Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~October 31, 2017,~~ ~~41,685,695~~August 2, 2023, 98,562,432 shares of the registrant’s common stock, par value $0.001 per share, were issued and outstanding.

Below is a summary of the principal factors that make an investment in our common stock speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading “Risk Factors” and should be carefully considered, together with other information in this Quarterly Report on Form 10-Q and our other filings with the Securities and Exchange Commission (SEC) before making investment decisions regarding our common stock.

1. Organization and Summary of Significant Accounting Policies

Organization

1.	~~Organization and Summary of Significant Accounting Policies~~

~~Organization~~

Fate Therapeutics, Inc. (the ~~“Company”)~~Company) was incorporated in the state of Delaware on April 27, 2007, and has its principal operations in San Diego, California. The Company is a clinical-stage biopharmaceutical company dedicated to ~~the development of programmed cellular immunotherapies for cancer~~bringing off-the-shelf, multiplexed-engineered, iPSC-derived natural killer (NK) and ~~immune disorders. The Company’s hematopoietic cell therapy pipeline is comprised of NK- and~~ T-cell ~~immuno-oncology programs, including off-the-shelf product candidates derived from engineered induced pluripotent cell lines, and immuno-regulatory programs, including~~ product candidates to ~~prevent life-threatening complications in~~ patients ~~undergoing hematopoietic cell transplantation~~for the treatment of cancer and ~~to promote immune tolerance in patients with~~ autoimmune disease. ~~Its adoptive cell therapy programs are based on the Company’s novel~~ ~~ex vivo~~ ~~cell programming approach, which it applies to modulate the therapeutic function and direct the fate of immune cells.~~

As of ~~September~~June 30, ~~2017,~~2023, the Company has devoted substantially all of its efforts to product development, raising capital and building infrastructure and has not generated any revenues from any sales of its therapeutic products. To date, the Company’s revenues have been derived from collaboration agreements and government grants.

~~Private Placements of Common Stock and Convertible Preferred Stock~~

In ~~August 2016,~~January 2023, the Company implemented a corporate restructuring to streamline operations, reduce operating expenses, extend cash runway and focus resources on the Company's most promising programs. In connection with the restructuring, the Company reduced its workforce by 60%. Affected employees were informed on January 5, 2023. The restructuring was completed ~~a private placement~~by March 31, 2023.

The Company incurred charges of ~~common stock in~~$12.9 million during the six months ended June 30, 2023 for severance and other employee termination-related costs, of which, ~~investors purchased 5,250,000 shares of the Company’s common stock at a price of $1.96 per share. Gross proceeds from the private placement~~$10.9 million were ~~$10.3 million. After giving effect to costs~~ related to research and development expenses and $2.0 million were related to general and administrative expenses. As of June 30, 2023, all restructuring and related expenses have been fully recognized by the ~~private placement, net proceeds were $10.2 million.~~ Company.

The Company also ~~registered all shares issued~~evaluated the impact of the restructuring on the carrying value of its long-lived assets, such as property and equipment and operating lease assets. This process included evaluating the estimated remaining lives, significant changes in ~~this private placement transaction for resale~~the use, and potential impairment charges related to its long-lived assets. Based on ~~a Form S-3 filed with the United States Securities and Exchange Commission (the “SEC”), as required under a registration rights agreement entered into by~~its evaluation, the Company ~~with the purchasers~~determined that its long-lived assets were not impaired as of ~~the common stock,~~June 30, 2023, and ~~the registration statement was declared effective in September 2016.~~

In November 2016, the Company completed a private placement of common and preferred stock in which investors, including investors affiliated with the Company’s directors and officers, purchased convertible preferred stock and common stock of the Company. The Company issued 2,819,549 shares of non-voting Class A Preferred Stock at $13.30 per share, each of which is convertible into five shares of common stock upon certain conditions. The Company also issued 7,236,837 shares of common stock at $2.66 per share. Gross proceeds from the private placement were $56.7 million. After giving effect to costsit has not recognized any impairment charges related to its long-lived assets since the private placement, net proceeds were $54.9 million. The Company also entered into a registration rights agreement (the “Registration Rights Agreement”) with certain of the purchasers in the November 2016 private placement, excluding those purchasers affiliated with the Company’s directors and officers, requiring the Company to register for the resale of the relevant shares. The Company registered all of the relevant shares issued in this placement for resale on a Form S-3 filed with the SEC, as required under the Registration Rights Agreement, and the registration statement was declared effective in January 2017. See Note 6 to the Consolidated Financial Statements for additional information related to this offering.restructuring announcement.

Use of Estimates

The Company’s unaudited condensed consolidated financial statements are prepared in accordance with United States generally accepted accounting principles ~~(“GAAP”)~~(U.S. GAAP). The preparation of the Company’s unaudited condensed consolidated financial statements requires itmanagement 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 unaudited condensed consolidated financial statements and accompanying notes. The most significant estimates and assumptions in the Company’s unaudited condensed consolidated financial statements relate to its stock price appreciation milestone obligations, contracts containing leases, and accrued expenses. Although these estimates are based on the Company’s knowledge of current events and actions it may undertake in the future, actual results may ultimately materially differ from these estimates and assumptions.

Principles of Consolidation

The unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries, Fate Therapeutics (Canada), Inc. or “Fate Canada”, incorporated in Canada and which was dissolved in November 2016, Fate Therapeutics Ltd., incorporated in the United Kingdom, and Tfinity Therapeutics, Inc., incorporated in the United States.subsidiaries. To date, the aggregate operations of these subsidiaries have not been significant and all intercompany transactions and balances have been eliminated in consolidation.

Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents include cash in readily available ~~checking and savings~~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.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the ~~Condensed Consolidated Balance Sheet~~unaudited condensed consolidated balance sheets that sum to the total of the same such amounts shown in the ~~Condensed Consolidated Statements~~unaudited condensed consolidated statements of ~~Cash~~cash flows as of ~~September~~June 30, ~~2017~~2023 and 2022 (in thousands):

September 30,
2017

Cash and cash equivalents

$
43,231

Restricted cash

122

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

$
43,353


	Six Months Ended June 30,
	2023		2022
Cash and cash equivalents	$	46,802	$	55,275
Restricted cash		15,177		15,227
Total cash, cash equivalents, and restricted cash shown in the unaudited condensed consolidated statement of cash flows	$	61,979	$	70,502

~~Amounts included in~~For each of the six months ended June 30, 2023 and 2022, the restricted cash ~~represent security deposits required to secure~~balance includes cash-collateralized irrevocable standby letters of credit for $15.2 million associated with the Company’s ~~credit card limit~~facilities leases.

Investments

Investments are accounted for as available-for-sale securities and ~~its facilities lease.~~

~~Short-Term Investments~~

~~Available-for-sale securities~~ are carried at fair value on the unaudited condensed consolidated balance sheets. Upon initial recognition of the investment and at each reporting period, the Company evaluates whether any unrealized losses on investments are attributable to a credit loss or other factors. Any unrealized losses attributable to credit loss are recorded through an allowance for credit losses, limited to the amount by which the fair value is below amortized cost, with the offsetting amount recorded in other income or expense in the unaudited condensed consolidated statement of operations and comprehensive loss. Unrealized losses not attributable to an expected credit loss and unrealized gains on investments are recorded in other comprehensive income (loss) on the unaudited condensed consolidated statements of operations and comprehensive loss. Realized gains and losses, ~~reported~~if any, on investments classified as available-for-sale securities are included in ~~comprehensive income.~~ other income or expense.

The amortized cost of investments classified as available-for-sale debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and accretion isare included in interest income. ~~Realized gains and losses and declines in value judged to be other-than-temporary, if any, on available-for-sale securities are included in other income or expense.~~ The cost of securities sold is based on the specific identification method. Interest and dividends on securities classified as available-for-sale are included in interest income.

Unaudited Interim Financial Information

The accompanying interim condensed consolidated financial statements are unaudited. These unaudited interim condensed consolidated financial statements have been prepared in accordance with U.S. GAAP and following the requirements of the ~~SEC~~United States Securities and Exchange Commission (SEC) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required ~~by GAAP~~ can be condensed or omitted. The interim unaudited condensed consolidated financial statements should be read in conjunction with the Company’s financial statements and accompanying notes for the fiscal year ended December 31, 2022, contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed by the Company with the SEC on February 28, 2023. In management’s opinion, the unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited financial statements and include all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s financial position and its results of operations and comprehensive loss and its cash flows for the periods presented. These statements do not include all disclosures required by GAAP and should be read in conjunction with the Company’s financial statements and accompanying notes for the fiscal year ended December 31, 2016, contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 filed by the Company with the SEC on March 16, 2017. The results for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 are not necessarily indicative of the results expected for the full fiscal year or any other interim period or any future year or period.

Collaborative Arrangements

~~Revenue Recognition~~

The Company ~~recognizes revenues when all four~~analyzes its collaboration arrangements to assess whether they are within the scope of the following criteria are met: (i) persuasive evidence that an agreement exists; (ii) delivery of the products and/or services has occurred; (iii) the selling price is fixed or determinable; and (iv) collectability is reasonably assured.

~~Revenue arrangements with multiple elements are analyzed~~ASC Topic 808, Collaborative Arrangements (ASC 808), to determine whether such arrangements involve joint operating activities performed by parties that are both active participants in the ~~elements~~activities and exposed to significant risks and rewards that are dependent on the commercial success of such activities. To the extent the arrangement is within the scope of ASC 808, the Company assesses whether aspects of the arrangement between the Company and its collaboration partner are within the scope of other accounting literature, including ASC Topic 606, Revenue from Contracts with Customers (ASC 606). If it is concluded that some or all aspects of the arrangement represent a transaction with a customer, the Company will account for those aspects of the arrangement within the scope of ASC 606.

ASC 808 provides guidance for the presentation and disclosure of transactions in collaborative arrangements, but it does not provide recognition or measurement guidance. Therefore, if the Company concludes a counterparty to a transaction is not a customer or otherwise not within the scope of ASC 606, the Company considers the guidance in other accounting literature as applicable or by analogy to account for such transaction. The classification of transactions under the Company’s arrangements is determined based on the nature and contractual terms of the arrangement along with the nature of the operations of the participants.

Revenue Recognition

The Company analyzes its collaboration arrangements to assess whether they are within the scope of ASC 808, to determine whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards that are dependent on the commercial success of such activities. If the Company concludes that some or all aspects of the arrangement represent a transaction with a customer, the Company accounts for those aspects of the arrangement within the scope of ASC 606.

For arrangements attributable to ASC 606, the Company recognizes revenue in a manner that depicts the transfer of control of a product or a service to a customer and reflects the amount of the consideration the Company is entitled to receive in exchange for such product or service. In doing so, the Company follows a five-step approach: (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 considers the terms of a contract and all relevant facts and circumstances when applying the revenue recognition standard. The Company applies the revenue recognition standard, including the use of any practical expedients, consistently to contracts with similar characteristics and in similar circumstances.

A customer is a party that has entered into a contract with the Company, where the purpose of the contract is to obtain a product or a service that is an output of the Company’s ordinary activities in exchange for consideration. To be considered a contract, (i) the contract must be approved (in writing, orally, or in accordance with other customary business practices), (ii) each party’s rights regarding the product or the service to be transferred can be ~~divided into separate units~~identified, (iii) the payment terms for the product or the service to be transferred can be identified, (iv) the contract must have commercial substance (that is, the risk, timing or amount of ~~accounting or whether the elements must be accounted for~~future cash flows is expected to change as a ~~single unit~~result of ~~accounting.~~the contract), and (v) it is probable that the Company will collect substantially all of the consideration to which it is entitled to receive in exchange for the transfer of the product or the service.

A performance obligation is defined as a promise to transfer a product or a service to a customer. The Company ~~divides~~identifies each promise to transfer a product or a service (or a bundle of products or services, or a series of products and services that are substantially the ~~elements into separate units~~same and have the same pattern of ~~accounting and applies~~transfer) that is distinct. A product or a service is distinct if both (i) the ~~applicable revenue recognition criteria to each of~~customer can benefit from the ~~elements, if~~product or the ~~delivered elements have value~~service either on its own or together with other resources that are readily available to the customer onand (ii) the Company’s promise to transfer the product or the service to the customer is separately identifiable from other promises in the contract. Each distinct promise to transfer a ~~stand-alone~~product or a service is a unit of accounting for revenue recognition. If a promise to transfer a product or a service is not separately identifiable from other promises in the contract, such promises should be combined into a single performance obligation.

The transaction price is the amount of consideration the Company is entitled to receive in exchange for the transfer of control of a product or a service to a customer. To determine the transaction price, the Company considers the existence of any significant financing component, the effects of any variable elements, noncash considerations and consideration payable to the customer. If a significant financing component exists, the transaction price is adjusted for the time value of money. If an element of variability exists, the Company must estimate the consideration it expects to receive and uses that amount as the basis for recognizing revenue as the product or the service is transferred to the customer. There are two methods for determining the amount of variable consideration: (i) the expected value method, which is the sum of probability-weighted amounts in a range of possible consideration amounts, and (ii) the mostly likely amount method, which identifies the single most likely amount in a range of possible consideration amounts.

If a contract has multiple performance obligations, the Company allocates the transaction price to each distinct performance obligation in an amount that reflects the consideration the Company is entitled to receive in exchange for satisfying each distinct performance obligation. For each distinct performance obligation, revenue is recognized when (or as) the Company transfers control of the product or the service applicable to such performance obligation.

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

The Company expenses incremental costs of obtaining and fulfilling a contract as and when incurred if the ~~arrangement includes a general right~~expected amortization period of ~~return relative~~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 ~~delivered elements,~~contract and ~~if the delivery or performance~~amortized to expense proportionate to revenue recognition of the ~~undelivered elements is considered probable~~underlying contract.

Stock Price Appreciation Milestones

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

~~Revenue has been allocated~~10

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 ~~element~~reporting date. The assumptions used to calculate the fair value of the stock price appreciation milestones are subject to a significant amount of judgment including the probability of achieving a specified clinical milestone, the expected volatility of the Company’s common stock, the risk-free interest rate, and the estimated term, which is based in part on the last valid patent claim date. The Company remeasures the fair value of the stock price appreciation milestones at each balance sheet date, with changes in fair value recorded in earnings as non-operating income or expense on the unaudited condensed consolidated statements of operations and comprehensive loss.

Leases

The Company determines if a contract contains a lease at the inception of the ~~arrangement~~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 unaudited condensed 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 ~~relative selling price method that~~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 ~~a three-tier hierarchy. The relative selling price method requires that~~ the ~~estimated selling price for each element be based on vendor-specific objective evidence (“VSOE”)~~information available at the lease commencement date in determining the present value of ~~fair~~lease payments. ROU assets are measured as the present value ~~which represents~~of the ~~price charged for each element~~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 ~~sold separately or, for an element not yet being sold separately, the price established by management. When VSOE of fair value is not~~

available, third-party evidence (“TPE”) of fair value is acceptable, or a best estimate of selling price is used if neither VSOE nor TPE is available. A best estimate of selling price should be consistent with the objective of determining the price at which the Company would transact if the element were sold regularly on a stand-alone basis and should also take into account market conditions and company-specific factors.

Revenue arrangements with multiple elements may include license fees, research and development payments, milestone payments, other contingent payments, and royalties on any product sales derived from collaborations. The Company recognizes nonrefundable license fees with stand-alone value as revenue at the timereasonably certain that the Company ~~has satisfied all performance obligations, and recognizes license fees without stand-alone value as revenue in combination with any undelivered performance obligations.~~will exercise that option. Lease expense for operating leases is recognized on a straight-line basis over the lease term. The Company ~~recognizes~~aggregates all lease and non-lease components for each class of underlying assets into a ~~research~~single lease component.

Employee Retention Credit

The Coronavirus Aid, Relief and ~~development payment as revenue over~~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 ~~term~~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 ~~collaboration agreement as contracted amounts are earned, or reimbursable costs are incurred,~~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 ~~agreement, where contracted amounts are considered~~CARES Act for qualified wages through December 31, 2021. In connection with the CARES Act, the Company adopted a policy to recognize an ERC when it is reasonably assumed the Company will comply with the conditions and the grant will be ~~earned~~received and include in relative proportion to the performance required under the applicable agreement. The Company recognizes a milestone payment, which is contingent upon the achievement of a milestone in its entirety, as revenueother income in the ~~period in which~~statement of operations. Accordingly, the ~~milestone is achieved only if~~Company received a cash payment and recorded $4.8 million and $0.4 million of other income during the ~~milestone meets all criteria to be considered substantive. These criteria include~~three months ended June 30, 2023 and 2022, respectively, and $5.1 million and $0.4 million of other income during the following: (i) the consideration being earned should be commensurate with either the Company’s performance to achieve the milestone or the enhancement of the value of the item delivered as a result of a specific outcome resulting from the Company’s performance to achieve the milestone; (ii) the consideration being earned should relate solely to past performance; (iii) the consideration being earned should be reasonable relative to all deliverablessix months ended June 30, 2023 and payment terms in the arrangement; and (iv) the milestone should be considered in its entirety and cannot be bifurcated into substantive and nonsubstantive components. Any amounts received pursuant to revenue arrangements with multiple elements prior to satisfying the Company’s revenue recognition criteria are recorded as deferred revenue on the Company’s consolidated balance sheets.2022, respectively.

~~Revenue from government grants is recorded when reimbursable expenses are incurred under the grant in accordance with the terms of the grant award.~~

Stock-Based Compensation

Stock-based compensation expense represents the cost of the grant date fair value of employee stock option and restricted stock unit grants recognized over the requisite service period of the awards (usually the vesting period) on a straight-line ~~basis, net~~basis. Performance-based stock units/awards represent a right to receive a certain number of ~~estimated forfeitures. For~~shares of common stock ~~option grants for which vesting is subject to performance-based milestones, the expense is recorded over the remaining service period after the point when~~based on the achievement of corporate performance goals and continued employment during the ~~milestone~~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 ~~performance condition has been achieved.~~estimated shares to be released is treated as a cumulative catch-up in the period of adjustment. For stock ~~option grants~~awards for which vesting is subject to both performance-based milestones and market conditions, expense is recorded over the derived service period after the point when the achievement of the performance-based milestone is probable or the performance condition has been achieved.

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

price of the Company’s common stock as reported on The ~~NASDAQ~~Nasdaq Global Market on the date of grant.

The Company ~~accounts~~recognizes forfeitures for ~~stock options and restricted stock~~all awards to non-employees using the fair value approach. Stock options and restricted stock awards to non-employees are subject to periodic revaluation over their vesting terms. For stock option grants for which vesting is subject to performance-based milestones, the expense is recorded over the remaining service period after the point when the performance condition is determined to be probable of achievement or when it has been achieved.as such forfeitures occur.

Convertible Preferred Stock

The Company applies the relevant accounting standards to distinguish liabilities from equity when assessing the classification and measurement of preferred stock. Preferred shares subject to mandatory redemptions are considered liabilities and measured at fair value. Conditionally redeemable preferred shares are considered temporary equity. All other preferred shares are considered as stockholders’ equity.

The Company applies the relevant accounting standards for derivatives and hedging (in addition to distinguishing liabilities from equity) when accounting for hybrid contracts that contain conversion options. Conversion options must be bifurcated from the host instruments and accounted for as ~~free standing~~free-standing financial instruments according to certain criteria. These criteria include circumstances when (i) the economic characteristics and risks of the embedded derivative instruments are not clearly and closely related to the economic characteristics and risks of the host contract, (ii) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable accounting principles with changes in fair value reported in earnings as they occurred, and (iii) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. The derivative is subsequently measured at fair value at each reporting date, with the changes in fair value reported in earnings.

Comprehensive Loss

Comprehensive loss is defined as a change in equity during a period from transactions and other events and circumstances from non‑owner sources. Other comprehensive ~~income~~loss includes unrealized gains and losses, other than losses attributable to a credit loss which are included in other income and expense, on investments classified as available-for-sale securities, which was the only difference between net loss and comprehensive loss for the applicable periods.

Net Loss ~~per~~Per Common Share

Basic net loss per common share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding for the period, without consideration for common stock equivalents. ~~Excluded from~~The Pre-Funded Warrants associated with the ~~weighted-average number of~~January 2021 public equity offering (see Note 8) are considered outstanding shares ~~outstanding are shares which were issued upon~~in the ~~early~~basic earnings per share calculation given their nominal exercise of stock options and were subject to future vesting totaling zero and 4,378 shares for the three and nine months ended September 30, 2016, respectively. No such shares were outstanding during the three and nine months ended September 30, 2017.price. Dilutive common stock equivalents for the periods presented include convertible preferred stock, warrants for the purchase of common stock, and common stock options and restricted stock units outstanding under the Company’s stock option and incentive ~~plan.~~plans. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding due to the Company’s net loss position.

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2023, the Company realized a net loss of ~~$10.7~~$52.8 million and ~~$30.5~~$71.6 million, respectively. Shares of potentially dilutive securities totaled ~~20.5~~29.1 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2023, including ~~14.1~~13.8 million shares associated with a hypothetical conversion of all outstanding shares of the Company’s Class A ~~convertible preferred stock,~~Convertible Preferred Stock, and an aggregate of ~~6.2~~15.3 million shares of common stock issuable upon the exercise of outstanding stock options and the ~~settlement~~vesting of outstanding restricted stock units.

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2022, the Company realized a net loss of ~~$8.7~~$76.1 million and ~~$25.5~~$141.8 million, respectively. Shares of potentially dilutive securities totaled ~~4.6~~27.7 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2022, including14.0 million shares associated with a hypothetical conversion of all outstanding shares of the Company’s Class A Convertible Preferred Stock, and an aggregate of ~~4.5~~13.8 million shares of common stock issuable upon the exercise of outstanding stock options and the ~~settlement~~vesting of outstanding restricted stock units.

~~Recent Accounting Pronouncements~~

In November 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-18 “ASU 2016-18”. ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. ASU 2016-18 is effective for fiscal years beginning after December 15, 2017. As early adoption of this amendment is permitted, the Company has adopted the update retrospectively to each period presented during the interim period ended September 30, 2017. The adoption of this guidance did not have a material impact on the Company��s Consolidated Financial Statements.

In March 2016, the FASB issued ASU 2016-09, which simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 became effective for the Company on January 1, 2017. The adoption of this guidance did not have a material impact on the Company’s Consolidated Financial Statements.

In February 2016, the FASB issued ASU 2016-02, which requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases, along with additional qualitative and quantitative disclosures. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the effect this standard will have on its Consolidated Financial Statements.

In November 2015, the FASB issued ASU 2015-17, which requires that all deferred tax assets and liabilities be classified as noncurrent on the balance sheet, instead of separating deferred taxes into current and noncurrent amounts. The update is effective for financial statements issued for fiscal years beginning after December 15, 2016. The Company early adopted the update prospectively during the year ended December 31, 2015. The adoption of this guidance did not have a material impact on the Company’s Consolidated Financial Statements.

In May 2014, the FASB issued ASU 2014-09, which created a single, principle-based revenue recognition model that will supersede and replace nearly all existing U.S. GAAP revenue recognition guidance. Entities will recognize revenue in a manner that depicts the transfer of goods or services to customers at an amount that reflects the consideration to which the entity expects to be entitled to receive in exchange for those goods or services. The model provides that entities follow five steps: (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. For public business entities, ASU 2014-09 is effective beginning in the first quarter of 2018 using one of two prescribed transition methods: retrospectively to each prior reporting period

presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the cumulative catch-up transition method). The Company will adopt ASU 2014-09 in the first quarter of 2018. The Company is currently evaluating the effect that the updated standard and transition method will have on its internal processes, financial statements and related disclosures.

Going Concern Assessment

~~Pursuant to ASU 2014-15, the Company has assessed its ability to continue as a going concern for a period of one year from the date of the issuance of these financial statements.~~ Substantial doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year from the financial statement issuance date. The Company determined that there are no conditions or events that raise substantial doubt about its ability to continue as a going concern asfor a period of at least twelve months from the date of ~~the~~ issuance of these financial statements.

2. Collaboration and License Agreements

Janssen Collaboration and Option Agreement

2.	~~Juno Collaboration and License Agreement~~

On ~~May 4, 2015,~~April 2, 2020 (the Janssen Agreement Effective Date), the Company entered into a ~~strategic~~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. (JJDC). 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. Additionally, the Company was entitled to receive full funding for the conduct of all research, preclinical development and IND-enabling activities performed by the Company under the Janssen Agreement.

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.

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 in the three months ended June 30, 2023. In connection with the termination, and ~~license agreement~~per the terms of the Janssen Agreement, (i) all licenses and other rights granted to either party pursuant to the Janssen Agreement have terminated, subject to limited exceptions set forth in the Janssen Agreement; (ii) both parties have wound down all development, commercialization and manufacturing activities under the Janssen Agreement; (iii) neither party has any right to continue to develop, manufacture or commercialize any collaboration candidate or collaboration product or use the other party’s materials; and (iv) neither party is restricted from independently developing, manufacturing, or commercializing any product, including any products directed to the same antigens as those of any collaboration candidate or collaboration product.

In connection with the Janssen Agreement, the Company has incurred $17.1 million in sublicense fees to certain of its existing licensors as of June 30, 2023. The $17.1 million in sublicense consideration represents an asset under ASC Topic 340, Other Assets and Deferred Costs (ASC 340) and was amortized to research and development expense ratably with the Company’s revenue recognition under the Janssen Agreement. During the three months ended June 30, 2023, the Company recognized no such expense. During the three months ended June 30, 2022, the Company recognized $1.2 million of such expense. During the six months ended June 30, 2023 and 2022, the Company recognized $7.2 million and $2.4 million of such expense, respectively. As of June 30, 2023, there was no remaining balance on the Janssen Agreement contract asset.

The Company recognized revenue of $52.3 million under the Janssen Agreement for the six months ended June 30, 2023, of which $41.2 million was previously deferred. Such revenue comprised $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 for the six months ended June 30, 2023. The Company did not recognize any revenue during the three months ended June 30, 2023. The Company recognized revenue of $18.1 million and $34.1 million for three and six months ended June 30, 2022, respectively. Such revenue comprised $11.4 million associated with research and development services and $6.7 million associated with the upfront fee and Equity Premium for the three months ended June 30, 2022, and, $21.2 million associated with research and development services and $12.9 million associated with the upfront fee and Equity Premium for the six months ended June 30, 2022.

As of June 30, 2023, the Company has received $82.0 million in aggregate research and development fees from Janssen.

Ono Collaboration and Option Agreement

On September 14, 2018, the Company entered into a Collaboration and Option Agreement (the ~~“Agreement”)~~Ono Agreement) with ~~Juno Therapeutics, Inc. (“Juno”) to screen~~Ono for the joint development and ~~identify small molecules that enhance the therapeutic properties~~commercialization of ~~Juno’s genetically-engineered~~two off-the-shelf iPSC-derived CAR T-cell ~~immunotherapies.~~product candidates (Candidate 1 and Candidate 2). Pursuant to the terms of the Ono Agreement, ~~Juno~~the Company received an upfront, non-refundable and non-creditable payment of $10.0 million. Additionally, the Company is entitled to receive funding for the conduct of research and 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 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 ~~non-refundable upfront~~milestone fee of $10.0 million for further research and development of Candidate 2. In addition, Ono terminated all further research and development with respect to Candidate 1, and the Company retained all rights to research, develop and commercialize Candidate 1 throughout the world without any obligation to Ono.

In June 2022, the Company entered into an amendment with Ono to the Ono Agreement (the Ono Amendment). Pursuant to the Ono Amendment, the companies agreed to designate an additional antigen expressed on certain solid tumors for research and preclinical development, and Ono agreed to contribute proprietary antigen binding domains targeting such additional solid tumor antigen (Candidate 3). In addition, for both Candidate 2 and Candidate 3, Ono and the Company expanded the scope of the collaboration to include the research and development of iPSC-derived CAR NK cell product candidates (in addition to iPSC-derived CAR T-cell product candidates) targeting the designated solid tumor antigens. Similar to Candidate 2, the Company granted to Ono, during a specified period of time, a preclinical option to obtain an exclusive license under certain intellectual property rights, subject to payment of ~~$5.0 million~~an option exercise fee to the Company by Ono, to develop and ~~purchased 1,000,000 shares~~commercialize Candidate 3 in all territories of the ~~Company’s common stock~~world, where the Company retains rights to co-develop and co-commercialize Candidate 3 in the United States and Europe under a joint arrangement with Ono under which the Company is eligible to share at ~~a price of $8.00 per share.~~

~~Additionally, Juno agreed to fund all~~least 50% of the ~~Company’s collaboration~~profits and losses. The Company will continue to receive committed funding from Ono through September 2024 and has maintained worldwide rights of manufacture for Candidate 3. The preclinical option expires upon the earlier of: (a) September 30, 2024, or (b) the achievement of the pre-defined preclinical milestone under the joint development plan for Candidate 3. Subject to payment of an extension fee by Ono, Ono may choose to defer its decision to exercise the preclinical option until no later than June 2026. Under the Ono Amendment, aggregate estimated research ~~activities~~and development fees have been increased by approximately $9.3 million, for a total estimated $29.3 million in aggregate research and development fees over the course of the joint development plan.

Under the terms of the Ono Agreement (as amended by the Ono Amendment), for Candidate 2 and for Candidate 3 (subject to exercise by Ono of its preclinical option to Candidate 3), 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 ~~initial four-year research term beginning~~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 such royalties subject to certain reductions.

The Ono Agreement will terminate with respect to a Candidate if Ono does not exercise its option for a candidate within the option period, or in its entirety if Ono does not exercise any of its options for the candidates within their respective option periods. In addition, either party may terminate the Ono Agreement in the event of breach, insolvency or patent challenges by the other party; provided, that Ono may terminate the Ono Agreement in its sole discretion (x) on a Candidate-by-Candidate basis at any time after the second anniversary of the effective date of the Ono Agreement ~~with minimum annual research payments~~or (y) on a Candidate-by-Candidate or country-by-country basis at any time after the expiration of ~~$2.0 million to the Company. Juno has~~ the option ~~to extend the exclusive research term for an additional two years beyond the initial four-year term,~~period, subject to certain limitations. The Ono Agreement will expire on a Candidate-by-Candidate and country-by-country basis upon the ~~payment of an extension fee of $3.0 million and the continued funding~~expiration of the ~~Company’s activities~~applicable royalty term, or in its entirety upon the expiration of all applicable payment obligations under the collaboration during the extended term, with minimum annual research payments of $4.0 million to the Company during the two-year extension period. Upon exercise of the research term extension, the Company has the option to require Juno to purchase up to $10.0 million of the Company’s common stock at a premium equal to 120% of the then thirty-day trailing volume weighted average trading price of the Company’s common stock.agreement.

The Company determined that the Ono Agreement, Ono Letter Agreement, and Ono Amendment were within the scope of ASC 808 and applicable to such guidance. The Company concluded that certain units of account within the Ono Agreement and Ono Amendment represented a customer and applied ~~Accounting Standards Codification (“ASC”) 605-25,~~ ~~Revenue Recognition — Multiple Element Arrangements,~~relevant guidance from ASC 606 to evaluate the appropriate accounting for ~~the Agreement.~~those units of account. In accordance with this guidance, the Company ~~assessed the potential deliverables,~~identified its performance obligations, including ~~an exclusive~~its grant of a license ~~granted by the Company~~ to ~~Juno for~~Ono to certain of its intellectual property ~~and~~subject to certain conditions, its conduct of research services, ~~to be performed by the Company,~~ and ~~determined that the deliverables did not have stand-alone value.~~its participation in a joint steering committee. The Company determined that its grant of a license to Ono to certain of its intellectual property subject to certain conditions was not distinct from other performance obligations because such grant is dependent on the ~~license deliverable granted under the Agreement does not have standalone value given the highly specific nature~~conduct and results of the small molecules to be identified for use with Juno’s genetically-engineered T-cell immunotherapies. The Company concluded that there is one single unit of accounting, and the arrangement consideration will be recognized in the same manner as the final deliverable, which is the research services. AsAdditionally, the Company determined that its conduct of research services was not distinct from other performance obligations since such conduct is dependent on the guidance of the joint steering committee. Accordingly, the Company determined that all performance obligations should be accounted for as one combined performance obligation, and that the combined performance obligation is transferred over the expected term of the conduct of the research services, which is estimated to be four years. The termination of 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 under the Ono Amendment equals $39.3 million, consisting of the upfront, non-refundable and non-creditable payment of $10.0 million and the aggregate estimated research and development fees of $29.3 million. The upfront payment of ~~$5.0~~$10.0 million was recorded as deferred revenue and is being recognized as revenue over time in conjunction with the Company’s conduct of research services as the research services are the primary component of the combined performance obligations. Revenue associated with the upfront payment will be recognized based on actual costs incurred as a percentage of the estimated total costs expected to be incurred over the ~~initial four-year~~expected term of conduct of the research ~~term under~~services. The Company recorded the ~~Agreement. With respect to~~$5.0 million prepayment of the $8.0 million payment for the Company’s common stock, the Company determined that the common stock purchase price of $8.00 per share represented a premium of $3.40 per share. This premium represents arrangement considerationfirst-year research and ~~therefore the aggregate premium of $3.4 million was recorded~~development fees as deferred revenue, and ~~is being recorded~~such fees were recognized as revenue ~~ratably over the initial four-year research term. The remaining $4.6 million consideration that represents the purchase of common stock was recorded~~ as the ~~issuance~~research services were delivered.

On November 7, 2022, Ono exercised its option for continued development of ~~common stock in shareholders’ equity.~~Candidate 2. Upon Ono's exercise, the Company granted Ono a license to develop and commercialize Candidate 2. The Company elected its preclinical option to co-develop and co-commercialize Candidate 2. As a result, the Company received an Option Exercise Payment (as defined under the Ono Agreement) of $12.5 million. The Company determined the exercise represented an option with no material right under the Ono Agreement. The

~~Pursuant~~14

Company has completed its performance obligations with respect to the ~~collaboration’s~~exercise of the option and accordingly, recognized the Option Exercise Payment as revenue for the year ended December 31, 2022. The Company and Ono will proceed with a joint development plan for the ongoing development of Candidate 2. The costs of this development plan are accounted for in accordance with ASC 808, and cost sharing payments to the Company from Ono are recorded net into research ~~plan under~~and development expenses. During the three and six months ended June 30, 2023, the Company recognized contra-research and development expense of $2.8 million and $3.8 million, respectively. As of June 30, 2023, the Company has received $1.0 million in aggregate cost-sharing payments from Ono.

As a direct result of the Company’s entry into the Ono Agreement and the Ono Letter Agreement, the Company ~~is responsible for screening~~incurred an aggregate of $7.8 million in sublicense consideration to existing licensors as of June 30, 2023. The $7.8 million in sublicense consideration represents an asset under ASC 340 and ~~identifying small molecule modulators of immunological cells, while Juno will be responsible for the~~was amortized to research and development ~~and commercialization of engineered T-cell immunotherapies incorporating~~expense ratably with the Company’s ~~modulators. As~~revenue recognition under the Ono Agreement. During the three and six months ended June 30, 2023, the Company ~~is principally responsible for~~recognized no such expense, and during the ~~performance~~three and six months ended June 30, 2022, the Company recognized no such expense and $0.3 million of ~~the research services~~such expense, respectively.

The Company recognized revenue of $0.9 million and $7.6 million under the ~~Agreement, revenue is recognized on a gross basis for such services when earned. Billings for research services will be recognized as deferred revenue until earned.~~

~~Total revenue recognized under the~~Ono Agreement for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023, respectively. All such revenue was ~~$1.0 million and $3.1 million, respectively. Total revenue recognized under the Agreement~~associated with research services for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016 was $1.0~~2023. During the three and six months ended June 30, 2022, the Company recognized revenue of $0.4 million and ~~$3.4~~$2.9 million under the Ono Agreement, respectively. Such revenue comprised $0.2 million associated with research services and $0.2 million associated with the upfront payment for the three months ended June 30, 2022, and $1.4 million associated with research services and $1.5 million associated with upfront payment for the six months ended June 30, 2022.

As of ~~September~~June 30, ~~2017, aggregate deferred revenue related to the Agreement was $3.4 million.~~

~~Under the Agreement,~~2023, the Company has ~~granted Juno~~received $30.3 million in aggregate research and development fees from Ono.

Memorial Sloan Kettering Cancer Center License Agreement

On May 15, 2018, the Company entered into an Amended and Restated Exclusive License Agreement (Amended MSK License) with Memorial Sloan Kettering Cancer Center (MSK). The Amended MSK License amends and restates the Exclusive License Agreement entered into between the Company and MSK on August 19, 2016 (Original MSK License), pursuant to which the Company entered into an exclusive ~~worldwide~~ license agreement with MSK for rights relating to compositions and methods covering iPSC-derived cellular immunotherapy, including T-cells and NK-cells derived from iPSCs engineered with CARs.

Pursuant to the Amended MSK License, MSK granted to the Company additional licenses to certain patents and patent applications relating to new CAR constructs and off-the-shelf CAR T-cells, including the use of ~~its intellectual property, including its intellectual property arising under~~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 collaboration, to make, use, sell and otherwise exploit genetically-engineered T-cell immunotherapies using or incorporating small molecule modulators directed against certain designated tumor-associated antigen

~~targets, subject to the selection~~field of ~~a target by Juno.~~all human therapeutic uses worldwide. The Company has ~~retained exclusive~~the right to grant sublicenses to certain licensed rights in accordance with the terms of the Amended MSK License, in which case it is obligated to ~~such intellectual property, including its intellectual property arising under~~pay MSK a percentage of certain sublicense income received by the ~~collaboration, for all other purposes, including its use outside of those targets selected by Juno.~~Company.

The Company is ~~eligible under~~obligated to pay to MSK an annual license maintenance fee during the ~~Agreement~~term of the agreement, and is required to receive selection fees for each tumor-associated antigen target selected by Juno and bonus selection fees based on the aggregate number of tumor-associated antigen targets selected by Juno. In accordance with ASC 605-28, ~~Revenue Recognition — Milestone Method,~~ ~~the Company determined that such contingent payments do not constitute~~make milestone payments ~~and will not be accounted for under the milestone method of revenue recognition. The events leading to these payments do not meet the definition of a milestone under ASU 2010-17 because~~upon the achievement of ~~these events depends~~specified clinical, regulatory and commercial milestones for licensed products as well as royalty payments on ~~Juno’s performance and selections. Any revenue from these contingent selection payments would be subject~~net sales of licensed products.

In the event a licensed product achieves a specified clinical milestone, MSK is then eligible to ~~an allocation of arrangement consideration and would be recognized over any remaining period of performance obligation, if any, relating to the collaboration.~~

~~In connection with each Juno therapy that uses or incorporates the Company’s small molecule modulators, Juno has agreed to pay the Company non-refundable, non-creditable~~receive certain milestone payments totaling up to ~~approximately $51.0~~$75.0 million based on the price of the Company’s common stock, where the amount of such payments owed to MSK is contingent upon certain increases in the ~~aggregate per therapy upon~~price of the Company’s common stock following the date of achievement of ~~various~~such clinical ~~regulatory~~milestone. These payments are based on common stock price multiples, with the numerator being the fair value of the ten-trading day trailing average closing price of the Company’s common stock and ~~commercial milestones. Additionally,~~the denominator being the ten-trading day trailing average closing price of the Company’s common stock as of the effective date of the Amended MSK License, adjusted for any stock splits, cash dividends, stock dividends, other distributions, combinations, recapitalizations, or similar events. Under the terms of the Amended MSK License, upon a change of control of the Company, in certain circumstances, the Company may be required to pay a portion of these payments to MSK based on the price of the Company’s common stock in connection with such change of control.

The following table summarizes the ~~third Juno therapy~~common stock multiples and the ~~fifth Juno therapy that uses or incorporates the Company’s small molecule modulators, Juno has agreed to pay the Company additional non-refundable, non-creditable bonus~~stock price appreciation milestone payments totaling up to approximately $116.0 million and $137.5 million, respectively, in the aggregate, per therapy upon the achievement of various clinical, regulatory, and commercial milestones. In accordance with ASU 2010-17, the Company determined that these contingent payments meet the definition of a milestone under ASU 2010-17, and that the milestones are substantive given that the milestones are commensurate with the Company’s performance, relate solely to the Company’s past performance, and are reasonable relative to other deliverables and payments under the ~~Agreement. Accordingly,~~terms of the ~~milestones~~agreement:


Common stock multiple	5.0x		10.0x		15.0x
Ten-trading day trailing average common stock price	$	50.18	$	100.36	$	150.54
Stock price appreciation milestone payment (in millions)	$	20.0	$	30.0	$	25.0

In July 2021, the Company achieved the specified clinical milestone for a licensed product under the ~~Agreement will be accounted for as revenue~~Amended MSK License and the Company’s ten-trading day trailing average common stock price exceeded the first, pre-specified threshold. As a result, the Company remitted the first milestone payment of $20.0 million to MSK during the year ended December 31, 2021.

To determine the estimated fair value of the remaining stock price appreciation milestones, the Company uses a Monte Carlo simulation methodology which models future Company common stock prices based on the ~~achievement date, if any.~~

~~Beginning on~~current stock price and several key variables. The following variables were incorporated in the ~~date~~calculation of the ~~first commercial sale (in each country) for each Juno therapy that uses or incorporates~~estimated fair value of the stock price appreciation milestones as of June 30, 2023:


	As of June 30,			As of December 31,
	2023			2022
Risk-free interest rate		3.9	%		4.0	%
Expected volatility		84.0	%		78.1	%
Estimated term (in years)		15.5			16.0
Closing stock price as of remeasurement date	$	4.76		$	10.09

The key inputs to the Monte Carlo simulation to determine the fair value of the stock price appreciation milestones include the Company’s ~~small molecule modulators, and continuing until~~stock price as of the ~~later of: i)~~measurement date; the ~~expiration of~~estimated term, which is based in part on the last valid patent claim ~~ii) ten years after such first commercial sale,~~date; the expected volatility of the Company’s common stock, estimated using the Company’s historical common stock volatility as of the remeasurement date; and the risk-free rate based on the U.S. Treasury yield for the estimated term determined. Fair value measurements are highly sensitive to changes in these inputs and significant changes could result in a significantly higher or ~~iii) the expiration of all data~~lower fair value and ~~other regulatory exclusivity periods afforded~~resulting expense or gain.

At each ~~therapy, Juno has agreed to pay~~balance sheet date, the Company ~~royalties~~remeasures the fair value of the stock price appreciation milestones, with changes in fair value recognized as a component of other income (expense) in the ~~low single-digits~~unaudited condensed consolidated statements of operations and comprehensive loss. Amounts are included in current or non-current liabilities based on ~~net sales~~the estimated timeline associated with the individual potential payments. During the three and six months ended June 30, 2023, the Company recorded $0.4 million and $2.1 million of ~~each Juno therapy that uses or incorporates~~income, respectively, associated with the change in fair value of the stock price appreciation milestones. As of June 30, 2023, the Company recorded a liability of $1.8 million associated with the stock price appreciation milestones for the Amended MSK License.

3. California Institute for Regenerative Medicine Award

On April 5, 2018, the Company executed an award agreement with the California Institute for Regenerative Medicine (CIRM) pursuant to which CIRM awarded the Company $4.0 million to advance the Company’s ~~small molecule modulators.~~

FT516 product candidate into a first-in-human clinical trial for the treatment of subjects with advanced solid tumors, including in combination with monoclonal antibody therapy (the Award). The ~~Agreement will end on~~Award is subject to certain co-funding requirements by the ~~date that no further payments are due~~Company, and the Company is required to provide CIRM progress and financial update reports under the ~~Agreement.~~Award.

Pursuant to the terms of the Award, the Company, in its sole discretion, has the option to treat the Award either as a loan or as a grant. During the first quarter of 2023, the Company elected to treat the Award as a grant and reversed the liability associated with the Award and recorded such amount in other income during the six months ended June 30, 2023.

4. Investments

3.	~~Short-term Investments~~

The Company invests portions of excess cash in United States treasuries, commercial paper, non-U.S. government securities, municipal securities, and corporate debt securities with maturities ranging from ~~six~~three to ~~twelve~~thirty-six months from the purchase date. These ~~debt~~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 ~~and are accounted for as available-for-sale securities.~~based on each security’s contractual maturity date.

The following table summarizes the Company’s ~~short-term~~ investments accounted for as available-for-sale securities as of ~~September~~June 30, ~~2017,~~2023 and December 31, ~~2016~~2022 (in thousands, except for maturity in years):


	Maturity (in years)	Amortized Cost		Unrealized Losses			Unrealized Gains		Estimated Fair Value
June 30, 2023
Classified as current assets:
U.S. Treasury debt securities	1 or less	$	104,586	$	(130	)	$	9	$	104,465
Non-U.S. government securities	1 or less		2,479		(3	)		—		2,476
Municipal securities	1 or less		14,999		(53	)		—		14,946
Corporate debt securities	1 or less		63,073		(169	)		2		62,906
Commercial paper	1 or less		146,534		(194	)		—		146,340
Total short-term investments		$	331,671	$	(549	)	$	11	$	331,133
Classified as non-current assets:
U.S. Treasury debt securities	Greater than 1	$	3,423	$	(6	)	$	—	$	3,417
Corporate debt securities	Greater than 1		3,917		(43	)		—		3,874
Total long-term investments		$	7,340	$	(49	)	$	—	$	7,291

December 31, 2022
Classified as current assets:
U.S. Treasury debt securities	1 or less	$	79,251	$	(263	)	$	37	$	79,025
Non-US government securities	1 or less		2,425		(2	)		—		2,423
Municipal securities	1 or less		18,963		(208	)		—		18,755
Corporate debt securities	1 or less		123,996		(1,138	)		3		122,861
Commercial paper	1 or less		152,056		(230	)		4		151,830
Total short-term investments		$	376,691	$	(1,841	)	$	44	$	374,894
Classified as non-current assets:
Municipal securities	Greater than 1	$	5,000	$	(58	)	$	—	$	4,942
Total long-term investments		$	5,000	$	(58	)	$	—	$	4,942

As of June 30, 2023 and December 31, 2022, the Company had $1.1 million and $0.8 million, respectively, of accrued interest on investments recorded in prepaid expenses and other assets on the unaudited condensed consolidated balance sheets.

The following tables present gross unrealized losses and fair values for those investments that were in an unrealized loss position as of June 30, 2023 and December 31, 2022, aggregated by investment category and the length of time that individual securities have been in a continuous loss position (in thousands):

	Maturity (in years)	Amortized Cost		Unrealized Losses			Unrealized Gains		Estimated Fair Value
September 30, 2017
											Less Than 12 Months					12 Months or Greater					Total
											Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses
June 30, 2023
U.S. Treasury debt securities	1 or less		25,996		(13	)		—		25,983	$	85,685	$	(136	)	$	—	$	—		$	85,685	$	(136	)
Non-U.S. government securities												2,475		(3	)		—		—			2,475		(3	)
Municipal securities												4,947		(53	)		—		—			4,947		(53	)
Corporate debt securities												58,780		(204	)		2,994		(8	)		61,774		(212	)
Commercial paper												111,727		(194	)		—		—			111,727		(194	)
Total		$	25,996	$	(13	)	$	—	$	25,983	$	263,614	$	(590	)	$	2,994	$	(8	)	$	266,608	$	(598	)

December 31, 2016
December 31, 2022
U.S. Treasury debt securities	1 or less		3,504		(1	)		—		3,503	$	51,246	$	(163	)	$	9,898	$	(100	)	$	61,144	$	(263	)
Non-U.S. government securities												2,424		(2	)	—		—				2,424		(2	)
Municipal securities												14,765		(193	)		8,933		(73	)		23,698		(266	)
Corporate debt securities												45,621		(174	)		71,625		(964	)		117,246		(1,138	)
Commercial paper												66,455		(230	)		—		—			66,455		(230	)
Total		$	3,504	$	(1	)	$	—	$	3,503	$	180,511	$	(762	)	$	90,456	$	(1,137	)	$	270,967	$	(1,899	)

The Company ~~reviewed~~reviews its investment holdings asat the end of ~~September 30, 2017~~each reporting period and ~~determined that~~evaluates any unrealized losses using the expected credit loss model to determine if the unrealized ~~losses were not other-than-temporary unrealized losses because~~loss is a result of a credit loss or other factors. The Company also evaluates its investment holdings for impairment using a variety of factors including the ~~Company does not intend~~Company’s intent to sell the underlying securities prior to maturity and whether it is ~~not~~ more likely than not that the Company ~~will~~would be required to sell ~~these~~the securities before the recovery of their amortized ~~cost~~ basis. During each of the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016, respectively,~~2022, the Company did ~~not~~not recognize any

impairment or realized gains or losses on sales of ~~available-for-sale securities.~~investments, and the Company did not record an allowance for, or recognize, any expected credit losses.

5. Fair Value Measurements

4.	~~Fair Value Measurements~~

The Company’s financial instruments consist primarily of cash and cash equivalents, marketable securities, accounts receivable, stock price appreciation milestones, accounts payable, and accrued liabilities. The carrying amounts of accounts receivable, accounts payable and accrued liabilities are considered to be representative of their respective fair values because of the relatively short-term nature of those instruments. Based on the borrowing rates available to the Company for loans with similar terms, which is considered a Level 2 input as described below, the Company believes that the fair value of long-term debt approximates its carrying value.

The accounting guidance defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1: Observable inputs such as quoted prices in active markets;

Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

~~Financial assets measured at~~Assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurements. The Company reviews the fair value hierarchy classification on a ~~recurring basis consist~~quarterly basis. Changes in the ability to observe valuation inputs may result in reclassification of levels for certain securities within the ~~Company’s cash equivalents and short-term investments. Cash equivalents consisted of money market funds and short-term investments consisted of U.S. treasuries.~~ fair value hierarchy.

The following table presents the Company’s financial assets ~~which were~~and liabilities measured at fair value on a recurring basis as of ~~September~~June 30, ~~2017~~2023 and December 31, ~~2016~~2022 (in thousands):

Fair Value Measurements at
Reporting Date Using

Total

Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

As of September 30, 2017:

Cash equivalents

$
43,231

$
43,231

$
—

$
—

U.S. Treasury debt securities

25,983

25,983

—

—

Total assets

$
69,214

$
69,214

$
—

$
—

As of December 31, 2016:

Cash equivalents

$
88,609

$
88,609

$
—

$
—

U.S. Treasury debt securities

3,503

3,503

—

—

Total assets

$
92,112

$
92,112

$
—

$
—


			Fair Value Measurements at Reporting Date Using
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
As of June 30, 2023
Financial assets:
Money market funds	$	46,802	$	46,802	$	—	$	—
U.S. Treasury debt securities		107,882		107,882		—		—
Non-U.S. government securities		2,476		—		2,476		—
Municipal securities		14,946		—		14,946		—
Corporate debt securities		66,780		—		66,780		—
Commercial paper		146,340		—		146,340		—
Total financial assets measured at fair value on a recurring basis	$	385,226	$	154,684	$	230,542	$	—

Financial liabilities:
Stock price appreciation milestones	$	1,750	$	—	$	—	$	1,750
Total financial liabilities measured at fair value on a recurring basis	$	1,750	$	—	$	—	$	1,750

As of December 31, 2022
Financial assets:
Money market funds	$	61,333	$	61,333	$	—	$	—
U.S. Treasury debt securities		79,025		79,025		—		—
Non-U.S. government securities		2,423		—		2,423		—
Municipal securities		23,697		—		23,697		—
Corporate debt securities		122,861		—		122,861		—
Commercial paper		151,830		—		151,830		—
Total assets measured at fair value on a recurring basis	$	441,169	$	140,358	$	300,811	$	—

Financial liabilities:
Stock price appreciation milestones	$	3,861	$	—	$	—	$	3,861
Total financial liabilities measured at fair value on a recurring basis	$	3,861	$	—	$	—	$	3,861

~~The Company obtains pricing information from quoted~~Level 1 assets consisted of money market ~~prices from our investment manager~~funds and ~~generally determines the~~U.S. Treasury securities measured at fair value based on quoted prices in active markets as provided by the Company’s investment managers.

Level 2 assets consisted of ~~investment~~corporate debt securities, commercial paper, municipal securities, and non-U.S. government securities measured at fair value using standard observable inputs, including reported trades, broker/dealer quotes, and bids and/or offers. The Company validates the quoted market prices provided by its investment managers by comparing the investment managers’ assessment of the fair values of the Company's investment portfolio balance against the fair values of the Company's investment portfolio balance obtained from an independent source.

There were no Level 3 assets held by the Company as of June 30, 2023.

Level 3 liabilities consisted of stock price appreciation milestones associated with the Amended MSK License as described in detail in Note 2. To determine the estimated fair value of the stock price appreciation milestones, the Company uses a Monte Carlo simulation methodology which models future Company common stock prices based on several key variables. The assumptions used to calculate the fair value of the stock price appreciation milestones are subject to a significant amount of judgment including the expected volatility of the Company’s common stock and estimated term, which is based in part on the last valid patent claim date. Fair value measurements are highly sensitive to changes in these inputs and significant changes could result in a significantly higher or lower fair value and resulting expense or gain. Further, because the stock price appreciation milestones are first contingent upon the

achievement of a specified clinical milestone, the Company also estimates the fair value of the stock price appreciation milestones based on the probability of achieving the clinical milestone. This assessment is based on several factors including the successful achievement of technological, manufacturing, and regulatory requirements.

A small change in the assumptions and other inputs, such as the price of the Company’s common stock, may have a relatively large change in the estimated fair value of the stock price appreciation milestones and associated liability and expense. For example, keeping all other variables constant, a hypothetical 10% increase in the stock price at June 30, 2023 from $4.76 to $5.24 per share would have decreased the income recorded during the three months ended June 30, 2023 by $0.2 million related to the stock price appreciation milestones. Keeping all other variables constant, a hypothetical 10% decrease in the stock price at June 30, 2023 from $4.76 to $4.28 per share would have increased the income recorded during the three months ended June 30, 2023 by $0.2 million related to the stock price appreciation milestones.

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


Balance at December 31, 2022	$	3,861
Changes in fair value of stock price appreciation milestones liability		(2,111	)
Balance at June 30, 2023	$	1,750

None of the Company’s non-financial assets or liabilities isare recorded at fair value on a non-recurring basis. No transfers between levels have occurred during the periods presented.

~~As of September 30, 2017, and December 31, 2016, the Company had no material liabilities measured at fair value on a recurring basis.~~

5.	~~Accrued Expenses, Long-Term Debt, Commitments and Contingencies~~

6. Accrued Expenses

Accrued Expenses

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


	June 30, 2023		December 31, 2022
Accrued payroll and other employee benefits	$	8,396	$	17,899
Accrued clinical trial related costs		12,963		16,858
Accrued other		8,110		19,175
Total current accrued expenses	$	29,469	$	53,932

September 30,
2017

December 31,
2016

Accrued payroll and other employee benefits

$
1,597

$
1,505

Accrued clinical trial related costs

2,287

1,043

Accrued other

1,529

1,409

Current accrued expenses

$
5,413

$
3,957

7. Leases

~~Long-term accrued expenses consist primarily~~The Company has lease agreements for office, laboratory and manufacturing spaces that are classified as operating leases on the unaudited condensed consolidated balance sheets. These leases have terms varying from one to approximately sixteen years, with renewal options of ~~accruals~~up to ten years, as well as early termination options. Extension and termination options are included in the total lease term when the Company is reasonably certain to exercise them. The leases are subject to additional variable charges, including common area maintenance, property taxes, property insurance and other variable costs. Given the variable nature of such costs, they are recognized as expense as incurred. Additionally, some of the Company’s leases are subject to certain fixed fees which the Company has determined to be non-lease components. The Company has elected to combine and account for lease and non-lease components as a single-lease component for purposes of determining the total future lease payments.

As of June 30, 2023, future undiscounted minimum contractual payments under the Company’s operating leases were $170.2 million, which will be paid over a remaining weighted-average lease term of 11.1 years. The weighted-average discount rate for the ~~final payment fees associated with our long-term debt.~~operating lease liabilities was 8.34%, which was the Company’s incremental borrowing rate at lease commencement, as the discount rates implicit in the leases could not be readily determined.

The components of lease expense were as follows (in thousands):

~~Long-Term Debt~~


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Straight-line lease expense	$	3,361	$	3,865	$	6,571	$	7,680
Variable lease expense		498		678		1,111		1,295
Total operating lease expense	$	3,859	$	4,543	$	7,682	$	8,975

~~Long-term debt~~20

No short-term lease expense was recognized during the three and ~~unamortized discount balances~~six months ended June 30, 2023 and 2022.

Future undiscounted minimum lease payments under the Company’s operating leases as of June 30, 2023 are as follows (in thousands):

September 30,
2017

December 31,
2016

Long-term debt

$
15,000

$
10,765

Less debt issuance costs and discount, net of current
portion

(211
)

(7
)
Long-term debt, net of long-term portion of debt issuance
costs and discount

14,789

10,758

Less current portion of long-term debt

—

(8,257
)
Long-term debt, net

$
14,789

$
2,501

Current portion of long-term debt

$
—

$
8,257

Less current portion of debt issuance costs and discount

—

(70
)
Current portion of long-term debt, net

$
—

$
8,187


	Operating Lease Payments
Remaining 2023	$	7,232
2024		14,659
2025		15,087
2026		15,540
2027		16,006
2028		15,057
Thereafter		86,579
Total undiscounted lease payments	$	170,160
Less: imputed interest		(63,812	)
Total lease liability	$	106,348

~~SVB Loan Amendment~~

~~On July 14, 2017 (the “First Amendment Effective Date”),~~In April 2023, the Company entered into an agreement to sublease approximately 18,913 square feet of space, which sublease agreement commenced in April 2023 and expires in December 2028 with no option to extend the ~~First Amendment (the “SVB Loan Amendment”) to~~sublease term. Under the Amended and Restated Loan and Security Agreement (the “Restated LSA”) between the Company and Silicon Valley Bank (the “Bank”) dated July 30, 2014. The SVB Loan Amendment amends the Restated LSA.

Pursuant to the SVB Loan Amendment, the Bank extended an additional term loan to the Company on July 14, 2017 in the principal amount of $15.0 million (the “2017 Term Loan”), a portion of which was applied to repay in full the Company’s existing outstanding debt with the Bank under the Restated LSA, which included outstanding principal, accrued interest, and final payment fees. Following such repayment in full of the Company’s existing outstanding debt with the Bank under the Restated LSA, cash proceeds to the Company from the remaining portion of the 2017 Term Loan were $7.5 million. The net proceeds of the 2017 Term Loan are expected to be used for working capital purposes, including the advancement of the Company’s clinical and research programs.

The 2017 Term Loan matures on January 1, 2022 (the “Term Loan Maturity Date”) and bears interest at a floating per annum rate equal to the greater of (i) 3.50% above the Prime Rate (as defined in the SVB Loan Amendment) or (ii) 7.25%; provided, however, that in no event shall such interest rate exceed 8.25%. Interestsublease agreement, rent is ~~payable on a monthly basis on the first day of each month~~. ~~The interest rate as of September 30, 2017 was 7.75%.~~

From August 1, 2017 through January 1, 2019 (the “Interest-only Period”), the Company is required to make monthly payments of interest only. Thereafter, the Company is required to repay the principal, plus monthly payments of accrued interest, in 36 equal monthly installments based on a 36-month amortization schedule. Notwithstanding the foregoing, subject to scheduled annual increases and the achievement of a product development milestone by the Company before the expiration of the above-described Interest-only Period, at the Company’s election (i) the Interest-only Period shall be extended from January 1, 2019 throughsubtenant is responsible for certain operating expenses and including to July 1, 2019 and (ii) the Company shall thereafter repay the principal, plus monthly payments of accrued interest, in 30 equal monthly installments based on a 30-month amortization schedule.

The Company’s final payment, due on the Term Loan Maturity Date, shall include all outstanding principal and accrued and unpaid interest under the 2017 Term Loan, plus a 7.5%, or $1.1 million, final payment fee. This final payment fee is accrued as interest expense overtaxes throughout the term of the ~~2017 Term Loan and recorded~~sublease.

Sublease income is recognized in ~~accrued expenses.~~

In connection with the SVB Loan Amendment, the Company issued to the Bank on the First Amendment Effective Date a fully exercisable warrant (the “2017 Warrant”) to purchase up to an aggregate of 91,463 shares of the Company’s common stock, subject to adjustment, at an exercise price equal to $3.28 per share. The 2017 Warrant expires in July 2024. The aggregate fair value of the 2017 Warrant was determined to be $0.2 million using the Black-Scholes option pricing model and was recorded as a debt discount on the 2017 Term Loan. This debt discount is amortized to interest expense over the term of the 2017 Term Loan using the effective interest method. The Company determined the effective interest rate of the 2017 Term Loan to be 10.2% as of the First Amendment Effective Date.

~~The Company determined the repayment of the Restated LSA and issuance of the 2017 Term Loan was a debt extinguishment, and accounted~~other income. Sublease income for the 2017 Term Loan at fair value as of the First Amendment Effective Date, accordingly. During the three months ended September 30, 2017, the Company recorded a loss on debt extinguishment of $0.1 million, which was primarily related to the unaccrued amount of the final payment fee under the Restated LSA that was paid in connection with the 2017 Term Loan.

The Company is required under its loan agreement with the Bank to maintain its deposit and securities accounts with the Bank and to comply with various operating covenants and default clauses. A breach of any of these covenants or clauses could result in a default under the agreement, which would cause all of the outstanding indebtedness under the facility to become immediately due and payable. The Company is in compliance with all such covenants and clauses.

~~For each of~~ the three and ~~nine~~six months ended ~~September~~June 30, ~~2017, the Company recorded $0.4 million in aggregate interest expense related to the 2017 Term Loan.~~2023 and 2022 was as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Sublease income	$	182	$	—	$	182	$	—

~~Restated LSA~~

On July 30, 2014, the Company entered into the Restated LSA with the Bank, collateralized by substantially all of the Company’s assets, excluding certain intellectual property. Pursuant to the Restated LSA, the Bank agreed to make loans to the Company in an aggregate principal amount of up to $20.0 million, comprised of (i) a $10.0 million term loan, funded at the closing date (the “Term A Loan”) and (ii) subject to the achievement of a specified clinical milestone, additional term loans totaling up to $10.0 million in the aggregate, which were available until December 31, 2014 (each, a “Term B Loan”). On December 24, 2014, the Company elected to draw on the full $10.0 million under a Term B Loan.

~~The Term A Loan and the Term B Loan were scheduled to mature on January 1, 2018 and June 1, 2018, respectively.~~

The Company was required to make a final payment fee of 7.5%, equaling $0.8 million, of the funded amount for each of the Term A Loan and Term B Loan on the respective maturity dates. These final payment fees were accrued as interest expense over the terms of the loans and recorded in accrued expenses.

In connection with the funding of the Term B Loan, the Company issued the Bank and one of its affiliates fully-exercisable warrants to purchase an aggregate of 98,039 shares of the Company’s common stock (the “2014 Warrants”) at an exercise price of $4.08 per share. The 2014 Warrants expire in December 2021 and remain outstanding as of September 30, 2017.

For the three and nine months ended September 30, 2017, the Company recorded $0.1 million and $0.5 million, respectively, in aggregate interest expense related to the Term A and Term B Loans. For the three and nine months ended September 30, 2016, the Company recorded $0.4 million and $1.3 million, respectively, in aggregate interest expense related to the Term A and Term B Loans.

Warrants to purchase 36,074 shares of the Company’s common stock at a weighted average exercise price of $7.21 per share issued in connection with a prior debt agreement between the Company and the Bank in 2009 remain outstanding as of September 30, 2017, with 5,305 and 30,769 of such warrants having expiration dates in January 2019 and August 2021, respectively.

~~Facility Leases~~

The Company leases certain office and laboratory space, comprising approximately 48,000 square feet, under a non-cancelable operating lease through June 2023. The lease is subject to additional charges for common area maintenance and other costs. In connection with the lease, the Company entered into a cash-collateralized irrevocable standby letter of credit in the amount of $0.1 million. As of September 30, 2017, future minimum payments under the operating lease are $13.2 million.

In January 2015, the Company entered into a sublease for additional laboratory space. The sublease was accounted for as an operating lease and expired in September 2017. No future payments remain under the sublease.

6.	~~Convertible Preferred Stock and Stockholders’ Equity~~

8. Convertible Preferred Stock and Stockholders’ Equity

Convertible Preferred Stock

In November 2016, the Company completed a private placement of stock in which investors, ~~certain of which are~~including investors affiliated with the directors and officers of the Company, purchased convertible preferred stock and common stock of the Company (the ~~“November~~November 2016 ~~Placement”)~~Placement). The Company issued 2,819,549 shares of ~~non-voting~~ Class A Convertible Preferred Stock, $0.001 par value per share (the ~~“Class~~Class A ~~Preferred”)~~Preferred), at ~~$13.30~~$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”)~~CoD). The Class A Preferred were purchased exclusively by entities affiliated with Redmile Group, LLC (collectively, ~~“Redmile”)~~Redmile). The terms of the CoD prohibited Redmile from converting the Class A Preferred into shares of the Company’s common stock if, as a result of conversion, Redmile, together with its affiliates, would own more than ~~9.99%~~9.99% of the Company’s common stock then issued and outstanding (the ~~“Redmile~~Redmile Percentage ~~Limitation”)~~Limitation), which percentage could change at Redmile’s election upon 61 days’ notice to the Company to i)(i) any other number less than or equal to ~~19.99%~~19.99% or (ii) subject to approval of the Company’s stockholders to the extent required in accordance with the NASDAQ Global Market rules, any number in excess of ~~19.99%~~19.99%. On May 2, 2017, the Company’s stockholders approved the issuance of up to an aggregate of 14,097,745 shares of common stock upon the conversion of the outstanding shares of Class A Preferred. As a result, Redmile has the right to increase the Redmile Percentage Limitation to any percentage in excess of ~~19.99%~~19.99% at its election. The Company also issued 7,236,837 shares of common stock at ~~$2.66~~$2.66 per share as part of the November 2016 Placement. ~~Gross proceeds from~~In April 2023, the ~~November 2016 Placement were $56.7 million,~~Company filed with the office of the Secretary of State of the State of Delaware a Certificate of Amendment to Certificate of Designation of Preferences, Rights and Limitations of Class A Convertible Preferred Stock which amends the definition of Beneficial Ownership Limitation to be 14.99% of the number of shares of the Common Stock outstanding immediately after giving effect to ~~costs related~~the issuance of shares of Common Stock pursuant to ~~placement, net proceeds were $54.9 million.~~

~~The rights~~a Notice of Conversion. In April 2023, 33,441 shares of the Company's Class A Preferred ~~issued in November 2016 are set forth in~~were converted into 167,205 shares of the ~~CoD.~~ Company's common stock.

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

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

~~The Company evaluated~~During the year ended December 31, 2019, 25,000 shares of the Class A Preferred ~~for liability or equity classification under ASC 480,~~ ~~Distinguishing Liabilities from Equity,~~ ~~and determined that equity treatment was appropriate because~~were converted into 125,000 shares of common stock.

Pre-Funded Warrants

In January 2021, in conjunction with a public offering, the ~~Class A Preferred did not meet the definition~~Company issued Pre-Funded Warrants, in lieu of ~~the liability instruments defined thereunder for convertible instruments. Specifically, the Class A Preferred are not mandatorily redeemable and do not embody an obligation~~common stock to ~~buy back the~~certain investors, to purchase 257,310 shares ~~outside~~ of the Company’s ~~control~~common stock. The purchase price for the Pre-Funded Warrants was $85.499 per Pre-Funded Warrant, which equals the per share public offering price for the shares of common stock less the $0.001 exercise price for each such Pre-Funded Warrant. Given that the Pre-Funded Warrants are indexed to the Company’s own shares of common stock (and otherwise meet the requirements to be classified in ~~a manner that could require the transfer of assets. Additionally,~~equity), the Company ~~determined that~~recorded the ~~Class A Preferred would be recorded~~consideration received from the issuance of the warrants as ~~permanent equity, not temporary equity, based~~additional paid-in capital on the ~~guidance~~Company’s unaudited condensed consolidated balance sheets.

The Pre-Funded Warrants are exercisable at any time after the date of ~~ASC 480 given that they are~~issuance. A holder of Pre-Funded Warrants may not ~~redeemable for cash or other assets (i) on a fixed or determinable date, (ii) at~~exercise the ~~option~~Pre-Funded Warrant if the holder, together with its affiliates, would beneficially own more than 9.99% of the ~~holder, and (iii) upon the occurrence~~number of ~~an event that is not solely within control of the Company.~~

~~The Company has also evaluated the Class A Preferred in accordance with the provisions of ASC 815,~~ ~~Derivatives and Hedging,~~ including the consideration of embedded derivatives requiring bifurcation from the equity host. Based on this assessment, the Company determined that the conversion option is clearly and closely related to the equity host, and thus, bifurcation is not required.

The issuance of convertible preferred stock could generate a beneficial conversion feature (“BCF”), which arises when a debt or equity security is issued with an embedded conversion option that is beneficial to the investor (or in-the-money) at inception because the conversion option has an effective strike price that is less than the market price of the underlying stock on the commitment date. The Class A Preferred have an effective conversion price of $2.66 per common share, which was equal to the market priceshares of the Company’s common stock ~~on the commitment date. Therefore, no BCF is present.~~

~~The Company also entered into a registration rights agreement (the “Registration Rights Agreement”) with certain~~outstanding immediately after giving effect to such exercise. A holder of ~~the purchasers~~Pre-Funded Warrants may increase or decrease this percentage not in ~~the November 2016 Placement, excluding those purchasers affiliated with the Company’s directors and officers, requiring~~excess of 19.99% by providing at least 61 days’ prior notice to the Company ~~to register for the resale~~.

