What changed in this filing

/stocks — the workspaceLOADING

Item 5. Market for Registrant’s Common Equity

2022-02-28 compared with 2021-02-24 · 1536 added, 3 removed, 18 unchanged (99% of the section changed)

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market for Registrant’s Common Equity, Related Sto ckholder Matters and Issuer Purchases of Equity Securities

Market Information

Our ticker symbol is “FATE”, as traded and reported by The NASDAQ Global Market.

Holders of Common Stock

As of February 17, 2022, there were approximately 22 stockholders of record of our common stock.

The approximate number of holders is based upon the actual number of holders registered in our records at such date and excludes holders in “street name” or persons, partnerships, associations, corporations, or other entities identified in security positions listings maintained by depository trust companies.

The approximate number of holders is based upon the actual number of holders registered in our records at such date and excludes holders in “street name”

or persons, partnerships, associations, corporations, or other entities identified in security positions listings maintained by depository trust companies.

Performance Graph

13 unchanged sentences

Not applicable.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included under Item 8 of this Annual Report on Form 10-K.

The following discussion contains forward-looking statements that involve risks and uncertainties.

Our actual results could differ materially from those expressed or implied in any forward-looking statements as a result of various factors, including those set forth under the caption “Item 1A.

Risk Factors.”

This section of this Form 10-K generally discusses 2021 and 2020 items and year-to-year comparisons between 2021 and 2020.

Discussions of 2019 items and year-to-year comparisons between 2020 and 2019 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”

in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 as filed with the Securities and Exchange Commission on February 24, 2021 and incorporated herein by reference.

We are a clinical-stage biopharmaceutical company dedicated to the development of programmed cellular immunotherapies for patients with cancer.

We are developing first-in-class cell therapy product candidates based on a simple notion:

we believe that better cell therapies start with better cells.

To create better cell therapies, we use a therapeutic approach that we generally refer to as cell programming.

We use human induced pluripotent stem cells (iPSCs) to generate a clonal master iPSC line having preferred biological properties, and we direct the fate of the clonal master iPSC line to create our cell therapy product candidate.

Analogous to master cell lines used to manufacture biopharmaceutical drug products such as monoclonal antibodies, we believe clonal master iPSC lines can be used as a renewable source for manufacturing cell therapy products which are well-defined and uniform in composition, can be repeatedly mass produced at significant scale in a cost-effective manner, and can be delivered off-the-shelf to treat many patients.

Utilizing this therapeutic approach, we are advancing a pipeline of programmed cellular immunotherapies, including off-the-shelf natural killer (NK) and T-cell product candidates derived from clonal master iPSC lines for the treatment of cancer.

In September 2018, we entered into a collaboration and option agreement with Ono Pharmaceutical Co.

(Ono) for the joint development and commercialization of off-the-shelf, iPSC-derived chimeric antigen receptor (CAR) T-cell product candidates (Ono Agreement) for the treatment of cancer.

In April 2020, we entered into a collaboration and option agreement with Janssen Biotech, Inc.

(Janssen), part of the Janssen Pharmaceutical Companies of Johnson & Johnson (Janssen Agreement), for the development and commercialization of off-the-shelf, iPSC-derived CAR NK and CAR T-cell product candidates for the treatment of cancer.

We were incorporated in Delaware in 2007, and are headquartered in San Diego, CA.

Since our inception in 2007, we have devoted substantially all of our resources to our cell programming approach and the research and development of our product candidates, the creation, licensing and protection of related intellectual property, and the provision of general and administrative support for these activities.

To date, we have funded our operations primarily through the public and private sale of common stock, the private placement of preferred stock and convertible notes, commercial bank debt and revenues from collaboration activities and grants.

We have never been profitable and have incurred net losses in each year since inception.

Substantially all of our net losses resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations.

We expect to continue to incur operating losses for at least the foreseeable future.

Our net losses may fluctuate significantly from quarter to quarter and year to year.

We expect our expenses will increase substantially in connection with our ongoing and planned activities as we:

conduct our ongoing and planned clinical trials of our product candidates, which may include higher clinical trial expenses associated with arrangements we may enter into with clinical research organizations for the execution and management of certain clinical trials;

conduct GMP production, process and scale-up development and technology transfer activities for the manufacture of our product candidates, including those undergoing clinical investigation and IND-enabling preclinical development;

procure laboratory equipment, materials and supplies for the manufacture of our product candidates and the conduct of our research activities;

conduct preclinical and clinical research to investigate the therapeutic activity of our product candidates;

continue our research, development and manufacturing activities, including under our sponsored research and collaboration agreements with Janssen and Ono;

maintain, prosecute, protect, expand and enforce our intellectual property portfolio;

engage with regulatory authorities for the development of, and seek regulatory approvals for, our product candidates;

establish business operations at our new corporate headquarters, including internal GMP production capabilities;

hire additional clinical, manufacturing, regulatory, quality control and technical personnel to advance our product candidates;

hire additional scientific personnel to advance our research and development efforts;

hire general and administrative personnel to continue operating as a public company and support our operations.

We do not expect to generate any meaningful product sales or royalty revenue unless and until we successfully complete development and obtain regulatory approval for one or more of our product candidates, which we expect will take a number of years.

If we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution.

Accordingly, we will seek to fund our operations through public or private equity or debt financings or other sources.

However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all.

Our failure to raise capital or enter into such other arrangements when needed would have a negative effect on our financial condition and ability to develop our product candidates .

Due to the global outbreak of SARS-CoV-2, the strain of coronavirus that causes Coronavirus disease 19 (COVID-19), including the emergence of new variants of the virus, we experienced impacts on certain aspects of our business, including our clinical trial and research and development activities, during the year ended December 31, 2021.

For example, certain of our research and development activities have been delayed or disrupted as a result of measures we implemented in response to governmental “stay at home”

orders and in the interests of public health and safety, and we have experienced delays or disruptions in the initiation and conduct of our clinical trials as a result of prioritization of hospital and other medical resources toward pandemic efforts, policies and procedures implemented at clinical sites with respect to the conduct of clinical trials, and other precautionary measures taken in treating patients or in practicing medicine in response to the ongoing COVID-19 pandemic.

The scope and duration of these delays and disruptions, and the ultimate impacts of the COVID-19 pandemic on our operations, are currently unknown, and depend on continuously changing circumstances, including the emergence of new variants of the virus, such as the Delta and Omicron variants .

We are continuing to actively monitor the situation and may take further precautionary and preemptive actions as may be required by federal, state or local authorities or that we determine are in the best interests of public health and safety and that of our patient community, employees, partners, and stockholders.

We cannot predict the effects that such actions, or the impact of the ongoing COVID-19 pandemic, including the emergence of new variants of the virus, on global business operations and economic conditions, may have on our business, strategy, collaborations, or financial and operating results .

Financial Operations Overview

We conduct substantially all of our activities through Fate Therapeutics, Inc., a Delaware corporation, at our facilities in San Diego, California.

Fate Therapeutics, Inc.

owns 100% of the voting shares of Tfinity Therapeutics, Inc.

(Tfinity), 100% of the voting shares of Fate Therapeutics Ltd.

(Fate Ltd.), incorporated in the United Kingdom, and 100% of the voting shares of Fate Therapeutics B.V.

(Fate B.V.), incorporated in the Netherlands.

The following information is presented on a consolidated basis to include the accounts of Fate Therapeutics, Inc., Tfinity, Fate B.V., and Fate Ltd.

To date, the aggregate operations of our subsidiaries have not been significant and all intercompany transactions and balances have been eliminated in consolidation.

Collaboration Revenue

To date, we have not generated any revenues from therapeutic product sales or royalties.

Our revenues have been derived from collaboration agreements and government grants.

Agreement with Janssen Biotech, Inc.

On April 2, 2020 (the Janssen Agreement Effective Date), we entered into a Collaboration and Option Agreement (the Janssen Agreement) with Janssen Biotech, Inc.

(Janssen), part of the Janssen Pharmaceutical Companies of Johnson & Johnson.

Additionally, on the Janssen Agreement Effective Date, we entered into a Stock Purchase Agreement (the Stock Purchase Agreement) with Johnson & Johnson Innovation - JJDC, Inc.

Under the terms of the Janssen Agreement and the Stock Purchase Agreement taken together, we received $100.0 million, of which $50.0 million was an upfront cash payment and $50.0 million was in the form of an equity investment by JJDC.

Additionally, we are entitled to receive fees for the conduct of all research, preclinical development and IND-enabling activities performed by us under the Janssen Agreement.

We determined the common stock purchase by JJDC represented a premium of $9.93 per share, or $16.0 million in aggregate (the Equity Premium), and the remaining $34.0 million was recorded as issuance of common stock in shareholders’

We concluded that Janssen represented a customer, and in accordance with Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (ASC 606), we determined that the initial transaction price under the Janssen Agreement equals $66.0 million, consisting of the upfront, non-refundable and non-creditable payment of $50.0 million and the Equity Premium of $16.0 million.

In addition, we identified our potential performance obligations under the Janssen Agreement, including our grant to Janssen of a license to certain of our intellectual property subject to certain conditions, our conduct of research and development services, and our participation in various joint oversight committees.

We determined that our grant of a license to Janssen and our conduct of research and development services should be accounted for as one combined performance obligation, and that the combined performance obligation is transferred over the expected term of the conduct of the research and development services, which is estimated to be four years.

Additionally, we determined that participation in the various joint oversight committees did not constitute a performance obligation as our participation in the various joint oversight committees does not transfer a service.

During the year ended December 31, 2021, we achieved a pre-defined research milestone under the Janssen Agreement and received a cash payment of $3.0 million.

During the year ended December 31, 2021, we recognized $43.7 million of collaboration revenue under the Janssen Agreement.

During the year ended December 31, 2020, we recognized $16.8 million of collaboration revenue under the Janssen Agreement.

As of December 31, 2021, aggregate deferred revenue related to the Janssen Agreement was $48.3 million.

Agreement with Ono Pharmaceutical Co., Ltd.

On September 14, 2018, we entered into a Collaboration and Option Agreement (the Ono Agreement) with Ono for the joint development and commercialization of two off-the-shelf iPSC-derived CAR T-cell product candidates (Candidate 1 and Candidate 2).

Pursuant to the terms of the Ono Agreement, we received an upfront, non-refundable and non-creditable payment of $10.0 million.

Additionally, we are entitled to receive fees for the conduct of research and development under a joint development plan, which fees are estimated to be $20.0 million in aggregate.

We concluded that Ono represented a customer and in accordance with ASC 606, we determined that the initial transaction price under the Ono Agreement equals $30.0 million, consisting of the upfront, non-refundable and non-creditable payment of $10.0 million and the aggregate estimated research and development fees of $20.0 million.

In addition, we identified our performance obligations under the Ono Agreement, including our grant to Ono of a license to certain of our intellectual property subject to certain conditions, our conduct of research services, and our participation in a joint steering committee.

We determined that all performance obligations should be accounted for as one combined performance obligation since no individual performance obligation is distinct, and that the combined performance obligation is transferred over the expected term of the conduct of the research services, which is estimated to be four years.

On December 4, 2020, we entered into a letter agreement (the Ono Letter Agreement) with Ono in connection with the Ono Agreement.

Pursuant to the Ono Letter Agreement, Ono delivered to us proprietary antigen binding domains targeting an antigen expressed on certain solid tumors and nominated such antigen binding domains as the Ono Antigen Binding Domain for incorporation into Candidate 2.

In connection with such nomination, Ono paid us a milestone fee of $10.0 million for further research and development of Candidate 2 under the Ono Agreement, and Ono continues to maintain its option to Candidate 2 under the Ono Agreement.

In addition, together with Ono, we agreed to the termination of the Ono Agreement with respect to Candidate 1.

We retain all rights, in our sole discretion, to research, develop and commercialize Candidate 1 throughout the world without any obligation to Ono.

During the years ended December 31, 2021 and 2020, we recognized $12.1 million and $14.6 million, respectively, of collaboration revenue under the Ono Agreement.

As of December 31, 2021, aggregate deferred revenue related to the Ono Agreement and Ono Letter Agreement was $0.3 million.

Research and Development Expenses

Research and development expenses consist of costs associated with the research, preclinical development, process and scale-up development, manufacture and clinical development of our product candidates, the research and development of our cell programming technology including our iPSC product platform, and the performance of research and development activities under our collaboration agreements.

These costs are expensed as incurred and include:

salaries and employee-related costs, including stock-based compensation;

costs incurred under clinical trial agreements with investigative sites;

costs to acquire, develop and manufacture preclinical study and clinical trial materials, including our product candidates;

costs associated with conducting our preclinical, process and scale-up development, manufacturing, clinical and regulatory activities, including fees paid to third-party professional consultants, service providers and suppliers;

costs incurred for our research, development and manufacturing activities, including under our collaboration agreements;

costs for laboratory equipment, materials and supplies for the manufacture of our product candidates and the conduct of our research activities;

costs incurred to license and maintain intellectual property;

facilities, depreciation and other expenses including allocated expenses for rent and maintenance of facilities.

We plan to increase our current level of research and development expenses for the foreseeable future as we continue the clinical and preclinical development of our product candidates, research and develop our cell programming technology including our iPSC product platform, and perform our obligations under collaboration agreements including under our agreements with Janssen and Ono.

Our current planned research and development activities over the next twelve months consist primarily of the following:

conducting clinical trials of our product candidates, including through the engagement of CROs to manage various aspects of our clinical trials;

conducting GMP production, process and scale-up development and technology transfer activities for the manufacture of our product candidates, including those undergoing clinical investigation and IND-enabling preclinical development;

procuring laboratory equipment, materials and supplies for the manufacture of our product candidates and the conduct of our research activities;

conducting preclinical and clinical research to investigate the therapeutic activity of our product candidates;

conducting research, development and manufacturing activities, including under our sponsored research and collaboration agreements with Janssen and Ono.

Due to the inherently unpredictable nature of preclinical and clinical development and manufacture, and given our novel therapeutic approach and the current stage of development of our product candidates, we cannot determine and are unable to estimate with certainty the timelines we will require and the costs we will incur for the development and manufacture of our product candidates.

Clinical and preclinical development and manufacturing timelines and costs, and the potential of development and manufacturing success, can differ materially from expectations.

In addition, we cannot forecast which product candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development and manufacturing plans and capital requirements.

We cannot predict the effects of the impact of the ongoing COVID-19 pandemic on our business and operations, and our expenditures may be increased by delays or disruptions due to the COVID-19 pandemic, including as a result of actions we take in the near term to ensure business continuity and protect against possible supply chain shortages .

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and employee-related costs, including stock-based compensation, for our employees in executive, operational, finance and human resource functions;

professional fees for accounting, legal and tax services;

costs for obtaining, prosecuting and maintaining our intellectual property;

and other costs and fees, including director and officer insurance premiums, to support our operations as a public company.

We anticipate that our general and administrative expenses will increase in the future as we increase our research and development activities, maintain compliance with exchange listing and SEC requirements and continue to operate as a public company.

Other Income (Expense)

Other income (expense) consists of changes in the fair value of stock price appreciation milestones associated with the Amended and Restated Exclusive License Agreement dated May 15, 2018 (the Amended MSK License) with Memorial Sloan Kettering Cancer Center (MSK), interest income earned on cash and cash equivalents and interest income from investments (including the amortization of discounts and premiums).

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with U.S.

generally accepted accounting principles.

The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities in our financial statements.

On an ongoing basis, we evaluate our estimates and judgments, including those related to the fair value of the stock price appreciation milestones for the Amended MSK License, accrued expenses, stock-based compensation, and the estimated total costs expected to be incurred under our collaboration agreement.

We base our estimates on historical experience, known trends and events, financial models, and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates under different assumptions or conditions .

While our significant accounting policies are described in more detail in the notes to our financial statements appearing elsewhere in this Annual Report, we believe that the following critical accounting policies reflect the more significant procedures, estimates and assumptions used in the preparation of our consolidated financial statements.

Revenue Recognition

We recognize revenue in a manner that depicts the transfer of control of a product or a service to a customer and reflects the amount of the consideration we are entitled to receive in exchange for such product or service.

In doing so, we follow a five-step approach:

(i) identify the contract with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations, and (v) recognize revenue when (or as) the customer obtains control of the product or service.

We consider the terms of a contract and all relevant facts and circumstances when applying the revenue recognition standard.

We apply the revenue recognition standard, including the use of any practical expedients, consistently to contracts with similar characteristics and in similar circumstances.

A customer is a party that has entered into a contract with us, where the purpose of the contract is to obtain a product or a service that is an output of our ordinary activities in exchange for consideration.

To be considered a contract, (i) the contract must be approved (in writing, orally, or in accordance with other customary business practices), (ii) each party’s rights regarding the product or the service to be transferred can be identified, (iii) the payment terms for the product or the service to be transferred can be identified, (iv) the contract must have commercial substance (that is, the risk, timing or amount of future cash flows is expected to change as a result of the contract), and (v) it is probable that we will collect substantially all of the consideration to which we are entitled to receive in exchange for the transfer of the product or the service.

A performance obligation is defined as a promise to transfer a product or a service to a customer.

We identify each promise to transfer a product or a service (or a bundle of products or services, or a series of products and services that are substantially the same and have the same pattern of transfer) that is distinct.

