What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2023-02-28 compared with 2022-02-28 · 346 added, 258 removed, 1296 unchanged (32% of the section changed)

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We did not repurchase any securities during the year ended December 31, 2022.

Selected Financial Data

Not applicable.

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in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 as filed with the Securities and Exchange Commission on February 28, 2022 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 are a clinical-stage biopharmaceutical company dedicated to bringing a first-in-class pipeline of programmed cellular immunotherapies to patients with cancer and autoimmune disorders.

Our development of first-in-class cell therapy product candidates is 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.

To create better cell therapies, we have pioneered a therapeutic approach that we generally refer to as cell programming:

we create and engineer human induced pluripotent stem cells (iPSCs) to incorporate novel synthetic controls of cell function;

we generate a clonal master iPSC line for use as a renewable source of cell manufacture;

and we direct the fate of the clonal master iPSC line to produce our first-in-class 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 to mass produce multiplexed-engineered cellular immunotherapies which are well-defined and uniform in composition, can be stored in inventory for off-the-shelf availability, can be combined and administered with other therapies, and can have broader patient reach.

Utilizing this therapeutic approach, we are advancing a cell therapy pipeline comprised of off-the-shelf, multiplexed-engineered, iPSC-derived natural killer (NK) and T-cell product candidates that are selectively designed, incorporate novel synthetic controls of cell function, and are intended to deliver multiple mechanisms of therapeutic importance to patients for the treatment of cancer and autoimmune disease.

We have entered into a research collaboration and license agreement with the Regents of the University of Minnesota to develop off-the-shelf, engineered NK-cell cancer immunotherapies derived from clonal master iPSC lines.

Additionally, we have entered into a research collaboration and license agreement with Memorial Sloan Kettering Cancer Center (MSK) to develop off-the-shelf, engineered T-cell cancer immunotherapies derived from clonal master iPSC lines.

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.

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

In June 2022, we entered into an amendment (Ono Amendment) to the Ono Agreement to expand the collaboration to include the research and development of off-the-shelf, iPSC-derived CAR NK-cell product candidates and pursuant to the Ono Agreement, Ono agreed to provide novel binding domains targeting a second solid tumor antigen under the collaboration.

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.

On January 3, 2023, we received notice of termination from Janssen of the Janssen Agreement.

During 2022, Janssen had exercised a commercial option for two collaboration candidates:

an iPSC-derived, CAR-targeted NK cell product candidate for the treatment of B-cell lymphoma, for which the U.S.

Food and Drug Administration (the FDA) allowed an Investigational New Drug (IND) application in December 2022;

and an iPSC-derived, CAR-targeted NK cell product candidate for the treatment of multiple myeloma, for which the companies were preparing to submit an IND application to the FDA in early 2023.

In addition, the companies were researching and preclinically developing two iPSC-derived, CAR-targeted T-cell programs for the treatment of solid tumors.

The termination of the Janssen Agreement will take effect on April 3, 2023 and, during the first quarter of 2023, we will wind down our activities with Janssen, including discontinuing development of all collaboration products.

As a result of the termination of the Janssen collaboration and the NK cell program prioritization, during the first quarter of 2023 we are reducing our workforce to approximately 220 employees.

We expect that we will incur charges of approximately $12 million to $16 million for severance and other employee termination-related costs in the first quarter of 2023.

The restructuring is expected to extend our cash runway into the second half of 2025.

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.

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.

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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;

conduct our ongoing and planned clinical trials of our product candidates, which may include higher clinical trial expenses associated with arrangements we may into with clinical research organizations (CROs) for the execution and management of certain clinical trials, including trials outside of the United States;

conduct Good Manufacturing Practice (GMP) production, including through the use of contract manufacturing organizations (CMOs) for the conduct of some or all of the activities required for manufacturing our iPSC-derived cell product candidates, 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;

continue our research, development and manufacturing activities, including under our sponsored research and collaboration agreement with 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.

build out business operations at our corporate headquarters, including internal GMP production capabilities;

continue to implement the corporate restructuring and reduction in force that we announced in January 2023;

continue operating as a public company and support our operations and develop commercial infrastructure for potential commercialization of our product candidates.

We do not expect to generate any meaningful revenues from product sales, royalties, or sales milestones 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.

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

Due to the global outbreak of SARS-CoV-2, the strain of coronavirus that causes Coronavirus disease 2019 (COVID-19), we continued to experience impacts on certain aspects of our business, including our clinical trial, manufacturing, and research and development activities, during the year ended December 31, 2022.

For example, we also continue to experience delays in obtaining equipment, materials, and supplies needed to conduct our clinical trials, maintain our operations, and manufacture our product candidates as a result of production shortages experienced by our suppliers in connection with the COVID-19 pandemic.

The scope and duration of these delays and disruptions, and the ultimate impacts of the COVID-19 pandemic on our operations, remain uncertain, and depend on continuously changing circumstances, including the emergence of new variants of the virus.

We continue to monitor the impact of the COVID-19 pandemic on our business 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.

For more information regarding the risks and uncertainties associated with the evolving effects of COVID-19 on our business, our preclinical and clinical development and regulatory efforts, refer to Part I Item 1A.

Risk Factors.

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.

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

The results of operations include the operations of the Company and its subsidiaries.

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

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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.

