What changed in this filing

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Item 1. Financial Statements

2021-05-06 compared with 2020-11-05 · 302 added, 301 removed, 492 unchanged (55% of the section changed)

3 unchanged sentences

in thousands, except share and per share information)

September 30,

Current Assets

5 unchanged sentences

Operating lease right-of-use assets

Long-term investments

Restricted cash

8 unchanged sentences

Operating lease liabilities – noncurrent

Long-term note payable

Other liabilities

1 unchanged sentence

Total Liabilities

Commitments and contingencies (Note 8 and 9)

Commitments and contingencies

Stockholders’ Equity

Series A Convertible Preferred stock, $ 0.001 par value;

17,000 shares designated, 194 shares issued and outstanding as of September 30, 2020 and December 31, 2019 (aggregate liquidation value of $ 194 )

17,000 shares designated, 194 shares issued and outstanding as of March 31, 2021 and December 31, 2020

Series B Convertible Preferred stock, $ 0.001 par value;

11,500,000 shares designated, 3,581,119 shares issued and outstanding as of September 30, 2020 and December 31, 2019 (aggregate liquidation value of $ 17,010 )

11,500,000 shares designated, 2,842,158 and 3,581,119 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively

Common stock, $ 0.000041666 par value;

300,000,000 shares authorized, 146,581,624 and 126,411,808 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively

300,000,000 shares authorized, 149,315,299 and 146,874,917 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively

Accumulated other comprehensive income

8 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Costs and expenses

11 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Other comprehensive (loss) / gain:

Unrealized (loss) / gain on short-term investments

Other comprehensive loss:

Unrealized gain on short-term investments

Comprehensive Loss

2 unchanged sentences

Condensed Consolidated Statements of Stockholders’ Equity

For the Nine Months Ended September 30, 2020 and 2019

For the Three Months Ended March 31, 2021 and 2020

in thousands, except share information)

6 unchanged sentences

Stock-based compensation expense

Vesting of restricted shares issued for services

Tax payments related to shares withheld for vested restricted stock units

Common stock issued upon exercise of stock options

Unrealized loss on short-term investments

Common stock sold in public offering, net of offering costs

Balance - September 30, 2020

Balance - December 31, 2018

Adoption of ASU 2018-07

Stock-based compensation expense

Vesting of restricted shares issued for services

Tax payments related to shares withheld for vested restricted stock units

Common stock issued upon exercise of stock options

Common stock issued from preferred stock conversion

( 2,273,726 )

Unrealized gain on short-term investments

Cancellation of common stock from settlement of dispute

Balance - September 30, 2019

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

IOVANCE BIOTHERAPEUTICS, INC.

Condensed Consolidated Statements of Stockholders’ Equity

For the Three Months Ended September 30, 2020 and 2019

in thousands, except share information)

Accumulated other

Preferred Sock

Preferred Stock

Comprehensive

Stockholders’

Balance - June 30, 2020

Stock-based compensation expense

Common stock issued upon exercise of stock options

Common stock sold in public offering, net of offering costs

Unrealized loss on short-term investments

Balance - September 30, 2020

Balance - June 30, 2019

Balance - March 31, 2021

Balance - December 31, 2019

Stock-based compensation expense

2 unchanged sentences

Common stock issued upon exercise of stock options

Common stock issued from preferred stock conversion

( 2,273,726 )

Unrealized loss on short-term investments

Balance - September 30, 2019

Unrealized gain on short-term investments

Balance - March 31, 2020

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

2 unchanged sentences

in thousands)

Nine Months Ended

September 30,

Three Months Ended

Cash Flows from Operating Activities

2 unchanged sentences

Noncash lease expense

Depreciation and amortization

Gain on settlement of dispute

Accretion (amortization) of discounts and premiums on investments

Depreciation and amortization

Changes in assets and liabilities:

Prepaid expenses, other assets, and long-term assets

Operating lease liabilities (Right-of-use assets)

Right-of-use assets

Operating lease liabilities

Accounts payable

2 unchanged sentences

Cash Flows from Investing Activities

Maturities of short-term investments

Purchase of short-term investments

Maturities of investments

Purchase of investments

Purchase of property and equipment

Net cash (used in) provided by investing activities

Net cash provided by investing activities

Cash Flows from Financing Activities

Tax payments related to shares withheld for vested restricted stock awards

Tax payments related to shares withheld for vested restricted stock units

Proceeds from the issuance of common stock upon exercise of options

Proceeds from the issuance of common stock, net

Proceeds from the issuance of debt

Net cash provided by financing activities

3 unchanged sentences

Supplemental disclosure of non-cash investing and financing activities:

Unrealized (loss) / gain on short-term investments

Net unrealized (loss) gain on short-term investments

Acquisitions of property and equipment included in accounts payable and accrued expense

14 unchanged sentences

Basis of Presentation of Unaudited Condensed Consolidated Financial Information

The unaudited condensed consolidated financial statements of the Company for the three and nine months ended September 30, 2020 and 2019 have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Regulation S-X.

The unaudited condensed consolidated financial statements of the Company for the three months ended March 31, 2021 and 2020 have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Regulation S-X.

Accordingly, they do not include all the information and footnotes required by GAAP for audited financial statements.

3 unchanged sentences

These interim financial statements should be read in conjunction with that report.

The Company is currently developing therapeutics for the treatment of cancer, including solid tumors and hematological malignancies.

The Company is currently engaged in the development of therapeutics to fight cancer, specifically solid tumors.

The Company currently does not have any commercial products and has not yet generated any revenues from its business.

The Company currently does not anticipate that it will generate any significant revenues from the sale or licensing of any of its product candidates during the 12 months from the date these financial statements are issued.

The Company has incurred a net loss of $ 191.2 million for the nine months ended September 30, 2020 and used $ 142.4 million of cash in its operating activities during the nine months ended September 30, 2020.

In June 2020, the Company received net proceeds of $ 567.0 million from the June 2020 Public Offering (as discussed in Note 5).

As of September 30, 2020, the Company had $ 719.7 million in cash, cash equivalents, short-term investments, and restricted cash ($ 68.3 million of cash and cash equivalents, $ 645.8 million in short-term investments and $ 5.5 million in restricted cash).

The Company has incurred a net loss of $ 75.4 million for the three months ended March 31, 2021 and used $ 62.4 million of cash in its operating activities during the three months ended March 31, 2021.

For the three months ended March 31, 2021, the Company received net proceeds of approximately $ 42.9 million from the “at the market” offering program the Company has in place with Jefferies LLC, acting as sales agent.

As of March 31, 2021, the Company had $ 610.2 million in cash, cash equivalents, investments, and restricted cash ($ 131.9 million of cash and cash equivalents, $ 462.0 million in short-term investments, $ 10.2 million in long-term investments, and $ 6.1 million in restricted cash).

The Company expects to continue its research and development activities, increase pre-commercial activities and continue the construction of the tenant improvements for its new manufacturing facility, which will increase the amount of cash used during 2021 and beyond.

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Impact of COVID-19

In December 2019, a novel (new) coronavirus known as SARS-CoV-2 was first detected in Wuhan, Hubei Province, People’s Republic of China, causing outbreaks of the coronavirus disease, known as COVID-19, that has now spread globally.

On January 30,

2020, the World Health Organization (WHO) declared COVID-19 a pandemic (the "COVID-19 Pandemic").

The Secretary of Health and Human Services declared a public health emergency on January 31, 2020, under section 319 of the Public Health Service Act (42 U.S.C.

In December 2019, a novel coronavirus known as SARS-CoV-2 was first detected in Wuhan, Hubei Province, People’s Republic of China, causing outbreaks of the coronavirus disease, known as COVID-19, that has now spread globally.

On January 30, 2020, the World Health Organization (“WHO”) declared COVID-19 a pandemic (the “COVID-19 Pandemic”).

The Secretary of

Health and Human Services declared a public health emergency on January 31, 2020, under section 319 of the Public Health Service Act (42 U.S.C.

247d), in response to the COVID-19 Pandemic.

5 unchanged sentences

Concentrations of Risk

The Company is subject to credit risk from its portfolio of cash equivalents and short-term investments.

The Company is subject to credit risk from its portfolio of cash equivalents and investments.

Under its investment policy, the Company limits amounts invested in such securities by credit rating, maturity, industry group, investment type and issuer, except for securities issued by the U.S.

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The goals of its investment policy, in order of priority, are as follows:

safety and preservation of principal and diversification of risk and liquidity of investments sufficient to meet cash flow requirements.

safety and preservation of principal, liquidity of investments sufficient to meet cash flow requirements of its business, and maximization of total return while maintaining safety and liquidity.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash, Cash Equivalents, and Short-term Investments

Cash, Cash Equivalents, and Investments

The Company’s cash and cash equivalents include short-term investments with original maturities of three months or less when purchased.

The Company's short-term investments are classified as “available-for-sale.” The Company includes these investments in current assets and carries them at fair value.

The Company's investments are classified as “available-for-sale” and are presented at fair value as either a current or non-current asset based on the length of maturity from the reporting date.

Unrealized gains and losses on available-for-sale securities are included in accumulated other comprehensive income.

Any impairment losses related to credit losses (if any) are included in an allowance for credit losses with an offsetting entry to net loss.

No impairment losses related to credit losses were recognized for the three and nine months ended September 30, 2020 and 2019.

No impairment losses related to credit losses were recognized for the three months ended March 31, 2021 or March 31, 2020.

The cost of debt securities is adjusted for the amortization of premiums and accretion of discounts to maturity.

4 unchanged sentences

government and U.S.

government agencies as well as corporate debt securities, and places restrictions on maturities and concentration by type and issuer, except for securities issued by the U.S.

