ImmunityBio, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS. ImmunityBio, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (in thousands, except share and per share amounts) June 30, 2021 December 31, 2020 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 83,958 $ 34,915 Marketable securities 19,970 61,146 Due from related parties 2,047 2,003 Prepaid expenses and other current assets (including amounts with related parties) 7,756 13,649 Total current assets 113,731 111,713 Marketable securities, noncurrent 822 950 Property, plant and equipment, net 89,023 72,541 Non-marketable equity investment — 7,849 Intangible asset, net 1,445 1,463 Convertible note receivable 6,253 6,129 Operating lease right-of-use assets, net (including amounts with related parties) 28,230 18,138 Other assets (including amounts with related parties) 6,797 2,598 Total assets $ 246,301 $ 221,381 LIABILITIES AND STOCKHOLDERS’ DEFICIT Current liabilities: Accounts payable $ 19,153 $ 11,510 Accrued expenses and other liabilities 36,134 36,771 Due to related parties 16,711 14,838 Operating lease liabilities (including amounts with related parties) 2,430 5,015 Total current liabilities 74,428 68,134 Related-party notes payable 300,252 254,353 Operating lease liabilities, less current portion (including amounts with related parties) 29,116 16,179 Deferred income tax liability 170 170 Other liabilities 920 1,035 Total liabilities 404,886 339,871 Commitments and contingencies (Note 7) Stockholders’ deficit: Common stock, $ 0.0001 par value; 500,000,000 shares authorized; 390,347,740 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 June 30, 2021 and December 31, 2020, respectively 39 38 Additional paid-in capital 1,625,018 1,495,163 Accumulated deficit ( 1,783,033 ) ( 1,615,131 ) Accumulated other comprehensive income 37 122 Total ImmunityBio stockholders’ deficit ( 157,939 ) ( 119,808 ) Noncontrolling interests ( 646 ) 1,318 Total stockholders’ deficit ( 158,585 ) ( 118,490 ) Total liabilities and stockholders’ deficit $ 246,301 $ 221,381 The accompanying notes are an integral part of these condensed consolidated financial statements. 1 Table of Contents ImmunityBio, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (in thousands, except share and per share amounts) (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Revenue $ 339 $ 436 $ 478 $ 601 Operating expenses: Research and development (including amounts with related parties) 53,800 33,005 94,928 60,379 Selling, general and administrative (including amounts with related parties) 32,445 18,347 77,720 27,840 Total operating expenses 86,245 51,352 172,648 88,219 Loss from operations ( 85,906 ) ( 50,916 ) ( 172,170 ) ( 87,618 ) Other (expense) income: Interest and investment (loss) income, net ( 177 ) 986 8,767 1,064 Interest expense (including amounts with related parties) ( 3,577 ) ( 2,123 ) ( 6,745 ) ( 4,012 ) Other income, net (including amounts with related parties) 277 81 290 1,185 Total other (expense) income ( 3,477 ) ( 1,056 ) 2,312 ( 1,763 ) Loss before income taxes and noncontrolling interests ( 89,383 ) ( 51,972 ) ( 169,858 ) ( 89,381 ) Income tax expense ( 2 ) ( 45 ) ( 8 ) ( 63 ) Net loss ( 89,385 ) ( 52,017 ) ( 169,866 ) ( 89,444 ) Net loss attributable to noncontrolling interests, net of tax ( 1,097 ) ( 578 ) ( 1,964 ) ( 967 ) Net loss attributable to ImmunityBio common stockholders $ ( 88,288 ) $ ( 51,439 ) $ ( 167,902 ) $ ( 88,477 ) Net loss per ImmunityBio common share – basic and diluted $ ( 0.23 ) $ ( 0.14 ) $ ( 0.44 ) $ ( 0.24 ) Weighted-average number of common shares used in computing net loss per share – basic and diluted 384,820,486 372,286,278 383,939,031 372,137,752 The accompanying notes are an integral part of these condensed consolidated financial statements. 2 Table of Contents ImmunityBio, Inc. and Subsidiaries Condensed Consolidated Statements of Comprehensive Loss (in thousands) (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Net loss $ ( 89,385 ) $ ( 52,017 ) $ ( 169,866 ) $ ( 89,444 ) Other comprehensive income (loss), net of income taxes: Net unrealized gains on available-for-sale securities 18 29 17 5 Foreign currency translation adjustments 60 ( 63 ) ( 102 ) 7 Reclassification of net realized gains on available-for-sale securities included in net loss ( 3 ) ( 1 ) — — Total other comprehensive income (loss) 75 ( 35 ) ( 85 ) 12 Comprehensive loss ( 89,310 ) ( 52,052 ) ( 169,951 ) ( 89,432 ) Less: Comprehensive loss attributable to noncontrolling interests ( 1,097 ) ( 578 ) ( 1,964 ) ( 967 ) Comprehensive loss attributable to ImmunityBio common stockholders $ ( 88,213 ) $ ( 51,474 ) $ ( 167,987 ) $ ( 88,465 ) The accompanying notes are an integral part of these condensed consolidated financial statements. 3 Table of Contents ImmunityBio, Inc. and Subsidiaries Condensed Consolidated Statements of Stockholders’ (Deficit) Equity (in thousands, except share amounts) (Unaudited) Common Stock Additional Paid-in Accumulated Accumulated Other Comprehensive (Loss) Total ImmunityBio Stockholders’ Noncontrolling Total Stockholders’ Three Months Ended June 30, 2021 Shares Amount Capital Deficit Income Deficit Interests Deficit Balance as of March 31, 2021 383,067,321 $ 38 $ 1,508,958 $ ( 1,694,745 ) $ ( 38 ) $ ( 185,787 ) $ 451 $ ( 185,336 ) Issuance of common stock under “at-the market” offering net of commissions and offering costs of $ 3,077 6,420,441 1 94,886 — — 94,887 — 94,887 Stock-based compensation expense — — 17,863 — — 17,863 — 17,863 Exercise of stock options 759,639 — 3,311 — — 3,311 — 3,311 Vesting of restricted stock units (RSUs) 100,359 — — — — — — — Net share settlement for RSUs vesting ( 20 ) — — — — — — — Other comprehensive income, net of tax — — — — 75 75 — 75 Net loss — — — ( 88,288 ) — ( 88,288 ) ( 1,097 ) ( 89,385 ) Balance as of June 30, 2021 390,347,740 $ 39 $ 1,625,018 $ ( 1,783,033 ) $ 37 $ ( 157,939 ) $ ( 646 ) $ ( 158,585 ) Common Stock Additional Paid-in Accumulated Accumulated Other Comprehensive Total ImmunityBio Stockholders’ Noncontrolling Total Stockholders’ Six Months Ended June 30, 2021 Shares Amount Capital Deficit Income Deficit Interests Deficit Balance as of December 31, 2020 382,243,142 $ 38 $ 1,495,163 $ ( 1,615,131 ) $ 122 $ ( 119,808 ) $ 1,318 $ ( 118,490 ) Issuance of common stock under “at-the market” offering net of commissions and offering costs of $ 3,077 6,420,441 1 94,886 — — 94,887 — 94,887 Stock-based compensation expense — — 33,161 — — 33,161 — 33,161 Exercise of stock options 1,450,104 — 4,432 — — 4,432 — 4,432 Vesting of RSUs 336,084 — — — — — — — Net share settlement for RSUs vesting ( 102,031 ) — ( 2,624 ) — — ( 2,624 ) — ( 2,624 ) Other comprehensive loss, net of tax — — — — ( 85 ) ( 85 ) — ( 85 ) Net loss — — — ( 167,902 ) — ( 167,902 ) ( 1,964 ) ( 169,866 ) Balance as of June 30, 2021 390,347,740 $ 39 $ 1,625,018 $ ( 1,783,033 ) $ 37 $ ( 157,939 ) $ ( 646 ) $ ( 158,585 ) The accompanying notes are an integral part of these condensed consolidated financial statements. 