We concluded that certain units of account within the Janssen Agreement represented a customer relationship, 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.

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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, 2022, we achieved two pre-defined research milestones under the Janssen Agreement and received a cash payment of $3.0 million per milestone achieved, for a total of $6.0 million received.

During the year ended December 31, 2022, Janssen elected to exercise a commercial option for two separate development candidates with respect to two particular Janssen Antigens (as defined under the Janssen Agreement), and as a result, we received one of the Option Exercise Payments (as defined under the Janssen Agreement) of $10.0 million cash, and are entitled to receive an additional Option Exercise Payment (as defined under the Janssen Agreement) of $10.0 million.

During the year ended December 31, 2022, we filed an IND for the second antigen, development candidate, which was cleared by the FDA on December 15, 2022.

Accordingly, we achieved a pre-defined clinical development milestone under the Janssen Agreement and are entitled to receive a $3.0 million payment from Janssen.

During the year ended December 31, 2022, we recognized $79.7 million of collaboration revenue under the Janssen Agreement.

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As of December 31, 2022, aggregate deferred revenue related to the Janssen Agreement was $41.2 million.

On January 3, 2023, we received notice of termination from Janssen of the Janssen Agreement.

The termination will take effect on April 3, 2023 and, during the first quarter of 2023, we will wind down our activities with Janssen, including discontinuing development of all collaboration products.

Under the terms of the Janssen Agreement, in connection with the termination, (i) all licenses and other rights granted to either party pursuant to the Janssen Agreement will terminate, subject to limited exceptions set forth in the Janssen Agreement;

(ii) both parties will wind down any development, commercialization and manufacturing activities under the Janssen Agreement;

(iii) neither party will have any right to continue to develop, manufacture or commercialize any collaboration candidate or collaboration product or use the other party’s materials;

and (iv) neither party is restricted from independently developing, manufacturing, or commercializing any product, including any products directed to the same antigens as those of any collaboration candidate or collaboration product.

We expect to recognize the remaining amount of deferred revenue of

$41.2 million and any payments from Janssen for wind down activities, which cannot currently be estimated, during the first quarter of 2023.

Agreement with Ono Pharmaceutical Co., Ltd.

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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.

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

We concluded that certain units of account within the Ono Agreement represented a customer relationship 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.

In December 2020, we entered into a letter agreement with Ono pursuant to which Ono delivered proprietary antigen binding domains targeting an antigen expressed on certain solid tumors for incorporation into Candidate 2 and paid the Company a milestone fee of $10.0 million for further research and development of Candidate 2.

In addition, Ono terminated all further research and development with respect to Candidate 1, and we retained all rights to research, develop and commercialize Candidate 1 throughout the world without any obligation to Ono.

In June 2022, we entered into an amendment with Ono to the Ono Agreement (the Ono Amendment).

Pursuant to the Ono Amendment, the companies agreed to designate an additional antigen expressed on certain solid tumors for research and preclinical development, and Ono agreed to contribute proprietary antigen binding domains targeting such additional solid tumor antigen (Candidate 3).

In addition, for both Candidate 2 and Candidate 3, the companies expanded the scope of the collaboration to include the research and development of iPSC-derived CAR NK cell product candidates (in addition to iPSC-derived CAR T-cell product candidates) targeting the designated solid tumor antigens.

Similar to Candidate 2, we granted to Ono, during a specified period of time, a preclinical option to obtain an exclusive license under certain intellectual property rights, subject to payment of an option exercise fee to us by Ono, to develop and commercialize Candidate 3 in all territories of the world, where we retain rights to co-develop and co-commercialize Candidate 3 in the United States and Europe under a joint arrangement with Ono under which we are eligible to share at least 50% of the profits and losses.

We maintained worldwide rights of manufacture for Candidate 3.

The preclinical option expires upon the earlier of:

(a) September 30, 2024, or (b) the achievement of the pre-defined preclinical milestone under the joint development plan for Candidate 3.

Subject to payment of an extension fee by Ono, Ono may choose to defer its decision to exercise the preclinical option until no later than June 2026.

In November 2022, Ono exercised its preclinical option to Candidate 2, and we exercised our preclinical option to co-develop and co-commercialize (CDCC Option) in the United States and Europe under a joint arrangement with Ono.

As a result, we are entitled to an option exercise fee of $12.5 million from Ono.

During the years ended December 31, 2022 and 2021, we recognized $16.6 million and $12.1 million, respectively, of collaboration revenue under the Ono Agreement.

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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.

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

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;

conducting GMP production, including through the use of CMOs for the conduct of some or all of the activities required for manufacturing our iPSC-derived cell product candidates, 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.

conducting research, development and manufacturing activities, including under our sponsored research and collaboration agreement with 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.

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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 .

We cannot predict the effects of the impact of global economic and market conditions, the ongoing COVID-19 pandemic and the ongoing conflict in Ukraine on our business and operations, and our expenditures may be increased by delays or disruptions due to these or other factors, 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

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professional fees for accounting, legal and tax services;

costs for obtaining, prosecuting and maintaining our intellectual property;

costs for obtaining, prosecuting, maintaining, and enforcing 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)

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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.

While our significant accounting policies are described in more detail in the notes to our financial statements appearing elsewhere in this Annual Report on Form 10-K, 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.

