NORTHWEST BIOTHERAPEUTICS INC

1. Organization and Description of Business

Northwest Biotherapeutics, Inc. and its wholly owned subsidiaries Flaskworks, Northwest Biotherapeutics Limited (formerly known as Aracaris Ltd), Aracaris Capital, Ltd, Northwest Biotherapeutics B.V., and NW Bio GmbH (collectively, the “Company”, “we”, “us” and “our”) were organized to discover and develop innovative immunotherapies for cancer. The Company has developed DCVax® platform technologies for both operable and inoperable solid tumor cancers. The Company has wholly owned subsidiaries in Boston, the U.K., the Netherlands and Germany. On August 28, 2020, the Company acquired Flaskworks, LLC (“Flaskworks”), a company that has developed a system designed to close and automate the manufacturing of cell therapy products such as DCVax®. On July 24, 2023, the Company’s wholly-owned U.K. subsidiary changed its name from Aracaris Ltd to Northwest Biotherapeutics Limited.

The Company relies upon contract manufacturers for production of its DCVax products, research and development services, distribution and logistics, and related services, in compliance with the Company’s specifications and the applicable regulatory requirements.

The Company has completed a Phase 3 clinical trial of its DCVax®-L product for glioblastoma brain cancer, has publicly reported the results in a peer reviewed publication in a medical journal as well as at a medical conference, and has submitted an application for regulatory approval of the product in the U.K.

2. Financial Condition, Going Concern and Management Plans

The Company has incurred annual net operating losses since its inception. The Company had a net loss of $62.8 million for the year ended December 31, 2023. The Company used approximately $53.6 million of cash in its operating activities during the year ended December 31, 2023.

The Company does not expect to generate material revenue in the near future from the sale of products and is subject to all of the risks and uncertainties that are typically faced by biotechnology companies that devote substantially all of their efforts to research and development (“R&D”) and clinical trials and do not yet have commercial products. The Company expects to continue incurring annual losses for the foreseeable future. The Company’s existing liquidity is not sufficient to fund its operations, anticipated capital expenditures, working capital and other financing requirements until the Company reaches significant revenues. Until that time, the Company will need to obtain additional equity and/or debt financing, especially if the Company experiences downturns in its business that are more severe or longer than anticipated, or if the Company experiences significant increases in expense levels resulting from being a publicly-traded company or from expansion of operations. If the Company attempts to obtain additional equity or debt financing, the Company cannot assume that such financing will be available to the Company on favorable terms, or at all.

Because of recurring operating losses and operating cash flow deficits, there is substantial doubt about the Company’s ability to continue as a going concern within one year from the date of this filing. The consolidated financial statements have been prepared assuming that the Company will continue as a going concern, and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets, or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

3. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements of the Company were prepared in accordance with generally accepted accounting principles in the U.S. (“U.S. GAAP”) and include the assets, liabilities, revenues and expenses of the wholly owned subsidiaries in Germany, United Kingdom and Netherlands. All intercompany transactions and accounts have been eliminated in consolidation.

Consolidation

The Company’s policy is to consolidate all entities in which it can vote a majority of the outstanding voting stock. In addition, the Company consolidates entities that meet the definition of a variable interest entity (“VIE”) for which the Company is the primary beneficiary, if any. The primary beneficiary is the party who has the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and who has an obligation to absorb losses of the entity or a right to receive benefits from the entity that could potentially be significant to the VIE.

As of December 31, 2023 and 2022, the Company did not consolidate any VIE’s as the Company has concluded that it is not the primary beneficiary.

Use of Estimates

In preparing consolidated financial statements in conformity with U.S. GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of expenses during the reporting period. Due to inherent uncertainty involved in making estimates, actual results reported in future periods may be affected by changes in these estimates.

On an ongoing basis, the Company evaluates its estimates and judgments, including valuing equity securities in share-based payment arrangements, estimating the fair value of financial instruments recorded as derivative liabilities, useful lives of depreciable assets and whether impairment charges may apply. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the reported amounts of revenues and expenses that are not readily apparent from other sources. Actual results could differ from those estimates.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash accounts in a financial institution, which at times may exceed the Federal depository insurance coverage (“FDIC”) of $250,000. As of December 31, 2023, of the total $2.1 million in cash and cash equivalents, $36,000 was held by foreign subsidiaries. As of December 31, 2022, of the total $7.0 million in cash and cash equivalents, $0.4 million was held by foreign subsidiaries. The Company had not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.

Property, Plant and Equipment

Property and equipment are stated at cost. Depreciation and amortization are provided for using straight-line methods, in amounts sufficient to charge the cost of depreciable assets to operations over their estimated service lives. Repairs and maintenance costs are charged to operations as incurred.

Costs for capital assets not yet placed into service are capitalized as construction in progress on the consolidated balance sheets and will be depreciated once placed into service. In October 2021, approval was received from the UK Human Tissue Authority (“HTA”) of a license for collection and processing of human cells and tissues for medical purposes at the Company’s Sawston, UK facility. In December 2021, approval was received from the UK Medicines and Healthcare Products Regulatory Agency (“MHRA”) of a license for manufacture at the Sawston facility of GMP (clinical grade) cell therapy products for compassionate use and trials. All costs associated with the facility buildout (Phase 1A) were reclassified from construction in progress to leasehold improvements, and the costs began to be amortized over the estimated useful life of the asset and/or leasehold lease. The Company incurred additional construction works related to Phase 1B build out during the year ended December 31, 2022, which was completed and placed in use in 2023.

The Company assesses its long-lived assets for impairment whenever facts and circumstances indicate that the carrying amounts may not be fully recoverable. To analyze recoverability, the Company projects undiscounted net future cash flows over the remaining lives of such assets. If these projected undiscounted net future cash flows are less than the carrying amounts, an impairment loss would be recognized, resulting in a write-down of the assets with a corresponding charge to earnings. The impairment loss is measured based upon the difference between the carrying amounts and the fair values of the assets.

Goodwill and Intangible Assets

Goodwill is the excess of purchase price over the fair value of identified net assets of businesses acquired. The Company’s intangible asset with an indefinite life is related to in-process research and development (“IPR&D”) programs acquired in the Flaskworks Acquisition, as the Company expects future research and development on these programs to provide the Company with substantial benefit for a period that extends beyond the foreseeable horizon. Intangible assets with indefinite useful lives are measured at their respective fair values as of the acquisition date. The Company does not amortize goodwill and intangible assets with indefinite useful lives. Intangible assets related to IPR&D projects are considered to be indefinite lived until the completion or abandonment of the associated R&D efforts. If and when development is complete, which generally occurs if and when regulatory approval to market a product is obtained, the associated assets would be deemed finite lived and would then be amortized based on their respective estimated useful lives at that point in time.

The Company hasone operating segment andone reporting unit. The Company reviews goodwill and indefinite-lived intangible assets at least annually for possible impairment. Goodwill and indefinite-lived intangible assets are reviewed for possible impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit or the indefinite-lived intangible assets below their carrying values. No impairment charge was recognized for the year ended December 31, 2023 and 2022.

Fair Value of Financial Instruments

ASC 820, Fair Value Measurements, provides guidance on the development and disclosure of fair value measurements. Under this accounting guidance, fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability.

The accounting guidance classifies fair value measurements in one of the following three categories for disclosure purposes:

Level 1: Quoted prices in active markets for identical assets or liabilities.

Level 2: Inputs other than Level 1 prices for similar assets or liabilities that are directly or indirectly observable in the marketplace.

Level 3: Unobservable inputs which are supported by little or no market activity and values determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.

The Company accounts for the issuance of common stock purchase warrants issued in connection with the equity offerings in accordance with the provisions of ASC 815, Derivatives and Hedging (“ASC 815”). The Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) gives the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The Company accounts for certain common stock warrants outstanding as a liability at fair value and adjusts the instruments to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in its Consolidated Statements of Operations and Comprehensive Loss. The fair value of the warrants issued by the Company has been estimated using Monte Carlo simulation and or a Black Scholes model. The warrant liabilities are valued using Level 3 valuation inputs (see Note 4).