A product or a service is distinct if both (i) the customer can benefit from the product or the service either on its own or together with other resources that are readily available to the customer and (ii) our promise to transfer the product or the service to the customer is separately identifiable from other promises in the contract.

Each distinct promise to transfer a product or a service is a unit of accounting for revenue recognition.

If a promise to transfer a product or a service is not separately identifiable from other promises in the contract, such promises should be combined into a single performance obligation.

The transaction price is the amount of consideration we are entitled to receive in exchange for the transfer of control of a product or a service to a customer.

To determine the transaction price, we consider the existence of any significant financing component, the effects of any variable elements, noncash considerations and consideration payable to the customer.

If a significant financing component exists, the transaction price is adjusted for the time value of money.

If an element of variability exists, we must estimate the consideration we expect to receive and use that amount as the basis for recognizing revenue as the product or the service is transferred to the customer.

There are two methods for determining the amount of variable consideration:

(i) the expected value method, which is the sum of probability-weighted amounts in a range of possible consideration amounts, and (ii) the mostly likely amount method, which identifies the single most likely amount in a range of possible consideration amounts.

If a contract has multiple performance obligations, we allocate the transaction price to each distinct performance obligation in an amount that reflects the consideration we are entitled to receive in exchange for satisfying each distinct performance obligation.

For each distinct performance obligation, revenue is recognized when (or as) we transfer control of the product or the service applicable to such performance obligation.

In those instances where we first receive consideration in advance of satisfying its performance obligation, we classify such consideration as deferred revenue until (or as) we satisfy such performance obligation.

In those instances where we first satisfy our performance obligation prior to our receipt of consideration, the consideration is recorded as accounts receivable.

We expense incremental costs of obtaining and fulfilling a contract as and when incurred if the expected amortization period of the asset that would be recognized is one year or less, or if the amount of the asset is immaterial.

Otherwise, such costs are capitalized as contract assets if they are incremental to the contract and amortized to expense proportionate to revenue recognition of the underlying contract.

Stock Price Appreciation Milestones

We estimate the fair value of the stock price appreciation milestones under the Amended MSK License using a Monte Carlo simulation model, which relies on our current stock price at the end of each quarter as well as significant estimates and assumptions to determine the estimated liability associated with the contingent milestone payments.

We account for the fair value of the stock price appreciation milestones in accordance with ASC 815, Derivatives and Hedging , with fair value marked to market.

The assumptions used to calculate the fair value of the stock price appreciation milestones are subject to a significant amount of judgment including the assessment of achieving a specified clinical milestone, the expected volatility of our common stock, the risk-free interest rate and the estimated term, which is based in part on the last valid patent claim date.

We achieved the specified clinical milestone in July 2021 and met the first milestone during fiscal 2021.

Accordingly, we remitted a payment to MSK of $20.0 million in the year ended December 31, 2021.

We remeasure the fair value of the remaining stock price appreciation milestones at each balance sheet date, with changes in fair value recorded in earnings as a non-operating income or expense.

Accrued Research and Development Expenses

As part of the process of preparing our financial statements, we are required to estimate our accrued expenses.

This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost.

The majority of our service providers invoice us monthly in arrears for services performed or when contractual milestones are met.

We make estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us at that time.

We periodically confirm the accuracy of our estimates with the service providers and make adjustments if necessary.

Examples of accrued research and development expenses include amounts owed to clinical research organizations, to investigative sites in connection with clinical trials, to sponsored research organizations, to service providers in connection with preclinical development activities and to service providers related to product manufacturing, development and distribution of clinical supplies.

We base our accrued expenses related to clinical trials on our estimates of the services performed and efforts expended pursuant to our contractual arrangements, including those with clinical research organizations.

The financial terms of these agreements are sometimes subject to negotiation, vary from contract to contract and may result in uneven payment flows.

There may be instances in which payments made to our service providers will exceed the level of services performed and result in a prepayment of the clinical expense.

Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical milestones.

In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period.

If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid accordingly.

Although we do not expect our estimates to be materially different from expenses actually incurred, if our estimates of the status and timing of services performed differs from the actual status and timing of services performed, we may report amounts that are too high or too low in any particular period.

To date, there have been no material differences from our estimates to the amounts actually incurred.

Stock-Based Compensation

Stock-based compensation expense represents the grant date fair value of employee stock option and restricted stock unit grants recognized over the requisite service period of the awards (usually the vesting period) on a straight-line basis.

Performance-based stock units/awards represent a right to receive a certain number of shares of common stock based on the achievement of corporate performance goals and continued employment during the vesting period.

During the year ended December 31, 2021, we granted 1,997,377 performance-based restricted stock units with a total grant date fair value of approximately $121.9 million.

At each reporting period, and to the extent achievement of one or any of the performance conditions is probable, we reassess the probability of the achievement of such corporate performance goals and any increase or decrease in share-based compensation expense resulting from an adjustment in the estimated shares to be released is treated as a cumulative catch-up in the period of adjustment.

We estimate the fair value of stock option grants using the Black-Scholes option pricing model, with the exception of option grants with both performance-based milestones and market conditions, which are valued using a lattice-based model.

These models require the use of highly subjective and complex assumptions which determine the fair value of stock-based awards, (a) the risk-free interest rate, (b) the expected volatility of our stock, (c) the expected term of the award and (d) the expected dividend yield.

The expected volatility is based on the historical volatility of our common stock over the most recent period commensurate with the estimated expected term of our stock options which is derived from historical experience and anticipated future exercise behavior.

The risk-free interest rates for periods within the expected life of the option are based on the yields of zero-coupon U.S.

Treasury securities.

See Note 9 of the notes to the consolidated financial statements for additional information.

The fair value of our restricted stock units, including performance-based restricted stock units, is based on the closing price of our common stock as reported on The NASDAQ Global Market on the date of grant.

Recent Accounting Pronouncements

For a discussion of recently issued accounting pronouncements, please see Note 1 of the notes to the consolidated financial statements.

Results of Operations

Comparison of Years Ended December 31, 2021 and 2020

The following table summarizes the results of our operations for the years ended December 31, 2021 and 2020:

(in thousands)

Collaboration revenue

Research and development expenses

General and administrative expenses

Total other income (expense), net

During the year ended December 31, 2021, we recognized revenue of $55.8 million, under our collaboration agreements with Janssen and Ono.

During the year ended December 31, 2020, we recognized revenue of $31.4 million under our collaboration agreements with Janssen and Ono.

Research and development expenses.

Research and development expenses were $215.5 million for the year ended December 31, 2021, compared to $125.6 million for the year ended December 31, 2020.

The increase in research and development expenses was attributable primarily to the following:

$40.9 million increase in employee compensation and benefits expense, which includes a $16.5 million increase in employee-stock based compensation expense;

$24.0 million increase in expenditures for laboratory materials and supplies relating to the manufacture of our product candidates and the conduct of our research activities, including under our collaboration agreements;

$19.4 million increase in third-party professional consultant and clinical trial related expense.

General and administrative expenses.

General and administrative expenses were $57.3 million for the year ended December 31, 2021, compared to $33.9 million for the year ended December 31, 2020.

The increase in general and administrative expenses was attributable primarily to the following:

$13.4 million increase in employee compensation and benefits expense, which includes a $7.1 million increase in employee stock-based compensation expense;

$2.9 million increase in office and computer supplies, including software licenses;

$2.5 million increase in facility lease and related expenses primarily relating to our new headquarters lease;

$1.0 million increase in insurance related expenses.

Other income (expense), net.

Other income (expense), net was $4.8 million and ($45.3) million for the years ended December 31, 2021 and 2020, respectively.

During the year ended December 31, 2021, we recorded $3.5 million in other income attributable to the fair value of the stock price appreciation milestone under the Amended MSK License.

Other income (expense), net

for the year ended December 31, 2021 also consisted of interest income earned on cash and cash equivalents and interest income from investments (including the amortization of discounts and premiums).

During the year ended December 31, 2020, we recorded $47.7 million in other expense attributable to the fair value of the stock price appreciation milestones under the Amended MSK License.

Other income (expense), net for the year ended December 31, 2020 also consisted of interest income earned on cash and cash equivalents and interest income from investments (including the amortization of discounts and premiums).

Liquidity and Capital Resources

We have incurred losses and negative cash flows from operations since inception.

As of December 31, 2021, we had an accumulated deficit of $769.1 million and anticipate that we will continue to incur net losses for the foreseeable future.

The following table sets forth a summary of the net cash flow activity for each of the years ended December 31:

(in thousands)

Net cash used in operating activities

Net cash used in investing activities

Net cash provided by financing activities

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

Operating Activities

Cash used in operating activities increased from $39.2 million for the year ended December 31, 2020 to $162.9 million for the year ended December 31, 2021.

The primary drivers of this change in cash used in operating activities was our increase of $38.8 million in net loss and the one-time receipt of the $50.0 million upfront payment from Janssen in connection with entering into the Janssen Agreement in April 2020, which was not repeated in 2021 .

Additionally, during the year ended December 31, 2021, we achieved the first milestone under the Amended MSK License, and as a result paid $20.0 million to MSK.

Agreement with Janssen Biotech, Inc.

On April 2, 2020 (the Janssen Agreement Effective Date), we entered into the Janssen Agreement with Janssen to develop iPSC-derived CAR NK- and CAR T-cell product candidates for the treatment of cancer.

Additionally, on the Janssen Agreement Effective Date, we entered into the Stock Purchase Agreement with JJDC.

Under the terms of the Janssen Agreement and the Stock Purchase Agreement taken together, we received $100.0 million as of the Janssen Agreement Effective Date, of which $50.0 million was an upfront cash payment and $50.0 million was in the form of an equity investment by JJDC.

Of the $50.0 million equity investment, $16.0 million represented a premium over the fair value of our common stock and was classified under operating activities.

We are entitled to receive fees for the conduct of all research, preclinical development and IND-enabling activities performed by us under the Janssen Agreement.

Additionally, we are eligible to receive (i) with respect to the first Janssen Cancer Target, payments of up to $898.0 million upon the achievement of specified development, regulatory and sales milestones (the Janssen Milestone Payments) for the first Collaboration Candidate, and up to $460.0 million in Janssen Milestone Payments for each additional Collaboration Candidate, directed to the first Janssen Cancer Target;

and (ii) with respect to each of the second, third and fourth Janssen Cancer Targets, payments of up to $706.0 million in Janssen Milestone Payments for each of the first Collaboration Candidates, and up to $340.0 million in Janssen Milestone Payments for each additional Collaboration Candidate, directed to the applicable Janssen Cancer Target, where certain Janssen Milestone Payments are subject to reduction in the event we elect to co-commercialize and share equally in the profits and losses in the United States of a respective Collaboration Candidate.

We are further eligible to receive double-digit tiered royalties ranging up to the mid-teens on net sales of Collaboration Candidates that are commercialized by Janssen under the Janssen Agreement, subject to reduction under certain circumstances.

During the year ended December 31, 2021, we achieved a pre-defined research milestone under the Janssen Agreement and received a cash payment of $3.0 million.

As of December 31, 2021, no royalties have been paid to us.

In connection with the Janssen Agreement, we have incurred $13.6 million in sublicense fees to certain of our existing licensors, of which $13.3 million has been paid as of December 31, 2021.

The $13.6 million in sublicense consideration represents an asset under ASC 340, Other Assets and Deferred Costs.

Agreement with Ono Pharmaceutical Co., Ltd.

On September 14, 2018, we entered into the Ono Agreement with Ono for the joint development and commercialization of two off-the-shelf, iPSC-derived CAR T-cell product candidates (each a Candidate and collectively the Candidates).

Under the terms of the Ono Agreement, Ono paid to us an upfront, non-refundable and non-creditable payment of $10.0 million.

Additionally, as consideration for our conduct of research and preclinical development under a joint development plan, Ono pays us annual research and development fees set forth in the annual budget included in the joint development plan, which fees are estimated to be $20.0 million in aggregate over the course of the joint development plan.

Further, under the terms of the Ono Agreement, Ono had agreed to pay us up to an additional $40.0 million, subject to the achievement of a preclinical milestone and the exercise by Ono of its options to obtain exclusive licenses to develop and commercialize the Candidates.

Such fees are in addition to the upfront payment and research and development fees.

Pursuant to the Ono Agreement, we and Ono are jointly conducting research and development activities under a joint development plan, with the goal of advancing Candidate 2 to a pre-defined preclinical milestone.

We have granted to Ono, during a specified period of time, an option to obtain an exclusive license under certain intellectual property rights to develop and commercialize Candidate 2 in all territories of the world, with us retaining the right to co-develop and co-commercialize Candidate 2 in the United States and Europe under a joint arrangement whereby it is eligible to share at least 50% of the profits and losses.

On December 4, 2020, we entered into the Ono Letter Agreement with Ono in connection with the Ono Agreement.

In connection with such nomination, Ono paid us a milestone fee of $10.0 million in December 2020 for further research and development of Candidate 2 under the Ono Agreement, and Ono continues to maintain its option to Candidate 2 under the Ono Agreement.

In addition, the Ono Letter Agreement terminated further development with respect to Candidate 1.

Subject to Ono’s exercise of its options to obtain exclusive licenses to develop and commercialize Candidate 2 and to the achievement of certain clinical, regulatory and commercial milestones in specified territories, we are eligible to receive an aggregate of up to $885.0 million in milestone payments for Candidate 2, with the applicable milestone payments for Candidate 2 for the United States and Europe subject to reduction by 50% if we elect to co-develop and co-commercialize Candidate 2 as described above.

As of December 31, 2021, we have not received any milestone payments other than the $10.0 million associated with the Ono Letter Agreement in December 2020.

We are also eligible to receive tiered royalties ranging from the mid-single digits to the low-double digits based on annual net sales by Ono for Candidate 2 in specified territories, with such royalties subject to certain reductions.

As of December 31, 2021, no royalties have been paid to us.

As a direct result of our entry into the Ono Agreement and the Ono Letter Agreement, we incurred an aggregate of $4.0 million in sublicense consideration to certain of our existing licensors.

The $4.0 million in sublicense consideration represents an asset under ASC 340, Other Assets and Deferred Costs.

As of December 31, 2021, all such consideration has been paid, with $2.0 million paid during the year ending December 31, 2021.

Memorial Sloan Kettering Cancer Center License Agreement

On May 15, 2018, we entered into the Amended MSK License with MSK.

The Amended MSK License amends and restates the Exclusive License Agreement entered into between us and MSK on August 19, 2016, pursuant to which we entered into an exclusive license agreement with MSK for rights relating to compositions and methods covering iPSC-derived cellular immunotherapy, including T-cells and NK-cells derived from iPSCs engineered with CARs.

Pursuant to the Amended MSK License, MSK granted us additional licenses to certain patents and patent applications relating to new CAR constructs and off-the-shelf CAR T cells, including the use of clustered regularly interspaced short palindromic repeat (CRISPR) and other innovative technologies for their production, in each case to research, develop, and commercialize licensed products in the field of all human therapeutic uses worldwide.

We have the right to grant sublicenses to certain licensed rights in accordance with the terms of the Amended MSK License, in which case we are obligated to pay MSK a percentage of certain sublicense income received.

In the event a licensed product achieves a specified clinical milestone, MSK is then eligible to receive certain milestone payments totaling up to $75.0 million based on the price of our common stock, where the amount of such payments owed to MSK is contingent upon certain increases in the price of our common stock following the date of achievement of such clinical milestone.

These payments are based on common stock price multiples, with the numerator being the fair value of the ten-trading day trailing average closing price of our common stock and the denominator being the ten-trading day trailing average closing price of our common stock as of the effective date of the Amended MSK License, adjusted for any stock splits, cash dividends, stock dividends, other distributions, combinations, recapitalizations, or similar events.

Under the terms of the Amended MSK License, upon a change of control of our company, in certain circumstances, we may be required to pay a portion of these payments to MSK based on the price of our common stock in connection with such change of control.

As of December 31, 2021, we recorded a liability of $24.2 million associated with the remaining stock price appreciation milestones for the Amended MSK License.

In July 2021, we achieved a specified clinical milestone for a licensed product under the Amended MSK License and our ten-trading day trailing average common stock price exceeded the first, pre-specified threshold.

As a result, we remitted the first milestone payment of $20.0 million to MSK.

Investing Activities

During the years ended December 31, 2021 and 2020, investing activities used cash of $324.0 million and $161.1 million, respectively.

During the year ended December 31, 2021 we purchased $968.2 million of investments, which were partially offset by $694.8 million in maturities of investments.

During the year ended December 31, 2020, we purchased $277.3 million of investments, offset by $121.2 million in maturities of investments.

The remaining investing activities for the periods presented were primarily attributable to the purchase of property and equipment.

Financing Activities

Financing activities provided cash of $453.1 million for the year ended December 31, 2021, which primarily consisted of $432.4 million of net proceeds from our January 2021 public offering of common stock and issuance of pre-funded warrants and $20.7 million received from the issuance of common stock from equity incentive plans pursuant to the exercise of employee stock options.

Financing activities provided cash of $282.8 million for the year ended December 31, 2020, which primarily consisted of $188.8 million of net proceeds from our June 2020 public offering of common stock, $50.0 million of net proceeds from our June 2020 private placement of common stock, and $33.9 million of net proceeds from the issuance of common stock in conjunction with our collaboration agreement with Janssen, which amount represents the fair value of the equity component from Janssen’s common stock purchase in connection with the collaboration agreement.