4 Table of Contents ImmunityBio, Inc. and Subsidiaries Condensed Consolidated Statements of Stockholders’ (Deficit) Equity (in thousands, except share amounts) (Unaudited) Common Stock Additional Paid-in Accumulated Accumulated Other Comprehensive Total ImmunityBio Stockholders’ (Deficit) Noncontrolling Total Stockholders’ (Deficit) Three Months Ended June 30, 2020 Shares Amount Capital Deficit Loss Equity Interests Equity Balance as of March 31, 2020 372,015,023 $ 37 $ 1,406,359 $ ( 1,430,318 ) $ ( 40 ) $ ( 23,962 ) $ 3,265 $ ( 20,697 ) Issuance of common stock, net of offering costs of $ 4,392 8,521,500 1 86,281 — — 86,282 — 86,282 Stock-based compensation expense — — 322 — — 322 — 322 Exercise of stock options 259,017 — 564 — — 564 — 564 Vesting of RSUs 495,226 — — — — — — — Net share settlement for RSUs vesting ( 10,017 ) — ( 40 ) — — ( 40 ) — ( 40 ) Other comprehensive loss, net of tax — — — — ( 35 ) ( 35 ) — ( 35 ) Net loss — — — ( 51,439 ) — ( 51,439 ) ( 578 ) ( 52,017 ) Balance as of June 30, 2020 381,280,749 $ 38 $ 1,493,486 $ ( 1,481,757 ) $ ( 75 ) $ 11,692 $ 2,687 $ 14,379 Common Stock Additional Paid-in Accumulated Accumulated Other Comprehensive Total ImmunityBio Stockholders’ Noncontrolling Total Stockholders’ Six Months Ended June 30, 2020 Shares Amount Capital Deficit Loss Equity Interests Equity Balance as of December 31, 2019 371,976,995 $ 37 $ 1,406,002 $ ( 1,393,280 ) $ ( 87 ) $ 12,672 $ 3,654 $ 16,326 Issuance of common stock, net of offering costs of $ 4,392 8,521,500 1 86,281 — — 86,282 — 86,282 Stock-based compensation expense — — 802 — — 802 — 802 Exercise of stock options 259,017 — 564 — — 564 — 564 Vesting of RSUs 558,976 — — — — — — — Net share settlement for RSUs vesting ( 35,739 ) — ( 163 ) — — ( 163 ) — ( 163 ) Other comprehensive income, net of tax — — — — 12 12 — 12 Net loss — — — ( 88,477 ) — ( 88,477 ) ( 967 ) ( 89,444 ) Balance as of June 30, 2020 381,280,749 $ 38 $ 1,493,486 $ ( 1,481,757 ) $ ( 75 ) $ 11,692 $ 2,687 $ 14,379 The accompanying notes are an integral part of these condensed consolidated financial statements. 5 Table of Contents ImmunityBio, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (in thousands) (Unaudited) Six Months Ended June 30, 2021 2020 Operating activities: Net loss $ ( 169,866 ) $ ( 89,444 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation expense 33,161 802 Unrealized gains on equity securities ( 8,391 ) ( 494 ) Depreciation and amortization 6,956 6,959 Non-cash interest items, net (including amounts with related parties) 6,248 3,988 Non-cash lease expense related to operating lease right-of-use assets 2,269 2,034 Realized gains on sales of equity securities ( 173 ) — Amortization of net premiums and discounts on marketable debt securities 248 93 Change in fair value of contingent consideration obligations ( 118 ) ( 457 ) Deferred tax — ( 1,029 ) Changes in operating assets and liabilities: Prepaid expenses and other current assets 5,420 ( 5,635 ) Other assets ( 4,199 ) 114 Accounts payable 2,600 2,287 Accrued expenses and other liabilities ( 3,821 ) 10,216 Related parties 2,579 ( 4,740 ) Operating lease liabilities ( 2,977 ) ( 1,823 ) Net cash used in operating activities ( 130,064 ) ( 77,129 ) Investing activities: Purchases of property, plant and equipment ( 15,128 ) ( 324 ) Purchases of marketable debt securities, available-for-sale ( 266 ) ( 14,828 ) Maturities of marketable debt securities, available for sale 44,159 42,920 Proceeds from sales of marketable debt and equity securities 13,569 1,500 Net cash provided by investing activities 42,334 29,268 Financing activities: Proceeds from equity offering, net of issuance costs paid 95,026 86,816 Proceeds from issuance of related-party promissory notes 40,000 — Proceeds from exercises of stock options 4,432 564 Net share settlement for RSUs vesting ( 2,624 ) ( 163 ) Net cash provided by financing activities 136,834 87,217 Effect of exchange rate changes on cash, cash equivalents, and restricted cash ( 61 ) 5 Net change in cash, cash equivalents, and restricted cash 49,043 39,361 Cash, cash equivalents, and restricted cash, beginning of period 35,094 75,980 Cash, cash equivalents, and restricted cash, end of period $ 84,137 $ 115,341 The accompanying notes are an integral part of these condensed consolidated financial statements. 6 Table of Contents ImmunityBio , Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Continued) (in thousands) (Unaudited) Six Months Ended June 30, 2021 2020 Reconciliation of cash, cash equivalents, and restricted cash, end of period: Cash and cash equivalents $ 83,958 $ 115,162 Restricted cash (Note 3) 179 179 Cash, cash equivalents, and restricted cash, end of period $ 84,137 $ 115,341 Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ 842 $ 10 Income taxes 10 6 Supplemental disclosure of non-cash activities: Property and equipment purchases included in accounts payable, accrued expenses and due to related parties $ 8,347 $ 2,368 Unpaid offering costs included in accounts payable and accrued expenses 140 534 Right-of-use assets obtained in exchange for operating lease liabilities 12,361 — Unrealized gains on marketable debt securities 17 5 The accompanying notes are an integral part of these condensed consolidated financial statements. 7 Table of Contents ImmunityBio, Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements 1. Description of Business Organization We were incorporated in Illinois on October 7, 2002 under the name ZelleRx Corporation. On January 22, 2010, we changed our name to Conkwest, Inc. In March 2014, we formed Conkwest, Inc., our wholly-owned subsidiary in the state of Delaware, or Conkwest Delaware, for the purposes of changing the state of our incorporation to the state of Delaware. In March 2014, we merged with 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) (“NantCell”), and we changed our name to ImmunityBio, Inc. Our principal executive offices are located in San Diego, California. 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 (“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 (“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. 8 Table of Contents The Merger 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. On March 9, 2021 , we completed the Merger pursuant to the terms of the Merger Agreement. Under the terms of the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each share of NantCell common stock , par value $ 0.001 per share, issued and outstanding immediately prior to the Effective Time, subject to certain exceptions as set forth in the Merger Agreement, was converted automatically into a right to receive 0.8190 (the “Exchange Ratio”) newly issued shares of common stock, par value $ 0.0001 per share, of the company (“Company Common Stock”), with cash paid in lieu of any fractional shares. At the Effective Time, each share of the company’s common stock issued and outstanding immediately prior to the Effective Time, remained an issued and outstanding share of the combined company. At the Effective Time, each outstanding option, warrant or restricted stock unit to purchase NantCell common stock was converted using the Exchange Ratio into an option, warrant or restricted stock unit, respectively, on the same terms and conditions immediately prior to the Effective Time, to purchase shares of Company Common Stock. Immediately following the Effective Time, the former stockholders of NantCell held approximately 71.5 % of the outstanding shares of Company Common Stock and the stockholders of the company as of immediately prior to the Merger held approximately 28.5 % of the outstanding shares of Company Common Stock. As a result of the Merger and immediately following the Effective Time, Dr. Patrick Soon-Shiong, our Executive Chairman, and his affiliates beneficially 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 (“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. We have recast our prior period financial statements to reflect the conveyance of NantCell’s common shares as if the Merger had occurred as of the earliest date of the financial statements presented. All material intercompany accounts and transactions have been eliminated in consolidation. 