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Item 7. Management’s Discussion and Analysis

2026-02-26 compared with 2025-03-05 · 276 added, 364 removed, 1117 unchanged (36% of the section changed)

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Risk Factors.”

We are a clinical-stage biopharmaceutical company dedicated to bringing a first-in-class pipeline of programmed cellular immunotherapies to patients.

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

We are a clinical-stage biopharmaceutical company dedicated to bringing a transformative pipeline of off-the shelf cellular immunotherapies to patients.

We have pioneered a therapeutic approach that we generally refer to as cellular 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 cell therapy product candidates.

cellular immunotherapies which have off-the-shelf availability, can be combined and administered alone or with standard-of-care therapies, and enable significant patient reach.

Utilizing our proprietary iPSC product platform, we are developing off-the-shelf, multiplexed-engineered T-cell and natural killer (NK) cell product candidates which are selectively designed, incorporate novel synthetic controls of cell function, and intended to deliver multiple therapeutic mechanisms to patients.

after the engineering step that incorporates multiple functional elements into the iPSCs, we generate a clonal master iPSC line for use as a renewable source of starting materials for the manufacture of cell therapies;

through the manufacturing process, we direct the fate of the clonal master iPSC line to produce our cell therapy product candidates that are uniform in composition.

Analogous to master cell lines used to manufacture biopharmaceutical drug products such as monoclonal antibodies, we believe our proprietary clonal master iPSC lines can be used to mass produce multiplexed-engineered cellular immunotherapies which have off-the-shelf availability and on-demand availability, and that can be combined and administered alone or in combination with standard-of-care therapies, to make cell therapies accessible to all.

Utilizing our iPSC product platform, we are developing off-the-shelf, multiplexed-engineered T-cell and natural killer (NK) cell product candidates which are selectively designed and incorporate novel synthetic controls of cell function to uniquely enhance the therapeutic capacity of the drug product to deliver multiple therapeutic mechanisms to patients.

We have a pipeline of iPSC-derived, chimeric antigen receptor (CAR)-targeted T-cell and NK cell product candidates currently under development.

In addition, we have entered into research collaborations and license agreements with academic institutions to support the development of our iPSC product platform and our off-the-shelf product candidates.

We have also entered into collaborations with pharmaceutical companies to research, develop and commercialize off-the-shelf, multiplexed-engineered, iPSC-derived CAR T-cell CAR NK cell product candidates for the treatment of cancer.

We have also entered into collaborations with pharmaceutical companies to research, develop and commercialize off-the-shelf, multiplexed-engineered, iPSC-derived CAR T-cell and CAR NK cell product candidates for the treatment of cancer.

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

(Ono), under which we are currently researching and developing iPSC-derived CAR T-cell and CAR NK cell product candidates for the treatment of solid tumors.

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

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

On January 3, 2023, we received notice of termination of the Janssen Agreement from Janssen, which took effect on April 3, 2023.

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

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.

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

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

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• 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 Investigational New Drug (IND) application-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;

• procure laboratory equipment, materials and supplies for the manufacture of our product candidates to support our clinical trials and the conduct of our research activities;

• continue our research, development and manufacturing activities, including under our sponsored research and collaboration agreement with Ono;

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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.

We believe we have sufficient funding to operate for at least twelve months from the date of issuance of the financial statements appearing elsewhere in this Annual Report on Form 10-K.

Financial Operations Overview

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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 funding for the conduct of research and preclinical development under a joint research plan, which fees were estimated to be $20.0 million in aggregate.

In December 2020, we entered into a letter agreement with Ono (the Ono Letter Agreement) 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 preclinical development of Candidate 2.

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

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

In addition, Ono terminated all further research and preclinical 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.

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In May 2024, following Ono’s exercise of the Candidate 2 Development Option and grant of the development and commercialization license, we achieved a $5.0 million clinical development milestone for Candidate 2.

We determined that we had completed our performance obligation with respect to such milestone during the year ended December 31, 2024 and accordingly, recognized such amount as revenue during the period.

In August 2024, we entered into an amendment with Ono to the Ono Agreement (the 2024 Ono Amendment and collectively with the 2023 Ono Amendment and 2022 Ono Amendment, the Ono Amendments).

Under the 2024 Ono Amendment, aggregate estimated research and preclinical development fees payable to us by Ono for Candidate 3 have been increased by approximately $7.3 million, for a total estimated $38.0 million in aggregate research and preclinical development fees over the course of the joint research plan.

We will continue to receive committed funding from Ono through June 2025.

The Candidate 3 Development Option expires upon the earlier of:

(a) June 30, 2025 or (b) the achievement of the pre-defined preclinical milestone under the joint research plan for Candidate 3.

Subject to payment of an extension fee by Ono, Ono may choose to defer its decision to exercise the Candidate 3 Development Option until no later than June 2026.

In August 2024, we entered into an amendment with Ono to the Ono Agreement (the 2024 Ono Amendment).

Under the 2024 Ono Amendment, the aggregate estimated research and preclinical development fees payable by Ono to us for Candidate 3 were increased by approximately $7.3 million, for a total estimated $38.0 million in aggregate research and preclinical development fees over the course of the joint development plan.

In June 2025, we entered into an amendment with Ono to the Ono Agreement (the 2025 Ono Amendment, and collectively with the 2024 Ono Amendment, 2023 Ono Amendment, and 2022 Ono Amendment, the Ono Amendments).

Under the 2025 Ono Amendment, aggregate estimated research and preclinical development fees payable by Ono to us for Candidate 3 were increased by approximately $6.5 million, for a total estimated $44.5 million in aggregate research and preclinical development fees over the course of the joint development plan.

We will continue to receive committed funding under the joint development plan from Ono through June 2026.

The Candidate 3 Development Option expires upon the achievement of the pre-defined preclinical milestone under the joint development plan.

We account for the Ono Agreement, Ono Letter Agreement, and Ono Amendments (collectively, the Ono Arrangement) under ASC 808.

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We recognize revenue for the combined performance obligation over time as the research and preclinical development services are performed.

During the years ended December 31, 2024 and 2023, we recognized $13.6 million and $11.2 million, respectively, of collaboration revenue under the Ono Arrangement.

During the years ended December 31, 2024 and 2023, we recognized $5.1 million and $8.0 million, respectively, of contra-research and development expense under the Ono Arrangement.

As of December 31, 2024, aggregate deferred revenue related to the Ono Agreement, Ono Letter Agreement, and Ono Amendments was $0.4 million.

Agreement with Janssen Biotech, Inc.

On April 2, 2020 (the Janssen Agreement Effective Date), we entered into the Janssen Agreement.

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

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

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’ equity.

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

The termination took effect on April 3, 2023, and during the three months ending March 31, 2023, we performed wind-down activities, including discontinuing development of all collaboration product candidates under the Janssen Agreement.

We were reimbursed for all wind-down activities associated with the termination of the Janssen Agreement during the second quarter of 2023.

During the year ended December 31, 2023, we recognized $52.3 million of collaboration revenue under the Janssen Agreement, of which $41.2 million was deferred as of December 31, 2022.

During the years ended December 31, 2025 and 2024, we recognized $6.6 million and $13.6 million of collaboration revenue, respectively, and $5.7 million and $5.1 million of contra-research and development expense, respectively, under the Ono Arrangement.

As of December 31, 2025, aggregate deferred revenue related to the Ono Arrangement was $0.4 million.

Research and Development Expenses

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

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

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

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

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

• costs for laboratory equipment, materials and supplies for the manufacture of our product candidates to support our clinical trials and the conduct of our research activities;

• costs incurred to license and maintain intellectual property;

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

We plan to continue to significantly invest in our current level of research and development activities for the foreseeable future as we continue the clinical and preclinical development and 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 MSKCC.

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, 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;

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

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

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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 global economic and market conditions, a continued and prolonged public health emergency such as the COVID-19 pandemic, and wars and other armed conflicts, such as the ongoing wars between Russia and Ukraine and in the Middle East, 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.

We cannot predict the effects of the impact of global economic and market conditions, including wars and other armed conflicts, or any continued and prolonged public health emergency, 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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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 remain significant in the future as we maintain our focus on innovation, and research and development activities, maintain compliance with exchange listing and SEC requirements, protect and enforce our intellectual property, and continue to operate as a public company.

