As used in this Annual Report on Form 10‑K, or Annual Report, for the year ended December 31, 2020, the terms “NantKwest,” “the company,” “our,” “us” or “we” refer to NantKwest, Inc. and/or its subsidiaries.

This Annual Report on Form 10-K, or this Annual Report, may contain “forward-looking statements” within the meaning of the federal securities laws made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under Part I, Item 1A, “~~Risk Factors~~”, in this Annual Report. Except as required by law, we assume no obligation to update these forward-looking statements, whether as a result of new information, future events or otherwise. These statements, which represent our current expectations or beliefs concerning various future events, may contain words such as “may,” “will,” “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate” or other words indicating future results, though not all forward-looking statements necessarily contain these identifying words. Such statements may include, but are not limited to, statements concerning the following:

~~In addition, you should refer to Part I, Item 1A, “Risk Factors~~” of this Annual Report for a discussion of other important factors that may cause actual results to differ materially from those expressed or implied by the forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Annual Report will prove to be accurate. Furthermore, if one or more of these forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

This Annual Report also contains estimates, projections and other information concerning our industry, our business, and the markets for certain diseases, including data regarding the estimated size of those markets, and the incidence and prevalence of certain medical conditions. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained this industry, business, market, and other data from reports, research surveys, studies, and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data, and similar sources.

The FDA may withdraw approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including ~~adverse events~~AEs of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical ~~studies~~trials to assess new safety risks; or imposition of distribution restrictions or other restrictions under a REMS program. Other potential consequences include, among other things:

•

~~restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls;~~

•restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls;•

~~fines, warning letters or holds on post-approval clinical studies;~~

•fines, warning letters or holds on post-approval clinical trials;•

~~refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of product license approvals;~~

•refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of product license approvals;•

~~product seizure or detention, or refusal to permit the import or export of products; or~~

•product seizure or detention, or refusal to permit the import or export of products; or•

~~injunctions or the imposition of civil or criminal penalties.~~

•injunctions or the imposition of civil or criminal penalties.

The FDA closely regulates the marketing, labeling, advertising and promotion of ~~biologics.~~biologics or drug products. A company can make only those claims relating to safety and efficacy, purity and potency that are approved by the FDA and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses. Failure to comply with these requirements can result in, among other things, adverse publicity, warning letters, corrective advertising and potential civil and criminal penalties, and exclusion from participation in governmental health programs, like Medicare and Medicaid. Physicians may prescribe legally available products for uses that are not described in the product’s labeling and that differ from those tested by us and approved by the FDA. Such off-label uses are common across medical specialties. Physicians may believe that such off-label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of physicians in their choice of treatments. The FDA does, however, restrict manufacturer’s communications on the subject of off-label use of their products.

Table of Contents

Premarket Clearance and Approval Requirements for Medical Devices

Each medical device we seek to commercially distribute in the U.S. will require either a prior 510(k) clearance, unless it is exempt (PMA) from the FDA. Generally, if a new device has a predicate that is already on the market under a 510(k) clearance, the FDA will allow that new device to be marketed under a 510(k) clearance; otherwise, a PMA is required. Medical devices are classified into one of three classes: Class 1, Class 2 or Class 3, depending on the degree of risk associated with each medical device and the extent of control needed to provide reasonable assurance of safety and effectiveness. Class 1 devices are deemed to be low risk and are subject to the general controls of the FDCA, such as provisions that relate to: adulteration; misbranding; registration and listing; notification, including repair, replacement, or refund; records and reports; and good manufacturing practices. Most Class 1 devices are classified as exempt from pre-market notification under section 510(k) of the FDCA, and therefore may be commercially distributed without obtaining 510(k) clearance from the FDA. Class 2 devices are subject to both general controls and special controls to provide reasonable assurance of safety and effectiveness. Special controls include performance standards, post market surveillance, patient registries and guidance documents. A manufacturer may be required to submit to the FDA a pre-market notification requesting permission to commercially distribute some Class 2 devices. Devices deemed by the FDA to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices, or devices deemed not substantially equivalent to a previously cleared 510(k) device, are placed in Class 3. A Class 3 device cannot be marketed in the U.S. unless the FDA approves the device after submission of a PMA. However, there are some Class 3 devices for which FDA has not yet called for a PMA. For these devices, the manufacturer must submit a pre-market notification and obtain 510(k) clearance in orders to commercially distribute these devices. The FDA can also impose sales, marketing or other restrictions on devices in order to assure that they are used in a safe and effective manner.

510(k) Clearance Pathway

When a 510(k) clearance is required, we must submit a pre-market notification to the FDA demonstrating that our proposed device is substantially equivalent to a predicate device, which is a previously cleared and legally marketed 510(k) device or a device that was in commercial distribution before May 28, 1976. By regulation, a pre-market notification must be submitted to the FDA at least 90 days before we intend to distribute a device. As a practical matter, clearance often takes significantly longer. To demonstrate substantial equivalence, the manufacturer must show that the proposed device has the same intended use as the predicate device, and it either has the same technological characteristics, or different technological characteristics and the information in the pre-market notification demonstrates that the device is equally safe and effective and does not raise different questions of safety and effectiveness. The FDA may require further information, including clinical data, to make a determination regarding substantial equivalence. If the FDA determines that the device, or its intended use, is not substantially equivalent to a previously cleared device or use, the FDA will place the device into Class 3.

There are three types of 510(k)s: traditional; special; and abbreviated. Special 510(k)s are for devices that are modified and the modification needs a new 510(k) but does not affect the intended use or alter the fundamental scientific technology of the device. Abbreviated 510(k)s are for devices that conform to a recognized standard. The special and abbreviated 510(k)s are intended to streamline review, and the FDA intends to process special 510(k)s within 30 days of receipt.

De Novo Classification

Medical device types that the FDA has not previously classified as Class 1, 2 or 3 are automatically classified into Class 3 regardless of the level of risk they pose. The Food and Drug Administration Modernization Act of 1997 established a new route to market for low to moderate risk medical devices that are automatically placed into Class 3 due to the absence of a predicate device, called the Request for Evaluation of Automatic Class 3 Designation (or the De Novo Classification Process).

Table of Contents

This procedure allows a manufacturer whose novel device is automatically classified into Class 3 to request down-classification of its medical device into Class 1 or Class 2 on the basis that the device presents low or moderate risk, rather than requiring the submission and approval of a PMA application. Prior to the enactment of the FDASIA, a medical device could only be eligible for de novo classification if the manufacturer first submitted a 510(k) pre-market notification and received a determination from the FDA that the device was not substantially equivalent. FDASIA streamlined the de novo classification pathway by permitting manufacturers to request de novo classification directly without first submitting a 510(k) pre-market notification to the FDA and receiving a not substantially equivalent determination. Under FDASIA, the FDA is required to classify the device within 120 days following receipt of the de novo application. If the manufacturer seeks reclassification into Class 2, the manufacturer must include a draft proposal for special controls that are necessary to provide a reasonable assurance of the safety and effectiveness of the medical device. In addition, the FDA may reject the reclassification petition if it identifies a legally marketed predicate device that would be appropriate for a 510(k) or determines that the device is not low to moderate risk or that general controls would be inadequate to control the risks and special controls cannot be developed.

Pre-market Approval Pathway

A PMA application must be submitted to the FDA for Class 3 devices for which the FDA has required a PMA. The PMA application process is much more demanding than the 510(k) pre-market notification process. A PMA application must be supported by extensive data, including but not limited to technical, preclinical, clinical trials, manufacturing and labeling to demonstrate to the FDA’s satisfaction reasonable evidence of safety and effectiveness of the device.

After a PMA application is submitted, the FDA has 45 days to determine whether the application is sufficiently complete to permit a substantive review and thus whether the FDA will file the application for review. The FDA has 180 days to review a filed PMA application, although the review of an application generally occurs over a significantly longer period of time and can take up to several years. During this review period, the FDA may request additional information or clarification of the information already provided. Also, an advisory panel of experts from outside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the device.

Although the FDA is not bound by the advisory panel decision, the panel’s recommendations are important to the FDA’s overall decision making process. In addition, the FDA may conduct a preapproval inspection of the manufacturing facility to ensure compliance with the Quality System Regulation (QSR). The agency also may inspect one or more clinical sites to assure compliance with FDA’s regulations.

Upon completion of the PMA review, the FDA may: (i) approve the PMA application which authorizes commercial marketing with specific prescribing information for one or more indications, which can be more limited than those originally sought; (ii) issue an approvable letter which indicates the FDA’s belief that the PMA application is approvable and states what additional information the FDA requires or the post-approval commitments that must be agreed to prior to approval; (iii)issue a not approvable letter which outlines steps required for approval, but which are typically more onerous than those in an approvable letter, and may require additional clinical trials that are often expensive and time consuming and can delay approval for months or even years; or (iv) deny the application. If the FDA issues an approvable or not approvable letter, the applicant has 180 days to respond, after which the FDA’s review clock is reset.

Table of Contents

Clinical trials are almost always required to support PMA and are sometimes required for 510(k) clearance. In the U.S., for significant risk devices, these trials require submission of an application for an Investigational Device Exemption (IDE) to the FDA. The IDE application must be supported by appropriate data, such as animal and laboratory testing results, showing it is safe to test the device in humans and that the testing protocol is scientifically sound. The IDE must be approved in advance by the FDA for a specific number of patients at specified trial sites. During the trial, the sponsor must comply with the FDA’s IDE requirements for investigator selection, trial monitoring, reporting and recordkeeping. The investigators must obtain patient informed consent, rigorously follow the investigational plan and trial protocol, control the disposition of investigational devices and comply with all reporting and recordkeeping requirements. Clinical trials for significant risk devices may not begin until the IDE application is approved by the FDA and the appropriate IRBs at the clinical trial sites. An IRB is an appropriately constituted group that has been formally designated to review and monitor medical research involving subjects and which has the authority to approve, require modifications in, or disapprove research to protect the rights, safety and welfare of human research subjects. A nonsignificant risk device does not require FDA approval of an IDE; however, the clinical trial must still be conducted in compliance with various requirements of FDA’s IDE regulations and be approved by an IRB at the clinical trial sites. The FDA or the IRB at each site at which a clinical trial is being performed may withdraw approval of a clinical trial at any time for various reasons, including a belief that the risks to study subjects outweigh the benefits or a failure to comply with FDA or IRB requirements. Even if a trial is completed, the results of clinical testing may not demonstrate the safety and effectiveness of the device, may be equivocal or may otherwise not be sufficient to obtain approval or clearance of the product.

Sponsors of clinical trials of devices are required to register with clinical trials.gov, a public database of clinical trial information. Information related to the device, patient population, phase of investigation, study sites and investigators and other aspects of the clinical trial is made public as part of the registration.

Ongoing Medical Device Regulation by the FDA

Even after a device receives clearance or approval and is placed on the market, numerous regulatory requirements apply. These include:

•establishment registration and device listing;

•the QSR, which requires manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the manufacturing process;

•labeling regulations and the FDA prohibitions against the promotion of products for uncleared, unapproved or off-label uses and other requirements related to promotional activities;

•medical device reporting regulations, which require that manufactures report to the FDA if their device may have caused or contributed to a death or serious injury, or if their device malfunctioned and the device or a similar device marketed by the manufacturer would be likely to cause or contribute to a death or serious injury if the malfunction were to recur;

•corrections and removal reporting regulations, which require that manufactures report to the FDA field corrections or removals if undertaken to reduce a risk to health posed by a device or to remedy a violation of the FDCA that may present a risk to health; and

•post market surveillance regulations, which apply to certain Class 2 or 3 devices when necessary to protect the public health or to provide additional safety and effectiveness data for the device.

After a device receives 510(k) clearance, any modification that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, will require a new clearance or possibly a PMA. The FDA requires each manufacturer to make this determination initially, but the FDA can review any such decision and can disagree with a manufacture’s determination. If the FDA disagrees with our determination not to seek a new 510(k) clearance, the FDA may retroactively require us to seek 510(k) clearance or possibly a PMA. The FDA could also require manufacturer to cease marketing and distribution and/or recall the modified device until 510(k) clearance or PMA is obtained. Also, in these circumstances, the manufacturer may be subject to significant regulatory fines and penalties.

Table of Contents

Some changes to an approved PMA device, including changes in indications, labeling or manufacturing processes or facilities, require submission and FDA approval of a new PMA application or PMA supplement, as appropriate, before the change can be implemented. Supplements to a PMA application often require the submission of the same type of information required for an original PMA application, except that the supplement is generally limited to that information needed to support the proposed change from the device covered by the original PMA. The FDA uses the same procedures and actions in reviewing PMA supplements as it does in reviewing original PMA applications.

FDA regulations require us to register as a medical device manufacturer with the FDA. Additionally, some states require us to register as a medical device manufacturer within the state. Because of this, the FDA and similar state agencies may inspect us on a routine basis for compliance with the QSR. These regulations require that the manufacturer maintain proper documentation in a prescribed manner with respect to manufacturing, testing and control activities. Further, the FDA requires medical device manufacturers to comply with various FDA regulations regarding labeling. Failure by us or by our suppliers to comply with applicable regulatory requirements can result in enforcement action by the FDA or state authorities, which may include any of the following sanctions:

•warning or untitled letters, fines, injunctions, consent decrees and civil penalties;

•customer notifications, voluntary or mandatory recall or seizure of our medical device product candidates;

•operating restrictions, partial suspension or total shutdown of production;

•delay in processing submissions or applications for new products or modifications to existing products;

•withdrawing approvals that have already been granted; and

•criminal prosecution.

The Medical Device Reporting laws and regulations require medical device manufacturers to provide information to the FDA when they receive or otherwise become aware of information that reasonably suggests the device may have caused or contributed to a death or serious injury as well as a device malfunction that likely would cause or contribute to death or serious injury if the malfunction were to recur. In addition, the FDA prohibits an approved device from being marketed for off-label use. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability, including substantial monetary penalties and criminal prosecution.

Newly discovered or developed safety or effectiveness data may require changes to a product’s labeling, including the addition of new warnings and contraindications, and also may require the implementation of other risk management measures. Also, new government requirements, including those resulting from new legislation, may be established, or the FDA’s policies may change, which could delay or prevent regulatory clearance or approval of our medical device product candidates under development. Medical device manufacturers are also subject to other federal, state and local laws and regulations relating to safe working conditions, laboratory and manufacturing practices.

Other Healthcare Laws and Compliance Requirements

Our sales, promotion, medical education, clinical research and other activities following product approval will be subject to regulation by numerous regulatory and law enforcement authorities in the U.S. in addition to the FDA, including potentially the Federal Trade Commission, the Department of Justice, ~~the Centers for Medicare and Medicaid Services, or~~ CMS, other divisions of ~~the U.S. Department of Health and Human Services~~HHS and state and local governments. Our promotional and scientific/educational programs must comply with the ~~federal Anti-Kickback Statute,~~AKS, the ~~False Claims Act,~~FCA, physician payment transparency laws, privacy laws, security laws, and additional federal and state laws similar to the foregoing.

Table of Contents

The ~~federal Anti-Kickback Statute~~AKS prohibits, among other things, the knowing and willing, direct or indirect offer, receipt, solicitation or payment of remuneration in exchange for or to induce the referral of patients, including the purchase, order or lease of any good, facility, item or service that would be paid for in whole or part by Medicare, Medicaid or other federal health care programs. Remuneration has been broadly defined to include anything of value, including cash, improper discounts, and free or ~~reduced price~~reduced-price items and services. The ~~federal Anti-Kickback Statute~~AKS has been interpreted to apply to arrangements between pharmaceutical manufacturers on one hand and prescribers, purchasers, formulary managers, and beneficiaries on the other. Although there are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution, the exceptions and safe harbors are drawn narrowly. Practices that involve remuneration that may be alleged to be intended to induce prescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exception or safe harbor. Failure to meet all of the requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the ~~federal Anti-Kickback Statute.~~AKS. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all its facts and circumstances. Several courts have interpreted the statute’s intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal healthcare covered business, the ~~federal Anti-Kickback Statute~~AKS has been violated. The government has enforced the ~~federal Anti-Kickback Statute~~AKS to reach large settlements with healthcare companies based on sham research or consulting and other financial arrangements with physicians. Further, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation. In addition, the government may assert that a claim including items or services resulting from a violation of the ~~federal Anti-Kickback Statute~~AKS constitutes a false or fraudulent claim for purposes of the ~~False Claims Act.~~FCA. Many states have similar laws that apply to their state health care programs, as well as private payors.

Federal false claims and false statement laws, including the ~~federal civil False Claims Act, or~~ FCA, imposes liability on persons or entities that, among other things, knowingly present or cause to be presented claims that are false or fraudulent or not provided as claimed for payment or approval by a federal health care program. The FCA has been used to prosecute persons or entities that “cause” the submission of claims for payment that are inaccurate or fraudulent, by, for example, providing inaccurate billing or coding information to customers, promoting a product off-label, submitting claims for services not provided as claimed, or submitting claims for services that were provided but not medically necessary. Actions under the FCA may be brought by the Attorney General, or as a qui tam action by a private individual, in the name of the government. Violations of the FCA can result in significant monetary penalties and treble damages. The federal government is using the FCA, and the accompanying threat of significant liability, in its investigation and prosecution of pharmaceutical and biotechnology companies throughout the country, for example, in connection with the promotion of products for unapproved uses and other illegal sales and marketing practices. The government has obtained multi-million and multi-billion dollar settlements under the FCA in addition to individual criminal convictions under applicable criminal statutes. In addition, certain companies that were found to be in violation of the FCA have been forced to implement extensive corrective action plans and have often become subject to consent decrees or corporate integrity agreements, restricting the manner in which they conduct their business.

~~The federal Health Insurance Portability and Accountability Act of 1996, or~~

HIPAA created additional federal criminal statutes that prohibit, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors; knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services; and willfully obstructing a criminal investigation of a healthcare offense. Like the ~~federal Anti-Kickback Statute,~~AKS, the ~~Affordable Care Act~~ACA amended the intent standard for certain healthcare fraud statutes under HIPAA such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.

Given the significant size of actual and potential settlements, it is expected that the government will continue to devote substantial resources to investigating healthcare providers’ and manufacturers’ compliance with applicable fraud and abuse laws. In addition, many states have similar fraud and abuse statutes or regulations that may be broader in scope and may apply regardless of payor, in addition to items and services reimbursed under Medicaid and other state programs. Additionally, to the extent that our ~~products,~~product candidates, once commercialized, are sold in a foreign country, we may be subject to similar foreign laws.

Table of Contents

In addition, there has been a recent trend of increased federal and state regulation of payments made to physicians and certain other healthcare ~~providers.~~providers and teaching hospitals. The ACA, among other things, under the federal Physician Payment Sunshine Act, or the Sunshine Act, enacted as part of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively, the Affordable Care Act, among other things, imposed ~~new~~ reporting requirements on certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, for payments ~~and~~or other transfers of value made by them to certain covered recipients, including physicians and teaching hospitals, ~~as defined by law,~~ as well as ownership and investment interests held by physicians and their immediate family members. Effective January 1, 2022, for data reported to the Centers for Medicare & Medicaid Services (CMS) in 2022, these ~~annual~~ reporting obligations ~~will extend~~with respect to covered recipients have been extended to include payments and transfers of value made ~~during the previous year~~ to ~~certain~~ non-physician ~~covered recipients,~~providers such as physician assistants and nurse ~~practitioners, clinical nurse specialists, certified registered nurse anesthetists, anesthesiologist assistants, and certified nurse-midwives.~~practitioners. Covered manufacturers are required to collect and report detailed payment data and submit legal attestation to the accuracy of such data to the government each year. Failure to submit required information may result in civil monetary penalties ~~of up to an aggregate of $176,495 per year (or up to an aggregate of $1,176,638 per year for “knowing failures”), subject to adjustment for inflation,~~ for all payments, transfers of value or ownership or investment interests that are not timely, accurately and completely reported in an annual submission. Additionally, entities that do not comply with mandatory reporting requirements may be subject to a corporate integrity agreement. ~~Non-compliance under the Sunshine Act may increase government scrutiny and increase liability under other healthcare laws.~~ Certain states also mandate implementation of commercial compliance programs, impose restrictions on covered manufacturers’ marketing practices and/or require the tracking and reporting of gifts, compensation and other remuneration to physicians and other healthcare professionals.

We may also be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business. HIPAA, as amended by the Health Information Technology and Clinical Health Act ~~or HITECH,~~of 2009 (HITECH) and their respective implementing regulations, ~~imposes~~impose specified requirements on certain health care providers, plans and clearinghouses, ~~(collectively, “covered entities”)~~or collectively, covered entities, and their “business associates,” relating to the privacy, security and transmission of individually identifiable health information. Among other things, HITECH makes HIPAA’s security standards directly applicable to “business associates,” ~~defined as~~which includes independent contractors or agents of covered entities that create, receive, maintain or transmit protected health information in connection with providing a service for or on behalf of a covered entity. HITECH also increased the civil and criminal penalties that may be imposed against covered entities, business associates and possibly other persons, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce HIPAA and seek attorney’s fees and costs associated with pursuing federal civil actions. In addition, certain states have their own laws that govern the privacy and security of health information in certain circumstances, many of which differ from each other and/or HIPAA in significant ways and may not have the same effect, thus complicating compliance efforts.

If our operations are found to be in violation of any of such laws or any other governmental regulations that apply to us, we may be subject to penalties, including, without limitation, civil and criminal penalties, damages, fines, disgorgement, the curtailment or restructuring of our operations, exclusion from participation in federal and state healthcare programs, imprisonment, contractual damages, reputational harm, and diminished profits and future earnings, any of which could adversely affect our ability to operate our business and our financial results.

If any of the physicians or other providers, independent contractors, or entities with whom we do business are found to not be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs and imprisonment, which could affect our ability to operate our business. Further, defending against any such actions can be costly, time-consuming and may require significant personnel resources. Therefore, even if we are successful in defending against any such actions that may be brought against us, our business may be impaired.

In addition to the foregoing health care laws, we are also subject to the U.S. Foreign Corrupt Practices Act ~~or FCPA,~~(FCPA) and similar worldwide anti-bribery laws, which generally prohibit companies and their intermediaries from making improper payments to government officials or private-sector recipients for the purpose of obtaining or retaining business. ~~We also maintain an~~The anti-corruption policy ~~which~~ mandates compliance with the FCPA and similar anti-bribery laws applicable to our business throughout the world. However, we cannot assure you that such a policy or procedures implemented to enforce such a policy will protect us from intentional, reckless or negligent acts committed by our employees, distributors, partners, collaborators or agents. Violations of these laws, or allegations of such violations, could result in fines, penalties or prosecution and have a negative impact on our business, results of operations and reputation.

Table of Contents

Coverage and Reimbursement

Sales of pharmaceutical products depend significantly on the extent to which coverage and adequate reimbursement are provided by third-party payors. Third-party payors include state and federal government health care programs, managed care providers, private health insurers and other organizations. Although we currently believe that third-party payors will provide coverage and reimbursement for our product candidates, if approved, we cannot be certain of this. Third-party payors are increasingly challenging the price, examining the cost-effectiveness, and reducing reimbursement for medical products and services. In addition, significant uncertainty exists as to the reimbursement status of newly approved healthcare products. The U.S. government, state legislatures and foreign governments have continued implementing cost containment programs, including price controls, restrictions on coverage and reimbursement and requirements for substitution of generic products. Adoption of price controls and cost containment measures and adoption of more restrictive policies in jurisdictions with existing controls and measures could further limit our ~~net revenue~~revenues and results. We may need to conduct expensive clinical ~~studies~~trials to demonstrate the comparative cost-effectiveness of our ~~products.~~product candidates. The product candidates that we develop may not be considered cost-effective and thus may not be covered or

sufficiently reimbursed. It is time consuming and expensive for us to seek coverage and reimbursement from third-party payors, as each payor will make its own determination as to whether to cover a product and at what level of reimbursement. Thus, one payor’s decision to provide coverage and adequate reimbursement for a product does not assure that another payor will provide coverage or that the reimbursement levels will be adequate. Moreover, a payor’s decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved. Reimbursement may not be available or sufficient to allow us to sell our ~~products~~product candidates on a competitive and profitable basis.

Healthcare Reform

The U.S. and some foreign jurisdictions are considering or have enacted a number of legislative and regulatory proposals to change the healthcare system in ways that could affect our ability to sell our ~~products~~product candidates profitably. Among policy makers and payors in the U.S. and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and/or expanding access. In the U.S., the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives.

By way of example, in March 2010, the ~~Affordable Care Act~~ACA was signed into law, intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms. Among the provisions of the ~~Affordable Care Act~~ACA of importance to our potential ~~drug~~product candidates are:

•

an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs and biologic agents, apportioned among these entities according to their market share in certain government healthcare programs, not including orphan drug sales;

•an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic agents, apportioned among these entities according to their market share in certain government healthcare programs;•

an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13% of the average manufacturer price for most branded and generic drugs, respectively;

•an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13.0% of the average manufacturer price for branded and generic drugs, respectively;•

a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 70% point-of-sale discounts on negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D;

•a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected;•

~~extension of manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations;~~

•a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 70% (increased pursuant to the Bipartisan Budget Act of 2018, effective as of 2019) point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for a manufacturer’s outpatient drugs to be covered under Medicare Part D;•

expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals and by adding new mandatory eligibility categories for certain individuals with income at or below 133% of the Federal Poverty Level, thereby potentially increasing manufacturers’ Medicaid rebate liability;

•extension of a manufacturer’s Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations;•

~~expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program;~~

•expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals and by adding new mandatory eligibility categories for certain individuals with income at or below 133% of the federal poverty level, thereby potentially increasing a manufacturer’s Medicaid rebate liability;•

new requirements for certain manufacturers of drugs, devices, biologics, and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program, with specific exceptions to report annually certain financial arrangements with physicians, as defined by such law, and teaching hospitals, as defined in ACA and its implementing regulations, including reporting any payment or “transfer of value” provided to physicians and teaching hospitals and any ownership and investment interests held by physicians and their immediate family members during the preceding calendar year;

•

expansion of healthcare fraud and abuse laws, including the U.S. federal False Claims Act and the U.S. federal Anti-Kickback Statute, new government investigative powers and enhanced penalties for noncompliance;

Table of Contents

•

~~a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in and conduct comparative clinical effectiveness research, along with funding for such research;~~•expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program; and

•a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.•

~~a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted, or injected.~~

In addition, other legislative changes have been proposed and adopted since the ~~Affordable Care Act~~ACA was enacted. These changes include, among others, the Budget Control Act of 2011, which mandates aggregate reductions to Medicare payments to providers of up to 2% per fiscal year effective April 1, 2013, and, due to subsequent legislative amendments, will remain in effect through 2030, with the exception of a temporary suspension implemented under various ~~COVID‑19~~COVID-19 relief legislation from May 1, 2020 through March 31, ~~2021,~~2022, followed by a 1% payment adjustment from April 1 to June 30, 2022 and a 2% payment adjustment beginning July 1, 2022, unless additional Congressional action is taken. ~~The American Taxpayer Relief Act of 2012,~~In January 2013, President Obama signed into law the ARTA, which, among other things, further reduced Medicare payments to several providers, including hospitals and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. These new laws may result in additional reductions in Medicare and other healthcare funding, which could have a material adverse effect on customers for our product candidates, if approved, and, accordingly, our financial operations.

Under the American Rescue Plan Act of 2021, effective January 1, 2024, the statutory cap on Medicaid Drug Rebate Program rebates that manufacturers pay to state Medicaid programs will be eliminated. Elimination of this cap may require pharmaceutical manufacturers to pay more in rebates than it receives on the sale of products, which could have a material impact on our business. Further, in July 2021, the Biden administration released an executive order, “Promoting Competition in the American Economy,” with multiple provisions aimed at increasing competition for prescription drugs. Congress is considering legislation that, if passed, could have significant impact on prices of prescription drugs covered by Medicare, including limitations on drug price increases. The impact of these regulations and any future healthcare measures and agency rules implemented by the Biden administration on us and the pharmaceutical industry as a whole is currently unknown. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our product candidates if approved. Complying with any new legislation and regulatory changes could be time-intensive and expensive, resulting in a material adverse effect on our business.

Since the enactment of the ACA, there have been judicial and Congressional challenges to certain aspects of the ACA. In June 2021, the United States Supreme Court held that Texas and other challengers had no legal standing to challenge the ACA, dismissing the case without specifically ruling on the constitutionality of the ACA. Accordingly, the ACA remains in effect in its current form. It is unclear how this Supreme Court decision, future litigation, or healthcare measures promulgated by the Biden administration will impact our business, financial condition and results of operations. Complying with any new legislation or changes in healthcare regulation could be time-intensive and expensive, resulting in material adverse effect on our business.

At the state level, individual states are increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including discounts, restrictions on certain product access and marketing cost disclosure and transparency measures. For example, a number of states are considering or have recently enacted state drug price transparency and reporting laws that could substantially increase our compliance burdens and expose us to greater liability under such state laws once we begin commercialization after obtaining regulatory approval for any of our products. These measures could reduce the demand for our products, if approved, or impose additional pricing pressures on how much we can charge for our products if approved.

We expect that the ~~Affordable Care Act,~~ACA, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and lower reimbursement and in additional downward pressure on the price that we receive for any approved product. Any reduction in reimbursement from Medicare or other government-funded programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize our ~~drugs.~~product candidates. Furthermore, the current presidential administration and Congress may continue to attempt broad sweeping changes to the current health care laws. We face uncertainties that might result from modifications or repeal of any of the provisions of the ~~Affordable Care Act,~~ACA, including as a result of current and future executive orders and legislative actions. The impact of those changes on us and potential effect on the pharmaceutical and biotechnology industries as a whole is currently unknown. However, any changes to the ~~Affordable Care Act~~ACA are likely to have an impact on our results of operations and may have a material adverse effect on our results of operations. We cannot predict what other healthcare programs and regulations will ultimately be implemented at the federal or state level or the effect any future legislation or regulation in the U.S. may have on our business.

Table of Contents

Foreign Regulation

In addition to regulations in the U.S., we will be subject to a variety of foreign regulations governing clinical trials and commercial sales and distribution of our ~~products~~product candidates to the extent we choose to develop or sell any ~~products~~product candidates outside of the U.S. The approval process varies from country to country and the time may be longer or shorter than that required to obtain FDA approval. The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country.

~~Employees~~

Human Capital

Our Human Capital Talent Strategy relies on attracting, retaining and developing top talent that align with our culture and mission to “outsmart your disease”. We promote a culture that is focused on delivering treatments utilizing natural immunities, and we seek to harness our science first focus to deliver solutions to patients and families. As of December 31, ~~2020,~~2021, we had ~~171 employees.~~587 employees located in our offices in Southern California, Washington, Colorado, Florida, North Carolina, Massachusetts, and Italy. Among our employees, 23% are focused on research and development, 8%13% on clinical development and regulatory, ~~51%~~45% on manufacturing and quality, and ~~18%~~19% on general and administrative functions. ~~Personnel~~We have not been subject to labor action or union activities, and our management considers its relationships with employees to be good.

We believe that fostering a workplace that celebrates differences and strengths creates an environment that supports the inclusion and value of ~~related companies who provide corporate, general~~diverse thoughts, backgrounds and ~~administrative, manufacturing strategy, research~~perspectives. A well rounded culture allows for ongoing dialogue and ~~development, regulatory~~discussions that challenge the status quo and ~~clinical trial strategy~~create a learning environment that supports diversity, equity and ~~other administrative~~inclusion. As part of our commitment we continue to encourage a culture where employees can freely ask questions and raise concerns. Our annual performance review process helps support ~~services under~~ our ~~shared services agreement with NantWorks are not included~~commitment to develop and retain top talent by providing an opportunity to have open dialogue, establish goals, discuss milestones and continue to engage in ~~this number. For additional information, see Note 10,~~ ~~Related Party Agreements, of~~opportunities to develop and cultivate the ~~“Notes~~talent. Additionally, our management team makes themselves available to ~~Consolidated Financial Statements” included in Part II, Item 8 of this Annual Report. We believe~~all employees including 1:1s, Department Meetings and Town Hall events.

Our ongoing success will continue to depend on our ability to successfully achieve our vision depends on how effectively we manage our growth. Our leadership is focused on continuing to implement and improve our management systems, recruit and train new employees and cultivateattract, engage and retain our existing team members. Our employees are a highly unique group of individuals across our drug discovery, preclinical development, clinical operations, regulatory affairs, manufacturing and quality, and executive leadership teams with deep experiencetop talent in ~~biotech across a breadth of novel scientific areas.~~an ever growing competitive market. We offer a competitive compensation ~~and benefits~~package to ~~all employees, as well as a host of other programs that enhance employee well-being in and outside of~~help meet the ~~workplace. We believe we have a positive relationship with our employees, and none~~needs of our employees. In addition to salaries, these programs include annual bonuses, stock awards, a 401(k) plan, healthcare and insurance benefits, flexible spending accounts, paid time off, family leave, flexible work schedules, an employee assistance program, among others. We work to ensure pay equity by assessing our compensation practices and working with external benchmarks and compensation consultants to design and benchmark our programs.

Our ongoing response to the COVID-19 pandemic, which complies with government orders in all the states and counties where we operate, focuses on employee health and wellness. We implemented a number of health-related measures over the past two years. We continue to support a general work from home policy and restrict on-site access to essential employees ~~are represented by~~such as laboratory personnel, increasing hygiene, cleaning and sanitizing procedures at our office and laboratory facilities, requiring face masks be worn while on company premises, and implementing temperature checks and COVID-19 testing requirements in order to enter company facilities.

Organization and Development of ImmunityBio, Inc.

ImmunityBio, Inc. was established following a ~~labor union or covered by collective bargaining agreements.~~

~~Corporate Information~~

series of mergers and name changes. We were incorporated in Illinois on October 7, 2002 ~~in the state of Illinois~~ under the name ZelleRx Corporation. ~~On January 22, 2010, we~~Our name was later changed ~~our name~~ to Conkwest, Inc. ~~In March 2014,~~, and we ~~formed Conkwest, Inc., our wholly owned subsidiary~~were reincorporated in the state of Delaware ~~or Conkwest Delaware, for the purposes of changing the state of our incorporation to the state of Delaware. In~~in March ~~2014, we merged with and into Conkwest Delaware, with Conkwest Delaware surviving the merger.~~2014. On July 10, 2015, we changed our name to NantKwest, Inc. ~~Our~~

NantCell, LLC was originally organized as a Delaware limited liability company in November 2014. In April 2015, it was converted to a Delaware corporation, NantCell, Inc., and in May 2019 changed its name to ImmunityBio, Inc. (a private company).

Table of Contents

On December 21, 2020, NantKwest, Inc. and ImmunityBio, Inc. entered into a merger agreement (the Merger Agreement) providing for the combination of the two companies (the Merger), with NantKwest, Inc. being the surviving company which then changed its name to ImmunityBio, Inc. (and ImmunityBio, Inc., a private company, changed its name back to NantCell, Inc. and is now our wholly owned subsidiary). At the time, NantKwest, Inc. was an innovative, clinical-stage immunotherapy company focused on harnessing the power of the innate immune system to treat cancer and infectious diseases, and ImmunityBio, Inc. was a clinical-stage immunotherapy company developing next-generation therapies that drive immunogenic mechanisms for defeating cancer and infectious diseases, with an immunotherapy platform designed to activate both the innate and adaptive immune systems to create long-term “immunological memory.” We believe that the Merger, which closed on March 9, 2021 as described below, combined two companies to create a clinical-stage biotechnology company developing next-generation therapies and vaccines that complement, harness, and amplify the immune system to defeat cancers and infectious diseases.

ImmunityBio is incorporated in Delaware and its principal executive offices are located in San Diego, California.

Available Information

Financial and other information about our company is available on our website ~~address is www.nantkwest.com. The contents~~at https://www.immunitybio.com. We make available on our website, free of charge, copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the Exchange Act), as soon as reasonably practicable after we electronically file such material with, or furnish it, to the U.S. Securities and Exchange Commission (the SEC). All reports we file with the SEC are available free of charge via EDGAR through the SEC website ~~are not~~at https://www.sec.gov. We have included the web addresses of ImmunityBio and the SEC as inactive textual references only. Except as specifically incorporated by reference into this ~~Form 10‑K. We provide free~~Annual Report, information on these websites is not part of charge through a link on our website access to our Annual Reports on Form 10‑K, Quarterly Reports on Form 10‑Q and Current Reports on Form 8‑K, as well as amendments to those reports, as soon as reasonably practical after the reports are electronically filed with, or furnished to, the Securities and Exchange Commission.

this filing.

~~Item~~

ITEM 1A. ~~Risk Factors.~~

RISK FACTORS.

Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below, as well as other information included in this Annual Report on Form 10‑K, or Annual Report, including our financial statements and the related notes, and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” any of which may be relevant to decisions regarding an investment in or ownership of our stock. The occurrence of any of these risks could have a significant adverse effect on our reputation, business, financial condition, results of operations, growth and ability to accomplish our strategic objectives. We have organized the description of these risks into groupings in an effort to enhance readability, but many of the risks interrelate or could be grouped or ordered in other ways, so no special significance should be attributed to the groupings or order below.

On March 9, 2021, we completed the Merger with ImmunityBio, Inc., a private company referred to below as “ImmunityBio.” After the completion of this Merger, we (formerly known as NantKwest, Inc.) changed our name to ImmunityBio, Inc., and references below to “the company,” “the combined company,” “we,” “us,” and “our” refer to ImmunityBio, Inc. and its subsidiaries.

Risk Factor Summary

Risks Related to Our ~~Financial Condition and Capital Requirements:~~

•

We are a clinical-stage biopharmaceutical company with a limited operating history and have incurred significant losses since our inception, and we anticipate that we will continue to incur losses for the foreseeable future, which makes it difficult to assess our future viability.

•

We do not have any therapeutic products that are approved for commercial sale. Our ability to generate revenue from product sales and achieve and maintain profitability depends significantly on our success in a number of factors.

•

We will need to obtain substantial additional financing to complete the development and any commercialization of our product candidates, and a failure to obtain this necessary capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our commercialization efforts, product development or other operations.

•

~~We expect our business to be adversely affected by outbreaks of epidemic, pandemic or contagious diseases, including the ongoing coronavirus pandemic.~~

•

We may use our financial and human resources to pursue a particular type of treatment, or treatment for a particular type of cancer, and fail to capitalize on programs or treatment of other types of cancer that may be more profitable or for which there is a greater likelihood of success.

~~Risks Relating to Our Business and Industry:~~

•

The foundation of our business is based upon the success of our aNK cells as a technology platform. Our aNK platform and product candidates derived thereof, including genetically modified haNK, taNK, t‑haNK ceNK and MSC product candidates, will require significant additional clinical testing before we can potentially seek regulatory approval and launch commercial sales.

•

Utilizing haNK, taNK, t‑haNK and ceNK cells represents a novel approach to immunotherapy, including cancer treatment, and we must overcome significant challenges in order to successfully develop, commercialize and manufacture our product candidates.

•

Even if we successfully develop and commercialize our haNK product candidate for Merkel cell carcinoma, we may not be successful in developing and commercializing our other product candidates, and our commercial opportunities may be limited.

•

~~We may not be able to file INDs to commence additional clinical trials on the timelines we expect, and even if we are able to, the FDA may not permit us to proceed in a timely manner, or at all.~~

•

~~Our plans to support the Joint COVID‑19 Collaboration by moving some of our current manufacturing facilities or repurposing personnel may cause delays in our oncology trials.~~

•

Our efforts regarding the Joint COVID‑19 Collaboration may be difficult to integrate into our current operations and will require additional personnel who will require training, which may cause some of our employees to reallocate their time from our current operations or manufacturing duties, which could in turn cause delays in clinical supply of our products or trials.

•

~~We face significant competition in the biopharmaceutical industry, and many of our competitors have substantially greater experience and resources than we have.~~

~~Risks Relating to Government Regulation:~~

•

~~We may fail to obtain or may experience delays in obtaining regulatory approval to market our aNK platform product candidates, which will significantly harm our business.~~

•

Even if we obtain regulatory approvals for aNK related platform products, those approvals and ongoing regulation of our products may limit how we manufacture and market our products, which could prevent us from realizing the full benefit of our efforts.

•

Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not mean that we will be successful in obtaining regulatory approval of our product candidates in other jurisdictions.

•

We may seek orphan drug status or breakthrough therapy designation for one or more of our product candidates, but even if either is granted, we may be unable to maintain any benefits associated with breakthrough therapy designation or orphan drug status, including market exclusivity.

•

~~We will need to obtain FDA approval of any proposed product brand names, and any failure or delay associated with such approval may adversely impact our business.~~

~~Risks Relating to Our Intellectual Property:~~

•

~~If our efforts to protect the intellectual property related to our product candidates are not adequate, we may not be able to compete effectively in our market.~~

•

~~Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.~~

•

~~We may not be able to protect our intellectual property rights throughout the world.~~

•

Obtaining and maintaining our patent protection depends on compliance with various procedural, documentary, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

•

~~Third-party claims alleging intellectual property infringement may adversely affect our business.~~

•

~~We may become involved in lawsuits to protect or enforce our patents or other intellectual property or the patents of our licensors, which could be expensive and time consuming.~~

~~Risks Relating to our Proposed Merger with ImmunityBio~~

•

~~We may suffer negative consequences if the proposed merger is not completed.~~

•

~~We may not consummate the proposed merger with ImmunityBio in the time frame anticipated or at all.~~

•

~~The combined company may not realize all of the anticipated benefits of the proposed merger.~~

~~Risks Relating to Our Common Stock:~~

•

Our Executive Chairman, and entities affiliated with him, collectively own a significant majority of our common stock and will exercise significant influence over matters requiring stockholder approval, regardless of the wishes of other stockholders.

•

~~The market price of our common stock has been and may continue to be volatile, and investors may have difficulty selling their shares.~~

•

Future sales and issuances of our common stock or rights to purchase common stock, including pursuant to our equity incentive plan, could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall.

•

We have incurred and will continue to incur costs as a result of operating as a public company and our management has been and will be required to devote substantial time to compliance initiatives and corporate governance practices, including maintaining an effective system of internal control over financial reporting.

•

If a restatement of our financial statements were to occur, our shareholders’ confidence in the company’s financial reporting in the future may be affected, which could in turn have a material adverse effect on our business and stock price.

~~Risks Related to Our~~Limited Operating History, Financial Condition and Capital Requirements

•

We will need additional financing to fund our operations and complete the development and commercialization of our various product candidates, and if we are unable to obtain such financing when needed, or on acceptable terms, we may be unable to complete the development and commercialization of our product candidates.

•Our debt could adversely affect our cash flows and limit our flexibility to raise additional capital.

•Our businesses may not be integrated successfully, or such integration may be more difficult, time consuming or costly than expected.

•We are a clinical-stage ~~biopharmaceutical~~biotechnology company with a limited operating history and no products approved for commercial sale. We have ~~incurred significant~~a history of operating losses, ~~since our inception,~~ and we ~~anticipate that we will~~expect to continue to incur losses ~~for the foreseeable future,~~and may never be profitable, which together with our limited operating history, makes it difficult to assess our future viability.

Table of Contents

Risks Related to the Discovery, Development and Commercialization of our Product Candidates

•We will be substantially dependent on the success of our product candidates and cannot guarantee that these product candidates will successfully complete development, receive regulatory approval or be successfully commercialized.

•We may develop product candidates in combination with other therapies, which exposes us to additional risks.

•We may choose to expend our limited resources on programs that do not yield successful product candidates as opposed to indications that may be more profitable or for which there is a greater likelihood of success.

•Our projections regarding the market opportunities for our product candidates may not be accurate, and the actual market for our products, if approved, may be smaller than we estimate.

•Our clinical trials may fail to adequately demonstrate the safety and efficacy of our product candidates, which would prevent or delay regulatory approval and commercialization. If our trials are not successful, we will be unable to commercialize our product candidates.

Risks Related to Reliance on Third Parties

•We have limited experience conducting clinical trials and have relied and will rely on third parties and related parties to conduct many of our preclinical studies and clinical trials, to manufacture products and to perform many essential services for any products that we commercialize, including services related to distribution, government price reporting, customer service, accounts receivable management, cash collection and AE reporting. Any failure by a third party, related party, or by us to perform as expected, to comply with legal and regulatory requirements or to conduct the clinical trials according to Good Clinical Practice (GCP) regulations, and in a timely manner, may delay or prevent our ability to seek or obtain regulatory approval for or commercialization of our product candidates and our ability to commercialize our current or future product candidates will be significantly impacted and we may be subject to regulatory sanctions.

•We use the Clinic, a related party, in some of our clinical trials which may expose us to significant regulatory risks. If our data for this site is not sufficiently robust or if there are any data integrity issues, we may be required to repeat such studies or required to contract with other clinical trial sites, and our clinical development plans will be significantly delayed, and we will incur additional costs.

•We have formed, and may in the future form or seek, strategic alliances or enter into collaborations with third parties or additional licensing arrangements in the future, and we may not realize the benefits of such alliances or licensing arrangements. If we fail to enter into such strategic alliances, collaborations or licensing arrangements, or such strategic alliances, collaborations or licensing arrangements are not successful, we may not be able to capitalize on the market potential of our product candidates.

•If conflicts arise between us and our collaborators or strategic partners, these parties may act in a manner adverse to us and could limit our ability to implement our strategies.

Table of Contents

Risks Related to Healthcare and Other Government Regulations

•We may be unable to obtain U.S. or foreign regulatory approval and, as a result, be unable to commercialize our product candidates. We are, and if we receive regulatory approval of our product candidates, will continue to be subject to ongoing extensive regulation, regulatory obligations and continued regulatory review, which may result in significant additional expense.

•Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not mean that we will be successful in obtaining regulatory approval of our product candidates in other jurisdictions.

•If we fail to comply with U.S. and foreign regulatory requirements, regulatory authorities could limit or withdraw any marketing or commercialization approvals we may receive and subject us to other penalties that could materially harm our business. For example, our GMP-in-a-Box will be regulated by the FDA as a medical device, and regulatory compliance for medical devices is expensive, complex and uncertain, and a failure to comply could lead to enforcement actions against us and other negative consequences for our business.

•We are and will be subject to U.S. and certain foreign export and import controls, sanctions, embargoes, anti-corruption laws and anti-money laundering laws and regulations. Compliance with these legal standards could impair our ability to compete in domestic and international markets. We can face criminal and/or civil liability and other serious consequences for violations, which can harm our business.

Risks Related to Intellectual Property

•If we are unable to obtain, maintain, protect and enforce patent protection and other proprietary rights for our product candidates and technologies, we may not be able to compete effectively or operate profitably and our ability to prevent our competitors from commercializing similar or identical technology and product candidates would be adversely affected.

•If any of our owned or in-licensed patent applications do not issue as patents in any jurisdiction, we may not be able to compete effectively.

•We or our licensors, collaborators, or any future strategic partners may become subject to third-party claims or litigation alleging infringement of patents or other proprietary rights or seeking to invalidate patents or other proprietary rights, and we may need to resort to litigation to protect or enforce our patents or other intellectual property or the patents or other intellectual property of our licensors, all of which could be expensive, time-consuming and unsuccessful, may delay or prevent the development and commercialization of our product candidates, or may put our patents and other proprietary rights at risk.

•The use of our technology and product candidates could potentially conflict with the rights of others, and third-party claims of intellectual property infringement, misappropriation or other violation against us, our licensors or our collaborators may prevent or delay the development and commercialization of our product candidates and technologies.

•Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our product candidates.

Table of Contents

Risks Related to Our Common Stock

•Dr. Patrick Soon-Shiong, our Executive Chairman, Global Chief Scientific and Medical Officer and our principal stockholder, has significant interests in other companies which may conflict with our interests.

•Dr. Soon-Shiong, through his voting control of the company, has the ability to control actions that require stockholder approval.

•The market price of our common stock has been and may continue to be volatile, and investors may have difficulty selling their shares.

Risks Related to Our Limited Operating History, Financial Condition and Capital Requirements

The development of biopharmaceutical products, including conducting preclinical studies and clinical trials, is a very time-consuming, expensive and uncertain process that takes years to complete. Our operations have consumed substantial amounts of cash since inception. A significant portion of our funding had been in the form of promissory notes totaling $605.6 million in indebtedness (consisting of related-party promissory notes and accrued and unpaid interest, less unamortized debt issuance costs) as of December 31, 2021 held by entities affiliated with Dr. Soon-Shiong.

As of December 31, 2021, we held cash, cash equivalents and marketable securities totaling $317.9 million. We will need to obtain additional financing to fund our future operations, including completing the development and commercialization of our product candidates. Changing circumstances may cause us to increase our spending significantly faster than we currently anticipate and we may need to raise additional funds sooner than we presently anticipate. Moreover, research and development and our operating costs and fixed expenses such as rent and other contractual commitments, including those for our research collaborations, are substantial and are expected to increase in the future.

Unless and until we can generate a sufficient amount of revenues, we may finance future cash needs through public or private equity offerings, license agreements, debt financings, collaborations, strategic alliances and marketing or distribution arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms, or at all.

To the extent that we raise additional capital through the sale of equity or equity-linked securities, including convertible debt, or through our at-the-market offering (the ATM) or other offerings, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder. The incurrence of additional indebtedness would result in increased fixed payment obligations and could involve certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. If we raise additional funds through strategic partnerships and alliances and licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies or product candidates, or grant licenses on terms unfavorable to us. We have no committed source of additional capital and if we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may be required to delay or reduce the scope of or eliminate one or more of our research or development programs or our commercialization efforts. Our current license and collaboration agreements may also be terminated if we are unable to meet the payment obligations under those agreements. As a result, we may seek to access the public or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time.

Table of Contents

Our debt could adversely affect our cash flows and limit our flexibility to raise additional capital.

We have a significant amount of debt and may need to incur additional debt to support our growth. As of December 31, 2021, our indebtedness totals $605.6 million, (consisting of related-party promissory notes and accrued and unpaid interest, less unamortized debt issuance costs), held by entities affiliated with Dr. Soon-Shiong.

Our substantial amount of debt could have important consequences and could:

•require us to dedicate a substantial portion of our cash and cash equivalents to make interest and principal payments on our debt, reducing the availability of our cash and cash equivalents and cash flow from operations to fund future capital expenditures, working capital, execution of our strategy and other general corporate requirements;

•increase our cost of borrowing and even limit our ability to access additional debt to fund future growth;

•increase our vulnerability to general adverse economic and industry conditions and adverse changes in governmental regulations;

•limit our flexibility in planning for, or reacting to, changes in our business and industry, which may place us at a disadvantage compared with our competitors; and

•limit our ability to borrow additional funds, even when necessary to maintain adequate liquidity, which would also limit our ability to further expand our business.

The occurrence of any of the foregoing factors could have a material adverse effect on our business, results of operations and financial condition.

We may need to refinance a portion of our outstanding debt as it matures. In particular, we have a $300.0 million promissory note with an entity affiliated with Dr. Soon-Shiong that becomes due and payable on December 17, 2022. In the event of a default on the loan (as defined in the promissory note), including if we do not repay the loan at maturity, the company has the right, at its sole option, to convert the outstanding principal amount and accrued and unpaid interest due under this note into shares of the company’s common stock at a price equal to $5.67 per share. If we decide to convert this note into shares of common stock, it may be dilutive to our current stockholders. There can be no assurance that we can refinance this promissory note or what terms will be available in the market at the time of refinancing. Furthermore, if prevailing interest rates or other factors at the time of refinancing result in higher interest rates upon refinancing, then the interest expense relating to the refinanced indebtedness would increase. These risks could materially adversely affect our financial condition, cash flows and results of operations.

Our businesses may not be integrated successfully, or such integration may be more difficult, time consuming or costly than expected.

The combination of two businesses is complex, costly and time-consuming and may divert significant management attention and resources to combining our prior businesses. This process may disrupt our businesses. The failure to meet the challenges involved in combining the two businesses and to realize the anticipated benefits of the Merger could cause an interruption of, or a loss of momentum in, the activities of the combined company and could adversely affect the results of operations of the combined company. Our ability to realize the anticipated benefits of the Merger will depend, to a large extent, on our ability to integrate our businesses in a manner that facilitates growth opportunities and achieves the projected synergies identified by each company without adversely affecting current revenues and investments in future growth. The overall combination of our businesses may also result in material unanticipated problems, expenses, liabilities, competitive responses, and loss of customer and other business relationships.

Many of these factors are outside of our control, and any one of them could result in lower revenues, higher costs and diversion of management time and energy, which could materially impact the business, financial condition and results of operations of the combined company. In addition, a decline in the market price of the combined company’s common stock could adversely affect the company’s ability to issue additional securities and to obtain additional financing in the future.

Table of Contents

We are a clinical-stage biotechnology company with a limited operating history and no products approved for commercial sale. We have a history of operating losses, and we expect to continue to incur losses and may never be profitable, which together with our limited operating history, makes it difficult to assess our future viability.

We are a clinical-stage ~~biopharmaceutical~~biotechnology company with a limited operating history upon which you can evaluate our business ~~can be evaluated. To date, we have generated minimal revenue related to the non-clinical use of our cell lines~~ and ~~intellectual property,~~prospects, and we have noa broad portfolio of product candidates at various stages of development. None of our products have been approved for commercial sale, and we have not generated any revenue from product ~~sales. We~~sales, although we have generated revenues from non-exclusive license agreements related to our cell lines, the sale of our bioreactors and related consumables and grant programs. In addition, we have limited experience and have not yet demonstrated an ability to successfully overcome many of the risks and uncertainties frequently encountered by companies in new and rapidly evolving fields, particularly in the biotechnology industry, including in connection with obtaining marketing approvals, manufacturing a commercial-scale product or arranging for a third party to do so on our behalf or conducting sales and marketingactivities necessary for successful product commercialization. Because of the numerous risks and uncertainties associated with our product development efforts, we are unable to predict when we may become profitable, if at all.

Since the commencement of our operations, we have incurred ~~operating~~significant losses ~~on an annual basis since our formation~~each year, and, ~~we may never become profitable. As~~as of December 31, ~~2020,~~2021 we had an accumulated deficit of ~~$754.6 million.~~$2.0 billion. We incurred net losses of $92.4 million, $65.8 million, and $96.2 million for the years ended December 31, 2020, 2019 and 2018, respectively. Our losses have resulted principally from costs incurred in ongoing preclinical studies, clinical trials and operations, as well as other research and development expenses, and general and administrative expenses.

~~A critical aspect of our strategy is~~expect to ~~invest significantly in expanding our haNK, taNK, t‑haNK, MSC and ceNK platforms and the development of our product candidates. We expect~~continue to incur significant expenses as we ~~continue~~seek to expand our business, including in connection with conducting research and development across multiple therapeutic areas, participating in clinical trial activities, continuing to acquire or in-license technologies, maintaining, protecting and expanding our intellectual property, seeking regulatory approvals, increasing our manufacturing capabilities and, upon successful receipt of ~~U.S. Food and Drug Administration, or~~ FDA approval, commercializing our products. We will also incur costs as we hire additional personnel and increase our manufacturing capabilities, including the lease or purchase of a facility for the manufacturing of our product candidates for our ongoing and any future clinical trials and, upon receipt of any FDA approval, for our initial commercialization activities. Moreover, we do not expect to have ~~any~~ significant product sales or revenue ~~for at least the next several years. These losses have had and, as our operating losses continue to increase significantly~~ in the ~~future due to these expenditures, will continue to have an adverse effect on~~near term, if ever.

If our ~~stockholders’ equity~~research and ~~working capital. Because of~~development efforts are successful, we may also face the ~~numerous~~ risks ~~and uncertainties~~ associated with the shift from development to commercialization of new products based on innovative technologies. Our ability to achieve profitability, if ever, is dependent upon, among other things, obtaining regulatory approvals for our product ~~development efforts, we are unable to predict when we may become profitable, if at all. Additionally,~~candidates and successfully commercializing our ~~net losses may fluctuate significantly from quarter to quarter, and as a result, a period-to-period comparison of~~product candidates alone or with third parties. However, our ~~results of~~ operations may not be ~~meaningful. For example, we expect~~profitable even if one or more of our ~~operating expenses to continue to increase in the year ended December 31, 2021, due to increased research~~product candidates under development are successfully developed and ~~development expenses including personnel related costs~~produced and capital and facility operating expenditures in continued efforts for our Joint COVID‑19 Collaboration with ImmunityBio. Additionally, we also expect to incur increased costs associated with our proposed merger with ImmunityBio.thereafter commercialized. Even if we do become profitable, we may not be able to sustain or increase our profitability on a quarterly or annual basis. ~~In addition, we expect increased expenses in future quarters as a result of the Joint COVID-19 Collaboration.~~

We currently do not have any therapeutic products that are approved for commercial sale. We have not received, and do not expect to receive for at least the next several years, if at all, any revenues from the commercialization of our product candidates if approved. To obtain revenue from sales of our product candidates that are significant or large enough to achieve profitability, we must succeed, either alone or with third or related parties, in developing, obtaining regulatory approval for, manufacturing and marketing therapies with commercial potential. Our ability to generate revenue and achieve and maintain profitability depends significantly on our success in many areas, including:

•

~~our research and development efforts, including preclinical studies and clinical trials of our haNK, taNK, t‑haNK, ceNK and MSC platforms and our product candidates;~~

•

continuing to develop sustainable, scalable, reliable and cost-effective manufacturing and distribution processes for our product candidates, if approved, including establishing and maintaining commercially viable supply relationships with third and related parties and establishing our own current Good Manufacturing Practices, or cGMP, manufacturing facilities and processes to support clinical development and meet the market demand for product candidates that we develop, if approved;

•

~~addressing any competing therapies and technological and industry developments;~~

•

~~identifying, assessing, acquiring and developing new technology platforms and product candidates across numerous therapeutic areas;~~

•

establishing and maintaining relationships with contract research organizations, or CROs, and clinical sites for the clinical development, both in the U.S. and internationally, of our product candidates;

•

~~successful and timely completion of preclinical and clinical development of our product candidates and any other future product candidates;~~

•

obtaining regulatory approvals and marketing authorizations for our current and future product candidates, including a continued acceptable safety profile both prior to and following any marketing approval of our product candidates;

•

~~making any required post-marketing approval commitments to applicable regulatory authorities;~~

•

~~launching and commercializing any approved products, either directly or with a collaborator or distributor, including the development of a commercial infrastructure;~~

•

~~obtaining market acceptance of and acceptable reimbursement for any approved products;~~

•

~~completing collaborations, licenses and other strategic transactions on favorable terms, if at all;~~

•

~~maintaining, protecting and expanding our portfolio of intellectual property rights, including patents, trade secrets and know-how;~~

•

~~defending against third-party interference or infringement claims, if any; and~~

•

~~attracting, hiring and retaining qualified personnel.~~

Even if one or more of our product candidates is eventually approved for commercial sale, we anticipate incurring significant costs associated with commercializing any approved product candidate and we may not generate significant revenue from sales of such products, resulting in limited or no profitability in the future. Our prior losses and expected future losses have had and will continue to have an adverse effect on our stockholders’ equity and working capital for the foreseeable future. Any failure to become and remain profitable may adversely affect the market price of our common stock, our ability to raise additional capital and our future viability.

Since our inception, we have used substantial amounts of cash to fund our operations and expect our expenses to increase substantially in the foreseeable future. Developing our product candidates and conducting clinical trials for the treatment of cancer, virally infectious diseases, and other diseases requires substantial amounts of capital. We will also require a significant additional amount of capital to commercialize any approved products.

As of December 31, 2020, we had cash and cash equivalents of $11.4 million and marketable debt securities of $54.8 million. We are using and expect to continue to use our existing cash and cash equivalents and marketable debt securities to fund expenses in connection with our ongoing and any future clinical trials, our manufacturing facilities and processes and the hiring of additional personnel, and for other research and development activities, working capital and general corporate purposes, including our previously announced share repurchase program. As a result, of continuing anticipated operating cash outflows, we believe that substantial doubt exists regarding our ability to continue as a going concern without additional funding or financial support. However, we believe our existing cash, cash equivalents, and investments in marketable debt securities, and our ability to borrow from affiliated entities, will be sufficient to fund operations through at least the next 12 months following the issuance date of the financial statements based primarily upon our Executive Chairman’s intent and ability to support our operations with additional funds, including loans from affiliated entities, as required, which we believe alleviates such doubt. Our estimate as to how long we expect our existing cash and cash equivalents to be available to fund our operations is based on assumptions that may be proved inaccurate, and we could deplete our available capital resources sooner than we currently expect. In addition, changing circumstances, including the completion of the proposed merger with ImmunityBio, may cause us to consume capital significantly faster than we currently anticipate, and we may need to spend more money than currently expected because of circumstances beyond our control. We may require additional capital for the further development and any commercialization of our product candidates and may need to raise additional funds sooner than we anticipate if we choose to expand more rapidly.

~~Our future capital requirements may depend on, and could increase significantly as a result of, many factors, including:~~

•

~~the timing of, and the costs involved in, preclinical and clinical development and obtaining any regulatory approvals for our oncology product candidates;~~

•

~~the timing of, and the costs involved with, the joint development, manufacturing and marketing of a vaccine and multiple therapeutics for COVID‑19 with ImmunityBio;~~

•

~~the costs of manufacturing, distributing and processing our product candidates and any products for which we receive regulatory approval, if any;~~

•

~~the number and characteristics of any other product candidates we develop or acquire;~~

•

our ability to establish and maintain strategic collaborations, licensing or other commercialization arrangements and the terms and timing of such arrangements, including our arrangements with ImmunityBio and its subsidiaries and Viracta;

•

~~the degree and rate of market acceptance of any approved products;~~

•

~~the emergence, approval, availability, perceived advantages, relative cost, relative safety and relative efficacy of other products or treatments;~~

•

~~the expenses needed to attract and retain skilled personnel;~~

•

~~the costs associated with being a public company;~~

•

~~the costs associated with our proposed merger with ImmunityBio;~~

•

~~the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing intellectual property claims, including litigation costs and the outcome of such litigation;~~

•

~~the costs related to commercializing product candidates independently;~~

•

~~the timing, receipt and amount of sales of, or royalties on, any approved products; and~~

•

~~any product liability or other lawsuits related to our product candidates or the company.~~

To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our common stockholders’ rights. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or licensing arrangements with pharmaceutical partners, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates, or grant licenses on terms that may not be favorable to us. Additional capital may not be available when we need it on terms that are acceptable to us or at all. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market any approved products that we would otherwise prefer to develop and market ourselves, or be unable to continue or expand our operations or otherwise capitalize on our business opportunities, as desired, which could materially affect our business, financial condition and results of operations and cause the price of our common stock to decline.

~~We expect our business to be adversely affected by outbreaks of epidemic, pandemic or contagious diseases, including the ongoing coronavirus pandemic.~~

Outbreaks of epidemic, pandemic or contagious diseases, such as the coronavirus pandemic, may significantly disrupt our operations and adversely affect our business, financial condition and results of operations. In March 2020, the World Health Organization declared the outbreak of COVID‑19 a global pandemic as the novel coronavirus continued to spread throughout the world. The spread of this pandemic has caused significant volatility and uncertainty in the U.S. and international markets and has resulted in increased risks to our operations. We are monitoring a number of risks related to this pandemic, including the following:

•

Financial: While to date, the financial impact to our business has not been material, we anticipate that the pandemic could have an adverse financial impact in the short-term and potentially beyond. As a result of slower patient enrollment, we may not be able to complete our clinical trials as planned or in a timely manner. We expect to continue spending on research and development during the year ended December 31, 2021 and beyond, and we could also have unexpected expenses related to the pandemic. The short-term continued expenses, as well as the overall uncertainty and disruption caused by the pandemic, will likely cause a delay in our ability to commercialize a product and adversely impact our financial results.

•

Supply Chain: While to date we have not experienced significant disruptions in our supply chain and distribution, an extended duration of this pandemic could result in disruptions in the future. For example, quarantines, shelter-in-place and similar government orders, travel restrictions and health impacts of the COVID‑19 pandemic, could impact the availability or productivity of personnel at third-party laboratory supply manufacturers, distributors, freight carriers and other necessary components of our supply chain. In addition, there may be unfavorable changes in the availability or cost of raw materials, intermediates and other materials necessary for production, which may result in disruptions in our supply chain and adversely affect our ability to manufacture and distribute certain product candidates for clinical supply.

•

Clinical Trials: This pandemic did not significantly impact our business or financial results during the year ended December 31, 2020, however, it is likely to adversely affect certain of our clinical trials, including our ability to initiate and complete our clinical trials within the anticipated timelines. Due to site and participant availability during the pandemic, new subject enrollment is expected to slow in the short-term for most of our clinical trials. For ongoing trials, we have seen an increasing number of clinical trial sites imposing restrictions on patient visits to limit risks of possible COVID‑19 exposure, and we may experience issues with participant compliance with clinical trial protocols as a result of quarantines, travel restrictions and interruptions to healthcare services. The current pressures on medical systems and the prioritization of healthcare resources toward the COVID‑19 pandemic have also resulted in interruptions in data collection and submissions for certain clinical trials and delayed starts for certain planned studies. As a result, our anticipated filing and marketing timelines may be adversely impacted.

•

Overall economic and capital markets decline: The impact of the COVID‑19 pandemic could result in a prolonged recession or depression in the U.S. or globally that could harm the banking system, limit demand for all products and services and cause other seen and unforeseen events and circumstances, all of which could negatively impact us. The continued spread of COVID‑19 has led to and could continue to lead to severe disruption and volatility in the U.S. and global capital markets, which could result in a decline in stock price, increase our cost of capital and adversely affect our ability to access the capital markets in the future. In addition, trading prices on the public stock market, including our common stock, have been highly volatile as a result of the COVID‑19 pandemic.

•

Regulatory Reviews: The operations of the FDA or other regulatory agencies may be adversely affected. In response to COVID‑19, federal, state and local governments are issuing new rules, regulations, orders and advisories on a regular basis. These government actions can impact us, our members and our suppliers. There is also the possibility that we may experience delays with obtaining approvals for our Investigational New Drug, or IND, applications.

The foregoing and other risks may have an adverse effect on our overall business, financial condition and results of operations. Additionally, the ongoing COVID‑19 pandemic may also affect our operating and financial results in a manner that is not presently known to us or that we currently have not considered as significant risks to our operations. This pandemic may also amplify many of the other risks described throughout the “Risk Factors” section of this Annual Report. Any resulting financial impact cannot be reasonably estimated at this time. The extent to which the COVID‑19 pandemic impacts our business and results will depend on future developments, which are uncertain and cannot be predicted with confidence, including the duration and scope of the outbreak, any potential future waves of the pandemic, new information which may emerge concerning the severity of COVID‑19 and the ongoing and future actions to contain it or treat its impact, among others.

We may use our financial and human resources to pursue a particular type of treatment, or treatment for a particular type of cancer, and fail to capitalize on programs or treatment of other types of cancer that may be more ~~profitable or~~difficult for ~~which there is a greater likelihood of success.~~

~~Because we have limited resources, we must choose~~you to pursue and fund the development of specific types of treatment, or treatment for a specific type of cancer or viral infectious diseases, and may forego or delay pursuit of opportunities with other programs, investigational medicines, or treatment for other types of cancer or viral infectious diseases, which could later prove to have greater commercial potential. Moreover, given the rapidly evolving competitive landscape and the time it takes to advance a product through clinical development, an incorrect decision to pursue a particular type of treatment or cancer may have a material adverse effect on our results of operation and negatively impactassess our future clinical strategies. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs for investigational medicines or clinical trials may not yield any commercially viable products. Ifviability than it could be if we ~~do not accurately evaluate and anticipate the commercial potential or target market for~~had a particular type of treatment or cancer or viral infectious disease, we may choose to spend our limited resources on a particular treatment, or treatment for a particular type of cancer or viral infectious disease, and then later learn that another type of treatment or cancer that we previously decided not to pursue would have been more advantageous.

longer operating history.

We invest our cash on hand in various financial instruments which are subject to risks that could adversely affect our business, results of operations, liquidity and financial condition.

We invest our cash in a variety of financial instruments, principally commercial paper, corporate debt securities and foreign government bonds. All of these investments are subject to credit, liquidity, market and interest rate risk. Such risks, including the failure or severe financial distress of the financial institutions that hold our cash, cash equivalents and investments, may result in a loss of liquidity, impairment to our investments, realization of substantial future losses, or a complete loss of the investments in the long-term, which may have a material adverse effect on our business, results of operations, liquidity and financial condition. In order to manage the risk to our investments, we maintain an investment policy that, among other things, limits the amount that we may invest in any one issue or any single issuer and requires us to only invest in high credit quality securities to preserve liquidity.

Table of Contents

Risks ~~Relating~~Related to ~~Our Business~~the Discovery, Development and ~~Industry~~

~~The foundation~~Commercialization of our ~~business is based upon~~Product Candidates

We will be substantially dependent on the success of our ~~aNK cells as a technology platform. Our aNK platform and~~ product candidates ~~derived thereof, including genetically modified haNK, taNK, t~~‑~~haNK, ceNK~~ and ~~MSC~~cannot guarantee that these product candidates will ~~require significant additional clinical testing before we can potentially seek~~successfully complete development, receive regulatory approval or be successfully commercialized.

From inception through the date of this Annual Report, we have generated minimal revenue from non-exclusive license agreements related to our cell lines, and ~~launch~~the sale of our bioreactors and related consumables. We have no clinical products approved for commercial ~~sales.~~

~~Our business~~sale and ~~future success depend on our ability to utilize our aNK cells as a technology platform,~~have not generated any revenue from therapeutic and ~~to obtain regulatory approval for one or more~~vaccine product candidates ~~derived from it,~~that are under development. We have invested a significant portion of our efforts and ~~then successfully commercialize~~financial resources in the development of our main product candidates, ~~addressing numerous therapeutic areas.~~an antibody cytokine fusion protein (Anktiva), saRNA and second-generation hAd5 vaccine candidates, and aldoxorubicin, some of which are used in combination with our NK cell therapy candidates. Our ~~aNK platform and our haNK, taNK, t‑haNK, ceNK and MSC~~ product candidates ~~are in varying stages of development and may never become commercialized. All of our product candidates developed from our technology platform~~ will require additional clinical and non-clinical development, regulatory ~~review and~~ approval, ~~in multiple jurisdictions, substantial investment, access to sufficient~~ commercial manufacturing ~~capacity and~~arrangements, establishment of a commercial organization, significant marketing efforts, and further investment before ~~they~~we can ~~be successfully commercialized. Because all of~~generate any revenues from product sales. We expect to invest heavily in these product candidates as well as in our other existing product candidates and in any future product candidates that we may develop. Our product candidates are ~~based on~~susceptible to the ~~same core aNK technology, if~~risks of failure inherent at any ~~of our product candidates encounter safety or efficacy problems, developmental delays or regulatory issues or other problems, these could impact the development plans for our other product candidates.~~

~~Utilizing haNK, taNK, t~~‑haNK and ceNK cells represents a novel approach to immunotherapy, including cancer treatment, and we must overcome significant challenges in order to successfully develop, commercialize and manufacture our product candidates.

We have concentrated our research and development efforts on utilizing aNK cells as an immunotherapy platform and genetically modified aNK cells as product candidates based on this platform. We believe that our product candidates represent a novel approach to immunotherapy, including cancer treatment. Advancing this novel immunotherapy creates significant challenges for us, including:

•

~~educating medical personnel regarding the potential side effect profile of our cells;~~

•

~~training a sufficient number of medical personnel how to properly administer our cells;~~

•

~~enrolling sufficient numbers of patients in clinical trials;~~

•

~~developing a reliable, safe and effective means of genetically modifying our cells;~~

•

~~manufacturing our cells on a large scale and in a cost-effective manner;~~

•

submitting applications for and obtaining regulatory approval, as the FDA and other regulatory authorities have limited experience with commercial development of immunotherapies for cancer and viral associated infectious diseases; and

•

~~establishing sales and marketing capabilities, as well as developing a manufacturing process and distribution network to support the commercialization of any approved products.~~

~~We must be able to overcome these challenges in order for us to successfully develop, commercialize and manufacture our product candidates utilizing haNK, taNK, t‑haNK and ceNK cells.~~

We believe that our ability to realize the full value of our aNK platform will depend on our ability to successfully develop and commercialize haNK and our other product candidates in a wider range of indications. We are simultaneously pursuing preclinical and clinical development of a numberstage of product ~~candidates spanning several types~~development, including the appearance of ~~cancers. For example,~~unexpected AEs or failure to achieve primary endpoints in clinical trials. Furthermore, we are devoting substantial resources toward the development of haNK and t‑haNK product candidates as combination therapies with commercially approved monoclonal antibodies and late-stage product candidates for solid tumors such as breast, pancreatic, lung, head and neck and hematologic malignancies such as diffuse large B‑cell lymphoma, or DLBCL, and serious viral diseases such as COVID‑19.

Even if we are successful in continuing to build our pipeline of product candidates based on our technology platform, obtaining regulatory approvals and commercializing any approved product candidates will require substantial additional funding beyond our existing cash and cash equivalents and marketable debt securities, and are prone to numerous risks of failure. Investment in biopharmaceutical product development involves significant risks that any product candidate will fail to demonstrate adequate efficacy or an acceptable safety profile to the satisfaction of regulatory authorities, gain regulatory approval or become commercially viable. We cannot assure you that we will meet our timelines for current or future clinical trials, which may be delayed or not completed for a number of reasons. Additionally, our ability to generate revenues from our combination therapy products will also depend on the availability of the other therapies with which our products are intended to be used. We currently generate no meaningful revenues from the sale of any product candidates, and we may never be able to ~~successfully advance any~~develop or commercialize a product.

We may develop product candidates ~~through the development process. Our research programs~~in combination with other therapies, which exposes us to additional risks.

We may ~~initially show promise in identifying~~develop product candidates ~~but ultimately fail to yield~~in combination with one or more other therapies. We are studying Anktiva therapy along with other products and product candidates, such as BCG, PD-L1 t-haNK, hAd5 and yeast TAAs, and aldoxorubicin. If we choose to develop a product candidate for use in combination with an approved therapy, we are subject to the risk that the FDA, EMA or comparable foreign regulatory authorities in other jurisdictions could revoke approval of, or that safety, efficacy, manufacturing or supply issues could arise with the therapy used in combination with our product candidate. The FDA may require us to use more complex clinical ~~development~~trial designs in order to evaluate the contribution of each product and product candidate to any observed effects. To the extent that we do not have rights to already approved products, this may require us to work with another company to satisfy such a requirement or ~~commercialization~~increase our cost of development. It is possible that the results of these trials could show that any positive results are attributable to the already approved product. Following product approval, the FDA may require that products used in conjunction with each other be cross labeled for ~~many reasons, including~~combined use. If the ~~following:~~

•

~~our product candidates may not succeed in preclinical or clinical testing due to failing to generate enough data to support the initiation or continuation~~therapies we use in combination with our product candidates are replaced as the standard of care for the indications we choose for any of our product candidates, the FDA or comparable foreign regulatory authorities may require us to conduct additional clinical trials. The occurrence of ~~clinical trials or due to lack of patient enrollment in clinical trials;~~

•

~~a product candidate may be shown to have harmful side effects or other characteristics in larger scale clinical studies that indicate it is unlikely to meet applicable regulatory criteria;~~

•

~~competitors may develop alternatives that render our product candidates obsolete or less attractive;~~

•

~~we may not be able or willing to assemble sufficient resources to acquire or discover additional product candidates from our technology platform;~~

•

~~product candidates we develop may nevertheless be covered by third parties’ patents or other exclusive rights;~~

•

~~the market for a product candidate may change during our program so that the continued development of that product candidate is no longer reasonable;~~

•

~~a product candidate may not be capable of being manufactured in commercial quantities at an acceptable cost, or at all; and~~

•

~~a product candidate may not be accepted as safe and effective by patients, the medical community or third-party payors.~~

If any of these ~~events occur, we may be forced~~risks could result in our own products, if approved, being removed from the market or being less successful commercially.

In addition, unapproved therapies face the same risks described with respect to ~~abandon~~ our ~~development efforts for a product candidate or the entire platform, or we may not be able to identify, discover, develop or commercialize additional~~ product candidates ~~which would have a material adverse effect on our business~~currently in development and ~~could potentially cause us to cease operations.~~

~~We may not be able to file INDs to commence additional~~ clinical trials, onincluding the ~~timelines we expect,~~potential for serious adverse effects, delays in clinical trials and ~~even if we are able to,~~lack of FDA approval. If the FDA ~~may~~or comparable foreign regulatory authorities do not ~~permit us~~approve or revoke their approval of these other therapies, or if safety, efficacy, quality, manufacturing or supply issues arise with, the therapies we choose to ~~proceed~~evaluate in ~~a timely manner, or at all.~~

~~Prior to commencing clinical trials in the U.S. for~~combination with any of our product candidates, we may be ~~required~~unable to ~~have an allowed IND for each product candidate. As~~obtain approval of ~~the date~~or market such combination therapy.

Table of ~~this filing, we have numerous INDs for clinical trials that have been authorized in the U.S.~~ Contents

We are required to file additional INDs prior to initiating our planned clinical trials. Submission of an IND may not result in the FDA allowing further clinical trials to begin and, once begun, issues may arise that will require us to suspend or terminate such clinical trials. Additionally, even if relevant regulatory authorities agree with the design and implementation of the clinical trials set forth in an IND or clinical trial application, these regulatory authorities may change their requirements in the future. The fact that we are pursuing novel technologies may also exacerbate these risks with respect to our product candidates, and as a result, we may not meet our anticipated clinical development timelines.

~~Our plans to support the Joint COVID‑19 Collaboration by moving some of our current manufacturing facilities or repurposing personnel may cause delays in our oncology trials.~~

We have prepared one of our GMP manufacturing facilities previously used to manufacture product for our oncology trials to manufacture and produce a COVID‑19 vaccine candidate and we are in the process of readying a new, well-equipped location to manufacture and produce clinical products for our oncology trials. We cannot assure you that we will be able to achieve GMP qualifications for this new manufacturing facility, or the extent of costs or delays in timing to do so.

Failure to achieve GMP status could adversely impact our ability to successfully develop our oncology product candidates. In addition, we have repurposed some of our manufacturing facility in Culver City, California, and personnel to support the Joint COVD‑19 Collaboration Agreement. While we believe we have sufficient product in our inventory to not incur any disruptions in our current or planned oncology trials, we cannot be certain that we will not experience any unforeseen circumstances that may cause delays in our ability to manufacture sufficient product for our current or planned trials. If this occurs, such trials could be significantly delayed which would have an adverse effect on our business, financial condition, results of operations and prospects.

Our efforts regarding the Joint COVID‑19 Collaboration may be difficult to integrate into our current operations and will require additional personnel who will require training which may cause some of our employees to reallocate their time from our current operations or manufacturing duties which could in turn cause delays in clinical supply of our products or trials.

After signing the binding term sheet regarding the Joint COVID‑19 Collaboration in May 2020, we have made significant investments related to the development and manufacture of our COVID‑19 product candidates. We have repurposed some of our personnel to support our QUILT‑COVID‑19‑MSC program and have repurposed some of our personnel overseeing quality of our oncology products to support the Joint COVID‑19 Collaboration. We also plan to hire additional staff to support the Joint COVID‑19 Collaboration, which will increase our expenses. Although we do not believe the Joint COVID‑19 collaboration will have a material impact on our current oncology trials in the near term, if our current personnel fail to remain focused on our oncology drug candidates, or new personnel that we plan to hire to support the Joint COVID‑19 Collaboration require extensive training, our current oncology operations may be adversely impacted.

~~We face significant competition in the biopharmaceutical industry, and many of our competitors have substantially greater experience and resources than we have.~~

Even if our aNK platform products prove successful, we might not be able to remain competitive because of the rapid pace of technological development in the biopharmaceutical field. Our haNK, taNK, t‑haNK and ceNK product candidates compete with other cell and molecule-based immunotherapy approaches using or targeting natural killer cells, NKT cells, T‑cells, and dendritic cells.

Competitors focused on CAR‑T related treatment approaches include AbbVie Inc., Atara Biotherapeutics, Inc., Precigen Corporation, Inc., Allogene Therapeutics, Inc., Bristol‑Myers Squibb Company, Beijing Immunochina Pharmaceuticals Co., Ltd., Cellular Biomedicine Group, Inc., iCell Gene Therapeutics LLC, JW Therapeutics Co., Ltd., Amgen, Inc., Leucid Bio Ltd., Bellicum Pharmaceuticals, Inc., Medisix Therapeutics Pte Ltd., Bluebird Bio, Inc., Mesoblast Ltd., Calibr/Scripps Research, Mustang Bio, Inc., Carina Biotech, Inc., CARsgen Therapeutics, CRISPR Therapeutics, Inc., GEMoaB Monoclonals GmbH, Nanjing Legend Biotechnology Co., Ltd, Cartherics Pty Ltd, Novartis AG, Pfizer, Inc., Cellectis SA, Poseida Therapeutics, Inc., Prepromene Bio, Inc., Celularity, Inc., Servier Laboratories, Sorrento Therapeutics, Inc., Celyad SA, Takeda Pharmaceutical Company Limited, Fortress Biotech, Inc., TC BioPharm Ltd., Tessa Therapeutics Pte Ltd, Gilead Sciences, Inc., Tmunity Therapeutics, Inc., Transposagen Biopharmaceuticals, Inc., Humanigen, Inc., Immune Therapeutics, Inc., and Xyphos, Inc./Astellas.

Competitor companies focused on other T‑cell based approaches include Adaptimmune Ltd., Adicet Bio, Inc., Autolus Therapeutics, plc, Cell Medica Limited, Eureka Therapeutics, Inc., Formula Pharmaceuticals, Inc., GlaxoSmithKline plc., Green Cross LabCell Corp., Immatics Biotechnologies GmbH, Immunocore Limited, Iovance Biotherapeutics, Inc., Kiadis Pharma Netherlands B.V., Lion TCR Pte Ltd., MolMed, S.p.A., Precision Biosciences, Inc., Janssen Pharmaceuticals, Inc., Noile‑Immune Biotech, Inc., Anixa Biosciences, Inc., Beam Therapeutics Inc., BioNTech SE, Cartesian Therapeutics, Inc., Marker Therapeutics, Inc., Refuge Biotechnologies, Inc., Repertoire Immune Medicines, Inc., Sensei Biotherapeutics, Inc., Senti Biosciences, Inc., TCR² Therapeutics Inc., TScan Therapeutics, Inc., and Takara Bio, Inc.

Competitor companies focused on dendritic cell based approaches include Argos Therapeutics, Inc., Biovest International, Inc., ImmunoCellular Therapeutics, Ltd., Merck & Co, Inc./Immune Design, Inc., Inovio Pharmaceuticals, Inc., Precigen Corporation, Inc., Medigene AG, and Northwest Biotherapeutics, Inc.

Competitor companies focused on natural killer cell based approaches include Acepodia, Inc., Carabou Biosciences, Inc., Catamaran Bio Inc., Celularity, Inc., Century Therapeutics, Inc., Cytovia Therapeutics, Inc., Glycostem Therapeutics BV, Kiadis Pharma Netherlands B.V./CytoSen Therapeutics, Inc., Dragonfly Therapeutics, Inc., Editas Medicine, Inc., EMERcell, Exacis Biotherapeutics, Inc., Fate Therapeutics, Inc., Gamida Cell, Ltd., INmune Bio Inc., Nkarta Therapeutics, Inc., Onkimmune Ltd., Oncternal Therapeutics, Inc., NKMax America, Artiva Biotherapeutics/Merck, HebeCell Corp., Vycellix, Inc., oNKo‑innate Pty Ltd., ONK Therapeutics Limited, Sanofi, S.A., Shoreline Biosciences, Inc., Takeda Pharmaceutical Company Limited, XNK Therapeutics AB, Zelluna Immunotherapy AS, and Ziopharm Oncology, Inc.

Competitor companies focused on large molecule immunotherapy approaches, including those overlapping the natural killer cell space, include Cytomx Therapeutics, Inc., Compass Therapeutics, Inc., Innate Pharma SA, Nektar Therapeutics, Inc., and Sorrento Therapeutics, Inc.

Other potential immunotherapy competitors include Affimed GmbH, AgenTus Therapeutics, Inc., Agios Pharmaceuticals, Inc., Codiak Biosciences, Glycostem Therapeutics BV, Kuur Therapeutics Limited, Triumvira Immunologics, Incysus Therapeutics, Inc., GammaDelta Therapeutics Ltd., Lyell Immunopharma, Inc., and GT Biopharma, Inc.

There are currently four approved T‑cell based treatments that are marketed by Novartis AG, Gilead Sciences/Kite Pharma (two therapeutics), and the Bristol‑Myers Squibb Company. There is currently one approved dendritic cell-based cancer vaccine marketed by Dendron Pharmaceuticals, LLC for the treatment of metastatic castration resistant prostate cancer.

Competitor companies focused on COVID‑19 cell therapy currently include AstraZeneca plc, Athersys, Inc./Healios K.K., Capricor Therapeutics, Inc., CAR‑T (Shanghai) Biotechnology, Cellavita Pesquisa Científica Ltda, Cellenkos, Inc., Cellular Biomedicine Group, Inc., Celularity, Inc., Sorrento Therapeutics, Inc., Chinese Academy of Sciences, Chongqing Sidemu Biotechnology Technology/ImmunCyte Life Sciences, Inc., Enlivex Therapeutics Ltd, Green Cross LabCell Corp., Hope Biosciences, Johnson & Johnson, Mesoblast Limited, Moderna, Inc., NovaVax, Inc., Orbsen Therapeutics Limited, Pfizer, Inc./BioNTech SE, Pluristem Therapeutics, Inc., Rigshospitalet, Tianhe Stem Cell Biotechnologies Inc., University of Minnesota/Fate Therapeutics, Inc., and Xinjiang Medical University.

In addition, a very large number of companies, government agencies and academic centers around the world are developing COVID‑19 vaccines, and many of these entities are in more advanced stages of development than ImmunityBio, including some that have started Phase II and/or III clinical trials or already have emergency regulatory approval in some regions. Even if ImmunityBio’s COVID‑19 vaccine candidate is ultimately approved for marketing, the value of our profit-sharing opportunity would be adversely impacted if other COVID‑19 vaccines are approved earlier or show better efficacy or safety than ImmunityBio’s COVID‑19 vaccine candidate.

Many of our current or potential competitors have greater financial and other resources, larger research and development staffs, and more experienced capabilities in researching, developing and testing products than we do. Many of these companies also have more experience in conducting clinical trials, obtaining FDA and other regulatory approvals, and manufacturing, marketing and distributing therapeutic products. Smaller or clinical-stage companies like us may successfully compete by establishing collaborative relationships with larger pharmaceutical companies or academic institutions. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient, or are less expensive than any products that we may develop. Furthermore, currently approved products could be discovered to have application for treatment of cancer and other diseases, which could give such products significant regulatory and market timing advantages over any of our product candidates. In addition, large pharmaceutical companies or other companies with greater resources or experience than us may choose to ~~forgo therapy opportunities~~expend our limited resources on programs that would have otherwise been complementary to our product development and collaboration plans. Our competitors may succeed in developing, obtaining patent protection for, or commercializing their products more rapidly than us, which could result in our competitors establishing a strong market position before we are able to enter the market. A competing company developing or acquiring rights to a more effective therapeutic product for the same diseases targeted by us, or one that offers significantly lower costs of treatment could render our products noncompetitive or obsolete. We maydo not beyield successful ~~in marketing against competitors any~~ product candidates weas opposed to indications that may ~~develop.~~

~~Our business plan involves the creation~~be more profitable or for which there is a greater likelihood of ~~a complex integrated ecosystem capable of addressing a wide range of indications. As a result, our future success depends on our ability to prioritize among many different opportunities.~~

success.

We do not have sufficient resources to pursue development of all or even a substantial portion of the potential opportunities that we believe will be afforded to us by our ~~planned integrated ecosystem.~~product candidates. Because we have limited resources and access to capital to fund our operations, our management must make ~~significant prioritization~~strategic decisions as to which product candidates and indications to pursue and how much of our resources to allocate to each. Our management must also evaluate the benefits of developing in-licensed or jointly owned technologies, which in some circumstances we may be contractually obligated to pursue, relative to developing other product candidates, indications or programs. Our management has broad discretion to suspend, scale down, or discontinue any or all of these development efforts, or to initiate new programs to treat other diseases. If we select and commit resources to opportunities that we are unable to successfully develop, or we forego more promising opportunities, our business, financial condition and results of operations will be adversely affected.

~~We plan to develop~~

Our projections regarding the market opportunities for our product candidates and potentially other programs in combination with other commercially available therapies or therapies we, or an affiliate of ours, have in development, which exposes us to additional risks. We do not know whether our attempts to use our product candidates in combination will be safe or effective.

We intend to develop cryopreserved PD‑L1.t‑haNK, haNK, and potentially other programs in combination with one or more currently approved cancer therapies or therapies in development. For Merkel cell carcinoma, we plan to evaluate haNK in combination with N‑803 and avelumab. For pancreatic cancer, TNBC, and breast cancer indications, we plan to evaluate PD‑L1.t‑haNK in combination with N‑803 and aldoxorubicin. For NSCLC indications, we plan to evaluate PD‑L1.t‑haNK in combination with N‑803 and a checkpoint inhibitor.

~~Patients~~ may not be ~~able to tolerate any of~~accurate, and the actual market for our ~~other~~products, if approved, may be smaller than we estimate.

Since our current product candidates ~~in combination with~~and any ~~other therapies or dosing of our~~future product candidates will represent novel approaches to treating various conditions, it may be difficult, in ~~combination with other therapies may have serious or unexpected adverse events. Furthermore, we will be required~~any event, to ~~show with substantial evidence that~~accurately estimate the ~~combination of drugs when used together are more effective than each of the individual drugs used separately. We can provide no assurance that we can establish that any of our~~potential revenues from these product ~~candidates, when used in combination with other drugs, will be more effective than each individual drug when used alone.~~

We may also evaluate our product candidates in combination with one or more other cancer therapies that have not yet been approved for marketing by the FDA, the European Medicines Agency, or EMA, or comparable foreign regulatory authorities. We will not be able to market and sell any product candidate in combination with any such unapproved cancer therapies that do not ultimately obtain marketing approval.

If the FDA, EMA or other comparable foreign regulatory authorities do not approve or revoke their approval of these other therapies, or if safety, efficacy, purity, potency, commercial adoption, manufacturing or supply issues arise with the therapies we choose to evaluate in combination with any of our product candidates,candidates. Accordingly, we may ~~be unable~~spend significant capital trying to obtain approval ~~of or successfully market any one or all of the~~for product candidates ~~we develop.~~

~~Additionally, if the third-party providers~~that have an uncertain commercial market. Our projections of ~~therapies or therapies in development used in combination~~addressable patient populations that may benefit from treatment with our product candidates are ~~unable~~based on our beliefs and estimates. These estimates, which have been derived from a variety of sources, including scientific literature, surveys of clinics, patient foundations, or market research by third parties, may prove to ~~produce sufficient quantities~~be incorrect. Further, new studies or approvals of new therapeutics may change the estimated incidence or prevalence of these diseases. The number of patients may turn out to be lower than expected. Additionally, the potentially addressable patient population for our product candidates may be limited or may not be amenable to treatment with our product candidates and may also be limited by the cost of our treatments and the reimbursement of those treatment costs by third-party payors. Even if we obtain significant market share for our product candidates, because the potential target populations may be small, we may never achieve profitability without obtaining regulatory approval for additional indications.

Our clinical trials ~~or for commercialization~~may fail to adequately demonstrate the safety and efficacy of our product candidates, ~~or if the cost of combination therapies are prohibitive, our development and commercialization efforts would be impaired,~~ which would ~~have an adverse effect on our business, financial condition, results of operations~~prevent or delay regulatory approval and growth prospects. If clinical trial collaboration and supply agreement terminates or if we cannot negotiate favorable terms for combination therapies, our combination therapy development plans could be delayed or terminated, and the cost to us to conduct such trials may significantly increase.

Clinical development involves a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future clinical trial results. We may encounter substantial delays in clinical trials, or may not be able to conduct or complete clinical trials on the expected timelines, if at all.commercialization. If our ~~preclinical studies and clinical~~ trials are not ~~sufficient~~successful, we will be unable to ~~support~~commercialize our product candidates.

Our research and development programs are at various stages of development. The clinical trials of our product candidates as well as the manufacturing and marketing of our product candidates will be subject to extensive and rigorous review and regulation by numerous government authorities in the U.S. and in other countries where we intend to test and market our product candidates. Before obtaining regulatory ~~approval~~approvals for the commercial sale of any of our product candidates, we ~~may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development of such product candidate.~~

~~It is impossible to predict when or if any of our product candidates~~must demonstrate through lengthy, complex and therapies will prove safe, effective, or potent in humans or will receive regulatory approval. Before obtaining marketing approval from regulatory authorities for the sale of any product candidate, we must complete extensiveexpensive preclinical studies and clinical trials to demonstrate the safety, efficacy or potency of our product candidates in humans. A failure of one or more clinical trials can occur at any stage of testing. The outcome of early clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their product candidates. Our pre-clinical studies and future clinical trials may not be successful.

~~We cannot be certain that our planned clinical trials will be sufficient to support regulatory approval of our product candidates. Clinical~~ testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Human clinical trials are expensive and difficult to design and implement, in part because they are subject to rigorous regulatory requirements. Failure or delay can occur at any time during the clinical trial process.

We may experience delays in obtaining the FDA’s authorization to initiate clinical trials under future INDs, completing ongoing preclinical and clinical studies of our other future product candidates, and initiating our planned preclinical studies and clinical trials. Additionally, we cannot be certain that preclinical studies or clinical trials for our product candidates will begin on time, not require redesign, enroll an adequate number of research subjects or patients on time, or be completed on schedule, if at all. Clinical trials can be delayed or terminated for a variety of reasons, including delays or failures related to:

•

~~the FDA or comparable foreign regulatory authorities disagreeing as to the design or implementation of our clinical trials;~~

•

~~the FDA or comparable foreign regulatory authorities disagreeing with our tissue-agnostic anti-tumor development strategy;~~

•

~~delays in obtaining regulatory approval to commence a clinical trial;~~

•

reaching agreement on acceptable terms with prospective CROs and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and clinical trial sites;

•

~~obtaining institutional review board, or IRB, approval at each clinical trial site;~~

•

~~recruiting an adequate number of suitable patients to participate in a clinical trial;~~

•

~~the number of patients required for clinical trials of our product candidates may be larger than we anticipate;~~

•

~~having subjects complete a clinical trial or return for post-treatment follow-up;~~

•

~~clinical trial sites deviating from clinical trial protocol or dropping out of a clinical trial;~~

•

~~addressing subject safety concerns that arise during the course of a clinical trial;~~

•

~~adding a sufficient number of clinical trial sites; or~~

•

~~obtaining sufficient product supply of product candidates for use in preclinical studies or clinical trials from third-party suppliers.~~

~~We may experience numerous adverse or unforeseen events during, or as a result of, preclinical studies~~ and clinical trials that ~~could delay or prevent our ability to receive marketing approval or commercialize~~ our product candidates ~~including:~~

•

~~we may receive feedback from regulatory authorities that requires us to modify~~are safe, pure, and potent for use in their target indications. Each product candidate must demonstrate an adequate risk versus benefit profile in its intended patient population and for its intended use. The risk/benefit profile required for product licensure will vary depending on these factors and may include not only the ~~design of our clinical trials, including additional procedures and contingency measures in response to the COVID‑19 pandemic or as required by clinical sites, IRB, or FDA;~~

•

clinical trials of our product candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon our research efforts for our other future product candidates;

•

~~clinical trials of our product candidates may not produce differentiated or clinically significant results across tumor types or indications;~~

•

the number of patients required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate or participants may drop out of our clinical trials at a higher rate than we anticipate;

•

our third-party contractors may fail to comply with regulatory requirements, fail to maintain adequate quality controls or be unable to provide us with sufficient product supply to conduct and complete preclinical studies or clinical trials of our product candidates in a timely manner, or at all;

~~We or our investigators might have to suspend or terminate clinical trials of our product candidates for various reasons, including:~~

•

non-compliance with regulatory requirements, a finding that our product candidates have undesirable side effects or other unexpected characteristics or a finding that the participants are being exposed to unacceptable health risks;

•

the cost of clinical trials of our product candidates may be greater than we anticipate, for example, if we experience delays or challenges in identifying patients with the mutations required for our clinical trials, we may have to reimburse sites for genetic sequencing costs in order to encourage sequencing of additional patients;

•

the quality of our product candidates or other materials necessary to conduct preclinical studies or clinical trials of our product candidates may be insufficient or inadequate, and any transfer of manufacturing activities may require unforeseen manufacturing or formulation changes;

•

~~regulators may revise the requirements for approving our product candidates, or such requirements may not be as we anticipate; and~~

•

~~future collaborators may conduct clinical trials in ways they view as advantageous to them but that are suboptimal for us.~~

We have commenced studies that may provide the basis for regulatory approval, but we have not sought or obtained FDA input on the trial design, number of patients that will be enrolled in the studies, or statistical analysis plan. FDA may not accept the data generated from these studies and my reject any regulatory applications we submit with this data. If we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, if we are unable to successfully complete clinical trials of our product candidates or other testing, if the results of these trials or tests are not positive or are only moderately positive or if there are safety concerns, our business and results of operations may be adversely affected and we may incur significant additional costs. We could also encounter delays if a clinical trial is suspended or terminated by us, by the IRBs of the institutions in which such clinical trials are being conducted, by the Data Safety Monitoring Board, if any, for such clinical trial or by the FDA or other regulatory authorities. Such authorities may suspend or terminate a clinical trial due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical trial protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from the product candidates, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial.