Currently the Company invests excess cash only in obligations issued by the U.S.

government and U.S.

government agencies.

The Company maintains a required minimum balance, currently $ 5.5 million in a segregated bank account in connection with two letters of credit, one for $ 5.45 million for the benefit of the landlord for its commercial manufacturing facility used as a security deposit for the lease (See Note 9 - Leases), and a second one for $ 74,685 for the benefit of a utilities service provider.

The total amount is classified as Restricted Cash on the Balance Sheet.

The original term of the letter of credit expired on May 28, 2020;

however, the term was automatically extended for an additional one-year period on May 28, 2020, and will be automatically extended for additional one-year periods, without written agreement, to May 28 in each succeeding calendar year, through at least 60 days after the lease expiration date.

government agencies as well as corporate debt securities and commercial papers, and places restrictions on maturities and concentration by type and issuer, except for securities issued by the U.S.

Restricted Cash

The Company maintains a required minimum balance, currently $ 6.1 million in a segregated bank account in connection with three letters of credit, one for $ 5,450,000 million for the benefit of the landlord for its commercial manufacturing facility used as a security deposit for the lease (See Note 10 - Leases), the second one for $ 74,685 for the benefit of a utilities service provider, and the third one for $ 559,082 for the benefit of the landlord for its new headquarters lease.

The total amount is classified as Restricted Cash on the Condensed Consolidated Balance Sheet.

The first letter of credit originally expired on May 28, 2020, however, it automatically extends for additional one-year periods, without written agreement, to May 28 in each succeeding calendar year, through at least 60 days after the lease expiration date.

Further, on the expiration of the seventh year of the lease, and each anniversary date thereafter, the letter of credit may be decreased by $ 1,000,000 , with a minimum security deposit of $ 1,450,000 maintained through the end of the lease term.

The $ 74,685 letter of credit will expire on February 25, 2021, however, it will be automatically extended, without written agreement, to the expiration date of December 1, 2022.

As of September 30, 2020, restricted cash consisted of $ 5.5 million and this amount has been classified as a non-current asset on the Company’s condensed consolidated balance sheets.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash, reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown in the condensed consolidated statements of cash flows:

September 30,

The second letter of credit of $ 74,685 expired on March 9, 2021, however, it automatically extends, without written agreement, to the expiration date of December 1, 2022.

The third letter of credit of $ 559,082 expires on February 1, 2032, however, it will be automatically extended, without written agreement, for one year periods to February in each succeeding calendar year.

As of March 31, 2021 and December 31, 2020, restricted cash consisted of $ 6.1 million and $ 5.5 million, respectively.

This amount has been classified as a non-current asset on the Company’s Condensed Consolidated Balance Sheets.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash, reported within the Condensed Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Condensed Consolidated Statements of Cash Flows (in thousands):

Cash and cash equivalents

4 unchanged sentences

Diluted net loss per share is computed by dividing the net loss by the sum of the weighted average number of shares of common stock outstanding and the dilutive common stock equivalent shares outstanding during the period.

The Company’s potentially dilutive common stock equivalent shares, which include incremental shares of common stock issuable upon (i) the exercise of outstanding stock options, (ii) vesting of restricted stock units, and (iii) conversion of preferred stock, are only included in the calculation of diluted net loss per share when their effect is dilutive.

At September 30, 2020 and 2019, the following outstanding common stock equivalents have been excluded from the calculation of net loss per share because their impact would be anti-dilutive.

September 30,

The Company’s potentially dilutive common stock equivalent shares, which include incremental shares of common stock issuable upon (i) the exercise of outstanding stock options and warrants, (ii) purchases though the 2020 Employee Stock Purchase Plan (the “2020 ESPP”), (iii) vesting of restricted stock units and restricted stock awards, and (iv) conversion of preferred stock, are only included in the calculation of diluted net loss per share when their effect is dilutive.

As of March 31, 2021 and 2020, the following outstanding common stock equivalents have been excluded from the calculation of net loss per share because their impact would be anti-dilutive.

Stock options

6 unchanged sentences

Fair Value Measurements

Under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, fair value is defined as the price at which an asset could be exchanged, or a liability transferred in a transaction between knowledgeable, willing parties in the principal or most advantageous market for the asset or liability.

Under ASC 820, Fair Value Measurements and Disclosures, fair value is defined as the price at which an asset could be exchanged, or a liability transferred in a transaction between knowledgeable, willing parties in the principal or most advantageous market for the asset or liability.

Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters.

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Level 2–These are investments where values are based on quoted market prices in markets that are not active or model derived valuations in which all significant inputs are observable in active markets.

The Company does not have fair valued assets classified under Level 2 as of September 30, 2020 and December 31, 2019.

Level 3–These are financial instruments where values are derived from techniques in which one or more significant inputs are unobservable.

The Company does not have fair valued assets classified under Level 3 as of September 30, 2020 and December 31, 2019.

The Company’s financial instruments consist of cash and cash equivalents and short-term investments, all of which are reported at their respective fair value on its condensed consolidated balance sheets.

As of September 30, 2020 and December 31, 2019, financial assets measured at fair value on a recurring basis are categorized in the table below based upon the lowest level of significant input to the valuations (in thousands):

Assets at Fair Value as of September 30, 2020

The Company does not have fair valued assets classified under Level 3 as of March 31, 2021 or December 31, 2020.

The Company’s financial instruments consist of cash, cash equivalents, short and long-term investments, and long-term notes payable, all of which are reported at their respective fair value on its Condensed Consolidated Balance Sheets.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The Company’s financial instruments consist of Level 1 and Level 2 assets.

Where quoted prices are available in an active market, securities are classified as Level 1.

When quoted market prices are not available for a specific security, the Company estimates the fair value by using quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets.

Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs obtained from various third-party data providers, including but not limited to, benchmark yields, interest rate curves, reported trades, broker/dealer quotes and market reference data.

Level 2 assets consist of commercial paper and government agency securities.

Level 2 inputs for the valuations are limited to quoted prices for similar assets or liabilities in active markets and inputs other than quoted prices that are observable for the asset.

As of March 31, 2021 and December 31, 2020, financial assets measured at fair value on a recurring basis are categorized in the table below based upon the lowest level of significant input to the valuations (in thousands):

Assets at Fair Value as of March 31, 2021

treasury securities

government agency securities

Commercial paper

Assets at Fair Value as of December 31, 2020

2 unchanged sentences

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.

Actual results could differ from those estimates.

Significant estimates include the assumptions made in valuing stock instruments issued for services and used in measuring operating right-of-use assets and operating lease liabilities, valuation of short-term investments, accounting for potential liabilities, and the valuation allowance associated with the Company’s deferred tax assets.

Significant estimates include the assumptions made in valuing stock instruments issued for services and used in measuring operating right-of-use assets and operating lease liabilities, accounting for potential liabilities, capitalization of internal-use software development costs, and the valuation allowance associated with the Company’s deferred tax assets.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of Iovance Biotherapeutics, Inc.

and its wholly-owned subsidiaries, Iovance Biotherapeutics Manufacturing LLC and Iovance Biotherapeutics GmbH.

The accompanying consolidated financial statements include the accounts of Iovance Biotherapeutics, Inc.

and its wholly-owned subsidiaries, Iovance Biotherapeutics Manufacturing LLC, Iovance Biotherapeutics GmbH, and Iovance Biotherapeutics B.V .

All intercompany accounts and transactions have been eliminated.

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The Company has no material uncertain tax positions for any of the reporting periods presented.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted and signed into law, and GAAP requires recognition of the tax effects of new legislation during the reporting period that includes the enactment date.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted and signed into law, and GAAP requires recognition of the tax effects of new legislation during the reporting period that includes the enactment date.

The CARES Act, among other things, includes changes to the tax provisions that benefits business entities and makes certain technical corrections to the 2017 Tax Cuts and Jobs Act.

1 unchanged sentence

The CARES Act also provides other non-tax benefits to assist those impacted by the pandemic.

The Company evaluated the impact of the CARES Act and determined no material tax provision impact for the three and nine months ended September 30, 2020.

The Company evaluated the impact of the CARES Act and determined the impact is immaterial for the three months ended March 31, 2021.

The Company determines if an arrangement includes a lease at inception.

Operating leases are included in its condensed consolidated balance sheet as Operating lease right-of-use assets and Operating lease liabilities as of September 30, 2020 and December 31, 2019.

Operating leases are included in its Condensed Consolidated Balance Sheet as Operating lease right-of-use assets and Operating lease liabilities as of March 31, 2021 and December 31, 2020.

Operating lease right-of-use assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

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The Company periodically grants stock options to employees in non-capital raising transactions as compensation for services rendered.

The Company accounts for stock option grants to employees based on the authoritative guidance provided by the FASB where the value of the award is measured on the date of grant and recognized over the vesting period.

The Company accounts for all stock-based payment awards made to employee, including the employee stock purchase plans based on the authoritative guidance provided by the FASB where the value of the award is measured on the date of grant and recognized over the vesting period.

Upon the adoption of ASU No.

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The fair value of the Company's common stock option grants is estimated using a Black-Scholes option pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the common stock options, and future dividends.

The stock-based compensation expense is recorded based upon the value derived from the Black-Scholes option pricing model.

The stock-based compensation expense is recorded based upon the value derived from the Black-Scholes option pricing

The assumptions used in the Black-Scholes option pricing model could materially affect compensation expense recorded in future periods.

2 unchanged sentences

The fair value of RSUs and RSAs is based on the closing price of the Company’s common stock on the grant date.

