What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-08-12 compared with 2021-05-14 · 453 added, 432 removed, 589 unchanged (60% of the section changed)

2 unchanged sentences

and Subsidiaries

Condensed Combined Consolidated Balance Sheets

Condensed Consolidated Balance Sheets

(in thousands, except share and per share amounts)

7 unchanged sentences

Property, plant and equipment, net

Non-marketable equity investment (Note 4)

Non-marketable equity investment

Intangible asset, net

19 unchanged sentences

390,347,740 and

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

382,243,142 shares issued and outstanding as of June 30, 2021 and

December 31, 2020, respectively;

excluding treasury stock, 163,800 shares

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

outstanding as of June 30, 2021 and December 31, 2020, respectively

Additional paid-in capital

Accumulated deficit

Accumulated other comprehensive (loss) income

Accumulated other comprehensive income

Total ImmunityBio stockholders’ deficit

2 unchanged sentences

Total liabilities and stockholders’ deficit

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

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

ImmunityBio, Inc.

and Subsidiaries

Condensed Combined Consolidated Statements of Operations

Condensed Consolidated Statements of Operations

(in thousands, except share and per share amounts)

Three Months Ended March 31,

Three Months Ended

Six Months Ended

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

Loss from operations

Other income (expense):

Interest and investment income, net

Other (expense) income:

Interest and investment (loss) income, net

Interest expense (including amounts with related parties)

Other income, net (including amounts with related parties)

Total other income (expense)

Total other (expense) income

Loss before income taxes and noncontrolling interests

5 unchanged sentences

net loss per share – basic and diluted

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

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

ImmunityBio, Inc.

and Subsidiaries

Condensed Combined Consolidated Statements of Comprehensive Loss

Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

Three Months Ended March 31,

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

Net unrealized losses on available-for-sale securities

Three Months Ended

Six Months Ended

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

Net unrealized gains 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

Reclassification of net realized gains on

available-for-sale securities included in net loss

Total other comprehensive income (loss)

Comprehensive loss

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.

Comprehensive loss attributable to ImmunityBio

common stockholders

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

ImmunityBio, Inc.

and Subsidiaries

Condensed Combined Consolidated Statements of (Deficit) Equity

Condensed Consolidated Statements of Stockholders’ (Deficit) Equity

(in thousands, except share amounts)

3 unchanged sentences

Stockholders’

Three Months Ended March 31, 2021

Income (Loss)

Balance as of December 31, 2020

Three Months Ended June 30, 2021

Balance as of March 31, 2021

Issuance of common stock

under “at-the market”

offering net of

commissions and

offering costs

Stock-based compensation

1 unchanged sentence

Vesting of restricted stock

Net share settlement for RSUs

Net share settlement for

Other comprehensive income,

Balance as of June 30, 2021

Comprehensive

Stockholders’

Noncontrolling

Stockholders’

Six Months Ended June 30, 2021

Balance as of December 31, 2020

Issuance of common stock

under “at-the market”

offering net of

commissions and

offering costs

Stock-based compensation

Exercise of stock options

Vesting of RSUs

Net share settlement for

Other comprehensive loss,

Balance as of June 30, 2021

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

ImmunityBio, Inc.

and Subsidiaries

Condensed Consolidated Statements of Stockholders’ (Deficit) Equity

(in thousands, except share amounts)

Comprehensive

Stockholders’

Noncontrolling

Stockholders’

Three Months Ended June 30, 2020

Balance as of March 31, 2020

Issuance of common stock,

net of offering costs

Stock-based compensation

Exercise of stock options

Vesting of RSUs

Net share settlement for

Other comprehensive loss,

Balance as of June 30, 2020

Comprehensive

2 unchanged sentences

Stockholders’

Three Months Ended March 31, 2020

Six Months Ended June 30, 2020

Balance as of December 31, 2019

Issuance of common stock,

net of offering costs

Stock-based compensation

Exercise of stock options

Vesting of RSUs

Net share settlement for RSUs

Net share settlement for

Other comprehensive income,

Balance as of March 31, 2020

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

Balance as of June 30, 2020

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

ImmunityBio, Inc.

and Subsidiaries

Condensed Combined Consolidated Statements of Cash Flows

Condensed Consolidated Statements of Cash Flows

(in thousands)

Three Months Ended March 31,

Six Months Ended

Operating activities:

1 unchanged sentence

Stock-based compensation expense

Unrealized (gains) losses on equity securities

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

Unrealized gains on equity securities

Depreciation and amortization

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

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

Realized gains on sales of equity securities

Amortization of net premiums and discounts on marketable debt securities

Change in fair value of contingent consideration obligations

Changes in operating assets and liabilities:

8 unchanged sentences

Purchases of marketable debt securities, available-for-sale

Maturities of marketable debt securities

Proceeds from sales of marketable debt securities

Maturities of marketable debt securities, available for sale

Proceeds from sales of marketable debt and equity 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

1 unchanged sentence

Net share settlement for RSUs vesting

Net cash provided by (used in) financing activities

Net cash provided by financing activities

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

2 unchanged sentences

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

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

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

ImmunityBio , Inc.

and Subsidiaries

Condensed Combined Consolidated Statements of Cash Flows (Continued)

Condensed Consolidated Statements of Cash Flows (Continued)

(in thousands)

Three Months Ended March 31,

Six Months Ended

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

5 unchanged sentences

Supplemental disclosure of non-cash activities:

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

and due to related parties

Property and equipment purchases included in accounts payable, accrued

expenses and due to related parties

Unpaid offering costs included in accounts payable and accrued expenses

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

Unrealized gains on marketable debt securities

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

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

ImmunityBio, Inc.

and Subsidiaries

Notes to Unaudited Condensed Combined Consolidated Financial Statements

Notes to Unaudited Condensed Consolidated Financial Statements

Description of Business

2 unchanged sentences

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.

