What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-02-25 compared with 2020-02-27 · 325 added, 287 removed, 762 unchanged (45% of the section changed)

Financial Statements and Supplementary Data.

INDEX TO FINANCIAL STATEMENTS

For the year ended December 31, 2019 and 2018

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2020 and 2019

Report of Independent Registered Public Accounting Firm

Financial Statements:

Balance Sheets

Statements of Operations and Comprehensive Loss

Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

Statements of Cash Flows

Notes to Financial Statements

Consolidated Financial Statements:

Consolidated Balance Sheets

Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of

Allogene Therapeutics, Inc.

To the Stockholders and the Board of Directors of Allogene Therapeutics, Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Allogene Therapeutics, Inc.

(the Company) as of December 31, 2019 and 2018, the related statements of operations and comprehensive loss, statements of convertible preferred stock and stockholders’ equity (deficit) and cash flows for each of the years ended December 31, 2019 and 2018 and the period from November 30, 2017 (inception) to December 31, 2017, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the years ended December 31, 2019 and 2018 and the period from November 30, 2017 (inception) to December 31, 2017, in conformity with U.S.

We have audited the accompanying consolidated balance sheets of Allogene Therapeutics, Inc.

(the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations and comprehensive loss, statements of convertible preferred stock and stockholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2020 and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with U.S.

generally accepted accounting principles.

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(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the 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.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Accrued Research and Development Costs

Description of the Matter As discussed in Note 1 liabilities are recorded for estimated unpaid costs of research and development activities conducted by the Company and its collaboration partners and third-party service providers, which include the conduct of preclinical and clinical studies, and contract manufacturing activities.

Description of the Matter

As discussed in Note 1 liabilities are recorded for estimated unpaid costs of research and development activities conducted by the Company and its collaboration partners and third-party service providers, which include the conduct of preclinical and clinical studies, and contract manufacturing activities.

Total research and development expenses were $193 million during the year ended December 31, 2020 and include the estimated costs of accrued research and development activities for services provided but not yet invoiced.

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Auditing accrued research and development costs was complex due to significant judgments and estimates made by management in determining the required accruals.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of relevant controls over the Company’s determination of accrued research and development costs, including controls over the determination of significant assumptions and the completeness and accuracy of the data used in determining accrued costs.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design, and tested the operating effectiveness of relevant controls over the Company’s determination of accrued research and development costs, including controls over the determination of significant assumptions and the completeness and accuracy of the data used in determining accrued costs.

Our audit procedures included, among others, examining, on a test basis, evidence regarding the estimated accrued amounts through comparison of expenses incurred to budgeted amounts and to expenses incurred in prior periods and obtaining an understanding of the reasons for changes.

We verified that accrued amounts were in accordance with key terms and conditions through review of the underlying agreements with the Company’s collaboration partners and third-party service providers.

We verified expenses incurred by obtaining confirmation from the Company’s collaboration partner and further validated accrued amounts based on information provided by third-party service providers.

We verified expenses incurred by obtaining confirmation from the Company’s collaboration partners and further validated accrued amounts based on information provided by third-party service providers.

/s/ Ernst & Young LLP

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ALLOGENE THERAPEUTICS, INC.

Balance Sheets

Consolidated Balance Sheets

(In thousands, except share and per share amounts)

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Accrued and other current liabilities 44,938 23,829

Deferred revenue 38,992 —

Total current liabilities 94,320 33,079

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Preferred stock, $ 0.001 par value:

10,000,000 authorized as of December 31, 2019 and December 31, 2018, respectively;

10,000,000 authorized as of December 31, 2020 and December 31, 2019;

no shares were issued and outstanding as of December 31, 2020 and December 31, 2019

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Total liabilities and stockholders’ equity $ 1,227,829 $ 717,802

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

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

ALLOGENE THERAPEUTICS, INC.

Statements of Operations and Comprehensive Loss

Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share amounts)

Years Ended December 31, Period from November 30, 2017 (Inception) to December 31,

Years Ended December 31,

2020 2019 2018

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Other comprehensive income:

Net unrealized gain on available-for-sale investments, net of tax 839 306 —

Net unrealized (loss) gain on available-for-sale investments, net of tax ( 877 ) 839 306

Net comprehensive loss $ ( 251,098 ) $ ( 183,755 ) $ ( 211,199 )

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share, basic and diluted 120,370,177 101,061,149 28,948,386

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

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

ALLOGENE THERAPEUTICS, INC.

Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(In thousands, except share and per share data)

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Shares Amount Shares Amount

Balance — November 30, 2017 (Inception)

— $ — $ — — $ — $ — $ — $ — $ — $ —

Issuance of common stock — — — 26,249,993 26 — — ( 21 ) — 5

Notes receivable from common stockholders

— — — — — ( 5 ) — — — ( 5 )

Net loss and comprehensive loss — — — — — — — ( 2 ) — ( 2 )

Balance — December 31, 2017 — — — 26,249,993 26 ( 5 ) — ( 23 ) — ( 2 )

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— — — 5,020,580 5 — — — — 5

Issuance of common stock upon initial public offering, net of issuance costs of $29,272

Issuance of common stock upon initial public offering, net of issuance costs of $ 29.3 million

— — — 20,700,000 21 — 343,308 — — 343,329

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— — — 107,982 — — 1,783 — — 1,783

Issuance of common stock from public offering, net of commissions and offering costs of $1.6 million

Issuance of common stock from ATM offering, net of commissions and offering costs of $ 1.6 million

— — — 1,965,082 2 — 54,217 — — 54,219

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Balance — December 31, 2019 — $ — $ — 124,267,358 $ 124 $ — $ 1,023,876 $ ( 396,122 ) $ 1,145 $ 629,023

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

Issuance of common stock upon exercise of stock options and vesting of RSU's

— — — 1,725,695 2 — 8,813 — — 8,815

Vesting of early exercised common stock

— — — — — — 2,840 — — 2,840

Stock-based compensation

— — — — — — 65,261 — — 65,261

Employee stock purchase plan

— — — 175,142 — — 2,843 — — 2,843

Issuance of common stock from ATM offering, net of commissions and offering costs of $ 0.6 million

— — — 848,663 1 — 26,202 — — 26,203

Issuance of common stock from public offering, net of commissions and offering costs of $ 36.8 million

— — — 13,457,447 13 — 595,717 — — 595,730

— — — — — — — ( 250,221 ) — ( 250,221 )

Net unrealized loss on available-for-sale investments

— — — — — — — — ( 877 ) ( 877 )

Balance — December 31, 2020 — — — 140,474,305 140 — 1,725,552 ( 646,343 ) 268 1,079,617

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

ALLOGENE THERAPEUTICS, INC.

Statements of Cash Flows

Consolidated Statements of Cash Flows

(in thousands)

Year Ended December 31, Period from November 30, 2017 (Inception) to December 31, 2017

Year Ended December 31,

2020 2019 2018

Cash flows from operating activities:

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Accrued and other current liabilities 18,726 6,351 12,138

Deferred revenue 38,992 — —

Other long-term liabilities ( 1,268 ) ( 2,425 ) —

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Right-of-use asset obtained in exchange for lease liability $ — $ 13,827 $ 33,015

Property and equipment purchases in accounts payable and accrued liabilities $ 4,668 $ 3,182 $ —

Property and equipment purchases in accounts payable and accrued and other current liabilities $ 8,567 $ 4,668 $ 3,182

Capitalized cloud computing costs included in accounts payable and accrued and other current liabilities $ 584 $ — $ —

Deferred offering costs included in accounts payable and accrued and other current liabilities $ — $ 135 $ 356

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Cash received for amounts related to tenant improvement allowances from lessors $ 2,809 $ 4,473 $ —

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

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

ALLOGENE THERAPEUTICS, INC.

Notes to Financial Statements

Notes to Consolidated Financial Statements

Description of Business and Summary of Significant Accounting Policies

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The aggregate compensation payable to Cowen as the Company's sales agent equals up to 3.0 % of the gross sales price of the shares sold through it pursuant to the sales agreement.

Beginning November 2019 and through the year ended December 31, 2019, the Company sold an aggregate of 1,965,082 shares of common stock in ATM offerings resulting in net proceeds of $ 54.2 million, after deducting commissions and offering costs of $ 1.6 million.

Deferred Offering Costs

Offering costs, including legal, accounting and filing fees related to the IPO, were deferred and were offset against the offering proceeds upon the completion of the IPO.

Upon the completion of the IPO in October 2018, $ 3.2 million of deferred offering costs were reclassified to additional paid in capital.

Offering costs, including legal, accounting and filing fees related to the ATM offerings were incurred.

Upon the issuance and sale of common stock in ATM offerings in November 2019, $ 0.5 million of deferred offering costs were reclassified to additional paid in capital.

There were no deferred offering costs capitalized as of December 31, 2019 and 2018.

During the year ended December 31, 2020, we sold an aggregate of 848,663 shares of common stock in ATM offerings resulting in net proceeds of $ 26.2 million.

In June 2020, the Company sold 13,457,447 shares of its common stock, which included 1,755,319 shares sold pursuant to the full exercise of the underwriters' option to purchase additional shares, in an underwritten public offering at a price of $ 47.00 per share, which resulted in gross proceeds of approximately $ 632.5 million.

Net proceeds to the Company after deducting the underwriting discounts and commissions and other expenses were approximately $ 595.7 million.

Forward Stock Split

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The Company has sustained operating losses and expects to continue to generate operating losses for the foreseeable future.

The Company’s ultimate success depends on the outcome of its research and development activities as well as the ability

to commercialize the Company’s product candidates.

The Company had cash and cash equivalents and investments of $ 588.9 million as of December 31, 2019.