From our inception through December 31, 2021 we have funded our consolidated operations primarily through the public and private sale of common stock, the private placement of preferred stock and convertible notes, commercial bank debt and revenues from collaboration activities and grants.

As of December 31, 2021, we had aggregate cash and cash equivalents and investments of $716.6 million.

Private Placement of Common Stock

In June 2020, in connection with the June 2020 public offering of common stock, the Company exercised its right to cause an existing shareholder, Johnson & Johnson Innovation-JJDC, Inc (JJDC) to purchase $50.0 million of the Company’s common stock, and JJDC purchase in a private placement 1.8 million shares of the Company’s common stock at a price of $28.31 per share, for aggregate proceeds of $50.0 million.

In April 2020, we entered into a Stock Purchase Agreement with JJDC.

Under the Stock Purchase Agreement, we sold 1.6 million shares of our common stock to JJDC at $31.00 per share, for an aggregate purchase price of $50.0 million.

The shares of common stock purchased as part of these private placements were not subject to underwriting discounts or commissions.

Public Offerings of Common Stock

In June 2020, we completed a public offering of common stock in which investors, certain of which are affiliated with one of our directors, purchased 7.1 million shares of our common stock at a price of $28.31 per share under a shelf registration statement.

Gross proceeds from the offering were $201.3 million.

After giving effect to $12.5 million in underwriting discounts, commissions and expenses related to the offering, net proceeds were $188.8 million.

In January 2021, we completed a public offering of common stock in which investors, certain of which are affiliated with a director of ours, purchased 5.1 million shares of our common stock at a price of $85.50 per share under a shelf registration statement.

In addition, we issued pre-funded warrants, in lieu of common stock to certain investors, to purchase 257,310 shares of our common stock (Pre-Funded Warrants).

The purchase price of for the Pre-Funded Warrants was $85.499 per Pre-Funded Warrant, which equals the per share public offering price for the shares of common stock less the $0.001 exercise price for each such Pre-Funded Warrant.

See Note 8 for additional detail.

Gross proceeds from the public offering and the issuance of the Pre-Funded Warrants were $460.0 million.

After giving effect to $27.6 million in underwriting discounts, commissions and expenses related to the public offering and the issuance of Pre-Funded Warrants, net proceeds were $432.4 million.

California Institute for Regenerative Medicine Award

On April 5, 2018, we executed an award agreement with the CIRM pursuant to which CIRM awarded us $4.0 million to advance our FT516 product candidate into a first-in-human clinical trial (the Award).

Pursuant to the terms of the Award, we are

eligible to receive five disbursements in varying amounts totaling $4.0 million throughout the project period of the Award.

In November 2019, we submitted an IND application for FT516 in advanced solid tumors.

As of December 31, 2021, we have received aggregate disbursements under the Award in the amount of $4.0 million.

The Award is subject to certain co-funding requirements by us.

We, in our sole discretion, have the option to treat the Award either as a loan or as a grant.

In the event we elect to treat the Award as a loan, we will be obligated to repay i) 60%, ii) 80%, iii) 100% or iv) 100% plus interest at 7% plus LIBOR, of the total Award to CIRM, where such repayment rate is dependent upon the phase of clinical development of FT516 at the time of our election.

If we do not elect to treat the Award as a loan within 10 years of the date of the Award, the Award will be considered a grant and we will be obligated to pay to CIRM a royalty on commercial sales of FT516 until such royalty payments equal nine times the total amount awarded to us under the Award.

Registration Statements on Form S-3

In November 2021, we filed an automatic shelf registration statement (File No.

333-260772), which became effective upon filing.

The shelf registration statement allows us to issue certain securities, including shares of our common stock, from time to time.

The specific terms of any offering under the automatic shelf registration statement are established at the time of such offering.

Additionally, we entered into a sales agreement with Jefferies Group LLC (Jefferies) with respect to an at-the-market offering program, under which we may offer and sell, from time to time at our sole discretion, shares of our common stock having an aggregate offering price of up to $350.0 million through Jefferies as the sales agent, pursuant to this automatic shelf registration statement.

Operating Capital Requirements

We anticipate that we will continue to incur losses for the foreseeable future, and we expect the losses to increase as we continue the research, manufacture and development of, and seek regulatory approvals for, our product candidates and conduct additional research, manufacturing and development activities pursuant to our collaboration agreements with Janssen and Ono.

Our product candidates have not yet achieved regulatory approval and we may not be successful in achieving commercialization of our product candidates.

We believe our existing cash and cash equivalents and investments as of December 31, 2021 will be sufficient to fund our projected operating requirements for at least the next twelve months.

However, we are subject to all the risks and uncertainties incident in the research, manufacture and development of therapeutic products.

For example, the FDA or other regulatory authorities may require us to generate additional data or conduct additional preclinical studies, manufacturing activities, or clinical trials, or may impose other requirements beyond those that we currently anticipate.

Additionally, it is possible for a product candidate to show promising results in preclinical studies or in clinical trials, but fail to establish sufficient safety and efficacy data necessary to obtain regulatory approvals.

As a result of these and other risks and uncertainties and the probability of success, the duration and the cost of our research, manufacturing and development activities required to advance a product candidate cannot be accurately estimated and are subject to considerable variation.

We may encounter difficulties, complications, delays and other unknown factors and unforeseen expenses in the course of our research, manufacturing and development activities, any of which may significantly increase our capital requirements and could adversely affect our liquidity.

We will require additional capital for the research, manufacture and development of our product candidates and to perform our obligations under our collaboration agreements, and we may need to seek additional funds sooner than expected due to any changes in our business, operations, financial condition or prospects, including any impacts of the COVID-19 pandemic.

We expect to finance our capital requirements in the foreseeable future through the sale of public or private equity or debt securities.

However, additional capital may not be available to us on reasonable terms, if at all.

If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue the research, manufacture or development of one or more of our product candidates.

If we do raise additional funds through the issuance of additional equity or debt securities, it could result in dilution to our existing stockholders, increased fixed payment obligations and the existence of securities with rights that may be senior to those of our common stock.

Additionally, if we incur indebtedness, we may become subject to financial or other covenants that could adversely restrict, impair or affect our ability to conduct our business, such as requiring us to relinquish rights to certain of our product candidates or technologies or limiting our ability to acquire, sell or license intellectual property rights or incur additional debt.

Any of these events could significantly harm our business, operations, financial condition and prospects.

In addition, while the full impact of the COVID-19 pandemic on our business, operations, financial condition and prospects, and on the global economy, are currently unknown and difficult to predict, the pandemic has caused significant disruptions and created uncertainties in the global financial markets, and the economic impacts of the pandemic could materially and adversely affect our ability to raise capital through equity or debt financings in the future.

Our forecast of the period of time through which our existing cash and cash equivalents and investments will be adequate to support our operations is a forward-looking statement and involves significant risks and uncertainties.

We have based this forecast on assumptions that may prove to be wrong, and actual results could vary materially from our expectations, which may adversely affect our capital resources and liquidity.

We could utilize our available capital resources sooner than we currently expect.

The amount and timing of future funding requirements, both near- and long-term, will depend on many factors, including, but not limited to :

the initiation, timing, progress, size, duration, costs and results of our clinical trials and preclinical studies for our product candidates;

the number and the nature of product candidates and indications that we pursue;

the time to and cost of establishing business operations at our new corporate headquarters, including internal GMP production capabilities to support the clinical and potential commercial manufacture of our product candidates;

the cost of GMP production, process and scale-up development and technology transfer activities for the manufacture of our product candidates, including the cost of laboratory equipment, materials and supplies to support these activities;

the time, cost and outcome of seeking and obtaining regulatory approvals;

the extent to which we are required to pay milestone or other payments under our existing in-license agreements and any in-license agreements that we may enter into in the future, and the timing of such payments, including payments owed to MSK in connection with the stock price appreciation milestones;

the extent to which milestones are achieved under our collaboration agreements with Ono and Janssen, and any other strategic partnership or collaboration agreements that we may enter into in the future, and the time to achievement of such milestones and our receipt of any associated milestone payments;

the cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights;

the cost of our research and development activities, including our need and ability to hire additional employees and procure additional equipment, materials and supplies;

the establishment and continuation of collaborations and strategic alliances;

the timing and terms of future in-licensing and out-licensing transactions;

the cost of establishing sales, marketing, manufacturing and distribution capabilities for, and the pricing and reimbursement of, any products for which we may receive regulatory approval.

In addition, we are closely monitoring ongoing developments in connection with the COVID-19 pandemic and evaluating adjustments to our business and operations, which may negatively impact our financial condition and prospects and our operating results.

We will continue to assess our operating capital requirements and may make adjustments to our business and operations if circumstances warrant.

If we cannot continue or expand our research, manufacturing and development operations, or otherwise capitalize on our business opportunities, because we lack sufficient capital, our business, operations, financial condition and prospects could be materially adversely affected .

Contractual Obligations and Commitments

We lease our headquarters office and laboratory space under a non-cancelable operating lease, comprising approximately 200,000 square feet.

In addition to rent, the lease is subject to certain fixed amenities fees.

Lease payments commenced in May 2021 (the Rent Commencement Date) and the lease has a lease term of 15 years starting from the Rent Commencement Date.

We have the option to extend the lease for two successive five-year periods.

We also have a one-time option to terminate the lease after 10 years from the Rent Commencement Date, subject to payment of a $30.0 million early termination fee.

See Note 8 of the consolidated financial statements for additional detail.

Total undiscounted aggregate future operating lease obligations under all of our operating leases as of December 31, 2021 are $192.6 million.

We have no material contractual obligations not fully recorded on our consolidated balance sheets or fully disclosed in the notes to the financial statements.

We have obligations under various license agreements to make future payments to third parties that become due and payable on the achievement of certain development, regulatory and commercial milestones (such as the start of a clinical trial, filing for product approval with the FDA or other regulatory agencies, product approval by the FDA or other regulatory agencies, product launch or product sales) or on the sublicense of our rights to another party.

We have not included these commitments on our balance sheet

because the achievement and timing of these events is not fixed and determinable.

Certain milestones are in advance of receipt of revenue from the sale of products and, therefore, we may require additional debt or equity capital to make such payments.

These commitments include:

Under a license agreement with the Whitehead Institute for Biomedical Research, pursuant to which we license certain patents relating to our iPSC product platform, we are required to make annual maintenance payments and payments based upon development, regulatory and commercial milestones for any products covered by the in-licensed intellectual property.

The maximum aggregate milestone payments we may be obligated to make per product are $2.3 million.

We will also be required to pay a royalty on net sales of products covered by the in-licensed intellectual property in the low single digits.

The royalty is subject to reduction for any third-party payments required to be made, with a minimum floor in the low single digits.

We have the right to sublicense our rights under this agreement, and we will be required to pay a percentage of any sublicense income.

Under license agreements with The Scripps Research Institute (TSRI), pursuant to which we license certain patents relating to our iPSC product platform, we are required to make annual maintenance payments and payments based upon development, regulatory and commercial milestones for any products covered by the in-licensed intellectual property.

The maximum aggregate milestone payments we may be obligated to make are $1.8 million.

We will also be required to pay a royalty on net sales of products covered by the in-licensed intellectual property in the low- to mid-single digits.

The royalty is subject to reduction for any third-party payments required to be made, with a minimum floor in the low single digits.

We have the right to sublicense our rights under these agreements, and we will be required to pay a percentage of any sublicense income.

Under a license agreement with the Regents of the University of Minnesota, pursuant to which we license certain patents relating to compositions and uses of NK cells and to compositions of engineered receptors and immune cells expressing such receptors, we are required to make annual maintenance payments and payments based upon development, regulatory and commercial milestones for any products covered by the in-licensed intellectual property.

The maximum aggregate milestone payments we may be obligated to make per product are $4.6 million.

We will also be required to pay a royalty on net sales of products covered by the in-licensed intellectual property in the low single digits.

The royalty is subject to reduction for any third-party payments required to be made, with a minimum floor in the low single digits.

We have the right to sublicense our rights under this agreement, and we will be required to pay a percentage of any sublicense income.

Under a license agreement with Memorial Sloan Kettering Cancer Center, pursuant to which we license certain patents relating to compositions and uses of T cells derived from iPSCs, CARs and genetic modifications using CRISPR, we are required to make annual maintenance payments and payments based upon development, regulatory and commercial milestones for any products covered by the in-licensed intellectual property.

The maximum aggregate milestone payments we may be obligated to make per product are $12.5 million.

We will also be required to pay a royalty on net sales of products covered by the in-licensed intellectual property up to the high-single digits.

The royalty is subject to reduction for any third-party payments required to be made, with a minimum floor in the low- to mid-single digits.

We have the right to sublicense our rights under this agreement, and we will be required to pay a percentage of any sublicense income.

Additionally, in the event a licensed product achieves a specified clinical milestone, Memorial Sloan Kettering Cancer Center is then eligible to receive additional milestone payments, where the amount of such payments owed to Memorial Sloan Kettering Cancer Center are contingent upon certain increases in the price of our common stock following the date of achievement of such clinical milestone.

See Note 2 of the notes to the consolidated financial statements for additional detail related to the stock price appreciation milestone payments.

Under a license agreement with Dana Farber Cancer Institute, pursuant to which we license certain patent applications relating to novel antibody fragments that bind the alpha-3 domain of MICA/B, we are required to make annual maintenance payments and payments based upon development, regulatory and commercial milestones for any products covered by the in-licensed intellectual property.

The maximum aggregate milestone payments we may be obligated to make per product are $25 million.

We will also be required to pay a royalty on net sales of products covered by the in-licensed intellectual property in the low single digits.

The royalty is subject to reduction for any third-party payments required to be made, with a minimum floor in the low single digits.

We have the right to sublicense our rights under these agreements, and we will be required to pay a percentage of any sublicense income.

We enter into contracts in the normal course of business, including with clinical sites, CROs, and other professional service providers for the conduct of clinical trials, contract manufacturers for the production of our product candidates, contract research service providers for preclinical research studies, professional consultants for expert advice and vendors for the sourcing of clinical and laboratory supplies and materials.

These contracts generally provide for termination on notice, and therefore are cancelable contracts and not included in the table of contractual obligations and commitments.

Quantitative and Qualitat ive Disclosures about Market Risk

Interest Rate Risk

We are exposed to market risk primarily related to changes in interest rates.

As of December 31, 2021, our cash and cash equivalents consisted of cash and money market mutual funds, and our investments consisted of United States treasuries and corporate debt securities with maturities up to eighteen months from the date of acquisition.

Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of U.S.

interest rates.

However, because of the relatively short-term nature and low risk profile of the instruments in our portfolio, a 10% change in market interest rates would not have a material impact on our financial condition and/or results of operations.

Stock Price Sensitivity

We entered into a license agreement with MSK under which we obtained rights relating to compositions and methods covering iPSC-derived cellular immunotherapy, including T cells and NK cells derived from iPSCs engineered with CARs.

MSK is eligible to receive certain milestone payments totaling up to $75.0 million in the event a licensed product achieves a specified clinical milestone, where the amount of such payments owed to MSK is contingent upon certain increases in the price of our common stock following the date of achievement of such clinical milestone.

As of December 31, 2021, the estimated fair value of the stock price appreciation milestones was $24.2 million.

As a result, the Company remitted the first milestone payment of $20.0 million to MSK.

Changes in the price our common stock as of each balance sheet date may cause a relatively large change in the estimated fair value of the stock price appreciation milestones and the associated liability and resulting expense or gain.

See Note 5 to our consolidated financial statements for a related sensitivity analysis.

Financial Stateme nts and Supplementary Data

Report of Independent Regist ered Public Accounting Firm

The Board of Directors and Stockholders of Fate Therapeutics, Inc

Opinion on the Financial Statements

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

as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive loss, convertible preferred stock and stockholders’

equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control- Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 28, 2022, expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

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

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

Revenue recognition –

Revenue Recognized Over Time

Description of the Matter

As more fully described in Note 2 of the financial statements, the Company has concluded that the grant of intellectual property licenses and the delivery of related research and development services under certain of its existing collaboration agreements represent a combined performance obligation for which the Company recognizes collaboration revenues as the research services are transferred over time.

Revenue is recognized over the estimated period of time to conduct the research services based on an appropriate measure of progress towards satisfaction of the identified performance obligation.

Collaboration revenue is significant to our audit because the revenue recognition assessment process involves inherent uncertainty, uses subjective assumptions, and the amounts involved are material to the financial statements taken as a whole.

The subjective assumptions relate to the estimated total costs expected to be incurred and the estimated total full-time employees (FTEs) expected to be utilized under each agreement.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s revenue recognition review process including controls over management’s review of the significant assumptions described above.

For example, we tested controls over the development of the estimated costs and estimated full-time employees to complete and the review of the estimates by management.

To test revenue recognized we performed audit procedures that included, among other things, testing the assumptions and underlying data used by the Company in its computations and testing the accuracy of the computations.

We inspected evidence supporting actual FTEs utilized and the amount of actual costs incurred and assessed whether they were appropriate costs according to the terms of the contract.

