The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our consolidated financial
statements and related notes included in this Annual Report on Form 10-K. This
discussion contains forward-looking statements that reflect our plans, estimates
and beliefs and involve numerous risks and uncertainties, including but not
limited to those described in the "Risk Factors" section of this Annual Report.
Actual results may differ materially from those contained in any forward-looking
statements. You should carefully read "Forward-Looking Statements" and "Risk
Factors."


Forward-Looking Statements


The information in this discussion contains forward-looking statements and
information within the meaning of Section 27A of the Securities Act of 1933, as
amended, or the Securities Act, and Section 21E of the Securities Exchange Act
of 1934, as amended, or the Exchange Act, which are subject to the "safe harbor"
created by those sections. These forward-looking statements include, but are not
limited to, statements concerning our strategy, future operations, our
expectations regarding our clinical trials, future financial position, future
revenues, projected costs, prospects and plans and objectives of management. The
words "anticipates," "believes," "estimates," "expects," "intends," "may,"
"plans," "projects," "will," "would" and similar expressions are intended to
identify forward-looking statements, although not all forward-looking statements
contain these identifying words. We may not actually achieve the plans,
intentions, or expectations disclosed in our forward-looking statements and you
should not place undue reliance on our forward-looking statements. Actual
results or events could differ materially from the plans, intentions and
expectations disclosed in the forward-looking statements that we make. These
forward-looking statements involve risks and uncertainties that could cause our
actual results to differ materially from those in the forward-looking
statements, including, without limitation, the risks set forth in Part I, Item
1A, "Risk Factors" in this Annual Report on Form 10-K. The forward-looking
statements are applicable only as of the date on which they are made, and we do
not assume any obligation to update any forward-looking statements.

Overview




We are a clinical-stage biopharmaceutical company focused on developing an
innovative cell therapy pipeline of autologous tumor infiltrating lymphocyte, or
TIL, therapies for the treatment of patients with cancer. We have assembled an
accomplished team with a successful track record in cell therapy innovation. We
are developing a novel class of genetically engineered TIL therapies using our
Co-Stimulatory Antigen Receptor, or CoStAR, platform. These modified CoStAR-TILs
still rely on their native, patient-specific T cell receptors, or TCRs, to bind
to tumor neoantigens, but have been enhanced to express novel CoStAR molecules,
which bind to shared tumor-associated antigens and provide potent costimulation
to T cells within the tumor microenvironment. We believe that the ability of
CoStAR to augment the activation of TILs upon native TCR-mediated recognition of
tumor neoantigens has the potential to bring TIL therapy to patients with cancer
types that have been historically resistant to immunotherapy and increase the
benefit from TIL therapy in patients with cancer types that have been
historically sensitive to immunotherapy. In 2022, we submitted an
investigational new drug application, or IND, for ITIL-306, our first CoStAR-TIL
therapy, to the U.S. Food and Drug Administration, or FDA, and, following
clearance, opened a Phase 1 dose escalation trial of ITIL-306 in non-small cell
lung cancer, or NSCLC, ovarian, and renal cancers. In October 2022, we announced
the successful dosing of the first patient with NSCLC in the ITIL-306 Phase 1
trial.

We were founded in August 2018. In February 2019, we entered into a license agreement with Immetayte Ltd., or Immetacyte, pursuant to which we obtained a worldwide license to Immetacyte's proprietary technology, know-how and intellectual property for the research, development, manufacture and commercialization of TIL therapies. Immetacyte had been manufacturing a TIL product under a compassionate use program since 2011.




In March 2020, we acquired 100% of the share capital of Immetacyte. We acquired
Immetacyte primarily for this in-process research and development (IPR&D), which
is critical to achieve our objective of developing an innovative cell therapy
pipeline of autologous TIL therapies for the treatment of patients with cancer,
as well as the dedicated workforce of Immetacyte. Utilizing this IPR&D, we have
designed and developed our initial CoStAR
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construct targeting folate receptor alpha and are advancing our first CoStAR-TIL
product candidate, ITIL-306, for the treatment of multiple solid tumors. We have
initiated a Phase 1 clinical trial of ITIL-306 in the United States, and plan to
initiate a Phase 1 clinical trial of ITIL-306 in the United Kingdom in 2023.