Collaborative Arrangements

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

To the extent the arrangement is within the scope of ASC 808, we assess whether aspects of the arrangement with our collaboration partners are within the scope of other accounting literature, including ASC Topic 606, Revenue from Contracts with Customers ("ASC 606").

If it is concluded that some or all aspects of the arrangement represent a transaction with a customer, we will account for those aspects of the arrangement within the scope of ASC 606.

ASC 808 provides guidance for the presentation and disclosure of transactions in collaborative arrangements, but it does not provide recognition or measurement guidance.

Therefore, if we conclude a counterparty to a transaction is not a customer or otherwise not within the scope of ASC 606, we considers the guidance in other accounting literature as applicable or by analogy to account for such transaction.

The classification of transactions under our arrangements is determined based on the nature and contractual terms of the arrangement along with the nature of the operations of the participants.

Revenue Recognition

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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.

high or too low in any particular period.

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

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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.

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General and administrative expenses

Total other income (expense), net

Total other income, net

During the year ended December 31, 2022, we recognized revenue of $96.3 million under our collaboration agreements with Janssen and Ono.

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$38.3 million increase in employee compensation and benefits expense, which includes a $16.0 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;

$31.3 million increase in third-party professional consultant and clinical trial related expense;

$17.6 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.

General and administrative expenses.

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$14.5 million increase in employee compensation and benefits expense, which includes a $8.4 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.

$5.9 million increase in patent and legal expense;

$1.0 million increase in maintenance related expenses.

Other income (expense), net.

Other income (expense), net was $26.7 million and $4.8 million for the years ended December 31, 2022 and 2021, 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, 2022, we recorded $20.3 million in other income attributable to the change in fair value of the stock price appreciation milestone under the Amended MSK License.

Other income (expense), net for the year ended December 31, 2022 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, 2021, we recorded $3.5 million in other expense attributable to the fair value of the stock price appreciation milestones under the Amended MSK License.

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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.

As of December 31, 2022, we had an accumulated deficit of $1.05 billion 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:

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Cash used in operating activities increased from $162.9 million for the year ended December 31, 2021 to $248.2 million for the year ended December 31, 2022.

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.

The primary drivers of this change in cash used in operating activities was our increase of $69.6 million in net loss.

Agreement with Janssen Biotech, Inc.

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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;

We were 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 were 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.

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

During the year ended December 31, 2022, we achieved two pre-defined research milestones under the Janssen Agreement and received a cash payment of $3.0 million per milestone, for a total of $6.0 million.

During the year ended December 31, 2022, Janssen elected to exercise two commercial options for two development candidates, and we received one of the Option Exercise Payments of $10.0 million during the year.

Additionally, during the year ended December 31, 2022, we filed an IND for the second antigen, development candidate, which was cleared by the FDA on December 15, 2022.

Accordingly, we achieved a pre-defined clinical development milestone under the Janssen Agreement and are entitled to receive a $3.0 million payment from Janssen.

As of December 31, 2022, no royalties have been paid to us under the Janssen Agreement.

In connection with the Janssen Agreement, we have incurred $17.1 million in sublicense fees to certain of our existing licensors, of which $15.6 million has been paid as of December 31, 2022.

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

The $17.1 million in sublicense consideration represents an asset under ASC 340, Other Assets and Deferred Costs and is amortized to research and development expense ratably with our revenue recognition under the Janssen Agreement.

Agreement with Ono Pharmaceutical Co., Ltd.

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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.

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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.

On June 28, 2022, we entered into the Ono Amendment, which expanded the scope of the collaboration to include the research and development of CAR-targeted NK cells, and pursuant to which Ono agreed to contribute novel binding domains targeting a second solid tumor antigen (Candidate 3).

Under the Ono Amendment, aggregate estimated research and development fees have been increased by approximately $9.3 million, for a total estimated $29.3 million in aggregate research and development fees over the course of the joint development plan, subject to Ono exercising its option to continue the research term for a candidate targeting the second solid tumor antigen.

Pursuant to the Ono Amendment, we and Ono are jointly conducting research and development activities under a joint development plan, with the goal of advancing Candidate 2 and Candidate 3 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 each remaining candidate in all territories of the world, with us retaining the right to co-develop and co-commercialize in the United States and Europe under a joint arrangement whereby we are eligible to share at least 50% of the profits and losses (the Option).

On November 7, 2022, Ono exercised its option for continued development of Collaboration Candidate 2 (as defined under the Ono Agreement).

The Company elected its Co-Development Co-Commercialization option (CDCC Option) for Collaboration Candidate 2.

As a result, we are entitled to receive an Option Exercise Payment (as defined under the Ono Agreement) of $12.5 million.

We determined the exercise represented an option with no material right under the Ono Agreement.

We have completed our performance obligations with respect to the exercise of the option and accordingly, recognized the Option Exercise Payment as revenue for the year ended December 31, 2022.

Subject to Ono’s exercise of its options to obtain exclusive licenses to develop and commercialize Candidate 2 or Candidate 3 and to the achievement of certain clinical, regulatory and commercial milestones (the Ono Milestones) with respect to the Candidate in specified territories, we are entitled to receive an aggregate of up to $843.0 million in additional milestone payments for each Candidate, with the applicable milestone payments for the United States and Europe subject to reduction by 50% if we elect to co-develop and co-commercialize the Candidate as described above.