We performed corroborative inquiries of individuals outside of the finance department to assess the reasonableness of management’s estimates of total estimated costs and total FTEs to understand the progress to date and the estimate of total inputs.

In addition, we performed sensitivity analyses, including assessing the reasonableness of the estimated costs to be incurred and estimated FTEs to be utilized as of the reporting date based on current factors.

/s/ Ernst & Young, LLP

We have served as the Company's auditor since 2009.

San Diego, California

February 28, 2022

Fate Therapeutics, Inc.

Consolidated B alance Sheets

(In thousands, except par value and share data)

Current assets:

Cash and cash equivalents

Accounts receivable

Short-term investments and related maturity receivables

Prepaid expenses and other current assets

Total current assets

Long-term investments

Property and equipment, net

Operating lease right-of-use assets

Restricted cash

Collaboration contract assets

Liabilities and Stockholders’

Current liabilities:

Accounts payable

Accrued expenses

CIRM award liability, current portion

Deferred revenue, current portion

Operating lease liabilities, current portion

Stock price appreciation milestones, current portion

Total current liabilities

Deferred revenue, net of current portion

CIRM award liability, net of current portion

Operating lease liabilities, net of current portion

Stock price appreciation milestones, net of current portion

Commitments and contingencies

Stockholders’

Preferred stock, $ 0.001 par value;

authorized shares—

5,000,000 at December 31, 2021

and December 31, 2020;

Class A Convertible Preferred shares issued and

outstanding—

2,794,549 at December 31, 2021 and December 31, 2020

Common stock, $ 0.001 par value;

authorized shares—

250,000,000 at December 31,

2021 and 150,000,000 at December 31, 2020;

issued and outstanding—

at December 31, 2021 and 87,722,237 at December 31, 2020

Additional paid-in capital

Accumulated other comprehensive (loss) gain

Accumulated deficit

Total stockholders’

Total liabilities and stockholders’

See accompanying notes.

Fate Therapeutics, Inc.

Consolidated Statements of Ope rations and Comprehensive Loss

(In thousands, except share and per share data)

For the Years Ended December 31,

Collaboration revenue

Operating expenses:

Research and development

General and administrative

Total operating expenses

Loss from operations

Other income (expense):

Interest income

Interest expense

Change in fair value of stock price appreciation milestones

Total other income (expense), net

Other comprehensive loss:

Unrealized (loss) gain on available-for-sale securities, net

Comprehensive loss

Net loss per common share, basic and diluted

Weighted–average common shares used to compute basic and

diluted net loss per share

See accompanying notes.

Fate Therapeutics, Inc.

Consolidated Statements of Convertible Prefer red Stock and Stockholders’

(In thousands, except share data)

Preferred Stock

Other Comprehensive

Stockholders’

Balance at December 31, 2018

Exercise of stock options, net of issuance costs

Issuance of common stock upon vesting of restricted stock units

Stock–based compensation

Public offering of common stock, net of offering costs

Issuance of common stock upon cashless warrant exercise

Conversion of preferred shares to common stock

Unrealized gain on investments

Balance at December 31, 2019

Exercise of stock options, net of issuance costs

Issuance of common stock upon vesting of restricted stock units

Stock–based compensation

Public offering of common stock, net of offering costs

Private placement of common stock, net of issuance costs

Issuance of stock to collaboration partner, net of issuance costs

Unrealized gain on investments

Balance at December 31, 2020

Exercise of stock options, net of issuance costs

Issuance of common stock upon vesting of restricted stock units

Stock–based compensation

Public offering of common stock and issuance of pre-funded warrants, net of offering costs

Unrealized (loss) gain on investments, net

Balance at December 31, 2021

See accompanying notes

Fate Therapeutics, Inc.

Consolidated Statem ents of Cash Flows

(in thousands)

Years Ended December 31,

Operating activities:

Adjustments to reconcile net loss to net cash used in operating activities

Depreciation and amortization

Stock–based compensation

Amortization of debt discounts and debt issuance costs

Accretion and amortization of premiums and discounts on investments, net

Amortization of collaboration contract asset

Deferred revenue

Change in fair value of stock price appreciation milestones

Changes in assets and liabilities:

Accounts receivable

Prepaid expenses and other assets

Accounts payable and accrued expenses

Right-of-use assets and lease liabilities, net

Net cash used in operating activities

Investing activities

Purchases of property and equipment

Purchases of investments

Maturities of investments

Net cash used in investing activities

Financing activities

Issuance of common stock from equity incentive plans, net of issuance costs

Proceeds from public offering of common stock, net of issuance costs

Proceeds from issuance of pre-funded warrants, net of issuance costs

Proceeds from private placement of common stock, net of issuance costs

Proceeds from sale of common stock to collaboration partner, net of issuance costs

Proceeds from CIRM award

Principal repayments of long–term debt

Net cash provided by financing activities

Net change in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of the year

Cash, cash equivalents and restricted cash at end of the year

Supplemental disclosure of cash flow information

Interest paid

Supplemental schedule of noncash investing and financing activities

Purchases of property and equipment in accounts payable

Right-of-use assets obtained in exchange for lease obligations

Accrued issuance costs included in additional paid-in-capital

See accompanying notes.

Fate Therapeutics, Inc.

Notes to Consolidated Financial Statements

Organization and Summary of Significant Accounting Policies

Fate Therapeutics, Inc.

(the Company) was incorporated in the state of Delaware on April 27, 2007 and has its principal operations in San Diego, California.

The Company is a clinical-stage biopharmaceutical company dedicated to the development of programmed cellular immunotherapies for patients with cancer, including off-the-shelf natural killer (NK) and T-cell product candidates derived from clonal master engineered induced pluripotent stem cell (iPSC) lines.

As of December 31, 2021, the Company has devoted substantially all of its efforts to product development, raising capital and building infrastructure and has not generated any revenues from any sales of its therapeutic products.

To date, the Company’s revenues have been derived from collaboration agreements and government grants.

Public Equity Offerings

In January 2021, the Company completed a public offering of common stock in which investors, certain of which are affiliated with a director of the Company, purchased 5.1 million shares of the Company’s common stock at a price of $ 85.50 per share under a shelf registration statement.

In addition, the Company issued pre-funded warrants, in lieu of common stock to certain investors, to purchase 257,310 shares of the Company’s common stock (Pre-Funded Warrants).

The purchase price of the Pre-Funded Warrants was $ 85.499 per Pre-Funded Warrant, which equals the per share public offering price for the shares of common stock less the $ 0.001 exercise price for each such Pre-Funded Warrant.

See Note 8 for additional detail.

Gross proceeds from the public offering and the issuance of the Pre-Funded Warrants were $ 460.0 million, and after giving effect to $ 27.6 million of costs related to the public offering and the issuance of Pre-Funded Warrants, net proceeds were $ 432.4 million.

In June 2020, the Company completed a public offering of common stock in which investors, certain of which are affiliated with a director of the Company, purchased 7.1 million shares of its common stock at a price of $ 28.31 per share under a shelf registration statement.

Gross proceeds from the offering were $ 201.3 million, and after giving effect to $ 12.5 million of costs related to the offering, net proceeds were $ 188.8 million.

In September 2019, the Company completed a public offering of common stock in which investors, certain of which are affiliated with a director of the Company, purchased 9.9 million shares of its common stock at a price of $ 17.50 per share under a shelf registration statement.

Gross proceeds from the offering were $ 173.1 million, and, after giving effect to $ 10.7 million of costs related to the offering, net proceeds were $ 162.4 million.

Private Placements of Common Stock

In June 2020, in connection with the June 2020 public offering of common stock, the Company exercised its right to cause an existing shareholder, Johnson & Johnson Innovation-JJDC, Inc (JJDC), to purchase $ 50.0 million of the Company’s common stock, and JJDC purchased in a private placement 1.8 million shares of the Company’s common stock at a price of $ 28.31 per share, for aggregate proceeds of $ 50.0 million.

In April 2020, in connection with the Janssen Agreement described in Note 2, JJDC purchased in a private placement 1.6 million shares of the Company’s common stock at a price of $ 31.00 per share, for aggregate proceeds of $ 50.0 million.

The shares of common stock purchased in the private placements were not subject to any underwriting discounts or commissions.

Use of Estimates

The Company’s consolidated financial statements are prepared in accordance with United States generally accepted accounting principles (U.S.

The preparation of the Company’s consolidated financial statements requires it to make estimates and assumptions that impact the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in the Company’s consolidated financial statements and accompanying notes.

The most significant estimates in the Company’s consolidated financial statements relate to its stock appreciation milestone obligations, contracts containing leases, accrued expenses and the estimated total costs expected to be incurred under the Company’s collaboration agreements.

Although these estimates are based on the Company’s knowledge of current events and actions it may undertake in the future, actual results may ultimately materially differ from these estimates and assumptions.

Risks and Uncertainties

Due to the global outbreak of SARS-CoV-2, the strain of coronavirus that causes Coronavirus disease 19 (COVID-19), including the emergence of new variants of the virus, the Company experienced impacts on certain aspects of its business, including its clinical trial and research and development activities, during the year ended December 31, 2021 .

For example, certain of the Company’s research and development activities have been delayed or disrupted as a result of measures the Company implemented in response to governmental “stay at home”

orders and in the interests of public health and safety, and the Company has experienced delays or disruptions in the initiation and conduct of its clinical trials as a result of prioritization of hospital and other medical resources toward pandemic efforts, policies and procedures implemented at clinical sites with respect to the conduct of clinical trials, and other precautionary measures taken in treating patients or in practicing medicine in response to the COVID-19 pandemic.

The scope and duration of these delays and disruptions, and the ultimate impacts of COVID-19 on the Company’s operations, are currently unknown.

The Company is continuing to actively monitor the situation and may take further precautionary and preemptive actions as may be required by federal, state or local authorities or that it determines are in the best interests of public health and safety and that of the Company’s patient community, employees, partners, and stockholders.

The Company cannot predict the effects that such actions, or the impact of COVID-19 on global business operations and economic conditions, may have on its business, strategy, collaborations, or financial and operating results.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its subsidiaries, Fate Therapeutics Ltd., incorporated in the United Kingdom, Fate Therapeutics, B.V., incorporated in the Netherlands and Tfinity Therapeutics, Inc., incorporated in the United States.

To date, the aggregate operations of these subsidiaries have not been significant and all intercompany transactions and balances have been eliminated in consolidation.

Segment Reporting

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance.

The Company views its operations and manages its business in one operating and reportable segment.

Fair Value of Financial Instruments

The Company’s financial instruments consist primarily of cash and cash equivalents, marketable securities, accounts receivable, stock price appreciation milestones, accounts payable, and accrued liabilities.

The carrying amounts of accounts receivable, accounts payable and accrued liabilities are considered to be representative of their respective fair values because of the relatively short-term nature of those instruments.

Based on the borrowing rates available to the Company for loans with similar terms, which is considered a Level 2 as described below, the Company believes that the fair value of long-term debt approximates its carrying value during the periods when debt was outstanding.

The accounting guidance 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 defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

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.

As a basis for considering such assumptions, the accounting guidance establishes a three- tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Observable inputs such as quoted prices in active markets;

Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly;

Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

Assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurements.

The Company reviews the fair value hierarchy classification on a quarterly basis.

Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents include cash in readily available checking and savings accounts, money market accounts and money market funds.

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

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows as of December 31, 2021, 2020 and 2019 (in thousands):

Years Ended December 31,

Cash and cash equivalents

Restricted cash

Total cash, cash equivalents, and restricted cash shown in the consolidated statement of cash flows

For the years ended December 31, 2021, 2020 and 2019 , the restricted cash balance includes cash-collateralized irrevocable standby letters of credit in the amounts of $ 15.2 million, $ 15.2 million, and $ 0.2 million, respectively, associated with the Company’s facilities leases .

Investments are accounted for as available-for-sale securities and are carried at fair value on the consolidated balance sheets.

Upon initial recognition of the investment and at each reporting period, the Company evaluates whether any unrealized losses on investments are attributable to a credit loss or other factors.

Any unrealized losses attributable to credit loss are recorded through an allowance for credit losses, limited to the amount by which the fair value is below amortized cost, with the offsetting amount recorded in other income or expense in the consolidated statement of operations and comprehensive loss.

Unrealized losses not attributable to an expected credit loss and unrealized gains on investments are recorded in other comprehensive income (loss) on the consolidated statements of operations and comprehensive loss.

Realized gains and losses, if any, on investments classified as available-for-sale securities are included in other income or expense.

The amortized cost of investments classified as available-for-sale debt securities is adjusted for amortization of premiums and accretion of discounts to maturity.

Such amortization and accretion are included in interest income.

The cost of securities sold is based on the specific identification method.

Interest and dividends on securities classified as available-for-sale are included in interest income.

Concentration of Credit Risk

Financial instruments, which potentially subject the Company to a significant concentration of credit risk, consist primarily of cash and cash equivalents and investments.

The Company maintains deposits in federally insured financial institutions in excess of federally insured limits.

The Company has not experienced any losses in such accounts and management believes that the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits and investments are held.

Property and Equipment

Property and equipment are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets (generally two to five years ) and generally consist of furniture and fixtures, computers, scientific and office equipment, and in-process costs related to facilities construction.

Repairs and maintenance costs are charged to expense as incurred.

Impairment of Long-Lived Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

An impairment loss is recorded if and when events and circumstances indicate that assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of those assets.

If the carrying amount is not recoverable, the Company measures the amount of any impairment by comparing the carrying value of the asset to the present value of the expected future cash flows associated with the use of the asset.

While the Company’s current and historical operating losses and negative cash flows are indicators of impairment, management believes that future cash flows to be received support the carrying value of its long-lived assets and, accordingly, has not recognized any impairment losses since inception.

The Company determines if a contract contains a lease at the inception of the contract.

The Company currently has leases related to its facilities leased for office and laboratory space, which are classified as operating leases.

These leases result in operating right-of-use (ROU) assets, current operating lease liabilities, and non-current operating lease liabilities in the Company’s consolidated balance sheets.

The Company does not have any financing leases.

Leases with a term of 12 months or less are considered short-term and ROU assets and lease obligations are not recognized.

Payments associated with short-term leases are expensed on a straight-line basis over the lease term.

Lease liabilities represent an obligation to make lease payments arising from the lease and ROU assets represent the right to use the underlying asset identified in the lease for the lease term.

Lease liabilities are measured at the present value of the lease payments not yet paid discounted using the discount rate for the lease established at the lease commencement date.

To determine the present value, the implicit rate is used when readily determinable.

For those leases where the implicit rate is not provided, the Company determines an incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments.

ROU assets are measured as the present value of the lease payments and also include any prepaid lease payments made and any other indirect costs incurred, and exclude any lease incentives received.

Lease terms may include the impact of options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

Lease expense for operating leases is recognized on a straight-line basis over the lease term.

The Company aggregates all lease and non-lease components for each class of underlying assets into a single lease component.

Revenue Recognition

The Company recognizes revenue in a manner that depicts the transfer of control of a product or a service to a customer and reflects the amount of the consideration the Company is entitled to receive in exchange for such product or service.

In doing so, the Company follows a five-step approach:

The Company considers the terms of a contract and all relevant facts and circumstances when applying the revenue recognition standard.

The Company applies the revenue recognition standard, including the use of any practical expedients, consistently to contracts with similar characteristics and in similar circumstances.

A customer is a party that has entered into a contract with the Company, where the purpose of the contract is to obtain a product or a service that is an output of the Company’s ordinary activities in exchange for consideration.

To be considered a contract, (i) the contract must be approved (in writing, orally, or in accordance with other customary business practices), (ii) each party’s rights regarding the product or the service to be transferred can be identified, (iii) the payment terms for the product or the service to be transferred can be identified, (iv) the contract must have commercial substance (that is, the risk, timing or amount of future cash flows is expected to change as a result of the contract), and (v) it is probable that the Company will collect substantially all of the consideration to which it is entitled to receive in exchange for the transfer of the product or the service.

A performance obligation is defined as a promise to transfer a product or a service to a customer.

The Company identifies each promise to transfer a product or a service (or a bundle of products or services, or a series of products and services that are substantially the same and have the same pattern of transfer) that is distinct.

A product or a service is distinct if both (i) the customer can benefit from the product or the service either on its own or together with other resources that are readily available to the customer and (ii) the Company’s promise to transfer the product or the service to the customer is separately identifiable from other promises in the contract.

Each distinct promise to transfer a product or a service is a unit of accounting for revenue recognition.

If a promise to transfer a product or a service is not separately identifiable from other promises in the contract, such promises should be combined into a single performance obligation.

The transaction price is the amount of consideration the Company is entitled to receive in exchange for the transfer of control of a product or a service to a customer.

To determine the transaction price, the Company considers the existence of any significant financing component, the effects of any variable elements, noncash considerations and consideration payable to the customer.

If a significant financing component exists, the transaction price is adjusted for the time value of money.

If an element of variability exists, the Company must estimate the consideration it expects to receive and uses that amount as the basis for recognizing revenue as the product or the service is transferred to the customer.

There are two methods for determining the amount of variable consideration:

If a contract has multiple performance obligations, the Company allocates the transaction price to each distinct performance obligation in an amount that reflects the consideration the Company is entitled to receive in exchange for satisfying each distinct performance obligation.