If we experience delays in the completion, or termination, of any preclinical study or clinical trial of our product candidates, the commercial prospects of our product candidates may be harmed, and our ability to ~~generate revenues from any~~show tumor shrinkage, but also adequate duration of these product candidates will be delayed or not realized at all. In addition, any delays in completing our preclinical studies or clinical trials may increase our costs, slow down our product candidate development and approval process and jeopardize our ability to commence product sales and generate revenues. Any of these occurrences may significantly harm our business, financial condition and prospects. In addition, many of the factors that cause, or lead to,response, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates. If one or more of our product candidates generally prove to be ineffective, unsafe or commercially unviable, our entire pipeline and platform would have little, if any, value, which would have a material and adverse effect on our business, financial condition, results of operations and prospects.

Clinical drug development involves a lengthy and expensive process with an uncertain outcome, results of earlier studies and clinical trials may not be predictive of future clinical trial results, we may not be able to rely on the aNK and haNK phase I and II clinical trials data for our other product candidates, and our clinical trials may fail to adequately demonstrate substantial evidence of safety and efficacy of our product candidates. The results of our clinical trials may not satisfy the requirementsprogression of the ~~FDA~~ disease, and/or ~~other comparable foreign regulatory authorities, and we may incur additional costs or experience delays~~an improvement in ~~completing, or ultimately be unable to complete,~~survival. For example, response rates from the ~~development and commercialization of such product candidate.~~

Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. A failure of one or more of our clinical trials can occur at any time during the clinical trial process. The results of preclinical studies and early clinical trialsuse of our product candidates may not be predictive of the results of later-stage clinical trials. There is a high failure rate for product candidates proceeding through clinical trials, and product candidates in later stages of clinical trials may fail to show the required safety and efficacy despite having progressed through preclinical studies and initial clinical trials. A number of companies in the pharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier clinical trials, and we cannot be certain that we will not face similar setbacks. Even if our clinical trials are completed, the results may not be sufficient to ~~support obtaining~~obtain regulatory approval for our product candidates. In addition, our strategy and anticipated timelines are predicated upon our ability to utilize the phase I and II clinical trial data for aNK, haNK, and t‑haNK observed to date to support our planned clinical trials for allunless we can also show an adequate duration of our product candidates, including our haNK and t‑haNK product candidates. To date, we have several INDs for our haNK and t‑haNK product candidates, and we cannot offer assurances that the FDA will allow us to utilize the phase I and II aNK and haNK data to support other planned clinical trials or allow our anticipated INDs for (i) planned phase I or phase Ib/IIaresponse. The clinical trials for our ~~other~~ product candidates (ii) planned phase IIb/III clinical trials for our haNK and t‑haNK product candidates as potential combination therapies, or (iii) any other planned clinical trials, including registration studies.

~~We have in the past experienced delays in our ongoing clinical trials and we~~under development may ~~experience additional delays in the future. We do~~ not ~~know whether future clinical trials, if any, will begin on time, need to be redesigned, enroll an adequate number of patients on time or~~ be completed on schedule ~~if at all. Clinical trials can be delayed, suspended or terminated by us,~~and regulatory authorities ~~clinical trial investigators,~~may ultimately disagree with our chosen endpoints or may find that our studies or study results do not support product approval and ~~ethics committees for a variety of reasons, including failure to:~~

•

~~generate sufficient preclinical, toxicology, or other~~ ~~in vivo~~ or ~~in vitro~~ ~~data to support the initiation or continuation of clinical trials;~~

•

~~obtain regulatory authorization, or feedback on clinical trial design, to commence a clinical trial;~~

•

~~identify, recruit and train suitable clinical investigators;~~

•

~~reach agreement on acceptable terms with prospective Contract Research Organizations, or CROs, and clinical trial sites;~~

•

~~obtain and maintain IRB approval at each clinical trial site;~~

•

~~identify, recruit and enroll suitable patients to participate in a clinical trial;~~

•

~~have a sufficient number of patients complete a clinical trial or return for post-treatment follow-up;~~

•

~~ensure that our third-party contractors and clinical investigators comply with clinical trial protocols, comply with regulatory requirements, or meet their obligations to us in a timely manner;~~

•

~~address any patient safety concerns that arise during the course of a clinical trial;~~

•

~~address any conflicts with new or existing laws or regulations;~~

•

~~add a sufficient number of clinical trial sites;~~

•

~~timely manufacture sufficient quantities of product candidate for use in clinical trials; or~~

•

~~raise sufficient capital to fund a clinical trial.~~

Patient enrollment is a significant factor in the timing of clinical trials and is affected by many factors, including the size and nature of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the clinical trial, the design of the clinical trial, competing clinical trials and clinicians’ and patients’ or caregivers’ perceptions as to the potential advantages of the drug candidate being studied in relation to other available therapies, including any new drugs or treatments that may be approved for the indications we are investigating.

We could also encounter delays if a clinical trial is suspended or terminated by us, by the data safety monitoring board for such clinical trial or by the FDA or any other regulatory authority, or if the IRBs of the institutions in which such clinical trials are being conducted suspend or terminate the participation of their clinical investigators and sites subject to their review. Such authorities may suspend or terminate a clinical trial due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements, including Good Clinical Practices, or GCPs, or our clinical protocols, inspection of the clinical trial operations or clinical trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a product candidate, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial.

~~In addition, even if such clinical trials are successfully completed,~~ we cannot guarantee that the FDA or foreign regulatory authorities will interpret the results as we do or accept the therapeutic effects as valid endpoints in clinical trials necessary for market approval or they may find that our clinical trial design or conduct does not meet the applicable approval requirement and more trials could be required before we submit our product candidates for approval. ToSuccess in early clinical trials does not ensure that large-scale clinical trials will be successful, nor does it predict final results. Product candidates in later stages of clinical trials may fail to show the ~~extent~~desired safety, tolerability and efficacy traits despite having progressed through preclinical studies and initial clinical trials and after reviewing test results, we or our collaborators may abandon projects that we might previously have believed to be promising.

Table of Contents

In addition, we do not have data on possible harmful long-term effects of our product candidates and do not expect to have this data in the ~~results of the trials are not satisfactory~~near future. As a result, our ability to ~~the FDA or foreign regulatory authorities for~~generate clinical safety and effectiveness data sufficient to support submission of a marketing application we may be required to expend significant resources, which may not be available to us, to conduct additional trials in support of potential approval of our product candidates. Even if regulatory approval is secured for anyor commercialization of our product candidates is uncertain and is subject to significant risk.

Interim, initial, “top-line” and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the ~~terms~~final data.

From time to time, we may publicly disclose preliminary, interim or top-line data from our preclinical studies and clinical trials, which are based on preliminary analyses of ~~such approval~~then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular study or trial. Interim data from clinical trials that we may ~~limit~~complete are subject to the ~~scope~~risk that one or more of the clinical outcomes may materially change as patient enrollment continues and ~~use~~more patient data become available or as patients from our clinical trials continue other treatments for their disease. We also may make assumptions, estimations, calculations and conclusions as part of our ~~product candidate, which~~analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the interim, top-line or preliminary results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Top-line data also ~~limit its commercial potential.~~

~~If we experience delays~~remain subject to audit and verification procedures that may result in the ~~completion~~final data being materially different from the preliminary data we previously published. As a result, top-line data should be viewed with caution until the final data are available. Adverse differences between preliminary or interim data and final data could significantly harm our business prospects. Further, disclosure of interim data by us or ~~termination~~by our competitors could result in volatility in the price of ~~any~~our common stock.

In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is typically selected from a more extensive amount of available information, and you or others may not agree with what we determine is material or otherwise appropriate information to include in our ~~product candidates~~disclosure. If the interim, top-line or preliminary data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, ~~any reason, the commercial prospects of~~and commercialize, our product candidates may be harmed, which could harm our business, operating results, prospects or financial condition.

Our clinical trials may not be initiated or completed when we expect, or at all, they may take longer and cost more to complete than we project, our ~~ability~~clinical trial costs may be higher than for more conventional therapeutic technologies or drug products, and we may be required to ~~generate product revenues~~conduct additional clinical trials or modify current or future clinical trials based on feedback we receive from the FDA.

We cannot guarantee that any current or future clinical trials will be conducted as planned or completed on schedule, if at all, or that any of ~~these~~our product candidates will receive regulatory approval. A failure of one or more clinical trials can occur at any stage of the clinical trial process, other events may cause us to temporarily or permanently stop a clinical trial, and our future clinical trials may not be ~~delayed.~~successful.

Because our product candidates include, and we expect our future product candidates to include, candidates based on advanced therapy technologies, we expect that they will require extensive research and development and have substantial manufacturing costs. In addition, ~~any delays~~costs to treat patients and to treat potential side effects that may result from our product candidates can be significant. Some clinical trial sites may not bill, or obtain coverage from Medicare, Medicaid, or other third-party payors for some or all of these costs for patients enrolled in ~~completing~~ our clinical trials, and clinical trial sites outside of the U.S. may not reimburse for costs typically covered by third-party payors in the U.S., and as a result we may be required by those trial sites to pay such costs. Accordingly, our clinical trial costs are likely to be significantly higher per patient than those of more conventional therapeutic technologies or drug products.

Collaborations with other entities may be subject to additional delays because of the management of the trials, contract negotiations, the need to obtain agreement from multiple parties and the necessity of obtaining additional approvals for therapeutics used in the combination trials. These combination therapies will require additional testing and clinical trials will require additional FDA regulatory approval and will increase our future costs.

Table of Contents

Any inability to successfully complete preclinical and clinical development could result in additional costs to us, slow down our product ~~candidate~~ development and approval process ~~and jeopardize~~or impair our ability to commence product sales and generate revenues. In addition, if we make manufacturing changes to our product candidates, we may be required to, or we may elect to, conduct additional trials to bridge our modified product candidates to earlier versions. These changes may require FDA approval or notification and may not have their desired effect. The FDA may also not accept data from prior versions of the product to support an application, delaying our clinical trials or programs or necessitating additional clinical trials or preclinical studies. We may find that this change has unintended consequences that necessitates additional development and manufacturing work, additional clinical and preclinical studies, or that results in refusal to file or non-approval of a BLA and/or NDA.

Clinical trial delays could shorten any periods during which our product candidates have patent protection and may allow our competitors to bring products to market before we do, which could impair our ability to successfully commercialize our product candidates and may harm our business and results of operations. In addition, we have in the past experienced clinical holds imposed upon certain of our or investigator-initiated clinical trials for various reasons, and we may experience further clinical trial holds in the future. If we fail to commence or complete, or experience delays in, any of our planned clinical trials, our stock price and our ability to conduct our business as currently planned could be harmed.

Even if one of our product candidates is approved and commercialized, we may not become profitable.

If approved for marketing by applicable regulatory authorities, our ability to generate revenues from our product candidates will depend on our ability to:

•price our product candidates competitively such that third-party and government reimbursement leads to broad product adoption;

•prepare a broad network of clinical sites for administration of our product;

•create market demand for our product candidates through our own marketing and sales activities, and any other arrangements to promote these product candidates that we may otherwise establish;

•receive regulatory approval for the targeted patient population(s) and claims that are necessary or desirable for successful marketing;

•manufacture product candidates through CMOs or in our own, or our affiliates’, manufacturing facilities in sufficient quantities and at acceptable quality and manufacturing cost to meet commercial demand at launch and thereafter;

•establish and maintain agreements with wholesalers, distributors, pharmacies, and group purchasing organizations on commercially reasonable terms;

•obtain, maintain, protect and enforce patent and other intellectual property protection and regulatory exclusivity for our product candidates;

•successfully commercialize any of our product candidates that receive regulatory approval;

•maintain compliance with applicable laws, regulations, and guidance specific to commercialization including interactions with health care professionals, patient advocacy groups, and communication of health care economic information to payors and formularies;

•achieve market acceptance of our product candidates by patients, the medical community, and third-party payors;

•achieve appropriate reimbursement for our product candidates;

Table of Contents

•maintain a distribution and logistics network capable of product storage within our specifications and regulatory guidelines, and further capable of timely product delivery to commercial clinical sites;

•effectively compete with other therapies or competitors; and

•following launch, assure that our product will be used as directed and that additional unexpected safety risks will not arise.

Even if the FDA approves Anktiva for certain indications, and even if we obtain significant market share for it, because the potential target population may be small, we may never achieve profitability without obtaining regulatory approval for additional indications. The FDA often approves new therapies initially only for use in patients with r/r metastatic disease, which may limit our patient population.

Additionally, we may not be able to obtain the labeling claims necessary or desirable for the promotion of our product candidates.

Additionally, in connection with the Merger with ImmunityBio, we assumed the obligation to issue CVRs to the former stockholders of Altor in connection with the acquisition of Altor. These CVRs become payable upon the attainment of certain regulatory and sales milestones related to Anktiva. The former Altor stockholders have the ability to choose to receive these payments either in cash, in an equivalent value of our common stock or in a combination of both cash and stock at the time such payments are due, except that Dr. Soon-Shiong and his related party, as prior stockholders of Altor, have irrevocably elected to receive all payments in respect of their CVRs in the form of our common stock. Such CVR payments to Dr. Soon-Shiong and his related party are approximately $279.5 million in aggregate.

We may, however, still be required to pay the other prior Altor stockholders up to $164.2 million for the CVRs relating to the regulatory milestone and up to $164.2 million for the CVRs relating to the sales milestone should they choose to have these CVRs paid in cash instead of common stock. If this were to occur, we may need to seek additional sources of capital, and we may not be able to achieve profitability or positive cash flow. We plan to collaborate with governmental, academic and corporate partners, including affiliates, to improve and develop Anktiva, hAd5 and other therapies for new indications for use in combination with other therapies and to improve and develop other product candidates, which may expose us to additional risks, or we may not realize the benefits of such collaborations.

If we encounter delays or difficulties enrolling and/or maintaining patients in our clinical trials, our clinical development activities and receipt of necessary marketing approvals could be delayed or otherwise adversely affected.

The timely completion of clinical trials in accordance with their protocols depends, among other things, on our ability to enroll a sufficient number of patients who remain in the trial until its conclusion. We may experience difficulties or delays in patient enrollment and retention in our clinical trials for a variety of reasons.

Because the number of qualified clinical investigators is limited, we may need to conduct some of our clinical trials at the same clinical trial sites that some of our competitors use, which will reduce the number of patients who are available for our clinical trials at such clinical trial sites. Moreover, because our product candidates represent a departure from more commonly used methods for cancer and/or viral disease treatment, potential patients and their doctors may be inclined to use conventional therapies, such as chemotherapy and approved immunotherapies that have established safety and efficacy profiles, rather than enroll patients in any future clinical trial.

Delays or failures in planned patient enrollment or retention may result in increased costs or may affect the timing or outcome of the planned clinical trials, which could prevent completion of these trials and adversely affect our ability to advance the development of our product candidates, or could render further development impossible.

Table of Contents

Our product candidates may cause undesirable side effects or have other properties that could halt their clinical development, delay or prevent their regulatory approval, limit their commercial potential or result in significant negative consequences.

Results of our trials could reveal a high and unacceptable severity and prevalence of side effects, AEs or unexpected characteristics. Combination immunotherapy that includes our current product candidates may be associated with more frequent AEs or additional AEs. Undesirable side effects or unacceptable toxicities caused by our product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials or order our clinical trials to be placed on clinical hold, and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other regulatory authorities for any or all targeted indications. The FDA or comparable foreign regulatory authorities may also require additional data, clinical trials, or preclinical studies should unacceptable toxicities arise. We may need to abandon development or limit development of that product candidate to certain uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk/benefit perspective. Toxicities associated with our clinical trials and product candidates may also negatively impact our ability to conduct clinical trials using tumor-infiltrating lymphocyte therapy in larger patient populations, such as in patients that have not yet been treated with other therapies or have not yet progressed on other therapies. Even if we were to receive product approval, such approval could be contingent on inclusion of unfavorable information in our product labeling, such as limitations on the indicated uses for which the products may be marketed or distributed, a label with significant safety warnings, including boxed warnings, contraindications, and precautions, a label without statements necessary or desirable for successful commercialization, or requirements for costly post marketing testing and surveillance, or other requirements, including a Risk Evaluation and Mitigation Strategy (REMS) to monitor the safety or efficacy of the products, and in turn prevent us from commercializing and generating revenues from the sale of our current or future product candidates. In addition, these serious adverse effects may not be appropriately recognized or managed by the treating medical staff, as toxicities resulting from our product candidates are not normally encountered in the general patient population and by medical personnel. They may have difficulty observing patients and treating toxicities, which may be more challenging due to personnel changes, shift changes, house staff coverage or related issues. This could lead to more severe or prolonged toxicities or even patient deaths, which could result in us or the FDA delaying, suspending or terminating one or more of our clinical trials and which could jeopardize regulatory approval. Any of these occurrences may ~~significantly~~materially harm our business, financial condition and prospects.

The manufacture of our product candidates is complex, and we may encounter difficulties in production, particularly with respect to process development, quality control, or scaling-up of our manufacturing capabilities. If we or our related parties, or any of our third-party manufacturers encounter such difficulties, our ability to provide adequate supply of our product candidates for clinical trials or our products for patients, if approved, could be delayed or stopped, or we may be unable to maintain a commercially viable cost structure.

The manufacture of our product candidates involves complex processes, especially for our biologics, vectors and cell therapy product candidates, which are complex, highly regulated and subject to multiple risks. As a result of the complexities, the cost to manufacture biologics, vectors and cell therapies is generally higher than traditional small molecule chemical compounds, and the manufacturing process is less reliable and is more difficult to reproduce. The manufacture of cell therapy products requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. Manufacturers of cell therapy products often encounter difficulties in production, particularly in scaling up initial production. These problems include difficulties with production costs and yields, quality control, including stability of the product candidate and quality assurance testing, shortages of qualified personnel and compliance with strictly enforced federal, state, local and foreign regulations. We may also find that the manufacture of our product candidates is more difficult than anticipated, resulting in an inability to produce a sufficient amount of our product candidates for our clinical trials or, if approved, commercial supply. Even minor deviations from normal manufacturing processes could result in reduced production yields, product defects, and other supply disruptions. Currently, our product candidates are manufactured using processes developed or modified by us, our affiliates or by our third-party research institution collaborators that we may not utilize for more advanced clinical trials or commercialization.

Table of Contents

Currently we manufacture our product candidates or we may use third-party CMOs or some of our related parties to manufacture our product candidates. Our clinical trials will need to be conducted with product candidates and materials that were produced under current Good Manufacturing Practices (cGMP) and/or Good Tissue Practice regulations, which are enforced by regulatory authorities. Our product candidates may compete with other products and product candidates for access to manufacturing facilities. Moreover, because of the complexity and novelty of our manufacturing process, there are only a limited number of manufacturers that operate under cGMP regulations and that are both capable of manufacturing our product candidates for us and willing to do so. If our CMOs should cease manufacturing for us, we would experience delays in obtaining sufficient quantities of our product candidates for clinical trials and, if approved, commercial supply. Further, our CMOs may breach, terminate, or not renew our agreements with them. If we were to need to find alternative manufacturing facilities it may take us significant time to find a replacement, if we are able to find a replacement at all and it would significantly impact our ability to develop, obtain regulatory approval for or market our product candidates, if approved. The commercial terms of any new arrangement could be less favorable than our existing arrangements and the expenses relating to the transfer of necessary technology and processes could be significant.

Our failure to comply or our CMOs’ failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process. We may not be able to demonstrate sufficient comparability between products manufactured at different facilities to allow for inclusion of the clinical results from patients treated with products from these different facilities, in our product registrations. We also are required to register certain clinical trials and post the results of certain completed clinical trials on a government-sponsored database, ClinicalTrials.gov, within specified timeframes. Failure to do so could result in enforcement actions and adverse publicity.

Reliance on third-party manufacturers entails exposure to risks to which we would not be subject if we manufactured the product candidate ourselves, including:

•inability to negotiate manufacturing and quality agreements with third parties under commercially reasonable terms;

•reduced day-to-day control over the manufacturing process for our product candidates as a result of using third-party manufacturers for all aspects of manufacturing activities;

•reduced control over the protection of our trade secrets, know-how and other proprietary information from misappropriation or inadvertent disclosure or from being used in such a way as to expose us to potential litigation;

•termination or nonrenewal of manufacturing agreements with third parties in a manner or at a time that may be costly or damaging to us or result in delays in the development or commercialization of our product candidates; and

•disruptions to the operations of our third-party manufacturers or suppliers caused by conditions unrelated to our business or operations, including the bankruptcy of the manufacturer or supplier.

Moreover, any problems or delays we or our CMOs experience in preparing for commercial scale manufacturing of a product candidate may result in a delay in the FDA approval of the product candidate or may impair our ability to manufacture commercial quantities or such quantities at an acceptable cost, which could result in the delay, prevention, or impairment of clinical development and commercialization of our product candidates and could adversely affect our business. Furthermore, if we or our CMOs fail to deliver the required commercial quantities of our product candidates on a timely basis and at reasonable costs, we would likely be unable to meet demand for our products and we would lose potential revenues. We may ultimately be unable to reduce the cost of goods for our product candidates to levels that will allow for an attractive return on investment if and when those product candidates are commercialized.

Table of Contents

In addition, the manufacturing process and facilities for any products that we may develop are subject to FDA and foreign regulatory authority approval processes, and we or our CMOs will need to meet all applicable FDA and foreign regulatory authority requirements, including cGMP, on an ongoing basis. The cGMP requirements include quality control, quality assurance and the maintenance of records and documentation. The FDA and other regulatory authorities enforce these requirements through facility inspections. Manufacturing facilities must submit to pre-approval inspections by the FDA that will be conducted after we submit our marketing applications, including our BLAs and NDAs, to the FDA. Manufacturers are also subject to continuing FDA and other regulatory authority inspections following marketing approval. Further, we and our third-party CMOs must supply all necessary chemistry, manufacturing and quality control documentation in support of a BLA or NDA on a timely basis. Our or our CMOs’ manufacturing facilities may be unable to comply with our specifications, cGMP, and with other FDA, state, and foreign regulatory requirements, and there is no guarantee that we or our CMOs will be able to successfully pass all aspects of a pre-approval inspection by the FDA or other foreign regulatory authorities.

Poor control of production processes can lead to the introduction of adventitious agents or other contaminants, or to inadvertent changes in the properties or stability of product candidates that may not be detectable in final product testing. If microbial, viral, environmental or other contaminations are discovered in our product candidates or in the manufacturing facilities in which our product candidates are made, such manufacturing facilities may need to be closed for an extended period of time to investigate and remedy the contamination which could delay clinical trials and adversely harm our business. If we or our CMOs are unable to reliably produce products to specifications acceptable to the FDA or other regulatory authorities, or in accordance with the strict regulatory requirements, we may not obtain or maintain the approvals we need to commercialize such products. Even if we obtain regulatory approval for any of our product candidates, there is no assurance that either we or our CMOs will be able to manufacture the approved product to specifications acceptable to the FDA or other regulatory authorities, to produce it in sufficient quantities to meet the requirements for the potential launch of the product, or to meet potential future demand. Deviations from manufacturing requirements may further require remedial measures that may be costly and/or time-consuming for us or a third party to implement and may include the temporary or permanent suspension of a clinical trial or commercial sales or the temporary or permanent closure of a facility. Any such remedial measures imposed upon us or third parties with whom we contract could materially harm our business.

As product candidates progress through preclinical and clinical trials to marketing approval and commercialization, it is common that various aspects of the development program, such as manufacturing methods and formulation, are altered along the way in an effort to optimize yield and manufacturing batch size, minimize costs and achieve consistent quality and results. Such changes carry the risk that they will not achieve these intended objectives. Any of these changes could cause our product candidates to perform differently and affect the results of planned clinical trials or other future clinical trials conducted with the altered materials. This could delay completion of clinical trials, require the conduct of bridging clinical trials or the repetition of one or more clinical trials, increase clinical trial costs, delay approval of our product candidates and jeopardize our ability to commercialize our product candidates, if approved, and generate revenues.

To the extent we use CMOs, we are ultimately responsible for the manufacture of our products, if approved, and product candidates. A failure to comply with these requirements may result in regulatory enforcement actions against our manufacturers or us, including fines and civil and criminal penalties, which could result in imprisonment, suspension or restrictions of production, injunctions, delay or denial of product approval or supplements to approved products, clinical holds or termination of clinical trials, warning or untitled letters, regulatory authority communications warning the public about safety issues with the biologic, refusal to permit the import or export of the products, product seizure, detention, or recall, operating restrictions, suits under the federal civil False Claims Act (FCA), corporate integrity agreements, consent decrees, or withdrawal of product approval.

Any of these challenges could delay completion of clinical trials, require bridging clinical trials or the repetition of one or more clinical trials, increase clinical trial costs, delay approval of our product candidate, impair commercialization efforts, increase our cost of goods, and have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Table of Contents

Cell-based therapies and biologics rely on the availability of reagents, specialized equipment and other specialty materials, which may not be available to us on acceptable terms or at all. For some of these reagents, equipment and materials, we rely or may rely on sole source vendors or a limited number of vendors, which could impair our ability to manufacture and supply our products, if approved.

We currently depend on a small number of suppliers for some of the materials used in, and processes required to develop, our product candidates. For some of these reagents, equipment and materials used in the manufacture of our product candidates, we rely, and we may in the future rely, on sole source vendors or a limited number of vendors. Some of these suppliers may not have the capacity to support clinical trials and commercial products manufactured under cGMP by biopharmaceutical firms or may otherwise be ill-equipped to support our needs. We also do not have supply contracts with many of these suppliers and may not be able to obtain supply contracts with them on acceptable terms or at all. Accordingly, we may experience delays in receiving key materials and equipment to support clinical or commercial manufacturing. An inability to continue to source product from any of these suppliers could adversely affect our ability to satisfy demand for our product candidates, which could adversely and materially affect our product sales and operating results or our ability to conduct clinical trials, either of which could significantly harm our business.

As we seek to develop and scale our manufacturing process, we expect that we will need to obtain rights to and supplies of certain materials and equipment to be used as part of that process. We may not be able to obtain rights to such materials on commercially reasonable terms, or at all, and if we are unable to alter our process in a commercially viable manner to avoid the ~~factors that cause,~~use of such materials or find a suitable substitute, it would have a material adverse effect on our business. Even if we are able to alter our process so as to use other materials or equipment, such a change may lead to a delay in our clinical development and/or commercialization plans. If such a change occurs for a product candidate that is already in clinical testing, the ~~commencement~~change may require us to perform both ex vivo comparability studies and to collect additional data from patients prior to undertaking more advanced clinical trials.

Our ability to use net operating losses and research and development credits to offset future taxable income may be subject to certain limitations.

In general, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the Code), a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change net operating losses or ~~completion~~tax credits (NOLs) or credits, to offset future taxable income or taxes. For these purposes, an ownership change generally occurs where the aggregate stock ownership of one or more stockholders or groups of stockholders who owns at least 5% of a corporation’s stock increases its ownership by more than 50 percentage points over its lowest ownership percentage within a specified testing period. We have not conducted a complete study to assess whether a change of control has occurred or whether there have been multiple changes of control since inception due to the significant complexity and cost associated with such a study. If we have experienced a change of control, as defined by Section 382, at any time since inception (including as a result of the Merger), utilization of the net operating loss carryforwards or research and development tax credit carryforwards would be subject to an annual limitation under Section 382. Any limitation may result in expiration of a portion of the net operating loss carryforwards or research and development tax credit carryforwards before utilization. In addition, our NOLs or credits may also be impaired under state law. Accordingly, we may not be able to utilize a material portion of our NOLs or credits.

Since we will need to raise substantial additional funding to finance our operations, we may experience further ownership changes in the future, some of which may be outside of our control. Limits on our ability to use our pre-change NOLs or credits to offset U.S. federal taxable income could potentially result in increased future tax liability to us if we earn net taxable income in the future. In addition, under the legislation commonly referred to as the Tax Cuts and Jobs Act of 2017 (TCJA), as modified by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), the amount of NOLs generated in taxable periods beginning after December 31, 2017, that we are permitted to deduct in any taxable year beginning after December 31, 2020 is limited to 80% of our taxable income in such year, where taxable income is determined without regard to the NOL deduction itself. The TCJA allows post-2017 unused NOLs to be carried forward indefinitely. Similar rules may apply under state tax laws.

Table of Contents

Our transfer pricing policies may be subject to challenge by the Internal Revenue Service or other taxing authorities.

Our intercompany relationships are subject to complex transfer pricing regulations administered by taxing authorities in various jurisdictions. The relevant taxing authorities may disagree with our determinations as to the value of assets sold or acquired or income and expenses attributable to specific jurisdictions. If such a disagreement were to occur, and our position were not sustained, we could be required to pay additional taxes, interest and penalties, which could result in one-time tax charges, higher effective tax rates, reduced cash flows, and lower overall profitability of our operations. We believe that our financial statements reflect adequate reserves to cover such a contingency, but there can be no assurances in that regard.

Because our current product candidates represent, and our other potential product candidates will represent, novel approaches to the treatment of disease, there are many uncertainties regarding the development, market acceptance, public opinion, third-party reimbursement coverage and the commercial potential of our product candidates, which may impact public perception of us and our product candidates and which may adversely affect our ability to conduct our business and implement our business plans.

Human immunotherapy products are a new category of therapeutics. We use relatively novel technologies involving Anktiva, saRNA, hAd5 and yeast technologies, aldoxorubicin, and cell-based therapies, and our NK cell platform utilizes a relatively novel technology involving the genetic modification of human cells and utilization of those modified cells in other individuals. Because this is a relatively new and expanding area of novel therapeutic interventions, there are many uncertainties related to development, marketing, reimbursement and the commercial potential for our product candidates. There can be no assurance as to the length of the trial period, the number of patients the FDA will require to be enrolled in the trials in order to establish the safety, efficacy, purity and potency of immunotherapy products, or that the data generated in these trials will be acceptable to the FDA to support marketing approval. Adverse public attitudes may adversely impact our ability to enroll patients in clinical trials. The FDA may take longer than usual to come to a decision on any BLA and/or NDA that we submit and may ultimately determine that there is not enough data, information, or experience with our product candidates to support an approval decision. The FDA may also require that we conduct additional post-marketing studies or implement risk management programs, such as REMS, until more experience with our product candidates is obtained. Finally, after increased usage, we may find that our product candidates do not have the intended effect, do not work with other combination therapies or have unanticipated side effects, potentially jeopardizing initial or continuing regulatory approval and commercial prospects. More restrictive government regulations or negative public opinion could have an adverse effect on our business or financial condition and may delay or impair the development and commercialization of our product candidates or demand for any products we may develop. AEs in our clinical trials, even if not ultimately attributable to our product candidates, and the resulting publicity could result in increased governmental regulation, unfavorable public perception, potential regulatory delays in the testing or approval of our potential product candidates, stricter labeling requirements for those product candidates that are approved and a decrease in demand for any such product candidates.

There is no assurance that the approaches offered by our product candidates will gain broad acceptance among doctors or patients or that governmental agencies or third-party medical insurers will be willing to provide reimbursement coverage for our proposed product candidates. Public perception may be influenced by claims, such as claims that our technologies are unsafe, unethical or immoral and, consequently, our approach may not gain the acceptance of the public or the medical community. Negative public reaction to cell-based immunotherapy in general could result in greater government regulation and stricter labeling requirements of immunotherapy products, including our product candidates, and could cause a decrease in the demand for any products we may develop. Moreover, our success will depend upon physicians specializing in the treatment of those diseases that our product candidates target prescribing, and their patients being willing to receive treatments that involve the use of our product candidates in lieu of, or in addition to, existing treatments they are already familiar with and for which greater clinical data may be available. The market for any products that we successfully develop will also depend on the cost of the product. We do not yet have sufficient information to reliably estimate what it will cost to commercially manufacture our current product candidates, and the actual cost to manufacture these products could materially and adversely affect the commercial viability of these products. Our goal is to reduce the cost of manufacturing and providing our therapies. However, unless we can reduce those costs to an acceptable amount, we may never be able to develop a commercially viable product.

Table of Contents

If we do not successfully develop and commercialize products based upon our approach or find suitable and economical sources for materials used in the production of our potential products, we will not become profitable, which would materially and adversely affect the value of our common stock. Our Anktiva therapies and our other therapies may be provided to patients in combination with other agents provided by third parties or our affiliates. The cost of such combination therapy may increase the overall cost of therapy and may result in issues regarding the allocation of reimbursements between our therapy and the other agents, all of which may affect our ability to obtain reimbursement coverage for the combination therapy from governmental or private third-party medical insurers.

If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our product candidates.

We face an inherent risk of product liability as a result of the clinical development, testing and manufacturing of our product candidates and will face an even greater risk if we commercialize any products. For example, we may be sued if our product candidates cause or are perceived to cause injury or are found to be otherwise unsuitable during clinical testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability or a breach of warranties. Claims could also be asserted under state consumer protection acts. Large judgements have been awarded in class action lawsuits based on therapeutics that had unanticipated side effects. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our product candidates. Even successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in a regulatory investigation of the safety and effectiveness of our products, our third-party manufacturer’s manufacturing processes and facilities or our marketing programs and potentially a recall of our products or more serious enforcement action, including limitations on the approved indications for which our product candidates may be used or suspension or withdrawal of approvals, decreased demand for our products, injury to our reputation, costs to defend the related litigation, a diversion of management’s time and our resources, substantial monetary awards to trial participants or patients and a decline in our stock price.

Our inability to obtain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the commercialization of products we may develop, alone or with corporate collaborators. Our insurance policies may also have various exclusions, and we may be subject to product liability claims for which we have no coverage. While we have obtained clinical trial insurance for our clinical trials, we may have to pay amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts. Even if our agreements with any future corporate collaborators entitle us to indemnification against losses, such indemnification may not be available or adequate should any claim arise.

We will face significant competition from other biotechnology and pharmaceutical companies and from non-profit institutions.

Competition in the field of cancer and viral infectious disease therapy is intense and is accentuated by the rapid pace of technological development. We compete with a variety of multi-national biopharmaceutical companies and specialized biotechnology companies, as well as technology being developed at universities and other research institutions. These competitors have developed, may develop and are developing product candidates and processes competitive with our product candidates. Research and discoveries by others may result in breakthroughs which may render our product candidates obsolete even before they generate any revenues. We believe that a significant number of products are currently under development, and may become commercially available in the future, for the treatment of conditions for which we are developing product candidates. Many of our competitors have several therapeutic products that have already been developed, approved and successfully commercialized, or are in the process of obtaining regulatory approval for their therapeutic products in the U.S. and internationally. Many of our competitors, either alone or with their strategic partners, have substantially greater financial, technical, and human resources than we do, as well as significantly greater experience in the discovery and development of product candidates, obtaining FDA and other regulatory approvals of treatments and commercializing those treatments.

Table of Contents

Accordingly, our competitors may be more successful in obtaining approval of treatments and achieving widespread market acceptance, rendering our treatments obsolete or non-competitive, possibly even before we are able to enter the market. Accelerated merger and acquisition activity in the biotechnology and biopharmaceutical industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third parties compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.

Even if we obtain regulatory approval for our product candidates, the availability and price of our competitors’ products could limit the demand and the price we are able to charge for our therapies. The level of generic competition and the availability of reimbursement from government and other third-party payors will also significantly affect the pricing and competitiveness of our products.

A large number of companies, government agencies and academic centers around the world are developing COVID‑19 vaccines, and many of these entities are in more advanced stages of development than we are, including some that have started Phase 2 and/or 3 clinical trials or have already obtained emergency regulatory approval in the U.S. and internationally. Even if our COVID‑19 vaccine candidate is ultimately approved for marketing, the value of our opportunity will be adversely impacted by other COVID‑19 vaccines that have obtained emergency regulatory approval, obtain full regulatory approval, or demonstrate better efficacy or safety than our COVID‑19 vaccine candidate.

We may not be able to implement our business plan if the acceptance of our product candidates is inhibited by price competition or the reluctance of physicians to switch from other methods of treatment to our product, or if physicians switch to other new therapies, drugs or biologic products or choose to reserve our product candidates for use in limited circumstances. We may be adversely impacted if any of these competitors gain market share as a result of new technologies, commercialization strategies or otherwise.

We may seek orphan drug status or Fast Track or Breakthrough Therapy designations or other designation for one or more of our product candidates, but even if any such designation or status is granted, it may not lead to a faster development process or regulatory review and may not increase the ~~denial~~likelihood that our product candidates will receive marketing approval, and we may be unable to maintain any benefits associated with such designations or status, including market exclusivity.

In 2012, the FDA established a Breakthrough Therapy designation, which is intended to expedite, although there is no guarantee, the development and review of ~~regulatory~~products that treat serious or life-threatening conditions. We have been awarded, and may seek in the future, Fast Track or Breakthrough Therapy designation for current or future product candidates. Receipt of a designation to facilitate product candidate development is within the discretion of the FDA. Accordingly, even if we believe one of our product candidates meets the criteria for a designation, the FDA may disagree. In any event, the receipt of such a designation for a product candidate may not result in a faster development process, review or approval compared to product candidates considered for approval under conventional FDA procedures and does not assure ultimate marketing approval by the FDA. In addition, the FDA may later decide that the product candidates no longer meet the designation conditions.

Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biologic intended to treat a rare disease or condition or for which there is no reasonable expectation that the cost of developing and making available the drug or biologic will be recovered from sales in the U.S. If a product that has orphan drug designation subsequently receives the first FDA approval for the disease for which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications, including a full BLA to market the same drug or biologic for the same indication for seven years, except in limited circumstances. We may seek orphan drug status for one or more of our product candidates, but exclusive marketing rights in the U.S. may be lost if we seek approval for an indication broader than the orphan designated indication and may be lost if the FDA later determines that the request for designation was materially defective or if we are unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition.

Table of Contents

As a condition of approval, the FDA may require that we implement various post-marketing requirements and conduct post-marketing studies, any of which would require a substantial investment of time, effort, and money, and which may limit our commercial prospects.

As a condition of biologic licensing, the FDA is authorized to require that sponsors of approved BLAs implement various post-market requirements, including REMS and Phase 4 trials. For example, in connection with FDA approval of another company’s drug, the FDA required significant post-marketing commitments, including a Phase 4 trial, revalidation of a test method, and a substantial REMS program that included, among other requirements, the certification of hospitals and their associated clinics that dispensed the drug, including the implementation of a training program and limited distribution only to certified hospitals and their associated clinics. If we receive approval of our product candidates, the FDA may determine that similar or additional or more burdensome post-approval requirements are necessary to ensure that our product candidates are safe, pure and potent. To the extent that we are required to establish and implement any post-approval requirements, we will likely need to invest a significant amount of time, effort and money. Such post-approval requirements may also limit the commercial prospects of our product candidates.

We have never commercialized a product candidate before, and we may lack the necessary expertise, personnel and resources to successfully commercialize any products on our own or together with suitable collaborators. We may be unable to establish effective marketing and sales capabilities or enter into agreements with third parties or related parties to market and sell our product candidates, if they are approved, and as a result, we may be unable to generate product revenues.

We have little to no prior experience in, and currently do not have a commercial infrastructure for, the marketing, sale and distribution of biopharmaceutical products. To achieve commercial success for the product candidates, which we may license to others, we will rely on the assistance and guidance of those collaborators. For product candidates for which we retain commercialization rights and marketing approval, if approved, in order to commercialize our product candidates, we must continue to build out our marketing, sales and distribution capabilities, including a comprehensive healthcare compliance program, or arrange with third parties to perform these services, which will take time and require significant financial expenditures and could delay any product launch and we may not be successful in doing so. There are significant risks involved with building and managing a commercial infrastructure. We, or our collaborators, will have to compete with other pharmaceutical and biotechnology companies to recruit, hire, train, manage and retain medical affairs, marketing, sales and commercial support personnel. Recruiting, training and retaining a sales force is expensive and time-consuming and could delay any product launch. If the commercial launch of a product candidate for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have incurred these commercialization expenses prematurely or unnecessarily. These efforts may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel. In the event we are unable to develop a commercial infrastructure, we may not be able to commercialize our current or future product candidates, which would limit our ability to generate product revenues. Even if we are able to effectively establish a sales force and develop a marketing and sales infrastructure, our sales force and marketing teams may not be successful in commercializing our current or future product candidates. To the extent we rely on third parties to commercialize any products for which we obtain regulatory approval, we would have less control over their sales efforts and could be held liable if they failed to comply with applicable legal or regulatory requirements.

Table of Contents

If our product candidates do not achieve broad market acceptance, the revenues that we generate from their sales will be limited.

We have not commercialized a product candidate for any indication. Even if our product candidates are approved by the appropriate regulatory authorities for marketing and sale, they may not gain acceptance among physicians, patients, third-party payors and others in the medical community. If any product candidate for which we obtain regulatory approval does not gain an adequate level of market acceptance, we may not generate significant product revenues or become profitable. Market acceptance of our product candidates by the medical community, patients and third-party payors will depend on a number of factors, some of which are beyond our control. For example, physicians are often reluctant to switch their patients, and patients may be reluctant to switch from, existing therapies even when new and potentially more effective or safer treatments enter the market. Efforts to educate the medical community and third-party payors on the benefits of our product candidates may require significant resources and may not be successful. Even if the medical community accepts that our product candidates are safe and effective for their approved indications, physicians and patients may not immediately be receptive to such product candidates and may be slow to adopt them as an accepted treatment of the approved indications. If any of our product candidates is approved but does not achieve an adequate level of market acceptance, we may not generate significant revenues and we may not become profitable. The degree of market acceptance of any of our product candidates will depend on a number of factors, including:

•the continued safety and efficacy of our product candidates;

•the prevalence and severity of AEs associated with such product candidates;

•the clinical indications for which the products are approved and the approved claims that we may make for the products;

•limitations or warnings contained in the product’s FDA-approved labeling, including potential limitations or warnings for such products that may be more restrictive than other competitive products or distribution and use restrictions imposed by the FDA with respect to such product candidates or to which we agree as part of a mandatory REMS or voluntary risk management plan;

•changes in the standard of care for the targeted indications for such product candidates;

•the relative difficulty of administration of such product candidates;

•our ability to offer such product candidates for sale at competitive prices, including the cost of treatment versus economic and clinical benefit in relation to alternative treatments or therapies;

•the availability of adequate coverage or reimbursement by third parties, such as insurance companies and other healthcare payors, and by government healthcare programs, including Medicare and Medicaid;

•the extent and strength of our marketing and distribution of such product candidates;

•the safety, efficacy and other potential advantages over, and availability of, alternative treatments already used or that may later be approved for any of our intended indications;

•the timing of market introduction of such product candidates, as well as competitive products;

•the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;

•the extent and strength of our third-party manufacturer and supplier support;

•adverse publicity about the product or favorable publicity about competitive products; and

•potential product liability claims.

If any product candidate we commercialize fails to achieve market acceptance, it could have a material and adverse effect on our business, financial condition, results of operations and prospects.

Table of Contents

Our product candidates may face competition sooner than anticipated.

The enactment of the Biologics Price Competition and Innovation Act of 2009 (BPCIA) created an abbreviated approval pathway for biological products that are biosimilar to or interchangeable with an FDA-licensed reference biological product. Under the BPCIA, the FDA cannot make an approval of an application for a biosimilar product effective until 12 years after the original branded product was approved under a BLA. Certain changes, however, and supplements to an approved BLA, and subsequent applications filed by the same sponsor, manufacturer, licensor, predecessor in interest or other related entity do not qualify for the 12-year exclusivity period.

Our product candidates may qualify for the BPCIA’s 12-year period of exclusivity. There is a risk that any product candidates we may develop that are approved as a biological product under a BLA would not qualify for the 12-year period of exclusivity or that this exclusivity could be shortened due to congressional action or otherwise, or that the FDA will not consider any product candidates we may develop to be reference products for competing products, potentially creating the opportunity for generic competition sooner than anticipated. Additionally, this period of regulatory exclusivity does not block companies pursuing regulatory approval via their own traditional BLA, rather than via the abbreviated pathway. Even if we receive a period of BPCIA exclusivity for our first licensed product, if subsequent products do not include a modification to the structure of the product that impacts safety, purity, or potency, we may not receive additional periods of exclusivity for those products. Moreover, the extent to which a biosimilar, once approved, will be substituted for any one of our reference product candidates in a way that is similar to traditional generic substitution for non-biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing. Medicare Part B encourages use of biosimilars by paying the provider the same percentage of the reference product average sale price as a mark-up, regardless of which product is reimbursed. It is also possible that payors will give reimbursement preference to biosimilars even over reference biologics absent a determination of interchangeability.

For our small molecular product candidates, if qualified, the regulatory exclusivity period is less than for our biologic product candidates. The FDCA provides a five-year period of non-patent marketing exclusivity within the U.S. to the first applicant to gain approval of an NDA for a drug where the FDA has not previously approved any other new drug containing the same active molecule or ion responsible for the action of the drug substance. During the exclusivity period, the FDA may not accept for review an abbreviated NDA or a 505(b)(2) NDA submitted by another company for a generic version of such drug where the applicant does not own or have a legal right of reference to all the data required for approval. However, an application may be submitted after four years if it contains a certification of patent invalidity or non-infringement. The FDCA also provides three years of marketing exclusivity for an NDA, 505(b)(2) NDA or supplement to an existing NDA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example, new indications, dosages or strengths of an existing drug. As such, we may face competition from generic versions of our small molecule product candidates, which will negatively impact our long-term business prospects and marketing opportunities.

We will need to obtain FDA approval of any proposed branded product names, and any failure or delay associated with such approval may adversely affect our business.

Any name we intend to use for our product candidates in the U.S. will require approval from the FDA regardless of whether we have secured a formal trademark registration from the USPTO. The FDA typically conducts a review of proposed product names, including an evaluation of the potential for confusion with other product names. The FDA may also object to a product name if it believes the name inappropriately implies medical claims or contributes to an overstatement of efficacy. If the FDA objects to any of our proposed product names, we may be required to adopt alternative names for our product candidates. If we adopt alternative names, we would lose the benefit of any existing trademark applications for such product candidate and may be required to expend significant additional resources in an effort to identify a suitable product name that would qualify under applicable trademark laws, not infringe or otherwise violate the existing rights of third parties, and be acceptable to the FDA. We may be unable to build a successful brand identity for a new product name in a timely manner or at all, which would limit our ability to commercialize our product candidates.

Table of Contents

Our internal computer systems, or those used by our CROs, CMOs, clinical sites or other contractors or consultants, may fail or suffer security breaches. A breakdown, cyberattack or information security breach could compromise the confidentiality, integrity and availability of our information technology systems, network-connected control systems and/or our data, interrupt the operation of our business and/or affect our reputation.

We are and will be dependent upon information technology systems, infrastructure and data. In the ordinary course of our business, we will directly or indirectly collect, store and transmit sensitive data, including intellectual property, confidential information, preclinical and clinical trial data, proprietary business information, personal data and personally identifiable health information of our clinical trial subjects and employees, in our data centers and on our networks, or on those of third parties. The secure processing, maintenance and transmission of this information is critical to our operations. The multitude and complexity of our computer systems and those of our CROs, CMOs, clinical sites or other contractors or consultants make them inherently vulnerable to service interruption or destruction, malicious intrusion and random attack. Data privacy or security breaches by third parties, employees, contractors or others may pose a risk that sensitive data, including our intellectual property, trade secrets or personal information of our employees, patients, or other business partners may be exposed to unauthorized persons or to the public. Further, as many of our employees are working remotely, our reliance on our and third-party information technology systems has increased substantially and is expected to continue to increase.

Despite the implementation of security measures, our internal computer systems and those of our CROs, CMOs, clinical sites and other contractors and consultants are vulnerable to failure or damage from computer viruses and other malware, employee error, unauthorized and authorized access or other cybersecurity attacks, natural disasters, terrorism, war, fire and telecommunication and electrical failures. As the cyber-threat landscape evolves, these cyberattacks are increasing in their frequency, sophistication and intensity and are becoming increasingly difficult to detect. The techniques used by cyber criminals change frequently, may not be recognized until launched and can originate from a wide variety of sources, including outside groups such as external service providers, organized crime affiliates, terrorist organizations or hostile foreign governments or agencies. Cyberattacks could include the deployment of harmful malware, denial-of-service, social engineering and other means to affect service reliability and threaten data confidentiality, integrity and availability. While we and our shared services partner, NantWorks, have invested, and continue to invest, in the protection of our data and information technology infrastructure, there can be no assurance that our efforts, or the efforts of our partners, vendors, CROs, CMOs, clinical sites and other contractors and consultants will prevent service interruptions, or identify breaches in our or their systems, that could adversely affect our business and operations and/or result in the loss of critical or sensitive information, which could result in financial, legal, business or reputational harm to us. In addition, our liability insurance may not be sufficient in type or amount to cover us against claims related to security breaches, cyberattacks and other related breaches.

If any such event were to occur and cause interruptions in our operations, it could result in a disruption of our product development programs. For example, the loss of clinical trial data from completed or ongoing clinical trials for a product candidate could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data, or may limit our ability to effectively execute a product recall, if required. To the extent that any disruption or security breach were to result in a loss of or damage to our data or applications, or inappropriate disclosure of personal, confidential or proprietary information, we could incur liability and the further development and commercialization of any product candidates could be delayed. Any such event could also result in legal claims or proceedings, liability under laws that protect the privacy of personal information and significant regulatory penalties, and damage to our reputation and a loss of confidence in us and our ability to conduct clinical trials.

Table of Contents

Our business could be adversely affected by the effects of health epidemics, pandemics or contagious diseases, including the recent COVID‑19 pandemic and the public and governmental effort to mitigate against the spread of the disease, in regions where we or third parties on which we rely have significant manufacturing facilities, concentrations of clinical trial sites or other business operations, and may have a material adverse effect, on our clinical trials, operations, supply chains, distribution systems, product development, business and results of operations.

Outbreaks of epidemic, pandemic or contagious diseases, such as the ongoing COVID‑19 pandemic, and measures taken in response by governments and businesses worldwide to contain its spread have adversely impacted and may continue to significantly disrupt our operations and adversely affect our business, financial condition and results of operations. Many countries including the U.S. implemented measures such as quarantine, shelter-in-place, curfew, travel and activity restrictions and similar isolation measures, including government orders and other restrictions on the conduct of business operations. The continued spread of this pandemic has caused significant volatility and uncertainty in the U.S. and international markets and has resulted in increased risks to our operations. The COVID‑19 pandemic and any actions we have taken in response, are affecting and could materially affect our operations, including at our headquarters and at our manufacturing facilities, which have been and may in the future be subject to state executive orders and shelter-in-place orders, and at our clinical trial sites, as well as the business or operations of our CROs, CMOs, clinical sites or other third parties with whom we conduct business. Any such epidemic or pandemic may heighten the risk that a significant portion of our workforce could suffer illness or otherwise not be permitted or be unable to work, and may require that certain of our employees work remotely, which heightens certain risks, including but not limited to, those associated with an increased demand for information technology resources, increased risk of cybersecurity attacks (including social engineering attacks), risks related to internal controls and increased risk of unauthorized dissemination of sensitive personal information or our proprietary or confidential information.

The rapid development and fluidity of the pandemic preclude any prediction as to the ultimate effect of COVID-19 on us. While the U.S. and other countries have begun or will begin to reopen their economies, the extent to which COVID-19 will impact our future operations will depend on many factors which cannot be predicted with confidence, including the duration of the outbreak. Any resurgence in COVID-19 infections could result in the imposition of new mandates and prolonged restrictive measures implemented in order to control the spread of the disease.

U.S. President Biden has issued an Executive Order requiring federal employees and covered contractors to be vaccinated against COVID-19. Additionally, on November 4, 2021, the U.S. Department of Labor’s Occupational Safety and Health Administration (OSHA) issued a COVID-19 Vaccination and Testing Emergency Temporary Standard requiring all employers with 100 or more employees to ensure that their employees are fully vaccinated or tested for COVID-19 on at least a weekly basis. On January 20, 2022, The U.S. Supreme Court invalidated this requirement. However additional vaccine and testing mandates may be announced in other jurisdictions in which we operate our business. While it is not currently possible to predict with any certainty the exact impact the new regulations would have on us and our suppliers, the implementation of such government mandated vaccination or testing mandates may impact our ability to retain current employees and attract new employees and result in labor disruptions.

Table of Contents

We are monitoring a number of risks related to this pandemic, including the following:

•Financial: We expect to continue spending on research and development during the year ending December 31, 2022 and beyond, and we could also have unexpected expenses related to the pandemic. The short-term continued expenses, as well as the overall uncertainty and disruption caused by the pandemic, will likely cause a delay in our ability to commercialize a product and adversely impact our financial results.

•Manufacturing: The pandemic has impacted, and may continue to impact, our manufacturing locations, including through the effects of facility closures, reductions in operating hours and other social distancing efforts.

•Supply Chain: As the pandemic continues to progress, it has resulted and could continue to result in significant disruptions in our respective supply chains and distribution channels in the future. In addition, there may be unfavorable changes in the availability or cost of raw materials, intermediates and other materials necessary for production, which may result in disruptions in our supply chain and adversely affect our ability to have manufactured certain product candidates for clinical supply.

•Clinical Trials: This pandemic may adversely affect certain of our clinical trials, including our ability to initiate and complete our clinical trials within the anticipated timelines. Due to site and participant availability during the pandemic, new subject enrollment has slowed and is expected to continue to slow, at least in the short-term, for most of our clinical trials. For ongoing trials, we have seen, and expect to continue to see an increasing number of clinical trial sites imposing restrictions on patient visits to limit risks of possible COVID‑19 exposure, and we may experience issues with participant compliance with clinical trial protocols as a result of quarantines, travel restrictions and interruptions to healthcare services. The current pressures on medical systems and the prioritization of healthcare resources toward the COVID‑19 pandemic have also resulted, and may continue to result, in interruptions in data collection and submissions for certain clinical trials and delayed starts for certain planned studies. As a result, our anticipated filing and marketing timelines may be adversely impacted.

•Overall Economic and Capital Markets Environment: The continued spread of COVID‑19 has led to and could continue to lead to severe disruption and volatility in the U.S. and global capital markets, which could result in a decline in stock price, high inflation, increase our cost of capital and adversely affect our ability to access the capital markets in the future even after local conditions improve. In addition, trading prices on the public stock market have been highly volatile as a result of the COVID‑19 pandemic.

•Regulatory Reviews: The operations of the FDA or other regulatory agencies may be adversely affected. The legislative and regulatory environment governing our businesses is dynamic and changing frequently in response to COVID‑19. In response to COVID‑19, federal, state and local governments are issuing new rules, regulations, orders and advisories on a regular basis. These government actions can impact us, our members and our suppliers. There is also the possibility that we may experience delays with obtaining approvals for our IND applications, BLAs, and/or NDAs. The pandemic may also result in greater regulatory uncertainty.

Table of Contents

Risks Related to Reliance on Third Parties

We have limited experience conducting clinical trials and have relied and will rely on third parties and related parties to conduct many of our preclinical studies and clinical trials, to manufacture products and to perform many essential services for any products that we commercialize, including services related to distribution, government price reporting, customer service, accounts receivable management, cash collection and adverse event reporting. Any failure by a third party, related party, or by us to perform as expected, to comply with legal and regulatory requirements or to conduct the clinical trials according to GCP regulations, and in a timely manner, may delay or prevent our ability to seek or obtain regulatory approval for or commercialization of our product candidates and our ability to commercialize our current or future product candidates will be significantly impacted and we may be subject to regulatory sanctions.

Large-scale clinical trials require significant financial and management resources. We expect to be heavily reliant on third and related parties, including medical institutions, academic institutions, clinical investigators or contract research organizations (CROs) to conduct, supervise or monitor some or all aspects of our clinical trials, and in some cases, CMOs to manufacture products, which may force us to encounter delays and challenges that are outside of our control. Nevertheless, we are responsible for ensuring that each of our trials is conducted in accordance with the applicable trial protocol and legal, regulatory and scientific standards, and our reliance on CROs, clinical trial sites, and other third parties does not relieve us of these responsibilities. Our CROs and other third parties must communicate and coordinate with one another in order for our trials to be successful. We have a limited history of conducting clinical trials and have no experience as a company in filing and supporting the applications necessary to gain marketing approvals. Our relative lack of experience conducting clinical trials may contribute to our planned clinical trials not beginning or completing on time, if at all. Securing marketing approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing facilities and clinical trial sites by, applicable regulatory authorities.

For example, we will remain responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the trial and for ensuring that our preclinical studies are conducted in accordance with Good Laboratory Practice (GLP) regulations, as appropriate. Moreover, the FDA and comparable foreign regulatory authorities require us and the third parties upon which we intend to rely for conducting our clinical trials to comply with GCP for conducting, recording, and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity, and confidentiality of trial participants are protected. Regulatory authorities enforce these requirements through periodic inspections (including pre-approval inspections once a BLA or NDA is filed with the FDA) of trial sponsors, clinical investigators, trial sites and certain third parties including CMOs. If we, our CROs, clinical trial sites, or other third parties fail to comply with applicable GCP or other regulatory requirements, we or they may be subject to enforcement or other legal actions, the clinical data generated in our clinical trials may be deemed unreliable and have to be repeated, and our submission of marketing applications may be delayed or the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical trials comply with GCP regulations.

We rely on third parties to manufacture, package, label and ship some of our product candidates for the clinical trials that we conduct. Any performance failure on the part of these third parties could delay clinical development or marketing approval of our product candidates or commercialization of our product candidates, if approved, producing additional losses and depriving us of potential product revenues.

Table of Contents

Our CROs, clinical trial sites and other third parties may also have relationships with other entities, some of which may be our competitors, for whom they may also be conducting clinical trials or other therapeutic development activities that could harm our competitive position. In addition, these third parties are not our employees, and except for remedies available to us under our agreements with them, we cannot control whether or not they devote sufficient time and resources to our ongoing clinical and preclinical programs. If these third parties conducting our clinical trials (i) do not successfully carry out their contractual duties, (ii) do not meet expected deadlines, (iii) experience work stoppages, (iv) do not conduct our clinical trials in accordance with regulatory requirements or our stated protocols, (v) need to be replaced, (vi) experience financial hardships or (vii) terminate their agreements with us or if the quality or accuracy of the data they obtain is compromised due to the failure to adhere to our clinical trial protocols, GCP or other regulatory requirements or for other reasons, our trials may need to be repeated, extended, delayed or terminated, we may not be able to obtain, or may be delayed in obtaining, marketing approvals for our product candidates, we will not be able to, or may be delayed in our efforts to, successfully commercialize our product candidates or we or they may be subject to regulatory enforcement actions. Additionally, we may need to conduct additional clinical trials or enter into new arrangements with alternative CROs, clinical investigators or other third parties, which we may not be able to do on commercially reasonable terms, or at all and which may involve additional cost and time and require management time and focus. As a result, delays could occur, which could compromise our ability to meet our desired development timelines. Furthermore, if any of the third parties conducting our clinical trials experience any financial hardships due to difficulties relating to the operation of their business, it could damage our business, financial condition, results of operations and prospects. In addition, if an agreement with any of our collaborators terminates, our access to technology and intellectual property licensed to us by that collaborator may be restricted or terminate entirely, which may delay the continued development of our product candidates using the collaborator’s technology or intellectual property or require us to stop development of those product candidates completely. As a result, our results of operations and the commercial prospects for our product candidates would be harmed, our costs could increase and our ability to generate revenues could be delayed. To the extent we are unable to successfully identify and manage the performance of third-party service providers in the future, our business may be materially and adversely affected.

We expect to retain third-party service providers to perform a variety of functions related to the sale of our current or future product candidates, key aspects of which will be out of our direct control. These service providers may provide key services related to distribution, customer service, accounts receivable management, and cash collection. If we retain a service provider, we would substantially rely on it as well as other third-party providers that perform services for us, including entrusting our inventories of products to their care and handling. If these third-party service providers fail to comply with applicable laws and regulations, fail to meet expected deadlines or otherwise do not carry out their contractual duties to us, or encounter physical or natural damage at their facilities, our ability to deliver product to meet commercial demand would be significantly impaired and we may be subject to regulatory enforcement action.

In addition, we may engage in the future with third parties to perform various other services for us relating to AE reporting, safety database management, fulfillment of requests for medical information regarding our product candidates and related services. If the quality or accuracy of the data maintained by these service providers is insufficient, or these third parties otherwise fail to comply with regulatory requirements related to AE reporting, we could be subject to regulatory sanctions.

Additionally, we may contract in the future with a third party to calculate and report pricing information mandated by various government programs. If a third party fails to timely report or adjust prices as required or errs in calculating government pricing information from transactional data in our financial records, it could impact our discount and rebate liability, and potentially subject us to regulatory sanctions or FCA lawsuits.

Table of Contents

Our reliance on third and related parties can also present intellectual property-related risks. For example, collaborators may not properly obtain, maintain, enforce or defend intellectual property or proprietary rights relating to our product candidates or technology or may use our proprietary information in such a way as to expose us to potential litigation or other intellectual property-related proceedings, including proceedings challenging the scope, ownership, validity and enforceability of our intellectual property. Collaborators may also own or co-own intellectual property covering our product candidates or technology that results from our collaboration with them, and in such cases, we may not have the exclusive right to commercialize such intellectual property or such product candidates or technology. Collaborators may also gain access to our trade secrets or formulations and impact our ability to commercialize proprietary technology. We may also need the cooperation of our collaborators to enforce or defend any intellectual property we contribute to or that arises out of our collaborations, which may not be provided to us.

We also anticipate that part of our strategy for pursuing the wide range of indications potentially addressed by Anktiva will involve further investigator-initiated clinical trials. While these trials generally provide us with valuable clinical data that can inform our future development strategy, we generally have less control over not only the conduct but also the design of these clinical trials. Third-party investigators may design clinical trials involving our product candidates with clinical endpoints that are more difficult to achieve or in other ways that increase the risk of negative clinical trial results compared to clinical trials we may design on our own. Negative results from investigator-initiated clinical trials, regardless of how the clinical trial was designed or conducted, could have a material adverse effect on our business and the perception of our product candidates.

Moreover, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and receive compensation in connection with such services.

We use ~~Immuno-Oncology~~the Clinic, ~~Inc.,~~ a related party, in some of our clinical trials which may expose us to significant regulatory risks. If our data for this site is not sufficiently robust or if there are any data integrity issues, we may be required to repeat such studies or required to contract with other clinical trial sites, and our clinical development plans will be significantly delayed, and we will incur additional costs.

~~Many of our Phase I~~

The Clinic has conducted, is currently conducting, and IIin the future may conduct, clinical trials ~~for~~involving our ~~haNK, PD‑L1.t‑haNK and other t‑haNK products have been conducted by Immuno-Oncology~~product candidates. The Clinic ~~Inc., which~~ is a related ~~party.~~party as it is owned by an officer of the company and additionally, NantWorks, LLC (NantWorks) manages the administrative operations of the Clinic. Prior to June 30, 2019, one of the company’s officers was an investigator or sub-investigator for certain of the company’s trials conducted at the Clinic. NantWorks, which is wholly owned by our Executive Chairman and Global Chief Scientific and Medical Officer, Dr. Soon‑Shiong, provides certain administrative services (and has loaned money) to the Clinic. Under certain circumstances, we may be required to report some of these relationships to the FDA. Relying on a related party clinical site to develop data that is used as the basis to support regulatory approval can expose us to significant regulatory risks. ~~For example,~~The FDA may conclude that a ~~study used to support~~financial relationship between us, the Clinic and/or a principal investigator has created a conflict of interest or otherwise affected interpretation of the study. The FDA or comparable regulatory ~~approval that is conducted at a related party site can be rejected by~~authorities may therefore question the ~~FDA if there are~~integrity of the data ~~integrity issues, or if there are significant good clinical practice violations~~generated at the ~~site.~~applicable clinical trial site and the utility of the clinical trial itself may be jeopardized. If any data integrity, or regulatory non-compliance issues occur during the study, we may not be able to use the data for our regulatory approval. ~~Furthermore,~~This could result in a delay in approval, or rejection, of our marketing applications by the FDA and may ultimately lead to the denial of regulatory approval of one or more of our product candidates.

Table of Contents

We have formed, and may in the future form or seek, strategic alliances or enter into collaborations with third parties or additional licensing arrangements in the future, and we may not realize the benefits of such alliances or licensing arrangements. If we fail to enter into such strategic alliances, collaborations or licensing arrangements, or such strategic alliances, collaborations or licensing arrangements are not successful, we may not be able to capitalize on the market potential of our product candidates.

We have formed, and may in the future form or seek, strategic alliances, create joint ventures or collaborations or enter into additional licensing arrangements with third and related parties that we believe will complement or augment our development and commercialization efforts with respect to our product candidates and any future product candidates that we may develop. For example, we have entered into an agreement whereby Viracta Therapeutics, Inc. (Viracta) granted to us exclusive world-wide rights to Viracta’s Phase 2 drug candidate, VRx-3996, for use in combination with our platform of NK cell therapies. However, if Viracta fails to raise sufficient capital to complete their Phase 2 trial, if their trial is unsuccessful, or if our future clinical trial of NK cell therapy in combination with VRx-3996 fails, the value of the Viracta license would be adversely affected. We plan to collaborate with governmental, academic and corporate partners, including affiliates, to improve and develop Anktiva, saRNA, hAd5 and yeast technologies, and other therapies for new indications for use in combination with other therapies and to improve and develop other product candidates, which may expose us to additional risks, or we may not realize the benefits of such collaborations.

Because some of our collaborations are conducted at outside laboratories, and we do not have complete control over how the studies are conducted or reported or over the manufacturing methods used to manufacture our Anktiva product candidate, the results of such studies, which we may use as the basis for our conclusions, projections or decisions with respect to our current or future product candidates, may be incorrect or unreliable, or may have a negative impact on us if the ~~operations~~results of such studies are imputed to our product candidates or proposed indications, even if such imputation is improper. Additionally, we may use third-party data to analyze, reach conclusions or make predictions or decisions with respect to our product candidates that may be incomplete, inaccurate or otherwise unreliable.

Further, collaborations involving our product candidates will be subject to numerous risks, which may include the following:

•collaborators, including their related or affiliated companies, may be entitled to receive exclusive rights for or involving our products;

•collaborators have significant discretion in determining the efforts and resources that they will apply to a collaboration;

•collaborators may not pursue development and commercialization of our product candidates or may elect not to continue or renew development or commercialization of our product candidates based on clinical trial results, changes in their strategic focus due to the acquisition of competitive products, availability of funding or other external factors, such as a business combination that diverts resources or creates competing priorities;

•collaborators may delay clinical trials, provide insufficient funding for a clinical trial, stop a clinical trial, abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing;

•collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our product candidates;

•a collaborator with marketing and distribution rights to one or more products may not commit sufficient resources to their marketing and distribution;

•collaborators may not properly maintain, defend or enforce our intellectual property rights or may use our intellectual property or proprietary information in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential liability;

Table of Contents

•disputes may arise between us and a collaborator that cause the delay or termination of the research, development or commercialization of our product candidates, or that result in costly litigation or arbitration that diverts management attention and resources;

•collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable product candidates;

•if an agreement with any collaborator terminates, our access to technology and intellectual property licensed to us by that collaborator may be restricted or terminate entirely, which may delay our continued development of our product candidates using the collaborator’s technology or intellectual property or require us to stop development of those product candidates completely; and

•collaborators may own or co-own intellectual property covering our product candidates or technology that results from our collaborating with them, and in such cases, we may not have the exclusive right to commercialize such intellectual property.

As a result, if we enter into collaboration agreements and strategic partnerships or license our product candidates, we may not be able to realize the benefit of such transactions if we are unable to successfully integrate them with our existing operations and company culture, which could delay our timelines or otherwise adversely affect our business. Additionally, exclusive rights that we may grant in connection with collaboration agreements may limit our ability to enter into new or additional collaboration agreements or strategic partnerships if we experience issues with existing collaborations. We also cannot be certain that, following a strategic transaction or license, we will achieve the revenues or specific net income that justifies such transaction. Any delays in entering into new collaborations or strategic partnership agreements related to our product candidates could delay the development and commercialization of our product candidates in certain geographies for certain indications, which would harm our business prospects, financial condition and results of operations.

If conflicts arise between us and our collaborators or strategic partners, these parties may act in a manner adverse to us and could limit our ability to implement our strategies.

If conflicts arise between our corporate or academic collaborators or strategic partners and us, the other party may act in a manner adverse to us and could limit our ability to implement our strategies. Some of our existing academic collaborators and strategic partners are conducting multiple product development efforts. Such current or future collaborators or strategic partners could become our competitors in the future and could develop competing products, preclude us from entering into collaborations with their competitors, fail to obtain timely regulatory approvals, terminate their agreements with us prematurely or fail to devote sufficient resources to the development and commercialization of our product candidates. Competing product candidates, either developed by the collaborators or strategic partners or to which the collaborators or strategic partners have rights, may result in the withdrawal of our collaborator’s or partner’s support for our product candidates.

For example, in 2019, Sorrento Therapeutics, Inc. (Sorrento) with which we jointly established a new entity called Immunotherapy NANTibody, LLC (NANTibody) as a stand-alone biotechnology company, commenced litigation against us and certain of our officers and directors, alleging that we improperly caused NANTibody to acquire IgDraSol, Inc. and in 2020, Sorrento sent letters purporting to terminate an exclusive license agreement with us and an exclusive license agreement with NANTibody. Additionally, in 2020, we received a Request for Arbitration before the International Chamber of Commerce, International Court of Arbitration, served by Shenzhen Beike Biotechnology Co. Ltd. asserting breach of contract under our subsidiary Altor’s license agreement with them. For more information regarding these disputes, see Note 7, Commitments and Contingencies—Litigation, of the “Notes to Consolidated Financial Statements” that appears in Part II, Item 8. “Financial Statements and Supplementary Data” of this Annual Report. Any of these developments could harm our product development efforts.

Table of Contents

We will be heavily dependent on our senior management, particularly Dr. Soon-Shiong, our Executive Chairman and Global Chief Scientific and Medical Officer, and a loss of a member of our senior management team in the future, even if only temporary, could harm our business.

Our operations will be dependent upon the services of our executives and our employees who are engaged in research and development. If we lose the services of members of our senior management, particularly Dr. Soon-Shiong, for a short or an extended time, for any reason, we may not be able to find appropriate replacements on a timely basis, and our business, financial condition and results of operations could be materially adversely affected. Our existing operations and our future development depend to a significant extent upon the performance and active participation of certain key individuals, particularly Dr. Soon-Shiong, our Executive Chairman and Global Chief Scientific and Medical Officer. Although Dr. Soon-Shiong focuses heavily on our matters and is highly active in our management, he does devote a significant amount of his time to a number of different endeavors and companies, including NantHealth, Inc., NantMedia Holdings, LLC (which operates the Los Angeles Times and the San Diego Union-Tribune) and NantWorks, which is a collection of multiple companies in the healthcare and technology space. The risks related to our dependence upon Dr. Soon-Shiong are particularly acute given his ownership percentage, the commercial and other relationships that we have with entities affiliated with him, his role in our company and his public reputation. We may also be dependent on additional funding from Dr. Soon-Shiong and his affiliates, which may not be available when needed and which he is under no obligation to provide.

To induce valuable employees to remain at our company, in addition to salary and cash incentives, we have provided, and plan to continue providing, equity incentive awards that vest over time. The value to employees of equity incentive awards that vest over time may be significantly affected by movements in our stock price that are beyond our control and may at any time be insufficient to counteract more lucrative offers from other companies. Despite our efforts to retain valuable employees, members of our management, scientific and development teams may terminate their employment with us on short notice. We do not have employment agreements with our key employees and all of our employees are hired on an “at-will” basis, which means that any of our employees could leave our employment at any time, with or without notice. We do not maintain “key man” insurance policies on the lives of these individuals or the lives of any of our other employees.

We will need to grow the size and capabilities of our organization, and we may experience difficulties in managing this growth.

Our future financial performance and our ability to commercialize our product candidates will depend, in part, on our ability to effectively manage any future growth, and our management may also have to divert a disproportionate amount of their attention away from day-to-day activities in order to devote a substantial amount of time to managing these growth activities. In order to develop our business in accordance with our business plan, we will have to hire additional qualified personnel, including in the areas of research, manufacturing, clinical ~~site~~trials management, regulatory affairs, and sales and marketing. We are continuing our efforts to recruit and hire the necessary employees to support our planned operations in the near term. However, competition for qualified personnel in the biotechnology and pharmaceuticals industry is ~~disrupted~~intense due to the limited number of individuals who possess the skills and experience required, and no assurance can be given that we will be able attract, hire, retain and motivate the highly skilled employees that we need, on acceptable terms or at all. Future growth will impose significant added responsibilities on members of management, including:

•identifying, recruiting, integrating, maintaining, and motivating additional employees;

•managing our internal development efforts effectively, including the clinical and FDA review process for our product candidates, while complying with our contractual obligations to contractors and other third parties; and

•improving our operational, financial and management controls, reporting systems, and procedures.

We currently rely, and for the foreseeable future we expect to rely, in substantial part on certain independent organizations, advisors and consultants to provide certain services. There can be no assurance that the services of these independent organizations, advisors and consultants will continue to be available to us on a timely basis when needed, or that we can find qualified replacements on economically reasonable terms, or at all. In addition, if we are unable to effectively manage our outsourced activities or if the ~~site experiences disruptions~~quality, compliance or accuracy of the services provided by consultants is compromised for any reason, our clinical trials may be extended, delayed, or terminated, and we may not be able to obtain regulatory approval of our product candidates or otherwise advance our business.

Table of Contents

If we are not able to effectively expand our organization by hiring new employees and expanding our groups of consultants and contractors, we may not be able to successfully implement the tasks necessary to further develop and commercialize our product candidates and, accordingly, may not achieve our research, development, and commercialization goals on a timely basis, or at all.

If we engage in ~~its clinical supplies~~future acquisitions or ~~resources,~~strategic partnerships, this may increase our capital requirements, dilute our stockholders, cause us to incur debt or assume contingent liabilities, and subject us to other risks.

We may evaluate various acquisitions and strategic partnerships, including licensing or acquiring complementary products, intellectual property rights, technologies, or businesses. Any potential acquisition or strategic partnership may entail numerous risks, including:

•assimilation of operations, intellectual property, and products of an acquired company or product, including difficulties associated with integrating new personnel;

•the diversion of our managements’ attention from our existing product programs and initiatives in pursuing such a strategic merger or acquisition;

•retention of key employees, the loss of key personnel, and uncertainties in our ability to maintain key business relationships;

•risks and uncertainties associated with the other party to such a transaction, including the prospects of that party and their existing products or product candidates and regulatory approvals; and

•our inability to generate revenues from acquired technology and/or products sufficient to meet our objectives in undertaking the acquisition or even to offset the associated acquisition and maintenance costs.

Depending on the size and nature of future strategic acquisitions, we may acquire assets or businesses that require us to raise additional capital or to operate or manage businesses in which we have limited experience. Making larger acquisitions that require us to raise additional capital to fund the acquisition will expose us to the risks associated with capital raising activities. Acquiring and thereafter operating larger new businesses will also increase our management, operating and reporting costs and burdens (including increased cash requirements). In addition, if we undertake acquisitions, we may issue dilutive equity securities, assume or incur additional debt obligations or contingent liabilities, incur large one-time expenses and acquire intangible assets that could result in significant future amortization expense. Moreover, we may not be able to locate suitable acquisition opportunities and this inability could impair our ability to grow or obtain access to technology or products that may be important to the development of our business.

We may become involved in securities litigation or stockholder derivative litigation in connection with our recent Merger, and this could divert the attention of our management and harm our business, and insurance coverage may not be sufficient to cover all related costs and damages.

Securities litigation or stockholder derivative litigation frequently follows the announcement of certain significant business transactions, such as the sale of a business division or announcement of a business combination transaction. We are involved in this type of litigation in connection with our recent Merger, and we may become involved in this type of litigation in the future. Litigation often is expensive and diverts management’s attention and resources, which could adversely affect our business and the company.

Table of Contents

A variety of risks associated with marketing our product candidates internationally could materially adversely affect our business.

We plan to seek regulatory approval of our product candidates outside of the U.S. and, accordingly, we expect that we will be subject to additional risks related to operating in foreign countries if we obtain the necessary approvals, including:

•differing regulatory requirements in foreign countries;

•unexpected changes in tariffs, trade barriers, price and exchange controls and other regulatory requirements;

•economic weakness, including inflation, or political instability in particular foreign economies and markets;

•compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;

•foreign taxes, including withholding of payroll taxes;

•foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident to doing business in another country;

•difficulties staffing and managing foreign operations;

•workforce uncertainty in countries where labor unrest is more common than in the U.S.;

•differing payor reimbursement regimes, governmental payors or patient self-pay systems, and price controls;

•potential ~~disruptions due~~liability under the FCPA or comparable foreign regulations;

•challenges enforcing our contractual and intellectual property rights, especially in those foreign countries that do not respect and protect intellectual property rights to ~~COVID‑19, then~~the same extent as the U.S.;

•production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad;

•the impact of public health epidemics on the global economy, such as the coronavirus pandemic currently having an impact throughout the world; and

•business interruptions resulting from geo-political actions, including war and terrorism.

These and other risks associated with international operations may materially adversely affect our ability to attain or maintain profitable operations.

We are party to a public-private partnership regarding our manufacturing facility in Dunkirk, New York, and if we or our counterparties fail to meet the obligations of those agreements, it could materially impact our development, operations and prospects.

We paid approximately $40.0 million to Athenex, and the leasehold interest in the Dunkirk Facility was transferred to us. Our annual lease payment will be $2.00 per year for an initial 10-year term, with an option to renew the lease under substantially the same terms and conditions for an additional 10-year term. As part of the transaction, we assumed obligations under various third-party agreements, and committed to spend $1.52 billion on operational expenses during the initial term, and an additional $1.50 billion on operational expenses if we elect to renew the lease for the additional 10-year term. We also committed to hiring 450 employees at the Dunkirk Facility within the first five years of operations, with 300 such employees to be hired within the first 2.5 years of operation. We are eligible for certain sales-tax exemption savings during the development of the Dunkirk Facility, and certain property tax savings over the next 20 years, subject to certain terms and conditions, including performance of certain of the obligations described above.

Table of Contents

Failure to satisfy the obligations over the lease term, including the milestones we have committed to achieve, may give rise to certain rights and remedies of the lessor and other governmental authorities including, for example, termination of the lease agreement and other related agreements and potential recoupment of a percentage of the grant funding and other benefits received, subject to the terms and conditions of the applicable agreements. If we lose access to the Dunkirk Facility and related leased equipment, it could disrupt our operations and manufacturing activities, cause us to divert resources to finding alternative facilities, which would not have any subsidies, and could have a significant impact on our operations and financial performance. We may also be subject to lawsuits or claims for damages against us if we are unable to comply with our obligations under these arrangements, which could materially and adversely affect our business, results of operations and financial condition. Furthermore, there is no guarantee that the counterparties to our public-private partnerships will comply with the terms of the agreements, including that their ability to fund their capital commitments under the agreements may be subject to their ability to raise additional capital and that further construction or operational timetables may not be met. Public-private partnerships are also subject to risks associated with government and government agency counterparties, including risks related to government relations compliance, sovereign immunity, shifts in the political environment, changing economic and legal conditions and social dynamics.

Risks Related to Healthcare and Other Government Regulations

We may be unable to obtain U.S. or foreign regulatory approval and, as a result, unable to commercialize our product candidates. We are, and if we receive regulatory approval of our product candidates, will continue to be subject to ongoing extensive regulation, regulatory obligations and continued regulatory review, which may result in significant additional expense.

Our product candidates are subject to extensive governmental regulations relating to, among other things, the research, development, testing, manufacture, quality control, import, export, safety, effectiveness, labeling, packaging, storage, distribution, record keeping, approval, advertising, promotion, marketing, post-approval monitoring and post-approval reporting of drugs and therapeutic biologics. Rigorous preclinical testing and clinical trials and an extensive regulatory approval process are required to be successfully completed in the U.S. and in many foreign jurisdictions before a new drug or therapeutic biologic can be marketed. Satisfaction of these and other regulatory requirements is costly, lengthy, time-consuming, uncertain and subject to unanticipated delays and can vary substantially based upon the type, complexity and novelty of the products involved. We have not previously submitted a BLA or NDA or similar marketing or drug approval application to the FDA or comparable foreign authorities, for any product candidate, and we may never receive such regulatory approval for any of our product candidates or regulatory approval that will allow us to successfully commercialize our product candidates. In addition, regulatory agencies may lack experience with our technologies and products, which may lengthen the regulatory review process, increase our development costs and delay or prevent their commercialization.

Regulatory authorities have substantial discretion in the approval process and may refuse to accept any application or may decide that our data are insufficient for approval and require additional preclinical studies, clinical trials or other research. The number and types of preclinical studies and clinical trials that will be required for regulatory approval also vary depending on the product candidate, the disease or condition that the product candidate is designed to address and the regulations applicable to any particular product candidate. Approval policies, regulations or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates.

Any delay in completing development or obtaining, or failing to obtain, required approvals would have a material and adverse effect on our ability to generate revenue from the particular product candidate for which we are developing and seeking approval. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained, be subject to other regulatory enforcement action, and we may not achieve or sustain profitability.

Table of Contents

Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not guarantee that we will be able to obtain or maintain regulatory approval in any other jurisdiction, however a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory approval process in others. Approval policies, procedures and requirements may vary among jurisdictions and can involve requirements and administrative review periods different from, and greater than, those in the U.S., including additional preclinical studies or clinical trials as clinical trials conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions. For example, even if the FDA grants marketing approval of a product candidate, comparable regulatory authorities in foreign jurisdictions must also approve the manufacturing, marketing and promotion of the product candidate in those countries. In many jurisdictions outside the U.S., a product candidate must be approved for reimbursement before it can be approved for sale in that jurisdiction. In some cases, the price that we intend to charge for our product candidates is also subject to approval.

Obtaining foreign regulatory approvals and establishing and maintaining compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for us and could delay or prevent the introduction of our product candidates in certain countries. If we fail to comply with the regulatory requirements in international markets and/or fail to receive applicable marketing approvals, our target market will be reduced and our ability to realize the full market potential of our product candidates will be harmed.

If we fail to comply with U.S. and foreign regulatory requirements, regulatory authorities could limit or withdraw any marketing or commercialization approvals we may receive and subject us to other penalties that could materially harm our business. For example, our GMP-in-a-Box will be regulated by the FDA as a medical device, and regulatory compliance for medical devices is expensive, complex and uncertain, and a failure to comply could lead to enforcement actions against us and other negative consequences for our business.

The FDA and similar agencies regulate medical devices. All of our potential medical device products and material modifications will be subject to extensive regulation and clearance or approval from the FDA and non-U.S. regulatory agencies prior to commercial sale and distribution as well as after clearance or approval. Complying with these regulations is costly, time-consuming, complex and uncertain. For instance, before a new medical device, or a new intended use for an existing device, can be marketed in the U.S., a company must first submit and receive either 510(k) clearance or pre-marketing approval from the FDA, unless an exemption applies.

Any regulatory approvals that we receive for our product candidates will require surveillance to monitor the safety and efficacy of the product candidate. The FDA and similar agencies have significant pre- and post-market authority, including requirements related to product design, development, testing, laboratory and clinical trials and preclinical studies approval, manufacturing processes and quality (including suppliers), labeling, packaging, distribution, AE and deviation reporting, storage, shipping, pre-market clearance or approval, advertising, marketing, promotion, sale, import, export, product change, recalls, submissions of safety and effectiveness, post-market surveillance and reporting of deaths or serious injuries and certain malfunctions, and other post-marketing information and reports such as deviation reports, registration, product listing, annual user fees, and recordkeeping for our product candidates. The FDA may also require a REMS to approve our product candidates, which may impose further requirements or restrictions on the distribution or use of an approved drug or therapeutic biologic. The FDA may also require post-approval Phase 4 trials. Moreover, the FDA and comparable foreign regulatory authorities will continue to closely monitor the safety profile of any product even after approval.

Medical devices regulated by the FDA are subject to general controls which include: registration with the FDA; listing commercially distributed products with the FDA; complying with cGMP under Quality Systems Regulations; filing reports with the FDA of and keeping records relative to certain types of AEs associated with devices under the medical device reporting regulation; assuring that device labeling complies with device labeling requirements; reporting certain device field removals and corrections to the FDA; and obtaining pre-market notification 510(k) clearance for devices prior to marketing. Some devices known as 510(k)-exempt devices can be marketed without prior marketing-clearance or approval from the FDA. In addition to the general controls, some Class 2 medical devices are also subject to special controls, including adherence to a particular guidance document and compliance with the performance standard. Instead of obtaining 510(k) clearance, most Class 3 devices are subject to PMA.

Table of Contents

The FDA can also refuse to clear or approve pre-market applications for any medical device we develop. We may not be able to obtain the necessary clearances or approvals or may be unduly delayed in doing so, for any medical device products we develop, which could harm our business. Furthermore, even if we are granted regulatory clearances or approvals for any medical device products, they may include significant limitations on the indicated uses for the product, which may limit the market for the product.

In addition, we, our contractors, and our collaborators are and will remain responsible for FDA compliance. We and any of our collaborators, including our contract manufacturers, could be subject to periodic unannounced inspections by the FDA to monitor and ensure compliance with regulatory requirements. Application holders must further notify the FDA, and depending on the nature of the change, obtain FDA pre-approval for product and manufacturing changes. The cost of compliance with post-approval regulations may have a negative effect on our operating results and financial condition.

If the FDA or comparable foreign regulatory authorities become aware of new safety information or previously unknown problems after approval of any of our product candidates, including: (i) AEs of unanticipated severity or frequency, (ii) that the product is less effective than previously thought, (iii) problems with our third-party manufacturers or manufacturing processes, or (iv) failure to comply with regulatory requirements, or if we violate regulatory requirements at any stage, whether before or after marketing approval is obtained, we may face a number of regulatory consequences, including fines, warnings or untitled letters, holds on clinical trials, delay of approval or refusal by the FDA to approve pending applications or supplements to approved applications, suspension or withdrawal of regulatory approval, product recalls and seizures, administrative detention of products, refusal to permit the import or export of products, operating restrictions or partial suspension or total shutdown of production, injunctions, consent decrees, civil penalties and criminal prosecution, among other consequences. Additionally, we may face unanticipated expenditures to address or defend such actions and customer notifications for repair, replacement or refunds. Any such restrictions could limit sales of the product. Any of these events could further have other material and adverse effects on our operations and business and could adversely impact our stock price and could significantly harm our business, financial condition, results of operations, and prospects.

The FDA also regulates the advertising and promotion of medical devices to ensure that the claims are consistent with their regulatory clearances or approvals, that there are adequate and reasonable data to substantiate the claims and that the promotional labeling and advertising is neither false nor misleading in any respect. If the FDA determines that any of our advertising or promotional claims are misleading, not substantiated or not permissible, we may be subject to enforcement actions, including warning letters, and we may be required to ~~suspend~~revise our promotional claims and make other corrections or ~~terminate the study at this site, and we may need to contract with other clinical sites for the study, which will delay our clinical development and regulatory approval for the product candidate.~~restitutions. Failure ~~of this site~~ to comply with ~~the regulations~~applicable U.S. requirements regarding, for example, promoting, manufacturing, or ~~to recruit a sufficient number of patients~~labeling our medical device products, may ~~require~~subject us to ~~delay submission for regulatory approval~~a variety of administrative or ~~repeat clinical trials,~~judicial actions and sanctions, such as Form 483 observations, warning letters, untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties and criminal prosecution. If any of our medical device products cause or contribute to a death or a serious injury or malfunction in certain ways, we will be required to report under applicable medical device reporting regulations, which can result in voluntary corrective actions or agency enforcement actions.

If any of these events were to occur, it would ~~delay the regulatory approval process. Moreover,~~have a material and adverse effect on our business, ~~may be implicated if the site violates federal or state fraud~~financial condition and ~~abuse or false claims laws and regulations or healthcare privacy and security laws.~~

results of operations.

Table of Contents

Results for any patient who receives compassionate use access to our product candidates should not be viewed as representative of how the product candidate will perform in a well-controlled clinical trial, and cannot be used to establish safety or efficacy for regulatory approval.

We often receive requests for compassionate use access to our investigational drugs by patients that do not meet the entry criteria for enrollment into our clinical ~~studies.~~trials. Generally, patients requesting compassionate use have no other treatment alternatives for life threatening conditions. We evaluate each compassionate use request on an individual basis, and in some cases grant access to our investigational ~~products~~product candidates outside of our sponsored clinical ~~studies, and where~~trials if a physician certifies that the patient ~~they are treating~~receiving treatment is critically ill and does not meet the entry criteria for one of our open clinical trials. Individual patient results from compassionate use access may not be used to support submission of a regulatory application, ~~nor~~may not support approval of a product candidate. Although one patient with pancreatic cancer who was provided compassionate use access to our product candidates has experienced a six month complete remission after being treated, such resultscandidate and should not be considered to be indicative of results from any on-going or future well-controlled clinical trial. Before we can seek regulatory approval for any of our product candidates, we must demonstrate in well-controlled clinical trials statistically significant evidence that the product candidate is both safe and effective for the indication we are seeking approval. The results of our compassionate use program may not be used to establish safety or efficacy or regulatory approval.

We ~~may~~are and will be ~~unable~~subject to ~~obtain regulatory approval for our product candidates. The denial or delay of any such approval would delay commercialization~~U.S. and ~~have a material adverse effect on our potential to generate revenue, our business and our results of operations.~~

~~The research, development, testing, manufacturing, labeling, packaging, approval, promotion, advertising, storage, recordkeeping, marketing, distribution, post-approval monitoring and reporting, and~~certain foreign export and import ~~of biopharmaceutical products are~~controls, sanctions, embargoes, anti-corruption laws and anti-money laundering laws and regulations. Compliance with these legal standards could impair our ability to compete in domestic and international markets. We can face criminal and/or civil liability and other serious consequences for violations, which can harm our business.

Our product candidates will be subject to ~~extensive regulation~~export control and import laws and regulations, including the U.S. Export Administration Regulations, U.S. Customs regulations and various economic and trade sanctions regulations administered by the ~~FDA,~~U.S. Treasury Department’s Office of Foreign Assets Controls, the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. §201, the U.S. Travel Act, the USA PATRIOT Act and ~~by foreign regulatory authorities~~possibly other state and national anti-bribery and anti-money laundering laws in ~~other countries. These regulations differ~~countries in which we conduct activities. Anti-corruption laws are interpreted broadly and prohibit companies and their employees, agents, third-party intermediaries, joint venture partners and collaborators from ~~country~~authorizing, promising, offering or providing, directly or indirectly, improper payments or benefits to ~~country. To gain approval~~recipients in the public or private sector. We use CROs abroad for clinical trials. In addition, we may engage third-party intermediaries to ~~market~~sell our product candidates and solutions abroad once we must provide regulatory authorities with substantial evidence of safety, purity and potency of the product for each indication we seek to commercialize. We have not yet obtained regulatory approval to market any of our product candidates in the U.S. or any other country. Our business depends upon obtaining these regulatory approvals.

~~The FDA can delay, limit or deny approval of our product candidates for many reasons, including:~~

•

~~our inability to satisfactorily demonstrate with substantial clinical evidence that the product candidates are safe, pure and potent for the requested indication;~~

•

~~the FDA’s disagreement with our clinical trial protocol or the interpretation of data from preclinical studies or clinical trials;~~

•

~~the population studied in the clinical trial not being sufficiently broad or representative to assess safety in the full population for which we seek approval;~~

•

~~our inability to demonstrate that clinical or other benefits of our product candidates outweigh any safety or other perceived risks;~~

•

~~the FDA’s determination that additional preclinical or clinical trials are required;~~

•

~~the FDA’s non-approval of the labeling or the specifications of our product candidates;~~

•

~~the FDA’s failure to accept the manufacturing processes or facilities of third-party manufacturers with which we may contract;~~

•

for clinical trials conducted by the Immuno-Oncology Clinic, Inc., or the Clinic, a related party, the FDA or other regulatory authorities could view our study results as potentially biased even if we achieve such clinical trial endpoints; or

•

~~the potential for approval policies or regulations of the FDA to significantly change in a manner rendering our clinical data insufficient for approval.~~

~~Even if we eventually successfully complete clinical testing and receive approval of any regulatory filing~~enter a commercialization phase for our product candidates ~~the FDA~~and/or to obtain necessary permits, licenses, and other regulatory approvals. We or our third-party intermediaries may ~~only grant approval contingent on the performance~~have direct or indirect interactions with officials and employees of ~~costly additional post-approval clinical trials. The FDA may also approve our product candidates for a more limited indication~~government agencies or ~~a narrower patient population than we originally requested, and the FDA may not approve the labeling that we believe is necessary~~state-owned or ~~desirable~~affiliated entities. We can be held liable for the ~~successful commercialization~~corrupt or other illegal activities of these third-party intermediaries, our employees, representatives, contractors, partners and agents, even if we do not explicitly authorize or have actual knowledge of such activities. if we fail to comply with these laws and regulations, we and certain of our ~~product candidates. To~~employees could be subject to substantial civil or criminal fines and penalties, imprisonment, the ~~extent~~loss of export or import privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm and other consequences.

We have adopted an anti-corruption policy, which mandates compliance with the FCPA and other anti-corruption laws applicable to our business throughout the world. However, there can be no assurance that our employees and third-party intermediaries will comply with this policy or such anti-corruption laws. Non-compliance with anti-corruption and anti-money laundering laws could subject us to whistleblower complaints, investigations, sanctions, settlements, prosecution, other investigations, or other enforcement actions. If such actions are launched, or governmental or other sanctions are imposed, or if we ~~seek regulatory approval~~do not prevail in ~~foreign countries, we may face challenges similar to those described above with regulatory authorities in applicable jurisdictions. Any delay in obtaining,~~any possible civil or ~~our inability to obtain, applicable regulatory approval for any of our product candidates would delay or prevent commercialization of our product candidates and would materially adversely impact~~criminal litigation, our business, results of operations and financial condition ~~and prospects.~~

~~Use of our product candidates~~ could be ~~associated with side effects or adverse events.~~

~~As with most biopharmaceutical products, use~~materially harmed. In addition, responding to any action will likely result in a materially significant diversion of ~~our product candidates could be associated with side effects or adverse events,~~management’s attention and resources and significant defense and compliance costs and other professional fees. In certain cases, enforcement authorities may even cause us to appoint an independent compliance monitor, which can ~~vary~~result in ~~severity~~added costs and ~~frequency. Side effects or adverse events associated with the use~~administrative burdens.

Table of our product candidates may be observed at any time, including in clinical trials or once a product is commercialized, and any such side effects or adverse events may negatively affect our ability to obtain regulatory approval or market our product candidates. Side effects such as toxicity or other safety issues associated with the use of our product candidates could require us to perform additional studies or halt development or sale of these product candidates or expose us to product liability lawsuits, which will harm our business. We may be required by regulatory agencies to conduct additional preclinical or clinical trials regarding the safety and efficacy of our product candidates, which we have not planned or anticipated. We cannot provide any assurance that we will resolve any issues related to any product-related adverse events to the satisfaction of the FDA or any regulatory agency in a timely manner or ever, which could harm our business, prospects and financial condition.

If we are successful in commercializing our product candidates, the FDA and other foreign regulatory agency regulations will require that we report certain information about adverse medical events if those products may have caused or contributed to those adverse events. The timing of our obligation to report would be triggered by the date we become aware of the adverse event, as well as the nature of the event. We may inadvertently fail to report adverse events we become aware of within the prescribed timeframe. We may also fail to appreciate that we have become aware of a reportable adverse event, especially if it is not reported to us as an adverse event or if it is an adverse event that is unexpected or removed in time from the use of our products. If we fail to comply with our reporting obligations, the FDA or other foreign regulatory agencies could take action including criminal prosecution, the imposition of civil monetary penalties, seizure of our products, or delay in approval or clearance of future products.Contents

~~The clinical and commercial utility of our aNK, haNK, t‑haNK, ceNK and MSC platforms are uncertain and may never be realized.~~

Our NK platforms are in the early stages of development. The company currently has multiple ongoing clinical trials to evaluate cryopreserved haNK and t‑haNK cells in company sponsored clinical trials. Success in early clinical trials does not ensure that large-scale clinical trials will be successful nor does it predict final results. In addition, we will not be able to treat patients if we cannot manufacture a sufficient quantity of NK cells that meet our minimum specifications. In addition, our haNK product candidate has only been tested in a small number of patients. Results from these clinical trials may not necessarily be indicative of the safety and tolerability or efficacy of our products as we expand into larger clinical trials.

We may not ultimately be able to provide the FDA with substantial clinical evidence to support a claim of safety, purity and potency sufficient to enable the FDA to approve aNK platform product candidates for any indication. This may be because later clinical trials fail to reproduce favorable data obtained in earlier clinical trials, because the FDA disagrees with how we interpret the data from these clinical trials, or because the FDA does not accept these therapeutic effects as valid endpoints in pivotal clinical trials necessary for market approval. We will also need to demonstrate that aNK platform product candidates are safe. We do not have data on possible harmful long-term effects of aNK platform product candidates and do not expect to have this data in the near future. As a result, our ability to generate clinical safety and effectiveness data sufficient to support submission of a marketing application or commercialization of our aNK platform therapy is uncertain and is subject to significant risk.

We have limited experience as a company conducting clinical trials and have relied and will rely on third parties and related parties to conduct many of our preclinical studies and clinical trials. Any failure by a third party, related party, or by us to conduct the clinical trials according to Good Clinical Practices and in a timely manner may delay or prevent our ability to seek or obtain regulatory approval for or commercialize our product candidates.

