c ompany, which was effective as of October 26, 2020, and was modified from the recommended equity grant described in Mr.

Adcock’s offer of employment as of that date.

As of March 31, 2021, the unrecognized compensation cost related to outstanding stock options was $ 13.9 million, which is expected to be recognized over a remaining weighted-average period of 2.8 years.

The total intrinsic value of stock options exercised during the three months ended March 31, 2021 was $ 11.1 million.

Cash proceeds received from stock option exercises during the three months ended March 31, 2021 was $ 1.1 million.

There were no stock options exercised during the three months ended March 31, 2020.

As of December 31, 2020, a total of 4,345,497 vested and exercisable shares were outstanding.

The fair value of each stock option issued was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:

March 31, 2021

Expected term (in years)

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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.

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 s 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.

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 in the foreseeable future.

There were no stock options granted during the three months ended March 31, 2020.

Restricted Stock Units

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

The following table summarizes RSU activity for the three months ended March 31, 2021:

Unvested balance at December 31, 2020

Unvested balance at September 30, 2020

As of September 30, 2020, there was $ 0.8 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, $ 0.8 million of unrecognized expense is related to employee grants with a remaining weighted-average period of 2.0 years and $ 14,700 of unrecognized expense is related to non-employee grants with a remaining weighted-average period of 0.5 years.

During the nine months ended September 30, 2019, we recognized proceeds of $ 35.2 million upon the exercise of warrants by our Chairman during March 2019.

As of December 31, 2019 there were no warrants outstanding, and there were no warrants issued during the nine months ended September 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.

Prior to the adoption of ASU 2019‑12 in the first quarter of 2020, as described in Note 2, intraperiod tax allocation rules required us to allocate the provision for income taxes between continuing operations and other categories of earnings, such as other comprehensive income.

In periods in which we had a year-to-date pre-tax loss from continuing operations and pre-tax income in other categories of earnings, such as other comprehensive income, we had to allocate the tax provision to the other categories of earnings.

We then recorded a related tax benefit in continuing operations.

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

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

As a result, we recorded a tax expense of $ 0 for the three months ended September 30, 2019 and a tax benefit of $ 34,000 for the nine months ended September 30, 2019 on the condensed consolidated statements of operations.

We also recorded a reduction to other comprehensive income of $ 0 for the three months ended September 30, 2019, and a reduction of $ 0.1 million for the nine months ended September 30, 2019 on the condensed consolidated balance sheets.

We are operating in Korea.

During the three and nine months ended September 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 file Korean statutory tax returns.

Income tax expense consists of U.S.

federal, state, and Korean income taxes.

To date, we have not been required to pay 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 the coronavirus pandemic .

While the CARES Act provides sweeping tax changes in response to the 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.

We currently have significant federal and state deferred tax assets attributed to prior net operating losses and research and experimentation tax credits.

These deferred taxes are fully reserved.

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 d uring 2020.

Forfeited/canceled

Unvested balance at March 31, 2021

As of March 31, 2021, there was $ 179.2 million of unrecognized stock-based compensation expense related to RSUs that is expected to be recognized over a weighted-average period of 3.9 years.

We may grant RSUs to both employees and directors of the company and to employees of related parties that provide shared services to the company under our shared services agreement with NantWorks as discussed in Note 9 , Related Party Agreements .

On February 5, 2021, the compensation committee of the board of directors of the c ompany granted Mr.

Adcock two awards totaling 400,000 RSUs (each an “RSU Award” and collectively, the “RSU Awards”) of our common stock pursuant to the 2015 Plan.

The RSU Awards are comprised of two separate awards, one settled by issuing 150,000 shares of our common stock and the other to be settled by issuing 250,000 shares of our common stock upon vesting.

The first RSU Aw a rd vested immediately on the date of grant with the c ompany retaining shares equal in value to the c ompany’s tax withholding obligations.

The second RSU Aw a rd will vest according to the following schedule:

one-third (i.e.

83,333 ) of the shares subject to the RSU Aw a rd shall vest in equal annual installments on each of the first, second and third anniversaries of the date of grant , such that all shares shall be fully vested on the third anniversary of the date of g rant, subject to Mr.

Adcock remaining in c ontinuous s ervice as defined in the 2015 Plan through the applicable vesting dates.

This grant of equity awards to Mr.

Adcock’s offer of employment as of that date.

On March 4, 2021, prior to the Merger, NantCell awarded 7,121,110 RSUs (adjusted for the exchange ratio of 0.8190 ) to employees and consultants of NantCell and its affiliated companies, pursuant to the NC 2015 Plan.