9 Table of Contents 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 (Unaudited) NantCell NantKwest Intercompany Eliminations ImmunityBio, Inc. Revenue $ 183 $ — $ ( 44 ) $ 139 Operating expenses: Research and development (including amounts with related parties) 21,509 19,725 ( 106 ) 41,128 Selling, general and administrative (including amounts with related parties) 24,382 20,903 ( 10 ) 45,275 Loss from operations ( 45,708 ) ( 40,628 ) 72 ( 86,264 ) Other (expense) income, net (including amounts with related parties) ( 848 ) 6,637 — 5,789 Income tax expense — ( 6 ) — ( 6 ) Net loss $ ( 46,556 ) $ ( 33,997 ) $ 72 $ ( 80,481 ) Three Months Ended June 30, 2020 (Unaudited) NantCell NantKwest Intercompany Eliminations ImmunityBio, Inc. Revenue $ 1,525 $ 1 $ ( 1,090 ) $ 436 Operating expenses: Research and development (including amounts with related parties) 19,384 13,709 ( 88 ) 33,005 Selling, general and administrative (including amounts with related parties) 11,828 6,519 — 18,347 Loss from operations ( 29,687 ) ( 20,227 ) ( 1,002 ) ( 50,916 ) Other (expense) income, net (including amounts with related parties) ( 1,195 ) 139 — ( 1,056 ) Income tax expense ( 41 ) ( 4 ) ( 45 ) Net loss $ ( 30,923 ) $ ( 20,092 ) $ ( 1,002 ) $ ( 52,017 ) Six Months Ended June 30, 2020 (Unaudited) NantCell NantKwest Intercompany Eliminations ImmunityBio, Inc. Revenue $ 1,693 $ 22 $ ( 1,114 ) $ 601 Operating expenses: Research and development (including amounts with related parties) 33,636 26,943 ( 200 ) 60,379 Selling, general and administrative (including amounts with related parties) 15,948 11,892 — 27,840 Loss from operations ( 47,891 ) ( 38,813 ) ( 914 ) ( 87,618 ) Other (expense) income, net (including amounts with related parties) ( 2,105 ) 342 — ( 1,763 ) Income tax expense ( 59 ) ( 4 ) — ( 63 ) Net loss $ ( 50,055 ) $ ( 38,475 ) $ ( 914 ) $ ( 89,444 ) 10 Table of Contents 2. 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 (“SEC”) on April 22, 2021. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the SEC. 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 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 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 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 (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. However, we may not be able to secure such financing in a timely manner or on favorable terms. Without additional funds, we may choose to delay or reduce our operating or investment expenditures. Further, because of the risk and uncertainties associated with the commercialization of our product candidates in development, we may need additional funds to meet our needs sooner than planned. Principles of Consolidation 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 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 (“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. 11 Table of Contents 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 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 (“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. All investments are reviewed for possible impairment on a regular basis. If an investment’s fair value is determined to be less than its net carrying value, the investment is written down to its fair value. Such an evaluation is judgmental and dependent on specific facts and circumstances. Factors considered in determining whether an impairment indicator is present include: the investees’ earnings performance and clinical trial performance, change in the investees’ industry and geographic area in which it operates, offers to purchase or sell the security for a price less than the cost of the investment, issues that raise concerns about the investee’s ability to continue as a going concern, and any other information that we may be aware of related to the investment. Factors considered in determining whether an observable price change has occurred include: the price at which the investee issues equity instruments similar to those of our investment and the rights and preferences of those equity instruments compared to ours. Use of Estimates The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we evaluate our estimates, including those related to the valuation of equity-based awards, deferred income taxes and related valuation allowances, preclinical and clinical trial accruals, impairment assessments, contingent value right measurement and assessments, the measurement of right-of-use assets and lease liabilities, useful lives of long-lived assets, loss contingencies, fair value measurements, and the assessment of our ability to fund our operations for at least the next 12 months from the date of issuance of these financial statements. We base our estimates on historical experience and on various other market-specific and relevant assumptions that we believe to be reasonable under the circumstances. Estimates are assessed each period and updated to reflect current information, such as the economic considerations related to the impact that the ongoing coronavirus pandemic could have on our significant accounting estimates. Actual results could differ from those estimates. Risks and Uncertainties In March 2020, the World Health Organization declared the novel strain of coronavirus disease (SARS‑CoV‑2) a pandemic. To date, our operations have not been significantly disadvantaged by the pandemic. However, we cannot at this time predict the specific extent, duration, or full impact that this pandemic may have on our financial condition and results of operations, including ongoing and planned clinical trials. More specifically, the pandemic may result in prolonged impacts that we cannot predict at this time and we expect that such uncertainties will continue to exist for the foreseeable future. The impact of the pandemic on our financial performance will depend on future developments, including the duration and spread of the outbreak, impact of potential variants and the related governmental advisories and restrictions. These developments and the impact of the ongoing pandemic on the financial markets and the overall economy are highly uncertain. If the financial markets and/or the overall economy are impacted for an extended period, our results may be adversely affected. 12 Table of Contents 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 when our third-party insurers have agreed to pay, on our behalf, certain legal defense costs and settlement amounts directly to applicable law firms and a settlement fund. Concentration of Credit Risk and Other Risks and Uncertainties Financial instruments that potentially subject us to concentrations of risk consist principally of cash and cash equivalents, marketable securities, and a convertible note receivable. Our cash and cash equivalents are held by one major financial institution in the U.S., one in South Korea and one in Italy. Product candidates developed by us will require approvals or clearances from the FDA or international regulatory agencies prior to commercial sales. There can be no assurance that any of our product candidates will receive any of the required approvals or clearances. If we were to be denied approval or clearance or any such approval or clearance was to be delayed, it would have a material adverse impact on us. Stock-Based Compensation We account for stock-based compensation under the provisions of FASB ASC Topic 718, Compensation—Stock Compensation (“ASC 718”). We measure the fair value of an equity-classified award at the grant date and recognize the stock-based compensation expense over the period of vesting on the straight-line basis for our outstanding share awards that do not contain a performance condition. For awards subject to performance-based vesting conditions, we assess the probability of the individual milestones under the award being achieved and stock-based compensation expense is recognized over the service period using the graded vesting method once management believes the performance criteria is probable of being met. For awards with service or performance conditions, we recognize the effect of forfeitures in compensation cost in the period that the award was forfeited. Basic and Diluted Net Loss per Share of Common Stock Basic net loss per share is calculated by dividing the net loss attributable to ImmunityBio common stockholders by the weighted-average number of common shares outstanding for the period. Diluted loss per share is computed by dividing net loss attributable to ImmunityBio common stockholders by the weighted-average number of common shares, including the number of additional shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. For all periods presented, potentially dilutive securities are excluded from the computation of fully diluted loss per share as their effect is anti-dilutive. The following table details those securities that have been excluded from the computation of potentially dilutive securities: As of June 30, 2021 2020 (Unaudited) Outstanding stock options 4,330,318 6,104,799 Outstanding RSUs 7,443,504 565,802 Outstanding related-party warrants 1,638,000 1,638,000 Total 13,411,822 8,308,601 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 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. 