In March 2014, we merged with and 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.

(formerly known as ImmunityBio, Inc., a private company) (“NantCell”), 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.

In these notes to the unaudited condensed 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 next-generation immunotherapies and 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.

(1) activating natural killer (“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 NK 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 (M-ceNK), 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.

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

Based on patient readout data that was submitted with our application to obtain our Breakthrough Therapy designation, Anktiva achieved its primary endpoint of complete response rate at any time in the ongoing registrational Phase II / III trial.

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.

On December 21, 2020 , we and 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.

5 unchanged sentences

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.

Patrick Soon-Shiong, our Executive Chairman, and his affiliates beneficially owned, 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 were listed on the Nasdaq Global Select Market under the symbol “IBRX.”

We incurred costs totaling $ 23.3 million in connection with the Merger, consisting of financial advisory, legal and other professional fees, of which $ 13.0 million was recorded during the six months ended June 30, 2021.

Merger-related costs are reported in selling, general and administrative expense , on the condensed 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.

The Merger represents a business combination pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“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 both the company and NantCell for all of the periods presented in this report.

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

1 unchanged sentence

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):

The following tables provide the impact of the change in reporting entity on our unaudited condensed consolidated statements of operations for the three months ended March 31, 2021 and the three and six months ended June 30, 2020, respectively (in thousands):

Three Months Ended

March 31, 2021

ImmunityBio, Inc.

Operating expenses:

Research and development (including amounts with

related parties)

Research and development (including amounts

with related parties)

Selling, general and administrative (including amounts

1 unchanged sentence

Loss from operations

Other (expense) income, net (including amounts with

related parties)

Other (expense) income, net (including amounts

with related parties)

Income tax expense

Three Months Ended

March 31, 2020

ImmunityBio, Inc.

June 30, 2020

Operating expenses:

Research and development (including amounts with

related parties)

Research and development (including amounts

with related parties)

Selling, general and administrative (including amounts

1 unchanged sentence

Loss from operations

Other (expense) income, net (including amounts with

related parties)

Other (expense) income, net (including amounts

with related parties)

Income tax expense

Six Months Ended

June 30, 2020

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

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“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.

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.

GAAP for annual reports.

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.

As of June 30, 2021, the company had an accumulated deficit of $ 1.8 billion.

We also had negative cash flows from operations of $ 130.1 million for the six months ended June 30, 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.

The condensed consolidated financial statements are derived from NantKwest’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 consolidated financial statements assume that the Merger took place at the beginning of the earliest period for which the condensed consolidated financial statements are presented.

Accordingly, these financial statements should be read in conjunction with the audited Combined Consolidated Financial Statements and Notes thereto 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 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.

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 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.

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 (the “ATM”)), and our potential ability to borrow from affiliated entities, will be sufficient to fund our operations through at least the next 12 months following the issuance date of the 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.

3 unchanged sentences

Principles of Consolidation

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

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

All intercompany amounts have been eliminated.

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.

For consolidated entities where we have less than 100% of ownership, we record net loss attributable to noncontrolling interest on the condensed 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.

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

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

This analysis is performed at the initial investment in the entity or upon any reconsideration event.

For entities we hold as an equity investment that are not consolidated under the VIE model, we consider whether our investment constitutes ownership of a majority of the voting interests in the entity and therefore should be considered for consolidation under the voting interest model.

For entities we hold as an equity investment that are not consolidated under the VIE m odel, we consider whether our investment constitutes ownership of a majority of the voting interests in the entity and therefore should be considered for consolidation under the voting interest model.

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 % 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.

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 (“ASC 820”), we will apply the measurement alternative under ASC Topic 321, Investments—Equity Securities (“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.

7 unchanged sentences

Use of Estimates

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.

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 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.

23 unchanged sentences

Stock-Based Compensation

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

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

5 unchanged sentences

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 p otentially dilutive securities:

As of March 31,

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

As of June 30,

Outstanding stock options

2 unchanged sentences

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 ).

2015 Stock Incentive Plan (the “NC 2015 Plan”) that, in the case of June 30, 2021, were outstanding immediately prior to the Effective Time of the Merger and in the case of June 30, 2020 have been adjusted to include the combined NC 2015 Plan and NantCell warrants then outstanding (in both cases adjusted using the Exchange Ratio of 0.8190 ).

See Note 10 , Stock-Based Compensation , for further information.

1 unchanged sentence

Application of New or Revised Accounting Standards – Not Yet Adopted

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.