As of December 31, 2022, 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.

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 each Candidate in specified territories, with such royalties subject to certain reductions.

As of December 31, 2022, no royalties have been paid to us under the Ono Agreement, the Ono Letter Agreement or the Ono Amendment.

As a direct result of our entry into the Ono Agreement, the Ono Letter Agreement and the Ono Amendment, we incurred an aggregate of $7.8 million in sublicense consideration to certain of our existing licensors, of which $4.0 million has been paid as of December 31, 2022.

The $7.8 million in sublicense consideration represents an asset under ASC 340, Other Assets and Deferred Costs and is amortized to research and development expense ratably with our revenue recognition under the Ono Agreement.

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.

The Amended MSK License amended and restated 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.

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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.

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

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 years ended December 31, 2022 and 2021, investing activities provided cash of $166.8 million and used cash of $324.0 million, respectively.

During the year ended December 31, 2022 we purchased $404.8 million of investments, which were partially offset by $607.1 million in maturities of investments.

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Financing Activities

Financing activities provided cash of $9.2 million for the year ended December 31, 2022, which primarily consisted of $9.2 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 $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, 2022 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.

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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.

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

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.

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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 January 2021, we completed a public offering of common stock in which investors, certain of which are affiliated with one of our directors, 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.

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

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

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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.

On April 5, 2018, we executed an award agreement with the California Institute for Regenerative Medicine (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).

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.

As of December 31, 2022, we have received all disbursements available under the Award in the amount of $4.0 million.

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

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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, 2022 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.

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

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.

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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 will require additional capital for the research, manufacture and development of our product candidates and to perform our obligations under our existing collaboration agreements and any additional collaboration agreements that we may enter into, 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 or other global pandemics or epidemics, inflation rates and global economic conditions, and the ongoing conflict in Ukraine.

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

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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.

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 interest 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.

In addition, while the full impact of the COVID-19 pandemic, inflation rates, and the ongoing conflict in Ukraine 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, rising inflation rates and global economic conditions, or the Ukrainian conflict 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.

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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 number and the nature of product candidates that we pursue;

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

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;

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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 extent to which milestones are achieved under our collaboration agreement with Ono, 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, including in our ongoing lawsuits against Shoreline Biosciences, Inc.

(Shoreline) and Dr.

Kaufman (Kaufman), and the cost of enforcing any of our other contractual 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;

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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.

In addition, we are closely monitoring ongoing developments in connection with the COVID-19 pandemic, inflation rates and global economic conditions, and the ongoing conflict in Ukraine 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.

As a result of the termination of the Janssen Agreement and the NK cell program prioritization, during the first quarter of 2023, we expect an increase in revenue associated with the Janssen Agreement termination and additionally expect that we will incur charges of approximately $12 million to $16 million for severance and other employee termination-related costs.

However, we expect revenue and overall expenses to decrease in 2023 due to a corporate restructuring and prioritization of programs.

The restructuring is expected to extend our cash runway into the second half of 2025.

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.

We lease certain office, laboratory, and manufacturing space under non-cancelable operating leases.

In addition to rent, our leases are subject to certain fixed amenities fees.

These leases are also subject to additional variable charges for common area maintenance, property taxes, property insurance and other variable costs.

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

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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.

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.

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

Inflation has increased during the periods covered by this Annual Report on Form 10-K, and is expected to continue to increase for the near future.

Inflationary factors, such as increases in the prices of material, interest rates and cost of labor may adversely affect our operating results.

Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, we may experience some effect in the near future, especially if inflation rates continue to rise.

Quantitative and Qualitat ive Disclosures about Market Risk

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

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

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.

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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.

The subjective assumptions relate to the estimated total full-time employees (FTEs) expected to be utilized as well as the assumed timing and duration of the underlying activities.

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.

For example, we tested controls over the development of the estimated FTEs through the completion of the contract 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.

We inspected evidence supporting actual FTEs utilized and assessed whether they were appropriately included according to the terms of the contract.

We corroborated management’s estimates and judgements by performing sensitivity analyses of key inputs and inspecting communications between the Company and its collaborators regarding updates to budgeted FTEs and contract modifications that would impact the timing and duration of the collaboration.

We performed corroborative inquiries of individuals outside of the finance department to assess the basis for the key assumptions utilized as of the reporting date based on current factors.

/s/ Ernst & Young, LLP

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Accounts receivable

Short-term investments and related maturity receivables

Short-term investments

Prepaid expenses and other current assets

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Operating lease liabilities, current portion

Stock price appreciation milestones, current portion

Total current liabilities

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250,000,000 at December 31,

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

2022 and December 31, 2021;

issued and outstanding—

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Additional paid-in capital

Accumulated other comprehensive (loss) gain

Accumulated other comprehensive loss

Accumulated deficit

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Interest income

Interest expense

Change in fair value of stock price appreciation milestones

Total other income (expense), net

Other comprehensive loss:

Other comprehensive (loss) gain:

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

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Public offering of common stock, net of offering costs

Issuance of common stock upon cashless warrant exercise

Conversion of preferred shares to common stock

Private placement of common stock, net of issuance costs

Issuance of stock to collaboration partner, net of issuance costs

Unrealized gain on investments

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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

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

Unrealized loss on investments, net

Balance at December 31, 2021

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Stock–based compensation

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

Unrealized (loss) gain on investments, net

Unrealized loss on investments, net

Balance at December 31, 2022

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Stock–based compensation

Amortization of debt discounts and debt issuance costs

Accretion and amortization of premiums and discounts on investments, net

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Maturities of investments

Net cash used in investing activities

Net cash provided by (used in) investing activities

Financing activities

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Proceeds from CIRM award

Principal repayments of long–term debt

Net cash provided by financing activities

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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

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(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.