Derivative Financial Instruments

The Company has derivative financial instruments that are not hedges and do not qualify for hedge accounting. Changes in the fair value of these instruments are recorded in other income (expense), on a net basis in the Consolidated Statements of Operations and Comprehensive Loss.

Convertible Notes under Fair Value Option

The Company accounts for certain convertible notes issued from August to October 2023 on an instrument-by-instrument basis under the fair value option (“FVO”) election of ASC Topic 825, Financial Instruments (“ASC 825”). The convertible notes accounted for under the FVO election are each debt host financial instruments containing embedded features wherein the entire financial instrument is initially measured at its issue-date estimated fair value and then subsequently remeasured at estimated fair value on a recurring basis at each reporting period date. Changes in the estimated fair value of the convertible notes are recorded as a component of Other (expense) income in the consolidated statements of operations, except that the change in estimated fair value attributable to a change in the instrument-specific credit risks is recognized as a component of other comprehensive income. As a result of electing the FVO, issuance costs related to the convertible notes are expensed as incurred.

Contingent Payable Derivative Liability

During the year ended December 31, 2019, the Company entered into a settlement agreement with Cognate BioServices, resolving past matters and providing for the restart of DCVax®-Direct Production.

As part of this overall settlement, the Company also provided a contingent note payable (the “Contingent Payable Derivative”) of $10.0 million, which is only payable upon the Company’s first financing after DCVax product approval in or outside the U.S. If such product approval has not been obtained by the seventh anniversary of the agreement, such Contingent Payable Derivative will expire without becoming payable.

On a quarterly basis, management makes estimates for key performance milestones and uses the expected dates as the inputs for valuation. The fair value of the Contingent Payable Derivative has been estimated using Monte Carlo simulation, which are valued using Level 3 valuation inputs.

Leases

The Company recognizes a lease asset for its right to use the underlying asset and a lease liability for the corresponding lease obligation. The Company determines whether an arrangement is or contains a lease at contract inception. Operating leases with a duration greater than one year are included in right-of-use assets, lease liabilities, and lease liabilities, net of current portion in the Company’s consolidated balance sheets. Right-of-use assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. In determining the net present value of lease payments, the Company uses its incremental borrowing rate based on the information available at the lease commencement date. The incremental borrowing rate represents the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease. The Company considers a lease term to be the non-cancelable period that it has the right to use the underlying asset.

The operating lease right-of-use assets also include any lease payments made and exclude lease incentives. Lease expense is recognized on a straight-line basis over the expected lease term. Variable lease expenses are recorded when incurred.

Foreign Currency Translation and Transactions

The Company has operations in the United Kingdom and Netherlands in addition to the U.S. The Company translated its assets and liabilities into U.S. dollars using end of period exchange rates, and revenues and expenses are translated into U.S. dollars using weighted average rates. Foreign currency translation adjustments are reported as a separate component of accumulated other comprehensive income (loss) within stockholders’ equity deficit.

The Company converts receivables and payables denominated in other than the Company’s functional currency at the exchange rate as of the balance sheet date. The resulting transaction exchange gains or losses related to intercompany receivable and payables, are included in other income and expense.

Comprehensive Loss

The Company reports comprehensive loss and its components in its consolidated financial statements. Comprehensive loss consists of net loss and foreign currency translation adjustments, affecting stockholders’ equity deficit that, under U.S, GAAP, is excluded from net loss.

Revenue Recognition

The Company recognizes revenue in accordance with the terms stipulated under the applicable service contract. In various situations, the Company receives certain credits against invoices for manufacturing of patient treatments by its contract manufacturer. These payments are assessed and recognized in accordance with ASC 606 in the period when the performance obligation had been met.

Accrued Outsourcing Costs

Substantial portions of our preclinical studies and clinical trials are performed by third-party laboratories, medical centers, contract research organizations and other vendors (collectively “CROs”). These CROs generally bill monthly or quarterly for services performed, or bill based upon milestones achieved. For clinical studies, expenses are accrued when services are performed. The Company monitors patient enrollment, the progress of clinical studies and related activities through internal reviews of data that is tracked by the CROs under contractual arrangements, correspondence with the CROs and visits to clinical sites.

Research and Development Costs

Research and development costs are charged to operations as incurred and consist primarily of clinical trial related costs (including costs for collection, validation and analysis of trial results), related party manufacturing costs, consulting costs, contract research and development costs, clinical site costs and compensation costs.

Income Taxes

The Company evaluates its tax positions and estimates its current tax exposure along with assessing temporary differences that result from different book to tax treatment of items not currently deductible for tax purposes. These differences result in deferred tax assets and liabilities on the Company’s Consolidated Balance Sheets, which are estimated based upon the difference between the financial statement and tax bases of assets and liabilities using the enacted tax rates that will be in effect when these differences reverse. In general, deferred tax assets represent future tax benefits to be received when certain expenses previously recognized in the Company’s Consolidated Statements of Comprehensive Loss become deductible expenses under applicable income tax laws or loss or credit carryforwards are utilized. Accordingly, realization of the Company’s deferred tax assets is dependent on future taxable income against which these deductions, losses and credits can be utilized.

The Company must assess the likelihood that the Company’s deferred tax assets will be recovered from future taxable income, and to the extent the Company believes that recovery is not more likely than not, the Company must establish a valuation allowance. Management judgment is required in determining the Company’s provision for income taxes, the Company’s deferred tax assets and liabilities and any valuation allowance recorded against the Company’s net deferred tax assets. Excluding foreign operations, the Company recorded a full valuation allowance at each balance sheet date presented because, based on the available evidence, the Company believes it is more likely than not that it will not be able to utilize all of its deferred tax assets in the future. The Company intends to maintain the full valuation allowance until sufficient evidence exists to support the reversal of the valuation allowance.

Stock-Based Compensation

The Company measures stock-based compensation to employees, consultants, and Board members at fair value on the grant date of the award. Compensation cost is recognized as expense on a straight-line basis over the requisite service period of the award. For awards that have a performance condition, compensation cost is measured based on the fair value of the award on the grant date, the date performance targets are established, and is expensed over the requisite service period for each separately vesting tranche when achievement of the performance condition becomes probable. The Company assess the probability of the performance conditions being met on a continuous basis. Forfeitures are recognized when they occur. Prior to January 1, 2019, share-based compensation cost for non-employees was re-measured at every reporting period.

The Company estimates the fair value of stock option grants that do not contain market-based vesting conditions using the Black-Scholes option pricing model and the assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment.

Expected Term- The expected term of options represents the period that the Company’s stock-based awards are expected to be outstanding based on the simplified method, which is the half-life from vesting to the end of its contractual term.

Expected Volatility - The Company computes stock price volatility over expected terms based on its historical common stock trading prices.

Risk-Free Interest Rate - The Company bases the risk-free interest rate on the implied yield available on U. S. Treasury zero-coupon issues with an equivalent remaining term.

Expected Dividend - The Company has never declared or paid any cash dividends on its common shares and does not plan to pay cash dividends in the foreseeable future, and, therefore, uses an expected dividend yield of zero in its valuation models.

The Company is also required to make estimates as to the probability of achieving the specific performance conditions. If actual results are not consistent with the Company’s assumptions and judgments used in making these estimates, the Company may be required to increase or decrease compensation expense, which could be material to the Company’s consolidated results of operations.

Debt Extinguishment

The Company accounts for the income or loss from extinguishment of debt by comparing the difference between the reacquisition price and the net carrying amount of the debt being extinguished and recognizes this as gain or loss when the debt is extinguished. The gain or loss from debt extinguishment is recorded in the consolidated statements of operations under “other income (expense)” as loss from extinguishment of convertible debt.