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

Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”).

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

7 unchanged sentences

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

We 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 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.

We continue to evaluate the impact that this new standard and its related amendments will have 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 June 30, 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 March 31, 2021 and December 31, 2020, prepaid expenses and other current assets consist of the following (in thousands):

As of June 30, 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 8)

Insurance claim receivable

Prepaid services

Prepaid license fees

Prepaid services

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 8)

Insurance claims receivable

Equipment deposits

Interest receivable – marketable debt securities

Prepaid expenses and other current assets

1 unchanged sentence

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):

Our insurance claims receivable as of December 31, 2020 were 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 consolidated statements of operations.

Property, p lant and e quipment, n et

As of June 30, 2021 and December 31, 2020, property, plant and equipment, net, consist of the following (in thousands):

Leasehold improvements

4 unchanged sentences

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

Construction in progress at June 30, 2021 is related primarily to expansion of our pharmaceutical development and manufacturing facilities, including construction of a new filling suite at our leased facilities in El Segundo, California .

For the three months ended June 30, 2021, costs totaling $ 8.2 million were transferred from construction in progress to leasehold improvements as the construction was complete and the asset was ready for its intended use.

Depreciation and amortization expense related to property, plant and equipment totaled $ 7.0 million and $ 7.0 million for the six months ended June 30, 2021 and 2020, respectively.

As of June 30, 2021 and December 31, 2020, other assets consist of the following (in thousands):

Prepaid insurance

Prepaid preclinical and clinical trial services – with

related party (Note 8)

Value-added tax (VAT) receivable

ERP system implementation costs

Security deposits

Prepaid software license fees

Restricted cash

Prepaid software license fees

Due from related party

Prepaid preclinical and clinical trial services – with

related party (Note 9)

Prepaid insurance consists of policies required by and associated with the Merger.

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 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 e xpenses and other liabilities

As of June 30, 2021 and December 31, 2020, accrued expenses and other liabilities consist of the following (in thousands):

Accrued dissenting shares (Note 7)

3 unchanged sentences

Accrued research and development costs

Accrued bonus

Accrued construction costs

Accrued contingent consideration payable

Accrued laboratory equipment and supplies

Accrued laboratory equipment, supplies and related services

Financing obligation – current portion

3 unchanged sentences

Accrued expenses and other liabilities

Interest and investment income, net

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

Interest and investment (loss) income, net

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

Three Months Ended

Unrealized gains (losses) from equity securities

Six Months Ended

Unrealized (losses) gains from equity securities

Interest income

Investment amortization expense, net

Net realized losses on investments

Interest and investment income, net

Realized gains on investments

Interest and investment (loss) 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.

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 stock.

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 stock.

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.

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

As of June 30, 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):

June 30, 2021

Contractual Life

Corporate debt securities

Foreign bonds

Current portion

7 unchanged sentences

Noncurrent portion

Accumulated unrealized losses on debt securities classified as available-for-sale that have been in a continuous loss position for less than 12 months and for more than 12 months as of March 31, 2021 and December 31, 2020 were as follows (in thousands):

March 31, 2021

Less than 12 months

More than 12 months

Corporate debt securities

We do no t have debt securities classified as available-for-sale that were in an unrealized loss position as of June 30, 2021.

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

December 31, 2020

2 unchanged sentences

Corporate debt 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 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.

We evaluated our securities for other-than-temporary impairment, and we did no t recognize any other-than-temporary impairment losses for the six months ended June 30, 2021 and 2020.

Realized gains and losses on sales of available-for-sale debt securities were not significant for the six months ended June 30, 2021 and 2020.

Marketable E quity S ecurities

We held investments in marketable equity securities with readily determinable fair values of $ 19.7 million and $ 6.3 million as of June 30, 2021 and December 31, 2020, respectively.

Unrealized gains recorded on these securities totaled $ 8.4 million and $ 0.5 million in interest and investment (loss) income, net , on the condensed consolidated statements of operations for the six months ended June 30, 2021 and 2020, respectively.

We recorded a realized gain totaling $ 0.2 million from sales of equity securities in interest and investment (loss) income, net , on the condensed consolidated statements of operations for the six months ended June 30, 2021.

Fair Value Measurements

13 unchanged sentences

Recurring Valuations

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

Financial assets and liabilities measured at fair value on a recurring basis are summarized below as of June 30, 2021 and December 31, 2020 (in thousands):

Fair Value Measurements at June 30, 2021

Cash and cash equivalents

Equity securities

Corporate debt securities

Foreign bonds

Total assets measured at fair value

Contingent consideration obligations

Fair Value Measurements as of December 31, 2020

Fair Value Measurements at December 31, 2020

Cash and cash equivalents

4 unchanged sentences

Contingent consideration obligations

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.

Our equity securities include a $ 17.7 million investment in Viracta Therapeutics, Inc.

(“Viracta”), a clinical stage drug development company with whom we have an exclusive worldwide license to develop and commercialize one of their proprietary drug candidates.

In February 2021, Viracta merged with Sunesis Pharmaceuticals, Inc.

(“Sunesis”), 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.