Total stock-based compensation expense related to all of the Company’s stock-based awards was recorded on the statements of operations as follows (in thousands):

Three Months Ended

Nine Months Ended

September 30,

Research and development

General and administrative

Total stock-based compensation expenses

Total stock-based compensation expenses broken down based on each individual instrument were as follows (in thousands):

Three Months Ended

Nine Months Ended

September 30,

Stock option expenses

Restricted stock unit expenses

Total stock-based compensation expenses

Accrued Research and Development Costs

Research and development costs are expensed as incurred.

Clinical development costs compose a significant component of research and development costs.

The Company has a history of contracting with third parties that perform various clinical trial activities on its behalf.

Service agreements with contract research organizations (“CROs”) and contract manufacturing organizations (“CMOs”) are recognized as the services are incurred.

The Company accrues for expenses resulting from obligations under agreements with its third-parties for which the timing of payments does not match the periods over which the materials or services are provided to the Company.

Accruals are recorded based on estimates of services received and efforts expended pursuant to agreements established with CROs, CMOs and other outside service providers.

These estimates are typically based on contracted amounts applied to the proportion of work performed and determined through analysis with internal personnel and external service providers as to the progress or stage of completion of the services.

The Company makes judgements and estimates in determining the accrual balance in each reporting period.

In the event advance payments are made to a CRO, CMO or other outside service provider, the payments are recorded within prepaid expenses and other current assets and subsequently recognized as research and development expense when the associated services have been performed.

As actual costs become known, the Company adjusts its liabilities and assets.

Inputs, such as the extent of services received and the duration of services to be performed, may vary from the Company’s estimates, which will result in adjustments to research and development expense in future periods.

Changes in these estimates that result in material changes to the Company’s accruals could materially affect the Company’s results of operations.

The Company’s historical estimates have not been materially different from actual amounts recorded.

Preferred Stock

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The Company also records, when necessary, deemed dividends for the intrinsic value of the conversion options embedded in preferred stock based upon the difference between the fair value of the underlying common stock at the commitment date of the transaction and the effective conversion price embedded in the preferred stock.

Recent Accounting Standards

Financial Instruments

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses, and also issued subsequent amendments to the initial guidance, ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-11, and ASU 2020-03 (collectively, Topic 326), to introduce a new impairment model for recognizing credit losses on financial instruments based on an estimate of current expected

credit losses (“CECL”).

Under Topic 326, an entity is required to estimate CECL on available-for-sale (“AFS”) debt securities only when the fair value is below the amortized cost of the asset and is no longer based on an impairment being “other-than-temporary”.

Topic 326 also requires the impairment calculation on an individual security level and requires an entity use present value of cash flows when estimating the CECL.

The credit-related losses are required to be recognized through earnings and non-credit related losses are reported in other comprehensive income.

In April 2019, the FASB further clarified the scope of Topic 326 and addressed issues related to accrued interest receivable balances, recoveries, variable interest rates and prepayment.

Topic 326 will be effective for public entities in fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

The new guidance requires modified retrospective application to all outstanding instruments, with a cumulative effect adjustment recorded to opening retained earnings as of the beginning of the first period in which the guidance becomes effective.

The Company adopted this guidance on January 1, 2020, however, the adoption of this new guidance did not have any material impact on its condensed consolidated financial statements.

Cloud Computing Arrangements

In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40) Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (ASU 2018-15).

The guidance requires a customer in a cloud computing arrangement that is a service contract to follow the internal use software guidance to determine which implementation costs to defer and recognize as an asset.

It therefore requires a customer to defer potentially significant implementation costs incurred in a cloud computing arrangement that were often expensed as incurred under the legacy GAAP and recognize them as expense over the term of the hosting arrangement.

ASU 2018-15 is effective for fiscal years beginning subsequent to December 15, 2019.

The Company adopted this guidance on January 1, 2020.

The Company recorded $ 0.8 million as prepaid expenses and long-term assets on the condensed consolidated balance sheet as of September 30, 2020.

The amortization expense recorded for the three and nine months ended September 30, 2020 was de minimis.

Subsequent Event

The Company’s management evaluates events that have occurred after the balance sheet date but before the financial statements are issued.

CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

Cash equivalents and short-term investments consist of the following (in thousands):

September 30,

Recent Accounting Standards Adopted

In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes, which simplifies accounting for income taxes by eliminating certain exceptions to the guidance in Topic 740 related to the approach for allocating income tax expense or benefit for the year to continuing operations, discontinued operations, other comprehensive income, and other charges or credits recorded directly to stockholders’ equity;

the methodology for calculating income tax expense or benefit in an interim period;

and the recognition of deferred tax liabilities outside basis difference.

This ASU became effective for the Company on January 1, 2021, however, the adoption of this new standard did not have a material impact on its condensed consolidated financial statements and related disclosures.

CASH EQUIVALENTS AND INVESTMENTS

Cash equivalents consist of the following (in thousands):

Cash equivalents - Money market funds

Cash equivalents total

Cash equivalents in the tables above exclude cash demand deposits of $ 17.1 million and $ 3.9 million as of September 30, 2020 and December 31, 2019, respectively (in thousands).

September 30,

Cash equivalents in the tables above exclude cash demand deposits of $ 57.5 million and $ 17.6 million as of March 31, 2021 and December 31, 2020, respectively (in thousands).

The following table summarizes the Company’s available-for-sale debt securities (in thousands):

Short-term investments

Long-term investments

Investments total

The following table summarizes the classification of the Company’s available-for-sale debt securities in its Condensed Consolidated Balance Sheets (in thousands):

treasury securities

government agency securities

Short-term investments total

The cost and fair value of cash equivalents and short-term investments at September 30, 2020 and December 31, 2019 were as follows (in thousands):

As of September 30, 2020

(Amortization)

Commercial paper

Investments total

The cost and fair value of investments as of March 31, 2021 and December 31, 2020 were as follows (in thousands):

As of March 31, 2021

treasury securities

government agency securities

Commercial papers

As of December 31, 2020

1 unchanged sentence

government agency securities

Upon adoption of Topic 326 on January 1, 2020, the Company is required to assess and estimate CECL on AFS debt securities only when the fair value is below the amortized cost of the asset and is no longer based on an impairment being “other-than-temporary”.

The credit-related losses are required to be recognized through the statements of operations and non-credit related losses are reported in other comprehensive income.

For the three and nine months ended September 30, 2020, no CECL was recognized in the condensed consolidated statement of operations and all unrealized gains and losses are included in accumulated other comprehensive income.

All short-term investments held by the Company as of September 30, 2020 and December 31, 2019 have a maturity of less than one year.

BALANCE SHEET COMPONENTS

Accrued liabilities consist of the following (in thousands):

September 30,

The following table summarizes the Company’s available-for-sale debt securities by contractual maturity (in thousands):

March 31, 2021

Amortized Cost

Within one year

One year to two years

Investments total

All available-for-sale securities held as of March 31, 2021 and December 31, 2020 had contractual maturities of less than two years.

No significant available-for-sale securities held as of the periods presented have been in a continuous unrealized loss position for more than 12 months.

As of March 31, 2021, unrealized losses on available-for-sale investments are not attributed to credit risk.

The Company determined that it has the ability and intent to hold all marketable securities that have been in a continuous loss position until maturity or recovery.

To date, the Company has not recorded any impairment charges on its marketable securities.

PROPERTY AND EQUIPMENT

Property and equipment, net consists of the following (in thousands):

Lab equipment

Leasehold improvements

Computer equipment

Office furniture and equipment

Construction in progress

Total Property and equipment, cost

Accumulated depreciation and amortization

Property and Equipment, net

Depreciation expense for the three months ended March 31, 2021 and 2020, was approximately $ 0.4 million and $ 0.3 million, respectively.

ACCRUED EXPENSES

Accrued expenses consist of the following (in thousands):

Clinical related

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Commercial manufacturing facility related

Manufacturing related

R&D Manufacturing related

Legal and related services

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The Company’s certificate of incorporation authorizes the issuance of up to 50,000,000 shares of “blank check” preferred stock.

At September 30, 2020, 17,000 shares were designated as Series A Convertible Preferred Stock (“Series A Convertible Preferred Stock”) and 11,500,000 shares were designated as Series B Convertible Preferred Stock (“Series B Convertible Preferred Stock”).

As of March 31, 2021, 17,000 shares were designated as Series A Convertible Preferred Stock (“Series A Convertible Preferred Stock”) and 11,500,000 shares were designated as Series B Convertible Preferred Stock (“Series B Convertible Preferred Stock”).

Series A Convertible Preferred Stock

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The Company may not declare, pay or set aside any dividends on shares of capital stock of the Company (other than dividends on shares of common stock payable in shares of common stock) unless the holders of the Series A Convertible Preferred Stock shall first receive an equal dividend on each outstanding share of Series A Convertible Preferred Stock.

No Shares of Series A Convertible Preferred Stock were converted during the nine months ended September 30, 2020 or 2019.

At September 30, 2020 and December 31, 2019, 194 shares of Series A Convertible Preferred Stock (that are convertible into 97,000 shares of common stock) remained outstanding.

No Shares of Series A Convertible Preferred Stock were converted during the three months ended March 31, 2021 or 2020.

As of March 31, 2021 and December 31, 2020, 194 shares of Series A Convertible Preferred Stock (that are convertible into 97,000 shares of common stock) remained outstanding.

Series B Convertible Preferred Stock

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So long as any Series B Convertible Preferred Stock remains outstanding, the Company may not redeem, purchase or otherwise acquire any material amount of the Series A Convertible Preferred Stock or any securities junior to the Series B Convertible Preferred Stock.

No shares of Series B Convertible Preferred Stock were converted during the nine months ended September 30, 2020 and 2019.

