Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with the section titled “Selected Consolidated Financial Data” and our consolidated financial statements and the related notes thereto included elsewhere in this annual report. Some of the information contained in this discussion and analysis or set forth in other parts of this annual report contain forward-looking statements that involve risks, uncertainties and assumptions. As a result of many factors, including those factors set forth in the section titled “Risk Factors,” our actual results could differ materially from those discussed in or implied by these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section titled “Risk Factors.” Please also see the section titled “Cautionary Note Regarding Forward Looking Statements.”

Overview

We believe that the surest path to a better future is through technological advancement and that the new frontier of technology lies at the interface of computation, engineering and biology. Our mission is to improve health with technologies that transform the way that antibody-based therapies are discovered. We aim to become the centralized operating system for next generation antibody discovery.

Our full-stack, artificial intelligence-, or AI, powered antibody discovery platform searches and analyzes the database of natural immune systems to find antibodies that can be developed as drugs. We believe our technology increases the speed and the probability of success of therapeutic antibody discovery, including enabling discovery against targets that may otherwise be intractable. We forge partnerships with drug developers of all sizes, from large cap pharmaceutical to small biotechnology companies. We empower them to move quickly, reduce cost and tackle the toughest problems in drug development. As of December 31, 2021, we had 156 discovery programs that are either completed, in progress or under contract with 36 partners. As a recent example, in a collaboration with Eli Lilly and Company, or Lilly, we applied our technology stack to co-develop bamlanivimab, a potential antibody therapy to treat and prevent COVID-19. Starting from a single blood sample obtained from a convalescent patient, we and our partners identified a viable antibody drug candidate within three weeks that advanced into clinical testing 90 days after initiation of the program. Lilly progressed into these clinical trials at a greatly accelerated pace as a result of the Coronavirus Treatment Acceleration Program, which is a special emergency program for possible coronavirus therapies created by the FDA in 2020 to expedite the development of potentially safe and effective life-saving treatments to combat the COVID-19 pandemic. With respect to other or future product candidates, there is no assurance that any of our partners or collaborators will be able to advance a product candidate into clinical development on this timeframe again in the future, or at all. We initiated our partnering program in 2015 and have only had this one program result in clinical milestone payments to us to date and we have not yet had a program receive marketing approval.

We structure our agreements in a way that is designed to align our partners’ economic interests with our own. We forge partnerships with large cap pharmaceutical companies, biotechnology companies of all sizes and non-profit and government organizations. Our partners select a target and define the antibody properties needed for therapeutic development. We provide discovery solutions to partners that have a range of discovery capabilities, from the highly enabled to the less enabled. We enable discovery against targets that have traditionally been intractable, and we accelerate programs against less difficult targets.

Our deals emphasize participation in the success and upside of future antibody therapeutics. Our partnership agreements include near-term payments for technology access, research and intellectual property rights, and downstream payments in the form of clinical and commercial milestones, and royalties on net sales. We also participate in alternative investment opportunities including equity in our business partner and various rights for deeper involvement in moving molecules forward. Longer-term we are eligible to receive additional payments upon satisfaction of clinical and commercial milestones, which we refer to as milestone payments, as well as royalties on sales of products derived from antibodies that we discover for our partners. Our discovery partnerships generally include royalty payments on net sales in the single digit to low-double digit range.

We generated revenue of $233.2 million and $375.2 million for the years ended December 31, 2020 and 2021, respectively. As of December 31, 2021, we had a total of 36 partners for whom we were conducting antibody discovery activities. For the year ended December 31, 2020, three of our partners accounted for 35%, 25% and 14% of our research fees revenue and eight partners accounted for the remaining 26% of research fees revenue. For the year ended December 31, 2020 we recognized our first clinical milestone payments and royalty revenue streams, totaling $213.3 million, exclusively from our partnership with Lilly. For the year ended December 31, 2021, four of our partners accounted for 29%, 17%, 11% and 10% of our research fees revenue and 12 partners accounted for the remaining 33% of research fees revenue. For the year ended December 31, 2021, we recognized milestone payments of $7.0 million and royalty revenue of $327.3 million exclusively from our partnership with Lilly. Our partnership with Lilly constituted one of the partnerships that generated 10% or more of our consolidated revenues during the one or more periods described above. With respect to the other partners, we do not believe the loss of any one or more of such partners would have a material

adverse effect on us and our subsidiaries taken as a whole. We have also grown the number of programs that we have under contract with our partners, as illustrated by the following charts.

We incurred sales and marketing expenses of $3.8 million and $6.9 million for the years ended December 31, 2020 and 2021, respectively. We are increasing investment into our business development team and into marketing our solutions to new and existing partners.

We focus a substantial portion of our resources on research and development efforts towards deepening our technology and expertise along our technology stack, and we expect to continue to make significant investments in this area for the foreseeable future. We incurred research and development expenses of $29.4 million and $62.1 million for the years ended December 31, 2020 and 2021, respectively. We incurred general and administrative expenses of $11.9 million and $41.8 million for the years ended December 31, 2020 and 2021, respectively. We expect to continue to incur significant expenses, and we expect such expenses to increase substantially in connection with our ongoing activities, including as we:

• market and sell our solutions to existing and new partners;

• acquire businesses or technologies to support the growth of our business;

• attract, hire and retain qualified personnel;

• operate as a public company.

To date, we have financed our operations primarily from revenue from our antibody discovery partnerships in the form of revenue, government funding from grants, external borrowings, and from the issuance and sale of convertible preferred shares and notes, and common shares.

Our net earnings for the year ended December 31, 2020 was $118.9 million and our net earnings for the year ended December 31, 2021 was $153.5 million. As of December 31, 2021, we had accumulated earnings of $267.7 million and we had balance of cash, cash equivalents, and marketable securities totaling $723.0 million.

Recent Developments

In February 2022, we announced that bebtelovimab (LY-CoV1404), the second antibody developed through our collaboration with Lilly, received EUA from the FDA for the treatment of mild-to-moderate COVID-19. Lilly announced in February 2022 that they entered into a purchase agreement with the U.S. government to supply up to 600,000 doses of bebtelovimab no later than March 31, 2022, with an option of 500,000 additional doses no later than July 31, 2022, for at least $720 million.

Key Factors Affecting Our Results of Operations and Future Performance

We believe that our financial performance has been, and in the foreseeable future will continue to be, primarily driven by multiple factors as described below, each of which presents growth opportunities for our business. These factors also pose important challenges that we must successfully address in order to sustain our growth and improve our results of operations. Our ability to successfully address these challenges is subject to various risks and uncertainties, including those described in the section of this prospectus titled “Risk Factors.”

Key Business Metrics

We regularly review the following key business metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions. We believe that the following metrics are important to understand our current business. These metrics may change or may be substituted for additional or different metrics as

our business develops. For example, as our business matures and to the extent programs are discontinued, we anticipate updating these metrics to reflect such changes.

Year Ended December 31, Change

Number of discovery partners 27 36 33 %

Programs in the clinic 1 5 400 %

The table below outlines the details of molecules in the clinic as of December 31, 2021:

Molecule Most advanced stage Partner Therapy areas Program type

NBL-015 IND approved NovaRock Biotherapeutics Inc. Oncology Trianni license

IVX-01 Clinical field study Invetx Animal health Discovery partnership

Number of discovery partners represents the unique number of partners with whom we have executed partnership contracts. We view this metric as an indication of the competitiveness of our technology stack and our current level of market penetration. The metric also relates to our opportunities to secure programs under contract from existing customers through repeat business opportunities.

Programs under contract represent the number of antibody development programs that are under contract for delivery of discovery research activities. A program under contract is counted when a contract is executed with a partner under which we commit to discover antibodies against one selected target. A target is any relevant antigen for which a partner seeks our support in developing binding antibodies. We view this metric as an indication of commercial success and technological competitiveness. It further relates to revenue from technology access fees. The cumulative number of programs under contract with downstream participation is related to our ability to generate future revenue from milestone payments and royalties.

Program starts represent the number of unique programs under contract for which we have commenced the discovery effort. The discovery effort commences on the later of (i) the day on which we receive sufficient reagents to start discovery of antibodies against a target and (ii) the day on which the kick-off meeting for the program is held. We view this metric as an indication of our operational capacity to execute on programs under contract. It is also an indication of the selection and initiation of discovery projects by our partners and the resulting near-term potential to earn research fees. Cumulatively, program starts with downstream participation indicate our total opportunities to earn downstream revenue from milestone fees and royalties in the mid- to long-term.

Molecules in the clinic represent the count of unique molecules for which an Investigational New Drug, or IND, New Animal Drug, or equivalent under other regulatory regimes, application has been approved based on an antibody that was discovered either by us or by a partner using licensed AbCellera technology. Where the date of such application approval is not known to us, the date of the first public announcement of a clinical trial will be used for the purpose of this metric. We view this metric as an indication of our near- and mid-term potential revenue from milestone fees and potential royalty payments in the long term.

Summary partnership agreements with pharmaceutical and biotechnology companies that include downstream participation from 2016 to December 31, 2021:

Moderna Up to 6 targets, multi-year RNA-encoded antibodies September 15, 2021

EQRx Multi-target, multi-year Oncology and immunology (initially) August 4, 2021

Tachyon Single target Oncology August 3, 2021

Undisclosed biotech Up to 4 targets, multi-year Undisclosed June 30, 2021 *

Angios Multi-target, multi-year Ophthalmology May 6, 2021

Undisclosed biotech Multi-target, multi-year Oncology May 6, 2021 *

Empirico Up to 5 targets, multi-year Undisclosed April 14, 2021

Gilead Sciences 8 targets, multi-year Undisclosed April 1, 2021

Abdera Therapeutics 9 targets, multi-year Oncology January 14, 2021

Invetx Multi-target, multi-year Animal Health November 19, 2020

Kodiak Sciences Multi-target, multi-year Ophthalmology October 29, 2020

Undisclosed Single target Bispecific June 3, 2020 *

Invetx Multi-target, multi-year Animal health February 23, 2020

Undisclosed Multi-target, multi-year Cell therapy September 25, 2019 *

Gilead Sciences Single target Infectious disease June 13, 2019

Novartis Up to 10 targets, multi-year Undisclosed February 14, 2019

Autolus Therapeutics Single target Cell therapy (CAR-T) November 29, 2018

Denali Therapeutics Single target Neurological diseases June 12, 2018

Undisclosed mid-cap biopharma Undisclosed Undisclosed January 25, 2018

Teva Pharmaceutical Industries Single target Membrane protein June 13, 2017

Pfizer Multi-target, multi-year Membrane protein January 5, 2017

Undisclosed global biotech Multi-target, multi-year Undisclosed November 4, 2016

Kodiak Sciences Single target Ophthalmology August 24, 2016

Teva Pharmaceutical Industries Undisclosed Undisclosed February 2, 2016

* Effective date of agreement

Components of Results of Operations

Revenue

Our revenue is comprised of partnership research fees, licensing revenue, development milestones, and royalty payments from commercial products. Research fees consist primarily of technology access fees, which are generally generated upon execution of our partnership agreements, and discovery research fees, which are generated through our performance of antibody discovery research for our partners. Licensing revenue is primarily from our licensing of our humanized rodent platform, TrianniTM. Our partnership agreements also entitle us to receive payments upon the satisfaction of clinical, approval, and commercial milestones as well as royalties on our partners’ commercial sales of the molecules that we discover.