Sequencing

The Company adopted a sequencing policy under ASC 815-40-35 whereby in the event that reclassification of contracts from equity to liabilities is necessary pursuant to ASC 815 due to the Company’s inability to demonstrate it has sufficient authorized shares. This was previously the result of certain financial instruments with a potentially indeterminable number of shares and most recently due to the company committing more shares than authorized. While temporary suspensions are in place to keep the potential exercises beneath the number authorized, certain instruments are classified as liabilities, after allocating available authorized shares on the basis of the earliest grant date of potentially dilutive instruments. Pursuant to ASC 815, issuance of stock-based awards to the Company’s employees, nonemployees or directors are not subject to the sequencing policy.

Modification of Equity Classified Warrants

A change in the terms or conditions of a warrant is accounted for as a modification. For a warrant modification accounted for under ASC 815, the effect of a modification shall be measured as the difference between the fair value of the modified warrant over and the fair value of the original warrant immediately before its terms are modified, with each measured on the modification date. The accounting for any incremental fair value of the modified warrants over the original warrants is based on the specific facts and circumstances related to the modification. When a modification is directly attributable to an equity offering, the incremental change in fair value of the warrants is accounted for as an equity issuance cost. When a modification is directly attributable to a debt financing, the incremental change in fair value of the warrants is accounted for as a debt discount or debt issuance cost. For all other modifications, the incremental change in fair value is recognized as a deemed dividend.

Income (Loss) per Share

Basic income (loss) per share is computed on the basis of the weighted average number of shares outstanding for the reporting period. Diluted income (loss) per share is computed on the basis of the weighted average number of common shares plus dilutive potential common shares outstanding using the treasury stock method. Diluted weighted average shares reflect the dilutive effect, if any, of potential common shares. To the extent their effect is dilutive, employee equity awards and other commitments to be settled in common stock are included in the calculation of diluted income per share based on the treasury stock method. Potential common shares are excluded from the calculation of dilutive weighted average shares outstanding if their effect would be anti-dilutive at the balance sheet date based on a treasury stock method or due to a net loss.

Recently Issued Accounting Standards Not Yet Adopted

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions

In June 2022, the FASB issued ASU 2022-03, ASC Subtopic 820 “Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions”. The FASB is issuing this Update (1) to clarify the guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security, (2) to amend a related illustrative example, and (3) to introduce new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820.

For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance. The Company will adopt ASU 2022-03 effective January 1, 2024. The Company does not expect that the adoption of this guidance will have a material impact on its consolidated financial statements.

Improvements to Income Tax Disclosures

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which improves the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the effective tax rate reconciliation and income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. This guidance will be effective for the annual periods beginning the year ended December 31, 2025. Early adoption is permitted. Upon adoption, the guidance can be applied prospectively or retrospectively. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.

4. Fair Value Measurements

In accordance with ASC 820 (Fair Value Measurements and Disclosures), the Company uses various inputs to measure the fair value of liabilities related to certain embedded conversion feature associated with convertible debt, share liability, and contingent payable to Cognate BioServices on a recurring basis to determine the fair value of these liabilities. The Company also elects the FVO for certain eligible financial instruments, such as convertible notes, in order to simplify the accounting treatment.

The following table classifies the Company’s liabilities measured at fair value on a recurring basis into the fair value hierarchy as of December 31, 2023 and December 31, 2022 (in thousands):

There wereno transfers between Level 1, 2 or 3 during the years ended December 31, 2023 and 2022.

The following table presents changes in Level 3 liabilities measured at fair value for the years ended December 31, 2023 and 2022. Both observable and unobservable inputs were used to determine the fair value of positions that the Company has classified within the Level 3 category. Unrealized gains and losses associated with liabilities within the Level 3 category include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long- dated volatilities) inputs (in thousands).

A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring the Company’s warrant liabilities and embedded conversion feature (excluding the piggy-back right, which was based on key milestone estimates, see Note 8 for piggy-back rights) that are categorized within Level 3 of the fair value hierarchy as of December 31, 2023, January 9 2023 (the reclassification date) and December 31, 2022 is as follows:

• Contingent payable derivative liability based on stock price as of December 31, 2023 and 2022.

5. Stock-Based Compensation

The following table summarizes total stock-based compensation expense recognized for the years ended December 31, 2023, 2022 and 2021 (in thousands). The related party amounts were for milestone incentives that either were earned or are deemed probable to be achieved in the future and become issuable at that time (as detailed below in Restricted Stock Awards).

The related party amounts were for milestone incentives that either were earned or are deemed probable to be achieved in the future and become issuable at that time (as detailed below in Restricted Stock Awards).

During the year ended December 31, 2022, for eight milestones that were earned, the Company recognized and expensed approximately $5.9 million for 7.5 million shares.

During the year ended December 31, 2022, the Company reversed approximately $1.4 million and $0.3 million of stock-based compensation expense in research and development and general and administrative, respectively, which were related to the cancellation of certain unvested performance-based awards.

The Black-Scholes option pricing model is used to estimate the fair value of stock options granted. The weighted average assumptions used in calculating the fair values of stock options that were granted during the years ended December 31, 2023, 2022 and 2021:

The total unrecognized compensation cost was approximately $4.7 million as of December 31, 2023 and will be recognized over the next 1.7 years.

Stock Options

Equity Compensation Plan

On May 29, 2020, the Board of Directors of the Company approved a new equity compensation plan (the “Plan”). The Company’s prior plan was adopted in 2007, was updated in amended and restated plans that were approved by shareholders in 2012 and 2013 and expired in 2017 (the “Prior Plan”).

The Plan is substantially similar to the Prior Plan. The Plan has a 10-year life, and allows for awards to employees, directors and consultants of the Company. The Plan allows for any type of equity security to be awarded, as did the Prior Plan. The awards and their terms (including vesting) will be determined by the Board and applicable Committees, as was the case under the Prior Plan. The Plan establishes a pool of potential equity compensation equal to twenty percent of the outstanding securities of the Company, which is on an evergreen basis as under the Prior Plan.

On February 25, 2022, the Company amended its existing Equity Compensation Plan, which was adopted in 2020 as previously reported. The amendment provides that the possible forms of awards under the Plan include awards paid in cash or awards paid in a combination of cash and equity, in addition to the existing provisions for awards made in any form of equity. The amendment also clarifies that a delegation of authority from the Board to a Committee may be either a general delegation or a delegation for a specific occasion.

The following table summarizes stock option activity for the Company’s option plans during the years ended December 31, 2023, 2022 and 2021 (in thousands, except per share number):

Restricted Stock Awards

Advent SOW 6

As previously reported, during April 2022, the Company’s Board approved, and the Company entered into a Statement of Work #6 (the “SOW 6”) with Advent BioServices, a related party of the Company, forfive workstreams that are prerequisites for an application for regulatory approval of DCVax-L, forthree required licenses for the Sawston facility and for drafting of key portions of the application for approval. The SOW provides for baseline costs and for one-time milestone incentives for successful completion of each of the workstreams, for the completion and submission of each application for product approval, and for obtaining regulatory approval of each of the three Sawston licenses. The milestone incentives will be a combination of cash and stock and are not paid until they are achieved. As also previously reported, the Company amended the SOW6 on September 26, 2022 (the “Amended SOW6”) to (1) extend the service period through September 30, 2023, and (2) clarify the assessment and application of the milestones, and (3) add a sixth workstream. (The potential cost for all unearned stock awards for milestones not yet achieved was re-measured on the modification date and will be further re-measured until the date the milestone award is achieved and the stock awards are earned.) As of December 31, 2023, ten one-time milestones were achieved (i.e., for allsix workstreams that are prerequisites for an application for product approval, for obtaining allthree licenses required for the Sawston facility, and for the completion of key portions of the MAA application for product approval in the UK), the aggregate stock-based compensation under the Amended SOW 6 will be 13.5 million shares (including the shares already earned but not yet issued for the milestones already achieved) for an aggregate fair value of $10.1 million.