Other income consists of proceeds from a settlement agreement and changes in the fair value of stock price appreciation milestones associated with the Amended and Restated Exclusive License Agreement dated May 15, 2018 (Amended MSKCC License) with MSKCC, interest income earned on cash, cash equivalents, and investments (including the amortization of discounts and premiums).

California Institute for Regenerative Medicine Award

We anticipate that our general and administrative expenses will remain significant in the future as we maintain our focus on innovation, and research and development activities, maintain compliance with exchange listing and SEC requirements, protect and enforce our intellectual property, and continue to operate as a public company.

Other Income (Expense)

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

California Institute for Regenerative Medicine Awards

FT819 CIRM Award

In February 2024, we were awarded $7.9 million from the California Institute for Regenerative Medicine (CIRM) to support the conduct of the Company’s Phase 1 study of FT819 in patients with systemic lupus erythematosus and, in April 2024, we executed an award agreement with CIRM (the FT819 CIRM Award).

Pursuant to the terms of the FT819 CIRM Award, we are eligible to receive five disbursements in varying amounts from CIRM, with one disbursement receivable upon the execution of the award and four disbursements receivable based upon the completion of certain development milestones throughout the period of the award, which is estimated to be from April 1, 2024 to March 31, 2028 (the Award Period).

In February 2024, we were awarded $7.9 million from the California Institute for Regenerative Medicine (CIRM) to support the conduct of our Phase 1 study of FT819 in patients with systemic lupus erythematosus and, in April 2024, we executed an award agreement with CIRM (the FT819 CIRM Award).

Pursuant to the terms of the FT819 CIRM Award, we are eligible to receive five disbursements in varying amounts from CIRM, with one disbursement receivable upon the execution of the award and four

disbursements receivable based upon the completion of certain development milestones throughout the period of the award, which is estimated to be from April 1, 2024 to March 31, 2028 (the Award Period).

Under the FT819 CIRM Award, we have certain obligations of co-funding and are required to provide CIRM progress and financial update reports throughout the Award Period.

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Since we may, at our election, repay some or all of the FT819 CIRM Award, we account for the award as a liability until the time of election.

During the year ended December 31, 2024, we received two disbursements under the award in the aggregate amount of $5.1 million, which is recorded as a liability on the accompanying consolidated balance sheets.

As of December 31, 2024, the entire balance is classified as non-current as we do not expect any amount to be payable within the next 12 months.

As of December 31, 2025, we have received three disbursements under the award in the aggregate amount of $6.6 million, which is recorded as a liability on the accompanying consolidated balance sheets.

As of December 31, 2025, the total amount received is recorded as a CIRM liability in the consolidated balance sheets, with $5.3 million classified as current and the remaining $1.3 million as non-current, based on the portion we expect to be payable within twelve months from the balance sheet date.

FT836 CIRM Award

In April 2018, we executed an award agreement with CIRM pursuant to which CIRM awarded us $4.0 million to advance our FT516 product candidate into a first-in-human clinical trial for the treatment of subjects with advanced solid tumors (the FT516 CIRM Award).

Under the FT516 CIRM Award, we have certain obligations of co-funding and are required to provide CIRM with progress and financial update reports.

Pursuant to the terms of the FT516 CIRM Award, we, in our sole discretion, have the option to treat the FT516 CIRM Award either as a loan or as a grant.

During the first quarter of 2023, we elected to treat the FT516 CIRM Award as a grant.

As such, the liability associated with the FT516 CIRM Award was reversed and such amount was recorded as other income during the first quarter of 2023.

Employee Retention Credit

The Coronavirus Aid, Relief and Economic Security (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.

In connection with the CARES Act, we adopted a policy to recognize an ERC when it is reasonably assumed we will comply with the conditions and the grant will be received and include in other income in the statement of operations.

The Company received a cash payment and recorded $5.1 million of other income during the year ended December 31, 2023.

No such amount was received or recognized as other income during the year ended December 31, 2024.

In January 2025, we were awarded $4.0 million from CIRM to support the conduct of preclinical and IND-enabling activities for FT836, and in May 2025, we executed an award agreement with CIRM (the FT836 CIRM Award).

Pursuant to the terms of the FT836 CIRM Award, we are eligible to receive four disbursements in varying amounts from CIRM, with one disbursement receivable upon the execution of the award and three disbursements receivable based upon the completion of certain development milestones throughout the period of the award, which lasted from May 1, 2025 to October 31, 2025 (the FT836 Award Period).

Under the FT836 CIRM Award, we have certain obligations of co-funding and are required to provide CIRM progress and financial update reports throughout the FT836 Award Period.

We, in our sole discretion, have the option to treat the FT836 CIRM Award either as a loan or as a grant.

If we do not elect to treat the FT836 CIRM Award as a loan within 10 years of the award date, the award will be considered a grant and we will be obligated to pay CIRM, on a quarterly basis, a low single-digit royalty on commercial sales of FT836 until such aggregate royalty payments equal nine times the total amount awarded to us under the FT836 CIRM Award.

Since we may, at our election, repay some or all of the FT836 CIRM Award, we account for the award as a liability until the time of election.

As of December 31, 2025, we have received four disbursements under the FT836 CIRM Award in the aggregate amount of $4.0 million.

As of December 31, 2025, the total amount received is recorded as a CIRM liability in the consolidated balance sheets, with $3.2 million classified as current and the remaining $0.8 million as non-current, based on the portion we expect to be payable within twelve months from the balance sheet date.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with United States generally accepted accounting principles.

The preparation of

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

Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States.

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 MSKCC License, contracts containing leases, accrued expenses, stock-based compensation, and the estimated total costs expected to be incurred under our collaboration agreements.

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For our collaboration agreements, we calculate the transaction price as an estimate of the total research and development plan reimbursement.

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

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

Stock Price Appreciation Milestones

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

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

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

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During 2024, we identified an indicator of impairment of its long-lived assets due to a sustained decline in the trading price of the Company’s common stock over the preceding year, resulting in our market capitalization being below our net asset value.

Although there have been no changes in the intended use of our long-lived assets.

There have been no changes in the intended use of our long-lived assets.

We utilized observed market lease rates for comparable properties to estimate the fair value of the right-of-use asset and leasehold improvements.

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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.

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.

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 stock-based compensation expense resulting from an adjustment in the estimated shares to be released is treated as a cumulative catch-up in the period of adjustment.

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

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During the year ended December 31, 2025, we recognized revenue of $6.6 million under our collaboration agreement with Ono.

During the year ended December 31, 2023, we recognized revenue of $63.5 million under our collaboration agreements with Janssen and Ono.

The decrease in revenue was attributable to the termination of our collaboration with Janssen in April 2023.

The following table summarizes the revenue recognized with respect to each collaboration partner for the years ended December 31, 2024 and 2023:

(in thousands)

Janssen Biotech, Inc.

Ono Pharmaceutical Co., Ltd.

Total collaboration revenue

During the year ended December 31, 2024, we recognized revenue of $13.6 million under our collaboration agreement with Ono.

The decrease in revenue was primarily due to our achievement of a clinical development milestone during the year ended December 31, 2024, resulting in the recognition of $5.0 million in revenue during that period.

Research and development expenses.

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

• $18.8 million decrease in third-party professional consultant and clinical trial related expense;

• $16.1 million decrease in employee compensation and benefits expense, partially offset by a $1.7 million increase in employee-stock based compensation expense;

• $6.2 million decrease in sublicense consideration owed to existing licensors.

• $9.5 million decrease in employee-stock based compensation expense;

• $6.0 million decrease in depreciation expense;

• $5.0 million decrease in third-party professional consultant expense;

• $4.1 million decrease in laboratory materials and supplies expenses relating to the manufacture of our product candidates;

• $1.1 million decrease in sub-licensing fees.

General and administrative expenses.

General and administrative expenses were $46.5 million for the year ended December 31, 2025, compared to $74.2 million for the year ended December 31, 2024.

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

• $7.3 million decrease in employee compensation and benefits expense, which includes a $3.6 million decrease in employee stock-based compensation expense;

• $1.7 million decrease in third-party professional consultant expense;

• $4.7 million increase in patent and legal expense.

The decrease in general and administrative expenses was attributable primarily to a $20.0 million decrease in patent and legal expense and a $7.1 million decrease in employee stock-based compensation expense.

Other income.

Other income was $11.4 million and $24.0 million for the years ended December 31, 2025 and 2024, respectively.

During the year ended December 31, 2024, we recorded proceeds from a settlement agreement, and $0.8 million in other income attributable to the decrease in fair value of the stock price appreciation milestone under the Amended MSKCC License.