For each distinct performance obligation, revenue is recognized when (or as) the Company transfers control of the product or the service applicable to such performance obligation.

In those instances where the Company first receives consideration in advance of satisfying its performance obligation, the Company classifies such consideration as deferred revenue until (or as) the Company satisfies such performance obligation.

In those instances where the Company first satisfies its performance obligation prior to its receipt of consideration, the consideration is recorded as accounts receivable.

The Company expenses incremental costs of obtaining and fulfilling a contract as and when incurred if the expected amortization period of the asset that would be recognized is one year or less, or if the amount of the asset is immaterial.

Otherwise, such costs are capitalized as contract assets if they are incremental to the contract and amortized to expense proportionate to revenue recognition of the underlying contract .

Stock Price Appreciation Milestones

The Company estimates the fair value of the stock price appreciation milestones associated with the Amended and Restated Exclusive License Agreement with Memorial Sloan Kettering Cancer Center, using a Monte Carlo simulation model, which relies on the Company’s current stock price as well as significant estimates and assumptions to determine the estimated liability associated with the contingent milestone payments.

The Company accounts for the fair value of the stock price appreciation milestones in accordance with ASC 815, Derivatives and Hedging , with fair value marked to market at each reporting date.

The assumptions used to calculate the fair value of the stock price appreciation milestones are subject to a significant amount of judgment including the probability of achieving a specified clinical milestone, the expected volatility of the Company’s common stock, the risk-free interest rate, and the estimated term, which is based in part on the last valid patent claim date.

The Company remeasures the fair value of the stock price appreciation milestones at each balance sheet date, with changes in fair value recorded in earnings as non-operating income or expense on the consolidated statements of operations and comprehensive loss.

Research and Development Costs

All research and development costs are expensed as incurred.

Costs related to filing and pursuing patent applications are recorded as general and administrative expense and expensed as incurred since recoverability of such expenditures is uncertain.

Stock-Based Compensation

Stock-based compensation expense represents the cost of the grant date fair value of employee stock option and restricted stock unit grants recognized over the requisite service period of the awards (usually the vesting period) on a straight-line basis.

For stock awards for which vesting is subject to both performance-based milestones and market conditions, expense is recorded over the derived service period after the point when the achievement of the performance-based milestone is probable or the performance condition has been achieved.

The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model, with the exception of option grants for which vesting is subject to both performance-based milestones and market conditions, which are valued using a lattice-based model.

The fair value of restricted stock units, including performance-based restricted stock units, is based on the closing price of the Company’s common stock as reported on The Nasdaq Global Market on the date of grant.

The Company recognizes forfeitures for all awards as such forfeitures occur .

Convertible Preferred Stock

The Company applies the relevant accounting standards to distinguish liabilities from equity when assessing the classification and measurement of preferred stock.

Preferred shares subject to mandatory redemptions are considered liabilities and measured at fair value.

Conditionally redeemable preferred shares are considered temporary equity.

All other preferred shares are considered as stockholders’

The Company applies the relevant accounting standards for derivatives and hedging (in addition to distinguishing liabilities from equity) when accounting for hybrid contracts that contain conversion options.

Conversion options must be bifurcated from the host instruments and accounted for as free-standing financial instruments according to certain criteria.

These criteria include circumstances when (i) the economic characteristics and risks of the embedded derivative instruments are not clearly and closely related to the economic characteristics and risks of the host contract, (ii) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable accounting principles with changes in fair value reported in earnings as they occurred, and (iii) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.

The derivative is subsequently measured at fair value at each reporting date, with the changes in fair value reported in earnings.

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements.

Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

The Company recognizes net deferred tax assets to the extent that the Company believes these assets are more likely than not to be realized.

In making such a determination, management considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations.

If management determines that the Company would be able to realize its deferred tax assets in the future in excess of their net recorded amount, management would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

The Company records uncertain tax positions on the basis of a two-step process whereby (1) management determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more- likely-than-not recognition threshold, management recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

The Company recognizes interest and penalties related to unrecognized tax benefits within income tax expense.

Any accrued interest and penalties are included within the related tax liability.

Comprehensive Loss

Comprehensive loss is defined as a change in equity during a period from transactions and other events and circumstances from non‑owner sources.

Other comprehensive loss includes unrealized gains and losses, other than losses attributable to a credit loss which are included in other income and expense, on investments classified as available-for-sale securities, which was the only difference between net loss and comprehensive loss for the applicable periods.

Net Loss Per Common Share

Basic net loss per common share is calculated by dividing the net loss by the weighted-average number of common shares outstanding for the period, without consideration for common stock equivalents.

The Pre-Funded Warrants associated with the January 2021 public equity offering (see Note 8) are considered outstanding shares in the basic earnings per share calculation given their nominal exercise price.

Dilutive common stock equivalents comprise convertible preferred stock, warrants for the purchase of common stock, and common stock options and restricted stock units outstanding under the Company’s stock option plans.

For all periods presented, there is no difference in the number of common shares used to calculate basic and diluted common shares outstanding due to the Company’s net loss position.

Potentially dilutive securities are not included in the calculation of diluted net loss per common share because to do so would be anti-dilutive are as follows (in common stock equivalent shares):

As of December 31,

Common stock options

Restricted stock units

Series A convertible preferred stock (if converted)

Going Concern Assessment

Substantial doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year from the financial statement issuance date.

The Company determined that there are no conditions or events that raise substantial doubt about its ability to continue as a going concern for a period of at least twelve months from the date of issuance of these financial statements .

Recent Accounting Pronouncements

In August 2020, the FASB issued ASU 2020-06, Debt –

Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging –

Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments, and amends existing earnings-per-share, or EPS, guidance by requiring that an entity use the if-converted method when calculating diluted EPS for convertible instruments.

ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years, with early adoption permitted.

The Company plans to adopt ASU 2020-06 effective January 1, 2022 and does not anticipate this will have a material effect on the Company's financial statements.

Collaboration and License Agreements

Janssen Collaboration and Option Agreement

On April 2, 2020 (the Effective Date), the Company entered into a Collaboration and Option Agreement (the Janssen Agreement) with Janssen Biotech, Inc.

(Janssen), part of the Janssen Pharmaceutical Companies of Johnson & Johnson.

Additionally, on the Effective Date, the Company entered into a Stock Purchase Agreement (the Stock Purchase Agreement) with Johnson & Johnson Innovation –

Upon entering the Janssen Agreement, the Company received an upfront, non-refundable and non-creditable payment of $ 50.0 million.

Under the Janssen Agreement, Janssen and the Company will collaborate to develop iPSC-derived CAR NK and CAR T-cell product candidates for the treatment of cancer.

Janssen will contribute proprietary antigen binding domains directed to up to four tumor-associated antigen targets (the Janssen Cancer Targets).

The Company will research and construct iPSC-derived CAR NK and CAR T-cell product candidates directed to each of the Janssen Cancer Targets (the Collaboration Candidates) and perform preclinical development of Collaboration Candidates.

Upon the Company’s completion of activities sufficient to allow the filing of an Investigational New Drug (IND) application for a Collaboration Candidate, Janssen will have the right to exercise an exclusive option and obtain an exclusive license to the Company’s intellectual property rights for the development and commercialization of such Collaboration Candidate.

Upon the exercise of such exclusive option, Janssen will be solely responsible for the worldwide clinical development and commercialization of such Collaboration Candidate, and the Company will be primarily responsible for the manufacture, at Janssen’s cost, of such Collaboration Candidate.

For each Collaboration Candidate, upon attaining clinical proof-of-concept, the Company shall have the right to elect to co-commercialize and share equally in the profits and losses in the United States, subject to the Company sharing in certain development costs.

Under the terms of the Janssen Agreement, the Company is entitled to receive full funding for all research, preclinical development and IND-enabling activities performed by the Company for Collaboration Candidates, and is eligible to receive (i) with respect to the first Janssen Cancer Target, payments of up to $ 898.0 million upon the achievement of specified development, regulatory and sales milestones (the Janssen Milestone Payments) for the first Collaboration Candidate, and up to $ 460.0 million in Janssen Milestone Payments for each additional Collaboration Candidate, directed to the first Janssen Cancer Target;

and (ii) with respect to each of the second, third and fourth Janssen Cancer Targets, up to $ 706.0 million in Janssen Milestone Payments for each of the first Collaboration Candidates, and up to $ 340.0 million in Janssen Milestone Payments for each additional Collaboration Candidate, directed to the applicable Janssen Cancer Target, where certain Janssen Milestone Payments under (i) and (ii) are subject to reduction in the event the Company elects to co-commercialize and share equally in the profits and losses in the United States of a respective Collaboration Candidate.

The Company is further eligible to receive double-digit tiered royalties ranging up to the mid-teens on net sales of Collaboration Candidates that are commercialized by Janssen under the Janssen Agreement, subject to reduction under certain circumstances.

Under the Stock Purchase Agreement, the Company sold 1.6 million shares of common stock to JJDC at $ 31.00 per share, for an aggregate purchase price of approximately $ 50.0 million, on April 7, 2020.

The Company determined that this common stock purchase represented a premium of $ 9.93 per share, or $ 16.0 million in aggregate (the Equity Premium), and the remaining $ 34.0 million was recorded as an issuance of common stock in shareholders’

In addition, under the Stock Purchase Agreement, the Company had the right to require JJDC purchase an aggregate of $ 50.0 million in shares of the Company’s common stock in a private placement at the same price per share as that paid by investors in a public offering.

In June 2020, in connection with the Company’s June 2020 public offering, the Company exercised this right and JJDC purchased in a private placement 1.8 million shares of the Company’s common stock at a price of $ 28.31 per share, for aggregate proceeds of $ 50.0 million.

Janssen may terminate the Janssen Agreement with respect to one or more Janssen Cancer Targets, or in its entirety, at any time on or after the second anniversary of the Effective Date, and the Company may terminate the Janssen Agreement with respect to a particular Janssen Cancer Target if a Collaboration Candidate has not been selected for IND-enabling studies for such Janssen Cancer Target within specified time periods under certain conditions.

The Janssen Agreement contains customary provisions for termination by either party in the event of a material breach of the Janssen Agreement, subject to cure, by the other party and in the event of any bankruptcy, insolvency or similar events with respect to the other party.

The Company applied ASC 808, Collaborative Arrangements (ASC 808) and determined the Janssen Agreement is applicable to such guidance.

The Company concluded that Janssen represented a customer and applied relevant guidance from ASC 606, Revenue from Contracts with Customers (ASC 606) to evaluate the appropriate accounting for the Janssen Agreement.

In accordance with this guidance, the Company identified its potential performance obligations, including its grant of a license to Janssen to certain of its intellectual property subject to certain conditions, its conduct of research and development services, and its participation in various joint oversight committees.

The Company determined that its grant of a license to Janssen to certain of its intellectual property subject to certain conditions was not distinct from other performance obligations because such grant is dependent on the conduct and results of the research and development services.

Accordingly, the Company determined that its grant of a license to Janssen and its conduct of research and development services should be accounted for as one combined performance obligation, and that the combined performance obligation is transferred over the expected term of the conduct of the research and development services, which is estimated to be four years.

Additionally, the Company determined that participation in the various joint oversight committees did not constitute a performance obligation as the Company’s participation in the various joint oversight committees does not transfer a service.

The Company also assessed the effects of any variable elements under the Janssen Agreement.

Such assessment evaluated, among other things, the funding to be received by the Company for its conduct of research and development services.

Based on its assessment, the Company concluded that the total amount to be received by the Company for its conduct of research and development services is variable and cannot be readily estimated and, therefore, no amounts associated with such services were included in the initial transaction price.

In addition, the Company also assessed its likelihood of receiving (i) preclinical milestones, (ii) various clinical, regulatory and commercial milestone payments, and (iii) royalties on net sales of the Collaboration Candidates.

Based on the likelihood of receiving such milestone payments and royalties, no amounts associated with milestones or royalties were included in the initial transaction price.

In accordance with ASC 606, the Company determined that the initial transaction price under the Janssen Agreement equals $ 66.0 million, consisting of the upfront, non-refundable and non-creditable payment of $ 50.0 million and the Equity Premium of $ 16.0 million.

The Company concluded that there was not a significant financing component under the Janssen Agreement.

The upfront payment of $ 66.0 million was recorded as deferred revenue and is being recognized as revenue consistent with the Company’s efforts related to the conduct of research and development services, as the research and development services are the primary component of the combined performance obligation.

Since the total amount to be received by the Company for its research and development services under the Janssen Agreement could not be readily estimated, revenue associated with the upfront payment will be recognized based on actual headcount utilized as a percentage of total headcount expected to be utilized over the expected term of the conduct of the research and development services.

Revenue associated with the research and development services will be recognized in an amount equal to the actual costs incurred during the period in which the research and development services are performed by the Company.

During the year ended December 31, 2021, the Company achieved a research milestone under the Janssen Agreement and received a cash payment of $ 3.0 million.

In accordance with ASC 606, the Company determined that the $ 3.0 million milestone receivable represented an increase in the initial transaction price under the Janssen Agreement in the form of the receipt of variable consideration that was previously constrained.

The Company recognized revenue associated with the $ 3.0 million milestone receivable in an amount equal to the proportional percentage of actual headcount incurred under the Janssen Agreement since its inception as a percentage of the total headcount expected to be utilized over the expected term of conduct of research and development services under the Janssen Agreement.

The remaining unrecognized revenue associated with the $ 3.0 million milestone was recorded to deferred revenue, and is being recognized as revenue over the expected term of conduct of research and development services.

As a direct result of the Company’s entry into the Janssen Agreement, the Company incurred $ 13.6 million in sublicense fees to certain of its existing licensors.

The $ 13.6 million in sublicense consideration represents an asset under ASC 340, Other Assets and Deferred Costs (ASC 340) and is amortized to research and development expense ratably with the Company’s revenue recognition

under the Janssen Agreement.

During the year ended December 31, 2021 , the Company recognized $ 1.7 million of such expense.

As of December 31, 2021 , the Janssen Agreement contract asset balance was $ 9.5 million.

The Company recognized revenue of $ 43.7 million under the Janssen Agreement for the year ended December 31, 2021 .

Such revenue comprised $ 29.5 million associated with research and development services and $ 14.2 million associated with the upfront fee and Equity Premium for the year ended December 31, 2021 .

The Company recognized revenue of $ 16.8 million under the Janssen Agreement for the year ended December 31, 2020 .

Such revenue comprised $ 10.3 million associated with research and development services and $ 6.5 million associated with the upfront fee and Equity Premium for the year ended December 31, 2020.

As of December 31, 2021 , aggregate deferred revenue related to the Janssen Agreement was $ 48.3 million, of which $ 21.2 million is classified as current.

As of December 31, 2021 , the Company has received $ 31.1 million in cash in aggregate research and development fees from Janssen.

Ono Collaboration and Option Agreement

On September 14, 2018, the Company entered into a Collaboration and Option Agreement (the Ono Agreement) with Ono Pharmaceutical Co.

(Ono) for the joint development and commercialization of two off-the-shelf iPSC-derived chimeric antigen receptor (CAR) T-cell product candidates.

The first off-the-shelf, iPSC-derived CAR T-cell candidate (Candidate 1) targets an antigen expressed on certain lymphoblastic leukemias, and the second off-the-shelf, iPSC-derived CAR T-cell candidate (Candidate 2) targets a novel antigen identified by Ono expressed on certain solid tumors (each a Candidate and collectively the Candidates).

On December 4, 2020, the Company and Ono entered into a letter agreement (the Ono Letter Agreement) in connection with the Ono Agreement.

Pursuant to the Ono Letter Agreement, Ono delivered to the Company proprietary antigen binding domains targeting an antigen expressed on certain solid tumors and nominated such antigen binding domains as the Ono Antigen Binding Domain for incorporation into Collaboration Candidate 2.

In connection with such nomination and pursuant to the original agreement, in December 2020, Ono paid the Company a milestone fee of $ 10.0 million for further research and development of Collaboration Candidate 2 and Ono maintains its option to this candidate.

In addition, in connection with the Ono Letter Agreement, Fate and Ono agreed to the termination of the Ono Agreement with respect to Collaboration Candidate 1.

Fate retains all rights, in its sole discretion, to research, develop and commercialize Collaboration Candidate 1 throughout the world without any obligation to Ono.

Pursuant to the Ono Agreement, the Company and Ono are jointly conducting research and development activities under a joint development plan, with the goal of advancing Candidate 2 to a pre-defined preclinical milestone.

The Company has granted to Ono, during a specified period of time, an option to obtain an exclusive license under certain intellectual property rights to develop and commercialize Candidate 2 in all territories of the world, with the Company retaining the right to co-develop and co-commercialize Candidate 2 in the United States and Europe under a joint arrangement whereby it is eligible to share at least 50 % of the profits and losses (the Option).

The Option will expire upon the earliest of:

(a) the achievement of the pre-defined preclinical milestone, (b) termination by Ono of research and development activities for the Candidate and (c) the date that is the later of (i) four years after the Effective Date and (ii) completion of all applicable activities contemplated under the joint development plan (the Option Period).

The Company has maintained worldwide rights of manufacture for Candidate 2.

Under the terms of the Ono Agreement, Ono paid the Company an upfront, non-refundable and non-creditable payment of $ 10.0 million in connection with entering into the agreement.