During the year ended December 31, 2022, seven milestones were completed, including five workstreams and the regulatory approvals oftwo licenses required for the Sawston facility. An eighth milestone was partly completed and the stock component of that milestone was earned, but the cash portion of that eighth milestone was not yet earned.

On September 26, 2023, the Company further amended the SOW 6 (the “Second Amended SOW 6”) to extend the service period through March 31, 2024. As of the amendment date, the remaining unvested one-time milestone for submission of the application to MHRA for approval of DCVax-L was accounted as a Type I modification (probable to probable under FASB ASC Topic 718, Compensation—Stock Compensation (“ASC 718”). The previously remaining unrecognized compensation expense for total $17,000 was fully recognized as of December 20, 2023.

During the year ended December 31, 2023, the remaining milestones related to the workstream for Mechanism of Action, obtaining the commercial manufacturing license from the MHRA, completion of key portions of the application and submission of application for product approval to MHRA were all completed. As of December 31, 2023,1.5 million shares related to completed milestone (submission of the application to MHRA for approval) was not issued. As a result, the Company reclassed approximately $1.1 million from Additional Paid-in-Capital to Accounts Payable and accrued expenses to related parties and affiliates.

Employee Compensation

In August 2023, the Company issued 0.6 million shares of common stock as a bonus payment totwo staff employees. These shares were fully vested on the grant date. However,0.3 million shares are subject to lock-up restrictions, prohibiting their sale or transfer withinsix months of the grant date. The Company recognized $0.3 million stock-based compensation which is based on the Company’s closing stock price on the grant date.

Other Service Agreement

During year ended December 31, 2023, the Company issued 16,000 shares of Series C convertible preferred stock to an unrelated vendor who provided professional services for the Company. The fair value of the Series C convertible preferred stock on the issuance date was approximately $0.1 million, which was expensed over afour-month service period.

On August 22, 2022, the Company issued 1.6 million shares of common stock to certain unrelated vendors who provided professional services for the Company. The fair value of the common shares on the issuance date was approximately $1.0 million and was recognized as part of general and administrative expenses.

6. Property, Plant and Equipment

Property, plant and equipment consist of the following at December 31, 2023 and 2022 (in thousands):

Depreciation expense was approximately $1.5 million, $1.3 million and $0.3 million for the years ended December 31, 2023, 2022 and 2021, respectively.

The construction in progess related to expanding the operational portion of its UK facility (Phase 1B) were completed and placed in service as of December 31, 2023. All costs associated with the Phase 1B build out were reclassified from construction in progress to leasehold improvements effective June 2023 and are being amortized over the estimated useful life of the facility.

7. Notes Payable

The following tables summarize outstanding debt as of December 31, 2023 (in thousands):

*These convertible notes are convertible into Series C preferred shares at $10.00 - $17.50 per share. Each Series C preferred share is convertible into common shares with 30 days’ restriction period. The conversion price in common share equivalent is at $0.40 and $0.70 per share.

Promissory Note

On March 2, 2023, the Company entered into a Commercial Loan Agreement (the “March Commercial Loan”) with a commercial lender for an aggregate principal amount of $11.0 million. The March Commercial Loan bears interest at 8% per annum with a 22-month term. There are no principal repayments during the first eight months of the term. The March Commercial Loan is amortized in 14 installments starting on November 2, 2023. The March Commercial Loan carries an original issue discount of $1.0 million.

On November 10, 2023, the Company entered into another Commercial Loan Agreement (the “November Commercial Loan”) with the same commercial lender for an aggregate principal amount of $11.0 million. The November Commercial Loan bears interest at 8% per annum with a 24-month term. There are no principal repayments during the first twelve months of the term. The Commercial Loan is amortized in 12 installments starting on November 10, 2024. The November Commercial Loan carries an original issue discount of $1.0 million.

During the year ended December 31, 2023, the Company issued approximately 37.0 million shares of common stock with a fair value of $24.7 million to certain lenders in lieu of cash payments of $19.1 million of debt, including $1.8 million of accrued interest. In addition, pursuant to exchange agreements executed with various holders, the Company is required to potentially issue additional common stock (the “Share liability”) if the stock price is less than the price, defined in the exchange agreement as of the true-up date (the “True-up Price”), or the lender is required to return common shares to the Company (the “Share receivable”) if the stock price is greater than the True-up Price as of the true-up date. During the year ended December 31, 2023, the Company extinguished Share liabilities of $1.1 million and recognized additional $0.8 million in Share liabilities. The Company recognized an approximately $5.4 million debt extinguishment loss during the year ended December 31, 2023 from the debt redemption.

During the year ended December 31, 2023, the Company issued approximately 56,000 shares of Series C preferred stock with a fair value of $1.0 million to certain lenders in lieu of cash payments of $0.9 million in debt, including $0.1 million of accrued interest. The Company recognized an approximately $0.1 million debt extinguishment loss.

During the year ended December 31, 2023, the Company recognized $0.8 million change in fair value of embedded redemption option as this embedded feature had de minimis value based on the remaining life of the note and the next qualified financing.

Convertible Notes

In April 2023, the Company entered into severalten-month convertible notes (the “April Convertible Notes”) with multiple investors (the “Holders”) with an aggregate principal amount of $0.9 million for a purchase price of $0.8 million. The April Convertible Notes bear interest at 8% per annum and are convertible into Series C preferred shares at $13.75 per share at the Holders’ sole option. The Series C preferred shares are convertible into common stock 30 days after the debt conversion date. Each Series C preferred share is convertible into 25 shares of common stock. The Company reclassed $0.7 million Investor advances that were received from the Holders in December 2022 to Convertible notes payable on the consolidated balance sheet as of December 31, 2023. As a result, the Company received net cash proceeds of $0.1 million.

On July 11, 2023, the Company entered into aone-year convertible note (the “July Convertible Note”) with an individual investor with principal amount of $0.5 million. The Company received $0.5 million cash from the July Convertible Note. The July Convertible Note bears interest at 10% per annum and is convertible into Series C preferred shares at $12.50 per share at the holder’s sole option.

During the year ended December 31, 2023, the Company entered into severalone-year convertible note (the “One-Year Convertible Notes”) with multiple investor (the “Holders”) with aggregate principal amount of $2.6 million for an aggregate purchase price of $2.4 million. The Company reclassed $0.5 million Investor advances that were received from the Holders in December 2022 to convertible notes payable on the consolidated balance sheet as of December 31, 2023. As a result, the Company received net cash proceeds of $1.9 million. The One-Year Convertible Notes bear interest at 8% per annum and is convertible into Series C preferred shares between $12.50 to $17.50 per share at the Holders’ sole option. The Series C preferred shares are convertible into common stock 30 days after the debt conversion date. Each Series C preferred share is convertible into 25 shares of common stock.

As additional consideration for entering into the April Convertible Notes and the One-Year Convertible Notes (collectively the “Convertible Notes”), the Company also agreed to amend some of the Holders’ existing outstanding warrants. The exercise price of certain existing warrants was amended from $2.00 per share to price between $0.55 and $0.70 per share, or from $1.48 per share to price between $0.70 and $0.85 per share, and the maturity date was extended for an additionalsix toten months. The incremental change in fair value resulting from the amendment was approximately $0.4 million, which was recognized as an additional debt discount to the Convertible Notes.

Convertible Notes at Fair Value

From August to October 2023, the Company entered into severalone-year convertible notes (the “Convertible Notes”) with multiple individual investors (the “Holders”) with an aggregate principal amount of $10.8 million. The Convertible Notes bear interest at 11% per annum and are convertible into Series C preferred shares between $10.00 and $12.25 per share at the Holder’s sole option. The Series C preferred shares are convertible into common stock 30 days after the debt conversion date. Each Series C preferred share is convertible into 25 shares of common stock. In addition, the Holders have an alternative option to convert the Convertible Notes into a non-dilutive financial instrument, which has the same terms at those in the non-dilutive funding agreements as described in Note 12.