Other income for the year ended December 31, 2024 also consisted of $17.3 million interest income earned on cash, cash equivalents, and investments (including the amortization of discounts and premiums).

During the year ended December 31, 2023, we recorded $4.0 million in income attributable to the CIRM Award, $5.1 million in income attributable to the ERC, and $2.5 million in other income attributable to the decrease in fair value of the stock price appreciation milestone under the Amended MSKCC License.

Other income for the year ended December 31, 2025 primarily consisted of $11.1 million interest income earned on cash, cash equivalents, and investments (including the amortization of discounts and premiums).

During the year ended December 31, 2024, we recorded proceeds from a settlement agreement, and $0.8 million in other income attributable to the decrease in fair value of stock price appreciation milestone under the Amended MSKCC License.

Other income for the year ended December 31, 2024 also consisted of $17.3 million of interest income earned on cash, cash equivalents, and investments (including the amortization of discounts and premiums).

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Net cash provided by financing activities

Net decrease in cash, cash equivalents and restricted cash

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

Operating Activities

The net cash used in operating activities was $106.1 million for the year ended December 31, 2025 and primarily consisted of a net loss of $136.3 million adjusted for non-cash items including stock-based compensation of $24.9 million and depreciation and amortization of $12.9 million.

Operating cash inflows were primarily from cash receipts under the Ono Arrangement - see section Agreement with Ono Pharmaceutical Co., Ltd.

Operating cash inflows were primarily from cash receipts under the Ono Arrangement.

See section Agreement with Ono Pharmaceutical Co., Ltd.

above and Note 2 of the consolidated financial statements for additional detail.

The net cash used in operating activities was $132.3 million for the year ended December 31, 2023 and primarily consisted of a net loss of $160.9 million adjusted for non-cash items including stock based compensation of $43.5 million, $41.5 million change in deferred revenue, and depreciation and amortization of $18.3 million.

During the year ended December 31, 2023, we experienced a termination of the Janssen agreement, restructuring activities and discontinuation of programs implemented in January 2023.

The net cash used in operating activities was $122.9 million for the year ended December 31, 2024 and primarily consisted of a net loss of $186.3 million adjusted for non-cash items including stock based compensation of $41.5 million and depreciation and amortization of $19.0 million.

Investing Activities

During the years ended December 31, 2025 and 2024, investing activities provided cash of $111.2 million and $12.2 million, respectively.

During the year ended December 31, 2024, we purchased $317.8 million of investments, which were partially offset by

$330.7 million in maturities of investments.

During the year ended December 31, 2023, we purchased $358.8 million of investments, which were partially offset by $477.6 million in maturities of investments.

During the year ended December 31, 2025, we purchased $195.1 million of investments, which were offset by $311.9 million in maturities of investments.

During the year ended December 31, 2024, we purchased $317.8 million of investments, which were offset by $330.7 million in maturities of investments.

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

Financing Activities

Financing activities provided cash of $5.5 million for the year ended December 31, 2025 from proceeds from the FT819 CIRM Award and the FT836 CIRM Award.

Financing activities provided cash of $99.9 million for the year ended December 31, 2024, which primarily consisted of (i) the issuance of 14,545,454 shares of common stock at a purchase price of $5.50 per share in an underwritten public offering of common stock in March 2024, (ii) the issuance of pre-funded warrants to purchase an aggregate of 3,636,364 shares of common stock at a purchase price of $5.499 per pre-funded warrant, which represents the offering price per share of common stock in the underwritten public offering less the $0.001 exercise price per share of each pre-funded warrant, in a private placement concurrent with the underwritten public offering in March 2024, and (iii) the issuance of common stock from equity incentive plans pursuant to the exercise of employee stock options.

Financing activities provided cash of $0.1 million for the year ended December 31, 2023, which consisted of $0.1 million received from the issuance of common stock from equity incentive plans pursuant to the exercise of employee stock options.

From our inception through December 31, 2025, we have funded our consolidated operations primarily through the public and private sale of common stock and pre-funded warrants, the private placement of preferred stock and convertible notes, commercial bank debt and revenues from collaboration activities and grants.

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

We are eligible to issue an aggregate of $300.0 million in securities under the shelf registration statement.

We were initially eligible to issue an aggregate of $300.0 million in securities under the shelf registration statement.

Additionally, we entered into a sales agreement with Jefferies Group LLC (Jefferies) with respect to an at-the-market offering program, under which we may offer and sell, from time to time at our sole discretion, shares of our common stock having an aggregate offering price of up to $100.0 million (which is included in the $300.0 million registered under the shelf registration statement) through Jefferies as the sales agent.

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

In addition, the full impact of inflation rates, global political and economic instability, a continued and prolonged public health emergency such as the COVID-19 pandemic, and wars and other armed conflicts, on our business, operations, financial condition and prospects, and on the global economy, are currently unknown and difficult to predict, and these events could materially and adversely affect our ability to raise capital through equity or debt financings in the future.

In addition, the full impact of inflation rates, global political and economic instability, a continued and prolonged public health emergency, and wars and other armed conflicts, on our business, operations, financial condition and prospects, and on the global economy, are currently unknown and difficult to predict, and these events 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, 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 number and the nature of product candidates that we pursue;

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

• the cost of maintaining internal GMP production capabilities to support the clinical and potential commercial manufacture of our product candidates at our 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 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 inflation rates and global political and economic conditions, including the ongoing wars between Russia and Ukraine and in the Middle East, 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 inflation rates and global political and economic conditions, including the impact of tariffs, wars and other armed conflicts, 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.

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

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

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

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

Critical Audit Matter

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

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

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

Accrued research and development expenses – clinical trials

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To test the clinical trial expenses and related accruals, our audit procedures included, among others, confirming with a sample of vendors the progress of activities under research and development contracts at period end, testing a sample of invoices from vendors providing clinical services, testing a sample of cash disbursements after period end to assess the completeness of the expense recognition, and testing a sample of research and development expenses recorded during the period and evaluating the timing and amount of the expense recognition.

Impairment of long-lived assets

Description of the Matter

As discussed in Note 1 of the consolidated financial statements, the Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be recoverable.

The long-lived asset evaluation is performed at the asset group level, i.e., the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.

Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate from the use and eventual disposition.

If such review indicates that the carrying amount of the long-lived assets is not recoverable, the carrying amount of such assets is reduced to fair value.

During the year ended December 31, 2024, the Company recorded an impairment of $14.7 million, consisting of $1.3 million related to right-of-use assets and $13.4 million related to property and equipment.

Auditing the valuation of the Company’s impairment of its long-lived assets was complex and required a high degree of auditor judgment when performing procedures due to the significant estimation uncertainty in determining the fair value of its property and equipment.

Management used observed market lease rates for comparable properties to perform the impairment test for its leasehold improvements and the right-of-use lease assets.

To establish an estimate of fair value of the remaining property and equipment, primarily consisting of scientific equipment, management utilized trend factors applied to historical costs, estimates of economic depreciation, normal useful lives, and benchmark values for orderly liquidations of assets in secondary markets.

How We Addressed the Matter in Our Audit

Our audit procedures included, among others, evaluating the methodology and valuation models used and testing the key inputs and significant assumptions made by management.

We evaluated the significant assumptions used by management related to the valuation of the leasehold improvements and right-of-use lease assets by obtaining observable lease rates for comparable properties and recalculating the impairment charge.

We evaluated the significant assumptions for the valuation of other property and equipment by testing a sample of observable market data and comparable executed transactions and listings for scientific equipment.

/s/ Ernst & Young, LLP

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San Diego, California

March 5, 2025

February 26, 2026

Fate Therapeutics, Inc.