As of the relevant shares. The Company registered all of the relevant shares issued in the November 2016 Placement for resale on a Form S-3 filed with the SEC, as required under the Registration Rights Agreement, and the registration statement was declared effective in January 2017.June 30, 2023, there were 257,310 Pre-Funded Warrants outstanding.

Stock Options and Restricted Stock ~~Units~~Unit Awards

~~Stock~~The following table summarizes stock option activity and related information under all equity ~~and stock option~~ plans ~~is summarized as follows:~~for the year ended June 30, 2023:


	Number of Options			Weighted- Average Price
Balance at December 31, 2022		7,267,226		$	22.37
Granted		5,430,000			6.69
Exercised		(93,787	)		3.24
Cancelled		(1,106,618	)		35.85
Balance at June 30, 2023		11,496,821		$	13.82

Number of
Options

Weighted-
Average Price

Balance at December 31, 2016

3,910,350

$
3.77

Granted

2,438,980

3.04

Canceled

(559,571
)

3.59

Exercised

(70,649
)

2.74

Balance at September 30, 2017

5,719,110

$
3.49

Restricted stock unit activity under all equity and stock option plans is summarized as follows:


	Number of Restricted Stock Units			Weighted- Average Grant Date Fair Value per Share
Balance at December 31, 2022		5,862,733		$	48.13
Granted		1,136,340			6.73
Vested		(966,809	)		42.38
Cancelled		(2,252,363	)		45.68
Balance at June 30, 2023		3,779,901		$	38.53

Number of
Restricted Stock Units

Weighted-
Average Grant Date Fair Value per Share

Balance at December 31, 2016

525,250

$
4.89

Granted

—

—

Canceled

(75,000
)

4.89

Vested

—

—

Balance at September 30, 2017

450,250

$
4.89

~~In October 2017, 225,125 shares of common stock underlying restricted stock units vested and were issued to certain employees.~~

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


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016		2023		2022		2023		2022
Research and development	$	450	$	461	$	1,599	$	1,352	$	6,851	$	13,570	$	11,907	$	26,264
General and administrative		421		322		1,112		1,013		6,046		6,972		11,973		13,609
	$	871	$	783	$	2,711	$	2,365
Total									$	12,897	$	20,542	$	23,880	$	39,873

As of ~~September~~June 30, 2017, the outstanding options included 303,600 performance-based options for which the achievement of the performance-based vesting provisions was determined not to be probable. The aggregate grant date fair value of these unvested options at September 30, 2017 was $0.6 million.

~~As of September 30, 2017,~~2023, the unrecognized compensation cost related to outstanding options ~~(excluding those with performance-based conditions determined not to be probable)~~ was ~~$6.5~~$40.8 million and is expected to be recognized as expense over a ~~weighted average~~weighted-average period of approximately ~~2.8~~ 2.2 years.

As of ~~September~~June 30, ~~2017,~~2023, the unrecognized compensation cost related to restricted stock units was ~~$1.1~~$62.3 million which is expected to be recognized as expense over a weighted-average period of approximately ~~2.0~~ 2.4 years.

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


	Six Months Ended June 30,
	2023			2022
Risk-free interest rate		3.8	%		1.9	%
Expected volatility		89.6	%		76.2	%
Expected term (in years)		6.5			5.8
Expected dividend yield		0.0	%		0.0	%

Nine Months Ended September 30,

2017

2016

Risk-free interest rate

2.0
%

1.6
%
Expected volatility

90.4
%

79.8
%
Expected term (in years)

5.9

6.0

Expected dividend yield

0.0
%

0.0
%

The following table summarizes the Company’s changes in stockholders’ equity accounts for the three and six months ended June 30, 2023 (in thousands, except share data):


	Convertible Preferred Stock					Common Stock				Additional Paid-in		Accumulated Other Comprehensive			Accumulated			Total Stockholders'
	Shares			Amount		Shares		Amount		Capital		Gain (Loss)			Deficit			Equity
Balance at December 31, 2022		2,794,549		$	3		97,294,917	$	97	$	1,536,497	$	(1,854	)	$	(1,050,804	)	$	483,939
Exercise of stock options, net of issuance costs		—			—		68,847		—		222		—			—			222
Issuance of common stock upon vesting of restricted stock units		—			—		827,251		1		—		—			—			1
Stock-based compensation		—			—		—		—		10,983		—			—			10,983
Unrealized gain on investments		—			—		—		—		—		1,208			—			1,208
Net loss		—			—		—		—		—		—			(18,881	)		(18,881	)
Balance at March 31, 2023		2,794,549		$	3		98,191,015	$	98	$	1,547,702	$	(646	)	$	(1,069,685	)	$	477,472
Exercise of stock options, net of issuance costs		—			—		24,940		—		81		—			—			81
Issuance of common stock upon vesting of restricted stock units		—			—		139,558		—		—		—			—			—
Conversion of preferred shares to common stock		(33,441	)		—		167,205		1		—		—			—			1
Stock-based compensation		—			—		—		—		12,897		—			—			12,897
Unrealized gain on investments		—			—		—		—		—		59			—			59
Net loss		—			—		—		—		—		—			(52,755	)		(52,755	)
Balance at June 30, 2023		2,761,108		$	3		98,522,718	$	99	$	1,560,680	$	(587	)	$	(1,122,440	)	$	437,755

The following table summarizes the Company’s changes in stockholders’ equity accounts for the three and six months ended June 30, 2022 (in thousands, except share data):


	Convertible Preferred Stock				Common Stock				Additional Paid-in		Accumulated Other Comprehensive			Accumulated			Total Stockholders'
	Shares		Amount		Shares		Amount		Capital		Gain (Loss)			Deficit			Equity
Balance at December 31, 2021		2,794,549	$	3		95,726,962	$	96	$	1,448,584	$	(762	)	$	(769,083	)	$	678,838
Exercise of stock options, net of issuance costs		—		—		398,415		—		3,001		—			—			3,001
Issuance of common stock upon vesting of restricted stock units		—		—		412,707		1		—		—			—			1
Stock-based compensation		—		—	—			—		19,331		—			—			19,331
Unrealized loss on investments		—		—		—		—		—		(2,088	)		—			(2,088	)
Net loss		—		—		—		—		—		—			(65,690	)		(65,690	)
Balance at March 31, 2022		2,794,549	$	3		96,538,084	$	97	$	1,470,916	$	(2,850	)	$	(834,773	)	$	633,393
Exercise of stock options, net of issuance costs		—		—		251,486		—		3,184		—			—			3,184
Issuance of common stock upon vesting of restricted stock units		—		—		73,227		—		—		—			—			—
Stock-based compensation		—		—		—		—		20,542		—			—			20,542
Unrealized loss on investments		—		—		—		—		—		(531	)		—			(531	)
Net loss		—		—		—		—		—		—			(76,105	)		(76,105	)
Balance at June 30, 2022		2,794,549	$	3		96,862,797	$	97	$	1,494,642	$	(3,381	)	$	(910,878	)	$	580,483

~~The weighted-average assumptions used in the Black-Scholes option pricing model to determine the fair value of the non-employee stock option grants were as follows:~~

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our financial statements and accompanying notes included in this Quarterly Report on Form 10-Q and the financial statements and accompanying notes thereto for the fiscal year ended December 31, ~~2016~~2022 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, which are contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on ~~March 16, 2017.~~February 28, 2023.

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the ~~“Exchange Act”)~~Exchange Act). Such forward-looking statements, which represent our intent, belief, or current expectations, involve risks and uncertainties and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. In some cases you can identify forward-looking statements by terms such as “may,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “predict,” “potential,” “believe,” “should” and similar expressions. Factors that could cause or contribute to differences in results include, but are not limited to, those set forth under “Risk Factors” under Item 1A of Part II below. Except as required by law, we undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this report or to reflect actual outcomes.

We are a clinical-stage biopharmaceutical company dedicated to ~~the development~~bringing a first-in-class pipeline of programmed cellular immunotherapies ~~for~~to patients with cancer and ~~immune~~autoimmune disorders. ~~We are developing~~Our development of first-in-class cell therapy product candidates is based on a simple notion: we believe that better cell therapies start with better cells.

To create better cell therapies, we ~~use~~have pioneered a therapeutic approach that we generally refer to as cell ~~programming. For certain of our cell therapy product candidates,~~programming: we ~~use pharmacologic modulators, such as small molecules, to enhance the biological properties~~create and ~~therapeutic function of cells~~ ~~ex vivo~~ ~~before our product candidates are administered to a patient. In other cases, we use~~engineer human induced pluripotent stem cells ~~“iPSCs”,~~(iPSCs) to incorporate novel synthetic controls of cell function; we generate a clonal master iPSC line ~~having preferred biological properties~~for use as a renewable source of cell manufacture; and we direct the fate of the clonal master iPSC line to ~~create a clonal population of~~produce our first-in-class cell therapy product candidate. ~~We believe the use of~~Analogous to master ~~pluripotent~~ cell lines ~~may enable the creation of cell therapy product candidates that~~used to manufacture biopharmaceutical drug products such as monoclonal antibodies, we believe clonal master iPSC lines can be used to mass produce multiplexed-engineered cellular immunotherapies which are well-defined and uniform in ~~composition; that~~composition, can be ~~reproducibly manufactured at significant scale; and that~~stored in inventory for off-the-shelf availability, can be ~~effectively used to treat a large number of patients in an off-the-shelf manner.~~ combined and administered with other therapies, and can have broader patient reach.

Utilizing ~~these~~this therapeutic ~~approaches,~~approach, we ~~program cells of the immune system, including Natural Killer “NK” cells, T cells and CD34~~⁺ ~~cells, and~~ are advancing a cell therapy pipeline comprised of ~~programmed cellular immunotherapies in~~off-the-shelf, multiplexed-engineered, iPSC-derived natural killer (NK) and T-cell product candidates that are selectively designed, incorporate novel synthetic controls of cell function, and are intended to deliver multiple mechanisms of therapeutic importance to patients for the ~~therapeutic areas~~treatment of ~~immuno-oncology~~cancer and ~~immuno-regulation.~~autoimmune diseases.

We have entered into a research collaboration and license agreement with the Regents of the University of Minnesota to develop an off-the-shelf, ~~targeted NK cell~~engineered NK-cell cancer ~~immunotherapy~~immunotherapies derived from ~~an engineered~~clonal master iPSC ~~line.~~lines. Additionally, we have entered into a research collaboration and license agreement with Memorial Sloan Kettering Cancer Center (MSK) to develop off-the-shelf, engineered T-cell cancer immunotherapies derived from ~~engineered~~clonal master iPSC lines.

~~We have also~~In September 2018, we entered into a ~~research~~ collaboration and ~~license~~option agreement (Ono Agreement) with Ono Pharmaceutical Co. Ltd. (Ono) for the joint development and commercialization of off-the-shelf, iPSC-derived CAR T-cell product candidates for the treatment of cancer. In June 2022, we entered into an amendment (Ono Amendment) to the Ono Agreement to expand the collaboration to include the research and development of off-the-shelf, iPSC-derived CAR NK-cell product candidates, and pursuant to the Ono Agreement, Ono agreed to provide novel binding domains targeting a second solid tumor antigen under the collaboration.

In April 2020, we entered into a collaboration and option agreement with ~~Juno Therapeutics,~~Janssen Biotech, Inc. (Janssen), part of the Janssen Pharmaceutical Companies of Johnson & Johnson (Janssen Agreement), for the development and commercialization of off-the-shelf, iPSC-derived CAR NK and CAR T-cell product candidates for the treatment of cancer. Through the period ending December 31, 2022, Janssen had exercised a commercial option for two collaboration candidates: an iPSC-derived, CAR-targeted NK cell product candidate for the treatment of B-cell lymphoma, for which the U.S. Food and Drug Administration (FDA) allowed an Investigational New Drug (IND) application in December 2022; and an iPSC-derived, CAR-targeted NK cell product candidate for the treatment of multiple myeloma, for which the companies were preparing to ~~identify~~submit an IND application to the FDA in early 2023. On January 3, 2023, we received notice of termination from Janssen of the Janssen Agreement. The termination of the Janssen Agreement took effect on April 3, 2023, and ~~apply small molecule modulators~~during the three months ended March 31, 2023, we performed wind down activities, including discontinuing development of all collaboration product candidates, including two product candidates that were expected to ~~enhance~~enter the ~~therapeutic function~~clinic in 2023.

In January 2023, we announced the discontinuation of ~~genetically-engineered CAR (chimeric antigen receptor) T-cell~~our FT516, FT596, FT538, and ~~TCR (T-cell receptor) immunotherapies.~~FT536 NK cell programs to focus our resources on advancing our most innovative and differentiated programs.

We were incorporated in Delaware in 2007, and are headquartered in San Diego, CA. Since our inception in 2007, we have devoted substantially all of our resources to our cell programming approach and the research and development of our product candidates, the creation, licensing and protection of related intellectual property, and the provision of general and administrative support for these activities. To date, we have funded our operations primarily through the public and private sale of common stock, the private placement of preferred stock and convertible notes, commercial bank debt and revenues from collaboration activities and grants.

We have never been profitable and have incurred net losses in each year since inception. Substantially all of our net losses resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations. We expect to continue to incur operating losses for at least the foreseeable future. Our net losses may fluctuate significantly from quarter to quarter and year to year. We expect our expenses will ~~increase substantially~~remain significant in connection with our ongoing and planned activities as we:

We do not expect to generate any meaningful revenues from product sales, ~~of any therapeutic products~~royalties, or sales milestones unless and until we successfully complete development and obtain regulatory approval for one or more of our product candidates, which we expect will take a number of years. If we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Accordingly, we will seek to fund our operations through public or private equity or debt financings, collaboration arrangements, or other sources. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements when needed would have a negative effect on our financial condition and ability to develop our product candidates.

We conduct substantially all of our activities through Fate Therapeutics, Inc., a Delaware corporation, at our facilities headquartered in San Diego, California. ~~Fate Therapeutics, Inc. owned 100%~~The results of operations include the operations of the ~~voting shares~~Company and its subsidiaries. To date, the aggregate operations of Fate Therapeutics (Canada) Inc., or Fate Canada, which was dissolved in November 2016 and directed all of its operational activities, which were insignificant. Fate Therapeutics, Inc. owns 100% of the voting shares of Fate Therapeutics Ltd., or Fate Ltd., incorporated in the United Kingdom, whose operationsour subsidiaries have not been ~~material to date. Fate Therapeutics, Inc. owns the majority of the voting shares of Tfinity Therapeutics, Inc., or Tfinity,~~significant and controls Tfinity for consolidation purposes. To date, Tfinity has not had any material operations. The following information is presented on a consolidated basis to include the accounts of Fate Therapeutics, Inc., Tfinity, Fate Ltd., and Fate Canada. Allall intercompany transactions and balances ~~are~~have been eliminated in consolidation.

To date, we have not generated any revenues from therapeutic product ~~sales.~~sales or royalties. Our revenues have been derived from collaboration agreements and government grants.

On ~~May 4, 2015,~~April 2, 2020 (the Janssen Agreement Effective Date), we entered into a ~~strategic~~Collaboration and Option Agreement (the Janssen Agreement) with Janssen Biotech, Inc. (Janssen), part of the Janssen Pharmaceutical Companies of Johnson & Johnson. Additionally,

on the Janssen Agreement Effective Date, we entered into a Stock Purchase Agreement (the Stock Purchase Agreement) with Johnson & Johnson Innovation - JJDC, Inc. (JJDC). Under the terms of the Janssen Agreement and the Stock Purchase Agreement taken together, we received $100.0 million, of which $50.0 million was an upfront cash payment and $50.0 million was in the form of an equity investment by JJDC. Additionally, we are entitled to receive fees for the conduct of all research, preclinical development and IND-enabling activities performed by us under the Janssen Agreement.

We determined the common stock purchase by JJDC represented a premium of $9.93 per share, or $16.0 million in aggregate (the Equity Premium), and the remaining $34.0 million was recorded as issuance of common stock in shareholders’ 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 ~~and license agreement (the “Agreement”)~~product candidates under the Janssen Agreement. We expect to be reimbursed for all wind down activities associated with ~~Juno Therapeutics, Inc. (“Juno”) to screen for and identify small molecule modulators that enhance~~ the ~~therapeutic properties~~termination of ~~Juno’s genetically-engineered T-cell immunotherapies. In~~the Janssen Agreement in the second quarter of this year. Under the terms of the Janssen Agreement, in connection with the termination, (i) all licenses and other rights granted to either party pursuant to the Janssen Agreement have terminated, subject to limited exceptions set forth in the Janssen Agreement; (ii) both parties have wound down all development, commercialization and manufacturing activities under the Janssen Agreement; (iii) neither party has any right to continue to develop, manufacture or commercialize any collaboration candidate or collaboration product or use the other party’s materials; and (iv) neither party is restricted from independently developing, manufacturing, or commercializing any product, including any products directed to the same antigens as those of any collaboration candidate or collaboration product.

During the six months ended June 30, 2023, we recognized $52.3 million of collaboration revenue under the Janssen Agreement, of which $41.2 million was previously deferred. We did not recognize any revenue during the three months ended June 30, 2023. During the three and six months ended June 30, 2022, we recognized $18.1 million and $34.1 million of collaboration revenue under the Janssen Agreement.

On September 14, 2018, we entered into a Collaboration and Option Agreement (the Ono Agreement) with Ono for the joint development and commercialization of two off-the-shelf iPSC-derived CAR T-cell product candidates (Candidate 1 and Candidate 2). Pursuant to the terms of the Ono Agreement, we received an upfront, non-refundable and non-creditable payment of $5.0 million and $8.0 million for the purchase of 1,000,000 shares of our common stock at $8.00 per share. Based on the upfront payment and the premium paid on the share purchase, we recorded $8.4 million of deferred revenue to be recognized ratably as revenue over the initial four-year research term.$10.0 million. Additionally, we ~~have received and~~ are entitled to receive fees for the conduct of research and development under a ~~minimum of $2.0~~joint development plan, which fees were estimated to be $20.0 million in ~~research funding annually during~~aggregate.

We concluded that certain units of account within the Ono Agreement represented a customer relationship and in accordance with ASC 606, we determined that the initial ~~four-year term.~~transaction price under the Ono Agreement equals $30.0 million, consisting of the upfront, non-refundable and non-creditable payment of $10.0 million and the aggregate estimated research and development fees of $20.0 million. In addition, we identified our performance obligations under the Ono Agreement, including our grant to Ono of a license to certain of our intellectual property subject to certain conditions, our conduct of research services, and our participation in a joint steering committee. We ~~account~~determined that all performance obligations should be accounted for as one combined performance obligation since no individual performance obligation is distinct, and that the combined performance obligation is transferred over the expected term of the conduct of the research ~~funding as revenue using~~services, which is estimated to be four years.

In December 2020, we entered into a letter agreement with Ono pursuant to which Ono delivered proprietary antigen binding domains targeting an antigen expressed on certain solid tumors for incorporation into Candidate 2 and paid the ~~gross method~~Company a milestone fee of $10.0 million for further research and ~~record~~development of Candidate 2. In addition, Ono terminated all further research and development with respect to Candidate 1, and we retained all rights to research, develop and commercialize Candidate 1 throughout the world without any obligation to Ono.

In June 2022, we entered into an amendment with Ono to the Ono Agreement (the Ono Amendment). Pursuant to the Ono Amendment, the companies agreed to designate an additional antigen expressed on certain solid tumors for research and preclinical development, and Ono agreed to contribute proprietary antigen binding domains targeting such ~~amounts received from Juno as revenue when earned.~~

~~Per~~additional solid tumor antigen (Candidate 3). In addition, for both Candidate 2 and Candidate 3, the ~~Agreement, Juno has~~companies expanded the scope of the collaboration to include the research and development of iPSC-derived CAR NK cell product candidates (in addition to iPSC-derived CAR T-cell product candidates) targeting the designated solid tumor antigens. Similar to Candidate 2, we granted to Ono, during a specified period of time, a preclinical option to ~~extend the research term~~obtain an ~~additional two years~~exclusive license under certain intellectual property rights, subject to payment of ~~a one-time, non-refundable extension~~an option exercise fee ~~of $3.0 million~~to us by Ono, to develop and minimum research funding of $4.0 million per year during the extended two-year research term. Additionally, if Juno elects to exercise its extension option, we then have the option to require Juno to purchase up to $10.0 million of our common stock at a premium equal to 120%commercialize Candidate 3 in all territories of the ~~then thirty-day trailing volume weighted average trading price.~~

~~Additionally,~~world, where we retain rights to co-develop and co-commercialize Candidate 3 in the United States and Europe under a joint arrangement with Ono under which we are eligible to ~~receive certain contingent payments~~share at least 50% of the profits and losses. We maintained worldwide rights of manufacture for Candidate 3. The preclinical option expires upon the earlier of: (a) September 30, 2024, or (b) the achievement of the pre-defined preclinical milestone under the ~~Agreement, including selection~~joint development plan for Candidate 3. Subject to payment of an extension fee by Ono, Ono may choose to defer its decision to exercise the preclinical option until no later than June 2026. Under the Ono Amendment, aggregate estimated research and development fees for each tumor-associated antigen target selected by Juno and clinical, regulatory, and commercial milestones, and royalties on commercial sales, in connection with each Juno immunotherapy that uses or incorporates our small molecule modulators. To date, no such payments have been ~~received~~increased by ~~us.~~approximately $9.3 million, for a total estimated $29.3 million in aggregate research and development fees over the course of the joint development plan.

In ~~connection~~November 2022, Ono exercised its preclinical option to Candidate 2, and we exercised our preclinical option to co-develop and co-commercialize (CDCC Option) in the United States and Europe under a joint arrangement with ~~the Agreement,~~Ono. As a result, we ~~have recognized $1.0~~received an option exercise fee of $12.5 million ~~and $3.1 million, respectively during~~from Ono.

During the three and ~~nine~~six months ended ~~September~~June 30, ~~2017, as~~2023, we recognized $0.9 million and $7.6 million of collaboration revenue, ~~in the consolidated statements~~respectively, and $2.8 million and $3.8 million of ~~operations. Total revenue recognized~~contra-research and development expense, respectively, under the ~~Agreement for~~Ono Agreement. During the three and ~~nine~~six months ended ~~September~~June 30, ~~2016 was $1.0~~2022, we recognized $0.4 million and ~~$3.4~~$2.9 million ~~respectively. As~~ of ~~September 30, 2017, aggregate deferred~~collaboration revenue ~~related to~~under the ~~Agreement was $3.4 million.~~Ono Agreement.