We expect that our revenue, particularly revenue arising from royalties of antibodies sold by our partners, will fluctuate from period to period due to variances in demand for such antibodies and the status of regulatory approvals or emergency use authorizations for such antibodies. We expect that our overall revenue will fluctuate from period to period due to the timing of securing additional programs under contract, the inherently uncertain nature of the timing of milestone achievement, our dependence on the program decisions of our partners and uncertainty in sales of our antibodies by our partners that generate royalty revenue.

Operating Expenses

Royalty fees. Royalty fees consist of certain contractual royalty payments to our strategic partners upon receipt of royalty revenue based on our customers third-party net sales. Royalty fees are not included in every program. For royalties received from

Lilly for commercial sales of bamlanivimab, royalty fees were due to collaboration partners in AbCellera’s DARPA P3 (Pandemic Preparedness Program) project focused on rapid pandemic response. Royalty fees are recorded when the third-party sale occurs.

Research and development expenses.Research and development expenses primarily consist of salaries, benefits, incentive compensation, stock-based compensation, laboratory supplies and materials expenses for employees and contractors engaged in research and product development. These expenses are exclusive of depreciation and amortization. Research and development activities consist of discovery research for partners as well as our internal platform development. We derive improvements to our technology stack from both types of activities. We have not historically tracked our research and development expenses on a partner-by-partner basis or on a product candidate-by-product candidate basis.

We expect to continue to incur substantial research and development expenses as we conduct discovery research for our partners. In addition, we plan to continue to invest in research and development to enhance our solutions and offerings to our partners, including hiring additional employees and continuing research and development projects obtained through strategic technology acquisitions. As a result, we expect that our research and development expenses will continue to increase in absolute dollars in future periods and vary from period to period as a percentage of revenue.

Sales and marketing expenses.Our sales and marketing expenses consist primarily of salaries, benefits, incentive compensation and stock-based compensation costs for employees within our commercial sales functions, as well as marketing, travel expenses and information technology costs that are directly associated with sales and marketing efforts, such as client relationship management tools and other information technology data tools to provide insight into market segments and trends. We expect our sales and marketing expenses to increase in absolute dollars as we expand our commercial sales, marketing and business development teams; increase our presence globally; and increase marketing activities to drive awareness and adoption of our platform. While these expenses may vary from period to period as a percentage of revenue, we expect these expenses to increase as a percentage of sales in the short term as we continue to grow our commercial organization to drive anticipated growth in the business.

General and administrative expenses.General and administrative expenses primarily consist of salaries, benefits, incentive compensation and stock-based compensation costs for employees in our executive, accounting and finance, project management, corporate development, office administration, legal and human resources functions as well as professional services fees, such as consulting, audit, tax and legal fees, general corporate costs and allocated overhead expenses. General and administrative expenses also include all rent and facilities expenses for all employees, regardless of department or function. We expect that our general and administrative expenses will continue to increase in absolute dollars in future periods, primarily due to increased headcount to support anticipated growth in the business and due to incremental costs associated with operating as a public company, including costs to comply with the rules and regulations applicable to companies listed on a securities exchange and costs related to compliance and reporting obligations pursuant to the rules and regulations of the SEC and stock exchange listing standards, public relations, insurance and professional services. We expect these expenses to vary from period to period as a percentage of revenue.

Depreciation and amortization. Depreciation expense consists of the depreciation of property and equipment used actively in the business, primarily by research and development activities. Amortization expense includes the amortization of intangible assets over their respective useful lives.

Other (Income) Expense

Interest income.Interest income consists primarily of interest earned on cash, cash equivalent, and marketable securities balances.

Interest and other expense.Interest expense consists primarily of financing fees, fair value adjustments of contingent consideration and investments, and includes interest on borrowings under any credit agreements.

Foreign exchange (gain) loss, net. Foreign exchange (gain) loss, net, consists of income or loss due to fluctuation in exchange rates in the foreign jurisdictions that we operate in. All of our historical revenue has been generated in U.S. dollars.

Grants and incentives. Grants and incentives include cost recovery on activities that qualified for approved projects supported by grant funding or tax credits. Grants primarily include the benefit from programs administered by the Canadian government’s Ministry of Innovation, Science and Economic Development, Strategic Innovation Fund. To the extent that grant funding covers capital expenditures, a deferred credit is recorded on the balance sheet and recognized ratably over the benefit period of the related expenditure for which the grant was intended to compensate.

Tax credits include benefits from the Canadian Scientific Research and Experimental Development, or SR&ED, program, the Australian R&D Tax Incentive program and U.S. federal and state research and experimentation tax credits. Where we qualify for refundable tax credits, these are included in grants and incentives in the year the qualifying expenditure is made. Non-refundable tax

credits are recognized as a reduction to income tax expense in the year they are earned and are included in a note in the financial statements. We expect to continue to benefit from these tax programs in the future.

Results of Operations

The results of operations presented below should be reviewed in conjunction with the consolidated financial statements and notes included elsewhere in this annual report. The following tables set forth our results of operations for the periods presented:

Year Ended December 31,

Revenue:

Licensing revenue - - 20,778

Operating expenses:

Other (income) expense:

Foreign currency translation adjustment - - 280

Net earnings (loss) per share attributable to common shareholders

Weighted-average common shares outstanding

Year Ended December 31,

Comparison of the Years Ended December 31, 2020 and 2021

Revenue

Year Ended December 31, Change

(in thousands, except percentages)

Revenue

Revenue increased by $142.0 million from the year ended December 31, 2020 to the year ended December 31, 2021. In 2021, we received milestone revenue upon the first commercial sale in Europe by Lilly relating to molecule bamlanivimab for treatment of COVID-19 in the amount of $7.0 million and $1.0 million in milestone payments from Trianni licenses. Royalty revenue of $327.3 million for the year ended December 31, 2021 are directly associated with the specified percentage of proceeds that Lilly received from the sales of bamlanivimab. We earned $20.8 million in licensing revenue related to the Trianni humanized rodent platform business. The significant growth we delivered in program starts drove higher research fees in the year on non-COVID-19 discovery programs, offset by fees earned last year against our COVID-19 discovery program leading to a net decrease in research fees of $0.8 million.

Operating Expenses

Royalty fees

Year Ended December 31, Change

(in thousands, except percentages)

Royalty fees increased by $18.4 million from the year ended December 31, 2020 to the year ended December 31, 2021. Royalty fees are directly attributable to the royalty revenues received by the Company from sales of bamlanivimab by Lilly due to AbCellera’s collaborators in pandemic response.

Research and Development, Exclusive of Depreciation and Amortization

Year Ended December 31, Change

(in thousands, except percentages)

Research and development expenses increased by $32.7 million, or 111%, from the year ended December 31, 2020 to the year ended December 31, 2021 reflecting continuing strong investments in the capacity and capabilities of AbCellera’s antibody discovery and development platform. $13.2 million of the increase is due to the increase in compensation expense consistent with increased headcount. $10.2 million of the increase relates to stock-based compensation expense. $13.6 million of the increase is attributed to an increase in facilities, research materials, supplies and services consistent with the overall increase in research and development activities. The overall increase was partly offset by the decrease in IPR&D expense of $4.2 million attributable to the 2020 purchase of the OrthoMab bispecific platform, and licensing fees incurred during the prior period.

Sales and Marketing

Year Ended December 31, Change

(in thousands, except percentages)

Sales and marketing expenses increased by $3.1 million, or 80%, from the year ended December 31, 2020 to the year ended December 31, 2021. The increase was primarily driven by increased headcount in business development and marketing staff which resulted in an increase of $1.5 million in compensation expenses. $0.8 million of the increase is attributable to a donation made to Surrey Hospital to fund a study related to bamlanivimab in Canada. The remaining increase of $0.5 million is attributable to increased recruiting and consulting fees.

General and Administrative

Year Ended December 31, Change

(in thousands, except percentages)

General and administrative expenses increased by $29.9 million, or 251%, from the year ended December 31, 2020 to the year ended December 31, 2021. $11.7 million of the increase in general and administrative expense is related to the increased impact of non-cash stock-based compensation expense. $4.1 million of the increase is related to increased compensation expense, excluding stock-based compensation, which was driven by increased headcount within the general and administrative function. $7.3 million is attributable to legal fees and other corporate matters relating to being a public company and protecting our intellectual property. $6.7 million of the increase in general and administrative expense is due to increased expenditures related to rent and facilities expense, software, insurance premiums, and increased general office and expenses to support the growth of the Company.

Depreciation and Amortization

Year Ended December 31, Change

(in thousands, except percentages)

Depreciation and amortization expense increased by $9.6 million, or 199%, from the year ended December 31, 2020 to the year ended December 31, 2021. Depreciation expense increased by $2.1 million due to the depreciation of equipment and facilities related to capital equipment purchases of $8.4 million in the year. Amortization expense increased by $7.5 million due to the amortization of acquired intangible assets over their respective useful lives.

Other (Income) Expense

Interest Income

Year Ended December 31, Change

(in thousands, except percentages)

Interest income increased by $3.0 million, or 1037%, from the year ended December 31, 2020 to the year ended December 31, 2021. The increase was primarily driven by a larger average cash and cash equivalents balances maintained in the year ended December 31, 2021 compared to the prior period.