Prior to the acquisition by Sunesis, we accounted for our investment in Viracta by applying the measurement alternative under ASC 321.

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.

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

2 unchanged sentences

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

Three Months Ended

Six Months Ended

Fair value, beginning of period

3 unchanged sentences

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 during the three months ended March 31, 2021 and 2020.

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

Collaboration and License Agreements

Collaboration Agreements

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

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

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 T armogens expressing tumor-associated antigens and proprietary adenovirus technology expressing tumor-associated antigens for cancer immunotherapy.

Pursuant to the CRADA, the N IH 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.

We made payments of $ 0.6 million in each of the six months ended June 30, 2021 and 2020, respectively, and recorded $ 0.3 million in research and development expense , on the condensed consolidated statements of operations for the six months ended June 30, 2021 and 2020.

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.

In February 2018, we entered into an amendment to a CRADA with the NIH that was originally executed between the NIH and Amgen, Inc.

(“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.

The CRADA has a five-year term commencing on 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 the 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 $ 0.5 million and $ 0.6 million as of June 30, 2021 and December 31, 2020, respectively.

In February 2021, we entered into a CRADA with the NIH to conduct collaborative analysis of human clinical trial samples from clinical trials utilizing our proprietary recombinant NK cells and/or monoclonal antibodies (“mAbs”) for preclinical development in monotherapy and in combination immunotherapies.

The CRADA has a two-year term commencing on 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 the NIH for support of the research activities.

We made a payment of $ 0.1 million during the six months ended June 30, 2021.

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

1 unchanged sentence

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

License Agreements

Infectious Disease Research Institute

In May 2021, we entered into license agreements with the Infectious Disease Research Institute (“IDRI”), pursuant to which we received licenses to certain of their platforms and formulations relevant to our product portfolio.

Under the licenses, we were obligated to pay one-time, non-creditable, non-refundable upfront cash payments totaling $ 2.0 million that we recorded in research and development expense , on the condensed consolidated statements of operations for the six months ended June 30, 2021.

In addition, we will owe IDRI milestone payments based on the achievement of certain development and regulatory milestones and royalties on net sales of licensed products.

No milestone fees were incurred for the six months ended June 30, 2021.

In connection with the license agreements, we also entered into a Sponsored Research Agreement (“SRA”) with IDRI pursuant to which we will fund continued research of at least $ 2 million per year, payable in four equal quarterly installments each year until May 2024, or such year of earlier termination.

For the six months ended June 30, 2021, we recorded $ 0.2 million in research and development expense , on the condensed consolidated statements of operations related to the SRA.

Exclusive License Agreement

2 unchanged sentences

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.

Concurrently we entered into a non-exclusive license agreement with iosBio, which grants iosBio and its affiliates a non-exclusive, worldwide license for 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 June 30, 2021 and December 31, 2020, we accrued $ 0.2 million and $ 0.5 million payable, respectively, to iosBio for costs of supplies and reimbursable costs related to the clinical trial activities initiated by iosBio.

Commitments and Contingencies

1 unchanged sentence

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 April 10, 2015, NantWorks, LLC (“NantWorks”), a related party, acquired a 100 % interest in VivaBioCell, S.p.A.

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

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.

1 unchanged sentence

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.

The fair value of the contingent consideration obligation decreased $ 0.1 million during the six months ended June 30, 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).

In connection with our July 2017 acquisition of Altor BioScience Corporation (“Altor”), we issued contingent value rights (“CVRs”) under which we agreed to pay the prior stockholders of Altor approximately $ 304.0 million upon successful approval of the Biologics License Application (“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

We record accruals for loss contingencies to the extent that we conclude it is probable that a liability has been incurred and the amount of the related loss can be reasonably estimated.

We evaluate, on a quarterly basis, developments in legal proceedings and other matters that could cause a change in the potential amount of the liability recorded or of the range of potential losses disclosed.

Moreover, we record gain contingencies only when they are realizable, and the amount is known.

Additionally, we record our rights to insurance recoveries, limited to the extent of incurred or probable losses, as a receivable when such recoveries have been agreed to with our third-party insurers and when receipt is deemed probable.

This includes instances 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.

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

We are not currently a party to any legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business.

We are aware of complaints that have been filed regarding the Merger, but we have not been served with any of such complaints.

If we are served with any such complaints, we will assess at that time any contingencies for which we may need to reserve.

Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

Altor BioScience, LLC Litigation

The first action, Gray v.

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

An action captioned 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.

was filed in Delaware Chancery Court by plaintiffs Clayland Boyden Gray (“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;

The court denied the motion and permitted the merger to close.

Subsequent to the close of the merger, in 2017 the plaintiffs (joined by two additional minority stockholders, Barbara Sturm Waldman and Douglas E.

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

(2) quasi-appraisal;

1 unchanged sentence

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 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 (the “Waldmans”) agreed not to bring the lawsuit.

In a second action, Dyad Pharmaceutical Corporation, or Dyad, filed a petition in Delaware Chancery Court for appraisal in connection with the merger.

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

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

The court issued an oral ruling in 2019 that dismissed certain claims and 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 2019, the court issued a written order implementing its ruling on the Converted Motions (the “Implementing Order”).