Additionally, as consideration for the Company’s conduct of research and preclinical development under a joint development plan, Ono pays the Company annual research and development fees set forth in the annual budget included in the joint development plan, which fees are estimated to be $ 20.0 million in aggregate over the course of the joint development plan.

Further, under the terms of the Ono Agreement, Ono has agreed to pay the Company up to an additional $ 20.0 million, subject to the exercise by Ono of the Option (Option Exercise Fees) during the Option Period for Candidate 2.

Such fees are in addition to the upfront payment research and development fees, and the previously paid $10.0 milestone associated with the Ono Letter Agreement.

Subject to Ono’s exercise of the Option and to the achievement of certain clinical, regulatory and commercial milestones (Milestones) with respect to the Candidate in specified territories, the Company is entitled to receive an aggregate of up to $ 885.0 million in additional milestone payments for Candidate 2, with the applicable milestone payments for Candidate 2 for the United States and Europe subject to reduction by 50 % if the Company elects to co-develop and co-commercialize Candidate 2 as described above.

The Company is also eligible to receive tiered royalties (Royalties) ranging from the mid-single digits to the low-double digits based on annual net sales by Ono for Candidate 2 in specified territories, with such royalties subject to certain reductions.

No milestone payments specific to Candidate 1 are payable under the Ono Agreement, given the termination of such candidate in December 2020 under the agreement.

The Ono Agreement will terminate with respect to a Candidate if Ono does not exercise its Option for a Candidate within the Option Period, or in its entirety if Ono does not exercise any of its Options for the Candidates within their respective Option Periods.

In addition, either party may terminate the Ono Agreement in the event of breach, insolvency or patent challenges by the other party;

provided, that Ono may terminate the Ono Agreement in its sole discretion (x) on a Candidate-by-Candidate basis at any time after the second anniversary of the effective date of the Ono Agreement or (y) on a Candidate-by-Candidate or country-by-country basis at any time after the expiration of the Option Period, subject to certain limitations.

The Ono Agreement will expire on a Candidate-by-Candidate and country-by-country basis upon the expiration of the applicable royalty term, or in its entirety upon the expiration of all applicable payment obligations under the Ono Agreement.

The Company applied ASC 808 to the Ono Agreement and Ono Letter Agreement and determined that the agreements are applicable to such guidance.

The Company concluded that Ono represented a customer and applied relevant guidance from ASC 606 to evaluate the appropriate accounting for the Ono Agreement and the Ono Letter Agreement.

In accordance with this guidance, the Company identified its performance obligations, including its grant of a license to Ono to certain of its intellectual property subject to certain conditions, its conduct of research services, and its participation in a joint steering committee.

The Company determined that its grant of a license to Ono to certain of its intellectual property subject to certain conditions was not distinct from other performance obligations because such grant is dependent on the conduct and results of the research services.

Additionally, the Company determined that its conduct of research services was not distinct from other performance obligations since such conduct is dependent on the guidance of the joint steering committee.

Accordingly, the Company determined that all performance obligations should be accounted for as one combined performance obligation, and that the combined performance obligation is transferred over the expected term of the conduct of the research services, which is estimated to be four years .

The termination of Candidate 1 under the Ono Agreement did not impact this assessment.

The Company also assessed, in connection with the upfront, non-refundable and non-creditable payment of $ 10.0 million received in September 2018 and the $ 5.0 million prepayment of the first-year research and development fees in October 2018 and concluded that there was not a significant financing component to the Ono Agreement.

The Company also assessed the effects of any variable elements under the Ono Agreement.

Such assessment evaluated, among other things, the likelihood of receiving (i) preclinical milestone and option fees, (ii) various clinical, regulatory and commercial milestone payments, and (iii) royalties on net sales of either product Candidate.

Based on its assessment, the Company concluded that, based on the likelihood of these variable components occurring, there was not a significant variable element included in the transaction price.

Accordingly, the Company has not assigned a transaction price to any Ono Option Milestone, Ono Milestones or Ono Option Exercise Fees, other than the $10.0 million milestone triggered as part of the Ono Letter Agreement in December 2020, given the substantial uncertainty related to their achievement and has not assigned a transaction price to any Ono Royalties.

In accordance with ASC 606, the Company determined that the initial transaction price under the Ono Agreement equals $ 30.0 million, consisting of the upfront, non-refundable and non-creditable payment of $ 10.0 million and the aggregate estimated research and development fees of $ 20.0 million.

The upfront payment of $ 10.0 million was recorded as deferred revenue and is being recognized as revenue over time in conjunction with the Company’s conduct of research services as the research services are the primary component of the combined performance obligations.

Revenue associated with the upfront payment will be recognized based on actual costs incurred as a percentage of the estimated total costs expected to be incurred over the expected term of conduct of the research services.

The Company recorded the $ 5.0 million prepayment of the first-year research and development fees as deferred revenue, and such fees were recognized as revenue as the research services were delivered.

In accordance with ASC 606, the Company concluded that the $ 10.0 million milestone payment associated with the Ono Letter Agreement represented an increase in the initial transaction price under the Ono Agreement in the form of the receipt of variable consideration that was previously constrained.

The milestone payment of $ 10.0 million was recorded to deferred revenue for the proportional percentage of remaining costs to be incurred under the Ono Agreement as a percentage of the estimated total costs expected to be incurred over the expected term of conduct of the research services and is being recognized as revenue over the expected term in conjunction with the Company’s conduct of research services as the research services are the primary component of the combined performance obligations.

The Company recognized revenue associated with the milestone payment for the proportional percentage of actual costs incurred under the Ono Agreement as a percentage of the estimated total costs expected to be incurred over the expected term of conduct of the research services.

As a direct result of the Company’s entry into the Ono Agreement and the Ono Letter Agreement, the Company incurred an aggregate of $ 4.0 million in sublicense consideration to existing licensors of the Company.

The $ 4.0 million in sublicense consideration represents an asset under ASC 340 and is being amortized to research and development expense ratably with the Company’s revenue recognition under the Ono Agreement.

During the years ended December 31, 2021 and 2020 , the Company recognized $ 1.2 million and $ 1.8 million, respectively, of such expense.

As of December 31, 2021 , the Ono Agreement contract asset had a balance of $ 0.3 million.

The Company recognized revenue of $ 12.1 million, $ 14.6 million, and $ 9.3 million under the Ono Agreement and Ono Letter Agreement during the years ended December 31, 2021, 2020 and 2019 , respectively.

Such revenue comprised $ 6.0 million associated

with research services and $ 6.1 million associated with the upfront payment during the year ended December 31, 2021.

Suc h revenue comprised $ 6.1 million associated with the Ono Letter Agreement milestone earned in December 2020, $ 5.7 million associated with research services and $ 2.8 million associated with the upfront payment during the year ended December 31, 2020 .

Such revenue comprised $ 6.2 million associated with research services and $ 3.1 million associated with the upfront payment during the year ended December 31, 2019.

As of December 31, 2021 , aggregate deferred revenue related to the Ono Agreement and Ono Letter Agreement was $ 0.3 million, all of which is classified as current.

As of December 31, 2021 , the Company has received $ 17.0 million in cash of aggregate research and development fees from Ono.

Memorial Sloan Kettering Cancer Center License Agreement

On May 15, 2018, the Company entered into an Amended and Restated Exclusive License Agreement (the Amended MSK License) with Memorial Sloan Kettering Cancer Center (MSK).

The Amended MSK License amends and restates the Exclusive License Agreement entered into between the Company and MSK on August 19, 2016 (the Original MSK License), pursuant to which the Company entered into an exclusive license agreement with MSK for rights relating to compositions and methods covering iPSC-derived cellular immunotherapy, including T-cells and NK-cells derived from iPSCs engineered with CARs.

Pursuant to the Amended MSK License, MSK granted to the Company additional licenses to certain patents and patent applications relating to new CAR constructs and off-the-shelf CAR T cells, including the use of clustered regularly interspaced short palindromic repeat (CRISPR) and other innovative technologies for their production, in each case to research, develop, and commercialize licensed products in the field of all human therapeutic uses worldwide.

The Company has the right to grant sublicenses to certain licensed rights in accordance with the terms of the Amended MSK License, in which case it is obligated to pay MSK a percentage of certain sublicense income received by the Company.

The Company is obligated to pay to MSK an annual license maintenance fee during the term of the agreement, and milestone payments upon the achievement of specified clinical, regulatory and commercial milestones for licensed products as well as royalty payments on net sales of licensed products

In the event a licensed product achieves a specified clinical milestone, MSK is then eligible to receive certain milestone payments totaling up to $ 75.0 million based on the price of the Company’s common stock, where the amount of such payments owed to MSK is contingent upon certain increases in the price of the Company’s common stock following the date of achievement of such clinical milestone.

These payments are based on common stock price multiples, with the numerator being the fair value of the ten-trading day trailing average closing price of the Company’s common stock and the denominator being the ten-trading day trailing average closing price of the Company’s common stock as of the effective date of the Amended MSK License, adjusted for any stock splits, cash dividends, stock dividends, other distributions, combinations, recapitalizations, or similar events.

Under the terms of the Amended MSK License, upon a change of control of the Company, in certain circumstances, the Company may be required to pay a portion of these payments to MSK based on the price of the Company’s common stock in connection with such change of control.

The following table summarizes the common stock multiples and the stock price appreciation milestone payments under the terms of the agreement :

Common stock multiple

Ten-trading day trailing average common stock price

Stock price appreciation milestone payment (in millions)

In July 2021, the Company achieved the specified clinical milestone for a licensed product under the Amended MSK License and the Company’s ten-trading day trailing average common stock price exceeded the first, pre-specified threshold.

As a result, the Company remitted the first milestone payment of $ 20.0 million to MSK during the year ended December 31, 2021.

To determine the estimated fair value of the remaining stock price appreciation milestones, the Company uses a Monte Carlo simulation methodology which model s future Company common stock prices based on the current stock price and several key variables.

The following variables were incorporated in the calculation of the estimated fair value of the stock price appreciation milestones as of December 31, 2021:

Risk-free interest rate

Expected volatility

Estimated term (in years)

Closing stock price as of measurement date

The key inputs to the Monte Carlo simulation to determine the fair value of the stock price appreciation milestones include the Company’s stock price as of the measurement date;

the estimated term which is based in part on the last valid patent claim date;

the expected volatility of the Company’s common stock, estimated using the Company’s historical common stock volatility as of the remeasurement date;

and the risk-free rate based on the U.S.

Treasury yield for the estimated term determined.

Fair value measurements are highly sensitive to changes in these inputs and significant changes could result in a significantly higher or lower fair value and resulting expense or gain.

At each balance sheet date, the Company remeasures the fair value of the stock price appreciation milestones, with changes in fair value recognized as a component of other income (expense) in the consolidated statements of operations and comprehensive loss .

Amounts are included in current or non-current liabilities based on the estimated timeline associated with the individual potential payments.

During the year ended December 31, 2021 and 2020, the Company recorded $ 3.5 million of income and $ 47.7 million of expense, respectively, associated with the change in fair value of the stock price appreciation milestones.

No income or expense was recorded during the year ended December 31, 2019.

As of December 31, 2021 and 2020, the Company recorded a liability of $ 24.2 million and $ 47.7 million, respectively, associated with the stock price appreciation milestones for the Amended MSK License.

Juno Collaboration and License Agreement

On May 4, 2015 , the Company entered into a strategic research collaboration and license agreement (the Juno Agreement) with Juno Therapeutics, Inc.

(Juno) to screen for and identify small molecules that enhance the therapeutic properties of Juno’s genetically-engineered T-cell immunotherapies.

The four-year initial research term under the Juno Agreement concluded as scheduled on May 4, 2019, and the overall agreement was terminated upon the receipt of the last quarterly research payment of $ 0.2 million, which occurred in May 2019.

The Company applied ASC 606 to evaluate the appropriate accounting for the Juno Agreement.

In accordance with this guidance, the Company identified its performance obligations, including its grant of an exclusive worldwide license to certain of its intellectual property subject to certain conditions, its conduct of research services and its participation in a joint research committee.

No revenue was recognized under the Juno Agreement during the years ended December 31, 2021, and 2020 .

Total revenue recognized under the Juno Agreement during the year ended December 31, 2019 was $ 1.4 million, which comprised $ 0.7 million associated with the upfront fee and equity premium, and $ 0.7 million associated with research services.

California Institute for Regenerative Medicine Award

On April 5, 2018 , the Company executed an award agreement with the California Institute for Regenerative Medicine (CIRM) pursuant to which CIRM awarded the Company $ 4.0 million to advance the Company’s FT516 product candidate into a first-in-human clinical trial for the treatment of subjects with advanced solid tumors, including in combination with monoclonal antibody therapy (the Award).

Pursuant to the terms of the Award, the Company is eligible to receive five disbursements in varying amounts totaling $4.0 million, with one disbursement receivable upon the execution of the Award, and four disbursements receivable upon the completion of certain milestones throughout the project period.

The Award is subject to certain co-funding requirements by the Company, and the Company is required to provide CIRM progress and financial update reports under the Award.

Pursuant to the terms of the Award, the Company, in its sole discretion, has the option to treat the Award either as a loan or as a grant.

In the event the Company elects to treat the Award as a loan, the Company will be obligated to repay i) 60 %, ii) 80 %, iii) 100 % or iv) 100 % plus interest at 7 % plus LIBOR, of the total Award to CIRM, where such repayment rate is dependent upon the phase of clinical development of FT516 at the time of the Company’s election.

If the Company does not elect to treat the Award as a loan within 10 years of the date of the Award, the Award will be considered a grant and the Company will be obligated to pay to CIRM a royalty on commercial sales of FT516 until such royalty payments equal nine times the total amount awarded to the Company under the Award.

Since the Company may, at its election, repay some or all of the Award, the Company accounts for the Award as a liability until the time of election.

As of December 31, 2021 , the Company has received all disbursements available under the Award in the amount of $ 4.0 million.

The aggregate amount received is recorded as a CIRM Liability on the accompanying consolidated balance sheets and classified as current or non-current based on the potential amount payable within twelve months of the current balance sheet date.

The Company invests portions of excess cash in United States treasuries, commercial paper, non-U.S.

government securities, municipal securities, and corporate debt securities with maturities ranging from three to eighteen months from the purchase date.

These investments are accounted for as available-for-sale securities and are classified as short-term and long-term investments in the accompanying consolidated balance sheets based on each security’s contractual maturity date.

The following table summarizes the Company’s investments accounted for as available-for-sale securities as of December 31, 2021 and 2020 (in thousands):

December 31, 2021

Classified as current assets:

Treasury debt securities

Municipal securities

Corporate debt securities

Commercial paper

Total short-term investments

Classified as non-current assets:

Treasury debt securities

Greater than 1

Municipal securities

Greater than 1

Corporate debt securities

Greater than 1

Total long-term investments

December 31, 2020

Classified as current assets:

Treasury debt securities

government securities

Municipal securities

Corporate debt securities

Commercial paper

Total short-term investments

As of December 31, 2021 and 2020 , the Company had $ 1.1 million and $ 1.5 million, respectively, of accrued interest on investments recorded in prepaid expenses and other assets on the consolidated balance sheets.

The following tables present gross unrealized losses and fair values for those investments that were in an unrealized loss position as of December 31, 2021 and December 31, 2020 , aggregated by investment category and the length of time that individual securities have been in a continuous loss position (in thousands):

Less Than 12 Months

12 Months or Greater

Estimated Fair Value

Unrealized Losses

Estimated Fair Value

Unrealized Losses

Estimated Fair Value

Unrealized Losses

December 31, 2021

Treasury debt securities

Municipal securities

Corporate debt securities

Commercial paper

December 31, 2020

Municipal securities

Corporate debt securities

Commercial paper

The Company reviews its investment holdings at the end of each reporting period and evaluates any unrealized losses using the expected credit loss model to determine if the unrealized loss is a result of a credit loss or other factors.

The Company also evaluates its investment holdings for impairment using a variety of factors including the Company’s intent to sell the underlying securities prior to maturity and whether it is more likely than not that the Company would be required to sell the securities before the recovery of their amortized basis.

During the years ended December 31, 2021, 2020 and 2019 , the Company did no t recognize any impairment or realized gains or losses on sales of investments, and the Company did not record an allowance for, or recognize, any expected credit losses.

Fair Value Measurements

The following tables presents the Company’s financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2021 and 2020 (in thousands):

Fair Value Measurements at

Reporting Date Using

Quoted Prices

As of December 31, 2021:

Financial assets:

Money market funds

Treasury debt securities

Municipal securities

Corporate debt securities

Commercial paper

Total assets measured at fair value on a recurring basis

Financial liabilities:

Stock price appreciation milestones

Total financial liabilities measured at fair value on a recurring basis

As of December 31, 2020:

Financial assets:

Money market funds

Treasury debt securities

government securities

Municipal securities

Corporate debt securities

Commercial paper

Total assets measured at fair value on a recurring basis

Financial liabilities:

Stock price appreciation milestones

Total financial assets measured at fair value on a recurring basis

Level 1 assets consisted of money market funds and U.S.

Treasury securities measured at fair value based on quoted prices in active markets as provided by the Company’s investment managers.

Level 2 assets consisted of corporate debt securities, commercial paper, municipal securities, and non-U.S.

government securities measured at fair value using standard observable inputs, including reported trades, broker/dealer quotes, and bids and/or offers.

The Company validates the quoted market prices provided by its investment managers by comparing the investment managers’

assessment of the fair values of the Company's investment portfolio balance against the fair values of the Company's investment portfolio balance obtained from an independent source.

There were no Level 3 assets held by the Company as of December 31, 2021.

Level 3 liabilities consisted of stock price appreciation milestones associated with the Amended MSK License as described in detail in Note 2.

To determine the estimated fair value of the stock price appreciation milestones, the Company uses a Monte Carlo simulation methodology which models future Company common stock prices based on several key variables.

The assumptions used to calculate the fair value of the stock price appreciation milestones are subject to a significant amount of judgment including the expected volatility of the Company’s common stock and estimated term, which is based in part on the last valid patent claim date.

Fair value measurements are highly sensitive to changes in these inputs and significant changes could result in a significantly higher or

lower fair value and resulting expense or gain.

Further, as the stock price appreciation milestones are first contingent upon the achievement of a specified clinical milestone, the Company also estimates the fair value of the stock price appreciation milestones based on the probability of achieving the clinical milestone.

This assessment is based on several factors including the successful achievement of technological, manufacturing, and regulatory requirements.

A small change in the assumptions and other inputs, such as the price of the Company’s common stock, may have a relatively large change in the estimated fair value of the stock price appreciation milestones and associated liability and expense.

For example, keeping all other variables constant, a hypothetical 10 % increase in the stock price at December 31, 2021 from $ 58.51 to $ 64.36 per share would have decreased the income recorded during 2021 by $ 2.4 million related to the stock price appreciation milestones.

Keeping all other variables constant, a hypothetical 10 % decrease in the stock price at December 31, 2021 from $ 58.51 to $ 52.66 per share would have increased the income recorded during 2021 by $ 2.3 million related to the stock price appreciation milestones.

The following table presents the changes in fair value of the Company’s Level 3 stock price appreciation milestones liability (in thousands):

Balance at December 31, 2020

Achievement of $20.0 million stock price appreciation milestone

Changes in fair value of stock price appreciation milestones liability

Balance at December 31, 2021

None of the Company’s non-financial assets or liabilities are recorded at fair value on a non-recurring basis.

No transfers between levels have occurred during the periods presented.

Property and Equipment

Property and equipment consist of the following (in thousands):

Furniture and fixtures

Computer and office equipment

Leasehold improvements—building

Scientific equipment

Construction-in-process

Total property and equipment, gross

Less accumulated depreciation and amortization

Total property and equipment, net

Depreciation expense related to property and equipment was $ 5.9 million, $ 3.1 million, and $ 2.2 million, for the years ended December 31, 2021, 2020, and 2019, respectively.

No material gains or losses on the disposal of property and equipment have been recorded for the years ended December 31, 2021, 2020, and 2019 .

Accrued Expenses and Long-Term Debt

Accrued Expenses

Current accrued expenses consist of the following (in thousands):

Accrued payroll and other employee benefits

Accrued clinical trial related costs

Accrued other

Total current accrued expenses

Long-Term Debt

Silicon Valley Bank Debt Facilities

In 2009, the Company entered into a Loan and Security Agreement with Silicon Valley Bank, which was collateralized by substantially all of the Company’s assets excluding certain intellectual property.

This Loan and Security Agreement was subsequently amended in 2014 and 2017.

In November 2019, the Company repaid in full all outstanding obligations under the Loan and Security Agreement, as amended.

The Company used cash on hand in the amount of $ 14.2 million for the repayment of such obligations, including the repayment of $ 13.0 million in principal and $ 1.2 million associated with the final fee and outstanding interest.

For the year ended December 31, 2019, the Company recorded $ 1.8 million in aggregate interest expense related to the Loan and Security Agreement.

The Company has lease agreements for office, laboratory and manufacturing spaces that are classified as operating leases on the consolidated balance sheets.

These leases have terms varying from one to approximately sixteen years , with renewal options of up to ten years , as well as early termination options.

Extension and termination options are included in the total lease term when the Company is reasonably certain to exercise them.

The leases are subject to additional variable charges, including common area maintenance, property taxes, property insurance and other variable costs.

Given the variable nature of such costs, they are recognized as expense as incurred.

Additionally, some of the Company’s leases are subject to certain fixed fees which the Company has determined to be non-lease components.

The Company has elected to combine and account for lease and non-lease components as a single lease component for purposes of determining the total future lease payments.

In January 2020, the Company entered into a lease agreement for certain office, laboratory and manufacturing space (the Premises), and such lease is accounted for as an operating lease.

The Premises are located in San Diego, California and the Company moved its corporate headquarters to the Premises in August 2021.

Lease payments commenced in May 2021 (the Rent Commencement Date) and the lease has a lease term of 15 years starting from the Rent Commencement Date.

The Company has the option to extend the lease for two successive five-year periods.

The Company also has a one-time option to terminate the lease after 10 years from the Rent Commencement Date , subject to payment of a $ 30.0 million early termination fee.

The landlord of the Premises is obligated to contribute an aggregate of up to $ 29.8 million toward tenant improvements of the Premises.

As of December 31, 2021 , the Company had utilized the entire tenant improvements allowance.

The Company recorded the tenant improvement allowance as part of the Company's leasehold improvements, which is depreciated in accordance with the Company's Property and Equipment policy.

In connection with the lease, the Company maintains a letter of credit for the benefit of the landlord in an amount equal to $ 15.0 million, which amount is subject to reduction over time.

In November 2021, the Company entered into a lease agreement for certain office space in San Diego, California, and such lease is accounted for as an operating lease.

Lease payments shall commence, subject to certain conditions, in January 2022 (the Rent Commencement Date) and the lease has a lease term of 6 years starting from the Rent Commencement Date.

The Company has no option to extend the lease, and no option to early terminate the lease.

Upon lease commencement in December 2021, the Company recorded a right-of-use asset of $ 6.0 million.

As of December 31, 2021 , future undiscounted minimum contractual payments under the Company’s operating leases were $ 192.6 million, which will be paid over a remaining weighted-average lease term of 12.3 years.

The weighted-average discount rate for the operating lease liabilities was 6.94 %, which was the Company's incremental borrowing rate at lease commencement, as the discount rates implicit in the leases could not be readily determined.

The components of lease expense for the years ended December 31, 2021, 2020, and 2019 were as follows (in thousands):

Straight-line lease expense

Variable lease expense

Total operating lease expense

No short-term lease expense was recognized in the year ended December 31, 2021.

Total short-term lease expense associated with short-term leases for the years ended December 31, 2020, and 2019 was $ 1.2 million and $ 1.1 million, respectively.

Future undiscounted minimum payments under the Company’s operating leases as of December 31, 2021 are as follows (in thousands):

Lease Payments

Years Ending December 31,

Total undiscounted lease payments

imputed interest

Total lease liability

Convertible Preferred Stock and Stockholders’

Convertible Preferred Stock

In November 2016, the Company completed a private placement of stock in which investors, including investors affiliated with the directors and officers of the Company, purchased convertible preferred stock and common stock of the Company (the November 2016 Placement).

The Company issued 2,819,549 shares of non-voting Class A Convertible Preferred Stock (the Class A Preferred) at $ 13.30 per share, each of which is convertible into five shares of common stock upon certain conditions defined in the Certificate of Designation of Preferences, Rights and Limitations of the Class A Preferred filed with the Delaware Secretary of State on November 22, 2016 (the CoD).

The Class A Preferred were purchased exclusively by entities affiliated with Redmile Group, LLC (collectively, Redmile).

The terms of the CoD prohibited Redmile from converting the Class A Preferred into shares of the Company’s common stock if, as a result of conversion, Redmile, together with its affiliates, would own more than 9.99 % of the Company’s common stock then issued and outstanding (the Redmile Percentage Limitation), which percentage could change at Redmile’s election upon 61 days’

notice to the Company to (i) any other number less than or equal to 19.99 % or (ii) subject to approval of the Company’s stockholders to the extent required in accordance with the NASDAQ Global Market rules, any number in excess of 19.99%.

On May 2, 2017, the Company’s stockholders approved the issuance of up to an aggregate of 14,097,745 shares of common stock upon the conversion of the outstanding shares of Class A Preferred.

As a result, Redmile has the right to increase the Redmile Percentage Limitation to any percentage in excess of 19.99% at its election.

The Company also issued 7,236,837 shares of common stock at $ 2.66 per share as part of the November 2016 Placement.

The Class A Preferred are non-voting shares and have a stated par value of $ 0.001 per share and are convertible into five shares of the Company’s common stock at a conversion price of $ 2.66 per share, which was the fair value of the Company’s common stock on the date of issuance.

Holders of the Class A Preferred have the same dividend rights as holders of the Company’s common stock.

Additionally, the liquidation preferences of the Class A Preferred are pari passu among holders of the Company’s common stock and holders of the Class A Preferred, pro rata based on the number of shares held by each such holder (treated for this purpose as if the Class A Preferred had been converted to common stock).

During the year ended December 31, 2019, 25,000 shares of the Company’s Class A Preferred were converted into 125,000 shares of the Company’s common stock.

Description of Securities

As of December 31, 2021 , the Board of Directors of the Company has no t declared any dividends.

2013 Stock Option and Incentive Plan, and Inducement Equity Plan

2013 Stock Option and Incentive Plan

On August 28, 2013, the Company’s board of directors and stockholders approved and adopted the 2013 Stock Option and Incentive Plan (the 2013 Plan).

The 2013 Plan became effective immediately prior to the Company’s IPO.

The 2013 Plan was

subsequently amended in May 2017.

Under the 2013 Plan, the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units and other awards to individuals who are then employees, officers, directors or consultants of the Company or its subsidiaries.

A total of 1,020,000 shares of common stock were initially reserved for issuance under the 2013 Plan, and in May 2017, stockholders approved an additional 2,500,000 shares of common stock for issuance under the 2013 Plan.

The shares issuable pursuant to awards granted under the 2013 Plan will be authorized, but unissued shares.

The shares of common stock underlying any awards from the 2013 Plan and a previously existing equity plan from 2007 that are forfeited, cancelled, held back upon exercise or settlement of an award to satisfy the exercise price or tax withholding, reacquired by us prior to vesting, satisfied without any issuance of common stock, expire or are otherwise terminated (other than by exercise) will be added back to the shares of common stock available for issuance under the 2013 Plan.

In addition, the number of shares of stock available for issuance under the 2013 Plan will be automatically increased each January 1 by 4 % of the outstanding number of shares of the Company’s common stock on the immediately preceding December 31 or such lesser number as determined by the compensation committee of the Company’s board of directors.

Recipients of stock options under the 2013 Plan shall be eligible to purchase shares of the Company’s common stock at an exercise price equal to no less than the estimated fair value of such stock on the date of grant.

Under the 2013 Plan, stock options generally vest 25 % on the first anniversary of the original vesting date, with the balance vesting monthly over the remaining three years , or vest monthly over four years , unless they contain specific performance and/or market-based vesting provisions.

The maximum term of stock options granted under the 2013 Plan is ten years .

Under the 2013 Plan, restricted stock units generally vest annually over four years .

Performance-based stock units/awards vest upon the achievement of certain pre-defined company-specific performance-based clinical achievement criteria.

Inducement Plan

On May 10, 2016, the Company’s board of directors approved the Fate Therapeutics, Inc.

Inducement Equity Plan (the Inducement Plan), the purpose of which is to enable the Company to grant equity awards to induce highly-qualified prospective officers and employees who are not employed by the Company to accept employment with the Company.

Under the Inducement Plan, the Company may grant non-qualified stock options and restricted stock units.

A total of 500,000 shares of common stock were initially reserved for issuance under the Inducement Plan.

In January 2021, March 2020, and January 2019, an additional 300,000 shares, 470,822 shares, and 200,000 shares, respectively, of common stock were reserved for issuance under the Inducement Plan.

The shares of common stock underlying any awards from the Inducement Plan that are forfeited, cancelled, held back upon exercise or settlement of an award to satisfy the exercise price or tax withholding, reacquired by us prior to vesting, satisfied without any issuance of common stock, expire or are otherwise terminated (other than by exercise) under the Inducement Plan will be added back to the shares of common stock available for issuance under the Inducement Plan.

Employee Stock Purchase Plan

On September 13, 2013, the Company’s board of directors approved and adopted the 2013 Employee Stock Purchase Plan (the ESPP).

A total of 729,000 shares of common stock were initially reserved for issuance under the ESPP.

In addition, the number of shares of stock available for issuance under the ESPP will be automatically increased each January 1, beginning on January 1, 2015, by the lesser of (i) 2 % of the outstanding number of shares of the Company’s common stock on the immediately preceding December 31, (ii) 450,000 shares, or (iii) such lesser number as determined by the compensation committee of the Company’s board of directors.

No purchases have been made to date under the ESPP.

Pre-Funded Warrants

In January 2021, in conjunction with a public offering, the Company issued Pre-Funded Warrants, in lieu of common stock to certain investors, to purchase 257,310 shares of the Company’s common stock.

The purchase price for the Pre-Funded Warrants was $ 85.499 per Pre-Funded Warrant, which equals the per share public offering price for the shares of common stock less the $ 0.001 exercise price for each such Pre-Funded Warrant.

Given that the Pre-Funded Warrants are indexed to the Company’s own shares of common stock (and otherwise meet the requirements to be classified in equity), the Company recorded the consideration received from the issuance of the warrants as additional paid-in capital on the Company’s consolidated balance sheets.

The Pre-Funded Warrants are exercisable at any time after the date of issuance.

A holder of Pre-Funded Warrants may not exercise the Pre-Funded Warrant if the holder, together with its affiliates, would beneficially own more than 9.99 % of the number of shares of the Company’s common stock outstanding immediately after giving effect to such exercise.

A holder of Pre-Funded Warrants may increase or decrease this percentage not in excess of 19.99 % by providing at least 61 days’

prior notice to the Company.

As of December 31, 2021 , there were 257,310 Pre-Funded Warrants outstanding.

Stock Options and Restricted Stock Unit Awards

Stock Options.

The following table summarizes stock option activity and related information under all equity plans for the year ended December 31, 2021:

Price Per Share

Intrinsic Value

Outstanding at December 31, 2020

Outstanding at December 31, 2021

Options vested and expected to vest at December 31, 2021

Options exercisable at December 31, 2021

For the years ended December 31, 2021, 2020, and 2019 , the weighted average grant date fair value of stock options granted per share was equal to $ 55.83 , $ 18.87 and $ 11.52 , respectively.

As of December 31, 2021, 2020 and 2019 , the unrecognized compensation cost related to outstanding options was $ 48.9 million, $ 66.1 million and $ 40.4 million, respectively, which was expected to be recognized as expense over approximately 2.3 years, 2.9 years and 2.9 years, respectively.

The total intrinsic value, which is the amount by which the exercise price was exceeded by the price of the Company’s common stock on the date of exercise, of stock options exercised during the years ended December 31, 2021, 2020 and 2019 , was $ 184.3 million, $ 59.7 million and $ 10.7 million, respectively.

Total cash received upon the exercise of stock options was $ 20.8 million for the year ended December 31, 2021.

Restricted Stock Units.

The following table summarizes restricted stock unit activity and related information under all equity plans for the year ended December 31, 2021:

Restricted Stock Units

Fair Value Per Share

Intrinsic Value

Outstanding at December 31, 2020

Outstanding at December 31, 2021

Restricted stock units expected to vest at December 31, 2021

During the year ended December 31, 2021 , 1,997,377 performance-based restricted stock units were granted and are included in the table above, none of which had vested.

As of December 31, 2021, 2020 and 2019, the unrecognized compensation cost related to outstanding restricted stock units (excluding those with unachieved performance-based conditions) was $ 98.2 million, $ 20.8 million and $ 6.2 million, respectively, which was expected to be recognized as expense over approximately 3.2 years, 2.9 years and 2.7 years, respectively.

Stock-Based Compensation Expense

The allocation of stock-based compensation for all stock awards is as follows (in thousands):

Research and development

General and administrative

Total stock-based compensation expense

Stock Option Grants Valuation.

T he weighted-average assumptions used in the Black-Scholes option pricing model to determine the fair value of the employee and nonemployee stock option grants were as follows:

Risk–free interest rate

Expected volatility

Expected term (in years)

Expected dividend yield

Risk-free interest rate.

The Company bases the risk-free interest rate assumption on observed interest rates appropriate for the expected term of the stock option grants.

Expected dividend yield.

The Company bases the expected dividend yield assumption on the fact that it has never paid cash dividends and has no present intention to pay cash dividends.

Expected volatility.

During the years ended December 31, 2021 and 2020, the Company based t he expected volatility on the historical volatility of its common stock over the most recent period commensurate with the estimated expected term of the Company’s stock options , as the Company determined there was sufficient operating history and company-specific historical volatility to estimate the expected volatility.

During the year ended December 31, 2019, the expected volatility assumption was based on historical volatilities of a peer group of similar companies whose share prices were publicly available.

The peer group was developed based on companies in the biotechnology industry.

Expected term.

The expected term represents the period of time that options are expected to be outstanding.

During the years ended December 31, 2021 and 2020, the Company estimated the expected term using historical experience and anticipated future exercise behavior.