Interest and Other Expense

Year Ended December 31, Change

(in thousands, except percentages)

Interest and other expense decreased by $1.3 million, or 20% from the year ended December 31, 2020 to the year ended December 31, 2021. $4.9 million of the decrease relates to combined interest, and cancellation fees and legal fees on early retirement of the OrbiMed credit agreement in July 2020, in addition to interest expense on the credit facility for the period before retirement. This was offset by a $3.4 million increase in fair value adjustments of contingent consideration and investments.

Foreign Exchange (Gain) Loss

Year Ended December 31, Change

(in thousands, except percentages)

Foreign exchange (gain) loss increased by $0.6 million from the year ended December 31, 2020 to the year ended December 31, 2021. Foreign exchange gains and losses are driven primarily by foreign denominated cash balances that we maintain and the relative exchange rates against the U.S. dollar.

Grants and Incentives

Year Ended December 31, Change

(in thousands, except percentages)

Grants and incentives increased by $9.2 million, or 110%, from the year ended December 31, 2020 to the year ended December 31, 2021. The increase was primarily driven by an increase in activity relating to research and development expenditures that are eligible for the SIF project.

Income Tax Expense

Year Ended December 31, Change

(in thousands, except percentages)

Income taxes increased by $26.8 million, or 69%, from the year ended December 31, 2020 to the year ended December 31, 2021. For the year ended December 31, 2021, our provision for income taxes is $65.7 million primarily relating to current net earnings and partly offset by deferred income taxes due to timing of differences between accounting net income and taxable income.

Comparison of the Years Ended December 31, 2019 and 2020

Revenue

Year Ended December 31, Change

(in thousands, except percentages)

Revenue

Licensing revenue - -

Revenue increased by $221.5 million from the year ended December 31, 2019 to the year ended December 31, 2020. We received milestone payments upon achieving Phase 1, Phase 2, and Phase 3 clinical milestones and for the first commercial sale in the United States by Lilly relating to molecule bamlanivimab for treatment of COVID-19 in the amount of $15.0 million. Royalty payments of $198.3 million are directly associated with the specified percentage of proceeds that Lilly received from the sales of bamlanivimab. Research fees recognized increased by $8.2 million, or 71%. $5.3 million of the increase is associated with research fees from new partnerships agreements entered into in 2020. The remaining increase is attributable to additional targets and project activities from ongoing projects or new projects with existing partners.

Operating Expenses

Royalty fees

Year Ended December 31, Change

(in thousands, except percentages)

Royalty fees for the year ended December 31, 2020 were $27.1 million. These were directly attributable to the royalty revenues received by the Company from sales of bamlanivimab by Lilly due to AbCellera’s collaborators in pandemic response.

Research and Development, Exclusive of Depreciation and Amortization

Year Ended December 31, Change

(in thousands, except percentages)

Research and development expenses increased by $19.3 million, or 191%, from the year ended December 31, 2019 to the year ended December 31, 2020. $5.1 million of the increase relates to licensing fees due in relation to research activity. $5.1 million of the increase is due to the increase in compensation expense consistent with increased headcount. $4.3 million of the increase relates to stock-based compensation expense related to Liability Classified Options (LCOs). This $4.3 million in LCOs will be settled with equity when the employees exercise the associated options. In June 2020, the Company acquired the OrthoMab bispecific platform from Dualogics in the amount of $4.0 million. This transaction is accounted for as an acquisition of an asset and was expensed upon completion of the transaction, as the platform acquired is intended to be further utilized and expanded in our research and development efforts. The remaining increase is attributed to research materials and supplies consistent with increased research and development activities.

Sales and Marketing

Year Ended December 31, Change

(in thousands, except percentages)

Sales and marketing expenses increased by $2.6 million, or 204%, from the year ended December 31, 2019 to the year ended December 31, 2020. The increase was primarily driven by increased headcount in business development and marketing staff which resulted in an increase of $2.4 million in compensation expenses, including increased expenditures on new hires, external consultants for public relations and graphic design activities. Sales and marketing expenses related to travel were significantly lower for the year ended December 31, 2020 due to COVID-19 related travel restrictions.

General and Administrative

Year Ended December 31, Change

(in thousands, except percentages)

General and administrative expenses increased by $9.2 million, or 333%, from the year ended December 31, 2019 to the year ended December 31, 2020. $1.9 million of the increase is related to the closing of our 2020 preferred share financing and IPO including legal, accounting and other professional services which are not expected to recur in future periods. $2.9 million of the increase was driven by increased headcount within the general and administrative function and the associated compensation expenses. This investment in the general and administrative function was necessary to support both the overall growth of the Company as well as to prepare for being a listed company. $2.1 million is attributable to legal fees incurred with respect to Berkeley litigation and legal IP matters.

Depreciation and Amortization

Year Ended December 31, Change

(in thousands, except percentages)

Depreciation and amortization expense increased by $3.2 million, or 201%, from the year ended December 31, 2019 to the year ended December 31, 2020. Depreciation expense increased by $0.7 million due to the depreciation of equipment and facilities related to capital equipment purchases of $9.7 million in the year. Amortization expense increased by $2.5 million due to the amortization of acquired intangible assets over their respective useful lives.

Other (Income) Expense

Interest Income

Year Ended December 31, Change

(in thousands, except percentages)

Interest income increased by $0.1 million, or 89%, from the year ended December 31, 2019 to the year ended December 31, 2020. The increase was primarily driven by a larger average cash balance maintained in the year ended December 31, 2020 compared to the prior period.

Interest and Other Expense

Year Ended December 31, Change

(in thousands, except percentages)

Interest and other expense increased by $6.3 million, or 3015% from the year ended December 31, 2019 to the year ended December 31, 2020. $4.2 million of the increase relates to combined interest, and cancellation fees and legal fees on early retirement of the OrbiMed credit agreement in July 2020, in addition to interest expense on the credit facility for the period before retirement. Given the nature of these cancellation costs and the Company not having any material debt due to its strong liquidity position at the end of 2020, these expenses are not expected to recur in future periods.

Foreign Exchange (Gain) Loss

Year Ended December 31, Change

(in thousands, except percentages)

Foreign exchange (gain) loss increased by $0.5 million from the year ended December 31, 2019 to the year ended December 31, 2020. Foreign exchange gains and losses are driven primarily by the Canadian dollar cash balances that we maintain and the relative exchange rates between Canadian dollars and U.S. dollars.

Grants and Incentives

Year Ended December 31, Change

(in thousands, except percentages)

Grants and incentives increased by $6.5 million, or 369%, from the year ended December 31, 2019 to the year ended December 31, 2020. The increase was primarily driven by expenses for which there was cost recovery related to the SIF project

entered into between us and the Government of Canada in April 2020, in the amount of $6.8 million. Any additional cash from the SIF project that we receive for eligible capital expenditure activities will result in recognition of a deferred credit on the balance sheet. Subsequent to the third quarter, a number of expenditures incurred were identified as not being eligible under the SIF project which directly impacted the grant and incentives recovery amounts recognized in the year. These expenditures did not impact the commitment under the SIF project for $125.6 million of funding from the Government of Canada to AbCellera.Future eligible expenditures for the project and associated reimbursement will be recognized in a subsequent reporting period.

Liquidity and Capital Resources

As of December 31, 2021, we had $723.0 million of cash, cash equivalents, and marketable securities, comprising $476.1 million in cash and cash equivalents and $246.8 million in marketable securities. The increase of $128.9 million since December 30, 2020 was primarily from cash flow from operations and driven by the receipt of accounts receivable relating to royalties from bamlanivimab in the year ended December 31, 2021.

We have generated positive operating cash flow cumulatively since our inception in 2012 and in every year since 2018. We intend to significantly invest in our business, and as a result may incur operating losses in future periods. We will continue to invest in research and development efforts towards expanding our capabilities and expertise along our technology stack, the building of our business development team and marketing our solutions to new and existing partners, and the expansion of our future office headquarters, and related infrastructure, including execution of long-term office-lease arrangements. Based on our current business plan, we believe that our existing cash and cash equivalents and anticipated cash flows from operations, will be sufficient to meet our working capital and capital expenditure needs over at least the next 24 months following the date of this report.

Sources of Liquidity

Since our inception, we have financed our operations primarily from revenue in the form of research fees, milestone payments, and royalty payments from partners, government grants, and debt and equity financings.

Financings and Option Exercises

As of December 31, 2020, we raised a total of $688.4 million from the issuance of common shares in our IPO, the issuance and sale of convertible preferred shares and notes, common shares, net of costs associated with such financings, and exercises of employee share options. As of December 31, 2021, we raised proceeds of $4.0 million from the exercise of employee share options.

Government of Canada’s Strategic Innovation Fund

In April 2020, we entered into a multi-year agreement with the Canadian government’s Strategic Innovation Fund, or SIF. Under this agreement, up to CAD $175.6 million ($125.6 million) was committed by the Government of Canada to be directed towards two key stages of a project.

The first stage will provide financial support to our operations during the work that we perform for the discovery of antibodies against COVID-19. The funding supports investment into equipment, teams and physical space to advance our platform for future pandemic preparedness. The Canadian government has committed up to CAD $63.9 million ($45.7 million) towards this stage of the project, based on costs incurred and paid and such funding is non-repayable. As of December 31, 2021, we have claimed a total of $37.9 million under this first stage of the project.

The second stage of the project is intended to fund the expansion of research and development; building out process development and chemistry, manufacturing and control, or CMC, capabilities; constructing a facility for GMP manufacturing; and all related supporting laboratory and office requirements. The project related budget includes project costs for the land and building, the fit out for offices, labs, GMP cleanrooms as well as the equipment required to develop fully functional CMC and GMP capabilities as required to support clinical trials. The Canadian government has committed up to CAD $111.7 million ($79.9 million) for this project, contingent upon costs incurred and paid, with the rest to be co-funded by us through partnering with a developer and taking a co-ownership position in the resulting facilities. SIF funding for this project is expected to occur between 2021 and 2025. Repayment of SIF assistance received for this stage of the project will be calculated as a percentage rate of AbCellera’s revenue, with payment made to the Government of Canada on an annual basis during the repayment period of fifteen years starting in 2027. Repayment on this stage of the project is conditional on revenue thresholds being achieved in seven years, a year following the completion of the project and over the subsequent ten-year period. If the revenue threshold is not met, the SIF funding contribution will be non-repayable. This funding and its associated conditional repayment is not secured by any of our assets or that of the project, and includes certain non-financial covenants and restrictive covenants on dividend payments or other shareholder distributions that would prevent the Company in satisfying its obligations under the arrangement. As of December 31, 2021, we have claimed a total of $21.6 million under this

second stage of the project.No amounts have been accrued related to the repayment terms as the conditions are estimated to be non-probable at December 31, 2021.