In the Implementing Order, the court confirmed that all fiduciary duty claims brought by Gray, both individually and as trustee of the Gordon Gray Trust f/b/o C.

Boyden Gray, were dismissed.

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.

Gray and the Waldmans filed answers denying the counterclaims and asserting defenses.

The plaintiffs moved for leave to file a third amended complaint to add two former Altor stockholders as plaintiffs and a fiduciary duty claim on behalf of a purported class of former Altor stockholders, which the defendants opposed.

In 2020, the court granted the plaintiffs’ motion, and the plaintiffs filed a third amended complaint.

In 2020, the defendants answered the third amended complaint and asserted counter claims against the plaintiffs.

The defendants are seeking damages for attorneys’ fees and costs incurred as a result of these breaches.

The plaintiffs filed an answer denying the counterclaims and asserting defenses.

The trial has been set to commence in October 2021, but trial is likely to be continued until the second half of 2022.

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.

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 or 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.

As of June 30, 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 stockholder dispute along with any accrued statutory interest.

We cannot reasonably estimate a range of loss or likelihood of loss beyond the amounts recorded for dissenting shares as of June 30, 2021, 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.

Discovery is ongoing, and class certification motions relating to the putative class have not yet been filed or decided.

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

2 unchanged sentences

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.

(“Sorrento”), derivatively on behalf of NANTibody, LLC (“NANTibody”), filed an action in the Superior Court of California, Los Angeles County (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.

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

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

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

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

Sorrento filed a related arbitration proceeding, 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.

In 2020, the Superior Court 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, and at Sorrento’s request, the arbitrator entered an order dismissing Sorrento’s claims against Dr.

Soon-Shiong in the Cynviloq arbitration.

The hearing in the Cynviloq arbitration commenced in June 2021, and is scheduled to continue with breaks until at least September 2021.

Also in 2019, the company and Dr.

Soon-Shiong filed cross-claims in the Superior Court action against Sorrento and its Chief Executive Officer Henry Ji, asserting claims for fraud, breach of contract, breach of the covenant of good faith and fair dealing, tortious interference with contract, unjust enrichment, and declaratory relief.

Soon-Shiong allege that Dr.

Our claims 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.

The Superior Court ruled that the company’s claims should be pursued in arbitration and that Dr.

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

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.

In 2019, the company , along with NANTibody, filed an arbitration against Sorrento and Dr.

Ji asserting our claims relating to the exclusive license agreement.

Sorrento filed counterclaims against the company and NANTibody in the arbitration 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.

In 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.

Notwithstanding such negotiations, Sorrento sent a letter 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.

Sorrento filed counterclaims against the company and NANTibody in the arbitration and requested leave to file a dispositive motion.

The hearings in the antibody arbitration commenced in April 2021 and concluded in early August 2021.

Post-hearing briefing will be followed by concluding arguments on November 10, 2021.

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 2020, we received a Request for Arbitration before the International Chamber of Commerce, International Court of Arbitration, served by Shenzhen Beike Biotechnology Corporation (“Beike”).

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

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

3 unchanged sentences

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.

The parties have been asked to provide an update to the International Chamber of Commerce by August 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.

3 unchanged sentences

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.

Our initial court filing requested the Court to find that we have not breached material obligations 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.

On June 4, 2021, the federal court separated the parties’ claims, and returned ImmunityBio’s declaratory judgment claims back to the San Diego County court while retaining the patent inventorship challenge.

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.

We do not consider the 2004 License or the patent inventorship challenge to be material to our business.

Litigation Related to the Merger with ImmunityBio, Inc.

22 unchanged sentences

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 Hargett Complaint and the Gross Complaint were both voluntarily dismissed on May 18, 2021.

The Hargett Complaint and the Gross Complaint also brought 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.

25 unchanged sentences

Three Months Ended

Six Months Ended

Operating lease costs

2 unchanged sentences

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

Three Months Ended

Six 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).

Future minimum lease payments as of June 30, 2021, including $ 12.6 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:

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

2021 (excluding the six months ended June 30, 2021)

Total future minimum lease payments

Present value of operating lease liabilities

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.

In February 2021, but effective on January 1, 2021, we entered into a lease agreement with 605 Nash, LLC, a related party, for a facility primarily used for pharmaceutical development and manufacturing purposes.

In May 2021, but effective on April 1, 2021, we entered into an amendment to our lease agreement with 605 Nash, LLC.

See Note 8 , 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.

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.

We did not enter into any significant contracts during the six months ended June 30, 2021, other than those disclosed in these condensed consolidated financial statements.

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

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.

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.

Related-Party Agreements

9 unchanged sentences

Due to related party–Immuno-Oncology Clinic

Due to related party – Nant Capital

Due to related party – NantPharma

Due to related party–Various

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.

1 unchanged sentence

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.

Under the NantWorks shared services agreement executed in November 2015, but effective August 2015, NantWorks, a related party, 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 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.

For the three months ended June 30, 2021 and 2020, we recorded $ 1.2 million and $ 2.4 million, respectively, in selling, general and administrative expense , and $ 0.1 million and $ 0.2 million, respectively, of expense reimbursements under this arrangement in research and development expense , on the condensed consolidated statements of operations.