To date, the only company sponsored studies to engage in patient enrollment have been for the following cancer indications: Merkel cell, pancreatic, triple negative breast, squamous head and neck, non-small cell lung, triple negative breast, colorectal, B‑cell lymphoma, and advanced solid tumors, as well as COVID‑19 infection. Our relative lack of experience conducting clinical trials may contribute to our planned clinical trials not beginning or completing on time, if at all. In addition, we have entered into an agreement with the Clinic, a related party, to continue to conduct and oversee certain of our clinical trials. Large-scale clinical trials will require significant additional resources and reliance on Contract Research Organizations, or CROs, clinical investigators, or consultants. Consequently, our reliance on outside parties may introduce delays beyond our control. Our CROs, the Clinic, and other third parties must communicate and coordinate with one another in order for our trials to be successful. Additionally, our CROs, the Clinic, and other third parties may also have relationships with other commercial entities, some of which may compete with us. If our CROs, the Clinic, or other third parties conducting our clinical trials do not perform their contractual duties or regulatory obligations, experience work stoppages, do not meet expected deadlines, terminate their agreements with us or need to be replaced, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical trial protocols, GCPs, or other regulatory requirements or for any other reason, we may need to conduct additional clinical trials or enter into new arrangements with alternative CROs, clinical investigators or other third parties. We may be unable to enter into arrangements with alternative CROs on commercially reasonable terms, or at all.

We, the Clinic, and the third parties upon which we rely are required to comply with GCPs. GCPs are regulations and guidelines enforced by regulatory authorities around the world, through periodic inspections, for products in clinical development. If we or these third parties fail to comply with applicable GCP regulations, the clinical data generated in our clinical trials may be deemed unreliable and have to be repeated, and our submission of marketing applications may be delayed or the regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. We are subject to the risk that, upon inspection, a regulatory authority will determine that any of our clinical trials fail to comply or failed to comply with applicable GCP regulations. In addition, our clinical trials must be conducted with material produced under GMP and Good Tissue Practice, or GTP, regulations, which are enforced by regulatory authorities.

Our failure to comply with ~~these~~state, national and/or international data protection laws and regulations could lead to government enforcement actions and significant penalties against us, and adversely impact our operating results.

There are numerous laws and legislative and regulatory initiatives at the federal and state levels addressing privacy and security concerns, and some state privacy laws apply more broadly than the Health Insurance Portability and Accountability Act (HIPAA) and associated regulations. For example, California recently enacted legislation—the California Consumer Privacy Act of 2018 (CCPA)—which went into effect on January 1, 2020. The CCPA, among other things, creates new data privacy and security obligations for covered companies and provides new privacy rights to California consumers, including the right to opt out of certain disclosures of their information. The CCPA also provides for civil penalties as well as a private right of action with statutory damages for certain data breaches, thereby potentially increasing risks associated with a data breach. Although the law includes limited exceptions, including for certain information collected as part of clinical trials as specified in the law, it may regulate or impact our processing of personal information depending on the context. Additionally, a new privacy law, the California Privacy Rights Act (CPRA), was approved by California voters in November 2020 and goes into effect in most material respects on January 1, 2023. The CPRA significantly modified the CCPA, which may require us to ~~repeat clinical trials, which would delay~~modify our practices and policies and may further increase our compliance costs and potential liability. Certain other state laws impose similar privacy obligations, and all 50 states have laws including obligations to provide notification of security breaches of computer databases that contain personal information to affected individuals, state officers and others. For example, the ~~regulatory approval process. Moreover,~~CCPA has prompted the enactment of several new state laws or amendments of existing state laws, such as in New York, Nevada, Virginia, and Colorado. These laws could mark the beginning of a trend toward more stringent privacy legislation in other U.S. states and have prompted a number of proposals for new federal and state-level privacy legislation. To the extent these state laws as well as other federal and state privacy laws, including new laws and changes in existing laws, apply to our business ~~may be significantly impacted if~~and operations, our ~~CROs, the Clinic, clinical investigators or other third parties violate federal or state healthcare fraud~~compliance costs and ~~abuse or false claims~~potential liability with respect to personal information we collect could expose us to great liability and increase compliance costs.

There are also various laws and regulations in other jurisdictions relating to privacy and security. For example, European Union (EU) member states and other foreign jurisdictions, including Switzerland, have adopted data protection laws and regulations which impose significant compliance obligations on us. The collection and use of health data in the EU is governed by the EU General Data Protection Regulation (GDPR). The GDPR, which is wide-ranging in scope and applies extraterritorially, imposes several requirements relating to the consent of the individuals to whom the personal data relates, the information provided to such individuals, the security and confidentiality of the personal data, data breach notification, the adoption of appropriate privacy governance, including policies, procedures, training and audits, and the use of third-party processors in connection with the processing of personal data. The GDPR also imposes strict rules on the transfer of personal data out of the EU, including to the U.S., provides an enforcement authority and imposes large penalties for noncompliance, including the potential for fines of up to €20 million or ~~healthcare~~up to 4% of the total worldwide annual global revenues of the noncompliant entity, whichever is greater. The GDPR requirements apply not only to third-party transactions, but also to transfers of information between us and our subsidiaries, including employee information. In addition, in January 2021, following its exit from the EU, the UK transposed the GDPR into its domestic law with its own version of the GDPR (combining the GDPR and the UK Data Protection Act of 2018) (UK GDPR), which currently imposes the same obligations as the GDPR in most material respects and provides for fines of up £17.5 million or up to 4% of the total worldwide annual global revenues of the noncompliant entity, whichever is greater.

Table of Contents

Complying with these numerous, complex and often changing regulations is expensive and difficult, and failure to comply with any privacy laws or data security laws or any security incident or breach involving the misappropriation, loss or other unauthorized processing, use or disclosure of sensitive or confidential patient, consumer or other personal information, whether by us, one of our CROs or business associates or another third party, could adversely affect our business, financial condition and results of operations, including but not limited to: investigation costs; material fines and penalties; compensatory, special, punitive and statutory damages; litigation; consent orders regarding our privacy and security ~~laws.~~

practices; requirements that we provide notices, credit monitoring services and/or credit restoration services or other relevant services to impacted individuals; adverse actions against our licenses to do business; reputational damage; and injunctive relief. The recent implementation of the CCPA, GDPR and UK GDPR has increased our responsibility and liability in relation to personal data that we process, including in clinical trials, and we may in the future be required to put in place additional mechanisms to ensure compliance with the CCPA, GDPR, UK GDPR and other applicable laws and regulations, which could divert management’s attention and increase our cost of doing business. In addition, new regulation or legislative actions regarding data privacy and security (together with applicable industry standards) may increase our costs of doing business. In this regard, we expect that there will continue to be new proposed laws, regulations and industry standards relating to privacy and data protection in the U.S., the United Kingdom, the EU and other jurisdictions, and we cannot determine the impact such future laws, regulations and standards may have on our business.

We ~~also anticipate~~cannot assure you that ~~part~~our CROs or other third-party service providers with access to our or our customers’, suppliers’, trial patients’ and employees’ personally identifiable and other sensitive or confidential information in relation to which we are responsible will not breach contractual obligations imposed by us, or that they will not experience data security breaches, which could have a corresponding effect on our business, including putting us in breach of our ~~strategy for pursuing~~obligations under privacy laws and regulations and/or which could in turn adversely affect our business, results of operations and financial condition. We cannot assure you that our contractual measures and our own privacy and security-related safeguards will protect us from the ~~wide range~~risks associated with the third-party processing, use, storage and transmission of indications potentially addressed by our aNK, haNK, taNK, t‑haNK, ceNK and MSC platforms will involve further investigator-initiated clinical trials. While these trials generally provide us with valuable clinical data that can inform our future development strategy in a cost-efficient manner, we generally have less control over not onlysuch information. Any of the conduct but also the design of these clinical trials. Third-party investigators may design clinical trials involving our product candidates with clinical endpoints that are more difficult to achieve or in other ways that increase the risk of negative clinical trial results compared to clinical trials we may design on our own. Negative results in investigator-initiated clinical trials, regardless of how the clinical trial was designed or conducted,foregoing could have a material adverse effect on our ~~prospects~~business, financial condition, results of operations and prospects.

We and our third-party contractors must comply with environmental, health and safety laws and regulations. A failure to comply with these laws and regulations could expose us to significant costs or liabilities.

We and any of our third-party contract manufacturers or suppliers are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the ~~perception~~handling, use, generation, manufacture, storage, treatment and disposal of hazardous materials and wastes. Hazardous chemicals, including flammable and biological materials, are involved in certain aspects of our business, and we cannot eliminate the risk of injury or contamination from the use, generation, manufacture, distribution, storage, handling, treatment or disposal of hazardous materials and wastes. In the event of contamination or injury, or failure to comply with such environmental, health and safety laws and regulations, we could be held liable for any resulting damages, fines and penalties associated with such liability, which could exceed our assets and resources.

Although we will maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of biological or hazardous materials, or wastes arising out of and in the course of employment, this insurance may not provide adequate coverage against potential liabilities. We do not maintain comprehensive insurance coverage for liabilities arising from medical or hazardous materials, environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological or hazardous materials.

Environmental, health and safety laws and regulations are becoming increasingly more stringent. We may incur substantial costs in order to comply with current or future environmental, health, and safety laws and regulations. These current or future laws and regulations may impair our research, development, or production efforts, which could harm our business, prospects, financial condition or results of operations. Our failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.

Table of Contents

Coverage and reimbursement may be limited or unavailable in certain market segments for our product candidates, which could make it difficult for us to sell our product candidates profitably.

In both domestic and foreign markets, sales of our product ~~candidates.~~

~~Moreover, principal investigators~~candidates, if approved, depend on the availability of coverage and adequate reimbursement from third-party payors. Third-party payors, whether domestic or foreign, or governmental or commercial, are developing increasingly sophisticated methods of controlling healthcare costs. Regulatory authorities and third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications, which could affect our ability or that of our collaborators to sell our product candidates profitably. In addition, third-party payors are requiring higher levels of evidence of the benefits and clinical ~~trials~~outcomes of new technologies and are challenging the prices charged. Patients who are provided medical treatment for their conditions generally rely on third-party payors to reimburse all or part of the costs associated with their treatment. Patients are unlikely to use our product candidates unless coverage is provided, and reimbursement is adequate to cover a significant portion of the cost of our product candidates. Such third-party payors include government health programs such as Medicare and Medicaid, managed care providers, private health insurers and other organizations. Obtaining coverage and adequate reimbursement from governmental healthcare programs, such as Medicare and Medicaid, and commercial payors is critical to new product acceptance. In addition, because our product candidates represent new approaches to the treatment of cancer, we cannot accurately estimate the potential revenues from our product candidates.

Government authorities and third-party payors decide which drugs and treatments they will cover and the amount of reimbursement. Coverage decisions may ~~serve~~depend upon clinical and economic standards that disfavor new drug products when more established or lower cost therapeutic alternatives are already available or subsequently become available. These payors may not view our products, if any, as ~~scientific advisors~~cost-effective, and coverage and reimbursement may not be available to our customers, or ~~consultants~~those of our collaborators, or may not be sufficient to allow our products, if any, to be marketed on a competitive basis. If reimbursement is not available, or is available only to limited levels, our product candidates may be competitively disadvantaged, and we, or our collaborators, may not be able to successfully commercialize our product candidates. Alternatively, securing favorable reimbursement terms may require us to compromise pricing and prevent us from ~~time~~realizing an adequate margin over cost. Reimbursement by a third-party payor may depend upon a number of factors, including, but not limited to, ~~time~~the third-party payor’s determination that use of a product is:

•a covered benefit under its health plan;

•safe, effective and ~~receive compensation~~medically necessary;

•appropriate for the specific patient;

•cost-effective; and

•neither experimental nor investigational.

In the U.S., no uniform policy of coverage and reimbursement for products exists among third-party payors. Therefore, coverage and reimbursement for products can differ significantly from payor to payor. As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our product candidates to each payor separately, with no assurance that coverage and adequate reimbursement will be obtained. Moreover, the factors noted above have continued to be the focus of policy and regulatory debate that has, thus far, shown the potential for movement towards permanent policy changes; this trend is likely to continue, and may result in ~~connection~~more or less favorable impacts on pricing. The recent and ongoing series of congressional hearings relating to drug pricing has presented heightened attention to the biopharmaceutical industry, creating the potential for political and public pressure, while the potential for resulting legislative or policy changes presents uncertainty. Congress is considering legislation that, if passed, could have significant impact on prices of prescription drugs covered by Medicare, including limitations on drug price increases. The impact of these regulations and any future healthcare measures and agency rules implemented by the Biden administration on us and the pharmaceutical industry as a whole is currently unknown. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our product candidates if approved. Complying with any new legislation and regulatory changes could be time-intensive and expensive, resulting in a material adverse effect on our business.

Table of Contents

Prices paid for a drug also vary depending on the class of trade. Prices charged to government customers are subject to price controls, including ceilings, and private institutions obtain discounts through group purchasing organizations. Net prices for drugs may be further reduced by mandatory discounts or rebates required by government healthcare programs and demanded by private payors. It is also not uncommon for market conditions to warrant multiple discounts to different customers on the same unit, such ~~services.~~ as purchase discounts to institutional care providers and rebates to the health plans that pay them, which reduces the net realization on the original sale.

In addition, ~~some~~federal programs impose penalties on manufacturers of ~~our trials are being run by~~drugs marketed under a BLA or NDA, in the ~~Clinic, which is controlled by one~~form of our employees. Under certain circumstances, the company may be required to report some of these relationships to the FDA. The FDA may conclude that a financial relationship between the company, the Clinicmandatory additional rebates and/or discounts if commercial prices increase at a ~~principal investigator has created~~rate greater than the Consumer Price Index-Urban, and these rebates and/or discounts, which can be substantial, may impact our ability to raise commercial prices. For example, under the American Rescue Plan Act of 2021, effective January 1, 2024, the statutory cap on Medicaid Drug Rebate Program rebates that manufacturers pay to state Medicaid programs will be eliminated. Elimination of this cap may require pharmaceutical manufacturers to pay more in rebates than it receives on the sale of products, which could have a ~~conflict of interest~~material impact on our business. Cost control initiatives could cause us, or ~~otherwise affected interpretation~~our collaborators, to decrease, discount, or rebate a portion of the ~~study. The FDA may therefore question the integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial itself may be jeopardized. This~~price we, or they, might establish for products, which could result in lower than anticipated product revenues. If the realized prices for our product candidates, if any, decrease or if governmental and other third-party payors do not provide adequate coverage or reimbursement, our prospects for revenues and profitability will suffer.

Even if we obtain coverage for a ~~delay~~given product, the resulting approved reimbursement payment rates might not be high enough to allow us to establish or maintain a market share sufficient to realize a sufficient return on our or their investments or achieve or sustain profitability or may require co-payments that patients find unacceptably high. If payors subject our product candidates to maximum payment amounts or impose limitations that make it difficult to obtain reimbursement, providers may choose to use therapies which are less expensive when compared to our product candidates. Additionally, if payors require high copayments, beneficiaries may decline prescriptions and seek alternative therapies. We may need to conduct post-marketing studies in ~~approval, or rejection,~~order to demonstrate the cost-effectiveness of ~~our marketing applications by the FDA and may ultimately lead~~any future products to the ~~denial~~satisfaction of ~~regulatory approval~~hospitals and other target customers and their third-party payors. Such studies might require us to commit a significant amount of ~~one~~management time and financial and other resources. Our future products might not ultimately be considered cost-effective. Adequate third-party coverage and reimbursement might not be available to enable us to maintain price levels sufficient to realize an appropriate return on investment in product development.

We, and our collaborators, cannot be sure that coverage will be available for any product candidate that we, or ~~more~~they, commercialize and, if available, that the reimbursement rates will be adequate. Further, the net reimbursement for drug products may be subject to additional reductions if there are changes to laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the U.S. An inability to promptly obtain coverage and adequate payment rates from both government-funded and private payors for any of our product ~~candidates.~~

candidates for which we obtain marketing approval could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products, and our overall financial condition.

There have been, and likely will continue to be, legislative and regulatory proposals at the federal and state levels directed at broadening the availability of healthcare and containing or lowering the cost of healthcare. We cannot predict the initiatives that may be adopted in the future. The continuing efforts of the government, insurance companies, managed care organizations and ~~ImmunityBio~~other payors of healthcare services to contain or reduce costs of healthcare and/or impose price controls may ~~not~~adversely affect:

•the demand for our product candidates, if we obtain regulatory approval;

•our ability to set a price that we believe is fair for our product candidates;

•our ability to generate revenues and achieve or maintain profitability;

•the level of taxes that we are required to pay; and

•the availability of capital.

Table of Contents

Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors, which may adversely affect our future profitability. A particular challenge for our product candidates arises from the fact that they will primarily be ~~successful~~used in ~~jointly developing and obtaining regulatory approval~~an inpatient setting. Inpatient reimbursement generally relies on stringent packaging rules that may mean that there is no separate payment for ~~any collaborative COVID‑19~~our product candidates.

~~The risks described in this section~~ Additionally, data used to set the payment rates for inpatient admissions is usually several years old and would not take into account all of the additional therapy costs associated with the administration of our product candidates. If special rules are not created for reimbursement for immunotherapy treatments such as our product candidates, hospitals might not receive enough reimbursement to cover their costs of treatment, which will have a negative effect on their adoption of our product candidates.

We may face difficulties from changes to current regulations and future legislation.

In the U.S. and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the ~~development and regulatory~~healthcare system that could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities, and affect our ability, or the ability of our collaborators, to profitably sell any products for which we obtain marketing approval. We expect that current laws, as well as other federal and state healthcare reform measures that may be adopted in ~~oncology~~the future, may result in more rigorous coverage criteria, increased regulatory burdens and operating costs, decreased revenues from our biopharmaceutical product candidates, decreased potential returns from our development efforts, and additional downward pressure on the price that we, or our collaborators, may receive for any approved products.

Since enactment of the ACA in 2010, in both the U.S. and certain foreign jurisdictions, there have been a number of legislative and regulatory changes to the health care system that could impact our ability to sell our product candidates profitably. These changes included aggregate reductions of Medicare payments to providers of up to 2% per fiscal year, effective April 1, 2013, which, due to subsequent legislative amendments, will stay in effect through 2030, with the exception of a temporary suspension implemented under various COVID‑19 relief legislation from May 1, 2020 through March 31, 2022, followed by a 1% payment adjustment from April 1 to June 30, 2022 and a 2% payment adjustment beginning July 1, 2022, unless additional Congressional action is taken. In January 2013, the American Taxpayer Relief Act of 2012 (ATRA) was approved which, among other things, reduced Medicare payments to several providers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. These laws may result in additional reductions in Medicare and other healthcare funding, which could have a material adverse effect on customers for our product candidates, if approved, and accordingly, our financial operations.

Since its enactment, various portions of the ACA have been subject to judicial and constitutional challenges. In June 2021, the United States Supreme Court held that Texas and other challengers had no legal standing to challenge the ACA, dismissing the case without specifically ruling on the constitutionality of the ACA. Accordingly, the ACA remains in effect in its current form. It is unclear how this Supreme Court decision, future litigation, or healthcare measures promulgated by the Biden administration will impact our business, financial condition and results of operations. Complying with any new legislation or reversing changes implemented under the ACA could be time-intensive and expensive, resulting in a material adverse effect on our business.

Any reduction in reimbursement from Medicare or other government healthcare programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenues, attain profitability or commercialize our product candidates.

Legislative and regulatory proposals may also be made to expand post-approval requirements and restrict sales and promotional activities for drugs. We cannot be sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance, or interpretations will be changed, or what the impact of such changes on the marketing approvals of our product candidates, if any, may be. In addition, increased scrutiny by Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements.

Table of Contents

In addition, there have been increasing legislative efforts and enforcement interest in the U.S. with respect to drug pricing practices, including Congressional inquiries and proposed federal and state legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs. At the federal level, in 2020, the Trump administration used several means to propose or implement drug pricing reform, including through federal budget proposals, executive orders and policy initiatives, some of which resulted in lawsuits against the U.S Department of Health and Human Services challenging various aspects of the rules. The impact of these lawsuits as well as legislative, executive, and administrative actions of the Biden administration on us and the pharmaceutical industry as a whole remains unclear. At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

We are unable to predict the future course of federal or state healthcare legislation in the U.S. directed at broadening the availability of healthcare and containing or lowering the cost of healthcare. The ACA and any further changes in the law or regulatory framework that reduce our revenues or increase our costs could also have a material and adverse effect on our business, financial condition and results of operations. We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our current product candidates and any future product candidates or additional pricing pressures. It is possible that additional governmental action is taken to address the COVID-19 pandemic.

Governments outside the U.S. tend to impose strict price controls, which may adversely affect our revenues, if any.

In international markets, reimbursement and health care payment systems vary significantly by country, and many countries have instituted price ceilings on specific products and therapies. In some countries, particularly the countries of the EU, the pricing of prescription pharmaceuticals is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain coverage and reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidate to other available therapies. There can be no assurance that our product candidates will be considered cost-effective by third-party payors, that an adequate level of reimbursement will be available, or that the third-party payors’ reimbursement policies will not adversely affect our ability to sell our product candidates profitably. If reimbursement of our product candidates is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be harmed, possibly materially.

Our employees, independent contractors, consultants, commercial partners, principal investigators, CROs, suppliers and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.

We are exposed to the risk of employee fraud or other illegal activity by our employees, independent contractors, consultants, commercial partners, principal investigators, CROs, suppliers and vendors. Misconduct by these parties could include intentional, reckless and/or negligent conduct that fails to: comply with the laws of the FDA and other similar foreign regulatory bodies, provide true, complete and accurate information to the FDA and other similar foreign regulatory bodies, comply with manufacturing standards we have established, comply with healthcare fraud and abuse laws in the U.S. and similar foreign fraudulent misconduct laws, or report financial information or data accurately or to disclose unauthorized activities to us. If we obtain FDA approval of any of our product candidates and begin commercializing those product candidates in the U.S., our potential exposure under such laws will increase significantly, and our costs associated with compliance with such laws are also ~~applicable~~likely to increase. In particular, the ~~product candidates~~promotion, sales and marketing of healthcare items and services, as well as certain business arrangements in the healthcare industry, are subject to extensive laws and regulations designed to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, structuring and commission(s), certain customer incentive programs and other business arrangements. Activities subject to these laws also involve the improper use of information obtained in the course of patient recruitment for clinical trials, which could result in regulatory sanctions and serious harm to our reputation.

Table of Contents

It is not always possible to identify and deter misconduct or other improper activities by our employees or third parties that we engage for our business operations and ~~ImmunityBio intend~~the precautions we take to ~~jointly develop under~~detect and prevent inappropriate conduct may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with such laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a material adverse effect on our business, financial condition, results of operations and prospects, including the ~~Joint COVID‑19 Collaboration,~~imposition of significant fines or other sanctions, including ImmunityBio’s COVID‑19 vaccine candidate. In particular, while the second generation adenovirus used in ImmunityBio’s COVID‑19 vaccine candidate is being tested in Phase I trials for SARS‑CoV‑2exclusion from government healthcare programs, and ~~has been generally well-tolerated in those studies~~serious harm to date, the COVID‑19 vaccine candidate uses a different construct directed towards the SARS‑CoV‑2 virus. This vaccine candidate has not previously been tested in humans and very limited preclinical data has been generated to date.our reputation. In addition, the ~~biology~~approval and commercialization of any of our product candidates outside the U.S. will also likely subject us to foreign equivalents of the ~~SARS‑CoV‑2 virus and pathology of COVID‑19 disease are not fully understood and new information is constantly emerging. Thus, there remains~~healthcare laws mentioned above, among other foreign laws. Efforts to ensure that our business arrangements will comply with applicable healthcare laws may involve substantial ~~uncertainty about how ImmunityBio’s COVID‑19 vaccine candidate will perform in clinical trials, the timelines~~costs.

Risks Related to ~~complete development of the vaccine candidate and whether the FDA or other regulatory agencies will approve the vaccine candidate for registrational studies or subsequent marketing.~~ Intellectual Property

If we ~~and ImmunityBio~~ are unable to ~~successfully develop,~~ obtain, ~~regulatory approval~~maintain, protect and enforce patent protection and other proprietary rights for ~~manufacture at scale and commercialize~~our product candidates ~~for COVID‑19, or if the Joint COVID‑19 Collaboration is terminated,~~and technologies, we may not be able to ~~realize~~compete effectively or operate profitably and our ability to prevent our competitors from commercializing similar or identical technology and product candidates would be adversely affected.

Our success is dependent in large part on our obtaining, maintaining, protecting and enforcing patents and other proprietary rights in the U.S. and other countries with respect to our product candidates and technology and on our ability to avoid infringing the intellectual property and other proprietary rights of others. Certain of our intellectual property rights are licensed from other entities, and as such the preparation and prosecution of any ~~share~~such patents and patent applications was not performed by us or under our control. Furthermore, patent law relating to the scope of ~~net sales of resulting products or recoup~~claims in the ~~substantial investments~~biotechnology field in which we ~~expect to make~~operate is still evolving and, consequently, patent positions in our ~~joint development efforts.~~

~~We are heavily dependent on our senior management, particularly Mr. Richard Adcock, Dr. Patrick Soon-Shiong~~industry may not be as strong as in other more well-established fields. The patent positions of biotechnology and ~~Dr. Barry Simon,~~pharmaceutical companies can be highly uncertain and involve complex legal and factual questions for which important legal principles remain unresolved and has been the subject of much litigation in recent years. No consistent policy regarding the breadth of claims allowed in biotechnology patents has emerged to date. As a ~~loss of a member~~result, the issuance, scope, validity, enforceability, or commercial value of our ~~senior management team~~patent rights remain highly uncertain.

Any future patents we obtain may not be sufficiently broad to prevent others from using our technology or from developing competing therapeutics and technology. There is no guarantee that any of our pending patent applications will result in issued or granted patents, any of our issued or granted patents will not later be found to be invalid or unenforceable, or any issued or granted patents will include claims sufficiently broad to cover our product candidates and technology, or to provide meaningful protection from our competitors. Our owned or in-licensed pending and future patent applications may not result in patents being issued that protect our Anktiva, saRNA, hAd5 and yeast technologies, cell-based therapies, aldoxorubicin or other product candidates and technologies or that effectively prevent others from commercializing competitive technologies and product candidates.

Moreover, the coverage claimed in a patent application can be significantly reduced before the patent is issued, and its scope can be reinterpreted after issuance. Even if patent applications we license or own currently or in the future issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors or other third parties from competing with us, or otherwise provide us with any competitive advantage. Any patents that we own or in-license may be challenged, narrowed, circumvented, or invalidated by third parties. Consequently, we do not know whether our Anktiva, saRNA, hAd5 and yeast technologies, cell-based therapies or other product candidates and technologies will be protectable or remain protected by valid and enforceable patents. Our competitors or other third parties may be able to circumvent our patents by developing similar or alternative technologies or products in a non-infringing manner which could materially adversely affect our business, financial condition, results of operations and growth prospects.

Table of Contents

The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability and it is uncertain how much protection, if any, will be provided by our patents, including if they are challenged in the courts or patent offices or in other proceedings, such as re-examinations or oppositions, which may be brought in the U.S. or foreign jurisdictions to challenge the validity of a patent. A third party may challenge the validity or enforceability of a patent after its issuance. It is possible that a competitor may successfully challenge our patents or that a challenge will result in limiting their coverage. Moreover, it is possible that competitors may infringe our patents or successfully avoid the patented technology through design innovation. To counter infringement or other unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming, even if ~~only temporary,~~we were successful in stopping the violation of our patent rights.

We or our licensors may be subject to a third-party preissuance submission of prior art to the USPTO, or become involved in opposition, derivation, revocation, reexamination, post-grant and inter partes review, or interference proceedings or other similar proceedings challenging our owned or licensed patent rights. Should third parties file patent applications, or be issued patents claiming technology also used or claimed by our licensor(s) or by us in any future patent application, we, or one of our licensors, may be required to participate in interference proceedings in the USPTO to determine priority of invention for those patents or patent applications that are subject to the first-to-invent law in the U.S., or may be required to participate in derivation proceedings in the USPTO for those patents or patent applications that are subject to the first-inventor-to-file law in the U.S. We may be required to participate in such interference or derivation proceedings involving our issued patents and pending applications. We may also be required to participate in post-grant challenge proceedings, such as oppositions in a foreign patent office, that challenge our or our licensor’s priority of invention or other features of patentability with respect to our owned or in-licensed patents and patent applications. Such challenges may result in loss of patent rights, loss of exclusivity, or in patent claims being narrowed, invalidated, or held unenforceable, which could ~~harm~~limit our ~~business.~~

ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our Anktiva, saRNA, hAd5 and yeast technologies, cell-based therapies or other product candidates and technologies. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate or render unenforceable, our owned or in-licensed patent rights, allow third parties to commercialize our Anktiva, saRNA, hAd5 and yeast technologies, cell-based therapies or other product candidates or technologies and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights.

If we ~~lose members~~or our collaborators are unsuccessful in any such proceeding or other priority or inventorship dispute, we may be required to cease using the technology or to obtain and maintain license rights from prevailing third parties, including parties involved in any such interference proceedings or other priority or inventorship disputes. A prevailing party in that case may not offer us a license on commercially acceptable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors and other third parties access to the same technologies licensed to us, and it could require us to make substantial licensing and royalty payments. If we are unable to obtain and maintain such licenses, we may need to cease the development, manufacture, and commercialization of one or more of the product candidates we may develop. The loss of exclusivity or the narrowing of our ~~senior management~~owned and licensed patent claims could limit our ability to stop others from using or commercializing similar or identical technology and products. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations and prospects.

In addition, given the amount of time required for the development, testing, and regulatory review of new product candidates, patents protecting such product candidates might expire before or shortly after such product candidates are commercialized. As a ~~short~~result, our intellectual property may not provide us with sufficient rights to exclude others from commercializing products similar or ~~an extended time,~~identical to ours.

Table of Contents

Some of our owned and in-licensed patents and patent applications are, and may in the future be, co-owned with third parties. In addition, certain of our licensors co-own the patents and patent applications we in-license with other third parties with whom we do not have a direct relationship. Our exclusive rights to certain of these patents and patent applications are dependent, in part, on inter-institutional or other operating agreements between the joint owners of such patents and patent applications, who are not parties to our license agreements. If our licensors do not have exclusive control of the grant of licenses under any such third-party co-owners’ interest in such patents or patent applications or we are otherwise unable to secure such exclusive rights, such co-owners may be able to license their rights to other third parties, including our competitors, and our competitors could market competing products and technology. In addition, we may need the cooperation of any such co-owners of our patents in order to enforce such patents against third parties, and such cooperation may not be provided to us. Any of the foregoing could have a material adverse effect on our competitive position, business, financial conditions, results of operations and growth prospects.

If any of our owned or in-licensed patent applications do not issue as patents in any jurisdiction, we may not be able to ~~find appropriate replacements on a timely basis,~~compete effectively.

Changes in either the patent laws or their interpretation in the U.S. and other countries may diminish our ability to protect our inventions, obtain, maintain, and enforce our intellectual property rights and, more generally, could affect the value of our intellectual property or narrow the scope of our owned and licensed patents. With respect to both in-licensed and owned intellectual property, we cannot predict whether the patent applications we and our ~~business could be adversely affected. Our existing operations~~licensors are currently pursuing will issue as patents in any particular jurisdiction or whether the claims of any issued patents will provide sufficient protection from competitors or other third parties. The patent prosecution process is expensive, time-consuming, and continued future development depend to a significant extent upon the performance and active participation of certain key individuals, including Mr. Adcock, our CEO, Dr. Soon-Shiong, our Executive Chairman and our principal stockholder, and Dr. Simon, our President and Chief Administrative Officer. The risks related to our dependence upon Dr. Soon-Shiong are particularly acute given his ownership percentage, the commercial and other relationships that we have with entities affiliated with him, his role in our company and reputation. We may also be dependent on additional funding from Dr. Soon‑Shiong and his affiliates, which may not be available when needed. If we were to lose Mr. Adcock, Dr. Soon-Shiong or Dr. Simon for a short or an extended time, for any reason, including the contraction of COVID‑19, we may not be able to find appropriate replacements on a timely basis and our financial condition and results of operations could be materially adversely affected.

Competition for qualified personnel in the biotechnology and pharmaceuticals industry is intense due to the limited number of individuals who possess the skills and experience required. To induce valuable employees to remain at our company, in addition to salary and cash incentives, we have provided stock options and restricted stock units that vest over time. The value to employees of stock options and restricted stock units that vest over time may be significantly affected by movements in our stock price that are beyond our control, and may at any time be insufficient to counteract more lucrative offers from other companies. Despite our efforts to retain valuable employees, members of our management, scientific and development teams may terminate their employment with us on short notice. We face significant competition for employees, particularly scientific personnel, from other biopharmaceutical companies, which include both publicly traded and privately held companies,complex, and we may not be able to ~~hire new~~file, prosecute, maintain, enforce, or license all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output in time to obtain patent protection. Although we enter into nondisclosure and confidentiality agreements with parties who have access to confidential or patentable aspects of our research and development output, such as our employees, ~~quickly enough~~corporate collaborators, outside scientific collaborators, CROs, CMOs, consultants, advisors, and other third parties, any of these parties may breach the agreements and disclose such output before a patent application is filed, thereby jeopardizing our ability to seek patent protection. In addition, our ability to obtain and maintain valid and enforceable patents depends on whether the differences between our inventions and the prior art allow our inventions to be patentable over the prior art. Furthermore, publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the U.S. and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore, we cannot be certain that we or our licensors were the first to make the inventions claimed in any of our owned or licensed patents or pending patent applications, or that we or our licensors were the first to file for patent protection of such inventions.

We or our licensors, collaborators, or any future strategic partners may become subject to third-party claims or litigation alleging infringement of patents or other proprietary rights or seeking to invalidate patents or other proprietary rights, and we may need to resort to litigation to protect or enforce our patents or other intellectual property or the patents or other intellectual property of our licensors, all of which could be expensive, time-consuming and unsuccessful, may delay or prevent the development and commercialization of our product candidates, or may put our patents and other proprietary rights at risk.

If we or one of our licensors initiate legal proceedings against a third party to enforce a patent covering one of our product candidates or other technologies, the defendant could counterclaim that the patent is invalid and/or unenforceable or that we infringe their patents. In patent litigation in the U.S., defendant counterclaims alleging invalidity and/or unenforceability are commonplace, and there are numerous grounds upon which a third party can assert invalidity or unenforceability of a patent. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO or other applicable body, or made a misleading statement, during prosecution. Third parties may also raise similar claims before administrative bodies in the U.S. or abroad, even outside the context of litigation. Such mechanisms include re-examination, post grant review, inter partes review, interference proceedings, derivation proceedings, and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings).

Table of Contents

With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which we, our ~~needs.~~ licensor, our or our licensor’s patent counsel and the patent examiner were unaware during prosecution. Moreover, even if our patents were to survive such a litigation challenge to their validity, the patents might still be held to be valid but unenforceable if a court were to decide that the patents are being enforced in a manner inconsistent with the antitrust laws, or that the patents were obtained through deceit during patent office examination or other such failure of sufficient candor to the patent office. If a third party were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the patent protection on our product candidates. Such a loss of patent protection could have a material adverse impact on our business, financial condition, results of operations and prospects.

The cost to us of any litigation or other proceeding relating to intellectual property rights, even if resolved in our favor, could be substantial. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources, including our scientists and management, from our business.

An adverse result in any litigation or defense proceeding could put one or more of our owned or licensed patents at risk of being invalidated, held unenforceable, or interpreted narrowly, and could put our patent applications at risk of not issuing. Such proceedings could result in revocation or cancellation of, or amendment to, our patents in such a way that they no longer cover our product candidates or technologies. If the outcome of litigation is adverse to us, third parties may be able to use our patented invention without payment to us. In addition, in an infringement proceeding, there is a risk that a court may decide that one or more of our patents is not valid or is unenforceable and that we do not have the right to stop the other party from using the inventions. There is also the risk that, even if the validity of our patents were upheld, a court would refuse to stop the other party on the grounds that its activities are not covered by, that is, do not infringe, our patents. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.

In addition, there could be public announcements of the results of hearings, motions, or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing, or distribution activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Some of our competitors may be better able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources and more mature and developed intellectual property portfolios. The outcome following legal assertions of invalidity and unenforceability is unpredictable. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.

The use of our technology and product candidates could potentially conflict with the rights of others, and third-party claims of intellectual property infringement, misappropriation or other violation against us, our licensors or our collaborators may prevent or delay the development and commercialization of our product candidates and technologies.

Our commercial success depends in part on our, our licensors’ and our collaborators’ ability to avoid infringing, misappropriating and otherwise violating the patents and other intellectual property rights of third parties. There is a substantial amount of complex litigation involving patents and other intellectual property rights in the biopharmaceutical industry. Our potential competitors or other parties may have, develop or acquire patent or other intellectual property rights that they could assert against us. If they do so, then we may be required to alter our product candidates, pay licensing fees or cease our development and commercialization activities with respect to the applicable product candidates or technologies. If our product candidates conflict with patent or other intellectual property rights of others, such parties could bring legal actions against us or our collaborators, licensees, suppliers or customers, claiming damages and seeking to enjoin manufacturing, use and marketing of the affected products.

Table of Contents

Although we have ~~employment agreements~~conducted freedom-to-operate (FTO) analyses of the patent landscape with respect to our ~~key employees,~~lead product candidates and continue to undertake FTO analyses of our manufacturing processes, our Anktiva product candidate, and contemplated future processes and products, because patent applications do not publish for 18 months, and because the claims of patent applications can change over time, no FTO analysis can be considered exhaustive. We may not be aware of patents that have already been issued and that a competitor or other third party might assert are infringed by our current or future product candidates or technologies. It is also possible that we could be found to have infringed patents owned by third parties of which we are aware, but which we do not believe are relevant to our product candidates or technologies. In addition, because patent applications can take many years to issue, there may be currently pending patent applications that may later result in issued patents that our product candidates or technologies may infringe. Furthermore, patent and other intellectual property rights in biotechnology remains an evolving area with many risks and uncertainties. As such, we may not be able to ensure that we can market our product candidates without conflict with the rights of others.

If intellectual property-related legal actions asserted against us are successful, in addition to any potential liability for damages (including treble damages and attorneys’ fees for willful infringement), we could be enjoined from, or required to obtain a license to continue, manufacturing, promoting the use of or marketing the affected products. We may not prevail in any legal action and a required license under the applicable patent or other intellectual property may not be available on acceptable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors and other third parties access to the same technologies licensed to us, and it could require us to make substantial licensing and royalty payments. We also could be required to redesign our infringing products, which may be impossible or require substantial time and monetary expenditure.

Defense of infringement claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of management and other employee resources from our business, and may impact our reputation. Some of our competitors may be able to sustain the costs of litigation or administrative proceedings more effectively than we can because of greater financial resources. In addition, there could be public announcements of the results of hearings, motions, or other interim proceedings or developments, and if securities analysts or investors perceive these ~~employment agreements provide~~results to be negative, it could have a substantial adverse effect on the price of our common stock. The occurrence of any of the foregoing could have a material adverse effect on our business, financial condition, results of operations and prospects.

Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment, and other requirements imposed by government patent agencies, and our patent protection could be reduced or eliminated for ~~at-will employment,~~non-compliance with these requirements.

Periodic maintenance fees, renewal fees, annuity fees, and various other government fees on patents and patent applications are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime of a patent. The USPTO and various foreign governmental patent agencies require compliance with several procedural, documentary, fee payment and other similar provisions during the patent application process. In certain circumstances, we rely on our licensors to pay these fees and take the necessary actions to comply with these requirements. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which ~~means~~noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. In such an event, our competitors might be able to enter the market with similar or identical products or technology, which would have a material adverse impact on our business, financial condition, results of operations and prospects.

Table of Contents

Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our product candidates.

As is the case with other immunotherapy and biopharmaceutical companies, our success is dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biopharmaceutical industry involve both technological and legal complexity, and is therefore costly, time-consuming and inherently uncertain. In addition, the U.S. has recently enacted and is currently implementing wide-ranging patent reform legislation. Assuming that other requirements for patentability are met, prior to March 2013, in the U.S., the first to invent the claimed invention was entitled to the patent, while outside the U.S., the first to file a patent application was entitled to the patent. After March 2013, under the Leahy-Smith America Invents Act (the America Invents Act) enacted in September 2011, the U.S. transitioned to a first-to-file system in which, assuming that other requirements for patentability are met, the first inventor to file a patent application will be entitled to the patent on an invention regardless of whether a third party was the first to invent the claimed invention. A third party that files a patent application in the USPTO after March 2013, but before us could therefore be awarded a patent covering an invention of ours even if we had made the invention before it was made by such third party. This will require us to be cognizant of the time from invention to filing of a patent application. Since patent applications in the U.S. and most other countries are confidential for a period of time after filing or until issuance, we cannot be certain that we or our licensors were the first to either file any patent application related to our product candidates or other technologies or invent any of the inventions claimed in our or our licensor’s patents or patent applications. The America Invents Act also includes a number of significant changes that affect the way patent applications will be prosecuted and also may affect patent litigation. These include allowing third-party submission of prior art to the USPTO during patent prosecution and additional procedures to attack the validity of a patent by USPTO-administered post-grant proceedings, including post-grant review, inter partes review, and derivation proceedings. Therefore, the America Invents Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our owned or in-licensed patent applications and the enforcement or defense of our owned or in-licensed issued patents, all of which could have a material adverse effect on our business, financial condition, results of operations, and prospects.

Additionally, U.S. Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future. While we do not believe that any of the patents owned or licensed by us will be found invalid based on the foregoing, we cannot predict how future decisions by Congress, the federal courts or the USPTO may impact the value of our ~~employees~~patents.

Our rights to develop and commercialize our product candidates and technologies are subject, in part, to the terms and conditions of licenses granted to us by others.

We will rely on licenses to certain patent rights and proprietary technology from third parties that are important or necessary to the development of aldoxorubicin as well as products enabled by our adenoviral and yeast, including Tarmogen, vaccine technologies.

License agreements may not provide exclusive rights to use certain licensed intellectual property and technology in all relevant fields of use and in all territories in which we may wish to develop or commercialize our technology and product candidates in the future. As a result, we may not be able to prevent competitors or other third parties from developing and commercializing competitive products that also utilizes technology that we have in-licensed.

Table of Contents

In addition, subject to the terms of any such license agreements, we do not have the right to control the preparation, filing, prosecution and maintenance, and we may not have the right to control the enforcement, and defense of patents and patent applications covering the technology that we license from third parties. We cannot be certain that our in-licensed or out-licensed patents and patent applications that are controlled by our licensors or licensees will be prepared, filed, prosecuted, maintained, enforced, and defended in a manner consistent with the best interests of our business. If our licensors or licensees fail to prosecute, maintain, enforce, and defend such patents, or lose rights to those patents or patent applications, the rights we have licensed may be reduced or eliminated, our right to develop and commercialize Anktiva and any of our product candidates that are subject of such licensed rights could ~~leave~~be adversely affected, and we may not be able to prevent competitors from making, using and selling competing products. In addition, even where we have the right to control patent prosecution of patents and patent applications we have licensed to and from third parties, we may still be adversely affected or prejudiced by actions or inactions of our ~~employment~~licensees, our licensors and their counsel that took place prior to the date upon which we assumed control over patent prosecution.

Furthermore, our owned and in-licensed patents may be subject to a reservation of rights by one or more third parties. For example, certain of our in-licensed intellectual property was funded in part by the U.S. government. As a result, the U.S. government may have certain rights to such intellectual property. When new technologies are developed with U.S. government funding, the U.S. government generally obtains certain rights in any resulting patents, including a non-exclusive license authorizing the U.S. government to use the invention or to have others use the invention on its behalf. The U.S. government’s rights may also permit it to disclose the funded inventions and technology to third parties and to exercise march-in rights to use or allow third parties to use the technology we have licensed that was developed using U.S. government funding. The U.S. government may exercise its march-in rights if it determines that action is necessary because we fail to achieve practical application of the government-funded technology, or because action is necessary to alleviate health or safety needs, to meet requirements of federal regulations, or to give preference to U.S. industry. In addition, our rights in such inventions may be subject to certain requirements to manufacture products embodying such inventions in the U.S. in certain circumstances if this requirement is not waived. Any exercise by the U.S. government of such rights or by any third party of its reserved rights could have a material adverse effect on our competitive position, business, financial condition, results of operations and growth prospects.

If we fail to comply with our obligations in the agreements under which we license intellectual property rights from third parties or otherwise experience disruptions to our business relationships with our licensors, we may be required to pay damages and we could lose license rights that are important to our business.

We have entered into license agreements with third parties and may need to obtain additional licenses from others to advance our research or allow commercialization of our product candidates. We may be unable to obtain certain additional licenses at a reasonable cost or on reasonable terms, if at all. In that event, we may be required to expend significant time and resources to redesign our technology, product candidates, or the methods for manufacturing them or to develop or license replacement technology, all of which may not be feasible on a technical or commercial basis. If we are unable to do so, we may be unable to develop or commercialize the affected product candidates or continue to utilize our existing technology, which could harm our business, financial condition, results of operations and growth prospects significantly. We cannot provide any ~~time, with~~assurances that third-party patents do not exist which might be enforced against our current technology, manufacturing methods, product candidates, or ~~without notice. Except~~future methods or products resulting in either an injunction prohibiting our manufacture or future sales, or, with respect to ~~Dr. Simon,~~our future sales, an obligation on our part to pay royalties and/or other forms of compensation to third parties, which could be significant.

Table of Contents

In addition, each of our license agreements, and we expect our future agreements, will impose various development, diligence, commercialization, and other obligations on us. Certain of our license agreements also require us to meet development timelines, or to exercise commercially reasonable efforts to develop and commercialize licensed products, in order to maintain the licenses. In spite of our efforts, our licensors might conclude that we have materially breached our obligations under such license agreements and might therefore terminate the license agreements, thereby removing or limiting our ability to develop and commercialize products and technology covered by these license agreements. If these in-licenses are terminated, or if the underlying patents fail to provide the intended exclusivity, competitors or other third parties would have the freedom to seek regulatory approval of, and to market, products identical to ours and we may be required to cease our development and commercialization of certain of our product candidates or of Anktiva. Any of the foregoing could have a material adverse effect on our competitive position, business, financial conditions, results of operations and growth prospects.

Moreover, disputes may arise regarding intellectual property subject to a licensing agreement, including:

•the scope of rights granted under the license agreement and other interpretation-related issues;

•the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement;

•the sublicensing of patent and other rights under our collaborative development relationships;

•our diligence obligations under the license agreement and what activities satisfy those diligence obligations;

•the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our partners; and

•the priority of invention of patented technology.

In addition, the agreements under which we currently license intellectual property or technology from third parties are complex, and certain provisions in such agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant intellectual property or technology, or increase what we believe to be our financial or other obligations under the relevant agreement, either of which could have a material adverse effect on our business, financial condition, results of operations and growth prospects. Moreover, if disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on commercially acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates, which could have a material adverse effect on our business, financial conditions, results of operations and growth prospects.

We have limited foreign intellectual property rights and may not be able to protect our intellectual property rights in various jurisdictions throughout the world.

We have limited intellectual property rights outside the U.S. Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the U.S. can be less extensive than those in the U.S. In addition, the laws of some foreign countries do not ~~maintain “key man” insurance policies on~~protect intellectual property rights to the ~~lives~~same extent as federal and state laws in the U.S. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the U.S., or from selling or importing products made using our inventions in and into the U.S. or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the U.S. These products may compete with our product candidates and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

Table of Contents

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property protection, particularly those relating to biopharmaceutical products, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, many countries limit the enforceability of patents against government agencies or government contractors. In these ~~individuals~~countries, the patent owner may have limited remedies, which could materially diminish the value of such patent. If we or ~~the lives of~~ any of our licensors is forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may be impaired, and our business, financial condition, results of operations and prospects may be adversely affected.

We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed trade secrets or other confidential information of third parties or claims asserting ownership of what we regard as our own intellectual property.

We have received confidential and proprietary information from third parties and their employees and contractors. In addition, we plan to employ and contract with individuals who were previously employed at other biotechnology or pharmaceutical companies. We may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed the trade secrets or other confidential information of these third parties or our employees’ former employers. Litigation may be necessary to defend against or pursue these claims. Even if we are successful in resolving these claims, litigation could result in substantial cost and be a distraction to our management and employees.

In addition, while it is our policy to require our employees, consultants and independent contractors who may be involved in the conception or development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who, in fact, conceives or develops intellectual property that we regard as our own. The assignment of intellectual property rights may not be self-executing, or the assignment agreements may be breached, and we may be forced to bring claims against third parties, or defend claims that they may bring against us, to determine the ownership of what we regard as our intellectual property. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations, and prospects.

Table of Contents

We may not be able to ~~attract~~license or acquire new or necessary intellectual property rights or technology from third parties.

An element of our intellectual property strategy is to license intellectual property rights and ~~retain quality personnel on acceptable terms,~~ technologies from third parties and/or ~~at all, which~~our affiliates. Other parties, including our competitors or our affiliates, may ~~cause~~have patents relevant to our business, may have already filed patent applications relevant to our business, and ~~operating~~are likely filing patent applications potentially relevant to our business. In order to avoid infringing these patents, we may find it necessary or prudent to obtain licenses to such patents from such parties. In addition, with respect to any patents we co-own with other parties, including our affiliates, we may require licenses to such co-owners’ interest to such patents. The licensing or acquisition of intellectual property rights is a competitive area, and other more established companies may pursue strategies to license or acquire third-party intellectual property rights that we may consider attractive or necessary. These established companies may have a competitive advantage over us due to their size, capital resources, and greater clinical development and commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to license or acquire third-party intellectual property rights on terms that would allow us to make an appropriate return on our investment or at all. No assurance can be given that we will be successful in licensing any additional rights or technologies from third parties and/or our affiliates. Our inability to license the rights and technologies that we have identified, or that we may in the future identify, could have a material adverse impact on our ability to complete the development of our product candidates or to develop additional product candidates. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors and other third parties access to the same technologies licensed to us, and it could require us to make substantial licensing and royalty payments. Failure to obtain any necessary rights or licenses may detrimentally affect our planned development of our current or future additional product candidates and could increase the cost, and extend the timelines associated with our development, of such other products, and we may have to abandon development of the relevant program or product candidate. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations and prospects.

If we do not obtain patent term extension and data exclusivity for any product candidates we may develop, our business may be materially harmed.

Depending upon the timing, duration and specifics of any FDA marketing approval of any product candidates we may develop, one or more of our owned or in-licensed U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984 (the Hatch-Waxman Act). The Hatch-Waxman Act permits a patent term extension of up to ~~suffer.~~

five years as compensation for patent term lost during the FDA regulatory review process. A patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval. Only one patent may be extended per new drug, and only those claims covering the approved drug, a method for using it, or a method for manufacturing it may be extended. Similar extensions as compensation for patent term lost during regulatory review processes are also available in certain foreign countries and territories, such as in Europe under a Supplementary Patent Certificate. However, we may not be granted an extension in the U.S. and/or foreign countries and territories because of, for example, failing to exercise due diligence during the testing phase or regulatory review process, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents, or otherwise failing to satisfy applicable requirements. Moreover, the applicable time period or the scope of patent protection afforded could be less than we request. If we are unable to obtain patent term extension or the term of any such extension is shorter than what we request, our competitors may obtain approval of competing products following our patent expiration, and our business, financial condition, results of operations and growth prospects could be materially harmed.

We may be subject to claims challenging rights in our patents and other intellectual property.

We or our licensors may be subject to claims that former employees, collaborators or other third parties have an interest in our owned or in-licensed patents, trade secrets, or other intellectual property, including as an inventor or co-inventor. For example, we or our licensors may have disputes arise from conflicting obligations of employees, consultants or others who are involved in developing our product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship, or our or our licensors’ ownership of our owned or in-licensed patents, trade secrets or other intellectual property. If we or our licensors fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of or right to use valuable intellectual property. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Table of Contents

If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.

In addition to seeking patents for Anktiva, saRNA, hAd5 and yeast technologies, cell therapies, and other product candidates and technologies, we also rely on trade secrets and confidentiality agreements to protect our unpatented know-how, technology, and other proprietary information and to maintain our competitive position. Trade secrets and know-how can be difficult to protect. We expect our trade secrets and know-how will over time be disseminated within the industry through independent development, the publication of journal articles describing the methodology, and the movement of personnel from academic to industry scientific positions.

We seek to protect these trade secrets and other proprietary technology, in part, by entering into nondisclosure and confidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outside scientific collaborators, CROs, CMOs, consultants, advisors, and other third parties. We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants as well as train our employees not to bring or use proprietary information or technology from former employers to us or in their work, and remind former employees when they leave their employment of their confidentiality obligations. We cannot guarantee that we have entered into such agreements with each party that may have or have had access to our trade secrets or proprietary technology and processes. Despite our efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive, and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the U.S. are less willing or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor or other third party, we would have no right to prevent them from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor or other third party, our competitive position would be materially and adversely harmed.

If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected.

Our registered or unregistered trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing on other marks. We may not be able to protect our rights to these trademarks and trade names, which we need to build name recognition among potential partners or customers in our markets of interest. At times, competitors or other third parties may adopt trade names or trademarks similar to ours, thereby impeding our ability to build brand identity and possibly leading to market confusion. In addition, there could be potential trade name or trademark infringement claims brought by owners of other registered trademarks or trademarks that incorporate variations of our registered or unregistered trademarks or trade names. Over the long term, if we are unable to establish name recognition based on our trademarks and trade names, then we may not be able to compete effectively and our business may be adversely affected. Our efforts to enforce or protect our proprietary rights related to trademarks, trade secrets, domain names, copyrights or other intellectual property may be ineffective and could result in substantial costs and diversion of resources and could adversely affect our business, financial condition, results of operations and growth prospects.

Intellectual property rights do not necessarily address all potential threats.

The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations and may not adequately protect our business or permit us to maintain our competitive advantage. For example:

•others may be able to make products that are similar to our product candidates or utilize similar technology but that are not covered by the claims of the patents that we license or may own;

•we, or our current or future licensors or collaborators, might not have been the first to make the inventions covered by the issued patent or pending patent application that we license or own now or in the future;

•we, or our current or future licensors or collaborators, might not have been the first to file patent applications covering certain of our or their inventions;

100

Table of Contents

•others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our owned or licensed intellectual property rights;

•it is possible that our current or future pending owned or licensed patent applications will not lead to issued patents;

•issued patents that we hold rights to may be held invalid or unenforceable, including as a result of legal challenges by our competitors or other third parties;

•our competitors or other third parties might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets;

•we may not develop additional proprietary technologies that are patentable;

•the patents of others may harm our business; and

•we may choose not to file a patent in order to maintain certain trade secrets or know-how, and a third party may subsequently file a patent covering such intellectual property.

Should any of these events occur, they could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Risks Related to Our Common Stock

Dr. ~~Patrick~~ Soon-Shiong, our Executive Chairman, Global Chief Scientific and Medical Officer and our principal stockholder, has significant interests in other companies which may conflict with our interests.

Our Executive Chairman, Global Chief Scientific and Medical Officer and our principal stockholder, Dr. ~~Patrick~~ Soon-Shiong, is the founder of NantWorks. The various NantWorks companies are currently exploring opportunities in the immunotherapy, oncology, infectious disease and inflammatory disease fields. In particular, we have agreements with a number of related parties that provide services, technology and equipment for use in ~~our~~their efforts to develop ~~our~~their product ~~pipeline.~~pipelines. Dr. Soon-Shiong holds a controlling interest, either directly or indirectly, in these entities. Consequently, Dr. Soon-Shiong’s interests may not be aligned with our other stockholders and he may from time to time be incentivized to take certain actions that benefit his other interests and that our other stockholders do not view as being in their interest as investors in our company. In addition, other companies affiliated with Dr. Soon-Shiong may compete with us for business opportunities or, in the future, develop products that are competitive with ours (including products in other therapeutic fields which we may target in the future). Moreover, even if they do not directly relate to us, actions taken by Dr. Soon-Shiong and the companies with which he is involved could impact us.

We ~~may~~are also ~~pursue~~pursuing supply arrangements for various investigational agents controlled by affiliates to be used in ~~our~~their clinical trials. If Dr. Soon-Shiong ~~was~~were to cease his affiliation with us ~~ImmunityBio,~~ or ~~with~~ NantWorks, these entities may be unwilling to continue these relationships with us on commercially reasonable terms, or at all, and as a result may impede our ability to control the supply chain for our combination therapies. These ~~supply and~~ collaboration agreements do not typically specify how sales will be apportioned between the parties upon successful commercialization of the product. As a result, we cannot guarantee that we will receive a percentage of the ~~revenue~~revenues that is at least proportional to the costs that we will incur in commercializing the product candidate.

~~Furthermore, in November 2015, we~~

We have entered into ~~a Shared Services Agreement~~shared services agreements with NantWorks, pursuant to which NantWorks ~~and/or any of~~and its affiliates ~~provides~~provide corporate, general and administrative ~~manufacturing strategy, research and development, regulatory and clinical trial strategy,~~ and other support services to ~~us and our subsidiaries.~~us. If Dr. Soon-Shiong was to cease his affiliation with us or with NantWorks, we may be unable to establish or maintain this relationship with NantWorks on a commercially reasonable basis, if at all. As a result, we could experience a lack of business continuity due to loss of historical and institutional knowledge and a lack of familiarity of new employees and/or new service providers with business processes, operating requirements, policies and procedures, and we may incur additional costs as new employees and/or service providers gain necessary ~~experience, particularly in connection with issues or concerns we may have as a public company.~~experience. In addition, the loss of the services of NantWorks might significantly delay or prevent the development of our ~~products~~product candidates or achievement of other business objectives by diverting management’s attention to transition matters and identification of suitable replacements, if any, and could have a material adverse effect on our business and results of operations.

~~We will need~~

101

Table of Contents

Dr. Soon-Shiong, through his voting control of the company, has the ability to ~~grow~~control actions that require stockholder approval.

Dr. Soon-Shiong, through his direct and indirect ownership of the ~~size and capabilities~~company’s common stock, has voting control of ~~our organization, and we may experience difficulties in managing this growth.~~

~~To effect our business plan, we will need to add other management, administrative, regulatory, manufacturing and scientific staff.~~the company. As of December 31, ~~2020, we had 171 employees. We will need to attract, retain~~2021, Dr. Soon-Shiong and motivate a significant number of new additional managerial, operational, sales, marketing, financial, and other personnel, as well as highly skilled scientific and medical personnel, and to expand our capabilities to successfully pursue our research, development, manufacturing and commercialization efforts and secure collaborations to market and distribute our products. This growth may strain our existing managerial, operational, financial and other resources. We also intend to add personnel in our research and development and manufacturing departments as we expand our clinical trial and research capabilities. Moreover, we may need to hire additional accounting and other personnel and augment our infrastructure as a result of operating as a public company. Any inability to attract and retain qualified employees to enable our planned growth and establish additional capabilities or our failure to manage our growth effectively could delay or curtail our product development and commercialization efforts and harm our business.

~~We have limited manufacturing experience and may not be able to manufacture our haNK, taNK, t~~‑~~haNK or ceNK cells on a large scale or in a cost-effective manner.~~

haNK, taNK, t‑haNK and ceNK cells have been grown in various quantities in closed cell culture systems and intermediate to larger-scale bioreactors. With all manufacturing efforts being conducted in-house, we will need to develop the ability to grow haNK, taNK, t‑haNK and ceNK cells on a large-scale basis in a cost efficient manner. While we have made great strides with our haNK and t‑haNK production, including a validated cryopreserved formhis affiliates beneficially own approximately 78.7% of the ~~product, we have not demonstrated~~company’s common stock outstanding.

Additionally, an affiliate of Dr. Soon-Shiong holds a warrant to purchase 1,638,000 shares of the ability to manufacture these cells beyond quantities sufficient for our clinical programs. We have not demonstrated the ability to manufacture our taNK, t‑haNK and ceNK cells beyond quantities sufficient for research and development and limited clinical activities. We have also experienced increases in manufacturing costs and sporadic decreases in manufacturing yield of haNK, taNK, t‑haNK and ceNK cells. In addition, we have no experience manufacturing our NK cells specifically at the capacitycompany’s common stock that will ~~be necessary to support commercial sales. The novel nature of our technology~~become exercisable if certain performance conditions are satisfied. Dr. Soon-Shiong and his related party also ~~increases the complexity and risk~~hold approximately $279.5 million in the ~~manufacturing process. In addition, we may encounter difficulties in obtaining the approvals for, and designing, constructing, validating and operating, any new~~

~~manufacturing facility. We may also be unable to hire the qualified personnel that we will require to accommodate the expansion~~aggregate of our operations and manufacturing capabilities. If we relocate our manufacturing activities to a new facility during or after a pivotal clinical trial, we may be unable to obtain regulatory approval unless and until we demonstrateCVRs issued to the ~~FDA’s~~former stockholders of Altor in connection with NantCell’s acquisition of Altor. If the underlying conditions for payment are met, the CVRs become payable in cash or shares of the company’s common stock or any combination as the holder elects. Dr. Soon-Shiong and his related party have irrevocably agreed to receive shares of the company’s common stock in satisfaction of their CVRs.

During the ~~similarity of our haNK, taNK, t‑haNK and ceNK cells manufactured in the new facility to our cells manufactured in prior facilities. If~~year ended December 31, 2021, we ~~cannot adequately demonstrate similarity to the FDA, we could be required to repeat clinical trials, which would be expensive, and would substantially delay regulatory approval.~~

Because our product candidates are cell-based, their manufacture is complicated. In addition, we rely on certain third party suppliers for manufacturing supplies such as X‑VIVO 10 media to grow and produce our cells. Reliance on such third-party suppliers exposes us to supply interruptions and shortages that could haveexecuted a $300.0 million promissory note with an adverse effect on our ability to produce product. Moreover, our present production process may not meet our initial expectations as to reproducibility, yield, purity or other measurements of performance. Any supply interruption from third parties and entities that areentity affiliated with Dr. Soon‑Shiong and/or NantWorks could materially harm our ability to manufacture our product candidates until a new source of supply, if any, could be identified and qualified. We may be unable to find a sufficient alternative supply channel in a reasonable time or on commercially reasonable terms. In addition, we may have to customize a bioreactor system to our manufacturing process. Because our manufacturing process is unproven, we may never successfully commercialize our products. In addition, because the clinical trials were conducted using a system that will not be sufficient for commercial quantities, we may have to show comparability of the different versions of systems we have used. For these and other reasons, we may not be able to manufacture haNK, taNK, t‑haNK, ceNK and MSC cells on a large scale or in a cost-effective manner.

aNK platform cells have been produced at academic institutions associated with our other clinical trial sites. In the past, the lack of production of aNK platform cells has caused delays in the commencement of our clinical trials. We have been establishing NK cell production capacity to meet anticipated demand for our planned clinical trials but may not be able to successfully build out our capacity to meet our current and anticipated future needs. Any damage to or destruction of our facility and equipment, prolonged power outage, contamination or shut down by the FDA or other regulatory authority could significantly impair or curtail our ability to produce haNK, taNK, t‑haNK and ceNK cells.

~~We are dependent on third parties to store our aNK, haNK, taNK, t~~‑~~haNK and ceNK cells, and any damage or loss to our master cell bank would cause delays in replacement, and our business could suffer.~~

The aNK cells of our master and working cell banks are stored in freezers at a third party biorepository and also stored in our freezers at one of our production facilities. If these cells are damaged at these facilities, including by the loss or malfunction of these freezers or back-up power systems, as well as by damage from fire, loss of power, or other natural disasters, we would need to establish replacement master and working cell banks, which would impact clinical supply and delay our patients’ treatments. If we are unable to establish replacement cell banks, we could incur significant additional expenses and liability to patients whose treatment is delayed, and our business could suffer.

If we or any of our third party manufacturers that we may use do not maintain high standards of manufacturing, our ability to develop and commercialize haNK, taNK, t‑haNK or ceNK cells could be delayed or curtailed.

We and any third parties that we may use in the future to manufacture our products must continuously adhere to cGMP regulations rigorously enforced by the FDA through its facilities inspection program. If our facilities or the facilities of third parties who we may use in the future to produce our products do not pass a pre-approval inspection, the FDA will not grant market approval for haNK, taNK, t‑haNK or ceNK cells. In complying with cGMP, we and any third-party manufacturers must expend significant time, money and effort in production, record keeping and quality control to assure that each component of our haNK, taNK, t‑haNK and ceNK cell therapies meets applicable specifications and other requirements. We or any of these third-party manufacturers may also be subject to comparable or more stringent regulations of foreign regulatory authorities. If we or any of our third-party manufacturers fail to comply with these requirements, we may be subject to regulatory action, which could delay or curtail our ability to develop, obtain regulatory approval of, and commercialize haNK, taNK, t‑haNK or ceNK cells. If our component part manufacturers and suppliers fail to provide components of sufficient quality to meet our required specifications, our clinical trials or commercialization of haNK, taNK, t‑haNK or ceNK cells could be delayed or halted, and we could face product liability claims.

~~If we or any of our third-party manufacturers that we may engage use hazardous and biological materials in a manner that causes injury or violates applicable law, we may be liable for damages.~~

Our research and development activities involve the controlled use of potentially hazardous substances, including chemical and biological materials, by us and any third-party manufacturers that we may use in the future. We and any of our third party manufacturers that we may engage are subject to federal, state and local laws and regulations in the U.S. governing the use, manufacture, storage, handling and disposal of medical and hazardous materials. Although we believe that our procedures for using, storing and disposing of these materials comply with legally prescribed standards, we cannot completely eliminate the risk of contamination or injury resulting from medical or hazardous materials. As a result of any such contamination or injury, we may incur liability or local, city, state or federal authorities may curtail the use of these materials and interrupt our business operations. In the event of an accident, we could be held liable for damages or penalized with fines, and the liability could exceed our resources. We do not have any insurance for liabilities arising from medical or hazardous materials. Compliance with applicable environmental laws and regulations is expensive, and current or future environmental regulations may impair our research, development and production efforts, which could harm our business, prospects, financial condition or results of operations.

~~We have not yet developed a validated methodology for freezing and thawing large quantities of taNK and t~~‑~~haNK cells, which we believe will be required for the storage and distribution of our taNK and t~~‑~~haNK product candidates.~~

We have not demonstrated that taNK and t‑haNK cells can be frozen and thawed in large quantities without damage, in a cost-efficient manner and without degradation over time. We may encounter difficulties not only in developing freezing and thawing methodologies, but also in obtaining the necessary regulatory approvals for using such methodologies in treatment. If we cannot adequately demonstrate similarity of our frozen product to the unfrozen form to the satisfaction of the FDA, we could face substantial delays in our regulatory approvals. If we are unable to freeze taNK and t‑haNK cells for shipping purposes, our ability to promote adoption and standardization of our products, as well as achieve economies of scale by centralizing our production facility, will be limited. Even if we are able to successfully freeze and thaw taNK and t‑haNK cells in large quantities, we will still need to develop a cost-effective and reliable distribution and logistics network, which we may be unable to accomplish. For these and other reasons, we may not be able to commercialize haNK, taNK or t‑haNK cells on a large scale or in a cost-effective manner.

~~We rely on third party healthcare professionals to administer haNK, taNK, t~~‑~~haNK or ceNK cells to patients, and our business could be harmed if these third parties administer these cells incorrectly.~~

We rely on the expertise of physicians, nurses and other associated medical personnel to administer haNK, t‑haNK, MSC or ceNK cells to clinical trial patients. If these medical personnel are not properly trained to administer, or do not properly administer, haNK, taNK, t‑haNK, MSC or ceNK cells, the therapeutic effect of haNK, taNK, t‑haNK, MSC or ceNK cells may be diminished or the patient may suffer injury.

In addition, if we achieve the ability to freeze and thaw our haNK, t‑haNK, MSC and ceNK cells, third party medical personnel will have to be trained on proper methodology for thawing haNK, t‑haNK, MSC and ceNK cells received from us. If this thawing is not performed correctly, the cells may become damaged and/or the patient may suffer injury. While we intend to provide training materials and other resources to these third-party medical personnel, the thawing of haNK, t‑haNK, MSC or ceNK cells will occur outside our supervision and may not be administered properly. If, due to a third-party error, people believe that haNK, t‑haNK, MSC or ceNK cells are ineffective or harmful, the desire to use haNK, t‑haNK, MSC or ceNK cells may decline, which would negatively impact our business, reputation and prospects. We may also face significant liability even though we may not be responsible for the actions of these third parties.

~~Even if any of our product candidates receive regulatory approvals, they may fail to achieve the broad degree of market acceptance and use necessary for commercial success.~~

Any potential future commercial success of any of our product candidates will depend, among other things, on its acceptance by physicians, patients, healthcare payors, and other members of the medical community as a therapeutic and cost-effective alternative to commercially available products. Because only a few cell-based therapy products have been commercialized, we do not know to what extent cell-based immunotherapy products will be accepted as therapeutic alternatives. If we fail to gain market acceptance, we may not be able to earn sufficient revenues to continue our business. Market acceptance of, and demand for, any product that we may develop, if approved for commercial sale, will depend on many factors, including:

•

~~our ability to provide substantial evidence of safety and efficacy;~~

•

~~convenience and ease of administration;~~

•

~~prevalence and severity of adverse side effects associated with our product candidates;~~

•

~~availability of alternative and competing treatments;~~

•

~~the cost effectiveness of any approved product and competing treatments;~~

•

~~the ability to offer appropriate patient access programs, such as co-pay assistance;~~

•

~~the extent to which physicians recommend our products to their patients;~~

•

~~effectiveness of our marketing and distribution strategy and pricing of any product that we may develop;~~

•

~~publicity concerning our products or competitive products; and~~

•

~~our ability to obtain sufficient third-party coverage and adequate reimbursement.~~

If haNK, taNK, t‑haNK and ceNK cells are approved for use, but fail to achieve the broad degree of market acceptance necessary for commercial success, our operating results and financial condition will be adversely affected. In addition, even if haNK, taNK, t‑haNK and ceNK cells gain acceptance, the markets for treatment of patients with our target indications may not be as significant as we estimate.

Even if we are able to commercialize any product candidates, such products may become subject to unfavorable pricing regulations, third-party reimbursement practices or healthcare reform initiatives, which would harm our business.

The regulations that govern marketing approvals, pricing and reimbursement for new drugs vary widely from country to country. Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we might obtain marketing approval for a product in a particular country, but then be subject to price regulations that delay the commercial launch of the product and negatively impact the revenue we are able to generate from the sale of the product in that country. Adverse pricing limitations may hinder our ability to recoup our investment in one or more product candidates, even if any product candidates we may develop obtain marketing approval.

Our ability to successfully commercialize any products that we may develop also will depend in part on the extent to which reimbursement for these products and related treatments will be available from government health administration authorities, private health insurers and other organizations. Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish reimbursement levels. A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. Reimbursement may impact the demand for, or the price of, any product candidate for which we obtain marketing approval. Government authorities also impose mandatory discounts for certain patient groups and may seek to increase such discounts at any time. Future regulation may negatively impact the price of our products, if approved. It may be difficult to promptly obtain coverage and profitable payment rates from both the government-funded and private payors for any of our approved product candidates, and this may have a material adverse effect on our operating results, our ability to raise capital and our overall financial condition.

There are risks inherent in our business that may subject us to potential product liability suits and other claims, which may require us to engage in expensive and time-consuming litigation or pay substantial damages and may harm our reputation and reduce the demand for our product.

Our business exposes us to product liability risks, which are inherent in the testing, manufacturing, marketing and sale of biopharmaceutical products. We will face an even greater risk of product liability if we commercialize haNK, taNK, t‑haNK and ceNK cells. For example, we may be sued if any product we develop allegedly causes or is perceived to cause injury or is found to be otherwise unsuitable during product testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability and a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our products. Even a successful defense would require significant financial and management resources.

Certain aspects of how haNK, taNK, t‑haNK and ceNK cells are processed and administered may increase our exposure to liability. Medical personnel administer haNK, taNK, t‑haNK and ceNK cells to patients intravenously in an outpatient procedure. This procedure poses risks to the patient similar to those occurring with infusions of other cell products, such as T‑cells and stem cells, including blood clots, infection and mild to severe allergic reactions. Additionally, haNK, taNK, t‑haNK and ceNK cells or components of our haNK, taNK, t‑haNK and ceNK cell therapy may cause unforeseen harmful side effects. For example, a patient receiving haNK, taNK, t‑haNK and ceNK cells could have a severe allergic reaction or could develop an autoimmune condition to materials infused with the haNK, taNK, t‑haNK and ceNK cells.

In addition, we have not conducted studies on the long-term effects associated with the media that we use to grow our haNK, taNK, t‑haNK and ceNK cells. Similarly, we expect to use media in freezing our haNK, taNK, t‑haNK and ceNK cells for shipment. These media could contain substances that have proved harmful if used in certain quantities. As we continue to develop our haNK, taNK, t‑haNK and ceNK cell therapy, we may encounter harmful side effects that we did not previously observe in our prior studies and clinical trials. Additionally, the discovery of unforeseen side effects of haNK, taNK, t‑haNK and ceNK cells could also lead to lawsuits against us.

~~Regardless of merit or eventual outcome, product liability or other claims may, among other things, result in:~~

•

~~decreased demand for any approved products;~~

•

~~injury to our reputation and significant negative media attention;~~

•

~~withdrawal of clinical trial participants or cancellation of clinical trials;~~

•

~~costs to defend the related litigation;~~

•

~~a diversion of management’s time and our resources;~~

•

~~substantial monetary awards to clinical trial participants or patients;~~

•

~~regulatory investigations, product recalls, withdrawals or labeling, marketing or promotional restrictions;~~

•

~~exhaustion of any available insurance and our capital resources;~~

•

~~loss of revenue;~~

•

~~a potential decrease in our share price; and~~

•

~~the inability to commercialize any products we develop.~~

Our inability to obtain and maintain sufficient product liability insurance at an acceptable cost and scope of coverage to protect against potential product liability claims could prevent or inhibit the commercialization of our products. We obtained product liability insurance covering our clinical trials with policy limits that we believe are customary for similarly situated companies and adequate to provide us with coverage for foreseeable risks. Although we maintain such insurance, any claim that may be brought against us could result in a court judgment or settlement in an amountSoon-Shiong that is ~~not covered, in whole or in part, by our insurance or that is in excess of the limits of our insurance coverage. If we determine that it is prudent to increase our product liability coverage~~ due ~~to the commercial launch of any approved product, we may be unable to obtain such increased coverage on acceptable terms, or at all. Our insurance policies also have various exclusions~~ and deductibles, and we may be subject to a product liability claim for which we have no coverage. We will have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts. Moreover, in the future, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses. If and when we obtain approval for marketing our product candidates, we intend to expand our insurance coverage to include the sale of the applicable products; however, we may be unable to obtain this liability insurance on commercially reasonable terms. If a successful product liability or other claim or series of claims is brought against us for uninsured liabilities or in excess of insured liabilities, our assets may not be sufficient to cover these claims and our business operations could suffer.

We currently have no marketing and sales organization and have no experience in marketing products. If we are unable to establish marketing and sales capabilities or enter into agreements with third parties to market and sell our product candidates, we may not be able to generate product revenue.

We currently have no sales, marketing or distribution capabilities and have no experience as a company in marketing products. If we develop an internal sales, marketing and distribution organization, this would require significant capital expenditures, management resources and time, and we would have to compete with other pharmaceutical and biotechnology companies to recruit, hire, train and retain marketing and sales personnel.

If we are unable or decide not to establish internal sales, marketing and distribution capabilities, we expect to pursue collaborative arrangements regarding the sales, marketing and distribution of our products. However, we may not be able to establish or maintain such collaborative arrangements, or if we are able to do so, their sales forces may not be successful in marketing our products. Any revenue we receive would depend upon the efforts of such third parties, which may not be successful. We may have little or no control over the sales, marketing and distribution efforts of such third parties and our revenue from product sales may be lower than if we had commercialized our product candidates ourselves. We also face competition in our search for third parties to assist us with the sales, marketing and distribution efforts of our product candidates. There can be no assurance that we will be able to develop internal sales, marketing and distribution capabilities or establish or maintain relationships with third-party collaborators to commercialize any product in the U.S. or overseas.

~~A variety of risks associated with marketing our product candidates internationally could materially adversely affect our business.~~

•

~~differing regulatory requirements in foreign countries;~~

•

~~unexpected changes in tariffs, trade barriers, price and exchange controls and other regulatory requirements;~~

•

~~economic weakness, including inflation, or political instability in particular foreign economies and markets;~~

•

~~compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;~~

•

~~foreign taxes, including withholding of payroll taxes;~~

•

~~foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doing business in another country;~~

•

~~difficulties staffing and managing foreign operations;~~

•

~~workforce uncertainty in countries where labor unrest is more common than in the U.S.;~~

•

~~differing payor reimbursement regimes, governmental payors or patient self-pay systems, and price controls;~~

•

~~potential liability under the Foreign Corrupt Practices Act of 1977 or comparable foreign regulations;~~

•

challenges enforcing our contractual and intellectual property rights, especially in those foreign countries that do not respect and protect intellectual property rights to the same extent as the U.S.;

•

~~production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad;~~

•

~~the impact of public health epidemics on the global economy, such as the coronavirus pandemic currently having an impact throughout the world; and~~

•

~~business interruptions resulting from geo-political actions, including war and terrorism.~~

~~These and other risks associated with international operations may materially adversely affect our ability to attain or maintain profitable operations.~~

We have formed, and may in the future form or seek, strategic alliances or enter into additional licensing arrangements in the future, and we may not realize the benefits of such alliances or licensing arrangements.

We have formed, and may in the future form or seek, strategic alliances, create joint ventures or collaborations or enter into additional licensing arrangements with third and related parties that we believe will complement or augment our development and commercialization efforts with respect to our product candidates and any future product candidates that we may develop. For example, during the third quarter of 2020, we entered into a Joint COVID‑19 Collaboration Agreement with ImmunityBio, a related party, as further described above. In addition, we entered into an agreement whereby Viracta granted to us exclusive world-wide rights to Viracta’s phase II drug candidate, VRx‑3996, for use in combination with our platform of NK cell therapies. However, if Viracta fails to raise sufficient capital to complete their pivotal phase II trial, if their trial is unsuccessful, or if our future clinical trial of NK cell therapy in combination with VRx‑3996 fails, the value of the Viracta license would be adversely affected.

Any of these relationships may require us to incur non-recurring and other charges, increase our near and long-term expenditures, issue securities that dilute our existing stockholders or disrupt our management and business. In addition, we face significant competition in seeking appropriate strategic partners and the negotiation process is time-consuming and complex. Moreover, we may not be successful in our efforts to establish a strategic partnership or other alternative arrangements for our product candidates because they may be deemed to be at too early of a stage of development for collaborative effort and third parties may not view our product candidates as having the requisite potential to demonstrate safety and efficacy. If we license products or acquire businesses, we may not be able to realize the benefit of such transactions if we are unable to successfully integrate them with our existing operations and company culture. We cannot be certain that, following a strategic transaction or license, we will achieve the revenue or specific net income that justifies such transaction. Any delays in entering into new strategic partnership agreements related to our product candidates could delay the development and commercialization of our product candidates in certain geographies for certain indications, which would harm our business prospects, financial condition and results of operations.

~~Our internal computer systems, or those used by our contractors or consultants, may fail or suffer security breaches.~~

Our business model involves the storage and transmission of clinical trial and other data on our systems and on the systems of our consultants and contractors, and security breaches expose us to a risk of loss of this information, governmental fines and penalties, litigation and/or potential liability, in addition to negative publicity. Despite the implementation of security measures, our internal computer systems and those of our contractors and consultants are vulnerable to damage from computer viruses and unauthorized access. Our security measures and those of our contractors and consultants may also be breached due to employee error, malfeasance or otherwise. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs and our business operations. For example, the loss of clinical trial data from completed, ongoing or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Likewise, we rely on affiliated entities and third parties for research and development of our product candidates and to conduct clinical trials and may rely on third parties for the manufacture of our product candidates and similar events relating to their computer systems could have a material adverse effect on our business.

We expect that these risks and exposures related to our internal computer systems will remain high for the foreseeable future due to the rapidly evolving nature and sophistication of cyber threats to our internal computer systems. Moreover, as the use of technology has become more prevalent in the course of business as a result of COVID‑19, we may become more susceptible to operational, financial and information security risks resulting from cyber-attacks and/or technological malfunctions. There can be no assurance that our efforts to implement adequate security measures will remain sufficient to protect the company against future cyber-attacks. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability, suffer damage to our reputation, the further development and commercialization of our product candidates could be delayed, and our stock price could decline.

~~Future acquisitions and investments could disrupt our business and harm our financial condition and operating results.~~

Our success may depend, in part, on our ability to expand our products and services. In some circumstances, we may determine to do so through the acquisition of complementary businesses and technologies rather than through, or in conjunction with, internal development. The identification of suitable acquisition candidates can be difficult, time-consuming and costly, and we may not be able to successfully complete identified acquisitions. The risks we face in connection with acquisitions include:

•

~~diversion of management time and focus from operating our business to addressing acquisition integration challenges;~~

•

~~retention of key employees from the acquired company;~~

•

~~coordination of research and development functions;~~

•

~~integration of the acquired company’s accounting, management information, human resources and other administrative systems;~~

•

~~liability for activities of the acquired company before the acquisition, including intellectual property infringement claims, employee disputes, and alleged violations of laws; and~~

•

~~unanticipated write-offs or charges.~~

Our failure to address these risks or other problems encountered in connection with our past or future acquisitions and investments could cause us to fail to realize the anticipated benefits of these acquisitions or investments, cause us to incur unanticipated liabilities, and harm our business generally. Future acquisitions could also result in dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities, amortization expenses, incremental operating expenses or the write-off of goodwill, any of which could harm our financial condition or operating results.

~~Business disruptions could seriously harm our future revenue and financial condition and increase our costs and expenses.~~

Our operations, and those of our contractors and consultants, could be subject to earthquakes, power shortages, telecommunications failures, water shortages, floods, hurricanes, typhoons, fires, extreme weather conditions, medical epidemics and pandemics, acts of terrorism, acts of war and other natural or man-made disasters or business interruptions, for which we are predominantly self-insured. The occurrence of any of these business disruptions could seriously harm our operations and financial condition and increase our costs and expenses. We may rely on third-party manufacturers to produce and process our product candidates. Our ability to obtain clinical supplies of our product candidates could be disrupted if the operations of these suppliers are affected by a man-made or natural disaster, pandemics, epidemics, or other business interruption, including the continuing coronavirus pandemic. The extent to which coronavirus pandemic impacts our business will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID‑19 and the actions to contain SARS‑CoV‑2 or treat its impact, among others. If any disaster were to occur, our ability to operate our clinical trials could be seriously, or potentially completely, impaired. Our corporate headquarters are in California near major earthquake faults and fire zones. Our operations and financial condition could suffer in the event of a major earthquake, fire or other natural disaster.

A coronavirus pandemic is ongoing in many parts of the world and may result in significant disruptions to our clinical trials, preclinical studies and supply chain which could have a material adverse effect on our business.

A coronavirus pandemic exists as of the filing of this report. As the pandemic continues to evolve, much of its impact remains unknown, and it is impossible to predict the impact it may have on the development of our business.

The coronavirus pandemic may result in significant delays or disruptions in our clinical trials, which could affect or delay the regulatory approval process of our product candidates. If the patients involved with these clinical trials become infected with the coronavirus disease, we may have more adverse events and deaths in our clinical trials as a result. We may also face difficulties enrolling patients in our clinical trials if the patient populations that are eligible for our clinical trials are impacted by the coronavirus pandemic.

Additionally, if our clinical trial patients are unable to travel to our clinical trial sites as a result of quarantines or other restrictions resulting from the coronavirus pandemic, we may experience higher drop-out rates or delays in our clinical trials.

The severity of the coronavirus pandemic could also make access to our existing supply chain difficult or impossible by delaying the delivery of key raw materials used in our product candidates and therefore delay the delivery of such products for use in our clinical trials. Any of these results could have a material adverse effect on our business.

~~Our manufacturing facilities may be negatively impacted by the ongoing coronavirus pandemic.~~

The coronavirus pandemic, including any actions we have taken in response, may disrupt our internal operations, including by heightening the risk that a significant portion of our workforce could suffer illness or otherwise not be permitted or be unable to work, and required that certain of our employees work remotely, which has heightened certain risks, including those related to cybersecurity and internal controls. Additionally the coronavirus pandemic has impacted, and may continue to impact, our office and manufacturing locations, as well as our analytical, process development, and transitional research teams, including through the effects of facility closures, reductions in operating hours and other social distancing efforts. For example, if even a small number of our employees in our working clusters related to manufacturing, analytical, process development, or translational research, tested positive for COVID‑19, it would require us to temporarily close a number of our offices or manufacturing facilities and temporarily suspend operations in order to conduct a deep clean of the facilities in order to ensure the safety of our employees. Additionally, we cannot predict whether these conditions and concerns will continue or whether we will experience more significant or frequent disruptions in the future, including the complete closure of one or more of our facilities. In addition, in the event demand for our products is significantly reduced as a result of the coronavirus pandemic and related economic impacts, we may need to assess different corporate actions and cost-cutting measures, including reducing our workforce or closing one or more facilities, and these actions could cause us to incur costs and expose us to other risks and inefficiencies, including whether we would be able to rehire our workforce or recommence operations at a given facility if our business experiences a subsequent recovery.

Our employees, affiliates, independent contractors, clinical investigators, CROs, data safety and monitoring boards, consultants, commercial partners and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, and insider trading.

We are exposed to the risk of employee fraud, misconduct or other illegal activity by our employees, affiliates, independent contractors, clinical investigators, CROs, data safety and monitoring boards, consultants, commercial partners and vendors. Misconduct by these parties could include intentional, reckless or negligent conduct that fails to:

•

~~comply with the laws and requirements of the FDA and other similar foreign regulatory bodies;~~

•

~~provide true, complete and accurate information to the FDA and other similar foreign regulatory bodies;~~

•

~~comply with manufacturing standards we have established;~~

•

~~comply with healthcare fraud and abuse, privacy and security and other laws in the U.S. and similar foreign fraudulent misconduct laws;~~

•

~~comply with federal securities laws regulating insider trading; or~~

•

~~report financial information or data accurately or to disclose unauthorized activities to us.~~

Our current and future business operations may subject us to fraud and abuse, transparency, health information privacy and security, and other healthcare laws and regulations. If we obtain FDA approval of any of our product candidates and begin commercializing those products in the U.S., our potential exposure under such laws will increase significantly, and our costs associated with compliance with such laws are also likely to increase. These laws may impact, among other things, our current activities with principal investigators and research patients, as well as proposed and future sales, marketing and education programs. In particular, the promotion, sales and marketing of healthcare items and services, as well as certain business arrangements in the healthcare industry, are subject to extensive laws designed to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, structuring and commission(s), certain customer incentive programs and other business arrangements generally. Activities subject to these laws also include the collection and/or use of information obtained in the course of patient recruitment for clinical trials. The healthcare laws that may affect our ability to operate include, but are not limited to:

•

the federal Anti-Kickback Statute, which prohibits, among other things, knowingly and willfully soliciting, receiving, offering or providing any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual, or the purchase, lease, order or recommendation of any good, facility, item or service for which payment may be made, in whole or in part, under a federal healthcare program, such as the Medicare and Medicaid programs;

•

federal civil and criminal false claims laws, including the civil False Claims Act, and civil monetary penalty laws, which impose criminal and civil penalties against individuals or entities for, among other things, knowingly presenting, or causing to be presented, claims for payment or approval from the federal government including Medicare and Medicaid, that are false or fraudulent or knowingly making a false statement to improperly avoid, decrease or conceal an obligation to pay money to the federal government;

•

the U.S. federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created additional U.S. federal criminal statutes that prohibit, among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private), and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters;

•

HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and their respective implementing regulations, which impose requirements, including mandatory contractual terms, on certain covered healthcare providers, health plans, and healthcare clearinghouses, as well as their respective business associates that perform services for them that involve the use, or disclosure of, individually identifiable health information, relating to the privacy, security and transmission of individually identifiable health information;

•

the U.S. federal Physician Payments Sunshine Act, created under the Patient Protection and Affordable Care Act, as amended by the Health Care Education Reconciliation Act, which we refer to collectively as ACA, and its implementing regulations, which require certain manufacturers of drugs, devices, biologicals and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually to the U.S. Department of Health and Human Services, or HHS, information related to payments or other transfers of value made to physicians (currently defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members by the 90th day of each subsequent calendar year, and disclosure of such information will be made by HHS on a publicly available website; and

•

~~federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers.~~

Additionally, we are subject to state and foreign laws and regulations that are analogous to the healthcare laws and regulations described above, among others, some of which may be broader in scope and may apply regardless of the payor. Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and relevant compliance guidance promulgated by the federal government; some state laws require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; some state and local laws that require the registration of pharmaceutical sales representatives; and some state and foreign laws govern the privacy and security of health information in ways that differ, and in certain cases are more stringent than, HIPAA, thus complicating compliance efforts.

We have adopted a code of business conduct and ethics, but it is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent inappropriate conduct may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. Efforts to ensure that our business arrangements will comply with applicable healthcare laws may involve substantial costs. It is possible that governmental and enforcement authorities will conclude that our business practices do not comply with current or future statutes, regulations or case law interpreting applicable fraud and abuse or other healthcare laws and regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of civil, criminal and/or administrative penalties, damages, disgorgement, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of our operations, any of which could adversely affect our ability to operate our business and our results of operations. Defending against any such actions can be costly, time-consuming, and may require significant financial and personnel resources. Therefore, even if we are successful in defending against any such actions that may be brought against us, our business may be impaired.

~~Competing generic medicinal products or biosimilars may be approved.~~

In the European Union, or E.U., there exists a process for approval of generic biological medicinal products once patent protection and other forms of data and market exclusivity have expired. Arrangements for approval of biosimilar products exist in the U.S., as well. Other jurisdictions are considering adopting legislation that would allow the approval of generic biological medicinal products. If generic medicinal products are approved, competition from such products may substantially reduce sales of our products.

Public opinion and scrutiny of cell-based immunotherapy approaches may impact public perception of our company and product candidates, or may adversely affect our ability to conduct our business and our business plans.

Our platform utilizes a relatively novel technology involving the genetic modification of human cells and utilization of those modified cells in other individuals, and no natural killer cell-based immunotherapy has been approved to date. Public perception may be influenced by claims, such as claims that cell-based immunotherapy is unsafe, unethical, or immoral and, consequently, our approach may not gain the acceptance of the public or the medical community. Negative public reaction to cell-based immunotherapy in general could result in greater government regulation and stricter labeling requirements of cell-based immunotherapy products, including any of our product candidates, and could cause a decrease in the demand for any products we may develop. Adverse public attitudes may adversely impact our ability to enroll clinical trials. Moreover, our success will depend upon physicians specializing in the treatment of those diseases that our product candidates target prescribing, and their patients being willing to receive, treatments that involve the use of our product candidates in lieu of, or in addition to, existing treatments they are already familiar with and for which greater clinical data may be available. More restrictive government regulations or negative public opinion could have an adverse effect on our business or financial condition and may delay or impair the development and commercialization of our product candidates or demand for any products we may develop. Adverse events in our clinical trials, even if not ultimately attributable to our product candidates, and the resulting publicity could result in increased governmental regulation, unfavorable public perception, potential regulatory delays in the testing or approval of our potential product candidates, stricter labeling requirements for those product candidates that are approved and a decrease in demand for any such product candidates.

~~Risks Relating to Government Regulation~~

~~We may fail to obtain or may experience delays in obtaining regulatory approval to market our aNK platform product candidates, which will significantly harm our business.~~

We do not have the necessary approval to market or sell aNK platform products in the U.S. or any foreign market. Before marketing aNK platform product candidates, we must successfully complete extensive preclinical studies and clinical trials and rigorous regulatory approval procedures. We cannot offer assurances that we will apply for or obtain the necessary regulatory approval to commercialize aNK platform product candidates in a timely manner, or at all.

Conducting clinical trials is uncertain and expensive and often takes many years to complete. The results from preclinical testing and early clinical trials are often not predictive of results obtained in later clinical trials. In conducting clinical trials, we may fail to establish the effectiveness of haNK, t‑haNK, MSC and ceNK cells for the targeted indication or we may discover unforeseen side effects. Moreover, clinical trials may require the enrollment of large numbers of patients, and suitable patients may be difficult to identify and recruit. Clinical trials are also often subject to unanticipated delays. In addition, haNK, t‑haNK, MSC and ceNK cells are produced in small-scale cell culture systems and we may be unable to adapt the production method to large-scale production systems. In addition, patients participating in the trials may die before completion of the clinical trial or suffer adverse medical effects unrelated to treatment with haNK, t‑haNK, MSC and ceNK cells. This could delay or lead to termination of our clinical trials. A number of companies in the biotechnology industry have suffered significant setbacks in every stage of clinical trials, even in advanced clinical trials after positive results in earlier clinical trials.

To date, the FDA has approved only a few cell-based therapies for commercialization. The processes and requirements imposed by the FDA may cause delays and additional costs in obtaining regulatory approvals for our product candidates. Because our aNK platform product is novel, and cell-based therapies are relatively new, regulatory agencies may lack experience in evaluating product candidates like our aNK platform products. This inexperience may lengthen the regulatory review process, increase our development costs and delay or prevent commercialization of our aNK platform products. In addition, the following factors may impede or delay our ability to obtain timely regulatory approvals, if at all:

•

potential delays in or failure to reach agreement on acceptable terms with prospective CROs and clinical sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;

•

~~our failure to obtain sufficient enrollment in our clinical trials or participants may fail to complete our clinical trials;~~

•

regulators may require us to perform additional or unanticipated clinical trials to obtain approval or we may be subject to additional post-marketing testing requirements to maintain regulatory approval;

•

~~regulators may revise the requirements for approving our product candidates, or such requirements may not be as we anticipate;~~

•

the cost of clinical trials of our product candidates may be greater than we anticipate, and we may need to delay or suspend one or more trials until we complete additional financing transactions or otherwise receive adequate funding;

•

~~the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be insufficient or inadequate or may be delayed;~~

•

~~our product candidates may have undesirable side effects or other unexpected characteristics, causing us or our investigators, regulators or institutional review boards to suspend or terminate trials;~~

•

~~regulatory authorities may suspend or withdraw their approval of a product or impose restrictions on its distribution;~~

•

~~our limited experience in filing and pursuing Biologics License Applications, or BLAs, necessary to gain regulatory approvals related to genetically modified cancer cell line therapies;~~

•

any failure to develop substantial evidence of clinical efficacy and safety, and to develop quality standards and manufacturing processes to demonstrate consistent safety, purity, identity, and potency standards;

•

a decision by us, institutional review boards, or regulators to suspend or terminate our clinical trials for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks;

•

regulatory inspections of our clinical trials, clinical trial sites or manufacturing facilities, which may, among other things, require us to undertake corrective action or suspend or terminate our clinical trials if regulators find us not to be in compliance with applicable regulatory requirements;

•

~~our ability to produce sufficient quantities of haNK, taNK, t‑haNK and ceNK cells to complete our clinical trials;~~

•

~~varying interpretations of the data generated from our clinical trials;~~

•

~~timely coordination with our related party, ImmunityBio, in connection with the filing of our BLA as a combined therapy;~~

•

~~the ability of our related party, ImmunityBio, being commercially ready with a fully completed CMC package, and compliant with cGMP, for the manufacture of N‑803 and aldoxorubicin; and~~

•

~~changes in governmental regulations or administrative action.~~

Any delays in, or termination of, our clinical trials could materially and adversely affect our development and collaboration timelines, which may cause our stock price to decline. If we do not complete clinical trials for haNK, taNK, t‑haNK and ceNK cells and seek and obtain regulatory approvals, we may not be able to recover any of the substantial costs we have invested in the development of haNK, taNK, t‑haNK and ceNK cells.

If we obtain regulatory approvals, our aNK platform products, and our manufacturing facilities will be subject to continual regulatory review, including periodic unannounced inspections, by the FDA and other U.S. and foreign regulatory authorities. In addition, regulatory authorities may impose significant restrictions on the indicated uses or impose ongoing requirements for potentially costly post-approval studies. aNK platform product candidates would also be subject to ongoing FDA requirements governing the labeling, packaging, storage, advertising, promotion, recordkeeping and submission of safety and other post-market information. These and other factors may significantly restrict our ability to successfully commercialize haNK, taNK, t‑haNK and ceNK cell therapies.

Manufacturers of biopharmaceutical products and their facilities, vendors and suppliers are subject to continual review and periodic unannounced inspections by the FDA and other regulatory authorities for compliance with cGMP regulations, which include requirements relating to quality control and quality assurance, as well as to the corresponding maintenance of records and documentation. Furthermore, our manufacturing facilities must be approved by regulatory agencies before these facilities can be used to manufacture aNK platform products, and they will also be subject to additional regulatory inspections. Any material changes we may make to our manufacturing process or to the components used in our products may require additional prior approval by the FDA and state or foreign regulatory authorities. Failure to comply with FDA or other applicable regulatory requirements may result in criminal prosecution, civil penalties, recall or seizure of products, partial or total suspension of production or withdrawal of a product from the market.