13 Table of Contents Recent Accounting Pronouncements Application of New or Revised Accounting Standards – Not Yet Adopted 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. The new guidance supersedes existing U.S. GAAP for measuring and recording of credit losses on financial assets measured at amortized cost by replacing the incurred-loss model with an expected-loss model. Accordingly, these financial assets will be presented at the net amount expected to be collected. This new standard also requires that credit losses related to available-for-sale debt securities be recorded as an allowance through net income rather than reducing the carrying amount under the current, other-than-temporary-impairment model. For public business entities that meet the definition of an SEC filer, except entities that are eligible to be a smaller reporting company as defined by the SEC, the standard is effective for annual periods beginning after December 15, 2019, and interim periods therein. For all other entities, including us, the standard is effective for annual periods beginning after December 15, 2022, and interim periods therein. Early adoption is permitted for all entities for annual periods beginning after December 15, 2018. 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. 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. 3. Financial Statement Details Prepaid expenses and other current assets As of June 30, 2021 and December 31, 2020, prepaid expenses and other current assets consist of the following (in thousands): June 30, 2021 December 31, 2020 (Unaudited) Prepaid preclinical and clinical trial services – with related party (Note 8) $ 1,760 $ 4,626 Prepaid license fees 1,579 801 Prepaid services 1,356 1,294 Prepaid insurance 1,191 1,365 Prepaid rent 659 589 Insurance premium financing asset 627 1,421 Prepaid equipment maintenance 198 243 Prepaid supplies – with related party (Note 8) 103 143 Insurance claims receivable — 2,518 Equipment deposits — 66 Interest receivable – marketable debt securities — 473 Other 283 110 Prepaid expenses and other current assets $ 7,756 $ 13,649 We have reflected our right to insurance recoveries, limited to the extent of incurred or probable losses, as a receivable when such recoveries have been agreed to with our third-party insurers and receipt is deemed probable. This includes instances where our third-party insurers have agreed to pay, on our behalf, certain legal defense costs and settlement amounts directly to applicable law firms and a settlement fund. Our insurance claims receivable as of 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. 14 Table of Contents 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): June 30, 2021 December 31, 2020 (Unaudited) Leasehold improvements $ 62,445 $ 52,251 Equipment 45,443 34,738 Buildings 22,690 22,690 Construction in progress 4,030 1,333 Software 1,449 2,376 Furniture & fixtures 1,046 1,015 Gross property, plant and equipment 137,103 114,403 Less: Accumulated depreciation and amortization 48,080 41,862 Property, plant and equipment, net $ 89,023 $ 72,541 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. Other assets As of June 30, 2021 and December 31, 2020, other assets consist of the following (in thousands): June 30, 2021 December 31, 2020 (Unaudited) Prepaid insurance $ 3,220 $ — Prepaid preclinical and clinical trial services – with related party (Note 8) 911 92 Value-added tax (VAT) receivable 877 864 ERP system implementation costs 585 — Security deposits 486 634 Restricted cash 179 179 Prepaid software license fees 110 455 Due from related party 55 51 Other 374 323 Other assets $ 6,797 $ 2,598 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. 15 Table of Contents 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): June 30, 2021 December 31, 2020 (Unaudited) Accrued dissenting shares (Note 7) $ 6,941 $ 6,769 Accrued professional and service fees 6,575 7,668 Accrued preclinical and clinical trial costs 4,866 4,339 Accrued compensation 4,719 3,891 Accrued research and development costs 3,528 4,002 Accrued bonus 3,377 5,288 Accrued construction costs 2,894 — Accrued contingent consideration payable 831 856 Accrued laboratory equipment, supplies and related services 779 641 Financing obligation – current portion 627 1,421 Deferred revenue 217 270 Accrued franchise, sales, use and property taxes 211 103 Accrued capital expenditures — 337 Other 569 1,186 Accrued expenses and other liabilities $ 36,134 $ 36,771 Interest and investment (loss) income, net Interest and investment (loss) income, net consists of the following (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 (Unaudited) (Unaudited) Unrealized (losses) gains from equity securities $ ( 442 ) $ 692 $ 8,391 $ 494 Interest income 112 341 451 663 Investment amortization expense, net ( 23 ) ( 48 ) ( 248 ) ( 93 ) Realized gains on investments 176 1 173 — Interest and investment (loss) income, net $ ( 177 ) $ 986 $ 8,767 $ 1,064 Interest income includes interest from marketable securities, convertible notes receivable, other assets, and interest from bank deposits. 16 Table of Contents 4. Financial Instruments Investments in Marketable Debt Securities 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 (Unaudited) Weighted- Average Remaining Contractual Life (in years) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Current: Foreign bonds 0.7 $ 244 $ — $ — $ 244 Mutual funds 35 3 — 38 Current portion 279 3 — 282 Noncurrent: Foreign bonds 5.4 761 61 — 822 Noncurrent portion 761 61 — 822 Total $ 1,040 $ 64 $ — $ 1,104 As of December 31, 2020, the amortized cost, gross unrealized gains, gross unrealized losses and fair value of marketable debt securities, which were considered as available-for-sale, by type of security were as follows (in thousands): December 31, 2020 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Current: Corporate debt securities $ 54,789 $ 2 $ ( 19 ) $ 54,772 Mutual funds 35 2 — 37 Current portion 54,824 4 ( 19 ) 54,809 Noncurrent: Foreign bonds 861 89 — 950 Noncurrent portion 861 89 — 950 Total $ 55,685 $ 93 $ ( 19 ) $ 55,759 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 Less than 12 months More than 12 months Estimated Fair Value Gross Unrealized Losses Estimated Fair Value Gross Unrealized Losses Corporate debt securities $ 42,762 $ ( 19 ) $ — $ — Total $ 42,762 $ ( 19 ) $ — $ — 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. 17 Table of Contents 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. 5. Fair Value Measurements Fair value is defined as an exit price that would be received from the sale of an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. We use a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires us to use observable inputs when available, and to minimize the use of unobservable inputs, when determining fair value. The three tiers are defined as follows: • Level 1—Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets at the measurement date. Since valuations are based on quoted prices that are readily and regularly available in an active market, the valuation of these products does not entail a significant degree of judgment. Our Level 1 assets consist of bank deposits, money market funds, and marketable equity securities. • Level 2—Observable inputs other than quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities. Our Level 2 assets consist of corporate debt securities including commercial paper, government-sponsored securities and corporate bonds, as well as foreign municipal securities. • Level 3—Valuations based on inputs that are unobservable and significant to the overall fair value measurement. We utilize a third-party pricing service to assist in obtaining fair value pricing for our investments in marketable debt securities. Inputs are documented in accordance with the fair value disclosure hierarchy. The fair values of financial instruments other than marketable securities and cash and cash equivalents are determined through a combination of management estimates and third-party valuations. Recurring Valuations 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 (Unaudited) Total Level 1 Level 2 Level 3 Assets: Current: Cash and cash equivalents $ 83,958 $ 83,958 $ — $ — Equity securities 19,688 (1) 19,688 — — Foreign bonds 244 244 — — Mutual funds 38 38 — — Noncurrent: Foreign bonds 822 822 — — Total assets measured at fair value $ 104,750 $ 104,750 $ — $ — Liabilities: Contingent consideration obligations $ ( 854 ) (2) $ — $ — $ ( 854 ) 18 Table of Contents Fair Value Measurements at December 31, 2020 Total Level 1 Level 2 Level 3 Assets: Current: Cash and cash equivalents $ 34,915 $ 34,915 $ — $ — Corporate debt securities 54,772 — 54,772 — Equity securities 6,337 6,337 — — Mutual funds 37 37 — — Noncurrent: Foreign bonds 950 950 — — Total assets measured at fair value $ 97,011 $ 42,239 $ 54,772 $ — Liabilities: Contingent consideration obligations $ ( 972 ) (2) $ — $ — $ ( 972 ) (1) 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. 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. (2) Contingent consideration obligations are recorded at their estimated fair values and are revalued each reporting period until the related contingencies are resolved. The fair value measurements of these obligations are based on inputs that are unobservable and significant to the overall fair value measurement (i.e., a Level 3 measurement within the fair value hierarchy) and are reviewed periodically by management. See Note 7 , Commitments and Contingencies, for additional information. Changes in the carrying amount of contingent consideration obligations were as follows (in thousands): Six Months Ended June 30, 2021 2020 (Unaudited) Fair value, beginning of period $ ( 972 ) $ ( 1,725 ) Net change in fair value 118 457 Fair value, end of period $ ( 854 ) $ ( 1,268 ) Non-recurring Valuations Non-financial assets and liabilities are recognized at fair value subsequent to initial recognition when they are deemed to be other-than-temporarily impaired. There were no material non-financial assets and liabilities deemed to be other-than-temporarily impaired and measured at fair value on a non-recurring basis for the six months ended June 30, 2021 and 2020. 6. Collaboration and License Agreements Collaboration Agreements National Cancer Institute 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. 19 Table of Contents 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 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 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 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. Pursuant to the terms of the CRADAs, we have an option to elect to negotiate an exclusive or non-exclusive commercialization license to any inventions discovered in the performance of either of the CRADAs, whether solely by an NIH employee or jointly with a company employee for which a patent application has been filed. The parties jointly own any inventions and materials that are jointly produced by employees of both parties in the course of performing activities under the CRADAs. 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. 20 Table of Contents iosBio Ltd. Exclusive License Agreement In August 2020, we executed an exclusive license agreement with iosBio Ltd., formerly Stabilitech Biopharma Ltd. (“iosBio”), pursuant to which we and our affiliates will receive an exclusive, worldwide license to certain of iosBio’s intellectual property rights relating to the SARS-CoV-2 and successor vaccine candidates. In return, we are required to pay mid-to-high single-digit royalties on net sales of the resulting licensed products. Concurrently we entered into a non-exclusive license agreement with iosBio, which grants 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. 7. Commitments and Contingencies Contingent Consideration Related to Business Combinations VivaBioCell, S.p.A. 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. VivaBioCell develops bioreactors and products based on cell culture and tissue engineering in Italy. In connection with this transaction, we are obligated to pay the former owners up to $ 3.7 million upon the achievement of certain sales milestones relating to scaffold technology and certain clinical and regulatory milestones relating to the GMP-in-a-Box technology. The fair value of the contingent consideration obligation decreased $ 0.1 million during the six months ended June 30, 2021 to $ 0.8 million. Altor BioScience Corporation 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). Dr. 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. Litigation From time to time, we may be involved in various claims and legal proceedings relating to claims arising out of our operations. We are not currently a party to any legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business. 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 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. was filed in Delaware Chancery Court by plaintiffs Clayland Boyden Gray (“Gray”) and Adam R. Waldman. The plaintiffs, two minority stockholders, asserted claims against the company and other defendants for (1) breach of fiduciary duty and (2) aiding and abetting breach of fiduciary duty and filed a motion to enjoin the merger. The court denied the motion and permitted the merger to close. Subsequent to the close of the merger, in 2017 the plaintiffs (joined by two additional minority stockholders, Barbara Sturm Waldman and Douglas E. Henderson (“Henderson”)) filed a second amended complaint, asserting claims for (1) appraisal; (2) quasi-appraisal; (3) breach of fiduciary duty; and (4) aiding and abetting breach of fiduciary duty. 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. 21 Table of Contents 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. 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. 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 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 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. We believe the claims lack merit and intend to continue defending the case vigorously. Sorrento Therapeutics, Inc. Litigation Sorrento Therapeutics, Inc. (“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 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. 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. 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. 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. 22 Table of Contents In 2019, the company , along with NANTibody, filed an arbitration against Sorrento and Dr. Ji asserting our claims relating to the exclusive license agreement. 