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

We plan to ~~increase~~continue to significantly invest in our current level of research and development ~~expenses~~activities for the foreseeable future as we continue the clinical and preclinical development and manufacture of our product candidates, ~~and cell programming technology, and as we perform research activities under our sponsored~~ research and develop our iPSC product platform, and perform our obligations under collaboration agreements including under our agreements with ~~the~~Ono, University of Minnesota ~~Memorial Sloan Kettering~~ and ~~Juno.~~MSK. Our current planned research and development activities over the next twelve months consist primarily of the following:

Due to the inherently unpredictable nature of preclinical and clinical development and manufacture, and given our novel therapeutic approach and the current stage of development of our product candidates, we cannot determine and are unable to estimate with certainty the timelines we will require and the costs we will incur for the development and manufacture of our product ~~candidates, including ProTmune and FATE-NK100.~~candidates. Clinical and preclinical development and manufacturing timelines and costs, and the potential of development and manufacturing success, can differ materially from expectations. In addition, we cannot forecast which product candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development and manufacturing plans and capital requirements. We cannot predict the effects of the impact of global economic and market conditions, the COVID-19 pandemic and the ongoing conflict in Ukraine on our business and operations, and our expenditures may be increased by delays or disruptions due to these or other factors, including as a result of actions we take in the near term to ensure business continuity and protect against possible supply chain shortages.

General and administrative expenses consist primarily of salaries and employee-related costs, including stock-based compensation, for our employees in executive, operational, finance and human resource functions; professional fees for accounting, legal and tax services; costs for obtaining, prosecuting, maintaining, and ~~maintaining~~enforcing our intellectual property; and other costs and fees, including director and officer insurance premiums, to support our operations as a public company. We anticipate that our general and administrative expenses will ~~increase~~remain significant in the future as we ~~increase~~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) consists ~~primarily~~ 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 MSK License) with Memorial Sloan Kettering Cancer Center (MSK), interest income earned on cash and cash equivalents and interest income from ~~short-term~~ investments (including the amortization of discounts and premiums).

On April 5, 2018, we executed an award agreement with the California Institute for Regenerative Medicine (CIRM) pursuant to which CIRM awarded us $4.0 million to advance our FT516 product candidate into a first-in-human clinical trial (the Award). In November 2019, we submitted an IND application for FT516 in advanced solid tumors. As of June 30, 2023, we have received aggregate disbursements under the Award in the amount of $4.0 million.

Pursuant to the terms of the Award, we, in our sole discretion, have the option to treat the Award either as a loan or as a grant. During the first quarter of 2023, we elected to treat the Award as a grant and reversed the liability associated with the Award, and recorded such amount in other income during the six months ended June 30, 2023.

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 ~~interest expense~~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 ~~debt extinguishment losses~~the limit on ~~amounts outstanding under our credit facilities.~~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. Accordingly, we received a cash payment and recorded $4.8 million and $0.4 million of other income during the three months ended June 30, 2023 and 2022, respectively, and $5.1 million and $0.4 million of other income during the six months ended June 30, 2023 and 2022, respectively.

Our management’s discussion and analysis of our financial condition and results of operations are based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with ~~U.S.~~United States generally accepted accounting principles. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses and the disclosure of contingent assets and

liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to the fair value of the stock price appreciation milestones for the Amended MSK License, contracts containing leases, accrued expenses, stock-based compensation, and ~~stock-based compensation.~~the estimated total costs expected to be incurred under our collaboration agreements. We base our estimates on historical experience, known trends and events, financial models, and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

The estimates and judgments involved in ~~the~~our accounting policies as described in Item 7 of our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2022, continue to be our critical accounting ~~policies. There were~~policies and there have been no other material changes to our critical accounting policies ~~and estimates~~ during the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2023.

See Note 1 to the ~~Condensed Consolidated Financial Statements~~unaudited condensed consolidated financial statements for a summary of critical accounting policies and information related to recent accounting pronouncements.

Comparison of the Three Months Ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022

The following table summarizes the results of our operations for the three months ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022 (in thousands):

Collaboration Revenue. During ~~each of~~ the three months ended ~~September~~June 30, ~~2017~~2023 and ~~2016,~~2022, we recognized revenue of ~~$1.0~~$0.9 million and $18.5 million, respectively, under our collaboration agreements with Janssen and Ono. The decrease in collaboration revenue was primarily attributable to the ~~Agreement with Juno, which we entered into in May 2015.~~Janssen contract termination.

Research and development expenses. Research and development expenses were ~~$8.6~~$40.9 million for the three months ended ~~September~~June 30, ~~2017,~~2023, compared to ~~$6.8~~$81.3 million for the three months ended ~~September~~June 30, ~~2016.~~2022. The ~~increase~~decrease in research and development expenses was attributable primarily ~~includes~~to the ~~following changes:~~following:

General and administrative expenses. General and administrative expenses were ~~$2.8~~$22.6 million for the three months ended ~~September~~June 30, ~~2017,~~2023, compared to ~~$2.6~~$20.4 million for the three months ended ~~September~~June 30, ~~2016.~~2022. The increase in general and administrative expenses was attributable primarily ~~relates to:~~

Other ~~expense,~~income (expense), net. Other ~~expense,~~income (expense), net was ~~$0.3~~$9.8 million and $7.0 million for ~~each of~~ the three months ended ~~September~~June 30, ~~2017~~2023 and ~~September~~2022, respectively. During the three months ended June 30, ~~2016.~~2023, we recorded $4.8 million in income attributable to the ERC. Other ~~expense,~~income (expense), net for ~~each period~~the three months ended June 30, 2023 also consisted ~~primarily~~ of ~~interest expense relating to our term loans with Silicon Valley Bank,~~ interest income earned on cash and cash equivalents and interest income from ~~short-term~~ investments (including the amortization of discounts and premiums). ~~The~~

During the three months ended ~~September~~June 30, ~~2017 also included a $0.1~~2022, we recorded $5.9 million ~~loss on debt extinguishment related~~in other expense attributable to the ~~amendment of our loan agreement with Silicon Valley Bank.~~

~~Comparison~~change in fair value of the ~~Nine Months Ended September 30, 2017 and 2016~~

~~The following table summarizes~~stock price appreciation milestones under the ~~results of our operations~~Amended MSK License. Other income (expense), net for the ~~nine~~three months ended ~~September~~June 30, ~~2017 and 2016 (in thousands):~~

~~Revenue.~~ ~~During the nine months ended September 30, 2017 and 2016, we recognized revenue~~2022 also consisted of ~~$3.1 million and $3.4 million, respectively, under the Agreement with Juno, which we entered into in May 2015.~~

~~Research and development expenses.~~ Research and development expenses were $24.5 million for the nine months ended September 30, 2017, compared to $20.2 million for the nine months ended September 30, 2016. The increase in research and development expenses primarily includes the following changes:

~~General and administrative expenses.~~ General and administrative expenses were $8.5 million for the nine months ended September 30, 2017, compared to $7.5 million for the nine months ended September 30, 2016. The increase in general and administrative expenses primarily includes the following changes:

~~Other expense, net.~~ Other expense, net was $0.6 million for the nine months ended September 30, 2017 and $1.2 million for the nine months ended September 30, 2016. Other expense, net for each period consisted primarily of interest expense relating to our term loans with Silicon Valley Bank, interest income earned on cash and cash equivalents and interest income from ~~short-term~~ investments (including the amortization of discounts and premiums).

General and administrative expenses. General and administrative expenses were $44.6 million for the six months ended June 30, 2023, compared to $41.1 million for the six months ended June 30, 2022. The increase in general and administrative expenses was attributable primarily to a $8.0 million increase in patent and legal expenses.

Other income (expense), net. Other income (expense), net was $19.5 million and $15.8 million for the six months ended June 30, 2023 and 2022, respectively. During the six months ended June 30, 2023, we recorded $4.0 million in income attributable to the CIRM Award, $5.1 in income attributable to the ERC, and $2.1 million in income attributable to the change in fair value of the stock price appreciation milestones under the Amended MSK License. Other income (expense), net for the three months ended June 30, 2023 also consisted of interest income earned on cash and cash equivalents and interest income from investments (including the amortization of discounts and premiums).

During the six months ended June 30, 2022, we recorded $14.2 million in other expense attributable to the change in fair value of the stock price appreciation milestones under the Amended MSK License. Other income (expense), net for the six months ended June 30, 2022 also consisted of interest income earned on cash and cash equivalents and interest income from investments (including the amortization of discounts and premiums).

We have incurred losses and negative cash flows from operations since inception. As of ~~September~~June 30, ~~2017,~~2023, we had an accumulated deficit of ~~$206.3 million~~$1.1 billion and we anticipate that we will continue to incur net losses for the foreseeable future.

~~Cash~~During the six months ended June 30, 2023, cash used in operating activities ~~increased from $22.3~~was $57.4 million ~~for~~compared to cash used in operating activities of $117.8 million during the ~~nine~~six months ended ~~September~~June 30, ~~2016 to $26.2 million for the nine months ended September 30, 2017.~~2022. The primary driver of this change in cash used in operating activities was our ~~increase~~decrease in net ~~loss for the periods presented, partially offset by an increase in deferred rent.~~loss.

On ~~May 4, 2015,~~April 2, 2020 (the Janssen Agreement Effective Date), we entered into ~~a strategic research collaboration~~the Janssen Agreement with Janssen to develop iPSC-derived CAR NK- and ~~license agreement~~CAR T-cell product candidates for the treatment of cancer. Additionally, on the Janssen Agreement Effective Date, we entered into the Stock Purchase Agreement with ~~Juno to screen for and identify small molecule modulators that enhance the therapeutic properties of Juno’s genetically-engineered T-cell immunotherapies. Pursuant to~~JJDC. Under the terms of the Janssen Agreement ~~Juno paid us~~and the Stock Purchase Agreement collectively, we received $100.0 million as of the Janssen Agreement Effective Date, of which $50.0 million was an upfront cash payment and $50.0 million was in the form of ~~$5.0~~an equity investment by JJDC. Of the $50.0 million ~~and purchased one~~equity investment, $16.0 million ~~shares~~represented a premium over the fair value of our common stock and was classified under operating activities.

We were entitled to receive fees for the conduct of all research, preclinical development and IND-enabling activities performed by us under the Janssen Agreement. Additionally, we were eligible to receive (i) with respect to the first Janssen Cancer Target, payments of up to $898.0 million upon the achievement of specified development, regulatory and sales milestones (the Janssen Milestone Payments) for the first Collaboration Candidate, and up to $460.0 million in Janssen Milestone Payments for each additional Collaboration Candidate, directed to the first Janssen Cancer Target; and (ii) with respect to each of the second, third and fourth Janssen Cancer Targets, payments of up to $706.0 million in Janssen Milestone Payments for each of the first Collaboration Candidates, and up to $340.0 million in Janssen Milestone Payments for each additional Collaboration Candidate, directed to the applicable Janssen Cancer Target, where certain Janssen Milestone Payments are subject to reduction in the event we elect to co-commercialize and share equally in the profits and losses in the United States of a respective Collaboration Candidate. We were further eligible to receive double-digit tiered royalties ranging up to the mid-teens on net sales of Collaboration Candidates commercialized by Janssen under the Janssen Agreement, subject to reduction under certain circumstances.

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 with Janssen, including discontinuing development of all collaboration product candidates under the Janssen Agreement. Under the terms of the Janssen Agreement, in connection with the termination, (i) all licenses and other rights granted to either party pursuant to the Janssen Agreement will terminate, subject to limited exceptions set forth in the Janssen Agreement; (ii) both parties will wind down any development, commercialization and manufacturing activities under the Janssen Agreement; (iii) neither party will have any right to continue to develop, manufacture or commercialize any collaboration candidate or collaboration product or use the other party’s materials; and (iv) neither party is restricted from independently developing, manufacturing, or commercializing any product, including any products directed to the same antigens as those of any collaboration candidate or collaboration product.

In connection with the Janssen Agreement, we have incurred $17.1 million in sublicense fees to certain of our existing licensors, all of which has been paid as of June 30, 2023. The $17.1 million in sublicense consideration represents an asset under ASC 340, Other Assets and Deferred Costs and has been amortized to research and development expense ratably with our revenue recognition under the Janssen Agreement.

On September 14, 2018, we entered into the Ono Agreement with Ono for the joint development and commercialization of two off-the-shelf, iPSC-derived CAR T-cell product candidates (each a Candidate and collectively the Candidates). Under the terms of the Ono Agreement, Ono paid to us an upfront, non-refundable and non-creditable payment of $10.0 million. Additionally, as consideration for our conduct of research and preclinical development under a joint development plan, Ono pays us annual research and development fees set forth in the annual budget included in the joint development plan, which fees are estimated to be $20.0 million in aggregate over the course of the joint development plan. Further, under the terms of the Ono Agreement, Ono had agreed to pay us up to an additional $40.0 million, subject to the achievement of a preclinical milestone and the exercise by Ono of its options to obtain exclusive licenses to develop and commercialize the Candidates. Such fees are in addition to the upfront payment and research and development fees.

On December 4, 2020, we entered into the Ono Letter Agreement with Ono in connection with the Ono Agreement. Pursuant to the Ono Letter Agreement, Ono delivered to us proprietary antigen binding domains targeting an antigen expressed on certain solid tumors and nominated such antigen binding domains as the Ono Antigen Binding Domain for incorporation into Candidate 2. In connection with such nomination, Ono paid us a milestone fee of $10.0 million in December 2020 for further research and development of Candidate 2 under the Ono Agreement, and Ono continues to maintain its option to Candidate 2 under the Ono Agreement. In addition, the Ono Letter Agreement terminated further development with respect to Candidate 1.

On June 28, 2022, we entered into the Ono Amendment, which expanded the scope of the collaboration to include the research and development of CAR-targeted NK cells, and pursuant to which Ono agreed to contribute novel binding domains targeting a second solid tumor antigen (Candidate 3). Under the Ono Amendment, aggregate estimated research and development fees have been increased by approximately $9.3 million, for a total estimated $29.3 million in aggregate research and development fees over the course of the joint development plan, subject to Ono exercising its option to continue the research term for a candidate targeting the second solid tumor antigen.

Pursuant to the Ono Amendment, we and Ono are jointly conducting research and development activities under a joint development plan, with the goal of advancing Candidate 2 and Candidate 3 to a pre-defined preclinical milestone. We have granted to Ono, during a specified period of time, an option to obtain an exclusive license under certain intellectual property rights to develop and commercialize each remaining candidate in all territories of the world, with us retaining the right to co-develop and co-commercialize in the United States and Europe under a joint arrangement whereby we are eligible to share at ~~$8.00 per share,~~least 50% of the profits and losses (the Option).

On November 7, 2022, Ono exercised its option for continued development of Candidate 2 (as defined under the Ono Agreement). We elected our CDCC Option for Candidate 2. As a result, we received an Option Exercise Payment (as defined under the Ono Agreement) of $12.5 million. We determined the exercise represented an option with no material right under the Ono

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

Subject to Ono’s exercise of its options to obtain exclusive licenses to develop and commercialize Candidate 2 or Candidate 3 and to the achievement of certain clinical, regulatory and commercial milestones (the Ono Milestones) with respect to the Candidate in specified territories, we are entitled to receive an aggregate ~~purchase~~of up to $843.0 million in additional milestone payments for each Candidate, with the applicable milestone payments for the United States and Europe subject to reduction by 50% if we elect to co-develop and co-commercialize the Candidate as described above. As of June 30, 2023, we have not received any milestone payments other than the $10.0 million associated with the Ono Letter Agreement in December 2020 and $12.5 million associated with the option exercise in November 2022. We are also eligible to receive tiered royalties (Royalties) ranging from the mid-single digits to the low-double digits based on annual net sales by Ono for each Candidate in specified territories, with such royalties subject to certain reductions. As of June 30, 2023, no royalties have been paid to us under the Ono Agreement, the Ono Letter Agreement or the Ono Amendment.

As a direct result of our entry into the Ono Agreement, the Ono Letter Agreement and the Ono Amendment, we incurred an aggregate of $7.8 million in sublicense consideration to certain of our existing licensors, all of which has been paid as of June 30, 2023. The $7.8 million in sublicense consideration represents an asset under ASC 340, Other Assets and Deferred Costs and is amortized to research and development expense ratably with our revenue recognition under the Ono Agreement.

On May 15, 2018, we entered into the Amended MSK License with MSK. The Amended MSK License amended and restated the Exclusive License Agreement entered into between us and MSK on August 19, 2016, pursuant to which we entered into an exclusive license agreement with MSK for rights relating to compositions and methods covering iPSC-derived cellular immunotherapy, including T-cells and NK-cells derived from iPSCs engineered with CARs.

Pursuant to the Amended MSK License, MSK granted us additional licenses to certain patents and patent applications relating to new CAR constructs and off-the-shelf CAR T-cells, including the use of clustered regularly interspaced short palindromic repeat (CRISPR) and other innovative technologies for their production, in each case to research, develop, and commercialize licensed products in the field of all human therapeutic uses worldwide. We have the right to grant sublicenses to certain licensed rights in accordance with the terms of the Amended MSK License, in which case we are obligated to pay MSK a percentage of certain sublicense income received.

In the event a licensed product achieves a specified clinical milestone, MSK is then eligible to receive certain milestone payments totaling up to $75.0 million based on the price of ~~$8.0 million. Additionally, Juno agreed~~our common stock, where the amount of such payments owed to ~~fund all~~MSK is contingent upon certain increases in the price of our ~~collaboration research activities for an initial four-year research term beginning~~common stock following the date of achievement of such clinical milestone. These payments are based on common stock price multiples, with the numerator being the fair value of the ten-trading day trailing average closing price of our common stock and the denominator being the ten-trading day trailing average closing price of our common stock as of the effective date of the ~~Agreement, with minimum annual research payments~~Amended MSK License, adjusted for any stock splits, cash dividends, stock dividends, other distributions, combinations, recapitalizations, or similar events. Under the terms of ~~$2.0 million to us. Juno has~~ the ~~option to extend the exclusive research term for an additional two years beyond the initial four-year term, subject to the payment~~Amended MSK License, upon a change of ~~an extension fee of $3.0 million and the continued funding~~control of our ~~activities under the collaboration during the extended term, with minimum annual research~~company, in certain circumstances, we may be required to pay a portion of these payments ~~of $4.0 million~~ to ~~us during the two-year extension period. As of September 30, 2017, we have received a total of $4.8 million of such research payments.~~

~~We are eligible under the Agreement to receive selection fees for each tumor-associated antigen target selected by Juno and bonus selection fees~~MSK based on the ~~aggregate number~~price of ~~tumor-associated antigen targets selected by Juno. Additionally,~~our common stock in connection with ~~each Juno therapy that uses or incorporates~~such change of control.

In July 2021, we achieved a specified clinical milestone for a licensed product under the Amended MSK License and our ~~small molecule modulators, Juno has agreed~~ten-trading day trailing average common stock price exceeded the first, pre-specified threshold. As a result, we remitted the first milestone payment of $20.0 million to ~~pay us non-refundable, non-creditable milestone payments totaling up~~MSK during the year ended December 31, 2021. As of June 30, 2023, we recorded a liability of $1.8 million associated with the remaining stock price appreciation milestones for the Amended MSK License.

During the six months ended June 30, 2023, investing activities provided cash of $42.5 million compared to ~~approximately $51.0~~cash provided by investing activities of $33.3 million during the six months ended June 30, 2022. The change was primarily attributable to a decrease in the ~~aggregate, per therapy upon~~acquisitions of property and equipment of $5.4 million during the achievement of various clinical, regulatory and commercial milestones. Additionally, in connection with the third Juno therapy and the fifth Juno therapy that uses or incorporates our small molecule modulators, Juno has agreed to pay us additional non-refundable, non-creditable bonus milestone payments totaling up to approximately $116.0 million and $137.5 million, respectively, in the aggregate, per therapy upon the achievement of various clinical, regulatory, and commercial milestones. As of September 30, 2017, no selection fees or milestone payments have been received by us.

Beginning on the date of the first commercial sale (in each country) for each Juno therapy that uses or incorporates our small molecule modulators, and continuing until the later of i) the expiration of the last valid patent claim, ii) ten years after such first commercial sale, or iii) the expiration of all data and other regulatory exclusivity periods afforded each therapy, Juno has agreed to pay us royalties in the low single-digits on net sales of each Juno therapy that uses or incorporates our small molecule modulators. As of September 30, 2017, no royalties have been received by us.

~~During the nine~~six months ended ~~September~~June 30, ~~2017~~2023 compared to the acquisitions of property and ~~2016, investing activities used cash~~equipment of ~~$23.4~~$20.2 million ~~and $10.1 million, respectively. During~~during the ~~nine~~six months ended ~~September~~June 30, 2017, we purchased $40.0 million in U.S. Treasuries as short-term investments, offset by $17.5 million in maturities of short-term investments. During the nine months ended September 30, 2016, we purchased $19.7 million in U.S. Treasuries as short-term investments, offset by $10.0 million in maturities of short-term investments.2022. All other investing activities for the periods presented were attributable to the purchase and maturities of ~~property and equipment.~~investments.

For the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2023, financing activities provided cash of ~~$4.2~~$0.3 million, which primarily consisted of ~~$15.0 million~~the issuance of ~~proceeds~~common stock from ~~our July 14, 2017 loan agreement with Silicon Valley Bank, offset by $10.8 million~~equity incentive plans pursuant to the exercise of ~~principal payments on our term loans outstanding with Silicon Valley Bank.~~employee stock options.

For the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2022, financing activities provided cash of ~~$4.7~~$6.2 million, which primarily consisted of ~~$10.2 million of net proceeds from our private placement~~the issuance of common stock ~~completed in August 2016, offset by $5.7 million~~from equity incentive plans pursuant to the exercise of ~~principal payments on our term loans outstanding with Silicon Valley Bank.~~employee stock options.

From our inception through ~~September~~June 30, ~~2017,~~2023, we have funded our consolidated operations primarily through the public and private sale of common stock, the issuance of warrants, the private placement of preferred stock and convertible notes, commercial bank debt and revenues from collaboration activities and grants. As of ~~September~~June 30, ~~2017,~~2023, we had aggregate cash and cash equivalents and ~~short-term~~ investments of ~~$69.2~~$385.2 million.

In August 2016, we completed a private placement of common stock in which investors purchased 5,250,000 shares of our common stock at a price of $1.96 per share. Gross proceeds from the private placement were $10.3 million. After giving effect to costs related to the private placement, net proceeds were $10.2 million.

In November 2016, we completed a private placement of stock in which investors purchased shares of our Class A Convertible Preferred stock and common stock. We issued 2,819,549 shares of non-voting Class A Preferred Stock at $13.30 per share, each of which is convertible into five shares of common stock upon certain conditions. We also issued 7,236,837 shares of common stock at $2.66 per share. Gross proceeds from the private placement were $56.7 million. After giving effect to costs related to the private placement, net proceeds were $54.9 million.

On July 30, 2014, we entered into an Amended and Restated Loan and Security Agreement (the “Restated LSA”) with Silicon Valley Bank (the “Bank”), collateralized by substantially all of our assets, excluding certain intellectual property. The Restated LSA amends and restates the Loan and Security Agreement, dated as of January 5, 2009, as amended, by and between us and the Bank (the “Loan Agreement”). Pursuant to the Restated LSA, the Bank agreed to make loans to us in an aggregate principal amount of up to $20.0 million, comprised of (i) a $10.0 million term loan, funded at the closing date (the “Term A Loan”) and (ii) subject to the achievement of a specified clinical milestone, additional term loans totaling up to $10.0 million in the aggregate, which were available until December 31, 2014 (each, a “Term B Loan”). On December 24, 2014, we elected to draw $10.0 million under the Term B Loan.