We conduct work, incur expenses and fund all costs from our own cash resources. On a quarterly basis, we submit claims to the SIF for eligible reimbursable expenses. For the year ended December 31, 2021, we claimed a total of $47.1 million under SIF.

Cash Flows

The following table summarizes our cash flows for the periods presented:

Year Ended December 31,

Net cash provided by (used in):

Effect of exchange rate changes on cash and cash equivalents - - (1,425 )

Operating Activities

Net cash provided by operating activities increased from $22.7 million in the year ended December 31, 2020 to $244.6 million in the year ended December 31, 2021. The increase resulted primarily from increased revenue from royalty and licensing streams, satisfaction of clinical milestones under our partnership with Eli Lilly, and continued discovery research activities, as well as upfront payments from securing new multi-year, multi-target contracts with partners.

Net cash provided by operating activities increased by $20.0 million from $2.7 million in the year ended December 31, 2019 to $22.7 million in the year ended December 31, 2020. The increase resulted primarily from increased revenue from discovery research activities, securing new multi-year, multi-target contracts with partners that involved up front technology access fees upon execution of the contract, and payments resulting from the satisfaction of clinical milestones under our partnership with Lilly.

Investing Activities

Net cash used in investing activities increased from $119.8 million in the year ended December 31, 2020 to $332.2 million in the year ended December 31, 2021. The increase in investing activities during 2021 were directly attributed to our investment in marketable securities in addition to real estate, particularly our land purchase related to our future GMP facility. Additional investing activities during the period were related to facilities and equipment expenditures in our Vancouver offices, the acquisition of TetraGenetics, and investment in equity accounted investees, offset by grant funding received in the period.

Net cash used in investing activities was $5.8 million in the year ended December 31, 2019 compared to $119.8 million in the year ended December 31, 2020. The increase in cash used was primarily driven by the acquisition of Trianni, an investment in equity investees related to future facility expansion and investment in a fully paid up license for access to a humanized rodent platform for discovery projects with Alloy Therapeutics. By contrast, in the year ended December 31, 2019, investments were limited to equipment used primarily in our research and development activities.

Financing Activities

Net cash provided by financing activities decreased from $683.7 million for the year ended December 31, 2020 to net cash used by financing activities of $3.9 million for the year ended December 31, 2021. This was primarily due to proceeds from Series A2 financing, convertible debentures, and common stock from the IPO in 2020.

Net cash provided by financing activities was $0.2 million for the year ended December 31, 2019 compared to net cash provided by financing activities of $683.7 million for the year ended December 31, 2020. Net cash provided by financing activities for the year ended December 31, 2020 related primarily to the IPO, SIF funding, convertible note, and the Series A2 financing round closed in March 2020. By contrast, no major equity financing was completed in 2019.

Contractual Obligations and Commitments

The following table summarizes our commitments to settle contractual obligations at December 31, 2021, other than leases which are recognized as operating lease liabilities in our consolidated balance sheet:

Payments Due by Period

Total Less than 1 year 1 to 3 Years 3 to 5 Years More than 5 years

The commitment amounts in the table above are associated with contracts that are enforceable and legally binding and that specify all significant terms, including fixed or minimum services to be used, fixed, minimum or variable price provisions, and the approximate timing of the actions under the contracts.

Purchase and Other Obligations

In the normal course of business, we enter into contracts with third parties for research and development supplies and other services. These contracts generally do not contain minimum purchase commitments and are cancellable contracts. These payments are not included in the table above as the amount and timing of such payments are not known as of December 31, 2021.

The Company may enter into certain agreements with strategic partners in the ordinary course of operations that may include contractual milestone payments related to the achievement of pre-specified research, development, regulatory and commercialization events and indemnification provisions, which are common in such agreements. Pursuant to the agreements, the Company may be obligated to make research and development and regulatory milestone payments upon the occurrence of certain events and upon receipt of royalty payments in the low single-digits to mid-twenties based on certain net sales targets. Other than the amounts included in the above table, these contingent future payments are not included in the table above as they entail uncertainties in relation to the amount and timing of such payments as they are contingent upon future events, such as achieving certain commercial milestones or generating future product sales.

Berkeley Lights Litigation

See Item 3 “Legal Proceedings” for detailed information. The timing of the incurrence of legal expenses relating to pending litigation is difficult to predict and the outcome of litigation is inherently uncertain. Related costs and outcomes could materially affect our financial condition and operating results in future periods.

Critical Accounting Policies and Estimates

We have prepared our consolidated financial statements in accordance with U.S. GAAP. Our preparation of these consolidated financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on 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 could therefore differ materially from these estimates under different assumptions or conditions.

While our significant accounting policies are described in more detail in Note 3 to our audited consolidated financial statements, we believe the following accounting policies to be critical to the judgments and estimates used in the preparation of our consolidated financial statements.

Revenue Recognition

Our revenue primarily consists of research fees, milestone payments and royalty revenue, which are generated through our performance of antibody discovery research for our partners, and licensing revenue, which we generated from our Trianni humanized

rodent platform. Promised deliverables to our global partners include research and development and licenses. The Company applied ASC 606 to all arrangements to date.

We recognize revenue when we satisfy the performance obligations under the terms of a contract and control of our services is transferred to our customers in an amount that reflects the consideration we expect to receive from our customers in exchange for those services.

When applying the revenue recognition criteria of ASC 606 to research fees and milestone payments, management applies significant judgment when evaluating whether contractual obligations represent distinct performance obligations, including whether options for additional goods or services represent a material right; allocating the transaction price to performance obligations within a contract; and assessing the recognition and possible future reversal of variable consideration.

Research Fees. The transaction price generally includes fixed fees due at contract inception as well as fixed fees payable at the beginning and end of different phases of the discovery research services performed. Revenue is recognized based on the amount of the transaction price that is allocated to each respective performance obligation when or as the performance obligation is satisfied by transferring a promised good and/or service to the customer. We allocate the transaction price to each distinct performance obligation identified in the contract based on relative observable standalone selling prices.

Milestone Payments. At the inception of the arrangement and at each reporting date thereafter, we evaluate whether the associated event is considered probable of achievement and estimate the amount to be included in the transaction price using the most likely amount method. Whether the criteria for achieving the milestone payments will be met in the future is highly uncertain. Consequently, there is a significant risk that we may not earn all of the milestone payments from each of our arrangements. This uncertainty is considered resolved when the associated event giving rise to the milestone payment occurs.

Royalty Revenue. Royalty revenue is recognized in the period in which the obligation is satisfied and the corresponding sales by our corporate partners occur. The sales are based on sales data reported by our partners. Differences between actual and estimated royalty revenue will be adjusted for in the period in which they become known, which is generally expected to be the following quarter.

Business Combination, Goodwill and Intangible Assets

Acquisitions of businesses are accounted for using the acquisition method. The consideration of a business combination is measured, at the date of the exchange, as the aggregate of the fair value of assets given, liabilities incurred or assumed and equity instruments issued by us to the former owners of the acquiree in exchange for control of the acquiree. Acquisition related costs incurred for the business combination are expensed. The acquiree’s identifiable assets, liabilities and contingent liabilities are recognized at their fair value at the acquisition date.

Goodwill arising on acquisition is recognized as an asset and initially measured at cost, being the excess of the consideration of the acquisition over our interest in the fair value of the net identifiable assets, liabilities and contingent liabilities recognized. If our interest in the fair value of the acquiree’s net identifiable assets, liabilities and contingent liabilities exceeds the cost of the acquisition, the excess is recognized in earnings or loss immediately. Goodwill, which is not amortized, will be evaluated for impairment on an annual basis on October 1 or more frequently if an indicator of impairment is present.

As part of our acquisitions of Trianni in 2020, and TetraGenetics in 2021, Goodwill, License, Technology and In-Process Research and Development Intangible (“IPR&D”) intangible assets were recognized. The fair value of the aggregate intangible assets was determined to be $103.6 million and $43.3 million and goodwill was $30.9 million and $16.9 million at the acquisition dates related to Trianni and TetraGenetics, respectively.

IPR&D is classified as indefinite-lived, is not amortized, and is evaluated for impairment on an annual basis on October 1 or more frequently if an indicator of impairment is present. IPR&D becomes definite-lived upon the completion or abandonment of the associated research and development efforts. At December 31, 2021, our IPR&D was $72.4 million. To test our IPR&D for impairment we first perform a qualitative assessment to determine if it is more likely than not that the carrying amount of our indefinite-lived intangible assets exceeds its fair value. If it is, a quantitative assessment is required. Based on our qualitative assessment, we determined there were no potential indicators of impairment of our indefinite-lived intangible assets at October 1, 2021 and during the remainder of 2021.

For our annual goodwill impairment test, we begin with a qualitative assessment to determine whether a quantitative impairment test is necessary. If we determine, after performing an assessment based on the qualitative factors, that the fair value of the reporting unit is more likely than not less than the carrying amount, or that a fair value of the reporting unit substantially in excess of the carrying amount cannot be assured, then a quantitative impairment test would be performed. The quantitative test for impairment

requires us to make judgments relating to future cash flows, growth rates and economic and market conditions. These evaluations are based on determining the fair value of the reporting unit using a valuation method such as discounted cash flow or a relative, market-based approach. At October 1, 2021, we performed a qualitative assessment for our annual impairment test of goodwill after concluding that it was not more likely than not that the fair value of the reporting unit was less than its carrying value. Consequently, the quantitative impairment test was not required. The Company concluded that there were no impairment indicators related to goodwill during the remainder of 2021.

As part of our ongoing planned research and development and execution of our programs under contract, changes to our plans due to internal and external factors out of our control could impact the amount and timing of projected future cash flows. As a result, these unplanned changes could result in us performing a quantitative impairment test in the future, which could result in a potential non-cash impairment charge associated with our goodwill or intangible assets, which would reduce our future earnings.

In connection with our acquisition of Trianni, we may be required to make future payments to former shareholders of Trianni upon the achievement of certain earn-out provisions related to a specific customer license ending on April 9, 2024. As of December 31, 2021, the contingent consideration payable had an estimated fair value of approximately $22.9 million, which has been included as a current liability on our consolidated balance sheet. In connection with our acquisition of TetraGenetics, contingent consideration payable at December 31, 2021 is 35.9 million, all of which is a long-term liability. Contingent consideration payable is a financial liability and measured at its fair value at each reporting period, with any changes in fair value from the previous reporting period recorded in the statement of income (loss) and comprehensive income (loss).

In estimating the fair value of the intangible assets and contingent consideration, we applied an income approach based on the present value of the relevant future estimated after-tax cash flows. The key assumptions include the amount and timing of revenues, success probability, and discount rates. A 10% change in these key assumptions associated with the recognition of intangible assets and contingent consideration would not have a material impact on the amounts recognized.

See Note 21 to our consolidated financial statements for further information related to the accounting for the above acquisitions.

Stock-Based Compensation

We measure stock-based compensation based on the grant date fair value of the stock-based awards and recognize stock-based compensation expense on a straight-line basis over the requisite service period of the awards, which is generally the vesting period of the respective award. For non-employee awards, compensation expense is recognized as the services are provided, which is generally ratably over the vesting period. Awards with an exercise price which is not denominated in: (a) the currency of a market in which a substantial portion of our equity securities are traded, (b) the currency in which the individual’s pay is denominated, or (c) our functional currency, are classified as liabilities, and are subsequently re-measured to fair value at each balance sheet date until exercised or cancelled, with changes in fair value recognized as compensation cost for the period.

Stock-based compensation expense is classified in our consolidated statements of income (loss) and comprehensive income (loss) based on the function to which the related services are provided. We recognize stock-based compensation expense for the portion of awards that have vested. Forfeitures are accounted for as they occur.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model, which requires inputs based on certain subjective assumptions, including the expected share price volatility, the expected term of the option, the risk-free interest rate for a period that approximates the expected term of the option, and our expected dividend yield.

Prior to our IPO, as there was no public market for our common shares, we determined the volatility for awards granted with reference to an analysis of reported data for a group of guideline companies that issued options with substantially similar terms. We expect to continue to do so until we have adequate historical data regarding the volatility of the trading price of our common shares on the Nasdaq Stock Market. The risk-free interest rate is determined by reference to government treasury yield curves in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. The expected term represents the period that the stock-based awards are expected to be outstanding. We use the simplified method to determine the expected term, which is based on the average of the time-to-vesting and the contractual life of the options. We have not paid, and do not anticipate paying, dividends on our common shares; therefore, the expected dividend yield is assumed to be zero.

As there has been no public market for our common shares prior to our IPO, the historical estimated fair value of our common shares has been approved by our board of directors. Our board of directors determined the per-share fair value of our common shares in connection with option grants as equal to the per-share issuance price of our common shares in the then-most recent arms’ length financing transaction, and when appropriate, considered our most recently available independent third-party valuations of common shares and our operating results and financial performance.

In accordance with the guidance outlined in the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation, third-party valuation firms prepared valuations of our common shares. From November 2019 until March 2020, such valuations used a discounted cash flow, or DCF, analysis, which is based on management’s projection of future revenues and costs. The future cash flows are adjusted to arrive at a risk-adjusted present-day value of the future cash flows and fair value of equity. From March 2020 to July 2020, such valuations used a methodology that calculated the implied total value of an enterprise by accounting for all share class rights and preferences, as of the date of the latest financing. The total equity value implied by this transaction was then applied in the context of an option pricing model to determine the value of each class of our shares. The analysis used an option pricing method, or OPM, which treats common shares and preferred shares as call options on the total equity value of a company, with exercise prices based on the value thresholds at which the allocation among the various holders of a company’s securities changes. The OPM takes into account the preferred shareholders’ liquidation preferences, participation rights, dividend policy and conversion rights to determine how proceeds from a liquidity event will be distributed among various ownership classes at a future date. A discount for lack of marketability of the common shares is then applied to arrive at an indication of value for the common shares. After July 2020, in contemplation of this offering, such valuations estimated the enterprise value of our business using a hybrid approach in determining the fair value of our common shares that includes a probability-weighted expected return method, or PWERM and the OPM. Under a PWERM, the fair market value of our common shares is estimated based upon an analysis of future values for the enterprise assuming various future outcomes. Based on the timing and nature of an assumed liquidity event in each scenario, a discount for lack of marketability would be applied to each scenario, as appropriate. The probability-weighted the value of each expected outcome would then be used to arrive at an estimate of fair value per common share.

Our third-party valuation reports estimated a valuation of our common shares of $1.24 per share as of June 30, 2020, $2.37 per share as of September 30, 2020 and $2.71 per share as of October 31, 2020. No third-party valuation report was prepared for any period after October 31, 2020.

In addition to considering the results of the third-party valuations, our board of directors considered various objective and subjective factors to determine the fair value of our common shares as of each grant date, which may be a date other than the most recent third-party valuation date, including:

• the lack of liquidity of our equity as a private company;

For purposes of determining the fair value of our common shares for the awards granted in October, 2020, we also considered the applicability of the following factors and determined not to assign probability weightings to the potential occurrence of such events for the reasons discussed below:

The assumptions underlying these valuations represented management’s best estimates, which involved inherent uncertainties and the application of management’s judgment. As a result, if factors or expected outcomes change and we use significantly different assumptions or estimates, the fair value of our common shares and our stock-based compensation expense could be materially different.

Following the completion of our IPO, the fair value of our common shares are determined based on the quoted market price of our common shares.

See Note 12 to our consolidated financial statements concerning additional stock-based compensation expense and certain specific assumptions we used in applying the Black-Scholes option pricing model to determine the estimated fair value of our stock options granted in the years ended December 31, 2019, 2020 and 2021.

Recent Accounting Pronouncements

See Note 4 to our annual consolidated financial statements appearing elsewhere in this Annual Report for a description of recent accounting pronouncements applicable to our consolidated financial statements.

Impact of the COVID-19 Pandemic

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus, or COVID-19, as a pandemic, which continues to spread throughout the world. As with many companies around the world, our day to day operations evolved to include work from home policies and requirements for physical distancing for any personnel present in our offices and laboratories. The pandemic impacted our business development activities as shelter-in-place orders, quarantines, travel restrictions and other public health safety measures limited our ability to interact with our existing and potential partners. The impact of the pandemic continues to raise uncertainties which may impact our business going forward. We could be materially and adversely affected by the risks, or the public perception of the risks, related to the COVID-19 pandemic or similar public health crises. Such crises could adversely impact our ability to conduct on-site laboratory activities, expand our laboratory facilities, secure critical supplies such as reagents, laboratory tools or immunized animals required for discovery research activities, and hire and retain key personnel. In addition, the sustainability of an economic recovery remains unclear as inflationary pressures have increased in Canada, U.S. and globally and efforts to combat the virus have been complicated by new variants. The ultimate extent of the impact of any epidemic, pandemic, outbreak, or other public health crisis on our business, financial condition and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of such epidemic, pandemic, outbreak, or other public health crisis and actions taken to contain or prevent the further spread, among others. Accordingly, we cannot predict the extent to which our business, financial condition and results of operations will be affected. We remain focused on maintaining our operations, liquidity and financial flexibility and continue to monitor developments as we deal with the disruptions and uncertainties from the COVID-19 pandemic.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Interest Rate Risk

As of December 31, 2021, we had cash and cash equivalents of $476.1 million, restricted cash of $25.0 million, and marketable securities of $246.8 million, a majority of which was maintained in high credit quality and liquid held for trading marketable securities, bank accounts and term deposits. Our interest rate risk is affected by changes in the general level of interest rates, particularly because the majority our investments are short-term in nature. Due to record low interest rates and the short-term duration of our cash and cash equivalent holdings and marketable securities and the low risk profile of the marketable securities, a 10% change in interest rates would not have a material effect on the fair market value of cash, cash equivalents, restricted cash, and marketable securities. We also have the ability to hold the marketable securities until maturity, and therefore, the Company would not expect the Company’s operating results or cash flows to be affected to any significant degree by the effect of a sudden change in market interest rates.

We are further exposed to the risk that the fair value of the contingent consideration payable, and operating lease liability will vary as a result of changes in market interest rates. In order to manage funding needs or capital structure goals, the Company may enter into arrangements that are subject to either fixed market interest rates set at the time of issue or floating rates determined by ongoing market conditions. Debt subject to variable interest rates exposes the Company to variability in interest expense, while debt subject to fixed interest rates exposes the Company to variability in the fair value of debt. To manage interest rate exposure, the Company accesses various sources of financing and manages borrowings in line with debt ratings, liquidity needs, maturity schedule, and currency and interest rate profiles.

Foreign Currency Risk

We are exposed to financial risks as a result of exchange rate fluctuations between the U.S. dollar and the Canadian dollar and the volatility of these rates. In the normal course of business, we earn revenue denominated in U.S. dollars and we incur expenses primarily in Canadian denominated, U.S. denominated and Australian denominated dollars. Our reporting currency is the U.S. dollar. We hold a majority of our cash in U.S. dollars. To date, we have not entered into any hedging arrangements with respect to foreign currency risk. As our international operations grow, we will continue to reassess our approach to manage our risk relating to fluctuations in currency exchange rates.

Item 8. Financial Statements and Supplementary Data.

The financial statements required to be filed pursuant to this Item 8 are appended to this report. An index of those financial statements is found in Item 15.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Disclosure Controls and Procedures

Our “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, are designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures are designed to ensure that information required to be disclosed is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, to allow timely decisions regarding required disclosure. The Chief Executive Officer (CEO) and the Chief Financial Officer (CFO), with assistance from other members of management, have reviewed the effectiveness of our disclosure controls and procedures as of December 31, 2021 and, based on their evaluation, have concluded that the disclosure controls and procedures were effective as of such date.

Management’s Annual Report on Internal Control Over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal controls over financial reporting for the Company as defined in Rule 13a-15(f) under the Exchange Act. The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s CEO and CFO, overseen by the Company’s Board of Directors and implemented by the Company’s management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with U.S. generally accepted accounting principles, and the requirements of the SEC.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with policies and procedures may deteriorate.

Under the supervision of and with the participation of our management, we assessed the effectiveness of our internal control over financial reporting as of December 31, 2021, using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework (2013).