The Company’s ultimate success depends on the outcome of its research and development activities as well as the ability to commercialize the Company’s product candidates.

The Company had cash, cash equivalents and investments of $ 1.0 billion as of December 31, 2020.

Since inception through December 31, 2020, the Company has incurred cumulative net losses of $ 646.3 million.

Management expects to incur additional losses in the future to fund its operations and conduct product research and development and recognizes the need to raise additional capital to fully implement its business plan.

The Company intends to raise such additional capital through the issuance of equity securities, debt financings or other sources in order to further implement its business plan.

The Company intends to raise additional capital through the issuance of equity securities, debt financings or other sources in order to further implement its business plan.

However, if such financing is not available at adequate levels, the Company will need to reevaluate its operating plan and may be required to delay the development of its product candidates.

The Company expects that its cash and cash equivalents and investments will be sufficient to fund its operations for at least the next 12 months from the date the Company’s Annual Report on Form 10-K is filed with the Securities and Exchange Commission (SEC).

The Company cannot at this time predict the specific extent, duration, or full impact that the ongoing COVID-19 pandemic will have on its financial condition and operations, including ongoing and planned clinical trials.

The impact of the COVID-19 pandemic on the financial performance of the Company will depend on future developments, including the duration and spread of the pandemic and related governmental advisories and restrictions.

These developments and the impact of the COVID-19 pandemic on the financial markets and the overall economy are highly uncertain.

If business conditions, financial markets and/or the overall economy are impacted for an extended period, the Company’s results may be adversely affected.

Basis of Presentation

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP).

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP).

In June 2020, the Company formed a wholly-owned, Netherlands-based subsidiary, Allogene Therapeutics, B.V., to help prepare for and assist with the Company's activities in Europe.

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary.

All material intercompany balances and transactions have been eliminated during consolidation.

Use of Estimates

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

Significant estimates and assumptions made in the accompanying financial statements include but are not limited to the fair value of common stock, the fair value of stock options, the fair value of investments, the fair value of convertible notes payable upon conversion, income tax uncertainties, and certain accruals.

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

Significant estimates and assumptions made in the accompanying consolidated financial statements include but are not limited to the fair value of common stock, the fair value of stock options, the fair value of investments, the fair value of convertible notes payable upon conversion, income tax uncertainties, and certain accruals.

The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances change.

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The Company considers all highly liquid investments purchased with original maturities of three months or less from the purchase date to be cash equivalents.

Cash equivalents consist primarily of amounts invested in money market accounts.

The Company has issued letters of credit under separate lease agreements which have been collateralized by restricted cash.

This cash is classified as long-term restricted cash on the accompanying balance sheet based on the terms of the underlying leases.

Cash equivalents consist primarily of amounts invested in bank money market accounts and money market mutual funds.

The Company has issued letters of credit under separate lease and other agreements which have been collateralized by restricted cash.

This cash is classified as long-term restricted cash on the accompanying consolidated balance sheet based on the terms of the underlying agreements.

Investments are available-for-sale and are carried at estimated fair value.

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Management determines the appropriate classification of its investments in debt securities at the time of purchase and at the end of each reporting period.

Investments with original maturities beyond three months at the date of purchase and which mature at, or less than twelve months from the balance sheet date are classified as current.

Unrealized gains and losses are excluded from earnings and are reported as a component of comprehensive income.

Investments with original maturities of less than three months at the date of purchase are classified as cash and cash equivalents.

Investments with original maturities beyond three months at the date of purchase and which mature at, or less than twelve months from the consolidated balance sheet date are classified as current.

Unrealized gains and losses are excluded from earnings and are reported as a component of other comprehensive income.

The Company periodically evaluates whether declines in fair values of its available-for-sale securities below their book value are other-than-temporary.

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Fair Value Measurement

Assets and liabilities recorded at fair value on a recurring basis in the balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair values.

Assets and liabilities recorded at fair value on a recurring basis in the consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair values.

Fair value is defined as the exchange price that would be received for an asset or an exit price that would be paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

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Depreciation is computed on a straight-line basis over the estimated useful lives of the related assets, generally three to seven years .

Maintenance and repairs are charged to operations as incurred.

Upon sale or retirement of assets, the cost and related accumulated depreciation are removed from the balance sheet and the resulting gain or loss is reflected in other expense.

Maintenance and

repairs are charged to operations as incurred.

Upon sale or retirement of assets, the cost and related accumulated depreciation are removed from the consolidated balance sheet and the resulting gain or loss is reflected in other expense.

The Company has determined the estimated life of assets to be as follows:

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Leasehold improvements Shorter of lease term or useful life

The Company early adopted Accounting Standards Update (ASU) No.

The Company adopted Accounting Standards Update ("ASU") No.

2018-15, Intangibles – Goodwill and other – Internal-Use Software (Subtopic 350-40) on January 1, 2020 on a prospective basis.

The Company capitalizes implementation costs associated with internal use cloud computing arrangements in alignment with ASC 350-40 internal-use software.

Costs incurred in preliminary project stage and post implementation stage are expensed as incurred.

Costs incurred during the application development stage of implementation are capitalized in other long term assets on the consolidated balance sheet.

Capitalized implementation costs from cloud computing arrangements are amortized over the term of the cloud-based service arrangement.

The Company early adopted ASU No.

2016-2, Leases on January 1, 2018.

For its long-term operating leases, the Company recognizes a right-of-use asset and a lease liability on its balance sheets.

For its long-term operating leases, the Company recognizes a right-of-use asset and a lease liability on its consolidated balance sheets.

The lease liability is determined as the present value of future lease payments using an estimated rate of interest that the Company would pay to borrow equivalent funds on a collateralized basis at the lease commencement date.

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The lease term at the commencement date is determined by considering whether renewal options and termination options are reasonably assured of exercise.

Rent expense for the operating lease is recognized on a straight-line basis over the lease term and is included in operating expenses on the statements of operations and comprehensive loss.

Rent expense for the operating lease is recognized on a straight-line basis over the lease term and is included in operating expenses on the consolidated statements of operations and comprehensive loss.

Variable lease payments include lease operating expenses.

The Company elected to exclude from its balance sheets recognition of leases having a term of 12 months or less (short-term leases) and elected to not separate lease components and non-lease components for its long-term real-estate leases.

The Company elected to exclude from its consolidated balance sheets recognition of leases having a term of 12 months or less (short-term leases) and elected to not separate lease components and non-lease components for its long-term real-estate leases.

Equity Method Investments

The Company uses the equity method of accounting for equity investments in companies if the investment provides the ability to exercise significant influence, but not control, over operating and financial policies of the investee.

The Company's proportionate share of the net income or loss of these companies is included in other expenses in the statement of operations.

The Company's proportionate share of the net income or loss of these companies is included in other expenses in the consolidated statement of operations.

Judgment regarding the level of influence over each equity method investment includes considering key factors such as our ownership interest, representation on the board of directors, participation in policy-making decisions and material purchase and sale transactions.

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Variable Interest Entities

For entities in which the Company has variable interests, the Company focuses on identifying if one of the entities is the primary beneficiary through having the power to direct the activities that most significantly impact the variable interest entity’s economic performance and having the obligation to absorb losses or the right to receive benefits from the variable interest entity.

If the Company is the primary beneficiary of a variable interest entity, the assets, liabilities, and results of operations of the variable interest entity will be included in the Company’s financial statements.

For the year ended December 31, 2019, the Company did not consolidate any variable interest entities because the Company determined that it was not the primary beneficiary.

interest entity.

The Company did not consolidate any variable interest entities in any of the periods presented because the Company determined that it was not the primary beneficiary.

Accrued Research and Development Costs

The Company records accrued liabilities for estimated costs of research and development activities conducted by collaboration partners and third-party service providers, which include the conduct of preclinical studies and clinical trials, and contract manufacturing activities.

The Company records the estimated costs of research and development activities based upon the estimated amount of services provided but not yet invoiced and includes these costs in accrued and other current liabilities on the balance sheets and within research and development expenses on the statements of operations and comprehensive loss.

The Company records the estimated costs of research and development activities based upon the estimated amount of services provided but not yet invoiced and includes these costs in accrued and other current liabilities on the consolidated balance sheets and within research and development expenses on the consolidated statements of operations and comprehensive loss.

The Company accrues for these costs based on factors such as estimates of the work completed and in accordance with agreements established with its collaboration partners and third-party service providers.

The Company makes significant judgments and estimates in determining the accrued liabilities balance at the end of each reporting period.

As actual costs

become known, the Company adjusts its accrued liabilities.

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

The Company has not experienced any material differences between accrued costs and actual costs incurred since its inception.

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For the years ended December 31, 2020, 2019 and 2018 this was comprised of unrealized gains and losses, net of tax, on the Company’s investments.

For the period from November 30, 2017 (inception) to December 31, 2017, comprehensive net loss was equal to net loss.

Definite-Lived Intangible Assets

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If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the projected discounted future net cash flows arising from the asset.

There were impairment losses related to equipment disposals of $ 0.2 million and zero for the years ended December 31, 2019 and 2018, respectively.

There were impairment losses related to equipment disposals of zero and $ 0.2 million for the years ended December 31, 2020 and 2019, respectively.

Revenue Recognition

In the near future, the Company’s revenue is anticipated to be generated through collaboration research and license agreements.

The terms of these agreements are anticipated to contain multiple deliverables which may include (i) grant of licenses, (ii) transfer of know-how, (iii) research and development activities, (iii) clinical manufacturing and, (iv) product supply.

The payment terms of these agreements may include nonrefundable upfront fees, payments for research and development activities, payments based upon the achievement of certain milestones, royalty payments based on product sales derived from the collaboration, and payments for supplying product.