On July 14, 2017, the Company and the Bank entered into an amendment (the “SVB Loan Amendment”) of the Restated LSA where the Bank extended an additional term loan to the Company in the principal amount of $15.0 million (the “2017 Term Loan”), a portion of which was applied to repay in full all amounts previously outstanding under the Restated LSA. Following such repayment in full of the Company’s existing outstanding debt with the Bank under the Restated LSA, cash proceeds to the Company from the remaining portion of the Term Loan were $7.5 million.

The 2017 Term Loan matures on January 1, 2022 (the “Term Loan Maturity Date”). The 2017 Term Loan bears interest at a floating per annum rate equal to the greater of (i) 3.50% above the Prime Rate (as defined in the SVB Loan Amendment) or (ii) 7.25%; provided, however, that in no event shall such interest rate exceed 8.25%. Interest is payable on a monthly basis on the first day of each month. From August 1, 2017 through January 1, 2019 (the “Interest-only Period”), the Company is required to make monthly payments of interest only. Thereafter, the Company is required to repay the principal, plus monthly payments of accrued interest, in 36 equal monthly installments based on a 36-month amortization schedule. Notwithstanding the foregoing, subject to the achievement of a product development milestone by the Company before the expiration of the above-described Interest-only Period, (i) the Interest-only Period shall be extended from January 1, 2019 through and including to July 1, 2019 and (ii) the Company shall thereafter repay the principal, plus monthly payments of accrued interest, in 30 equal monthly installments based on a 30-month amortization schedule. The Company’s final payment, due on the Term Loan Maturity Date, shall include all outstanding principal and accrued and unpaid interest under the 2017 Term Loan, plus a 7.5% final payment fee.

Subject to certain conditions, including the payment of a prepayment fee in the amount of (x) 3% of the principal amount of the Term Loan for any prepayment made through July 14, 2018 or (y) 1% of the principal amount of the Term Loan for any prepayment made after July 14, 2018 and on or before July 14, 2019, the Company may voluntarily prepay all, but not less than all, of the 2017 Term Loan.

In connection with the SVB Loan Amendment, the Company issued to the Bank on the First Amendment Effective Date a warrant to purchase up to an aggregate of 91,463 shares of the Company’s common stock, subject to adjustment, at an exercise price equal to $3.28 per share.

We are required under the Loan Agreement, as amended by the SVB Loan Amendment, to maintain our deposit and securities accounts with the Bank and to comply with various default clauses and operating covenants that may restrict our ability to finance our operations, engage in business activities or expand or fully pursue our business strategies. A breach of any of these covenants or clauses could result in a default under the Loan Agreement, which could cause all of the outstanding indebtedness under the facility to become immediately due and payable.

In ~~August 2017, the SEC declared effective a~~November 2021, we filed an automatic shelf registration statement ~~filed by us in August 2017~~ (File No. ~~333-219987).~~333-260772), which became effective upon filing. The shelf registration statement allows us to issue certain securities, including shares of our common stock, from time to time. The specific terms of any offering ~~if any,~~ under the automatic shelf registration statement ~~would be~~are established at the time of such offering. ~~As of November~~

~~1, 2017,~~Additionally, we ~~are eligible~~entered into a sales agreement with Jefferies Group LLC (Jefferies) with respect to ~~issue~~ an ~~aggregate of $100.0 million in securities~~at-the-market offering program, under ~~the shelf registration statement. In addition, this registration statement registered for resale one million shares of common stock held by Juno,~~ which ~~were issued in May 2015 as described below.~~

~~In October 2017, a shelf registration statement filed by us in October 2014 (File No. 333-199107) expired.~~

~~Under the Agreement with Juno, Juno purchased one million~~we may offer and sell, from time to time at our sole discretion, shares of our common stock ~~at $8.00 per share, for~~having an aggregate ~~purchase~~offering price of $8.0 million in May 2015, $4.6 million of which was considered an equity component of the transaction. Juno has the option to extend the exclusive research term under the Agreement for an additional two years beyond the initial four-year term, subject to the payment of an extension fee of $3.0 million and the continued funding of our activities under the collaboration during the extended term, with minimum annual research payments of $4.0 million to us during the two-year extension period. Upon exercise of the research term extension, we have the option to require Juno to purchase up to ~~$10.0~~$350.0 million ~~of our common stock at a premium equal~~through Jefferies as the sales agent, pursuant to ~~120% of the then thirty-day trailing volume weighted average trading price of our common stock.~~this automatic shelf registration statement.

~~See the~~ ~~Operating Activities~~ ~~in the “Liquidity and Capital Resources” section above for further discussion on the Agreement.~~

We anticipate that we will continue to incur losses for the foreseeable future, and we expect the losses to ~~increase~~remain significant as we continue the research, manufacture and development of, and seek regulatory approvals for, our product ~~candidates.~~candidates and conduct additional research, manufacturing and development activities pursuant to our collaboration agreement with Ono. Our product candidates have not yet achieved regulatory approval and we may not be successful in achieving commercialization of our product candidates.

We believe our existing cash and cash equivalents and ~~short-term~~ investments as of ~~September~~June 30, ~~2017~~2023, will be sufficient to fund our projected operating requirements for at least the next twelve months. However, we are subject to all the risks and uncertainties incident in the research, manufacture and development of therapeutic ~~products.~~products, and cell therapy product candidates in particular. For example, the FDA or other regulatory authorities may require us to generate additional data or conduct additional preclinical studies, manufacturing activities, or clinical trials, or may impose other requirements beyond those that we currently anticipate. Additionally, it is possible for a product candidate to show promising results in preclinical studies or in clinical trials, but fail to establish sufficient safety and efficacy data necessary to obtain regulatory approvals. As a result of these and other risks and uncertainties and the probability of success, the duration and the cost of our research, manufacturing and development activities required to advance a product candidate cannot be accurately estimated and are subject to considerable variation. We may encounter difficulties, complications, delays and other unknown factors and unforeseen expenses in the course of our research, manufacturing and development activities, any of which may significantly increase our capital requirements and could adversely affect our liquidity.

We will require additional capital for the research, manufacture and development of our product candidates and to perform our obligations under our collaboration agreements, and we may ~~be forced~~need to seek additional funds sooner than expected due to ~~pursue~~any changes in our ~~research~~business, operations, financial condition or prospects, including any impacts of inflation rates and ~~development activities.~~global economic conditions, and the ongoing conflict in Ukraine. We expect to finance our capital requirements in the foreseeable future through the sale of public or private equity, debt securities, or ~~debt securities.~~through existing or future potential collaborations. However, additional capital may not be available to us on reasonable terms, if at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue the research, manufacture or development of one or more of our product candidates. If we do raise additional funds through the issuance of additional equity or debt securities, it could result in dilution to our existing stockholders, increased fixed payment obligations and the existence of securities with rights that may be senior to those of our common stock. Additionally, if we incur indebtedness, we may become subject to financial or other covenants that could adversely restrict, impair or affect our ability to conduct our business, such as requiring us to relinquish rights to certain of our product candidates or technologies or limiting our ability to acquire, sell or license intellectual property rights or incur additional debt. Any of these events could significantly harm our business, operations, financial condition and prospects. In addition, the full impact of rising inflation rates, global political and economic instability, the COVID-19 pandemic, and the ongoing conflict in Ukraine on our business, operations, financial condition and prospects, and on the global economy, are currently unknown and difficult to predict, 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 and cash equivalents and ~~short-term~~ investments will be adequate to support our operations is a forward-looking statement and involves significant risks and uncertainties. We have based this forecast on assumptions that may prove to be wrong, and actual results could vary materially from our expectations, which may adversely affect our capital resources and liquidity. We could utilize our available capital resources sooner than we currently expect. The amount and timing of future funding requirements, both near- and long-term, will depend on many factors, including, but not limited to:

In addition, we are closely monitoring inflation rates and global political and economic conditions, and the ongoing conflict in Ukraine, and evaluating adjustments to our business and operations, which may negatively impact our financial condition and prospects and our operating results. We will continue to assess our operating capital requirements and may make adjustments to our business and operations if circumstances warrant. If we cannot continue or expand our research, manufacturing and development operations, or otherwise capitalize on our business opportunities, because we lack sufficient capital, our business, operations, financial condition and prospects could be materially adversely affected.

We lease certain office, laboratory, and manufacturing space under non-cancelable operating leases. In addition to rent, our leases are subject to certain fixed amenities fees. These leases are also subject to additional variable charges for common area maintenance, property taxes, property insurance and other variable costs. See Note 7 of the unaudited condensed consolidated financial statements for additional detail.

We entered into a license agreement with MSK under which we obtained rights relating to compositions and methods covering iPSC-derived cellular immunotherapy, including T-cells and NK-cells derived from iPSCs engineered with CARs. In the event a licensed product achieves a specified clinical milestone, MSK is then eligible to receive certain milestone payments totaling up to $75.0 million based on the price of our common stock, where the amount of such payments owed to MSK are contingent upon certain increases in the price of our common stock following the date of achievement of such clinical milestone. In July ~~2017,~~2021, we ~~entered into~~achieved the ~~SVB Loan Amendment with~~specified clinical milestone for a licensed product under the ~~Bank. Pursuant~~Amended MSK License and our ten-trading day trailing average common stock price exceeded the first, pre-specified threshold. As a result, we remitted payment to MSK for the ~~SVB Loan Amendment, the Bank extended a term loan to us in an aggregate principal amount~~first milestone payment of ~~$15.0~~$20.0 million. See Note 52 of the ~~Condensed Consolidated Financial Statements~~unaudited condensed consolidated financial statements for ~~further details.~~additional detail surrounding our stock price appreciation milestone obligations.

We lease office and laboratory space, comprising approximately 48,000 square feet, under a non-cancelable operating lease through June 2023. As of September 30, 2017, aggregate future minimum payments under the operating lease are $13.2 million. See Note 5 of the Condensed Consolidated Financial Statements for further details.

We have no material contractual obligations not fully recorded on our ~~Condensed Consolidated Balance Sheets~~unaudited condensed consolidated balance sheets or fully disclosed in the notes to the financial statements.

~~We did not have,~~Inflation has increased during the periods ~~presented,~~covered by this Quarterly Report, and may continue to increase or remain elevated for the near future. Inflationary factors, such as increases in the prices of material, interest rates and cost of labor may adversely affect our operating results. Although we do not ~~currently have, any off-balance sheet arrangements, as defined~~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 ~~rules and regulations of the SEC.~~near future, especially if inflation rates continue to rise.

We are exposed to market risk related to changes in interest rates. As of ~~September~~June 30, ~~2017,~~2023, our cash and cash equivalents consisted of cash and money market mutual funds, and our ~~short-term~~ investments consisted of United States treasuries and corporate debt securities with maturities ~~ranging from six~~up to ~~twelve~~thirty-six months from the date of acquisition. Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of U.S. interest rates. However, because of the relatively short-term nature and low risk profile of the instruments in our portfolio, a 10% change in market interest rates would not have a material impact on our financial condition and/or results of operations.

We entered into a license agreement with MSK under which we obtained rights relating to compositions and methods covering iPSC-derived cellular immunotherapy, including T-cells and NK cells derived from iPSCs engineered with CARs. MSK is eligible to receive certain milestone payments totaling up to $75.0 million in the event a licensed product achieves a specified clinical milestone, where the amount of such payments owed to MSK is contingent upon certain increases in the price of our common stock following the date of achievement of such clinical milestone. In July 2021, we achieved a specified clinical milestone for a licensed product under the ~~SVB Loan Amendment bears~~ ~~interest at~~Amended MSK License and our ten-trading day trailing average common stock price exceeded the first, pre-specified threshold. As a ~~floating per annum rate equal~~result, we remitted the first milestone payment of $20.0 million to MSK during the ~~greater~~year ended December 31, 2021. As of ~~(i) 3.50% above~~June 30, 2023, the ~~Prime Rate (as defined~~estimated fair value of the stock price appreciation milestones was $1.8 million.

Changes in the ~~SVB Loan Amendment) or (ii) 7.25%, provided that~~price of our common stock as of each balance sheet date may cause a relatively large change in ~~no event shall such interest rate exceed 8.25%. Given~~ the ~~floor and ceiling~~estimated fair value of the ~~interest rate,~~stock price appreciation milestones and the ~~maximum interest~~associated liability and resulting expense ~~increase of~~or gain. See Note 5 to our unaudited condensed consolidated financial statements for a ~~10% change in market interest rates would be $0.1 million annually and would not have a material impact~~ ~~on our financial condition and/or results of operations.~~related sensitivity analysis.

We carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and our chief financial officer, who ~~serves~~serve as ~~both~~ our principal executive officer and our principal financial officer, respectively, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this Quarterly Report on Form 10-Q. In designing and evaluating the disclosure controls and procedures, management recognized 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 this evaluation, ~~the individual serving as~~ our principal executive officer and principal financial officer each concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of ~~September~~June 30, ~~2017.~~2023.

There were no changes in our internal ~~control~~controls over financial reporting that occurred during our latest fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal ~~control~~controls over financial reporting.

We are ~~not~~currently pursuing claims in two lawsuits that we 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, is pending in San Diego Superior Court against Shoreline and four of its founders, Drs. Dan S. Kaufman (Kaufman), Kleanthis G. Xanthopoulos, Steven Holtzman, and William Sandborn. Our claims stem from Kaufman’s founding of and participation in Shoreline’s business, in breach of his exclusivity obligations to us as our scientific advisor pursuant to a Scientific Advisor Agreement between Kaufman and the Company. Our claims include actions for breach of contract, breach of implied covenant of good faith and fair dealing, fraud and deceit, tortious interference, restitution and unfair competition. Fact and expert discovery is ongoing, and we are seeking monetary damages.

In the second of the Shoreline litigations, also filed on May 13, 2022, we 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. Patent Nos. 8,071,369, 8,932,856, 8,951,797, 8,940,536, 9,169,490, 10,457,917, and 10,017,744 (the Whitehead Patents). The Whitehead Patents, which we exclusively license from Whitehead, relate to key compositions and methods for reprogramming human somatic cells to a pluripotent state in the generation of induced pluripotent stem cells (iPSCs). On June 7, 2023, we 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. The patent infringement action against Shoreline is continuing. Shoreline has filed answers to our complaint denying infringement and alleging invalidity of the Whitehead Patents. Fact and expert discovery was completed June 13, 2023, and on July 14, 2023 each party filed motions for summary judgment which may be dispositive of the patent infringement action.

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. Fate Therapeutics, Inc. et al. in the U.S. District Court for the Southern District of California (the Securities Action). On May 4, 2023, the Court appointed a different purported stockholder of the Company to ~~any material legal proceedings at~~serve as lead plaintiff in the Securities Action. On July 24, 2023, the lead plaintiff filed an amended complaint. The amended complaint alleges 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 Janssen Agreement), potential product candidates subject to the Janssen Agreement, and the termination of the Janssen Agreement. We believe that there is no merit to this ~~time.~~ case and we intend to vigorously defend against it.

On June 2, 2023, a derivative complaint, captioned Guarino v. Wolchko, et al., was filed by a purported stockholder of the Company in the U.S. District Court for the Southern District of California. The derivative lawsuit names members of the Company’s board of directors and certain officers as defendants. The Company is named as a nominal defendant. The plaintiff asserts derivative claims arising out of substantially the same alleged facts and circumstances as the Securities Action. The complaint asserts claims for breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, waste of corporate assets, and violation of federal securities laws. On August 3, 2023, the plaintiff and defendants filed a joint motion to stay the derivative lawsuit pending the court’s decision on the expected motion to dismiss in the Securities Action. We believe that there is no merit to this case and we intend to vigorously defend against it.

From time to time, we may be subject to various other legal proceedings and claims that arise in the ordinary course of our business activities. Although the results of litigation and claims cannot be predicted with certainty, we do not believe we are party to any claim or litigation the outcome of which, if determined adversely to us, would individually or in the aggregate be reasonably expected to have a material adverse effect on our business. Regardless of the outcome, litigation can have an adverse effect on us because of defense and settlement costs, diversion of management resources and other factors.

You should carefully consider the following risk factors, as well as the other information in this Quarterly Report on Form 10-Q, and in our other public filings. The occurrence of any of these risks could harm our business, financial condition, results of operations and/or growth prospects or cause our actual results to differ materially from those contained in forward-looking statements we have made in this report and those we may make from time to time. You should consider all of the risk factors described in our public filings when evaluating our business.

Risks Related to the Discovery, Development and Regulation of Our Product Candidates

If we fail to complete the preclinical or clinical development of, or to obtain regulatory approval for, our product candidates, our business would be significantly harmed.

All of our product candidates are currently in research or early clinical development. We have not completed clinical development of or obtained regulatory approval for any of our product candidates. Only a small percentage of research and development programs ultimately result in commercially successful products, and we cannot assure you that any of our product candidates will demonstrate the safety, purity and potency, or efficacy profiles necessary to support further preclinical study, clinical development or regulatory approval.

We may experience delays in, or cancel our ongoing and planned clinical development activities or research and development activities for any of our product candidates for a variety of reasons, including:

For example, in January 2023, we announced the discontinuation of our FT516, FT596, FT538, and FT536 NK cell programs to focus our resources on advancing our most innovative and differentiated programs. We also announced the termination of our Collaboration and Option Agreement with Janssen Biotech, Inc. (Janssen), which took effect on April 3, 2023. As a result of the termination, we performed wind down activities for the collaboration in the first quarter of 2023, including winding down the development of two product candidates that were expected to enter the clinic in 2023.

Additionally, we will only be able to obtain regulatory approval to market a product candidate if we can demonstrate, to the satisfaction of the FDA or comparable foreign regulatory authorities, in well-designed and conducted clinical trials that such product candidate is manufactured in accordance with applicable regulatory requirements, is safe, pure and potent, or effective, and otherwise meets the appropriate standards required for approval for a particular indication. Our ability to obtain regulatory approval of our product candidates depends on, among other things, completion of additional preclinical studies, process development and manufacturing activities, and clinical trials, whether our clinical trials demonstrate statistically significant efficacy with safety profiles that do not potentially outweigh the therapeutic benefit, and whether regulatory agencies agree that the data from our clinical trials and our manufacturing operations are sufficient to support approval. In addition, the approval by the FDA of new products in the same indications that we are studying may change the standard of care, and this may result in the FDA or other regulatory agencies

requesting that we conduct additional studies to show that our product candidate is superior to the new standard of care. Securing regulatory approval also requires the submission of information about product manufacturing operations to, and inspection of manufacturing facilities by, the relevant regulatory authority. The results of our current and future clinical trials may not meet the FDA’s or other regulatory agencies’ requirements to approve a product candidate for marketing, and the regulatory agencies may otherwise determine that our manufacturing operations are insufficient to support approval. We may need to conduct preclinical studies and clinical trials that we currently do not anticipate, including as a result of changes in the standard of care. If we fail to complete preclinical or clinical development of, or obtain regulatory approval for, our product candidates, we will not be able to generate any revenues from product sales and our ability to receive milestone or other payments under any collaboration agreements may be impaired, which will harm our business, prospects, financial condition and results of operations.

We may face delays in initiating, conducting or completing our clinical trials, and we may not be able to initiate, conduct or complete them at all.

We are heavily dependent on our ability to complete the clinical development of, and obtain regulatory approval for, our product candidates. We have not completed the clinical trials necessary to support an application for approval to market ~~ProTmune or FATE-NK100. Furthermore, we have not initiated or conducted any clinical trials necessary to support an application for approval to market~~ any of our product ~~candidates created from master pluripotent cell lines or any other product candidates that we may identify.~~candidates. We, or any investigators who initiate or conduct clinical trials of our product candidates, may experience delays in our current or future clinical trials, and we do not know whether we or our investigators will be able to initiate, enroll patients in, or complete, clinical trials of our product candidates on time, if at all. Current and future clinical trials of our product candidates may be delayed, unsuccessful or terminated, or not initiated at all, as a result of many factors, including factors related to:

If there are delays in initiating or conducting any clinical ~~trial~~trials of our product candidates or any of these clinical trials are terminated before completion, the commercial prospects of our product candidates will be harmed. In addition, any delays in initiating, conducting or completing our clinical trials or adjustments to certain of our study protocols and procedures, including as a result of any shortage of materials or agents necessary to conduct our studies or as a result of any future public health crisis or other public health concerns or other factors, will increase our costs, slow down our product candidate development and regulatory approval process, and jeopardize our ability to gain regulatory approval, commence product sales and generate revenues. Furthermore, many of the factors that cause, or lead to, a delay in the initiation, conduct or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates. Any of these occurrences would significantly harm our business, prospects, financial condition, results of operations, and market price of shares of our common stock.

The manufacture and distribution of our cell product candidates, particularly our iPSC-derived cell product candidates, is complex and subject to a multitude of risks. These risks could substantially increase our costs and limit the clinical and commercial supply of our product candidates, and the development and commercialization of our product candidates could be substantially delayed or restricted if the FDA or other regulatory authorities impose additional requirements on our manufacturing operations or if we are required to change our manufacturing operations to comply with regulatory requirements.

The manufacture and supply of our cell product candidates involves novel processes that are more complex than those required for most small molecule drugs and other cellular immunotherapies, and accordingly present significant challenges and are subject to multiple risks. For our iPSC-derived product candidates, these complex processes include reprogramming human fibroblasts to obtain iPSCs, in some cases genetically engineering these iPSCs, and differentiating the iPSCs to obtain the desired cell product candidate. As a result of the complexities in manufacturing biologics and distributing cell therapies, the cost to manufacture and distribute biologics and cell therapies in general, and our cell product candidates in particular, is generally higher than for traditional small molecule chemical compounds. In addition, our cost of goods development is at an early stage. The actual cost to manufacture and process our product candidates could be greater than we expect and could materially and adversely affect the commercial viability of our product candidates.

We have limited experience in the manufacture of cell-based therapies. We are still developing optimized and reproducible manufacturing processes for clinical and commercial-scale manufacturing of our product candidates, and none of our manufacturing processes have been validated for commercial production of our product candidates. We may face multiple challenges as we scale our manufacturing for large-scale clinical trials or commercial-scale including, among others, cost overruns, potential problems with process scale-up, process reproducibility, stability issues, compliance with good manufacturing practices, lot consistency and timely availability of raw materials. In addition, we are continuing to optimize our protocols for the supply and transport of our product candidates for distribution to clinical trial sites. Although we are working to develop reproducible and commercially viable manufacturing processes for our product candidates, and effective protocols for the supply and transport of our product candidates, doing so is a difficult and uncertain task.

We may make changes or be required by the FDA to make changes to our manufacturing processes, including materials and equipment used in manufacturing our product candidates, as we continue to develop and refine the manufacturing and distribution processes for our product candidates for advanced clinical trials and commercialization, and we cannot be sure that even minor changes in these processes, materials, and equipment will not cause our product candidates to perform differently and affect the results of our ongoing and planned clinical trials or the performance of the product once commercialized. In some circumstances, changes in our manufacturing operations, including to our protocols, processes, materials or facilities used, may require us to perform additional preclinical or comparability studies, or to collect additional clinical data from patients prior to undertaking additional clinical studies or filing for regulatory approval for a product candidate. These requirements may lead to delays in our clinical development and commercialization plans for our product candidates, and may increase our development costs substantially.

The manufacturing processes for any products that we may develop are subject to FDA and foreign regulatory authority approval requirements, and we will need to meet, and our contract manufacturing organizations (CMOs) or other third party manufacturers will need to meet, all applicable FDA and foreign regulatory authority requirements on an ongoing basis. Our existing product candidates are currently manufactured by us or by third-party cell processing facilities or CMOs, including facilities operated by or affiliated with our clinical sites, and our current manufacturing operations, including protocols, processes, materials, and facilities, may not support regulatory approval of our existing product candidates. We may be required to identify alternative protocols, processes, materials or facilities for the manufacture of any of these product candidates in compliance with applicable regulatory requirements. In addition, we may be required to make changes to our protocols for the supply and transport of our product candidates to enable effective distribution of our product candidates. Any modifications to our manufacturing and supply protocols, processes, materials or facilities, and any delays in, or inability to, establish acceptable manufacturing and supply operations for our product candidates could require us to incur additional development costs or result in delays to our clinical development. If we or our CMOs or other third-party manufacturers are unable to reliably produce products to specifications acceptable to the FDA or other regulatory authorities, we may not obtain or maintain the regulatory approvals we need to commercialize such products. Even if we obtain regulatory approval for any of our product candidates, there is no assurance that either we or our CMOs or other third-party manufacturers will be able to manufacture the approved product to specifications acceptable to the FDA or other regulatory authorities, to produce it in sufficient quantities and on the requisite timelines to meet the requirements for the potential launch of the product, or to meet potential future demand. Additionally, changes in regulatory requirements may require us or our third-party manufacturers to perform additional studies or to modify protocols, processes, materials or facilities for the manufacture of our product candidates or any components thereof. Any of these challenges could delay initiation or completion of clinical trials, require bridging clinical trials or the repetition of one or more clinical trials, increase clinical trial costs, delay approval of our product candidates, impair commercialization efforts, increase our cost of goods, and have an adverse effect on our business, financial condition, results of operations and prospects.

A variety of risks associated with conducting research and clinical trials abroad and marketing our product candidates internationally could materially adversely affect our business.

We plan to develop and potentially commercialize our product candidates worldwide. Accordingly, we expect that we will be subject to additional risks related to operating in foreign countries, including:

These and other risks associated with our potential international operations may materially adversely affect our ability to attain or maintain profitable operations, which could have a material adverse effect on our business and results of operations.

We plan to conduct clinical trials for our product candidates outside the United States, and the FDA may not accept data from trials conducted in such locations.

To date, we have only conducted clinical trials in the United States. However, we may in the future choose to conduct one or more of our clinical trials or include sites in current or future clinical trials outside the United States.

Although the FDA may accept data from sites or clinical trials outside the United States, acceptance of these data is subject to conditions imposed by the FDA. The FDA will generally not consider the data from a foreign clinical trial not conducted under an IND unless (i) the trial was well-designed and well-conducted in accordance with Good Clinical Practice (GCP) requirements, including requirements for the design, conduct, performance, monitoring, auditing, recording, analysis, and reporting of clinical trials in a way that provides assurance that the data and reported results are credible and accurate and that the rights, safety, and well-being of trial subjects are protected, and (ii) the FDA is able to validate the data from the trial through an onsite inspection, if necessary. In cases where data from foreign clinical trials are intended to serve as the sole basis for marketing approval in the U.S., the FDA will generally not approve the application on the basis of foreign data alone unless (i) the data are applicable to the U.S. population and U.S. medical practice; (ii) the trials were performed by clinical investigators of recognized competence; and (iii) the data may be considered valid without the need for an on-site inspection by the FDA or, if the FDA considers such as inspection to be necessary, the FDA is able to validate the data through an on-site inspection or other appropriate means. Additionally, the FDA’s clinical trial requirements, including sufficient size of patient populations and statistical powering must be met. Many foreign regulatory authorities have similar approval requirements. In addition, while these clinical trials or trial sites are subject to the applicable local laws where the trials are conducted, FDA acceptance of the data will depend on its determination that the trials or trial sites also complied with all applicable U.S. laws and regulations. There can be no assurance that the FDA will accept data from trials conducted outside the United States. If the FDA does not accept the data from any trial or trial site outside the United States, it would likely result in the need for additional trials, which would be costly and time-consuming and would delay or halt our development of the applicable product candidates.

A disruption to our manufacturing operations, or our or our third-party suppliers’ or manufacturers’ inability to manufacture sufficient quantities of our product candidates at acceptable quality levels or costs, or at all, would materially and adversely affect our business.

Developing manufacturing processes to support clinical studies and commercialization requirements is a difficult and uncertain task, and there are risks associated with scaling to the level required for clinical trials or commercialization, including, among others, cost overruns, potential problems with process scale-out, process reproducibility, stability and purity issues, lot consistency, and timely availability of acceptable reagents and raw materials. If we are unable to scale to the level required for the conduct of clinical trials or commercialization, we may not be able to produce our product candidates in a sufficient quantity to conduct our ongoing and planned clinical trials, or to meet demand if any product candidates are approved for commercialization. We have not yet caused any of our product candidates to be manufactured or processed on a commercial scale and may not be able to do so for any of our product candidates.

We are substantially dependent on our own internal manufacturing facilities in San Diego, California for the production of our product candidates, and we rely, and expect to continue to rely, on third parties for the manufacture of certain components to

manufacture our product candidates for use in conducting clinical trials. The facilities used to manufacture our product candidates, including our own facilities, must be evaluated by the FDA or other foreign regulatory agencies pursuant to inspections that will be conducted after we submit an application to the FDA or other foreign regulatory agencies. If the FDA or a comparable foreign regulatory authority finds deficiencies with or does not approve these facilities for the manufacture of our product candidates or if it later finds deficiencies or withdraws any such approval in the future, we may not be able to locate additional or replacement facilities to produce such product candidates or materials in a timely manner and on commercially reasonable terms, or at all. This would significantly impact our ability to develop, obtain regulatory approval for or market our product candidates, if approved.

Because we rely on our own manufacturing facilities to produce our product candidates and on third parties for the manufacture of certain components, we are required to transfer certain manufacturing process know-how and certain intermediates to third parties, including larger-scale facilities operated by a CMO or by us, to facilitate manufacture of our product candidates for clinical trials and commercialization. Transferring manufacturing testing and processes and know-how is complex and involves review and incorporation of both documented and undocumented processes that may have evolved over time. In addition, transferring production to different facilities may require utilization of new or different processes to meet the specific requirements of a given facility. We and any CMOs or third parties that we engage to manufacture our product candidates will need to conduct significant development work to transfer these processes and manufacture each of our product candidates for clinical trials and commercialization. In addition, we may be required to demonstrate the comparability of material generated by any CMO or third parties that we engage for manufacturing our product candidates with material previously produced and used in testing. Any inability to manufacture comparable drug product by us or our CMOs could delay the continued development of our product candidates.

In addition to relying on third parties for the manufacture of certain components for the manufacture of our product candidates, we manufacture our product candidates ourselves, and intend to manufacture some or all of the clinical supply of our iPSC-derived NK-cell and T-cell product candidates for our ongoing and planned clinical trials. To do so, we will need to scale up our own manufacturing operations, as we do not currently have the infrastructure or capability internally to manufacture sufficient quantities of each of our product candidates to support the conduct of each of our clinical trials or commercialization of each of our product candidates, if approved. Accordingly, we will be required to make significant investments to maintain and expand our existing Good Manufacturing Practice (GMP) manufacturing capabilities and facilities, establish additional GMP manufacturing facilities, conduct GMP production, and process and scale up development and technology transfer activities for the manufacture of our product candidates, and our efforts to scale our own manufacturing operations may not succeed.

Even if we are successful in developing manufacturing capabilities sufficient for clinical and commercial supply, problems with our manufacturing operations or those of the third-party manufacturers upon which we rely, including difficulties with production costs and yields, quality control, stability of the product, quality assurance testing, operator error, shortages of qualified personnel, shortages of materials and supplies, facility shutdowns, global pandemics or other public health concerns, the ongoing conflict in Ukraine, natural disasters (including due to the effects of climate change) or other reasons, as well as compliance with strictly enforced federal, state and foreign regulations, could result in product defects or manufacturing failures that result in lot failures, product recalls, product liability claims or insufficient supplies of our product candidates for our ongoing and planned clinical trials or eventual commercialization. Further, delays in regulatory inspections, commissioning and receiving regulatory approvals for our manufacturing capabilities or facilities, including any new facilities could delay our development plans, including the initiation and conduct of our ongoing and planned clinical trials. In addition, we and our third-party manufacturers may have limited manufacturing capacity for certain product candidates or components used in manufacturing our product candidates, and we may fail to locate suitable additional or replacement manufacturing capacity, including for the manufacture of our product candidates in compliance with current GMP (cGMP) or current Good Tissue Practice (cGTP), on a reasonable basis or at all. Any such failure could be the basis for the FDA to issue a warning letter, withdraw approvals for product candidates previously granted to us, or take other regulatory or legal action, including recall or seizure of outside supplies of the product candidate, total or partial suspension of production, suspension of ongoing clinical trials, refusal to approve pending applications or supplemental applications, detention of product, refusal to permit the import or export of products, injunction or imposing civil and criminal penalties.

Furthermore, certain of the components currently used in manufacturing our product candidates are research-grade only, and we may encounter problems obtaining or achieving adequate quantities and quality of clinical grade materials that meet FDA, European Medicines Agency, or other applicable standards or specifications with consistent and acceptable production yields and costs. In addition, if contaminants are discovered in our supply of product candidates or in our manufacturing facilities or those of our third-party suppliers and manufacturers, such manufacturing facilities may be closed for an extended period of time to investigate and remedy the contamination. Any such events could delay or prevent our ability to obtain regulatory approval for or commercialize our product candidates, which would adversely affect our business, prospects, financial condition and results of operations.

Because our approach to the development of product candidates is based on novel and unproven technologies, it is subject to a substantial degree of technological uncertainty and we may not succeed in developing any of our product candidates.

All of our current product candidates are based on our novel iPSC platform, and some of our product candidates utilize novel genome editing technologies. To date, no iPSC-derived therapeutic product candidates have been approved in the United States or worldwide, and there have been only a limited number of regulatory approvals of genome edited therapeutics, and similarly a limited

number of clinical trials involving the use of a therapeutic product candidate manufactured using a master iPSC line or genome edited cells. The development of such complex cell therapies is a relatively new and emerging field, and the scientific research that forms the basis of our efforts to discover and develop iPSC-derived and genome edited cellular immunotherapies is ongoing. We may determine to incorporate information learned from this research into the design of our ongoing Phase 1 clinical trials of our iPSC product candidates, as well as our planned future clinical trials, which could delay or impair our clinical development activities. We may ultimately discover that our product candidates do not possess certain properties required for therapeutic effectiveness or protection from toxicity in our target patient populations, or they may exhibit undesirable side effects as more patient data become available. In addition, our product candidates may demonstrate different chemical and pharmacological properties in patients than they do in laboratory studies. It may take many years before we develop a full understanding of the pharmacological properties of our product candidates, and we may never know precisely how they function in vivo. As with any new biologic or product developed using novel technologies, our product candidates have an unknown immunogenicity profile. As a result, our cellular immunotherapy product candidates may trigger immune responses that inhibit their therapeutic effects or cause adverse side effects. In addition, one or more of our product candidates may:

Any such problems that affect one of our product candidates may have an unfavorable impact on all of our product candidates. As a result, we may never succeed in developing a marketable product and we may never become profitable, which would have an adverse effect on our business, prospects, financial condition, results of operations, and market price of shares of our common stock.

We anticipate that our current product candidates and any future product candidates may be used in combination with third-party drugs or biologics, some of which may still be in development, and we have limited or no control over the supply, regulatory status, or regulatory approval of such drugs or biologics.

Certain of our product candidates are being developed for use in combination with one or more other cancer therapies, such as monoclonal antibodies, and other current or future product candidates may be used in combination with other biologics or drugs, both approved and unapproved, such as fludarabine. Our ability to develop and ultimately commercialize our current product candidates and any future product candidates used in combination with another drug or biologic will depend on our ability, or the ability of third-party clinical trial sites on which we rely, to access such drugs or biologics on commercially reasonable terms for the clinical trials and their availability for use with the commercialized product, if approved. We cannot be certain that we, or third-party clinical trial sites on which we rely, will be able to secure a steady supply of such drugs or biologics on commercially reasonable terms or at all.

Any failure by us, or by third-party clinical trial sites on which we rely, to secure a steady supply of such drugs or biologics may delay our development timelines, increase our costs and jeopardize our ability to develop our current product candidates and any future product candidates as commercially viable therapies. If any of these occur, our business, financial condition, results of operations, stock price and prospects may be materially harmed.

Moreover, the development of product candidates for use in combination with another product or product candidate may present challenges that are not faced for single agent product candidates. For example, the FDA or comparable foreign regulatory authorities may require us to use more complex clinical trial designs in order to evaluate the contribution of each product and product candidate to any observed effects. It is possible that the results of such trials could show that any positive previous trial results are attributable to the combination therapy and not our current product candidates and any future product candidates. Moreover, following product approval, the FDA or comparable foreign regulatory authorities may require that products used in conjunction with each other be cross labeled for combined use. To the extent that we do not have rights to the other product, this may require us to work with a third party to satisfy such a requirement. Moreover, developments related to the other product may impact our clinical trials for the combination as well as our commercial prospects should we receive marketing approval. Such developments may include changes to the other product’s safety or efficacy profile, changes to the availability of the approved product, quality, manufacturing and supply issues, and changes to the standard of care.

In the event that any collaborator or supplier cannot continue to supply their products on commercially reasonable terms, we would need to identify alternatives for accessing such products. Additionally, should the supply of products from any collaborator or supplier be interrupted, delayed or otherwise be unavailable, our clinical trials may be delayed. In the event we are unable to source an alternative supply or are unable to do so on commercially reasonable terms, our business, financial condition, results of operations, stock price and prospects may be materially harmed.

In addition, to the extent a third-party clinical trial site on which we rely sources a combination therapy itself and does not submit the costs of such therapy to government programs or patients’ insurance, the costs of such therapy may be passed on to us, which could harm our business, financial condition, results of operations, stock price and prospects.

If we encounter difficulties enrolling patients in our clinical trials, including as a result of competition for patients, our clinical development activities could be delayed or otherwise adversely affected.

We are required to identify and enroll a sufficient number of patients with the disease under investigation for each of our ongoing and planned clinical trials of our product candidates, and we may not be able to identify and enroll a sufficient number of patients, or those with required or desired characteristics and who meet certain criteria, in a timely manner. ~~For example,~~In addition, we will be competing with ~~respect to~~other clinical trials of product candidates being developed by our competitors in the ~~development~~same therapeutic areas, and potential patients who might be eligible for enrollment in one of ~~ProTmune, there are currently only a limited number of specialized transplant centers that perform hematopoietic stem cell transplants, or HSCTs, and among physicians who perform HSCTs, some~~our clinical trials may ~~not~~instead choose to ~~perform these procedures under conditions that fall within~~enroll in a trial being conducted by one of our ~~protocols, which would have an adverse effect on our ability to develop ProTmune.~~ competitors.

Our ability, and the ability of investigators, to enroll patients in ~~clinical trials that we are conducting or sponsoring, including in~~ our ~~current Phase 1/2 PROTECT clinical trial of ProTmune~~ongoing and ~~our~~planned clinical trials of ~~FATE-NK100, certain of which are investigator-initiated,~~our product candidates is affected by factors including:

Moreover, development of certain of our product candidates as treatment for autoimmune diseases represents a novel approach to the treatment for autoimmune diseases where B cells may play a role in initiating or maintaining disease treatment, and potential patients and their doctors may choose to use conventional therapies, such as corticosteroids or systemic immunosuppressive medications, rather than enroll patients in our clinical trials.

In addition, certain of our clinical trial sites at times have delayed or paused patient enrollment in clinical trials as a result of the COVID-19 pandemic and supply chain shortages, and may do so again in the future for a variety of reasons. The extent and duration of such delays and disruptions, and the overall impact on the timing and conduct of our clinical trials, are uncertain. If we have difficulty enrolling a sufficient number of patients to conduct our clinical trials as planned, we may need to delay or terminate ongoing or planned clinical trials, either of which would have an adverse effect on our business, prospects, financial condition, results of operations, and market price of shares of our common stock.

~~Development of our product candidates will require substantial additional funding, without which we will be unable to complete preclinical or~~

The clinical development of ~~or obtain regulatory approval for,~~ our ~~product candidates.~~

Developing therapeutic products, including conducting preclinical studies, process development and manufacturing activities, and clinical trials of cellular immunotherapies, is expensive. Based upon our currently expected level of operating expenditures, we believe that we will be able to fund our operations for at least the next twelve months. However, our resources will likely be insufficient to conduct research and development programs, process development and manufacturing activities, and clinical development to the full extent currently planned. We will require substantial additional capital to conduct the research and development, process development, manufacturing, and clinical and regulatory activities necessary to bring any of our product candidates to market. Our future capital requirements will depend on many factors, including, but not limited to:

We cannot guarantee that additional capital will be available in sufficient amounts or on terms acceptable to us, if at all. We intend to seek additional funding through the public or private sales of our securities, including equity securities. Any additional equity financings will be dilutive to our stockholders and any additional debt financings may involve operating covenants that restrict our business.

If we cannot raise additional capital or obtain adequate funds, we may be required to curtail significantly our research and clinical programs or may not be able to continue our research or clinical development of our product candidates. Our failure to raise additional capital, or obtain adequate funds, will have a material adverse effect on our business, prospects, financial condition, results of operations, and market price of shares of our common stock.

~~Our clinical development of ProTmune and FATE-NK100, and the initiation of clinical development of our other~~ product candidates could be substantially delayed if we are required to conduct unanticipated studies, including preclinical studies or clinical trials, or if the FDA imposes other requirements or restrictions including on the manufacture, of our product candidates.

The FDA may require us to generate additional preclinical, product, manufacturing, or clinical data as a condition to continuing our current clinical trials, ~~of ProTmune or FATE-NK100,~~ or initiating and conducting any future clinical trials of ~~ProTmune, FATE-NK100 or~~ our ~~other~~current product candidates ~~including our iPSC-derived~~or other cell product ~~candidates.~~candidates that we may identify. Additionally, the FDA may in the future have comments, or impose requirements, on the conduct of our clinical trials or the initiation of ~~ProTmune, FATE-NK100,~~clinical trials or any of our other iPSC-derived cell product candidates, including the protocols, processes, materials and facilities we use to manufacture our product candidates and potential future product candidates in support of clinical trials. Any requirements to generate additional data, or redesign or modify our protocols, processes, materials or facilities, or other additional comments, requirements or impositions by the FDA, may cause delays in the initiation or conduct of the current or future clinical trials for our product candidates and subsequent development activities for our product candidates, and could

require us to incur additional development or manufacturing costs and resources, seek funding for these increased costs or resources or delay our timeline for, or cease, our preclinical or clinical development activities for our product candidates, or could create uncertainty and additional complexity in our ability to obtain regulatory approval for our product candidates.

Further, if the results of our clinical trials are inconclusive, or if there are safety concerns or adverse events associated with ~~ProTmune, FATE-NK100,~~ our ~~iPSC-derived cell~~existing product candidates or any other product candidates we may identify, we may:

Even if our current and planned clinical trials are successful, we will need to conduct additional clinical trials, which may include registrational trials, trials in additional patient populations or under different treatment conditions, and trials using different manufacturing protocols, processes, materials or facilities or under different manufacturing conditions, before we are able to seek approvals for our product candidates from the FDA and regulatory authorities outside the United States to market and sell these product candidates. If we fail to ~~complete~~meet the ~~preclinical or~~requirements to support continued clinical development, ~~of, or to obtain regulatory approval for,~~ our ~~product candidates, our business would be significantly harmed.~~

~~All of our product candidates are currently in research or early~~ clinical development including ProTmune, FATE-NK100, and our iPSC-derived cell product candidates. We have not completed clinical development of or obtained regulatory approval for any of our product candidates. Only a small percentage of research and development programs ultimately result in commercially successful products, and we cannot assure you that any of our product candidates will demonstrate the safety and efficacy profiles necessary to support further preclinical study, clinical development or regulatory approval.

~~We may delay or cancel our ongoing research and development~~ activities ~~and our current or planned clinical development~~ for any of our product candidates ~~including ProTmune, FATE-NK100, and our iPSC-derived cell product candidates, for a variety of reasons, including:~~

Additionally, we will only obtain regulatory approval to market a product candidate if we can demonstrate, to the satisfaction of the FDA or comparable foreign regulatory authorities, in well-designed and conducted clinical trials that such product candidate is manufactured in accordance with applicable regulatory requirements, is safe and effective, and otherwise meets the appropriate standards required for approval for a particular indication. Our ability to obtain regulatory approval of our product candidates depends on, among other things, completion of additional preclinical studies, process development and manufacturing activities, and clinical trials, whether our clinical trials demonstrate statistically significant efficacy with safety profiles that do not potentially outweigh the therapeutic benefit, and whether regulatory agencies agree that the data from our clinical trials and our manufacturing operations are sufficient to support approval. Securing regulatory approval also requires the submission of information about product manufacturing operations to, and inspection of manufacturing facilities by, the relevant regulatory authority. The final results of our current and future clinical trials may not meet the FDA’s or other regulatory agencies’ requirements to approve a product candidate for marketing, and the regulatory agencies may otherwise determine that our manufacturing operations are insufficient to support approval. We may need to conduct preclinical studies and clinical trials that we currently do not anticipate. If we fail to ~~complete preclinical~~obtain or ~~clinical development of, or obtain~~maintain regulatory ~~approval for, our product candidates, we will not be able to generate any revenues from product sales, which will harm~~approvals with an acceptable scope, our business, prospects, financial condition and results of ~~operations.~~operations will be harmed.

31We are pursuing multiple programs and product candidates in our novel cell therapy development pipeline using an approach that is designed to enable rapid incorporation of new product features. If we elect to incorporate these new features into next-generation product candidates, this may render our existing product candidates obsolete, and we may devote our limited resources in pursuit of a particular program for which there is a greater potential for success and fail to capitalize on development opportunities or product candidates including those which may be more advanced in development.

We focus on the development of programmed cellular immunotherapies for patients with cancer and autoimmune disorders, including off-the-shelf NK- and T-cell product candidates derived from clonal master engineered iPSC lines. Because our iPSC product platform is designed to enable rapid incorporation of novel functional product features in an evolving clinical setting, we may elect to incorporate these discoveries into next-generation product candidates that render our existing product candidates, including product candidates under clinical development, obsolete. Additionally, because we have limited financial and personnel resources, we may elect or be required to abandon or delay the pursuit of opportunities with existing or future product candidates, including those that may be more advanced in development than those we ultimately elect to pursue. For example, in January 2023, we announced the discontinuation of our FT516, FT596, FT538, and FT536 NK cell programs to focus our resources on advancing our most innovative and differentiated programs. We are also expanding our research and development efforts into areas outside of oncology, such as autoimmune diseases, where we have limited or no experience. Due to these factors, our spending on current and future research and development programs and product candidates and the scientific innovation arising from these expenditures, may not yield commercially viable product candidates.

Our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit their commercial potential or result in significant negative consequences following any potential marketing approval.

During the conduct of clinical trials, patients may report changes in their health, including illnesses, injuries and discomforts, to their doctor. Often, it is not possible to determine whether or not the product candidate being studied caused these conditions. Regulatory authorities may draw different conclusions and may require us to pause our clinical trials or require additional testing to confirm these determinations, if they occur.