During the year ended December 31, 2019, due to limited historical exercise behavior, the Company determined the expected life assumption using the simplified method, which is an average of the contractual term of the option and its vesting period.

Common Stock Reserved for Future Issuance

Common stock reserved for future issuance is as follows:

Convertible preferred stock (if converted)

Common stock options

Restricted stock units

Awards available under the 2013 Plan

Awards available under the Inducement Plan

Employee stock purchase plan

The following is a reconciliation of the Company’s expected federal income tax provision (benefit) to the actual income tax provision (in thousands):

Years Ended December 31,

Tax computed at federal statutory rate

State tax, net of federal tax benefit

Non-deductible compensation

Permanent differences

Stock compensation

R&D tax credits

Reserve for uncertain tax positions

Valuation allowance

Income tax expense

Significant components of the Company’s deferred tax assets are summarized as follows (in thousands):

Deferred tax assets:

Section 59e amortization

Net operating losses

R&D tax credits

Intangible asset amortization

Deferred revenue

Stock compensation

Lease liability

Total deferred tax assets

Deferred tax liabilities:

Right-of-use assets

Total deferred tax liabilities

Net of deferred tax assets and liabilities

Valuation allowance

Net deferred tax assets

A valuation allowance of $ 226.8 million and $ 144.1 million at December 31, 2021 and 2020, respectively, has been established to offset the deferred tax assets, as realization of such assets is uncertain.

At December 31, 2021 , the Company had federal and California net operating loss (NOL) carryforwards of $ 289.7 million and $ 291.2 million, respectively, which may be available to offset future taxable income.

The federal and California NOL carryforwards begin to expire in 2027 and 2028 , respectively, unless previously utilized.

At December 31, 2021 , the Company had federal and California research and development (R&D) credit carryforwards of $ 25.7 million and $ 25.8 million, respectively.

The federal R&D tax credit carryforwards will begin to expire in 2035 unless previously utilized.

The California R&D credit carryforwards will carry forward indefinitely.

Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, (the Code), substantial changes in our ownership may limit the amount of net operating loss and research and development credit carryforwards that could be used annually in the future to offset taxable income.

The tax benefits related to future utilization of federal and state net operating loss carryforwards, credit carryforwards, and other deferred tax assets may be limited or lost if cumulative changes in ownership exceeds 50 % within any three-year period.

The Company completed a study to assess whether an ownership change, as defined by Section 382 of the Internal Revenue Code of 1986, had occurred from the Company’s formation through December 31, 2015.

Based upon this study, the Company determined that several ownership changes had occurred.

Accordingly, the Company reduced its deferred tax assets related to the federal NOL carryforwards and the federal R&D credit carryforwards that are anticipated to expire unused as a result of these ownership changes.

These tax attributes were excluded from deferred tax assets with a corresponding reduction of the valuation allowance with no net effect on income tax expense or the effective tax rate.

The Company updated the study through December 31, 2021 and concluded there were no ownership changes during 2021.

Future ownership changes may further limit the Company’s ability to utilize its remaining tax attributes.

The Company files income tax returns in the United States and California.

The Company currently has no years under examination by any jurisdiction;

however, the Company is subject to income tax examination by federal and California tax authorities for years beginning in 2018 and 2017 , respectively.

However, to the extent allowed by law, the taxing authorities may have the right to examine prior periods where NOLs and tax credits were generated and carried forward, and make adjustments up to the amount of the carryforwards.

The change in the Company’s unrecognized tax benefits is summarized as follows (in thousands):

Beginning unrecognized tax benefits

Increase related to current year tax positions

Increase related to prior year tax positions

Decrease related to prior year tax positions

Ending unrecognized tax benefits

The Company does no t anticipate that the amount of unrecognized tax benefits as of December 31, 2021 will significantly change within the next twelve months.

Due to the valuation allowance recorded against the Company’s deferred tax assets, no ne of the total unrecognized tax benefits as of December 31, 2021 would reduce the effective tax rate if recognized.

The Company has not recognized interest or penalties related to income tax matters in its consolidated statements of operations and comprehensive loss since inception.

Employee Benefits

Effective January 1, 2009, the Company adopted a defined contribution 401(k) plan for employees who are at least 21 years of age.

Employees are eligible to participate in the plan beginning on the first day of the calendar quarter following date of hire.

Under the terms of the plan, employees may make voluntary contributions as a percent of compensation.

The Company makes discretionary contributions to the 401(k) Plan equal to 100 percent of each employee’s pretax contributions up to 20 percent of the IRS Standard Limit.

No matching contributions have been made by the Company as of December 31, 2021 since the adoption of the 401(k) plan.

Commitments and Contingencies

License Agreements

The Company has entered into exclusive license agreements with certain academic institutions and universities pursuant to which the Company acquired certain intellectual property.

Pursuant to each agreement, as consideration for an exclusive license to the intellectual property, the Company paid a license fee, reimbursed the institution for historical patent costs and, in certain instances, issued the institution shares of restricted common stock.

Additionally, under each agreement, the institution is generally eligible to receive future consideration including, but not limited to, annual maintenance fees, royalties, milestone payments and sublicensing fees.

Each of the license agreements is generally cancelable by the Company, given appropriate prior written notice.

Minimum annual payments to maintain these cancelable licenses total an aggregate of $ 0.4 million.

See Note 2 of the notes to the consolidated financial statements for additional information on certain licenses.

From time to time, the Company may be involved in various lawsuits, legal proceedings, or claims that arise in the ordinary course of business.

Management believes there are no claims or actions pending against the Company as of December 31, 2021 which will have, individually or in the aggregate, a material adverse effect on its business, liquidity, financial position, or results of operations.

Litigation, however, is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm the Company’s business.

Subsequent Events

In February 2022, the Company achieved a research milestone associated with a product candidate directed to a second tumor-associated antigen under the Janssen Agreement;

the amount due under the milestone is $ 3.0 million.

Changes in and Disagreements with Acco untants on Accounting and Financial Disclosure

Control s and Procedures

Evaluation of Disclosure Controls and Procedures.

We are responsible for maintaining disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act.

Disclosure controls and procedures are controls and other procedures designed to ensure that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms.

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including the individual serving as our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on our management’s evaluation (with the participation of our principal executive officer and principal financial officer) of our disclosure controls and procedures as required by Rules 13a-15 and 15d-15 under the Exchange Act, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2021, the end of the period covered by this report.

Management’s Report on Internal Control Over Financial Reporting.

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act).

Internal control over financial reporting is a process designed under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

Management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (2013 Framework).

Based on this assessment, our management concluded that, as of December 31, 2021, our internal control over financial reporting was effective based on those criteria.

Our independent registered public accounting firm, Ernst & Young LLP, has audited the financial statements included in this Form 10-K and has issued an unqualified opinion on the effectiveness of our internal control over financial reporting as of December 31, 2021, as stated in their attestation report, which is included elsewhere herein.

Changes in Internal Control Over Financial Reporting.

There were no changes in our internal control over financial reporting during the quarter ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Report of Independent Registered Public Accounting Firm

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

Opinion on Internal Control Over Financial Reporting

We have audited Fate Therapeutics, Inc.’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), (the COSO criteria).

In our opinion, Fate Therapeutics, Inc.

(the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive loss, convertible preferred stock and stockholders’

equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and our report dated February 28, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

San Diego, California

February 28, 2022

Othe r Information

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

Directors, Executive Of ficers and Corporate Governance

Except as set forth below, the information required by this item is contained in our definitive proxy statement (the Proxy Statement), to be filed with the SEC in connection with the Annual Meeting of Stockholders within 120 days after the conclusion of our fiscal year ended December 31, 2021 and is incorporated in this Annual Report on Form 10-K by reference.

We have adopted a written code of business conduct and ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.

A current copy of the code is posted on the Corporate Governance section of our website, which is located at www.fatetherapeutics.com.

If we make any substantive amendments to, or grant any waivers from, the code of business conduct and ethics for our principal executive officer, principal financial officer, principal accounting officer, controller or persons performing similar functions, or any officer or director, we will disclose the nature of such amendment or waiver on our website or in a current report on Form 8-K.

Execut ive Compensation

The information required by this item is contained in the Proxy Statement and is incorporated in this Annual Report on Form 10-K by reference.

Security Ownership of Certain Beneficial O wners and Management and Related Stockholder Matters

The information required by this item is contained in the Proxy Statement and is incorporated in this Annual Report on Form 10-K by reference.

Certain Relationships and Related P arty Transactions, and Director Independence

The information required by this item is contained in the Proxy Statement and is incorporated in this Annual Report on Form 10-K by reference.

Principal Acco unting Fees and Services

Our independent public accounting firm is Ernst & Young, LLP , San Diego, CA , PCAOB Auditor ID 42 .

The information required by this item is contained in the Proxy Statement and is incorporated in this Annual Report on Form 10-K by reference.

Exhibits and Fin ancial Statement Schedules

(a) The following documents are filed as part of this report:

(1) Index list to Financial Statements:

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets

Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statements of Convertible Preferred Stock and Stockholders’

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

(2) Financial Statement Schedules

All other schedules are omitted because they are not required or the required information is included in the financial statements or notes thereto.

The exhibits listed in the accompanying Exhibit Index are filed or incorporated by reference as part of this report.

Form 10-K Summary

EXHIBIT INDEX

Incorporated by

Exhibit Title

Amended and Restated Certificate of Incorporation of the Registrant

August 29, 2013

Certificate of Amendment to Amended and Restated Certificate of Incorporation of the Registrant, as currently in effect

Certificate of Designation of Preferences, Rights and Limitations of Class A Convertible Preferred Stock

November 29, 2016

Amended and Restated Bylaws of the Registrant, as currently in effect

February 24, 2021

Specimen Common Stock Certificate

August 29, 2013

Description of Securities

February 24, 2021

Form of Pre-Funded Warrant

January 8, 2021

2007 Equity Incentive Plan and forms of agreements thereunder

August 29, 2013

Amended and Restated 2013 Stock Option and Incentive Plan and forms of agreements thereunder

February 24, 2021

Form of Unrestricted Stock Award Agreement under the 2013 Stock Option and Incentive Plan

January 7, 2015

2013 Employee Stock Purchase Plan

September 16, 2013

Amended and Restated Employment Agreement by and between the Registrant and Scott Wolchko, dated January 14, 2018

March 5, 2018

Amended and Restated Senior Executive Incentive Bonus Plan

January 7, 2015

Amended and Restated Non-Employee Director Compensation Policy

August 4, 2021

Fate Therapeutics, Inc.

Amended and Restated Inducement Equity Plan

February 24, 2021

Forms of Stock Option Agreement under Fate Therapeutics, Inc.

Inducement Equity Plan

February 24, 2021

Forms of Restricted Stock Unit Award Agreement under Fate Therapeutics, Inc.

Inducement Equity Plan

February 24, 2021

Lease Agreement by and between the Registrant and ARE-3535/3565 General Atomics Court, LLC, dated December 3, 2009

August 13, 2013

First Amendment to Lease Agreement by and between the Registrant and ARE-3535/3565 General Atomics Court, LLC, dated October 1, 2011

August 13, 2013

Second Amendment to Lease Agreement by and between the Registrant and ARE-3535/3565 General Atomics Court, dated September 26, 2013

September 30, 2013

Third Amendment to Lease Agreement by and between the Registrant and ARE-3535/3565 General Atomics Court, dated September 2, 2014

March 3, 2016

Fourth Amendment to Lease Agreement by and between the Registrant and ARE-3535/3565 General Atomics Court, dated March 2, 2015

March 3, 2016

Fifth Amendment to Lease Agreement by and between the Registrant and ARE-3535/3565 General Atomics Court, dated June 1, 2016

August 8, 2016

Form of Indemnification Agreement

August 29, 2013

Whitehead Institute for Biomedical Research Exclusive Patent License Agreement between the Registrant and the Whitehead Institute for Biomedical Research, dated as of February 24, 2009

February 24, 2021

License Agreement between the Registrant and The Scripps Research Institute, dated as of July 13, 2009

February 24, 2021

License Agreement between the Registrant and The Scripps Research Institute, dated as of May 25, 2010

February 24, 2021

License Agreement between the Registrant and The Scripps Research Institute, dated as of August 24, 2010

February 24, 2021

Securities Purchase Agreement, dated August 6, 2016, by and among the Registrant and the Purchasers

August 8, 2016

Registration Rights Agreement, dated August 6, 2016, by and among the Registrant and the Purchasers

August 8, 2016

Securities Purchase Agreement, dated November 21, 2016, by and among the Registrant and the Purchasers

November 22, 2016

Registration Rights Agreement, dated November 21, 2016, by and among the Registrant and the Purchasers

November 22, 2016

Severance and Change in Control Policy

March 5, 2018

Offer Letter by and between the Registrant and Cindy R.

Tahl, dated October 23, 2009

March 5, 2019

Sixth Amendment to the Lease Agreement by and between the Registrant and ARE-3535/3565 General Atomics Court, dated May 31, 2018

August 6, 2018

Amended and Restated Exclusive License Agreement by and between the Registrant and Memorial Sloan Kettering Cancer Center, dated May 15, 2018

August 6, 2018

Exclusive License Agreement by and between the Registrant and The David Gladstone Institutes, dated September 11, 2018

November 1, 2018

Collaboration and Option Agreement by and between the Registrant and Ono Pharmaceutical Co., Ltd., dated September 14, 2018

February 8, 2019

Offer Letter by and between the Registrant and Bahram Valamehr, dated November 23, 2009

March 5, 2019

Lease Agreement by and between the Registrant and Scripps Summit Investments LLC, dated January 7, 2020

March 2, 2020

Collaboration and Option Agreement by and between the Registrant and Janssen Biotech, Inc., dated April 2, 2020

August 5, 2020

Stock Purchase Agreement by and between the Registrant and Johnson & Johnson Innovation –

JJDC, Inc., dated April 2, 2020

August 5, 2020

Stock Purchase Agreement by and between the Registrant and Johnson & Johnson Innovation –

JJDC, Inc., dated June 8, 2020

August 5, 2020

Offer Letter by and between the Registrant and Edward Dulac III, dated May 20, 2020

August 19, 2020

Letter Agreement, dated December 4, 2020, by and between the Registrant and Ono Pharmaceutical Co., Ltd.

February 24, 2021

Patent License Agreement by and between the Registrant and Max-Delbrück-Centrum für Molekulare Medizin in der Helmholtz-Gemeinschaft, dated August 30, 2019

February 24, 2021

License Agreement, dated April 9, 2020, by and between the Registrant and Dana-Farber Cancer Institute, Inc.

Filed herewith

Amended Code of Business Conduct and Ethics

March 5, 2019

Subsidiaries of the Registrant

March 5, 2019

Consent of Independent Registered Public Accounting Firm

Filed herewith

Power of Attorney (included on signature page to this Annual Report)

Filed herewith

Certification of Principal Executive Officer pursuant to Rules 13a-14 and 15-d-14 promulgated pursuant to the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Filed herewith

Certification of Principal Financial Officer pursuant to Rules 13a-14 and 15-d-14 promulgated pursuant to the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Filed herewith

Certification of Principal Executive Officer pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Filed herewith

Certification of Principal Financial Officer pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Filed herewith

Inline XBRL Instance Document –

the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

Filed herewith

Inline XBRL Taxonomy Extension Schema Document

Filed herewith

Inline XBRL Taxonomy Extension Calculation Linkbase Document

Filed herewith

Inline XBRL Taxonomy Extension Definition Linkbase Document

Filed herewith

Inline XBRL Taxonomy Extension Label Linkbase Document

Filed herewith

Inline XBRL Taxonomy Extension Presentation Linkbase Document

Filed herewith

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

Filed herewith

Certain provisions of this Exhibit have been omitted as confidential information.

# Indicates a management contract or any compensatory plan, contract or arrangement.

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

Fate Therapeutics, Inc.

February 28, 2022

Scott Wolchko

President and Chief Executive Officer

(Principal Executive Officer and Authorized Signatory)

February 28, 2022

/s/ Edward J.

Chief Financial Officer

(Principal Financial and Accounting Officer)

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of J.

Scott Wolchko and Edward J.

Dulac III as his or her attorney-in-fact, with the power of substitution, for him or her in any and all capacities, to sign any amendments to this report, and to file the same, with exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in-fact, or his or her substitute or substitutes may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated:

Scott Wolchko

President and Chief Executive Officer and Director

February 28, 2022

Scott Wolchko

(Principal Executive Officer)

/s/ Edward J.

Chief Financial Officer

February 28, 2022

(Principal Financial and Accounting Officer)

/s/ William H.

Chairman of the Board and Director

February 28, 2022

Rastetter, Ph.D.

Vice Chairman of the Board and Director

February 28, 2022

Mendlein, Ph.D., J.D.

/s/ Shefali Agarwal

February 28, 2022

Shefali Agarwal, M.D.

/s/ Timothy P.

February 28, 2022

/s/ Robert S.

February 28, 2022

/s/ Robert Hershberg

February 28, 2022

Robert Hershberg, M.D., Ph.D.

/s/ Karin Jooss

February 28, 2022

Karin Jooss, Ph.D.

/s/ Michael Lee

February 28, 2022

Yuan Xu, Ph.D.

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 5. Market for Registrant’s Common Equity