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 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. Shenzhen Beike Biotechnology Corporation Litigation 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. Among other things, Beike alleges that we failed to use commercially reasonable efforts to deliver to Beike materials and data related to Anktiva. Beike is seeking specific performance, or in the alternative, damages for the alleged breaches. On September 25, 2020, the parties entered into a standstill and tolling agreement under which, among other things, the parties affirmed they will perform certain of their obligations under the license agreement by specified dates and agreed that all deadlines in the arbitration are indefinitely extended. The standstill agreement may be terminated by any party on ten calendar days’ notice, and upon termination, the parties will have the right to pursue claims arising from the license agreement in any appropriate tribunal. The parties have been asked to provide an update to the International Chamber of Commerce by 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. We believe the claims lack merit and intend to defend the case vigorously and that we may have counterclaims. Fox Chase Litigation On July 21, 2020, ImmunityBio filed a declaratory judgment lawsuit in the Superior Court for San Diego County, California, naming Fox Chase Cancer Center Foundation and Institute for Cancer Research as the defendants (hereafter collectively “Fox Chase”). This litigation relates to the license with Fox Chase and includes various intellectual property rights (the “2004 License”). Our initial court filing requested 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. 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 or the patent inventorship challenge to be material to our business. Litigation Related to the Merger with ImmunityBio, Inc. In connection with the Merger with NantCell, Inc. (formerly known as ImmunityBio, Inc., a private company), a Delaware corporation, via a wholly-owned subsidiary of NantKwest (the “Merger Sub”), seven complaints have been filed as individual actions in United States District Courts. Three complaints have been filed in the United States District Court for the District of Delaware against NantKwest and its directors and are captioned Hargett v. NantKwest, Inc., et al. , 1:21‑cv‑00197 (filed February 11, 2021) (the “Hargett Complaint”), Franchi v. NantKwest, Inc., et al. , 1:21‑cv‑00218 (filed February 16, 2021) (the “Franchi Complaint”), and Gross v. NantKwest, Inc., et al. , 1:21‑cv‑00223 (filed February 17, 2021) (the “Gross Complaint”). One complaint has been filed in the United States District Court for the Southern District of New York and is captioned Leaman v. NantKwest, Inc., et al. , 1:21‑cv‑01351 (filed February 16, 2021) (the “Leaman Complaint”). Two complaints have been filed in the United States District Court for the Southern District of California and are captioned Weiss v. NantKwest, Inc., et al. , 3:21‑cv‑00280 (filed February 16, 2021) (the “Weiss Complaint”) and Carlisle v. NantKwest, Inc., et al. , 3:21‑cv‑00304 (filed February 19, 2021) (the “Carlisle Complaint”). 23 Table of Contents One complaint has been filed in the United States District Court for the Eastern District of New York and was captioned Shenk v. NantKwest, Inc., et al. , 1:21‑cv‑00871 (filed February 18, 2021) (the “Shenk Complaint,” and collectively with the Hargett Complaint, the “Franchi Complaint,” the Gross Complaint, the Leaman Complaint, the Weiss Complaint, and the Carlisle Complaint, the “Merger Actions”). The Shenk Complaint was voluntarily dismissed on March 10, 2021. The Franchi Complaint was voluntarily dismissed on May 6, 2021. The Leaman Complaint was voluntarily dismissed on May 7, 2021. The Hargett Complaint and the Gross Complaint 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. The Merger Actions assert violations of Sections 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 14a-9 promulgated thereunder against all defendants and violations of Section 20(a) of the Exchange Act against NantKwest’s directors. The Merger Actions seek, among other things, an injunction enjoining the stockholder vote on the Merger and the consummation of the Merger unless and until certain additional information is disclosed to NantKwest’s stockholders, costs of the action, including plaintiffs’ attorneys’ fees and experts’ fees, and other relief the Court may deem just and proper. Neither the stockholder vote on the Merger nor the Merger were enjoined and occurred on March 8 and March 9, 2021, respectively. The company cannot predict the outcome of the Merger Actions. The company believes the Merger Actions are without merit and the company and the individual defendants intend to vigorously defend against the Merger Actions and any subsequently filed similar actions. If additional similar complaints are filed, absent new or significantly different allegations, the company will not necessarily disclose such additional filings. Lease Arrangements Substantially all of our operating lease right-of-use assets and operating lease liabilities relate to facilities leases. We have leases in multiple facilities across the U.S. and Italy, including El Segundo, California (general corporate and administrative activities, research and development and regulatory from related parties); San Diego, California (research facility and office space); Culver City, California (research and manufacturing space from a related party); Torrance, California (a research facility from a related party); Miramar, Florida (clinical development); Seattle, Washington (research and development); Louisville, Colorado (research and development and manufacturing); Woburn, Massachusetts (research facility); and Udine and Tavangnacco, Italy (GMP-in-a-Box, research facility and office space). See Note 8 , Related-Party Agreements , for further information. Our leases generally have initial terms ranging from two to ten years and often include one or more options to renew. These renewal terms can extend the lease term from one to five years , and are included in the lease term when it is reasonably certain that we will exercise the option. Information regarding our leases is as follows: June 30, 2021 December 31, 2020 (Unaudited) Weighted average remaining lease term 6.2 years 3.9 years Weighted average discount rate 9 % 9 % The components of lease expense consist of the following (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 (Unaudited) (Unaudited) Operating lease costs $ 1,717 $ 1,624 $ 3,864 $ 3,406 Variable lease costs 517 726 1,183 1,574 Total lease costs $ 2,234 $ 2,350 $ 5,047 $ 4,980 24 Table of Contents Cash paid for amounts included in the measurement of lease liabilities is as follows (in thousands): Six Months Ended June 30, 2021 2020 (Unaudited) Operating cash flows for operating leases $ 4,004 $ 2,785 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: Operating Leases 2021 (excluding the six months ended June 30, 2021) $ 834 2022 8,952 2023 7,288 2024 5,840 2025 5,467 Thereafter 15,729 Total future minimum lease payments 44,110 Less: Interest 12,564 Present value of operating lease liabilities $ 31,546 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. 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. Commitments 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. 25 Table of Contents 8. Related-Party Agreements We conduct business with several affiliates under written agreements and informal arrangements. Below is a summary of outstanding balances and a description of significant relationships (in thousands): June 30, 2021 December 31, 2020 (Unaudited) Due from related party–NantBio $ 1,294 $ 1,294 Due from related party–NantOmics 591 591 Due from related parties–Various 162 118 Total due from related parties $ 2,047 $ 2,003 Due to related party–NantWorks $ 12,925 $ 10,650 Due to related party–Duley Road 2,427 2,787 Due to related party–NantBio 943 943 Due to related party–Immuno-Oncology Clinic 229 271 Due to related party–Various 187 187 Total due to related parties $ 16,711 $ 14,838 Our Executive Chairman, and principal stockholder, founded and has a controlling interest in NantWorks, which is a collection of multiple companies in the healthcare and technology space. As described below, we have entered into arrangements with NantWorks, and certain affiliates of NantWorks, to facilitate the development of new genetically modified NK cells for our product pipeline. Affiliates of NantWorks are also affiliates of the company due to the common control by and/or common ownership interest of our Executive Chairman. NantWorks 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. 