One of the Convertible Notes also contains a conversion feature to allow the holder to convert the outstanding debt in lieu of cash payment to purchase common shares via cash exercise of the holder’s existing warrants. In addition, the Company also agreed to amend the holder’s existing warrants to extend the term of the warrant maturity date for an additional three months.

The Company elected the FVO to fair value the Convertible Notes under the guidance in ASC 825. As described in Note 14, the fair value of the Convertible Notes (as revised) was approximately $15.2 million as of September 30, 2023. The fair value of the Convertible Notes was approximate $12.8 million as of December 31, 2023. The Company recognized $2.0 million change in fair value of convertible notes for the year ended December 31, 2023. As a result of electing the FVO, issuance costs related to the convertible notes are expensed as incurred. Therefore, the incremental change in fair value resulting from the warrant amendment for $0.3 million was recognized as part of interest expenses on the consolidated statement of operations and comprehensive loss.

For the year ended December 31, 2023, interest expense related to notes payable totaled approximately $5.2 million including amortization of debt discounts totaling $2.4 million.

The following tables summarize outstanding debt as of December 31, 2022 (in thousands):

On September 26, 2022, the Company entered into a Commercial Loan Agreement (the “Commercial Loan”) with a commercial lender for an aggregate principal amount of $5.5 million. The Commercial Loan bears interest at 8% per annum with a 22-month term. There are no principal repayments during the first eight months of the term. The Commercial Loan is amortized in 14 installments starting on May 26, 2023. The Commercial Loan carries an original issue discount of $0.5 million.

During the year ended December 31, 2022, the Company entered into multiple four-month note agreements (the “Notes”) with various individual lenders (the “Holders”) with an aggregate principal amount of $0.6 million for net proceeds of $0.6 million. The Notes have a 9% interest rate, a 5% original issue discount (“OID”), and contain a conditional right to independently purchase shares from the Company in a future raise of Capital (the “Piggy-back Right”), under which the Company agrees that if it (i) publicly releases top line data from the Phase III trial of its DCVax®-L vaccine (such eventuality, the “Release”) and (ii) consummates the first private placement offering of its common stock following such Release (the “Next Offering”), then Holder shall have the conditional right, at its sole option, typically exercisable within seven (7) days following the Next Offering, to independently purchase from the Company up to a number of shares equal in value to (a)50% of the principal amount of the loan, (b)50% of the value of the exercised warrant shares, and (c) exchange some or all of the outstanding loan amount for a variable number of shares (the “Contingent Rights”). The Contingent Right (a) and (b) above shall be priced at a 12% discount from the Next Offering, resulting in either an elimination of, or a reduced cash amount repayable under the loan agreement. The Company accounted for the Contingent Right (a) and (b) as a freestanding financial instrument, which was classified as a liability at fair value on the Consolidated Balance Sheet with changes in fair value recognized in the Consolidated Statement of Operations. The Company accounted for the Contingent Right (c) as an embedded derivative liability at fair value, which requires it to be bifurcated, with changes in fair value recognized in the Consolidated Statement of Operations.

During the year ended December 31, 2022, the Company entered into multiple note extension agreements whereby the maturity date of the notes was extended for an additionaltwo-four months.

The Company receivedtwo loans under the Coronavirus Aid, Relief and Economic Security (“CARES”) Act’s Paycheck Protection Program (“PPP”) in 2021 for the amount of $0.4 million. On February 22, 2022, the PPP loans were approved for forgiveness. The Company recorded approximately $0.4 million debt extinguishment gain from the forgiveness of these PPP loans.

During the year ended December 31, 2022, the Company issued approximately 18.1 million shares of common stock at fair value of $13.8 million to certain lenders in lieu of cash payments of $11.3 million debt, including $1.8 million accrued interest. The Company also extinguished approximately $0.2 million embedded derivative liability upon the conversion. The Company recognized approximately $2.3 million debt extinguishment loss during the year ended December 31, 2022. Additionally, pursuant to certain exchange agreement, the Company is required to potentially issue additional common stock (the “Share liability”) if the stock price is

less than certain price as defined in the exchange agreement as of the true-up date. The Company recognized additional $0.7 million debt extinguishment loss related to the Share liability during the year ended December 31, 2022.

During the year ended December 31, 2022, the Company issued approximately 0.2 million shares of Series C preferred stock at fair value of $3.5 million to certain lenders in lieu of cash payments of $3.4 million debt, including $0.4 million accrued interest. The Company recognized approximately $0.1 million debt extinguishment loss.

During the year ended December 31, 2022, the Company made aggregate cash payments of $6.4 million on notes payable, including $0.9 million of interest payment.

For the year ended December 31, 2022, interest expense related to notes payable totaled approximately $2.9 million including amortization of debt discounts totaling $2.8 million. The Company also accrued approximately $0.4 million interest expense related to German taxes during the year ended December 31, 2022 (see Note 12).

Interest Expenses Summary

The following table summarizes total interest expenses related to outstanding debt for the years ended December 31, 2023, 2022 and 2021, respectively (in thousands):

The following table summarizes the principal amounts of the Company’s debt obligations as of December 31, 2023 (in thousands):

8. Net Earnings (Loss) per Share Applicable to Common Stockholders

Basic earnings (loss) per common share is computed by dividing net earnings (loss) by the weighted average number of common shares outstanding during the reporting period. Diluted earnings (loss) per common share is computed similar to basic earnings (loss) per common share except that it reflects the potential dilution that could occur if dilutive securities or other obligations to issue common stock were exercised or converted into common stock. Diluted weighted average common shares include common stock potentially issuable under the Company’s convertible notes, warrants and vested and unvested stock options.

For the year ended December 31, 2021, net income is adjusted for gain from change in fair value of warrant liabilities.

The following table sets forth the computation of earnings (loss) per share for the years ended December 31, 2023, 2022 and 2021 (in thousands):

The following securities were not included in the diluted earnings (loss) per share calculation because their effect was anti-dilutive as of the periods presented (in thousands):

9. Related Party Transactions

Advent BioServices Services Agreement

The Company hadthree operational programs with Advent: (a) an ongoing development and manufacturing program at the GMP facility in London, (b) an ongoing development and manufacturing program at the Sawston GMP facility, and (c) a one-time program for specialized work, organized intoten sets of one-time milestones, for the following:

Each of thethree operational programs is covered by a separate contract. The ongoing manufacturing in the London facility is covered by a Manufacturing Services Agreement (“MSA”) entered into on May 14, 2018. The development and manufacturing program at the Sawston facility is covered by an Ancillary Services Agreement entered into on November 18, 2019. The specialized work associated with theten one-time milestones is covered by an SOW 6 entered into under the Ancillary Services Agreement as of April 1, 2022 and amended on September 26, 2022 and September 26, 2023. The 2023 amendment extended the SOW 6 service period for about six months, through March 31, 2024.

The Ancillary Services Agreement establishes a structure under which the Company and Advent negotiate and agree upon the scope and terms for Statements of Work (“SOWs”) for facility development activities and compassionate use program activities. After an SOW is agreed and approved by the Company, Advent will proceed with, or continue, the applicable services and will invoice the Company pursuant to the SOW. Since both the facility development and the compassionate use program involve pioneering and uncertainties in most aspects, the invoicing under the Ancillary Services Agreement is on the basis of costs incurred plus fifteen percent. The SOWs may involve ongoing activities or specialized one-time projects and related one-time milestone payments. The current Ancillary Services Agreement ended in July 2023. The Company subsequently extended the term by 12 months to July 2024 with no other changes.

SOW 6 provides for ongoing baseline costs for manufacturing at the Sawston facility and one-time milestone incentives for (a) regulatory approval of each of the three licenses required for the Sawston facility, (b) successful completion of each of the six workstreams and (c) completion of drafting key portions of an application for product approval. The milestone incentives are a combination of cash and stock, and are not paid until the milestone is achieved and earned.