At September 30, 2020 and December 31, 2019, 3,581,119 shares of Series B Preferred Stock (that are convertible into 3,581,119 shares of common stock) remained outstanding.

Cancellation of Common Stock

On September 30, 2013, the Company and a third party entered into an agreement under which the Company issued 50,000 shares of unregistered stock in the Company to the third party.

On January 16, 2019, the two parties entered into a confidential settlement agreement in connection with a dispute related to their prior relationship and activities.

As part of the settlement, the third party returned 32,500 shares of common stock to the Company for cancellation and retained the remaining 17,500 shares.

The Company included a gain of $ 335,000 on cancellation of 32,500 shares in Other income in its condensed consolidated statement of operations for the nine months ended September 30, 2019.

During the three months ended March 31, 2021, a total of 738,961 of Series B Convertible Preferred Stock were converted into 738,961 shares of common stock.

No shares of Series B Convertible Preferred Stock were converted during the three months ended March 31, 2020.

As of March 31, 2021 and December 31, 2020, 2,842,158 and 3,581,119 shares of Series B Preferred Stock (that are convertible into 2,842,158 and 3,581,119 shares of common stock) remained outstanding, respectively.

At the Market Offering Program

On February 8, 2021, the Company entered into an Open Market Sale Agreement (the “Sales Agreement”) with Jefferies LLC (“Jefferies”) with respect to an “at the market” offering program, under which the Company may, from time to time, in its sole discretion, issue and sell through Jefferies, acting as sales agent, up to $ 350.0 million of shares of the Company’s common stock, par value $ 0.000041666 per share (the “Common Shares”).

The issuance and sale, if any, of the Common Shares by the Company under the Sales Agreement will be made pursuant to a prospectus supplement, dated February 8, 2021, to the Company’s registration statement on Form S-3ASR, originally filed with the Securities and Exchange Commission on May 27, 2020, which became effective immediately upon filing.

Pursuant to the Sales Agreement, Jefferies may sell the Common Shares by any method permitted by law deemed to be an “at the market” offering as defined in Rule 415 of the Securities Act of 1933, as amended (the “Securities Act”).

Jefferies will use commercially reasonable efforts consistent with its normal trading and sales practices to sell the Common Shares from time to time, based upon instructions from the Company (including any price or size limits or other customary parameters or conditions the Company may impose).

The Company will pay Jefferies a commission of up to 3.0 % of the gross sales proceeds of any Common Shares sold through Jefferies under the Sales Agreement.

The Company is not obligated to make any sales of Common Shares under the Sales Agreement.

The offering of Common Shares pursuant to the Sales Agreement will terminate upon the earlier to occur of (i) the issuance and sale, through Jefferies, of all Common Shares subject to the Sales Agreement and (ii) termination of the Sales Agreement in accordance with its terms.

For the three months ended March 31, 2021, the Company received approximately $ 42.9 million in net proceeds, net of offering costs, through the sale of 1,278,243 shares of its common stock through the Sales Agreement at a weighted average price per share of $ 34.67 .

STOCK BASED COMPENSATION

Restricted Stock Units

On June 1, 2016, the Company entered into an RSU agreement with the Company’s Chief Executive Officer, Maria Fardis, Ph.D., M.B.A., pursuant to which the Company granted Dr.

Fardis 550,000 non-transferrable RSUs at a fair market value price of $ 5.87 per share as an inducement to her employment pursuant to the exception to The Nasdaq Global Market rules that generally require stockholder approval of equity incentive plans.

The 550,000 RSUs vested in installments as follows:

(i) 137,500 restricted stock units vested upon the first anniversary of the effective date of Dr.

Fardis’ employment agreement;

(ii) 275,000 restricted stock units vested upon the satisfaction of certain clinical trial milestones;

and (iii) 137,500 restricted stock units vested in equal monthly installments over the 36 -month period following the first anniversary of the effective date of Dr.

Fardis’ employment, such that the RSUs were fully vested as of June 1, 2020.

As of March 31, 2021, the Company had no RSUs outstanding.

Stock-based compensation expense for RSUs are measured based on the closing fair market value of the Company’s common stock on the date of grant.

No stock-based compensation expenses relating to RSUs were recorded for the three months ended March 31, 2021, and $ 0.1 million of stock-based compensation expenses were recorded for the same period ended in 2020 as part of general and administrative expenses.

Equity Incentive Plans

On October 14, 2011, the Company’s Board of Directors (the “Board”) adopted the 2011 Equity Incentive Plan (the “2011 Plan”).

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The 2011 Plan initially had 180,000 shares of common stock reserved for issuance in the form of incentive stock options, non-qualified options, common stock, and grant appreciation rights.

The 2011 Plan was not approved by the Company’s stockholders within the required one-year period following its adoption and, accordingly, no incentive stock options can be granted under the 2011 Plan.

The 2011 Plan was not approved by the Company’s stockholders within the required one-year period following its adoption and, accordingly, no incentive stock options can be granted under that plan.

In August 2013, the Board and a majority of the Company’s stockholders approved an amendment to increase the number of shares available under the 2011 Plan from 180,000 shares to 1,700,000 shares, and an amendment to increase the number options or other awards that can be granted to any one person during a twelve (12) month period from 50,000 shares to 300,000 shares.

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On August 20, 2014, the Board amended the 2011 Plan to increase the number of shares available for issuance upon the exercise of stock options under the 2011 Plan from 1,700,000 to 1,900,000 shares, effective immediately.

At September 30, 2020, 11,240 shares were available for future grant under the 2011 Plan.

As of March 31, 2021, 11,240 shares were available for future grant under the 2011 Plan.

On September 19, 2014, the Board adopted the Iovance Biotherapeutics, Inc.

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On August 16, 2016, the Company’s stockholders approved an increase in the total number of shares that can be issued under the 2014 Plan to 9,000,000 shares of the Company’s common stock.

At September 30, 2020, 15,746 shares were available for grant under the Company’s 2014 Plan.

As of March 31, 2021, 9,220 shares were available for grant under the Company’s 2014 Plan.

On April 22, 2018, the Board adopted the Iovance Biotherapeutics, Inc.

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On June 8, 2020, the Company's stockholders approved an amendment to the 2018 Plan to increase the number of shares available for issuance upon the exercise of stock options under the 2018 Plan from 6,000,000 to 14,000,000 shares, which became effective immediately.

At September 30, 2020, 7,641,416 shares of common stock were available for grant under the Company’s 2018 Plan.

Restricted Stock Units

On June 1, 2016, the Company entered into an RSU agreement with the Company’s new Chief Executive Officer, Maria Fardis, Ph.D., M.B.A., pursuant to which the Company granted Dr.

The 550,000 RSUs vested in installments as follows:

(i) 137,500 restricted stock units vested upon the first anniversary of the effective date of Dr.

Fardis’ employment agreement;

(ii) 275,000 restricted stock units vested upon the satisfaction of certain clinical trial milestones;

and (iii) 137,500 restricted stock units vested in equal monthly installments over the 36 -month period following the first anniversary of the effective date of Dr.

Fardis’ employment, such that the RSUs were fully vested as of June 1, 2020.

At September 30, 2020, the Company had no RSUs outstanding.

Stock-based compensation expense for RSUs are measured based on the closing fair market value of the Company’s common stock on the date of grant.

The stock-based compensation expenses relating to RSUs were zero and $ 0.07 million for the three months ended September 30, 2020 and 2019, respectively, and $ 0.1 million and $ 0.2 million for the nine months ended September 30, 2020 and 2019, respectively, recorded as part of general and administrative expenses.

Employee Stock Purchase Plan

In June 2020, the Company adopted the 2020 Employee Stock Purchase Plan (the "2020 ESPP") upon its approval by the Company's shareholders at its Annual Stockholders Meeting on June 8, 2020.

The Company reserved 500,000 shares of its common stock for issuance under the 2020 ESPP.

As of September 30, 2020, no shares were issued under the 2020 ESPP and there was no unrecognized compensation cost related to the 2020 ESPP.

As of March 31, 2021, 4,281,126 shares of common stock were available for grant under the Company’s 2018 Plan.

Stock Options

A summary of the status of stock options at September 30, 2020, and the changes during the nine months then ended, is presented in the following table:

A summary of the status of stock options as of March 31, 2021, and the changes during the three months then ended, is presented in the following table:

(in thousands)

Outstanding at December 31, 2019

Outstanding as of December 31, 2020

Expired/Forfeited

Outstanding at September 30, 2020

Options exercisable at September 30, 2020

The Company recorded stock-based compensation expenses related to stock options of $ 10.7 million and $ 6.5 million for the three months ended September 30, 2020 and 2019 respectively, and $ 30.5 million and $ 18.7 million for the nine months ended September 30, 2020 and 2019, respectively.

As of September 30, 2020, there was $ 78.4 million of total unrecognized compensation expense related to the options to be recognized over a weighted average period of 2.0 years.

The weighted average grant date fair value for employee options granted under the Company’s stock option plans during the nine months ended September 30, 2020 and 2019 was $ 16.37 and $ 8.90 per option, respectively.

The aggregate intrinsic value in the table above reflects the total pre-tax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the quarter ended September 30, 2020 and the exercise price of the options, multiplied by the number of in-the-money stock options) that would have been received by the option holders had all option holders exercised their options on September 30, 2020.

Outstanding as of March 31, 2021

Options exercisable as of March 31, 2021

The aggregate intrinsic value in the table above reflects the total pre-tax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the quarter ended March 31, 2021 and the exercise price of the options, multiplied by the number of in-the-money stock options) that would have been received by the option holders had all option holders exercised their options on March 31, 2021.

The intrinsic value of the Company’s stock options changes based on the closing price of the Company’s common stock.

The following table summarizes the assumptions relating to options granted pursuant to the Company’s equity incentive plans for the nine months ended September 30, 2020 and 2019:

Nine Months Ended September 30,

Employee Stock Purchase Plan

In June 2020, the Company adopted the 2020 ESPP upon its approval by the Company’s shareholders at its Annual Stockholders Meeting on June 8, 2020.

The Company reserved 500,000 shares of its common stock for issuance under the 2020 ESPP.

Under the 2020 ESPP, employees of the Company can purchase shares of its common stock based on a percentage of their compensation subject to certain limits.

The purchase price per share is equal to the lower of 85 % of the fair market value of its common stock on the offering date or the purchase date with a six month look-back feature.

The 2020 ESPP purchases are settled with common stock from the 2020 ESPP’s previously authorized and available pool of shares.

The compensation expense related to the 2020 ESPP for the three months ended March 31, 2021 was $ 0.3 million.

As of March 31, 2021, no shares were issued under the 2020 ESPP and there was $ 0.2 million of unrecognized compensation cost associated with the 2020 ESPP, which will be recognized over the remaining 2.3 months.

Stock-Based Compensation

Total stock-based compensation expense related to all of the Company’s stock-based awards was recorded on the statements of operations as follows (in thousands):

Three Months Ended

Research and development

General and administrative

Total stock-based compensation expenses

Total stock-based compensation expenses broken down based on each individual instrument were as follows (in thousands):

Three Months Ended

Stock option expenses

Restricted stock unit expenses

ESPP expenses

Total stock-based compensation expenses

The Company recorded stock-based compensation expenses related to stock options of $ 16.7 million and $ 9.3 million for the three months ended March 31, 2021 and 2020 respectively.

As of March 31, 2021, there was $ 148.4 million of total unrecognized compensation expense related to the options to be recognized over a weighted average period of 2.17 years.

The weighted average grant date fair value for employee options granted under the Company’s stock option plans during the three months ended March 31, 2021 and 2020 was $ 26.42 and $ 15.67 per option, respectively.

The following table summarizes the assumptions relating to options granted pursuant to the Company’s equity incentive plans for the three months ended March 31, 2021 and 2020:

Three Months Ended March 31,

Expected term (years)

Expected volatility

69.99 % - 70.96 %

70.78 % - 71.62 %

Risk-free interest rate

0.29 % - 1.83 %

1.87 % - 2.59 %

Expected dividend yield

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The principal changes effected by the second amendment included (i) extending the term of the CRADA by another five years to August 2021, and (ii) modifying the focus on the development of unmodified TIL as a stand-alone therapy or in combination with U.S.

Food and Drug Administration ("FDA") - licensed products and commercially available reagents routinely used for adoptive cell therapy.

Food and Drug Administration (“FDA”) - licensed products and commercially available reagents routinely used for adoptive cell therapy.

The parties will continue the development of improved methods for the generation and selection of TIL with anti-tumor reactivity in metastatic melanoma, bladder, lung, breast, and HPV-associated cancers.

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The Company or the NCI may unilaterally terminate the CRADA for any reason or for no reason at any time by providing written notice at least 60 days before the desired termination date.

The Company recorded costs associated with the CRADA of $ 0.5 million for the three months ended September 30, 2020 and 2019, and $ 1.5 million for the nine months ended September 30, 2020 and 2019 as research and development expenses.

The Company recorded costs associated with the CRADA of $ 0.5 million for the three months ended March 31, 2021 and 2020 as research and development expenses.

Patent License Agreement Related to the Development and Manufacture of TIL

Effective October 5, 2011, the Company entered into an Exclusive Patent License Agreement (the “Patent License Agreement”) with the NIH, an agency of the United States Public Health Service within the Department of Health and Human Services (NIH), which was subsequently amended on February 9, 2015 and October 2, 2015.

Effective October 5, 2011, the Company entered into an Exclusive Patent License Agreement (the “Patent License Agreement”) with the NIH, an agency of the U.S.

Public Health Service within the Department of Health and Human Services (NIH), which was subsequently amended on February 9, 2015 and October 2, 2015.

Pursuant to the Patent License Agreement, as amended, the NIH granted the Company licenses, including exclusive, co-exclusive, and non-exclusive licenses, to certain technologies relating to autologous tumor infiltrating lymphocyte adoptive cell therapy products for the treatment of metastatic melanoma, lung, breast, bladder and HPV-positive cancers.

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Unless terminated sooner, the license shall remain in effect until the last licensed patent right expires.

Under the Exclusive Patent License Agreement, the Company agreed to pay customary royalties based on a percentage of net sales of a licensed product (which percentage is in the mid-single digits), a percentage of revenues from sublicensing arrangements, and lump sum benchmark payments upon the successful completion of clinical studies involving licensed technologies, the receipt of the first FDA approval or foreign equivalent for a licensed product or process resulting from the licensed technologies, the first commercial sale of a licensed product or process in the United States, and the first commercial sale of a licensed product or process in any foreign country.

Under the Exclusive Patent License Agreement, the Company agreed to pay customary royalties based on a percentage of net sales of a licensed product (which percentage is in the mid-single digits), a percentage of revenues from sublicensing arrangements, and lump sum benchmark payments upon the successful completion of clinical studies involving licensed technologies, the receipt of the first FDA approval or foreign equivalent for a licensed product or process resulting from the licensed technologies, the first commercial sale of a licensed product or process in the U.S., and the first commercial sale of a licensed product or process in any foreign country.

Lee Moffitt Cancer Center

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In December 2016, the Company entered into a new three-year Sponsored Research Agreement with H.

Lee Moffitt Cancer Center (“Moffitt"), which expired in December 2019.

Lee Moffitt Cancer Center (“Moffitt”) which expired in December 2019.

In June 2020, the Company entered into a new Sponsored Research Agreement with Moffitt, with a term that ends either upon completion of the research thereunder or on July 1, 2022, whichever is sooner, and under which immaterial payments will be made to Moffitt in connection with the research services thereunder.

At the same time, the Company entered into a clinical grant agreement with Moffitt to support an ongoing clinical trial at Moffitt that combines TIL therapy with nivolumab for the treatment of patients with metastatic melanoma.

In June 2017, the Company entered into a second clinical grant agreement with Moffitt to support a new clinical trial at Moffitt that combines TIL therapy with nivolumab for the treatment of patients with non-small cell lung cancer, under which the Company obtained a non-exclusive, royalty-free license to any new Moffitt inventions made in the performance of the agreement.

inventions made in the performance of the agreement.

Under both clinical grant agreements with Moffit, the Company has non-exclusive rights to clinical data arising from the respective clinical trials.

The Company recorded research and development costs of $ 0.1 million and $ 0.2 million for the three months ended September 30, 2020 and 2019, respectively, and $ 0.5 million and $ 0.7 million for the nine months ended September 30, 2020 and 2019, respectively, in connection with the research collaboration and clinical grant agreements with Moffitt.

The Company recorded research and development costs of $ 0.2 million and $ 0.2 million for the three months ended March 31, 2021 and 2020, respectively, in connection with the research collaboration and clinical grant agreements with Moffitt.

Exclusive License Agreements with Moffitt

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In addition, the Company agreed to pay milestone license fees upon completion of specified milestones, customary royalties based on a specified percentage of net sales (which percentage is in the low single digits) and sublicensing payments, as applicable, and annual minimum royalties beginning with the first sale of products based on the licensed technologies, which minimum royalties will be credited against the percentage royalty payments otherwise payable in that year.

The Company will also be responsible for all costs associated with the preparation, filing, maintenance and prosecution of the patent applications and patents covered by the First Moffitt License related to the treatment of any cancers in the United States, Europe and Japan and in other countries designated by the Company in agreement with Moffitt.

No expenses were recorded for the First Moffitt License for the three and nine months ended September 30, 2020 and 2019.

The Company will also be responsible for all costs associated with the preparation, filing, maintenance and prosecution of the patent applications and patents covered by the First Moffitt License related to the treatment of any cancers in the U.S., Europe and Japan and in other countries designated by the Company in agreement with Moffitt.

No expenses were recorded for the First Moffitt License for the three months ended March 31, 2021 and 2020.

The Company entered into a license agreement with Moffitt effective as of May 7, 2018 (the “Second Moffitt License”), under which the Company received a license to Moffitt’s rights to patent-pending technologies related to the use of 4-1BB agonists in conjunction with TIL manufacturing processes and therapies.

Pursuant to the Second Moffitt License, the Company paid an upfront licensing fee in the amount of $ 0.1 million in 2018.

An annual license maintenance fee will be also payable commencing on the first anniversary of the effective date.

In addition, the Company agreed to pay an annual commercial use payment for each indication for

which a first sale has occurred, which in the aggregate amounts to up to $ 0.4 million a year.

The Company recorded a de minimis amount and $ 0.01 million for the three months ended September 30, 2020 and 2019, respectively, and a de minimis amount and $ 0.02 million for the nine months ended September 30, 2020 and 2019, respectively, as research and development expenses in connection with the Second Moffit License.

An annual license maintenance fee is also payable commencing on the first anniversary of the effective date.

In addition, the Company agreed to pay an annual commercial use payment for each indication for which a first sale has occurred, which in the aggregate amounts to up to $ 0.4 million a year.

The Company recorded $ 0.02 million for the three months ended March 31, 2021 and 2020 as research and development expenses in connection with the Second Moffit License.

Anderson Cancer Center

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The SAA’s term shall continue in effect until the later of the fourth anniversary of the SAA or the completion or termination of the research and receipt by the Company of all deliverables due from MDACC thereunder.

In May 2017, the Company made a prepayment of $ 1.4 million under this agreement.

In light of the COVID-19 Pandemic, MDACC has temporarily suspended their research programs and decommissioned their research labs, and as a result, enrollment in the Company’s MDACC-sponsored studies under the SAA was temporarily paused, but has recently been partially restarted.

The Company recorded $ 0.3 million and $ 0.7 million associated with the MDACC SAA for the three months ended September 30, 2020 and 2019, respectively, and $ 0.5 million and $ 2.3 million for the nine months ended September 30, 2020 and 2019, respectively as research and development expenses.

WuXi Apptech, Inc.

In November 2016, the Company entered into a three-year manufacturing and services agreement (“MSA”) with WuXi AppTech, Inc.

(“WuXi”) pursuant to which WuXi agreed to provide manufacturing and other services, which has since been amended and assigned to our subsidiary Iovance Biotherapeutics Manufacturing LLC.

The Company recorded $ 0.02 million and $ 0.2 million associated with the MDACC SAA for the three months ended March 31, 2021 and 2020, respectively, as research and development expenses.

WuXi Apptec, Inc.

In November 2016, the Company entered into a three-year manufacturing and services agreement (“MSA”) with WuXi AppTec, Inc.

(“WuXi”) pursuant to which WuXi agreed to provide manufacturing and other services, which has since been amended and assigned to its subsidiary Iovance Biotherapeutics Manufacturing LLC.

Under the agreement, the Company entered into two statements of work for two cGMP manufacturing suites to be established and operated by WuXi for the Company, both of the suites are expected to be capable of being used for the commercial manufacture of its products.

The statement of work for the first suite was amended in 2019 and September 2020, and the second suite was amended in 2019.

The statements of work for facility include a fixed component to reserve a dedicated suite and a trained work force, and a variable component, mainly materials and testing used during the manufacturing processes.

The statements of work for the first suite were amended in 2019, September 2020 and February 2021, and the second suite was amended in 2019.

The statements of work for facility include a fixed component to reserve a dedicated suite and a trained work force, and a variable component, mainly materials

and testing used during the manufacturing processes.

Both statements of work provide for adjustments to the targeted production capacity levels and the corresponding fixed quarterly fees upon written notice from the Company of 30 days and 90 days for the first and second dedicated suites, respectively.

The quarterly fixed fees payable for each of the dedicated manufacturing suites ranges from $ 0.6 million to $ 2.7 million depending on the production capacity level targeted.

The terms of the related statements of work for the first and second dedicated manufacturing suites currently extend to August 2022 and June 2021, respectively.

The Company recorded costs associated with agreements with WuXi of $ 2.8 million and $ 9.2 million for the three months ended September 30, 2020 and 2019 respectively, and $ 16.2 million and $ 20 million for the nine months ended September 30, 2020 and 2019, respectively, as research and development expenses.

Cellectis S.A.

The terms of the related statements of work for the first and second dedicated manufacturing suites currently extend to February 2022 and June 2021, respectively .

The Company recorded costs associated with agreements with WuXi of $ 3.4 million and $ 6.7 million for the three months ended March 31, 2021 and 2020 respectively, as research and development expenses.

On January 12, 2020, the Company entered into a research collaboration and exclusive worldwide license agreement whereby the Company will license gene-editing technology from Cellectis S.A.

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Financial terms of the license include development, regulatory and sales milestone payments from the Company to Cellectis, as well as royalty payments based on net sales of TALEN-modified TIL products.

The Company recorded costs associated with the license agreement from Cellectis of $ 0.1 million and $ 0.3 million for the three and nine months ended September 30, 2020, respectively.

Novartis Pharma AG (Novartis)

The Company recorded costs associated with agreements with Cellectis of $ 0.1 million and $ 0.1 million for the three months ended March 31, 2021 and 2020 respectively, as research and development expenses.

On January 12, 2020, the Company obtained a license from Novartis Pharma AG (“Novartis”) to develop and commercialize an antibody cytokine engrafted protein, which the Company refers to as IOV-3001.

Under the agreement, the Company has paid an upfront payment to Novartis and may pay future milestones related to initiation of patient dosing in various phases of clinical development for IOV-3001 and approval of the product in the U.S, EU and Japan.

Novartis is also entitled to low-to-mid single digit

royalties from commercial sales of the product.

Novartis is also entitled to low-to-mid single digit percentage royalties from commercial sales of the product.

No expenses were recorded for the three months ended March 31, 2021.

The Company recorded costs associated with the license agreement from Novartis of $ 10.0 million as research and development expenses for the three months ended March 31, 2020.

The Company did not record any expenses after March 31, 2020 through September 30, 2020.

LEGAL PROCEEDINGS

Derivative Lawsuits.

On December 15, 2017, a purported stockholder derivative complaint was filed by plaintiff Kevin Fong against the Company, as nominal defendant, and certain of its current and former officers and directors, and others, as defendants, in the U.S.

District Court for the District of Delaware (case no.

1:17-cv-1806).

The complaint alleges breaches of fiduciary duties, unjust enrichment, and violations of Section 14(a) of the Securities Exchange Act of 1934 and Rule 14a-9 promulgated thereunder arising from the SEC’s investigation in the In the Matter of Certain Stock Promotions investigation and its April 10, 2017 settlement thereof, and seeks unspecified damages on behalf of the Company and injunctive relief.

On March 28, 2018, a purported stockholder derivative complaint was filed by plaintiff Nazeer Khaleeluddin on behalf of the Company, against the Company, as nominal defendant, and certain of the Company’s current and former officers and directors, and others, as defendants, in the U.S.

District Court for the District of Delaware (case no.

1:18-cv-00469).

The complaint alleges, among other things, violations of securities law, breach of fiduciary duty, aiding and abetting, waste of corporate assets, and unjust enrichment.

The complaint is based on claims arising from the SEC’s investigation in the In the Matter of Certain Stock Promotions investigation and the Company’s April 10, 2017 settlement thereof, and seeks unspecified damages on behalf of the Company and injunctive relief.

On May 1, 2018, the court consolidated this case with the aforementioned purported stockholder derivative case filed by plaintiff Kevin Fong.

The consolidated case is titled In re Iovance Biotherapeutics, Inc.

Stockholder Derivative Litigation (lead case no.

On January 28, 2020, the parties reached a proposed settlement.

On April 24, 2020, the court granted preliminary approval for the proposed settlement.

The terms of the settlement were disseminated to shareholders as part of the notice process on May 8, 2020.

On July 2, 2020, the court granted final approval for the settlement.

The Company has not incurred any significant costs or expenses in connection with this settlement.

Derivative Lawsuit.

On December 11, 2020, a purported stockholder derivative complaint was filed by plaintiff Leo Shumacher against the Company, as nominal defendant, and its current directors, as defendants, in the Court of Chancery in the State of Delaware.

The complaint alleges breach of fiduciary duty and a claim for unjust enrichment in connection with alleged excessive compensation of certain non-executive directors of the Company and seeks unspecified damages on behalf of the Company .

The defendants intend to vigorously defend against the foregoing complaints.

Based on the early stage of the litigation, it is not possible to estimate the amount or range of possible loss that might result from these matters.

Solomon Capital, LLC.

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Based on the foregoing, the Solomon Plaintiffs allege causes for breach of contract and unjust enrichment and demand judgment against the Company in an unspecified amount exceeding $ 1.5 million, plus interest.

On June 3, 2016, the Company filed an answer and counterclaims in the lawsuit.

On June 3, 2016, the Company filed an answer and counterclaims in the lawsuits.

The Company has asserted counterclaims for fraudulent inducement, fraudulent misrepresentation, fraudulent concealment, breach of fiduciary duty, and breach of contract, alleging principally that the counterclaim defendants misrepresented their qualifications and failed to disclose that Solomon Sharbat was the subject of an investigation by the Financial Industry Regulatory Authority (“FINRA”) that resulted in the loss of his FINRA license.

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On July 2, 2020, the court granted the Company’s motion to dismiss the First Solomon Suit for want of prosecution.

On July 31, 2020, the Solomon Plaintiffs, through new counsel, filed a motion for reconsideration of the dismissal of the First Solomon Suit for want of prosecution.

On July 31, 2020, the Solomon Plaintiffs, through new counsel, filed a motion for reconsideration of the dismissal of the

First Solomon Suit for want of prosecution.

On August 11, 2020, the Company filed an opposition brief against the Solomon Plaintiffs’ motion for reconsideration.

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On September 2, 2020, the Solomon Plaintiffs filed a notice of appeal of the dismissal for want of prosecution.

On January 4, 2021, the court granted the Solomon Plaintiffs motion for reconsideration, and reinstituted the case.

On January 15, 2021, the Company filed a notice of appeal of the court’s grant of the Solomon Plaintiffs motion for reconsideration.

On February 10, 2021, the Company filed its opening brief in support of its appeal of the court’s grant of the Solomon Plaintiff’s motion for reconsideration.

On March 24, 2021, the Solomon Plaintiffs filed their brief in opposition to the Company’s appeal of the court’s grant of the Solomon Plaintiff’s motion for reconsideration.

On April 2, 2021, the Company filed its reply brief in support of the Company’s appeal of the court’s grant of the Solomon Plaintiff’s motion for reconsideration.

On September 27, 2019, the Solomon Plaintiffs filed a new lawsuit (through new legal counsel) (“the Second Solomon Suit”) titled Solomon Capital, LLC, Solomon Capital 401(K) Trust, Solomon Sharbat and Shelhav Raff v.

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655668/2019).

In the Second Solomon Suit, the Solomon Plaintiffs allege that they are third party beneficiaries of a “finder’s fee agreement” that prior management entered into with a third party unlicensed entity in 2012 in connection with seeking financing, that an agreement or understanding existed between the Company and the plaintiffs that the plaintiffs would be paid fees and commissions (in cash and stock) if they obtained financing for the Company, and that they directly

and indirectly introduced investors to the Company who invested in the Company, or were willing to invest in the Company.