We must also report adverse events that occur when our products are used. The discovery of previously unknown problems with aNK, haNK, taNK, t‑haNK and ceNK cells and therapies or our manufacturing facilities may result in restrictions or sanctions on our products or manufacturing facilities, including withdrawal of our products from the market or suspension of manufacturing. Regulatory agencies may also require us to reformulate our products, conduct additional clinical trials, make changes in the labeling of our product or obtain further approvals. This may harm our business and results of operations or cause our reputation in the market place to suffer or subject us to lawsuits, including class action suits.

Additionally, if one or more of our product candidates receives marketing approval, and we or others later identify undesirable side effects or adverse events caused by such products, a number of potentially significant negative consequences could result, including but not limited to:

•

~~regulatory authorities may withdraw approvals of such product or require additional warnings on the label;~~

•

~~we may be required to change the way the product is administered or conduct additional clinical trials or post-approval studies;~~

•

we may be required to create a Risk Evaluation and Mitigation Strategy, or REMS, plan, which could include a medication guide outlining the risks of such side effects for distribution to patients, a communication plan for healthcare providers, or other elements to assure safe use;

•

~~we could be sued and held liable for harm caused to patients; and~~

•

~~our reputation may suffer.~~

Any of these events could prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved, and could significantly harm our business, results of operations, and prospects.

~~In addition, if we, our product candidates or the manufacturing facilities for our product candidates fail to comply with applicable regulatory requirements, a regulatory agency may:~~

•

~~issue warning letters that can produce adverse publicity;~~

•

~~impose civil or criminal penalties;~~

•

~~suspend regulatory approval;~~

•

~~suspend any ongoing clinical trials;~~

•

~~refuse to approve pending applications or supplements to applications filed by us;~~

•

~~impose restrictions on operations, including costly new manufacturing requirements;~~

•

~~seize or detain products or request us to initiate a product recall; or~~

•

~~pursue and obtain an injunction.~~

Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not guarantee that we will be able to obtain or maintain regulatory approval in any other jurisdiction, while a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory approval process in others. For example, even if the FDA grants marketing approval of a product candidate, comparable regulatory authorities in foreign jurisdictions must also approve the product, manufacturing, and in many cases reimbursement of the product candidate in those countries. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from, and greater than, those in the U.S., including additional preclinical studies or clinical trials as clinical studies conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions. In some cases, the price that we intend to charge for our products is also subject to approval by regulatory authorities.

We may also submit marketing applications in other countries. Regulatory authorities in jurisdictions outside of the U.S. have requirements for approval of product candidates with which we must comply prior to marketing in those jurisdictions. Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for us and could delay or prevent the introduction of our products in certain countries. If we fail to comply with the regulatory requirements in international markets and/or receive applicable marketing approvals, our target market will be reduced and our ability to realize the full market potential of our product candidates will be harmed.

Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biologic intended to treat a rare disease or condition or for which there is no reasonable expectation that the cost of developing and making available in the U.S. a drug or biologic for a disease or condition will be recovered from sales in the U.S. for that drug or biologic. If a product that has orphan drug designation subsequently receives the first FDA approval for the disease for which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications, including a full BLA to market the same drug or biologic for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity. In 2012, the FDA established a Breakthrough Therapy Designation, which is intended to expedite the development and review of products that treat serious or life-threatening conditions.

We may seek orphan drug status for one or more of our product candidates, but exclusive marketing rights in the U.S. may be lost if we seek approval for an indication broader than the orphan designated indication and may be lost if the FDA later determines that the request for designation was materially defective or if we are unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition. In addition, we may seek breakthrough therapy designation for one or more of our product candidates, but there can be no assurance that we will receive such designation.

~~We will need to obtain FDA approval of any proposed product brand names, and any failure or delay associated with such approval may adversely impact our business.~~

A biopharmaceutical product cannot be marketed in the U.S. or other countries until we have completed rigorous and extensive regulatory review processes, including review and approval of a brand name. Any brand names we intend to use for our product candidates will require approval from the FDA regardless of whether we have secured a formal trademark registration from the U.S. Patent and Trademark Office, or the USPTO. The FDA may object to a product brand name if they believe the name creates potential for confusion or inappropriately implies medical claims. If the FDA objects to any of our proposed product brand names, we may be required to adopt an alternative brand name for our product candidates. If we adopt an alternative brand name, we would lose the benefit of our existing trademark applications for such product candidate and may be required to expend significant additional resources in an effort to identify a suitable product brand name that would qualify under applicable trademark laws, not infringe the existing rights of third parties and be acceptable to the FDA. We may be unable to build a successful brand identity for a new trademark in a timely manner or at all, which would limit our ability to commercialize our product candidates.

~~Coverage and reimbursement decisions by third-party payors may have an adverse effect on pricing and market acceptance.~~

There is significant uncertainty related to the third-party coverage and reimbursement of newly approved drugs. Patients who are provided medical treatment for their conditions generally rely on third-party payors to reimburse all or part of the costs associated with their treatment. Therefore, market acceptance and sales of our products, if approved, in both domestic and international markets will depend significantly on the availability of adequate coverage and reimbursement from third party and/or government payors for any of our products and may be affected by existing and future healthcare reform measures. Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which drugs they will cover and establish approved lists, known as formularies, and establish payment levels for such drugs. Formularies may not include all FDA-approved drugs for a particular indication. Private payors often follow Medicare coverage policy and payment limitations in setting their own payment rates. Any reduction in payment under Medicare Part D may result in a similar reduction in payments from non-governmental payors. We cannot be certain that coverage and adequate reimbursement will be available for any of our products, if approved, or that such coverage and reimbursement will be authorized in a timely fashion. In addition, we cannot be certain that reimbursement policies will not reduce the demand for, or the price paid for, any of our products, if approved. If reimbursement is not available or is available on a limited basis for any of our products, if approved, we may not be able to successfully commercialize any such products.

~~Reimbursement by a third party or government payor may depend upon a number of factors, including, without limitation, the third-party or government payor’s determination that use of a product is:~~

•

~~a covered benefit under its health plan;~~

•

~~safe, effective and medically necessary;~~

•

~~appropriate for the specific patient;~~

•

~~cost-effective; and~~

•

~~neither experimental nor investigational.~~

Obtaining coverage and reimbursement approval for a product from a government or other third-party payor is a time consuming and costly process that could require us to provide supporting scientific, clinical and cost-effectiveness data for the use of our products to the payor. We may not be able to provide data sufficient to gain acceptance with respect to coverage and reimbursement or to have pricing set at a satisfactory level. If reimbursement of our products, if any, is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels such as may result where alternative or generic treatments are available, we may be unable to achieve or sustain profitability.

Assuming we obtain coverage for a given product, the resulting reimbursement payment rates might not be adequate or may require co-payments that patients find unacceptably high. Patients are unlikely to use our products unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our products.

In the U.S., third-party payors include federal and state healthcare programs, government authorities, private managed care providers, private health insurers, and other organizations. No uniform policy of coverage and reimbursement for products exists among third-party payors, and third-party payors are increasingly challenging the price, examining the medical necessity, and reviewing the cost-effectiveness of medical drug products and medical services, in addition to questioning their safety and efficacy. Therefore, coverage and reimbursement for products can differ significantly from payor to payor. As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our products to each payor separately, with no assurance that coverage and adequate reimbursement will be obtained. We or our collaborators may need to conduct expensive pharmaco-economic studies in order to demonstrate the medical necessity and cost-effectiveness of our products, in addition to the costs required to obtain the FDA approvals.

In some foreign countries, particularly in Europe, the pricing of prescription pharmaceuticals is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we may be required to conduct additional clinical trials that compare the cost-effectiveness of our products to other available therapies. If reimbursement of any of our products, if approved, is unavailable or limited in scope or amount in a particular country, or if pricing is set at unsatisfactory levels, we may be unable to achieve or sustain profitability of our products in such country.

Recent legislative and regulatory activity may exert downward pressure on potential pricing and reimbursement for our products, if approved, that could materially affect the opportunity to commercialize.

The U.S. and several other jurisdictions are considering, or have already enacted, a number of legislative and regulatory proposals to change the healthcare system in ways that could affect our ability to sell any of our products profitably, if approved. Among policy-makers and payors in the U.S. and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and/or expanding access to healthcare. In the U.S., the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives. There have been, and likely will continue to be, legislative and regulatory proposals at the federal and state levels directed at broadening the availability of healthcare and containing or lowering the cost of healthcare. We cannot predict the initiatives that may be adopted in the future. The continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to contain or reduce costs of healthcare may adversely affect:

•

~~the demand for any of our products, if approved;~~

•

~~our ability to set a price that we believe is fair for any of our products, if approved;~~

•

~~our ability to generate revenues and achieve or maintain profitability;~~

•

~~the level of taxes that we are required to pay; and~~

•

~~the availability of capital.~~

In March 2010, ACA became law in the U.S. The goal of ACA is to reduce the cost of healthcare, broaden access to health insurance, constrain healthcare spending, enhance remedies against fraud and abuse, add transparency requirements for the healthcare and health insurance industries, impose taxes and fees on the health industry, impose additional health policy reforms, and substantially change the way healthcare is financed by both governmental and private insurers. While we cannot predict what impact on federal reimbursement policies this legislation will have in general or on our business specifically, ACA may result in downward pressure on pharmaceutical reimbursement, which could negatively affect market acceptance of any of our products, if they are approved. Provisions of ACA relevant to the pharmaceutical industry include the following:

•

~~extension of manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations;~~

•

~~expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program;~~

•

~~a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in and conduct comparative clinical effectiveness research, along with funding for such research; and~~

•

~~a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted, or injected.~~

The ACA has been modified and amended recently, including the elimination of the individual mandate that individuals purchase healthcare insurance. Furthermore, the current presidential administration and Congress may continue to attempt broad sweeping changes to the current health care laws. We face uncertainties that might result from modification or repeal of any of the provisions of the ACA, including as a result of current and future executive orders, legislative actions, and litigation, including the pending review by the U.S. Supreme Court of the constitutionality of the ACA. The impact of those changes on us and potential effect on the pharmaceutical and biotechnology industry as a whole is currently unknown. However, any changes to the ACA are likely to have an impact on our results of operations, and may have a material adverse effect on our results of operations. We cannot predict what other healthcare programs and regulations will ultimately be implemented at the federal or state level or the effect of any future legislation or regulation in the U.S. may have on our business.

We are subject to governmental export and import controls that could impair our ability to compete in international markets due to licensing requirements and subject us to liability if we are not in compliance with applicable laws. Compliance with these legal requirements could limit our ability to compete in foreign markets and subject us to liability if we violate them.

Our products and solutions are subject to export control and import laws and regulations, including the U.S. Export Administration Regulations, U.S. Customs regulations, and various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Controls. Exports of our products and solutions outside of the U.S. must be made in compliance with these laws and regulations. If we fail to comply with these laws and regulations, we and certain of our employees could be subject to substantial civil or criminal penalties, including the possible loss of export or import privileges; fines, which may be imposed on us and responsible employees or managers; and, in extreme cases, the incarceration of responsible employees or managers.

In addition, changes in our products or solutions or changes in applicable export or import laws and regulations may create delays in the introduction, provision, or sale of our products and solutions in international markets, prevent customers from using our products and solutions or, in some cases, prevent the export or import of our products and solutions to certain countries, governments or persons altogether. Any limitation on our ability to export, provide, or sell our products and solutions could adversely affect our business, financial condition and results of operations.

We are subject to U.S. and foreign anti-corruption and anti-money laundering laws with respect to our operations and non-compliance with such laws can subject us to criminal and/or civil liability and harm our business.

We are subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended, or the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. §201, the U.S. Travel Act, the USA PATRIOT Act, and possibly other state and national anti-bribery and anti-money laundering laws in countries in which we conduct activities. Anti-corruption laws are interpreted broadly and prohibit companies and their employees, agents, third-party intermediaries, joint venture partners and collaborators from authorizing, promising, offering, or providing, directly or indirectly, improper payments or benefits to recipients in the public or private sector. We have used contract research organizations abroad for clinical trials. In addition, we may engage third party intermediaries to sell our products and solutions abroad once we enter a commercialization phase for our product candidates and/or to obtain necessary permits, licenses, and other regulatory approvals. We or our third-party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities. We can be held liable for the corrupt or other illegal activities of these third-party intermediaries, our employees, representatives, contractors, partners, and agents, even if we do not explicitly authorize or have actual knowledge of such activities.

We have adopted an anti-corruption policy which mandates compliance with the FCPA and other anti-corruption laws applicable to our business throughout the world. However, there can be no assurance that our employees and third party intermediaries will comply with this policy or such anti-corruption laws. Noncompliance with anti-corruption and anti-money laundering laws could subject us to whistleblower complaints, investigations, sanctions, settlements, prosecution, other investigations, or other enforcement actions. If such actions are launched, or governmental or other sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, results of operations and financial condition could be materially harmed. In addition, responding to any action will likely result in a materially significant diversion of management’s attention and resources and significant defense and compliance costs and other professional fees. In certain cases, enforcement authorities may even cause us to appoint an independent compliance monitor, which can result in added costs and administrative burdens.

Changes in funding for the FDA, the SEC and other government agencies could hinder their ability to hire and retain key leadership and other personnel, prevent new products and services from being developed or commercialized in a timely manner or otherwise prevent those agencies from performing normal functions on which the operation of our business may rely, which could negatively impact our business.

The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept payment of user fees, and statutory, regulatory, and policy changes. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of the FDA, the Securities and Exchange Commission, or SEC, and other government agencies on which our operations may rely is inherently fluid and unpredictable.

Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example, over the last several years, including beginningpayable on December 22, 2018, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA and the SEC, have had to furlough critical FDA, SEC and other government employees and stop critical activities. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business. Further, future government shutdowns could potentially impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.

We may be, or may become, subject to data protection laws and regulations, and our failure to comply with such laws and regulations could lead to government enforcement actions and significant penalties against us, and adversely impact our operating results.

The E.U. has adopted data protection laws and regulations which may apply to us in certain circumstances, or in the future. These laws, which impose significant compliance obligations, are commonly known as the General Data Protection Regulation, or GDPR. The GDPR, which is wide-ranging in scope and applicability, imposes several requirements relating to the consent of the individuals to whom the personal data relates, the information provided to the individuals, the security and confidentiality of the personal data, data breach notification and the use of third party processors in connection with the processing of personal data, including clinical trials. The GDPR also imposes strict rules on the transfer of personal data out of the E.U. to the U.S., provides an enforcement authority, and imposes large penalties for noncompliance, including the potential for fines of up to €20 million or 4% of the annual global revenues of the noncompliant company, whichever is greater. Implementation of the GDPR, as applicable to us, will increase our responsibility and liability in relation to personal data that we process, including in clinical trials, and we may in the future be required to put in place additional mechanisms to ensure compliance with the GDPR, which could divert management’s attention and increase our cost of doing business. In addition, other new regulation or legislative actions regarding data privacy and security (together with applicable industry standards) may increase our costs of doing business. In this regard, we expect that there will continue to be new proposed laws, regulations and industry standards relating to privacy and data protection in the U.S., the E.U. and other jurisdictions, and we cannot determine the impact such future laws, regulations and standards may have on our business.

~~Risks Relating to Our Intellectual Property~~

~~If our efforts to protect the intellectual property related to our product candidates are not adequate, we may not be able to compete effectively in our market.~~

We rely upon a combination of patents, trade secret protection and contractual agreements, including confidentiality agreements to protect the intellectual property related to our product candidates and technology. Any disclosure to or misappropriation by third parties of our confidential proprietary information could enable competitors to quickly duplicate or surpass our technological achievements, eroding our competitive position in the market. We believe that we have worldwide commercial rights to the NK‑92 cell line and we believe that we control commercial use of our haNK, taNK, t‑haNK, MSC and ceNK cells in key territories. We have developed and in-licensed numerous patents and patent applications and we possess substantial know-how and trade secrets relating to the development and commercialization of natural killer cell-based immunotherapy product candidates, including related manufacturing processes and technology. Our owned and licensed patent portfolio consists of patents and pending patent applications in the U.S. disclosing subject matter directed to certain of our proprietary technology, inventions, and improvements and our most advanced product candidates, as well as licensed and owned patents and pending applications in jurisdictions outside of the U.S., that, in many cases, are counterparts to the foregoing U.S. patents and patent applications. We believe we have intellectual property rights that are necessary to commercialize haNK, taNK, t‑haNK, MSC and ceNK cells. However, our patent applications may not result in issued patents, and, even if issued, the patents may be challenged and invalidated. Moreover, our patents and patent applications may not be sufficiently broad to prevent others from practicing our technologies or developing competing products. We also face the risk that others may independently develop similar or alternative technologies or may design around our proprietary property.

The patent application process, also known as patent prosecution, is expensive and time-consuming, and we and our current or future licensors and licensees may not be able to prepare, file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we or our current licensors, or any future licensors or licensees, will fail to identify patentable aspects of inventions made in the course of development and commercialization activities before it is too late to obtain patent protection on them. Therefore, these and any of our patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business. Defects of form in the preparation or filing of our patents or patent applications may exist, or may arise in the future, for example with respect to proper priority claims, inventorship, etc. If we or our current licensors, or any future licensors or licensees, fail to establish, maintain or protect such patents and other intellectual property rights, such rights may be reduced or eliminated. If our current licensors, or any future licensors or licensees, are not fully cooperative or disagree with us as to the prosecution, maintenance or enforcement of any patent rights, such patent rights could be compromised. If there are material defects in the form or preparation of our patents or patent applications, such patents or applications may be invalid and unenforceable. Any of these outcomes could impair our ability to prevent competition from third parties, which may have an adverse impact on our business.

The strength of patents in the biopharmaceutical field involves complex legal and scientific questions and can be uncertain. This uncertainty includes changes to the patent laws through either legislative action to change statutory patent law or court action that may reinterpret existing law or rules in ways affecting the scope or validity of issued patents. The patent applications that we own or in-license may fail to result in issued patents in the U.S. or foreign countries with claims that cover our product candidates. Even if patents do successfully issue from the patent applications that we own or in-license, third parties may challenge the validity, enforceability or scope of such patents, which may result in such patents being narrowed, invalidated or held unenforceable.

Any successful challenge to our patents could deprive us of exclusive rights necessary for the successful commercialization of our product candidates. Furthermore, even if they are unchallenged, our patents may not adequately protect our product candidates, provide exclusivity for our product candidates, or prevent others from designing around our claims. If the breadth or strength of protection provided by the patents we hold or pursue with respect to our product candidates is challenged, it could dissuade companies from collaborating with us to develop, or threaten our ability to commercialize our product candidates.

Patents have a limited lifespan. In the U.S., the natural expiration of a patent is generally 20 years after its earliest effective non-provisional filing date. Various extensions may be available; however, the life of a patent, and the protection it affords, is limited. Without patent protection for our product candidates, we may be open to competition from generic versions of our product candidates. Further, if we encounter delays in our development efforts, including our clinical trials, the period of time during which we could market our product candidates under patent protection would be reduced.

In addition to the protection afforded by patents, we also rely on trade secret protection to protect proprietary know-how that may not be patentable or that we elect not to patent, processes for which patents may be difficult to obtain or enforce, and any other elements of our product candidates, and our product development processes (such as a manufacturing and formulation technologies) that involve proprietary know-how, information or technology that is not covered by patents. However, trade secrets can be difficult to protect. If the steps taken to maintain our trade secrets are deemed inadequate, we may have insufficient recourse against third parties for misappropriating any trade secrets. Misappropriation or unauthorized disclosure of our trade secrets could significantly affect our competitive position and may have a material adverse effect on our business. Furthermore, trade secret protection does not prevent competitors from independently developing substantially equivalent information and techniques and we cannot guarantee that our competitors will not independently develop substantially equivalent information and techniques. The FDA, as part of its Transparency Initiative, is currently considering whether to make additional information publicly available on a routine basis, including information that we may consider to be trade secrets or other proprietary information, and it is not clear at the present time how the FDA’s disclosure policies may change in the future, if at all.

In an effort to protect our trade secrets and other confidential information, we require our employees, consultants, advisors, and any other third parties that have access to our proprietary know-how, information or technology, for example, third parties involved in the formulation and manufacture of our product candidates, and third parties involved in our clinical trials to execute confidentiality agreements upon the commencement of their relationships with us. These agreements require that all confidential information developed by the individual or made known to the individual by us during the course of the individual’s relationship with us be kept confidential and not disclosed to third parties. However, we cannot be certain that our trade secrets and other confidential proprietary information will not be disclosed despite having such confidentiality agreements. Adequate remedies may not exist in the event of unauthorized use or disclosure of our trade secrets. In addition, in some situations, these confidentiality agreements may conflict with, or be subject to, the rights of third parties with whom our employees, consultants, or advisors have previous employment or consulting relationships. To the extent that our employees, consultants or contractors use any intellectual property owned by third parties in their work for us, disputes may arise as to the rights in any related or resulting know-how and inventions. If we are unable to prevent unauthorized material disclosure of our trade secrets to third parties, we may not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business, operating results and financial condition.

~~Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.~~

As is the case with other biopharmaceutical companies, our success is heavily dependent on intellectual property, particularly on obtaining and enforcing patents. Obtaining and enforcing patents in the pharmaceutical industry involves both technological and legal complexity, and therefore, is costly, time-consuming and inherently uncertain. In addition, the U.S. had previously enacted and implemented wide-ranging patent reform legislation (e.g., the Leahy-Smith America Invents Act in September 2011) and are currently considering additional legislation that may materially impact our ability to obtain or enforce our patents. Further, recent U.S. Supreme Court rulings and recent decisions from the United States Court of Appeals for the Federal Circuit have either narrowed the scope of patent protection available in certain circumstances or weakened the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained.

In addition, changes to U.S. patent laws provide additional procedures for third parties to challenge the validity of issued patents based on patent applications filed after March 15, 2013. If the breadth or strength of protection provided by the patents and patent applications we hold or pursue with respect to our current or future product candidates is challenged, then it could threaten our ability to commercialize our current or future product candidates and could threaten our ability to prevent competitive products from being marketed. Further, if we encounter delays in our clinical trials, the period of time during which we could market our current or future product candidates under patent protection would be reduced. Since U.S. patent applications are confidential for a period of time after filing, we cannot be certain that we were the first to either (i) file any patent application related to our product candidates, or (ii) invent any of the inventions claimed in our patents or patent applications. Furthermore, for applications filed before March 16, 2013, or patents issuing from such applications, an interference proceeding can be provoked by a third party or instituted by the U.S. Patent and Trademark Office, or USPTO, to determine who was the first to invent any of the subject matter covered by the patent claims of our applications and patents. As of March 16, 2013, the U.S. transitioned to a “first-to-file” system for deciding which party should be granted a patent when two or more patent applications are filed by different parties claiming the same invention. A third party that files a patent application with the USPTO before us could, therefore, be awarded a patent covering an invention of ours even if we had made the invention before it was made by the third party. The change to “first-to-file” from “first-to-invent” is one of the changes to the U.S. patent laws resulting from the Leahy-Smith America Invents Act, or the Leahy-Smith Act, signed into law on September 16, 2011.

Among some of the other significant changes to the patent laws are changes that limit where a patentee may file a patent infringement suit and provide opportunities for third parties to challenge any issued patent in the USPTO. This applies to all of our U.S. patents, even those issued before March 16, 2013. Because of a lower evidentiary standard in USPTO proceedings compared to the evidentiary standard in U.S. federal court necessary to invalidate a patent claim, a third party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented in a district court action. Accordingly, a third party may attempt to use the USPTO procedures to invalidate our patent claims that would not have been invalidated if first challenged by the third party as a defendant in a district court action. It is not yet clear what, if any, impact the Leahy-Smith Act will have on the operation of our business. However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business and financial condition.

~~We may not be able to protect our intellectual property rights throughout the world.~~

We strive to control cell line distribution, as well as limit commercial use through licenses and material transfer agreements with third parties in addition to our patents and patent applications. However, a company may illicitly obtain our cells or create their own modified variants and attempt to commercialize them in foreign countries where we do not have any patents or patent applications where legal recourse may be limited. For example, we believe that certain companies, including at least one in China, may be using our NK‑92 cell line without our permission. This may have a significant commercial impact on our foreign business operations.

Filing, prosecuting and defending patents on our product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the U.S. can be less extensive than those in the U.S. The requirements for patentability may differ in certain countries, particularly developing countries. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the U.S. and in some cases, may even force us to grant a compulsory license to competitors or other third parties. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the U.S., or from selling or importing products made using our inventions in and into the U.S. or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, but enforcement on infringing activities is inadequate or not as strong as that in the U.S. These products may compete with our products, and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

Patents granted by the European Patent Office may be opposed by any person within nine months from the publication of their grant and, in addition, may be challenged before national courts at any time. Furthermore, even if they are unchallenged, our patents and patent applications may not adequately protect our intellectual property or prevent others from designing around our claims. If the breadth or strength of protection provided by the patents and patent applications we hold, license or pursue with respect to our product candidates is threatened, it could threaten our ability to commercialize our product candidates.

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to pharmaceuticals or biopharmaceuticals, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing, and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. In addition, certain countries in Europe and certain developing countries, including India and China, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In those countries, we may have limited remedies if our patents are infringed or if we are compelled to grant a license to our patents to a third party, which could materially diminish the value of those patents. This could limit our potential revenue opportunities. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we own or license.

~~Finally, our ability to protect and enforce our intellectual property rights may be adversely affected by unforeseen changes in foreign intellectual property laws.~~

The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent prosecution process. Periodic maintenance fees and various other governmental fees on any issued patent and/or pending patent applications are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime of a patent or patent application. We have systems in place to remind us to pay these fees, and we employ an outside firm and rely on our outside counsel to pay these fees. While an inadvertent lapse may sometimes be cured by payment of a late fee or by other means in accordance with the applicable rules, there are many situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. If we fail to maintain the patents and patent applications directed to our product candidates, our competitors might be able to enter the market earlier than should otherwise have been the case, which would have a material adverse effect on our business.

~~Third-party claims alleging intellectual property infringement may adversely affect our business.~~

Our commercial success depends in part on our avoiding infringement of the patents and proprietary rights of third parties, for example, the intellectual property rights of competitors. Our research, development and commercialization activities may be subject to claims that we infringe or otherwise violate patents owned or controlled by third parties. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are developing our product candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our activities related to our product candidates may give rise to claims of infringement of the patent rights of others. We cannot assure you that our product candidates will not infringe existing or future patents. We may not be aware of patents that have already issued that a third party, for example a competitor in our market, might assert are infringed by our product candidates. It is also possible that patents of which we are aware, but which we do not believe are relevant to our product candidates, could nevertheless be found to be infringed by our product candidates. Nevertheless, we are not aware of any issued patents that we believe would prevent us from marketing our product candidates, if approved. There may also be patent applications that have been filed but not published that, when issued as patents, could be asserted against us.

Third parties making claims against us for infringement or misappropriation of their intellectual property rights may seek and obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize our product candidates. Further, if a patent infringement suit were brought against us, we could be forced to stop or delay research, development, manufacturing or sales of the product or product candidate that is the subject of the suit. Defense of these claims, regardless of their merit, would cause us to incur substantial expenses, and would be a substantial diversion of employee resources from our business.17, 2022. In the event of a ~~successful claim of infringement against us by a third party, we may have to (1) pay substantial damages,~~default on the loan (as defined in the promissory note), including ~~treble damages and attorneys’ fees~~ if we ~~are found~~do not repay the loan at maturity, the company has the right, at its sole option, to ~~have willfully infringed~~convert the third party’s patents; (2) obtain one or more licenses from the third party; (3) pay royalties to the third party; and/or (4) redesign any infringing products. Redesigning any infringing products may be impossible or require substantial timeoutstanding principal amount and monetary expenditure. Further, we cannot predict whether any required license would be available at all or whether it would be available on commercially reasonable terms. In the event that we could not obtain a license, we may be unable to further developaccrued and commercialize our product candidates, which could harm our business significantly. Even if we are able to obtain a license, the license would likely obligate us to pay license fees or royalties or both, and the rights granted to us might be nonexclusive, which could result in our competitors gaining access to the same intellectual property. Ultimately, we could be prevented from commercializing a product, or be forced to cease some aspect of our business operations, if, as a result of actual or threatened patent infringement claims, we are unable to enterunpaid interest due under this note into ~~licenses on acceptable terms.~~

Defending ourselves or our licensors in litigation is very expensive, particularly for a company of our size, and time-consuming. Some of our competitors may be able to sustain the costs of litigation or administrative proceedings more effectively than we can because of greater financial resources. Patent litigation and other proceedings may also absorb significant management time. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could impair our ability to compete in the marketplace. The occurrence of anyshares of the ~~foregoing could have a material adverse effect on our business, financial condition or results~~company’s common stock at price of ~~operations.~~

~~We may become involved in lawsuits to protect or enforce our patents or other intellectual property or the patents of our licensors, which could be expensive and time consuming.~~

Third parties may infringe or misappropriate our intellectual property, including our existing patents, patents that may issue to us in the future, or the patents of our licensors to which we have a license. As a result, we may be required to file infringement claims to stop third-party infringement or unauthorized use. Further, we may not be able to prevent, alone or with our licensors, misappropriation of our intellectual property rights, particularly in countries where the laws may not protect those rights as fully as in the U.S.

Generic drug manufacturers may develop, seek approval for, and launch generic versions of our products. If we file an infringement action against such a generic drug manufacturer, that company may challenge the scope, validity or enforceability of our or our licensors’ patents, requiring us and/or our licensors to engage in complex, lengthy and costly litigation or other proceedings.

For example, if we or one of our licensors initiated legal proceedings against a third party to enforce a patent covering our product candidates, the defendant could counterclaim that the patent covering our product candidates is invalid and/or unenforceable. In patent litigation in the U.S., defendant counterclaims alleging invalidity and/or unenforceability are commonplace, and there are numerous grounds upon which a third party can assert invalidity or unenforceability of a patent.

$5.67 per share. In addition, ~~within and outside~~entities affiliated with Dr. Soon-Shiong hold promissory notes representing $306.3 million in indebtedness, including interest thereon, of the ~~U.S., there~~company as of December 31, 2021. Also Dr. Soon-Shiong has ~~been~~926,064 stock options outstanding as of December 31, 2021, of which 900,000 are exercisable.

Dr. Soon-Shiong is in a substantial amount of litigation and administrative proceedings, including interference and reexamination proceedings before the USPTO or oppositions and other comparable proceedings in various foreign jurisdictions, regarding patent and other intellectual property rights in the biopharmaceutical industry. The Leahy-Smith Act introduced procedures including inter partes review and post grant review. The implementation of these procedures brings uncertaintyposition to ~~the possibility of challenges to our patents in the future, including those that patents perceived by our competitors as blocking entry into the market for their products, and~~control the outcome of ~~such challenges.~~

~~Such litigation and administrative proceedings could result in revocation of our patents~~corporate actions that require, or ~~amendment of our patents such that they do not cover our product candidates. They~~ may also put our pending patent applications at risk of not issuing, or issuing with limited and potentially inadequate scope to cover our product candidates. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect tobe accomplished by, stockholder approval, including amending the validity question, for example, we cannot be certain that there is no invalidating prior art, of which we and the patent examiner were unaware during prosecution. Additionally, it is also possible that prior art of which we are aware, but which we do not believe affects the validity or enforceability of a claim, may, nonetheless, ultimately be found by a court of law or an administrative panel to affect the validity or enforceability of a claim, for example if a priority claim is found to be improper. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all,bylaws of the ~~patent protection on our product candidates. Such~~company, the election or removal of directors and transactions involving a ~~loss~~change of ~~patent protection~~control. Dr. Soon-Shiong’s controlling ownership could ~~have a material adverse impact on our business.~~

Enforcing our or our licensor’s intellectual property rights through litigation is very expensive, particularly for a company of our size, and time-consuming. Some of our competitors may be able to sustain the costs of litigation more effectively than we can because of greater financial resources. Patent litigation and other proceedings may also absorb significant management time. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could impair our ability to compete in the marketplace. The occurrence of any of the foregoing could have a material adverse effect on our business, financial condition or results of operations.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation or administrative proceedings, there is a risk that some of our confidential information could be compromised by disclosure. In addition, during the course of litigation or administrative proceedings, there could be public announcements of the results of hearings, motions or other interim proceedings or developments or public access to related documents. If investors perceive these results to be negative, the market price for our common stock could be significantly harmed.

If we fail to comply with our obligation in any of the agreements under which we license intellectual property rights from third parties or otherwise experience disruptions to our business relationships with our licensors, we could lose license rights that are important to our business.

Licensing of intellectual property rights is of critical importance to our business and involves complex legal, business and scientific issues. We rely on our exclusive license from Hans Klingemann, M.D., Ph.D., one of our founders and the inventor of our aNK and related platform product cell therapies, and subject to our freedom to operate we may or may not rely on our exclusive licenses from Rush University Medical Center, Fox Chase Cancer Center, the University Health Network, and other current and future licensors, including ImmunityBio with respect to the Joint COVID‑19 Collaboration. If we fail to comply with the diligence obligations or otherwise materially breach our license agreement and fail to remedy such failure or cure such breach, the licensor may have the right to terminate the license.

Our obligation to pay royalties to Dr. Klingemann under the license agreement, as amended, runs until the expiration of the underlying patents and the license agreement may be terminated earlier by either party for material breach. Under the license agreement, we have the right to enforce the licensed patents.

~~Disputes may arise between us and our licensors regarding intellectual property rights subject to a license agreement, including:~~

•

~~the scope of rights granted under the license agreement and other interpretation-related issues;~~

•

~~our right to sublicense intellectual property rights to third parties under collaborative development relationships; and~~

•

our diligence obligations with respect to the use of the licensed technology in relation to our development and commercialization of our product candidates, and what activities satisfy those diligence obligations.

•

While we would expect to exercise all rights and remedies available to us, including seeking to cure any breach by us, and otherwise seek to preserve our rights under the patents licensed to us, we may not be able to do so in a timely manner, at an acceptable cost, or at all. Generally, the loss of any one of our current licenses, or any other license we may acquire in the future, could materially harm our business, prospects, financial condition and results of operations. In late May 2020, we received a letter from Fox Chase Cancer Center alleging breaches of our license. If the letter is found to be a proper notice of termination and the alleged breaches are confirmed and found to be material, we will lose the licensed rights. We do not consider these licensed rights to be material.

~~One of NantKwest’s ten issued U.S. patents is subject to a claim challenging the inventorship.~~

On September 10, 2020, a legal complaint was filed in a California court where Institute for Cancer Research (d/b/a Fox Chase Cancer Center) argued that it has a co-ownership interest in U.S. Patent No. 10,456,420 and its underlying U.S. Patent Application No. 15/529,848, as well as in certain related patent applications or issued patents that include claimed subject matter allegedly invented by one of the claimant’s employees. On September 30, 2020, NantKwest filed motion with the court asking that the complaint be dismissed. NantKwest disagrees that this claim for co-ownership has merit and intends to vigorously defend its position. All of the existing named inventors have assigned their rights in this patent to NantKwest. NantKwest will continue to have an undivided ownership interest in the technology covered by this patent even if claimant succeeds in this suit. Litigating this matter could result in substantial costs and be a distraction to management and other employees. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Confidentiality agreements with employees and others may not adequately prevent disclosure of our trade secrets and other proprietary information and may not adequately protect our intellectual property, which could limit ~~our ability to compete.~~

Because we operate in the highly technical field of research and development, we rely in part on trade secret protection and confidentiality agreements, including those with our employees and consultants, in order to protect our proprietary trade secrets and unpatented know-how. However, trade secrets are difficult to protect, and we cannot be certain that others will not develop the same or similar technologies on their own. We have taken steps, including entering into confidentiality agreements with our employees, consultants, outside scientific collaborators, sponsored researchers and other advisors, to protect our trade secrets and unpatented know-how. These agreements generally require that the other party keep confidential and not disclose to third parties all confidential information developed by the party or made known to the party by us during the course of the party’s relationship with us. We also typically obtain agreements from these parties, which provide that inventions conceived by the party in the course of rendering services to us will be our exclusive property. However, these agreements may not be honored and may not effectively assign intellectual property rights to us. Adequate remedies may not exist in the event of unauthorized use or disclosure of our confidential intellectual property. Enforcing a claim that a party illegally obtained and is using our trade secrets or know-how is difficult, expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the U.S. may be less willing to protect trade secrets or know-how. The failure to obtain or maintain trade secret protection could adversely affect our competitive position. Also, third parties, including our competitors, may independently develop substantially equivalent proprietary information and technologies or otherwise lawfully gain access to our trade secrets and other confidential information. In such a case, we would have no right to prevent such third parties from using such proprietary information or technologies to compete with us, which could harm our competitive position.

~~We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties.~~

We have received confidential and proprietary information from third parties. In addition, we employ individuals who were previously employed at other biotechnology or pharmaceutical companies, including our competitors or potential competitors. We may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise improperly used or disclosed intellectual property, including trade secrets, confidential information, or other proprietary information, of these third parties or our employees’ or consultants’ or independent contractors’ former or other employers. Further, we may be subject to ownership disputes in the future arising, for example, from conflicting obligations of consultants or others who are involved in developing our product candidates. We may also be subject to claims that former employees, consultants, independent contractors, collaborators or other third parties have an ownership interest in our patents or other intellectual property. Litigation may be necessary to defend against these and other claims challenging our right to and use of confidential and proprietary information. If we fail in defending any such claims, in addition to paying monetary damages, we may lose our rights therein. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against these claims, litigation could result in substantial cost and be a distraction to our management and employees.

~~Risks Relating to our Proposed Merger with ImmunityBio~~

~~We may suffer negative consequences if the proposed merger is not completed.~~

~~If the merger is not completed for any reason, we may suffer negative consequences and be subject to material risks, including:~~

•

~~the market price of our common stock may decline to the extent that the current market price of such shares reflects a market assumption that the merger will be completed, or for other reasons;~~

•

~~costs related to the merger, such as legal and accounting fees, must be paid even if the merger is not completed;~~

•

the diversion of management attention from the day-to-day business of our company and the unavoidable disruption to our employees during the period before completion of the merger may make it difficult for us to regain our financial position and strategic focus if the merger does not occur;

•

~~employees important to our success as a stand-alone company may have left in anticipation of the merger; and~~

•

~~business opportunities important to us as a stand-alone company may have been terminated or not pursued by either us or third parties in anticipation of the merger.~~

~~We may not consummate the proposed merger with ImmunityBio in the time frame anticipated or at all.~~

In order for the merger to be completed, our stockholders must approve the merger. Due to the related party nature of the merger, we are required to obtain the affirmative vote of a majority of the minority of stockholders. If the required votes are not obtained by September 20, 2021, the merger will not be consummated. In addition, the merger is subject to the satisfaction of other customary closing conditions, and the merger agreement may be terminated by the parties under certain specified circumstances. As a result, we cannot assure you that the proposed merger with ImmunityBio will be completed, or that, if completed, it will be within the expected time frame.

~~The combined company may not realize all of the anticipated benefits of the proposed merger.~~

~~The success of the merger will depend, in part, on~~ the ability of the ~~combined~~remaining stockholders of the company to ~~realize~~influence corporate matters, and the ~~anticipated synergies, cost savings and growth opportunities from integrating our business~~interests of Dr. Soon-Shiong may not coincide with the ~~business of ImmunityBio. The combined~~ company’s success in realizing these benefits and the timing of this realization depends upon the successful integration of the operations of ImmunityBio. The integration of two independent companies is a complex, costly and time-consuming process. The difficulties of combining the operations of the companies and realizing the expected benefits of the merger include, among others:

•

~~coordinating commercial and clinical development initiatives and staffs;~~

•

~~raising sufficient capital to fund the significant expenditures that are needed to launch and successfully commercialize our products;~~

•

~~retaining key employees;~~

•

~~consolidating research and development operations;~~

•

~~consolidating corporate and administrative infrastructures and physical offices;~~

•

~~integrating and managing the technology of two companies; and~~

•

~~minimizing the diversion of management’s attention from ongoing business concerns.~~

~~We cannot assure you that the integration of ImmunityBio with us will result in the realization of the full benefits anticipated to result from the merger.~~

~~The cash resources of the combined company could be materially depleted if a substantial number of ImmunityBio stockholders exercise their dissenters’ or appraisal rights under applicable state law.~~

Holders of ImmunityBio capital stock who dissent and do not consent to the approval and adoption of the merger agreement may be entitled to certain dissenters’ or appraisal rights under applicable state law in connection with the merger. If the merger is consummated, a holder of record of ImmunityBio stock who complies with the statutory procedures will be entitled to have those shares appraised by the Delaware Court of Chancery under Section 262 of the Delaware General Corporation Law and to receive payment for the “fair value” of those shares instead of the consideration provided for in the merger agreement. If a substantial number of ImmunityBio stockholders exercise their dissenters’ or appraisal rights under applicable state law, the combined company may be required to make substantial payments in cash to these stockholders, thereby materially depleting the cash resources of the combined company.

~~We are expected to incur substantial expenses related to the proposed merger with ImmunityBio.~~

We are expected to incur substantial expenses in connection with the merger with ImmunityBio. We will incur significant fees and expenses relating to legal, accounting, financial advisory and other transaction fees and costs associated with the merger. Actual transaction costs may substantially exceed our estimates and may have an adverse effect on the combined company’s financial condition and operating results.

We and ImmunityBio may become involved in securities litigation or stockholder derivative litigation in connection with the proposed merger, and this could divert the attention of our management and harm the combined company’s business, and insurance coverage may not be sufficient to cover all related costs and damages.

Securities litigation or stockholder derivative litigation frequently follows the announcement of certain significant business transactions, such as the sale of a business division or announcement of a business combination transaction. We are involved in this type of litigation in connection with the merger as described in Part I, Item 3. “~~Legal Proceedings–Litigation Related to the Merger with ImmunityBio” in this Annual Report, and we and/~~interests or the ~~combined company may become involved in this type~~interests of ~~litigation in the future. Litigation often is expensive and diverts management’s attention and resources, which could adversely affect our business and the combined company.~~

~~Risks Relating to Our Common Stock~~

As of December 31, 2020, our Executive Chairman, Dr. Patrick Soon-Shiong, and entities affiliated with him, collectively own approximately 64.4% of the outstanding shares of our common stock. Additionally, Dr. Soon‑Shiong holds vested options to purchase an aggregate of 900,000 additional shares of our common stock, which would give him and his affiliates ownership of approximately 64.7% of our outstanding shares of common stock if they were exercised in full.

In addition, pursuant to the Nominating Agreement between us and Cambridge Equities, LP ~~or Cambridge,~~(Cambridge), an entity that Dr. ~~Soon‑Shiong~~Soon-Shiong controls, Cambridge has the ability to designate one director to be nominated for election to ~~our board~~the Board of ~~directors~~Directors for as long as Cambridge continues to hold at least 20% of the issued and outstanding shares of our common stock. Dr. Soon-Shiong was selected by Cambridge to hold this board seat. Dr. Soon-Shiong and his affiliates will therefore have significant influence over management and significant control over matters requiring stockholder approval, including the annual election of directors and significant corporate transactions, such as a merger or other sale of our company or its assets, for the foreseeable future. ~~Finally, if the proposed merger with ImmunityBio is completed, Dr. Soon-Shiong will then hold approximately~~ ~~82% of the shares of the combined company’s common stock outstanding.~~ This ~~concentrated~~ control will limit stockholders’ ability to influence corporate matters and, as a result, we may take actions that our stockholders do not view as beneficial. As a result, the market price of our common stock could be adversely affected.

The market price of our common stock has been and may continue to be volatile, and investors may have difficulty selling their shares.

Although our common stock is listed on ~~The~~the Nasdaq Global Select Market, the market for our shares has demonstrated varying levels of trading activity. You may not be able to sell your shares quickly or at the market price if trading in shares of our common stock is not active. Further, an inactive market may also impair our ability to raise capital by selling shares of our common stock and may impair our ability to enter into strategic partnerships or acquire companies or products by using our shares of common stock as consideration.

102

Table of Contents

The stock market in general and the market for biopharmaceutical companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. The market price of our common stock has been and may continue to be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control, including:

•

the commencement, enrollment or results of the planned clinical trials of our product candidates or any future clinical trials we may conduct, or changes in the development status of our product candidates;

•the commencement, enrollment or results of the planned clinical trials of our product candidates or any future clinical trials we may conduct, or changes in the development status of our product candidates;•

any delay in our regulatory filings for our product candidates and any adverse development or perceived adverse development with respect to the applicable regulatory authority’s review of such filings, including without limitation the FDA’s issuance of a “refusal to file” letter or a request for additional information;

•any delay in our regulatory filings for our product candidates and any adverse development or perceived adverse development with respect to the applicable regulatory authority’s review of such filings, including without limitation the FDA’s issuance of a “refusal to file” letter or a request for additional information;•

~~adverse results or delays in clinical trials;~~

•adverse results or delays in clinical trials;•

~~our decision to initiate a clinical trial, not to initiate a clinical trial or to terminate an existing clinical trial;~~

•our decision to initiate a clinical trial, not to initiate a clinical trial or to terminate an existing clinical trial;•

~~adverse regulatory decisions, including failure to receive regulatory approval of our product candidates;~~

•adverse regulatory decisions, including failure to receive regulatory approval of our product candidates;•

~~changes in laws or regulations applicable to our products, including but not limited to clinical trial requirements for approvals;~~

•changes in laws or regulations applicable to our products, including but not limited to clinical trial requirements for approvals;•

~~our failure to commercialize our product candidates;~~

•our failure to commercialize our product candidates;•

~~additions or departures of key scientific or management personnel;~~

•additions or departures of key scientific or management personnel;•

~~unanticipated serious safety concerns related to the use of our product candidates;~~

•unanticipated serious safety concerns related to the use of our product candidates;•

~~announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments;~~

•announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments;•

~~our ability to effectively manage our growth;~~

•our ability to effectively manage our growth;•

~~variations in our quarterly operating results;~~

•variations in our quarterly operating results;•

~~our cash position and the amount and nature of any debt we may incur;~~

•our liquidity position and the amount and nature of any debt we may incur;•

~~announcements that our revenue or income are below or that costs or losses are greater than analysts’ expectations;~~

•

~~publication of research reports about us or our industry, or immunotherapy in particular, or positive or negative recommendations or withdrawal of research coverage by securities analysts;~~

•announcements that our revenue or income are below or that costs or losses are greater than analysts’ expectations;•

~~changes in the market valuations of similar companies;~~

•publication of research reports about us or our industry, or immunotherapy in particular, or positive or negative recommendations or withdrawal of research coverage by securities analysts;•

~~sales of large blocks of our common stock;~~

•changes in the market valuations of similar companies;•

~~fluctuations in stock market prices and volumes;~~

•sales of large blocks of our common stock;•

~~disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies;~~

•fluctuations in stock market prices and volumes;•

~~significant lawsuits, including patent or stockholder litigation;~~

•disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies;•

the perception of our clinical trial results by retail investors, which investors may be subject to the influence of information provided by third party investor websites and independent authors distributing information on the internet;

•significant lawsuits, including patent or stockholder litigation;•

~~general economic slowdowns;~~

•the perception of our clinical trial results by retail investors, which investors may be subject to the influence of information provided by third party investor websites and independent authors distributing information on the internet;•

~~investors' perceptions regarding the viability, timing, and availability of COVID‑19 vaccines; and~~

•

~~the other factors described in this “Risk Factors” section.~~

103

Table of Contents

•general economic slowdowns;

•coordinated actions by independent third-party actors to affect the price of certain stocks, coordinated via the Internet and otherwise; and

•other factors described in this “Risk Factors” section.

In the past, securities class action litigation has often been instituted against companies following periods of volatility in the market price of a company’s securities. This type of litigation could result in substantial costs and a diversion of management’s attention and resources, which would harm our business, operating results or financial condition.

Sales of a substantial number of shares of our common stock in the public market could occur at any time. If our stockholders sell, or the market perceives that our stockholders intend to sell substantial amounts of our common stock in the public market, the market price of our common stock could decline significantly. In addition, ~~as of December 31, 2020~~ our Executive Chairman and Global Chief Scientific and Medical Officer, Dr. ~~Patrick Soon‑Shiong,~~Soon-Shiong, and his affiliates currently beneficially ~~owned~~own approximately ~~64.7%~~78.7% of our outstanding shares of common ~~stock.~~stock as of December 31, 2021. Sales of stock by Dr. ~~Soon‑Shiong~~Soon-Shiong and his affiliates could have an adverse effect on the trading price of our common stock.

Certain holders ~~of approximately 46.2 million shares~~ of our common stock are entitled to certain rights with respect to the registration of their shares under the Securities ~~Act.~~Act of 1933, as amended (the Securities Act). Registration of these shares under the Securities Act would result in the shares becoming freely tradable without restriction under the Securities Act, except for shares held by our affiliates as defined in Rule 144 under the Securities Act. Any sales of securities by these stockholders could have an adverse effect on the market price of our common stock.

In addition, we expect that additional capital may be needed in the future to continue our planned operations, including conducting clinical trials, commercialization efforts, expanded research and development activities and costs associated with operating as a public company. To raise capital, we may sell common stock, including as part of the ATM, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If we sell common stock, including through the ATM, convertible securities or other equity securities, investors may be materially diluted ~~by subsequent sales. Such sales may also result in material dilution to our existing stockholders,~~ and new investors could gain rights, preferences and privileges senior to the holders of our common stock.

As a public company listed in the U.S., ~~and increasingly after we no longer qualify as a “smaller reporting company,”~~ we have incurred and will continue to incur significant additional legal, accounting and other expenses as a result of operating as a public company. In addition, changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 (Sarbanes Oxley) and regulations implemented by the SEC and Nasdaq, may increase legal and financial compliance costs and make some activities more time consuming. These laws, regulations and standards are subject to varying interpretations and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. We intend to invest resources to create a larger finance function with additional personnel to comply with evolving laws, regulations and standards, and this investment ~~may~~will result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If, notwithstanding our efforts to comply with new laws, regulations and standards, we fail to comply, regulatory authorities may initiate legal proceedings against us, and our business may be harmed.

104

Table of Contents

As a public company in the U.S., we ~~may be~~are required, pursuant to Section 404 of Sarbanes-Oxley ~~or Section 404,~~(Section 404) to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting. The controls and other procedures are designed to ensure that information required to be disclosed by us in the reports that we file with the SEC is disclosed accurately and is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. In addition, we are required to disclose any material weaknesses identified by our management in our internal control over financial reporting, and, when we no longer qualify as a “smaller reporting company,” we will be required to provide a statement that our independent registered public accounting firm has issued an opinion on our internal control over financial reporting. To date, we have not engaged our independent registered public accounting firm to perform an audit of, and give an opinion on, our internal control over financial reporting. There can be no assurance that we will not discover deficiencies or a material weakness in our internal control over financial reporting or that our auditor will agree with management’s assessment of our internal control over financial reporting if or when our auditor conducts such audit and delivers an opinion.

In the normal course of business our controls and procedures may become inadequate because of changes in conditions or the degree of compliance with these policies or procedures may deteriorate and material weaknesses in our internal control over financial reporting may be discovered. We may err in the design or operation of our controls, and all internal control systems, no matter how well designed and operated, can provide only reasonable assurance that the objectives of the control system are met. Because there are inherent limitations in all control systems, there can be no absolute assurance that all control issues have been or will be detected. If we are unable, or are perceived as unable, to produce reliable financial reports due to internal control deficiencies, investors could lose confidence in our reported financial information and operating results, which could result in a negative market reaction.

To fully comply with Section 404, we will need to retain additional employees to supplement our current finance staff, and we may not be able to do so in a timely manner, or at all. In addition, in the process of evaluating our internal control over financial reporting, we expect that certain of our internal control practices will need to be updated to comply with the requirements of Section 404 and the regulations promulgated thereunder, and we may not be able to do so on a timely basis, or at all. In the event that we are not able to demonstrate compliance with Section 404 in a timely manner, or are unable to produce timely or accurate financial statements, we may be subject to sanctions or investigations by regulatory authorities, such as the SEC or Nasdaq, and investors may lose confidence in our operating results and the price of our common stock could decline. Furthermore, if we are unable to certify that our internal control over financial reporting is effective and in compliance with Section 404, we may be subject to sanctions or investigations by regulatory authorities, such as the SEC or stock exchanges, and investors could lose confidence in the accuracy and completeness of our financial reports, which could hurt our business, the price of our common stock and our ability to access the capital markets.

Operating as a public company makes it more expensive for us to obtain directors’ and officers’ liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified persons to serve on ~~our board~~the Board of ~~directors,~~Directors, on committees of ~~our board~~the Board of ~~directors,~~Directors, or as members of senior management.

If a restatement of our consolidated financial statements were to occur, our ~~shareholders’~~stockholders’ confidence in the company’s financial reporting in the future may be affected, which could in turn have a material adverse effect on our business and stock price.

If any material weaknesses in our internal control over financial reporting are discovered or occur in the future, our consolidated financial statements may contain material misstatements, and we could be required to restate our financial results. In addition, if we are unable to successfully remediate any future material weaknesses in our internal controls or if we are unable to produce accurate and timely financial statements, our stock price may be adversely affected, and we may be unable to maintain compliance with applicable stock exchange listing requirements.

We have not paid cash dividends in the past and do not expect to pay dividends in the future. Any return on investment may be limited to the value of our common stock.

We have never paid cash dividends on our common stock and do not anticipate paying cash dividends infor the foreseeable future. The payment of dividends on our common stock will depend on earnings, financial condition and other business and economic factors affecting us at such time as the ~~board~~Board of ~~directors~~Directors may consider relevant. If we do not pay dividends, our common stock may be less valuable because a return on your investment will only occur if our stock price appreciates.

105

Table of Contents

Because we are relying on the exemptions from corporate governance requirements as a result of being a “controlled company” within the meaning of the Nasdaq listing standards, you do not have the same protections afforded to stockholders of companies that are subject to such requirements.

Our Executive Chairman and Global Chief Scientific and Medical Officer, Dr. ~~Patrick~~ Soon-Shiong, and entities affiliated with him, control a majority of our common stock. As a result, we are a “controlled company” within the meaning of the Nasdaq listing standards. Under these rules, a company of which more than 50% of the voting power is held by an individual, a group or another company is a “controlled company” and may elect not to comply with certain Nasdaq corporate governance requirements, including (1) the requirement that a majority of the ~~board~~Board of ~~directors~~Directors consist of independent directors, and (2) the requirement that we have a ~~nominating~~Nominating and ~~corporate governance committee~~Corporate Governance Committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities. Accordingly, you do not have the same protections afforded to stockholders of companies that are subject to all of the Nasdaq corporate governance requirements. However, our ~~board~~Board of ~~directors~~Directors is currently comprised of a majority of independent ~~directors. In addition, although not required by the rules of Nasdaq, in August 2019, our board of~~ directors ~~established~~and we currently have a ~~nominating~~Nominating and ~~corporate governance committee comprised of two directors, which are independent.~~

~~We are a “smaller reporting company,”~~Corporate Governance Committee and the ~~reduced disclosure requirements applicable to smaller reporting companies could make our common stock less attractive to investors.~~

~~Although we no longer qualify as an emerging growth company, we qualify as a “smaller reporting company” during fiscal year 2021, which allows us to take advantage of many~~majority of the ~~same exemptions from disclosure requirements, including reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. These exemptions include:~~

•

being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced “Management’s discussion and analysis of financial condition and results of operations” disclosure;

members of such committee are independent directors.

•

~~not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting; and~~

•

~~reduced disclosure obligations regarding executive compensation.~~

Investors may find our common stock less attractive as a result of our reliance on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and the market price of our common stock may be reduced or more volatile.

~~Our ability to use our net operating loss carryforwards, or NOLs, and certain other tax attributes to offset future taxable income may be subject to certain limitations.~~

As of December 31, 2020 we had U.S. federal, state and foreign NOLs of $389.8 million, $350.3 million and $0.2 million, respectively. Of the $389.8 million in federal NOLs, $226.4 million will not expire and will be able to offset 80% of taxable income in future years. Of the $350.3 million in state NOLs, $4.4 million will not expire and will be able to offset 80% of taxable income in future years. The remaining federal NOL carryforwards begin to expire in 2024, the remaining state NOL carryforwards begin to expire in 2030 and the foreign NOL carryforwards begin to expire in 2022. As of December 31, 2020, we also had federal and state research and development tax credit carryforwards of $11.1 million and state research tax credits of $7.8 million, respectively. The federal research tax credit carryforwards begin to expire in 2034 and certain state research tax credit carryforwards begin to expire in 2031. The California research tax credits can be carried forward indefinitely. These net operating loss and research and development tax credit carryforwards could expire unused and be unavailable to offset future income tax liabilities.

Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change NOLs and other pre-change tax attributes, such as research tax credits, to offset its future post-change income and taxes may be limited. In general, an “ownership change” occurs if there is a cumulative change in our ownership by “5% shareholders” that exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under state tax laws. We completed an Internal Revenue Code Section 382/383 analysis through March 2019 regarding the limitation of net operating loss and research and development credit carryforwards. The analysis concluded that the federal and state carryforwards associated with the NOLs were reduced by the amount of tax attributes estimated to expire during their respective carryforward periods. The reduction in the NOLs was offset by a similar change in the valuation allowance.

Since we will need to raise substantial additional funding to finance our operations, we may experience further ownership changes in the future, some of which may be outside of our control. Limits on our ability to use our pre-change NOLs or credits to offset U.S. federal taxable income could potentially result in increased future tax liability to us if we earn net taxable income in the future. In addition, under the legislation commonly referred to as the Tax Cuts and Jobs Act of 2017, or TCJA, as modified by the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, the amount of NOLs generated in taxable periods beginning after December 31, 2017, that we are permitted to deduct in any taxable year beginning after December 31, 2020 is limited to 80% of our taxable income in such year, where taxable income is determined without regard to the NOL deduction itself. The TCJA allows post-2017 unused NOLs to be carried forward indefinitely. Similar rules may apply under state tax laws.

~~We could be subject to additional income tax liabilities.~~

We are a U.S.-based company subject to tax in the U.S. and in Korea. Significant judgment is required in determining our global provision for income taxes, deferred tax assets or liabilities, and in evaluating our tax positions on a worldwide basis. While we believe our tax positions are consistent with the tax laws in the jurisdictions in which we conduct our business, it is possible that these positions may be overturned by jurisdictional tax authorities, which may have a significant impact on our global provision for income taxes.

~~Our business may be materially affected by changes to fiscal and tax policies. Negative or unexpected tax consequences could adversely affect our results of operations.~~

New tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could adversely affect our domestic and international business operations, and our business and financial performance. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us. For example, the Tax Cuts and Jobs Act of 2017, or TCJA, which was approved by Congress on December 20, 2017 significantly changed the U.S. Internal Revenue Code. Such changes include a reduction in the corporate tax rate and limitations on certain corporate deductions and credits, among other changes. We have generally accounted for such changes in accordance with our understanding of the TCJA and guidance available as of the date of this filing as described in more detail in our financial statements. The CARES Act, which was signed into law on March 27, 2020, further modified the TCJA and we will continue to monitor and assess the impact of the federal legislation on our business and the extent to which various states conform to the newly enacted federal tax law. In addition, adverse changes in the financial outlook of our operations or further changes in tax laws or regulations could lead to changes in our valuation allowances against deferred tax assets on our consolidated balance sheets, which could materially affect our results of operations.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our share price and trading volume could decline.

The trading market for our common stock will depend on the research and reports that securities or industry analysts publish about us or our business. We do not have any control over these analysts. There can be no assurance that analysts will cover us or provide favorable coverage. If one or more of the analysts who cover us downgrade our stock or change their opinion of our stock, our share price would likely decline. If one or more of these analysts’ cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.

We are not subject to the provisions of Section 203 of the Delaware General Corporation Law (DGCL), which could negatively affect your investment.

We elected in our amended and restated certificate of incorporation to not be subject to the provisions of Section 203 of the ~~Delaware General Corporation Law.~~DGCL. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. A “business combination” includes a merger, asset sale or other transaction resulting in a financial benefit to the interested stockholder. An “interested stockholder” is a person who, together with affiliates and associates, owns (or, in certain cases, within three years prior, did own) 15% or more of the corporation’s voting stock. Our decision not to be subject to Section 203 will allow, for example, our Executive Chairman and Global Chief Scientific and Medical Officer (who, with members of his immediate family and entities affiliated with him, ~~owned~~currently beneficially own, in the aggregate, approximately ~~64.4%~~78.7% of our common stock as of December 31, ~~2020)~~2021) to transfer shares in excess of 15% of our voting stock to a third-party free of the restrictions imposed by Section 203. This may make us more vulnerable to takeovers that are completed without the approval of our ~~board~~Board of ~~directors~~Directors and/or without giving us the ability to prohibit or delay such takeovers as effectively.

106

Table of Contents

Some provisions of our charter documents and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would be beneficial to our stockholders, and may prevent attempts by our stockholders to replace or remove our current management.

Provisions in our ~~amended~~Amended and ~~restated certificate~~Restated Certificate of ~~incorporation~~Incorporation and ~~amended~~Amended and ~~restated bylaws,~~Restated Bylaws, as well as provisions of Delaware law, could make it more difficult for a third party to acquire us or increase the cost of acquiring us, even if doing so would benefit our stockholders. These provisions include:

•

~~a requirement that special meetings of stockholders be called only by the board of directors, the president or the chief executive officer;~~

•a requirement that special meetings of stockholders be called only by the board of directors, president or chief executive officer;•

~~advance notice requirements for stockholder proposals and nominations for election to our board of directors; and~~

•advance notice requirements for stockholder proposals and nominations for election to the board of directors; and•

the authority of the board of directors to issue preferred stock on terms determined by the board of directors without stockholder approval and which preferred stock may include rights superior to the rights of the holders of common stock.

•the authority of the board of directors to issue preferred stock on terms determined by the board of directors without stockholder approval and which preferred stock may include rights superior to the rights of the holders of common stock.

These anti-takeover provisions and other provisions in our ~~amended~~Amended and ~~restated certificate~~Restated Certificate of ~~incorporation~~Incorporation and ~~amended~~Amended and ~~restated bylaws~~Restated Bylaws could make it more difficult for stockholders or potential acquirers to obtain control of our ~~board~~Board of ~~directors~~Directors or initiate actions that are opposed by the then-current ~~board~~Board of ~~directors~~Directors and could also delay or impede a merger, tender offer or proxy contest involving our company. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing or cause us to take other corporate actions you desire. Any delay or prevention of a change of control transaction or changes in our ~~board~~Board of ~~directors~~Directors could cause the market price of our common stock to decline.

Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us.

Our ~~amended~~Amended and ~~restated certificate~~Restated Certificate of ~~incorporation~~Incorporation and ~~amended~~Amended and ~~restated bylaws~~Restated Bylaws provide that we will indemnify our directors and officers, in each case to the fullest extent permitted by Delaware law. In addition, as permitted by Section 145 of the ~~Delaware General Corporation Law,~~DGCL, our ~~amended~~Amended and ~~restated bylaws~~Restated Bylaws and our indemnification agreements that we have entered into with our directors and officers provide that:

•

We will indemnify our directors and officers for serving us in those capacities or for serving other business enterprises at our request, to the fullest extent permitted by Delaware law. Delaware law provides that a corporation may indemnify such person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the registrant and, with respect to any criminal proceeding, had no reasonable cause to believe such person’s conduct was unlawful.

•We will indemnify our directors and officers for serving us in those capacities or for serving other business enterprises at our request, to the fullest extent permitted by Delaware law. Delaware law provides that a corporation may indemnify such person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the registrant and, with respect to any criminal proceeding, had no reasonable cause to believe such person’s conduct was unlawful.•

~~We may, in our discretion, indemnify employees and agents in those circumstances where indemnification is permitted by applicable law.~~

•We may, in our discretion, indemnify employees and agents in those circumstances where indemnification is permitted by applicable law.•

We are required to advance expenses, as incurred, to our directors and officers in connection with defending a proceeding, except that such directors or officers shall undertake to repay such advances if it is ultimately determined that such person is not entitled to indemnification.

•

We are not obligated pursuant to our amended and restated bylaws to indemnify a person with respect to proceedings initiated by that person against us or our other indemnitees except with respect to proceedings authorized by our board of directors or brought to enforce a right•We are required to advance expenses, as incurred, to our directors and officers in connection with defending a proceeding, except that such directors or officers shall undertake to repay such advances if it is ultimately determined that such person is not entitled to indemnification.

•We are not obligated pursuant to our Amended and Restated Bylaws to indemnify a person with respect to proceedings initiated by that person against us or our other indemnitees except with respect to proceedings authorized by our Board of Directors or brought to enforce a right to indemnification.•

The rights conferred in our amended and restated bylaws are not exclusive, and we are authorized to enter into indemnification agreements with our directors, officers, employees and agents and to obtain insurance to indemnify such persons.

•The rights conferred in our Amended and Restated Bylaws are not exclusive, and we are authorized to enter into indemnification agreements with our directors, officers, employees and agents and to obtain insurance to indemnify such persons.•

~~We may not retroactively amend our bylaw provisions to reduce our indemnification obligations to directors, officers, employees and agents.~~

•We may not retroactively amend our bylaw provisions to reduce our indemnification obligations to directors, officers, employees and agents.

To the extent that a claim for indemnification is brought by any of our directors or officers, it would reduce the amount of funds available for use in our business.

107

Table of Contents

~~Item~~

ITEM 1B. ~~Unresolved Staff Comments.~~

UNRESOLVED STAFF COMMENTS.

None.

~~Item~~

ITEM 2. ~~Properties.~~

~~The following table summarizes our principal properties~~PROPERTIES.

We lease property in multiple facilities across the U.S. and Italy, including facilities located in El Segundo and Culver City, CA that are leased ~~as of December 31, 2020:~~

~~Principal Properties Leased:~~	~~Approximate~~ ~~Square Feet~~		~~Operation~~	~~Lease Expiration Dates~~
~~San Diego, California~~		~~44,681~~	~~Laboratory - Research, Office~~	~~July 2023~~
El Segundo, California*		~~24,250~~	~~Laboratory - Research & Manufacturing~~	~~July 2023~~
Culver City, California*		~~9,500~~	~~Laboratory - Research & Manufacturing~~	~~December 2021~~
~~Woburn, Massachusetts~~		~~8,153~~	~~Laboratory - Research, Office~~	~~May 2022~~
El Segundo, California*		~~6,901~~	~~Laboratory - Research & Manufacturing~~	~~July 2022~~
Torrance, California**		~~1,034~~	~~Laboratory - Research~~	~~June 2027~~
* Property leased from a related party.
** Represents square footage dedicated to us within the facility, however, the lease also permits ~~our non-exclusive use of the third party's vivarium premises.~~

~~The following table summarizes our principal property owned as of December 31, 2020:~~

~~Principal Property Owned:~~

~~Approximate~~

~~Square Feet~~

~~Operation~~

~~El Segundo, California~~

~~36,434~~

~~Distribution Warehouse~~

~~For additional information, see~~ from related parties. See Note 9,8 ~~Commitments and Contingencies, Contractual Obligations – Leases~~, ~~and Note 10,~~ ~~Related Party~~Related-Party Agreements, of the “Notes to Consolidated Financial Statements” ~~included~~that appears in Part II, Item 88. “Financial Statements and Supplementary Data” of this Annual Report for additional information about our related-party leases.

The following table summarizes our principal properties under lease as of December 31, 2021:

Location

Expiration
Year (1)

Approximate
Rentable
Square Feet (2)

Primary Function(s)

United States

El Segundo, CA

2023 - 2028

168,570

Laboratory - Research & Manufacturing

Louisville, CO

2025

50,838

Laboratory - Research & Manufacturing

San Diego, CA

2023

44,681

Laboratory - Research & Corporate Office

Culver City, CA

Month to Month

9,500

Laboratory - Research & Manufacturing

Woburn, MA

2025

8,153

Laboratory - Research & Office

Seattle, WA

2025

5,527

Laboratory - Research

Miramar, FL

2025

2,571

Clinical Affairs & Office

International

Italy

2024 - 2027

11,313

Laboratory - Research & Office

_______________


(1)			Expiration years shown are per the lease agreements in effect as of December 31, 2021 and do not reflect contractual options to extend the term of the lease available to us under the lease agreements. For locations with multiple leases, the first and last expiration year are shown.
(2)			Amounts shown represent the total approximate rentable square feet for all buildings located in each city.

On February 14, 2022, we acquired a leasehold interest in approximately 409,000 rentable square feet of cGMP ISO Class 5 pharmaceutical manufacturing space in western New York (the Dunkirk Facility). This facility provides us with a state-of-the-art biotech production center that substantially expands and diversifies our existing manufacturing capacity in the U.S. See Note 13, Subsequent Events, of the “Notes to Consolidated Financial Statements” that appears in Part II, Item 8. “Financial Statements and Supplementary Data” of this Annual Report.

We believe that our existing facilities are adequate to meet our current and future needs and that we will be able to renew existing leases and obtain additional commercial space as needed.

108

Table of Contents

~~Item~~

ITEM 3. ~~Legal Proceedings.~~

LEGAL PROCEEDINGS.

From time to time, we may be involved in various claims and legal proceedings relating to claims arising out of our operations. We are not currently a party to any legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business. We are aware of complaints that have been filed regarding the Merger, but we have not been served with any of such complaints. If we are served with any such complaints, we will assess at that time any contingencies for which we may need to reserve. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

~~Fox Chase~~ For additional information regarding our legal proceedings, see Note 7, Commitments and Contingencies—Litigation,

~~On July 21, 2020, we filed a declaratory judgment lawsuit~~ of the “Notes to Consolidated Financial Statements” that appears in ~~the Superior Court for San Diego County, California, naming Fox Chase Cancer Center Foundation~~Part II, Item 8. “Financial Statements and Institute for Cancer Research as the defendants (“Fox Chase”). This litigation relates to an exclusive license agreement by which Fox Chase granted us various intellectual property rights (including patent rights) for certain modified NK‑92 cell technologies dating back to 2004 (“2004 License”). We requested the Court to grant declarations that we have not breached any material obligation under the 2004 License and that Fox Chase has not and cannot terminate the 2004 License. Fox Chase has answered the Complaint, lodged a Cross-Complaint raising a patent inventorship challenge, and moved the case to federal court (See Part I, Item 1A, “~~Risk Factors~~”Supplementary Data” of this Annual ~~Report for a more detailed discussion). While the litigation is in the early stage, its outcome cannot be predicted. We do not consider the Fox Chase license agreement to be material to our business.~~

~~Litigation Related to the Merger with ImmunityBio, Inc.~~

~~In connection with our merger (the Merger) with~~ ~~ImmunityBio, Inc., a Delaware corporation (ImmunityBio), via a wholly owned subsidiary of NantKwest (the Merger Sub),~~ Report.seven complaints have been filed as individual actions in United States District Courts. Three complaints have been filed in the United States District Court for the District of Delaware against NantKwest and its directors and are captioned ~~Hargett v. NantKwest, Inc., et al., 1:21‑cv‑00197 (filed February 11, 2021) (the Hargett Complaint),~~ ~~Franchi v. NantKwest, Inc., et al., 1:21‑cv‑00218 (filed February 16, 2021) (the Franchi Complaint), and~~ ~~Gross v. NantKwest, Inc., et al., 1:21‑cv‑00223 (filed February 17, 2021) (the Gross Complaint). One complaint has been filed in the United States District Court for the Southern District of New York and is captioned~~ ~~Leaman v. NantKwest, Inc., et al., 1:21‑cv‑01351 (filed February 16, 2021) (the Leaman Complaint). Two complaints has been filed in the United States District Court for the Southern District of California and are captioned~~ ~~Weiss v. NantKwest, Inc., et al.~~, 3:21‑cv‑00280 (filed February 16, 2021) (the Weiss Complaint) and Carlisle v. NantKwest, Inc., et al., 3:21‑cv‑00304 (filed February 19, 2021) (the Carlisle Complaint). One complaint has been filed in the United States District Court for the Eastern District of New York and is captioned ~~Shenk v. NantKwest, Inc., et al.~~, 1:21‑cv‑00871 (filed February 18, 2021) (the Shenk Complaint, and collectively with the Hargett Complaint, the Franchi Complaint, the Gross Complaint, the Leaman Complaint, the Weiss Complaint, and the Carlisle Complaint, the Merger Actions). The Hargett Complaint and the Gross Complaint also bring claims against ImmunityBio, and Merger Sub. The Merger Actions generally allege that the Definitive Proxy Statement filed with the SEC on February 2, 2021 misrepresents and/or omits certain purportedly material information relating to financial projections, analysis performed by the financial advisor to NantKwest’s Special Committee, alleged past engagements of the Special Committee’s financial advisor and industry consultant, and the terms of the engagement of such consultant. The Merger Actions assert violations of Sections 14(a) of the Securities Exchange Act of 1934, as amended (the Exchange Act), and Rule 14a-9 promulgated thereunder against all defendants and violations of Section 20(a) of the Exchange Act against NantKwest’s directors. The Merger Actions seek, among other things, an injunction enjoining the stockholder vote on the Merger and the consummation of the Merger unless and until certain additional information is disclosed to NantKwest’s stockholders, costs of the action, including plaintiffs’ attorneys’ fees and experts’ fees, and other relief the Court may deem just and proper. NantKwest cannot predict the outcome of the Merger Actions. NantKwest believes the Merger Actions are without merit and NantKwest and the individual defendants intend to vigorously defend against the Merger Actions and any subsequently filed similar actions. If additional similar complaints are filed, absent new or significantly different allegations, NantKwest will not necessarily disclose such additional filings.

~~Item~~

ITEM 4. ~~Mine Safety Disclosures.~~

MINE SAFETY DISCLOSURES.

Not applicable.

109

Table of Contents

PART II

~~Item~~

ITEM 5. ~~Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.~~

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information ~~for Common Stock~~

~~Our~~

Since the completion of our Merger with NantCell, Inc. (formerly known as ImmunityBio, Inc.) on March 9, 2021, our common stock ~~began trading~~has been traded under the ticker symbol “IBRX” on the Nasdaq Global Select Market. Prior to the Merger, our common stock was traded under the ticker symbol “NK” on the Nasdaq Global Select Market ~~under the symbol “NK” on~~from July 28, ~~2015. Prior to that date, there was no public trading market for our common stock.~~

2015 through March 8, 2021, the day before the consummation of the Merger.

Holders of Record

As of ~~March 3, 2021, we had 30 holders~~February 24, 2022, there were approximately 88 stockholders of record of our common stock. The actual number of stockholders is greater than the number of record holders and includes stockholders who are beneficial owners but whose shares are held in ~~street name~~“street name” by brokers and other nominees. ~~This~~The number of ~~holders~~stockholders of record also does not include stockholders whose shares may be held in trust or by other entities.

Dividend Policy

~~To date, we~~

We have ~~not declared or~~never paid ~~any~~ cash ~~dividends. We currently intend to retain all available funds and any future earnings for use in the operation of~~dividends on our ~~business~~common stock and do not anticipate paying ~~any~~cash dividends on our common stock infor the foreseeable future. ~~Any future determination to declare~~The payment of dividends ~~will be made at the discretion of~~on our ~~board of directors and~~common stock will depend on ~~among other factors, our~~earnings, financial condition ~~operating results, capital requirements, general business conditions~~ and other business and economic factors ~~that our board~~affecting us at such time as the Board of ~~directors~~Directors may ~~deem~~consider relevant.

Securities Authorized for Issuance Under ~~Our~~ Equity Compensation Plans

~~Information~~

The following table sets forth information regarding our equity compensation plans ~~is incorporated by reference to Item 12, “Security Ownership~~in effect as of ~~Certain Beneficial Owners and Management and Related Stockholder Matters” of Part III of this Annual Report.~~

~~Recent Sales of Unregistered Securities~~

~~None.~~

~~Repurchases of Equity Securities by the Issuer~~

~~We did not repurchase any shares of our common stock during the three months ended~~ December 31, ~~2020. At December 31, 2020, $18.3 million remained authorized~~2021 (including upon the exercise of stock options and the vesting restricted stock units (RSUs):


	Equity Compensation Plan Information
	Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights	Weighted-average Exercise Price of Outstanding Options, Warrants and Rights		Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in Column (a))
Plan Category	(a)	(b)		(c)

Equity compensation plans approved by security holders (1), (2), (3), (4)	10,640,819	$	15.62	4,969,446
Equity compensation plan not approved by security holders	—			—
Total	10,640,819			4,969,446

_______________

(1)The equity compensation plans approved by security holders are the 2014 Equity Incentive Plan (2014 Plan) and the 2015 Equity Incentive Plan (2015 Plan). The 2014 Plan has terminated as to future grants. The amount shown in Column (a) with respect to the 2014 Plan includes 503,493 shares issuable upon the exercise of vested stock options. The amount shown in Column (a) with respect to the 2015 Plan includes 3,075,390 shares issuable upon the exercise of vested stock options and 1,591,401 shares issuable upon the vesting of RSUs.

(2)The Amended and Restated ImmunityBio, Inc. 2015 Stock Incentive Plan (2015 NC Plan) was approved by security holders in conjunction with the Merger. The 2015 NC Plan has terminated as to future grants. The amount shown in Column (a) with respect to this plan includes 546,047 shares issuable upon the exercise of vested stock options and 4,924,488 shares issuable upon the vesting of RSUs.

(3)The amount shown in Column (b) is the weighted average exercise price for ~~repurchase~~stock options outstanding.

(4)The amount shown in Column (c) is the number of shares available for grant under ~~our stock repurchase program. For additional information regarding our stock repurchase program, see Note 11,~~the 2015 Plan.

110

~~Stockholders Equity~~,Table of ~~the “Notes to Consolidated Financial Statements” included in Part II, Item 8 of this Annual Report.~~

Contents

Stock Performance Graph

The following graph compares the cumulative total return on our common stock, the Russell 2000 Index, and the ~~Nasdaq~~NASDAQ Biotechnology Index over the five-year period ending December 31, ~~2020.~~2021. The graph assumes that $100 was invested on December 31, 2016 in our common stock ~~and in each of~~or the comparative indices, asincluding reinvestment of ~~the market close on December 31, 2015.~~dividends. The returns shown are based on historical results and are not indicative of, or intended to forecast, future performance of our common stock or the comparative indices. This performance graph shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended ~~or the~~(the Exchange ~~Act,~~Act), or incorporated by reference into any filing of ~~NantKwest,~~ImmunityBio, Inc. under the Securities Act of 1933, as amended or(the Securities Act).

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*

Among ImmunityBio, Inc., the ~~Securities Act.~~

~~Item 6. Selected Financial Data.~~

~~The following selected consolidated financial data should be read in conjunction with “Management’s Discussion~~ Russell 2000 Index

and ~~Analysis~~the NASDAQ Biotechnology Index

Recent Sales of ~~Financial Condition and Results~~Unregistered Securities

None.

Issuer Purchases of ~~Operations,”~~Equity Securities

We did not repurchase any shares of our common stock during the ~~consolidated financial statements and related notes, and other financial information included in this Annual Report on Form 10‑K, or Annual Report.~~

~~The selected consolidated statements of operations data for the years~~three months ended December 31, ~~2020, 2019 and 2018 and the selected consolidated balance sheet data as~~2021. As of December 31, ~~2020~~2021, $18.3 million remained authorized for repurchase under our stock repurchase program. For additional information regarding our stock repurchase program, see Note 9, Stockholders’ Deficit, of the “Notes to Consolidated Financial Statements” that appears in Part II, Item 8. “Financial Statements and ~~2019 are derived from our audited consolidated financial statements included elsewhere in~~Supplementary Data” of this Annual Report. ~~The following selected consolidated statements~~

ITEM 6. RESERVED

111

Table of operations data for the years ended December 31, 2017 and 2016 and the selected consolidated balance sheet data as of December 31, 2018, 2017 and 2016 are derived from our audited consolidated financial statements not included in this Annual Report.

For the Year Ended December 31,

(In thousands, except share and per share amounts)

2020

2019

2018

2017

2016

Revenue

$
111

$
43

$
47

$
45

$
44

Operating expenses:

Research and development (including
   amounts with related parties)

64,483

49,785

55,718

42,044

29,153

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

27,254

18,065

42,718

57,121

95,391

Total operating expenses

91,737

67,850

98,436

99,165

124,544

Loss from operations

(91,626
)

(67,807
)

(98,389
)

(99,120
)

(124,500
)
Other income (expense):

Investment income, net

366

1,642

1,857

2,665

3,097

Interest expense (including amounts
   with related parties)

(41
)

(19
)

(433
)

(618
)

(66
)
Other (expense) income, net (including
   amounts with related parties)

(1,077
)

298

236

157

88

Total other (expense) income

(752
)

1,921

1,660

2,204

3,119

Loss before income taxes

(92,378
)

(65,886
)

(96,729
)

(96,916
)

(121,381
)
Income tax (expense) benefit

(5
)

97

503

493

572

Net loss

$
(92,383
)

$
(65,789
)

$
(96,226
)

$
(96,423
)

$
(120,809
)

Net loss per share:

Basic and diluted

$
(0.89
)

$
(0.70
)

$
(1.22
)

$
(1.20
)

$
(1.47
)

Weighted average number of shares
   during the period:

Basic and diluted

103,550,936

94,210,087

79,132,220

81,979,005

81,979,005

Contents

As of December 31,

(In thousands)

2020

2019

2018

2017

2016

Balance Sheet Data:

Cash and cash equivalents

$
11,441

$
15,508

$
16,821

$
23,872

$
8,083

Working capital

50,847

44,198

61,512

111,590

192,592

Total assets

151,858

143,123

181,950

250,440

317,496

Total liabilities

34,465

22,444

35,944

31,596

24,078

Total stockholders' equity

117,393

120,679

146,006

218,844

293,418

~~Item~~

ITEM 7. ~~Management’s Discussion and Analysis of Financial Condition and Results of Operations.~~

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis of our financial condition and results of operations should be read together with ~~Item 6, “Selected Financial Data,”~~ the description of ~~the~~our business appearing in Part I, Item ~~1, “Business,” of this report,~~1. “Business” and the ~~Consolidated Financial~~consolidated financial statements and related notes thereto in Part II, Item 8. “Financial Statements ~~in Item 8~~and Supplementary Data” of this Annual ~~Report on Form 10‑K and the related notes included elsewhere in this report.~~Report. This discussion contains forward-looking statements as a result of many factors, including those set forth under Part I, Item ~~1, “Business –~~ 1. “Business—Forward-Looking Statements” and Item ~~1A, "Risk Factors",~~1A. “Risk Factors,” and elsewhere in this Annual ~~Report on Form 10‑K.~~Report. These statements are based on the current expectations and assumptions of management that are subject to risks and uncertainties. Actual results could differ materially from those discussed in or implied by such forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this ~~report,~~Annual Report, particularly in Part I, Item ~~1A,~~1A. “Risk ~~Factors”.~~

~~Overview~~

Factors.” Except as required by law, we do not undertake any responsibility to update any of these factors or to announce publicly any revisions to any of the forward-looking statements contained in this or any document, whether as a result of new information, future events, or otherwise.

Our Business

ImmunityBio, Inc. is a clinical-stage biotechnology company developing next-generation therapies and vaccines that complement, harness, and amplify the immune system to defeat cancers and infectious diseases. We ~~are~~strive to be a ~~pioneering clinical-stage~~vertically-integrated immunotherapy company ~~focused on harnessing the power of~~designing and manufacturing our products so they are more effective, accessible, more conveniently stored, and more easily administered to patients.

Our broad immunotherapy and cell therapy platforms are designed to attack cancer and infectious pathogens by activating both the innate immune ~~system by using our natural killer cells, or~~ system—NK cells, dendritic cells, and macrophages—and the adaptive immune system—B cells and T cells—in an orchestrated manner. The goal of this potentially best-in-class approach is to ~~treat cancer and viral infectious diseases. NK~~generate immunogenic cell death thereby eliminating rogue cells from the body whether they are ~~the body’s first line of defense due to their innate ability to rapidly seek and destroy abnormal cells, such as cancer~~cancerous or virally infected ~~cells, without prior exposure or co-activation by other support molecules~~and to ultimately establish an “immunological memory” that confers long-term benefit for the patient.

Our business is based on the foundation of multiple platforms that collectively act on the entire immune response with the goal of targeted, durable, coordinated, and safe immunity against disease. These platforms and their associated product candidates are ~~typically required~~designed to ~~train~~overcome the limitations of the current standards of care in oncology and ~~activate adaptive immune cells~~infectious disease, such as ~~T‑cells.~~

~~A critical aspect~~checkpoint inhibitors and antiretroviral therapies. We have established one of ~~our strategy is to invest significantly in innovating new therapeutic candidates, based upon our proprietary activated NK, or aNK, cell platform,~~the most comprehensive portfolios of immunotherapy and ~~conducting clinical testing and scale manufacturing~~vaccine platforms, which include:

112

Table of ~~our most promising biologic product candidates.~~ Contents

We believe that our ~~aNK~~innovative approach to orchestrate and combine therapies for optimal immune system response will become a therapeutic foundation across multiple clinical indications. Although such designations may not lead to a faster development process or regulatory review and may not increase the likelihood that a product candidate will receive approval, Anktiva, our novel antibody cytokine fusion protein, has received Breakthrough Therapy and Fast Track designations in combination with BCG from the FDA for BCG-unresponsive NMIBC CIS. Based on the reported results of the trial, we have initiated discussions with the FDA to file a BLA for Anktiva (to be branded VesAnktiva for intravesical administration) plus BCG for BCG-unresponsive NMIBC CIS. Additionally, we believe that data from multiple clinical trials indicates Anktiva has broad potential to enhance the activity of therapeutic mAbs, including checkpoint inhibitors (e.g., Keytruda®), across a wide range of tumor types.

Our platforms, which include 17 first-in-human therapeutic agents, are being studied in 26 actively recruiting clinical trials—17 of which are in Phase 2 or 3 development—across 13 indications in liquid and solid tumors, including bladder, pancreatic and lung cancers. These are among the most frequent and lethal cancer types for which there are high failure rates for existing standards of care or, in some cases, no available effective treatment. In infectious disease, our pipeline currently targets such pathogens as SARS-CoV-2 and HIV. We believe SARS-CoV-2 currently lacks a vaccine that provides long-term protection against the virus, particularly its variants, while HIV affects tens of millions of people globally and currently has no known cure.

We have established GMP manufacturing capacity at scale with cutting-edge cell ~~is capable of being manufactured as a cell-based “off-the-shelf” therapy that can be molecularly engineered in a variety of ways to boost its killing capabilities against cancers~~manufacturing expertise and ~~virally infected cells.~~

~~We retain worldwide commercial rights to clinical and research data, intellectual property and know-how developed with our aNK cells,~~ready-to-scale facilities, as well as extensive and seasoned R&D, clinical ~~grade master~~trial, and ~~working cell banks of aNK, haNK~~regulatory operations, and ~~t‑haNK cell lines.~~

~~Agreement and Plan of~~development teams.

The Merger ~~with ImmunityBio, Inc.~~

On December 21, 2020 ~~NantKwest~~, we and NantCell, Inc. (formerly known as ImmunityBio, Inc. ~~(ImmunityBio)~~, a private company) (NantCell) entered into an Agreement and Plan of Merger (the Merger Agreement), pursuant to which ~~NantKwest~~we and ~~ImmunityBio~~NantCell agreed to combine ~~their~~our businesses. The Merger Agreement ~~provides~~provided that a ~~wholly owned~~wholly-owned subsidiary of ~~NantKwest will~~the company would merge with and into ~~ImmunityBio~~NantCell (the Merger), with ~~ImmunityBio continuing~~NantCell surviving the Merger as a wholly-owned subsidiary of the ~~surviving company and being renamed NantCell, Inc.~~company.

113

Table of Contents

On March 9, 2021, ~~upon~~we completed the Merger pursuant to the terms ~~and subject to~~of the ~~conditions therein. At~~Merger Agreement. Under the terms of the Merger Agreement, at the effective time of the Merger (the Effective Time), ~~NantKwest’s name, as the parent of NantCell, Inc., will be changed to “ImmunityBio, Inc.”~~

~~At the Effective Time,~~ each share of ~~ImmunityBio~~NantCell common stock, par value $0.001 per share, issued and outstanding immediately prior to the Effective Time, subject to certain exceptions as set forth in the Merger Agreement, ~~will be~~was converted automatically into a right to receive 0.8190 (the Exchange Ratio) newly issued shares of ~~NantKwest~~ common ~~stock.~~stock, par value $0.0001 per share, of the company (Company Common Stock), with cash paid in lieu of any fractional shares. At the Effective Time, each share of ~~NantKwest~~the company’s common stock issued and outstanding immediately prior to the Effective Time, ~~will remain~~remained an issued and outstanding share of the combined company. At the Effective Time, each outstanding option, warrant or restricted stock unit to purchase ~~ImmunityBio~~NantCell common stock ~~will be~~was converted ~~(using~~using the ~~merger exchange ratio of 0.8190)~~Exchange Ratio into an option, warrant or restricted stock unit, respectively, on the same terms and conditions immediately prior to the Effective Time, to purchase shares of ~~common stock~~Company Common Stock.

Immediately following the Effective Time, the former stockholders of ~~the combined company.~~

~~Upon consummation of the Merger, on a fully-diluted basis, ImmunityBio stockholders and NantKwest stockholders will own~~NantCell held approximately ~~72% and 28%, respectively,~~71.5% of the outstanding shares of ~~common stock~~Company Common Stock and the stockholders of the ~~combined company. It is estimated that,~~company as of immediately following the closing date, Dr. Patrick Soon‑Shiong, our Executive Chairman and principal stockholder, and his affiliates will beneficially own, in the aggregate, approximately 82% of the common stock of the combined company.

~~Following consummation of~~prior to the Merger ~~shares of common stock of the combined company are expected to be listed on the Nasdaq Global Select Market under the symbol “IBRX”.~~

Under the terms and subject to the conditions set forth in the Merger Agreement, the closing of the Merger depends on a number of conditions being satisfied, including approval of the Merger by holders of a majorityheld approximately 28.5% of the outstanding shares of ~~NantKwest common stock as~~Company Common Stock. As a result of the ~~NantKwest record date (excluding all shares of NantKwest common stock beneficially owned by~~Merger and immediately following the Effective Time, Dr. Patrick ~~Soon‑Shiong~~Soon-Shiong, our Executive Chairman and Global Chief Scientific and Medical Officer, and his affiliates ~~Cambridge Equities, LP and Chan Soon‑Shiong Family Foundation or any of their respective controlled affiliates or any~~beneficially owned, in the aggregate, approximately 81.8% of the ~~directors or executive officers~~outstanding shares of ~~NantKwest or ImmunityBio).~~

~~On February 1, 2021, our Registration Statement on Form S-4, which~~Company Common Stock. Following the consummation of the Merger, the symbol for shares of the company’s common stock was ~~filed with the Securities and Exchange Commission (SEC)~~changed to “IBRX.”

We incurred costs totaling $23.3 million in connection with the Merger, ~~was declared effective by~~consisting of financial advisory, legal and other professional fees, of which $13.0 million and $10.3 million were recorded for the ~~SEC.~~

~~A special meeting~~years ended December 31, 2021 and 2020, respectively.

Accounting Treatment of the stockholders of NantKwest will be held on March 8, 2021 to consider and vote on a proposal to approve the issuance of shares of common stock of NantKwest to security holders of ImmunityBio, and to consider and vote on a proposal to approve the Merger. Only holders of record of NantKwest common stock at the close of January 29, 2021, will be entitled to notice of and to vote at the special meeting.

~~We expect the~~ Merger ~~to close in the first quarter of 2021, subject to receipt of the requisite stockholder approvals and satisfaction of other customary closing conditions.~~

The Merger ~~is expected~~represents a business combination pursuant to beFinancial Accounting Standards Board Accounting Standards Codification Topic 805-50, Mergers, which is accounted for as a transaction between entities under common control as Dr. ~~Patrick~~ Soon‑Shiong isand his affiliates were the controlling ~~stockholder~~stockholders of ~~each of NantKwest~~both the company and ~~ImmunityBio. Upon the closing~~NantCell for all of the ~~Merger,~~periods presented in this report. As a result, all of the ~~net~~ assets and liabilities of ~~ImmunityBio will be~~NantCell were combined with ~~those of NantKwest~~ours at their historical carrying amounts ~~and~~on the ~~companies will be presented on a combined basis for all historical periods presented.~~

~~For~~closing date of the ~~year ended December 31, 2020, we incurred costs of $6.2 million in connection with our proposed merger with ImmunityBio, consisting of financial advisory, legal and other professional fees.~~

~~Our Off-the-Shelf Approach~~

~~Multiple Modes of aNK Directed Tumor Cell Killing.~~ ~~Our NK platform has demonstrated the ability to induce cell death in cancers and virally infected cells through a variety of concurrent mechanisms including:~~

~~Innate Killing~~, whereby all of our NK platforms, aNK, haNK, taNK and t‑haNK, recognize the abnormal proteins typically found on the surfaces of metabolically stressed cells, which upon binding, release toxic granules to immediately kill their targets;

~~ii.~~

~~Antibody-Mediated Killing~~ with our haNK and t‑haNK platforms, which are aNK cells engineered to express antibody receptors that can bind to therapeutically administered antibody products or to antibodies naturally produced in the body, thereby enhancing the cancer cell killing effects of those antibodies through Antibody Dependent Cellular Cytotoxicity, or ADCC; and

~~iii.~~

~~CAR-Directed Killing~~ with our taNK and t‑haNK platforms, which are aNK cells engineered to express chimeric antigen receptors, or CARs, that target tumor-specific proteins commonly found only on the surfaces of cancer cells and upon binding, induce cell death through the release of toxic granules directly into their targets and by the release of cytokines and chemokines, which recruit additional innate and adaptive immune responses, including the recruitment of cytotoxic T‑cells.

~~All three modes of killing;~~ ~~Innate Killing, Antibody-Mediated Killing, and CAR-Directed Killing, are employed by our proprietary t‑haNK platform, which combines all the enhanced NK killing functions of aNK, haNK and taNK into a single product platform.~~

Our primary target therapeutic area is cancer, with a heavy emphasis on solid tumors. According to the National Cancer Institute, almost 1.9 million new cancer cases are expected to be diagnosed in the U.S. during 2021, adding to the 16.9 million already living with cancer. In addition, we plan to advance therapies for hematologic malignancies and virally induced infectious diseases.

~~Innate Killing—the aNK Platform.~~Merger. We have ~~developed a unique NK cell platform, which we believe is capable~~recast our prior period financial statements to reflect the conveyance of ~~being manufactured~~NantCell’s common shares as ~~a cell-based “off-the-shelf” therapy that can be molecularly engineered~~if the Merger had occurred as of the earliest date of the consolidated financial statements presented in ~~a variety~~Part II, Item 8. “Financial Statements and Supplementary Data” of ~~ways to boost its killing capabilities against cancers~~this Annual Report. All material intercompany accounts and virally infected cells. Unlike normal natural killer cells, our NK cells do not express the key inhibitory receptors that diseased cells often exploit to turn off the killing function of natural killer cells and escape elimination. We have developed a unique aNK cell, which omits key inhibitory receptors, while preserving critical activation receptors that enable selective innate targeting and killing of distressed and diseased cells. They do so through the recognition and binding of stress-proteins that are overexpressed on the surfaces of

~~rapidly growing cancer cells due to oxidative and metabolic stress, nutrient deprivation and waste accumulation that typically occurs when cell growth outpaces the capacity of local circulation; and~~

~~ii.~~

~~virally infected cells where the cellular machinery is hijacked to produce an abundance of viral proteins and virions.~~

Our aNK cells are also designed to deliver a more lethal blow to their target by delivering a larger payload of lytic enzymes and cytokines responsible for both direct and indirect killing when compared to other natural killer cells isolated from healthy donors. This is due to the higher density of lytic granules and larger cell volume possessed by aNK cells when compared to that of donor-derived natural killer cells. We believe that our aNK cells can be produced at commercial scale as a ‘living drug’ using our proprietary manufacturing and distribution processes to adequately address select global cancer markets.

~~Several phase I safety studies with unmodified aNK cells~~transactions have been ~~conducted~~eliminated in consolidation.

COVID-19 Pandemic

The COVID-19 pandemic continues to present a ~~variety~~substantial public health and economic challenge around the world. Through the date of bulky hematological cancers and solid tumors, enrolling 46 patients in a range of dose levels and schedules with encouraging evidence of single-agent activity and a durable remission, including some complete responses in liquid tumors. Based on these earlier clinical trials,this Annual Report, we have further modified our aNK platform through virus-free molecular engineering designed to leverage additional modes of killing available to aNKs, including antibody-mediated killing, the haNK platform, and both antibody-mediated and CAR-directed antigen targeted killing, the t‑haNK platform.