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Accrued expenses

CIRM award liability, current portion

Deferred revenue

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Total current liabilities

CIRM award liability

CIRM award liability, net of current portion

Operating lease liabilities, net of current portion

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Preferred shares issued and outstanding— 2,755,086 at December 31, 2025 and

2,761,108 at December 31, 2023

December 31, 2024

Common stock, $ 0.001 par value;

authorized shares— 250,000,000 ;

outstanding— 113,928,279 at December 31, 2024 and 98,627,076 at December 31,

authorized shares— 350,000,000 at December 31,

2025 and 250,0000,000 at December 31, 2024;

issued and outstanding—

115,359,735 at December 31, 2025 and 113,928,279 at December 31, 2024

Additional paid-in capital

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Other comprehensive gain:

Unrealized gain on available-for-sale securities, net

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

Comprehensive loss

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Stock–based compensation

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

Private placement of pre-funded warrants

Unrealized gain on investments, net

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Issuance of common stock upon vesting of restricted stock units

Conversion of preferred shares to common stock

Stock–based compensation

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

Private placement of pre-funded warrants

Unrealized gain on investments, net

Unrealized loss on investments, net

Balance at December 31, 2025

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Accretion and amortization of premiums and discounts on investments, net

Amortization of collaboration contract costs

Deferred revenue

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Loss on disposal of property and equipment

Grant income from FT516 CIRM award

Changes in assets and liabilities:

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Investing activities

Proceeds from sale of property and equipment

Purchases of property and equipment

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Proceeds from FT819 CIRM award

Proceeds from FT836 CIRM award

Net cash provided by 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 bringing off-the-shelf, multiplexed-engineered, iPSC-derived cellular immunotherapies to patients.

As of December 31, 2024, 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.

The Company is a clinical-stage biopharmaceutical company dedicated to bringing off-the-shelf, multiplexed-engineered, induced pluripotent stem cell (iPSC)-derived cellular immunotherapies to patients.

As of December 31, 2025, 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 product candidates.

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

Corporate Restructuring

In August 2025, the Company implemented a corporate restructuring to streamline operations, reduce operating expenses, and extend cash runway.

In connection with the restructuring, the Company committed to a reductio n in total workforce.

Affected employees were informed on August 12, 2025.

The Company incurred charges of $ 1.1 mil lion during the year ended December 31, 2025 for severance and other employee termination-related costs, of which $ 0.9 million were related to research and development expenses and $ 0.2 million were related to general and administrative expenses.

All restructuring and related expenses have been fully recognized and paid by the Company.

Use of Estimates

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

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

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

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

The preparation of the Company’s consolidated financial statements requires management 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 and assumptions in the Company’s consolidated financial statements relate to its obligations, contracts containing leases, accrued expenses, and stock price appreciation milestone.

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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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.

All intercompany transactions and balances have been eliminated in consolidation.

Fair Value of Financial Instruments

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Cash, Cash Equivalents and Restricted Cash

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

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

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

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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, 2024 and 2023, the restricted cash balance includes cash-collateralized irrevocable standby letters of credit for $ 10.2 mill io n and $ 15.2 million, respectively, associate d with the Company’s facilities leases .

For each of the years ended December 31, 2025 and 2024, the restricted cash balance includes a cash-collateralized irrevocable standby letter of credit for $ 10.2 mill ion 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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Property and Equipment

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

Leasehold improvements are depreciated over the lesser of the estimated useful life of the improvement or the associated lease term.

Repairs and maintenance costs are charged to expense as incurred.

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The long-lived asset evaluation is performed at the asset group level (i.e., the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities).

Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate from their use and eventual disposition.

Recoverability of these assets is

measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate from their use and eventual disposition.

If the carrying amount is not recoverable, the carrying amount of such assets is reduced to fair value.

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The Company utilized trend factors applied to historical costs, estimates of economic depreciation, normal useful lives, and benchmark values for orderly liquidations of the assets in secondary markets to estimate the fair value of the property and equipment.

As a result of its fair value analysis, the Company recorde d a $ 13.4 million impairment charge on its property

and equipment a nd a $ 1.3 m illion impairment charge on its right-of-use asset in the statement of operations during the year ended December 31, 2024 .

As a result of its fair value analysis, the Company recorde d a $ 13.4 million impairment charge on its property and equipment a nd a $ 1.3 m illion impairment charge on its right-of-use asset in the statement of operations during the year ended December 31, 2024 .

No impairment was recorded during the year ended December 31, 2025 .

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

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

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

The Company does not have any financing leases.

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

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

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

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

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

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

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

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

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

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

Collaborative Arrangements

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(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.

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

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

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

The Company does not have any financing leases.

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

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

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

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

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

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

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

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

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

Stock Price Appreciation Milestones

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

The Company accounts for the fair value of the stock price appreciation

milestones in accordance with ASC 815, Derivatives and Hedging, with fair value marked to market at each reporting date.

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

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

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

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.

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 stock-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.

T he Company received a cash

payment and recorded $ 5.1 million of other income during the year ended December 31, 2023 .

No such amount was received or recorded during the year ended December 31, 2024.

Comprehensive Loss

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As of December 31,

Common stock options

Restricted stock units

Series A convertible preferred stock (if converted)

Convertible preferred stock

Outstanding options to purchase common stock

Outstanding restricted stock awards

Going Concern Assessment

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Recently Adopted Accounting Pronouncements

In November 2023, the FASB issued ASU No.

2023-07, which requires public entities to disclose significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually.

Public entities with a single reportable segment are required to provide the new disclosures and all the disclosures required under ASC 280, Segment Reporting .

The ASU does not change how a public

entity identifies its operating segments, aggregates them or applies the quantitative thresholds to determine its reportable segments.

The ASU is effective for fiscal years beginning after December 15, 2023, and for interim periods beginning after December 15, 2024, with early adoption permitted.

The guidance should be applied retrospectively to all periods presented in the financial statements, unless it is impracticable.

The segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption.

The Company adopted ASU No.

2023-07 during the year ended December 31, 2024 and have included required disclosures in Note 11.

Recently Issued Accounting Pronouncements

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures (ASU 2023-09), which improves the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the effective tax rate reconciliation and income taxes paid disaggregated by jurisdiction.

In December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures, which improves the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the effective tax rate reconciliation and income taxes paid disaggregated by jurisdiction.

It also includes certain other amendments to improve the effectiveness of income tax disclosures.

This new standard will be effective for the annual periods beginning the year ended December 31, 2025.

The new standard permits early adoption and can be applied prospectively or retrospectively.

The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.

The Company prospectively adopted ASU 2023-09 during the year ended December 31, 2025.

The adoption of ASU 2023-09 did not have a material impact on the consolidated financial statements.

Recently Issued Accounting Pronouncements

In November 2024, the FASB issued ASU 2024-03, Income Statement:

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

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

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

In December 2020, the Company entered into a letter agreement with Ono (the Ono Letter Agreement) 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 preclinical development of Candidate 2.

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The Candidate 3 Development Option represents an option with no material right.

Under the 2022 Ono Amendment, aggregate estimated research and preclinical development fees have been increased by approximately $ 9.3 million, for a total estimated $ 29.3 million in aggregate research and preclinical development fees over the course of the joint research plan.

Under the 2022 Ono Amendment, aggregate estimated research and preclinical development fees were increased by approximately $ 9.3 million, for a total estimated $ 29.3 million in aggregate research and preclinical development fees over the course of the joint development plan.

In November 2022, Ono exercised its option to obtain a license to develop and commercialize Candidate 2 (the Candidate 2 Development Option).

The Company exercised its option (the CDCC Option) to co-develop and co-commercialize Candidate 2 in the United States and Europe.

As a result, the Company received an Option Exercise Payment (as defined under the Ono Agreement) of

$ 12.5 million.

As a result, the Company recognized an option exercise fee of $ 12.5 million from Ono during the year ended December 31, 2022.

The Company received the option exercise fee payment during the year ended December 31, 2023.

The Company and Ono are proceeding under a joint development plan for the ongoing development of Candidate 2.

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In November 2023, the Company entered into an amendment with Ono to the Ono Agreement (the 2023 Ono Amendment).

Under the 2023 Ono Amendment, aggregate estimated research and preclinical development fees payable by Ono to the Company for Candidate 3 have been increased by approximately $ 1.4 million, for a total estimated $ 30.7 million in aggregate research and preclinical development fees over the course of the joint research plan.

In May 2024, following Ono’ s exercise of the Candidate 2 Development Option and grant of the development and commercialization license, the Company achieved a $ 5.0 million clinical development milestone for Candidate 2 and the Company recognized such amount as revenue during the period.

In August 2024, the Company entered into an amendment with Ono to the Ono Agreement (the 2024 Ono Amendment and collectively with the 2023 Ono Amendment and 2022 Ono Amendment, the Ono Amendments).

Under the 2024 Ono Amendment, aggregate estimated research and preclinical development fees payable by Ono to the Company for Candidate 3 have been increased by approximately $ 7.3 million, for a total estimated $ 38.0 million in aggregate research and preclinical development fees over the course of the joint research plan.

The Company will continue to receive committed funding under the joint research plan from Ono through June 2025.