The Company is a clinical-stage biopharmaceutical company dedicated to bringing off-the-shelf, multiplexed-engineered, iPSC-derived natural killer (NK) and T-cell product candidates to patients for the treatment of cancer and autoimmune disease.

As of December 31, 2022, 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.

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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

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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.

The most significant estimates in the Company’s consolidated financial statements relate to its stock appreciation milestone obligations, contracts containing leases, and accrued expenses.

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.

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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, 2022 .

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”

For example, 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.

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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.

The consolidated financial statements include the accounts of the Company and its subsidiaries.

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

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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.

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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 .

For the years ended December 31, 2022, 2021 and 2020 , the restricted cash balance includes cash-collateralized irrevocable standby letters of credit for $ 15.2 million 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.

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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.

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.

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

Collaborative Arrangements

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

To the extent the arrangement is within the scope of ASC 808, the Company assesses whether aspects of the arrangement between the Company and its collaboration partner are within the scope of other accounting literature, including ASC Topic 606, Revenue from Contracts with Customers ("ASC 606").

If it is concluded that some or all aspects of the arrangement represent a transaction with a customer, the Company will account for those aspects of the arrangement within the scope of ASC 606.

ASC 808 provides guidance for the presentation and disclosure of transactions in collaborative arrangements, but it does not provide recognition or measurement guidance.

Therefore, if the Company concludes a counterparty to a transaction is not a customer or otherwise not within the scope of ASC 606, the Company considers the guidance in other accounting literature as applicable or by analogy to account for such transaction.

The classification of transactions under the Company’s arrangements is determined based on the nature and contractual terms of the arrangement along with the nature of the operations of the participants.

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:

In doing so, the Company follows a five-step approach for arrangements that are attributable to ASC 606 - Revenues from customers:

(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.

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At each reporting period, and to the extent achievement of one or any of the performance conditions is probable, the Company reassesses 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.

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.

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

Employee Retention Credit

The CARES Act provides an employee retention credit (ERC), which is a refundable tax credit against certain employment taxes of up to $ 5,000 per employee for eligible employers.

The tax credit is equal to 50 % of qualified wages paid to employees during a quarter, capped at $ 10,000 of qualified wages per employee through December 31, 2020.

Additional relief provisions were passed by the United States government, which extend and slightly expand the qualified wage caps on these credits through December 31, 2021.

Based on these additional provisions, the tax credit is now equal to 70 % of qualified wages paid to employees during a quarter, and the limit on qualified wages per employee has been increased to $ 10,000 of qualified wages per quarter.

The Company qualifies for the tax credit under the CARES Act and expects to continue to receive additional tax credits under the additional relief provisions for qualified wages through December 31, 2021.

In connection with the CARES Act, the Company adopted a policy to recognize the employee retention credit when received and include in other income in the statement of operations.

Accordingly, the Company received a cash payment and recorded $ 0.5 million of other income during the year ended December 31, 2022 .

The Company did not receive or record other income during the years ended December 31, 2021 or 2020 .

Comprehensive Loss

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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):

Potentially dilutive securities that 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,

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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.

On April 2, 2020 (the Janssen Agreement 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 –

Additionally, on the Janssen Agreement Effective Date, the Company entered into a Stock Purchase Agreement (the Stock Purchase Agreement) with JJDC.

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

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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 Company’s completion of activities sufficient to allow the filing of an 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 for each 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;

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.

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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 addition, under the Stock Purchase Agreement, the Company had the right to require JJDC to 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 permits Janssen to terminate development with respect to one or more Janssen Cancer Targets, or the entire Janssen Agreement, at any time on or after the second anniversary of the Janssen Agreement 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.

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

The Company concluded that certain units of account within the Janssen Agreement represented a customer relationship and applied relevant guidance from ASC Topic 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.

The Company determined that its grant of a license to Janssen to certain of its intellectual property in the initial development stage 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.

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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.

During the year ended December 31, 2022, the Company achieved two research milestones under the Janssen Agreement and received a cash payment of $ 3.0 million each, for a total of $ 6.0 million received.

In accordance with ASC 606, the Company determined that the milestone receivables 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 milestone receivables 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 milestones was recorded to deferred revenue, and is being recognized as revenue over the expected term of conduct of research and development services.

On May 26, 2022, Janssen exercised a commercial option for a development candidate with respect to a particular Janssen Antigen (as defined under the Janssen Agreement).

As a result, the Company received an Option Exercise Payment (as defined under the Janssen Agreement) of $ 10.0 million under the Janssen Agreement.

The Company determined the exercise represented an option with no material right under the Janssen Agreement.

The Company has not completed its performance obligations with respect to the exercise of the commercial option and accordingly, the Company has not recognized any revenue associated with the option exercise for the year ended December 31, 2022.

The cash received for the Option Exercise Payment was recorded to deferred revenue, and will be recognized as revenue upon completion of the performance obligations.

On September 14, 2022, Janssen provided notice of their intent to exercise a second commercial option for a development candidate with respect to a particular Janssen Antigen (as defined under the Janssen Agreement).

This option exercise is subject to Competition Law Filings, and therefore the exercise effective date was deemed to be the Clearance Date, which occurred during the year ended December 31, 2022.

Janssen owes the Company an Option Exercise Payment (as defined under the Janssen Agreement) of $ 10.0 million under the Janssen Agreement.

The Company determined the exercise represented an option with no material right under the Janssen Agreement.

The Company has completed its performance obligations with respect to the exercise of the commercial option and accordingly, recognized the Option Exercise Payment as revenue for the year ended December 31, 2022.

On November 18, 2022, the Company filed an IND for the second antigen, development candidate, which was cleared by the FDA during the year ended December 31, 2022.

Accordingly, the Company achieved a $ 3.0 million pre-defined clinical development milestone under the Janssen Agreement which was recognized as revenue during the year ended December 31, 2022.

As a direct result of the Company’s entry into the Janssen Agreement, the Company incurred $ 17.1 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.

The $ 17.1 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 years ended December 31, 2022 and 2021, the Company recognized $ 4.3 million and $ 1.7 million of such expense, respectively.

As of December 31, 2022 , the Janssen Agreement contract asset balance was $ 7.2 million.

The Company recognized revenue of $ 79.7 million under the Janssen Agreement for the year ended December 31, 2022.

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 .

Such revenue comprised $ 42.3 million associated with research and development services, $ 23.1 m illion associated with the upfront fee and Equity Premium, $ 13.0 million associated with a commercial option exercise and milestone achievements, and $ 1.3 million associated with collaboration services for the year ended December 31, 2022 .

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.

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.

As of December 31, 2022, aggregate deferred revenue related to the Janssen Agreement was $ 41.2 million, all of which is classified as current.

As of December 31, 2022, the Company has recei ved $ 70.4 million in cash in aggregate research and development fees from Janssen.

On January 3, 2023, the Company received notice of termination from Janssen of the Janssen Agreement.

The termination will take effect on April 3, 2023 and, during the first quarter of 2023, the Company will wind down activities with Janssen, including discontinuing development of all collaboration products.

Under the terms of the Janssen Agreement, in connection with the

termination, (i) all licenses and other rights granted to either party pursuant to the Janssen Agreement will terminate, subject to limited exceptions set forth in the Janssen Agreement;

(ii) both parties will wind down any development, commercialization and manufacturing activities under the Janssen Agreement;

(iii) neither party will have any right to continue to develop, manufacture or commercialize any collaboration candidate or collaboration product or use the other party’s materials;

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.

Under a collaboration and option agreement with Ono Pharmaceutical Co.

(Ono) entered into in September 2018 and amended in June 2022 (the Ono Agreement), the Company is conducting research and preclinical development of off-the-shelf, iPSC-derived, CAR-targeted effector cells for the treatment of solid tumors.

The Ono Agreement was initially designed to research and preclinically develop two iPSC-derived CAR T-cell product candidates, one of which was designated to target an antigen expressed on certain lymphoblastic leukemias (Candidate 1) and the second of which was designated to target an antigen expressed on certain solid tumors (Candidate 2) (each a Candidate and, collectively, the Candidates).

The Company granted to Ono, during a specified period of time, a preclinical option to obtain an exclusive license under certain intellectual property rights to develop and commercialize:

(a) Candidate 1 in Asia, where the Company retained rights for development and commercialization in all other territories of the world;

and (b) Candidate 2 in all territories of the world, where the Company retained rights to co-develop and co-commercialize Candidate 2 in the United States and Europe under a joint arrangement with Ono under which the Company is eligible to share at least 50 % of the profits and losses.

The Company maintained worldwide rights of manufacture for each Candidate.

For each Candidate, the preclinical option expired upon the earliest of:

(a) the achievement of the pre-defined preclinical milestone under the joint development plan;

(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.

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

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

In December 2020, the Company entered into a letter agreement with Ono pursuant to which Ono delivered proprietary antigen binding domains targeting an antigen expressed on certain solid tumors for incorporation into Candidate 2 and paid the Company a milestone fee of $ 10.0 million for further research and development of Candidate 2.

In addition, Ono terminated all further research and development with respect to Candidate 1, and the Company retained all rights to research, develop and commercialize Candidate 1 throughout the world without any obligation to Ono.

In June 2022, the Company entered into an amendment with Ono to the Ono Agreement (the Ono Amendment).

Similar to Candidate 2, the Company granted to Ono, during a specified period of time, a preclinical option to obtain an exclusive license under certain intellectual property rights, subject to payment of an option exercise fee to the Company by Ono, to develop and commercialize Candidate 3 in all territories of the world, where the Company retains rights to co-develop and co-commercialize Candidate 3 in the United States and Europe under a joint arrangement with Ono under which the Company is eligible to share at least 50 % of the profits and losses.

The Company maintained worldwide rights of manufacture for Candidate 3.

The preclinical option expires upon the earlier of:

(a) September 30, 2024, or (b) the achievement of the pre-defined preclinical milestone under the joint development plan for Candidate 3.

Subject to payment of an extension fee by Ono, Ono may choose to defer its decision to exercise the preclinical option until no later than June 2026 .

Under the terms of the Ono Agreement, for Candidate 2 and for Candidate 3 (subject to exercise by Ono of its preclinical option to Candidate 3), we are eligible to receive additional payments upon the achievement of certain clinical, regulatory and commercial milestones (the Ono Milestones) with respect to each Candidate in an amount up to $ 843.0 million in aggregate, with the applicable milestone payments for the United States and Europe subject to reduction by 50 % if we elect to co-develop and co-commercialize the Candidate in the United States and Europe as described above.

In addition, in those territories where Ono has exclusive rights of commercialization, we are 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 each Candidate in such territories, with such royalties subject to certain reductions.

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.

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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.

The Company determined that the Ono Agreement, Ono Letter Agreement, and Ono Amendment were within the scope of ASC 808.

The Company concluded that certain units of account within the Ono Agreement and Ono Amendment represented a customer and applied relevant guidance from ASC 606 to evaluate the appropriate accounting for the those units of account.

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.

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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 termination of the Ono Agreement with respect to Candidate 1 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.

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

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.

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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.

The Company recognized revenue associated with the $ 10.0 million milestone payment in an amount equal to 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.

On November 7, 2022, Ono exercised its option for continued development of Collaboration Candidate 2 (as defined under the Ono Agreement).

Upon exercise, the Company granted Ono a license to develop and commercialize Collaboration Candidate 2.

The Company elected its CDCC Option for Collaboration Candidate 2.

As a result, the Company is owed an Option Exercise Payment (as defined under the Ono Agreement) of $ 12.5 million.

The Company determined the exercise represented an option with no material right under the Ono Agreement.

The Company has completed its performance obligations with respect to the exercise of the option and accordingly, recognized the Option Exercise Payment as revenue for the year ended December 31, 2022.

The Company and Ono will establish a joint development plan for the ongoing development of Collaboration Candidate 2.

The costs of this development plan are accounted for in accordance with ASC 808, and cost sharing payments to the Company from Ono are recorded net into research and development expenses.

As of December 31, 2022, there were no cost-sharing payments made to the Company from Ono.

As a direct result of the Company’s entry into the Ono Agreement and the Ono Letter Agreement, the Company incurred an aggregate of $ 7.8 million in sublicense consideration to existing licensors of the Company.

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During the years ended December 31, 2022 and 2021, the Company recognized $ 4.1 million and $ 1.2 million, respectively, of such expense.

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

As of December 31, 2022, there is no remaining contract asset balance for the Ono Agreement.

The Company recognized revenue of $ 16.6 million, $ 12.1 million, and $ 14.6 million under the Ono Agreement and Ono Letter Agreement during the years ended December 31, 2022, 2021 and 2020, 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.

Such revenue comprised $ 2.5 million associated with research services, $ 1.6 million associated with the upfront payment, and $ 12.5 million associated with the option exercise during the year ended December 31, 2022.

Suc h revenue comprised $ 6.0 million associated with the Ono Letter Agreement milestone earned in December 2021, $ 6.0 million associated with research services and $ 6.1 million associated with the upfront payment during the year ended December 31, 2021 .

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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.

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

The following variables were incorporated in the calculation of the estimated fair value of the stock price appreciation milestones as of December 31, 2022:

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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.

During the year ended December 31, 2022 and 2021, the Company recorded $ 20.3 million of income and $ 3.5 million of income, respectively, associated with the change in fair value of the stock price appreciation milestones.

During the year ended December 31, 2020 , the Company recorded $ 47.7 million of expense.

As of December 31, 2022 and 2021, the Company recorded a liability of $ 3.9 million and $ 24.2 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.

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As of December 31, 2022 , 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 aggregate amount received is recorded as a CIRM Liability on the accompanying consolidated balance sheets and classified as 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.

government securities, municipal securities, and corporate debt securities with maturities ranging from three to thirty-six 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.

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Treasury debt securities

Non-US government securities

Municipal securities

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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

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Treasury debt securities

government securities

Municipal securities

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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

As of December 31, 2022 and 2021, the Company had $ 0.8 million and $ 1.1 million, respectively, of accrued interest on investments recorded in prepaid expenses and other assets on the consolidated balance sheets.

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Treasury debt securities

Non-US government securities

Municipal securities

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December 31, 2021

Treasury debt securities

Municipal securities

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Treasury debt securities

Non-US government securities

Municipal securities

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Treasury debt securities

government securities

Municipal securities

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Stock price appreciation milestones

Total financial assets measured at fair value on a recurring basis

Total financial liabilities measured at fair value on a recurring basis

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

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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.

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.

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Balance at December 31, 2021

Achievement of $20.0 million stock price appreciation milestone

Changes in fair value of stock price appreciation milestones liability

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Scientific equipment

Construction-in-process

Total property and equipment, gross

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No material gains or losses on the disposal of property and equipment have been recorded for the years ended December 31, 2022, 2021, and 2020 .

Accrued Expenses and Long-Term Debt

Accrued Expenses

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

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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.

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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.

Lease payments commenced, 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.

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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.

No short-term lease expense was recognized in the years ended December 31, 2022 and 2021.

Total short-term lease expense associated with short-term leases for the year ended December 31, 2020 was $ 1.2 million.