~~Antibody-Mediated Killing—the haNK Platform.~~ ~~We have genetically engineered our aNK cell platform using~~not seen a virus-free method to overexpress high-affinity CD16 receptors, which bind to antibodies. These antibody-targeted haNK cells are designed to directly bind to IgG1-type antibodies, such as avelumab, trastuzumab, cetuximab and rituximab with the intention of enhancing the cancer-killing efficacy of these antibodies by boosting the population of competent natural killer cells that can kill cancer cells through ADCC. Antibody products are abundantly utilized to treat cancer and it is estimated that they generate over $100 billion in reported annual sales. A growing number of studies suggest that clinically meaningful responses to these antibody therapies correlate directly with the overall health of a patient’s natural killer cell population and whether they express the high-affinity variant of the CD16 receptor. Currently available literature estimates that only approximately 10% to 15% of the addressable patient population eligible for antibody therapies carry high-affinity CD16 receptors. This implies that our haNK product candidate may have significant market potential as a combination therapy to potentially address a large number of patients who do not carry high-affinity CD16 receptors and, as a result, exhibit a poorer response to antibody therapies. We therefore intend to develop our haNK product candidate as a combination therapy with widely-used U.S. Food and Drug Administration, or FDA, approved antibody products such as avelumab, trastuzumab, cetuximab and rituximab. Current Good Manufacturing Practice, or cGMP, master and working cell banks of our haNK product candidate have been successfully established and will serve as our source for product for our clinical trials and, if approved, commercialization going forward. We have optimized our manufacturing process partly by designing our haNK product candidate to not require IL‑2 cytokine supplementation to the growth media every few days, thereby enabling us to overcome a technically challenging and costly limitation that many other natural killer cell-based therapies face. We have also successfully established processes for large-scale production, cryopreservation and long-term storage of final dose forms, thereby optimizing production efficiencies and allowing for on-demand availability with minimal handling at the infusion sites. Our cryopreserved haNK product candidate has been cleared for clinical testing in several phase Ib/II clinical trials, including our phase II Merkel cell cancer study.

~~CAR-Directed Killing—the taNK Platform.~~ We have genetically engineered our aNK platform to express CARs that target tumor-specific antigens found on the surfaces of cancers and virally infected cells. Our taNK cells are designed to bind directly to these surface antigens and induce cell death through the release of toxic granules directly into the tumor cells and release of cytokines and chemokines to recruit additional innate and adaptive immune responses, including the recruitment of cytotoxic T‑cells. These tumor antigens include checkpoint ligands, such as PD‑L1 and B7‑H4 as well as well-established tumor proteins such as CD19, HER2 and EGFR, all of which can be targeted individually by our engineered taNK products.

Preclinical evidence has been mounting which indicates that taNK cell activation through the binding of its CAR receptors to these cancer specific proteins may be potent enough to override many of the pre-existing inhibitory signals and immunosuppressive factors present in the tumor microenvironment that may be responsible for tumor resistance.

~~CAR-Directed and Antibody-Mediated Killing—the t‑haNK Platform.~~ Our newest and most promising platform for the development of therapeutic product candidates is an innovative, bioengineered combination of our haNK and taNK platforms that incorporates all the features of our haNK platform together with a CAR. The resulting line of product candidates under this platform avails itself to all three modes of killing: ~~innate~~, ~~antibody-mediated~~ ~~and~~ ~~CAR-directed killing~~. These product candidates also include one or more additional expression elements such as functional cytokines, chemokines and trafficking factors, making them amongst the most versatile in our portfolio. These product candidates are intended to be combined with commercially available therapeutic antibodies to effectively target either two different epitopes of the same cancer specific protein or two entirely different cancer specific proteins. In additionmaterial adverse impact to our two t‑haNK product candidates, PD‑L1.t‑haNK, currently in phase II testing, and CD19.t‑haNK, cleared to commence phase I testing, we believe a pipeline of prominent CARs for t‑haNK, including HER2 and EGFR, which are nearing IND submission, and others that are advancing through clinical enabling studies, will enable us to potentially address an even broader range of cancers as part of a chemotherapy-free combination regimen.

~~The Nant Cancer Vaccine.~~ The Nant Cancer Vaccine, or NCV, program is a personalized therapy regimen, which utilizes our “off-the-shelf” NK cell platform as the backbone of the regimen. NCV consists of an initial tumor-conditioning regimen followed by a molecularly-informed immunologic conditioning therapy. More specifically, NCV combines the novel delivery of metronomic, albumin-linked low-dose chemotherapy in conjunction with certain other agents, followed by a sequenced administration of tumor-associated antigen vaccines and an IL‑15 superagonist fusion protein, all of which potentiate our NK cell therapy to potentially drive immunogenic cell death while avoiding the ravages of toxic high-dose chemotherapy. By inducing immunogenic cell death and enhancing a patient’s innate and adaptive immune system, NCV is designed to attain a long-term, durable response in multiple cancer types with a potential for lower toxicity and improved efficacy and quality of life in comparison with current standards of care. We believe ultimately that employing our NK cell therapy in the context of NCV will be a highly effective combination for long term clinical success over available standards of care that employ maximum tolerated dose, tolerogenic cell death and immune system compromise.

~~Coronavirus Pandemic~~

In March 2020, the World Health Organization declared the novel strain of coronavirus disease (SARS‑CoV‑2) a pandemic. In the same month, the President of the United States declared a State of National Emergency due tobusiness from the pandemic. Many jurisdictions, particularly in North America, Europe and Asia, as well as U.S. states in which we operate, including California, have adopted or continue to consider laws, rules, regulations or decrees intended to address the pandemic, including travel restrictions, closing or re-opening of non-essential businesses or restricting daily activities. However, due to the pandemic new restrictions might be imposed by various governmental authorities. For example, many communities have limited, and may continue to limit, social mobility and gatherings in response to the continued rise in coronavirus cases and fatalities in the U.S. Such restrictions and other impacts from the pandemic may have an impact on our business.

~~Given~~given the unprecedented and continuously evolving nature of the pandemic, we cannot at this time predict the ~~future~~specific extent, duration, or full impact that this pandemic may have on our financial condition and results of operations, including ongoing and planned clinical trials. More specifically, the pandemic may result in prolonged impacts that we cannot predict at this time and we expect that such uncertainties will continue to exist for the foreseeable future. The impact of ~~these changes and potential changes~~the pandemic on our ~~company~~financial performance will depend on future developments, including the duration and spread of the outbreak, impact of potential variants and the related governmental advisories and restrictions. These developments and the impact of the ongoing pandemic on the financial markets and the overall economy are ~~unknown at this time. To date,~~highly uncertain. If the financial markets and/or the overall economy are impacted for an extended period, our results may be adversely affected. In addition, we ~~have seen no material adverse impact to our business from the pandemic. We~~ anticipate ~~however,~~ that enrollment of patients in certain studies will likely take longer than previously forecasted ~~in prior SEC filings~~ and that our clinical trials may require additional time to complete which would in turn impact the timeline ~~in which we were previously forecasting~~of BLA submissions of our product candidates and subsequent revenue generation.

These factors have been accounted for in the company’s anticipated upcoming milestones. During any such delays in our clinical trials, we will continue to incur fixed costs such as selling, general and administrative expenses and operating expenses related to our laboratory, GMP manufacturing, and office facilities.

~~Our~~

114

Table of Contents

Many of our office-based employees have been working from home since mid-March ~~2020, while ensuring essential~~2020. Essential staffing levels for our research and development operations remain in place, including maintaining key personnel in our laboratory and GMP manufacturing facilities. ~~While we have not previously experienced or been notified of any anticipated impact amongst our third party vendors, it~~It is likely that the pandemic and resulting mitigation efforts could have an impact in the future on our third-party suppliers who manufacture laboratory supplies required for our in-house manufacturing process, which in turn could have an impact on having sufficient clinical product supply available for our clinical trials. We have addressed this in part by ensuring that we have sufficient supplies on hand to weather interruptions in our supply chain.

~~There is significant uncertainty about~~

We continue to monitor the ~~progression and ultimate~~ impact of the COVID-19 pandemic on our business, including our clinical trials, manufacturing facilities and ~~operations. While~~capabilities, and ability to access necessary resources. For a discussion of the risks presented by the COVID-19 pandemic ~~did not materially impact~~to our results ~~during~~of operations and financial condition, see Part I, Item 1A. “Risk Factors.”

Operating Results

From inception through the ~~year ended December 31, 2020 outside~~date of ~~the Joint COVID-19 Collaboration Agreement as described above, we anticipate that it could impact our business in the short-term due to factors such as fewer patients accessing treatment for cancer.~~

~~Operating Results~~

~~To date,~~this Annual Report, we have generated minimal revenue from non-exclusive license agreements related to ~~the non-clinical use of~~ our cell lines, the sale of our bioreactors and ~~intellectual property.~~related consumables, and grant programs. We have no clinical products approved for commercial sale and have not generated any revenue from therapeutic and vaccine product ~~sales.~~candidates that are under development. We have incurred net losses in each year since our inception and, as of December 31, ~~2020,~~2021, we had an accumulated deficit of ~~$754.6 million.~~$2.0 billion. Our net losses attributable to ImmunityBio common stockholders were ~~$92.4~~$346.8 million, ~~$65.8~~$221.9 million, and ~~$96.2~~$157.8 million for the years ended December 31, 2021, 2020 ~~2019~~ and ~~2018,~~2019, respectively. Substantially all of our net losses resulted principally from costs incurred in connection with our ongoing clinical trials and operations, our research and development programs, and from selling, general and administrative costs associated with our operations, including stock-based compensation expense.

As of December 31, ~~2020,~~2021, we had ~~171~~587 employees. Personnel of related companies who provide corporate, general and administrative, manufacturing strategy, research and development, regulatory and clinical trial strategy and other support services under our shared services agreement with NantWorks are not included in this number. For additional information, see Note ~~10,~~8, ~~Related Party~~Related-Party Agreements,, of the “Notes to Consolidated Financial Statements” ~~included~~that appears in Part II, Item 88. “Financial Statements and Supplementary Data” of this Annual Report. WeIn anticipation of the commercialization of select drug candidates, we expect to continue to incur significant expenses and increasing operating losses for the foreseeable future, which may fluctuate significantly from quarter-to-quarter and year-to-year. ~~We anticipate that our expenses will increase substantially as we:~~

•

~~continue research and development, including preclinical and clinical development of our existing product candidates;~~

•

~~potentially seek regulatory approval for our product candidates;~~

•

~~seek to discover and develop additional product candidates;~~

•

~~establish a commercialization infrastructure and scale up our manufacturing and distribution capabilities to commercialize any of our product candidates for which we may obtain regulatory approval;~~

•

~~seek to comply with regulatory standards and laws;~~

•

~~maintain, leverage and expand our intellectual property portfolio;~~

•

~~hire clinical, manufacturing, scientific and other personnel to support our product candidates’ development and future commercialization efforts;~~

•

~~add operational, financial and management information systems and personnel;~~

•

~~incur additional legal, accounting and other expenses in operating as a public company; and~~

•

~~incur additional costs associated with our proposed merger with ImmunityBio, including a higher expense rate for the operations of the combined company if the merger closes.~~

~~We do not expect to generate any revenue from product sales unless and until we successfully complete development and obtain marketing approval~~See “—Future Funding Requirements” below for ~~one or more~~a discussion of our ~~product candidates, which we do not expect to happen for at least the next several years, if ever. Until such time that we can generate substantial revenue from product sales, if ever,~~anticipated expenditures and sources of capital we expect to finance our operating activities through a combination of equity offerings, debt financings, government or other third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements. However,access to fund these expenditures.

Collaboration Agreements

As we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all, which would have a negative impact on our financial condition and could force us to delay, limit, reduce or terminate our research andcontinue the development ~~programs or commercialization efforts. Failure to receive additional funding could cause us to cease operations, in part or in full.~~

~~Viracta Investment~~

In March 2017, we participated in a Series B convertible preferred stock financing and invested $8.5 million in Viracta Therapeutics, Inc., or Viracta, a clinical stage drug development company, which was initially recorded at cost. In May 2017, we executed an exclusive worldwide license with Viracta to develop and commercialize Viracta’s proprietary histone deacetylase inhibitor drug candidate for use in combination with NK cell therapy and possibly additional therapies.

We measure our equity securities without readily determinable fair values at cost, less impairment (if any), plus or minus observable price changes from an identical or similar investment of the same issuer, with such changes recognized in the consolidated statements of operations. Some factors we may consider in the impairment analysis include the extent to which the security has been in an unrealized loss position, the change in the financial condition and near-term prospects of the issuer, as well as security and industry specific economic conditions. At December 31, 2020, our fair value assessment indicated that the recent offering of Viracta’s Series E preferred shares, at a lower offering price per share than the per share carrying amount of our ~~investment in Viracta, is a directional indicator representing an observable price change in an orderly transaction for a similar investment. On December 31, 2020,~~pipeline, we reduced the carrying value by $1.4 million due to the observable price change, which has been included in other income and expense, net, on the consolidated statements of operations. On a cumulative basis, we have recognized a reduction in carrying value of $1.4 million. As of December 31, 2020, the carrying value of our investment in Viracta totaled $7.8 million.

~~For additional information, see Note 5,~~ ~~Viracta Investment, of the “Notes to Consolidated Financial Statements” included in Part II, Item 8 of this Annual Report.~~

~~Collaboration Agreements~~

We anticipate that strategic collaborations with established biopharma companies and other research-based entities will become an integral ~~part of~~to our operations ~~providing~~and the development of novel combination therapies. These collaborations will provide ImmunityBio with a range of opportunities to leverage our partners’ expertise and capabilities to further expand the potential of our technologies and product candidates. We are currently pursuing this aspect of our business in 13 clinical trials studying our IL-15 superagonist fusion protein Anktiva in combination with complementary, approved therapies to determine if Anktiva may have broad potential to enhance the activity of those therapies, including mAbs and other standard-of-care therapeutics across a wide range of tumor types. We believe we are well positioned to become a leader in ~~cell-based~~ immunotherapy ~~due to~~through the combined strength of our broad and ~~vertically integrated~~vertically-integrated platform and ~~through~~ complementary strategic partnerships.

~~In addition to the collaboration and license agreements discussed below, we~~ We may also enter into ~~a commercial agreement relating to an IL‑15 superagonist product developed by an affiliate, and we are also pursuing~~ supply arrangements for various investigational agents ~~controlled by affiliates and third parties~~ to be used in our clinical trials. These collaboration and supply agreements do not typically specify how sales will be apportioned between the parties upon successful commercialization of the product. As a result, we cannot guarantee that we will receive a percentage of the revenue that is at least proportional to the costs that we will incur in commercializing the product candidate. Furthermore, if Dr. Soon-Shiong was to cease his affiliation with us, ImmunityBio, or with NantWorks, these entities may be unwilling to continue these relationships with us on commercially reasonable terms, or at all, and as a result may impede our ability to control the supply chain for our combination therapies.

See Note 8, 6, Collaboration and License Agreements, of the “Notes to Consolidated Financial Statements” ~~included~~that appears in Part II, Item 88. “Financial Statements and Supplementary Data” of this Annual Report for a more detailed discussion regarding our collaboration and license agreements.

115

Table of Contents

Agreements with Related Parties

Our Executive Chairman, Global Chief Scientific and Medical Officer and our principal stockholder, founded and has a controlling interest in NantWorks, which is a collection of ~~multiple~~ companies in the healthcare and technology space. ~~As described below, we~~We have entered into arrangements with NantWorks, and certain affiliates of NantWorks, to facilitate the development of new ~~genetically modified NK cells~~immunotherapies for our product pipeline. Affiliates of NantWorks are also affiliates of the company due to the common control by and/or common ownership interest of our Executive ~~Chairman.~~

Chairman and Global Chief Scientific and Medical Officer.

Related-Party Promissory Notes

As of December 31, 2021, we have outstanding fixed-rate promissory notes with entities affiliated with Dr. Soon-Shiong in an aggregate amount of $306.3 million, including accrued interest. These notes bear interest at a per annum rate ranging from 3.0% to 6.0%, provide that the outstanding principal is due and payable on September 30, 2025, and accrued and unpaid interest is payable on either upon maturity or, with respect to one of the notes, on a quarterly basis beginning June 30, 2021. We may prepay the outstanding amount of any advance under such notes, together with accrued and unpaid interest, at any time, in whole or in part, without premium or penalty.

In addition, as of December 31, 2021 we have a $300.0 million variable-rate promissory note with an entity affiliated with Dr. Soon-Shiong that is due and payable on December 17, 2022. This loan bears interest at Term SOFR + 5.4%, which is compounded annually and payable quarterly commencing on March 17, 2022. As of December 31, 2021, the interest rate on this loan was 5.47%. In the event of a default on the loan (as defined in the promissory note), including if we do not repay the loan at maturity, the company has the right, at its sole option, to convert the outstanding principal amount and accrued and unpaid interest due under this note into shares of the company’s common stock at price of $5.67 per share. There can be no assurance that we can refinance this promissory note or what terms will be available in the market at the time of refinancing. Furthermore, if prevailing interest rates or other factors at the time of refinancing result in higher interest rates upon refinancing, then the interest expense relating to the refinanced indebtedness would increase. These risks could materially adversely affect our financial condition, cash flows and results of operations.

Immuno-Oncology Clinic, Inc.

We entered into multiple agreements with Immuno-Oncology Clinic, Inc. (the Clinic) to conduct clinical trials related to certain of our product candidates. The Clinic is a related party as it is owned by an officer of the company and NantWorks

manages the administrative operations of the Clinic.

In the second quarter of 2021, based on a review of our then updated clinical trial programs post-Merger, we updated our estimates of the investigator fees for the clinical trials that were underway or planned at the Clinic. As certain programs costs are excluded from and certain services are subject to credit adjustments under the Clinic agreements, we determined the expected future fees for services to be performed were less than the carrying value of the prepaid asset on the consolidated balance sheets. As a result, we partially wrote down the value of our prepayments under the Clinic agreements and recorded approximately $1.9 million in research and development expense, on the consolidated statement of operations for the three months ended June 30,2021. In November 2021, we completed a review of alternative structures that could support our more complex clinical trial requirementsand made a decision to explore a potential transition of clinical trials at the Clinic to a new structure (including contracting with a new, non-affiliated professional corporation) to be determined and agreed upon by all parties and currently planned for the first half of 2022. Based on this decision to explore a potential transition, we determined that it was more likely than not that the previously recorded prepaid asset would not result in the collection of fees for services performed by the Clinic as contemplated in the original agreements. As a result, we wrote down the remaining value of our prepaid asset and recorded approximately $2.5 million in research and development expense, on the consolidated statement of operations for the three months ended December 31, 2021.

116

Table of Contents

NantWorks

NantBio, Inc.

In 2018, we ~~recorded $2.5 million, $2.1 million~~entered into a supply agreement with NantCancerStemCell, LLC (NCSC), a 60% owned subsidiary of NantBio (with the other 40% owned by Sorrento). Under this agreement, we agreed to supply VivaBioCell’s proprietary GMP-in-a-Box bioreactors and ~~$2.8 million, respectively,~~related consumables, made according to specifications mutually agreed to with both companies.

Duley Road, LLC

In 2017, Altor BioScience Corporation (succeeded by our wholly-owned subsidiary Altor BioScience, LLC), through its wholly-owned subsidiary, entered into a lease agreement with Duley Road, a related party that is indirectly controlled by our Executive Chairman and Global Chief Scientific and Medical Officer, for office and cGMP manufacturing facility space in ~~selling, general and administrative expense, and $1.5 million, $1.5 million and $3.3 million, respectively,~~El Segundo, California. Effective in 2019, we entered into two lease agreements with Duley Road for a second building located in El Segundo, California. Both floors of the building are used for research and development ~~expense under this arrangement~~and office space.

605 Nash, LLC

In February 2021, but effective on the consolidated statements of operations. These amounts exclude certain general and administrative expenses provided by third party vendors directly for our benefit, which have been reimbursed to NantWorks based on those vendors’ invoiced amounts without markup by NantWorks.

~~In June 2016,~~January 1, 2021, we ~~amended the existing shared services~~entered into a lease agreement with ~~NantWorks whereby~~605 Nash, LLC, a related party, for a facility primarily used for pharmaceutical development and manufacturing purposes. In May 2021, but effective on April 1, 2021, we ~~can provide support services~~entered into an amendment to ~~NantWorks and/or any of its affiliates. For~~our lease agreement with 605 Nash, LLC to expand the ~~years ended December 31, 2020, 2019 and 2018,~~rentable leased square feet.

557 Doug St, LLC

In September 2021, we recorded expense reimbursements of $1.4 million, $1.2 million and $0.6 million, respectively, in selling, general and administrative expense and $1.6 million, $2.3 million and $2.6 million, respectively, in research and development expense.

entered into a sale transaction with Nant Capital, a related party, for a real estate property located at 557 South Douglas Street, El Segundo, California. We subsequently leased back the building for an initial seven-year lease term with an option to extend the lease for two additional seven-year periods.

Brink Biologics, Inc.

In ~~November~~ 2015, we entered into an agreement with Brink Biologics, Inc. (Brink) whereby we granted to Brink worldwide exclusive licenses to the use of certain cell lines and intellectual property for non-clinical laboratory testing. Brink is a related party as our Executive Chairman, Global Chief Scientific and Medical Officer and our principal stockholder, and our Chief Corporate Affairs Officer and member of our board of directors, collectively own more than 50% of Brink’s outstanding shares.

420 Nash, LLC

In September 2021, we entered into a lease agreement with 420 Nash, LLC, a related party, for a facility ~~license agreement with NantWorks, which became effective in May 2015,~~located at 420 Nash Street, El Segundo, California, to be used primarily for ~~approximately 9,500 square feet in Culver City, California, which~~the warehousing and storage of drug manufacturing supplies, products and equipment and ancillary office space. The company has ~~been converted to a research and development laboratory and a cGMP manufacturing facility. In September 2020, we amended this agreement~~options to extend the lease term for two additional consecutive periods of ~~this lease through December 31, 2021, as further described in~~ five years each.

See Note 9,8 ~~Commitments and Contingencies~~, Related-Party Agreements, of the “Notes to Consolidated Financial Statements” ~~included~~that appears in Part II, Item 88. “Financial Statements and Supplementary Data” of this Annual Report. Lease expense for this facility for the years ended December 31, 2020, 2019 and 2018, is recorded in research and development expense on the consolidated statements of operations and was $0.6 million, $0.6 million, and $0.2 million, respectively.

~~Immuno-Oncology Clinic, Inc.~~

Beginning in 2017, we entered into multiple agreements with Immuno-Oncology Clinic, Inc., or the Clinic (dba Chan Soon-Shiong Institutes for Medicine, in El Segundo, California), to conduct clinical trials related to certain of our product candidates. The Clinic is a related party as it is owned by one officer of NantKwest and NantWorks manages the administrative operations of the Clinic. Prior to June 30, 2019, one of the company’s officers was an investigator or sub-investigator for all of the company’s trials conducted at the Clinic.

In July 2019, we entered into a new agreement with the Clinic (the Clinic Agreement), which became effective on July 1, 2019. The Clinic Agreement, as amended on March 31, 2020, covers clinical trial and research related activities on a non-exclusive basis relating to our existing clinical trials, commenced prior to July 1, 2019, and prospective clinical trials and research projects. The Clinic Agreement also specifies certain services and related costs that are excluded from the Clinic Agreement. Prior to commencing any work under the Clinic Agreement, the parties have agreed to execute written work orders setting forth the terms and conditions related to specific services to be performed, including financial terms. For clinical trials that commenced prior to July 1, 2019, fees incurred for services performed after July 1, 2019 are covered under the Clinic Agreement and applied towards the below-mentioned prepayments. The Clinic Agreement allows for an automatic renewal and additional extensions beyond the initial one year term.

In consideration of the services to be performed under the Clinic Agreement, as amended on March 31, 2020, we agreed to make payments of up to $7.5 million to the Clinic, of which $3.75 million and $1.875 million were paid in July 2019 and October 2019, respectively. As amended, a conditional payment of $1.875 million shall be due and payable at such time, if any, that the payments made in July 2019 and October 2019 have been earned by the Clinic through performance of services. On a quarterly basis, our prepayment is increased by an interest credit computed in accordance with terms specified in the Clinic Agreement.

To the extent any portion of the prepayments remain unearned by the Clinic on the third anniversary of the Clinic Agreement, we may elect at our sole discretion either to (i) not extend the term of the Clinic Agreement and have the Clinic reimburse us for the total amount of any remaining unused portion of the prepayments, or (ii) extend the term of the Clinic Agreement for up to three additional one year periods, at which time the Clinic will reimburse us for the total amount of any remaining unused portion of the prepayments plus interest if reimbursement is not made within 60 days of expiration. The Clinic may terminate this agreement upon each anniversary date upon sixty (60) days prior written notice and reimbursement in full to us of any outstanding unearned balance of the prepayments, provided that any such termination by the Clinic will not apply with respect to any work orders still in effect at the time of such termination.

In July 2019, we executed a clinical trial work order under the Clinic Agreement for an open-label, phase I study of PD‑L1.t‑haNK for infusion in subjects with locally advanced or metastatic solid cancers. In July 2020, but effective on June 22, 2020, we and ImmunityBio executed a clinical trial work order under our existing master agreement with the Clinic for an open-label, randomized, comparative phase II study of ImmunityBio’s proprietary IL‑15 superagonist (N‑803) and Aldoxorubicin Hydrochloride (Aldoxorubicin) and our PD‑L1.t‑haNK with standard-of-care chemotherapy versus standard-of-care chemotherapy for first and second line treatment of locally or advanced metastatic pancreatic cancer.

~~ImmunityBio~~

~~ImmunityBio, Inc., or ImmunityBio, is a related party, as it is controlled by our Executive Chairman and principal stockholder, Dr. Patrick Soon-Shiong.~~

On December 21, 2020, we entered into a merger agreement with ImmunityBio pursuant to which NantKwest and ImmunityBio agreed to combine their businesses. The proposed merger is discussed in additional detail above under Agreement and Plan of Merger with ImmunityBio, Inc.

In September 2020, we entered into a sublease agreement with Altor Bioscience Manufacturing Company, LLC, a subsidiary of ImmunityBio, whereby we leased approximately 6,901 square feet in El Segundo, California, including laboratory space and related furniture, fixtures and equipment. The agreement also includes certain non-lease components related primarily to the right to use certain common areas within the building and the related furniture and fixtures. This facility will be used to manufacture and produce clinical products for our oncology product candidate trials. The lease runs from August 2020 through July 2022, and includes an option to extend the lease for an additional one-year term through July 2023. The monthly fixed charge related to the agreement is $0.2 million, a portion of which is subject to annual increases of 3% which began in November 2020. In addition, under the agreement, we are required to pay our share of estimated property taxes and operating expenses, both of which are variable lease expenses. Lease expense for this facility is recorded in research and development expense on the consolidated statements of operations and was $0.9 million during the year ended December 31, 2020.

~~On August 21, 2020, we entered into a Collaboration Agreement with ImmunityBio as further described in Note 8,~~ ~~Collaboration and License Agreements~~, of the “Notes to Consolidated Financial Statements” included in Part II, Item 8 of this Annual Report. As of December 31, 2020, the joint research activity under the Collaboration Agreement totaled $8.4 million, which has been included in research and development expense on the consolidated statements of operations. Expenses incurred during the year ended December 31, 2020 were primarily related to purchases of equipment of $5.0 million, to be utilized in the manufacture of the hAd5 COVID‑19 vaccine candidate, and net program related costs of $3.4 million, after applying the eligible cost sharing under the Collaboration Agreement. Certain equipment purchases made by us during the year ended December 31, 2020, which are necessary for us to fulfil our manufacturing obligations related to the COVID‑19 program, were borne solely by us. The equipment purchases do not have an alternative use and were therefore expensed as incurred within research and development expenses. Prior to the effective date of the Collaboration Agreement, COVID‑19 related program costs incurred by us and ImmunityBio, including expenditures related to property, plant and equipment, were the responsibility of each party and not subject to the equal cost sharing.

~~In January 2020, but effective on October 1, 2019, we entered into a Cost Allocation Agreement with ImmunityBio, which (together with related work orders) is described further in Note 8,~~ ~~Collaboration and License Agreements~~, of the “Notes to Consolidated Financial Statements” included in Part II, Item 8 of this Annual Report. During the years ended December 31, 2020 and 2019, we incurred net costs of $1.1 million and $35,700, respectively, after applying the eligible costs sharing under the Cost Allocation Agreement, which have been recognized in research and development expense on the consolidated statements of operations.

In November 2018, we entered into an agreement with Etubics Corporation, or Etubics, a subsidiary of ImmunityBio. Pursuant to this agreement we sold used laboratory equipment to Etubics for $0.3 million. In conjunction with this sale, we recognized a loss on disposal of related laboratory equipment of $0.1 million, which was included in other income, net on the consolidated statements of operations.

In June 2015, we entered into a supply agreement with ImmunityBio pursuant to which we have the right to purchase ImmunityBio’s proprietary bioreactors, made according to specifications mutually agreed to with ImmunityBio. We also have the right to purchase reagents and consumables associated with such equipment from ImmunityBio. When an upfront payment is made, it is included in prepaid expenses on the consolidated balance sheets until the product is received. The agreement had an initial term of five years and renews automatically for successive one-year periods unless terminated earlier.

At December 31, 2020 and 2019, we had $3.2 million and $1.8 million, respectively, in equipment purchased from ImmunityBio pursuant to our supply agreement, which has been included in property, plant and equipment, net, on the consolidated balance sheets. During the years ended December 31, 2020, 2019 and 2018, we recorded research and development expense associated with reagents and consumables purchased from ImmunityBio pursuant to our supply agreement of $0.3 million, $0.1 million and $0.1 million, respectively, on the consolidated statements of operations.

~~605 Doug St, LLC~~

In September 2016, we entered into a lease agreement with 605 Doug St, LLC, an entity owned by our Executive Chairman and principal stockholder, for approximately 24,250 square feet in El Segundo, California, which has been converted to a research and development laboratory and a cGMP laboratory manufacturing facility. The lease runs from July 2016 through July 2023. We have the option to extend the lease for an additional three-year term through July 2026. The monthly rent is $0.1 million with annual increases of 3% beginning in July 2017. Lease expense for this facility for the years ended December 31, 2020, 2019 and 2018, is recorded in research and development expense on the consolidated statements of operations and was $0.9 million, $0.9 million and $0.2 million, respectively.

~~NantBio, Inc.~~

In August 2018, NantBio, Inc., or NantBio, assigned an agreement to us for the use of a third-party research facility, which provides us with the exclusive right to use and access to a portion of the third party’s laboratory and vivarium premises. NantBio is a related party as it is an affiliate of NantWorks. In conjunction with the assignment, we reimbursed NantBio for upfront payments which it had made to the third party of $0.9 million, and paid $0.5 million directly to the third party for an aggregate value of $1.4 million. The assigned agreement isReport for a ~~term~~more detailed discussion regarding our related-party agreements.

117

Table of ten years and expires in June 2027. The agreement may be terminated by us at any time, with or without cause. In case of termination of the agreement, the third party will reimburse us for a pro-rata amount based upon the passage of time.

In March 2016, NantBio and the National Cancer Institute entered into a cooperative research and development agreement. The initial five-year agreement covers NantBio and its affiliates, including us. Under the agreement, the parties are collaborating on the preclinical and clinical development of proprietary recombinant natural killer cells and monoclonal antibodies in monotherapy and in combination immunotherapies. We benefited from the preclinical and clinical research conducted during the first four years under this agreement. In each of the contractual years under the agreement we paid $0.6 million to the National Cancer Institute as a prepayment for services under the agreement. We recognize research and development expense related to this agreement ratably over a 12-month period for each funding year and recorded $0.6 million of expense related to this agreement in each of the years ended December 31, 2020, 2019 and 2018.

~~NantHealth Labs, Inc.~~

In March 2018, we entered into an agreement with NantHealth Labs, Inc., or NantHealth Labs, to obtain blood-based tumor profiling services. NantHealth Labs is a related party, as it is a wholly owned subsidiary of NantHealth, Inc., a majority owned subsidiary of NantWorks. We are obligated to pay NantHealth Labs fixed, per-patient fees. The agreement has an initial term of five years and renews automatically for successive one-year periods, unless terminated earlier. During the years ended December 31, 2019 and 2018, $10,000 and $0.3 million, respectively, has been recognized in research and development expense on the consolidated statements of operations. There were no expenses associated with this agreement during the year ended December 31, 2020.

Contents

Components of our Results of Operations

Revenue

From inception through the date of this Annual Report, we have ~~derived substantially all of our~~generated minimal revenue from non-exclusive license agreements ~~with several pharmaceutical and biotechnology companies granting them the right~~related to ~~use~~ our cell lines, ~~and intellectual property for non-clinical use. These agreements generally include upfront fees and annual research license fees for such use, as well as commercial license fees for sales~~the sale of our ~~licensee’s products developed or manufactured using our intellectual property~~bioreactors and ~~cell lines. Our license agreements may also include milestone payments, although to date, we have not generated any revenue from milestone payments. To date, we have generated minimal revenue~~ related ~~to the non-clinical use of our cell lines~~consumables, and ~~intellectual property.~~grant programs. We have no clinical products approved for commercial sale and have not generated any revenue from therapeutic and vaccine product ~~sales.~~candidates that are under development. If we fail to complete the development of our product candidates in a timely manner or fail to obtain regulatory approval for them, we may never be able to generate substantial future revenue.

Operating Expenses

We generally classify our operating expenses into research and development, and selling, general and administrative expenses. Personnel costs, including salaries, benefits, bonuses, and stock-based compensation expense comprise a significant component of our research and development, and selling, general and administrative expense categories. We allocate expenses associated with our facilities and information technology costs between these two categories, primarily based on the nature of each cost.

Research and Development

Research and development expense consists of expenses incurred while performing research and development activities to discover and develop our technology and product ~~candidates, including collaborative arrangements.~~candidates. This includes conducting preclinical studies and clinical trials, manufacturing development efforts and activities related to regulatory filings for product candidates. We recognize research and development expenses as they are incurred. Our research and development ~~expense~~expenses primarily ~~consists~~consist of:

•

~~clinical trial and regulatory-related costs;~~

•clinical trial and regulatory-related costs;•

~~expenses incurred under agreements with investigative sites and consultants that conduct our clinical trials;~~

•expenses incurred under agreements with investigative sites and consultants that conduct our clinical trials;•

~~expenses incurred under collaborative agreements;~~

•expenses incurred under collaborative agreements;•

~~manufacturing and testing costs and related supplies and materials;~~

•manufacturing and testing costs and related supplies and materials;•

~~employee-related expenses, including salaries, benefits, travel and stock-based compensation; and~~

•employee-related expenses, including salaries, benefits, travel and stock-based compensation; and•

~~facility expenses dedicated to research and development.~~

•facility expenses dedicated to research and development.

We typically use our employee, consultant and infrastructure resources across our development programs. We track outsourced development costs by product candidate or development program, but we do not allocate personnel costs, other internal costs or external consultant costs to specific product candidates or development programs.

~~Substantially all of our research and development expenses to date have been incurred in connection with our product candidates.~~

We expect our research and development ~~expenses~~expense to continue to increase significantly for the foreseeable future as we advance our product candidates through clinical development, including the conduct of our ongoing and any future clinical ~~trials as well as product candidates pursued as part of our collaboration efforts.~~ trials.

The process of conducting clinical trials necessary to obtain regulatory approval is costly and time consuming. The successful development of product candidates is highly uncertain. At this time, we cannot reasonably estimate the nature, timing or costs required to complete the remaining development of any product candidates. This is due to the numerous risks and uncertainties associated with the development of product ~~candidates as discussed in greater detail in Part I, Item 1A, “~~candidates.

118

~~Risk Factors~~”Table of ~~this Annual Report.~~

Contents

The costs of clinical trials may vary significantly over the life of a project owing to, but not limited to, the following:

•

~~per patient trial costs;~~

•per patient trial costs;•

~~the number of sites included in the clinical trials;~~

•the number of sites included in the clinical trials;•

~~the countries in which the clinical trials are conducted;~~

•the countries in which the clinical trials are conducted;•

~~the length of time required to enroll eligible patients;~~

•the length of time required to enroll eligible patients;•

~~the number of patients that participate in the clinical trials;~~

•

the number of patients that participate in the ~~number of doses that patients receive;~~

•

~~the cost of comparative agents used in~~ clinical trials;

•the number of doses that patients receive;•

~~the drop-out or discontinuation rates of patients;~~

•the cost of comparative agents used in clinical trials;•

~~potential additional safety monitoring or other studies requested by regulatory agencies;~~

•the drop-out or discontinuation rates of patients;•

~~the duration of patient follow-up; and~~

•potential additional safety monitoring or other studies requested by regulatory agencies;•

~~the efficacy and safety profile of the product candidate.~~

•the duration of patient follow-up; and

•the efficacy and safety profile of the product candidate.

We have only one product candidate, Anktiva, currently planned for a BLA submission to the FDA in the near future. However, there can be no assurance that it will be approved for commercial sale in the near term, if ever. We do not expect any of our other product candidates to be commercially available for ~~at least the next several years, if ever.~~

~~In addition, we expect our research and development expenses to continue to increase significantly for~~ the foreseeable future, ~~as we advance our product candidates through clinical development and conduct our ongoing and planned clinical trials.~~

if ever.

Selling, General and Administrative

Selling, general and administrative expense consists primarily of salaries and personnel-related costs, including employee benefits and any stock-based compensation, for employees performing functions other than research and development. This includes personnel in executive, finance, human resources, information technology, legal, and administrative support functions. Other selling, general and administrative expenses include facility-related costs not otherwise allocated to research and development expense, professional fees for auditing, tax and legal services, advertising costs, expenses associated with strategic business transactions and business development efforts, obtaining and maintaining patents, consulting costs, royalties and licensing costs, and costs of our information systems.

We expect that our selling, general and administrative ~~expenses~~expense will increase for the ~~year ended December 31, 2021 will~~foreseeable future as we expand operations, build out information systems and increase ~~as compared~~our headcount to support continued research activities and the ~~year ended December 31, 2020.~~development of our clinical programs. We have incurred and expect that we will continue to incur in the future, additional costs associated with operating as a public company, including costs to comply with stock exchange listing and SEC requirements, future funding efforts, corporate governance, internal controls, investor relations, disclosure and similar requirements applicable to public companies. Additionally, if and when we believe that a regulatory approval of a product candidate appears likely, we expect to incur significant increases in our selling, general and administrative ~~expenses~~expense relating to the sales and marketing of the approved product candidate. ~~Furthermore, we expect to continue to incur additional costs associated with our proposed merger with ImmunityBio and the operations of the combined company after closing.~~

Other Income and Expense

Other income and expense consists primarily of interest income, ~~from our~~interest expense, unrealized gains and losses on investments in ~~marketable~~equity securities and equity-method investments, realized gains and losses on both debt and equity securities, ~~sublease rental income, unrealized~~and gains and losses ~~related to observable price changes associated with our equity investment in Viracta, and~~on foreign currency ~~gains and losses.~~

transactions.

Income Taxes

~~Income taxes consists of~~

We are subject to U.S. federal income tax, as well as income tax in Italy, South Korea, California and ~~state income taxes and foreign income taxes associated with our Korean subsidiary. To date,~~other states. From inception through December 31, 2021, we have not been required to pay U.S. federal and state income taxes because of ~~our~~ current and accumulated net operating losses. ~~Our income tax expense to date primarily relates to minimum income taxes in the State~~

119

Table of ~~California. Our income tax benefit to date relates primarily to the amortization~~Contents

Discussion of ~~deferred tax liabilities at our Korean subsidiary.~~

Results of Operations

Comparison of the ~~years ended~~Years Ended December 31, ~~2020, 2019~~2021 and ~~2018 (in thousands):~~

2020

For the Year Ended December 31,

Change

2020

2019

2018

2020 vs. 2019

2019 vs. 2018

Revenue

$
111

$
43

$
47

$
68

$
(4
)
Operating expenses:

Research and development (including
   amounts with related parties)

64,483

49,785

55,718

14,698

(5,933
)
Selling, general and administrative (including
   amounts with related parties)

27,254

18,065

42,718

9,189

(24,653
)
Total operating expenses

91,737

67,850

98,436

23,887

(30,586
)
Loss from operations

(91,626
)

(67,807
)

(98,389
)

(23,819
)

30,582

Other income (expense):

Investment income, net

366

1,642

1,857

(1,276
)

(215
)
Interest expense (including amounts
   with related parties)

(41
)

(19
)

(433
)

(22
)

414

Other (expense) income, net (including
   amounts with related parties)

(1,077
)

298

236

(1,375
)

62

Total other (expense) income

(752
)

1,921

1,660

(2,673
)

261

Loss before income taxes

(92,378
)

(65,886
)

(96,729
)

(26,492
)

30,843

Income tax (expense) benefit

(5
)

97

503

(102
)

(406
)
Net loss

$
(92,383
)

$
(65,789
)

$
(96,226
)

$
(26,594
)

$
30,437


	For the Year Ended December 31,
	2021		2020		$ Change		% Change

	($ in thousands)

Revenue	$	934	$	605	$	329	54.4	%
Operating expenses:
Research and development (including amounts with related parties)	195,958		139,507		56,451		40.5	%
Selling, general and administrative (including amounts with related parties)	135,256		71,318		63,938		89.7	%
Impairment of intangible assets	—		10,660		(10,660)		(100.0)	%
Total operating expenses	331,214		221,485		109,729		49.5	%
Loss from operations	(330,280)		(220,880)		(109,400)		49.5	%
Other expense, net:
Interest and investment (loss) income, net	(4,100)		2,435		(6,535)		(268.4)	%
Interest expense (including amounts with related parties)	(14,849)		(9,074)		(5,775)		63.6	%
Loss on equity method investment	(803)		—		(803)		100.0	%
Other income, net (including amounts with related parties)	193		1,486		(1,293)		(87.0)	%
Total other expense, net	(19,559)		(5,153)		(14,406)		279.6	%
Loss before income taxes and noncontrolling interests	(349,839)		(226,033)		(123,806)		54.8	%
Income tax (expense) benefit	(9)		1,846		(1,855)		(100.5)	%
Net loss	$	(349,848)	$	(224,187)	$	(125,661)	56.1	%

Revenue

~~The change in revenue was minimal during the comparative periods and consisted of license fees and royalties.~~

~~Research and Development~~

~~Research and development expense~~

Revenue increased ~~$14.7~~$0.3 million ~~during~~for the year ended December 31, ~~2020,~~2021, as compared to the year ended December 31, ~~2019.~~2020. The increase was primarily driven by royalty revenue in 2021 from a sublicense agreement.

Research and Development Expense

Research and development expense increased $56.5 million for the year ended December 31, 2021, as compared to the year ended December 31, 2020. The increase in research and development expense was primarily ~~attributable~~driven by a $32.1 million increase in compensation expense, including an $18.6 million increase in stock-based compensation expense due to ~~$8.4~~new grants issued to employees and executives and a $13.5 million increase in personnel costs due to higher headcount in support of our continued research and development efforts, a $6.9 million increase in clinical trial expenses and regulatory costs related to our ~~Joint COVID‑19 Collaboration Agreement~~Anktiva and COVID-19 programs, including a $4.4 million expense associated with ~~ImmunityBio, including~~ the ~~acquisition~~write down of ~~$5.0~~a prepaid asset with the Clinic, a $6.6 million increase in facilities expense, primarily related to the expansion of ~~equipment to be utilized~~one of our manufacturing facilities in ~~the manufacture of the hAd5 COVID‑19 vaccine candidate,~~El Segundo, California during 2021 and ~~net program related~~increased maintenance costs ~~of $3.4~~at our various facilities, a $5.5 million ~~after applying the eligible cost sharing under the Collaboration Agreement. The equipment purchases do not have an alternative use~~increase in quality control and ~~were therefore expensed as incurred within~~ research and ~~development expenses. In addition, research and development expenses increased by $4.0 million due to higher laboratory and supplies~~development-related technology expense, ~~mainly driven by our COVID‑19 programs, including additional expenses related to readying our new El Segundo manufacturing facility leased during the third quarter of 2020. We also experienced~~ a ~~$3.2~~$3.5 million increase ~~related to higher lease and facility operating costs, including an increase of $1.6 million~~in laboratory supply expense related to our ~~new El Segundo facility,~~COVID-19 programs ramp up and anNK-92 and M-ceNK cell therapy research, and a $2.4 million increase of $1.6 million for other manufacturing and facility related expenses including higher depreciation expense and higher facilities and equipment maintenance costs. Our new El Segundo facility is used to manufacture and produce clinical products for our oncology product candidate trials. In addition, we incurred higherin shared services costs ~~of $0.6 million driven mainly by manufacturing services, and higher third party research agreement costs of $0.5 million.~~to support our growth. These increases ~~in research and development expenses~~ were partially offset by a decrease of $0.9 million related to impairment of laboratory equipment during the year ended December 31, 2019, a decrease of $0.6 million in amortization expense due to the underlying asset being fully amortized as of March 2019, and a decrease of $0.5 million decrease in ~~clinical trial costs mainly driven by decreased activity.~~

consulting costs.

We expect our research and development expense to increase significantly for the foreseeable future as we advance our product candidates ~~including collaboration product candidates,~~ through clinical development and conduct our ongoing and planned clinical ~~trials~~trials.

120

Table of Contents

Selling, General and ~~those of ImmunityBio if the proposed merger closes.~~

Administrative Expense

~~Research~~Selling, general and ~~development~~administrative expense ~~decreased $5.9~~increased $63.9 million for the year ended December 31, ~~2019,~~2021, as compared to the year ended December 31, ~~2018.~~ 2020. The decrease in research and development expense was primarily attributable to decreases of $4.7 million in compensation and related expenses due to decreased staff and to fees for shared services rendered under our shared services agreement with NantWorks as a result of less clinical trial support activities, $2.0 million for pre-clinical and clinical trial costs mainly driven by decreased activity related to investigator sponsored trials and research agreements, and $1.7 million of intangible asset amortization expense due to the underlying asset being fully amortized as of March 2019. These decreases were partially offset by a net increase of $1.6 million for laboratory and manufacturing facility related expenses, including increases related to third-party facility and manufacturing process validation and qualification costs, depreciation expense, and lease expense, mainly driven and associated with our El Segundo cGMP facility, and decreases related to third party testing services and laboratory supplies. In addition, we recorded $0.9 million of expense related to impairment of laboratory equipment.

~~Selling, General and Administrative~~

Selling, general and administrative expense increased $9.2 million during the year ended December 31, 2020, as compared to the year ended December 31, 2019. The increase in selling, general and administrative expense was primarily attributable to higher financial advisory, legal and other professional fees of $7.1 million driven primarily by strategic initiatives, including our proposed merger with ImmunityBio, as well as by higher costs associated with contracting, trademark, and patent related legal fees and other matters. Selling, general and administrative expense also increased by $1.0 million due to higher compensation and related expenses, and higher insurance expense of $1.0 million which was driven by increases in directors’ and officers’ insurance rates. In addition, we incurred higher shared services costs of $0.5 million driven mainly by legal and information technology related activities, an increase of $0.4 million due to higher software license fees, and higher corporate relations costs of $0.2 million driven by an increase in corporate communications, including press releases. These increases in selling, general and administrative expense were offset in part by decreases in travel and tradeshow related expenses of $0.6 million and $0.4 million, respectively, due mainly to a decline in activity as a result of the ongoing COVID‑19 pandemic.

~~Selling, general and administrative expense decreased $24.7 million during the year ended December 31, 2019, as compared to the year ended December 31, 2018. The decrease~~ in selling, general and administrative expense was primarily attributable to a ~~decrease of $20.8~~$42.2 million increase in compensation expense, including a $36.4 million increase in stock-based compensation expense ~~which was primarily~~ driven by awards granted to employees and executives and option modifications resulting in incremental stock-based compensation expense in 2021and a ~~decrease~~$5.8 million increase in personnel costs related to higher headcount needed to support our business activities, a $19.3 million increase in professional services fees related to Merger costs, SOX compliance, the combined company audit, our recruitment and business growth strategy, various legal matters, and new system implementations, and a $3.2 million increase in insurance costs, primarily due to ~~vesting completed in July 2018~~higher directors’ and ~~March 2019 related to service-based equity awards issued to our Executive Chairman in 2015. In addition, selling, general~~officers’ insurance renewal rates and administrative expense decreased by $2.3 million due to lower costs associated with litigation, $1.1 million due to decreased activity in shared services provided by NantWorks, and $0.6 million due to lower headcount related expenses.increased insurance coverage. These ~~decreases in selling, general and administrative expense~~increases were partially offset by ~~a $0.2~~an $0.8 million ~~increase~~decrease in shared service costs and other general and administrative ~~costs.~~

~~Other Income and Expense~~

~~Other income decreased by $2.7 million during~~expense.

Impairment of Intangible Assets

During the year ended December 31, 2020, the company recorded an impairment charge totaling $10.7 million to write down the carrying value of indefinite-lived in-process research and development intangible assets associated with the acquisition of Receptome, LLC to zero in connection with the decision to discontinue certain programs based on results gathered from preclinical data.

Other Expense, Net

Other expense, net increased $14.4 million for the year ended December 31, 2021, as compared to the year ended December 31, ~~2019.~~ 2020. The increase was due to a $6.5 million decrease in interest and investment income, driven primarily by a $6.2 million net unrealized loss from equity securities and a $0.9 million decrease in interest income, partially offset by a $0.4 million decrease in accretion of investment premiums and $0.2 million of net realized gains on investments;a $5.8 million increase in interest expense driven primarily by higher related-party borrowings; an $0.8 million loss on equity method investment; and a $1.3 million decrease in other income ~~resulted primarily from~~in our subsidiaries and foreign exchanges losses.

Comparison of the Years Ended December 31, 2020 to 2019

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations” in the Management’s Discussion and Analysis of Financial Condition and Results of Operations of ImmunityBio, Inc. filed as Exhibit 99.3 to our Current Report on Form 8-K/A filed with the SEC on April 22, 2021 for a ~~$1.4 million unrealized loss attributable to an observable price change associated with our equity investment in Viracta, and a decrease~~discussion of ~~$1.3 million in investment income associated with our investments in marketable debt securities. Investment income from our marketable debt securities decreased due primarily to a decline in~~ the ~~average yield on our marketable debt securities which was driven in part by shorter contractual securities lives and broader economic and market conditions.~~

~~Other income increased by $0.3 million during~~company’s results of operations for the year ended December 31, ~~2019, as~~2020 compared to the year ended December 31, 2018. The increase in other income resulted primarily from lower interest expense of $0.4 million, offset in part by a decrease in investment income related to use of our investments for operations of $0.2 million.

~~Income Taxes~~

~~The change in income taxes was immaterial during the year ended December 31, 2020, as compared to the year ended December 31,~~ 2019.

Income tax benefit decreased by $0.4 million for the year ended December 31, 2019, as compared to the year ended December 31, 2018. The decrease was due primarily to lower income tax benefits related to losses at our Korean subsidiary.

~~100~~

Financial Condition, Liquidity and Capital Resources

Sources of Liquidity

Our principal sources of liquidity are our existing cash, cash equivalents, and marketable ~~debt~~ securities. We have historically invested our cash primarily in investment grade short- to intermediate-term corporate debt securities, commercial paper, ~~government sponsored~~government-sponsored securities, U.S. treasury securities, and foreign government bonds and classify these investments as available-for-sale. Certain of these investments are subject to general credit, liquidity and other market risks. The general condition of the financial markets and the economy may increase those risks and may affect the value and liquidity of investments and restrict our ability to access the capital markets.

~~On June 29, 2020, the company closed an underwritten public offering~~

121

Table of an aggregate of 8,521,500 shares of common stock, which included 4,811,500 shares issued to the public at a price of $9.50 per share (which included 1,111,500 shares sold to the public upon full exercise of the underwriters’ option to purchase additional shares at a public offering price of $9.50 per share), less underwriting discounts and commissions, and 3,710,000 shares issued to our Executive Chairman and principal stockholder, Dr. Patrick Soon-Shiong, at a price of $12.12 per share, less underwriting discounts and commissions. All of the shares were offered by the company. Including the underwriters’ option exercise, the aggregate gross proceeds from the offering were $90.7 million, before deducting underwriting discounts, commissions and other offering expenses of $4.4 million.

Contents

As of December 31, ~~2020,~~2021, we had cash and cash equivalents, and ~~restricted cash~~marketable securities of ~~$11.6~~$317.9 million compared to ~~$15.7~~$97.0 million as of December 31, ~~2019. The decrease was attributable~~2020. On April 30, 2021, we entered into an Open Market Sale Agreement (the Sale Agreement) with respect to ~~cash used~~an at-the-market (the ATM) offering program under which we may offer and sell, from time to time at our sole discretion, shares of our common stock, having an aggregate offering price of up to $500.0 million through our sales agent. For the year ended December 31, 2021, we received net proceeds totaling $164.5 million from the issuance of 13,295,817 shares under the ATM, which we expect to use for general corporate purposes, including to progress our clinical development programs, fund other research and development activities, make capital expenditures and fund working capital. We may also use a portion of the net proceeds to license intellectual property or to make acquisitions or investments. Although we made a decision to pause our ATM offering in ~~operating~~the fourth quarter of 2021 after our $300.0 million promissory note financing with Nant Capital and ~~investing activities of $70.5 million and $20.6 million, respectively, partially offset cash flows provided by financing activities of $87.0 million.~~

~~Investments in marketable debt securities were $54.8 million as~~do not have an active issuance notice with our sales agent, we expect to re-initiate activity at any time based on market dynamics and/or capital requirements.As of December 31, ~~2020, all~~2021, we had $330.8 million available for future stock issuances under the ATM.

In order to complete the development of ~~which were short-term investments,~~our current product candidates, and implement our business plan, we will require substantial additional funding. Furthermore, changing circumstances may cause us to increase our spending significantly faster than we currently anticipate, and we may need to raise even greater amounts of funds sooner if we choose to expand more rapidly than we presently anticipate. Moreover, our fixed expenses such as ~~compared~~rent and other contractual commitments are substantial and are expected to ~~$37.6 million as~~increase in the future.

Uses of Liquidity

In addition to the cash used to fund our operating activities discussed in “—Future Funding Requirements” below, we will require cash to settle the following obligations:

•As of December 31, ~~2019,~~2021, our indebtedness totals $605.6 million (consisting of related-party promissory notes and accrued and unpaid interest, less unamortized debt issuance costs), held by entities affiliated with Dr. Soon-Shiong. Of this amount, $300.0 million is due and payable on December 17, 2022. In the event of a default on the loan (as defined in the promissory note), including if we do not repay the loan at maturity, the company has the right, at its sole option, to convert the outstanding principal amount and accrued and unpaid interest due under this note into shares of the company’s common stock at price of $5.67 per share. There can be no assurance that we can refinance this promissory note or what terms will be available in the market at the time of refinancing. Furthermore, if prevailing interest rates or other factors at the time of refinancing result in higher interest rates upon refinancing, then the interest expense relating to the refinanced indebtedness would increase. These risks could materially adversely affect our financial condition, cash flows and results of operations.

The remaining $306.3 million is due and payable on September 30, 2025, including any accrued and unpaid interest. We may prepay the outstanding amount of any advance under such notes, together with accrued and unpaid interest, at any time, in whole or in part, without premium or penalty.

•In connection with our acquisition of Altor, we issued CVRs under which ~~$36.1~~we have agreed to pay the prior stockholders of Altor approximately $304.0 million ~~were short-term investments.~~

upon successful approval of the BLA, or foreign equivalent, for Anktiva by December 31, 2022 and approximately $304.0 million upon the first calendar year prior to December 31, 2026 in which worldwide net sales of Anktiva exceed $1.0 billion (with payments payable in cash or shares of our common stock or a combination thereof). Dr. Soon-Shiong and his related party hold approximately $279.5 million in the aggregate of CVRs, and they have both irrevocably agreed to receive shares of common stock in satisfaction of their CVRs. We may be required to pay the other prior Altor stockholders up to $164.2 million in settlement of the CVRs relating to the regulatory milestone and up to $164.2 million of the CVRs relating to the sales milestone should they choose to have the CVRs paid in cash instead of common stock. We may need to seek additional sources of capital to satisfy the CVR obligations if they are achieved.

•In connection with our acquisition of VivaBioCell, we are obligated to pay the former owners approximately $2.3 million of contingent consideration upon the achievement of a regulatory milestone relating to the GMP-in-a-Box technology.

122

Table of Contents

Discussion of Consolidated Cash Flows

The following discussion of ImmunityBio’s cash flows is based on the consolidated statements of cash flows in Part II, Item 8. “Financial Statements and Supplementary Data” and is not meant to be an all‑inclusive discussion of the changes in its cash flows for the periods presented below.

The following table sets forth our primary sources and uses of cash for periods indicated:


	For the Year Ended December 31,
	2021		2020

	(in thousands)

Cash provided by (used in):
Operating activities	$	(274,419)	$	(171,724)
Investing activities	(84,886)		(19,812)
Financing activities	505,443		150,675
Effects of exchange rate changes on cash, cash equivalents, and restricted cash	48		(25)
Net change in cash, cash equivalents, and restricted cash	$	146,186	$	(40,886)

Operating Activities

For the ~~years~~year ended December 31, ~~2020, 2019~~2021, net cash used in operating activities of $274.4 million consisted of a net loss of $349.8 million and ~~2018 (in thousands):~~

$19.1 million of cash used in net working capital changes, partially offset by $94.5 million in adjustments for non-cash items. The changes in net working capital consisted primarily of decreases of $10.2 million with related parties, $4.2 million in operating lease liabilities, $4.0 million in investment and other assets, $3.7 million in accounts payable, and $2.2 million in prepaid and other current assets, partially offset by an increase of $5.2 million in accrued expenses and other liabilities. Adjustments for non-cash items primarily consisted of $57.2 million in stock-based compensation expense, $14.2 million in depreciation and amortization expense, $12.5 million in non-cash interest related primarily to related-party promissory notes, $4.9 million in non-cash lease expense related to operating lease right-of-use assets, $4.6 million in unrealized losses on equity securities driven primarily by a decrease in the value of our investments, $0.8 million loss on our equity investment in the joint venture and $0.3 million in other non-cash items.

For the Year Ended December 31,

2020

2019

2018

Cash provided by (used in):

Operating activities

$
(70,453
)

$
(61,362
)

$
(63,381
)
Investing activities

(20,589
)

21,456

57,101

Financing activities

86,975

38,593

(771
)
Net decrease in cash, cash equivalents and restricted cash

$
(4,067
)

$
(1,313
)

$
(7,051
)

~~Operating Activities~~

For the year ended December 31, 2020, ~~our~~ net cash used in operating activities of ~~$70.5~~$171.7 million consisted of a net loss of ~~$92.4~~$224.2 million, partially offset by ~~$16.7~~$36.1 million in adjustments for non-cash items and ~~$5.3~~$16.4 million of cash provided by net working capital changes. Adjustments for non-cash items primarily consisted of ~~$9.1~~$12.7 million in depreciation and amortization, ~~$3.4~~an impairment of intangible assets totaling $10.7 million, of$8.5 million in non-cash interest items related primarily to related-party promissory notes, $5.2 million in non-cash lease expense related to operating lease right-of-use assets, $2.1 million in stock compensation expense, $1.4 million of unrealized losses attributable to an observable price change associated with our equity investment in Viracta, and $0.8 million in amortization of premiums on marketable debt securities, reduced by $0.3 million in non-cash interest. The change in net working capital consisted primarily of increases in amounts due to related parties of $5.0 million, accrued expenses of $3.7 million, and accounts payable of $2.1 million, partially offset by decreases related to operating lease liabilities of $3.9 million, other current assets of $1.3 million, and other long-term assets of $0.3 million. The $9.1 million increase in cash used in operating activities, as compared to the year ended December 31, 2019, was primarily due to costs incurred in ongoing clinical trials, ramp-up of manufacturing, and Joint COVID‑19 Collaboration Agreement related activities as well as costs associated with our proposed merger with ImmunityBio.

~~101~~

For the year ended December 31, 2019, our net cash used in operating activities of $61.4 million consisted of a net loss of $65.8 million, and $10.9 million of cash used by net working capital changes, partially offset by $15.4 million in adjustments for non-cash items. Adjustments for non-cash items primarily consisted of $9.0 million in depreciation and amortization, $2.6 million in stock compensation expense, $2.6 million of non-cash lease expense related to operating lease right-of-use assets, $0.9 million of impairment related to laboratory equipment, and $0.2 million in non-cash interest. The decrease in net working capital consisted primarily of decreases related to accrued expenses of $12.0 million, other long-term assets of $4.0 million, operating lease liabilities of $3.1 million, and due to related parties of $1.1 million, partially offset by an increase related to prepaid expenses and other current assets of $9.3 million. The $2.0 million decrease in cash used in operating activities, as compared to the year ended December 31, 2018, was primarily due to lower laboratory and manufacturing related costs and lower headcount and compensation costs including shared services, partially offset by higher clinical trial and related operational costs.

For the year ended December 31, 2018, our net cash used in operating activities of $63.4 million consisted of a net loss of $96.2 million, offset by $33.4 million in adjustments for non-cash items, primarily attributable to $23.4$2.2 million in stock-based compensation expense, ~~as well as research~~a $1.4 million unrealized loss on non-marketable equity investment, and ~~development and selling, general and administrative expenses,~~$1.2 million in other non-cash items, partially offset by a $2.9 million change in deferred tax liability, and a ~~$0.6~~$2.9 million ~~decrease of cash related to~~unrealized gain on equity securities. The changes in working capital. Adjustments for non-cash items primarily consisted of the $23.4 million in stock-based compensation expense, $9.6 million in depreciation and amortization, $0.5 million in amortization of premiums on marketable debt securities, $0.3 million in non-cash interest related to our marketable debt securities, and $0.2 million related to loss on disposal of assets, reduced by $0.5 million of deferred income tax benefit. Changes in net working capital consisted primarily of increases related to $12.5 million in accrued expenses and other liabilities, $3.4 million with related parties, and $2.6 million in accounts payable, and a decrease related to $4.2 million in prepaid expenses and other current assets, ~~of $9.8 million, other assets of $1.2 million, accounts payable of $1.1 million, due to related parties of $0.7 million, and deferred rent of $0.5 million,~~ partially offset by ~~an increase~~decreases related to $5.6 million in ~~accrued expenses~~operating lease liabilities and $0.7 million in investment and other assets.

We have historically experienced negative cash flows from operating activities, with such negative cash flows likely to continue for the foreseeable future.

123

Table of ~~$12.7 million.~~

Contents

Investing Activities

For the year ended December 31, 2021, net cash used in investing activities was $84.9 million, which included $141.8 million of purchases of marketable debt securities and $33.6 million of purchases of property, plant and equipment, partially offset by cash inflows of $70.0 million from maturities and sales of marketable debt and equity securities, and $20.5 million in proceeds from the sale of 557 Doug St, LLC that were allocated to the book value of the property. Our investments in property, plant and equipment are primarily related to acquisitions of equipment that will be used for the manufacturing of our product candidates and expenditures related to the build out of our manufacturing facilities.

For the year ended December 31, 2020, net cash used in investing activities was ~~$20.6~~$19.8 million, which included ~~cash outflows~~$91.8 million of ~~$91.6 million for~~ purchases of marketable debt securities and ~~$2.6~~$1.7 million ~~for~~of purchases of property, plant and equipment, partially offset by cash inflows of ~~$65.4 million and $8.3~~$73.7 million from maturities and sales of marketable debt ~~securities, respectively. Our investments in property, plant and equipment~~securities.

We expect to accelerate our capital spending as we scale our GMP manufacturing capabilities, which will require significant capital for the ~~year ended December 31, 2020, related primarily to acquisitions of equipment which will be used to manufacture our ceNK and MSC product candidates.~~

foreseeable future.

Financing Activities

For the year ended December 31, ~~2019,~~2021, net cash provided by ~~investing~~financing activities was ~~$21.5~~$505.4 million, which ~~was primarily attributable to cash inflows~~consisted of ~~$109.7~~$338.5 million ~~and $2.5~~in net proceeds from issuances of related-party promissory notes, $164.5 million from maturities and sales of marketable debt securities, respectively, partially offset by cash outflows of $86.6 million for purchases of marketable debt securities, and $4.2 million for purchases of property, plant and equipment. During the year ended December 31, 2019, our purchases of marketable debt securities included our investment of $39.2 million of cashin net proceeds ~~received in March 2019~~ from the ~~exercise~~ATM offering, $5.5 million in proceeds from exercises of stock options and ~~warrants, together with reinvestment~~a $1.4 million capital contribution representing excess proceeds received over book value from the sale of ~~excess~~557 Doug St, LLC to an entity under common control. Net cash used in financing activities consisted of $4.1 million related to ~~maturing securities. Our investments in property, plant~~net share settlement of vested RSUs for payment of payroll tax withholding and ~~equipment during the year ended December 31, 2019 mainly related to our El Segundo, California, facilities.~~

For the year ended December 31, 2018, net cash provided by investing activities was $57.1 million, which was primarily attributable to cash inflows of $165.3 million from maturities of marketable debt securities anda $0.4 million ~~from sales of laboratory equipment, partially offset by cash outflows of $94.8 million~~payment for purchases of marketable debt securities, driven by the reinvestment of excess cash resources, $13.1 million for purchases of property, plant and equipment, mainly related to our laboratory and cGMP build out in El Segundo, California, and $0.7 million for purchases of Viracta convertible notes.

~~Financing Activities~~

contingent consideration.

For the year ended December 31, 2020, net cash provided by financing activities was ~~$87.0~~$150.7 million, which consisted ~~of proceeds from the issuance of 8,521,500 shares of common stock, net of issuance cost paid,~~primarily of $86.3 million ~~and~~in net proceeds from an equity offering, $63.7 million in proceeds from issuances of related-party promissory notes and $1.2 million ~~resulting~~in proceeds from exercises of stock ~~options. Net cash used in financing activities for the year ended December 31, 2020, consisted of~~options, partially offset by $0.5 million related to net share settlement of vested RSUs for payment of ~~employee~~ payroll ~~taxes.~~

~~For~~tax withholding.

Comparison of the Years Ended December 31, 2020 to 2019

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Consolidated Cash Flows” in the Management’s Discussion and Analysis of Financial Condition and Results of Operations of ImmunityBio, Inc. filed as Exhibit 99.3 to our Current Report on Form 8-K/A filed with the SEC on April 22, 2021 for a discussion of the company’s consolidated cash flows for the year ended December 31, 2019, net cash provided by financing activities was $38.6 million, which primarily consisted of cash proceeds of $35.2 million and $4.1 million resulting from the exercise of warrants and stock options, respectively, by our Executive Chairman during March 2019, partially offset by $0.5 million used for stock repurchases, including commissions, and $0.1 million related2020 compared to ~~net share settlement of vested RSUs and option exercises for payment of employee payroll taxes.~~

~~For~~ the year ended December 31, ~~2018, net cash used in financing activities was $0.8 million, which primarily related to $0.5 million~~2019.

124

Table of principal payments on our financing obligations, $0.2 million used for stock repurchases, and $0.1 million in net share settlement of exercised warrants and vesting of RSUs for payment of employee payroll taxes, partially offset by $0.1 million in proceeds from the exercise of warrants.

~~102~~

Contents

Future Funding Requirements

From inception through the date of this Annual Report, we have generated minimal revenue, ~~related to the non-clinical use of our cell lines and intellectual property,~~ and we have no clinical products approved for commercial sale and have not generated any revenue from therapeutic and vaccine product ~~sales.~~candidates that are under development. We do not expect to generate significant revenue unless and until we obtain regulatory approval of and commercialize any of our product candidates, and we do not know when, or if, this will occur. In addition, we expect our operating expenses to significantly increase in connection with our ongoing development activities, particularly as we continue the research, development and clinical trials of, and seek regulatory approval for, our product candidates. We have also incurred and expect that we will continue to incur in the future additional costs associated with operating as a public company as well as costs related to future fundraising ~~efforts and our proposed merger with ImmunityBio.~~efforts. In addition, subject to obtaining regulatory approval of our product candidates, we expect to incur significant commercialization expenses for product sales, marketing, manufacturing and distribution. We anticipate that we will need substantial additional funding in connection with our continuing operations. We expect that our operating expenses will increase substantially if and as we:

•

continue research and development, including preclinical and clinical development of our existing product candidates including those related to our Joint CVOID-19 Collaboration agreement with ImmunityBio;

•

~~potentially seek regulatory approval for~~•continue research and development, including preclinical and clinical development of our existing product candidates;

•

~~seek to discover and develop additional~~•potentially seek regulatory approval for our product candidates;

•seek to discover and develop additional product candidates;•

•establish a commercialization infrastructure and scale up our manufacturing and distribution capabilities to commercialize any of our product candidates for which we may obtain regulatory approval;•

~~seek to comply with regulatory standards and laws;~~

•seek to comply with regulatory standards and laws;•

~~maintain, leverage and expand our intellectual property portfolio;~~

•maintain, leverage and expand our intellectual property portfolio;•

~~hire clinical, manufacturing, scientific and other personnel to support our product candidates’ development and future commercialization efforts;~~

•hire clinical, manufacturing, scientific and other personnel to support our product candidates’ development and future commercialization efforts;•

~~add operational, financial and management information systems and personnel;~~

•

~~incur additional legal, accounting and other expenses in operating as a public company;~~•add operational, financial and management information systems and personnel; and

•incur additional legal, accounting and other expenses in operating as a public company.•

~~complete our proposed merger with ImmunityBio.~~

As a result of continuing anticipated operating cash outflows, we believe that substantial doubt exists regarding our ability to continue as a going concern without additional funding or financial support. However, we believe our existing cash, cash equivalents, and investments in marketable ~~debt~~ securities, together with capital to be raised through equity offerings (including the ATM) and our potential ability to borrow from affiliated entities, will be sufficient to fund our operations through at least the next 12 months following the issuance date of the consolidated financial statements based primarily upon our Executive ~~Chairman’s~~Chairman and Global Chief Scientific and Medical Officer’s intent and ability to support our operations with additional funds, including loans from affiliated entities, as required, which we believe alleviates such doubt. We ~~have based this estimate on assumptions that~~ may ~~prove~~also seek to ~~be incorrect, and~~sell additional equity, through one or more follow-on public offerings, or in separate financings, or obtain a credit facility. However, we may ~~use~~not be able to secure such external financing in a timely manner or on favorable terms. Without additional funds, we may choose to delay or reduce our ~~available capital resources sooner than we currently expect. The successful development~~operating or investment expenditures. Further, because of ~~any product candidate is highly uncertain. Due to~~ the numerous risks and uncertainties associated with the development and commercialization of our product candidates, ~~if approved,~~ we ~~are unable~~may need additional funds to ~~estimate the amounts of increased capital outlays and operating expenses associated with~~meet our needs sooner than planned.

We will need to obtain additional financing to fund our future operations, including completing the development and commercialization of our product candidates.

Changing circumstances may cause us to increase our spending significantly faster than we currently anticipate and we may need to raise additional funds sooner than we presently anticipate. Moreover, research and development and our operating costs and fixed expenses such as rent and other contractual commitments, including those for our research collaborations, are substantial and are expected to increase in the future.

125

Table of Contents

Our future ~~capital~~funding requirements will depend on many factors, ~~including:~~

•

~~the timing of, and the costs involved in, preclinical and clinical development and obtaining any regulatory approvals for our product candidates;~~

including, but not limited to:

•

~~the impacts of COVID‑19 on our operations;~~

•

~~the costs of manufacturing, distributing and processing our product candidates;~~

•

~~the number and characteristics of any other product candidates we develop or acquire;~~

•

our ability to establish and maintain strategic collaborations, licensing or other commercialization arrangements and the terms and timing of such arrangements including our arrangements with ImmunityBio and its subsidiaries and Viracta;

•

~~the degree and rate of market acceptance of any approved products;~~

•

~~the emergence, approval, availability, perceived advantages, relative cost, relative safety and relative efficacy of other products or treatments;~~

•

~~the expenses needed to attract and retain skilled personnel;~~

•

~~the costs associated with being a public company;~~

~~103~~

•

~~the costs associated with our proposed merger with ImmunityBio~~•progress, timing, number, scope and costs ~~of operations for the combined company if the merger closes;~~

•

~~the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing intellectual property claims, including litigation costs and the outcome of such litigation;~~

•

~~the timing, receipt and amount of sales of, or royalties on, any approved products; and~~

•

~~any product liability or other lawsuits related to our product candidates or the company.~~

~~Because all~~ of researching and developing our product candidates ~~are in various stages~~and our ongoing, planned and potential clinical trials;

•time and cost of ~~preclinical and clinical development~~regulatory approvals;

•our ability to successfully commercialize any product candidates, if approved and the ~~outcome~~costs of ~~these efforts is uncertain,~~such commercialization activities;

•revenue from product candidates that we ~~cannot estimate~~may commercialize, if any, including the ~~actual amounts~~selling prices for such potential products and the availability of adequate third-party coverage and reimbursement for patients;

•cost of building, staffing and validating our own manufacturing facilities in the U.S., including having a product candidate successfully manufactured consistent with FDA and European Medicines Agency regulations;

•terms, timing and costs of our current and any potential future collaborations, business or product acquisitions, CVRs, milestones, royalties, licensing or other arrangements that we have established or may establish;

•time and cost necessary to ~~successfully complete the development~~respond to technological, regulatory, political and ~~commercialization~~market developments; and

•costs of filing, prosecuting, maintaining, defending and enforcing any ~~of our product candidates or whether, or when, we may achieve profitability. Until such time, if ever, as~~patent claims and other intellectual property rights.

Unless and until we can generate ~~substantial product~~a sufficient amount of revenues, we ~~expect to~~may finance ~~our~~future cash needs through ~~a combination of~~public or private equity offerings, license agreements, debt financings, collaborations, strategic alliances ~~and/~~and marketing or ~~licensing~~distribution arrangements. WeHowever, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms, or at all, including but not limited to the offering, issuance and sale by us of up to a maximum aggregate amount of $500.0 million of our common stock that may be issued and sold under the ATM. Although we made a decision to pause our ATM offering in the fourth quarter of 2021 after our $300.0 million promissory note financing with Nant Capital and do not have an active issuance notice with our sales agent, we expect to re-initiate activity at any ~~committed external source~~time based on market dynamics and/or capital requirements.As of ~~funds.~~ December 31, 2021, we had $330.8 million available for future stock issuances under the ATM. See Note 9, Stockholders’ Deficit, of the “Notes to Consolidated Financial Statements” that appear in Part II, Item 8. “Financial Statements and Supplementary Data” of this Annual Report.

To the extent that we raise additional capital through the sale of equity or equity-linked securities, including convertible debt ~~securities,~~or through the ATM or other offerings, your ownership interest ~~of our stockholders~~ will be diluted, and the terms ~~of these securities~~ may include liquidation or other preferences that adversely affect your rights as a ~~common~~ stockholder. ~~Debt financing, if available, may~~The incurrence of additional indebtedness would result in increased fixed payment obligations and could involve ~~agreements that include~~certain restrictive covenants, ~~limiting or restricting~~such as limitations on our ability to ~~take specific actions, such as incurring~~incur additional debt, ~~making capital expenditures~~limitations on our ability to acquire or ~~declaring dividends.~~license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. If we raise additional funds through ~~collaborations,~~ strategic partnerships and alliances orand licensing arrangements with ~~pharmaceutical partners,~~third parties, we may have to relinquish valuable rights to our technologies ~~future revenue streams, research programs~~ or product candidates, or grant licenses on terms ~~that may not be favorable~~unfavorable to us. IfWe have no committed source of additional capital and if we are unable to raise additional ~~funds through equity~~capital in sufficient amounts or ~~debt financings when needed,~~on terms acceptable to us, we may be required to delay ~~limit,~~or reduce the scope of or ~~terminate~~eliminate one or more of our ~~product~~research or development programs or ~~future~~our commercialization ~~efforts~~efforts. Our current license and collaboration agreements may also be terminated if we are unable to meet the payment obligations under those agreements. As a result, we may seek to access the public or ~~grant rights to develop and market our product candidates~~private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that ~~we would otherwise prefer to develop and market ourselves.~~

time.

126

Table of Contents

Contractual Obligations ~~Commitments~~

We have material cash requirements to pay related party affiliates and ~~Contingencies~~

~~Contractual Obligations~~third parties under various contractual obligations discussed below:

•We are obligated to make payments to several related party affiliates under written agreements and ~~Commitments~~

~~See~~ other informal arrangements. We are also obligated to pay interest and to repay principal under our related-party notes payable. For information regarding our financing obligations, see Note 9,8, ~~Commitments and Contingencies, Contractual Obligations – Leases~~Related-Party Agreements—Related-Party Notes Payable,, ~~and~~ ~~Note 10,~~ ~~Related Party Agreements~~, of the “Notes to Consolidated Financial Statements” ~~included~~that appears in Part II, Item 88. “Financial Statements and Supplementary Data” of this Annual Report.

~~Contingencies~~

~~From time~~

•We are obligated to ~~time,~~make payments under our operating leases, which primarily consist of facility leases. For information regarding our lease obligations, see Note 7, Commitments and Contingencies—Lease Arrangements, and Note 8, Related-Party Agreements, of the “Notes to Consolidated Financial Statements” that appear in Part II, Item 8. “Financial Statements and Supplementary Data” of this Annual Report.

•In connection with the acquisitions of Altor and VivaBioCell, we are obligated to pay contingent consideration upon the achievement of certain milestones. For information regarding our contingent consideration obligations, see Note 7, Commitments and Contingencies—Contingent Considerations Related to Business Combinations, of the “Notes to Consolidated Financial Statements” that appears in Part II, Item 8. “Financial Statements and Supplementary Data” of this Annual Report.

•We have contractual obligations to make payments to related party affiliates and third parties under our unconditional purchase arrangements. For information on these unconditional purchase obligations, see Note 7, Commitments and Contingencies—Contingent Consideration Related to Business Combinations, of the “Notes to Consolidated Financial Statements” that appears in Part II, Item 8. “Financial Statements and Supplementary Data” of this Annual Report.

•We have certain contractual commitments that are expected to be paid within one year, depending on the progress of build outs, completion of services, and the realization of milestones associated with third-party agreements. This amount totals $72.7 million and is primarily related to capital expenditures, open purchase orders as of December 31, 2021 for the acquisition of goods and services in the ordinary course of business, and near term up-front milestone payments to third parties.

•In addition, we have contractual commitments that are expected to be paid in fiscal year 2023 and beyond based on the achievement of various development, regulatory and commercial milestones for agreements with third parties. These payments may not be realized or may be ~~involved~~modified and are contingent upon the occurrence of various future events, substantially all of which have a high degree of uncertainty of occurring. As of December 31, 2021, the maximum amount that may be payable related to these commitments is $570.7 million.

On February 14, 2022, we acquired a leasehold interest in ~~various claims~~the Dunkirk Facility. In connection with this lease, we committed to spend an aggregate of $1.52 billion on operational expenses during the initial 10-year term, and ~~legal proceedings relating~~an additional $1.50 billion on operational expenses if we elect to ~~claims arising out of our operations. We~~renew the lease for the additional 10-year term. These amounts are not ~~currently a party to any legal proceedings that,~~included in the ~~opinion~~discussion above. See “—Subse quent Events—Acquisition of ~~our management, are likely to have a material adverse effect on our business. Regardless~~cGMP ISO Class 5 Manufacturing Facility”.

127

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

~~Off-Balance Sheet Arrangements~~

~~During the periods presented, we did not have, nor do we currently have, any off-balance sheet arrangements as defined under SEC rules.~~

Contents

Critical Accounting Policies ~~Significant Judgements~~ and ~~Use of~~ Estimates

~~Management’s~~

Our discussion and analysis of our financial condition and results of operations ~~are~~is based ~~upon~~on our consolidated financial statements, which ~~are~~have been prepared in accordance with ~~U.S.~~ GAAP. The preparation of ~~these~~our consolidated financial statements requires us to make certain estimates and ~~judgments~~assumptions that affect the reported amounts of assets and liabilities ~~related~~and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses ~~during~~for the reporting period. ~~We continually~~On an ongoing basis, we evaluate our estimates, ~~and judgments, the most critical of which are~~including those related to the valuation of equity-based awards, deferred income taxes and related valuation allowances, preclinical and clinical trial accruals, impairment assessments, contingent value right measurement and assessments, the measurement of right-of-use assets and lease liabilities, useful lives of long-lived assets, loss contingencies, fair value measurements, and the assessment of ~~the company’s~~our ability to fund ~~its~~our operations for at least the next ~~twelve~~12 months from the date of issuance of these financial statements. We base our estimates and judgments on historical experience and on various other market-specific and relevant assumptions that we believe to be reasonable under the circumstances. Materially differentActual results ~~can occur as circumstances change and additional information becomes known, such as the economic considerations related to the impact that the ongoing coronavirus pandemic~~ could ~~have on~~differ from those estimates. While our significant accounting ~~estimates.~~

~~The following is not intended to be a comprehensive discussion of all of our significant accounting policies. See~~policies are more fully described in the notes accompanying our consolidated financial statements ~~appearing in this Annual Report for a summary of all of our significant accounting policies and other disclosures required by U.S. GAAP.~~

~~104~~

~~Transactions with Related Parties~~

As discussed in additional detail above, we have various agreements with related parties. Some are billed and settled in cash monthly. Others are billed quarterly and settled in cash the following month. Monthly accruals are made for all quarterly billing arrangements.

~~Collaboration Arrangements~~

~~We analyze our collaboration arrangements to assess whether they are within the scope of Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 808,~~ ~~Collaborative Arrangements,~~ ~~or ASC 808. A collaborative arrangement is a contractual arrangement~~ that involves a joint operating activity. These arrangements involve two or more parties who are active participants in the activity, and exposed to significant risks and rewards dependent on the commercial success of the activity. This assessment is performed throughout the life of the arrangement based on changes in the responsibilities of all parties in the arrangement. To the extent the collaboration agreement is within the scope of ASC 808, we also assess whether the arrangement contains multiple elements that are within the scope of other accounting literature. If we conclude that some or all aspects of the agreement are distinct and represent a transaction with a customer, we account for those aspects of the arrangement within the scope of FASB ASC Topic 606, ~~Revenue from Contracts with Customers~~, or ASC 606. Amounts that are owed to collaboration partners that are within the scope of ASC 808 are recognized as an offset to research and development expenses as such amounts are incurred by the collaboration partner. Where amounts owed to a collaboration partner exceed our collaboration expenses in each quarterly period, such amounts are classified as research and development expense.

Our collaboration arrangements require us to acquire certain equipment for exclusive use in the joint operating activities. These equipment purchases do not have an alternative use and are therefore expensed as incurred within research and development expenses.

~~Our collaboration arrangements are further discussed within Note 8,~~ ~~Collaboration and License Agreements, of the “Notes to Consolidated Financial Statements” included~~appear in Part II, Item 88. “Financial Statements and Supplementary Data” of this Annual ~~Report.~~

Report, we believe the following accounting policies to be the most critical in understanding the judgments and estimates we use in preparing our consolidated financial statements:

Revenue Recognition

We have primarily generated revenues from non-exclusive license agreements related to our cell lines, the sale of our bioreactors and related consumables and grant programs. The nonexclusive license agreements with a limited number of pharmaceutical and biotechnology companies grant them the right to use our cell lines and intellectual property for non-clinical use. These agreements generally include upfront fees and annual research license fees for such use, as well as commercial license fees for sales of the licensee products developed or manufactured using our intellectual property and cell lines. We have generated revenues from product sales of our proprietary GMP-in-a-Box bioreactors and related consumables to related parties. Additionally, we also generated revenues from grant programs.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in ASC 606. A contract’s transaction price is allocated to each distinct performance obligation based on relative standalone selling price and recognized as revenue when, or as, the performance obligation is satisfied.

Under our license agreements with customers, we typically promise to provide a license to use certain cell lines and related patents, the related know-how, and future research and development data that affect the license. We have concluded that these promises represent one performance obligation due to the highly interrelated nature of the promises. We provide the cell lines and know-how immediately upon entering into the contracts. Research and development data are provided throughout the term of the contract when and if available.

The license agreements may include non-refundable upfront payments, event-based milestone payments, sales-based royalty payments, or some combination of these. The event-based milestone payments represent variable consideration and we use the most likely amount method to estimate this variable consideration. Given the high degree of uncertainly around the achievement of these milestones, we do not recognize revenue from these milestone payments until the uncertainty associated with these payments is resolved. We currently estimate variable consideration related to milestone payments to be zero and, as such, no revenue has been recognized for milestone payments. We recognize revenue from sales-based royalty payments when or as the sales occur. On a quarterly basis, we re-evaluate our estimate of milestone variable consideration to determine whether any amount should be included in the transaction price and recorded in revenue prospectively.

We also have sold our proprietary GMP-in-a-Box bioreactors and related consumables to affiliated companies. The arrangements typically include delivery of bioreactors, consumables, and providing installation service and perpetual software licenses for using the equipment. We recognize revenue when customers obtain control and can benefit from the promised goods or services, generally upon installation of the bioreactors, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. Upfront payments and fees are recorded as deferred revenue upon receipt and recognized as revenue when we satisfy our performance obligations under these arrangements.

128

Table of Contents

Business Combinations

Business combinations are accounted for using the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations (ASC 805). These standards require that the total cost of acquisition be allocated to the tangible and intangible assets acquired and liabilities assumed based on their respective fair values at the date of acquisition, with the excess purchase price recorded as goodwill. The allocation of the purchase price is dependent upon certain valuations and other studies. Acquisition costs are expensed as incurred. Estimating fair value requires us to make significant judgments and assumptions.

Contingent consideration obligations incurred in connection with a business combination are recorded at their fair values on the acquisition date and re-measured at their fair values each subsequent reporting period until the related contingencies are resolved. The resulting changes in fair values are recorded as research and development expense, on the consolidated statements of operations and comprehensive loss. Changes in fair values reflect changes to our assumptions regarding probabilities of successful achievement of related milestones, the timing in which the milestones are expected to be achieved, and the discount rate used to estimate the fair value of the obligation.

Preclinical and Clinical Trial Accruals

As part of the process of preparing the consolidated financial statements, we are required to estimate expenses resulting from obligations under contracts with vendors, clinical research organizations and consultants. The financial terms of these contracts vary and may result in payment flows that do not match the periods over which materials or services are provided under such contracts.

We estimate clinical trial and research ~~agreement related~~agreement-related expenses based on the services performed, pursuant to contracts with research institutions and clinical research organizations and other vendors that conduct clinical trials and research on our behalf. In accruing clinical and ~~research related~~research-related fees, we estimate the time period over which services will be performed and activity expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate, we will adjust the accrual accordingly. Payments made under these arrangements in advance of the receipt of the related services are recorded as prepaid expenses until the services are rendered.

Research and Development Costs

Major components of research and development costs include cash compensation and other personnel-related expenses, stock-based compensation, depreciation and amortization expense on research and development property and equipment and intangible assets, costs of preclinical studies, clinical trials costs, including CROs, and related clinical manufacturing, including CMOs, costs of drug development, costs of materials and supplies, facilities cost, overhead costs, regulatory and compliance costs, and fees paid to consultants and other entities that conduct certain research and development activities on our behalf. Costs incurred in research and development are expensed as incurred.

Included in research and development costs are clinical trial and research expenses based on the services performed pursuant to contracts with research institutions and clinical research organizations and other vendors that conduct clinical trials and research on our behalf. We record accruals for estimated costs under these contracts. When evaluating the adequacy of the accrued liabilities, we analyze the progress of the preclinical studies or clinical trials, including the phase or completion of events, invoices received, contracted costs and purchase orders. Significant judgments and estimates are made in determining the accrued balances at the end of any reporting period based on the facts and circumstances known at that time. Although we do not expect the estimates to be materially different from the amounts actually incurred, if the estimates of the status and timing of services performed ~~differs~~differ from the actual status and timing of services performed, we may report amounts that are too high or too low in any particular period. Actual results could differ from our estimates.

~~105~~

~~Cash, Cash Equivalents and Restricted Cash~~

~~Cash equivalents include highly liquid investments with an original maturity of three months or less from~~ We adjust the ~~date of purchase.~~

Restricted cash includes a certificate of deposit held as a substitute letter of credit for one of our leased properties. This certificate of deposit is included in other assets on the consolidated balance sheets as the landlord is the beneficiary of the account and we are not able to access the funds during the term of the lease.

We minimize the credit risk associated with cash and cash equivalents by periodically evaluating the credit quality of our primary financial institutions. While we maintain cash deposits in FDIC insured financial institutions in excess of federally insured limits, management believes we are not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held. We have not experienced any losses on such accounts.

~~Marketable Debt Securities~~

We invest our excess funds in investment grade short- to intermediate-term corporate debt securities, government sponsored securities, and foreign government bonds and classify these investments as available-for-sale. Marketable debt securities with remaining maturities of 12 months or less are classified as short-term and marketable debt securities with remaining maturities greater than 12 months are classified as long-term. All marketable debt securities are reported at fair value and any unrealized gains and losses are reported as a component of accumulated other comprehensive loss on the consolidated statements of stockholders’ equity, with the exception of unrealized losses believed to be other-than-temporary, which are recorded in investment income, net, on the consolidated statements of operations. Realized gains and losses are included in investment income, net, on the consolidated statements of operations. Realized gains and losses from sales of securities and the amounts, net of tax, reclassified out of accumulated other comprehensive loss, if any, are determined on a specific identification basis.

We periodically evaluate whether declines in fair values of our investments below their book value are other-than-temporary. This evaluation consists of several qualitative and quantitative factors regarding the severity and duration of the unrealized loss, as well as our ability and intent to hold the investment until a forecasted recovery occurs. Additionally, we assess whether or not we have plans to sell the security or whether or not it is more likely than not we will be required to sell any investment before recovery of its amortized cost basis. Factors considered include quoted market prices, recent financial results and operating trends, implied values from any recent transactions or offers of investee securities, credit quality of debt instrument issuers, other publicly available information that may affect the value of our investments, duration and severity of the decline in value, and our strategy and intentions for holding the investment. There were no other-than-temporary impairments recordedaccruals in the ~~years ended December 31, 2020, 2019 and 2018.~~

~~Contingencies~~

~~We record accruals for loss contingencies to the extent that we conclude it is probable that a liability has been incurred and the amount~~period when actual costs become known.

129

~~Investment in Equity Securities~~

We own non-marketable equity securities that are accounted for using the measurement alternative under ASC 321 because the preferred stock held by us is not considered in-substance common stock and such preferred stock does not have a readily determinable fair value. All investments are reviewed for possible impairment on a regular basis. If an investment's fair value is determined to be less than its net carrying value, the investment is written down to its fair value. Such an evaluation is judgmental and dependent on specific facts and circumstances. Factors considered in determining whether an impairment indicator is present include: the investees’ earnings performance and clinical trial performance, change in the investees’ industry and geographic area in which it operates, offers to purchase or sell the security for a price less than the cost of the investment, issues that raise concerns about the investee's ability to continue as a going concern, and any other information that we may be aware of related to the investment. Factors considered in determining whether an observable price change has occurred include the price at which the investee issues equity instruments similar to those of our investment and the rights and preferences of those equity instruments compared to ours.

~~106~~

~~Fair Value of Financial Instruments~~Contents

~~We record our available-for-sale investments at fair value. At December 31, 2020, our cash equivalents and investments in marketable debt securities totaled $54.8 million. FASB ASC Topic 820,~~ ~~Fair Value Measurements and Disclosures~~, or ASC 820, establishes three levels of inputs that may be used to measure fair value. Each level of input represents varying degrees of subjectivity and difficulty involved in determining fair value. Valuations using Level 1 and 2 inputs are generally based on price quotations and other observable inputs in active markets and do not require significant management judgment or estimation. We utilize a third-party pricing service to assist us in obtaining fair value pricing for these investments. While pricing for these securities is based on proprietary models, the inputs used are based on observable market information; therefore, we have classified our inputs as Level 1 and Level 2. For additional information, see Note 7, ~~Fair Value Measurements, of the “Notes to Consolidated Financial Statements” included in Part II, Item 8 of this Annual Report.~~

~~Impairments~~

Long-lived assets include property, plant and equipment and intangible assets. We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by comparison of the carrying amount to the future net cash flows that the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the projected undiscounted future cash flows arising from the assets using a discount rate determined by management to be commensurate with the risk inherent to our current business model.

During the year ended December 31, 2019, we determined that certain bioreactor laboratory equipment could no longer be utilized in the production process. As a result, we recorded an impairment charge totaling $0.9 million, which is included in research and development expense on the consolidated statements of operations. There were no impairment losses recognized during the years ended December 31, 2020 and 2018.

~~Lease Obligations~~

~~On January 1, 2019, we adopted FASB ASC Topic 842,~~ ~~Leases~~, or ASC 842. For contracts entered into on or after the effective date, we determine if an arrangement is, or contains, a lease at lease inception. Our assessment is based on: (1) whether the contract involves the use of a distinct identified asset; (2) whether we obtain the right to substantially all of the economic benefit from the use of the asset throughout the period; and (3) whether we have the right to direct the use of the asset. At inception of a lease, we allocate the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments. Leases entered into prior to January 1, 2019, which were accounted for under ASC 840, ~~Leases~~, were not reassessed as we elected the package of practical expedients permitted under the transition guidance within ASC 842, which among other things, allowed us to carry forward the historical lease classification. We determine the lease term by assuming the exercise of renewal options that are reasonably assured. The exercise of lease renewal options is at our sole discretion. Several of our leases have renewal options, however, exercise of renewal is only assured for two of our current Good Manufacturing Practices, or cGMP, facilities, where we have made significant improvements or extended the lease.

For all leases at the lease commencement date, a right-of-use asset and a lease liability are recognized. The right-of-use asset represents the right to use the leased asset for the lease term. At lease commencement, leases are classified as either finance leases or operating leases. A lease is classified as a finance lease if any one of the following criteria are met: (1) the lease transfers ownership of the underlying asset by the end of the lease term; (2) the lease contains an option to purchase the underlying asset that is reasonably certain to be exercised; (3) the lease term is for a major part of the remaining economic life of the underlying asset; (4) the present value of the sum of the lease payments and any guaranteed residual value that is not already included in the lease payments equals or exceeds substantially all of the fair value of the underlying asset; or (5) the underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. A lease is classified as an operating lease if it does not meet any one of these criteria.

We do not currently have any leases classified as finance leases. Our operating lease assets and liabilities are included in operating lease right-of-use assets, net, and current and long-term operating lease liabilities, respectively, on the consolidated balance sheets. At the commencement date, operating lease right-of-use assets and operating lease liabilities are determined based on the present value of lease payments to be made over the lease term. Operating lease right-of-use assets also include any rent paid prior to the commencement date, less any lease incentives received, and initial direct costs incurred. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. We have elected to combine our lease components (e.g., fixed payments including rent, real estate taxes and insurance costs) with non-lease components (e.g., common-area maintenance costs and equipment maintenance costs) and as such, we account for lease and non-lease components as a single component. Lease expense also includes amounts relating to variable lease payments. Variable lease payments include amounts relating to common area maintenance and real estate taxes.

~~107~~

We also elected not to recognize right-of-use assets and lease liabilities for qualifying short-term leases with an initial lease term of 12 months or less at lease inception. Such leases are expensed on a straight-line basis over the lease term.

~~The depreciable life of operating right-of-use-assets and leasehold improvements is limited by the expected lease term.~~

Stock-Based Compensation

We account for stock-based compensation under the provisions of ~~FASB~~ ASC Topic 718, Compensation—Stock Compensation~~, or ASC 718, which applies~~ (ASC 718). We estimate fair value of each stock option award on the date of grant using the Black-Scholes option pricing model. The Black-Scholes model requires the use of highly subjective assumptions, including, but not limited to, ~~share-based payments issued to employees~~expected stock price volatility over the term of the awards and ~~nonemployees in exchange for goods or services. Under ASC 718,~~the expected term of the stock options. We measure the fair value of an equity-classified award ~~is estimated on~~at the grant date ~~without regard to service or performance conditions. The grant date fair values for options~~ and ~~warrants are estimated using~~recognize the ~~Black-Scholes-Merton option pricing model, and~~stock-based compensation expense over the ~~grant date fair values for restricted stock units, or RSUs, are based upon the closing market price~~period of ~~our common stock~~vesting on the ~~date of grant.~~

~~We use the~~ straight-line ~~method to recognize stock-based compensation expense~~basis for our outstanding share awards that do not contain a performance condition. For awards subject to performance-based vesting conditions, we assess the probability of the individual milestones under the award being achieved and stock-based compensation expense is recognized over the service period ~~commencing~~using the graded vesting method once management believes the performance criteria is probable of being met. If factors change and we employ different assumptions, share-based compensation expense may differ significantly from what we have recorded in the past. For awards with service or performance conditions, we recognize the effect of forfeitures in compensation cost in the period that the award was forfeited.

~~Stock Repurchases~~

~~In November 2015,~~

Contingencies

We record accruals for loss contingencies to the ~~board of directors approved~~extent that we conclude it is probable that a ~~share repurchase program, or~~liability has been incurred and the ~~2015 Share Repurchase Program, allowing the CEO or CFO, on behalf~~amount of the ~~company, to repurchase from time to time,~~related loss can be reasonably estimated. We accrue for the best estimate of a loss within a range; however, if no estimate in the ~~open market~~range is better than any other, then we accrue the minimum amount in the range. If we determine that a material loss is reasonably possible, we disclose the possible loss or ~~in privately negotiated transactions, up~~range of loss, or that the amount of loss cannot be estimated at this time.

Because of the inherent uncertainty and unpredictability related to ~~$50.0 million~~these matters, accruals are based on what we believe to be the best information available at the time of our ~~outstanding~~assessment, including the legal facts and circumstances of the case, status of the proceedings, applicable law and the views of legal counsel. Upon the final resolution of such matters, it is possible that there may be a loss in excess of the amount recorded, and such amounts could have a material adverse effect on our results of operations, cash flows or financial position. We evaluate, on a quarterly basis, developments in legal proceedings and other matters that could cause a change in the potential amount of the liability recorded or of the range of potential losses disclosed. As of December 31, 2021, we recorded an accrual of $7.1 million contingency related to the dissenting share obligations in accrued and other current liabilities, on our consolidated balance sheets.

See further information in Note 7, Commitments and Contingencies, of the “Notes to Consolidated Financial Statements” included in Part II, Item 8. “Financial Statements and Supplementary Data” of this Annual Report.