The Candidate 3 Development Option expires upon the earlier of:

(a) June 30, 2025 or (b) the achievement of the pre-defined preclinical milestone under the joint research plan for Candidate 3.

Subject to payment of an extension fee by Ono, Ono may choose to defer its decision to exercise the Candidate 3 Development Option until no later than June 2026.

Under the 2023 Ono Amendment, aggregate estimated research and preclinical development fees payable by Ono to the Company for Candidate 3 were increased by approximately $ 1.4 million, for a total estimated $ 30.7 million in aggregate research and preclinical development fees over the course of the joint development plan.

In August 2024, the Company entered into an amendment with Ono to the Ono Agreement (the 2024 Ono Amendment).

Under the 2024 Ono Amendment, aggregate estimated research and preclinical development fees payable by Ono to the Company for Candidate 3 were increased by approximately $ 7.3 million, for a total estimated $ 38.0 million in aggregate research and preclinical development fees over the course of the joint development plan.

In June 2025, the Company entered into an amendment with Ono to the Ono Agreement (the 2025 Ono Amendment, and collectively with the 2024 Ono Amendment, 2023 Ono Amendment, and 2022 Ono Amendment, the Ono Amendments).

Under the 2025 Ono Amendment, aggregate estimated research and preclinical development fees payable by Ono to the Company for Candidate 3 were increased by approximately $ 6.5 million, for a total estimated $ 44.5 million in aggregate research and preclinical development fees over the course of the joint development plan.

The Company will continue to receive committed funding under the joint development plan from Ono through June 2026.

The Candidate 3 Development Option expires upon the achievement of the pre-defined preclinical milestone under the joint development plan.

Under the terms of the Ono Agreement (as amended by the Ono Amendments), for Candidate 2 and for Candidate 3 (subject to exercise by Ono of its Candidate 3 Development Option), the Company is 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 the Company elects 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, the Company is 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 the Royalties subject to certain reductions.

The Ono Agreement will terminate with respect to a Candidate if Ono does not exercise its development option for a candidate within the option period, or in its entirety if Ono does not exercise any of its development options for the candidates within their respective option periods.

The Ono Agreement will terminate with respect to a Candidate if Ono does not exercise its development option for the applicable candidate within the option period, or in its entirety if Ono does not exercise any of its development options for the Candidates within their respective option periods.

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

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The termination of the Ono Agreement with respect to Candidate 1 did not impact this assessment.

In accordance with ASC 606, the Company determined that the initial transaction price for research and preclinical development under the Ono Arrangement equaled $ 48.0 million, consisting of the upfront, non-refundable and non-creditable payment of $ 10.0 million and the aggregate estimated research and preclinical development fees of $ 38.0 million.

In accordance with ASC 606, the Company determined that the amended transaction price for research and preclinical development under the Ono Arrangement equaled $ 54.5 million, consisting of the upfront, non-refundable and non-creditable payment of $ 10.0 million and the aggregate estimated research and preclinical development fees of $ 44.5 million.

The Company also concluded that the milestone fee of $ 10.0 million paid by Ono to the Company for further research and preclinical development of Candidate 2 represented a variable consideration that was previously constrained.

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The Company recognized revenue of $ 6.6 million and $ 13.6 million under the Ono Arrangement during the years ended December 31, 2025 and 2024, respectively.

Such revenue consisted of $ 8.6 million associated with research and preclinical development services, and $ 5.0 million associated with the achievement of a clinical development milestone for the year ended December 31, 2024.

During the year ended December 31, 2023 , such revenue comprised $ 11.2 million associated with research and preclinical development services.

During the year ended December 31, 2025, all of such revenue was associated with research and preclinical development services.

During the year ended December 31, 2024 , such revenue comprised $ 8.6 million associated with research and preclinical development services, and $ 5.0 million associated with the achievement of a clinical development milestone.

The Company recognized contra-research and development expense of $ 5.7 million associated with the joint development of Candidate 2 under the Ono Arrangement for the year ended December 31, 2025.

During the year ended December 31, 2024 , the Company recognized contra-research and development expense of $ 5.1 million.

As a direct result of the Company’s entry into the Ono Arrangement, the Company incurred an aggregate of $ 9.0 million in sublicense consideration to existing licensors.

The Company recognized $ 1.2 million of such expense during the year ended December 31, 2024 .

The Company recognized no such expense during the year ended December 31, 2023.

Janssen Collaboration and Option Agreement

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

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

The termination took effect on April 3, 2023, and during the three months ended March 31, 2023, the Company performed wind-down activities including discontinuing development of all collaboration product candidates under the Janssen Agreement.

The Company was reimbursed for all wind-down activities.

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

The Company 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’ equity.

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

In June 2020, JJDC purchased 1.8 million shares of the Company’s common stock at a price of $ 28.31 per share.

Additionally, the Company received full funding for the conduct of all research, preclinical development and Investigational New Drug Application (IND)-enabling activities performed by the Company under the Janssen Agreement.

The Company recognized revenue of $ 52.3 million under the Janssen Agreement for the year ended December 31, 2023 , of which $ 41.2 million was deferred as of December 31, 2022.

Such revenue consisted of $ 11.1 million associated with research and development services, $ 31.2 million associated with the upfront fee and Equity Premium, and $ 10.0 million associated with a commercial option exercise.

In connection with the Janssen Agreement, the Company incurred $ 17.1 million in sublicense fees to certain of its existing licensors.

The $ 17.1 million in sublicense consideration represents an asset under ASC 340, and was amortized to research and development expense ratably with the Company’s revenue recognition under the Janssen Agreement.

During the year ended December 31, 2023 , the Company recognized $ 7.2 million of such expense.

As of December 31, 2024, there was no remaining balance on the Janssen Agreement.

Memorial Sloan Kettering Cancer Center License Agreement

On May 15, 2018, the Company entered into an Amended and Restated Exclusive License Agreement (the Amended MSKCC License) with MSKCC.

The Amended MSKCC License amends and restates the Exclusive License Agreement entered into between the Company and MSKCC on August 19, 2016 (the Original MSKCC License), pursuant to which the Company entered into an exclusive license agreement with MSKCC 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 MSKCC License, MSKCC granted to the Company additional licenses to certain patents and patent applications relating to new CAR constructs and off-the-shelf CAR T-cells, including the use of clustered regularly interspaced short palindromic repeat (CRISPR) and other innovative technologies for their production, in each case to research, develop, and commercialize licensed products in the field of all human therapeutic uses worldwide.

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

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

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

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

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

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

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

Common stock multiple

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As a result, the Company remitted the first milestone payment of $ 20.0 million to MSKCC 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 models 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 model s future Company common stock prices based on the current stock price and several key variables.

The following variables were incorporated in the calculation of the estimated fair value of the stock price appreciation milestones as of December 31, 2025:

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Since the Company may, at its election, repay some or all of the FT819 CIRM Award, the Company accounts for the award as a liability until the time of election.

During the year ended December 31, 2024, the Company received two disbursements under the FT819 CIRM Award in the aggregate amount of $ 5.1 million, which amount is recorded as a liability on the accompanying consolidated balance sheets.

As of December 31, 2024 , the entire balance is classified as non-current as the Company does no t expect any amount to be payable within the next 12 months.

As of December 31, 2025, the Company has received three disbursements under the FT819 CIRM Award in the aggregate amount of $ 6.6 million, which amount is recorded as a liability on the accompanying consolidated balance sheets.

As of December 31, 2025, the total amount received is recorded as a CIRM liability in the consolidated balance sheets, with $ 5.3 million classified as current and the remaining $ 1.3 million as non-current, based on the portion expected to be payable within twelve months from the balance sheet date.

FT836 CIRM Award

In April 2018, the Company executed an award agreement with 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 (the FT516 CIRM Award).

Under the FT516 CIRM Award, the Company has certain obligations of co-funding and is required to provide CIRM progress and financial update reports.

Pursuant to the terms of the FT516 CIRM Award, the Company, in its sole discretion, has the option to treat the FT516 CIRM Award either as a loan or as a grant.

During the first quarter of 2023, the Company elected to treat the FT516 CIRM Award as a grant.

As such, the liability associated with the FT516 CIRM Award was derecognized and such amount was recorded as other income during the year ended December 31, 2023 .

In January 2025, the Company was awarded $ 4.0 million from CIRM to support the conduct of preclinical and Investigational New Drug (IND)-enabling activities for FT836, and in May 2025, the Company executed an award agreement with CIRM (the FT836 CIRM Award).