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 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. 26 Table of Contents 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. 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 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 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. (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. In July 2019, we entered into a new agreement with the Clinic (the “Clinic Agreement”), which became effective on July 1, 2019. The Clinic Agreement, as amended on March 31, 2020, covers clinical trial and research-related activities on a non-exclusive basis relating to our existing clinical trials, commenced prior to July 1, 2019, and prospective clinical trials and research projects. The Clinic Agreement also specifies certain services and related costs that are excluded from the Clinic Agreement. Prior to commencing any work under the Clinic Agreement, the parties have agreed to execute written work orders setting forth the terms and conditions related to specific services to be performed, including financial terms. For clinical trials that commenced prior to July 1, 2019, fees incurred for services performed after July 1, 2019 are covered under the Clinic Agreement and applied towards the below-mentioned prepayments. The Clinic Agreement allows for automatic renewal and additional extensions beyond the initial one-year term. In consideration of the services to be performed under the Clinic Agreement, as amended on March 31, 2020, we agreed to make payments of up to $ 7.5 million to the Clinic, of which $ 3.75 million and $ 1.88 million were paid in July 2019 and October 2019, respectively. As amended, a conditional payment of $ 1.88 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 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 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. 27 Table of Contents 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; and • 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, 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. Under the agreement, the parties collaborated on the preclinical and clinical development of proprietary recombinant natural killer cells and monoclonal antibodies in monotherapy and combination immunotherapies. In each of the contractual years under the agreement we paid $ 0.6 million to the NCI as a payment for services under the agreement. We 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. 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. In April 2019, we agreed with NantBio to transfer certain NantBio employees and associated research and development projects, comprising the majority of NantBio’s business, to the company. After the transfer, NantBio continued to make payments on our behalf for certain employee benefits and vendor costs related to the research and development projects that were transferred to the company. In addition, we settled certain employee bonuses and benefits that were accrued by NantBio for 2018. As of 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. 28 Table of Contents NantOmics 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. 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 June 30, 2021 and December 31, 2020. 605 Doug St, LLC In September 2016, we entered into a lease agreement with 605 Doug St, LLC, an entity owned by our Executive Chairman, for approximately 24,250 square feet in El Segundo, California, which has been converted to a research and development laboratory and a cGMP manufacturing facility. The lease runs from July 2016 through July 2023. We have the option to extend the lease for an additional three-year term through July 2026. The 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), 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 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. The first lease is for the first floor of the building with approximately 5,650 square feet. The lease has a seven-year term commencing in September 2019. The second lease is for the second floor of the building with approximately 6,488 square feet. The lease has a seven-year term commencing in July 2019. Both floors of the building are used for research and development and office space. We have options to extend the initial terms of both leases for two consecutive five-year periods through 2036. The 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 (the “Initial Premises”) in a two story mixed use building containing approximately 64,643 rentable square feet on 605-607 Nash Street in El Segundo, California. This facility is used primarily for pharmaceutical development and manufacturing purposes. The lease term commenced in January 2021 and expires in December 2027, and includes an option to extend the lease for 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 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. 29 Table of Contents 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 As of June 30, 2021 and December 31, 2020, related-party notes payable consist of the following (in thousands): Total Notes and Interest Payable Note Outstanding Interest June 30, 2021 December 31, 2020 Related-Party Notes Payable Year Advances Rate (Unaudited) Nant Capital (1) 2015 $ 55,226 5.0 % $ 59,908 (2) $ 58,482 (2) Nant Capital (1) 2020 50,000 6.0 % 52,252 (3) 50,764 (3) Nant Capital (4) 2021 40,000 6.0 % 40,000 (4) — NantMobile (1) 2019 55,000 3.0 % 57,502 (5) 56,660 (5) NantWorks (1) 2017 43,418 5.0 % 52,791 (6) 51,546 (6) NCSC (1) 2018 33,000 5.0 % 37,799 (7) 36,901 (7) Total related-party notes payable $ 276,644 $ 300,252 $ 254,353 (1) 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. (2) 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. (3) 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. (4) 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. (5) 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. (6) 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. (7) 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. 30 Table of Contents 9. Stockholders’ Deficit Merger with NantCell Under the terms of the Merger Agreement, at the Effective Time of the Merger, each share of NantCell common stock , par value $0.001 per share, issued and outstanding immediately prior to the Effective Time, subject to certain exceptions as set forth in the Merger Agreement, was converted automatically into a right to receive 0.8190 newly issued shares of common stock , par value $ 0.0001 per share, resulting in the issuance of approximately 273.7 million shares of Company Common Stock. From and after the Effective Time, all of such NantCell shares ceased to be outstanding, were canceled and ceased to exist. At the Effective Time, each share of our common stock issued and outstanding immediately prior to the Effective Time, remained an issued and outstanding share of the combined company. Since the Merger has been accounted for as a transaction between entities under common control, the outstanding shares presented on the condensed 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 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 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. 