Finally, the Solomon Plaintiffs allege that they were promised a license to use the Company’s technology in Israel.

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The Solomon Plaintiffs also allege that Manish Singh, the Company’s former Chief Executive Officer, committed fraud and took shares belonging to them.

On February 18, 2020, the Company filed a removal petition and removed the Second Solomon Suit to the United States District Court for the Southern District of New York, where the case has been assigned case no.

On February 18, 2020, the Company filed a removal petition and removed the Second Solomon Suit to the U.S.

District Court for the Southern District of New York, where the case has been assigned case no.

1:20-cv-1391.

The Company has not yet responded to the complaint in the Second Solomon Suit.

On May 22, 2020, the Company moved to dismiss the Second Solomon Suit for lack of personal jurisdiction.

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On August 7, 2020, the Company filed a reply brief in support of the Company’s motion to dismiss for lack of personal jurisdiction.

On March 26, 2021, the Court denied the Company’s motion to dismiss for lack of personal jurisdiction.

The Company filed a response to the complaint in the Second Solomon Suit on April 30, 2021.

The Company intends to vigorously defend these complaints and pursue its counterclaims, as applicable.

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Fischkoff alleges breaches of his employment agreement and violation of New York Labor Law for failure to pay monies purportedly owed to him, and seeks to recover amounts including severance pay and retention bonus (totaling $ 300,000 ), a prorated incentive bonus, and amounts relating to unvested options to 150,000 shares of the Company's common stock, together with prejudgment interest, costs, expenses and attorneys’ fees.

On July 5, 2017, the Company filed a removal petition and removed the lawsuit to the United States District Court for the Southern District of New York, where the case has been assigned case no.

On July 5, 2017, the Company filed a removal petition and removed the lawsuit to the U.S.

District Court for the Southern District of New York, where the case has been assigned case no.

1:17-cv-05041.

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In connection with the Company’s reincorporation from Nevada to Delaware in 2017, the Company (as a Delaware corporation) untimely filed a post-effective amendment to adopt a Form S-8 registration statement that the Company filed (as a Nevada corporation) to register the shares underlying the Company’s 2011 Equity Incentive Plan.

Before the Company filed the required post-effective amendment, options to purchase 200,000 shares were exercised under the 2011 Equity Incentive Plan.

Before the Company filed the

required post-effective amendment, options to purchase 200,000 shares were exercised under the 2011 Equity Incentive Plan.

The effect of the delayed post-effective amendment filing on the 200,000 option shares is uncertain, but the issuance and sale of the shares may not have been in compliance with the Form S-8 registration statement.

The existence of any liability to the Company, and the amount of any such liability to the Company, as a result of the issuance of the 200,000 shares is uncertain.

Accordingly, no accrual for a potential claim has been made by the Company in its condensed consolidated financial statements.

Accordingly, no accrual for a potential claim has been made by the Company in its consolidated financial statements.

The Company may be involved, from time to time, in legal proceedings and claims arising in the ordinary course of its business.

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The Company elected not to apply the recognition requirements of Topic 842 for short-term leases that have a lease term of 12 months or less.

In December 2014, the Company commenced a five-year non-cancellable operating lease with the University of South Florida Research Foundation for a 5,115 square foot facility located in Tampa, Florida.

The facility is part of the University of South Florida research park and is used as the Company’s research and development facilities.

The Company had the option to extend the lease term of this facility for an additional five-year period on the same terms and conditions, except that the base rent for the renewal term will be increased in accordance with the applicable consumer price index.

In April 2015, the Company amended the original lease agreement to increase the rentable space to 6,043 square feet.

In September 2016, the Company further increased the rentable space to 8,673 square feet.

The per square foot cost and term of the lease were unchanged, and rent payments are approximately $ 20,000 per month.

In December 2019, the Company entered into an agreement to extend the lease term to December 18, 2024 for approximately $ 20,500 a month.

In June 2020, the Company amended the lease agreement to further increase the rentable space to 13,139 square feet and extend the lease term to June 5, 2025 for approximately $ 34,500 a month.

San Carlos Lease

New Headquarters Lease

On February 3, 2021, the Company entered into a lease agreement with ARE-San Francisco No.

63, LLC (the “New Headquarters Lease”) for laboratories and offices to be constructed in Suite 400 of an existing building located at 825 Industrial Road, San Carlos, California (the “Building”), commonly known as The District.

Under the New Headquarters Lease, the Company will lease approximately 49,918 rentable square feet of space in the Building (the “Premises”).

The New Headquarters Lease is for a term of 120 months , commencing upon the first day of the first full month (the “Rent Commencement Date”) after the earlier to occur of (i) the date that is 12 months and one day after the execution date (the “Commencement Date”), which is January 30, 2022, or (ii) the date that the Tenant Improvements are substantially completed;

provided, however, that the Rent Commencement Date shall be delayed 1 day for each day after the Commencement Date that (a) to the extent that, after the Commencement Date, any governmental authority having jurisdiction, as a result of the COVID-19 outbreak in the U.S., declares or implements any order or mandate that restricts construction activities in San Mateo County, California (any such order or mandate, a “Government Mandate”), to the extent that such Government Mandate precludes the construction of tenant improvements, or (b) a landlord delay occurs.

Construction of the Company’s offices is expected to extend through 2021.

The New Headquarters Lease includes an option to extend the term of the lease for 60 months , exercisable under certain conditions and at a market rate as described in the New Headquarters Lease.

Commencing 210 days after the Rent Commencement Date as the result of a rent abatement, the Company’s monthly base rent under the New Headquarters Lease will be approximately $ 280,000 , subject to an annual increase of 3 % .

Beginning in 2022, the Company will also be responsible for paying operating expenses.

San Carlos Existing Headquarters Leases

On August 4, 2016, the Company entered into an agreement to lease 8,733 square feet in San Carlos, California.

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The Company’s monthly base rent for the Expansion Space under the Amended Lease will be approximately $ 39,000 for the first year, and $ 40,000 for the second year.

On February 3, 2021, the Company entered into two amendments (the “Suite 150 Second Amendment” and the “Suite 100 and Suite 125 First Amendment”) to its previously disclosed lease agreements with Hudson Skyway Landing, LLC, for space located on the first floor of the building located at 999 Skyway Road, San Carlos, California, commonly known as Skyway Landing II.

Under the Suite 100 and Suite 125 Second Amendment, the Company will extend its previously disclosed amended lease of approximately 20,432 rentable square feet of space, which would have expired on April 30, 2021, to December 31, 2021.

The Company’s monthly base rent under the Suite 100 and Suite 125 Second Amendment will be approximately $ 103,000 .

The Company is also responsible for paying its portion of operating expenses and real estate taxes.

The Company has an option to extend the expiration of the Suite 100 and Suite 125 Second Amendment for one month or six months , at its discretion, by providing notice as specified in the Suite 100 and Suite 125 Second Amendment.

Under the Suite 150 First Amendment, the Company will extend its previously disclosed lease of approximately 8,733 rentable square feet of space, which also would have expired on April 30, 2021, to December 31, 2021.

The Company’s monthly base rent under the Suite 150 First Amendment will be approximately $ 44,000 .

The Company is also responsible for paying its portion of operating expenses and real estate taxes.

The Company has an option to extend the expiration of the Suite 150 First Amendment for one month or six months , at its discretion, by providing notice as specified in the Suite 150 First Amendment.

The facility is part of the University of South Florida research park and is used as the Company’s research and development facilities.

In April 2015, the Company amended the original lease agreement to increase the rentable space to 6,043 square feet.

In September 2016, the Company further increased the rentable space to 8,673 square feet.

The per square foot cost and term of the lease were unchanged, and rent payments are approximately $ 20,000 per month.

In December 2019, the Company entered into an agreement to extend the lease term to December 18, 2024 for approximately $ 20,500 a month.

In June 2020, the Company amended the lease agreement to further increase the rentable space to 13,139 square feet and extend the lease term to June 30, 2025 for approximately $ 34,500 a month.

New York Lease

The Company leased office space in New York for a monthly rental of approximately $ 18,000 a month from January 2017 through July 2017.

On June 5, 2017, the Company entered into an agreement whereby the Company will lease office space from

August 1, 2017 to July 31, 2018, for approximately $ 9,000 a month.

On June 5, 2017, the Company entered into an agreement whereby the Company will lease office space from August 1, 2017 to July 31, 2018, for approximately $ 9,000 a month.

On April 20, 2018, the Company entered into an agreement to extend the lease term to January 31, 2019 for approximately $ 7,000 a month.

4 unchanged sentences

On May 24, 2020, the Company entered into an agreement to extend the lease term to October 31, 2020 for approximately $ 4,000 a month.

On September 1, 2020, the Company entered into an agreement to extend the lease term to January 31, 2021, for approximately $ 4,000 a month.

On September 1,

2020, the Company entered into an agreement to extend the lease term to January 31, 2021, for approximately $ 4,000 a month.

On January 31, 2021, the lease terminated, and the Company closed its New York office.

Philadelphia Office Lease

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On May 28, 2019, the Company entered into a lease agreement with 300 Rouse Boulevard, LLC (the “Commercial Manufacturing Facility Lease”) for a build-to-suit commercial manufacturing facility, laboratories, and offices located in Philadelphia, Pennsylvania.

Under the Commercial Manufacturing Facility Lease, the Company will lease approximately 136,000 rentable square feet of space in a building to be located at 300 Rouse Boulevard, Philadelphia, Pennsylvania (the “Premises”).