Pursuant to the terms of the FT836 CIRM Award, the Company is eligible to receive four disbursements in varying amounts from CIRM, with one disbursement receivable upon the execution of the award and three disbursements receivable based upon the completion of certain development milestones throughout the period of the award, which lasted from May 1, 2025 to October 31, 2025 (the FT836 Award Period).

Under the FT836 CIRM Award, the Company has certain obligations of co-funding and is required to provide CIRM progress and financial update reports throughout the FT836 Award Period.

The Company, in its sole discretion, has the option to treat the FT836 CIRM Award either as a loan or as a grant.

If the Company does not elect to treat the FT836 CIRM Award as a loan within 10 years of the award date, the award will be considered a

grant and the Company will be obligated to pay CIRM, on a quarterly basis, a low single-digit royalty on commercial sales of FT836 until such aggregate royalty payments equal nine times the total amount awarded to the Company under the FT836 CIRM Award.

Since the Company may, at its election, repay some or all of the FT836 CIRM Award, the Company accounts for the award as a liability until the time of election.

As of December 31, 2025 , the Company has received four disbursements under the FT836 CIRM Award in the aggregate amount of $ 4.0 million.

As of December 31, 2025 , the total amount received is recorded as a CIRM liability in the consolidated balance sheets, with $ 3.2 million classified as current and the remaining $ 0.8 million as non-current, based on the portion expected to be payable within twelve months from the balance sheet date.

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

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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.

There were no significant realized losses on available-for-sale securities during the year ended December 31, 2025.

As of December 31, 2025, the Company did not intend to sell the investments in an unrealized loss position and it was unlikely that the Company will be required to sell the investments before the recovery of their amortized cost basis.

The following table summarizes the Company’s investments accounted for as available-for-sale securities as of December 31, 2025 and 2024 (in thousands):

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Non-US government securities

Municipal securities

Corporate debt securities

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Classified as non-current assets:

Treasury debt securities

Greater than 1

Corporate debt securities

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Classified as non-current assets:

Treasury debt securities

Greater than 1

Corporate debt securities

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Non-US government securities

Municipal securities

Corporate debt securities

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

The Company validates the quoted market prices provided by its investment managers by comparing the investment managers’ assessment of the fair values of the Company’s investment portfolio balance against the fair values of the Company’s investment portfolio balance obtained from an independent source.

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

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

There were no Level 3 assets held by the Company as of December 31, 2025.

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Total property and equipment, net

The Company recognized an impairment charge of $ 13.4 million of long-lived asset impairment described in Note 1 above for the year ended December 31, 2024, which was calculated as the difference between the fair value of the assets and its carrying value.

During the year ended December 31, 2024, t he Company recognized an impairment charge of $ 13.4 million of long-lived asset impairment described in Note 1 above, which was calculated as the difference between the fair value of the assets and its carrying value.

The cost basis for these assets was updated to fair value.

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

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

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

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

The leases are subject to additional variable charges, including common area

maintenance, property taxes, property insurance and other variable costs.

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

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

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In October 2024, the Company exercised its right of early termination for its Torrey Pines operating lease, which consists of 72,000 square feet of office, laboratory, and Good Manufacturing Practice (GMP) space.

In connection with such exercise, the Company paid $ 2.5 million to its landlord.

Termination of the lease, which previously extended through December 31, 2028, will now take effect on October 31, 2025.

The Company accounted for this transaction as a modification to the lease agreement, which reduced the ROU asset and corresponding lease liability balances as of December 31, 2024 in connection with such transaction.

In connection with such exercise, the Company paid $ 2.5 million to its landlord during the year ended December 31, 2024.

Termination of the lease, which previously extended through December 31, 2028, took effect on October 31, 2025.

As of December 31, 2025, future undiscounted minimum contractual payments under the Company’s operating leases were $ 119.3 million, which will be paid over a remaining weighted-average lease term of 10.1 years.

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Total lease liability

As described in Note 1 above, the Company incurre d a $ 1.3 mill ion impairment charge against its right-of-use asset during the year ended Decem ber 31, 2024.

As described in Note 1 above, the Company incurre d a $ 1.3 mill ion impairment charge against its right-of-use asset during the year ended December 31, 2024.

The Company applied a discounted cash flow method to estimate the fair value of the right-of-use asset, which represents Level 3 non-recurring fair value measurements.

The estimated fair value of the was determined by discounting the estimated rental rates using market participant assumptions.

No such expense was recognized for the year ended December 31, 2025.

The Company’s estimates and assumptions used to determine the estimated fair value of the asset group is subject to risks, uncertainties, and changes in circumstances that may result in adjustments and material changes to the estimated fair values in future periods.

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

The Company issued 2,819,549 shares of Class A Convertible Preferred Stock, $ 0.001 par value per share (the Class A Preferred), at $ 13.30 per share, each of which is convertible into five shares of common stock upon certain conditions defined in the Certificate of Designation of Preferences, Rights and Limitations of the Class A Preferred filed with the Delaware Secretary of State

on November 22, 2016 (the CoD).

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

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In December 202 4, 6,022 shares of the Class A Preferred were converted into 30,110 shares of the Company’s common stock.

In July 2025, Redmile provided the Company with notice of its intent to increase the Redmile Percentage Limitation from 9.99 % to 14.99 %, which became effective August 31, 2025.

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

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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 initially authorized 9.5 million shares, and in June 2024, stockholders approved an additional 8,000,000 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.

On June 9, 2022, the Company adopted the 2022 Stock Option and Incentive Plan (as amended and restated to date, the 2022 Plan).

The 2022 Plan initially authorized 9.5 million shares, and in June 2024 and May 2025, stockholders approved an additional 8,000,000 and 7,000,000 shares respectively, 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.

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

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

Under the Inducement Plan,

the Company may grant non-qualified stock options and restricted stock units.

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

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

In January 2021, March 2020, January 2019, and October 2025, an additional 300,000 shares, 470,822 shares, 200,000 shares, and 1,750,000 shares, respectively, of common stock were reserved for issuance under the Inducement Plan.

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

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

As of December 31, 2024, there w ere 3,893,674 Pre-Fu nded Warrants outstanding.

As of December 31, 2025, there were 3,893,674 Pre-Funded Warrants outstanding.

Stock Options and Restricted Stock Unit Awards

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As of December 31, 2025 and 2024, the unrecognized compensation cost related to outstanding options was $ 5.1 million and $ 15.4 million, respectively, which was expected to be recognized as expense over approximately 1.7 years and 1.6 years, respectively.

The total intrinsic value, which is the amount by which the exercise price was exceeded by the price of the Company’s common stock on the date of exercise, of stock options exercised during the year ended December 31, 2023 was $ 0.3 million.

As of December 31, 2024, all outstanding options had an exercise price above the Company's common stock price and therefore no intrinsic value.

Total cash received upon the exercise of stock options was $ 0.1 million for the year ended December 31, 2024.

Restricted Stock Units.

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As of December 31, 2025 and 2024, the unrecognized compensation cost related to outstanding restricted stock units (excluding those with unachieved performance-based conditions) was $ 10.8 million and $ 31.4 million, respectively, which was expected to be recognized as expense over approximately 1.6 years and 1.7 years, respectively.

During the year ended December 31, 2021, 1,997,377 performance-based restricted stock units (PRSUs) were granted, none of which have vested.

During the year ended December 31, 2024, the Company granted 300,000 performance-based restricted stock units with a total grant date fair value of approximately $ 1.6 million, none of which have vested.

During the year ended December 31, 2021, 1,997,377 performance-based restricted stock units (PRSUs) were granted, none of which have vested as of December 31, 2025.

During the year ended December 31, 2024, the Company grante d 300,000 pe rformance-based restricted stock units were granted , no ne of which have vested as of December 31, 2025 .

There were 895,624 and 1,062,607 PRSUs outstanding at December 31, 2025 and 2024, respectively.

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Awards available under the Inducement Plan

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

Years Ended December 31,

The Company incurred no current or deferred federal or state tax expense during the periods presented.

The only tax expense is related to state minimum taxes.

The following is a reconciliation of the Company’s expected federal income tax provision (benefit) to the actual income tax provision (in thousands) (after the adoption of ASU 2023-09):

Year Ended December 31,

Income tax (benefit) at statutory rate

State and local tax, net of federal income tax effect (1)

Effects of changes in tax laws or rates enacted in the current period

R&D tax credits

Changes in valuation allowance

Nontaxable or nondeductible items

Stock Compensation

Nondeductible executive compensation

Changes in unrecognized tax benefits

Income tax expense

(1) The state of California comprises greater than 50% of the Company’s state tax benefit.