During the year ended December 31, 2023, the Company paid an aggregate of $5.0 million in cash, of which $1.0 million was related totwo milestones that were completed and fully expensed in 2022, but was unpaid as of December 31, 2022, $4.0 million was payment for four completed one-time milestones (MAA workstream for mechanism of Action, obtaining a commercial manufacturing license from the MHRA on March 2023 and completion of drafting key portions of the application and submit the application to MHRA for product approval). The Company issued 4.5 million common shares as a result of completion of the two one-time milestones (obtaining a commercial manufacturing license from the MHRA and completion of drafting application) at fair value of $3.2 million, of which $0.6 million was recognized during the year ended December 31, 2023 and $2.6 million had already been recognized (but not paid) in 2022.

As of December 31, 2023, $0.5 million was unpaid and 1.5 million common shares have been earned but not issued in regard to the completed milestone (submission of the application to MHRA for product approval).

The following table summarizes total research and development costs from Advent for the years ended December 31, 2023, 2022 and 2021, respectively (in thousands).

required licenses for the Sawston facility (licenses from the Human Tissue Authority and from the MHRA for manufacturing for clinical trials and compassionate use cases).

Advent BioServices Sublease Agreement

On December 31, 2021, the Company entered into a Sub-lease Agreement (the “Agreement”) with Advent. The Agreement permits use by Advent of a portion of the space in the Sawston facility, which is leased by the Company under a separate head lease with a different counterparty (Huawei) that commenced on December 14, 2018. The Company subleased approximately 14,459 square feet of the 88,000 square foot building interior space, plus corresponding exterior support space and parking. The lease payments amount under the Agreement aretwo times the £5.75 (approximate $7.32 per square foot based on exchange rate as of December 31, 2023) rate per square foot payable under the head lease, but subject to a cap of $10 per square foot. Accordingly, the monthly lease payments under the Sublease are calculated based on $145,000 annually for 2023. The total lease payments paid by the Company for the facility, exterior spaces and parking under the head lease are 500,000 pounds per year and 550,000 pounds per year effective December 6, 2023. The term of the Agreement shall end on the same date as the head lease term ends.

During the years ended December 31, 2023 and 2022,the Company recognized sub-lease income of $145,000.

Related Party Accounts Payable

As of December 31, 2023 and 2022, there was approximately $0.3 million and $0.4 million of unpaid board compensation to one of our Directors that was included in the accounts payable to related party on the consolidated balance sheets, respectively.

As of December 31, 2023 and 2022, there were outstanding unpaid accounts payable and accrued expenses owed to Advent as summarized in the following table (in thousands).These unpaid amounts are part of the Related Party expenses reported in the above section.

10. Preferred Stock

Series C Convertible Preferred Stock

On July 20, 2022, the Company filed a Certificate of Elimination with the Secretary of State of the State of Delaware with respect to the Company’s Series A Preferred Stock and Series B Preferred Stock pursuant to which both series were eliminated and returned to the status of authorized and unissued preferred shares of the Company, as there are no longer any Series A or Series B Preferred shares outstanding.

Also on July 20, 2022, the Company filed the Certificate of Designations for Series C Preferred Stock (the “Series C Certificate of Designations”) with the Secretary of State of the State of Delaware, setting forth the terms of the Series C Preferred Stock. The Series C Certificate of Designations, effective as of July 20, 2022, that was created out of the authorized and unissued shares of preferred stock of the Company, provides for 10,000,000 shares, par value $0.001 per share, and establishes the rights, preferences and privileges of the Series C.

The Company determined that the Series C Shares contain contingent redemption provisions allowing redemption by the holder upon certain defined events (“deemed liquidation events”). As the event that may trigger the redemption of the Series C Shares is not solely within the Company’s control, the Series C Shares are classified as mezzanine equity (temporary equity) in the Company’s consolidated balance sheets.

During the year ended December 31, 2023, the Company entered into various Subscription Agreements (the “Series C Subscription Agreements”) with certain investors (the “Series C Investors”). Pursuant to the Series C Subscription Agreements, the Company issued the Series C Investors an aggregate of 1.0 million shares of the Company’s Series C convertible preferred stock, par value $0.001 per share (the “Series C Shares”), at a weighted purchase price of $14.01 per share for proceeds of approximately $13.3 million.

During the year ended December, 2023, the Company issued approximately 56,000 Series C Shares with a fair value of $1.0 million to certain lenders in lieu of cash payments of $0.9 million in debt, including $0.1 million accrued interest. The Company recognized an approximately $0.1 million debt extinguishment loss.

During the year ended December, 2023, approximately 1.2 million Series C Shares with a book value of $18.9 million were converted into 30.8 million common shares at a ratio of 1:25.

During the year ended December 31, 2022, the Company entered into various Subscription Agreements (the “Series C Subscription Agreements”) with certain investors (the “Series C Investors”). Pursuant to the Series C Subscription Agreements, the Company issued the Series C Investors an aggregate of 1.4 million shares of the Company’s Series C convertible preferred stock, par value $0.001 per share (the “Series C Shares”), at a weighted purchase price of $16.15 per share for gross proceeds of approximately $22.0 million.

Pursuant to some of the Series C Subscription Agreements, certain Series C investors chose to purchase the Series C Shares by debt redemption. During the year ended December 31, 2022, the Company extinguished approximately $3.4 million debt, including $0.4 million of accrued interest in lieu of partial consideration received for issuance the Series C Shares. The Company received approximately $18.7 million net proceeds from issuance of the Series C Shares. Additionally, as a partial consideration for certain Series C investors, the Company agreed to amend the terms of the warrants that are currently held by them.

On August 12, 2022, an unrelated investor exercised existing warrants to purchase 1.4 million common shares at a weighted average exercise price of $0.24 per share and a total purchase price of approximately $329,000. The warrant holder agreed to receive Series C Preferred Shares instead of common shares and agreed that these Series C shares could not be converted for a period ofthree months. Since Series C Preferred shares are convertible into common shares at a ratio of 1:25, the number of Series C Shares issued to the warrant holder was 1/25 of the 1.4 million common shares for which the warrants were exercisable, or 54,847 Series C Preferred Shares.

Each of the Series C Shares which were sold for prices between $15.00 and $21.25 per share will be convertible into 25 shares of common stock (equivalent to prices of $0.60 to $0.85 per share of common stock) at the option of the holder three months after the effective date of purchase.

11. Stockholders’ Deficit

Common Stock

On January 9, 2023, the Company filed a Certificate of Amendment of its Seventh Amended and Restated Certificate of Incorporation (the “Certificate of Amendment”) with the Secretary of the State of Delaware, which effected an increase in the Company’s authorized shares of common stock, from 1.2 billion to 1.7 billion, par value $0.001 per share.

During the year ended December 31, 2023, the Company received $2.9 million from the exercise of outstanding warrants and options with an exercise price between $0.153 and $2.00, of which $1.2 million was received in December 2022 as investor advances. The Company issued approximately 12.8 million shares of common stock upon these warrant exercises.

During the year ended December 31, 2023, certain options and warrants holders elected to exercise some of their options and warrants pursuant to cashless exercise formulas. The Company issued approximately 21.3 million shares of common stock upon exercise of 22.9 million warrants at exercise prices between $0.17 and $0.22 per share, and 3.9 million options at exercise prices between $0.23 and $0.55 per share.

During the year ended December 31, 2023, the Company issued approximately 37.0 million shares of common stock with a fair value of $24.7 million to certain lenders in lieu of cash payments of $19.0 million of debt, including $1.8 million of accrued interest, and settled $1.1 million true-up provision (see Note 7).

During the year ended December 31, 2022, the Company received $9.5 million from issuance of 13.1 million shares of common stock to various investors.