Recent Accounting Pronouncements

Refer to Note 2, Summary of Significant Accounting Policies, of the “Notes to Consolidated Financial Statements” that appears in Part II, Item 8. “Financial Statements and Supplementary Data” of this Annual Report for a discussion of recent accounting pronouncements or changes in accounting pronouncements that are of significance, or potential significance, to us.

130

Table of Contents

Subsequent Events

Increase in Shares of Common Stock Authorized for Issuance

Effective February 1, 2022, ImmunityBio amended its Amended and Restated Certificate of Incorporation to increase the number of shares that the company is authorized to issue from 500,000,000 shares of common stock, ~~exclusive~~$0.0001 par value per share, to 900,000,000 shares of ~~any commissions, markups or expenses.~~common stock, $0.0001 par value per share. The timing and amounts of any purchases were and will continue to be based on market conditions and other factors, including price, regulatory requirements and other corporate considerations. The 2015 Share Repurchase Program does not require the purchase of any minimum number of shares of preferred stock, $0.0001 par value per share, that the company is authorized to issue remained unchanged at 20,000,000 shares.

Acquisition of cGMP ISO Class 5 Manufacturing Facility

On February 14, 2022, we acquired a leasehold interest in approximately 409,000 rentable square feet of cGMP ISO Class 5 pharmaceutical manufacturing space in western New York from Athenex. The facility provides us with a state-of-the-art biotech production center that substantially expands and ~~may~~diversifies our existing manufacturing capacity in the U.S.

We paid approximately $40.0 million to Athenex, and the leasehold interest in the Dunkirk Facility was transferred to us. Our annual lease payment will be ~~suspended, modified or discontinued at any time without prior notice. We have financed,~~$2.00 per year for an initial 10-year term, with an option to renew the lease under substantially the same terms and ~~expect~~conditions for an additional 10-year term. As part of the transaction, we assumed obligations under various third-party agreements, and committed to ~~continue~~spend $1.52 billion on operational expenses during the initial term, and an additional $1.50 billion on operational expenses if we elect to ~~finance,~~renew the ~~purchases with existing cash balances. As it is the intent~~lease for the ~~repurchased shares~~additional 10-year term. We also committed to hiring 450 employees at the Dunkirk Facility within the first five years of operations, with 300 such employees to be ~~retired, we have elected to account~~hired within the first 2.5 years of operation. We are eligible for certain sales-tax exemption savings during the ~~shares repurchased under~~development of the ~~constructive retirement method. For shares repurchased in excess of par, we allocate the purchase price in excess of par value to accumulated deficit.~~

~~Utilization of Net Operating Loss Carryforwards, or NOLs, and Research and Development Credits~~

As of December 31, 2020, we had federal, state and foreign income tax NOLs of $389.8 million, $350.3 million and $0.2 million, respectively. Of the $389.8 million in federal NOLs, $226.4 million will not expire and will be able to offset 80% of taxable income in future years. Of the $350.3 million in state NOLs, $4.4 million will not expire and will be able to offset 80% of taxable income in future years. The remaining federal NOL carryforwards begin to expire in 2024, the remaining state NOL carryforwards begin to expire in 2030 and the foreign NOL carryforwards begin to expire in 2022. As of December 31, 2020, we also had federal and state research and development tax credit carryforwards of $11.1 million and state research tax credits of $7.8 million, respectively. The federal research tax credit carryforwards begin to expire in 2034Dunkirk Facility, and certain ~~state research~~property tax ~~credit carryforwards begin~~savings over the next 20 years, subject to ~~expire in 2031. The California research tax credits can be carried forward indefinitely. These net operating loss~~certain terms and ~~research and development tax credit carryforwards could expire unused and be unavailable to offset future income tax liabilities.~~

~~Under Sections 382 and 383~~conditions, including performance of certain of the ~~Internal Revenue Code~~obligations described above.

131

Table of 1986, as amended, if a corporation undergoes an “ownership change” (generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period), the corporation’s ability to use its pre-change net operating loss carry forwards and other pre-change tax attributes to offset its post-change income may be limited. We have completed a study through March 2019 to determine the impact of ownership changes on our NOLs and we have undergone significant ownership changes in previous years. Accordingly, some of our NOLs and research and development credits have been derecognized.

~~Recent Accounting Pronouncements~~

~~Application of New or Revised Accounting Standards – Not Yet Adopted~~

~~In June 2016, the FASB issued Accounting Standards Update, or ASU, 2016‑13,~~ ~~Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~Contents. The FASB subsequently issued amendments to ASU 2016‑13, which have the same effective date and transition dates as described below. The new guidance supersedes existing U.S. GAAP for measuring and recording of credit losses on financial assets measured at amortized cost by replacing the incurred-loss model with an expected-loss model. Accordingly, these financial assets will be presented at the net amount expected to be collected. This new standard also requires that credit losses related to available-for-sale debt securities be recorded as an allowance through net income rather than

~~108~~

reducing the carrying amount under the current, other-than-temporary-impairment model. For public business entities that meet the definition of a Securities and Exchange Commission, or SEC, filer, except entities that are eligible to be a smaller reporting company as defined by the SEC, the standard is effective for annual periods beginning after December 15, 2019, and interim periods therein. For all other entities, the standard is effective for annual periods beginning after December 15, 2022, and interim periods therein. Early adoption is permitted for all entities for annual periods beginning after December 15, 2018. With certain exceptions, adjustments are to be applied using a modified-retrospective approach by reflecting adjustments through a cumulative-effect impact on retained earnings as of the beginning of the fiscal year of adoption. We continue to evaluate the impact that this new standard and its related amendments will have on our consolidated financial statements and we do not intend to early adopt this new standard.

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

~~Item~~

ITEM 7A. ~~Quantitative and Qualitative Disclosures About Market Risk.~~

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Our exposure to market risk for changes in interest rates relates primarily to interest earned on our cash equivalents, investments and ~~investments.~~variable interest rate debt. The primary objective of our investment activities is to preserve our capital to fund operations. A secondary objective is to maximize income from our investments without assuming significant risk. Our investment policy provides for investments in low-risk, investment-grade debt instruments. As of December 31, ~~2020,~~2021, we had ~~$11.4~~$181.1 million in cash and cash equivalents and ~~$54.8~~$136.8 million in our investment portfolio. Our cash equivalents are short-term investments with maturities of 90 days or less at the time of purchase. We maintain cash deposits in FDIC insured financial institutions in excess of federally insured limits. However, we believe that we are not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held. As of December 31, ~~2020,~~2021, our investment portfolio was comprised of available-for-sale securities, and we did not hold or issue financial instruments for trading purposes. ~~To date, we have not realized any significant loss of principal on our investments.~~

Interest ~~rate risk~~Rate Risk – ~~cash~~

Cash

With the cash discussed above, our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of U.S interest rates. However, we do not believe a sudden change in the interest rates would have a material impact on our financial condition or results of operations due to the short-term maturities on our cash equivalents. A hypothetical 100 basis point change in interest rates during any of the periods presented would not have had a material impact on our consolidated financial statements.

Interest ~~rate risk~~Rate Risk – ~~cash equivalents~~Cash Equivalents and ~~investment portfolio~~

Investment Portfolio

We invest a portion of our cash in a number of diversified fixed and floating rate securities, consisting of marketable debt securities and debt funds that are subject to interest rate risk. Changes in the general level of interest rates can affect the fair value of our investment portfolio. If interest rates in the general economy were to rise, our holdings could lose value. At December 31, ~~2020,~~2021, a hypothetical increase in interest rates of 100 basis points across the entire yield curve on our holdings would not have resulted in a material impact on the fair value of our portfolio.

Interest Rate Risk – Variable-Rate Debt

Our use of variable-rate debt exposes us to interest rate risk as changes in interest rates would affect interest expense. In December 2021, we entered into a $300.0 million variable interest loan that matures on December 17, 2022. This loan bears interest at Term SOFR + 5.4%. As of December 31, 2021, the interest rate on this loan was 5.47%. A 100-basis point increase in the Term SOFR rate as of December 31, 2021 would not have a material impact on our results of operations and cash flows.

Foreign Currency Exchange Risk

We are exposed to foreign currency exchange rate risk

inherent in conducting business globally in numerous currencies. We contract with clinical research organizations, investigational sites and suppliers in foreign ~~countries~~countries. ~~and we have a bank account in Korea~~. We are, therefore, subject to fluctuations in foreign currency rates in connection with these agreements. We have not entered into any material foreign currency hedging contracts although we may do so in the future. ToFrom inception through the date of this Annual Report, we have not incurred any material effects from foreign currency changes on these contracts. The effect of a 10% adverse change in exchange rates on foreign currency denominated cash and payables as of December 31, ~~2020~~2021 would not have been material. However, fluctuations in currency exchange rates could harm our business in the future.

We are also exposed to foreign currency fluctuations related to the operations of our subsidiary in Italy whose financial statements are denominated in the Euro. We translate all assets and liabilities denominated in foreign currency into U.S. dollars using the exchange rate as of the end of the reporting period, while the operating results are translated into U.S. dollars using the average exchange rates for the reporting periods. Gains and losses resulting from translating the financial statements from our subsidiary’s functional currency to U.S. dollars are recognized as a component of other comprehensive income (loss), on the consolidated statement of comprehensive loss. Foreign currency exchange rate fluctuations affect our reported net loss and can make comparisons from period to period more difficult. Our foreign operations are not material to our operations as a whole. As such, we currently do not enter into currency forward exchange or option contracts to hedge foreign currency exposures.

Inflation ~~risk~~

Risk

Inflation may affect us by increasing our cost of labor, clinical trial, and other costs. We do not believe that inflation has had a material effect on our business, financial condition or results of operations for any period presented herein.

132

Table of Contents

~~109~~

~~Item~~

ITEM 8. ~~Financial Statements and Supplementary Data.~~

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


		Page

~~Report~~Reports of Independent Registered Public Accounting Firm (PCAOB ID: 42)	~~111~~	134

Consolidated Balance Sheets as of December 31, ~~2020~~2021 and ~~2019~~2020	~~113~~	137

Consolidated Statements of Operations for the years ended December 31, 2021, 2020 ~~2019~~ and ~~2018~~2019	~~114~~	138

Consolidated Statements of Comprehensive Loss for the years ended December 31, 2021, 2020 ~~2019~~ and ~~2018~~2019	~~115~~	139

Consolidated Statements of Stockholders’ ~~Equity~~Deficit for the years ended December 31, 2021, 2020 ~~2019~~ and ~~2018~~2019	~~116~~	140

Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020 ~~2019~~ and ~~2018~~2019	~~117~~	142

Notes to Consolidated Financial Statements	~~119~~	145

~~110~~

133

Table of Contents

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of ~~NantKwest,~~ImmunityBio, Inc.

and Subsidiaries

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of ~~NantKwest,~~ImmunityBio, Inc. and Subsidiaries (the Company) as of December 31, ~~2020~~2021 and ~~2019,~~2020, the related consolidated statements of operations, comprehensive loss, stockholders’ ~~equity~~deficit and cash flows for each of the three years in the period ended December 31, ~~2020,~~2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, ~~2020~~2021 and ~~2019,~~2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, ~~2020,~~2021, in conformity with U.S. generally accepted accounting principles.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 1, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the ~~Company's~~Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the ~~Public Company Accounting Oversight Board (United States) (PCAOB)~~PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of ~~the~~ critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

~~111~~

134

~~Related party transactions and disclosures~~Table of Contents


Related party transactions and disclosures

Description of the Matter			As discussed in Note 108 to the consolidated financial statements, the Company’s Executive Chairman ~~of the Board of Directors~~ and ~~former CEO founded~~Global Chief Scientific and Medical Officer has a controlling interest in certain entities with which the Company has entered into material transactions including shared services agreement with NantWorks ~~LLC, which is a collection of multiple companies in the healthcare~~ and ~~technology space.~~related party notes payable with NantWorks, Nant Capital, NantMobile, and NantCancerStemCell. Affiliates of ~~NantWorks LLC~~such entities are also affiliates of the Company due to the common control ~~by and/or common ownership interest~~ of the Company’s Executive Chairman ~~of the Board of Directors~~ and former CEO. The Company has entered into multiple transactions with related parties, including shared services provided by/to NantWorks LLC, agreements with Immuno‑Oncology Clinic, Inc. to conduct various clinical trials,Global Chief Scientific and ~~multiple agreements with ImmunityBio, Inc. including a collaboration agreement with ImmunityBio, Inc. for the joint development, manufacturing, and marketing of a vaccine/treatment for COVID‑19.~~ Medical Officer. Assessing the sufficiency of procedures performed to identify related parties and related party transactions and determining the identified related party transactions were properly recorded, presented and disclosed was challenging due to the nature, volume and the significance of related party transactions.

How We Addressed the Matter in Our Audit			We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over the Company’s related party process. This included testing controls over management’s identification, review and disclosure of related party transactions. We tested management’s controls over the completeness and accuracy of the related party disclosures in the consolidated financial statements. The audit procedures we performed included, among others, testing the completeness and accuracy of the listing of significant related parties identified and related party transactions provided by management, and testing the manner in which related party transactions were recorded, presented and ~~disclosed, and performing~~disclosed. We performed journal entry searches of identified related parties to verify completeness and accuracy of the Company’s related party transactions. We also inspected questionnaires received from the Company’s directors and officers, read minutes of the meetings of Board of Directors and its various Committees, read employment and compensation contracts, proxy statements and other relevant filings with the Securities and Exchange Commission and other regulatory agencies that relate to the Company’s financial relationships and transactions with the Company’s executive officers and with other entities controlled by the Company’s Executive Chairman ~~of the Board of Directors~~ and ~~former CEO.~~Global Chief Scientific and Medical Officer. We confirmed ~~management fees~~the transactions and/or balances, as applicable, with the related parties including amounts payable to NantWorks ~~LLC~~under the shared service agreement and ~~other~~ related party ~~affiliates~~notes payable to Nant Capital, NantMobile, NantWorks and ~~agreed such fees to subsequent payments made by~~NantCancerStemCell. We also obtained the ~~Company.~~underlying agreements and assessed the associated accounting and disclosures. We designed and executed our tests of account balances and transaction details to assess potential effects on the Company’s identified related parties and related party transactions. We inquired of management and members of the ~~Company's~~Company’s audit committee regarding the completeness of the related party transactions identified. We ~~assessed~~have evaluated the ~~adequacy of financial statement footnote disclosure pertaining to~~Company’s related party ~~transactions.~~ disclosures included in Note 8 in relation to these matters.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2016.

Los Angeles, California

March 4,1, 2022

135

Table of Contents

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of ImmunityBio, Inc. and Subsidiaries

Opinion on Internal Control Over Financial Reporting

We have audited ImmunityBio, Inc. and Subsidiaries’ internal control over financial reporting as of December 31, 2021,

~~112~~

based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, ImmunityBio, Inc. and Subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive loss, stockholders’ deficit and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and our report dated March 1, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Los Angeles, California

March 1, 2022

136

~~NantKwest,~~

Table of Contents

ImmunityBio, Inc.

and Subsidiaries

Consolidated Balance Sheets

(in thousands, except share and per share amounts)


	As of December 31,							As of December 31,
	2020			2019				2021		2020
ASSETS							ASSETS
Current assets:							Current assets:
Cash and cash equivalents	$	11,441		$	15,508		Cash and cash equivalents	$	181,101	$	34,915
Marketable securities							Marketable securities	136,015		61,146
Due from related parties							Due from related parties	1,333		2,003
Prepaid expenses and other current assets (including amounts with related parties)		9,285			4,105		Prepaid expenses and other current assets (including amounts with related parties)	15,898		13,649
Marketable debt securities, available-for-sale		54,772			36,144
Total current assets		75,498			55,757		Total current assets	334,347		111,713
Marketable debt securities, noncurrent		0			1,497
Property, plant and equipment, net (including amounts with related parties)		53,927			60,501
Marketable securities, noncurrent							Marketable securities, noncurrent	822		950
Property, plant and equipment, net							Property, plant and equipment, net	82,863		72,541
Non-marketable equity investment							Non-marketable equity investment	—		7,849
Intangible asset, net							Intangible asset, net	1,420		1,463
Convertible note receivable							Convertible note receivable	6,379		6,129
Operating lease right-of-use assets, net (including amounts with related parties)		13,463			11,729		Operating lease right-of-use assets, net (including amounts with related parties)	36,304		18,138
Equity investment		7,849			9,253
Other assets (including amounts with related parties)		1,121			4,386
Investment and other assets (including amounts with related parties)							Investment and other assets (including amounts with related parties)	6,775		2,598
Total assets	$	151,858		$	143,123		Total assets	$	468,910	$	221,381
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES AND STOCKHOLDERS’ DEFICIT							LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:							Current liabilities:
Accounts payable	$	4,101		$	1,749		Accounts payable	$	11,418	$	11,510
Accrued expenses		8,343			5,343
Accrued expenses and other liabilities							Accrued expenses and other liabilities	51,387		36,771
Related-party notes payable							Related-party notes payable	299,236		—
Due to related parties		5,269			486		Due to related parties	3,943		14,838
Operating lease liabilities (including amounts with related parties)		5,500			3,206		Operating lease liabilities (including amounts with related parties)	3,011		5,015
Other current liabilities (including amounts with related parties)		1,438			775
Total current liabilities		24,651			11,559		Total current liabilities	368,995		68,134
Related-party notes payable, less current portion							Related-party notes payable, less current portion	306,349		254,353
Operating lease liabilities, less current portion (including amounts with related parties)		9,814			10,885		Operating lease liabilities, less current portion (including amounts with related parties)	37,068		16,179
Deferred tax liability							Deferred tax liability	162		170
Other liabilities							Other liabilities	249		1,035
Total liabilities		34,465			22,444		Total liabilities	712,823		339,871
Commitments and contingencies (Note 9)
Stockholders’ equity:
Common stock, $0.0001 par value; 500,000,000 shares authorized; 108,726,551 and 98,460,404 issued and outstanding as of December 31, 2020 and December 31, 2019		11			10
Commitments and contingencies (Note 7)							Commitments and contingencies (Note 7)	0		0
Stockholders’ deficit:							Stockholders’ deficit:
Common stock, $0.0001 par value; 500,000,000 shares authorized; 397,830,044 and 382,243,142 shares issued and outstanding as of December 31, 2021 and 2020, respectively; excluding treasury stock, 163,800 shares outstanding as of December 31, 2021 and 2020, respectively							Common stock, $0.0001 par value; 500,000,000 shares authorized; 397,830,044 and 382,243,142 shares issued and outstanding as of December 31, 2021 and 2020, respectively; excluding treasury stock, 163,800 shares outstanding as of December 31, 2021 and 2020, respectively	40		38
Additional paid-in capital		872,078			782,965		Additional paid-in capital	1,719,704		1,495,163
Accumulated other comprehensive loss		(122	)		(105	)
Accumulated deficit		(754,574	)		(662,191	)	Accumulated deficit	(1,961,921)		(1,615,131)
Total stockholders’ equity		117,393			120,679
Total liabilities and stockholders’ equity	$	151,858		$	143,123
Accumulated other comprehensive income							Accumulated other comprehensive income	4		122
Total ImmunityBio stockholders’ deficit							Total ImmunityBio stockholders’ deficit	(242,173)		(119,808)
Noncontrolling interests							Noncontrolling interests	(1,740)		1,318
Total stockholders’ deficit							Total stockholders’ deficit	(243,913)		(118,490)
Total liabilities and stockholders’ deficit							Total liabilities and stockholders’ deficit	$	468,910	$	221,381

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

~~113~~

137

~~NantKwest,~~

Table of Contents

ImmunityBio, Inc.

and Subsidiaries

Consolidated Statements of Operations

(in thousands, except share and per share amounts)

For the Year Ended December 31,

2020

2019

2018

Revenue

$
111

$
43

$
47

Operating expenses:

Research and development (including amounts with related parties)

64,483

49,785

55,718

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

27,254

18,065

42,718

Total operating expenses

91,737

67,850

98,436

Loss from operations

(91,626
)

(67,807
)

(98,389
)
Other income (expense):

Investment income, net

366

1,642

1,857

Interest expense (including amounts with related parties)

(41
)

(19
)

(433
)
Other (expense) income, net (including amounts with related parties)

(1,077
)

298

236

Total other (expense) income

(752
)

1,921

1,660

Loss before income taxes

(92,378
)

(65,886
)

(96,729
)
Income tax (expense) benefit

(5
)

97

503

Net loss

$
(92,383
)

$
(65,789
)

$
(96,226
)

Net loss per share:

Basic and diluted

$
(0.89
)

$
(0.70
)

$
(1.22
)

Weighted-average number of shares during the period:

Basic and diluted

103,550,936

94,210,087

79,132,220


	Year Ended December 31,
	2021		2020		2019
Revenue	$	934	$	605	$	2,202
Operating expenses:
Research and development (including amounts with related parties)	195,958		139,507		111,997
Selling, general and administrative (including amounts with related parties)	135,256		71,318		46,456
Impairment of intangible assets	—		10,660		—
Total operating expenses	331,214		221,485		158,453
Loss from operations	(330,280)		(220,880)		(156,251)
Other expense, net:
Interest and investment (loss) income, net	(4,100)		2,435		2,442
Interest expense (including amounts with related parties)	(14,849)		(9,074)		(5,920)
Loss on equity method investment	(803)		—		—
Other income (expense), net (including amounts with related parties)	193		1,486		(534)
Total other expense, net	(19,559)		(5,153)		(4,012)
Loss before income taxes and noncontrolling interests	(349,839)		(226,033)		(160,263)
Income tax (expense) benefit	(9)		1,846		105
Net loss	(349,848)		(224,187)		(160,158)
Net loss attributable to noncontrolling interests, net of tax	(3,058)		(2,336)		(2,381)
Net loss attributable to ImmunityBio common stockholders	$	(346,790)	$	(221,851)	$	(157,777)

Net loss per ImmunityBio common share – basic	$	(0.89)	$	(0.59)	$	(0.43)
Net loss per ImmunityBio common share – diluted	$	(0.89)	$	(0.59)	$	(0.43)
Weighted-average number of common shares used in computing net loss per share – basic and diluted	389,234,156		377,067,527		366,324,859

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

~~114~~

138

~~NantKwest,~~

Table of Contents

ImmunityBio, Inc.

and Subsidiaries

Consolidated Statements of Comprehensive Loss

(in thousands)

For the Year Ended December 31,

2020

2019

2018

Net loss

$
(92,383
)

$
(65,789
)

$
(96,226
)
Other comprehensive (loss) income, net of income taxes:

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

(26
)

158

114

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

9

4

0

Total other comprehensive (loss) income

(17
)

162

114

Comprehensive loss

$
(92,400
)

$
(65,627
)

$
(96,112
)


	Year Ended December 31,
	2021		2020		2019
Net loss	$	(349,848)	$	(224,187)	$	(160,158)
Other comprehensive (loss) income, net of income taxes:
Net unrealized (losses) gains on available-for-sale securities	(13)		140		158
Reclassification of net realized losses on available-for-sale securities included in net loss	—		9		4
Foreign currency translation adjustments	(105)		60		(35)
Total other comprehensive (loss) income	(118)		209		127
Comprehensive loss	(349,966)		(223,978)		(160,031)
Less: Comprehensive loss attributable to noncontrolling interests	(3,058)		(2,336)		(2,381)
Comprehensive loss attributable to ImmunityBio common stockholders	$	(346,908)	$	(221,642)	$	(157,650)

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

~~115~~

139

~~NantKwest,~~

Table of Contents

ImmunityBio, Inc.

and Subsidiaries

Consolidated Statements of Stockholders’ ~~Equity~~

Deficit

(in thousands, except share ~~and per share~~ amounts)

Common Stock

Additional
Paid-in

Accumulated
Other
Comprehensive

Accumulated

Shares

Amount

Capital

Loss

Deficit

Total

Balance as of December 31, 2017

79,021,878

$
8

$
717,930

$
(381
)

$
(498,713
)

$
218,844

Stock-based compensation expense

—

0

23,382

0

0

23,382

Exercise of warrants

93,254

0

57

0

0

57

Vesting of restricted stock units (RSUs)

172,330

0

0

0

0

0

Net share settlement for RSU vesting and
   warrant exercises

(61,379
)

0

(123
)

0

0

(123
)
Repurchase of common stock

(138,349
)

0

0

0

(228
)

(228
)
Cumulative effect of the adoption of the new
   revenue standard

—

0

0

0

186

186

Other comprehensive income

—

0

0

114

0

114

Net loss

—

0

0

0

(96,226
)

(96,226
)
Balance as of December 31, 2018

79,087,734

$
8

$
741,246

$
(267
)

$
(594,981
)

$
146,006

Stock-based compensation expense

—

0

2,627

0

0

2,627

Exercise of warrants

17,589,250

2

35,149

0

0

35,151

Exercise of stock options

1,986,300

0

4,070

0

0

4,070

Vesting of RSUs

395,051

0

0

0

0

0

Net share settlement for RSU vesting and
   warrant exercises

(124,345
)

0

(127
)

0

0

(127
)
Repurchase of common stock

(473,586
)

0

0

0

(501
)

(501
)
Cumulative effect of the adoption of the new
   lease standard

—

0

0

0

(920
)

(920
)
Other comprehensive income

—

0

0

162

0

162

Net loss

—

0

0

0

(65,789
)

(65,789
)
Balance as of December 31, 2019

98,460,404

$
10

$
782,965

$
(105
)

$
(662,191
)

$
120,679

Issuance of common stock, net of $4,373 in offering
   costs

8,521,500

1

86,301

0

0

86,302

Stock-based compensation expense

—

0

2,139

0

0

2,139

Exercise of stock options

1,272,273

0

1,176

0

0

1,176

Vesting of RSUs

648,336

0

0

0

0

0

Net share settlement for RSU vesting and
   option exercises

(175,962
)

0

(503
)

0

0

(503
)
Other comprehensive loss

—

0

0

(17
)

0

(17
)
Net loss

—

0

0

0

(92,383
)

(92,383
)
Balance as of December 31, 2020

108,726,551

$
11

$
872,078

$
(122
)

$
(754,574
)

$
117,393


	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive (Loss) Income		Total ImmunityBio Stockholders’ Equity (Deficit)		Noncontrolling Interests		Total Stockholders’ Equity (Deficit)
	Shares	Amount
Balance as of December 31, 2018	348,677,955	$	35	$	1,326,760	$	(1,232,320)	$	(214)	$	94,261	$	(12,318)	$	81,943
Issuance of common stock for equity investment	2,047,500	—		30,000		—		—		30,000		—		30,000
Stock-based compensation expense	—	—		3,421		—		—		3,421		—		3,421
Exercise of warrants	19,664,050	2		41,862		—		—		41,864		—		41,864
Exercise of stock options	1,995,120	—		4,086		—		—		4,086		—		4,086
Vesting of restricted stock units (RSUs)	395,051	—		—		—		—		—		—		—
Net share settlement for RSUs vesting and warrant exercises	(124,345)	—		(127)		—		—		(127)		—		(127)
Repurchase of common stock	(678,336)	—		—		(2,501)		—		(2,501)		—		(2,501)
Cumulative effect of adoption of lease standard	—	—		—		(682)		—		(682)		—		(682)
Deconsolidation of Precision Biologics	—	—		—		—		—		—		18,353		18,353
Other comprehensive income (loss), net of tax	—	—		—		—		127		127		—		127
Net loss	—	—		—		(157,777)		—		(157,777)		(2,381)		(160,158)
Balance as of December 31, 2019	371,976,995	37		1,406,002		(1,393,280)		(87)		12,672		3,654		16,326
Issuance of common stock, net of offering costs of $4,373	8,521,500	1		86,301		—		—		86,302		—		86,302
Stock-based compensation expense	—	—		2,187		—		—		2,187		—		2,187
Exercise of stock options	1,272,273	—		1,176		—		—		1,176		—		1,176
Vesting of RSUs	648,336	—		—		—		—		—		—		—
Net share settlement for RSUs vesting	(175,962)	—		(503)		—		—		(503)		—		(503)
Other comprehensive income (loss), net of tax	—	—		—		—		209		209		—		209
Net loss	—	—		—		(221,851)		—		(221,851)		(2,336)		(224,187)
Balance as of December 31, 2020	382,243,142	38		1,495,163		(1,615,131)		122		(119,808)		1,318		(118,490)

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

~~116~~

140

~~NantKwest,~~

Table of Contents

ImmunityBio, Inc.

and Subsidiaries

Consolidated Statements of ~~Cash Flows~~

Stockholders’ Deficit (Continued)

(in ~~thousands)~~

thousands, except share amounts)

For the Year Ended December 31,

2020

2019

2018

Operating activities:

Net loss

$
(92,383
)

$
(65,789
)

$
(96,226
)
Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

9,147

9,012

9,555

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

3,430

2,604

0

Stock-based compensation expense

2,139

2,627

23,382

Unrealized loss on equity investment

1,405

0

0

Amortization of net premiums and discounts on marketable debt
securities

794

0

463

Losses (gains) on sales of marketable debt securities

8

4

(3
)
Loss on disposal of assets

4

0

209

Non-cash interest items, net

(251
)

246

291

Loss on impairment of assets

0

869

0

Deferred income tax benefit

0

0

(498
)
Changes in operating assets and liabilities:

Prepaid expenses and other current assets

(1,328
)

9,276

(9,818
)
Other assets

(339
)

(4,063
)

(1,151
)
Accounts payable

2,142

41

(1,100
)
Accrued expenses and other liabilities

3,686

(12,020
)

12,708

Due to related parties

5,034

(1,093
)

(685
)
Operating lease liabilities

(3,941
)

(3,076
)

0

Deferred rent

0

0

(508
)
Net cash used in operating activities

(70,453
)

(61,362
)

(63,381
)

Investing activities:

Purchases of property, plant and equipment

(2,639
)

(4,182
)

(13,102
)
Proceeds from sales of property, plant and equipment

0

0

412

Purchases of debt securities, held-to-maturity

0

0

(723
)
Purchases of investments in equity securities

0

(3
)

0

Purchases of marketable debt securities, available-for-sale

(91,572
)

(86,618
)

(94,770
)
Maturities of marketable debt securities

65,350

109,730

165,284

Sales of marketable debt securities

8,272

2,529

0

Net cash (used in) provided by investing activities

(20,589
)

21,456

57,101

Financing activities:

Proceeds from equity offering, net of issuance cost paid

86,302

0

0

Proceeds from exercises of stock options

1,176

4,070

0

Proceeds from exercises of warrants

0

35,151

57

Principal payments of financing obligations

0

0

(477
)
Repurchases of common stock with commissions

0

(501
)

(228
)
Net share settlement for restricted stock unit vesting and warrant and
option exercises

(503
)

(127
)

(123
)
Net cash provided by (used in) financing activities

86,975

38,593

(771
)
Net decrease in cash, cash equivalents, and restricted cash

(4,067
)

(1,313
)

(7,051
)
Cash, cash equivalents and restricted cash, beginning of period

15,687

17,000

24,051

Cash, cash equivalents and restricted cash, end of period

$
11,620

$
15,687

$
17,000


	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive (Loss) Income		Total ImmunityBio Stockholders’ Equity (Deficit)		Noncontrolling Interests		Total Stockholders’ Equity (Deficit)
	Shares	Amount
Issuance of common stock “at-the-market” offering, net of commissions and offering costs of $4,674	13,295,817	$	2	$	164,528	$	—	$	—	$	164,530	$	—	$	164,530
Stock-based compensation expense	—	—		57,181		—		—		57,181		—		57,181
Exercise of stock options	1,695,638	—		5,461		—		—		5,461		—		5,461
Vesting of RSUs	873,058	—		—		—		—		—		—		—
Net share settlement for RSUs vesting	(277,611)	—		(4,064)		—		—		(4,064)		—		(4,064)
Sales of assets to an entity under common control	—	—		1,435		—		—		1,435		—		1,435
Other comprehensive income (loss), net of tax	—	—		—		—		(118)		(118)		—		(118)
Net loss	—	—		—		(346,790)		—		(346,790)		(3,058)		(349,848)
Balance as of December 31, 2021	397,830,044	$	40	$	1,719,704	$	(1,961,921)	$	4	$	(242,173)	$	(1,740)	$	(243,913)

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

~~117~~

141

~~NantKwest,~~

Table of Contents

ImmunityBio, Inc.

and Subsidiaries

Consolidated Statements of Cash Flows ~~(Continued)~~

(in thousands)

For the Year Ended December 31,

2020

2019

2018

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

Cash and cash equivalents

$
11,441

$
15,508

$
16,821

Restricted cash included in other assets

179

179

179

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

$
11,620

$
15,687

$
17,000

Supplemental disclosure of cash flow information:

Cash paid during the period for:

Interest

$
40

$
19

$
475

Income taxes

$
8

$
3

$
4

Supplemental disclosure of non-cash activities:

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

$
5,164

$
800

$
0

Cashless exercise of stock options and warrants

$
1,233

$
29

$
94

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

$
289

$
74

$
4,664

Conversion of Viracta convertible notes and accrued interest into
investment in equity securities of Viracta (Note 5)

$
0

$
751

$
0

Unrealized (losses) gains on marketable debt securities

$
(17
)

$
258

$
123


	Year Ended December 31,
	2021		2020		2019
Operating activities:
Net loss	$	(349,848)	$	(224,187)	$	(160,158)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense	57,181		2,187		3,421
Depreciation and amortization	14,238		12,739		14,042
Non-cash interest items, net (including amounts with related parties)	12,479		8,531		(704)
Non-cash lease expense related to operating lease right-of-use assets	4,884		5,155		4,131
Unrealized losses (gains) on equity securities	4,615		(2,876)		320
Unrealized loss on non-marketable equity investment	—		1,405		—
Loss on equity method investment	803		—		—
Impairment of intangible assets	—		10,660		—
Impairment of fixed assets	—		—		1,593
Deferred tax	(8)		(2,938)		(8)
Other	349		1,240		890
Changes in operating assets and liabilities:
Prepaid expenses and other current assets	(2,249)		4,208		5,837
Investment and other assets	(3,977)		(684)		(4,009)
Accounts payable	(3,717)		2,570		1,188
Accrued expenses and other liabilities	5,182		12,495		(11,796)
Related parties	(10,187)		3,378		(2,380)
Operating lease liabilities	(4,164)		(5,607)		(4,476)
Net cash used in operating activities	(274,419)		(171,724)		(152,109)
Investing activities:
Purchases of property, plant and equipment	(33,563)		(1,669)		(4,287)
Proceeds from sales of property, plant and equipment	20,498		—		200
Purchases of marketable debt securities, available-for-sale	(141,750)		(91,765)		(87,189)
Maturities of marketable debt securities, available for sale	56,166		65,350		109,730
Proceeds from sales of marketable debt and equity securities	13,763		8,272		2,601
Payment to Precision Biologics to facilitate deconsolidation	—		—		(2,500)
Purchase of non-marketable equity investment	—		—		(3)
Net cash (used in) provided by investing activities	(84,886)		(19,812)		18,552

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

~~118~~

142

~~NantKwest,~~

Table of Contents

ImmunityBio, Inc.

and Subsidiaries

Consolidated Statements of Cash Flows (Continued)

(in thousands)


	Year Ended December 31,
	2021		2020		2019
Financing activities:
Proceeds from equity offering, net of issuance costs paid	$	164,530	$	86,302	$	30,000
Proceeds from issuance of related-party promissory notes, net of issuance costs paid	338,500		63,700		47,670
Proceeds from exercises of stock options	5,461		1,176		4,086
Sale of assets to an entity under common control	1,435		—		—
Net share settlement for RSUs vesting and warrant exercise	(4,064)		(503)		(127)
Payment for contingent consideration	(419)		—		—
Proceeds from exercises of warrants	—		—		35,151
Repurchase of common stock	—		—		(2,501)
Net cash provided by financing activities	505,443		150,675		114,279
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	48		(25)		(21)
Net change in cash, cash equivalents, and restricted cash	146,186		(40,886)		(19,299)
Cash, cash equivalents, and restricted cash, beginning of year	35,094		75,980		95,279
Cash, cash equivalents, and restricted cash, end of year	$	181,280	$	35,094	$	75,980

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

143

Table of Contents

ImmunityBio, Inc. and Subsidiaries

Consolidated Statements of Cash Flows (Continued)

(in thousands)


	Year Ended December 31,
	2021		2020		2019
Reconciliation of cash, cash equivalents, and restricted cash, end of year:
Cash and cash equivalents	$	181,101	$	34,915	$	75,801
Restricted cash (Note 2)	179		179		179
Cash, cash equivalents, and restricted cash, end of year	$	181,280	$	35,094	$	75,980

Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest	$	2,106	$	40	$	19
Income taxes	9		8		3

Supplemental disclosure of non-cash activities:
Right-of-use assets obtained in exchange for operating lease liabilities	$	23,069	$	2,394	$	1,968
Property and equipment purchases included in accounts payable, accrued expenses and due to related parties	11,654		220		662
Unrealized (losses) gains on marketable debt securities	(13)		(17)		258
Cashless exercise of stock options	1,035		1,233		29
Accrued investment in joint venture	1,000		—		—
Issuance of equity for warrant exercise via reduction of related-party promissory notes	—		—		6,713
Conversion of convertible notes and accrued interest into non-marketable equity investment	—		—		751

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

144

Table of Contents

ImmunityBio, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

1. Description of Business

~~Organization~~

NantKwest, Inc., or NantKwest, was incorporated in Illinois on October 7, 2002 under the name ZelleRx Corporation. On January 22, 2010, the company changed its name to Conkwest, Inc., and on July 10, 2015, the company changed its name to NantKwest, Inc. In March 2014, the company redomesticated from the State of Illinois to the State of Delaware and the Illinois company ceased to exist. We are a pioneering clinical-stage immunotherapy biotechnology company headquartered in San Diego, California with certain operations in Culver City and El Segundo, California and Woburn, Massachusetts.

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

ImmunityBio and subsidiaries.

Our Business

ImmunityBio, Inc. is a clinical-stage biotechnology company developing next-generation therapies and vaccines that complement, harness, and amplify the immune system to defeat cancers and infectious diseases. We strive to be a vertically-integrated immunotherapy company designing and manufacturing our products so they are ~~focused on harnessing the power of~~more effective, accessible, more conveniently stored, and more easily administered to patients.

Our broad immunotherapy and cell therapy platforms are designed to attack cancer and infectious pathogens by activating both the innate immune ~~system by using our~~ system—natural killer (NK) cells, ~~or NK~~dendritic cells, ~~to treat cancer~~ and ~~viral infectious diseases. A critical aspect~~macrophages—and the adaptive immune system—B cells and T cells—in an orchestrated manner. The goal of ~~our strategy~~this potentially best-in-class approach is to ~~invest significantly in innovating new therapeutic candidates, based upon our proprietary activated NK,~~generate immunogenic cell death thereby eliminating rogue cells from the body whether they are cancerous or ~~aNK, cell platform, and conducting clinical testing and scale manufacturing of our most promising biologic product candidates.~~

~~We hold the exclusive right to commercialize aNK cells, a commercially viable NK cell line, and a wide range of genetically modified derivatives capable of killing cancer and~~ virally infected ~~cells. We own corresponding United States,~~and to ultimately establish an “immunological memory” that confers long-term benefit for the patient.

Although such designations may not lead to a faster development process or ~~U.S.~~regulatory review and may not increase the likelihood that a product candidate will receive approval, Anktiva™, our novel antibody cytokine fusion protein, has received Breakthrough Therapyand foreign composition and methods-of-use patents and applications covering the cells, improvements, methods of expansion and manufacture and use of aNK cells and their improvements as therapeutics to treat a spectrum of clinical conditions.

~~Liquidity~~

~~On June 29, 2020, the company closed an underwritten public offering of common stock as discussed further~~Fast Track designations in ~~Note 11,~~ ~~Stockholders Equity. Gross proceeds~~combination with BCG from the ~~offering were $90.7 million, before deducting underwriting discounts, commissions~~U.S. Food and ~~other offering expenses of $4.4 million.~~

As of December 31, 2020, the company had an accumulated deficit of $754.6 million. We also had negative cash flow from operations of $70.5 million during the year ended December 31, 2020. The company will likely need additional capital to further fund development of, and seek regulatory approvalsDrug Administration (FDA) for ~~our product candidates, and to begin to commercialize any approved products.~~

~~We are currently focused primarily~~bacillus Calmette-Guérin (BCG)-unresponsive non-muscle invasive bladder cancer (NMIBC) carcinoma in situ (CIS). Based on the ~~development~~reported results of ~~immunotherapeutic treatments~~the trial, we have initiated discussions with the FDA to file a BLA for ~~cancers~~Anktiva (to be branded VesAnktiva™ for intravesical administration) plus BCG for BCG-unresponsive NMIBC CIS.

Our platforms, which include 17 first-in-human therapeutic agents, are being studied in 26 actively recruiting clinical trials—17 of which are in Phase 2 or 3 development—across 13 indications in liquid and ~~debilitating viral infections using targeted~~solid tumors, including bladder, pancreatic and lung cancers. These are among the most frequent and lethal cancer types for which there are high failure rates for existing standards of care or, in some cases, no available effective treatment. In infectious disease, our pipeline currently targets such pathogens as the novel strain of the coronavirus (SARS-CoV-2) and ~~viral killing~~human immunodeficiency virus (HIV).

We have established Good Manufacturing Process (GMP) manufacturing capacity at scale with cutting-edge cell ~~lines,~~manufacturing expertise and ~~we believe such activities will result in the company’s continued incurrence of significant~~ready-to-scale facilities, as well as extensive and seasoned research and development (R&D), clinical trial, and ~~other expenses related to those programs. If the clinical trials for any of the company’s product candidates fail or produce unsuccessful results and those product candidates do not gain~~ regulatory approval, or if any of our product candidates, if approved, fail to achieve market acceptance, we may never become profitable. Even if the company achieves profitability in the future, it may not be able to sustain profitability in subsequent periods. We intend to cover our future operating expenses through cash and cash equivalents and marketable debt securities on hand and through a combination of equity offerings, debt financings, government or other third party funding, marketing and distribution arrangements and other collaborations, strategic alliances, and licensing arrangements. Additional financing may not be available to us when needed and, if available, financing may not be obtained on terms favorable to the company or its stockholders.

~~While we expect our existing cash, and cash equivalents and marketable debt securities, together with the ability to borrow from affiliated entities, will enable us to fund~~ operations, and capital expenditure requirements for at least the next 12 months, we may not have sufficient funds to reach commercialization. Failure to obtain adequate financing when needed may require us to delay, reduce, limit, or terminate some or all of our development programs or future commercialization efforts or grant rights to develop and market product candidates that we might otherwise prefer to develop and market ourselves, which could adversely affect our ability to operate as a going concern. If we raise additional funds from the issuance of equity securities, substantial dilution to existing stockholders may result. If we raise additional funds by incurring debt financing,teams.

The Merger

Under the terms of the ~~debt may involve significant~~Merger Agreement, at the effective time of the Merger (the Effective Time), each share of NantCell common stock, par value $0.001 per share, issued and outstanding immediately prior to the Effective Time, subject to certain exceptions as set forth in the Merger Agreement, was converted automatically into a right to receive 0.8190 (the Exchange Ratio) newly issued shares of common stock, par value $0.0001 per share, of the company (Company Common Stock), with cash ~~payment obligations,~~paid in lieu of any fractional shares. At the Effective Time, each share of the company’s common stock issued and outstanding immediately prior to the Effective Time, remained an issued and outstanding share of the combined company. At the Effective Time, each outstanding option, warrant or restricted stock unit to purchase NantCell common stock was converted using the Exchange Ratio into an option, warrant or restricted stock unit, respectively, on the same terms and conditions immediately prior to the Effective Time, to purchase shares of Company Common Stock.

145

Table of Contents

Immediately following the Effective Time, the former stockholders of NantCell held approximately 71.5% of the outstanding shares of Company Common Stock and the stockholders of the company as ~~well~~of immediately prior to the Merger held approximately 28.5% of the outstanding shares of Company Common Stock. As a result of the Merger and immediately following the Effective Time, Dr. Patrick Soon-Shiong, our Executive Chairman and Global Chief Scientific and Medical Officer, and his affiliates beneficially owned, in the aggregate, approximately 81.8% of the outstanding shares of Company Common Stock. Following the consummation of the Merger, the symbol for shares of the company’s common stock was changed to “IBRX.”

We incurred costs totaling $23.3 million in connection with the Merger, consisting of financial advisory, legal and other professional fees, of which $13.0 million and $10.3 million were recorded for the years ended December 31, 2021 and 2020, respectively. Merger-related costs are reported in selling, general and administrative expense, on the consolidated statements of operations.

Accounting Treatment of the Merger

The Merger represents a business combination pursuant to Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 805-50, Mergers, which is accounted for as ~~covenants~~a transaction between entities under common control as Dr. Soon-Shiong and ~~specific~~his affiliates were the controlling stockholders of both the company and NantCell for all of the periods presented in this report. As a result, all of the assets and liabilities of NantCell were combined with ours at their historical carrying amounts on the closing date of the Merger. We have recast our prior period financial ~~ratios that may restrict~~statements to reflect the conveyance of NantCell’s common shares as if the Merger had occurred as of the earliest date of the financial statements presented. All material intercompany accounts and transactions have been eliminated in consolidation.

The following tables provide the impact of the change in reporting entity on our ~~ability to operate~~unaudited condensed consolidated statements of operations for the three months ended March 31, 2021 and our ~~business.~~

~~119~~

consolidated statements of operations for the years ended December 31, 2020 and 2019, respectively (in thousands):


	Three Months Ended March 31, 2021
	(Unaudited)
	NantCell		NantKwest		Intercompany Eliminations		ImmunityBio, Inc.
Revenue	$	183	$	—	$	(44)	$	139
Operating expenses:
Research and development (including amounts with related parties)	21,509		19,725		(106)		41,128
Selling, general and administrative (including amounts with related parties)	24,382		20,903		(10)		45,275
Loss from operations	(45,708)		(40,628)		72		(86,264)
Other (expense) income, net (including amounts with related parties)	(848)		6,637		—		5,789
Income tax expense	—		(6)		—		(6)
Net loss	$	(46,556)	$	(33,997)	$	72	$	(80,481)

146

Table of Contents


	Year ended December 31, 2020
	(Unaudited)
	NantCell		NantKwest		Intercompany Eliminations		ImmunityBio, Inc.
Revenue	$	1,695	$	111	$	(1,201)	$	605
Operating expenses:
Research and development (including amounts with related parties)	75,763		64,483		(739)		139,507
Selling, general and administrative (including amounts with related parties)	44,099		27,254		(35)		71,318
Impairment of intangible assets	10,660		—		—		10,660
Loss from operations	(128,827)		(91,626)		(427)		(220,880)
Other (expense) income, net (including amounts with related parties)	(4,401)		(752)		—		(5,153)
Income tax benefit (expense)	1,851		(5)		—		1,846
Net loss	$	(131,377)	$	(92,383)	$	(427)	$	(224,187)


	Year ended December 31, 2019
	(Unaudited)
	NantCell		NantKwest		Intercompany Eliminations		ImmunityBio, Inc.
Revenue	$	2,994	$	43	$	(835)	$	2,202
Operating expenses:
Research and development (including amounts with related parties)	62,253		49,785		(41)		111,997
Selling, general and administrative (including amounts with related parties)	28,391		18,065		—		46,456
Loss from operations	(87,650)		(67,807)		(794)		(156,251)
Other (expense) income, net (including amounts with related parties)	(6,162)		1,921		229		(4,012)
Income tax benefit	8		97		—		105
Net loss	$	(93,804)	$	(65,789)	$	(565)	$	(160,158)

147

Table of Contents

2. Summary of Significant Accounting Policies

Basis of Presentation

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

(U.S. GAAP) and pursuant to the rules and regulations of the SEC. The consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of our financial position and results of operations.

As of December 31, 2021, the company had an accumulated deficit of $2.0 billion. We also had negative cash flows from operations of $274.4 million for the year ended December 31, 2021. The company will likely need additional capital to further fund the development of, and seek regulatory approvals for, our product candidates, and to begin to commercialize any approved products.

The consolidated financial statements have been prepared assuming the company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business, and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or amounts and classification of liabilities that may result from the outcome of the uncertainty ~~discussed in the Liquidity section~~ of ~~Note 1.~~our ability to continue as a going concern. As a result of continuing anticipated operating cash outflows, we believe that substantial doubt exists regarding our ability to continue as a going concern without additional funding or financial support. However, we believe our existing cash, cash equivalents, and investments in marketable ~~debt~~ securities, together with capital to be raised through equity offerings (including but not limited to the offering, issuance and sale by us of our common stock that may be issued and sold under an “at-the-market” sales agreement with Jefferies LLC (the ATM), of which we had $330.8 million available for future issuance as of December 31, 2021), and our potential ability to borrow from affiliated entities, will be sufficient to fund our operations through at least the next 12 months following the issuance date of the consolidated financial statements based primarily upon our Executive ~~Chairman’s~~Chairman and Global Chief Scientific and Medical Officer’s intent and ability to support our operations with additional funds, including loans from affiliated entities, as required, which we believe alleviates such doubt. We may also seek to sell additional equity, through one or more follow-on public offerings, or in separate financings, or obtain a credit facility. However, we may not be able to secure such external financing in a timely manner or on favorable terms. Without additional funds, we may choose to delay or reduce our operating or investment expenditures. Further, because of the risk and uncertainties associated with the potential commercialization of ~~the company’s~~our product candidates in development, we may need additional funds to meet our needs sooner than planned.

Principles of Consolidation

The consolidated financial statements include the accounts of ~~NantKwest~~the company and its ~~wholly owned subsidiaries. All intercompany amounts have been eliminated.~~

~~We apply~~subsidiaries in which the company has a controlling financial interest. The consolidated financial statements also include certain variable interest ~~model under Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 810,~~ ~~Consolidation, to any entity~~entities in which we ~~hold an equity investment or to which~~are the primary beneficiary (as described in more detail below). For consolidated entities where we have less than 100% of ownership, we record net loss attributable to noncontrolling interest on the ~~power~~consolidated statements of operations equal to ~~direct~~ the ~~entity's most significant economic activities~~percentage of the ownership interest retained in such entities by the respective noncontrolling parties. Any material intercompany transactions and ~~the ability to participate in the entity's economics.~~ balances have been eliminated upon consolidation.

If the entity is within the scope of the variable interest model and meets the definition of a variable interest entity ~~or VIE,~~(VIE), we consider whether we must consolidate the VIE or provide additional disclosures regarding our involvement with the VIE. If we determine that we are the primary beneficiary of the VIE, we will consolidate the VIE. This analysis is performed at the initial investment in the entity or upon any reconsideration event.

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

~~Unconsolidated equity investments in the common stock or in-substance common stock~~

148

Table of an entity under which we are able to exercise significant influence, but not control, are accounted for using the equity method. Our ability to exercise significant influence is generally indicated by ownership of 20 to 50 percent interest in the voting securities of the entity.

All other unconsolidated equity investments on which we are not able to exercise significant influence will be subsequently measured at fair value with unrealized holding gains and losses included in other income and expense, net, on the consolidated statements of operations. In the instance the equity investment does not have a readily determinable fair value and does not qualify for the practical expedient to estimate fair value in accordance with ASC 820, ~~Fair Value Measurement~~Contents~~, or ASC 820, we will apply the measurement alternative under ASC 321,~~ ~~Investments—Equity Securities~~, or ASC 321, pursuant to which we will measure the investment at its cost, less impairment, adjusted for observable price changes in an orderly market for an identical or similar investment of the same issuer.

We own non-marketable equity securities that are accounted for using the measurement alternative under ASC 321 because the preferred stock held by us is not considered in-substance common stock and such preferred stock does not have a readily determinable fair value. All investments are reviewed for possible impairment on a regular basis. If an investment's fair value is determined to be less than its net carrying value, the investment is written down to its fair value. Such an evaluation is judgmental and dependent on specific facts and circumstances. Factors considered in determining whether an impairment indicator is present include: the investees’ earnings performance and clinical trial performance, change in the investees’ industry and geographic area in which it operates, offers to purchase or sell the security for a price less than the cost of the investment, issues that raise concerns about the investee's ability to continue as a going concern, and any other information that we may be aware of related to the investment. Factors considered in determining whether an observable price change has occurred include: the price at which the investee issues equity instruments similar to those of our investment and the rights and preferences of those equity instruments compared to ours.

~~120~~

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we evaluate our estimates, including those related to the valuation of equity-based awards, deferred income taxes and related valuation allowances, preclinical and clinical trial accruals, impairment assessments, contingent value right measurement and assessments, the measurement of right-of-use assets and lease liabilities, useful lives of long-lived assets, loss contingencies, fair value measurements, and the assessment of ~~the company’s~~our ability to fund ~~its~~our operations for at least the next ~~twelve~~12 months from the date of issuance of these consolidated financial statements. We base our estimates on historical experience and on various other market-specific and relevant assumptions that we believe to be reasonable under the circumstances. Estimates are assessed each period and updated to reflect current information, such as the economic considerations related to the impact that the ongoing coronavirus pandemic could have on our significant accounting estimates. Actual results could differ from those estimates.

~~Risks and Uncertainties~~

In March 2020, the World Health Organization declared the novel strain of coronavirus disease (SARS‑CoV‑2) outbreak a pandemic. To date, our operations have not been significantly impacted by the pandemic. However, we cannot at this time predict the specific extent, duration, or full impact that this pandemic may have on our financial condition and results of operations, including ongoing and planned clinical trials. More specifically, the pandemic may result in prolonged impacts that we cannot predict at this time and we expect that such uncertainties will continue to exist until such time a vaccine is broadly available and in use. The impact of the pandemic on the financial performance of the company will depend on future developments, including the duration and spread of the outbreak and related governmental advisories and restrictions. These developments and the impact of the ongoing pandemic on the financial markets and the overall economy are highly uncertain. If the financial markets and/or the overall economy are impacted for an extended period, our results may be adversely affected.

Contingencies

We record accruals for loss contingencies to the extent that we conclude it is probable that a liability has been incurred and the amount of the related loss can be reasonably estimated. We accrue for the best estimate of a loss within a range; however, if no estimate in the range is better than any other, then we accrue the minimum amount in the range. If we determine that a material loss is reasonably possible, we disclose the possible loss or range of loss, or that the amount of loss cannot be estimated at this time. We evaluate, on a quarterly basis, developments in legal proceedings and other matters that could cause a change in the potential amount of the liability recorded or of the range of potential losses disclosed. Moreover, we record gain contingencies only when they are realizable and the amount is known. Additionally, we record our rights to insurance recoveries, limited to the extent of incurred or probable losses, as a receivable when such recoveries have been agreed to with our third-party insurers and when receipt is deemed probable. This includes instances when our third-party insurers have agreed to pay, on our behalf, certain legal defense costs and settlement amounts directly to applicable law firms and a settlement fund.

Concentration of Credit Risk and Other Risks and Uncertainties

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

~~Our cash and cash equivalents are held by one major financial institution in the U.S. and one in Korea.~~ a convertible note receivable.

We attempt to minimize credit risk associated with our cash and cash equivalents by periodically evaluating the credit quality of our primary financial institutions. Our investment portfolio is maintained in accordance with our investment policy. While we maintain cash deposits in FDIC insured financial institutions in excess of federally insured limits, we do not believe that we are exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held. We have not experienced any losses on such accounts.

We also monitor the creditworthiness of the borrower of the convertible promissory note. We believe that any concentration of credit risk in its convertible note receivable was mitigated in part by our ability to convert, if necessary, at the qualifying financing event or upon a payment default into shares of the senior class of equity securities of the borrower.

Product candidates developed by us will require approvals or clearances from the ~~U.S. Food and Drug Administration, or~~ FDA or international regulatory agencies prior to commercial sales. There can be no assurance that any of our product candidates will receive any of the required approvals or clearances. If we were to be denied approval or clearance or any such approval or clearance was to be delayed, it would have a material adverse impact on us.

149

Table of Contents

Cash, Cash Equivalents and Restricted Cash

Cash equivalents include highly liquid investments with an original maturity of three months or less from the date of purchase.

Restricted cash includes a certificate of deposit held as a substitute letter of credit for one of our leased properties. This certificate of deposit is included in other assets, on the consolidated balance sheets as the landlord is the beneficiary of the account and we are not able to access the funds during the term of the lease.

A reconciliation of cash, cash equivalents, and restricted cash is included on the consolidated statements of cash flows as of December 31, 2021, 2020 ~~2019~~ and ~~2018.~~

~~121~~

2019.

Marketable Securities and Other Investments

Marketable Debt Securities

We invest our excess funds in investment grade short- to intermediate-term corporate debt securities, ~~government sponsored~~government-sponsored securities, and foreign government bonds and classify these investments as available-for-sale. Marketable debt securities with remaining maturities of 12 months or less are classified as short-term and marketable ~~debt~~ securities with remaining maturities greater than 12 months are classified as long-term. All marketable debt securities are reported at fair value and any unrealized gains and losses are reported as a component of accumulated other comprehensive loss, on the consolidated statements of stockholders’ ~~equity,~~deficit, with the exception of unrealized losses believed to be other-than-temporary, which are recorded in interest and investment income, net ~~on the consolidated statements of operations. Realized gains and losses are included in investment income, net,~~, on the consolidated statements of operations. Realized gains and losses from sales of securities and the amounts, net of tax, reclassified out of accumulated other comprehensive loss, if any, are determined on a specific identification basis.

Marketable Equity Securities

Investments in mutual funds and equity securities, other than equity method investments, are recorded at fair market value, if fair value is readily determinable and any unrealized gains and losses are included in other income (expense), net, on the consolidated statements of operations. Realized gains and losses from the sale of the securities are determined on a specific identification basis and the amounts are included in other income (expense), net, on the consolidated statement of operations.

Non-Marketable Equity Securities

Prior to March 31, 2021, we owned non-marketable equity securities that were accounted for using the measurement alternative under ASC Topic 321, Investments—Equity Securities (ASC 321), because the preferred stock held by us was not considered in-substance common stock and such preferred stock did not have a readily determinable fair value. We measured the non-marketable equity investment at cost, less impairment, adjusted for observable price changes in an orderly market for an identical or similar investment of the same issuer, with such changes recognized on the consolidated statements of operations. Some factors we may consider in the impairment analysis include the extent to which the security has been in an unrealized loss position, the change in the financial condition and near-term prospects of the issuer, as well as security and industry-specific economic conditions.

Evaluating Investments for Other-than-Temporary Impairments

We periodically evaluate whether declines in fair values of our investments below their book value are other-than-temporary. This evaluation consists of several qualitative and quantitative factors regarding the severity and duration of the unrealized loss, as well as our ability and intent to hold the investment until a forecasted recovery occurs. Additionally, we assess whether ~~or not~~ we have plans to sell the security or whether ~~or not~~ it is more likely than not we will be required to sell any investment before recovery of its amortized cost basis. Factors considered include quoted market prices, recent financial results and operating trends, implied values from any recent transactions or offers of investee securities, credit quality of debt instrument issuers, other publicly available information that may affect the value of our investments, duration and severity of the decline in value, and our strategy and intentions for holding the investment. There were 0no other-than-temporary impairments recorded induring the years ended December 31, 2021, 2020 ~~2019~~ and ~~2018.~~

2019.

150

Table of Contents

Equity Method of Accounting

In circumstances where we have the ability to exercise significant influence over the operating and financial policies of a company in which we have an investment, we utilize the equity method of accounting for recording investment activity. In assessing whether we exercise significant influence, we consider the nature and magnitude of our investment, the voting and protective rights we hold, any participation in the governance of the other company and other relevant factors such as the presence of a collaborative or other business relationship. Under the equity method of accounting, we record our share of the income or loss of the other company as gain (loss) on equity method investment, in our consolidated statements of operations.

Property, Plant and Equipment,

Net

Property, plant and equipment isare stated at historical cost less accumulated depreciation. Historical cost includes expenditures that are directly attributable to the acquisition of the items. All repairs and maintenance are charged to net loss during the financial period in which they are incurred. Depreciation of property, plant and equipment is calculated using the straight-line method over the estimated useful lives of the assets, as follows:

~~Buildings~~	~~39 years~~
~~Software~~ Buildings		339 years
~~Laboratory equipment~~ Software		53 years
Laboratory equipment		5 to 7 years
Furniture & fixtures		5 years
IT equipment		3 years
Leasehold improvements		The lesser of the lease term or ~~the~~ life of the asset

Upon disposal ~~or impairment~~ of property, plant and equipment, the cost and related accumulated depreciation isare removed from the consolidated financial statements and the net amount, less any proceeds, is included in ~~the consolidated statements of operations.~~

~~Intangible Assets~~

Intangible assets, which consisted of the cost of reacquiring a technology license during 2015, were amortized using the straight-line method over an estimated useful life of 4 years. As of December 31, 2019, our intangible assets were fully amortized.

~~Patents~~

~~Patent costs, including related legal costs, are expensed as incurred and recorded in selling, general and administrative expenses~~other income (expense), net, on the consolidated statements of operations.

~~Impairments~~

~~Long-lived assets include~~

We review impairment of property, plant and equipment ~~and intangible assets. We review long-lived assets~~ for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by a comparison of the carrying amount to the future net cash flows that the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the projected undiscounted future cash flows arising from the assets using a discount rate determined by management to be commensurate with the risk inherent to our current business model.

~~122~~

Business Combinations

~~During~~Business combinations are accounted for using the ~~year ended~~acquisition method of accounting in accordance with ASC Topic 805, Business Combinations (ASC 805). These standards require that the total cost of acquisition be allocated to the tangible and intangible assets acquired and liabilities assumed based on their respective fair values at the date of acquisition, with the excess purchase price recorded as goodwill. The allocation of the purchase price is dependent upon certain valuations and other studies. Acquisition costs are expensed as incurred.

Contingent consideration incurred in connection with a business combination are recorded at their fair values on the acquisition date and re-measured at their fair values each subsequent reporting period until the related contingencies are resolved. The resulting changes in fair value are recorded as research and development expense, on the consolidated statements of operations and comprehensive loss. Changes in fair value reflect changes to our assumptions regarding probabilities of successful achievement of related milestones, the timing in which the milestones are expected to be achieved, and the discount rate used to estimate the fair value of the obligation.

151

Table of Contents

Common Control Transactions

Transactions between us and entities where Dr. Soon-Shiong and his affiliates are the controlling stockholders are accounted for as common control transactions whereby the net assets acquired or transferred are accounted at their carrying value. Any difference between the carrying value and consideration recognized is treated as a capital transaction. Cash consideration up to the carrying value of the net assets acquired or transferred is presented as an investing activity in our consolidated statements of cash flows. Cash consideration in excess of the carrying value of the net assets acquired or transferred is presented as a financing activity in our consolidated statements of cash flows.

Intangible Assets, Net

Intangible assets acquired in a business combination are initially recognized at their fair value on the acquisition date. The in-process research and development (IPR&D) assets are required to be classified as indefinite-lived assets and are not amortized until they become definite-lived assets, upon the successful completion of the associated research and development effort. At that time, we will evaluate whether recorded amounts are impaired and make any necessary adjustments, and then determine the useful life of the asset and begin amortization. If the associated research and development effort is abandoned, the related IPR&D assets will be written-off and an impairment charge recorded. Intangible assets are tested for impairment at least annually or more frequently if indicators of potential impairment exist.

Acquired definite-lived intangible assets are amortized using the straight-line method over their respective estimated useful lives. Intangible assets, which consisted of the cost of reacquiring a technology license during 2015, were amortized using the straight-line method over an estimated useful life of 4 years. As of December 31, 2019, ~~we determined that certain bioreactor laboratory equipment could no longer be utilized~~our definite-lived intangible assets were fully amortized.

Patents

Patent costs, including related legal costs, are expensed as incurred and recorded in ~~the production process. As a result, we recorded an impairment charge totaling $0.9 million, which is included in research~~selling, general and ~~development~~administrative expense on the consolidated statements of operations. ~~There were 0 impairment losses recognized during the years ended December 31, 2020 and 2018.~~

Fair Value of Financial Instruments

~~The accounting standard for fair value measurements provides a framework for measuring fair value and requires disclosures regarding fair value measurements.~~

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

date. We use a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires us to use observable inputs when available, and to minimize the use of unobservable inputs, when determining fair value.

The three tiers are defined as follows:

•

~~Level 1—~~ •Level 1—Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets at the measurement date. Since valuations are based on quoted prices that are readily and regularly available in an active market, the valuation of these products does not entail a significant degree of judgment. Our ~~Level 1 assets consist of bank deposits and money market funds.~~

•

Level 2— Observable inputs other than quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities. Our Level 2 assets consist of corporate debt securities including commercial paper, government sponsored securities and corporate bonds, as well as foreign municipal securities.

•

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

~~During the years ended December 31, 2020, 2019 and 2018, 0 transfers were made into or out of the~~ Level 1 assets consist of bank deposits, money market funds, and marketable equity securities.

•Level 2—Observable inputs other than quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities. Our Level 2 orassets consist of corporate debt securities including commercial paper, government-sponsored securities and corporate bonds, as well as foreign municipal securities.

•Level 3 ~~categories. We will continue~~—Valuations based on inputs that are unobservable and significant to ~~review~~ the overall fair value ~~inputs on a quarterly basis.~~

measurement.

152

Table of Contents

We utilize a third-party pricing service to assist in obtaining fair value pricing for our investments in marketable debt securities. Inputs are documented in accordance with the fair value disclosure hierarchy.

The fair values of financial instruments other than marketable securities and cash and cash equivalents are determined through a combination of management estimates and third-party valuations.

During the years ended December 31, 2021, 2020 and 2019, no transfers were made into or out of the Level 1, 2 or 3 categories. We will continue to review the fair value inputs on a quarterly basis.

Collaboration Arrangements

We analyze our collaboration arrangements to assess whether they are within the scope of ~~FASB~~ ASC Topic 808, Collaborative Arrangements or (ASC ~~808.~~808). A collaborative arrangement is a contractual arrangement that involves a joint operating activity. These arrangements involve two or more parties who are active participants in the activity, and are exposed to significant risks and rewards dependent on the commercial success of the activity. This assessment is performed throughout the life of the arrangement based on changes in the responsibilities of all parties in the arrangement. To the extent the collaboration agreement is within the scope of ASC 808, we also assess whether the arrangement contains multiple elements that are within the scope of other accounting literature. If we conclude that some or all aspects of the agreement are distinct and represent a transaction with a customer, we account for those aspects of the arrangement within the scope of ~~FASB~~ ASC Topic 606, Revenue from Contracts with Customers~~, or ASC 606.~~ (ASC 606). Amounts that are owed toby collaboration partners ~~that are~~ within the scope of ASC 808 are recognized as an offset to research and development ~~expenses~~expense as such amounts are incurred by the collaboration partner. ~~Where~~The amounts owed to a collaboration partner ~~exceed our collaboration expenses in each quarterly period, such amounts~~ are classified as research and development expense.

expense.

Our collaboration arrangements are further discussed ~~within~~ in Note 8, 6, Collaboration and License Agreements.

Preclinical and Clinical Trial Accruals

~~123~~

Transactions with Related Parties

As outlined in Note ~~10,~~ 8~~Related Party~~, Related-Party Agreements, we have various agreements with related parties. Some are billed and settled in cash monthly. Others are billed quarterly and settled in cash the following month. Monthly accruals are made for all quarterly billing arrangements.

153

Table of Contents

Lease Obligations

~~On January 1, 2019, we adopted FASB ASC Topic 842,~~

~~Leases~~, or ASC 842. For contracts entered into on or after the effective date, we determine if an arrangement is, or contains, a lease at lease inception. Our assessment is based on: (1) whether the contract involves the use of a distinct identified asset; (2) whether we obtain the right to substantially all of the economic benefit from the use of the asset throughout the period; and (3) whether we have the right to direct the use of the asset. At inception of a lease, we allocate the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments. Leases entered into prior to January 1, 2019, which were accounted for under ASC 840, ~~Leases~~, were not reassessed as we elected the package of practical expedients permitted under the transition guidance within ASC 842, which among other things, allowed us to carry forward the historical lease classification. We determine the lease term by assuming the exercise of renewal options that are reasonably assured. The exercise of lease renewal options is at our sole discretion. Several of our leases have renewal options, however, exercise of renewal is only assured for two of our current Good Manufacturing Practices, or cGMP, facilities, where we have made significant improvements or extended the lease.

For all leases other than short-term leases, at the lease commencement date, a right-of-use asset and a lease liability are ~~recognized.~~recognized and included in operating lease right-of-use assets, net, and current and non-current operating lease liabilities, respectively, on the consolidated balance sheets. The right-of-use asset represents the right to use the leased asset for the lease term. At lease commencement, leases are classified as either finance leases or operating leases. A lease is classified as a finance lease if any one of the following criteria are met: (1) the lease transfers ownership of the underlying asset by the end of the lease term; (2) the lease contains an option to purchase the underlying asset that is reasonably certain to be exercised; (3) the lease term is for a major part of the remaining economic life of the underlying asset; (4) the present value of the sum of the lease payments and any guaranteed residual value that is not already included in the lease payments equals or exceeds substantially all of the fair value of the underlying asset; or (5) the underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. A lease is classified as an operating lease if it does not meet any one of these criteria.

As the rate implicit in lease contracts are not readily determinable, we utilize its incremental borrowing rate as a discount rate for purposes of determining the present value of lease payments, which is based on the estimated interest rate at which we could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment. Prospectively, we will remeasure the lease liability at the net present value of the remaining lease payments using the same incremental borrowing rate that was in effect as of the lease commencement or transition date.

Operating lease right-of-use assets also include any rent paid prior to the commencement date, less any lease incentives received, and initial direct costs incurred. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. We determine the lease term by assuming the exercise of renewal options that are reasonably assured. The exercise of lease renewal options is at our sole discretion. Several of our leases have ~~elected to~~renewal options, however, the exercise of renewal is only assured for five of our current Good Manufacturing Practices (cGMP) facilities where we have made significant improvements or extended the lease.

We combine our lease components (e.g., fixed payments including rent, real estate taxes and insurance costs) with non-lease components (e.g., common-area maintenance costs and equipment maintenance costs) and as such, we account for lease and non-lease components as a single component. Lease expense also includes amounts relating to variable lease payments. Variable lease payments include amounts relating to common area maintenance and real estate taxes.

We ~~also elected~~do not to recognize right-of-use assets and lease liabilities for qualifying short-term leases with an initial lease term of 12 months or less at lease inception. Such leases are expensed on a straight-line basis over the lease term.

The lease term includes the non-cancellable period of the lease and any additional periods covered by either options to renew or not to terminate when the company is reasonably certain to exercise.

The depreciable life of operating right-of-use-assets and leasehold improvements is limited by the expected lease term.

Income Taxes

We recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities, as well as for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the tax rates that are expected to apply to taxable income for the years in which those tax assets and liabilities are expected to be realized or settled. We record valuation allowances to reduce deferred tax assets to the amount we believe is more likely than not to be realized.

~~124~~

We recognize uncertain tax positions when the position will be more likely than not be upheld on examination by the taxing authorities based solely upon the technical merits of the positions. We recognize interest and penalties, if any, related to unrecognized income tax uncertainties in income tax ~~expense.~~(expense) benefit, on the consolidated statement of operations. We did 0tnot have any accrued interest or penalties associated with uncertain tax positions as of December 31, ~~2020~~2021 and ~~2019.~~

2020.

154

Table of Contents

Stock Repurchases

In 2015, the Board of Directors approved a share repurchase program (the 2015 Share Repurchase Program). As it is our intent for the repurchased shares to be retired, we have elected to account for the shares repurchased using the constructive retirement method. For shares repurchased in excess of par, we record the purchase price in excess of par value in accumulated deficit, on the consolidated balance sheet.

Revenue Recognition

We ~~are subject~~have primarily generated revenues from non-exclusive license agreements related to ~~U.S. federal income tax,~~our cell lines, the sale of our bioreactors and related consumables and grant programs. The nonexclusive license agreements with a limited number of pharmaceutical and biotechnology companies grant them the right to use our cell lines and intellectual property for non-clinical use. These agreements generally include upfront fees and annual research license fees for such use, as well as ~~income tax~~commercial license fees for sales of the licensee products developed or manufactured using our intellectual property and cell lines. We have generated revenues from product sales of our proprietary GMP-in-a-Box bioreactors and related consumables to related parties. Additionally, we also generated revenues from grant programs.

A performance obligation is a promise in ~~Korea, California~~a contract to transfer a distinct good or service to the customer and is the unit of account in ASC 606. A contract’s transaction price is allocated to each distinct performance obligation based on relative standalone selling price and recognized as revenue when, or as, the performance obligation is satisfied.

Grant revenue is typically paid for reimbursable costs incurred over the duration of the associated research project or clinical trial and is recognized when expenses reimbursable under the grants have been incurred and payments under the grants become contractually due.

From inception through December 31, 2021, we have generated minimal revenue from non-exclusive license agreements related to our cell lines, the sale of our bioreactors and related consumables, and grant programs. We have no clinical products approved for commercial sale and have not generated any revenue from therapeutic and vaccine product candidates that are under development.

155

Table of Contents

Research and Development Costs

Major components of research and development costs include cash compensation and other ~~states.~~personnel-related expenses, stock-based compensation, depreciation and amortization expense on research and development property and equipment and intangible assets, costs of preclinical studies, clinical trials costs, including contract research organizations (CROs) and related clinical manufacturing, including contract manufacturing organizations (CMOs), costs of drug development, costs of materials and supplies, facilities cost, overhead costs, regulatory and compliance costs, and fees paid to consultants and other entities that conduct certain research and development activities on our behalf. Costs incurred in research and development are expensed as incurred.

Included in research and development costs are clinical trial and research expenses based on the services performed pursuant to contracts with research institutions and clinical research organizations and other vendors that conduct clinical trials and research on our behalf. We record accruals for estimated costs under these contracts. When evaluating the adequacy of the accrued liabilities, we analyze the progress of the preclinical studies or clinical trials, including the phase or completion of events, invoices received, contracted costs and purchase orders. Significant judgments and estimates are made in determining the accrued balances at the end of any reporting period based on the facts and circumstances known at that time. Although we do not expect the estimates to be materially different from the amounts actually incurred, if the estimates of the status and timing of services performed differ from the actual status and timing of services performed, we may report amounts that are too high or too low in any particular period. Actual results could differ from our estimates. We adjust the accruals in the period when actual costs become known.

Stock-Based Compensation

We account for stock-based compensation under the provisions of ASC Topic 718, Compensation—Stock Compensation (ASC 718). We estimate fair value of each stock option award on the date of grant using the Black-Scholes option pricing model. The Black-Scholes model requires the use of highly subjective assumptions, including, but not limited to, expected stock price volatility over the term of the awards and the expected term of the stock options. We measure the fair value of an equity-classified award at the grant date and recognize the stock-based compensation expense over the period of vesting on the straight-line basis for our outstanding share awards that do not contain a performance condition. For awards subject to performance-based vesting conditions, we assess the probability of the individual milestones under the award being achieved and stock-based compensation expense is recognized over the service period using the graded vesting method once management believes the performance criteria is probable of being met. For awards with service or performance conditions, we recognize the effect of forfeitures in compensation cost in the period that the award was forfeited. See Note 10, Stock-Based Compensation.

Sale-Leaseback Transaction

A sale-leaseback transaction occurs when an entity sells an asset it owns and immediately leases the asset back from the buyer. The seller then becomes the lessee and the buyer becomes the lessor. When entering into a sale-leaseback transaction as a seller-lessee, the requirements in ASC Topic 606, Revenue from Contracts with Customers, and all related accounting standards updates to such Topic are applied in determining whether the transfer of an asset shall be accounted for as a sale of the asset by assessing whether it satisfies a performance obligation under the contract by transferring control of an asset. If the company transfers control of an asset to the buyer-lessor, the transfer is accounted for as a sale and the company derecognizes the transferred asset. The subsequent leaseback of the asset is accounted for in accordance with ASC Topic 842, Leases, in the same manner as any third-party lease. If the company does not transfer control of an asset to the buyer-lessor, the sale-leaseback transaction is accounted for as a financing arrangement.

In September 2021, we entered into a sale transaction with Nant Capital, LLC (Nant Capital), a related party, for a building located at 557 South Douglas Street, El Segundo, California. We subsequently leased back the building for an initial seven-year lease term with an option to extend the lease for 2 additional seven-year periods. There is no purchase option at the end of the lease term. Since we transferred the legal title and all benefits and risks incidental to the ownership of the property to Nant Capital, we accounted for the transfer as a sale. We have classified the leaseback of the building as an operating lease and accordingly, a right-of-use asset and an operating lease liability were established on the lease commencement date that will be amortized through the end of the lease term. See Note 8, Related-Party Agreements, for further information.

156

Table of Contents

Comprehensive Income (Loss)

Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Comprehensive income or loss is composed of net income (loss) and other comprehensive income (loss). Our other comprehensive income or loss consists of net unrealized gains (losses) on marketable debt securities classified as available-for-sale, net of income taxes. and foreign currency translation adjustments.

Noncontrolling Interests

Noncontrolling interests are recorded for the entities that we consolidate but are not wholly-owned by the company. Noncontrolling interests are classified as a separate component of equity on the consolidated balance sheets and consolidated statements of stockholders’ deficit. Additionally, net loss attributable to noncontrolling interests is reflected separately from consolidated net loss on the consolidated statements of operations and the consolidated statements of stockholders’ deficit. We record the noncontrolling interests’ share of loss based on the percentage of ownership interest retained by the respective noncontrolling interest holders. Noncontrolling interests recorded on the consolidated financial statements result from the company’s share of GlobeImmune, Inc. (GlobeImmune), of which we controlled 69.1%, and Immunotherapy NANTibody, LLC (NANTibody), of which we controlled 60.0% as of December 31, 2021, 2020 and 2019. Noncontrolling interest stockholders are common stockholders.

GlobeImmune was determined to be a VIE as it does not have sufficient equity investment at risk to finance its operations without additional subordinated financial support and we are deemed the primary beneficiary of GlobeImmune and, accordingly, consolidates GlobeImmune into the consolidated financial statements under the VIE model. The company also supports GlobeImmune through a promissory note agreement, in which the company provides advances to GlobeImmune from time to time up to $6.0 million with a per annum interest rate of five percent (5%). As of December 31, 2021 and 2020, there were no outstanding advances due from GlobeImmune under the promissory note agreement.

GlobeImmune recognized $0.2 million of revenues for the year ended December 31, 2019, and recognized $0.7 million, $2.0 million and $7.7 million of operating expenses for the years ended December 31, 2021, 2020 and 2019, respectively. The consolidated balance sheets include approximately $0.8 million and $0.5 million of total assets and $0.0 million and $0.3 million of total liabilities as of December 31, 2021 and 2020, respectively, related to GlobeImmune.

In addition, the company held a 68.5% ownership interest in Precision Biologics, Inc. (Precision) arising from a preferred stock investment. The company ended its investment in Precision pursuant to a final settlement agreement approved by the court in 2019. Under the terms of the settlement agreement, the company deconsolidated the related assets, liabilities and noncontrolling interests of Precision. The disposition of this investment resulted in a reduction of $18.4 million in noncontrolling interests for the year ended December 31, 2019. See Note 7, Commitments and Contingencies—Litigation, for additional information.

Foreign Currencies

We have operations and holds assets in Italy and South Korea. The functional currency of the subsidiary in Italy is the Euro, based on the nature of the transactions occurring within this entity, and accordingly, assets and liabilities of this subsidiary are translated into U.S. dollars at exchange rates prevailing as of the balance sheet dates, while the operating results are translated into U.S. dollars using the average exchange rates for the period correlating with those operating results. Adjustments resulting from translating the financial statements of the foreign subsidiary into U.S. dollars are recorded as a component of other comprehensive income (loss), on the consolidated statements of comprehensive loss. Transaction gains and losses are recorded in other income (expense), net, on the consolidated statements of operations.

157

Table of Contents

Basic and Diluted Net Loss per Share of Common Stock

Basic net loss per share is calculated by dividing the net loss attributable to ImmunityBio common stockholders by the weighted-average number of common shares outstanding for the period. Diluted loss per share is computed by dividing net loss attributable to ImmunityBio common stockholders by the weighted-average number of common shares, including the number of additional shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.

For all periods presented, potentially dilutive securities are excluded from the computation of fully diluted loss per share as their effect is anti-dilutive. The following table details those securities that have been excluded from the computation of potentially dilutive securities:


	As of December 31,
	2021	2020	2019
Outstanding stock options	4,124,930	4,996,284	6,080,483
Outstanding RSUs	6,515,889	466,842	1,155,808
Outstanding related-party warrants	1,638,000	1,638,000	1,638,000
Total	12,278,819	7,101,126	8,874,291

Amounts in the table above reflect the common stock equivalents of the noted instruments, including awards issued under the NantKwest 2015 Equity Incentive Plan (the 2015 Plan), the NantKwest 2014 Equity Incentive Plan (the 2014 Plan), and awards issued under the NantCell, Inc. 2015 Stock Incentive Plan (the NC 2015 Plan) that, in the case of December 31, 2021, were outstanding immediately prior to the Effective Time of the Merger and in the case of December 31, 2020 and 2019 have been adjusted to include the combined NC 2015 Plan and NantCell warrants then outstanding (in both cases adjusted using the Exchange Ratio of 0.8190). See Note 10, Stock-Based Compensation, for further information.

Segment and Geographic Information

We operate in 1 reporting segment focused on creating the next generation of immunotherapies to address serious unmet needs within oncology and infectious diseases. Our chief executive officer (CEO) is the chief operating decision-maker (CODM) of the company, and manages and allocates resources to our operations on a company-wide basis. Consistent with this decision-making process, our CEO uses consolidated, single-segment financial information for purposes of evaluating performance, forecasting future-period financial results, allocating resources and setting incentive targets.

We generate a portion of its revenues from outside of the U.S. Information about our revenues from the different geographic regions is as follows (in thousands):


	Year Ended December 31,
	2021		2020		2019
United States	$	373	$	513	$	1,997
Europe	561		92		205
Total segment revenue	$	934	$	605	$	2,202

158

Table of Contents

Recent Accounting Pronouncements

Application of New or Revised Accounting Standards – Adopted

In November 2018, the FASB issued Accounting Standards Update, or ASU, No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606 (ASU 2018-18), which clarifies when certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606, “Revenue from Contracts with Customers” when the counterparty is a customer. In addition, the update precludes an entity from presenting consideration from a transaction in a collaborative arrangement as customer revenue if the counterparty is not a customer for that transaction. We adopted ASU 2018-18 in the quarter ended March 31, 2020 on a prospective basis. The adoption did not have an impact on our consolidated financial statements.

In December 2019, the FASB issued ASU 2019‑12, Simplifying the Accounting for Income Taxes, or ASU 2019‑12. The amendments removed the exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items (e.g., discontinued operations or other comprehensive income), and the exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. ASU 2019‑12 also amends other aspects of accounting for income taxes to help simplify and promote consistent application of U.S. GAAP. We early adopted ASU 2019‑12 effective January 1, 2020, and it did not have a material impact on our consolidated financial statements

In June 2016, the FASB issued Accounting Standards Update (ASU) 2016‑13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13), which requires credit losses on most financial instruments measured at amortized cost and certain other financial instruments be measured using an expected credit loss model. Under this model, entities are required to estimate credit losses over the entire contractual term of the financial instrument from the date of initial recognition of the instrument. The company adopted this guidance on the first day of the company’s fourth quarter of fiscal 2021. The adoption of ASU 2016-13 did not have any impact on our consolidated financial statements.

Application of New or Revised Accounting Standards – Not Yet Adopted

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. Among other changes, ASU 2020-06 removes the separation models for convertible instruments with cash or beneficial conversion features. Instead, entities will account for convertible debt instruments wholly as debt, unless certain other conditions are met. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The adoption of the new standard is not expected to have a material impact on the company’s financial position or results of operations upon adoption.

Other recent authoritative guidance issued by the FASB (including technical corrections to the ASC), the American Institute of Certified Public Accountants, and the SEC during the three months ended December 31, 2021 did not, or are not expected to, have a material effect on our consolidated financial statements.

159

Table of Contents

3. Financial Statement Details

Property, Plant and Equipment, Net

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




	As of December 31,
	2021		2020
Leasehold improvements	$	62,482	$	52,251
Equipment	54,284		34,738
Construction in progress	16,575		1,333
Software	1,544		2,376
Furniture & fixtures	1,052		1,015
Building	—		22,690
Gross property, plant and equipment	135,937		114,403
Less: Accumulated depreciation and amortization	53,074		41,862
Property, plant and equipment, net	$	82,863	$	72,541

In September 2021, we entered into a sale transaction with Nant Capital, a related party, for a building located at 557 South Douglas Street, El Segundo, California. We subsequently leased back the building for an initial seven-year lease term with an option to extend the lease for 2 additional seven-year periods. The net proceeds from the transaction totaled $21.9 million and the net carrying value of the building was $20.5 million at the time of the transaction. We accounted for the transfer as a sale of an asset to an entity under common control, recorded the transfer at book value and recognized the excess of net consideration over carrying book value of $1.4 million as a capital contribution received from Nant Capital. See Note 8, Related-Party Agreements, for further information.

Depreciation and amortization expense related to property, plant and equipment totaled $14.2 million, $12.7 million and $14.0 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Intangible Assets, Net

As of December 31, 2021 and 2020, the company only had indefinite-lived IPR&D intangible assets, which were obtained from business acquisitions. During 2020, we determined to discontinue the LMP1 and LMP/IPS programs based on the results gathered from the preclinical data during the third quarter of 2020. As a result, the carrying value of the IPR&D relating to the LMP1 and LMP/IPS program was written down to zero and we recorded an impairment charge of $10.7 million on the consolidated statement of operations. No such charges were recorded during the years ended December 31, 2021 and 2019.

Convertible Note Receivable

In 2016, we executed a convertible promissory note with Riptide Bioscience, Inc., or Riptide, and advanced Riptide a principal amount of $5.0 million. The note bears interest at a per annum rate of five percent (5%). The original term of the promissory note requires that the entire unpaid principal amount and all unpaid accrued interest shall become fully due and payable upon the earlier of (i) the three (3) year anniversary of the issuance date, and (ii) when we accelerate the maturity of the note upon the occurrence of an event of default. In the event of qualified financing, the outstanding principal amount and unpaid accrued interest automatically convert into the most senior class of preferred stock sold in such qualified financing at a 25% discount to the price per share paid for such preferred stock. In addition, in the event of a change in control, we have the option to be paid in cash or to convert, immediately prior to the closing of such transaction, the outstanding indebtedness into Riptide’s most senior class of equity securities at a 25% discount to the price per share paid for such equity securities in such transaction.

160

Table of Contents

Concurrent with the transaction, we entered into an exclusive license agreement with Riptide to obtain worldwide exclusive rights, with the right to sublicense, certain know-how related to RP-182, RP-233 and RP-183. We are required to pay a single-digit royalty on net sales of the licensed products on a country-by-country basis. Pursuant to the license agreement, we are also required to make cash milestone payments upon successful completion of certain clinical, regulatory and commercial milestones up to an aggregate amount of $47.0 million for the first three indications of the licensed product with a maximum payment amount of $100.0 million.

In 2019, we and Riptide entered into a first amendment to the convertible promissory note. Under the agreement, we extended the maturity of the promissory note to the earlier of, a) the later of, i) the completion of non-clinical IND enabling studies by the company, or ii) December 31, 2020; and b) when we accelerate the maturity of the note upon the occurrence of an event of default. No other terms and conditions of the promissory note were modified. Concurrently, we also entered into a first amendment to the exclusive license agreement with Riptide and extended the achievement dates for certain clinical trial milestones related to the licensed products. This option for receiving a 25% discount was determined to have an immaterial value at inception and life to date of the note, as the probability of a future qualifying event is remote. All other terms and conditions of the license agreement continued in full force and effect. This promissory note is still outstanding as of December 31, 2021. The convertible note receivable balance was $6.4 million and $6.1 million, which included accrued interest of $1.4 million and $1.1 million as of December 31, 2021 and 2020, respectively

Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities consist of the following (in thousands):




	As of December 31,
	2021		2020
Accrued bonus	$	8,316	$	5,288
Accrued construction costs	8,145		—
Accrued dissenting shares (Note 7)	7,118		6,769
Accrued professional and service fees	6,909		7,668
Accrued preclinical and clinical trial costs	5,842		4,339

Accrued compensation	5,613		3,891








Other	9,444		8,816
Accrued expenses and other liabilities	$	51,387	$	36,771

Interest and Investment (Loss) Income, Net

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


	Year Ended December 31,
	2021		2020		2019
Unrealized (losses) gains from equity securities	$	(4,615)	$	1,577	$	(321)
Interest income	836		1,725		2,764
Investment (amortization expense) accretion income, net	(488)		(858)		3
Net realized gains (losses) on investments	167		(9)		(4)
Interest and investment (loss) income, net	$	(4,100)	$	2,435	$	2,442

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

161

Table of Contents

4. Financial Instruments

Investments in Marketable Debt Securities

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


	December 31, 2021
	Weighted- Average Remaining Contractual Life (in years)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Current:
Corporate debt securities	0.5	$	129,190	$	10	$	(36)	$	129,164
Foreign bonds	0.4	116		—		(1)		115
Mutual funds		35		3		—		38
Current portion		129,341		13		(37)		129,317
Noncurrent:
Foreign bonds	5.0	719		103		—		822
Noncurrent portion		719		103		—		822
Total		$	130,060	$	116	$	(37)	$	130,139

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


	December 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Current:
Corporate debt securities	$	54,789	$	2	$	(19)	$	54,772
Mutual funds	35		2		—		37
Current portion	54,824		4		(19)		54,809
Noncurrent:
Foreign bonds	861		89		—		950
Noncurrent portion	861		89		—		950
Total	$	55,685	$	93	$	(19)	$	55,759

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


	December 31, 2021
	Less than 12 months				More than 12 months
	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
Corporate debt securities	$	86,158	$	(36)	$	—	$	—
Mutual funds	—		—		34		(2)
Foreign bonds	115		(1)		113		(1)
Total	$	86,273	$	(37)	$	147	$	(3)

162

Table of Contents


	December 31, 2020
	Less than 12 months				More than 12 months
	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
Corporate debt securities	$	42,762	$	(19)	$	—	$	—
Total	$	42,762	$	(19)	$	—	$	—

We evaluated our securities for other-than-temporary impairment, and we did not recognize any other-than-temporary impairment losses for the years ended December 31, 2021, 2020 and 2019.

Realized gains and losses on sales of available-for-sale marketable debt securities were not significant for the years ended December 31, 2021, 2020 and 2019.

Marketable Equity Securities

We held investments in marketable equity securities with readily determinable fair values of $6.7 million and $6.3 million as of December 31, 2021 and 2020, respectively. Unrealized losses recorded on these securities totaled $4.6 million and $0.3 million for the years ended December 31, 2021 and 2019, and an unrealized gain recorded on these securities totaled $1.6 million for the year ended December 31, 2020, respectively, in interest and investment (loss) income, net, on the consolidated statements of operations. We recorded a realized gain totaling $0.2 million from sales of marketable equity securities in interest and investment (loss) income, net, on the consolidated statement of operations for the year ended December 31, 2021.

Non-Marketable Equity Securities

In 2017, we participated in a Series B convertible preferred stock financing and invested $8.5 million in Viracta Therapeutics, Inc. (Viracta), a clinical-stage drug development company with whom we have an exclusive worldwide license to develop and commercialize one of their proprietary drug candidates, which was initially recorded at cost. In 2018, we purchased additional convertibles notes totaling $0.7 million, which could be converted into preferred stock of Viracta under certain circumstances. Effective in early 2019, the notes, together with accrued interest then outstanding, were converted to Series B preferred stock resulting in an increase to our investment in Viracta’s Series B convertible preferred stock of $0.8 million. In 2019, we exercised warrants to acquire 253,120 shares of Viracta common stock.

We have elected to apply the measurement alternative under ASC 321, pursuant to which we measure our investment in Viracta at cost, less impairment, adjusted for observable price changes in an orderly market for an identical or similar investment of the same issuer, with such changes recognized on the consolidated statements of operations.

On December 31, 2020, we reduced the carrying value by $1.4 million due to the observable price change, which was included in other income (expense), net, on the consolidated statements of operations. As of December 31, 2020, the carrying value of our investment in Viracta, which is reflected in non-marketable equity investment, on the consolidated balance sheets, totaled $7.8 million.

In February 2021, Viracta merged with Sunesis Pharmaceuticals, Inc. (Sunesis), a public company. In connection with this transaction, our preferred stock investment in Viracta was converted into 1,562,604 shares of Viracta common stock effective February 25, 2021. The fair value of investment is accounted as marketable equity securities and is reflected in marketable securities, on the consolidated balance sheets, totaled $5.7 million as of December 31, 2021.

163

Table of Contents

5. Fair Value Measurements

Recurring Valuations

Financial assets and liabilities measured at fair value on a recurring basis are summarized below (in thousands):


	Fair Value Measurements at December 31, 2021
	Total			Level 1		Level 2		Level 3
Assets:
Current:
Cash and cash equivalents	$	181,101	(1)	$	51,421	$	129,680	$	—
Equity securities	6,698		(2)	6,698		—		—
Corporate debt securities	129,164			—		129,164		—
Foreign bonds	115			115		—		—
Mutual funds	38			38		—		—
Noncurrent:
Foreign bonds	822			822		—		—
Total assets measured at fair value	$	317,938		$	59,094	$	258,844	$	—
Liabilities:
Contingent consideration	$	(409)	(3)	$	(388)	$	—	$	(21)


	Fair Value Measurements at December 31, 2020
	Total			Level 1		Level 2		Level 3
Assets:
Current:
Cash and cash equivalents	$	34,915		$	34,915	$	—	$	—
Corporate debt securities	54,772			—		54,772		—
Equity securities	6,337			6,337		—		—
Mutual funds	37			37		—		—
Noncurrent:
Foreign bonds	950			950		—		—
Total assets measured at fair value	$	97,011		$	42,239	$	54,772	$	—
Liabilities:
Contingent consideration	$	(972)	(3)	$	—	$	—	$	(972)

_______________


(1)			Amounts shown as a Level 2 measurement include government-sponsored securities of $75.0 million, corporate debt securities of $54.2 million, and commercial paper of $0.5 million with original maturities of less than 90 days.


(2)			Our equity securities include a $5.7 million investment in Viracta. As of December 31, 2020, the carrying value of our investment in Viracta, which was reflected in non-marketable equity investment, on the consolidated balance sheets, was $7.8 million.


(3)			Contingent consideration is recorded at estimated fair value and revalued each reporting period until the related contingency is resolved. The fair value measurement is based on inputs that are unobservable and significant to the overall fair value measurement (i.e., a Level 3 measurement within the fair value hierarchy) and are reviewed periodically by management. See Note 7, Commitments and Contingencies—Contingent Consideration Related to Business Combinations, for further information.

164

Table of Contents

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


	For the Year Ended December 31,
	2021		2020		2019
Fair value, beginning of year	$	(972)	$	(1,725)	$	(1,004)
Consideration paid	419		—		(786)
Net decrease in fair value	144		753		65
Fair value, end of year	$	(409)	$	(972)	$	(1,725)

Non-Recurring Valuations

Non-financial assets and liabilities are recognized at fair value subsequent to initial recognition when they are deemed to be other-than-temporarily impaired. There were no material non-financial assets and liabilities deemed to be other-than-temporarily impaired and measured at fair value on a non-recurring basis for the years ended December 31, 2021, 2020 and 2019.

6. Collaboration and License Agreements

Collaboration Agreements

National Cancer Institute

2015 NCI CRADA

In May 2015, Etubics Corporation (Etubics) entered into a Cooperative Research and Development Agreement (CRADA) with the U.S. Department of Health and Human Services (HHS) as represented by the National Cancer Institute (NCI) of the National Institutes of Health (NIH) to collaborate on the preclinical and clinical development of an adenovirus technology expressing tumor-associated antigens for cancer immunotherapy. In January 2016, we acquired all of the outstanding equity interests in Etubics and Etubics became a wholly-owned subsidiary.

Effective January 2018, our subsidiary NantCell assumed the CRADA and it was amended to cover a collaboration for the preclinical and clinical development of our proprietary yeast-based Tarmogens expressing tumor-associated antigens and proprietary adenovirus technology expressing tumor-associated antigens for cancer immunotherapy. Pursuant to the CRADA, the NCI provides scientific staff and other support necessary to conduct research and related activities as described in the CRADA.

During the term of the CRADA, we were required to make annual payments of $0.6 million to the NCI for support of research activities. We made payments of $0.6 million in each of the years ended December 31, 2021 and 2020, respectively, and recorded $0.6 million in research and development expense, on the consolidated statements of operations for the years ended December 31, 2021 and 2020.

In November 2021, NantCell entered into a third amendment to the CRADA, which was effective as of March 16, 2021. The principal changes effected by the third amendment are the following: (i) assignment of the CRADA from NantCell to ImmunityBio; (ii) modification of the research plan; (iii) extension of the CRADA term through May 2026; and (iv) an increase in funding for a total of $1.3 million per year, payable in semi-annual installments from 2022 through 2025.

Pursuant to the updated CRADA research plan, NCI and ImmunityBio will collaborate on the preclinical and clinical development of ImmunityBio’s proprietary adenovirus platform expressing tumor-associated antigens; proprietary yeast platform expressing tumor-associated antigens; proprietary agent Anktivaand derivatives, agent N-808 and derivatives, and/or TxM product candidates; proprietary recombinant NK cells and mAbs; proprietary RNA vaccines and adjuvants; and other proprietary agents owned or controlled by ImmunityBio as contemplated in the research plan, for cancer immunotherapy.