The following is a reconciliation of the Company’s expected federal income tax provision (benefit) to the actual income tax provision (in thousands) (prior to the adoption of ASU 2023-09):

Year Ended December 31,

Tax computed at federal statutory rate

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Net deferred tax assets

Income taxes paid or refunded consist of the following as of:

Total income taxes paid (refunded)

A valuation allowance of $ 388.0 million and $ 362.1 million at December 31, 2025 and 2024, respectively, has been established to offset the deferred tax assets, as realization of such assets is uncertain.

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Ending unrecognized tax benefits

The Company does no t anticipate that the amount of unrecognized tax benefits as of December 31, 2024 will significantly change within the next twelve months.

Due to the valuation allowance recorded against the Company’s deferred tax assets, no ne of the total unrecognized tax benefits as of December 31, 2024 would reduce the effective tax rate if recognized.

Due to the valuation allowance recorded against the Company’s deferred tax assets, none of the total unrecognized tax benefits as of December 31, 2025 would reduce the effective tax rate if recognized.

The Company has not recognized interest or penalties in its consolidated statements of operations and comprehensive loss since inception.

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

The Company has not recognized interest or penalties related to income tax matters in its consolidated statements of operations and comprehensive loss since inception.

The Company has no t recognized interest or penalties related to income tax matters in its consolidated statements of operations and comprehensive loss since inception.

Segment Reporting

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See Note 2 for additional information on certain licenses.

During the reporting period, the Company pursued claims in two lawsuits that were filed in 2022 against Shoreline Biosciences, Inc.

(Shoreline) and certain of its founders and officers (collectively, the Shoreline litigations).

The first suit, filed on May 13, 2022, was pending in San Diego Superior Court against Shoreline and four of its founders, Drs.

Kaufman (Kaufman), Kleanthis G.

Xanthopoulos, and Messrs.

William Sandborn and Steven Holtzman.

The Company's claims included actions for breach of contract, breach of implied covenant of good faith and fair dealing, fraud and deceit, tortious interference, restitution and unfair competition.

On August 9, 2024, the court denied the defendants’ motions for summary judgment preserving for trial all of the Company’s claims against the defendants, with the exception of defendants’ motions with respect to certain theories under the Company’s tortious interference claim (which claim by Fate was otherwise preserved for trial).

On September 19, 2024, the court denied defendants’ motion for reconsideration of its summary judgment ruling.

Trial began on October 21, 2024, with a jury selected on October 24, 2024.

On October 28, 2024, the parties entered a settlement agreement resolving the litigation on terms agreeable to all parties, pursuant to which the Company filed a request for dismissal with prejudice of all claims on October 31, 2024.

In the second of the Shoreline litigations, also filed on May 13, 2022, the Company and Whitehead Institute for Biomedical Research (Whitehead) filed a lawsuit in the U.S.

District Court for the Southern District of California against Shoreline and Kaufman seeking monetary damages for the defendants’ infringement of U.S.

8,071,369, 8,932,856, 8,951,797, 8,940,536, 9,169,490, 10,457,917, and 10,017,744.

On June 7, 2023, the Company and Whitehead filed a motion to dismiss our patent infringement claims against Kaufman in his personal capacity;

that motion was granted on June 9, 2023.

On August 30, 2023, the court granted Shoreline’s motion for summary judgment and denied the Company’s motion for partial summary judgment as moot.

Judgment in favor of Shoreline was entered on August 31, 2023.

On September 27, 2023, the Company and Whitehead filed a Notice of Appeal with the Court of Appeals for the Federal Circuit challenging the trial court’s claim construction and grant of summary judgment in favor of the defendants;

the defendants cross-appealed challenging the district court’s earlier denial of a motion to dismiss and partial motion for summary judgment on other grounds.

The Federal Circuit docketed the case on October 5, 2023, and briefing was completed on June 26, 2024.

On October 28, 2024, the parties entered a settlement agreement resolving the litigation on terms agreeable to all parties, pursuant to which the parties filed a joint notice of dismissal of the appeal and cross-appeal on October 31, 2024.

On January 20, 2023, a purported stockholder of the Company filed a securities class action lawsuit against the Company and certain of its officers captioned Hadian v.

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On July 24, 2023, the lead plaintiff filed an amended complaint.

The amended complaint alleged that the Company violated the federal securities laws by making allegedly false and/or misleading statements and/or omissions in its public disclosures dating back to August 2020 relating to the Company’s collaboration agreement with Janssen Biotech, Inc.

The amended complaint alleged that the Company violated the federal securities laws by making allegedly false and/or misleading statements and/or omissions in its public disclosures dating back to August 2020 relating to our collaboration agreement with Janssen Biotech, Inc.

(the Janssen Agreement), potential product candidates subject to the Janssen Agreement, and the termination of the Janssen Agreement.

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The Company filed a motion to dismiss the second amended complaint on November 18, 2024, and briefing on the motion was completed on January 21, 2025.

On September 22, 2025, the court granted the Company's motion to dismiss the second amended complaint, with leave for plaintiff to file a third amended complaint.

On October 17, 2025, the plaintiff filed a third amended complaint.

The Company filed a motion to dismiss the third amended complaint on November 17, 2025.

Plaintiff filed an opposition brief on December 18, 2025.

On January 15, 2026, the Company filed its reply in support of its motion to dismiss.

The Company intends to continue to vigorously defend against this action.

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On December 2, 2024, the court entered an order consolidating the Guarino Action and the Horrobin Action under the caption In re Fate Therapeutics, Inc.

Derivative Litigation (the Derivative Action) and staying the Derivative Action pending the court’s decision on our motion to dismiss the second amended complaint in the Securities Action.

Derivative Litigation (the Derivative Action) and staying the Derivative Action pending the court’s decision on the Company's motion to dismiss the second amended complaint in the Securities Action.

On September 22, 2025, the stay of the consolidated case automatically expired when the decision dismissing the second amended complaint in the Securities Action was issued.

On October 24, 2025, the court extended the stay pending the court’s decision on the Company's anticipated motion to dismiss the third amended complaint.

The court's ruling on the motion is pending.

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The Company intends to vigorously defend against the Derivative Action.

From time to time, the Company may be subject to various other legal proceedings and claims that arise in the ordinary course of business activities.

Subsequent Events

California Institute for Regenerative Medicine Award

On January 30, 2025, the Company received approval from CIRM for funding of a $ 4.0 million grant to support the conduct of pre-clinical and IND-enabling activities for FT836.

Employment Agreement with Chief Executive Officer

On March 3, 2025, the Company entered into an Employment Agreement (the “Employment Agreement”) with Bahram Valamehr (“Valamehr”).

Pursuant to the Employment Agreement, Dr.

Valamehr will have the customary powers and responsibilities of a chief executive officer of a corporation of the size and type of the Company.

On December 17, 2025, a derivative complaint, captioned West v.

Wolchko, et al., was filed by a purported stockholder of the Company in the Court of Chancery of the State of Delaware (the West Action).

The West Action names certain current and former members of the Company’s board of directors and certain current and former officers as defendants.

The Company is also named as a nominal defendant.

The plaintiff in the West Action asserts derivative claims for breach of fiduciary duty and insider trading arising

out of substantially the same alleged facts and circumstances as the Securities Action.

On January 16, 2026, the court entered an order staying the West Action until the earliest of the following events:

(i) the public announcement of any settlement in the Securities Action;

(ii) a ruling on the motion to dismiss the second amended complaint in the Securities Action;

or (iii) the dismissal of the Securities Action with prejudice and exhaustion of all related appeals.

The Company intends to vigorously defend against the West Action.

From time to time, the Company may be subject to various other legal proceedings and c laims that arise in the ordinary course of its business activities.

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

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In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on our management’s evaluation (with the participation of the individual who serves as our principal executive officer and principal financial officer) of our disclosure controls and procedures as required by Rules 13a-15 and 15d-15 under the Exchange Act, the individual serving as our principal executive officer and principal financial officer has concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2024, the end of the period covered by this report.

Based on our management’s evaluation (with the participation of our principal executive officer and principal financial officer) of our disclosure controls and procedures as required by Rules 13a-15 and 15d-15 under the Exchange Act, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2025, the end of the period covered by this report.