For the six months ended June 30, 2021 and 2020, we recorded $ 3.0 million and $ 3.9 million, respectively, in selling, general and administrative expense , and $ 0.4 million and $ 1.2 million, respectively, of expense reimbursements under this arrangement in research and development expense , on the condensed consolidated statements of operations.

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

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.

As of June 30, 2021 and December 31, 2020, we owed NantWorks a net amount of $ 12.9 million and $ 10.7 million, respectively, for all agreements between the two affiliates, which is included in due to related parties, on the condensed consolidated balance sheets.

We also recorded $ 1.2 million and $ 1.1 million of prepaid expenses for services that have been passed through to the company from NantWorks as of June 30, 2021 and December 31, 2020, respectively, which are included in prepaid expenses and other current assets , on the condensed consolidated balance sheets.

In November 2015, we entered into a facility license agreement with NantWorks 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 current Good Manufacturing Practice (“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.

The base rent for the initial lease term was $ 47,000 per month, with annual increases of 3% beginning in January 2017.

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

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

Commencing January 1, 2021, the base rent increased by 3% to approximately $ 54,500 per month.

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.

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

On the date of amendment, we recorded an increase of $ 1.2 million in both operating lease right-of-use assets and operating lease liabilities , on the condensed 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 $ 0.3 million and $ 0.3 million for the six months ended June 30, 2021 and 2020, respectively, was recorded in research and development expense , on the condensed 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 the company and NantWorks manages the administrative operations of the Clinic.

Beginning in 2017, we entered into multiple agreements with Immuno-Oncology Clinic, Inc.

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

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

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

7 unchanged sentences

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.

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

To the extent any portion of the prepayments remain unearned by the Clinic on the third anniversary of the Clinic Agreement, we may elect at our sole discretion either to (i) not extend the term of the Clinic Agreement and have the Clinic reimburse us for the total amount of any remaining unused portion of the prepayments, or (ii) extend the term of the Clinic Agreement for up to three additional one year periods, at which time the Clinic will reimburse us for the total amount of any remaining unused portion of the prepayments plus interest if reimbursement is not made within 60 days of expiration.

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

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 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.

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

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 on June 22, 2020, we and NantCell 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.

In April 2021, ImmunityBio executed two work orders under an existing master agreement with the Clinic.

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.

Based on a review of our updated clinical trial programs post-Merger, we updated our estimates of the investigator fees for the clinical trials currently underway or planned at the Clinic.

As certain programs costs are excluded from and certain services are subject to credit adjustments under the Clinic Agreement, we determined the expected future fees for services to be performed are less than the carrying value of the prepaid asset on the condensed consolidated balance sheets.

As a result, we partially wrote down the value of our prepayments under the Clinic Agreement and recorded approximately $ 1.9 million in research and development expense , on the condensed consolidated statements of operations for the three months ended June 30, 2021.

In addition , we reclassified $ 0.9 million of prepaid assets from prepaid expenses and other current assets to other assets, on the condensed consolidated balance sheets as of June 30, 2021 based on the additional time expected for them to be realized than initially estimated .

For the three months ended June 30, 2021 and 2020, we incurred $ 0.5 million and $ 0.1 million in research and development expense , on the condensed consolidated statements of operations related to the Clinic Agreement.

For the six months ended June 30, 2021 and 2020, we incurred $ 0.8 million and $ 0.2 million in research and development expense , on the condensed consolidated statements of operations related to the Clinic Agreement.

As of June 30, 2021 and December 31, 2020, we owed the Clinic $ 0.2 million and $ 0.3 million, respectively, for services excluded from the Clinic Agreement.

As of June 30, 2021 and December 31, 2020, we had prepaid balances related to the Clinic Agreement of $ 2.7 million and $ 4.7 million, respectively.

NantBio, Inc.

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

In March 2016, NantBio, Inc.

(“NantBio”) and the NCI entered into a cooperative research and development agreement.

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

1 unchanged sentence

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).

We recognize expense related to this agreement ratably over a 12-month period for each funding year.

We accrued $ 0.2 million in research and development expense , on the condensed consolidated statements of operations related to this agreement for the six months ended June 30, 2021 and 2020.

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

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

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.

We recognized revenue of $ 0.3 million for the six months ended June 30, 2021.

We recorded $ 0.1 million and $ 0.3 million of deferred revenue for bioreactors that were delivered but not installed as of June 30, 2021 and December 31, 2020, respectively.

As of June 30, 2021 and December 31, 2020, we recorded $ 0.9 million in due to related parties , on the condensed consolidated balance sheets related to this agreement.

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

2 unchanged sentences

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.

As of June 30, 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 2019, we made a strategic decision and transferred certain employees from NantOmics, LLC (“NantOmics”), a related party that is controlled by our Executive Chairman, to the company.

605 Doug St, LLC

2 unchanged sentences

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 % 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.

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

Lease expense of $ 0.4 million for this facility for the six months ended June 30, 2021 and 2020, respectively, was recorded in research and development expense , on the condensed consolidated statements of operations.