During the year ended December 31, 2022, the Company received $11.1 million from the exercise of warrants issued in the past with an exercise price between $0.18 and $0.85. The Company issued approximately 45.3 million shares of common stock and 0.3 million Series C convertible preferred stock in lieu of common stock upon these warrant exercises.

During the year ended December 31, 2022, certain warrant holders elected to exercise some of their warrants pursuant to cashless exercise formulas. The Company issued approximately 29.0 million shares of common stock for exercise of 36.0 million warrants at exercise prices between $0.18 and $0.52.

During the year ended December 31, 2022, certain options holders elected to exercise some of their options pursuant to cashless exercise formulas. The Company issued approximately 5.2 million shares of common stock for exercise of 8.2 million options at exercise prices between $0.23 and $0.34.

During the year ended December 31, 2022, the Company issued approximately 18.1 million shares of common stock to certain lenders in lieu of cash payments on $11.3 million outstanding debt, including $1.8 million interest.

2021 Activities

During the year ended December 31, 2021, the Company received $4.1 million from issuance of 6.3 million shares of common stock to various investors. The Company also received $0.3 million partial proceeds pursuant to one security purchase agreement. Accordingly, such amounts are included in Investor advances in the accompanying consolidated balance sheet as of December 31, 2021.

During the year ended December 31, 2021, the Company received $20.0 million from the exercise of warrants and stock options issued in the past with an exercise price between $0.175 and $0.40. The Company issued approximately 86.9 million shares of common stock upon these warrant and stock option exercises.

The Company also entered into certain warrant exercise agreements which contain a conditional right to purchase shares directly from the Company in a future raise of capital (the “Piggy-back Right”). In exchange for these exercises, the Company agreed that if the Company (i) publicly releases top line data from the Phase III trial of its DCVax®-L vaccine (such eventuality, the “Release”) and (ii) consummates the first offering of its common stock following such Release (the “Next Offering”) then Holder shall have the conditional right, at its sole option exercisable typically within seven days following the Next Offering, to independently purchase from the Company up to a number of shares equal in value to 50% of the Total Exercise Amount provided that: the price per share paid by Holder shall be equal to the Next Offering price per share less 12%. This Piggy-back Right was granted to the warrant holders in connection with their early exercise of warrants prior to the Release. The Company recognized approximately $0.6 million inducement expense during the year ended December 31, 2021.

During the year ended December 31, 2021, certain warrant and stock option holders elected to exercise some of their warrants and stock options pursuant to cashless exercise formulas. The Company issued approximately 20.4 million shares of common stock for exercise of 24.5 million warrants and stock options. The exercise prices were between $0.20 and $0.52.

Stock Purchase Warrants

The following is a summary of warrant activity for the years ended December 31, 2023, 2022 and 2021 (in thousands, except per share data):

The options and warrants held by Ms. Powers and Mr. Goldman are subject to an ongoing suspension on a rolling basis pursuant to the Blocker Letter. In addition, other executive officers and directors extended their suspensions to various dates until at least April 30, 2024.

At December 31, 2023, of the 105 million total outstanding warrants listed above, approximately 94 million warrants were under block or suspension agreements.

Warrant Modifications

Between January 10, 2023 and December 31, 2023, the Company amended multiple warrants whereby the maturity dates of certain warrants were extended for an additional approximately 3 months. The value of these modifications were calculated using the Black-Scholes-Merton option pricing model based on the following weighted average assumptions.

The incremental fair value attributable to the modified awards compared to the original awards immediately prior to the modification was calculated at $2.5 million, of which $0.7 million was associated with debt financing and was recognized as an additional debt discount and interest expense (see Note 7), and the remaining $1.8 million was treated as a deemed dividend and is reflected as “Deemed dividend related to warrant modifications” in the accompanying consolidated statement of operations and comprehensive loss.

12. Commitments and Contingencies

Operating Lease- Lessee Arrangements

Company has operating leases for corporate offices in the U.S. and U.K., and for manufacturing facilities in the U.K. The Leases with an initial term of 12 months or less are not recorded in the balance sheet. The Company has elected thepractical expedient to account for each separate lease component of a contract and its associated non-lease components as a single lease component, thus causing all fixed payments to be capitalized. The Company also elected the package of practical expedients permitted within the new standard, which among other things, allows the Company to carry forward historical lease classification. The lease renewal options have not been included in the calculation of the lease liabilities and right-of-use (“ROU”) assets as the Company has not yet determined whether to exercise the options. Variable lease payment amounts that cannot be determined at the commencement of the lease such as increases in lease payments based on changes in index rates or usage, are not included in the ROU assets or liabilities. These are expensed as incurred and recorded as variable lease expense.

At December 31, 2023, the Company had operating lease liabilities of approximately $4.8 million for both the 20-year lease of the building for the manufacturing facility in Sawston, U.K., and the current office lease in the U.S. and ROU assets of approximately $4.2 million for the Sawston lease and U.S. office lease are included in the consolidated balance sheet.

Operating Lease- Lessor Arrangements

On December 31, 2021, the Company entered into a Sub-lease Agreement (the “Agreement”) with Advent, a related party as discussed in Note 8. The Agreement permits use by Advent of a portion of the space in the Sawston facility which is leased by the Company under a separate head lease with a different counterparty that commenced on December 14, 2018. The Company subleased approximately 14,459 square feet of 88,000 square foot building interior space, plus corresponding exterior support space and parking located in Sawston, UK. Lease payments under the Agreement are two times the £5.75 (approximate $7.32 per square foot based on exchange rate as of December 31, 2023) rate per square foot payable under the head lease, subject to a cap of $10 per square foot. Accordingly, the lease payments under the Sublease are set at $145,000 per year. The total lease payments paid by the Company for the overall building, exterior space and parking under the head lease were £500,000 (approximate $637,000), and were increased to £520,000 (approximate $662,000) per year effective December 25, 2023. The term of the Agreement shall end on the same date as the head lease term ends.

The following summarizes quantitative information about the Company’s operating leases (in thousands):

The Company recorded lease costs as a component of general and administrative expense during the years ended December 31, 2023, 2022 and 2021.

Maturities of our operating leases, excluding short-term leases and sublease agreement, are as follows:

Maturities of our operating leases under the sublease agreement, are as follows:

Manufacturing Services Agreements

Advent BioServices

On May 14, 2018, the Company entered into a DCVax®-L Manufacturing and Services Agreement (“MSA”) with Advent BioServices, a related party which was formerly part of Cognate BioServices and was spun off separately as part of an institutional financing of Cognate. The MSA provides for manufacturing of DCVax-L products at an existing facility in London. The MSA is structured in the same manner as the Company’s prior agreements with Cognate BioServices. The MSA provides for certain payments for achievement of milestones and, as was the case under the prior agreement with Cognate BioServices, the Company is required to pay certain fees for dedicated production capacity in the London facility reserved exclusively for DCVax production and pay for manufacturing of DCVax-L products for a certain minimum number of patients, whether or not the Company fully utilizes the dedicated capacity and number of patients. The MSA remains in force until five years after the first commercial sales of DCVax-L products pursuant to a marketing authorization, accelerated approval or other commercial approval, unless cancelled. Either party may terminate the MSA ontwelve months’ notice, to allow for transition arrangements by both parties. During the notice period services would still be provided. Minimum required payments for this notice period are anticipated to total approximately £4.5 million ($5.7 million).

The Company entered into SOW 6 with Advent, which was incorporated into the Ancillary Services Agreement, on April 1, 2022, and amended it on September 26, 2022 and again on September 26, 2023. The milestone incentives involve a combination of cash and stock and are not paid until they are achieved and earned, as described in Note 9.