Management’s Report on Internal Control Over Financial Reporting.

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act).

Internal control over financial reporting is a process designed under the supervision and with the participation of our management, including the individual serving as our principal executive officer and principal financial officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

Internal control over financial reporting is a process designed under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

Management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (2013 Framework).

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Othe r Information

a) 8-K Events.

On March 3, 2025, the Company entered into an employment agreement with Bahram Valamehr, Ph.D., pursuant to which Dr.

Valamehr serves as the Company’s President and Chief Executive Officer (the “Employment Agreement”).

The Employment Agreement sets forth Dr.

Valamehr’s then-current annual base salary, an option grant and his eligibility to participate in our incentive bonus and benefit plans generally.

Pursuant to the Employment Agreement, Dr.

Valamehr is eligible to receive an annual incentive compensation at a target percentage of 60% his annual base salary, as determined by the Board of Directors or the Compensation Committee from time to time.

Valamehr’s employment is at-will.

In the event that Dr.

Valamehr’s employment is terminated by the Company without “Cause” (other than due to death or disability) or by Dr.

Valamehr for “Good Reason” (as such terms are defined in the Employment Agreement), in each case outside of the “Sale Event Period” (as defined below), subject to his execution of a nonrevocable separation agreement and release, Dr.

Valamehr will be entitled to (i) a lump sum cash payment equal to the sum of (A) twelve (12) months of Dr.

Valamehr’s then-current base salary and (B) his annual target incentive compensation for the year of termination, and (ii) payment of the premiums for Dr.

Valamehr’s and his family’s participation in the Company’s group health care plans, subject to Dr.

Valamehr’s copayment amount, for up to twelve (12) months after such termination.

Pursuant to the Employment Agreement, in the event that Dr.

Valamehr’s employment is terminated by the Company without Cause (other than due to death or disability) or by Dr.

Valamehr for Good Reason, in each case within the period beginning three months prior to and ending eighteen (18) months following a “Sale Event” (as defined in the 2022 Plan) (the “Sale Event Period”), subject to his execution of a nonrevocable separation agreement and release, Dr.

Valamehr is entitled to (i) a lump sum cash payment equal to the sum of (A) eighteen (18) months of Dr.

Valamehr’s then-current base salary (or base salary in effect immediately prior to the Sale Event, if higher) and (B) one and a half (1.5) times his annual target incentive compensation for the year of termination;

(ii) full acceleration of vesting of all outstanding equity awards;

provided, however, that for any equity awards that include a performance-based vesting condition, no acceleration of vesting will be provided unless the applicable performance-based vesting condition has been satisfied as of the date of Dr.

Valamehr’s termination, provided further that, in determining whether achievement of a specified stock price has been satisfied, such price is satisfied to the extent that the consideration payable per share of common stock of the Company upon a Sale Event exceeds such stock price;

and (iii) payment of the premiums for Dr.

Valamehr’s and his family’s participation in the Company’s group health care plans, subject to Dr.

Valamehr’s copayment amount, up to eighteen (18) months after such termination.

The payments and benefits provided to Dr.

Valamehr under the Employment Agreements in connection with a change of control may not be eligible for federal income tax deduction for the Company pursuant to Section 280G of the Code.

These payments and benefits may also be subject to an excise tax under Section 4999 of the Code.

If the payments or benefits payable to Dr.

Valamehr in connection with a change of control would be subject to the excise tax imposed under Section 4999 of the Code, then those payments or benefits will be reduced if such reduction would result in a higher net after-tax benefit to him.

b) Rule 10b5-1 Trading Plans

43 unchanged sentences

June 10, 2024

Certificate of Amendment to Amended and Restated Certificate of Incorporation of the Registrant, as currently in effect

Specimen Common Stock Certificate

5 unchanged sentences

Description of Securities

November 8, 2023

Filed herewith

Amended and Restated 2013 Stock Option and Incentive Plan and forms of agreements thereunder

2 unchanged sentences

January 7, 2015

Amended and Restated Employment Agreement by and between the Registrant and Scott Wolchko, dated January 14, 2018

March 5, 2018

Amended and Restated Senior Executive Incentive Bonus Plan

1 unchanged sentence

Amended and Restated Non-Employee Director Compensation Policy

Filed herewith

March 5, 2025

Fate Therapeutics, Inc.

25 unchanged sentences

February 24, 2021

Severance and Change in Control Policy

March 5, 2018

Severance and Change in Control Policy, as currently in effect

November 13, 2025

Offer Letter by and between the Registrant and Cindy R.

9 unchanged sentences

February 8, 2019

Offer Letter by and between the Registrant and Bahram Valamehr, dated November 23, 2009

March 5, 2019

Lease Agreement by and between the Registrant and Scripps Summit Investments LLC, dated January 7, 2020

8 unchanged sentences

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.

8 unchanged sentences

March 21, 2024

Amended and Restated 2022 Stock Option and Incentive Plan and form agreements thereunder

Amended and Restated Form of Indemnification Agreement

6 unchanged sentences

Employment Agreement by and between the Registrant and Bahram Valamehr, dated March 3, 2025

Filed herewith

March 5, 2025

Offer Letter between the Company and Kamal Adawi, dated October 13, 2025

October 14, 2025

Amendment No.

5 to Collaboration and Option Agreement by and between the Registrant and Ono Pharmaceutical Co., Ltd, dated June 13, 2025

August 12, 2025

Second Amended and Restated 2022 Stock Option and Incentive Plan and form agreements thereunder

Amended Code of Business Conduct and Ethics

1 unchanged sentence

Insider Trading Policy

Filed herewith

March 5, 2025

Subsidiaries of the Registrant

4 unchanged sentences

Filed herewith

Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rules 13a-14 and 15-d-14 promulgated pursuant to the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Certification of Principal Executive Officer pursuant to Rules 13a-14 and 15-d-14 promulgated pursuant to the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Filed herewith

Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C.

Certification of Principal Financial Officer pursuant to Rules 13a-14 and 15-d-14 promulgated pursuant to the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Filed herewith

Certification of Principal Executive Officer pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Filed herewith

Certification of Principal Financial Officer pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Filed herewith

Compensation Recovery Policy

10 unchanged sentences

Fate Therapeutics, Inc.

March 5, 2025

February 26, 2026

/s/ Bahram Valamehr

Bahram Valamehr, Ph.D., MBA

Bahram Valamehr, Ph.D., M.B.A.

President, Chief Executive Officer and Director

(Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of Bahram Valamehr as his or her attorney-in-fact, with the power of substitution, for him or her in any and all capacities, to sign any amendments to this report, and to file the same, with exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in-fact, or his or her substitute or substitutes may do or cause to be done by virtue hereof.

(Principal Executive Officer)

February 26, 2026

/s/ K amal Adawi

Kamal Adawi, M.S., M.B.A.

Chief Financial Officer and Treasurer

(Principal Financial and Accounting Officer)

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of Bahram Valamehr and Kamal Adawi as his or her attorney-in-fact, with the power of substitution, for him or her in any and all capacities, to sign any amendments to this report, and to file the same, with exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in-fact, or his or her substitute or substitutes may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated:

1 unchanged sentence

President, Chief Executive Officer and Director

March 5, 2025

February 26, 2026

Bahram Valamehr, Ph.D., MBA

(Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)

(Principal Executive Officer)

/s/ Kamal Adawi

Chief Financial Officer and Treasurer

February 26, 2026

Kamal Adawi, M.S., M.B.A.

(Principal Financial and Accounting Officer)

/s/ William H.

Chairman of the Board and Director

March 5, 2025

February 26, 2026

Rastetter, Ph.D.

Vice Chairman of the Board and Director

March 5, 2025

Mendlein, Ph.D., J.D.

/s/ Matthew C.

February 26, 2026

/s/ Shefali Agarwal

March 5, 2025

February 26, 2026

Shefali Agarwal, M.D.

/s/ Timothy P.

March 5, 2025

/s/ Robert S.

March 5, 2025

February 26, 2026

Epstein, M.D.

/s/ Karin Jooss

March 5, 2025

February 26, 2026

Karin Jooss, Ph.D.

/s/ Michael Lee

March 5, 2025

/s/ Neelufar Mozaffarian

March 5, 2025

Neelufar Mozaffarian, M.D., Ph.D., FACR

March 5, 2025

February 26, 2026

Yuan Xu, Ph.D.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis