FATE THERAPEUTICS INC 10-K

ITEM 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures. We are responsible for maintaining disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Disclosure controls and procedures are controls and other procedures designed to ensure that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including the individual serving as our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on our management’s evaluation (with the participation of our principal executive officer and principal financial officer) of our disclosure controls and procedures as required by Rules 13a-15 and 15d-15 under the Exchange Act, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2020, the end of the period covered by this report. Management’s Report on Internal Control over Financial Reporting. The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act). Internal control over financial reporting is a process designed under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (2013 Framework). Based on this assessment, our management concluded that, as of December 31, 2020, our internal control over financial reporting was effective based on those criteria. Our independent registered public accounting firm, Ernst & Young LLP, has audited the financial statements included in this Form 10-K and has issued an unqualified opinion on the effectiveness of our internal control over financial reporting as of December 31, 2020, as stated in their attestation report, which is included elsewhere herein. Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting during the quarter ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Enhancements were made to our existing internal controls over financial reporting, effective during the year ended December 31, 2020, due to the adoption and implementation of the new credit loss reporting requirements under ASU 2016-13. Further, due to the achievement of certain technological, manufacturing and regulatory operating milestones, we have enhanced our existing internal controls over financial reporting associated with the fair value assessment of the stock price appreciation milestones for the Amended MSK License. 116 Table of Contents Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Fate Therapeutics, Inc. Opinion on Internal Control over Financial Reporting We have audited Fate Therapeutics, Inc.’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), (the COSO criteria). In our opinion, Fate Therapeutics, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of operations and comprehensive loss, convertible preferred stock and stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and our report dated February 24, 2021 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP San Diego, CA February 24, 2021 117 Table of Contents ITEM 9B. Other Information None. 118 Table of Contents PART III ITEM 10. Directors, Executive Officers and Corporate Governance Except as set forth below, the information required by this item is contained in our definitive proxy statement (the Proxy Statement), to be filed with the SEC in connection with the Annual Meeting of Stockholders within 120 days after the conclusion of our fiscal year ended December 31, 2020 and is incorporated in this Annual Report on Form 10-K by reference. We have adopted a written code of business conduct and ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A current copy of the code is posted on the Corporate Governance section of our website, which is located at www.fatetherapeutics.com. If we make any substantive amendments to, or grant any waivers from, the code of business conduct and ethics for our principal executive officer, principal financial officer, principal accounting officer, controller or persons performing similar functions, or any officer or director, we will disclose the nature of such amendment or waiver on our website or in a current report on Form 8-K. ITEM 11. Executive Compensation The information required by this item is contained in the Proxy Statement and is incorporated in this Annual Report on Form 10-K by reference. ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by this item is contained in the Proxy Statement and is incorporated in this Annual Report on Form 10-K by reference. ITEM 13. Certain Relationships and Related Party Transactions, and Director Independence The information required by this item is contained in the Proxy Statement and is incorporated in this Annual Report on Form 10-K by reference. ITEM 14. Principal Accounting Fees and Services The information required by this item is contained in the Proxy Statement and is incorporated in this Annual Report on Form 10-K by reference. 119 Table of Contents PART IV ITEM 15. Exhibits and Financial Statement Schedules (a) The following documents are filed as part of this report: (1) Index list to Financial Statements: Page Report of Independent Registered Public Accounting Firm 85 Consolidated Balance Sheets 88 Consolidated Statements of Operations and Comprehensive Loss 89 Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity 90 Consolidated Statements of Cash Flows 91 Notes to Consolidated Financial Statements 92 (2) Financial Statement Schedules All other schedules are omitted because they are not required or the required information is included in the financial statements or notes thereto. (3) Exhibits The exhibits listed in the accompanying Exhibit Index are filed or incorporated by reference as part of this report. ITEM 16. Form 10-K Summary None. 120 Table of Contents EXHIBIT INDEX Incorporated by Reference Exhibit Number Exhibit Title Form File No. Exhibit Filing Date 3.1 Amended and Restated Certificate of Incorporation of the Registrant, as currently in effect S-1/A 333-190608 3.2 August 29, 2013 3.2 Certificate of Designation of Preferences, Rights and Limitations of Class A Convertible Preferred Stock 8-K 001-36076 3.1 November 29, 2016 3.3 Amended and Restated Bylaws of the Registrant, as currently in effect — — — Filed herewith 4.1 Specimen Common Stock Certificate S-1/A 333-190608 4.1 August 29, 2013 4.2 Warrant to Purchase Stock issued to Silicon Valley Bank on January 5, 2009 S-1 333-190608 4.2 August 13, 2013 4.3 First Amendment to Warrant to Purchase Stock dated January 5, 2009 by and between the Registrant and SVB Financial Group, dated August 25, 2011 S-1 333-190608 4.3 August 13, 2013 4.4 Warrant to Purchase Stock issued to Silicon Valley Bank on August 25, 2011 S-1 333-190608 4.4 August 13, 2013 4.5 Description of Securities — — — Filed herewith 4.6 Form of Pre-Funded Warrant 8-K 001-36076 4.1 January 8, 2021 10.1# 2007 Equity Incentive Plan and forms of agreements thereunder S-1/A 333-190608 10.1 August 29, 2013 10.2# Amended and Restated 2013 Stock Option and Incentive Plan and forms of agreements thereunder — — — Filed herewith 10.3# Form of Unrestricted Stock Award Agreement under the 2013 Stock Option and Incentive Plan 8-K 001-36076 10.2 January 7, 2015 10.4# 2013 Employee Stock Purchase Plan S-1/A 333-190608 10.24 September 16, 2013 10.5# Amended and Restated Employment Agreement by and between the Registrant and Scott Wolchko, dated January 14, 2018 10-K 001-36076 10.5 March 5, 2018 10.6# Amended and Restated Senior Executive Incentive Bonus Plan 8-K 001-36076 10.1 January 7, 2015 10.7# Amended and Restated Non-Employee Director Compensation Policy — — — Filed herewith 10.8# Fate Therapeutics, Inc. Amended and Restated Inducement Equity Plan — — — Filed herewith 10.9# Forms of Stock Option Agreement under Fate Therapeutics, Inc. Inducement Equity Plan — — — Filed herewith 10.10# Forms of Restricted Stock Unit Award Agreement under Fate Therapeutics, Inc. Inducement Equity Plan — — — Filed herewith 10.11† Exclusive License Agreement by and between the Registrant and Children's Medical Center Corporation, dated May 13, 2009 S-1 333-190608 10.9 August 13, 2013 121 Table of Contents Incorporated by Reference Exhibit Number Exhibit Title Form File No. Exhibit Filing Date 10.1 2 Lease Agreement by and between the Registrant and ARE-3535/3565 General Atomics Court, LLC, dated December 3, 2009 S-1 333-190608 10.14 August 13, 2013 10.13 First Amendment to Lease Agreement by and between the Registrant and ARE-3535/3565 General Atomics Court, LLC, dated October 1, 2011 S-1 333-190608 10.15 August 13, 2013 10.14 Second Amendment to Lease Agreement by and between the Registrant and ARE-3535/3565 General Atomics Court, dated September 26, 2013 S-1/A 333-190608 10.25 September 30, 2013 10.15 Third Amendment to Lease Agreement by and between the Registrant and ARE-3535/3565 General Atomics Court, dated September 2, 2014 10-K 001-36076 10.15 March 3, 2016 10.16 Fourth Amendment to Lease Agreement by and between the Registrant and ARE-3535/3565 General Atomics Court, dated March 2, 2015 10-K 001-36076 10.16 March 3, 2016 10.17 Fifth Amendment to Lease Agreement by and between the Registrant and ARE-3535/3565 General Atomics Court, dated June 1, 2016 10-Q 001-36076 10.2 August 8, 2016 10.18 Form of Indemnification Agreement S-1/A 333-190608 10.20 August 29, 2013 10.19† Whitehead Institute for Biomedical Research Exclusive Patent License Agreement between the Registrant and the Whitehead Institute for Biomedical Research, dated as of February 24, 2009 — — — Filed herewith 10.20† License Agreement between the Registrant and The Scripps Research Institute, dated as of July 13, 2009 — — — Filed herewith 10.21† License Agreement between the Registrant and The Scripps Research Institute, dated as of May 25, 2010 — — — Filed herewith 10.22† License Agreement between the Registrant and The Scripps Research Institute, dated as of August 24, 2010 — — — Filed herewith 10.23 Securities Purchase Agreement, dated August 6, 2016, by and among the Registrant and the Purchasers 8-K 001-36076 10.1 August 8, 2016 10.24 Registration Rights Agreement, dated August 6, 2016, by and among the Registrant and the Purchasers 8-K 001-36076 10.2 August 8, 2016 10.25 Securities Purchase Agreement, dated November 21, 2016, by and among the Registrant and the Purchasers 8-K 001-36076 10.1 November 22, 2016 10.26 Registration Rights Agreement, dated November 21, 2016, by and among the Registrant and the Purchasers 8-K 001-36076 10.2 November 22, 2016 10.27# Severance and Change in Control Policy 10-K 001-36076 10.32 March 5, 2018 10.28# Offer Letter by and between the Registrant and Cindy R. Tahl, dated October 23, 2009 10-K 001-36076 10.33 March 5, 2019 122 Table of Contents Incorporated by Reference Exhibit Number Exhibit Title Form File No. Exhibit Filing Date 10.29 Sixth Amendment to the Lease Agreement by and between the Registrant and ARE-3535/3565 General Atomics Court, dated May 31, 2018 10-Q 001-36076 10.1 August 6, 2018 10.30 Amended and Restated Exclusive License Agreement by and between the Registrant and Memorial Sloan Kettering Cancer Center, dated May 15, 2018 10-Q 001-36076 10.2 August 6, 2018 10.31† Exclusive License Agreement by and between the Registrant and The David Gladstone Institutes, dated September 11, 2018 10-Q 001-36076 10.1 November 1, 2018 10.32† Collaboration and Option Agreement by and between the Registrant and Ono Pharmaceutical Co., Ltd., dated September 14, 2018 10-Q/A 001-36076 10.2 February 8, 2019 10.33# Offer Letter by and between the Registrant and Bahram Valamehr, dated November 23, 2009 10-K 001-36076 10.38 March 5, 2019 10.34† Lease Agreement by and between the Registrant and Scripps Summit Investments LLC, dated January 7, 2020 10-K 001-36076 10.34 March 2, 2020 10.35† Collaboration and Option Agreement by and between the Registrant and Janssen Biotech, Inc., dated April 2, 2020 10-Q 001-36076 10.1 August 5, 2020 10.36† Stock Purchase Agreement by and between the Registrant and Johnson & Johnson Innovation – JJDC, Inc., dated April 2, 2020 10-Q 001-36076 10.2 August 5, 2020 10.37† Stock Purchase Agreement by and between the Registrant and Johnson & Johnson Innovation – JJDC, Inc., dated June 8, 2020 10-Q 001-36076 10.3 August 5, 2020 10.38# Offer Letter by and between the Registrant and Edward Dulac III, dated May 20, 2020 8-K 001-36076 10.1 August 19, 2020 10.39† Letter Agreement, dated December 4, 2020, by and between the Registrant and Ono Pharmaceutical Co., Ltd. — — — Filed herewith 10.40† Patent License Agreement by and between the Registrant and Max-Delbrück-Centrum für Molekulare Medizin in der Helmholtz-Gemeinschaft, dated August 30, 2019 — — — Filed herewith 14.1 Amended Code of Business Conduct and Ethics 10-K 001-36076 14.1 March 5, 2019 21.1 Subsidiaries of the Registrant 10-K 001-36076 21.1 March 5, 2019 23.1 Consent of Independent Registered Public Accounting Firm — — — Filed herewith 24.1 Power of Attorney (included on signature page to this Annual Report) — — — Filed herewith 123 Table of Contents Incorporated by Reference Exhibit Number Exhibit Title Form File No. Exhibit Filing Date 31.1 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 31.2 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 32.1 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 32.2 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 101.INS Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. — — — Filed herewith 101.SCH Inline XBRL Taxonomy Extension Schema Document — — — Filed herewith 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document — — — Filed herewith 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document — — — Filed herewith 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document — — — Filed herewith 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document — — — Filed herewith 104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). — — — Filed herewith † Certain provisions of this Exhibit have been omitted as confidential information. # Indicates a management contract or any compensatory plan, contract or arrangement. 124 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Fate Therapeutics, Inc. Date: February 24, 2021 By: /s/ J. Scott Wolchko J. Scott Wolchko President and Chief Executive Officer (Principal Executive Officer and Authorized Signatory) Date: February 24, 2021 By: /s/ Edward J. Dulac III Edward J. Dulac III Chief Financial Officer (Principal Financial and Accounting Officer) KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of J. Scott Wolchko and Edward J. Dulac III as his or her attorney-in-fact, with the power of substitution, for him or her in any and all capacities, to sign any amendments to this report, and to file the same, with exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in-fact, or his or her substitute or substitutes may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated: SIGNATURE TITLE DATE /s/ J. Scott Wolchko President and Chief Executive Officer and Director February 24, 2021 J. Scott Wolchko (Principal Executive Officer) /s/ Edward J. Dulac III Chief Financial Officer February 24, 2021 Edward J. Dulac III (Principal Financial and Accounting Officer) /s/ William H. Rastetter Chairman of the Board and Director February 24, 2021 William H. Rastetter, Ph.D. /s/ John D. Mendlein Vice Chairman of the Board and Director February 24, 2021 John D. Mendlein, Ph.D., J.D. /s/ Shefali Agarwal Director February 24, 2021 Shefali Agarwal, M.D. /s/ Timothy P. Coughlin Director February 24, 2021 Timothy P. Coughlin /s/ Robert S. Epstein Director February 24, 2021 Robert S. Epstein /s/ Robert Hershberg Director February 24, 2021 Robert Hershberg, M.D., Ph.D. /s/ Karin Jooss Director February 24, 2021 Karin Jooss, Ph.D. /s/ Michael Lee Director February 24, 2021 Michael Lee 125