The prepaid rent for this lease was $ 0.1 million, which was included in prepaid expenses and other current assets , and the security deposit for this lease was $ 0.1 million, which was included in other assets , on the condensed consolidated balance sheets as of June 30, 2021.

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.

In February 2017, Altor BioScience Corporation (succeeded by our wholly-owned subsidiary Altor BioScience, LLC), through its wholly-owned subsidiary, entered into a lease agreement with Duley Road, LLC (“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.

The base rent is approximately $ 40,700 per month, with annual increases of 3 % that began in November 2018.

As of June 30, 2021 and December 31, 2020, we recorded rent payable to Duley Road of $ 1.1 million and $ 1.0 million, respectively.

For the six months ended June 30, 2021 and 2020, we recorded rent expense of $ 0.3 million and $ 0.3 million, respectively, which is reflected in research and development expense , on the condensed 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.

5 unchanged sentences

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.

The base rent for the two leases is approximately $ 35,800 per month that increases at a rate of 3 % per year.

As of June 30, 2021 and December 31, 2020, we recorded $ 0.9 million and $ 0.7 million of leasehold improvement payables, respectively, and $ 0.4 million and $ 1.1 million of lease-related payables to Duley Road, which were included in due to related parties , on the condensed consolidated balance sheets.

For the six months ended June 30, 2021 and 2020, we recorded $ 0.2 million and $ 0.1 million of rent expense for the two leases, respectively, which was included in research and development expense , on the condensed consolidated statements of operations.

The security deposits for the leases totaled $ 0.1 million as of June 30, 2021, which were included in other assets , on the condensed consolidated balance sheets.

605 Nash, LLC

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

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 (the “Initial Premises”) in a two story mixed use building containing approximately 64,643 rentable square feet on 605-607 Nash Street in El Segundo, California.

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

The lease 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.

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

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

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

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.

We will receive a rent abatement for the first seven months, and a tenant improvement incentive of $ 0.3 million from the landlord for costs and expenses associated with the construction of tenant improvements for the Initial Premises.

During the three months ended June 30, 2021, we completed the build out of certain facility space in connection with this lease and transferred costs totaling $ 8.2 million from construction in progress to leasehold improvements.

For the three and six months ended June 30, 2021, we recorded rent expense of $ 0.1 million, which is reflected in research and development expense, on the condensed consolidated statements of operations.

In May 2021, but effective on April 1, 2021, we entered into an amendment to our Initial Premises lease with 605 Nash, LLC.

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

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

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

Base rent for the Expansion Premises is approximately $ 170,400 per month with annual increases of 3 % on April 1 of each year.

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

The amended lease provides for a rent abatement for the first seven month s, and for a tenant improvement allowance of approximately $ 2.6 million for costs and expenses related to improvements made by us to the Expansion Premises.

During the three and six months ended June 30, 2021, we incurred $ 0.5 million of rent expense related to the Expansion Premises lease agreement.

The security deposits for the leases total $ 0.2 million as of June 30, 2021, which are included in other assets , on the condensed consolidated balance sheets.

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.

As of June 30, 2021 and December 31, 2020, related-party notes payable consist of the following (in thousands):

Total Notes and Interest Payable

Related-Party Notes Payable

Nant Capital (1)

Nant Capital (4)

NantMobile (1)

NantWorks (1)

Total related-party notes payable

All outstanding advances and accrued and unpaid interest is due and payable on September 30, 2025 .

Interest on related-party notes payable is compounded annually.

We may prepay the outstanding principal at any time without premium, penalty or the prior consent of the issuer.

All outstanding amounts under the notes become due and payable upon certain bankruptcy and insolvency-related events.

There are no equity or equity-linked convertible rights related to these promissory notes.

Accrued and unpaid interest on this note totaled $ 4.7 million and $ 3.3 million as of June 30, 2021 and December 31, 2020, respectively.

Accrued and unpaid interest on this note totaled $ 2.3 million and $ 0.8 million as of June 30, 2021 and December 31, 2020, respectively.

The outstanding principal is due and payable on September 30, 2025 .

Interest on this related-party note is compounded annually and payable quarterly commencing on June 30, 2021.

We paid $ 0.8 million in interest on this loan during the three months ended June 30, 2021.

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

There are no equity or equity-linked convertible rights related to this promissory note.

Accrued and unpaid interest on this note totaled $ 2.5 million and $ 1.7 million as of June 30, 2021 and December 31, 2020, respectively.

Accrued and unpaid interest on this note totaled $ 9.4 million and $ 8.1 million as of June 30, 2021 and December 31, 2020, respectively.

Accrued and unpaid interest on this note totaled $ 4.8 million and $ 3.9 million as of June 30, 2021 and December 31, 2020, respectively.

Stockholders’ Deficit

3 unchanged sentences

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.

Since the Merger has been accounted for as a transaction between entities under common control, the outstanding shares presented on the condensed 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.

The 2015 Share Repurchase Program does not require the purchase of any minimum number of shares and may be suspended, modified, or discontinued at any time without prior notice.

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

Shares repurchased under this program are formally retired through 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.

No shares of our common stock were repurchased during the six months ended June 30, 2021 and 2020 under the company’s 2015 Share Repurchase Program.