Future undiscounted minimum payments under the Company’s operating leases as of December 31, 2022 are as follows (in thousands):

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As of December 31, 2022 , the Board of Directors of the Company has no t declared any dividends.

2013 Stock Option and Incentive Plan, and Inducement Equity Plan

Stock Option and Incentive Plans and Inducement Equity Plan

2013 Stock Option and Incentive Plan

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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.

The 2013 Plan was subsequently amended in May 2017.

Under the 2013 Plan, the Company could 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.

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.

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

The 2013 Plan was replaced by the 2022 Stock Option and Incentive Plan on June 9, 2022.

2022 Stock Option and Incentive Plan

On June 9, 2022, the Company adopted the 2022 Stock Option and Incentive Plan (the “2022 Plan”

The 2022 Plan authorizes 9.5 million shares of common stock for issuance and allows for the grant of stock options, stock appreciation rights, restricted stock awards, performance-based awards, and other awards to individuals who are then employees, officers, directors or consultants of the Company.

The shares of common stock underlying any awards from the 2022 Plan and a previously existing equity plan from 2013 or 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) are added back to the shares of common stock available for issuance under the 2022 Plan.

Recipients of stock options under the 2022 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 2022 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 2022 Plan is ten years .

Under the 2022 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

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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.

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.

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Restricted stock units expected to vest at December 31, 2022

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, 2022, 2021 and 2020, the unrecognized compensation cost related to outstanding restricted stock units (excluding those with unachieved performance-based conditions) was $ 137.7 million, $ 98.2 million and $ 20.8 million, respectively, which was expected to be recognized as expense over approximately 2.8 years, 3.2 years and 2.9 years, respectively.

During the year ended December 31, 2021, 1,199,377 performance-based restricted stock units ("PRSUs") were granted, none of which have vested.

No PRSUs were granted during the year ended December 31, 2022.

There were 1,797,619 and 1,199,377 PRSUs outstanding at December 31, 2022 and 2021, respectively.

Stock-Based Compensation Expense

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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.

During the years ended December 31, 2022 and 2021, the Company based the 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.

Expected term.

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During the years ended December 31, 2022 and 2021, 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

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Awards available under the 2013 Plan

Awards available under the 2022 Plan

Awards available under the Inducement Plan

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Deferred tax assets:

Section 59e amortization

Capitalized R&D expense

Net operating losses

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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.

Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, (the Code), substantial changes in the Company's 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.

The Company completed a study to assess whether an ownership change, as defined by Section 382 of the Code, had occurred from the Company’s formation through December 31, 2015.

Based upon this study, the Company determined that several ownership changes had occurred.

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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 files income tax returns in the United States, various state jurisdictions, and the Netherlands with varying statutes of limitations.

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, the Company is subject to income tax examination by federal and state tax authorities for years beginning in 2019 and 2018 , 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.

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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.

See Note 2 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.

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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.

Janssen Agreement Termination

On January 3, 2023, the Company received notice of termination from Janssen of the Collaboration and Option Agreement dated April 2, 2020 by and between the Company and Janssen (the “Collaboration Agreement”), pursuant to which Janssen and the Company had agreed to collaborate to develop iPSC-derived CAR NK- and CAR T-cell product candidates for the treatment of cancer.

Janssen provided notice of termination after the Company declined a proposal from Janssen for continuation of the Collaboration Agreement on revised terms.

Under the terms of the Collaboration Agreement, in connection with the termination, (i) all licenses and other rights granted to either party pursuant to the Collaboration Agreement will terminate, subject to limited exceptions set forth in the Collaboration Agreement;

(ii) both parties will wind down any development, commercialization and manufacturing activities under the Collaboration Agreement;

(iii) neither party will have any right to continue to develop, manufacture or commercialize any collaboration candidate or collaboration product or use the other party’s materials;

Corporate Restructuring

In January 2023, the Company implemented a corporate restructuring to streamline operations, reduce operating expenses, extend cash runway and focus resources on the Company's most promising programs.

In connection with the restructuring, the Company committed to a reduction in total workforce by approximately 60 %, to approximately 220 employees.

Affected employees were informed on January 5, 2023.

The Company expects the reduction in force to be completed during the first quarter of 2023, and that it will incur charges of approximately $ 12 million to $ 16 million for severance and other employee termination-related costs during the first quarter of 2023.

The Company may also incur additional costs not currently contemplated due to events that may occur as a result of, or that are associated with, its workforce reduction.

Changes in and Disagreements with Acco untants on Accounting and Financial Disclosure

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February 24, 2021

Open Market Sale Agreement, dated November 4, 2021, by and between the Registrant and Jefferies LLC

November 4, 2021

License Agreement, dated April 9, 2020, by and between the Registrant and Dana-Farber Cancer Institute, Inc.

Filed herewith

February 28, 2022

2022 Stock Option and Incentive Plan and form agreements thereunder

Amendment 01 to Collaboration and Option Agreement, dated June 28, 2022, by and between the Registrant and Ono Pharmaceutical Co.

August 3, 2022

Letter Agreement, dated November 7, 2022, by and between the Registrant and Ono Pharmaceutical Co., Ltd.

November 7, 2022

Amended Code of Business Conduct and Ethics

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Subsidiaries of the Registrant

March 5, 2019

Filed herewith

Consent of Independent Registered Public Accounting Firm

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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