German Tax Matter

The German tax authorities have audited our wholly owned subsidiary, NW Bio GmbH, for 2013-2015. The NW Bio GmbH submitted substantial documentation to refute certain aspects of the assessments and the German tax authorities agreed in principle with the Company’s proposed revised approach and settlement offer. A final settlement bill was received from the German Tax Authority confirming that only a portion of the original bill was owed,€277,000 (approximately$306,000), for corporate taxes, interest, and reduced penalty for the period under audit, which the Company paid on September 2, 2021. The Company also received and paid the final settlement bill from the local authority for trade taxes for the audit period in the amount of€231,000 (approximately$255,000). On November 4, 2021, the Company received a letter from the local tax authorities asking for additional late fees of€513,000 (now approximately$566,000) on reimbursable withholding taxes that had been waived during the settlement process. On December 8, 2021, the Company appealed the assessment of additional late fees. Additionally, the Company requested that NW Bio GmbH be deregistered from the trade register, as it no longer had current operations. The deregistration was granted effective December 31, 2021. Between January 2022 and July 2022, the Company received tax bills for the corporate and trade taxes for the 2016-2020 tax years that totaled approximately€222,000 (approximately$245,000). On July 27, 2022, the Company was informed that the German Tax Authorities were prepared to waive€135,000 (approximately$149,000) of the penalties. The Company offered to pay this reduced penalty if an extended payment plan was approved. A response was received dated November 14, 2022 indicating that the tax authority would not be able to grant a further deferral of payment of these penalties. In a letter dated December 27, 2022, the Leipzig tax authority sent letters to the former and current managing directors of NW Bio GmbH giving 30 days to respond to a tax liability questionnaire. Based on the responses to the liability questionnaires the tax authorities have currently not directed any further measures against former and current managing directors of NW Bio GmbH with respect to tax liability proceedings.

As of December 31, 2023, the Company accrued for the current amounts owed for these penalties of €188,000 (approximately$207,000) after a partial payment of €189,000 (approximately$208,000) on October 12, 2023. Subsequently on January 17, 2024, the Company fully paid the remaining €189,000 (approximately$207,000). As of December 31, 2023, the Company accrued for trade tax liability of€155,000 (approximately$171,000) and corporation tax of€98,000 (approximately$108,000). Based on the Company’s current operating state in Germany and the negotiations, the Company believes, based on its evaluation under ASC 740, that the resolution of these tax matters will not likely result in a net material charge to the Company.

Other Contingent Payment Obligation

During the year ended December 31, 2023, the Company entered into certain non-dilutive funding agreements with multiple investors, pursuant to which the Company received funding of $5.0 million related to a gain contingency. These agreements are accounted for under ASC 470 and are recognized as contingent payment obligations on the Company’s consolidated balance sheet. The Company’s payment obligations only apply when such are received by the Company.

13. Income Taxes

No provision was made for U.S. taxes on undistributed foreign earning as such earnings are considered to be permanently reinvested. It is not practicable to determine the amount of additional tax, if any that might be payable on those earnings if repatriated.

The tax effects of temporary differences and tax loss and credit carry forwards that give rise to significant portions of deferred tax assets and liabilities at December 31, 2023 and 2022 are comprised of the following (in thousands):

The Company has identified the United States, Maryland, Germany and United Kingdom as significant tax jurisdictions.

The Company’s U.S. net operating loss (“NOL”) carryforwards for tax purposes as of December 31, 2023, are approximately $739.7 million. Unused NOL carryforwards from years prior to 2018 of $519.5 million will begin to expire in 2021 through 2037. NOL incurred in 2018 and later amount to $220.2 million and shall carryforward indefinitely. NOL carryforwards are generally available to offset future taxable income. However, an Internal Revenue Code Section 382 analysis has not been performed to determine availability of NOL to offset future taxable income, and the utilization of NOL may be limited under the Internal Revenue Code Section 382 as a result of changes in ownership of the Company’s stock over the loss periods and prior to utilization of the carryforwards. The Company also has approximately $18.4 million in research and development tax credits available to offset federal income tax in future periods. If unused, these credits expire through 2037. The Company’s NOL carryforwards for foreign tax purposes as of December 31, 2023 are $39.3 million. NOL in the United Kingdom and Germany of $22.3 million and $16.7 million respectively do not expire over time. NOL in the Netherlands of $0.4 million will begin to expire in 2025 through 2033. The Company’s tax years are still open under statute from 2018 to present, although NOL carryovers from prior tax years are subject to examination and adjustments to the extent utilized in future years.

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and taxing strategies in making this assessment. In case the deferred tax assets will not be realized in future periods, the Company has provided a valuation allowance for the full amount of the deferred tax assets at December 31, 2023 and 2022.

The expected tax expense (benefit) based on the U.S. federal statutory rate is reconciled with actual tax expense (benefit) as follow

(dollars in thousands):

ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. As of December 31, 2023 and 2022, there were no uncertain tax positions. The Company’s policy for recording interest and penalties associated with uncertain tax positions is to record such expense as a component of income tax expense. There wereno amounts accrued for penalties or interest during the year ended December 31, 2023, 2022 and 2021. Management is currently unaware of any issues under review that could result in significant payments, accruals or material deviations from its position.

14. Revision to Prior Period Financial Statements

As described in Item 9A, during the three and nine months ended September 30, 2023, the Company recorded the valuation of a number of its convertible notes, that it had entered into during the third quarter of 2023, at a fair value under the market approach using the price actually paid. In preparing the annual report on Form 10-K for the years ended December 31, 2023, 2022 and 2021, the Company determined that its application of the market approach for calculating the fair value based on the price actually paid was incorrect. The Company engaged a third-party valuation expert to prepare a modified Monte Carlo simulation under the income approach to determine fair value of the convertible notes as of December 31, 2023. In order to properly reflect the same valuation methodology of these notes for the third quarter of 2023, the Company is revising its prior period financial statements. This resulted in a non-cash adjustment to the convertible notes at fair value of $4.9 million as of September 30, 2023, and a non-cash adjustment to the change in fair value of convertible notes for both the three and nine months ended September 30, 2023 of $4.9 million.

The effect of the revisions to the unaudited condensed consolidated financial statements is as follows (amount in thousands):

Condensed Consolidated Statement of Stockholders’ Deficit (Unaudited)

15. Subsequent Events

Between January 1, 2024 and February 28, 2024, the Company received $5.5 million in funding from the sale of preferred shares, proceeds from warrant exercise, proceeds of debt arrangements.

Between January 1, 2024 and February 28, 2024, the Company issued approximately 0.2 million shares of Series C preferred stock for proceeds of$1.9 million.

Between January 1, 2024 and February 28, 2024, the Company received $1.3 million from the exercise of 5.7 million outstanding warrants.

Between January 1, 2024 and February 28, 2024, approximately 0.2 million Series C Shares with a book value of $2.3 million were converted into 4.3 million common shares in accordance with their terms at a ratio of 1:25.

Between January 1, 2024 and February 28, 2024, the Company issued approximately 2.8 million shares of common stock to certain lenders in lieu of cash payments of $1.4 million of debt, including $0.2 million of accrued interest. The Company also issued 1.0 million shares of common stock to extinguish $0.6 million outstanding share liability.

On January 8, 2024, certain warrants holders elected to exercise some of their warrants pursuant to cashless exercise formulas. The Company issued approximately 0.7 million shares of common stock upon exercise of 1.3 million warrants at exercise prices at $0.34 per share.

On February 22, 2024, the Company received a $0.8 million prepayment for the purchase of securities for which the terms are in the process of being finalized.

On February 27, 2024, the Company entered into a one-year convertible note (the “Note”) with an individual investor (the “Holder”) for principal amount of $1.5 million. The Note bears interest at 11% per annum and is convertible into Series C preferred shares at $11.50 per share at the Holder’s sole option. The Series C preferred shares are convertible into common stock 30 days after the debt conversion date. Each Series C preferred share is convertible into 25 shares of common stock. In addition, the Holder has an alternative option to convert the Note into a non-dilutive financial instrument, which has the same terms at those in the non-dilutive funding agreements as described in Note 12.