The commercial manufacturing facility is expected to be constructed in two phases:

Phase I-A, the construction of the commercial manufacturing facility, with approximately 66,000 rentable square feet of space;

and Phase I-B, the construction of offices and laboratories, with approximately 70,000 rentable square feet of space.

The Commercial Manufacturing Facility Lease is for a term of 242 months , commencing on the earlier of (i) the date on which the Company occupies any portion of the Premises for the normal operation of its business or (ii) the date that is the later of (A) one hundred sixty ( 160 ) days after the Phase I-A substantial completion date, July 16, 2020, or (B) the Phase I-B Substantial Completion Date (the “Commencement Date”).

The Commencement Date shall be extended by one day for each day of landlord delay, net of any tenant delay, as defined in the Lease.

Under the Commercial Manufacturing Facility Lease, the Company leases approximately 136,000 rentable square feet of space in a building located at 300 Rouse Boulevard, Philadelphia, Pennsylvania (the “Premises”).

The construction of the commercial manufacturing facility began in July 2019 and has been substantially completed.

The Company determined the commencement date of the Commercial Manufacturing Lease to be October 7, 2020 in accordance with Topic 842 when its landlord made the Premise available for the Company’s use and the Company obtained control over the use of the Premises.

The Commercial Manufacturing Facility Lease includes an option to extend the term of the lease, exercisable under certain conditions as described in the Commercial Manufacturing Facility Lease, such that the overall term, when added to the initial term, shall be 359 months , by giving the landlord prior written notice thereof at least 18 months in advance of the expiration date.

Beginning on the Commencement Date, the Company’s monthly base rent under the Lease will be approximately $ 320,000 , subject to an annual increase of 2 % for the first ten years, and an annual increase of the greater of 2 % or 75 % of the average ten-year consumer price index.

The Company will also be responsible for paying operating expenses, which are expected to be approximately $ 53,000 per month in 2020.

In determining the lease term, the Company did not include the periods covered by the option to extend the lease as it determined that it is not reasonably certain that the Company will exercise such option.

Upon the commencement date, the Company recognized operating lease liabilities and right-of-use assets of $ 41.3 million and $ 45.7 million, respectively.

The Company’s monthly base rent under the Lease will be approximately $ 320,000 , subject to an annual increase of 2 % for the first ten years, and an annual increase of the greater of 2 % or 75 % of the average ten-year consumer price index.

The Company is also responsible for paying operating expenses, which are expected to be approximately $ 72,000 per month in 2021.

Manufacturing Contracts

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The terms of the CMO contracts include options to terminate the lease with an advance notice of five to six months.

The termination clauses and extension

clauses are included in the calculation of the lease term for each of the CMOs when it is reasonably certain that it will not exercise such options.

The termination clauses and extension clauses are included in the calculation of the lease term for each of the CMOs when it is reasonably certain that it will not exercise such options.

The guidance requires the Company to first identify a lease deliverable and non-lease deliverable included in the arrangements, and then allocate the fixed contractual consideration to the lease deliverable(s) and the non-lease deliverable(s) on a relative standalone selling price basis to determine the amount of operating lease right-of-use assets and liabilities.

The Company identified the use of a dedicated suite as a single lease deliverable, and related labor services as a single non-lease deliverable in each of the CMO arrangements.

Judgment is required to determine the relative standalone selling price of each deliverable as the observable standalone selling prices are not readily available.

Judgment is required to determine the relative standalone selling price of each deliverable as the observable

standalone selling prices are not readily available.

Therefore, management used estimates and assumptions in determining relative standalone selling price of lease of a suite and labor service using information that includes market and other observable inputs to the extent possible.

1 unchanged sentence

Since the commencement date does not include an option to purchase the underlying asset, the Company elected not to apply the recognition requirements of Topic 842 for short-term leases, however, the lease costs that pertain to the short-term leases are disclosed in the components of lease costs table below.

The balance sheet classification of the Company’s right-of-use asset and lease liabilities was as follows:

September 30, 2020

The balance sheet classification of the Company’s right-of-use asset and lease liabilities was as follows (in thousands):

March 31, 2021

December 31, 2020

4 unchanged sentences

Total Operating lease liabilities

The following table summarizes components of lease expenses, which were included in Total expenses in the Company’s condensed consolidated statement of operations, and other information related to our operating leases as follows (in thousands except weighted-average remaining lease terms and discount rates):

The following table summarizes components of lease expenses, which were included in Total expenses in the Company’s Condensed Consolidated Statement of Operations, and other information related to its operating leases as follows (in thousands except weighted-average remaining lease terms and discount rates):

Three Months Ended

Nine Months Ended

September 30,

Operating lease cost

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Cash paid for amounts included in the measurement of lease liabilities included in Operating cashflows

Increase in right-of-use assets from the adoption of Topic 842

Right-of-use assets obtained from entering new leases

3 unchanged sentences

Variable lease cost is determined based on performance or usage in accordance with the contractual agreements, and not based on an index or rate.

As of September 30, 2020, the maturities of the Company’s operating lease liabilities were as follows (in thousands):

As of March 31, 2021, the maturities of the Company’s operating lease liabilities were as follows (in thousands):

Total lease payments

2 unchanged sentences

Operating lease liabilities are based on the net present value of the remaining lease payments over the remaining lease term.

In determining the present value of lease payments, the Company used its incremental borrowing rate based on the information available at the date of adoption of Topic 842.

As of September 30, 2020, the weighted average remaining lease term is 1.71 years and the weighted average discount rate used to determine the operating lease liabilities was 7.5 %.

As of September 30, 2020, the Company has a finance lease for the commercial manufacturing facility that has not yet commenced.

This finance lease will commence in December 2020 with a lease term of 20 years.

CLOUD COMPUTING ARRANGEMENTS

The Company defers implementation costs incurred in cloud computing arrangements in accordance with ASC 2018-15 and amortizes it over the noncancelable term of the cloud computing arrangements plus any optional renewal periods (1) that are reasonably certain to be exercised by the Company or (2) for which exercises, of the renewal option is controlled by the cloud service provider.

Costs incurred during the application development stage that are directly attributable to developing or obtaining software for internal use are defined as implementation costs and capitalized.

Costs incurred during operation and post-implementation stages are charged to expense.

As of September 30, 2020, the Company capitalized $ 0.8 million and included in prepaid expenses and long-term assets in its condensed consolidated balance sheet.

The amortization expense recognized for the three and nine months ended September 30, 2020 was de minimis.

In determining the present value of lease payments, the Company used its incremental borrowing rate based on the information available at the date of adoption of Topic 842 or the date of lease modifications.

LONG-TERM NOTE

On January 26, 2021, the Company entered into a Loan Note and accompanying Economic Stimulus Program Loan Agreement with PIDC – Local Development Corporation, a Pennsylvania nonprofit corporation (the “Lender”), pursuant to which the Lender agreed to make a loan (the “Job Creation Loan”) to the Company in a principal amount of $ 1.0 million.

The Job Creation Loan will be for a term of five years starting on February 18, 2021, the date of the issuance of a final certificate of occupancy for the Company’s leased premises in Philadelphia, Pennsylvania.

The Job Creation Loan is unsecured, bears no interest, and will be forgiven by the Lender in the amount of $ 2,000 per full-time or “full time equivalent” (defined as two or more part time employees whose working hours total at least 35 hours a week) employee with an average salary of at least $ 80,000 (“FT Employees”), up to a maximum amount equal to the amount of the Job Creation Loan, as calculated based on the average number of FT Employees employed at the Company’s premises during the period of the 5-year term beginning on the date that is six months prior to the maturity date and ending on the maturity date.

If the Job Creation Loan is not forgiven in full by the maturity date, the remaining balance of the loan not forgiven will become payable on the maturity date.

The Loan Note includes customary events of default.

Upon the occurrence of an event of default, the Lender will have the right to exercise remedies against the Company, including the right to require immediate payment of all amounts due under the Loan Note.

The Company concludes that it is not reasonably assured that all or a portion of the loan will be forgiven as of March 31, 2021, and therefore accounted for the Job Creation Loan as debt in accordance with ASC Topic 470 – Debt, as opposed to as an in-substance government grant, and classified as a long-term debt in its Condensed Consolidated Balance Sheet as of March 31, 2021.

RELATED PARTY TRANSACTIONS

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The vesting of the granted stock options will accelerate, and the entire award will become fully vested upon the closing of a significant licensing transaction, a material product acquisition, a material strategic transaction, or upon a change of control transaction.

The Company recognized zero and $ 0.1 million in stock-based compensation expense related to this consulting agreement during the three months ended September 30, 2020 and 2019, respectively, and $ 0.2 million and $ 0.3 million for the nine months ended September 30, 2020 and 2019, respectively.

In addition, in connection with the adoption of ASC 2018-07, the Company recognized $ 0.3 million to retained earnings as of January 1, 2019.

This stock option was fully vested in September 2020.

The Company recognized zero and $ 0.1 million in stock-based compensation expense related to this consulting agreement during the three months ended March 31, 2021 and 2020, respectively.

The Company did not record income tax expenses for the three months ended March 31, 2021 and 2020, respectively as the Company expected to be in a taxable loss position in 2021 and 2020, and the net deferred tax assets are fully offset by a valuation

allowance as it is not more likely than not that the benefit will be realized.

Therefore, the Company’s effective tax rate was 0.0 % , for the three months ended March 31, 2021 and 2020, respectively.

As of March 31, 2021, the Company remains in a cumulative book loss position and does not have sufficient positive evidence to realize its net deferred tax assets.

As such, the Company continues to maintain a full valuation allowance against its net deferred tax assets.

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

What changed 10-Q

Item 1. Financial Statements