Since inception, we have had significant operating losses. Our net loss was
$223.2 million and $156.8 million for the years ended December 31, 2022 and
2021, respectively. As of December 31, 2022, we had an accumulated deficit of
$424.9 million. As of December 31, 2022, we had cash, cash equivalents and
marketable securities of $260.9 million which consists of $43.7 million in cash
and cash equivalents and $217.2 million in marketable securities. We expect to
continue to incur net losses for the foreseeable future, and we expect our
research and development expenses, general and administrative expenses, and
capital expenditures will continue to increase.

Recent Developments




In May 2022, we achieved IND clearance from the FDA for a Phase 1 dose
escalation study of ITIL-306 in NSCLC, ovarian cancer, and renal cell carcinoma,
and we announced the successful dosing of the first patient with NSCLC in
October 2022. In January 2023, we announced the consolidation of substantially
all of our research and development operations, including clinical product
manufacturing and clinical trial operations, to our Manchester, United Kingdom
site to further extend our expected cash runway beyond 2026. We expect initial
clinical data from the ITIL-306 program in 2024.

In December 2022, our Board of Directors approved a strategic reprioritization
of our preclinical and clinical development programs. This decision involves
reallocating resources to focus on advancing ITIL-306, our CoStAR platform, and
other next-generation TIL technologies, while discontinuing our ITIL-168
development program. As part of this strategic restructuring plan, we have
reduced our U.S. workforce to a team of approximately 15 individuals responsible
for leading our global business operations. Additionally, we are currently
concentrating our efforts with our UK workforce to re-align our operating model.

Components of Operating Results




Operating Expenses

Research and Development

Research and development expenses account for a significant portion of our
operating expenses. Research and development expenses consist primarily of
research and development, manufacturing, monitoring and other services payments
and, to a lesser extent, salaries, benefits, and other personnel-related costs,
including stock-based compensation, professional service fees and facility and
other related costs. In addition, research and development expense is presented
net of reimbursements from reimbursable tax and expenditure credits and grants
from the UK government. For the years ended December 31, 2022 and 2021, we did
not allocate our research and development expenses by program.

We expect our future research and development expenses to change in line with
our prioritization of advancing our clinical development activities for
ITIL-306, our CoStAR platform, and other next-generation TIL technologies, and
changes in the size of our company. Our expenditures on future nonclinical and
clinical development programs are subject to numerous uncertainties in timing
and cost to completion. The duration, costs and timing of clinical trials and
development of product candidates will depend on a variety of factors,
including:

•the scope, rate of progress and expenses of clinical trials and other research
and development activities, including the impacts of our voluntary pause in our
clinical trials and the related investigation into our manufacturing processes;

•potential safety monitoring and other studies requested by regulatory agencies;

•significant and changing government regulation; and

•the timing and receipt of regulatory approvals, if any.


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The process of conducting the necessary clinical research to obtain FDA and
other regulatory approval is costly and time consuming and the successful
development of product candidates is highly uncertain. The risks and
uncertainties associated with our research and development projects are
discussed more fully in the section of this Annual Report titled "Risk Factors."
As a result of these risks and uncertainties, we are unable to determine with
any degree of certainty the duration and completion costs of our research and
development projects, or if, when or to what extent we will generate revenues
from the commercialization and sale of any of our product candidates that obtain
regulatory approval. We may never succeed in achieving regulatory approval for
any of our product candidates.

General and Administrative



General and administrative expenses consist primarily of compensation and
personnel-related expenses, including stock-based compensation, for our
personnel in executive, finance and other administrative functions. General and
administrative expenses also include professional fees paid for accounting,
auditing, legal, tax and consulting services, insurance costs, recruiting costs,
travel expenses, amortization and depreciation, and other general and
administrative costs.


We expect our future general and administrative expenses to change in line with
our prioritization of advancing our CoStAR platform and other next-generation
TIL technologies, changes in the size of our company to support our research and
development activities and operations generally, and the potential growth of our
business. If any of our product candidates receive marketing approval, we expect
to incur additional expenses related to commercialization activities.


Additionally, we expect to continue to incur expenses as a result of operating
as a public company, including expenses related to compliance with the rules and
regulations of the SEC, additional director and officer insurance expenses, and
investor relations activities, as well as other administrative and professional
services.

Restructuring and Impairment Charges




Restructuring and impairment charges consist primarily of asset impairment
charges, contract terminations, severance and other employee-related costs.
Restructuring and impairment charges are related to our strategic prioritization
of the Company's preclinical and clinical development programs. Our
restructuring plan is designed to reduce costs and reallocate resources to focus
on advancing our CoStAR platform and other next-generation TIL technologies. As
part of the restructuring plan, our ITIL-168 development program was
discontinued and we reduced our U.S. workforce by approximately 60%.

Interest Income

Interest income consists of interest income from funds held in our cash and cash equivalent accounts, and marketable securities.

Interest Expense

Interest expense consists of interest expense on our note payable and amortization of loan origination costs.

Other Expense, Net

Other expense, net consists primarily of derivative instrument fair value gains, foreign exchange remeasurement gains and other expenses and income.

Income Tax Provision




We are subject to income taxes in the United States and the foreign jurisdiction
where we operate, the United Kingdom. The United Kingdom has statutory tax rates
that differ from those in the United States. Accordingly, our

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effective tax rates will vary depending on the relative proportion of United
Kingdom to United States income, the availability of research and development
tax credits, changes in the valuation of our deferred tax assets and liabilities
and changes in tax laws.


In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the 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. Due to the uncertainty of
the business in which we operate, projections of future profitability are
difficult and past profitability is not necessarily indicative of future
profitability. At December 31, 2022, we maintained a full valuation allowance
against net deferred tax assets for the United States and the United Kingdom.
The valuation allowance has been provided based on the positive and negative
evidence relative to our company, including the existence of cumulative net
operating losses, or NOLs, since the Company's inception, and the inability to
carryback these NOLs to prior periods. Furthermore, the Company determined that
it is more likely than not that the benefit of these assets would not be
realized in the foreseeable future. The timing and the reversal of the Company's
valuation allowance will continue to be monitored.

Results of Operations

Comparison of the Years Ended December 31, 2022 and 2021

The following table summarizes our results of operations for the years ended December 31, 2022 and 2021 (in thousands):



                                             Year Ended December 31,          Change
                                              2022              2021             $
Operating expenses:
Research and development                 $     141,056      $  107,251      $  33,805
General and administrative                      62,235          48,309

13,926


Restructuring and impairment charges            23,167               -         23,167
Total operating expenses                       226,458         155,560         70,898
Loss from operations                          (226,458)       (155,560)       (70,898)
Interest income                                  3,655              80          3,575
Interest expense                                (1,883)              -         (1,883)
Other expense, net                                (564)         (1,275)           711
Loss before income tax expense                (225,250)       (156,755)       (68,495)
Income tax benefit (expense)                     2,073             (39)         2,112
Net loss                                 $    (223,177)     $ (156,794)     $ (66,383)

Research and Development Expenses



Research and development expenses were $141.1 million and $107.3 million for the
years ended December 31, 2022 and 2021, respectively. The increase in research
and development expenses during this period of $33.8 million was primarily due
to:

•$14.0 million in costs from an increase in headcount, consisting of
$15.5 million in wages and benefits, partially offset by a decrease in
stock-based compensation expense of $1.0 million and a decrease of $0.5 million
for other employee-related expenses in relation to our research and development
personnel;

•$8.2 million in costs related to research and clinical development activities, including from our clinical trials and expanded clinical manufacturing activities; and

•$11.6 million of expenses related to facilities and overhead, depreciation and amortization, and other expenses.


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We anticipate a reduction in our future research and development expenses as a
result of discontinuing the ITIL-168 development program, implementing
significant workforce reductions in the United States, and adapting to changes
in our company's size.

General and Administrative Expenses

General and administrative expenses were $62.2 million and $48.3 million for the years ended December 31, 2022 and 2021, respectively. The net increase of $13.9 million was primarily due to:




•$12.0 million in costs resulting from increased headcount and personnel related
costs, including increased stock-based compensation expense of $5.3 million, to
support our growing business and for preparation of clinical trials;

•$1.3 million in consulting and professional service costs, mainly consisting of
costs of information technology and facility consultants of $0.6 million, and
costs of business operations consultants of $0.7 million; and

•$0.6 million from an increase in insurance expense and other office expenses.




We anticipate a reduction in our future general and administrative expenses as a
result of discontinuing the ITIL-168 development program, implementing
significant workforce reductions in the United States, and adapting to changes
in our company's size. If any of our product candidates receive marketing
approval, we expect to incur additional expenses related to commercialization
activities.

Restructuring and Impairment Charges




Restructuring and impairment charges were approximately $23.2 million for the
year ended December 31, 2022 and nil for the year ended December 31, 2021, since
we did not have any restructuring and impairment charges during the prior year.
The net increase of $23.2 million was primarily due to:

•$15.8 million in costs resulting from a goodwill impairment charge of $5.7 million and an in-process research and development impairment charge of $10.1 million;

•$1.9 million in costs resulting from a leasehold improvement charge of $1.2 million and a $0.7 million impairment for other fixed assets;

•$3.0 million in costs consisting of severance payments and benefits continuation costs; and

•$2.4 million in costs comprised principally of the termination of software contracts.

Interest Income, Interest Expense and Other Expense, Net




Interest income, interest expense and other expense, net were $1.2 million of
income and $1.2 million of expense for the years ended December 31, 2022 and
2021, respectively. The increase of $2.4 million was primarily due to:

•$3.6 million of interest income related to our investments;

•$1.0 million from our derivative investment; and

•$0.4 million gain in other income, primarily consisting of a gain on asset disposal, net of other expenses;

•partially offset by an increase of interest expense of $1.9 million from our note payable; and

•$0.7 million of loss on foreign currency transactions.




Income Tax Expense


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Income tax expense, decreased from $39 thousand expense for the year ended
December 31, 2021 to $2.1 million benefit for the year ended December 31, 2022.
During the year ended December 31, 2022, income tax benefit mostly consisted of
deferred foreign income taxes from our operations in the United Kingdom.

Liquidity and Capital Resources

Sources of Liquidity



Since our inception, we have not generated any revenue from product sales and we
have incurred significant operating losses. We do not have any products that
have achieved regulatory marketing approval and we do not expect to generate
revenue from sales of any product candidates for several years, if ever.

As of December 31, 2022, we had cash, cash equivalents, and marketable
securities of $260.9 million, which consists of $43.7 million in cash and cash
equivalents, and $217.2 million in marketable securities. As of December 31,
2021, we had cash and cash equivalents of $37.6 million and $416.5 million in
marketable securities. Cash in excess of immediate requirements is invested in
accordance with our investment policy, primarily with a view to liquidity and
capital preservation.


In June 2022, our wholly-owned subsidiary, Complex Therapeutics Mezzanine LLC,
and our wholly-owned indirect subsidiary, Complex Therapeutics LLC, entered into
a mortgage construction loan and mezzanine construction loan, or together, the
Loan, secured by our Tarzana, California land and building, which is partially
complete and is expected to reach full completion in the second quarter of 2023.
The initial principal amount of the Loan was $52.1 million, with additional
future principal of up to $32.9 million to fund ongoing construction costs. As
of December 31, 2022, the outstanding principal amount under the Loan was
$74.8 million and unamortized debt issuance costs were $2.4 million.


On April 1, 2022, we filed an automatic shelf registration statement on Form
S-3, or the 2022 Shelf Registration Statement. We have not yet sold and issued
any securities under the 2022 Shelf Registration Statement.


In March 2021, we raised net proceeds of $339.0 million in our initial public
offering, or IPO, pursuant to which we sold an aggregate of 18,400,000 shares of
common stock.

In the first quarter of 2021, we raised aggregate net cash proceeds of $52.5 million from the issuance and sale of our Series C convertible preferred stock.



Future Funding Requirements

Based on our current operating plan, we believe our existing cash and cash
equivalents, and marketable securities will be sufficient to fund our operating
expenses and capital expenditure requirements beyond 2026. We are also
evaluating opportunities for a potential sale or lease of the Tarzana
manufacturing site, as well as subleases of other facilities under lease, which
would further extend our expected cash runway. We have based this estimate on
assumptions that may prove to be wrong, and we could utilize our available
capital resources sooner than we expect. We expect to continue to expend
significant resources for the foreseeable future.

We use our cash to fund operations, primarily to fund our research and
development expenditures and related personnel costs. We expect our expenses to
continue to be significant as we invest in research and development activities,
particularly as we advance our product candidates into later stages of
development and conduct larger clinical trials, seek regulatory approvals for
and commercialize any product candidates that successfully complete clinical
trials, hire personnel and invest in and grow our business, expand and protect
our intellectual property portfolio, and operate as a public company. Because of
the numerous risks and uncertainties associated with research, development and
commercialization of our product candidates, we are unable to estimate the exact
timing and amount of our funding requirements. Our future operating expenditures
will depend on many factors, including:
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•the scope, rate of progress, costs and results of our clinical and preclinical development activities, including the impacts of our voluntary pause in our clinical trials, the results of our discussions with the FDA and other regulatory agencies, and the related investigation into our manufacturing process;

•the number and characteristics of any additional product candidates we develop or acquire;



•the timing of, and the costs involved in, obtaining regulatory approvals for
ITIL-306 or any future product candidates, and the number of trials required for
regulatory approval;

•the cost of manufacturing ITIL-306 or any future product candidates as well as any products we successfully commercialize;

•costs related to our manufacturing and other facilities;

•the cost of commercialization activities of our product candidates, if approved for sale, including marketing, sales and distribution costs;

•the timing, receipt and amount of sales of ITIL-306 or any future product candidates, if approved;

•the costs associated with constructing our new clinical and commercial manufacturing facility and building out lab space, as well as our ability to complete a sale or lease of our Tarzana, California facility, as well as subleases of other facilities under lease;

•the extent to which we acquire or in-license other companies' product candidates and technologies;



•our ability to establish and maintain strategic collaborations, licensing or
other arrangements and the financial terms of any such arrangements, including
the timing and amount of any future milestone, royalty or other payments due
under any such agreement;

•any product liability or other lawsuits;

•the expenses needed to attract, hire and retain skilled personnel;

•our investments in our operational, financial and management information systems;

•the costs associated with operating as a public company;

•the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing our intellectual property portfolio; and

•any delays or issues resulting from the ongoing COVID-19 pandemic or adverse geopolitical and economic conditions.



In March 2020, we acquired 100% of the share capital of Immetacyte for total
cash and non-cash consideration, including contingent consideration, of
$15.4 million. In connection with the acquisition, we terminated the Immetacyte
license agreement and associated payment obligations. The maximum consideration
that remained unpaid at December 31, 2022, which payment is contingent on future
events, was $13.3 million.

Until such time as we can generate significant revenue from sales of our product
candidates, if ever, we expect to finance our operations through equity
offerings, debt financings or other capital sources, which may include strategic
collaborations or other arrangements with third parties. Additional funds may
not be available to us on acceptable terms or at all. If we raise additional
funds by issuing equity or convertible debt securities, our stockholders will
suffer dilution and the terms of these securities may include liquidation or
other preferences that adversely affect the rights of our common shareholders.
Debt financing, if available, may involve restrictive covenants limiting our
flexibility in conducting future business activities, and, in the event of
insolvency, debt holders would be repaid before holders of our equity securities
receive any distribution of our corporate assets. If we raise funds through
collaborations or other similar arrangements with third parties, we may have to
relinquish valuable rights to technologies, future revenue streams, product
candidates or research programs or grant licenses on terms that may not be
favorable to us and/or may reduce the value of our common shares. Our ability to
raise additional funds may be adversely impacted by worsening global economic
conditions and the recent disruptions to, and volatility in, the credit and
financial markets in the United States and worldwide resulting from, among other
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things, inflation, rising interest rates, the war in Ukraine and the COVID-19
pandemic. If we fail to obtain necessary capital when needed on acceptable
terms, or at all, it could force us to delay, limit, reduce or terminate our
product development programs, commercialization efforts or other operations. See
"Risk Factors."

We lease various operating spaces in the United States and the United Kingdom
under non-cancelable operating lease arrangements that expire on various dates
through 2026. These arrangements require us to pay certain operating expenses,
such as taxes, repairs, and insurance and contain landlord or tenant incentives
or allowances, renewal and escalation clauses. As of December 31, 2022, our
future minimum lease payments under committed or non-cancelable lease agreements
were $8.4 million, as discussed in Note 7 to the consolidated financial
statements included elsewhere in this Annual Report on Form 10-K.


Our contractual obligations and commitments primarily consist of amounts we will
pay to the general contractor constructing and developing land and buildings in
Tarzana, California which we acquired in October 2020 for $37.6 million. We are
in the process of developing this land for our U.S. operations and our
contractual commitments for this development project are limited to unreimbursed
spend by the general contractor. As of December 31, 2022, $4.0 million was
contractually committed to the development of this project.

In the normal course of business, we enter into contracts with Clinical Research Organizations, or CROs, and other third parties for preclinical studies and clinical trials, research and development supplies and other testing and manufacturing services. We are committed to approximately $13.5 million in future services related to clinical trial progress as of December 31, 2022.




In December 2022, the Company's Board of Directors approved a restructuring plan
to implement a strategic prioritization of the Company's preclinical and
clinical development programs. In the year ended December 31, 2022, the Company
recorded aggregate restructuring and impairment charges of approximately
$23.2 million related to contract termination, severance payments and other
employee-related costs.


On January 30, 2023, the Company's Board of Directors approved an expansion of
its previously announced restructuring plan implementing a strategic
prioritization of the Company's preclinical and clinical development programs.
The Company currently estimates that it will incur charges of up to $9.0 million
in connection with the restructuring plan, consisting primarily of cash
expenditures for severance payments, retention bonus payments, contract
terminations and related costs, as well as non-cash expenses related to vesting
of share-based awards, excluding any charges or costs associated with any
potential sale of its facilities and asset impairments. The Company expects that
the majority of the restructuring and impairment charges will be incurred in the
next 12 months and that the execution of the restructuring will be substantially
complete by the end of April 2023.

Cash Flows

The following table sets forth the significant sources and uses of cash for the periods set forth below (in thousands):

Years Ended December 31,


                                                                     2022                      2021
Net cash provided by (used in):
Cash used in operating activities                            $      (180,164)            $     (122,138)
Cash provided by (used in) investing activities                      114,541                   (474,396)
Cash provided by financing activities                                 71,886                    393,164

Net increase (decrease) in cash, cash equivalents, and restricted cash

                                              $         6,263             $     (203,370)

Cash Flows from Operating Activities

Cash used in operating activities for the year ended December 31, 2022 was $180.2 million, which consisted of the net loss of $223.2 million and a $9.6 million net change to our net operating assets and liabilities, partially offset


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by $52.6 million in non-cash charges and other adjustments to reconcile net loss
to net cash used in operating activities. The net change in our operating assets
and liabilities was primarily due to a decrease of $1.8 million in accounts
payable, decrease of $9.0 million in accrued expenses and other current
liabilities, and a decrease of $0.4 million in prepaid expenses and other
current assets, offset partially by an increase of $1.6 million in long-term
liabilities. The non-cash charges primarily consisted of stock-based
compensation expense of $30.4 million, goodwill and intangible assets impairment
of $15.8 million, depreciation and amortization expense of $6.0 million and
change in foreign exchange measurement of $1.4 million.


Cash used in operating activities for the year ended December 31, 2021 was
$122.1 million, which consisted of the net loss of $156.8 million, partially
offset by $30.3 million in non-cash charges and other adjustments to reconcile
net loss to net cash used in operating activities and a $4.4 million net change
to our net operating assets and liabilities. The non-cash charges primarily
consisted stock-based compensation of $26.2 million, and depreciation and
amortization expense of $2.8 million. The net change in our operating assets and
liabilities was primarily due to an increase of $3.9 million in accounts
payable, an increase of $12.0 million in accrued expenses and other current
liabilities, partially offset by an increase of $5.0 million in prepaid expenses
and other current assets and an increase in $6.5 million in other long-term
assets.

Cash Flows from Investing Activities

Cash provided by investing activities for the year ended December 31, 2022 was $114.5 million, of which $200.3 million provided related to marketable securities, partially offset by $1.2 million used related to derivative financial instruments and $84.6 million used related to purchases of property.

Cash used in investing activities for the year ended December 31, 2021 was $474.4 million, of which $57.8 million was related to purchases of property, plant and equipment of $416.6 million was related to marketable securities.

Cash Flows from Financing Activities




Cash provided by financing activities for the year ended December 31, 2022 was
$71.9 million, which was primarily related to net cash proceeds from our note
payable of $70.3 million and cash proceeds from exercise of stock options of
$1.5 million.


Cash provided by financing activities for the year ended December 31, 2021 was
$393.2 million, which was primarily related to net cash proceeds from our IPO of
$339.0 million, net cash proceeds from the issuance of Series C convertible
preferred stock of $52.5 million and cash proceeds from exercise of stock
options of $1.8 million.

Contractual Obligations and Commitments




Our construction contractual obligations and commitments primarily consist of
amounts we will pay to the general contractor for constructing and developing
our land and buildings in Tarzana, California. As of December 31, 2022,
$4.0 million was contractually committed to the development of this project.


In June 2022, our wholly-owned subsidiary, Complex Therapeutics Mezzanine LLC,
and our wholly-owned indirect subsidiary, Complex Therapeutics LLC, entered into
a mortgage construction loan and mezzanine construction loan (together, the
"Loan") and as of December 31, 2022, the outstanding principal amount under the
Loan was $74.8 million and unamortized debt issuance costs were $2.4 million.


As of December 31, 2022, we had non-cancelable purchase commitments of
approximately $18.3 million consisting mainly of CROs, software and operating
commitments. Additionally, future minimum lease payments under noncancellable
operating leases as of December 31, 2022 totaled $8.4 million, as discussed in
Note 7.


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As part of our restructuring plan, as of December 31, 2022, we recorded $3.0 million related to one-time employee termination benefits and $2.4 million for contract termination, as discussed in Note 12.

Critical Accounting Policies and Estimates




This management's discussion and analysis of our financial condition and results
of operations is based on our consolidated financial statements, which have been
prepared in accordance with GAAP. The preparation of financial statements
requires us to make estimates and assumptions that affect the reported amounts
of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements, as well as the reported
expenses incurred during the reporting periods. Our estimates are based on our
historical experience and on various other factors that we believe are
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.

While our significant accounting policies are described in the notes to our consolidated financial statements, we believe that the following critical accounting policies are most important to understanding and evaluating our reported financial results.

Intangible Assets and Goodwill



Our intangible assets classified as in-process research and development or
IPR&D, are composed of intangible assets acquired in a business combination and
used in research and development activities that have not yet reached
technological feasibility, regardless of their potential future use. The main
criterion we use to determine the technological feasibility or completion of
these projects is regulatory approval to market the underlying products in a
relevant geographic region. However, obtaining regulatory approval is often
subject to significant risks and uncertainties, which may result in the eventual
realized value of the acquired IPR&D projects differing from their fair value at
the date of acquisition. We classify IPR&D intangible assets acquired in a
business combination as indefinite-lived until the completion or abandonment of
the associated research and development efforts. Once the associated research
and development activities are completed, we will assess the useful life and
begin amortizing the assets to reflect their use over their remaining lives. In
the event of permanent abandonment, we will write off the remaining carrying
amount of the associated IPR&D intangible asset.

Our indefinite-lived IPRD intangible assets are tested at least annually for
impairment, or upon the occurrence of a triggering event. The impairment test
for IPR&D involves comparing the fair value of the asset, based on updated
forecasts and commercial development plans, with its carrying value. Impairment
is deemed to exist when the fair value of IPR&D assets is less than their
carrying value.

Goodwill represents the excess of the purchase price over the fair value of the
net tangible and intangible assets acquired in a business combination. Goodwill
is not amortized but is tested for impairment. We review goodwill for impairment
at least annually or more frequently for triggering events or changes in
circumstances indicate that the carrying value of goodwill may not be
recoverable based on management's assessment of the fair value of the Company's
reporting unit as compared to their related carrying value. Under the
authoritative guidance issued by the Financial Accounting Standards Board, we
have the option to first assess the qualitative factors to determine whether it
is more likely than not that the fair value of the reporting unit is less than
its carrying amount as a basis for determining whether it is necessary to
perform a quantitative goodwill impairment test.

Our impairment tests are based on a single operating segment and reporting unit
structure. If the carrying value of the reporting unit exceeds its fair value,
an impairment charge is recognized for the excess of the carrying value of the
reporting unit over its fair value.

In December 2022, we performed a quantitative goodwill impairment test for our
Immetacyte acquisition. The test was prompted by the discontinuation of the
ITIL-168 development program (see Note 12 to the consolidated financial
statements included elsewhere in this Annual Report on Form 10-K), the
realignment of our preclinical and clinical development programs and decline in
our stock price. Based on the results of the test as of December 31, 2022, we
determined that the carrying amount of our goodwill and intangible assets
exceeded their fair value. The fair value of the IPR&D was determined through
utilizing the multiperiod excess earnings method (MPEEM), which
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considered various factors such as future cash flows, discount rates, and market
conditions. The fair value of the reporting unit was determined through an
income approach, the discounted cash flow model, considering projected future
cash flows (including timing and profitability), discount rate reflecting the
risk inherent in future cash flows, a perpetual growth rate, and projected
future economic and market conditions.


As a result of the analysis, we recognized a non-cash impairment charge of $15.8
million for the year ended December 31, 2022. The charge consisted of $10.1
million for IPR&D impairment and $5.7 million for goodwill impairment during the
fourth quarter of 2022. These impairment charges were recorded in the
consolidated statements of operations and comprehensive loss in the line item
"restructuring and impairment charges".

Stock-Based Compensation

We maintain a stock-based compensation plan as a long-term incentive for employees, directors and consultants. The plan allows for the issuance of stock options, stock appreciation rights and restricted stock units.



For stock-based awards with only service conditions, we recognize stock-based
compensation expense for stock-based awards on a straight-line basis over the
requisite service period and account for forfeitures as they occur. For
stock-based awards with performance conditions, stock-based compensation expense
is not recognized until the performance condition is probable to occur. Our
stock-based compensation costs are based upon the grant date fair value
estimated using the Black-Scholes option pricing model. This model utilizes
inputs that are highly subjective assumptions and generally require significant
judgment. These assumptions include:

•Fair Value of Common Stock-Prior to our IPO in March 2021, the fair value of
the shares of common stock underlying stock options had historically been
determined by the Board of Directors. Because there has been no public market
for the our common stock, the Board of Directors has determined fair value of
the common stock at the time of grant of the option by considering a number of
objective and subjective factors including important developments in our
operations, contemporaneous valuations performed by an independent third party
firm, sales of our convertible preferred stock, our operating results and
financial performance, the conditions in the biotechnology industry and the
economy in general, the stock price volatility of similar public companies and
the lack of marketability of our common stock, among other factors. After our
IPO in March 2021, the fair value of common stock is determined using the
closing price of our common stock on the Nasdaq Global Select Market.

•Expected Term-The expected term represents the period that stock-based awards
are expected to be outstanding and is determined as the average of the
time-to-vesting and the contractual life of the awards.
•Expected Volatility-Since we do not have sufficient trading history for our
common stock, the expected volatility was estimated based on the average
volatility for comparable publicly traded biotechnology companies over a period
equal to the expected term of the stock option grants. The comparable companies
were chosen based on their similar size, stage in the life cycle or area of
specialty.

•Risk-Free Interest Rate-The risk-free interest rate is based on the U.S. Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of awards.

•Expected Dividend Yield-We have never paid dividends on our common stock and have no plans to pay dividends on our common stock. Therefore, we used an expected dividend yield of zero.

Recent Accounting Pronouncements

Information regarding recent accounting pronouncements applicable to us is included in Note 2 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Emerging Growth Company Status and Smaller Reporting Company Status



We are an "emerging growth company" as defined in the JOBS Act. For so long as
we remain an emerging growth company, we are permitted and intend to rely on
certain exemptions from various public company reporting requirements, including
not being required to have our internal control over financial reporting audited
by our
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independent registered public accounting firm pursuant to Section 404 of the
Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive
compensation in our periodic reports and proxy statements and exemptions from
the requirements of holding a nonbinding advisory vote on executive compensation
and any golden parachute payments not previously approved. Accordingly, the
information contained herein may be different than the information you receive
from other public companies in which you hold stock.

In addition, emerging growth companies can delay adopting new or revised
accounting standards issued subsequent to the enactment of the JOBS Act until
such time as those standards apply to private companies. We have elected to
avail ourselves of this extended transition period for complying with new or
revised accounting standards that have different effective dates for public and
private companies until the earlier of the date that we (i) are no longer an
emerging growth company or (ii) affirmatively and irrevocably opt out of the
extended transition period provided in the JOBS Act. As a result, our financial
statements may not be comparable to companies that comply with the new or
revised accounting pronouncements as of public company effective dates.

We will remain an emerging growth company until the earliest of (i) December 31,
2026, (ii) the last day of the fiscal year in which we have total annual gross
revenue of at least $1.235 billion, (iii) the last day of the fiscal year in
which we are deemed to be a "large accelerated filer" as defined in Rule 12b-2
under the Exchange Act, which would occur if the market value of our common
stock held by non-affiliates exceeded $700.0 million as of the last business day
of the second fiscal quarter of such year or (iv) the date on which we have
issued more than $1.0 billion in non-convertible debt securities during the
prior three-year period.

We are also a "smaller reporting company," as defined in Rule 12b-2 under the
Exchange Act. We may continue to be a smaller reporting company if either (i)
the market value of our shares held by non-affiliates is less than $250.0
million or (ii) our annual revenue was less than $100.0 million during the most
recently completed fiscal year and the market value of our shares held by
non-affiliates is less than $700.0 million. If we are a smaller reporting
company at the time we cease to be an emerging growth company, we may continue
to rely on exemptions from certain disclosure requirements that are available to
smaller reporting companies. Specifically, as a smaller reporting company, we
may choose to present only the two most recent fiscal years of audited financial
statements in our Annual Report on Form 10-K and, similar to emerging growth
companies, smaller reporting companies have reduced disclosure obligations
regarding executive compensation.

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