The Company will analyze its collaboration arrangements to assess whether they are within the scope of ASC 808, Collaborative Arrangements (ASC 808) to determine whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on the commercial success of such activities.

This assessment is performed throughout the life of the arrangement based on changes in the responsibilities of all parties in the arrangement.

For collaboration arrangements within the scope of ASC 808 that contain multiple elements, the Company first determines which elements of the collaboration are deemed to be within the scope of ASC 808 and those that are more reflective of a vendor-customer relationship and, therefore, within the scope of Topic 606, Revenue from Contracts with Customers (ASC 606).

For elements of collaboration arrangements that are accounted for pursuant to ASC 808, an appropriate recognition method is determined and applied consistently, generally by analogy to Topic 606.

For elements of those arrangements that the Company determines should be accounted for under ASC 606, the Company assesses which activities in the collaboration agreements are performance obligations that should be accounted for separately and determine the transaction price of the arrangement, which includes the assessment of the probability of achievement of future milestones and other potential consideration.

A performance obligation represents a promise in a contract to transfer a distinct good or service to a customer, which represents a unit of accounting in accordance with ASC 606.

A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract.

The Company considers a performance obligation satisfied once the Company has transferred control of a good or service to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service.

A portion of the consideration should be allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.

The total consideration which the Company expects to collect in exchange for the Company’s products is an estimate and may be fixed or variable.

The Company constrains the estimated variable consideration when it assesses it is probable that a significant reversal in the amount of cumulative revenue recognized may occur in future periods.

The transaction price is re-evaluated, including the estimated variable consideration included in the transaction price and all constrained amounts, in each reporting period and as uncertain events are resolved or other changes in circumstances occur.

The allocation of the transaction price is performed based on standalone selling prices, which are based on estimated amounts that the Company would charge for a performance obligation if it were sold separately.

Revenue is recognized when, or as, performance obligations in the contracts are satisfied, in the amount reflecting the expected consideration to be received from the goods or services transferred to the customers.

Funds received in advance are recorded as deferred revenue and are recognized as the related performance obligation is satisfied.

Research and Development Expenses

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Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are capitalized and then expensed as the related goods are delivered or the services are performed.

Research and development expenses for the year ended December 31, 2018 primarily consisted of acquired intangible assets pursuant to the Asset Contribution Agreement with Pfizer (see Note 6) as, at the time of acquisition of the asset, the technology was under development, was not approved by the U.S.

Food and Drug Administration or other regulatory agencies for marketing, had not reached technical feasibility, or otherwise had no foreseeable alternative future use.

For the year ended December 31, 2018, the Company recognized expense of $ 109.4 million related to the acquired intangible in-process research and development.

Recent Accounting Guidance

Recently Adopted Accounting Pronouncements

In January 2017, the FASB issued Accounting Standards Update, Business Combinations (Topic 805):

Clarifying the Definition of a Business (ASU 2017-01).

ASU 2017-01 clarifies the framework for determining whether an integrated set of assets and activities meets the definition of a business.

The revised framework establishes a screen for determining whether an integrated set of assets and activities is a business and narrows the definition of a business.

The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business.

This screen reduces the number of transactions that need to be further evaluated.

This new accounting guidance is effective for public or private companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.

Early adoption is permitted.

The new accounting guidance should be applied prospectively on or after the effective date.

The Company adopted this guidance on January 1, 2018.

In June 2018, the FASB issued Accounting Standards Update No.

2018-07, Improvements to Nonemployee Share-Based Payment Accounting (ASU 2018-07).

ASU 2018-07 simplifies the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions.

Some of the areas of simplification apply only to nonpublic entities.

For all entities, the amendments are effective for annual periods beginning after December 15, 2019, and interim periods within annual periods beginning after December 15, 2020.

Early adoption is permitted for any entity in any interim or annual period for which financial statements have not been issued or made available for issuance, but not before an entity adopts ASC 606.

The Company early adopted this guidance on January 1, 2018.

As a result, the accounting for share-based payments to nonemployee consultants is consistent with employees.

In November 2016, the FASB issued Accounting Standards Update No.

2016-18, Statement of Cash Flows:

Restricted Cash .

This ASU requires changes in restricted cash during the period to be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows.

If cash, cash equivalents and restricted cash are presented in more than one line item on the balance sheet, the new guidance requires a reconciliation of the total in the statement of cash flows to the related captions in the balance sheet.

This guidance is effective for annual and interim periods of public entities beginning after December 15, 2017, with early adoption permitted.

The amendments in this ASU should be applied retrospectively to all periods presented.

The Company adopted this guidance on January 1, 2018.

The adoption of this ASU increased our ending cash balances within the statements of cash flows.

The adoption had no other material impacts to the statements of cash flows and had no impact on the results of operations or financial position.

In February 2016, the FASB issued Accounting Standards Update No.

2016-02, Leases (ASU 2016-02), which provides revised accounting requirements for both lessees and lessors.

Lessees will recognize a right-of-use asset and a lease liability for virtually all leases (other than short-term leases upon election).

The liability is recognized at the present value of future lease payments.

The asset is recognized based on the liability.

For statements of operations purposes, ASU 2016-02 requires leases to be classified as either operating or finance.

Operating leases will result in straight-line expense while finance leases will result in a front-loaded expense pattern.

ASU 2016-02 is effective for public companies for fiscal years beginning after December 15, 2018.

Early adoption is permitted.

The standard requires a modified-retrospective transition method and

provides for certain practical expedients.

The Company early adopted the new lease standard on July 1, 2018 with the adoption reflected as of January 1, 2018 in accordance with ASU No.

2018-11, Leases (Topic 842) –Targeted Improvements .

There were no lease arrangements prior to August 2018 and consequently, the adoption of the standard did not have any impact on periods prior to August 2018.

In February 2018, the FASB issued Accounting Standards Update No.

2018-02, Income Statement – Reporting Comprehensive Income (Topic 220):

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which provided amended guidance to allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act.

Additionally, under the new guidance, an entity will be required to provide certain disclosures regarding stranded tax effects.

The guidance is effective for fiscal years beginning after December 15, 2018, with early adoption permitted.

The Company adopted this guidance on January 1, 2019.

Adoption of the new guidance had no significant impact on the Company’s financial statements.

Recent Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses:

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For available-for-sale debt securities, expected credit losses should be estimated when the fair value of the debt securities is below their associated amortized costs.

The standard will become effective for the Company in the first quarter of 2020, with early adoption permitted beginning the first quarter of 2019.

The modified retrospective approach should be applied upon adoption of this new guidance.

The Company’s financial instruments that are in the scope of ASU 2016-13 include but not limited to trade receivables and available-for-sale debt securities.

The Company will adopt this standard on January 1, 2020 and does not anticipate this amendment to have a material impact on the financial statements.

This standard became effective for fiscal years beginning after December 15, 2019, with early adoption permitted beginning the first quarter of 2019.

The Company’s financial instruments that are in the scope of ASU 2016-13 include, but are not limited to, other receivables and available-for-sale debt securities.

The Company adopted this standard on January 1, 2020 and applied the modified retrospective approach.

Adoption of the new guidance had no significant impact on the Company’s consolidated financial statements.

In August 2018, the FASB issued Accounting Standards Update No.

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This new standard also requires customers to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement.

The guidance is effective for fiscal years beginning after December 15, 2019, with early adoption permitted.

The Company is currently evaluating the impact of adopting this amendment on the financial statements.

This standard became effective for fiscal years beginning after December 15, 2019, with early adoption permitted.

The Company adopted this standard on January 1, 2020, on a prospective basis for applicable implementation costs.

As of December 31, 2020, $ 4.2 million of implementation costs related to cloud computing service arrangements were capitalized and included in other long term assets on the consolidated balance sheets.

In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808):

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In addition, Topic 808 precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue from contracts with customers if the counterparty is not a customer for that transaction.

The Company will adopt this standard on January 1, 2020 and does not anticipate this amendment to have a material impact on the financial statements.

In December 2019, the FASB issued Accounting Standard Update No.

This standard is effective for fiscal years beginning after December 31, 2019, with early adoption permitted.

The Company adopted this standard on January 1, 2020.

Adoption of the new guidance had no significant impact on the Company’s consolidated financial statements.

In December 2019, the FASB issued Accounting Standards Update No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes (ASU 2019-12) , which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities.

This guidance will be effective for the Company in the first quarter of 2021 on a prospective basis, and early adoption is permitted.

The Company is currently evaluating the impact of the new guidance on the financial statements.

This standard is effective for fiscal years beginning after December 15, 2020, with early adoption permitted.

The Company early adopted this standard as of January 1, 2020 on a prospective basis in accordance with ASC 250, Accounting Changes and Error Corrections.

The adoption resulted in the Company no longer needing to determine the tax effect from unrealized gains on available for sale securities, which previously had been disclosed in the consolidated statement of operations as a benefit from income taxes.

Adoption of the new guidance had no significant impact on the Company's consolidated financial statements.

Recent Accounting Pronouncements Not Yet Adopted

In January 2020, the FASB issues Accounting Standard Update No.

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This guidance will be effective for the Company in the first quarter of 2021, and early adoption is permitted.

The Company is currently evaluating the impact of the new guidance on the financial statements.

The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

Fair Value Measurements

The Company follows authoritative accounting guidance, which among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis.

Fair value is an exit price, representing the amount that would be received

to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.

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Money market funds ¹ $ 102,039 $ — $ — $ 102,039

Commercial paper — 58,975 — 58,975

Corporate bonds — 262,757 — 262,757

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agency securities — 80,039 — 80,039

Certificates of deposit — 1,000 — 1,000

Total financial assets $ 549,035 $ 401,771 $ — $ 950,806

¹ Included within cash and cash equivalents on the Company’s balance sheet

¹ Included within cash and cash equivalents on the Company’s consolidated balance sheet

Financial assets subject to fair value measurements on a recurring basis and the level of inputs used in such measurements by major security type as of December 31, 2019 are presented in the following table:

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Money market funds ¹ $ 122,900 $ — $ — $ 122,900

Commercial paper — 4,917 — 4,917

Corporate bonds — 205,011 — 205,011

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agency securities — 25,824 — 25,824

Certificates of deposit — 1,000 — 1,000

Total financial assets $ 304,794 $ 231,835 $ — $ 536,629

¹ Included within cash and cash equivalents on the Company’s balance sheet

¹ Included within cash and cash equivalents on the Company’s consolidated balance sheet

The carrying amounts of accounts payable and accrued liabilities approximate their fair values due to their short-term maturities.

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Money market funds $ 102,039 $ — $ — $ 102,039

Commercial paper 58,969 8 ( 2 ) 58,975

Corporate bonds 262,349 444 ( 36 ) 262,757

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agency securities 80,012 30 ( 3 ) 80,039

Certificates of deposit 1,000 — — 1,000

Total cash equivalents and investments $ 950,095 $ 764 $ ( 53 ) $ 950,806

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Money market funds $ 122,900 $ — $ — $ 122,900

Commercial Paper 4,917 — — 4,917

Corporate bonds 204,144 871 ( 4 ) 205,011

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agency securities 25,658 167 ( 1 ) 25,824

Certificates of deposit 1,000 — — 1,000

Total cash equivalents and investments $ 535,042 $ 1,595 $ ( 8 ) $ 536,629

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Total cash equivalents, and investments $ 536,629

The Company believes that it is more-likely-than-not that investments in an unrealized loss position will be held until maturity and all interest and principal will be received.

The Company does not intent to sell these investments and it is not more likely than not that the Company will be required to sell the investment before recovery of its amortized cost basis.

The fair values of available-for-sale debt investments by contractual maturity as of December 31, 2020 and 2019 were as follows:

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Total cash equivalents and investments $ 950,806 $ 536,629

As of December 31, 2019 and 2018, the remaining contractual maturities of available-for-sale securities were less than two years and three years , respectively.

As of December 31, 2020 and 2019, the remaining contractual maturities of available-for-sale securities were less than three years and two years , respectively.

There have been no significant realized losses on available-for-sale securities for the years ended December 31, 2020, 2019 and 2018.

Based on the Company's review of its available-for-sale securities, the Company believes it had no other-than-temporary impairments on these securities as of December 31, 2019 and 2018, because the Company does not intend to sell these securities nor does the Company believe that it will be required to sell these securities before the recovery of their amortized cost basis.

Gross realized gains and gross realized losses were immaterial for the years ended December 31, 2019 and 2018.

As of December 31, 2020 and 2019, unrealized losses on available-for-sale investments are not attributed to credit risk.

The Company believes that it is more-likely-than-not that investments in an unrealized loss position will be held until maturity and all interest and principal will be received.

The Company believes that an allowance for credit losses is unnecessary because the unrealized losses on certain of the Company’s marketable securities are due to market factors.

As of December 31, 2020 and 2019, securities with a fair value of $ 5.0 million and zero respectively, were in a net unrealized loss position for more than 12 months.

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

As of December 31, 2020 and 2019, the Company recognized $ 2.8 million and $ 2.4 million of accrued interest receivable from available-for-sale investments within prepaid expenses and other current assets on the consolidated balance sheets.

Balance Sheet Components

Prepaid Expenses and Other Current Assets

(in thousands)

Prepaid research and development expenses $ 6,387 $ 2,356

Prepaid insurance 2,625 2,376

Accrued interest on short-term marketable securities 2,403 3,108

Other prepaid and current assets 2,628 758

Total prepaid expenses and other current assets $ 14,043 $ 8,598

Property and Equipment, Net

(in thousands)

Construction in progress $ 68,944 $ 12,390

Leasehold improvements 31,518 29,924

Laboratory equipment 23,810 13,117

Construction in progress 12,390 2,703

Computers equipment and purchased software 4,088 3,726

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Total property and equipment, net $ 118,840 $ 56,449

Depreciation expense for the years ended December 31, 2019 and 2018 was $ 4.6 million and $ 1.0 million, respectively.

Disposals of property and equipment were $ 0.2 million and zero for the years ended December 31, 2019 and 2018, respectively.

Intangible Assets, Net

December 31, 2019

Cost Accumulated

Carrying Value

(in thousands)

Assembled workforce $ 1,206 $ ( 1,055 ) $ 151

December 31, 2018

Cost Accumulated Amortization Carrying Value

(in thousands)

Assembled workforce $ 1,206 $ ( 452 ) $ 754

As of December 31, 2019, the weighted-average remaining amortization period of the assembled workforce was 0.26 years.

Amortization expense related to the assembled workforce intangible assets was $ 0.6 million and $ 0.5 million for the years ended December 31, 2019 and 2018, respectively.

Depreciation expense for the years ended December 31, 2020, 2019 and 2018 was $ 7.4 million, $ 4.6 million and $ 1.0 million respectively.

Disposals of property and equipment were zero , $ 0.2 million and zero for the years ended December 31, 2020, 2019 and 2018, respectively.

Accrued Liabilities

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Accrued property and equipment 7,475 3,575

Unvested shares liabilities 2,843 4,590

Unvested shares liability 2,842 2,843

Other 4,791 3,018

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The Company accounted for the transaction as an asset acquisition as substantially all of the estimated fair value of the gross assets acquired was concentrated in a single identified asset, anti-CD19 CAR T cell therapy, thus satisfying the requirements of the screen test in ASU 2017-1.

The assets acquired in the transaction were measured based on the fair value of the Series A-1 convertible preferred stock issued to Pfizer and direct transaction costs of $ 2.1 million, as the fair value of the

equity given was more readily determinable than the fair value of the assets received.

The following table summarizes the fair value of assets acquired (in thousands):

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No milestone or royalty payments were made in the years ended December 31, 2020, 2019 and 2018.

Pfizer is also eligible to receive, on a product-by-product and country-by-country basis, royalties in single-digit percentages on annual net sales for products covered by the Pfizer Agreement or that use certain Pfizer intellectual property and

for which an IND is first filed on or before April 6, 2023.

The Company’s royalty obligation with respect to a given product in a given country begins upon the first sale of such product in such country and ends on the later of (i) expiration of the last claim of any applicable patent or (ii) 12 years from the first sale of such product in such country.

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In addition, certain Cellectis intellectual property rights granted by Cellectis to the Company and to Servier pursuant to the Exclusive License and Collaboration Agreement by and between Servier and Pfizer, dated October 30, 2016, which Pfizer assigned to the Company in April 2018, will survive the termination of the Original Cellectis Agreement.

Pursuant to the Cellectis Agreement, the Company granted Cellectis a non-exclusive, worldwide, royalty-free, perpetual and irrevocable license, with sublicensing rights under certain conditions, under certain of the Company's intellectual property, to make, use, sell, import and otherwise commercialize CAR T products directed at certain targets (the Cellectis Targets).

property, to make, use, sell, import and otherwise commercialize CAR T products directed at certain targets (the Cellectis Targets).

The Cellectis Agreement provides for development and sales milestone payments by the Company of up to $ 185.0 million per product that is directed against an Allogene Target, with aggregate potential development and sales milestone payments totaling up to $ 2.8 billion.

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If the Company materially breaches any of its diligence obligations and fails to cure within 90 days, then with respect to certain targets, such target will cease to be an Allogene Target and instead will become a Cellectis Target.

Unless earlier terminated in accordance with its terms, the Cellectis Agreement will expire on a product-by-product and country-by-country basis, upon expiration of all royalty payment obligations with respect to such licensed product in such

The Company has the right to terminate the Cellectis Agreement at will upon 60 days’ prior written notice, either in its entirety or on a target-by-target basis.

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The Cellectis Agreement may also be terminated by the Company upon written notice at any time in the event that Cellectis becomes bankrupt or insolvent or upon written notice within 60 days of a consummation of a change of control of Cellectis.

All costs the Company incurred in connection with this agreement were recognized as research and development expenses.

For the year ended December 31, 2019, $ 5.0 million of costs were incurred related to the achievement of a clinical development milestone under this agreement, which was recognized in research and development expenses in the statement of operations.

No clinical development milestones were achieved for the year ended December 31, 2018.

For the years ended December 31, 2019 and 2018, zero and $ 0.4 million, respectively, of costs have been incurred associated with research services performed by Cellectis.

All costs the Company incurred in connection with this agreement were recognized as research and development expenses in the consolidated statement of operations.

For the year ended December 31, 2019, $ 5.0 million of costs were incurred related to the achievement of a clinical development milestone under this agreement.

No clinical development milestones were achieved for the years ended December 31, 2020 and 2018.

License and Collaboration Agreement with Servier

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The Company is not required to make any additional payments to Servier to exercise an option.

If the Company opts-in to another product candidate, Servier has the right to obtain rights to such product candidate outside the United States and to share development costs for such product candidate.

Company opts-in to another product candidate, Servier has the right to obtain rights to such product candidate outside the United States and to share development costs for such product candidate.

Under the Servier Agreement, the Company is required to use commercially reasonable efforts to develop and obtain marketing approval in the United States in the field of anti-tumor adoptive immunotherapy for at least one product directed against CD19, and Servier is required to use commercially reasonable efforts to develop and obtain marketing approval in the European Union, and one other country in a group of specified countries outside of the European Union and the United States, in the field of anti-tumor adoptive immunotherapy for at least one allogeneic adaptive T cell product directed against a certain Company-selected target.

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Such royalties may be reduced for interchangeable drug entry, expiration of patent rights and amounts paid pursuant to licenses of third-party patents.

The royalty obligation for each party with respect to a given licensed product in a given country in each

party’s respective territory (the Servier Royalty Term) begins upon the first commercial sale of such product in such country and ends after a defined number of years.

The royalty obligation for each party with respect to a given licensed product in a given country in each party’s respective territory (the Servier Royalty Term) begins upon the first commercial sale of such product in such country and ends after a defined number of years.

Unless earlier terminated in accordance with the Servier Agreement, the Servier Agreement will continue, on a licensed product-by-licensed product and country-by-country basis, until the Servier Royalty Term with respect to the sale of such licensed product in such country expires.

For the years ended December 31, 2019 and 2018, the Company recorded $ 7.3 million and $ 4.2 million, respectively, of costs incurred under the cost-sharing terms of the Servier Agreement as research and development expenses.

As of December 31, 2019 and 2018, amounts due to Servier of $ 2.2 million and $ 4.2 million were recorded in accrued and other current liabilities in the accompanying balance sheets.

Research Collaboration and License Agreement with Notch

For the year ended December 31, 2020, the Company recorded $ 8.5 million of net cost recoveries under the cost-sharing terms as a reduction to research and development expenses.

For the years ended December 31, 2019 and 2018, the Company recorded $ 7.3 million and $ 4.2 million, respectively, of costs incurred under the collaboration agreement with Servier as research and development expenses.

As of December 31, 2020, amounts due from Servier of $ 3.8 million were recorded in other current assets in the accompanying consolidated balance sheets.

As of December 31, 2019, amounts due to Servier of $ 2.2 million were recorded in accrued and other current liabilities in the accompanying consolidated balance sheets.

Research Collaboration and License Agreement with Notch Therapeutics

On November 1, 2019, the Company entered into a Collaboration and License Agreement (the Notch Agreement) with Notch Therapeutics Inc.

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The Notch Agreement includes a research collaboration to conduct research and pre-clinical development activities to generate engineered cells directed to Allogene’s exclusive targets, which will be conducted in accordance with an agreed research plan and budget under the oversight of a joint development committee.

Allogene will reimburse Notch’s costs incurred in accordance with such plan and budget.

Allogene will reimburse Notch’s costs incurred

in accordance with such plan and budget.

The term of the research collaboration will expire upon the earlier of (i) the fifth anniversary of the date of the Notch Agreement, (ii) at Allogene’s election, following the joint development committee’s determination that for each exclusive target, Notch has met certain success criteria, or (iii) the joint development committee’s determination that the research collaboration cannot be reasonably pursued against any exclusive target due to technical infeasibility or safety issues.

In connection with the execution of the Notch Agreement, Allogene made an upfront payment to Notch of $ 10.0 million in return for a license to access Notch's technology in order to conduct research pursuant to the Notch Agreement.

The Company recognized a research and development expense of $ 10 million during the year to December 31, 2019 as the license had no foreseeable alternative future use.

The Company recognized a research and development expense of $ 10 million during the year ended December 31, 2019 as the license had no foreseeable alternative future use.

In addition, Allogene made a $ 5.0 million investment in Notch’s series seed convertible preferred stock, resulting in Allogene having a 25 % ownership interest in Notch’s outstanding capital stock on a fully diluted basis immediately following the investment.

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Either party may also terminate the Collaboration Agreement with written notice upon material breach by the other party, if such breach has not been cured within a defined period of receiving such notice, or in the event of the other party’s insolvency.

The Company has determined that Notch is a variable interest entity as of December 31, 2019.

The Company has determined that Notch is a variable interest entity as of December 31, 2020 and 2019, respectively.

The Company does not have the power to direct the activities which most significantly affect Notch's economic performance.

Accordingly, for the year

ended December 31, 2019, the Company did not consolidate Notch because the Company determined that it was not the primary beneficiary.

Accordingly, for the years ended December 31, 2020 and 2019, the Company did not consolidate Notch because the Company determined that it was not the primary beneficiary.

For the years ended December 31, 2020 and 2019, the Company recorded $ 3.2 million and $ 0.1 million, respectively, in collaboration costs as research and development expenses.

Strategic Alliance with The University of Texas MD Anderson Cancer Center

On October 6, 2020, the Company entered into a strategic five-year collaboration agreement with The University of Texas MD Anderson Cancer Center (MD Anderson) for the preclinical and clinical investigation of allogeneic CAR T cell product candidates.

The Company and MD Anderson are collaborating on the design and conduct of preclinical and clinical studies with oversight from a joint steering committee.

Under the terms of the agreement, the Company has committed up to $ 15.0 million of funding for the duration of the agreement.

Payment of this funding is contingent on mutual agreement to study orders in order for any study to be included under the alliance.

The Company made an upfront payment of $ 3.0 million to MD Anderson in the year ended December 31, 2020.

The Company is obligated to make further payments to MD Anderson each year upon the anniversary of the agreement effective date through the duration of the agreement term.

These costs are expensed to research and development as MD Anderson renders the services under the strategic alliance.

As of December 31, 2020, no research and development costs had been incurred under the alliance.

The agreement may be terminated by either party for material breach by the other party.

Individual studies may be terminated for, among other things, material breach, health and safety concerns or where the institutional review board, the review board at the clinical site with oversight of the clinical study, requests termination of any study.

Where any legal or regulatory authorization is finally withdrawn or terminated, the relevant study will also terminate automatically.

Joint Venture and License Agreement with Allogene Overland Biopharm (CY) Limited

On December 14, 2020, the Company entered into a License Agreement with Allogene Overland Biopharm (CY) Limited (Allogene Overland), a joint venture established by the Company and Overland Pharmaceuticals (CY) Inc.

(Overland), pursuant to a Share Purchase Agreement, dated December 14, 2020, for the purpose of developing, manufacturing and commercializing certain allogeneic CAR T cell therapies for patients in greater China, Taiwan, South Korea and Singapore (the JV Territory).

Pursuant to the Share Purchase Agreement, the Company acquired Seed Preferred Shares in Allogene Overland representing 49 % of Allogene Overland's outstanding stock as partial consideration for the License Agreement, and Overland acquired Seed Preferred Shares representing 51 % of Allogene Overland's outstanding stock for $ 117.0 million in upfront and certain quarterly cash payments, to support operations of Allogene Overland.

As of December 31, 2020, the Company and Overland are the sole equity holders in Allogene Overland.

The Company received $ 40 million from Allogene Overland as partial consideration for the License Agreement.

Pursuant to the License Agreement, the Company granted Allogene Overland an exclusive license to develop, manufacture and commercialize certain allogeneic CAR T cell candidates directed at four targets, BCMA, CD70, FLT3, and DLL3, in the JV Territory.

As consideration, the Company would also be entitled to additional regulatory milestone payments of up to $ 40.0 million and, subject to certain conditions, tiered low-to-mid single-digit sales royalties.

Promises that the Company concluded were distinct performance obligations in the License Agreement included:

(1) the license of intellectual property and delivery of know-how, (2) the manufacturing license, related know-how and support, (3) if and when available know-how developed in future periods, and (4) participation in the joint steering committee.

In order to determine the transaction price, the Company evaluated all the payments to be received during the duration of the contract.

Fixed consideration exists in the form of the upfront payment.

Regulatory milestones and royalties were considered variable consideration.

The Company constrains the estimated variable consideration when it assesses it is probable that a significant reversal in the amount of cumulative revenue recognized may occur in future periods.

Milestone fees were constrained and not included in the transaction price due to the uncertainties of research and development.

The Company re-evaluates the transaction price, including the estimated variable consideration included in the transaction price and all constrained amounts, in each reporting period and as uncertain events are resolved or other changes in circumstances occur.

The shares of Series Seed Preferred Stock were accounted for as part of the Company’s joint venture and equity method accounting upon formation of the joint venture, and as such, were excluded from the transaction price.

The Company determined that the initial transaction price consists of the upfront payment of $ 40.0 million.

The transaction price allocated to the license of intellectual property and delivery of know-how will be recognized upon grant of license and delivery of know-how.

The transaction price allocated to (i) the manufacturing license, related know-how and support services, (ii) if and when available know-how developed in future periods, and (iii) participation in the joint steering committee, will be recognized over time as the services are delivered.

Funds received in advance are recorded as deferred revenue and will be recognized as the performance obligations are satisfied.

The Company has determined that Allogene Overland is a variable interest entity as of December 31, 2020.

The Company does not have the power to independently direct the activities which most significantly affect Allogene Overland's economic performance.

Accordingly, for the year ended December 31, 2020, the Company did not consolidate Allogene Overland because the Company determined that it was not the primary beneficiary.

For the year ended December 31, 2020, the Company recorded the $ 40.0 million upfront cash payment received from Allogene Overland as deferred revenue, of which $ 39.0 million was current, on the consolidated balance sheet.

Commitments and Contingencies

In August 2018, the Company entered into an operating lease agreement for new office and laboratory space which consists of approximately 68,000 square feet located in South San Francisco, California.

The lease term is 127 months beginning August 2018 through February 2029 with an option to extend the term for another seven years which is not reasonably assured of exercise.

The Company has the right to make tenant improvements, including the addition of laboratory space, with a lease incentive allowance of $ 5.1 million.

The Company has made certain tenant improvements, including the addition of laboratory space, and has received $ 5.0 million of tenant improvement allowances up to December 31, 2020.

The rent payments began on March 1, 2019 after an abatement period.

In connection with the lease, the Company has maintained a letter of credit for the benefit of the landlord in the amount of $ 1.0 million.

In connection with the lease, the Company recognized an operating lease right-of-use asset of $ 23.2 million and $ 24.6 million as of December 31, 2019 and 2018, respectively, and an aggregate lease liability of $ 30.9 million and $ 26.3 million, respectively, on the balance sheet.

The remaining lease term is 9 years and 2 months , and the estimated incremental borrowing rate is 8.0 %.

In October 2018, the Company entered into an operating lease agreement for new office and laboratory space which consists of approximately 14,943 square feet located in South San Francisco, California.

In October 2018, the Company entered into an operating lease agreement for new office and laboratory space which consists of 14,943 square feet located in South San Francisco, California.

The lease term is 124 months beginning November 2018 through February 2029, with an option to extend the term for another seven years which is not reasonably assured of exercise.

The Company has the right to make tenant improvements, including the upgrading of current office and laboratory space with a lease incentive allowance of $ 0.8 million.

The Company has made certain tenant improvements, including the upgrading of current office and laboratory space with a lease incentive allowance of $ 0.8 million.

Rent payments began in November 2018.

In connection with the lease, the Company has maintained a letter of credit for the benefit of the landlord in the amount of $ 0.2 million.

In connection with the lease, the Company recognized an operating lease right-of-use asset of $ 5.9 million and $ 6.2 million as of December 31, 2019 and 2018, respectively, and an aggregate lease liability of $ 6.2 million and $ 6.3 million, respectively, on the balance sheet.

The remaining lease term is 9 years and 2 months , and the estimated incremental borrowing rate is 8.0 %.

In December 2018, the Company entered into two operating leases for office space in New York and Los Angeles for approximately 4,358 and 1,293 square feet respectively.

The Company recognized operating lease right-of-use assets of $ 1.7 million and $ 2.0 million for New York and $ 0.1 million and $ 0.2 million for Los Angeles as of December 31, 2019 and 2018, respectively.

The Company recognized aggregate lease liabilities of $ 1.7 million and $ 2.0 million for New York and $ 0.2 million and $ 0.2 million for Los Angeles as of December 31, 2019 and 2018, respectively.

The lease term for the New York operating lease is 6 years and 7 months , with no option for renewal.

The lease term for the Los Angeles operating lease is 3 years with an option to extend the lease term for another 2 years which is not reasonably assured of exercise.

There were no lease incentive allowances for either location.

In connection with the New York lease, the Company maintained a letter of credit for the benefit of the landlord in the amount of $ 0.1 million.

The remaining lease terms were 5 years and 6 months for New York and 1 year and 11 months for Los Angeles at December 31, 2019 and the estimated incremental borrowing rates applied were 8.0 % and 7.5 %, respectively.

In February 2019, the Company entered into a lease agreement for approximately 118,000 square feet of space to develop a cell therapy manufacturing facility in Newark, California.

The lease term is 188 months beginning November 2020 through July 2036.

Upon certain conditions, the Company has two ten-year options to extend the lease, both of which are not reasonably assured of exercise.

The Company is entitled to a tenant improvement allowance of $ 2.9 million for costs related to the design and construction of certain Company improvements.

In connection with the lease, the Company will maintain a letter of credit for the benefit of the landlord in the amount of $ 3.0 million.

The Company started accounting for this lease in October 2019 when tenant improvement work commenced, and recognized an operating lease right-of-use asset of $ 13.6 million as of December 31, 2019 and an aggregate lease liability of $ 14.0 million on its balance sheet.

The lease term is 188 months, and the estimated incremental borrowing rate is 9.25 %.

The Company is entitled to a tenant improvement allowance of $ 2.9 million for costs related to the design and construction of certain Company improvements, and has received $ 1.6 million of tenant improvement allowances up to December 31, 2020.

The Company maintains letters of credit for the benefit of landlords which is disclosed as restricted cash in the consolidated balance sheet.

Restricted cash related to letters of credit due to landlords was $ 5.2 million and $ 4.3 million as of December 31, 2020 and 2019, respectively.

The balance sheet classification of our lease liabilities were as follows (in thousands):

December 31, 2020 December 31, 2019

Operating lease liabilities

Current portion included in accrued and other current liabilities $ 2,974 $ 1,679

Long-term portion of lease liabilities 50,809 51,349

Total operating lease liabilities $ 53,783 $ 53,028

The components of lease costs for operating leases, which were recognized in operating expenses, were as follows (in thousands):

Twelve Months Ended December 31,

2020 2019 2018

Operating lease cost $ 7,390 $ 5,945 $ 1,863

Variable lease cost 1,382 1,087 32

Total lease costs $ 8,771 $ 7,033 $ 1,895

Cash paid for amounts included in the measurement of lease liabilities for the twelve months ended December 31, 2020 was $ 6.2 million and was included in net cash used in operating activities in our consolidated statements of cash flows.

The undiscounted future non-cancellable lease payments under our operating leases as of December 31, 2020 is as follows:

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Total $ 53,783

Rent expense for the Company’s operating leases was $ 5.9 million and $ 1.9 million for the years ended December 31, 2019 and 2018, respectively, net of lease incentives recognized.

Rent expense for short-term leases was $ 2.4 million and $ 2.6 million for the years ended December 31, 2019 and 2018, respectively.

There was a total commitment of zero and $ 1.6 million at December 31, 2019 and 2018, respectively, related to short-term leases.

Variable lease payments for operating expenses were $ 1.1 million and immaterial for the years ended December 31, 2019 and 2018, respectively.

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

In determining the present value of lease payments, we use our estimated incremental borrowing rate.

The weighted average discount rate used to determine the operating lease liability was 8.37 %.

As of December 31, 2020, the weighted average remaining lease term for our operating leases is 10.28 years.

Rent expense for short-term leases was $ 0.2 million, $ 2.4 million and $ 2.6 million for the years ended December 31, 2020, 2019 and 2018 respectively.

Certain lease agreements require the Company to return designated areas of leased space to its original condition upon termination of the lease agreement.

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In subsequent periods, for each asset retirement obligation, the Company records interest expense to accrete the asset retirement obligation liability to full value and depreciate each capitalized asset retirement obligation asset, both over the term of the associated lease agreement.

Asset retirement obligations were $ 0.4 million and zero as of December 31, 2019 and 2018 respectively.

Equity Method Investment

In conjunction with the execution of the Notch Agreement (see Note 7), the Company also entered into a Share Purchase Agreement (“Notch Investment Agreement”) with the Company acquiring shares of Notch’s Series Seed convertible preferred stock for a total investment cost of $ 5.1 million which includes transaction costs of $ 0.1 million, resulting in a 25 % ownership interest in Notch.

The Company’s total equity investment in Notch as of December 31, 2019 was $ 4.9 million and the Company accounted for the investment using the cost method of accounting.

During the year ended December 31, 2019, the Company recognized its share of Notch's net loss under the other expenses caption within the statement of operations.

The Company's share of Notch's net loss was $ 0.2 million for the year ended December 31, 2019.

Commitments and Contingencies

Asset retirement obligations were $ 0.5 million and $ 0.4 million as of December 31, 2020 and 2019 respectively.

Other Commitments

Solar Power Purchase and Energy Services Agreement

In July 2020, the Company entered into a Solar Power Purchase and Energy Services Agreement for the installation and operation of a solar photovoltaic generating system and battery energy storage system at the Company's cell therapy manufacturing facility in Newark, California.

The agreement has a term of 20 years and is expected to commence in the first half of 2021.

The Company is obligated to pay for electricity generated from the system at an agreed rate for the duration of the agreement term.

Termination of the agreement by the Company will result in a termination payment due of approximately $ 4.3 million.

In connection with the agreement, the Company maintains a letter of credit for the benefit of the service provider in the amount of $ 4.3 million which is disclosed as restricted cash in the consolidated balance sheet as of December 31, 2020.

License Agreements for Intellectual Property

The Company has entered into certain license agreements for intellectual property which is used as part of our development and manufacturing processes.

Each of these respective agreements are generally cancellable by the Company.

These agreements require payment of annual license fees and may include conditional milestone payments for achievement of specific research, clinical and commercial events, and royalty payments.

The timing and likelihood of any significant conditional milestone payments or royalty payments becoming due was not probable as of December 31, 2020.

Purchase Commitments

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These agreements generally provide for termination or cancellation, other than for costs already incurred.

As of December 31, 2020, the Company had non-cancellable purchase commitments of $ 5.4 million.

Contingencies

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There have been no claims to date, and the Company has a directors and officers liability insurance policy that may enable it to recover a portion of any amounts paid for future claims.

Equity Method Investments

Notch Therapeutics

In conjunction with the execution of the Notch Agreement (see Note 7), the Company also entered into a Share Purchase Agreement with the Company acquiring shares of Notch’s Series Seed convertible preferred stock for a total investment cost of $ 5.1 million which includes transaction costs of $ 0.1 million, resulting in a 25 % ownership interest in Notch.

The Company’s total equity investment in Notch as of December 31, 2020 and 2019 was $ 3.7 million and $ 4.9 million, respectively, based on the cost method of accounting.

During the years ended December 31, 2020 and 2019, the Company recognized its share of Notch's net loss under the other expenses caption within the consolidated statement of operations.

Allogene Overland Biopharm (CY) Limited

In conjunction with the execution of the License Agreement with Allogene Overland (see Note 7), the Company also entered into a Share Purchase Agreement and Shareholders' Agreement with the joint venture company acquiring shares of Allogene Overland’s Seed Preferred Shares representing a 49 % ownership interest in exchange for entering into a License Agreement which had a carrying value of zero.