31 Table of Contents 10. Stock-Based Compensation 2015 Equity Incentive Plan In July 2015, the company’s board of directors adopted, and the company’s stockholders approved, 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 consolidated statements of operations (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 (Unaudited) (Unaudited) Stock-based compensation expense: Stock options $ 1,610 $ 198 $ 7,965 $ 328 RSUs 16,253 124 25,196 474 $ 17,863 $ 322 $ 33,161 $ 802 Stock-based compensation expense in operating expenses: Research and development $ 8,545 $ ( 53 ) $ 11,433 $ 108 Selling, general and administrative 9,318 375 21,728 694 $ 17,863 $ 322 $ 33,161 $ 802 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 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 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 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 the six months ended June 30, 2021: Number of Options Weighted- Average Exercise Price Aggregate Intrinsic Value (in thousands) Weighted- Average Remaining Contractual Life (in years) Outstanding at December 31, 2020 4,996,284 $ 9.96 $ 29,746 4.7 Granted 1,069,940 $ 21.38 Exercised ( 1,661,912 ) $ 3.86 Expired/forfeited ( 73,994 ) $ 5.22 Outstanding at June 30, 2021 4,330,318 $ 15.25 $ 19,012 5.7 Vested and exercisable at June 30, 2021 3,143,710 $ 13.61 $ 17,705 4.3 32 Table of Contents On February 5, 2021, the compensation committee of the board of directors of the c ompany granted Richard Adcock, our c hief e xecutive o fficer, a stock option award (the “ Option Grant”) to purchase 750,000 shares of our common stock pursuant to our 2015 Plan. The Option Grant has an exercise price of $ 23.72 per share, the closing price as reported on the Nasdaq on the date of grant. In addition, the Option Grant shall vest according to the following vesting schedule: one-third of the Option Grant (i.e., 250,000 options) shall vest in equal installments on each of the first, second, and third anniversaries of the date of grant, such that all shares shall be fully vested on the third anniversary of the date of grant , subject to Mr. Adcock remaining in c ontinuous s ervice as defined in the 2015 Plan through the applicable vesting dates. This grant of equity awards to Mr. Adcock was made in connection with his appointment as c hief e xecutive o fficer of the c ompany, which was effective as of October 26, 2020, and was modified from the recommended equity grant described in Mr. Adcock’s offer of employment as of that date. 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 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 June 30, 2021 (Unaudited) Expected term (in years) 5.9 Risk-free interest rate 0.7 % Expected volatility 101.0 % Dividend yield 0.0 % Weighted-average grant date fair value $ 16.80 The expected term was estimated using the average of the contractual term and the weighted-average vesting term of the options. The risk-free interest rate was based on the U.S. Treasury’s rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the expected term of the award being valued. The expected volatility was estimated based on the historical volatility of our common stock. The assumed dividend yield was based on our expectation of not paying dividends in the foreseeable future. 33 Table of Contents Restricted Stock Units The following table summarizes RSU activity during the six months ended June 30, 2021: Number of Units Weighted- Average Grant Date Fair Value Nonvested balance at December 31, 2020 466,842 $ 2.52 Granted 7,643,955 $ 25.23 Vested ( 336,084 ) $ 11.78 Forfeited/canceled ( 331,209 ) $ 23.91 Nonvested balance at June 30, 2021 7,443,504 $ 24.47 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 . On February 5, 2021, the compensation committee of the board of directors of the c ompany granted Mr. Adcock two awards totaling 400,000 RSUs (each an “RSU Award” and collectively, the “RSU Awards”) of our common stock pursuant to the 2015 Plan. The RSU Awards are comprised of two separate awards, one settled by issuing 150,000 shares of our common stock and the other to be settled by issuing 250,000 shares of our common stock upon vesting. The first RSU Aw a rd vested immediately on the date of grant with the c ompany retaining shares equal in value to the c ompany’s tax withholding obligations. The second RSU Aw a rd will vest according to the following schedule: one-third (i.e. 83,333 ) of the shares subject to the RSU Aw a rd shall vest in equal annual installments on each of the first, second and third anniversaries of the date of grant , such that all shares shall be fully vested on the third anniversary of the date of g rant, subject to Mr. Adcock remaining in c ontinuous s ervice as defined in the 2015 Plan through the applicable vesting dates. This grant of equity awards to Mr. Adcock was made in connection with his appointment as c hief e xecutive o fficer of the c ompany, which was effective as of October 26, 2020, and was modified from the recommended equity grant described in Mr. Adcock’s offer of employment as of that date. On March 4, 2021, prior to the Merger, NantCell awarded 7,121,110 RSUs (adjusted for the Exchange Ratio of 0.8190 ) to employees and consultants of NantCell and its affiliated companies, pursuant to the NC 2015 Plan. These RSU awards were subject to a performance condition in connection with a “Liquidity Event”, defined as either (i) NantCell’s registration of shares for issuance on a securities offering or (ii) the closing of a corporate transaction. In addition, the vesting of certain performance-based RSU grants accelerates upon obtaining approval by the FDA of a BLA or equivalent application for approval of Anktiva for use in the treatment of non-muscle-invasive bladder cancer. These performance-based RSUs are also subject to service conditions and are scheduled to cliff vest on the last date of each tranche as defined by the individual grant agreements. On March 9, 2021, we completed the Merger with NantCell, and the performance condition related to the Liquidity Event was met. The fair value of the RSUs was estimated based on a third-party valuation as of the grant date of March 4, 2021 and was derived primarily from the estimated probabilities of the Merger close on March 9, 2021 and the other exit assumptions. Once the liquidity event related performance condition was met as of March 9, 2021 due to the Merger, compensation expense for these RSUs began to be recognized on a graded vesting attribution approach over the requisite service period for each participant, which ranges from six-month to seventy (70)-month vesting periods. During the 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 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. 34 Table of Contents Warrants 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 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 . 11. Income Taxes On March 9, 2021, the company completed the Merger with NantCell. 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. Earnings from non-U.S. activities are subject to local country income tax. The company computes its quarterly income tax provision by using a forecasted annual effective tax rate and adjusts for any discrete items arising during the quarter. No tax benefit was provided for losses incurred in the United States, Italy, and South Korea because those losses are offset by a full valuation allowance. The difference between the federal statutory tax rate of 21 % and the company’s 0 % tax rate is due to losses from which the company cannot benefit. The company is no longer subject to income tax examination by the U.S. federal, state or local tax authorities for years ended December 31, 2015 or prior; however, its tax attributes, such as net operating loss (“NOL”) carryforwards and tax credits, are still subject to examination in the year they are used. 35 Table of Contents