These RSU awards were subject to a performance condition in connection with a “Liquidity Event”, defined as either (i) NantCell’s registration of shares for issuance on a securities offering or (ii) the closing of a corporate transaction.

In addition, the vesting of certain performance-based RSU grants accelerates upon obtaining approval by the FDA of a BLA or equivalent application for approval of Anktiva for use in the treatment of non-muscle-invasive bladder cancer.

These performance-based RSUs are also subject to service conditions and are scheduled to cliff vest on the last date of each tranche as defined by the individual grant agreements.

On March 9, 2021, we completed the Merger with NantCell, and the performance condition related to the Liquidity Event was met.

The fair value of the RSUs was estimated based on a third-party valuation as of the grant date of March 4, 2021 and was derived primarily from the estimated probabilities of the Merger close on March 9, 2021 and the other exit assumptions.

Once the liquidity event related performance condition was met as of March 9, 2021 due to the Merger, compensation expense for these RSUs began to be recognized on a graded vesting attribution approach over the requisite service period for each participant, which ranges from six-month to seventy (70)-month vesting periods.

During the three months ended March 31, 2021, we recognized approximately $ 5.1 million of stock-based compensation expense related to these awards, of which approximately $ 2.9 million was recorded in research and development expense , and approximately $ 2.2 million was recorded in selling, general and administrative expense , respectively, on the condensed combined consolidated statements of operations.

The RSUs awarded to employees and consultants of affiliated companies were accounted for as stock-based compensation in accordance with ASU 2018-07, Compensation—Stock Compensation (Topic 718) , as the compensation was in exchange for continued support or services expected to be provided to the company over the vesting periods under the NantWorks shared services agreement discussed in Note 9 , Related Party Agreements .

We have evaluated the associated benefit of these awards to the affiliated companies under common control and determined that the benefit is limited to the retention of their employees.

We estimated such benefit at the grant date fair value of $ 4.0 million and recognized $ 0.1 million of deemed dividends for the three months ended March 31, 2021, which was recorded in additional paid in capital, on the condensed combined consolidated balance sheets, with a corresponding credit to stock compensation expense.

In connection with the Merger, warrants issued to NantWorks, a related party, in connection with NantCell’s acquisition of Altor were assumed by the company.

After applying the Exchange Ratio at the Effective Time of the Merger, a total of 1,638,000 warrants with an exercise price of $ 3.24 per share, with vesting subject to the achievement of a certain performance condition pertaining to building manufacturing capacity, were outstanding as of March 31, 2021.

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

On March 9, 2021, the company completed the Merger with NantCell.

The merger is accounted for as a transaction between entities under common control.

The Merger is also considered a nontaxable transaction for U.S.

income tax purposes and it is intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended.

The company is subject to taxation in the United States, various state, and foreign jurisdictions.

Earnings from non-U.S.

activities are subject to local country income tax.

The company computes its quarterly income tax provision by using a forecasted annual effective tax rate and adjusts for any discrete items arising during the quarter.

No tax benefit was provided for losses incurred in the United States, Italy, and South Korea because those losses are offset by a full valuation allowance.

The difference between the federal statutory tax rate of 21 % and the company’s 0 % tax rate is due to losses from which the company cannot benefit.

The company is no longer subject to income tax examination by the U.S.

federal, state or local tax authorities for years ended December 31, 2015 or prior;

however, its tax attributes, such as net operating loss (“NOL”) carryforwards and tax credits, are still subject to examination in the year they are used.

Subsequent Events

Immuno-Oncology Clinic, Inc.

During April 2021, ImmunityBio executed two work orders under an existing master agreement with Immuno-Oncology Clinic, Inc.

(the “Clinic”), a related party.

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

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

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

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 $ 0.2 million of qualifying clinical trial expenses under each work order, subject to changes dependent on clinical trial enrollments and progress.

Open Market Sale Agreement

On April 30, 2021, we entered into an Open Market Sale Agreement (the “Sale Agreement”) with respect to an at-the-market (“ATM”) offering program under which we may offer and sell, from time to time at our sole discretion, shares of our common stock, having an aggregate offering price of up to $ 500.0 million through our sales agent.

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

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

The Sale Agreement may be terminated by us at any time given written notice to the sales agent for any reason or by the sales agent at any time by giving written notice to us for any reason or immediately under certain circumstances, and shall automatically terminate upon the issuance and sale of all of the shares.

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