The Company accounts for its investment in Allogene Overland as an equity method investment at carrying value.

The Company's total equity investment is Allogene Overland was zero as of December 31, 2020.

The Company’s equity investment in Allogene Overland as of December 31, 2020 had a zero carryover basis.

Therefore, the Company did not account for its share of losses incurred by Allogene Overland.

See Note 7 for further details.

Convertible Notes Payable (2018 Notes)

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2018 Equity Incentive Plan

In June 2018, the Company adopted the 2018 Equity Incentive Plan (2018 Plan).

In June 2018, the Company adopted its 2018 Equity Incentive Plan (Prior 2018 Plan).

The 2018 Plan provided for the Company to sell or issue common stock or restricted common stock, or to grant incentive stock options or nonqualified stock options for the purchase of common stock, to employees, members of the Company’s Board of Directors and consultants of the Company under terms and provisions established by the Company’s Board of Directors.

In October 2018, the Board of Directors approved an amendment and restatement of the 2018 Plan, increasing the shares of common stock issuable under the 2018 Plan as well as allowing for an automatic annual increase to the shares issuance under the 2018 Plan to the amount equal to 5 % of the total number of shares of common stock outstanding on December 31 st of the preceding calendar year.

In September 2018, the Board of Directors adopted a new amended and restated 2018 Equity Incentive Plan as a successor to and continuation of the Prior 2018 Plan, which became effective in October 2018 (the 2018 Plan), which authorized additional shares for issuance and provided for an automatic annual increase to the number of shares issuable under the 2018 Plan by an amount equal to 5 % of the total number of shares of common stock outstanding on December 31 st of the preceding calendar year.

The term of any stock option granted under the 2018 Plan cannot exceed 10 years.

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Balance, December 31, 2020 10,434,034 $ 17.73 8.29 $ 93,149

Options granted 3,052,816 27.47

Options exercised ( 711,123 ) 4.16 $ 17,141

Options forfeited ( 386,716 ) 8.79

Balance, December 31, 2019 9,190,522 $ 14.51 8.82 $ 110,490

Exercisable, December 31, 2020 6,473,752 $ 15.77 8.17 $ 65,818

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During the years ended December 31, 2020 and 2019, the estimated weighted-average grant-date fair value of employee options granted was $ 13.79 per share and $ 18.42 per share, respectively.

As of December 31, 2019 and 2018, there was $ 74.7 million and $ 42.8 million, respectively, of unrecognized stock-based compensation related to unvested stock options, which is expected to be recognized over a weighted-average period of 3 years, 15 days and 3 years, 6 months , respectively.

As of December 31, 2020 and 2019, there was $ 81.1 million and $ 74.7 million, respectively, of unrecognized stock-based compensation related to unvested stock options, which is expected to be recognized over a weighted-average period of 2 years, 222 days and 3 years, 15 days , respectively.

The fair value of employee, consultant and director stock option awards was estimated at the date of grant using a Black-Scholes option-pricing model with the following assumptions:

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Fair value of common stock $ 18.22 - $ 48.94

$ 25.94 - $ 31.99

Expected term in years 5.31 - 6.09

Expected volatility 71.42 % - 72.14 %

74.14 % - 74.92 %

Expected risk-free interest rate 0.31 % - 1.65 %

1.54 % - 2.62 %

Expected dividend 0 % 0 %

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Vested and expected to vest, December 31, 2020 2,493,920 $ 26.14 1.66 $ 62,947

In September 2019, the Company granted 57,361 performance based restricted stock units to a certain executive officer pursuant to the 2018 Plan.

These performance awards are subject to the holder's continued service to the Company through each applicable vesting event.

For the years ended December 31, 2020 and 2019, the Company granted zero and 57,361 performance based restricted stock units to a certain executive officer pursuant to the 2018 Plan.

The 2019 granted performance awards are subject to the holder's continued service to the Company through each applicable vesting event.

Through December 31, 2020, the Company believes that the achievement of the requisite performance conditions for these awards are not probable and as a result, no compensation expense has been recognized related to these awards in the year ended December 31, 2020.

For the years ended December 31, 2019 and 2018, total stock-based compensation expense related to restricted stock units was $ 8.8 million and zero , respectively.

As of December 31, 2019 and 2018, there was $ 43.0 million and zero , respectively, of unrecognized stock-based compensation which is expected to be recognized over a weighted average period of 1.98 years.

For the years ended December 31, 2020 and 2019, total stock-based compensation expense related to restricted stock units was $ 17.2 million and $ 8.8 million, respectively.

As of December 31, 2020 and 2019, there was $ 51.1 million and $ 43.0 million, respectively, of unrecognized stock-based compensation which is expected to be recognized over a weighted average period of 2.84 years.

Employee Stock Purchase Plan

In October 2018, the shareholders approved the 2018 Employee Stock Purchase Plan (ESPP), which initially reserved 1,160,000 shares of our common stock for employee purchases under terms and provisions established by the Board of Directors.

Effective January 1, 2019, the number of shares authorized under the ESPP for employee purchases increased by 1,214,826 shares.

Effective January 1, 2020 and 2019, the number of shares authorized under the ESPP for employee purchases increased by 1,242,673 and 1,214,826 shares respectively.

The ESPP is intended to qualify as an ‘employee stock purchase plan’ under Section 423 of the Internal Revenue Code.

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Volatility 63.88 % - 72.75 %

60.4 % - 76.0 %

Risk-free interest rate 0.12 %- 0.36 %

1.72 % - 2.49 %

Dividend yield — —

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For the years ended December 31, 2020 and 2019, $ 13.7 million and $ 13.7 million of stock-based compensation expense was recognized related to the vesting of 6,057,684 and 6,057,684 shares, respectively, of founders' stock.

At December 31, 2019 and 2018, there was $ 30.9 million and $ 44.6 million of unrecognized stock-based compensation expense related to 13,629,803 and 19,687,487 shares of unvested founders’ stock which is expected to be recognized over 2 years, 3 months and 3 years, 3 months , respectively.

At December 31, 2020 and 2019, there was $ 17.1 million and $ 30.9 million of unrecognized stock-based compensation expense related to 7,572,119 and 13,629,803 shares of unvested founders’ stock which is expected to be recognized over 1 year, 3 months and 2 years, 3 months , respectively.

The weighted-average fair value at grant date for founders’ stock was $ 2.27 per share.

Total stock-based compensation expense related to stock options, employee stock purchase plans and vesting of the founders’ common stock was as follows:

Total stock-based compensation expense related to stock options, restricted stock units, employee stock purchase plans and vesting of the founders’ common stock was as follows:

Year Ended December 31,

2020 2019 2018

(in thousands)

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Early Exercised Options

The Company allows certain of its employees and its directors to exercise options granted under the 2018 Plan prior to vesting.

The Company allows certain of its employees and its directors to exercise options granted under the Prior 2018 Plan and the 2018 Plan prior to vesting.

The shares related to early exercised stock options are subject to the Company’s lapsing repurchase right upon termination of employment or service on the Company’s Board of Directors at the lesser of the original purchase price or fair market value at the time of repurchase.

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The proceeds are reclassified to paid-in capital as the repurchase right lapses.

During the years ended December 31, 2019 and 2018, zero and 5,020,580 options were early exercised.

During the years ended December 31, 2020 and 2019, zero options were early exercised.

As of December 31, 2020 and 2019, there was $ 2.8 million and $ 2.8 million recorded in accrued and other liabilities and $ 1.1 million and $ 3.9 million recorded in other long-term liabilities related to shares held by employees and directors that were subject to repurchase.

The underlying shares are shown as outstanding in the financial statements since the exercise date.

The underlying shares are shown as outstanding in the consolidated financial statements since the exercise date but the shares which are subject to future vesting conditions are not included in the calculation of earnings per share.

Related Party Transactions

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In September 2019, the Company and Pfizer terminated the Pfizer TSA.

For the years ended December 31, 2019 and 2018, the costs incurred under the Pfizer TSA were $ 4.5 million and $ 10.1 million, respectively.

For the years ended December 31, 2020, 2019 and 2018, the costs incurred under the Pfizer TSA were zero , $ 4.5 million and $ 10.1 million, respectively.

The Company also purchased certain lab supplies and services from Pfizer in connection with its research and development activities.

For the years ended December 31, 2019 and 2018, total lab supplies and services purchased from Pfizer were $ 1.4 million and $ 10.4 million, respectively.

As of December 31, 2019 and 2018, the Company had amounts payable to Pfizer of $ 0.1 million and $ 5.7 million, respectively, which were recorded in the accompanying balance sheet.

For the years ended December 31, 2020, 2019 and 2018, total lab supplies and services purchased from Pfizer were zero , $ 1.4 million and $ 10.4 million, respectively.

As of December 31, 2020 and 2019, the Company had amounts payable to Pfizer of zero and $ 0.1 million, respectively, which were recorded in the accompanying consolidated balance sheets.

Consulting Agreements

In June 2018, the Company entered into a services agreement with Two River Consulting LLC (Two River) a firm affiliated with the Company’s President and Chief Executive Officer, the Company’s Executive Chairman of the board of directors, and a director of the Company to provide various managerial, administrative, accounting and financial services to the Company.

The costs incurred for services provided under this agreement were $ 0.6 million for the years ended December 31, 2019 and 2018.

In June 2018 the Company entered into a consulting services agreement with TPG Capital – FO LLC (TPG FO) a firm affiliated with a beneficial owner of more than 5 % of the Company’s capital stock.

The costs incurred for services performed under this agreement were zero and $ 0.3 million for the years ended December 31, 2019 and 2018, respectively.