165

Table of Contents

In accordance with the terms of the amended CRADA, the company is required to make an additional $0.7 million payment within 30 days of the execution date in addition to a $0.6 million payment to the NCI for support of research activities during 2021. We made a payment of $0.7 million and recorded an additional $0.5 million for the third amendment in research and development expense, on the consolidated statement of operations for the year ended December 31, 2021.

National Institute of Deafness and Communication Disorders

2021 NIDCD CRADA

In February 2021, we entered into a CRADA with HHS as represented by the National Institute of Deafness and Communication Disorders (NIDCD) of the NIH to conduct collaborative analysis of human clinical trial samples from clinical trials using our proprietary recombinant NK cells and/or mAbs for preclinical development in monotherapy and in combination immunotherapies. The CRADA has a two-year term commencing on February 22, 2021 and expiring on February 22, 2023. During the term of the agreement, we are required to provide $0.1 million per year to the NIDCD for support of the research activities. We made a payment of $0.1 million during the year ended December 31, 2021.

Under any of the CRADAs, any party may unilaterally terminate the agreement by providing timely advance written notice to the other party before the desired termination date.

Pursuant to the terms of the CRADAs, we have an option to elect to negotiate an exclusive or non-exclusive commercialization license to any inventions discovered in the performance of any of the CRADAs. The parties jointly own any inventions and materials that are jointly produced by employees of both parties in the course of performing activities under the CRADAs.

Amyris Joint Venture

In December 2021, ImmunityBio and Amyris, Inc. (Amyris) entered into a 50:50 joint venture arrangement and formed a new limited liability company to conduct the business of the joint venture, to accelerate the commercialization of a next-generation COVID-19 vaccine utilizing IDRI’s RNA vaccine platform to which Amyris holds a license. As part of the limited liability agreement, we agreed to contribute $1.0 million in cash and priority access to our manufacturing capacity for the joint venture product. Amyris contributed $1.0 million in cash and rights to its license agreement with IDRI for the IDRI RNA platform for the field of COVID-19. The value of the manufacturing access right and the license right was determined by the board of directors of the joint venture to be $9.0 million, respectively. Both parties agreed to enter into a separate manufacturing and supply agreement and a sublicense agreement within 90 days of the execution of the joint venture agreement. Both parties agreed to make additional capital contributions in cash, in proportion to their respective interests, as determined by the board of directors of the joint venture (two members appointed by us and two members appointed by Amyris). The joint venture agreement stipulates the initial terms for equal representation in the management of the newly-formed joint venture. We considered the joint venture entity as a VIE and determined that we are not the primary beneficiary of the VIE. We accounted for the joint venture using the equity method of accounting, and recorded our 50% share of the net loss from the joint venture totaling $0.8 million in other expense, net, on the consolidated statement of operations for the year ended December 31, 2021.

License Agreements

EnGeneIC Licensing Agreement

During the fourth quarter of 2021, we signed a binding term sheet with EnGeneIC for an exclusive, worldwide license to develop, manufacture and commercialize their patented EDV nanocell technology as a single agent in certain cancer fields and with respect to the treatment and prevention of COVID-19 and in combination with our COVID-19 vaccine and anti-cancer drugs in a more broadly defined field of use. The companies have agreed to a 50:50 split of the net profit from worldwide sales of EDV-based products, and we have agreed to pay certain periodic license fees.

166

Table of Contents

Infectious Disease Research Institute

In May 2021, we entered into two license agreements with the Infectious Disease Research Institute (IDRI) pursuant to which we received a license to certain patents and know-how relating to IDRI’s (i) adjuvant formulations for the treatment, prevention and/or diagnosis of SARS-CoV-2 (the IDRI Adjuvant Formulation License Agreement) and (ii) RNA vaccine platform as further described below (the IDRI RNA License Agreement). Under both agreements, we were obligated to pay one-time, non-creditable, non-refundable upfront cash payments totaling $2.0 million. In addition, under the IDRI Adjuvant Formulation License Agreement we owe IDRI milestone payments to a total of up to $2.5 million based on the achievement of certain development and regulatory milestones for the first licensed product and royalties on annual net sales of licensed products on a country-by-country and product-by-product basis of a low-single digit percentage, subject to certain royalty-reduction provisions. Under these agreements, we made a $2.0 million upfront payment and recognized $2.0 million in research and development expense, on the consolidated statement of operations, and no milestone fees were incurred for the year ended December 31, 2021.

In September 2021, we amended and restated the IDRI RNA License Agreement, pursuant to which IDRI granted us an exclusive, worldwide, sublicensable license to IDRI’s rights to an RNA vaccine platform for the development and commercialization of certain therapeutic, diagnostic or prophylactic products for the prevention, treatment or diagnosis of any indication, other than those subject to pre-existing third-party license grants, including, without limitation, SARS-CoV-2. Pursuant to the terms of the amended and restated IDRI RNA License Agreement, we were required to make an additional one-time, non-creditable, non-refundable, upfront payment to IDRI of $1.5 million. The company is also required to pay license maintenance fees to IDRI as follows: $3.0 million in 2022 and $5.5 million annually from 2023 through 2030. The company may terminate the restated agreement without cause by paying IDRI a $10.0 million one-time early termination fee. In addition, the milestone payments to IDRI based on the achievement of certain development and regulatory milestones for the first licensed product were amended to a total of up to $4.0 million. We are required to pay royalties on annual net sales of licensed products on a country-by-country and product-by-product basis of a low to mid-single digit percentage. We made a payment of $1.5 million and recorded in research and development expense, on the consolidated statement of operations for the year ended December 31, 2021.

In connection with the license agreements, in May 2021 we also entered into a sponsored research agreement (SRA) with IDRI pursuant to which we will fund continued research of at least $2.0 million per year, payable in four equal quarterly installments each year until May 2024, or such year of earlier termination. For the year ended December 31, 2021, we recorded $1.2 million in research and development expense, on the consolidated statement of operations related to the SRA.

Viracta License Agreement

In 2017, we entered into an agreement with Viracta under which we were granted exclusive worldwide rights to Viracta’s Phase 2 drug candidate, VRx-3996 (nanatinostat), for use in combination with our platform of NK cell therapies. In consideration for the license, we are obligated to pay Viracta mid-single digit percentage royalties on net sales of licensed products for therapeutic use and milestone payments ranging from $10.0 million to $25.0 million up to an aggregate maximum of $100.0 million for various regulatory approvals and cumulative net sales levels. We may terminate the agreement, at our sole discretion, in whole or on a product by product and/or country by country basis, at any time upon 90 days’ prior written notice. In addition, either party may terminate the agreement in the event of a material breach or for bankruptcy of the other party. To date, we have not ~~been~~had incurred any royalty or milestone payment obligations under this agreement, including during the years ended December 31, 2021, 2020 and 2019.

167

Table of Contents

7. Commitments and Contingencies

Contingent Consideration Related to Business Combinations

VivaBioCell, S.p.A.

In April 2015, NantWorks, LLC (NantWorks), a related party, acquired a 100% interest in VivaBioCell, S.p.A. (VivaBioCell) through its wholly-owned subsidiary, VBC Holdings, LLC, (VBC Holdings) for $0.7 million, less working capital adjustments. In June 2015, NantWorks contributed its equity interest in VBC Holdings to the company, in exchange for cash consideration equal to its cost basis in the investment. VivaBioCell develops bioreactors and products based on cell culture and tissue engineering in Italy.

In connection with our acquisition of VBC, we are obligated to pay the former owners contingent consideration upon the achievement of certain milestones related to the GMP-in-a-Box technology. A clinical milestone totaling $0.8 million was earned by the former owners of VivaBioCell, of which $0.4 million was paid during the year ended December 31, 2021. The remaining $0.4 million was accrued as of December 31, 2021 and is expected to be paid in 2022. If the regulatory milestone is achieved, we are obligated to pay approximately $2.3 million.

Altor BioScience Corporation

In connection with the 2017 acquisition of Altor BioScience Corporation (Altor), we issued contingent value rights (CVRs) under which we agreed to pay the prior stockholders of Altor approximately $304.0 million upon successful approval of the Biologics License Application (BLA) or foreign equivalent, for Anktiva by December 31, 2022 and approximately $304.0 million upon the first calendar year before December 31, 2026 in which worldwide net sales of Anktiva exceed $1.0 billion (with amounts payable in cash or shares of our common stock or a combination thereof). Dr. Soon-Shiong and his related party hold approximately $279.5 million in the aggregate of CVRs and they have both irrevocably agreed to receive shares of the company’s common stock in satisfaction of their CVRs. We may be required to pay ~~U.S.~~the other prior Altor stockholders up to $164.2 million in settlement of the CVRs relating to the regulatory milestone and up to $164.2 million of the CVRs relating to the sales milestone should they choose to have the CVRs paid in cash instead of common stock. As the transaction was recorded as an asset acquisition, future CVR payments will be recorded when the corresponding events are probable of achievement or the consideration becomes payable.

Litigation

Altor BioScience, LLC Litigation

In 2017, NantCell announced it had entered into a definitive merger agreement to acquire Altor BioScience Corporation. An action captioned Gray v. Soon-Shiong, et al. was filed in Delaware Chancery Court by plaintiffs Clayland Boyden Gray (Gray) and Adam R. Waldman. The plaintiffs, two minority stockholders, asserted claims against the company and other defendants for (1) breach of fiduciary duty and (2) aiding and abetting breach of fiduciary duty and filed a motion to enjoin the merger. The court denied the motion and permitted the merger to close.

Subsequent to the close of the merger, in 2017 the plaintiffs (joined by two additional minority stockholders, Barbara Sturm Waldman and Douglas E. Henderson (Henderson)) filed a second amended complaint, asserting claims for (1) appraisal; (2) quasi-appraisal; (3) breach of fiduciary duty; and (4) aiding and abetting breach of fiduciary duty. The defendants moved to dismiss the second amended complaint, raising grounds that included a “standstill” agreement under which defendants maintained that Gray and Adam R. Waldman and Barbara Strum Waldman (the Waldmans) agreed not to bring the lawsuit.

168

Table of Contents

In a second action, Dyad Pharmaceutical Corporation (Dyad) filed a petition in Delaware Chancery Court for appraisal in connection with the merger. Respondent moved to dismiss the appraisal petition in 2018, arguing in part that the petition was barred by the same “standstill” agreement. In 2018, the court heard oral arguments on the motions to dismiss in both consolidated cases and converted the motions to dismiss into motions for summary judgment with regard to the “standstill” agreement argument (the Converted Motions).

The court issued an oral ruling in 2019 that dismissed certain claims and dismissed Altor BioScience from the action. The following claims remained: (a) the appraisal claims by all plaintiffs and Dyad (against Altor BioScience, LLC), and (b) Henderson’s claims for breach of fiduciary duty and aiding and abetting breach of fiduciary duty.

In 2019, the court issued a written order implementing its ruling on the Converted Motions (the Implementing Order). In the Implementing Order, the court confirmed that all fiduciary duty claims brought by Gray, both individually and as trustee of the Gordon Gray Trust f/b/o C. Boyden Gray, were dismissed. Gray and the Waldmans filed answers denying the counterclaims and asserting defenses. The plaintiffs then moved for leave to file a third amended complaint to add two former Altor stockholders as plaintiffs and a fiduciary duty claim on behalf of a purported class of former Altor stockholders, which the defendants opposed.

In 2020, the court granted the plaintiffs’ motion, and the plaintiffs filed the third amended complaint. In 2020, the defendants answered the third amended complaint and asserted counter claims against the plaintiffs. The defendants are seeking damages for attorneys’ fees and costs incurred as a result of the breaches of the “standstill” agreements discussed above and of stockholder releases. The plaintiffs filed an answer denying the counterclaims and asserting defenses. Trial was set to commence on August 8, 2022, but the parties have received notice that the Vice Chancellor assigned to the case is retiring, and there may be a new trial date.

The shares of the former Altor stockholders seeking appraisal met the definition of dissenting shares under the merger agreement and were not entitled to receive any portion of the merger consideration at the closing date. However, these dissenting shares will automatically be converted to receive the portion of the merger consideration they were entitled to, on the later of the closing date or when the stockholder withdraws or loses the right to demand appraisal rights. Payment for dissenting shares will be on the same terms and conditions originally stated in the merger agreement.

As of December 31, 2021 and 2020, we had accrued $7.1 million and $6.8 million, respectively, related to the dissenting share obligations. The accrued amount represents the estimated low-end of the range of currently estimated payout amounts in accordance with ASC Topic 450, Contingencies, after considering the reasonable outcomes for settling the dissenting stockholder dispute along with any accrued statutory interest. We cannot reasonably estimate a range of loss or likelihood of loss beyond the amounts recorded for dissenting shares as of December 31, 2021, as the dissenting stockholders have not yet provided a quantified value of their claim and, therefore, an upper end of the range of loss cannot be determined. Discovery is ongoing, and the class certification motion relating to the putative class has not yet been decided. We reassess the reasonableness of the recorded amount at each reporting period. We believe the claims lack merit and intend to continue defending the case vigorously.

Sorrento Therapeutics, Inc. Litigation

Sorrento Therapeutics, Inc. (Sorrento), derivatively on behalf of NANTibody, filed an action in the Superior Court of California, Los Angeles County (the Superior Court) against the company, Dr. Soon-Shiong and Charles Kim. The action alleged that the defendants improperly caused NANTibody to acquire IgDraSol, Inc. from our affiliate NantPharma, LLC (NantPharma) and sought to have the transaction undone and the purchase amount returned to NANTibody. In 2019, we filed a demurrer to several causes of action alleged in the Superior Court action, and Sorrento filed an amended complaint, eliminating Mr. Kim as a defendant and dropping the causes of action we had challenged in our demurrer.

169

Table of Contents

Sorrento filed a related arbitration proceeding (the Cynviloq arbitration) against Dr. Soon-Shiong and NantPharma; the company is not named in the Cynviloq arbitration. In 2020, the Superior Court granted Dr. Soon-Shiong’s request for a preliminary injunction barring Sorrento from pursuing claims against him in the Cynviloq arbitration. Sorrento then filed the claims it had previously asserted in arbitration against Dr. Soon-Shiong in the Superior Court, and at Sorrento’s request, the arbitrator entered an order dismissing Sorrento’s claims against Dr. Soon-Shiong in the Cynviloq arbitration. The hearing in the Cynviloq arbitration commenced in June 2021, and continued with breaks until early October 2021. The parties are now engaged in post-hearing briefing, and it is expected that summations will be scheduled in mid-July 2022.

Also in 2019, the company and Dr. Soon-Shiong filed cross-claims in the Superior Court action against Sorrento and its Chief Executive Officer Henry Ji, asserting claims for fraud, breach of contract, breach of the covenant of good faith and fair dealing, tortious interference with contract, unjust enrichment, and declaratory relief. Our claims allege that Dr. Ji and Sorrento breached the terms of an exclusive license agreement between the company and Sorrento related to Sorrento’s antibody library and that Sorrento did not perform its obligations under the exclusive license agreement. The Superior Court ruled that the company’s claims should be pursued in arbitration and that Dr. Soon-Shiong’s claims could be pursued in Superior Court.

In 2019, the company, along with NANTibody, filed an arbitration against Sorrento and Dr. Ji asserting our claims relating to the exclusive license agreement. In 2020, Sorrento sent letters purporting to terminate the exclusive license agreement with the company, and an exclusive license agreement with NANTibody and demanding the return of its confidential information and transfer of all regulatory filings and related materials. As required pursuant to the exclusive license agreements, both parties must engage in good-faith negotiations before attempting to invoke any termination provision contained in the agreement. Notwithstanding such negotiations, Sorrento sent a letter purporting to terminate the exclusive license agreements, maintaining the negotiations did not reach a successful resolution. We believe we have cured any perceived breaches during the 90-day contractual cure period provided under the agreements. Sorrento filed counterclaims against the company and NANTibody in the arbitration and requested leave to file a dispositive motion. The hearings in the NANTibody arbitration commenced in April 2021 and concluded in early August 2021. After post-hearing briefing was concluded, the parties were notified on November 30, 2021 that the arbitrator in the NANTibody arbitration had passed away. A substitute arbitrator was appointed on February 25, 2022, and the parties will work with the substitute arbitrator to conclude the proceedings. We intend to prosecute our claims, and to defend the claims asserted against us, vigorously. An estimate of the possible loss or range of loss cannot be made at this time.

Shenzhen Beike Biotechnology Co. Ltd. Arbitration

In 2020, we received a Request for Arbitration before the International Chamber of Commerce, International Court of Arbitration. The arbitration relates to a license, development, and commercialization agreement that Altor entered into with Beike in 2014, which agreement was amended and restated in 2017, pursuant to which Altor granted to Beike an exclusive license to use, research, develop and commercialize products based on Anktiva in China for human therapeutic uses. In the arbitration, Beike is asserting a claim for breach of contract under the license agreement. Among other things, Beike alleges that we failed to use commercially reasonable efforts to deliver to Beike materials and data related to Anktiva. Beike is seeking specific performance, or in the alternative, damages for the alleged breaches. On September 25, 2020, the parties entered into a standstill and tolling agreement under which, among other things, the parties affirmed they will perform certain of their obligations under the license agreement by specified dates and agreed that all deadlines in the arbitration are indefinitely extended. The standstill agreement may be terminated by any party on ten calendar days’ notice, and upon termination, the parties will have the right to pursue claims arising from the license agreement in any appropriate tribunal. The parties have been providing periodic updates to the International Chamber of Commerce confirming a stay of all proceedings during the standstill. Given that this action remains at the pleading stage and no discovery has occurred, it remains too early to evaluate the likely outcome of the case or to estimate any range of potential loss. We believe the claims lack merit and intend to defend the case vigorously and that we may have counterclaims.

170

Table of Contents

Fox Chase Cancer Center Foundation Litigation

In, 2020, ImmunityBio filed a declaratory judgment lawsuit in the Superior Court for San Diego County, California, naming Fox Chase Cancer Center Foundation and Institute for Cancer Research (ICR) as the defendants (hereafter collectively Fox Chase). This litigation relates to the license with Fox Chase and includes various intellectual property rights (the 2004 License). Our initial court filing requested the Court to find that we have not breached material obligations under the 2004 License and that Fox Chase has not and cannot terminate the 2004 License. Fox Chase filed a Cross-Complaint raising a patent inventorship challenge and moved the case to federal court. On June 4, 2021, the federal court separated the parties’ claims, and returned ImmunityBio’s declaratory judgment claims back to the San Diego County court but retained the patent inventorship challenge. On November 18, 2021, we reached a settlement with Fox Chase related to the 2004 License and agreed to a mechanism for addressing the patent inventorship dispute. There was no financial impact to the company with respect to this settlement.

Litigation Related to the Merger with ImmunityBio, Inc.

In connection with the Merger with NantCell, Inc. (formerly known as ImmunityBio, Inc., a private company), a Delaware corporation, via a wholly-owned subsidiary of NantKwest (the Merger Sub), seven complaints have been filed as individual actions in United States District Courts. Three complaints have been filed in the United States District Court for the District of Delaware against NantKwest and its directors and are captioned Hargett v. NantKwest, Inc., et al., 1:21‑cv‑00197 (filed February 11, 2021) (the Hargett Complaint), Franchi v. NantKwest, Inc., et al., 1:21‑cv‑00218 (filed February 16, 2021) (the Franchi Complaint), and Gross v. NantKwest, Inc., et al., 1:21‑cv‑00223 (filed February 17, 2021) (the Gross Complaint). One complaint has been filed in the United States District Court for the Southern District of New York and is captioned Leaman v. NantKwest, Inc., et al., 1:21‑cv‑01351 (filed February 16, 2021) (the Leaman Complaint). Two complaints have been filed in the United States District Court for the Southern District of California and are captioned Weiss v. NantKwest, Inc., et al., 3:21‑cv‑00280 (filed February 16, 2021) (the Weiss Complaint) and Carlisle v. NantKwest, Inc., et al., 3:21‑cv‑00304 (filed February 19, 2021) (the Carlisle Complaint). One complaint has been filed in the United States District Court for the Eastern District of New York and was captioned Shenk v. NantKwest, Inc., et al., 1:21‑cv‑00871 (filed February 18, 2021) (the Shenk Complaint, and collectively with the Hargett Complaint, the Franchi Complaint, the Gross Complaint, the Leaman Complaint, the Weiss Complaint, and the Carlisle Complaint, the Merger Actions). The Shenk Complaint was voluntarily dismissed on March 10, 2021. The Franchi Complaint was voluntarily dismissed on May 6, 2021. The Leaman Complaint was voluntarily dismissed on May 7, 2021. The Hargett Complaint and the Gross Complaint were both voluntarily dismissed on May 18, 2021. The Hargett Complaint and the Gross Complaint also brought claims against ImmunityBio, Inc. and Merger Sub. The Merger Actions generally allege that the Definitive Proxy Statement filed with the SEC on February 2, 2021 misrepresents and/or omits certain purportedly material information relating to financial projections, analysis performed by the financial advisor to NantKwest’s Special Committee, alleged past engagements of the Special Committee’s financial advisor and industry consultant, and the terms of the engagement of such consultant. The Merger Actions assert violations of Section 14(a) of the Securities Exchange Act of 1934, as amended (the Exchange Act), and Rule 14a-9 promulgated thereunder against all defendants and violations of Section 20(a) of the Exchange Act against NantKwest’s directors. The Merger Actions seek, among other things, an injunction enjoining the stockholder vote on the Merger and the consummation of the Merger unless and until certain additional information is disclosed to NantKwest’s stockholders, costs of the action, including plaintiffs’ attorneys’ fees and experts’ fees, and other relief the Court may deem just and proper. Neither the stockholder vote on the Merger nor the Merger were enjoined and occurred on March 8 and March 9, 2021, respectively. The company cannot predict the outcome of the Merger Actions. The company believes the Merger Actions are without merit and the company and the individual defendants intend to vigorously defend against the Merger Actions and any subsequently filed similar actions. If additional similar complaints are filed, absent new or significantly different allegations, the company will not necessarily disclose such additional filings.

171

Table of Contents

Securities Litigation

In 2016, a putative securities class action complaint captioned Sudunagunta v. NantKwest, Inc., et al., 16-cv-01947 was filed in federal district court for the Central District of California related to our restatement of certain interim financial statements for the periods ended June 30, 2015 and September 30, 2015. A number of similar putative class actions were filed in federal and state ~~income taxes because~~courts in California. The plaintiffs asserted causes of ~~current~~action for alleged violations of Sections 11 and ~~accumulated net operating losses.~~15 of the Securities Act of 1933 and Sections 10(b) and 20(a) of the Exchange Act, and Rule 10b-5 promulgated thereunder. The ~~federal returns~~plaintiffs sought unspecified damages, costs and attorneys’ fees, and equitable/injunctive or other relief on behalf of putative classes of persons who purchased or acquired our securities during various time periods from July 28, 2015 through March 11, 2016.

In 2018, the district court granted the plaintiffs’ motions for ~~tax years 2017 through 2020 remain open~~class certification and to ~~examination~~strike plaintiffs’ claims under the Exchange Act and Rule 10b-5. The parties informed the Ninth Circuit that they had reached a settlement in principle, moved to stay in appellate proceedings, and notified the district court that they had reached a settlement in principle. The plaintiffs then filed an unopposed motion for preliminary approval of the settlement and notice to class members.

A final approval hearing was held, and the ~~state returns remain subject~~district court granted final approval and entered judgment on May 31, 2019. Under the terms of the settlement, we paid $12.0 million to ~~examination~~the plaintiffs as a full and complete settlement of the litigation. The company was responsible for ~~tax years 2016 through 2020. Carryforward attributes that were generated~~$1.2 million of the settlement amount, which was recognized in ~~years where~~selling, general and administrative expense, on the ~~statute~~consolidated statement of ~~limitations is closed may still be adjusted upon examination~~operations for the year ended December 31, 2018, while the remaining $10.8 million was funded by our insurance carriers under our directors’ and officers’ insurance policy. The settlement amount was deposited into a settlement fund during the year ended December 31, 2019.

Stipulation of Settlement

In 2019, following approval by our Board of Directors, we entered into a settlement agreement (the Stipulation of Settlement) with three stockholders of the company, each of whom had submitted a stockholder demand for the Board of Directors to take action to remedy purported harm to the company resulting from certain alleged wrongful conduct concerning, among other things, disclosures about Dr. Soon-Shiong’s compensation and a related-party lease agreement. The Stipulation of Settlement called for us to adopt certain governance changes, and for the three stockholders to file a stockholder derivative action in the Superior Court of the State of California, County of San Diego, followed by an application for court approval of the Stipulation of Settlement. The court entered an order preliminarily approving the Stipulation of Settlement. Pursuant to the Stipulation of Settlement, we provided stockholders with notice of the settlement and the final settlement hearing.

Under the terms of the Stipulation of Settlement, which received final approval by the ~~Internal Revenue Service~~court on August 9, 2019, the company paid attorney fees of $0.5 million to the plaintiffs as part of the settlement. Of that amount, we were responsible for half, which was recognized in selling, general and administrative expense, on the consolidated statement of operations for the year ended December 31, 2019, while the other half was funded by our insurance carrier. The settlement amount was deposited into a settlement fund during the year ended December 31, 2019.

Precision Biologics, Inc. Settlement

In 2015, the company invested $50.0 million in cash in Precision in exchange for 41.0 million shares of Precision’s series A preferred stock (representing a 68.5% ownership interest in Precision at the time of the investment). In 2017, a Precision stockholder filed a complaint captioned Feldman v. Soon-Shiong, et al. (individually and derivatively on behalf of Precision), and filed an amended complaint against the company and other defendants asserting claims for breach of contract (including the implied covenant of good faith and fair dealing), tortious interference with contract, breach of the fiduciary duty of loyalty, the appointment of a custodian, fraud in the inducement, and violation of state “Blue Sky” laws. The defendants moved to dismiss the amended complaint. In 2018, the court heard oral arguments and issued an opinion granting in part, and denying in part, defendants’ motion.

172

Table of Contents

In 2019, the parties completed fact discovery other than depositions (and certain document discovery subsequently ordered by the court). The parties agreed in principle to the terms of a settlement and filed a settlement stipulation with the court. A settlement hearing before the court was held, and the court approved the settlement, which was finalized on July 20, 2019. Under the terms of the settlement, the company ended its investment in Precision. As part of the deconsolidation, we withdrew $29.3 million in cash from the investment on our books and transferred $2.5 million to Precision. In addition to $20.2 million of accumulated losses recorded in prior years, which represented the expected losses associated with giving up our preferred stock ownership and absorbing losses arising from the deconsolidation, we recorded a $0.9 million loss associated with the final settlement for the year ended December 31, 2019.

Lease Arrangements

We lease property in multiple facilities across the U.S. and Italy, including facilities located in El Segundo and Culver City, CA that are leased from related parties. Substantially all of our operating lease right-of-use assets and operating lease liabilities relate to facilities leases. See Note 8, Related-Party Agreements, for additional information about our related-party leases.

Our leases generally have initial terms ranging from two to ten years and often include one or more options to renew. These renewal terms can extend the lease term from one to seven years, and are included in the lease term when it is reasonably certain that we will exercise the option.

Information regarding our leases is as follows:


	As of December 31,
	2021		2020
Weighted average remaining lease term	7.8 years		3.9 years
Weighted average discount rate	9.6	%	9.0	%

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


	Year Ended December 31,
	2021		2020		2019
Operating lease costs	$	7,977	$	5,668	$	5,795
Variable lease costs	2,862		3,564		2,764
Total lease costs	$	10,839	$	9,232	$	8,559

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


	Year Ended December 31,
	2021		2020		2019
Cash paid for operating leases (excluding variable lease costs)	$	9,034	$	7,843	$	7,571

173

Table of Contents

Future minimum lease payments as of December 31, 2021, including $24.1 million related to options to extend lease terms that are reasonably certain of being exercised, are presented in the following table (in thousands). Common area maintenance costs and taxes are not included in these payments.


Years ending December 31:	Operating Leases
2022	$	8,962
2023	8,316
2024	7,768
2025	7,214
2026	5,259
Thereafter	26,098
Total future minimum lease payments	63,617
Less: Interest	20,597
Less: Tenant improvement allowance receivable	2,941
Present value of operating lease liabilities	$	40,079

In February 2021, but effective on January 1, 2021, we entered into a lease agreement with 605 Nash, LLC, a related party, for a facility primarily used for pharmaceutical development and manufacturing purposes. In May 2021, but effective on April 1, 2021, we entered into an amendment to our lease agreement with 605 Nash, LLC. See Note 8, Related-Party Agreements, for further information.

Unconditional Purchase Obligations

Unconditional purchase obligations are defined as an agreement to purchase goods or services that are enforceable and legally binding (non-cancelable, or cancelable only in certain circumstances). In the normal course of business, we enter into unconditional purchase obligation arrangements with a CMO to reserve manufacturing slots in its cGMP manufacturing facility for the manufacture and supply of cGMP batches per FDA and European Medicines Agency (EMA) regulations for commercial use. The total amount of future non-cancelable purchase commitments related to the manufacture of cGMP batches is $3.5 million and $3.5 million for the years ending December 31, 2022 and 2023, respectively.

We estimate our total unconditional purchase obligation commitment (for contracts with terms in excess of one year) as of December 31, 2021, at $2.6 million. Payments by year are estimated as follows: 2022 ($2.1 million) and 2023 ($0.5 million). These commitments relate primarily to hosted software license subscription fees and related implementation costs and our pro-rata share is passed-through to us without any markup under the shared services agreement with NantWorks, as further discussed in Note 8, Related-Party Agreements. The purchase obligation amounts do not represent the entire anticipated purchases in the future, but represent only those items for which we are contractually obligated. The majority of our goods and services are purchased as needed, with no unconditional commitment. For this reason, these amounts do not provide an indication of our expected future cash outflows related to purchases.

Commitments

We did not enter into any significant contracts or material unconditional purchase commitments during the year ended December 31, 2021, other ~~respective tax authority. All~~than those disclosed in these consolidated financial statements.

174

Table of Contents

8. Related-Party Agreements

We conduct business with several affiliates under written agreements and informal arrangements. Below is a summary of outstanding balances and a description of significant relationships (in thousands):




	As of December 31,
	2021		2020
Due from related party–NantBio, Inc.	$	1,294	$	1,294
Due from related party–NantOmics LLC	—		591
Due from related parties–Various	39		118
Total due from related parties	$	1,333	$	2,003

Due to related party–NantWorks	$	1,113	$	10,650
Due to related party–Duley Road, LLC	1,380		2,787
Due to related party–NantBio, Inc.	943		943
Due to related party–605 Nash, LLC	—		—
Due to related party–Immuno-Oncology Clinic, Inc.	507		271
Due to related party–Various	—		187
Total due to related parties	$	3,943	$	14,838

Our Executive Chairman, Global Chief Scientific and Medical Officer, and principal stockholder founded and has a controlling interest in NantWorks, which is a collection of companies in the healthcare and technology space. As described below, we have entered into arrangements with NantWorks, and certain affiliates of NantWorks, to facilitate the development of new genetically modified NK cells for our product pipeline. Affiliates of NantWorks are also affiliates of the company due to the common control by and/or common ownership interest of our Executive Chairman and Global Chief Scientific and Medical Officer.

NantWorks

Under the NantWorks shared services agreement executed in November 2015, but effective August 2015, NantWorks, a related party, provides corporate, general and administrative, manufacturing strategy, research and development, regulatory and clinical trial strategy, and other ~~state jurisdictions remain open~~support services. We are charged for the services at cost plus reasonable allocations of employee benefits, facilities and other direct or fairly allocated indirect costs that relate to ~~examination. No income tax returns~~the employees providing the services. For the years ended December 31, 2021, 2020 and 2019, we recorded $4.4 million, $6.0 million and $6.8 million, respectively, in selling, general and administrative expense, and $0.4 million, $2.0 million and $1.5 million, respectively, of expense reimbursements under this arrangement in research and development expense, on the consolidated statements of operations. These amounts exclude certain general and administrative expenses provided by third-party vendors directly for our benefit, which were reimbursed to NantWorks based on those vendors’ invoiced amounts without markup by NantWorks.

As of December 31, 2021 and 2020, we owed NantWorks a net amount of $1.1 million and $10.7 million, respectively, for all agreements between the two affiliates, which is included in due to related parties, on the consolidated balance sheets. We also recorded $2.2 million and $1.0 million of prepaid expenses for services that have been passed through to the company from NantWorks as of December 31, 2021 and 2020, respectively, which are ~~currently under examination by taxing authorities.~~

~~Stock Repurchases~~

included in prepaid expenses and other current assets, on the consolidated balance sheets.

175

Table of Contents

In November 2015, we entered into a facility license agreement with NantWorks for approximately 9,500 rentable square feet of office space in Culver City, California, which was converted to a research and development laboratory and a cGMP manufacturing facility. The initial license was effective from May 2015 through December 2020. The base rent for the initial lease term was $47,000 per month, with annual increases of 3% beginning in January 2017. In September 2020, we amended this agreement to extend the term of this lease through December 31, 2021. Commencing January 1, 2021, the base rent increased by 3% to approximately $54,500 per month. Subsequent to December 31, 2021, the lease term will automatically renew on a month-to-month basis, terminable by either party with at least 30 days’ prior written notice to the other party. Lease expense for this facility totaling $0.7 million, $0.6 million and $0.6 million for the years ended December 31, 2021, 2020 and 2019, respectively, was recorded in research and development expense, on the consolidated statements of operations.

Immuno-Oncology Clinic, Inc.

Beginning in 2017, we entered into multiple agreements with Immuno-Oncology Clinic, Inc. (the Clinic) to conduct clinical trials related to certain of our product candidates. The Clinic is a related party as it is owned by an officer of the company and NantWorks manages the administrative operations of the Clinic. Prior to June 30, 2019, one of our officers was an investigator or sub-investigator for all of our trials conducted at the Clinic.

In July 2019, we entered into a new agreement with the Clinic (the Clinic Agreement), which became effective on July 1, 2019. The Clinic Agreement, as amended on March 31, 2020, covers clinical trial and research-related activities on a non-exclusive basis relating to existing clinical trials, commenced prior to July 1, 2019, and prospective clinical trials and research projects. The Clinic Agreement also specifies certain services and related costs that are excluded from the Clinic Agreement. Prior to commencing any work under the Clinic Agreement, the parties have agreed to execute written work orders setting forth the terms and conditions related to specific services to be performed, including financial terms. For clinical trials that commenced prior to July 1, 2019, excluding certain NantCell trials not covered by the agreement, fees incurred for services performed after July 1, 2019 are covered under the Clinic Agreement and applied towards the below-mentioned prepayments. The Clinic Agreement allows for automatic renewal and additional extensions beyond the initial one-year term.

In consideration of the services to be performed under the Clinic Agreement, as amended on March 31, 2020, we agreed to make payments of up to $7.5 million to the Clinic, of which $3.8 million and $1.9 million were paid in July 2019 and October 2019, respectively. As amended, a conditional payment of $1.9 million shall be due and payable at such time, if any, that the payments made in July 2019 and October 2019 have been earned by the Clinic through the performance of services. On a quarterly basis, our prepayment is increased by a nominal interest credit computed in accordance with terms specified in the Clinic Agreement.

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

We executed a clinical trial work order under the Clinic Agreement for an open-label, Phase 1 study of PD‑L1 t‑haNK™ for infusion in subjects with locally advanced or metastatic solid cancers. In July 2020, but effective on June 22, 2020, we and NantCell executed a clinical trial work order under our existing master agreement with the Clinic for an open-label, randomized, comparative Phase 2 study of our proprietary IL‑15 superagonist (Anktiva) and aldoxorubicin hydrochloride (aldoxorubicin) and our PD‑L1 t‑haNK with standard-of-care chemotherapy versus standard-of-care chemotherapy for patients with locally advanced or metastatic pancreatic cancer treated as first-line, second-line, or third-line or greater, in three separate cohorts, respectively.

176

Table of Contents

During the year ended December 31, 2021, ImmunityBio executed multiple work orders under an existing master agreement with the Clinic. Under these work orders, the parties agreed that the Clinic would serve as a site for the following multi-site clinical trials:

•A Phase 1B open-label study of the safety, reactogenicity, and immunogenicity of prophylactic vaccination with second-generation E1/E2B/E3-deleted adenoviral-COVID-19 in normal healthy volunteers;

•A Phase 1B open-label study of the safety, reactogenicity, and immunogenicity of subcutaneously and orally administered prophylactic vaccination with second-generation E1/E2B/E3-deleted adenoviral-COVID-19 in normal healthy volunteers;

•A Phase 1 study of the safety, reactogenicity, and immunogenicity of subcutaneously- and orally-administered supplemental spike & nucleocapsid-targeted COVID‑19 vaccine to enhance T cell-based immunogenicity in participants who have already received a vaccine authorized for emergency use;

•A Phase 1 study of the safety, reactogenicity, and immunogenicity of a supplemental spike & nucleocapsid-targeted COVID‑19 vaccine to enhance T cell-based immunogenicity in participants who have already received a vaccine authorized for emergency use; and

•A Phase 1 open-label study of M‑ceNK cells in subjects with locally advanced or metastatic solid tumors.

In the second quarter of 2021, based on a review of our then updated clinical trial programs post-Merger, we updated our estimates of the investigator fees for the clinical trials that were underway or planned at the Clinic. As certain programs costs are excluded from and certain services are subject to credit adjustments under the Clinic agreements, we determined the expected future fees for services to be performed were less than the carrying value of the prepaid asset on the consolidated balance sheets. As a result, we partially wrote down the value of our prepayments under the Clinic agreements and recorded approximately $1.9 million in research and development expense, on the consolidated statement of operations for the three months ended June 30, 2021. In November 2021, we completed a review of alternative structures that could support our more complex clinical trial requirementsand made a decision to explore a potential transition of clinical trials at the Clinic to a new structure (including contracting with a new, non-affiliated professional corporation) to be determined and agreed upon by all parties and currently planned for the first half of 2022. Based on this decision to explore a potential transition, we determined that it was more likely than not that the previously recorded prepaid asset would not result in the collection of fees for services performed by the Clinic as contemplated in the original agreements. As a result, we wrote down the remaining value of our prepaid asset and recorded approximately $2.5 million in research and development expense, on the consolidated statement of operations for the three months ended December 31, 2021.

For the years ended December 31, 2021, 2020 and 2019, we incurred $1.6 million, $0.9 million and $1.1 million in research and development expense, on the consolidated statements of operations related to the Clinic Agreement. As of December 31, 2021 and 2020, we owed the Clinic $0.5 million and $0.3 million, respectively, for services excluded from the Clinic Agreement. As of December 31, 2020, we had prepaid balances related to the Clinic Agreement of $4.7 million.

Brink Biologics, Inc.

In 2015, we entered into an agreement with Brink Biologics, Inc. (Brink) whereby we granted to Brink worldwide exclusive licenses to the use of certain cell lines and intellectual property for non-clinical laboratory testing. Brink is a related party as our Executive Chairman, Global Chief Scientific and Medical Officer and our principal stockholder, and our Chief Corporate Affairs Officer and member of our board of directors, collectively own more than 50% of Brink’s outstanding shares. We recognized revenue of $0.4 million for the year ended December 31, 2021 related to this license.

177

Table of Contents

NantBio, Inc.

In March 2016, NantBio and the NCI entered into a CRADA. The initial five-year agreement covered NantBio and its affiliates, including us. Under the agreement, the parties collaborated on the preclinical and clinical development of proprietary recombinant NK cells and mAbs in monotherapy and combination immunotherapies. In each of the contractual years under the agreement, we paid $0.6 million to the NCI for services under the agreement. We recognized expenses related to this agreement ratably over a 12-month period for each funding year. This CRADA expired in March 2021. In November 2021, we entered into a third amendment to the 2015 NCI CRADA, which was effective as of March 16, 2021, and transferred the research plan from this expired CRADA into the research plan of the amended 2015 NCI CRADA. We made a payment of $0.7 million and recorded $0.5 million in research and development expense, on the consolidated statements of operations related to the third amendment for the year ended December 31, 2021. See Note 6, Collaboration and License Agreements—National Cancer Institute, for further information.

In August 2018, we entered into a supply agreement with NantCancerStemCell, LLC (NCSC), a 60% owned subsidiary of NantBio (with the other 40% owned by Sorrento). Under this agreement, we agreed to supply VivaBioCell’s proprietary GMP-in-a-Box bioreactors and related consumables, made according to specifications mutually agreed to with both companies. The agreement has an initial term of five years and renews automatically for successive one-year terms unless terminated by either party in the event of material default upon prior written notice of such default and the failure of the defaulting party to remedy the default within 30 days of the delivery of such notice, or upon 90 days’ prior written notice by NCSC. We recognized revenue of $0.3 million for the year ended December 31, 2021. We recorded $0.1 million and $0.3 million of deferred revenue for bioreactors that were delivered but not installed as of December 31, 2021 and 2020, respectively. As of December 31, 2021 and 2020, we recorded $0.9 million in due to related parties, on the consolidated balance sheets related to this agreement.

In 2018, we entered into a shared service agreement pursuant to which we are charged for services at cost, without mark-up or profit by NantBio, but including reasonable allocations of employee benefits that relate to the employees providing the services. In April 2019, we agreed with NantBio to transfer certain NantBio employees and associated research and development projects, comprising the majority of NantBio’s business, to the company. After the transfer, we settled certain employee bonuses and benefits that were accrued by NantBio for 2018. As of December 31, 2021 and 2020, we recorded a net receivable from NantBio of $1.3 million, which included $1.0 million for employee bonuses and $0.3 million for vendor costs we paid on behalf of NantBio.

NantOmics, LLC

In 2019, we made a strategic decision and transferred certain employees from NantOmics, a related party that is controlled by our Executive Chairman and Global Chief Scientific and Medical Officer, to the company. After the transfer, we settled certain employee bonuses and benefits that were accrued by NantOmics for the year ended December 31, 2020. We recorded no receivable and a $0.6 million receivable from NantOmics as of December 31, 2021 and 2020, respectively.

605 Doug St, LLC

In September 2016, we entered into a lease agreement with 605 Doug St, LLC, an entity owned by our Executive Chairman and Global Chief Scientific and Medical Officer, for approximately 24,250 rentable square feet in El Segundo, California, which has been converted to a research and development laboratory and a cGMP manufacturing facility. The lease runs from July 2016 through July 2023. We have the option to extend the lease for 1 additional three-year term through July 2026. We have included the first option to extend the lease term for three years as part of the initial lease term as it is reasonably certain that we will exercise the option, which implies lease expiration in July 2026. The base rent is approximately $72,385 per month, with annual increases of 3% that began in July 2017. Lease expense for this facility totaling $0.9 million for the years ended December 31, 2021, 2020 and 2019, respectively, was recorded in research and development expense, on the consolidated statements of operations.

178

Table of Contents

Duley Road, LLC

In February 2017, Altor BioScience Corporation (succeeded by our wholly-owned subsidiary Altor BioScience, LLC), through its wholly-owned subsidiary, entered into a lease agreement with Duley Road, a related party that is indirectly controlled by our Executive Chairman and Global Chief Scientific and Medical Officer, for approximately 12,000 rentable square feet of office and cGMP manufacturing facility space in El Segundo, California. The lease term is from February 2017 through October 2024. We have the option to extend the initial term for 2 consecutive five-year periods through October 2034. The base rent is approximately $40,700 per month, with annual increases of 3% that began in November 2018. As of December 31, 2021 and 2020, we recorded rent payable to Duley Road of $0.2 million and $1.3 million, respectively. For the years ended December 31, 2021 and 2020, we recorded rent expense of $0.6 million and $0.5 million, respectively, which is reflected in researchand development expense, on the consolidated statements of operations.

Effective in January 2019, we entered into two lease agreements with Duley Road for a second building located in El Segundo, California. The first lease is for the first floor of the building with approximately 5,650 rentable square feet. The lease has a seven-year term commencing in September 2019. The second lease is for the second floor of the building with approximately 6,488 rentable square feet. The lease has a seven-year term commencing in July 2019. Both floors of the building are used for research and development and office space. We have options to extend the initial terms of both leases for 2 consecutive five-year periods through 2036. The base rent for the 2 leases is approximately $35,800 per month that increases at a rate of 3% per year.

As of December 31, 2021 and 2020, we recorded $0.9 million and $0.9 million of leasehold improvement payables, respectively, and $0.3 million and $0.6 million of lease-related payables to Duley Road, which were included in due to related parties, on the consolidated balance sheets. For the years ended December 31, 2021 and 2020, we recorded $0.4 million and $0.3 million of rent expense for the two leases, respectively, which was included in research and development expense, on the consolidated statements of operations.

605 Nash, LLC

In February 2021, but effective on January 1, 2021, we entered into a lease agreement with 605 Nash, a related party, whereby we leased approximately 6,883 rentable square feet (the Initial Premises) in a two story mixed use building containing approximately 64,643 rentable square feet on 605-607 Nash Street in El Segundo, California. This facility is used primarily for pharmaceutical development and manufacturing purposes. The lease term commenced in January 2021 and expires in December 2027, and includes an option to extend the lease for 1 three-year term through December 2030. The base rent is approximately $20,300 per month with an annual increase of 3% on January 1 of each year during the lease term. In addition, under the agreement, we are required to pay our share of estimated property taxes and operating expenses. We have included the first option to extend the lease term for three years as part of the initial lease term as it is reasonably certain that we will exercise the option. We will receive a rent abatement for the first seven months, and a tenant improvement incentive of $0.3 million from the landlord for costs and expenses associated with the construction of tenant improvements for the Initial Premises. During the year ended December 31, 2021, we recorded rent expense of $0.2 million, which is reflected in research and development expense, on the consolidated statement of operations.

In May 2021, but effective on April 1, 2021, we entered into an amendment to our Initial Premises lease with 605 Nash. The amendment expanded the leased square feet by approximately 57,760 rentable square feet (the Expansion Premises). The lease term of the Expansion Premises commenced in April 2021 and expires in March 2028, whereby the company has the option to extend the initial term for three years. Per the terms of the amendment, the term of the Initial Premises lease was extended for an additional three months and now expires in March 2031. Base rent for the Expansion Premises is approximately $170,400 per month with annual increases of 3% on April 1 of each year. We are responsible for the build out of the facility space and associated costs. The amended lease provides for a rent abatement for the first seven months, and for a tenant improvement allowance of approximately $2.6 million for costs and expenses related to improvements made by us to the Expansion Premises. During the year ended December 31, 2021, we incurred $1.5 million of rent expense related to the Expansion Premises lease agreement.

179

Table of Contents

557 Doug St, LLC

On September 27, 2021, we entered into a Membership Interest Purchase Agreement with Nant Capital (the Purchase Agreement). Nant Capital is a related party controlled by Dr. Soon-Shiong. The Purchase Agreement transferred all outstanding membership interests in 557 Doug St, LLC from the company to Nant Capital. The only asset owned by 557 Doug St, LLC is the improved property located at 557 South Douglas Street, El Segundo, California with a building area of approximately 36,434 rentable square feet (the Douglas Property).

The purchase price under the Purchase Agreement was $22.0 million, and after the offset prorated property taxes of $0.1 million, the net proceeds from the sale were $21.9 million. An independent appraisal of the Douglas Property (the Appraisal) assigned the Douglas Property a value of $22.0 million. The net carrying value of the property was $20.5 million as of the closing date. We accounted for the transfer as a sale of an asset to an entity under common control, recorded the transfer at book value and recognized the excess of net consideration over carrying book value of $1.4 million as a capital contribution received from Nant Capital in additional paid-in capital, on the consolidated statement of stockholders’ deficit for the year ended December 31, 2021.

In September 2021, we entered into a lease agreement with Nant Capital under which we leased back 557 South Douglas Street for an initial lease term of seven years, which commenced on September 27, 2021. The monthly base rent under the lease is approximately $81,976 per month with an annual increase of 3% on October 1 of each year beginning in 2022 during the initial term and, if applicable, during the option term. For the first two years under the lease we will not be charged rent; we will begin paying rent on October 1, 2023 at the current monthly base rent. We prepaid the first month rent and security deposit totaling $0.2 million upon the execution of the lease. We have an option to extend the lease for 2 additional seven-year periods when the prior term expires. We have included the first option to extend the lease term for seven years as part of the initial lease term as it is reasonably certain that we will exercise the option, which implies lease expiration on September 30, 2035. The lease is classified as an operating lease. As of December 31, 2021, we recorded $0.3 million of rent expense for the lease, which was included in research and development expense, on the consolidated statements of operations.

420 Nash, LLC

On September 27, 2021, we entered into a lease agreement with 420 Nash, LLC, a related party, whereby we leased an approximately 19,125 rentable square foot property located at 420 Nash Street, El Segundo, California, to be used primarily for the warehousing and storage of drug manufacturing supplies, products and equipment and ancillary office space.

Under the terms of the lease agreement, the lease term began on October 1, 2021 and expires on September 30, 2026. The base rent is approximately $38,250 per month with an annual increase of 3% on October 1 of each year beginning in 2022 during the initial term. The company is responsible for the payment of real property taxes, repairs and maintenance, improvements, insurance and operating expenses during the term of the lease. We will receive a rent abatement for the first month of the lease, and a one-time improvement allowance of $15,000 from the landlord that will be credited against base rent obligations for the second month of the lease.

The company has options to extend the lease term for 2 additional consecutive periods of five years each. At the beginning of each option term, the initial monthly base rent will be adjusted to market rent (as defined in the lease agreement) with an annual increase of 3% during the option term. We have included the first option to extend the lease term for five years as part of the initial term of the lease as it is reasonably certain that we will exercise the option, which implies lease expiration in September 2031. As of December 31, 2021, we recorded $0.1 million of rent expense for the lease, which was included in research and development expense, on the consolidated statement of operations.

180

Table of Contents

Related-Party Notes Payable

Our related-party notes payable consist of the following (in thousands):


						Total Notes and Interest Payable as of December 31,
Related-Party Notes Payable	Note Year	Outstanding Advances		Interest Rate		2021			2020

Nant Capital (1)	2021	$	300,000	SOFR + 5.4%		$	299,236	(1)	$	—
Nant Capital (2)	2015	55,226		5.0	%	61,367		(3)	58,482		(3)
Nant Capital (2)	2020	50,000		6.0	%	53,810		(4)	50,764		(4)
Nant Capital (5)	2021	40,000		6.0	%	40,000		(5)	—
NantMobile (2)	2019	55,000		3.0	%	58,359		(6)	56,660		(6)
NantWorks (2)	2017	43,418		5.0	%	54,067		(7)	51,546		(7)
NCSC (2)	2018	33,000		5.0	%	38,746		(8)	36,901		(8)
Total related-party notes payable		$	576,644			$	605,585		$	254,353

_______________


(1)			The outstanding advance is due and payable on December 17, 2022. This loan bears interest at Term SOFR + 5.4%, which is compounded annually and payable quarterly commencing on March 17, 2022. As of December 31, 2021, the interest rate on this loan was 5.47%. Accrued and unpaid interest on this note totaled $0.7 million as of December 31, 2021. In the event of a default on the loan (as defined in the promissory note), including if we do not repay the loan at maturity, the company has the right, at its sole option, to convert the outstanding principal amount and accrued and unpaid interest due under this note into fully paid and non-assessable shares of the company’s common stock at a price per share equal to $5.67. Debt issuance cost of $1.5 million paid to the lender in December 31, 2021 was recorded as a reduction of the principal amount of the note.

(2)			All outstanding advances and accrued and unpaid interest is due and payable on September 30, 2025. Interest on related-party notes payable is compounded annually. We may prepay the outstanding principal at any time without premium, penalty or the prior consent of the issuer. All outstanding amounts under the notes become due and payable upon certain bankruptcy and insolvency-related events. There are no equity or equity-linked convertible rights related to these promissory notes.

(3)			Accrued and unpaid interest on this note totaled $6.1 million and $3.3 million as of December 31, 2021 and 2020, respectively.

(4)			Accrued and unpaid interest on this note totaled $3.8 million and $0.8 million as of December 31, 2021 and 2020, respectively.

(5)			The outstanding principal is due and payable on September 30, 2025. Interest on this related-party note is compounded annually and payable quarterly commencing on June 30, 2021. We paid $2.0 million in interest on this loan during the year ended December 31, 2021. All outstanding amounts under the note become due and payable upon certain bankruptcy and insolvency-related events. There are no equity or equity-linked convertible rights related to this promissory note.

(6)			Accrued and unpaid interest on this note totaled $3.4 million and $1.7 million as of December 31, 2021 and 2020, respectively.

(7)			Accrued and unpaid interest on this note totaled $10.6 million and $8.1 million as of December 31, 2021 and 2020, respectively.

(8)			Accrued and unpaid interest on this note totaled $5.7 million and $3.9 million as of December 31, 2021 and 2020, respectively.

181

Table of Contents

The following table summarizes our estimated future contractual obligations for related-party notes payable as of December 31, 2021 (in thousands):


	Principal Payments		Interest Payments (1)			Total
2022	$	300,000	$	18,808	(2)	$	318,808
2023	—		2,400			2,400
2024	—		2,407			2,407
2025	276,644		85,823		(3)	362,467
Total principal and estimated interest due on related-party notes	$	576,644	$	109,438		$	686,082

_______________


(1)			Interest payments on our fixed-rate debt are calculated based on contractual interest rates and scheduled maturity dates. Interest payments on our variable-rate debt are calculated based on schedule maturity dates and the Term SOFR rate plus the contractual spread per the loan agreement. The rate on this debt as of December 31, 2021 was 5.47%.

(2)			Interest shown includes $0.7 million of accrued and unpaid interest as of December 31, 2021 related to the $300.0 million variable-rate loan. Interest on our $300.0 million variable-rate loan and our $40.0 million fixed-rate loan are payable on a monthly and quarterly basis, respectively.

(3)			Interest shown includes $29.7 million of accrued and unpaid interest of December 31, 2021. Interest on these notes is payable at maturity on September 30, 2025.

9. Stockholders’ Deficit

Stock Authorized for Issuance

As of December 31, 2021, the company was authorized to issue up to 500,000,000 shares of its common stock, par value $0.0001 per share, and 20,000,000 shares of our preferred stock, par value $0.0001 per share. As of December 31, 2021, there were 397,830,044 shares of our common stock outstanding (excluding 163,800 shares held by a majority owned subsidiary of the company that are treated as treasury shares for accounting purposes).

Effective February 1, 2022, ImmunityBio amended and restated its Amended and Restated Certificate of Incorporation to increase the number of shares of common stock that the company is authorized to issue from 500,000,000 shares to 900,000,000 shares. The number of shares of preferred stock that the company is authorized to issue remains unchanged at 20,000,000 shares. See Note 13, Subsequent Events.

Common Stock Issued in Connection with the Merger

Under the terms of the Merger Agreement, at the Effective Time of the Merger, each share of NantCell common stock, par value $0.001 per share, issued and outstanding immediately prior to the Effective Time, subject to certain exceptions as set forth in the Merger Agreement, was converted automatically into a right to receive 0.8190 newly issued shares of common stock, par value $0.0001 per share, resulting in the issuance of approximately 273.7 million shares of Company Common Stock.From and after the Effective Time, all of such NantCell shares ceased to be outstanding, were canceled and ceased to exist. At the Effective Time, each share of our common stock issued and outstanding immediately prior to the Effective Time, remained an issued and outstanding share of the combined company.

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

182

Table of Contents

Stock Repurchases

2015 Share Repurchase Program

In 2015, the Board of Directors approved the 2015 Share Repurchase Program, ~~(Note 11) allowing the~~which allows our CEO or ~~CFO,~~chief financial officer (CFO), to repurchase on behalf of the company, ~~to repurchase~~ from time to time in the open market or in privately negotiated transactions, up to $50.0 million of our outstanding shares of common stock, exclusive of any commissions, markups or expenses. The timing and amounts of any purchases were and will continue to be based on market conditions and other factors, including price, regulatory requirements and other corporate considerations. The 2015 Share Repurchase Program does not require the purchase of any minimum number of shares and may be suspended, modified, or discontinued at any time without prior notice. We have financed, and expect to continue to finance, the purchases with existing cash balances. ~~As it is the intent for the repurchased shares to be retired, we have elected to account for the shares~~Shares repurchased under ~~the constructive retirement method. For shares repurchased in excess of par, we allocate the purchase price in excess of par value to accumulated deficit.~~

~~Revenue Recognition~~

~~On January 1, 2018, we adopted the provisions of FASB ASC Topic 606,~~ ~~Revenue from Contracts with Customers~~, or ASC 606. This guidance requires that entities recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We adopted ASC 606 on January 1, 2018 by recording the cumulative effectthis program are formally retired through approval of the ~~adoption to accumulated deficit. We applied the new guidance to contracts that were not complete as~~Board of ~~January 1, 2018. Implementation of ASC 606 did not have a material impact on our consolidated financial statements.~~

We derive substantially all of our revenue from non-exclusive license agreements with a limited number of pharmaceutical and biotechnology companies granting them the right to use our cell lines and intellectual property for non-clinical use. These agreements generally include upfront fees and annual research license fees for such use, as well as commercial license fees for sales of the licensee products developed or manufactured using our intellectual property and cell lines.

Under the company’s license agreements with customers, the company typically promises to provide a license to use certain cell lines and related patents, the related know-how, and future research and development data that affect the license. We have concluded that these promises represent one performance obligation due to the highly interrelated nature of the promises. We provide the cell lines and know-how immediatelyDirectors upon ~~entering into the contracts. The research and development data is provided throughout the term of the contract when and if available.~~

Our license agreement with Precigen (Note 8) included a nonrefundable upfront payment of $0.4 million, received when we entered into the contract in 2010. In this instance, we determined that under ASC 606 it would be appropriate to recognize the initial milestone payment at a point in time, when we transferred the license. In this case, the intellectual property provided under the contract is functional intellectual property under ASC 606 and was determined to be a distinct performance obligation in the context of the arrangement. Prior to adoption, the upfront payment had been initially recorded as deferred revenue and was being recognized into revenue on a straight-line basis. As a result, upon adoption of ASC 606, we adjusted our accumulated deficit for the effects of recognizing revenue upfront for the initial milestone. The adjustment to accumulated deficit upon adoption was not material.

~~125~~

The license agreements may include nonrefundable upfront payments, event-based milestone payments, sales-based royalty payments, or some combination of these. The event-based milestone payments represent variable consideration and we use the most likely amount method to estimate this variable consideration. Given the high degree of uncertainly around achievement of these milestones, we do not recognize revenue from these milestone payments until the uncertainty associated with these payments is resolved. We currently estimate variable consideration related to milestone payments to be 0 and, as such, 0 revenue has been recognized for milestone payments. We recognize revenue from sales-based royalty payments when or as the sales occur. On a quarterly basis, we re-evaluate our estimate of milestone variable consideration to determine whether any amount should be included in the transaction price and recorded in revenue prospectively.

Upon adoption, we changed our accounting policy from accounting for milestones payments under the milestone method to accounting for variable consideration as discussed above. The change in accounting policy did not change any amounts in the financial statements because of the significant uncertainty surrounding the estimate of variable consideration for milestone payments.

To date, we have generated minimal revenue related to the non-clinical use of our cell lines and intellectual property. We have 0 products approved for commercial sale and we have not generated any revenue from product sales. If we fail to complete the development of our product candidates in a timely manner or fail to obtain regulatory approval for them, we may never be able to generate substantial future revenue.

~~Research and Development Costs~~

Major components of research and development costs include cash compensation and other personnel-related expenses, stock-based compensation, depreciation and amortization expense on research and development property and equipment and intangible assets, costs of preclinical studies, clinical trials and related clinical manufacturing, costs of drug development, costs of materials and supplies, facilities cost, overhead costs, regulatory and compliance costs, and fees paid to consultants and other entities that conduct certain research and development activities on our behalf. Costs incurred in research and development are expensed as incurred.

Included in research and development costs are clinical trial and research expenses based on the services performed pursuant to contracts with research institutions and clinical research organizations and other vendors that conduct clinical trials and research on our behalf. We record accruals for estimated costs under these contracts. When evaluating the adequacy of the accrued liabilities, we analyze the progress of the studies or clinical trials, including the phase or completion of events, invoices received, contracted costs and purchase orders. Significant judgments and estimates are made in determining the accrued balances at the end of any reporting period based on the facts and circumstances known at that time. Although we do not expect the estimates to be materially different from the amounts actually incurred, if the estimates of the status and timing of services performed differs from the actual status and timing of services performed, we may report amounts that are too high or too low in any particular period. Actual results could differ from our estimates.

~~Stock-Based Compensation~~

~~We account for stock-based compensation under the provisions of FASB ASC Topic 718,~~ ~~Compensation—Stock Compensation~~, or ASC 718, which applies to share-based payments issued to employees and nonemployees in exchange for goods or services. Under ASC 718, the fair value of an equity-classified award is estimated on the grant date without regard to service or performance conditions. The grant date fair values for options and warrants are estimated using the Black-Scholes-Merton option pricing model, and the grant date fair values for restricted stock units, or RSUs, are based upon the closing market pricerepurchase.

No shares of our common stock ~~on the date of grant.~~

We use the straight-line method to recognize stock-based compensation expense for our outstanding share awards that do not contain a performance condition. For awards subject to performance-based vesting conditions, we assess the probability of the individual milestones under the award being achieved and stock-based compensation expense is recognized over the service period commencing once management believes the performance criteria is probable of being met. For awards with service or performance conditions, we recognize the effect of forfeitures in compensation cost in the period that the award was forfeited.

~~Litigation Costs~~

~~We expense legal fees as they are incurred.~~

~~126~~

~~Comprehensive Income (Loss)~~

Comprehensive income or loss is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Comprehensive income or loss is composed of net income (loss) and other comprehensive income (loss). Our other comprehensive income or loss consists of unrealized gains and losses on marketable debt securities classified as available-for-sale, net of income taxes.

~~Basic and Diluted Net Loss per Share of Common Stock~~

Basic net loss per share is calculated by dividing the net loss by the weighted-average number of common shares outstanding for the period. Diluted loss per share is computed similarly to basic loss per share except that the denominator is increased to include the number of additional shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were ~~dilutive.~~

As of December 31,

2020

2019

2018

Outstanding options

3,518,010

4,506,950

6,493,250

Outstanding RSUs

466,842

1,139,428

867,911

Outstanding warrants

0

0

17,589,250

Total

3,984,852

5,646,378

24,950,411

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

~~Segment and Geographic Information~~

Operating segments are defined as components of an enterprise (business activity from which it earns revenue and incurs expenses) for which discrete financial information is available and regularly reviewed by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Our chief operating decision maker is the company’s CEO. We view our operations and manage our business as a single operating and reporting segment. As of December 31, 2020 and 2019, the majority of our assets were held in the U.S. For the years ended December 31, 2020, 2019 and 2018, all of our revenue was derived in the U.S.

~~Recent Accounting Pronouncements~~

~~Application of New or Revised Accounting Standards – Adopted~~

~~In November 2018, the FASB issued Accounting Standards Update, or ASU, No. 2018-18,~~ ~~Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606~~ (ASU 2018-18). ASU 2018-18 clarifies when certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606. It also specifically addresses when the participant should be considered a customer in the context of a unit of account; adds unit of account guidance in ASC 808 to align with guidance in ASC 606; and precludes presenting revenue from a collaborative arrangement together with revenue recognized under ASC 606 if the collaborative arrangement participant is not a customer. This standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years with early adoption permitted. We adopted ASU 2018-18, as required, in the quarter ended March 31, 2020. We are a party to several collaboration arrangements as further described in Note 8, ~~Collaboration and License Agreements, however, adoption of ASU 2018-18 did not have an impact on our consolidated financial statements because the counterparties to our collaboration agreements do not meet the definition of a customer.~~

~~127~~

~~In December 2019, the FASB issued ASU 2019‑12,~~ ~~Simplifying the Accounting for Income Taxes~~, or ASU 2019‑12. The amendments in ASU 2019‑12 include removing the exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items (e.g., discontinued operations or other comprehensive income), and the exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. ASU 2019‑12 also amends other aspects of accounting for income taxes to help simplify and promote consistent application of U.S. GAAP. The guidance is effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted. We early adopted ASU 2019‑12 effective January 1, 2020, and it did not have a material impact on our consolidated financial statements. Although our adoption of ASU 2019‑12 did not have a material impact on our consolidated financial statements during the year ended December 31, 2020, it may have a material impact on our consolidated financial statements in future periods due to the removal of the exceptions discussed above. The amendments related to intraperiod tax allocation and the amendment related to calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year were applied prospectively.

~~Application of New or Revised Accounting Standards – Not Yet Adopted~~

~~In June 2016, the FASB issued ASU 2016‑13,~~ ~~Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~. The FASB subsequently issued amendments to ASU 2016‑13, which have the same effective date and transition dates as described below. The new guidance supersedes existing U.S. GAAP for measuring and recording of credit losses on financial assets measured at amortized cost by replacing the incurred-loss model with an expected-loss model. Accordingly, these financial assets will be presented at the net amount expected to be collected. This new standard also requires that credit losses related to available-for-sale debt securities be recorded as an allowance through net income rather than reducing the carrying amount under the current, other-than-temporary-impairment model. For public business entities that meet the definition of a Securities and Exchange Commission, or SEC, filer, except entities that are eligible to be a smaller reporting company as defined by the SEC, the standard is effective for annual periods beginning after December 15, 2019, and interim periods therein. For all other entities, the standard is effective for annual periods beginning after December 15, 2022, and interim periods therein. Early adoption is permitted for all entities for annual periods beginning after December 15, 2018. With certain exceptions, adjustments are to be applied using a modified-retrospective approach by reflecting adjustments through a cumulative-effect impact on retained earnings as of the beginning of the fiscal year of adoption. We continue to evaluate the impact that this new standard and its related amendments will have on our consolidated financial statements and we do not intend to early adopt this new standard.

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

~~3. Financial Statement Details~~

~~Prepaid expenses and other current assets~~

~~As of December 31, 2020 and 2019, prepaid expenses and other current assets consist of (in thousands):~~

As of December 31,

2020

2019

Prepaid preclinical and clinical trial services - with
related party (Note 10)

$
4,626

$
1,021

Insurance premium financing asset

1,421

757

Prepaid insurance

657

372

Prepaid services

607

440

Prepaid rent

589

392

Interest receivable - marketable debt securities

473

222

Prepaid supplies - with related party (Note 10)

281

467

Prepaid equipment maintenance

243

251

Prepaid license fees

233

78

Laboratory equipment deposit

66

0

Due from related parties

45

47

Insurance claim receivables

0

34

Other

44

24

$
9,285

$
4,105

~~128~~

~~Property, plant and equipment, net~~

~~As of December 31, 2020 and 2019, property, plant and equipment, net, consist of (in thousands):~~

As of December 31,

2020

2019

Leasehold improvements

$
33,680

$
33,406

Equipment

23,069

21,434

Buildings

22,690

22,690

Software

1,190

1,195

Furniture & fixtures

415

383

81,044

79,108

Accumulated depreciation

(27,117
)

(18,607
)

$
53,927

$
60,501

~~Depreciation expense related to property, plant and equipment was $9.1 million, $8.4 million and $7.3 million for the years ended December 31, 2020, 2019 and 2018, respectively.~~

~~Intangible assets, net~~

Our intangible assets were fully amortized as of March 31, 2019. Amortization expense was $0.6 million and $2.3 million for the years ended December 31, 2019 and 2018, respectively, and is included in research and development expense on the consolidated statements of operations.

~~Other assets~~

~~As of December 31, 2020 and 2019, other assets consist of (in thousands):~~

As of December 31,

2020

2019

Security deposits

$
481

$
113

Prepaid software license fees

318

0

Restricted cash

179

179

Prepaid preclinical and clinical trial services - with
related party (Note 10)

92

4,075

Due from related party

51

19

$
1,121

$
4,386

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

~~Accrued expenses~~

~~As of December 31, 2020 and 2019, accrued expenses consist of (in thousands):~~

As of December 31,

2020

2019

Accrued professional and service fees

$
2,920

$
975

Accrued bonus

2,236

2,002

Accrued compensation

1,368

1,064

Accrued laboratory equipment and supplies

641

640

Accrued preclinical and clinical trial costs

638

281

Accrued capital expenditures

337

0

Accrued franchise, sales/use and property taxes

103

200

Other

100

181

$
8,343

$
5,343

~~129~~

~~Other current liabilities~~

~~As of December 31, 2020 and 2019, other current liabilities consist of (in thousands):~~

As of December 31,

2020

2019

Financing obligation - current portion

$
1,421

$
757

Other

17

18

$
1,438

$
775

~~Investment income, net~~

~~Net investment income included the following for the years ended December 31, 2020, 2019 and 2018 (in thousands):~~

For the Year Ended December 31,

2020

2019

2018

Interest income

$
1,233

$
1,643

$
2,317

Investment (amortization expense) accretion income, net

(858
)

3

(463
)
Net realized (losses) gains on investments

(9
)

(4
)

3

$
366

$
1,642

$
1,857

~~Interest income includes interest from marketable debt securities, notes receivable, other assets, and interest from bank deposits. We did 0t recognize an impairment loss on any investments~~repurchased during the years ended December 31, ~~2020, 2019~~2021 and ~~2018.~~

~~4. Agreement and Plan of Merger with ImmunityBio~~

~~On December 21,~~ 2020 NantKwest and ImmunityBio, Inc. (ImmunityBio) entered into an Agreement and Plan of Merger (the Merger Agreement), pursuant to which NantKwest and ImmunityBio agreed to combine their businesses. The Merger Agreement provides that a wholly owned subsidiary of NantKwest will merge with and into ImmunityBio (the Merger), with ImmunityBio continuing as the surviving company and being renamed NantCell, Inc., upon the terms and subject to the conditions therein. At the effective time of the Merger (the Effective Time), NantKwest’s name, as the parent of NantCell, Inc., will be changed to “ImmunityBio, Inc.”

At the Effective Time, each share of ImmunityBio common stock issued and outstanding immediately prior to the Effective Time, subject to certain exceptions as set forth in the Merger Agreement, will be converted automatically into a right to receive 0.8190 shares of NantKwest common stock. At the Effective Time, each share of NantKwest common stock issued and outstanding immediately prior to the Effective Time, will remain an issued and outstanding share of the combined company. At the Effective Time, each outstanding option, warrant or restricted stock unit to purchase ImmunityBio common stock will be converted (using the merger exchange ratio of 0.8190) into an option, warrant or restricted stock unit, respectively, on the same terms and conditions immediately prior to the Effective Time, to purchase shares of common stock of the combined company.

Upon consummation of the Merger, on a fully-diluted basis, ImmunityBio stockholders and NantKwest stockholders will own approximately 72% and 28%, respectively, of the outstanding shares of common stock of the combined company. It is estimated that, immediately following the closing date, Dr. Patrick Soon-Shiong, our Executive Chairman and principal stockholder, and his affiliates will beneficially own, in the aggregate, approximately 82% of the common stock of the combined company.

~~Following consummation of the Merger, shares of common stock of the combined company are expected to be listed on the Nasdaq Global Select Market~~ under the ~~symbol “IBRX”.~~

Under the terms and subject to the conditions set forth in the Merger Agreement, the closing of the Merger depends on a number of conditions being satisfied, including approval of the Merger by holders of a majority of the outstanding shares of NantKwest common stock as of the NantKwest record date (excluding all shares of NantKwest common stock beneficially owned by Dr. Patrick Soon‑Shiong and his affiliates Cambridge Equities, LP and Chan Soon‑Shiong Family Foundation or any of their respective controlled affiliates or any of the directors or executive officers of NantKwest or ImmunityBio).

~~On February 1, 2021, our Registration Statement on Form S-4, which was filed with the Securities and Exchange Commission (SEC) in connection with the Merger, was declared effective by the SEC.~~

~~130~~

A special meeting of the stockholders of NantKwest will be held on March 8, 2021 to consider and vote on a proposal to approve the issuance of shares of common stock of NantKwest to security holders of ImmunityBio, and to consider and vote on a proposal to approve the Merger. Only holders of record of NantKwest common stock at the close of January 29, 2021, will be entitled to notice of and to vote at the special meeting.

~~We expect the Merger to close in the first quarter of 2021, subject to receipt of the requisite stockholder approvals and satisfaction of other customary closing conditions.~~

The Merger is expected to be accounted for as a transaction between entities under common control as Dr. Patrick Soon-Shiong is the controlling stockholder of each of NantKwest and ImmunityBio. Upon the closing of the Merger, the net assets of ImmunityBio will be combined with those of NantKwest at their historical carrying amounts and the companies will be presented on a combined basis for all historical periods presented.

~~For the year ended December 31, 2020, we incurred costs of $6.2 million in connection with our proposed merger with ImmunityBio, consisting of financial advisory, legal and other professional fees.~~

~~5. Viracta Investment~~

In June 2018, Viracta executed a 2018 Note and Warrant Purchase Agreement with existing and new investors, including us. The initial closing under the Purchase Agreement occurred in June 2018, at which point we purchased a convertible note for $0.4 million, which under certain circumstances was convertible into preferred stock of Viracta, and a warrant to purchase Viracta’s common shares. The convertible note accrued interest at 8% and had a ~~one-year~~ maturity date. In September 2018, a milestone closing under the Purchase Agreement occurred, at which point we purchased an additional convertible note for $0.4 million, which under certain circumstances was convertible into preferred stock of Viracta, and a warrant to purchase Viracta’s common shares. The convertible note accrued interest at 8% and had a ~~one-year~~ maturity date. We classified the convertible notes as held-to-maturity notes receivable on the consolidated balance sheets. Effective January 31, 2019, the notes, together with accrued interest then outstanding, were converted to Series B preferred stock resulting in an increase to our investment in Viracta’s Series B convertible preferred stock of $0.8 million. In May 2019, we exercised warrants to acquire 253,120 shares of Viracta common stock.

Based on the level of equity investment at risk, Viracta is not a VIE and therefore is not consolidated under the VIE model. In addition, we do not hold a controlling financial interest in Viracta, and therefore we do not consolidate Viracta under the voting interest model. As the preferred stock is not considered in-substance common stock, the investment is not within the scope of accounting for the investment under the equity method. As the preferred stock does not have a readily determinable fair value and does not qualify for the practical expedient to estimate fair value in accordance with ASC 820, we have elected to apply the measurement alternative under ASC 321, pursuant to which we measure our investment in Viracta at cost, less impairment, adjusted for observable price changes in an orderly market for an identical or similar investment of the same issuer, with such changes recognized in the consolidated statements of operations. Some factors we may consider in the impairment analysis include the extent to which the security has been in an unrealized loss position, the change in the financial condition and near-term prospects of the issuer, as well as security and industry specific economic conditions.

At December 31, 2020, our fair value assessment indicated that the recent offering of Viracta’s Series E preferred shares, at a lower offering price per share than the per share carrying amount of our investment in Viracta, is a directional indicator representing an observable price change in an orderly transaction for a similar investment. On December 31, 2020, we reduced the carrying value by $1.4 million due to the observable price change, which has been included in other income and expense, net, on the consolidated statements of operations. On a cumulative basis, we have recognized a reduction in carrying value of $1.4 million. At December 31, 2020, the carrying value of our investment in Viracta, which is reflected in equity investment on the consolidated balance sheets, totaled $7.8 million.

~~131~~

~~6. Financial Instruments – Investments in Marketable Debt Securities~~

~~At December 31, 2020, our investments in available-for-sale debt securities consist of (in thousands):~~

December 31, 2020

Weighted-
Average
Remaining
Contractual Life
(in years)

Amortized
Cost

Unrealized
Gains

Unrealized
Losses

Fair
Value

Current:

Corporate debt securities

0.3

$
54,789

$
2

$
(19
)

$
54,772

Current portion

0.3

54,789

2

(19
)

54,772

Total

0.3

$
54,789

$
2

$
(19
)

$
54,772

~~At December 31, 2019, our investments in available-for-sale debt securities consist of (in thousands):~~

December 31, 2019

Amortized
Cost

Unrealized
Gains

Unrealized
Losses

Fair
Value

Current:

Corporate debt securities

$
32,382

$
10

$
(3
)

$
32,389

Foreign government bonds

1,007

0

0

1,007

Government sponsored securities

2,752

0

(4
)

2,748

Current portion

36,141

10

(7
)

36,144

Noncurrent:

Corporate debt securities

1,501

0

(4
)

1,497

Noncurrent portion

1,501

0

(4
)

1,497

Total

$
37,642

$
10

$
(11
)

$
37,641

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

December 31, 2020

Less than 12 months

More than 12 months

Estimated Fair
Value

Gross Unrealized
Losses

Estimated Fair
Value

Gross Unrealized
Losses

Corporate debt securities

$
42,762

$
(19
)

$
0

$
0

Total

$
42,762

$
(19
)

$
0

$
0

December 31, 2019

Less than 12 months

More than 12 months

Estimated Fair
Value

Gross Unrealized
Losses

Estimated Fair
Value

Gross Unrealized
Losses

Corporate debt securities

$
11,021

$
(3
)

$
1,497

$
(4
)
Government sponsored securities

0

0

2,748

(4
)
Total

$
11,021

$
(3
)

$
4,245

$
(8
)

At December 31, 2020, 34 of the securities were in an unrealized loss position. We evaluated our securities for other-than-temporary impairment and concluded that the decline in value was primarily caused by current economic and market conditions. We do not intend to sell the investments and it is not more likely than not that we will be required to sell the investments before recovery of their amortized cost bases. Therefore, we did not recognize any other-than-temporary impairment loss during the years ended December 31, 2020, 2019 and 2018.

~~132~~

~~We recognized realized gains and losses on sales of available-for-sale debt securities as follows (in thousands):~~

Gross
Realized
Gains

Gross
Realized
Losses

Net
Realized
Gains (Losses)

2020

$
4

$
(13
)

$
(9
)
2019

$
4

$
(8
)

$
(4
)
2018

$
3

$
0

$
3

~~7. Fair Value Measurements~~

Fair value is defined as an exit price that would be received from the sale of an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Authoritative guidance establishes a three-level hierarchy for disclosure that is based on the extent and level of judgment used to estimate the fair value of assets and liabilities.

~~Recurring Valuations~~

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

Fair Value Measurements as of December 31, 2020

Total

Level 1

Level 2

Level 3

Assets:

Current:

Cash and cash equivalents

$
11,441

$
11,441

$
0

$
0

Corporate debt securities

54,772

0

54,772

0

Total assets measured at fair value

$
66,213

$
11,441

$
54,772

$
0

Fair Value Measurements as of December 31, 2019

Total

Level 1

Level 2

Level 3

Assets:

Current:

Cash and cash equivalents

$
15,508

$
15,508

$
0

$
0

Corporate debt securities

32,389

0

32,389

0

Foreign government bonds

1,007

0

1,007

0

Government sponsored securities

2,748

0

2,748

0

Noncurrent:

Corporate debt securities

1,497

0

1,497

0

Total assets measured at fair value

$
53,149

$
15,508

$
37,641

$
0

~~Non-recurring Valuations~~

~~8. Collaboration and License Agreements~~

~~Collaborative Arrangements~~

A collaborative arrangement is a contractual arrangement that involves a joint operating activity. These arrangements involve two or more parties who are (i) active participants in the activity, and (ii) exposed to significant risks and rewards dependent on the commercial success of the activity.

~~133~~

We have entered into the following collaborative arrangements with ImmunityBio, Inc., ImmunityBio, as described below. ImmunityBio is a related party, as it is controlled by our Executive Chairman and principal stockholder, Dr. Patrick Soon-Shiong (Note 10).

~~Joint COVID‑19 Collaboration Agreement~~

On August 21, 2020, we entered into a definitive agreement, which we refer to as the Collaboration Agreement, with ImmunityBio to pursue collaborative joint development, manufacturing and marketing of certain COVID‑19 therapeutics and vaccines. The terms of the Collaboration Agreement supersede and replace the terms of the binding term sheet executed on May 22, 2020. Through their efforts, the parties agreed to jointly develop ceNK, haNK, mesenchymal stem cells (MSC), adenovirus constructs (hAd5), and N‑803, a novel IL‑15 superagonist fusion protein, for the prevention and treatment of SARS‑CoV‑2 viral infections and associated conditions in humans, including without limitation, COVID‑19. Pursuant to the Collaboration Agreement, we have contributed our ceNK, haNK, and MSC product candidates and certain of our manufacturing capabilities, and ImmunityBio has contributed their hAd5 and N‑803 product candidates. hAd5 has been developed as a vaccine, and ceNK, haNK, MSC and N‑803 have each been developed as therapeutics for treating COVID‑19 at various stages of infection.

From and after the effective date of the Collaboration Agreement, the parties will share equally in all costs relating to developing and manufacturing of the product candidates globally with the exception of certain laboratory equipment purchases that will be borne solely by us. With the exception of N‑803, we will be primarily responsible for the manufacture of each product. Each party will be responsible for the regulatory affairs and the commercialization relating to its contributed products. The global net profits from the collaboration products will be shared 60%/40% in favor of the party contributing the product on which the sales are based except if the parties mutually agree because of certain circumstances. All net profits from sales of combined collaboration products will be shared equally. This collaboration is supervised by a joint steering committee, which is comprised of an equal number of representatives from both parties. The term of the agreement will be ~~five years~~ ~~and it is renewable for an additional~~ ~~five year~~ ~~period upon mutual agreement. Each party will also have a right to terminate in the event of material breach, bankruptcy, or insolvency.~~

For the year ended December 31, 2020, joint research activity under the Collaboration Agreement totaled $8.4 million, which has been included in research and development expense on the consolidated statements of operations. Expenses incurred during the year ended December 31, 2020 were primarily related to purchases of equipment of $5.0 million to be utilized in the manufacture of the hAd5 COVID‑19 vaccine candidate, and net program related costs of $3.4 million, after applying the eligible cost sharing under the Collaboration Agreement. Certain equipment purchases made by us during the year ended December 31, 2020, which are necessary for us to fulfil our manufacturing obligations related to the COVID‑19 program, were borne solely by us. The equipment purchases do not have an alternative use and were therefore expensed as incurred within research and development expenses. Prior to the effective date of the Collaboration Agreement, COVID‑19 related program costs incurred by us and ImmunityBio, including expenditures related to property, plant and equipment, were the responsibility of each party and not subject to the equal cost sharing. As of December 31, 2020, we owed ImmunityBio $3.3 million for net costs incurred under the Collaboration Agreement, which has been included in due to related parties on the consolidated balance sheets.

~~Cost Sharing Agreement~~

In January 2020, but effective on October 1, 2019, we entered into a Cost Allocation Agreement with ImmunityBio and its subsidiaries to co-sponsor and conduct certain combination clinical trials (each a Joint Study) pursuant to clinical trial protocols wherein at least one investigational agent is a proprietary therapeutic drug candidate owned or controlled by NantKwest and at least one other investigational agent is a proprietary therapeutic drug candidate owned or controlled by ImmunityBio. Prior to initiating any activities for a Joint Study the parties agreed to enter into written work orders describing, amongst other things, development and management responsibilities, allocation of Joint Study costs and expenses, regulatory responsibilities, and any other matters relating to the Joint Study.

Under the Cost Allocation Agreement, each of ImmunityBio and the company will receive exclusive rights to any new intellectual property developed that relates solely to its respective study drug, and the parties will have joint co-equal rights in any other intellectual property. The Cost Allocation Agreement expires on June 22, 2022 with the option to renew for additional successive ~~one-year~~ ~~terms, but work orders for any joint studies still in process at the time of termination will continue until the applicable study is completed.~~

We and ImmunityBio are splitting certain costs related to these joint studies equally in accordance with the terms of the Cost Allocation Agreement and related work orders. Shared Joint Study costs include cost related to conducting the Joint Study development activities, such as personnel related costs, as well as all costs associated with regulatory matters. Costs and expenses incurred in connection with the development, manufacturing, supply, delivery, and pre-patient administration dosing mechanism of each party’s study drug, are excluded from the shared Joint Study costs.

~~134~~

In January 2020, but effective on October 1, 2019, we executed Work Order Number One with ImmunityBio, pursuant to the Cost Allocation Agreement. Under Work Order Number One, the parties are conducting a clinical trial pursuant to the protocol titled QUILT 3.063: A phase 2 study of combination therapy with an IL‑15 superagonist (N‑803), off-the-shelf CD16‑targeted natural killer cells (haNK), and avelumab without cytotoxic chemotherapy in subjects with Merkel Cell Carcinoma (MCC) that has progressed on or after treatment with a checkpoint inhibitor. The ImmunityBio study drug included in this Joint Study is ImmunityBio’s proprietary IL‑15 superagonist known as N‑803, and our study drug is our proprietary “off-the-shelf” CD16-targeted natural killer cell therapy known as haNK. We are the sponsor of this Joint Study for purposes of regulatory matters, including submissions, correspondence, and communications. Additionally, we are designated as the contracting party to execute agreements with third and related parties relating to the Joint Study.

In July 2020, but effective on June 22, 2020, we executed Work Order Number Two with ImmunityBio, pursuant to the Cost Allocation Agreement. Under Work Order Number Two, the parties are conducting a clinical trial pursuant to the protocol titled QUILT 88: Open-label, randomized, comparative phase 2 study of combination immunotherapy with standard-of-care chemotherapy versus standard-of-care chemotherapy for first and second line treatment of locally or advanced metastatic pancreatic cancer. The ImmunityBio study drugs included in the joint study are ImmunityBio’s proprietary IL‑15 superagonist (N‑803) and Aldoxorubicin Hydrochloride (Aldoxorubicin), and our study drug is PD‑L1.t‑haNK. ImmunityBio is the sponsor of this Joint Study for purposes of regulatory matters, including submissions, correspondence, and communications with the FDA. Additionally, ImmunityBio is designated as the contracting party to execute agreements with third and related parties relating to this Joint Study.

program. During the years ended December 31, 2020 and 2019, we incurred net costs of $1.1 million and $35,700, respectively, after applying the eligible costs sharing under the Cost Allocation Agreement, which have been recognized in research and development expense on the consolidated statements of operations. As of December 31, 2020, we owed ImmunityBio $0.3 million related to the Cost Allocation Agreement. As of December 31, 2019, 0 balances were due between the parties with respect to the Cost Allocation Agreement.

~~Royalties and In-licensing Agreements~~

~~Viracta License Agreement~~

In May 2017, we entered into an agreement with Viracta under which we were granted exclusive worldwide rights to Viracta’s phase II drug candidate, VRx‑3996, for use in combination with our platform of NK cell therapies. In consideration for the license, we are obligated to pay to Viracta (i) mid-single digit percentage royalties of net sales of licensed products for therapeutic use; and (ii) milestone payments ranging from $10.0 million to $25.0 million for various regulatory approvals and cumulative net sales levels. We may terminate the agreement, at our sole discretion, in whole or on a product by product and/or country by country basis, at any time upon 90 days’ prior written notice. In addition, either party may terminate the agreement in the event of a material breach or for bankruptcy of the other party.

~~Fox Chase Cancer Center License Agreement~~

In 2004 and amended in 2008, we entered into an exclusive license agreement with Fox Chase Cancer Center, or Fox Chase, for the exclusive, worldwide right to certain patents and know-how pertaining to CD16 receptor bearing NK‑92 cell lines. In consideration for this exclusive license, we agreed to pay Fox Chase (i) low single-digit percentage royalties on net sales of licensed products for therapeutic and diagnostic use; and (ii) mid-twenties percentage royalties on any compensation we receive from sublicensees.

~~Rush University Medical Center License Agreement~~

In 2004, we entered into a 12-year licensing agreement with Rush University Medical Center for the exclusive rights to license and grant sublicenses of certain intellectual property related to clinical use of NK‑92. We are required to pay low to mid-single digit percentage royalties on net sales depending upon the various fields of studies and other factors. We were required to pay a minimum annual royalty of $25,000. The Rush University Medical Center License Agreement also provides for payments in the aggregate amount of $2.5 million upon the company achieving various milestones, including upon (i) the completion of phase II clinical trial associated with the licensed intellectual property; (ii) the approval by the FDA of a new drug application for a licensed product; and (iii) the first year that sales of the licensed product equals or exceeds $0.3 million. The license had a term of 12 years from 2006, the year in which royalty payments were first made, and included customary termination rights for both parties. Beginning in 2018, this license converted to a perpetual, irrevocable, fully paid, royalty-free, exclusive license. No milestones were met during the years ended December 31, 2020, 2019 and 2018.

~~135~~

~~Out-Licensing Agreement~~

~~Precigen (formerly known as Intrexon) License Agreement~~

In February 2010, we entered into a 17-year license agreement with Precigen Corporation, Inc., or Precigen, pursuant to which we granted to Precigen a non-exclusive, worldwide, sublicensable license to research and sell products under certain patents relating to modified NK‑92 cells that express Precigen’s proprietary gene sequences for use as a therapeutic and prophylactic agent in humans in specified therapeutic areas. In consideration for the license agreement, Precigen paid us a one-time fee of $0.4 million. Prior to our adoption of ASC 606 at the beginning of 2018, this upfront payment had initially been recorded as deferred revenue and was being recognized into revenue on a straight-line basis. Upon our adoption of ASC 606, we adjusted our accumulated deficit in an amount equal to the then remaining deferred revenue after concluding that under ASC 606 the upfront payment would have been recognized when the license was transferred in 2010. Precigen will pay the following milestone payments: $0.1 million upon the first IND filing; $0.1 million upon the commencement of the first phase II clinical trial; $0.4 million upon the commencement of the first phase III clinical trial; and $0.5 million upon the first commercial sale relating to the licensed products. Precigen is obligated to pay us a low single digit percentage royalty based on net sales of the licensed products by Precigen and a mid-teen percentage royalty based on revenues received by Precigen in connection with sublicenses of the licensed products. NaN milestone payments were due or received in the years ended December 31, 2020, 2019 and 2018, and, therefore, we did 0t record any milestone revenue for any of those years on the consolidated statements of operations.

~~9. Commitments and Contingencies~~

~~Contingencies~~

We record accruals for loss contingencies to the extent that we conclude it is probable that a liability has been incurred and the amount of the related loss can be reasonably estimated. We evaluate, on a quarterly basis, developments in legal proceedings and other matters that could cause a change in the potential amount of the liability recorded or of the range of potential losses disclosed. Moreover, we record gain contingencies only when they are realizable, and the amount is known. Additionally, we record our rights to insurance recoveries, limited to the extent of incurred or probable losses, as a receivable when such recoveries have been agreed to with our third-party insurers and when receipt is deemed probable. This includes instances where our third-party insurers have agreed to pay, on our behalf, certain legal defense costs and settlement amounts directly to applicable law firms and a settlement fund.

~~Securities Litigation~~

~~In March 2016, a putative securities class action complaint captioned~~ ~~Sudunagunta v. NantKwest, Inc., et al.~~, No. 16‑cv‑01947 was filed in federal district court for the Central District of California related to the company’s restatement of certain interim financial statements for the periods ended June 30, 2015 and September 30, 2015. A number of similar putative class actions were filed in federal and state court in California. The actions originally filed in state court were removed to federal court, and the various related actions were consolidated. Plaintiffs asserted causes of action for alleged violations of Sections 11 and 15 of the Securities Act of 1933 and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b‑5 promulgated thereunder. Plaintiffs sought unspecified damages, costs and attorneys’ fees, and equitable/injunctive or other relief on behalf of putative classes of persons who purchased or acquired the company’s securities during various time periods from July 28, 2015 through March 11, 2016. In September 2017, the court denied defendants' motion to dismiss the third amended consolidated complaint. On August 13, 2018, the district court granted plaintiffs’ motions for class certification and to strike plaintiffs’ claims under the Securities Exchange Act of 1934 and Rule 10b‑5. On August 24, 2018, at the district court’s direction, plaintiffs filed a fourth amended consolidated complaint. On August 27, 2018, defendants petitioned the U.S. Court of Appeals for the Ninth Circuit to authorize interlocutory appeal of the class certification order. On September 7, 2018, defendants answered the fourth amended consolidated complaint. On September 21, 2018, the parties informed the Ninth Circuit that they had reached a settlement in principle, and the parties moved to stay appellate proceedings. On September 24, 2018, the parties notified the district court that they had reached a settlement in principle. On November 9, 2018, the plaintiffs filed an unopposed motion for preliminary approval of the settlement and notice to class members. On January 9, 2019, the district court granted the motion for preliminary approval. A final approval hearing was held on April 29, 2019, and the district court granted final approval and entered judgment on May 31, 2019.

Under the terms of the settlement, we paid $12.0 million to the plaintiffs as full and complete settlement of the litigation. We were responsible for $1.2 million of the settlement amount, which was recognized in selling, general and administrative expense during the year ended December 31, 2018, while the remaining $10.8 million was fully funded by our insurance carriers under our directors’ and officers’ insurance policy. We and the insurance carriers paid the settlement amount into a settlement fund during the year ended December 31, 2019. Subsequent to receiving final approval of the settlement on May 31, 2019, the aforementioned settlement accrual, associated insurance claim receivable and restricted cash were released and are no longer reflected on the consolidated balance sheets.

~~136~~

~~Stipulation of Settlement~~

In early April 2019, following board approval, we entered into a settlement agreement, or the Stipulation of Settlement, with three stockholders of the company, each of whom had submitted a stockholder demand for the board to take action to remedy purported harm to the company resulting from certain alleged wrongful conduct concerning, among other things, disclosures about Dr. Soon-Shiong’s compensation and a related-party lease agreement. The Stipulation of Settlement called for us to adopt certain governance changes, and for the three stockholders to file a stockholder derivative action in the Superior Court of the State of California, County of San Diego, followed by an application for court approval of the Stipulation of Settlement. On May 31, 2019, the court entered an order preliminarily approving the Stipulation of Settlement and scheduling the final settlement hearing for August 9, 2019. Pursuant to the Stipulation of Settlement, we have provided stockholders with notice of the settlement and the final settlement hearing.

Under the terms of the Stipulation of Settlement, which received final approval by the court on August 9, 2019, we paid an attorney’s fee of $0.5 million to the plaintiffs as part of the settlement. Of that amount, we were responsible for half, which was recognized in selling, general and administrative expense on the consolidated statements of operations during the year ended December 31, 2019, ~~while~~we repurchased 473,586 shares at a cost of $0.5 million. Since the ~~other half was funded by our insurance carrier. We and the insurance carrier paid the settlement amount into~~plan’s inception, we have repurchased a ~~settlement fund in June 2019. Subsequent to receiving final approval~~total of the settlement on August 9, 2019, the aforementioned settlement accrual, associated insurance claim receivable and restricted cash were released and are no longer reflected on the consolidated balance sheets.

~~Insurance Recoveries~~

~~We have reflected our right to insurance recoveries, limited to the extent~~6,403,489 shares at a total cost of incurred or probable losses, as a receivable when such recoveries have been agreed to with our third-party insurers and receipt is deemed probable. This includes instances where our third-party insurers have agreed to pay, on our behalf, certain legal defense costs and settlement amounts directly to applicable law firms and a settlement fund. The amount of such receivable recorded at December 31, 2019 was $34,000, which is included in prepaid expenses and other current assets on our consolidated balance sheets. There were 0 such receivables recorded as of December 31, 2020.

~~Contractual Obligations - Leases~~

On January 1, 2019, we adopted the new lease accounting guidance as discussed in further detail in Note 2. The most significant change requires us to record the present value of operating lease payments as right-of-use assets and lease liabilities on our balance sheets. We adopted the new guidance using the simplified transition approach. As a result, reporting periods beginning on January 1, 2019 are presented under the new guidance, while periods prior to January 1, 2019 continue to be reported in accordance with our historical accounting.

The adoption of the new lease accounting guidance had a substantial impact on our balance sheet. The most significant impacts were (1) the recognition of $13.5 million of operating lease right-of-use assets, net, and $16.4 million of operating lease liabilities, and (2) the derecognition of assets and liabilities associated with build-to-suit leases under ASC 840, resulting in the derecognition of property, plant and equipment, net, of $6.6 million and net adjustments to related liabilities of $5.7 million). The build-to-suit leases were recorded as normal operating leases under ASC 842. The difference between the excess of build-to-suit related liabilities and assets of $0.9 million was recorded as an increase to our accumulated deficit. The cumulative-effect adjustment had no tax impact due to the valuation allowance against the gross deferred tax asset less reversing deferred tax liabilities. Adoption of this standard had no material impact on our results of operations and cash flows.

~~Lease Arrangements~~

~~Substantially all of our operating lease right-of-use assets and operating lease liabilities relate to facilities leases.~~$31.7 million. As of December 31, 2020, we lease: (i) a research facility and office space in San Diego, California; (ii) a research and manufacturing space in Culver City, California, from a related party; (iii) research and manufacturing facilities in El Segundo, California, also from related parties; (iv) a research facility in Torrance, California, and (v) a research facility in Woburn, Massachusetts. See Note 10, ~~Related Party Agreements~~,2021, $18.3 million remained authorized for ~~further information.~~

~~Our leases generally have initial terms ranging from~~ ~~two to ten years~~ ~~and often include one or more options to renew. These renewal terms can extend~~repurchase under the ~~lease term from~~ ~~one to three years~~, and are included in the lease term when it is reasonably certain that we will exercise the option. These operating leases are included in operating lease right-of-use assets, net, on the consolidated balance sheets, and represent the right to use the underlying asset for the lease term. Our obligations to make lease payments are included in current and non-current operating lease liabilities on the consolidated balance sheets.

~~137~~

~~Our operating right-of-use assets and lease liabilities as of December 31, 2020 and 2019, are as follows (in thousands):~~

program.