As disclosed in Part II Item 9A Controls and Procedures in our Annual Report on Form 10-K for the year ended December, 31, 2020, a material weakness in internal control over financial reporting was identified in prior periods which was the result of a material adjustment in our financial statements, due to an overstatement of lease liability upon adoption of ASU 2016-02, as well as certain other adjustments as of and for the years ended December 31, 2018 and 2019.

During 2021, to remediate the previously reported material weakness in internal controls over financial reporting, we designed and implemented new controls, enhanced existing controls, hired additional accounting and finance resources with public company and US GAAP experience, improved reporting processes, and enhanced related supporting technology. During the fourth quarter of 2021, we completed our testing of the operating effectiveness of the implemented controls and found them to be effective. As a result, the CEO and CFO have concluded that the material weakness has been remediated as of December 31, 2021.

Attestation Report of Independent Registered Public Accounting Firm

The effectiveness of our internal control over financial reporting as of December 31, 2021 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report included elsewhere in this Annual Report on Form 10-K.

Changes in Internal Control over Financial Reporting

Except for changes in connection with the implementation of our remediation efforts, described above, there have been no other changes to internal control over financial reporting, that occurred during the fourth quarter of 2021 that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Item 9B. Other Information.

None.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Not applicable.

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The information required by this item will be included in our definitive proxy statement with respect to our 2021 Annual Meeting of Shareholders to be filed with the SEC, and is incorporated herein by reference.

Item 11. Executive Compensation.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Item 14. Principal Accounting Fees and Services.

Our independent public accounting firm is KPMG LLP, Vancouver, BC, Canada, PCAOB Auditor ID 85.

PART IV

Item 15. Exhibits, Financial Statement Schedules.

(a) The following documents are filed as part of this Annual Report on Form 10-K:

Item 16. Form 10-K Summary

None.

Exhibit Index.

Exhibit No. Description

23.1* Consent of KPMG LLP, Independent Registered Public Accounting Firm

101.SCH* Inline XBRL Taxonomy Extension Schema Document

101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document

104 Cover Page Interactive Data File (embedded within the Inline XBRL document)

* Filed herewith

100

101

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized.

ABCELLERA BIOLOGICS INC.

Date: February 25, 2022 By: /s/ Carl L. G. Hansen

Carl L.G. Hansen, Ph.D.

Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.

Name Title Date

Carl L. G. Hansen, Ph.D.

Andrew Booth

/s/ Véronique Lecault Director February 25, 2022

Véronique Lecault, Ph.D.

/s/ Andrew Lo Director February 25, 2022

Andrew Lo, Ph.D.

/s/ Michael Hayden Director February 25, 2022

Michael Hayden, Ph.D.

/s/ John S. Montalbano Director February 25, 2022

John S. Montalbano

/s/ Peter Thiel Director February 25, 2022

Peter Thiel

102

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm F-2

Consolidated Balance Sheets as of December 31, 2020 and 2021 F-5

Notes to Consolidated Financial Statements F-9

F-1

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

AbCellera Biologics Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of AbCellera Biologics Inc. and subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of income (loss) and comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 25, 2022 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Initial measurement of the fair value of contingent consideration and acquired intangible assets related to a business combination

As discussed in Note 21 to the consolidated financial statements, the purchase consideration associated with the business combination with TetraGenetics, Inc. (TetraGenetics) included potential milestone payments based on the achievement of specified technical milestones and additional development and commercial milestone payments related to successfully developed therapeutics (contingent consideration). The aggregate fair value of the purchase consideration is allocated across the estimated net tangible assets acquired, intangible assets with the residual amount allocated to goodwill. The Company estimated the fair value of the contingent consideration to be $35,100 thousand, and estimated the fair value of the intangible assets, which includes technology and in process research and development intangibles, to be $43,300 thousand (acquired intangible assets).

We identified the assessment of the initial measurement of the fair value of contingent consideration and the acquired intangible assets in the TetraGenetics business combination as a critical audit matter. Evaluating the key assumptions, including certain non-observable inputs, such as the probabilities of successful achievement of technical, development, and commercial milestones, forecasted revenues and discount rates involved a high degree of auditor judgment. Changes in these key

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assumptions could have a significant impact on the measurement of the contingent consideration and of the acquired intangible assets recognized on acquisition.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s process for determining the fair value of the contingent consideration and of the acquired intangible assets. These included an internal control related to the development of the key assumptions. We evaluated the probabilities of successful achievement of technical, development, and commercial milestones assumptions used in the Company’s model by comparing them to relevant and reliable publicly available third-party data and studies. We evaluated the Company’s forecasted revenues by comparing them to relevant and reliable third-party industry data. We performed sensitivity analyses and assessed the impact of possible changes to the key assumptions on the fair value of the contingent consideration and the acquired intangible assets. We involved valuation professionals with specialized skills and knowledge, who assisted in evaluating the Company’s discount rates by comparing them against discount rate ranges that were independently developed using publicly available market data for comparable entities.

/s/ KPMG LLP

Chartered Professional Accountants

We have served as the Company’s auditor since 2017.

Vancouver, Canada

February 25, 2022

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Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

AbCellera Biologics Inc.:

Opinion on Internal Control Over Financial Reporting

We have audited AbCellera Biologics Inc.’s and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of income (loss) and comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes (collectively, the consolidated financial statements), and our report dated February 25, 2022 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ KPMG LLP

Chartered Professional Accountants

Vancouver, Canada

February 25, 2022

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AbCellera Biologics Inc.

Consolidated Balance Sheets

(Expressed in thousands of U.S. dollars except share data)

Assets

Current assets:

Marketable securities - 246,835

Total cash, cash equivalents, and marketable securities 594,116 722,977

Long-term assets:

Investments in and loans to equity accounted investees 19,247 50,313

Liabilities and shareholders' equity

Current liabilities:

Accounts payable and other liabilities $ 20,195 $ 32,017

Current portion of contingent consideration payable 13,411 22,934

Long-term liabilities:

Commitments and contingencies

Shareholders' equity:

Accumulated other comprehensive income - 280

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

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AbCellera Biologics Inc.

Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)

(Expressed in thousands of U.S. dollars except share and per share data)

Year Ended December 31,

Revenue:

Licensing revenue - - 20,778

Operating expenses:

Other (income) expense

Foreign currency translation adjustment - - 280

Net earnings (loss) per share attributable to common shareholders

Weighted-average common shares outstanding

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

1Exclusive of depreciation and amortization

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AbCellera Biologics Inc.

Consolidated Statements of Stockholders’ Equity

(Expressed in thousands U.S. dollars except share data)

Shares Amount Shares Amount Shares Amount Capital (Deficit) Income Equity

Shares issued under stock option plan - - - - 740,000 48 (23 ) - - 25

Issuance costs - (11 ) - - - - - - - (11 )

Stock-based compensation expense - - - - - - 840 - - 840

Net loss - - - - - - - (2,211 ) - (2,211 )

Stock-based compensation expense - - - - - - 4,127 - - 4,127

Stock-based compensation expense - - - - - - 29,240 - - 29,240

Reclassification of liability classified options - - - - - - 5,675 - - 5,675

Foreign currency translation adjustment - - - - - - - - 280 280

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

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AbCellera Biologics Inc.

Consolidated Statements of Cash Flows

(Expressed in thousands of U.S. dollars)

Cash flows from operating activities:

Amortization of intangible assets - 2,519 10,062

Amortization of operating lease right-of-use assets 243 435 2,785

Changes in operating assets and liabilities:

Accounts and accrued research fees receivable (1,803 ) (5,467 ) (37,386 )

Accounts payable and accrued liabilities 150 6,601 1,400

Other operating assets and liabilities 849 1,466 (2,603 )

Cash flows from investing activities:

Purchase of intangible assets - (5,000 ) -

Repayment (issuance) of related party loans (1,783 ) 1,783 -

Purchase of marketable securities - - (274,710 )

Proceeds from marketable securities - - 27,608

Receipt of grant funding - - 32,621

Acquisitions, net of cash acquired - (87,643 ) (11,457 )

Long-term investments and other assets - - (17,534 )

Investment in and loans to equity accounted investees - (19,247 ) (30,323 )

Cash flows from financing activities:

Proceeds from convertible debentures - 89,990 -

Payment of contingent consideration - - (2,550 )

Payment of liability for in-licensing agreement - - (5,000 )

Short-term borrowings 387 (387 ) -

Net proceeds from issuance of common shares - 522,840 -

Net cash provided by (used in) financing activities 195 683,653 (3,886 )

Effect of exchange rate changes on cash and cash equivalents - - (1,425 )

Supplemental disclosure of non-cash investing and financing activities:

Property and equipment purchases in accounts payable 35 656 5,397

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

F-8

AbCellera Biologics Inc.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars except share and per share data)

1. Nature of operations

AbCellera Biologics Inc.’s (the “Company”) mission is to improve health with technologies that transform the way that antibody-based therapies are discovered. The Company aims to become the centralized operating system for next generation antibody discovery. The Company’s full-stack, AI-powered antibody discovery platform searches and analyzes the database of natural immune systems to find antibodies that can be developed as drugs. The Company believes its technology increases the speed and the probability of success of therapeutic antibody discovery, including enabling discovery against targets that may otherwise be intractable. Rather than advancing its own clinical pipeline of drug candidates, the Company forges partnerships with drug developers of all sizes, from large cap pharmaceutical to small biotechnology companies.

2. Basis of presentation

These consolidated financial statements are presented in U.S. dollars and have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). All intercompany transactions and balances have been eliminated.

All amounts expressed in the consolidated financial statements of the Company and the accompanying notes thereto are expressed in thousands of U.S. dollars, except for share and per share data and where otherwise indicated. References to “$” are to U.S. dollars and references to “C$” and “CAD” are to Canadian dollars.

Initial public offering

The Company’s registration statement on Form S-1 related to its initial public offering (“IPO”) was declared effective on December 10, 2020, by the SEC, and the Company’s common shares began trading on the Nasdaq on December 11, 2020. Upon close of the IPO, the Company sold 27,772,500 common shares at a price to the public of $20.00 per share. The Company received gross proceeds of $555.5 million, or aggregate net proceeds of $522.8 million, after deducting offering costs, underwriting discounts and commissions.

Immediately prior to the completion of the IPO, all convertible preferred stock and notes then outstanding converted into an equivalent number of shares of common shares.

On December 4, 2020, the Board of Directors of the Company approved a 1-for-10 forward stock split of its issued and outstanding common shares and stock options, which was affected on December 4, 2020. All share and per share information in these consolidated financial statements has been retroactively restated to reflect the stock split.

3. Significant accounting policies

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and variable interest entities (“VIE”) when the Company possesses both (1) the power to direct the economically significant activities of the entity and (2) the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to that entity. Intercompany accounts and transactions have been eliminated.

In 2021, the Company entered into a participation agreement with a segregated accounts company for purposes of Director and Officer’s insurance. The Company contributed $25.0 million to the segregated account, representing the Company’s maximum loss exposure under the participation agreement, for security for a letter of credit issued to a third-party insurer. As the funds cannot be transferred to other parts of the Company, the funds are presented as Restricted Cash.

Use of estimates

The preparation of the consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Areas of significant estimates include, but are not limited to, revenue recognition including estimated timing of completion of performance obligations and

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determining whether an option for additional goods or services represents a material right, the fair value of acquired intangible assets, and contingent consideration payable, and the estimates of stock-based compensation awards. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates when there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could significantly differ from those estimates.

COVID-19 Pandemic

With the global spread of the ongoing COVID-19 pandemic, the Company has implemented business continuity plans designed to address and mitigate the impact of the COVID-19 pandemic on its employees and its business. The Company has taken measures to secure its research and development activities, while work in its laboratories and facilities has been re-organized to reduce risk of COVID-19 transmission. Given the global economic impact, the overall disruption of global healthcare systems and the other risks and uncertainties associated with the pandemic, the Company’s business, financial condition, and results of operations could be materially adversely affected. The Company continues to closely monitor the COVID-19 pandemic as it evolves its business continuity plans and response strategy. As of the date of these financial statements, the Company is not aware of any specific event or circumstance that would require the Company to update its estimates, assumptions and judgments or revise the carrying value of its assets or liabilities. Actual results could differ from these estimates, and any such differences may be material to the Company’s financial statements.

Revenue recognition

The Company accounts for revenue from contracts with customers, which includes the identification and assessment of the goods and/or services promised within a contract to evaluate which promises are distinct from each other.

The terms of our arrangements generally include the payment of one or more of the following: (i) non-refundable, up-front fixed fees, (ii) fixed fees for ‘discovery’ research support, (iii) fixed technology assignment fees, (iv) fixed payments based on the achievement of specified development and/or commercial milestones, (v) royalties on net sales by the customer of licensed products, and in some cases, (vi) early termination penalties, and (vii) reimbursements for costs incurred to fulfill the contract with the customer at cost or at cost plus an agreed upon mark-up.

Promises that are not distinct at contract inception are combined into a single performance obligation. An option to acquire additional goods and/or services is evaluated on both quantitative and qualitative aspects to determine if such an option provides a material right to the customer that it would not have received without entering into the contract. If so, the option is accounted for as a separate performance obligation. If not, the option is considered a marketing offer and is accounted for as a separate contract upon the customer’s election.

The transaction price generally includes fixed fees due at contract inception as well as fixed fees payable at the beginning and end of different phases of the discovery research support services performed. Where a fixed fee due at contract inception is an option to obtain additional goods or services and is considered to be a material right, we allocate the transaction price to the optional goods or services we expect to provide to the corresponding consideration we expect to receive. The Company utilizes either the expected value method or the most likely amount method to estimate the amount of variable consideration to include in the transaction price, as most appropriate in the circumstances. With respect to development and commercial milestone payments, at the inception of the arrangement, the Company evaluates whether the associated event is considered probable of achievement and estimate the amount to be included in the transaction price using the most likely amount method. In determining the transaction price the Company constrains the transaction price for variable consideration to limit its inclusion so that it only includes the amount that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

The Company allocates the transaction price to each performance obligation identified in the contract based on relative observable standalone selling prices. Revenue is recognized based on the amount of the transaction price that is allocated to each respective performance obligation when or as the performance obligation is satisfied by transferring a promised good and/or service to the customer. The Company generally uses output methods to measure the progress toward satisfaction of performance obligations that are satisfied over time. Due to different types of end customers and nature of work involved, revenue contracts require formal inspection and approval of experiments and research plans at each stage of work, therefore, the output method is the most faithful depiction of the Company’s performance.

Royalty revenue is recognized in the period in which the obligation is satisfied and the corresponding sales by our corporate partners occur.

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For the licenses to our intellectual property the Company recognizes revenue from non-refundable, up-front fees when the license is transferred to the customer and the customer is able to use and benefit from the license.

Collaborative Arrangements

We may enter into collaborative and other similar arrangements with respect to the development and commercialization of potential drug candidates. Collaborative arrangements are contractual agreements with third parties that involve a joint operating activity, typically a research and/or commercialization effort, where both we and our partner are active participants in the activity and are exposed to the significant risks and rewards of the activity. Our rights and obligations under our collaborative arrangements vary and typically involve the partners to jointly perform research and development activities and/or participate together in commercializing, marketing, promoting, manufacturing and/or distributing a drug product. These arrangements typically include milestone as well as royalty or profit-share payments, contingent upon the occurrence of certain future events linked to the success of the asset in development, as well as expense reimbursements from or payments to the collaboration partner.

The Company considers the nature and contractual terms of arrangements and assesses whether an arrangement involves a joint operating activity pursuant to which the Company is an active participant and is exposed to significant risks and rewards dependent on the commercial success of the activity as described under ASC 808, Collaborative Arrangements (ASC 808). For arrangements determined to be within the scope of ASC 808 where a collaborative partner is not a customer for certain research and development activities, the Company accounts for payments received for the reimbursement of research and development costs as a contra-expense in the period such expenses are incurred. If payments from the collaborative partner to the Company represent consideration from a customer in exchange for distinct goods and services provided, then the Company accounts for those payments within the scope of ASC 606.

The Company applied ASC 606 to all arrangements to date.

Segmented and Enterprise-wide information

The Company manages its operations as a single operating segment for the purposes of assessing performance and making operating decisions. The Company’s focus is on the discovery and development of antibodies.

The Company’s revenues from external customers in which the services originated were in Canada in 2019 and 2020. In 2021, $353.4 million and $21.8 million of revenues originated from services in Canada and the U.S., respectively.

Of the Company’s long-term assets at December 31, 2020, $133.7 million was in the U.S. and $58.5 million was in Canada. Of the Company’s long-term assets at December 31, 2021, $200.3 million was in the US, $159.5 million in Canada, and $28.9 million in other foreign countries.

Government grants and credits

Government grants are recognized when there is reasonable assurance that the grant will be received, and all associated conditions will be complied with. Reimbursements of eligible expenditures pursuant to government assistance programs are recorded when the related costs have been incurred and there is reasonable assurance regarding collection of the claim.

The Company recognizes the benefits of refundable government investment tax credits for scientific research and development expenditures in the year the qualifying expenditure is made providing there is reasonable assurance of recoverability. The Company records the investment tax credits based on its estimates of amounts expected to be recovered.

Government grants and credits received for expenditures on eligible research, development and capital expenditures are recognized ratably over the benefit period of the related expenditure for which the grants are intended to compensate in other income.

Grant claims not settled by the balance sheet date are recorded as receivables provided their receipt is probable. The determination of the amount of the claim and the corresponding receivable amount requires management judgement and interpretation of eligible expenditures in accordance with the terms of the programs. The reimbursement claims submitted by the Company are subject to review by the relevant government agencies. The Company has used its best judgement and understanding of the related program agreements in determining the receivable amount.

F-11

Functional currency

The reporting currency of the Company and its subsidiaries is the U.S. dollar. The functional currency of the Company and its subsidiaries is the U.S. dollar, and for the Dayhu JV and Beedie JV, is the Canadian Dollar.

Transactions in foreign currencies are translated to the functional currency at exchange rates at the date of the transactions. Period end balances of monetary assets and liabilities in foreign currencies are translated to the functional currency using the period end foreign currency rates. Foreign currency gains and losses are recognized in the consolidated statements of income (loss).

The functional currency of the Dayhu JV and Beedie JV is Canadian dollars and are translated into US dollars using the period-end exchange rate for assets and liabilities and the average exchange rates during the period for revenues, expenses, gains and losses. Foreign exchange gains or losses arising from the translation of these joint ventures’ assets and liabilities are included in “Other comprehensive income”.

Cash and cash equivalents and restricted cash

Cash and cash equivalents are defined as cash on hand and deposits held with banks with maturity dates of less than three months. Cash and cash equivalents that are restricted as to withdrawal or usage, in accordance with specific commercial arrangements, are presented as restricted cash on the consolidated balance sheet. At December 31, 2020 we had $593.7 million cash, $0.4 million cash equivalents, and $ nil restricted cash. At December 31, 2021 we had $100.5 million cash, $375.6 million cash equivalents and $25.0 million restricted cash.

Marketable Securities

The Company’s marketable securities consist of U.S. government agency securities, certificates of deposit, commercial paper, non-U.S. government agency securities, and asset-backed securities. The Company has classified and accounted for these marketable securities as held-for-trading and they are reported at fair value with unrealized gains and losses reported as other (income) expense on the consolidated statement of income (loss) and comprehensive income (loss).

Accounts receivable

The Company has trade receivables which are recorded at the invoiced amount and do not bear interest. The Company evaluates the collectability of accounts receivable on a regular basis based on economic assessment of market conditions and review of customer financial history. There was no allowance for doubtful accounts recorded as of December 31, 2020 and 2021.

Property and equipment

Property and equipment are recorded at cost less accumulated depreciation. Expenditures for major additions and improvements to property and equipment are capitalized and repairs and maintenance costs are expensed as incurred.

Excluding land and assets not yet placed into service, property and equipment are amortized using the straight-line method over the estimated useful lives of the property and equipment as follows:

Asset Rate

Computer equipment 3 years

Laboratory equipment 5 years

Office furniture and equipment 5 years

Leasehold improvements Shorter of lease term or estimated useful life

Estimated useful lives are periodically assessed to determine if changes are appropriate. When assets are retired or otherwise disposed of, the cost of these assets and related accumulated depreciation or amortization are removed from the accounts and any resulting gains or losses are included in loss from operations in the period of disposal. Costs for capital assets not yet placed into service are capitalized as construction-in-progress and depreciated once placed into service.

Intangible assets

Costs incurred to acquire patents and to prosecute and maintain intellectual property rights are expensed as incurred to general and administrative expense due to the uncertainty surrounding the drug development process and the uncertainty of future benefits.

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Patents, and intellectual property acquired from third parties are capitalized and amortized over the remaining life of the patent, if related to approved products or if there are alternative future uses for the underlying technology. No patent or intellectual property costs have been capitalized to date. In process research and development (IPR&D) will be amortized on completion of IPR&D activities.Acquired IPR&D represent the fair value assigned to research and development assets that have not reached technological feasibility. IPR&D is classified as an indefinite-lived intangible asset and is not amortized. All research and development costs incurred subsequent to the acquisition of IPR&D are expensed as incurred.

Definite lived intangible assets are amortized using the straight-line method over the estimated useful lives of the assets as follows:

Asset Useful Life

License 3-10 years

Technology 20 years

Impairment of long-lived assets

The Company assesses the recoverability of its long-lived assets, including property and equipment and intangible assets subject to amortization, for indicators of impairment on each reporting date. If events or changes in circumstances indicate impairment, the Company measures recoverability by a comparison of the asset’s carrying amount to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. When quoted market prices are not available, the Company uses the expected future cash flows discounted at a rate commensurate with the risks associated with the recovery of the asset as an estimate of fair value. No indicators of impairment were identified at the respective balance sheet dates.

Indefinite-lived intangible assets are tested annually for impairment as of October 1, and between annual tests if indicators of potential impairment exist. The Company has the option of performing a qualitative assessment to first determine whether the quantitative impairment test is necessary. This involves an assessment of qualitative factors to determine the existence of events or circumstances that would indicate whether it is more likely than not that the carrying amount of the indefinite-lived intangible asset is less than its fair value. If the qualitative assessment indicates it is not more likely than not that the carrying amount is less than its fair value, a quantitative impairment test is not required. Where a quantitative impairment test is required, the procedure is to compare the indefinite-lived intangible asset’s fair value with its carrying amount. An impairment loss is recognized as the difference between the indefinite-lived intangible asset’s carrying amount and its fair value. Based on our qualitative assessment, the Company determined there were no potential indicators of impairment of our indefinite-lived intangible assets.

Leases

The Company determines if an arrangement is a lease at its inception. After determination of lease arrangement, the Company identifies whether the lease arrangement consists of any non-lease component. The company account for lease components (e.g., rental payments) separately from non-lease components (e.g., common area maintenance costs). Lease component is considered in operating leases, whereas non-lease component is accounted for separately in profit and loss. Such non-lease component is accounted for ratably over a straight-line basis over the duration of lease period. Operating leases are included in operating lease right-of-use assets, accrued liabilities, and long-term operating lease liabilities in our consolidated balance sheet. Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease liabilities and right-of-use assets are recognized at commencement date based on the present value of lease payments over the lease term. The Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments if an explicit rate is not available. Rent expense, included as part of general and administrative expense, for lease payments is recognized on a straight-line basis over the lease term. The operating lease right-of-use assets also includes any rent prepayments, lease incentives upon receipt, and straight-line rent expense impacts, which represent the differences between its operating lease liabilities and right-of-use assets. The initial recognition of the lease obligation and right-of-use asset excludes leases that have a remaining lease term of 12 months or less on the date of acquisition. For the years ended December 31, 2020 and December 31, 2021, all of our leases are classified as operating leases.

Research and development costs

Research and development costs are expensed in the period incurred. These costs related to spending for partner projects in addition to internal platform development programs and include required materials, salaries and benefits including stock-based compensation, and service contracts. These costs exclude depreciation and amortization.

F-13

Royalty fees

Royalty fees consist of certain contractual royalty payments to our strategic partners upon receipt of royalty revenue based on our customers third-party net sales. Royalty fees are recorded when the third-party sale occurs.

Income taxes

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets (“DTAs”) and deferred tax liabilities (“DTLs”) for the expected future tax consequences of events that have been included in the financial statements. Under this method, DTAs and DTLs are determined on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on DTAs and DTLs is recognized in income in the period that includes the enactment date.

A valuation allowance against deferred tax assets is recorded if, based on the weight of the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

The Company recognizes uncertain tax positions in accordance with Accounting Standards Codification (“ASC”) 740 on the basis of a two-step process in which (1) the Company determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, they are measured as the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

Income tax credit (“ITC”) policy

The Company earns income tax credits (ITCs) in jurisdictions in which it incurs eligible research and development expenditures. The Company uses the flow-through method to account for ITCs. Under this method, the ITCs subject to income tax accounting are recognized as a reduction to income tax expense in the year they are earned.

Stock-based compensation

The Company accounts for awards of stock options and shares to directors, employees, consultants, and non-employees using the fair value method. Under this method, stock-based compensation expense is measured at the fair value at the date of grant and is expensed over the award’s vesting period. The requisite service period generally equals the vesting period of the awards.

Equity classified awards are measured using their grant date fair value. Liability classified awards are initially measured using their grant date fair value and are subsequently re-measured to fair value at each balance sheet date until exercised or cancelled, with changes in fair value recognized as compensation cost for the period.

For equity classified awards, a corresponding increase in additional paid-in capital is recorded when stock-based compensation is recognized. When stock options are exercised, share capital is credited by the sum of the consideration received and the related portion of the stock-based compensation previously recorded in additional paid-in capital. The effects of forfeitures of options and share awards are accounted for as they occur.

Awards with an exercise price which is not denominated in: (a) the currency of a market in which a substantial portion of the Company’s equity securities traded, (b) the currency in which the individual’s pay is denominated, or (c) the Company’s functional currency, are classified as liabilities.

Business combinations and goodwill

Business combinations are accounted for using the acquisition method. The fair value of total purchase consideration is allocated to the fair values of identifiable tangible and intangible assets acquired and liabilities assumed, with the remaining amount being classified as goodwill. All assets, liabilities and contingent liabilities acquired or assumed in a business combination are recorded at their fair values at the date of acquisition. If the Company’s interest in the fair value of the acquiree’s net identifiable assets exceeds the cost of the acquisition, the excess is recognized in earnings or loss immediately. Transaction costs that are incurred in connection with a business combination, other than costs associated with the issuance of debt or equity securities, are expensed as incurred.

F-14

Goodwill is evaluated for impairment on an annual basis as of October 1, or more frequently if an indicator of impairment is present. As part of the impairment evaluation, the Company may elect to perform an assessment of qualitative factors. If this qualitative assessment indicates that it is more likely than not that the fair value of the reporting unit that includes the goodwill is less than its carrying value, then a quantitative impairment test would be prepared to compare this fair value to the carrying value and record an impairment charge if the carrying value exceeds the fair value. At October 1, 2021, the Company performed a qualitative assessment for its annual impairment test of goodwill after concluding that it was not more likely than not that the fair value of the reporting unit was less than its carrying value. Consequently, the quantitative impairment test was not required. The Company concluded that there were no impairment indicators related to goodwill during the remainder of 2021.

Equity method investments

The Company accounts for its investments in equity-accounted joint ventures using the equity method. Under the equity method, the initial cost of the investment is adjusted for subsequent additional investments and the Company’s proportionate share of earnings or losses and distributions. The Company does not control the equity-accounted investments and as a result, the Company does not have the unilateral ability to determine whether cash generated by its equity-accounted investees is retained within the equity-investee or is distributed to the Company and other owners. In addition, equity-accounted investees do not control the timing of such distributions to the Company and other owners. The Company evaluates its investments in joint ventures for impairment when events or circumstances indicate that the carrying value of such investments may have experienced an other-than-temporary decline in value below carrying value. If the estimated fair value is less than the carrying value, the carrying value is written down to its estimated fair value and the resulting impairment is recorded in the Company’s consolidated statements of income (loss).

Net earnings (loss) per share

The Company follows the two-class method when computing net earnings (loss) per share as the Company has issued shares that meet the definition of participating securities. The two-class method determines net earnings (loss) per share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires income available to common shareholders for the period to be allocated between common and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed.

Basic net earnings (loss) per share attributable to common shareholders is computed by dividing the net income (loss) attributable to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted net earnings (loss) attributable to common shareholders is computed by adjusting net income (loss) attributable to common shareholders to reallocate undistributed earnings based on the potential impact of dilutive securities. Diluted net earnings (loss) per share attributable to common shareholders is computed by dividing the diluted net income (loss) attributable to common shareholders by the weighted-average number of common shares outstanding for the period, including potential dilutive common shares. For purpose of this calculation, outstanding stock options and convertible preferred shares and notes are considered potential dilutive common shares.

The Company’s convertible preferred shares, all of which converted prior to the completion of our IPO in 2020, contractually entitle the holders of such shares to participate in dividends but do not contractually require the holders of such shares to participate in losses of the Company. Accordingly, in periods in which the Company reports a net loss attributable to common shareholders, such losses are not allocated to such participating securities. In periods in which the Company reported a net loss attributable to common shareholders, diluted net loss per share attributable to common shareholders is the same as basic net loss per share attributable to common shareholders, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.

4. Changes in significant accounting policies

Recent accounting pronouncements adopted

There was no adoption of any new accounting standards that had a significant impact on the consolidated financial statements.

Recent accounting pronouncements not yet adopted

The Company has reviewed recent accounting pronouncements and concluded that they are either not applicable to the Company or that no material impact is expected in the consolidated financial statements as a result of future adoption.

F-15

5. Net earnings (loss) per share

Basic and diluted net earnings (loss) per share attributable to common shareholders was calculated as follows:

Year Ended December 31,

Basic earnings (loss) per share

ABCL US Equity

ABCL · 10-K · period ended 2021-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Item 8. Financial Statements and Supplementary Data.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

Item 9A. Controls and Procedures.

Item 9B. Other Information.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Item 10. Directors, Executive Officers and Corporate Governance.

Item 11. Executive Compensation.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Item 14. Principal Accounting Fees and Services.

Item 15. Exhibits, Financial Statement Schedules.

Item 16. Form 10-K Summary

ABCL US Equity☆

ABCL · 10-K · period ended 2021-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Item 8. Financial Statements and Supplementary Data.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

Item 9A. Controls and Procedures.

Item 9B. Other Information.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Item 10. Directors, Executive Officers and Corporate Governance.

Item 11. Executive Compensation.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Item 14. Principal Accounting Fees and Services.

Item 15. Exhibits, Financial Statement Schedules.

Item 16. Form 10-K Summary

ABCL US Equity