As of June 30, 2021, $ 18.3 million remained authorized for repurchase under the 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.

As of June 30, 2021, a total of approximately 11.8 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 Exchange Ratio of 0.8190 ), on the same terms and conditions as immediately prior to the Effective Time.

As of June 30, 2021, there were approximately 6.8 million RSUs and 0.7 million stock options outstanding under the NC 2015 Plan, and there were no additional shares available for future grant.

Open Market Sale Agreement

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

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

During the three months ended June 30, 2021, we received net proceeds totaling $ 94.9 million from the issuance of 6,420,441 shares under the ATM, which we expect to use for general corporate purposes, including to progress our clinical development programs, fund other research and development activities, for capital expenditures and to fund working capital.

We may also use a portion of the net proceeds to license intellectual property or to make acquisitions or investments.

As of June 30, 2021, we had $ 402.0 million available for future stock issuances under the ATM.

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

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.

Stock-Based Compensation

1 unchanged sentence

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.

Pursuant to the Merger, we assumed 7,121,110 RSUs (adjusted for the Exchange Ratio of 0.8190 ) issued under NantCell’s equity incentive plan.

As of June 30, 2021, the 2015 Plan is the only equity plan available for grant of equity awards to employees, directors and consultants of the company.

As of June 30, 2021, a total of approximately 5.9 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):

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

Three Months Ended

Six Months Ended

Stock-based compensation expense:

4 unchanged sentences

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 expiration date of these options was extended to thirty (30) days following the effective date of Post-Effective Amendment No.

1 on Form S-3 to our Form S-4 Registration Statement.

We recorded 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 independent directors, the Board of Directors approved the acceleration of vesting of 83,333 shares of unvested stock options 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.

We recorded 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.

The incremental stock-based compensation was recorded in selling, general and administrative expense , on the condensed consolidated statements of operations during the six months ended June 30, 2021.

Stock Options

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

The following table summarizes stock option activity and related information for the six months ended June 30, 2021:

(in thousands)

Outstanding at December 31, 2020

Options granted

Options exercised

Options forfeited

Outstanding at March 31, 2021

Vested and exercisable at March 31, 2021

Expired/forfeited

Outstanding at June 30, 2021

Vested and exercisable at June 30, 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.

6 unchanged sentences

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.

On May 3, 2021, the compensation committee of the board of directors of the company granted each of our newly-appointed independent directors a non-qualified stock option award to purchase 21,873 shares of our common stock pursuant to the 2015 Plan at an exercise price of $ 17.24 per share, the closing price as reported on the Nasdaq on the date of grant.

The shares subject to the award will vest in three (3) equal installments on each of the first, second and third anniversary date of their appointment to the board of directors, such that the award will be fully vested on the third anniversary date in 2024, subject to the director continuing to be a service provider as defined in the 2015 Plan through the applicable vesting dates.

On June 10, 2021, the compensation committee of the board of directors of the company granted our Chairman and each of the independent members of our board of directors a non-qualified stock option award to purchase 26,064 shares of our common stock pursuant to the 2015 Plan at an exercise price of $ 14.91 per share, the closing price as reported on the Nasdaq on the date of grant.

The shares subject to the award will vest 100% on the earlier to occur of June 10, 2022 or the date immediately preceding the 2022 annual meeting of stockholders, subject to the recipient continuing to be a service provider as defined in the 2015 Plan through the applicable vesting date.

These grants were made in connection with the re-election of our Executive Chairman and independent directors to the company’s board of directors at the 2021 annual meeting of stockholders.

As of June 30, 2021, the unrecognized compensation cost related to outstanding stock options was $ 16.2 million, which is expected to be recognized over a remaining weighted-average period of 2.4 years.

The total intrinsic value of stock options exercised during the six months ended June 30, 2021 was $ 20.6 million.

Cash proceeds received from stock option exercises during the six months ended June 30, 2021 was $ 4.4 million.

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

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

Six Months Ended

Expected term (in years)

9 unchanged sentences

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 RSU activity for the three months ended March 31, 2021:

Unvested balance at December 31, 2020

The following table summarizes RSU activity during the six months ended June 30, 2021:

Nonvested balance at December 31, 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.

Nonvested balance at June 30, 2021

As of June 30, 2021, there was $ 159.9 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 8 , Related-Party Agreements .

17 unchanged sentences

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.

During the six months ended June 30, 2021, we recorded approximately $ 21.1 million of stock-based compensation expense related to these awards, of which approximately $ 11.3 million was recorded in research and development expense and approximately $ 9.8 million was recorded in selling, general and administrative expense , on the condensed 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 8 , 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.

We estimated such benefit at the grant date fair value of $ 4.0 million and recorded $ 0.5 million of deemed dividends for the six months ended June 30, 2021 in additional paid-in capital, on the condensed 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 .

After applying the Exchange Ratio at the Effective Time of the Merger, a total of 1,638,000 warrants with an exercise price of $ 3.24 per share were outstanding as of June 30, 2021.

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

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 Merger is accounted for as a transaction between entities under common control, and is considered a nontaxable transaction for U.S.

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

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

7 unchanged sentences

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:

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.

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