As of December 31,

2020

2019

Right-of-use assets:

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

$
13,463

$
11,729

Short-term lease liabilities:

   Operating lease liabilities (including amounts with related parties)

$
5,500

$
3,206

Long-term lease liabilities:

   Operating lease liabilities (including amounts with related parties)

$
9,814

$
10,885

Total lease liabilities:

   Operating lease liabilities (including amounts with related parties)

$
15,314

$
14,091

Other Repurchase

~~The components of lease expense for the years ended December 31, 2020 and 2019 consist of (in thousands):~~

For the Year Ended December 31,

2020

2019

Operating lease costs

$
4,655

$
3,898

Variable lease costs

1,566

1,215

Total lease costs

$
6,221

$
5,113

~~Rental expenses for operating leases during~~During the year ended December 31, ~~2018, excluding common-area maintenance, was $2.8 million.~~

~~Cash paid during the years ended December 31, 2020 and~~ 2019, ~~for amounts included in the measurement of lease liabilities is as follows (in thousands):~~

For the Year Ended December 31,

2020

2019

Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows for operating leases

5,345

4,371

The weighted-average remaining lease term as of December 31, 2020 and 2019 was 3.2 years and 4.5 years, respectively. The weighted-average discount rate used in determining the present value of operating lease liabilities as of December 31, 2020 and 2019 was 9%.

Future minimum lease payments as of December 31, 2020, including $3.9 million related to options to extend lease terms that are reasonably certain of being exercised, are presented in the following table (in thousands). Common area maintenance costs and taxes are not included in these payments.

Years ending December 31:
Operating
Leases (a)

2021
$
6,563

2022

5,607

2023

2,545

2024

1,083

2025

1,115

Thereafter

614

Total future minimum lease payments

17,527

Less: Interest

2,213

Present value of operating lease liabilities
$
15,314

~~138~~

~~In September 2020,~~ we entered into a ~~sublease~~stock transfer agreement with ~~Altor Bioscience Manufacturing Company, LLC,~~ a ~~related party (Note 10), whereby~~stockholder and purchased 204,750 shares of our common stock at a price of $9.77 per share for an aggregate purchase price of $2.0 million in cash. All shares repurchased in this transaction were retired and reduced the number of shares issued and outstanding.

Open Market Sale Agreement

On April 30, 2021, we ~~leased approximately 6,901 square feet in El Segundo, California, including laboratory space~~entered into an Open Market Sale Agreement (the Sale Agreement) with respect to an ATM offering program under which we may offer and ~~related furniture, fixtures~~sell, from time to time at our sole discretion, shares of our common stock, having an aggregate offering price of up to $500.0 million through our sales agent. We pay our sales agent a commission of up to 3.0% of the gross sales proceeds of any shares of our common stock sold through them under the Sale Agreement, and ~~equipment. The agreement~~ also ~~includes certain non-lease components related primarily to~~have provided them with customary indemnification and contribution rights.

During the ~~right~~year ended December 31, 2021, we received net proceeds totaling $164.5 million from the issuance of 13,295,817 shares under the ATM, which we expect to use ~~certain common areas within the building~~for general corporate purposes, including to progress our clinical development programs, fund other research and ~~the related furniture~~development activities, make capital expenditures and fixtures. This facility will be used to manufacture and produce clinical products for our oncology product candidate trials. The lease runs from August 2020 through July 2022, and includes an option to extend the lease for an additional ~~one-year~~ ~~term through July 2023. The monthly fixed charge related to the agreement is $0.2 million, a portion of which is subject to annual increases of 3% which began in~~ ~~November 2020~~. In addition, under the agreement, we are required to pay our share of estimated property taxes and operating expenses, both of which are variable lease expenses. At inception of the lease we recognized an increase of $4.0 million in both operating lease right-of-use assets and operating lease liabilities on the consolidated balance sheets.

~~In August 2018, NantBio, Inc., or NantBio, a related party (Note 10), assigned an agreement to us for the~~fund working capital. We may also use ~~of a third-party research facility, which provides us with the exclusive right to use and access to~~ a portion of the ~~third party’s laboratory~~net proceeds to license intellectual property or to make acquisitions or investments. As of December 31, 2021, we had $330.8 million available for future stock issuances under the ATM.

We are not obligated to sell any shares and ~~vivarium premises. In conjunction with~~may at any time suspend solicitation and offers under the assignment, we reimbursed NantBio for upfront payments which it had made to the third party of $0.9 million, and paid $0.5 million directly to the third party for an aggregate value of $1.4 million.Sale Agreement. The ~~assigned agreement is for a term of~~ ~~ten years~~ ~~and expires in June 2027. The agreement~~Sale Agreement may be terminated by us at any time ~~with or without cause. In case of termination of the agreement, the third party will reimburse us for a pro-rata amount based upon the passage of time.~~

In September 2016, we entered into a lease agreement with 605 Doug St, LLC, a related party (Note 10), for approximately 24,250 square feet in El Segundo, California, which has been converted to a research and development laboratory and a cGMP manufacturing facility. The lease runs from July 2016 through July 2023. We have the option to extend the lease for an additional ~~three year~~ ~~term through July 2026. The monthly rent is $0.1 million with annual increases of 3% beginning in~~ ~~July 2017~~.

In March 2016, we entered into a lease agreement for an approximately 7,893 square foot facility in Woburn, Massachusetts, for a research and development laboratory, related office and other related uses. The initial lease term ran for 48 months from April 29, 2016 through May 31, 2020. In June 2016, the lease was amended to add 260 square feet, for a total of 8,153 square feet. Base rent for the initial term of the lease was $19,000 per month with a $1 per square foot annual increase on each anniversary date. In August 2019, we exercised our right pursuant to the lease agreement to extend the term of the lease for an additional ~~two years~~ through May 31, 2022. Consequently, in August 2019 we recognized an increase of $0.6 million in both operating lease right-of-use assets and operating lease liabilities on the consolidated balance sheets. Base rent for the extended term of the lease is $25,800 per month with an annual increase of 3% on June 1, 2021.

In November 2015, we entered into a facility license agreement with NantWorks LLC, or NantWorks, a related party (Note 10), for approximately 9,500 square feet of office space in Culver City, California, which has been converted to a research and development laboratory and a cGMP manufacturing facility. The initial license was effective from May 2015 through December 2020. Base monthly rent for the initial lease term was $47,000, with annual increases of 3% beginning in ~~January 2017~~. In September 2020, we entered into an amendment to extend the term of this lease through December 31, 2021. Commencing on January 1, 2021, the monthly rent will increase by 3% to $54,500. Subsequent to December 31, 2021, the lease term will automatically renew on a month-to-month basis, terminable by either party with at least thirty days’ priorgiven written notice to the ~~other party. In addition, we will have a one-time option to extend~~sales agent for any reason or by the ~~lease term through December 31, 2022. If we exercise the option to extend the lease through December 31, 2022, or continue on a month-to-month basis, the monthly rent will increase~~sales agent at any time by 3% annually commencing on January 1 of each year. On the date of amendment we recognized an increase of $1.2 million in both operating lease right-of-use assets and operating lease liabilities on the consolidated balance sheets, which reflects our belief that we will extend the term of this lease through December 31, 2022.

In June 2015, we entered into a lease agreement for an approximately 44,700 square foot facility in San Diego, California, for a research and development laboratory, related office and other related uses. The term of the lease extends for ~~seven years~~ ~~commencing on August 1, 2016. The base rent is $0.2 million per month with 3% annual increases on each anniversary date.~~

~~Unconditional Purchase Obligations~~

Unconditional purchase obligations are defined as an agreement to purchase goods or services that is enforceable and legally binding (non-cancelable, or cancelable only in certain circumstances). We estimate our total unconditional purchase obligation commitment (for those contracts with terms in excess of one year) as of December 31, 2020, at $2.7 million. Payments by year are estimated as follows: 2021 ($1.2 million), 2022 ($1.2 million) and 2023 ($0.3 million). These commitments relate primarily to hosted software license subscription fees and related implementation costs and our pro-rata share is passed-throughgiving written notice to us ~~without~~for any ~~markup~~reason or immediately under certain circumstances, and shall automatically terminate upon the shared services agreement with NantWorks (as further described in Note 10 below). The purchase obligation amounts do not represent the entire anticipated purchases in the future, but represent only those items for which we are contractually obligated. The majorityissuance and sale of ~~our goods and services are purchased as needed, with no unconditional commitment. For this reason, these amounts do not provide an indication of our expected future cash outflows related to purchases.~~

~~139~~

~~10. Related Party Agreements~~

Our Executive Chairman, and principal stockholder, founded and has a controlling interest in NantWorks, which is a collection of multiple companies in the healthcare and technology space. As described below, we have entered into arrangements with NantWorks, and certain affiliates of NantWorks, to facilitate the development of new genetically modified NK cells for our product pipeline. Affiliates of NantWorks are also affiliates of the company due to the common control by and/or common ownership interest of our Executive Chairman.

~~NantWorks~~

Under the NantWorks shared services agreement executed in November 2015, but effective August 2015, NantWorks provides corporate, general and administrative, manufacturing strategy, research and development, regulatory and clinical trial strategy, and other support services. We are charged for the services at cost plus reasonable allocations for indirect costs that relate to the employees providing the services. For the years ended December 31, 2020, 2019 and 2018, we recorded $2.5 million, $2.1 million and $2.8 million, respectively, in selling, general and administrative expense, and $1.5 million, $1.5 million and $3.3 million, respectively, in research and development expense under this arrangement on the consolidated statements of operations. These amounts exclude certain general and administrative expenses provided by third party vendors directly for our benefit, which have been reimbursed to NantWorks based on those vendors’ invoiced amounts without markup by NantWorks.

In June 2016, we amended the existing shared services agreement with NantWorks whereby we can provide support services to NantWorks and/or any of its affiliates. For the years ended December 31, 2020, 2019 and 2018, we recorded expense reimbursements of $1.4 million, $1.2 million and $0.6 million, respectively, in selling, general and administrative expense and $1.6 million, $2.3 million and $2.6 million, respectively, in research and development expense.

At December 31, 2020 and 2019, we owed NantWorks a net amount of $1.2 million and $0.4 million, respectively, for all agreements between the two affiliates, which is included in due to related parties on the consolidated balance sheets.

In November 2015, we entered into a facility license agreement with NantWorks, which became effective in May 2015, for approximately 9,500 square feet in Culver City, California, which has been converted to a research and development laboratory and a cGMP manufacturing facility. In September 2020, we amended this agreement to extend the term of this lease through December 31, 2021, as further described in Note 9, ~~Commitments and Contingencies~~. Lease expense for this facility for the years ended December 31, 2020, 2019 and 2018, is recorded in research and development expense on the consolidated statements of operations and was $0.6 million, $0.6 million, and $0.2 million, respectively.

~~Immuno-Oncology Clinic, Inc.~~

Beginning in 2017, we entered into multiple agreements with Immuno-Oncology Clinic, Inc., or the Clinic (dba Chan Soon-Shiong Institutes for Medicine, in El Segundo, California), to conduct clinical trials related to certain of our product candidates. The Clinic is a related party as it is owned by 1 officer of NantKwest and NantWorks manages the administrative operations of the Clinic. Prior to June 30, 2019, one of the company’s officers was an investigator or sub-investigator for all of the ~~company’s trials conducted at the Clinic.~~

~~In consideration~~shares.

Other Sales of the services to be performed under the Clinic Agreement, as amended on March 31, 2020, we agreed to make payments of up to $7.5 million to the Clinic, of which $3.75 million and $1.875 million were paid in July 2019 and October 2019, respectively. As amended, a conditional payment of $1.875 million shall be due and payable at such time, if any, that the payments made in July 2019 and October 2019 have been earned by the Clinic through performance of services. On a quarterly basis, our prepayment is increased by an interest credit computed in accordance with terms specified in the Clinic Agreement.

~~140~~

Common Stock

During the years ended December 31, 2020, 2019 and 2018, $0.6 million, $1.1 million, and $2.7 million, respectively, was recognized in research and development expense on the consolidated statements of operations related to clinical trial and research related activities conducted for us by the Clinic. As of December 31, 2020 and 2019, we owed the Clinic $0.3 million and $0.1 million, respectively, for services excluded from the Clinic Agreement, which are included in due to related parties on the consolidated balance sheets. As of December 31, 2020 and 2019, we had prepaid balances related to the Clinic Agreement of $4.7 million and $5.1 million, respectively, which are included in prepaid expenses and other currents assets, and other assets, on the consolidated balance sheets. We anticipate that the remaining prepayment amount as of December 31, 2020 will be utilized in future periods as the Clinic provides additional services pursuant to the Clinic Agreement.

~~ImmunityBio~~

~~ImmunityBio, Inc., or ImmunityBio, is a related party, as it is controlled by our Executive Chairman and principal stockholder, Dr. Patrick Soon-Shiong.~~

On December 21, 2020, we entered into a merger agreement with ImmunityBio pursuant to which NantKwest and ImmunityBio agreed to combine their businesses. The proposed merger is discussed in additional detail in Note 4, ~~Agreement and Plan of Merger with ImmunityBio~~.

~~On August 21, 2020, we entered into a Collaboration Agreement with ImmunityBio as further described in Note 8,~~ ~~Collaboration and License Agreements~~. As of December 31, 2020, the joint research activity under the Collaboration Agreement totaled $8.4 million, which has been included in research and development expense on the consolidated statements of operations. Expenses incurred during the year ended December 31, 2020 were primarily related to purchases of equipment of $5.0 million, to be utilized in the manufacture of the hAd5 COVID‑19 vaccine candidate, and net program related costs of $3.4 million, after applying the eligible cost sharing under the Collaboration Agreement. Certain equipment purchases made by us during the year ended December 31, 2020, which are necessary for us to fulfil our manufacturing obligations related to the COVID‑19 program, were borne solely by us. The equipment purchases do not have an alternative use and were therefore expensed as incurred within research and development expenses. Prior to the effective date of the Collaboration Agreement, COVID‑19 related program costs incurred by us and ImmunityBio, including expenditures related to property, plant and equipment, were the responsibility of each party and not subject to the equal cost sharing. As of December 31, 2020, we owed ImmunityBio $3.3 million for net costs incurred under the Collaboration Agreement, which has been included in due to related parties on the consolidated balance sheets.

~~141~~

~~In January 2020, but effective on October 1, 2019, we entered into a Cost Allocation Agreement with ImmunityBio, which (together with related work orders) is described further in Note 8,~~ ~~Collaboration and License Agreements~~. During the years ended December 31, 2020 and 2019, we incurred net costs of $1.1 million and $35,700, respectively, after applying the eligible costs sharing under the Cost Allocation Agreement, which have been recognized in research and development expense on the consolidated statements of operations. As of December 31, 2020, our balance owed to ImmunityBio related to the Cost Allocation Agreement was $0.3 million. As of December 31, 2019, no balances were due between the parties with respect to the Cost Allocation Agreement.

In June 2015, we entered into a supply agreement with ImmunityBio pursuant to which we have the right to purchase ImmunityBio’s proprietary bioreactors, made according to specifications mutually agreed to with ImmunityBio. We also have the right to purchase reagents and consumables associated with such equipment from ImmunityBio. When an upfront payment is made, it is included in prepaid expenses on the consolidated balance sheets until the product is received. The agreement had an initial term of ~~five years~~ ~~and renews automatically for successive~~ ~~one-year~~ ~~periods unless terminated earlier.~~

~~605 Doug St, LLC~~

In September 2016, we entered into a lease agreement with 605 Doug St, LLC, an entity owned by our Executive Chairman, and principal stockholder, for approximately 24,250 square feet in El Segundo, California, which has been converted to a research and development laboratory and a cGMP laboratory manufacturing facility. The lease runs from July 2016 through July 2023. We have the option to extend the lease for an additional three-year term through July 2026. The monthly rent is $0.1 million with annual increases of 3% beginning in ~~July 2017~~. Lease expense for this facility for the years ended December 31, 2020, 2019 and 2018, is recorded in research and development expense on the consolidated statements of operations and was $0.9 million, $0.9 million and $0.2 million, respectively. At December 31, 2020 and 2019, 0 balances were due between the parties.

~~NantBio, Inc.~~

In August 2018, NantBio assigned an agreement to us for the use of a third-party research facility, which provides us with the exclusive right to use and access to a portion of the third party’s laboratory and vivarium premises. NantBio is a related party as it is an affiliate of NantWorks. In conjunction with the assignment, we reimbursed NantBio for upfront payments which it had made to the third party of $0.9 million and paid $0.5 million directly to the third party for an aggregate value of $1.4 million. The assigned agreement is for a term of ~~ten years~~ and expires in June 2027. The agreement may be terminated by us at any time, with or without cause. In case of termination of the agreement, the third party will reimburse us for a pro-rata amount based upon the passage of time.

~~In March 2016, NantBio and the National Cancer Institute entered into a cooperative research and development agreement. The initial~~ ~~five-year~~ agreement covers NantBio and its affiliates, including us. Under the agreement, the parties are collaborating on the preclinical and clinical development of proprietary recombinant natural killer cells and monoclonal antibodies in monotherapy and in combination immunotherapies. We benefited from the preclinical and clinical research conducted during the first four years under this agreement. In each of the contractual years under the agreement we paid $0.6 million to the National Cancer Institute as a prepayment for services under the agreement. We recognize research and development expense related to this agreement ratably over a 12-month period for each funding year and recorded $0.6 million of expense related to this agreement in each of the years ended December 31, 2020, 2019 and 2018. At December 31, 2020 and 2019, we had balances of $0.1 million and $0.1 million, respectively, included in prepaid expenses and other current assets related to this agreement on the consolidated balance sheets.

~~142~~

~~NantHealth Labs, Inc.~~

In March 2018, we entered into an agreement with NantHealth Labs, Inc., or NantHealth Labs, to obtain blood-based tumor profiling services. NantHealth Labs is a related party, as it is a wholly owned subsidiary of NantHealth, Inc., a majority owned subsidiary of NantWorks. We are obligated to pay NantHealth Labs fixed, per-patient fees. The agreement has an initial term of ~~five years~~ ~~and renews automatically for successive~~ ~~one-year~~ periods, unless terminated earlier. During the years ended December 31, 2019 and 2018, $10,000 and $0.3 million, respectively, has been recognized in research and development expense on the consolidated statements of operations. There were 0 expenses associated with this agreement during the year ended December 31, 2020. As of December 31, 2020 and 2019, 0 balances were due between the parties.

~~11. Stockholders’ Equity~~

~~Issuance of Common Stock –~~ ~~On June 29,~~ 2020, the company closed an underwritten public offering of an aggregate of 8,521,500 shares of common stock, which included 4,811,500 shares issued to the public at a price of $9.50 per share ~~(which includes~~(including 1,111,500 shares sold to the public upon full exercise of the underwriters’ option to purchase additional shares at a public offering price of $9.50 per share), less underwriting discounts and commissions, and 3,710,000 shares issued to Dr. Soon-Shiong, our Executive Chairman and ~~principal stockholder, Dr. Patrick Soon-Shiong,~~Global Chief Scientific and Medical Officer, at a price of $12.12 per share, less underwriting discounts and commissions. All of the shares were offered by the company. Including the underwriters’ option exercise, the aggregate gross proceeds from the offering were $90.7 million, before deducting underwriting discounts, commissions and other offering ~~expenses~~costs of $4.4 million.

~~Stock Repurchase –~~ In November 2015, the board of directors approved a share repurchase program, or the 2015 Share Repurchase Program, allowing the CEO or CFO, on behalf of the company, to repurchase from time to time, in the open market or in privately negotiated transactions, up to $50.0 million of our outstanding shares of common stock, exclusive of any commissions, markups or expenses. The timing and amounts of any purchases were and will continue to be based on market conditions and other factors, including price, regulatory requirements and other corporate considerations. The 2015 Share Repurchase Program does not require the purchase of any minimum number of shares and may be suspended, modified, or discontinued at any time without prior notice. We have financed, and expect to continue to finance, the purchases with existing cash balances. The shares are formally retired through board approval upon repurchase.

To date, we have repurchased 6,403,489 shares of our common stock under the 2015 Share Repurchase Program at a total cost of $31.7 million. In addition, we have paid $0.1 million of broker commissions on repurchases. We did 0t repurchase any shares during

During the year ended December 31, ~~2020. During~~2019, the years ended December 31, 2019 and 2018, we repurchased 473,586 shares for $0.5 million and 138,349 shares for $0.2 million, respectively. At December 31, 2020, $18.3 million remained authorized for repurchase under the 2015 Share Repurchase Program.

~~Common Stock Reserved for Future Issuance~~

We are authorized to issue up to 500,000,000 shares of our common stock, par value $0.0001 per share at December 31, 2020. As of December 31, 2020, there were 108,726,551 shares of our common stock issued and outstanding.

~~The following table summarizes the common shares reserved for issuance on exercise or vesting of various awards at December 31, 2020:~~

~~Outstanding stock options~~			~~3,518,010~~
~~Outstanding RSUs~~			~~466,842~~
~~Total shares reserved for future issuance~~			~~3,984,852~~

~~12. Stock-Based Compensation~~

~~2014 Equity Incentive Plan –~~ ~~In March 2014, the company’s board of directors and stockholders approved the 2014 Equity Incentive Plan, or 2014 Plan, under which 11,109,000~~company sold 2,047,500 shares of common stock ~~were reserved for the granting~~at a price of ~~incentive stock options, within the meaning~~$14.66 per share to a private party and received net proceeds totaling $30.0 million.

183

Table of Section 422 of the Internal Revenue Code, non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock units and performance awards to employees, directors and consultants. The maximum term of awards granted under the 2014 Plan is ~~ten years~~Contents. Recipients of stock awards are eligible to purchase shares of our common stock at an exercise price equal to no less than the estimated fair market value of such stock on the date of grant. As of December 31, 2020, there were approximately 1.1 million vested and exercisable options outstanding under the 2014 Plan, and there were 0 additional shares available for future grant.

~~143~~

10. Stock-Based Compensation

2015 Equity Incentive Plan –

In ~~July~~ 2015, the ~~company’s board~~Board of ~~directors~~Directors adopted, and ~~the company’s~~our stockholders approved, the ~~2015 Equity Incentive Plan, or~~ 2015 Plan. The 2015 Plan, as amended, permits the grant of incentive stock options to the company’s employees, and ~~for~~ the grant of non-statutory stock options, restricted stock, ~~restricted stock units,~~RSUs, stock appreciation rights, performance units and performance shares to the company’s employees, directors and consultants. The 2015 Plan is the only equity plan of the company available for future grant of equity awards to employees, directors and consultants of the company. In April 2019, the company’s board of directors adopted, and in June 2019 the company’s stockholders approved, a first amendment to the 2015 Plan to reserve a further 3,000,000 shares of common stock for issuance pursuant to the 2015 Plan. In March 2020, the company’s board of directors adopted, and in June 2020 the company’s stockholders approved, a second amendment to the 2015 Plan to reserve a further 3,000,000 shares of common stock for issuance pursuant to the 2015 Plan. As of December 31, 2020, a total of approximately 10.2 million shares of common stock were reserved for issuance pursuant to the 2015 Plan and a total of approximately 7.2 million shares were available for future grant. In addition, the number of shares reserved for future grant under the 2015 Plan include shares subject to stock options granted under the 2014 Plan that expire or terminate without having been exercised in full and shares issued pursuant to awards granted under the 2014 Plan that are forfeited to or repurchased by us (provided that the maximum number of shares that may be added to the 2015 Plan pursuant to this provision is approximately ~~1.1 million~~ 503,493shares as of December 31, ~~2020)~~2021). Pursuant to the Merger, we assumed 7,121,110 RSUs (adjusted for the Exchange Ratio of 0.8190) issued under the 2015 NC Plan.

As of December 31, 2021, the 2015 Plan is the only equity plan available for grant of equity awards to employees, directors and consultants of the company. As of December 31, 2021, a total of approximately 5.0 million shares were available for future grants under the 2015 Plan.

Stock-Based Compensation

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


	For the Year Ended December 31,							Year Ended December 31,
	2020		2019		2018			2021		2020		2019
Stock-based compensation expense:							Stock-based compensation expense:
Warrants for common stock to an officer	$	0	$	0	$	17,817
Employee stock options		1,388		1,309		4,057
Employee RSUs		629		938		1,193
Non-employee RSUs		122		380		315
Stock options							Stock options	$	11,623	$	1,426	$	2,053
RSUs							RSUs	45,558		761		1,368
	$	2,139	$	2,627	$	23,382		$	57,181	$	2,187	$	3,421
Stock-based compensation expense in operating expenses:							Stock-based compensation expense in operating expenses:
Research and development	$	220	$	499	$	460	Research and development	$	18,819	$	261	$	1,288
Selling, general and administrative		1,919		2,128		22,922	Selling, general and administrative	38,362		1,926		2,133
	$	2,139	$	2,627	$	23,382		$	57,181	$	2,187	$	3,421

On March 18, 2021, the Board of Directors approved to modify certain non-qualified stock options that were assumed in the Merger and otherwise would have expired during a period when the grantees were legally restricted from exercising these awards. The expiration date of these options was extended to thirty (30) days following the effective date of Post-Effective Amendment No. 1 on Form S-3 to our Form S-4 Registration Statement. We recorded an incremental stock-based compensation expense of approximately $2.7 million for this stock option modification.

On March 29, 2021, in connection with the resignation of 2 former independent directors, the Board of Directors approved the acceleration of vesting of 83,333 shares of unvested stock options of the former directors on the date of their respective resignations. The modified options are exercisable for ninety (90) days after the date of the modification. We recorded an incremental stock-based compensation expense of approximately $2.3 million for this stock option modification.

The stock option modifications were measured as the excess of the fair value of the modified awards over the fair value of the original awards immediately before the modifications. The incremental stock-based compensation was recorded in selling, general and administrative expense, on the consolidated statement of operations for the year ended December 31, 2021.

184

Table of Contents

Stock Options

The following table summarizes stock option activity and related information ~~under all equity incentive plans~~ for the ~~years~~year ended December 31, 2021:


	Number of Options	Weighted- Average Exercise Price		Aggregate Intrinsic Value (in thousands)		Weighted- Average Remaining Contractual Life (in years)
Outstanding at December 31, 2020	4,996,284	$	9.96	$	29,746	4.7
Granted	1,069,940	$	21.38
Exercised	(1,817,300)	$	3.95
Expired/forfeited	(123,994)	$	10.10
Outstanding at December 31, 2021	4,124,930	$	15.62	$	4,178	5.3
Vested and exercisable at December 31, 2021	3,038,322	$	13.89	$	3,978	3.9

On February 5, 2021, the Compensation Committee of the Board of Directors granted Richard Adcock, our chief executive officer, a stock option award (the Option Grant) to purchase 750,000 shares of our common stock pursuant to our 2015 Plan. The Option Grant has an exercise price of $23.72 per share, the closing price as reported on the Nasdaq on the date of grant. In addition, the Option Grant shall vest according to the following vesting schedule: one-third of the Option Grant (i.e., 250,000 options) shall vest in equal installments on each of the first, second, and third anniversaries of the date of grant, such that all shares shall be fully vested on the third anniversary of the date of grant, subject to Mr. Adcock remaining in continuous service as defined in the 2015 Plan through the applicable vesting dates. This grant of equity awards to Mr. Adcock was made in connection with his appointment as chief executive officer of the company, which was effective as of October 26, 2020, ~~2019~~ and ~~2018:~~

was modified from the recommended equity grant described in Mr. Adcock’s offer of employment as of that date.

Number of
Shares

Weighted-
Average
Exercise Price

Aggregate
Intrinsic
Value
(in thousands)

Weighted-
Average
Remaining
Contractual Life
(in years)

Outstanding as of December 31, 2017

5,693,250

$
7.71

$
11,920

5.3

Options granted

800,000

$
3.07

Outstanding at December 31, 2018

6,493,250

$
7.14

$
563

4.8

Options exercised

(1,986,300
)

$
2.06

Outstanding as of December 31, 2019

4,506,950

$
9.37

$
5,710

5.8

Options granted

400,000

$
6.21

Options exercised

(1,272,273
)

$
1.89

Options forfeited

(116,667
)

$
3.07

Outstanding as of December 31, 2020

3,518,010

$
11.93

$
21,922

5.5

Vested and Exercisable as of December 31, 2020

2,868,008

$
13.50

$
16,509

4.7

On May 3, 2021, the Compensation Committee of the Board of Directors granted each of our newly-appointed independent directors a non-qualified stock option award to purchase 21,873 shares of our common stock pursuant to the 2015 Plan at an exercise price of $17.24 per share, the closing price as reported on the Nasdaq on the date of grant. The shares subject to the award will vest in 3 (3) equal installments on each of the first, second and third anniversary date of their appointment to the Board of Directors, such that the award will be fully vested on the third anniversary date in 2024, subject to the director continuing to be a service provider as defined in the 2015 Plan through the applicable vesting dates.

On June 10, 2021, the Compensation Committee of the Board of Directors granted our Chairman and each of the independent members of our Board of Directors a non-qualified stock option award to purchase 26,064 shares of our common stock pursuant to the 2015 Plan at an exercise price of $14.91 per share, the closing price as reported on the Nasdaq on the date of grant. The shares subject to the award will vest 100% on the earlier to occur of June 10, 2022 or the date immediately preceding the 2022 annual meeting of stockholders, subject to the recipient continuing to be a service provider as defined in the 2015 Plan through the applicable vesting date. These grants were made in connection with the re-election of our Executive Chairman (who then later also became our Global Chief Scientific and Medical Officer), and independent directors to the Board of Directors at the 2021 Annual Meeting of Stockholders.

As of December 31, ~~2020,~~2021, the unrecognized compensation cost related to outstanding stock options was ~~$1.3~~$11.8 million, which is expected to be recognized over a remaining weighted-average period of ~~0.9~~2.0 years.

~~144~~

For the years ended December 31, 2020, 2019 and 2018, there were 166,667, 343,810, and 462,875 stock options vested, respectively, with weighted-average exercises prices of $2.09, $3.51, and $8.45, respectively.

The total intrinsic value of stock options exercised during the ~~years~~year ended December 31, ~~2020, 2019 and 2018~~2021 was ~~$12.7 million, $0.2 million and $0.6 million, respectively.~~

$21.3 million. Cash proceeds received from stock option exercises ~~for~~during the ~~years~~year ended December 31, ~~2020, 2019 and 2018~~2021 was ~~$1.2 million, $4.1 million and $0, respectively.~~

$5.4 million.

185

Table of Contents

As of December 31, ~~2019 and 2018,~~2020, a total of ~~3,973,614 and 5,577,531~~4,345,497 vested and exercisable shares were ~~outstanding, respectively.~~

~~The following table provides a summary of options outstanding and vested as of December 31, 2020:~~

outstanding.

Exercise Prices

Number
Outstanding

Weighted-
Average Remaining
Contractual Life
(in years)

Number
Exercisable

Weighted-
Average Remaining
Contractual Life
(in years)

$0.4213

512,036

3.9

512,036

3.9

$1.7554

288,404

4.0

288,404

4.0

$1.9984

262,120

4.1

262,120

4.1

$3.07

600,000

7.7

349,998

7.7

$6.21

400,000

9.4

0

—

$25.00

1,455,450

4.6

1,455,450

4.6

3,518,010

5.5

2,868,008

4.7

We may grant stock options to both employees and directors of the company and to employees of related parties that provide shared services to the company under the company’s shared services agreement with NantWorks (Note 10). The fair value of ~~each~~ stock ~~option~~options issued was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:

	For the Year Ended December 31,
	2020	2019	2018		Year Ended December 31,
Expected term (in years)	5.5	N/A	6.0 - 6.1
					2021			2020			2019
Expected life (in years)				Expected life (in years)	5.9 years			5.5 years			N/A
Risk-free interest rate	0.4%	N/A	2.8%	Risk-free interest rate	0.7		%	0.4		%	N/A
Expected volatility	96.8%	N/A	75.9%
Volatility factor				Volatility factor	101.0		%	96.8		%	N/A
Dividend yield	0.0%	N/A	0.0%	Dividend yield	0.0		%	0.0		%	N/A
Weighted-average grant date fair value	$4.64	N/A	$2.09	Weighted-average grant date fair value	$	16.80		$	4.64		N/A

The expected term was estimated using the average of the contractual term and the weighted-average vesting term of the options. The risk-free interest rate was based on the U.S. Treasury’s rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the expected term of the award being valued. ~~For grants issued during 2020, the~~The expected volatility was estimated based on the historical volatility of our common stock. For grants issued during 2018, the expected volatility was based on a weighted-average calculation of the company’s common stock together with a peer group of comparable companies whose share prices are publicly available. The assumed dividend yield was based on ~~the company’s~~our expectation of not paying dividends infor the foreseeable future. ~~There were 0 grants issued during 2019.~~

~~145~~

Restricted Stock Units

The following table summarizes RSU activity during the ~~restricted stock units, or~~year ended December 31, 2021:


	Number of Units	Weighted- Average Grant Date Fair Value
Nonvested balance at December 31, 2020	466,842	$	2.52
Granted	8,665,942	$	23.27
Vested	(873,058)	$	19.61
Forfeited/canceled	(1,743,837)	$	24.77
Nonvested balance at December 31, 2021	6,515,889	$	21.88

As of December 31, 2021, there was $112.1 million of unrecognized stock-based compensation expense related to RSUs ~~activity under~~that is expected to be recognized over a weighted-average period of 3.5 years. The total intrinsic value of RSUs vested during the ~~2015 Plan:~~

year ended December 31, 2021 was $12.2 million.

Number of
RSUs
Outstanding

Weighted-
Average
Grant Date
Fair Value

Unvested balance as of December 31, 2017

888,189

$
8.14

Granted

487,472

$
3.57

Vested

(172,330
)

$
6.16

Forfeited/canceled

(335,420
)

$
6.27

Unvested balance as of December 31, 2018

867,911

$
6.69

Granted

749,793

$
1.12

Vested

(395,051
)

$
8.83

Forfeited/canceled

(83,225
)

$
7.29

Unvested balance as of December 31, 2019

1,139,428

$
2.23

Granted

33,500

$
6.43

Vested

(648,336
)

$
2.04

Forfeited/canceled

(57,750
)

$
4.47

Unvested balance as of December 31, 2020

466,842

$
2.52

We may grant RSUs to both employees and directors of the company and to employees of related parties that provide shared services to the company under ~~the company’s~~our shared services agreement with NantWorks ~~(Note 10)~~as discussed in Note 8, Related-Party Agreements. The grant date fair value of an RSU equals the closing price of our common stock on the date of grant.

186

Table of Contents

On February 5, 2021, the Compensation Committee of the Board of Directors granted Mr. Adcock 2 awards totaling 400,000 RSUs (each an RSU Award and collectively, the RSU Awards) of our common stock pursuant to the 2015 Plan. The RSU Awards are comprised of 2 separate awards, one settled by issuing 150,000 shares of our common stock and the other to be settled by issuing 250,000 shares of our common stock upon vesting. The first RSU Award vested immediately on the date of grant with the company retaining shares equal in value to the company’s tax withholding obligations. The second RSU Award will vest according to the following schedule: one-third (i.e., 83,333) of the shares subject to the RSU Award shall vest in equal annual installments on each of the first, second and third anniversaries of the date of grant, such that all shares shall be fully vested on the third anniversary of the date of grant, subject to Mr. Adcock remaining in continuous service as defined in the 2015 Plan through the applicable vesting dates. This grant of equity awards to Mr. Adcock was made in connection with his appointment as chief executive officer of the company, which was effective as of October 26, 2020, and was modified from the recommended equity grant described in Mr. Adcock’s offer of employment as of that date.

On March 4, 2021, prior to the Merger, NantCell awarded 7,121,110 RSUs (adjusted for the Exchange Ratio of 0.8190) to certain employees, consultants and/or service providers of NantCell and its affiliates, pursuant to the NC 2015 Plan. These RSU awards were subject to a performance condition in connection with a “Liquidity Event”, defined as either (i) NantCell’s registration of shares for issuance on a securities offering or (ii) the closing of a corporate transaction. In addition, the vesting of certain performance-based RSU grants accelerates upon obtaining approval by the FDA of a BLA or equivalent application for approval of Anktiva for use in the treatment of non-muscle-invasive bladder cancer. These performance-based RSUs are also subject to service conditions and are scheduled to cliff vest on the last date of each tranche as defined by the individual grant agreements. On March 9, 2021, we completed the Merger with NantCell, and the performance condition related to the Liquidity Event was met.

The fair value of the RSUs was estimated based on a third-party valuation as of the grant date of March 4, 2021 and was derived primarily from the estimated probabilities of the Merger close on March 9, 2021 and the other exit assumptions. Once the liquidity event related performance condition was met as of March 9, 2021 due to the Merger, compensation expense for these RSUs began to be recognized on a graded vesting attribution approach over the requisite service period for each participant, which ranges from six-month to seventy (70)-month vesting periods. During the year ended December 31, ~~2018,~~2021, we granted 90,906 RSUs to employees of related companies under our shared services agreement with NantWorks (Note 10). There were 0 grants made to non-employees during the years ended December 31, 2020 and 2019.

~~As of December 31, 2020, there was $0.6~~recorded approximately $40.5 million of ~~unrecognized~~ stock-based compensation expense related to these awards, of which approximately $18.9 million was recorded in research and development expense and approximately $21.6 million was recorded in selling, general and administrative expense, on the consolidated statement of operations.

The RSUs ~~that is~~awarded to employees and consultants of affiliated companies were accounted for as stock-based compensation in accordance with ASU 2018-07, Compensation—Stock Compensation (Topic 718), as the compensation was in exchange for continued support or services expected to be ~~recognized~~provided to the company over ~~a weighted-average period~~the vesting periods under the NantWorks shared services agreement discussed in Note 8, Related-Party Agreements. We have evaluated the associated benefit of ~~1.8 years. Of~~these awards to the affiliated companies under common control and determined that ~~amount, $0.6~~the benefit is limited to the retention of their employees. We estimated such benefit at the grant date fair value of $4.0 million and recorded $0.9 million of unrecognized expense is related to employee grants with a remaining weighted-average period of 1.9 years and $6,400 of unrecognized expense is related to non-employee grants with a remaining weighted-average period of 0.2 years.

~~Warrants~~

~~The following table summarizes~~deemed dividends for the ~~company’s warrant activity:~~

~~Outstanding as of December 31, 2017~~	~~17,721,088~~
~~Warrants exercised~~	~~(93,254~~	)
~~Warrants expired~~	~~(38,584~~	)
~~Outstanding as of December 31, 2018~~	~~17,589,250~~
~~Warrants exercised~~	~~(17,589,250~~	)
~~Outstanding as of December 31, 2019~~	0

~~Cash proceeds recognized from exercises of warrants during the years~~year ended December 31, ~~2019 and 2018,~~2021 in additional paid-in capital, on the consolidated balance sheets, with a corresponding credit to stock-based compensation expense.

Warrants

In connection with the Merger, warrants issued to NantWorks, a related party, in connection with NantCell’s acquisition of Altor were ~~$35.2 million and $0.1 million, respectively.~~

~~NaN~~assumed by the company. After applying the Exchange Ratio at the Effective Time of the Merger, a total of 1,638,000 warrants with an exercise price of $3.24 per share were ~~issued during the years ended December 31, 2020, 2019 and 2018, and~~outstanding as of December 31, ~~2020 and 2019 there were 0~~2021. The fair value of $18.0 million assigned to the warrants ~~outstanding.~~

~~13.~~will be recognized in equity upon achievement of a performance-based vesting condition pertaining to building manufacturing capacity to support supply requirements for one of our product candidates.

187

Table of Contents

11. Income Taxes

We are subject to U.S. federal income tax, as well as income tax in Italy, South Korea, California and other states. From inception through December 31, 2021, we have not been required to pay U.S. federal and state income taxes because of current and accumulated net operating losses. Our federal returns for tax years 2018 through 2020 remain open to examination, and our state returns remain subject to examination for tax years 2017 through 2020. The ~~amount~~Italian and South Korea returns for tax years 2016 through 2020 remain open to examination. Carryforward attributes that were generated in years where the statute of limitations is closed may still be adjusted upon examination by the Internal Revenue Service (IRS) or other respective tax authorities. No income tax returns are currently under examination by taxing authorities. There are no cumulative earnings in our Italian and South Korean subsidiaries as of December 31, 2021 that would be subject to U.S. income tax or foreign withholding tax. We plan to indefinitely reinvest any future earnings of our foreign subsidiaries.

On March 9, 2021, the company completed the Merger with NantCell. The Merger is accounted for as a transaction between entities under common control, and is considered a nontaxable transaction for U.S. income tax purposes, as it is intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the Code).

Our loss before taxes is as follows (in thousands):


	For the Year Ended December 31,										Year Ended December 31,
	2020			2019			2018				2021		2020		2019
U.S. loss before taxes	$	(92,412	)	$	(65,286	)	$	(94,423	)	U.S. loss before taxes	$	(347,226)	$	(223,519)	$	(159,089)
Foreign income (loss) before taxes		34			(600	)		(2,306	)
Foreign loss before taxes										Foreign loss before taxes	(2,613)		(2,514)		(1,174)
Loss before income taxes	$	(92,378	)	$	(65,886	)	$	(96,729	)	Loss before income taxes	$	(349,839)	$	(226,033)	$	(160,263)

~~146~~

Income tax (expense) benefit ~~for~~consists of the ~~years ended December 31, 2020, 2019 and 2018~~following (in thousands):


	Year Ended December 31,
	2021		2020		2019
Current:
Federal	$	—	$	—	$	—
State	(9)		(5)		(3)
Foreign	—		—		—
Total current	(9)		(5)		(3)
Deferred:
Federal	—		1,187		77
State	—		664		31
Foreign	—		—		—
Total deferred	—		1,851		108
Total income tax (expense) benefit	$	(9)	$	1,846	$	105

188

Table of Contents

The components that comprise our net deferred tax assets consist of the following (in thousands):

For the Year Ended December 31,

2020

2019

2018

Current:

Federal

$
0

$
0

$
0

State

(5
)

(3
)

(3
)
Foreign

0

0

0

Total current

(5
)

(3
)

(3
)
Deferred:

Federal

0

79

0

State

0

21

8

Foreign

0

0

498

Total deferred

0

100

506

Income tax (expense) benefit

$
(5
)

$
97

$
503


	As of December 31,
	2021		2020
Deferred tax assets:
Net operating loss carryforwards	$	314,612	$	223,123
Stock-based compensation	23,116		13,305
Research and development credits	17,716		21
Operating lease liabilities	10,316		5,456
Interest expense	8,531		5,055
Amortization	4,407		5,860
Depreciation	—		5,523
Investments	3,227		2,490
Accrued compensation	2,525		1,527
Other accrued liabilities	905		418
Other	2,055		3,334
Total deferred tax assets	387,410		266,112
Deferred tax liabilities:
Operating lease right-of-use assets	(9,345)		(4,668)
Depreciation	(2,905)		—
Indefinite-lived intangible assets	(162)		(170)
Total deferred tax liabilities	(12,412)		(4,838)
Net deferred tax assets	374,998		261,274
Valuation allowance	(375,160)		(261,444)
Net deferred tax liability	$	(162)	$	(170)

~~The components that comprise the company’s net deferred tax assets at~~

As of December 31, ~~2020 and 2019 consist of the following (in thousands):~~

As of December 31,

2020

2019

Deferred tax assets:

Net operating loss carryforwards

$
105,537

$
78,377

Stock compensation

7,699

8,536

Operating lease liabilities

4,254

3,884

Depreciation and amortization

4,128

2,042

Tax credits

898

898

Accrued compensation

762

775

Leases and other accrued liabilities

451

453

Other

1,419

0

Total deferred tax assets

125,148

94,965

Deferred tax liabilities:

Operating lease right-of-use assets

(3,739
)

(3,233
)
Total deferred tax liabilities

(3,739
)

(3,233
)
Net deferred tax assets

121,409

91,732

Valuation allowance

(121,409
)

(91,732
)
Net deferred tax liability

$
0

$
0

~~A reconciliation of the~~2021, we have federal ~~statutory income tax rate to the company’s effective income tax rate for the years ended December 31, 2020, 2019 and 2018 is as follows:~~

For the Year Ended December 31,

2020

2019

2018

Tax computed at federal statutory rate

21.0

%

21.0

%

21.0

%
State income taxes, net of federal tax benefit

7.7

(19.4
)

6.2

Tax rate adjustment

(0.1
)

0.1

(0.3
)

Research and development credits

0.1

0.2

0.1

Stock-based compensation

3.2

(82.5
)

(0.1
)

Other

0.2

(0.1
)

0.3

Valuation allowance

(32.1
)

80.5

(26.7
)

Effective income tax rate

0

%

(0.2
)
%

0.5

%

~~147~~

Pursuant to Internal Revenue Code Sections 382 and 383, annual use of the company's net operating loss and research and development credit carryforwards may be limited in the event a cumulative change in ownership of more than 50% occurs within a ~~three-year~~ period. We completed an Internal Revenue Code Section 382/383 analysis through March 2019 regarding the limitation of net operating loss and research and development credit carryforwards. As a result, we derecognized a portion of the deferred tax assets for net operating losses (NOLs) of $1.3 billion, state NOLs of $1.2 billion, and foreign NOLs of $8.0 million. Of the $1.3 billion in federal NOLs, $850.3 million do not expire and will be able to be used to offset 80% of taxable income in future years. Of the $1.2 billion in state ~~research~~NOLs, $50.4 million do not expire and ~~development credits~~will be able to be used to offset 80% of ~~$0.8 million from our deferred tax asset schedule as of December 31, 2020. There is no impact to tax expense for~~taxable income in future years. The remaining federal NOL carryforwards expire beginning in 2022, the ~~derecognition of~~remaining state NOL carryforwards expire beginning in 2022, the ~~net operating losses~~South Korean NOL carryforwards expire beginning in 2022 and ~~federal and state research and development credits due to~~ the ~~valuation allowance recorded against the deferred tax assets. Additionally, we have~~Italian NOLs do not recognized the deferred tax asset for research and development credit carryforwards as of December 31, 2020 and 2019 because we are a part of a controlled group of affiliated companies with common ownership and cannot complete our calculation of the credit until the time that all members of the controlled group complete their analysis and calculation of qualified research expenditures.

expire.

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some ~~portion~~ or all of ~~the~~our deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the level of historical operating results and the uncertainty of ~~the~~ economic conditions, we have recorded a ~~full~~ valuation allowance of ~~$121.4~~$375.1 million atand $261.4 million as of December 31, ~~2020.~~2021 and 2020, respectively. The change in the valuation allowance for the ~~year~~years ended December 31, 2021 and 2020 ~~was an increase~~were increases of ~~$29.7~~$113.7 million and $63.4 million, respectively, which ~~was~~were mainly driven by losses ~~for~~from which ~~the company~~we cannot benefit. The portion of the valuation allowance for deferred tax assets for which subsequently recognized tax benefits will be credited directly to contributed capital is $0.2 million.

189

Table of Contents

A reconciliation of the federal statutory income tax rate to our effective income tax rate is as follows:


	Year Ended December 31,
	2021		2020		2019
Federal statutory tax rate	21.0	%	21.0	%	21.0	%
State income taxes, net of federal tax benefit	7.0	%	7.2	%	(0.8)	%
Other permanent items	(0.1)	%	(0.1)	%	1.6	%
Tax rate adjustment	1.5	%	(0.3)	%	0.2	%
Research and development credits	3.7	%	0.1	%	0.1	%
Stock-based compensation	0.5	%	1.3	%	(33.9)	%
Other	(0.9)	%	(0.2)	%	0.2	%
Valuation allowance	(32.7)	%	(28.2)	%	11.7	%
Effective income tax rate	0.0	%	0.8	%	0.1	%

Pursuant to Code Sections 382 and 383, annual use of our net operating loss and research and development credit carryforwards may be limited in the event a cumulative change in ownership of more than 50% occurs within a three-year period. We have not recognized the deferred tax assets for federal and state NOLs and credits of $274.2 million from our deferred tax asset schedules as of December 31, ~~2020,~~2021 due to Section 382/383 limitations. There is no impact to tax expense for the ~~company has federal~~derecognition of net operating losses, ~~or NOLs,~~and federal and state research and development credits due to the valuation allowance recorded against our deferred tax assets.

As of $389.8 million, state NOLs of $350.3 million, and foreign NOLs of $0.2 million. Of the $389.8 million in federal NOLs, $226.4 million will not expire and will be able to offset 80% of taxable income in future years. Of the $350.3 million in state NOLs, $4.4 million will not expire and will be able to offset 80% of taxable income in future years. The remaining federal NOL carryforwards begin to expire in 2024, the remaining state NOL carryforwards begin to expire in 2030 and the foreign NOL carryforwards begin to expire in 2022. At December 31, ~~2020, the company~~2021, we also had federal research tax credit carryforwards of ~~$11.1~~$22.6 million and state research tax credits of ~~$7.8~~$8.4 million. The federal research tax credit carryforwards ~~begin to~~ expire beginning in ~~2034~~2032 and certain state research tax credit carryforwards ~~begin to~~ expire beginning in ~~2031. The~~2030. Our California research tax credits can be carried forward indefinitely.

Net operating losses and tax credits also are limited when there is a separate return limitation year (SRLY). These rules generally limit the use of the acquired or departing members’ net operating loss and tax credit carryovers to the amount of taxable income such entity contributes to consolidated taxable income. The 80% limitation also applies to SRLY NOL carryovers and tax credits. Therefore, any SRLY NOLs and tax credits will be subject to this limitation, as well as Section 382 and 383 limitations.

As of December 31, 2021 and 2020, we have $33.1 million and $19.6 million of interest, respectively, that is temporarily disallowed pursuant to IRC Section 163(j). This interest can be carried forward indefinitely and will be deductible when the company generates sufficient adjusted taxable income.

On March 27, 2020, the U.S. enacted the Coronavirus Aid, Relief and Economic Security Act or(the CARES Act). The Cares Act is an emergency economic stimulus package that includes spending and tax breaks to strengthen the U.S. economy and fund a nationwide effort to curtail the effect of COVID-19. The CARES Act ~~was signed into law~~provides sweeping tax changes in response to the ~~economic challenges facing U.S. businesses.~~COVID-19 pandemic. Under the CARES Act, some of the ~~Internal Revenue Code was amended to allow for federal~~more significant provisions are NOL carrybacks for five years to offset previous ~~years~~years’ income, or ~~the federal NOLs~~ can be carried forward indefinitely to offset 100% of taxable income for the tax year ~~2020~~beginning before 2021 and 80% of taxable income for tax years 2021 and ~~thereafter.~~

thereafter, increasing the ability to deduct interest expense, as well as amending certain provisions of the previously enacted Tax Cuts and Jobs Act. As of December 31, 2021 and 2020, we did not record any income tax (provision) benefit resulting from the CARES Act, mainly due to our history of net operating losses generated and the maintenance of a full valuation allowance against our net deferred tax assets. There was no material impact from the provisions of the Cares Act for the years ended December 31, 2021 and 2020.

190

Table of Contents

On June 29, 2020, the state of California enacted Assembly Bill No. 85 (AB 85) suspending California ~~net operating loss~~NOL utilization and imposing a cap on the amount of business incentive tax credits companies can utilize, effective for tax years 2020, 2021 and 2022. There was no material impact from the provisions of AB 85 for the years ended December 31, 2021 and 2020. On February 9, 2022, Senate Bill No. 113 was enacted that removed the limitations on the use of NOLs and the cap on the business incentive tax credits that were suspended in ~~2020.~~

~~The following table summarizes the~~accordance with AB 85 effective for tax year 2022.

A summary of changes to the amount of unrecognized tax benefits is as follows (in thousands):

Unrecognized tax benefits as of December 31, 2018

$
11,983

Decrease for prior year tax positions

(7
)
Increase for current year tax positions

3,680

Unrecognized tax benefits as of December 31, 2019

15,656

Decrease for prior year tax positions

(6
)
Increase for current year tax positions

4,763

Unrecognized tax benefits as of December 31, 2020

$
20,413


	Year Ended December 31,
	2021		2020		2019
Unrecognized tax benefits, beginning of year	$	20,413	$	15,656	$	11,983
Additions based on tax positions related to the current year	536		4,763		3,680

Reductions for tax positions of prior years	(7,445)		(6)		(7)

Unrecognized tax benefits, end of year	$	13,504	$	20,413	$	15,656

Included in the balance of unrecognized tax benefits atas of December 31, ~~2020,~~2021 is ~~$18.3~~$11.4 million that, if recognized, would not impact our income tax benefit or effective tax rate as long as the deferred tax asset remains subject to a full valuation allowance. We do not expect that the unrecognized tax benefits will change within 12 months of ~~this reporting date.~~December 31, 2021. Due to the existence of the valuation allowance, future changes in our unrecognized tax benefits will not impact ~~the company's~~our effective tax rate.

We have not incurred any material interest or penalties as of the current reporting date with respect to income tax matters.

~~148~~

We are subject to U.S. federal income tax and various state income taxes. The federal returns for tax years 2017 through 2020 remain open to examination and the state returns remain subject to examination for tax years 2016 through 2020. Carryforward attributes that were generated in years where the statute of limitations is closed may still be adjusted upon examination by the Internal Revenue Service or other respective tax authority. All other state jurisdictions remain open to examination.

Prior to the adoption of ASU 2019‑12 in the first quarter of 2020, ~~as described in Note 2, intraperiod~~intra-period tax allocation rules required us to allocate the provision for income taxes between continuing operations and other categories of earnings, such as other comprehensive (loss) income. In periods in which we had a year-to-date pre-tax loss from continuing operations and pre-tax income in other categories of earnings, such as other comprehensive (loss) income, we had to allocate the tax provision to the other categories of earnings. We then recorded a related tax benefit in continuing operations. However, with the adoption of ASU 2019‑12, we are no longer required to allocate the tax provision to the other categories of earnings and related ~~benefit~~benefits to continuing operations under these circumstances.

~~14. Summarized Quarterly Data (Unaudited)~~

~~The following financial information reflects all normal recurring adjustments that are, in the opinion of management, necessary for a fair statement of the results of the interim periods.~~

~~The table below presents unaudited quarterly data for years ended December 31, 2020 and 2019 (in thousands, except for share and per share amounts):~~

1st Quarter

2nd Quarter

3rd Quarter

4th Quarter

2020

Revenue

$
21

$
1

$
68

$
21

Operating expenses

18,607

20,228

21,995

30,907

Operating loss

(18,586
)

(20,227
)

(21,927
)

(30,886
)
Net loss

(18,383
)

(20,092
)

(21,776
)

(32,132
)
Net loss per share - basic and diluted

$
(0.19
)

$
(0.20
)

$
(0.20
)

$
(0.30
)
Shares used in calculating net loss per share - basic and
diluted

98,472,641

98,769,687

108,246,579

108,607,715

1st Quarter

2nd Quarter

3rd Quarter

4th Quarter

2019

Revenue

$
5

$
17

$
12

$
9

Operating expenses

18,340

17,313

16,077

16,120

Operating loss

(18,335
)

(17,296
)

(16,065
)

(16,111
)
Net loss

(17,885
)

(16,682
)

(15,581
)

(15,641
)
Net loss per share - basic and diluted

$
(0.22
)

$
(0.17
)

$
(0.16
)

$
(0.16
)
Shares used in calculating net loss per share - basic and
diluted

81,261,302

98,594,355

98,331,695

98,419,166

~~15.~~

12. Employee Benefits

Defined Contribution Benefit Plan –

In December 2015, ~~the company~~we adopted a 401(k) retirement and savings plan ~~or the~~(the 401(k) ~~Plan,~~Plan) covering all employees. The 401(k) Plan allows employees to make pre- and post-tax contributions up to the maximum allowable amount set by the ~~Internal Revenue Service.~~IRS. The company, at its discretion, may make certain contributions to the 401(k) Plan. We made contributions ~~of $0.5~~totaling $1.7 million, ~~$0.6~~$1.1 million and ~~$0.5~~$0.9 million ~~during~~to the 401(k) Plan for the years ended December 31, 2021, 2020 and 2019, ~~and 2018,~~ respectively.

Compensated Absences –

Under our vacation policy, salaried employees are provided unlimited vacation leave. Therefore, we do not record an accrual for paid leave related to these employees since we are unable to reasonably estimate the compensated absences that these employees will take.

191

Table of Contents

~~149~~

~~16.~~

13. Subsequent ~~Event~~

~~Related Party Lease Agreement~~

InEvents

Increase in Shares of Common Stock Authorized for Issuance

Effective February ~~2021, but effective on January~~ 1, ~~2021,~~2022, ImmunityBio amended its Amended and Restated Certificate of Incorporation to increase the number of shares that the company is authorized to issue from 500,000,000 shares of common stock, $0.0001 par value per share, to 900,000,000 shares of common stock, $0.0001 par value per share. The number of shares of preferred stock, $0.0001 par value per share, that the company is authorized to issue remained unchanged at 20,000,000 shares.

Acquisition of cGMP ISO Class 5 Manufacturing Facility

On February 14, 2022, we ~~entered into~~acquired a ~~lease agreement with 605 Nash, LLC, whereby we leased~~leasehold interest in approximately ~~6,883~~409,000 rentable square feet of cGMP ISO Class 5 pharmaceutical manufacturing space in ~~El Segundo, California. 605 Nash, LLC is a related party, as it is owned by our Executive Chairman and principal stockholder, Dr. Patrick Soon‑Shiong.~~western New York (the Dunkirk Facility) from Athenex, Inc. (Athenex). This facility provides us with a state-of-the-art biotech production center that substantially expands and diversifies our existing manufacturing capacity in the U.S.

We paid approximately $40.0 million to Athenex, and the leasehold interest in the Dunkirk Facility was transferred to us. Our annual lease payment will be ~~used primarily~~$2.00 per year for ~~pharmaceutical development and manufacturing purposes. The lease runs from January 2021 through December 2027, and includes~~an initial 10-year term, with an option to ~~extend~~renew the lease under substantially the same terms and conditions for an additional ~~three year~~ ~~term through~~ ~~December 2030. Base rent for the term~~10-year term. As part of the ~~lease is approximately $20,300 per month with an annual increase of 3%~~transaction, we assumed obligations under various third-party agreements, and committed to spend $1.52 billion on ~~January 1 of each year~~operational expenses during the initial term, and an additional $1.50 billion on operational expenses if ~~applicable,~~we elect to renew the lease for the additional 10-year term. We also committed to hiring 450 employees at the Dunkirk Facility within the first five years of operations, with 300 such employees to be hired within the first 2.5 years of operations. We are eligible for certain sales-tax exemption savings during the ~~option term. In addition, under~~development of the ~~agreement, we are required~~Dunkirk Facility, and certain property tax savings over the next 20 years, subject to ~~pay our share~~certain terms and conditions, including performance of ~~estimated property taxes and operating expenses, both~~certain of ~~which are variable lease expenses.~~

~~150~~

the obligations described above.

192

Table of Contents

~~Item~~

ITEM 9. ~~Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.~~

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

~~Item~~

ITEM 9A. ~~Controls and Procedures.~~

CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

~~Management, with the participation of its Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO, evaluated the effectiveness of our~~

Our disclosure controls and procedures as of December 31, 2020. The term “disclosure controls and procedures,” as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, or the Exchange Act, means controls and other procedures of a company that are designed to provide reasonable assurance of achieving their objectives of ensuring that information we are required to ~~be disclosed by a company~~disclose in the reports ~~that it files~~we file or ~~submits~~submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officer (CEO) and chief financial officer (CFO), as appropriate, to allow timely decisions regarding required disclosures, and is recorded, processed, summarized and reported, within the time periods specified in the ~~Securities and Exchange Commission’s~~SEC’s rules and forms. ~~Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable~~There is no assurance that information required to be disclosed is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures ~~as of December 31, 2020, our CEO and CFO have concluded that, as of December 31, 2020, our disclosure controls and procedures were effective at the reasonable assurance level.~~

~~Management's~~will operate effectively under all circumstances.

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a-15(f) under the Exchange Act. Internal control over financial reporting is a process designed under the supervision and with the participation of our management, including our CEO and CFO, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; and (ii) provide reasonable assurance (a) that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, (b) that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (c) regarding the prevention or timely detection of the unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements.

As of December 31, ~~2020,~~2021, our management conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control - Integrated Framework (2013). Based on this evaluation, our management concluded that, as of December 31, ~~2020,~~2021, our internal control over financial reporting was effective.

~~This annual report does not include an attestation report~~

The effectiveness of the company’s internal control over financial reporting has been audited by Ernst & Young LLP, our independent registered public accounting firm, ~~regarding~~as stated in its attestation report appearing on page 136 of this Annual Report under the heading “Report of Independent Public Accounting Firm on Internal Control Over Financial Reporting”, which expresses an unqualified opinion concerning the effectiveness of the company’s internal control over financial ~~reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules~~reporting as of ~~the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.~~

December 31, 2021.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting ~~that occurred~~(as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the ~~last~~ fiscal quarter ended December 31, ~~2020,~~2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

~~151~~

193

Table of Contents

Inherent Limitations on Effectiveness of Controls

Management recognizes that a control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud or error, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

~~Item~~

ITEM 9B. ~~Other Information.~~

OTHER INFORMATION.

None.

~~152~~

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

Not applicable.

194

Table of Contents

PART III

~~Item~~

ITEM 10. ~~Directors, Executive Officers and Corporate Governance.~~

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

The information required by this item will be contained in our definitive proxy statement to be filed with the Securities and Exchange Commission on Schedule 14A in connection with our ~~2021~~2022 Annual Meeting of Stockholders ~~or the~~(the Proxy ~~Statement,~~Statement), which is expected to be filed not later than 120 days after the end of our fiscal year ended December 31, ~~2020,~~2021, and is incorporated herein by reference.

~~Item~~

ITEM 11. ~~Executive Compensation.~~

EXECUTIVE COMPENSATION.

The information required by this item will be contained in the Proxy Statement under the headings “Executive Compensation” and “Board of Directors and Corporate Governance – Director Compensation,” and is incorporated herein by reference.

~~Item~~

ITEM 12. ~~Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.~~

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The information required by this item will be contained in the Proxy Statement under the headings “Security Ownership of Certain Beneficial Owners and Management” and “Executive Compensation – Equity Compensation Plan Information,” and is incorporated herein by reference.

~~Item~~

ITEM 13. ~~Certain Relationships and Related Transactions, and Director Independence.~~

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

The information required by this item will be contained in the Proxy Statement under the headings “Certain Relationships and Related Party Transactions” and “Board of Directors and Corporate Governance,” and is incorporated herein by reference.

~~Item~~

ITEM 14. ~~Principal Accounting Fees and Services.~~

PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The information required by this item will be contained in the Proxy Statement under the heading “Ratification of Appointment of Independent Registered Public Accounting Firm – Fees Paid to the Independent Registered Public Accounting Firm” and is incorporated herein by reference.

~~153~~

195

Table of Contents

PART IV

~~Item~~

ITEM 15. ~~Exhibits, Financial Statement Schedules.~~

EXHIBIT AND FINANCIAL STATEMENT SCHEDULES.

The consolidated financial statements, financial statement schedules and exhibits filed as part of this Annual Report ~~on Form 10‑K, or Annual Report,~~ are as follows:

(1)Financial Statements~~Consolidated financial statements~~

Reference is made to the consolidated financial statements identified in the “Index to Financial Statements” under ~~Part~~ P art II,Item 8 8. “Financial Statements and Supplementary Data” of this Annual Report.

(2)Financial Statement Schedules

for the Years Ended December 31, 2021, 2020 and 2019

All ~~other~~financial statement schedules ~~not listed above~~ have been omitted because the information required to be set forth therein is not applicable or is otherwise onincluded in the consolidated financial statements or notes thereto.

~~(3)~~ See Part II, Item 8. “Financial Statements and Supplementary Data” of this Annual Report.

(3)Exhibits

The documents listed ~~in the Exhibit Index of this Annual Report~~below are incorporated by reference or ~~are~~ filed with this Annual Report, in each case as indicated therein (numbered in accordance with Item 601 of Regulation S-K).

~~Exhibit Index~~

Exhibit
Number

Incorporated by Reference Herein

Description

Form

File No.

Exhibit

Filing Date

    2.1

Agreement and Plan of Merger, dated December 21, 2020, by and among NantKwest, Inc., ImmunityBio, Inc. and Nectarine Merger Sub, Inc.

8-K

001-37507

2.1

December 22, 2020

    3.1

Amended and Restated Certificate of Incorporation of NantKwest, Inc.

8-K

001-37507

3.1

August 4, 2015

    3.2

Amended and Restated Bylaws of NantKwest, Inc., effective as of June 18, 2020.

8-K

001-37507

3.1

June 19, 2020

    4.1

Nominating Agreement by and between the Registrant and Cambridge Equities, LP, dated June 18, 2015.

S-1

333-205124

4.1

June 19, 2015

    4.2

Form of Registration Rights Agreement by and between the Company and the Purchasers of Common Stock, dated June 2015.

S-1

333-205124

4.2

June 19, 2015

    4.3

Registration Rights Agreement by and between the Company and Cambridge Equities LP, dated December 23, 2014.

S-1

333-205124

4.3

June 19, 2015

    4.4

Form of Subscription and Securities Purchase Agreement among the Company and the Subscribers of Series C Preferred Stock, dated as of April 1, 2014.

S-1

333-205124

4.5

June 19, 2015

    4.5

Registration Rights Agreement, among the Company and the purchasers of Series B Preferred Stock, dated as of June 20, 2013.

S-1

333-205124

4.6

June 19, 2015

    4.6

Specimen common stock certificate.

S-1/A

333-205124

4.7

July 15, 2015

    4.7

Description of the Registrant’s Securities.

10-K

001-37507

10.26

March 25, 2020

  10.1

Form of Indemnification Agreement between the Company and each of its directors and executive officers.

S-1

333-205124

10.1

June 19, 2015

  10.2+

2014 Equity Incentive Plan and forms of agreements thereunder.

S-1

333-205124

10.2

June 19, 2015

  10.3+

2015 Equity Incentive Plan (as Amended and Restated June 10, 2020) and all forms and agreements thereunder.

10-Q

001-37507

10.1

August 7, 2020

  10.4+

Executive Incentive Compensation Plan.

S-1/A

333-205124

10.4

July 15, 2015

  10.5+

Amended and Restated Executive Employment Agreement between the Company and Patrick Soon-Shiong, effective March 24, 2015.

S-1/A

333-205124

10.5

July 15, 2015


Exhibit Number		Incorporated by Reference Herein
	Description	Form	File No.	Exhibit No.	Filing Date

2.1†	Agreement and Plan of Merger, dated December 21, 2020, by and among ImmunityBio, Inc. (f/k/a NantKwest, Inc.), NantCell, Inc. (f/k/a ImmunityBio, Inc.) and Nectarine Merger Sub, Inc.	8-K	001-37507	2.1	December 22, 2020

3.1	Amended and Restated Certificate of Incorporation of ImmunityBio, Inc.	8-K	001-37507	3.1	August 4, 2015

3.2	Certificate of Amendment of Amended and Restated Certificate of Incorporation of ImmunityBio, Inc. dated March 9, 2021.	8-K	001-37507	3.1	March 10, 2021

3.3	Certificate of Amendment of Amended and Restated Certificate of Incorporation of ImmunityBio, Inc. dated February 1, 2022.	POSASR	333-255699	3.3	March 1, 2022

3.4	Amended and Restated Bylaws of ImmunityBio, Inc . effective as of March 10, 2021.	10-Q	001-37507	3.2	August 12, 2021

4.1	Nominating Agreement by and between the Registrant and Cambridge Equities, LP, dated June 18, 2015.	S-1	333-205124	4.1	June 19, 2015

4.2	Form of Registration Rights Agreement by and between the Registrant and the Purchasers of Common Stock, dated June 2015.	S-1	333-205124	4.2	June 19, 2015

4.3	Registration Rights Agreement by and between the Registrant and Cambridge Equities LP. dated December 23, 2014.	S-1	333-205124	4.3	June 19, 2015

~~154~~

196

Exhibit
Number

Incorporated by Reference Herein

Description

Form

File No.

Exhibit

Filing Date

  10.6+

Executive Employment Agreement between the Company and Barry J. Simon, M.D., dated January 1, 2015.

S-1

333-205124

10.6

June 19, 2015

  10.7

License Agreement between the Company and Brink Biologics, Inc., dated June 9, 2015.

S-1

333-205124

10.7

June 19, 2015

  10.8

License Agreement between the Company and Coneksis, Inc., dated June 9, 2015.

S-1

333-205124

10.8

June 19, 2015

  10.9

License Agreement between the Company and Intrexon Corporation, dated February 23, 2010.

S-1

333-205124

10.10

June 19, 2015

  10.10

UHN-ZelleRx License Agreement between University Health Network and the Company, dated May 9, 2005.

S-1

333-205124

10.11

June 19, 2015

  10.11

License Agreement, as amended, between Fox Chase Cancer Center and the Company, dated as of July 10, 2004.

S-1

333-205124

10.12

June 19, 2015

  10.12

Rush-ZelleRx License Agreement, between Rush University Medical Center and the Registrant, dated as of March 24, 2004.

S-1

333-205124

10.13

June 19, 2015

  10.13

License Agreement, as amended, between Hans G. Klingemann and the Company, dated February 10, 2003.

S-1/A

333-205124

10.14

July 27, 2015

  10.14

Genomic and Proteomic Services Agreement by and between the Company and NantOmics, LLC, dated June 18, 2015.

S-1

333-205124

10.18

June 19, 2015

  10.15

Lease Agreement by and between ARE - John Hopkins Court, LLC and the Company, dated June 19, 2015.

S-1/A

333-205124

10.19

July 27, 2015

  10.16

Shared Services Agreement by and between the Company and NantWorks, LLC, dated November 10, 2015.

10-K

001-37507

10.22

March 30, 2016

  10.17

Facility License Agreement by and between the Company and NantWorks, LLC, dated November 10, 2015.

10-K

001-37507

10.23

March 30, 2016

  10.18+

Offer Letter between Sonja Nelson and the Company, dated April 7, 2016.

10-Q

001-37507

10.1

May 16, 2016

  10.19

Amended and Restated Shared Services Agreement by and between the Company and NantWorks LLC, dated June 28, 2016.

10-Q

001-37507

10.1

August 15, 2016

  10.20

Lease agreement by and between the Company and 605 Doug Street, LLC, dated June 28, 2016.

10-Q

001-37507

10.1

November 10, 2016

  10.21+

Letter Agreement with Barry Simon dated May 3, 2018.

10-Q

001-37507

10.1

August 06, 2018

  10.22+

Offer of Employment Letter with Sonja Nelson dated June 11, 2018.

10-Q

001-37507

10.2

August 06, 2018

  10.23

Notice of Pendency of Proposed Settlement of Stockholder Derivative Action dated May 31, 2019.

8-K

001-37507

99.1

June 10, 2019

  10.24

Stipulation and Agreement of Settlement dated April 10, 2019.

8-K

001-37507

99.2

June 10, 2019

  10.25

Letter Agreement between the Company and Immuno-Oncology Clinic, Inc., dated July 5, 2019.

10-Q

001-37507

10.4

August 6, 2019

  10.26

Cost Allocation Agreement between the Company and ImmunityBio, Inc. and its subsidiaries, dated January 29, 2020.

10-K

001-37507

10.26

March 25, 2020

  10.27

First Amendment to the July 1, 2019 Letter Agreement between the Company and Immuno-Oncology Clinic, Inc., dated March 31, 2020.

10-Q

001-37507

10.1

May 5, 2020

  10.28

COVID Joint Development, Manufacturing, and Marketing Agreement between NantKwest, Inc. and ImmunityBio, Inc. Binding Term Sheet, dated May 22, 2020.

10-Q

001-37507

10.2

August 7, 2020

Table of Contents

~~155~~


Exhibit Number		Incorporated by Reference Herein
	Description	Form	File No.	Exhibit No.	Filing Date

4.4	Form of Subscription and Securities Purchase Agreement among the Registrant and the Subscribers of Series C Preferred Stock, dated as of April 1, 2014.	S-1	333-205124	4.5	June 19, 2015

4.5	Registration Rights Agreement, among the Registrant and the purchasers of Series B Preferred Stock, dated as of June 20, 2013.	S-1	333-205124	4.6	June 19, 2015

4.6	Specimen Common Stock Certificate.	S-8 POS	333-252232	4.1	May 21, 2021

4.7*	Description of Registrant’s Securities.

10.1	Voting Agreement, dated as of December 21, 2020, by and among ImmunityBio, Inc., NantKwest, Inc. and the NantKwest, Inc. stockholders party thereto.	8-K	001-37507	10.1	December 22, 2020

10.2	Voting Agreement, dated as of December 21, 2020, by and among ImmunityBio, Inc., NantKwest, Inc. and the ImmunityBio, Inc. stockholders party thereto.	8-K	001-37507	10.2	December 22, 2020

10.3+	Common Stock Purchase Warrant, dated June 30, 2016, issued by the Company to NantWorks, LLC.	S-4	333-252232	10.13	January 19, 2021

10.4†	Common Stock Purchase Agreement, dated April 30, 2018, by and among ImmunityBio, Inc. and NantBio, Inc.	S-4	333-252232	10.30	January 19, 2021

10.5	Open Market Sale Agreement dated April 30, 2021, by and between ImmunityBio, Inc. and Jefferies LLC.	8-K	001-37507	10.1	May 3, 2021

10.6†	Agreement and Plan of Merger, dated May 19, 2017, by and among the Company, Altor Acquisition LLC, Altor BioScience Corporation and Shareholder Representative Services LLC.	S-4	333-252232	10.4	January 19, 2021

10.7	FDA Milestone Contingent Value Rights Agreement, dated as of July 31, 2017, by and between the Company and Shareholder Repre sentative Services LLC .	S-4	333-252232	10.11	January 19, 2021

10.8	S ales Milestone Contingent Value Rights Agreement, dated as of July 31, 2017, by and between the Company and Shareholder Representative Services LLC.	S-4	333-252232	10.12	January 19, 2021

10.9†	Agreement and Plan of Merger, entered into as of May 15, 2018, by and among the Company, Receptome Acquisition Corporation, Receptome, Inc., and the Selling Stockholder thereunder.	S-4	333-252232	10.5	January 19, 2021

10.10	Promissory Note by and between ImmunityBio, Inc. and Nant Capital, LLC dated as of December 17, 2021.	8-K	001-37507	10.1	December 20, 2021

197

Exhibit
Number

Incorporated by Reference Herein

Description

Form

File No.

Exhibit

Filing Date

  10.29

COVID Joint Development, Manufacturing, and Marketing Agreement between NantKwest, Inc. and ImmunityBio, Inc., dated August 21, 2020.

10-Q

001-37507

10.1

November 9, 2020

  10.30

First Amendment to Facility License Agreement by and between   NantWorks, LLC and NantKwest, Inc., dated September 14, 2020.

10-Q

001-37507

10.2

November 9, 2020

  10.31

Sublease Agreement between Altor Bioscience Manufacturing Company, LLC and NantKwest, Inc., dated September 14, 2020.

10-Q

001-37507

10.3

November 9, 2020

  10.32+

Offer Letter between the Company and Richard Adcock, dated October 26, 2020.

10-Q

001-37507

10.4

November 9, 2020

  10.33

Voting Agreement, dated December 21, 2020, by and among ImmunityBio, Inc., NantKwest, Inc., and the NantKwest, Inc. stockholders party thereto.

8-K

001-37507

10.1

December 22, 2020

  10.34

Voting Agreement, dated December 21, 2020, by and among NantKwest, Inc., ImmunityBio, Inc. and the ImmunityBio, Inc. stockholders party thereto.

8-K

001-37507

10.2

December 22, 2020

  10.35*

Lease Agreement between 605 Nash, LLC and NantKwest, Inc., dated February 11, 2021.

  21.1*

Subsidiaries.

  23.1*

Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.

  24.1*

Power of Attorney (Contained on Signature Page to this Annual Report on Form 10-K).

  31.1*

Rule 13a-14(a) / 15d-14(a) Certification of Principal Executive Officer.

  31.2*

Rule 13a-14(a) / 15d-14(a) Certification of Principal Financial Officer.

  32.1**

Section 1350 Certification of Chief Executive Officer.

  32.2**

Section 1350 Certification of Chief Financial Officer.

101.INS

Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB

Inline XBRL Taxonomy Extension Labels Linkbase Document.

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

Table of Contents



Exhibit Number		Incorporated by Reference Herein
	Description	Form	File No.	Exhibit No.	Filing Date

10.11	Promissory Note issued by ImmunityBio, Inc. to Nant Capital, LLC dated February 22, 2021.	8-K	001-37507	10.14	March 10, 2021

10.12	Promissory Note issued by ImmunityBio, Inc. to Nant Capital, LLC dated September 30, 2020.	S-4	333-252232	10.10	January 19, 2021

10.13	Amended and Restated Promissory Note issued by ImmunityBio, Inc. t o Nant Capital, LLC dated July 28, 2020.	S-4	333-252232	10.6	January 19, 2021

10.14	Amended and Restated Promissory Note issued by ImmunityBio, Inc. to NantWorks, LLC dated July 28, 2020.	S-4/A	333-252232	10.7	January 19, 2021

10.15	Amended and Restated Promissory Note issued by ImmunityBio, Inc. to NantCancerStemCell, LLC dated July 28, 2020.	S-4/A	333-252232	10.8	January 19, 2021

10.16	Amended and Restated Promissory Note issued by ImmunityBio, Inc. to NantMobile, LLC dated July 28, 2020.	S-4/A	333-252232	10.9	January 19, 2021

10.17	Lease Agreement by and between ARE -JOHN HOPKINS COUR T , LLC and the Company, dated June 19, 2015.	S-1/A	333-205124	10.19	July 27, 2015

10.18	Facility License Agreement by and between NantWorks, LLC and the Company , dated as of November 6, 2015.	10-K	001-37507	10.23	March 30, 2016

10.19	First Amendment to Facility License Agreement by and between NantWorks, LLC and the Company , dated as of September 14, 2020.	10-Q	001-37507	10.2	November 9, 2020

10.20	Commercial Lease by and between 605 Doug St, LLC and the Company, dated September 15, 2016.	10-Q	001-37507	10.1	November 10, 2016

10.21+	Commercial Lease by and between Duley Road, LLC and Altor BioScience Manufacturing Company, LLC dated February 1, 2017.	S-4/A	333-252232	10.27	January 19, 2021

10.22+	Commercial Lease by and between Duley Road, LLC and the Company dated January 28, 2019.	S-4/A	333-252232	10.28	January 19, 2021

10.23+	Commercial Lease by and between Duley Road, LLC and the Company dated January 28, 2019.	S-4/A	333-252232	10.29	January 19, 2021

198

Table of Contents

Exhibit
Number

Incorporated by Reference Herein

Description

Form

File No.

Exhibit No.

Filing Date

10.24

Sublease Agreement between Altor BioScience Manufacturing Company, LLC and the Company, dated as of September 30, 2020.

10-Q

001-37507

10.3

November 9, 2020

10.25

Commercial Lease between 605 Nash, LLC and the Company, dated February 11, 2021.

10-K

001-37507

10.35

March 4, 2021

10.26

First Amendment to Lease (Expansion & Extension) made and entered into as of May 28, 2021 by and between 605 Nash, LLC and Imm unityBio, Inc .

10-Q

001-37507

10.1

August 12, 2021

10.27

Membership Interest Purchase Agreement ente red into as of September 27, 2021 by and among Nant Capital, LLC and ImmunityBio, Inc.

10-Q

001-37507

10.2

November 12, 2021

10.28

Industrial/Commercial Lease Agreement dated September 27, 2021 by and between 557 Doug St, LLC and ImmunityBio, Inc.

10-Q

001-37507

10.3

November 12, 2021

10.29

Commercial Lease Agreement dated September 27, 2021 by and between 420 Nash, LLC and ImmunityBio, Inc.

10-Q

001-37507

10.4

November 12, 2021

10.30†

Purchase Agreement by and between Athenex, Inc. and ImmunityBio, Inc. dated January 7, 2022 .

8-K

001-37507

10.1

January 12, 2022

10.31+

Letter Agreement effective as of July 1, 2019 between Immuno-Oncology Clinic, Inc. and the Company.

10-Q

001-37507

10.4

August 6, 2019

10.32

First Amendment to the July 1, 2019 Letter Agreement by and between Immuno-Oncology Clinic, Inc. and the Company dated March 31, 2020.

10-Q

001-37507

10.1

May 11, 2020

10.33#+

Amended and Restated Executive Employment Agreement between the Company and Patrick Soon-Shiong, M.D., dated July 13 , 2015.

S-1/A

333-205124

10.5

July 15, 2015

10.34#^

Offer Letter between the Company and Richard Adcock, dated October 26, 2020.

10-Q

001-37507

10.4

November 9, 2020

10.35#^

Offer Letter, dated August 3, 2020, between ImmunityBio, Inc. and David Sachs.

S-4

333-252232

10.31

January 19, 2021

10.36*#^

Offer Letter, dated October 12, 2021, by and among ImmunityBio, Inc. and Regan Lauer.

10.37#

Executive Employment Agreement between the Company and Barry J. Simon, M.D., dated January 1, 2015.

S-1

333-205124

10.6

June 19, 2015

10.38#

Letter Agreement with Barry Simon dated May 3, 2018.

10-Q

001-37507

10.1

August 6, 2018

10.39#^

Offer Letter between Sonja Nelson and the Company, dated April 7, 2016.

10-Q

001-37507

10.1

May 16, 2016

10.40#^

Revised Offer of Employment Letter with Sonja Nelson dated June 11, 2018.

10-Q

001-37507

10.2

August 6, 2018

199

Table of Contents

Exhibit
Number

Incorporated by Reference Herein

Description

Form

File No.

Exhibit No.

Filing Date

10.41#

ImmunityBio, Inc. Outside Director Compensation Policy as of March 9,2021.

8-K

001-37507

10.1

March 10, 2021

10.42

Form of Indemnification Agreement between ImmunityBio, Inc. and each of its Directors and Executive Officers.

S-1

333-205124

10.1

June 19, 2015

10.43#

Executive Incentive Compensation Plan.

S-1/A

333-205124

10.4

July 15, 2015

10.44#

2014 NantKwest, Inc. Equity Incentive Plan and Forms of Agreement Thereunder.

S-1

333-205124

10.2

June 19, 2015

10.45#

2015 NantKwest, Inc. Equity Incentive Plan (as Amended and Restated June 10, 2020) and a ll f orms and a greements t hereunder.

10-Q

001-37507

10.1

August 7, 2020

10.46#

NantCell, Inc. 2015 Stock Incentive Plan and f orm s of a greement t hereunder.

S-4

333-252332

10.14

January 19, 2021

10.47

Assignment Agreement, dated July 2, 2017, by and between NantPharma, LLC and Immunotherapy NANTibody, LLC.

S-4

333-252332

10.25

January 19, 2021

10.48

Letter Agreement, dated February 14, 2018, by and between NantPharma, LLC and Immunother a p y NANTibody, LLC.

S-4

333-252332

10.26

January 19, 2021

10.49

Notice of Pendancy of Proposed Settlement of Stockholder Derivative Action dated May 31, 2019.

8-K

001-37507

99.1

June 10, 2019

10.50

Stipulation and Agreement of Settlement dated April 10, 2019.

8-K

001-37507

99.2

June 10, 2019

21.1*

Subsidiaries of ImmunityBio, Inc. as of December 31, 2021.

23.1*

Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.

24.1*

Power of Attorney (Contained in Signature Page to this Annual Report on Form 10-K).

31.1*

Rule 13a-14(a)/15(d)-14(a) Certification of Principal Executive Officer.

31.2*

Rule 13a-14(a)/15(d)-14(a) Certification of Principal Financial Officer.

32.1**

Section 1350 Certification of Chief Executive Officer.

200

Table of Contents

Exhibit
Number

Incorporated by Reference Herein

Description

Form

File No.

Exhibit No.

Filing Date

32.2**

~~Filed herewith.~~

Section 1350 Certification of Chief Financial Officer.

101.INS

Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).

101.SCH

Inline XBRL Taxonomy Extension Schema Document.

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

The certifications attached as Exhibits 32.1 and 32.2 that accompany this Annual Report, are deemed furnished and not filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of NantKwest, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Annual Report, irrespective of any general incorporation language contained in such filing.

_______________

+	~~Indicates a management contract or compensatory plan.~~

* Filed herewith.

~~156~~

** The certifications attached as Exhibits 32.1 and 32.2 that accompany this Annual Report are deemed furnished and not filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of ImmunityBio, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Annual Report, irrespective of any general incorporation language contained in such filing.

† Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The company agrees to furnish to the SEC a copy of any omitted schedule or exhibit upon request.

+Schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The company agrees to furnish to the SEC a copy of any omitted schedule or exhibit upon request.

# Indicates a management contract or compensatory plan.

^ Portions of this exhibit have been redacted in compliance with Regulation S-K Item 601(a)(6).

~~Item~~

ITEM 16. ~~Form~~FORM 10-K ~~Summary.~~

SUMMARY.

None.

~~157~~

201

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities ~~Exchange~~ Act of 1934, as amended, the ~~Registrant~~registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

	~~NantKwest, Inc.~~
					IMMUNITYBIO, INC.
		Registrant

Date: March ~~4, 2021~~ 1, 2022		By:	~~By:~~	/s/ Richard Adcock
				Richard Adcock
				Chief Executive Officer
			(Principal Executive Officer)

Date: March 1, 2022		By:	/s/ David C. Sachs
			David C. Sachs
			Chief Financial Officer
			(Principal Financial Officer)

Date: March 1, 2022		By:	/s/ Regan J. Lauer
			Regan J. Lauer
			Chief Accounting Officer
			(Principal Accounting Officer)

202

Table of Contents

POWER OF ATTORNEY

Each person whose signature appears below constitutes and appoints Richard Adcock, David C. Sachs and ~~Sonja Nelson,~~Jason Liljestrom, and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitutes, may lawfully do or cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the ~~Registrant~~registrant in the capacities and on the dates indicated.

~~Signature~~

~~Title~~

~~Date~~

Signature

Title

Date

/s/ Patrick Soon-Shiong

Global Chief Scientific and Medical Officer, and
Executive Chairman of the Board of Directors

March ~~4, 2021~~

1, 2022

Patrick Soon-Shiong

~~Patrick Soon-Shiong~~

/s/ Richard Adcock

Chief Executive Officer,

President and Director

(Principal Executive Officer)

March ~~4, 2021~~

1, 2022

Richard Adcock

~~Richard Adcock~~

/s/ David C. Sachs

Chief Financial Officer

(Principal Financial Officer)

March 1, 2022

David C. Sachs

/s/ Regan J. Lauer

Chief Accounting Officer

(Principal Accounting Officer)

March 1, 2022

Regan J. Lauer

/s/ Barry J. Simon

~~President,~~ Chief ~~Administrative~~Corporate Affairs Officer and Director

March ~~4, 2021~~

1, 2022

Barry J. Simon

~~Barry J. Simon~~

~~/s/ Sonja Nelson~~

~~Chief Financial Officer~~

~~(Principal Financial and Accounting Officer)~~

~~March 4, 2021~~

~~Sonja Nelson~~

/s/ Michael D. Blaszyk

Director

March ~~4, 2021~~

1, 2022

Michael D. Blaszyk

~~Michael D. Blaszyk~~

~~/s/ Frederick W. Driscoll~~

~~Director~~

~~March 4, 2021~~

~~Frederick W. Driscoll~~

/s/ John ~~C. Thomas, Jr.~~

Owen Brennan

Director

March ~~4, 2021~~

1, 2022

John Owen Brennan

~~John C. Thomas, Jr.~~

/s/ Wesley Clark

Director

March 1, 2022

Wesley Clark

/s/ Cheryl L. Cohen

Director

March ~~4, 2021~~

1, 2022

Cheryl L. Cohen

~~Cheryl L. Cohen~~

/s/ Linda Maxwell

Director

March 1, 2022

Linda Maxwell

/s/ Christobel Selecky

Director

March 1, 2022

Christobel Selecky

~~158~~

203

~~Delaware~~	~~43-1979754~~
Delaware		43-1979754
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

3530 John Hopkins Court San Diego,, California		92121
(Address of principal executive offices)		(Zip Code)

☒
þ			ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐
¨			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ~~FOR THE TRANSITION PERIOD FROM TO~~


		Page
PART I
Item 1.	Business	2 1
Item 1A.	Risk Factors	37 48
Item 1B.	Unresolved Staff Comments	84 108
Item 2.	Properties	84 108
Item 3.	Legal Proceedings	84 109
Item 4.	Mine Safety Disclosures	85 109

PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	86 110
Item 6.	~~Selected Financial Data~~Reserved	88 111
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	89 112
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	~~109~~ 132
Item 8.	~~Consolidated~~ Financial Statements and Supplementary Data	~~110~~ 133
Item 9.	Changes in and Disagreements ~~With~~with Accountants on Accounting and Financial Disclosure	~~151~~ 193
Item 9A.	Controls and Procedures	~~151~~ 193
Item 9B.	Other Information	~~152~~ 194
Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	194

PART III
Item 10.	Directors, Executive Officers and Corporate Governance	~~153~~ 195
Item 11.	Executive Compensation	~~153~~ 195
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	~~153~~ 195
Item 13.	~~Certain Relationships~~C ertain R elationships and ~~Related Transactions,~~R elated Tra nsactions, and Director Independence	~~153~~ 195
Item 14.	~~Principal Accounting~~ P rincipal Accountant Fees and Services	~~153~~ 195

PART IV

Item 15.	Exhibits and Financial Statement Schedules	~~154~~ 196
Item 16.	Form 10-K Summary	~~157~~ 201
Signatures		~~Signatures~~202	~~158~~

	For the Year Ended December 31,									Change
	2020			2019			2018			2020 vs. 2019			2019 vs. 2018
Revenue	$	111		$	43		$	47		$	68		$	(4	)
Operating expenses:
Research and development (including amounts with related parties)		64,483			49,785			55,718			14,698			(5,933	)
Selling, general and administrative (including amounts with related parties)		27,254			18,065			42,718			9,189			(24,653	)
Total operating expenses		91,737			67,850			98,436			23,887			(30,586	)
Loss from operations		(91,626	)		(67,807	)		(98,389	)		(23,819	)		30,582
Other income (expense):
Investment income, net		366			1,642			1,857			(1,276	)		(215	)
Interest expense (including amounts with related parties)		(41	)		(19	)		(433	)		(22	)		414
Other (expense) income, net (including amounts with related parties)		(1,077	)		298			236			(1,375	)		62
Total other (expense) income		(752	)		1,921			1,660			(2,673	)		261
Loss before income taxes		(92,378	)		(65,886	)		(96,729	)		(26,492	)		30,843
Income tax (expense) benefit		(5	)		97			503			(102	)		(406	)
Net loss	$	(92,383	)	$	(65,789	)	$	(96,226	)	$	(26,594	)	$	30,437

	Common Stock					Additional Paid-in			Accumulated Other Comprehensive			Accumulated
	Shares			Amount		Capital			Loss			Deficit			Total
Balance as of December 31, 2017		79,021,878		$	8	$	717,930		$	(381	)	$	(498,713	)	$	218,844
Stock-based compensation expense	—			0			23,382		0			0				23,382
Exercise of warrants		93,254		0			57		0			0				57
Vesting of restricted stock units (RSUs)		172,330		0		0			0			0				0
Net share settlement for RSU vesting and warrant exercises		(61,379	)	0			(123	)	0			0				(123	)
Repurchase of common stock		(138,349	)	0		0			0				(228	)		(228	)
Cumulative effect of the adoption of the new revenue standard	—			0		0			0				186			186
Other comprehensive income	—			0		0				114		0				114
Net loss	—			0		0			0				(96,226	)		(96,226	)
Balance as of December 31, 2018		79,087,734		$	8	$	741,246		$	(267	)	$	(594,981	)	$	146,006
Stock-based compensation expense	—			0			2,627		0			0				2,627
Exercise of warrants		17,589,250			2		35,149		0			0				35,151
Exercise of stock options		1,986,300		0			4,070		0			0				4,070
Vesting of RSUs		395,051		0		0			0			0				0
Net share settlement for RSU vesting and warrant exercises		(124,345	)	0			(127	)	0			0				(127	)
Repurchase of common stock		(473,586	)	0		0			0				(501	)		(501	)
Cumulative effect of the adoption of the new lease standard	—			0		0			0				(920	)		(920	)
Other comprehensive income	—			0		0				162		0				162
Net loss	—			0		0			0				(65,789	)		(65,789	)
Balance as of December 31, 2019		98,460,404		$	10	$	782,965		$	(105	)	$	(662,191	)	$	120,679
Issuance of common stock, net of $4,373 in offering costs		8,521,500			1		86,301		0			0				86,302
Stock-based compensation expense	—			0			2,139		0			0				2,139
Exercise of stock options		1,272,273		0			1,176		0			0				1,176
Vesting of RSUs		648,336		0		0			0			0				0
Net share settlement for RSU vesting and option exercises		(175,962	)	0			(503	)	0			0				(503	)
Other comprehensive loss	—			0		0				(17	)	0				(17	)
Net loss	—			0		0			0				(92,383	)		(92,383	)
Balance as of December 31, 2020		108,726,551		$	11	$	872,078		$	(122	)	$	(754,574	)	$	117,393

	December 31, 2019
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Current:
Corporate debt securities	$	32,382	$	10	$	(3	)	$	32,389
Foreign government bonds		1,007		0		0			1,007
Government sponsored securities		2,752		0		(4	)		2,748
Current portion		36,141		10		(7	)		36,144
Noncurrent:
Corporate debt securities		1,501		0		(4	)		1,497
Noncurrent portion		1,501		0		(4	)		1,497
Total	$	37,642	$	10	$	(11	)	$	37,641

	Gross Realized Gains		Gross Realized Losses			Net Realized Gains (Losses)
2020	$	4	$	(13	)	$	(9	)
2019	$	4	$	(8	)	$	(4	)
2018	$	3	$	0		$	3

Years ending December 31:	Operating Leases (a)
2021	$	6,563
2022		5,607
2023		2,545
2024		1,083
2025		1,115
Thereafter		614
Total future minimum lease payments		17,527
Less: Interest		2,213
Present value of operating lease liabilities	$	15,314

	Number of Shares			Weighted- Average Exercise Price		Aggregate Intrinsic Value (in thousands)		Weighted- Average Remaining Contractual Life (in years)
Outstanding as of December 31, 2017		5,693,250		$	7.71	$	11,920		5.3
Options granted		800,000		$	3.07
Outstanding at December 31, 2018		6,493,250		$	7.14	$	563		4.8
Options exercised		(1,986,300	)	$	2.06
Outstanding as of December 31, 2019		4,506,950		$	9.37	$	5,710		5.8
Options granted		400,000		$	6.21
Options exercised		(1,272,273	)	$	1.89
Options forfeited		(116,667	)	$	3.07
Outstanding as of December 31, 2020		3,518,010		$	11.93	$	21,922		5.5
Vested and Exercisable as of December 31, 2020		2,868,008		$	13.50	$	16,509		4.7

Exercise Prices	Number Outstanding		Weighted- Average Remaining Contractual Life (in years)		Number Exercisable		Weighted- Average Remaining Contractual Life (in years)
$0.4213		512,036		3.9		512,036		3.9
$1.7554		288,404		4.0		288,404		4.0
$1.9984		262,120		4.1		262,120		4.1
$3.07		600,000		7.7		349,998		7.7
$6.21		400,000		9.4		0		—
$25.00		1,455,450		4.6		1,455,450		4.6
		3,518,010		5.5		2,868,008		4.7

		~~Page~~

	Number of RSUs Outstanding			Weighted- Average Grant Date Fair Value
Unvested balance as of December 31, 2017		888,189		$	8.14
Granted		487,472		$	3.57
Vested		(172,330	)	$	6.16
Forfeited/canceled		(335,420	)	$	6.27
Unvested balance as of December 31, 2018		867,911		$	6.69
Granted		749,793		$	1.12
Vested		(395,051	)	$	8.83
Forfeited/canceled		(83,225	)	$	7.29
Unvested balance as of December 31, 2019		1,139,428		$	2.23
Granted		33,500		$	6.43
Vested		(648,336	)	$	2.04
Forfeited/canceled		(57,750	)	$	4.47
Unvested balance as of December 31, 2020		466,842		$	2.52

Unrecognized tax benefits as of December 31, 2018	$	11,983
Decrease for prior year tax positions		(7	)
Increase for current year tax positions		3,680
Unrecognized tax benefits as of December 31, 2019		15,656
Decrease for prior year tax positions		(6	)
Increase for current year tax positions		4,763
Unrecognized tax benefits as of December 31, 2020	$	20,413

	1st Quarter			2nd Quarter			3rd Quarter			4th Quarter
2020
Revenue	$	21		$	1		$	68		$	21
Operating expenses		18,607			20,228			21,995			30,907
Operating loss		(18,586	)		(20,227	)		(21,927	)		(30,886	)
Net loss		(18,383	)		(20,092	)		(21,776	)		(32,132	)
Net loss per share - basic and diluted	$	(0.19	)	$	(0.20	)	$	(0.20	)	$	(0.30	)
Shares used in calculating net loss per share - basic and diluted		98,472,641			98,769,687			108,246,579			108,607,715

	1st Quarter			2nd Quarter			3rd Quarter			4th Quarter
2019
Revenue	$	5		$	17		$	12		$	9
Operating expenses		18,340			17,313			16,077			16,120
Operating loss		(18,335	)		(17,296	)		(16,065	)		(16,111	)
Net loss		(17,885	)		(16,682	)		(15,581	)		(15,641	)
Net loss per share - basic and diluted	$	(0.22	)	$	(0.17	)	$	(0.16	)	$	(0.16	)
Shares used in calculating net loss per share - basic and diluted		81,261,302			98,594,355			98,331,695			98,419,166