The costs incurred for services provided under this agreement were $ 0.4 million, $ 0.6 million and $ 0.6 million for the years ended December 31, 2020, 2019 and 2018, respectively.

In August 2018, the Company entered into a consulting agreement with Bellco Capital LLC (Bellco).

The Company’s executive chairman, Arie Belldegrun, M.D., FACS, is the Chairman and an owner of Bellco.

Pursuant to the consulting agreement, Bellco provides certain services for the Company, which are performed by Dr.

Belldegrun and include without limitation, providing advice and analysis with respect to the Company’s business, business strategy and potential opportunities in the field of allogeneic CAR T cell therapy and any other aspect of the CAR T cell therapy business as the Company may agree.

In consideration for these services, the Company paid Bellco $ 26,250 per month in arrears commencing June 2018.

Beginning January 2019, the Company paid Bellco $ 33,333.33 per month in arrears and, at the Company’s discretion, may pay Bellco an annual performance award in an amount up to 60 % of the aggregate compensation payable to Bellco in a calendar year.

In consideration for these services, the Company paid Bellco $ 33,333 per month in arrears commencing January 2019 and $ 37,000 per month in arrears commencing January 2020.

The Company may also, at its discretion, pay Bellco an annual performance award in an amount up to 60 % of the aggregate compensation payable to Bellco in a calendar year.

The Company also reimburses Bellco for out of pocket expenses incurred in performing the services.

The costs incurred for services provided, bonus and out-of-pocket expenses incurred under this consulting agreement were $ 0.8 million and $ 0.5 million for the years ended December 31, 2019 and 2018, respectively.

The costs incurred for services provided, bonus and out-of-pocket expenses incurred under this consulting agreement were $ 0.9 million, $ 0.8 million and $ 0.5 million for the years ended December 31, 2020, 2019 and 2018, respectively.

As of December 31, 2020 and 2019, amounts due to Bellco of $ 0.3 million and $ 0.3 million, respectively, were recorded in accrued and other current liabilities in the accompanying consolidated balance sheets.

Sublease Agreements

In December 2018, the Company entered into a sublease with Bellco for 1,293 square feet of office space in Los Angeles, California for a three year term.

On April 1, 2020, Bellco Capital Advisors Inc.

assumed all rights, title, interests and obligations under the sublease from Bellco Capital LLC.

The Company’s executive chairman, Arie Belldegrun, M.D., FACS, is a trustee of the Belldegrun Family Trust, which controls Bellco Capital Advisors Inc.

The total right of use asset and associated liability recorded related to this related party lease was $ 0.1 million and $ 0.1 million at December 31, 2020 and 2019, respectively.

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ByHeart is a development-stage infant formula company.

Two of the Company’s board members have beneficial ownership in ByHeart and one serves on the board of directors of ByHeart.

Certain of the Company’s board members and executive officers have beneficial ownership in ByHeart and two serve on the board of directors of ByHeart.

In September 2019, the Company entered into an amendment to the sublease agreement and increased the subleased space to 2,907 square feet.

Sublease income for the year ended December 31, 2019 was $ 0.3 million and was recognized as other income.

In October 2020, the sublease agreement between the Company and ByHeart was terminated.

Sublease income for the years ended December 31, 2020 and 2019 was $ 0.3 million and $ 0.3 million, respectively, and was recognized as other income.

Allogene Overland Biopharm (CY) Limited

On December 14, 2020, the Company entered into an agreement with Overland to create a joint venture for the purpose of developing, manufacturing and commercializing certain allogeneic CAR T cell therapies for patients in greater China, Taiwan, South Korea and Singapore.

In December 2020, the joint venture company, Allogene Overland, was established and obtained its business license in the Cayman Islands.

Upon consummation of the joint venture, the Company and Overland received a 49 % and 51 % equity interest, respectively, in the entity in exchange for their contributions to the entity.

See Notes 7 and 9 for further discussion.

In April 2018, the Company began to sponsor a 401(k) retirement savings plan for the benefit of its employees.

All employees are eligible to participate, provided they meet the requirements of the plan.

The Company made contributions to the plan for eligible participants, and recorded contribution expenses of $ 0.9 million and $ 0.4 million related to matched contributions for the year ended December 31, 2019 and 2018, respectively.

For the years ended December 31, 2019 and 2018, the Company recorded income tax benefit due to the intraperiod tax allocation of deferred income taxes on unrealized gains on available for sale securities recorded in other comprehensive income.

The Company made contributions to the plan for eligible participants, and recorded contribution expenses of $ 1.4 million, $ 0.9 million and $ 0.4 million related to matched contributions for the years ended December 31, 2020, 2019 and 2018, respectively.

For the years ended December 31, 2020, 2019 and 2018, the Company recorded income tax related to minimum state taxes.

The Company has incurred net operating losses for all the periods presented.

The Company has not reflected any benefit of such net operating loss carryforwards in the accompanying financial statements.

The Company has not reflected any benefit of such net operating loss carryforwards in the accompanying consolidated financial statements.

The Company has established a full valuation allowance against its deferred tax assets due to the uncertainty surrounding the realization of such assets.

Year Ended December 31, Period from November 30, 2017 (Inception) to December 31,

Year Ended December 31,

2020 2019 2018

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Reconciliation of the benefit for income taxes calculated at the statutory rate to our benefit for income taxes is as follows:

Year Ended December 31, Period from November 30, 2017 (Inception) to December 31,

Year Ended December 31,

2020 2019 2018

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Significant components of our deferred tax assets and liabilities are as follows:

Year Ended December 31, Period from November 30, 2017 (Inception) to December 31

Year Ended December 31,

2020 2019 2018

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Stock based compensation 12,970 6,870 360

Investments 175 — —

Total deferred tax assets 176,173 105,111 51,804

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Due to the lack of earnings history, the net deferred tax assets have been fully offset by a valuation allowance.

The valuation allowance increased by approximately $ 50.0 million and $ 41.9 million during the years ended December 31, 2019 and December 31, 2018, respectively.

The valuation allowance increased by approximately $ 72.5 million, $ 50.0 million and $ 41.9 million during the years ended December 31, 2020, 2019 and 2018, respectively.

The following table sets forth our federal and state NOL carryforwards and federal research and development tax credits as of December 31, 2020:

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Such a limitation could result in the expiration of carryforwards before they are utilized.

Income tax expense or benefit from continuing operations is generally determined without regard to other categories of earnings, such as discontinued operations and other comprehensive income.

An exception is provided in ASC 740 when there is aggregate income from categories other than continuing operations and a loss from continuing operations in the current year.

In this case, the tax benefit allocated to continuing operations is the amount by which the loss from continuing operations reduces the tax expenses recorded with respect to the other categories of earnings, even when a valuation allowance has been established against the deferred tax assets.

In instances where a valuation allowance is established against current year losses, income from other sources, including gain from available-for-sale investments recorded as a component of other comprehensive

income, is considered when determining whether sufficient future taxable income exists to realize the deferred tax assets.

For the years ended December 31, 2019 and 2018, the Company recorded a tax benefit of $ 0.3 million and $ 0.1 million, respectively, in other comprehensive income, related to available-for-sale securities.

In December 2019, the FASB issued Accounting Standards Update No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes (ASU 2019-12), which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities.

This guidance will be effective for the Company in the first quarter of 2021 on a prospective basis, and early adoption is permitted.

The Company early adopted this standard as of January 1, 2020 on a prospective basis in accordance with ASC 250, Accounting Changes and Error Corrections.

The impact of the adoption is that the benefit from income taxes in the consolidated statement of operations and comprehensive loss is zero.

For the years ended December 31,

2019 and 2018, the Company recorded a tax benefit of $ 0.3 million and $ 0.1 million respectively, in other comprehensive income, related to available-for-sale securities.

We apply the provisions of ASC Topic 740 to account for uncertain income tax positions.

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The following table sets forth the computation of the basic and diluted net loss per share (in thousands, except share and per share data):

Year Ended December 31, Period From November 30, 2017 (Inception) to December 31,

Year Ended December 31,

2020 2019 2018

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Potentially dilutive securities that were not included in the diluted per share calculations because they would be anti-dilutive were as follows:

Year Ended December 31, Period From November 30, 2017 (Inception) to December 31,

Year Ended December 31,

2020 2019 2018

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Subsequent Events

From January 6 to January 17, 2020, the Company sold an aggregate of 570,839 shares of common stock in ATM offerings resulting in net proceeds of $ 14.8 million.

Selected Quarterly Financial Data (unaudited)

The following table provides the selected quarterly financial data for the year ended December 31, 2019 (in thousands, except per share amounts):

Quarter Ended

March 31, 2019 June 30,

2019 September 30, 2019 December 31, 2019

Loss from operations $ ( 36,461 ) $ ( 45,961 ) $ ( 55,011 ) $ ( 64,575 )

Net loss ( 31,586 ) ( 41,243 ) ( 50,735 ) ( 61,030 )

Net loss per share, basic and diluted $ ( 0.32 ) $ ( 0.41 ) $ ( 0.50 ) $ ( 0.58 )

The following table provides the selected quarterly financial data for the year ended December 31, 2018 (in thousands, except per share amounts):

Quarter Ended

2018 June 30,

2018 September 30,

2018 December 31,

Loss from operations $ 2,597 $ 135,012 $ 22,187 $ 33,046

Net loss ( 2,597 ) ( 134,902 ) ( 43,497 ) ( 30,509 )

Net loss per share, basic and diluted $ ( 0.10 ) $ ( 43.82 ) $ ( 10.71 ) $ ( 0.37 )

In February 2021, the Company made a $ 15.9 million investment in Notch's Series A preferred stock.

Immediately following this transaction, the Company's share in Notch was 17 % on a fully diluted basis.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data