In addition, it is possible that as we test our product candidates ~~particularly our proposed iPSC-derived cell~~in larger, longer and more extensive clinical trials, or as use of these product candidates ~~is complex. Our plans for clinical development~~becomes more widespread if they receive regulatory approval, illnesses, injuries, discomforts and ~~commercialization of our product candidates could be substantially delayed~~other adverse events that were not observed in earlier trials, as well as conditions that did not occur or restricted if the FDA or other regulatory authorities impose additional requirements on our manufacturing operations or if we are required to change our manufacturing operations to comply with regulatory requirements.

~~The requirements to manufacture ProTmune~~went undetected in close proximity to transplant centers within a short period of time before transplantation, and to manufacture FATE-NK100 within a short period of time before administration to a patient, may present unprecedented complexities associated with ensuring consistent manufacture in compliance with regulatory requirements as necessary for marketing approval. We will need to standardize the process for manufacturing ProTmune and FATE-NK100, and any product that is used in registrational clinicalprevious trials, must be manufactured in compliance with FDA regulatory requirements. In addition, the FDA may impose additional requirements on our protocols, processes, materials and facilities used for the manufacture of ProTmune, FATE-NK100, or our other product candidates.

While our clinical product candidates ProTmune and FATE-NK100 are currently manufactured by third-party cell processing facilities, including third-party facilities operated by or affiliated with our clinical sites, we may be ~~required~~reported by subjects or patients. Many times, drug-related side effects are only detectable after investigational products are tested in large-scale pivotal trials or, in some cases, after they are made available to identify alternative protocols, processes, materials or facilities for the manufacture of ProTmune or FATE-NK100 in compliance with applicable regulatory requirements, and in the future we may manufacture ProTmune and FATE-NK100 at facilities operated by us. Any requirements to modify our manufacturing protocols, processes, materials or facilities, and any delays in, or inability to, establish manufacturing operations acceptable to the FDA for ProTmune, FATE-NK100, or any of our iPSC-derived cell product candidates could require us to incurpatients on a commercial scale after approval. If additional ~~development costs or result in delays to our~~ clinical ~~development plans, or could create uncertainty and additional complexity in our ability to obtain regulatory approval for such product candidates.~~

In addition, the manufacturing operations required for producing our proposed iPSC-derived cell product candidates may be complex, as these processes are novel and have not been validated for clinical and commercial production. Any product candidatesexperience indicates that ~~we develop using iPSCs will require processing steps that are more complex than those required for most small molecule drugs and other cellular immunotherapies.~~

~~Further, we are still developing~~ reproducible and commercial-scale manufacturing operations for our product candidates, including our proposed iPSC-derived cell product candidates, and we will need to transfer protocols, processes and materials to third parties, including larger-scale facilities operated by either a contract manufacturing organization, or CMO, or by us, to support commercialization of any approved product candidates. We may run into technical or scientific issues related to manufacturing or development of any of our product candidates ~~including problems establishing manufacturing sites~~have side effects or ~~processes acceptable to~~cause serious or life-threatening side effects, the ~~FDA, that we~~development of the product candidate may fail or be delayed, or, if the product candidate receives regulatory approval, such approval may be unable to resolve in a timely manner or with available funds. In addition, we may experience technical issues or delays in transferring our internal manufacturing protocols, processes or materials to third parties for manufacture of our product candidates for conduct of clinical trials or for commercialization of our product candidates.

In addition, we will make changes as we work to optimize our manufacturing operations, and we cannot be sure that even minor changes in these operations will not result in changes to the efficacy and safety of our product candidates. ~~In some circumstances, changes in our manufacturing operations, including to our~~ ~~protocols, processes, materials or facilities~~ used, may require us to perform additional preclinical or comparability studies, or to collect additional clinical data from patients prior to undertaking additional clinical studies or filing for regulatory approval for a product candidate. These requirements may lead to delays in our clinical development and commercialization plans for our product candidates.

Problems with our manufacturing operations, even minor deviations from the normal protocols, processes or materials, could result in product defects or manufacturing failures that result in lot failures, product recalls, product liability claims or insufficient supplies of our product candidates for our planned clinical trials or eventual commercialization. Furthermore, certain of the components currently used in manufacturing our product candidates are research-grade only, and we may encounter problems obtaining or achieving adequate quantities and quality of clinical grade materials that meet FDA, EMA or other applicable standards or specifications with consistent and acceptable production yields and costs.

~~Any such events could delay or prevent our ability to obtain regulatory approval or commercialize ProTmune, FATE-NK100 or our other product candidates,~~revoked, which would ~~adversely affect~~harm our business, financial condition, ~~and~~ results of ~~operations.~~operations and prospects.

Drug-related side effects could also affect subject recruitment or the ability of enrolled subjects to complete the trial or result in potential product liability claims. Any of these occurrences may harm our business prospects significantly.

We study our product candidates in patient populations with significant comorbidities that may result in deaths or serious adverse events or unacceptable side effects and require us to abandon or limit our clinical development activities.

Patients treated with ~~ProTmune or FATE-NK100 in~~ our ~~ongoing clinical trials, as well as patients who may undergo treatment with other~~current product candidates ~~that we may develop,~~ may also receive chemotherapy, radiation, and/or other high dose or myeloablative treatments in the course of treatment of their disease, and may therefore experience side effects or adverse events, including death, that are unrelated to our product candidates. While these side effects or adverse events may be unrelated to our

product candidates, they may still affect the success of our clinical studies. The inclusion of critically ill patients in our clinical studies may result in deaths or other adverse medical events due to underlying disease or to other therapies or medications that such patients may receive. Any of these events could prevent us from advancing ~~ProTmune, FATE-NK100, or other~~our product candidates through clinical development, and from obtaining regulatory approval, and would impair our ability to commercialize our product candidates. Any inability to advance ~~ProTmune, FATE-NK100,~~our existing product candidates or any other product candidate through clinical development would have a material adverse effect on our business, and the value of our common stock would decline.

Because our product candidates are based on novel technologies, it is difficult to predict the regulatory approval process and the time, the cost and our ability to successfully initiate, conduct and complete clinical development, and obtain the necessary regulatory and reimbursement approvals, required for commercialization of our product candidates.

Our cell programming technology and platform for generating cell therapy products using iPSCs represent novel therapeutic approaches, and to our knowledge there are currently no iPSC-derived cell products approved anywhere in the world for commercial sale. As such, it is difficult to accurately predict the type and scope of challenges we may incur during development of our product candidates, and we face uncertainties associated with the preclinical and clinical development, manufacture and regulatory requirements for the initiation and conduct of clinical trials, regulatory approval, and reimbursement required for successful commercialization of these product candidates. In addition, because our iPSC-derived cell product candidates are all in the ~~research~~early clinical or preclinical stage, we are currently assessing safety in humans and have not yet been able to assess ~~safety in humans or~~ the long-term effects of treatment. Animal models and assays may not accurately predict the safety and efficacy of our product candidates in our target patient populations, and appropriate models and assays may not exist for demonstrating the safety and purity of our product candidates, ~~particularly any iPSC-derived cell product candidates we develop,~~ as required by the FDA and other regulatory authorities for ~~product~~ongoing clinical development and regulatory approval.

The preclinical and clinical development, manufacture, and regulatory requirements for approval of novel product candidates such as ours can be more expensive and take longer than for other more well-known or extensively studied pharmaceutical or biopharmaceutical product candidates due to a lack of prior experiences on the side of both developers and regulatory agencies. Additionally, due to the uncertainties associated with the preclinical and clinical development, manufacture, and regulatory requirements for approval of our product candidates, we may be required to modify or change our preclinical and clinical development plans or our manufacturing activities and plans, or be required to meet stricter regulatory requirements for approval. Any such modifications or changes could delay or prevent our ability to develop, manufacture, obtain regulatory approval or commercialize our product candidates, which would adversely affect our business, financial condition and results of operations.

Cellular immunotherapies, ~~and stem cell therapies~~ and iPSC-derived cell therapies in particular, represent relatively new therapeutic areas, and the FDA has cautioned consumers about potential safety risks associated with cell therapies. To date, there are relatively few approved cell ~~therapies.~~therapies, and the development of any cell therapy may be placed on hold by the FDA upon the detection of any unexpected safety event to evaluate the potential relevance of such novel technology to the occurrence of such safety event, highlighting the technical and regulatory risk of working with new technology. As a result, the regulatory approval process for product candidates such as ours is uncertain and may be more expensive and take longer than the approval process for cell therapy product candidates based on other, better known or more extensively studied technologies and therapeutic approaches. For example, there are currently no FDA approved products with a label designation that supports the use of a product to prevent acute graft-versus-host disease in patients undergoing allogeneic HSCT, which makes it difficult to determine the clinical endpoints and data required to support an application or regulatory approval, and the time and cost required to obtain regulatory approval in the United States for ProTmune.

Regulatory requirements in the United States and in other countries governing the development of cell therapy products and therapeutic products created with gene editing technology have changed frequently and the FDA or other regulatory bodies may change the requirements, or identify different regulatory pathways, for approval for any of our product candidates. ~~For example,~~The FDA previously established the Office of Tissues and Advanced Therapies (OTAT) within ~~the FDA,~~ the Center for Biologics Evaluation and Research or(CBER) to consolidate the review of cell therapy and related products, and to advise CBER ~~recently~~on its review. In September 2022, the FDA announced ~~that~~retitling of OTAT to the Office of ~~Cellular, Tissue~~Therapeutic Products (OTP) and ~~Gene Therapies would be restructured~~elevation of OTP to ~~create~~ a "Super Office" to meet its growing cell and gene therapy workload and new ~~Office of Tissues and Advanced Therapies to better align its oversight activities with FDA Centers~~commitments under the Prescription Drug User Fee Act agreement for ~~Drugs and Medical Devices.~~fiscal years 2023-2027. It is possible that over time new or different divisions may be established or be granted the responsibility for regulating cell and/or gene therapy products, including iPSC-derived cell products made with gene editing technology, such as ours. The regulatory review divisions and committees, and any new guidelines they promulgate, may lengthen the regulatory review process, require us to perform additional studies or clinical trials, and delay or prevent development, approval, and commercialization of our product candidates. As a result, we may be required to change our regulatory strategy or to modify our applications for regulatory approval, which could delay and impair our ability to complete the preclinical and clinical development and manufacture of, and obtain regulatory approval for, our product candidates. Changes in regulatory authorities and advisory groups, or any new requirements or guidelines they promulgate, may lengthen the regulatory review process, require us to perform additional studies, increase our development and manufacturing costs, lead to changes in regulatory pathways, positions and interpretations, delay or prevent approval and commercialization of our product candidates or lead to significant post-approval limitations or restrictions. As we advance our product candidates, we will be required to consult with the FDA and other regulatory authorities, and our ~~products~~product candidates will likely be reviewed by ~~the FDA’s~~an FDA advisory committee. We also must comply with applicable requirements, and if we fail to do so, we may be required to delay or discontinue development of our product candidates. Delays or unexpected costs in obtaining, or the failure to obtain, the regulatory approval necessary to bring a potential product to market could impair our ability to generate sufficient product revenues to maintain our business.

~~Results~~Preliminary data and interim results we disclose may change as more patient data becomes available or as we make changes to our protocols or manufacturing processes, and such interim results and results from earlier studies may not be predictive of the final results, or of later studies or future clinical trials.

~~All~~We may from time to time disclose results from preclinical testing or preliminary data or interim results from clinical studies of our product ~~candidates are still in an early stage of development, and we cannot be assured that the development of any of our product candidates will ultimately be successful. Results~~candidates. Such results from preclinical testing, process development and manufacturing activities, and ~~earlier~~ clinical studies, including interim clinical trial results as of specified data cutoff dates and results of earlier clinical studies with similar product candidates, are not necessarily predictive of future results, including later clinical trial results. While we have demonstrated in preclinical models that a single administration of ProTmune resulted in a statistically-significant reduction in GvHD score and improvement in survival, as compared to vehicle-treated cells, we may not observe similar results in future preclinical or clinical studies of ProTmune, including our Phase 1/2 PROTECT study. Additionally, while an independent data monitoring committee recommended the initiation of the blinded Phase 2 stage of our PROTECT study based on a review of the data available in September 2017 from the open-label Phase 1 stage, ProTmune may not continue to demonstrate safety as the subjects treated in the Phase 1 stage continue to progress. Additionally, ProTmune may not demonstrate in the Phase 2 stage of PROTECT, or in subsequent trials, an adequate safety or efficacy profile to support further development or commercialization.

The results of our current and future clinical trials may differ from results achieved in earlier preclinical and clinical studies for a variety of reasons, including:

~~Even if~~Additionally, some clinical trials of our ~~current~~product candidates performed to date were generated from open-label studies and ~~planned~~are being conducted at a limited number of clinical sites on a limited number of patients. An “open-label” clinical trial is one where both the patient and investigator know whether the patient is receiving the investigational product candidate or either an existing approved drug or placebo. Most typically, open-label clinical trials test only the investigational product candidate and sometimes may do so at different dose levels. Open-label clinical trials are ~~successful, we will need~~subject to ~~conduct additional~~various limitations that may exaggerate any therapeutic effect as patients in open-label clinical trials are aware when they are receiving treatment. Open-label clinical trials may be subject to a “patient bias” where patients perceive their symptoms to have improved merely due to their awareness of receiving an experimental treatment. In addition, open-label clinical trials may be subject to an “investigator bias” where those assessing and reviewing the physiological outcomes of the clinical trials are aware of which treatment regimen patients have received and may ~~include registrational~~interpret the information of the treated group more favorably given this knowledge. Accordingly, the preliminary data from our Phase 1 clinical trials trials in additional patient populations or under different treatment conditions, and trials using different manufacturing protocols, processes, materials or facilities or under different manufacturing conditions, before we are able to seek approvals forof certain of our product candidates may not be predictive of future clinical trial results for these or other product candidates when studied in a controlled environment or larger patient populations.

From time to time, we also publish interim, “top-line,” or preliminary data from our clinical studies based on a preliminary analysis of then-available data. Preliminary or interim data from clinical trials that we are conducting are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues, the duration of treatment increases and more patient data become available. For example, although we have, from time to time, reported positive interim clinical data for certain of our clinical programs, we may encounter dose-limiting toxicities or unacceptable side effects for these product candidates as dose escalation and expansion progresses in our clinical trials and additional patient data become available. Our preliminary or interim results and related conclusions also are subject to change following a more comprehensive review of the data related to the particular study or trial. Preliminary or “top-line” data also remain subject to audit and verification procedures that may result in the final data being materially different from the ~~FDA~~preliminary data we previously published. As a result, interim and preliminary data should be viewed with caution until the final data are available. Material adverse changes between preliminary, “top-line,” or interim data and final data could significantly harm our business prospects, financial condition and results of operations.

Results of clinical testing of any of our existing or future product candidates may fail to show the necessary safety and efficacy required for regulatory approval.

Before obtaining marketing approval from regulatory authorities ~~outside~~for the ~~United States to market and sell these product candidates. Our failure to meet the requirements to support marketing approval for~~sale of any of our product candidates, ~~in our ongoing~~we must complete preclinical development and ~~future~~then conduct extensive clinical trials ~~would substantially harm~~to demonstrate the safety and efficacy in humans of any such product candidates. Clinical testing is expensive, difficult to design and implement, can take many years to complete, and is uncertain as to outcome. A failure of one or more clinical trials can occur at any stage of testing. The outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. Our product candidates have a limited history of being evaluated in human clinical trials. Any of our product candidates may fail to show the desired safety and efficacy in later stages of clinical development despite having successfully advanced through initial clinical trials.

There is a high failure rate for drugs and biologics proceeding through clinical trials. A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in later stage clinical trials even after achieving promising results in earlier stage clinical trials. Data obtained from preclinical and clinical activities are subject to varying interpretations, which may delay, limit, or prevent regulatory approval. In addition, regulatory delays or rejections may be encountered as a result of many factors, including changes in regulatory policy during the period of product development.

If our product candidates are ultimately not approved for any reason, our business, prospects, results of operations and ~~prospects.~~financial condition would be adversely affected. In addition, the standard of care may change with the approval of new products for the same indications that we are studying.

Increasing scrutiny and changing expectations from governments and third-parties relating to environmental, social and governance (ESG) policies and practices may cause us to incur additional costs or expose us to additional risks.

In recent years, there has been increasing public focus and scrutiny from certain investors, employees and other stakeholders concerning corporate responsibility, specifically related to environmental, social and governance (ESG) factors. Third-party providers of ESG ratings and reports on companies have increased in number, resulting in varied and, in some cases, inconsistent standards. Topics taken into account in such assessments include, among others, the company’s efforts and impacts with respect to climate change and the role of the company’s board of directors in supervising various sustainability issues.

Some investors may use third-party ESG ratings and reports to guide their investment strategies and, in some cases, may choose not to invest in us if they believe our ESG practices are inadequate. The criteria by which companies’ ESG practices are assessed are evolving, which could result in greater expectations of us and cause us to undertake costly initiatives to satisfy such new criteria. Alternatively, if we elect not to or are unable to satisfy new criteria or do not meet the criteria of a specific third-party provider, some investors may conclude that our policies with respect to ESG are inadequate and choose not to invest in us.

If our ESG practices do not meet evolving investor, government agency or other stakeholder expectations and standards, then our reputation, our ability to attract or retain employees and the market price of our securities could be negatively impacted. New governmental regulations could result in new directives and new or more stringent forms of ESG oversight and disclosures which may lead to increased expenditures for sustainability initiatives, which in turn could have a material adverse effect on our business, financial condition, cash flows and results of operations and could cause the market value of our common stock to decline.

Even if we obtain regulatory approval for a product candidate, our products will remain subject to regulatory scrutiny.

Any product candidate for which we obtain marketing approval, along with the manufacturing protocols, processes, materials and facilities, qualification testing, post-approval clinical data, labeling and promotional activities for such product, will be subject to continual and additional requirements of the FDA and other regulatory authorities. These requirements include submissions of safety and other post-marketing information, reports, registration and listing requirements, requirements relating to ~~current good manufacturing practices, or~~ cGMP, applicable

product tracking and tracing requirements, quality control, quality assurance and corresponding maintenance of records and documents, and recordkeeping. Even if marketing approval of a product candidate is granted, the approval may be subject to limitations on the indicated uses for which the product may be marketed or to conditions of approval, or contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the product. Additionally, under the Food and Drug Omnibus Reform Act of 2022 (FDORA), sponsors of approved drugs and biologics must provide 6 months' notice to the FDA of any changes in marketing status, such as the withdrawal of a drug, and failure to do so could result in the FDA placing the product on a list of discontinued products, which would revoke the product's ability to be marketed. The FDA closely regulates the post-approval marketing and promotion of pharmaceutical and biological products to ensure such products are marketed only for the approved indications and in accordance with the provisions of the approved labeling. Later discovery of previously unknown problems with our product candidates, manufacturing operations, or failure to comply with regulatory requirements, may lead to various adverse conditions, including significant delays in bringing our product candidates to market ~~and~~ and/or being precluded from manufacturing or selling our product candidates, any of which could significantly harm our business.

We ~~expect~~may seek regenerative medicine advanced therapy (RMAT) designation for certain of our product candidates, but such designation may not actually lead to a faster development or regulatory review or approval process and we may be unable to obtain or maintain the benefits associated with such designation.

We may seek regenerative medicine advanced therapy (RMAT) designation from the FDA for certain of our product candidates. A product candidate is eligible for RMAT designation if: (1) it is a cell therapy, therapeutic tissue engineering product, human cell or tissue product, or a combination product using any such therapies or products; (2) it is intended to treat, modify, reverse, or cure a serious or life-threatening disease or condition; and (3) there is preliminary clinical evidence that indicates that the product candidate has the potential to address unmet medical needs for such disease or condition. This program is intended to facilitate efficient development and expedite review of RMATs. A Biologics License Application (BLA) for a product candidate with RMAT designation may be eligible for priority review or accelerated approval through (1) surrogate or intermediate endpoints reasonably likely to predict long-term clinical benefit or (2) reliance upon data obtained from a meaningful number of sites. Benefits of such designation also include early interactions with the FDA to discuss any potential surrogate or intermediate endpoint to be used to support accelerated approval. A product candidate that has RMAT designation and is subsequently granted accelerated approval and is subject to post-approval requirements may fulfill such requirements through the submission of clinical evidence, clinical studies, patient registries, or other sources of real-world evidence, such as electronic health records; the collection of larger confirmatory data sets; or post-approval monitoring of all patients treated with such therapy prior to its approval. RMAT designation is within the discretion of the FDA. Accordingly, even if we believe one of our product candidates meets the criteria for RMAT designation, the FDA may disagree and instead determine not to grant such designation. In any event, the receipt of RMAT designation for a product candidate may not result in a faster development process, review or approval compared to product candidates considered for approval under conventional FDA procedures and does not assure ultimate approval by the FDA. In addition, even if one or more of our product candidates qualifies for RMAT designation, the FDA may later decide that the product candidate no longer meets the conditions for qualification.

We may rely on orphan drug status to develop and commercialize certain of our product candidates, but ~~our~~ orphan drug designations may not confer marketing exclusivity or other expected commercial ~~benefits.~~benefits and we may not be able to obtain orphan drug designations for our other product candidates.

We ~~expect to~~may rely on orphan drug exclusivity for ~~ProTmune and potential future~~ product candidates that we may develop. Orphan drug status confers seven years of marketing exclusivity in the United States under the Federal Food Drug, and Cosmetic Act, and up to ten years of marketing exclusivity in Europe for a particular product in a specified ~~indication. We have been granted~~indication, subject to certain conditions. However, we may be unable to obtain orphan drug ~~designation in~~designations for any of our product candidates that we are currently developing or may pursue. Even if we do obtain orphan drug designations and are the ~~United States for~~ ~~ex vivo~~ ~~programmed mobilized peripheral blood~~first to obtain marketing approval of our product candidates for the prevention of GvHD in patients undergoing allogeneic hematopoietic cell transplantation, and in the European Union for ProTmune for treatment in hematopoietic stem cell transplantation. While we have been granted these orphan designations,applicable indications, we will not be able to rely on these designations to

exclude other companies from manufacturing or selling biological products using the same principal molecular structural features for the same indication beyond these timeframes. Furthermore, any marketing exclusivity in Europe can be reduced from ten years to six years if the initial designation criteria have significantly changed since the market authorization of the orphan product.

For any product candidate for which we ~~are~~may be granted orphan drug designation in a particular indication, it is possible that another company also holding orphan drug designation for the same product candidate will receive marketing approval for the same indication before we do. If that were to happen, our applications for that indication may not be approved until the competing company’s period of exclusivity expires. Even if we are the first to obtain marketing authorization for an orphan drug indication in the United States, there are circumstances under which a competing product may be approved for the same indication during the seven-year period of marketing exclusivity, such as if the later product is shown to be clinically superior to our orphan product, or if the later product is deemed a different product than ours. Further, the seven-year marketing exclusivity would not prevent competitors from

obtaining approval of the same product candidate as ours for indications other than those in which we have been granted orphan drug designation, or for the use of other types of products in the same indications as our orphan product.

We may seek designation for our cell programming technology as a designated platform technology, but we might not receive such designation, and even if we do, such designation may not lead to a faster development or regulatory review or approval process.

We may seek designation for our cell programming technology as designated platform technology. Under FDORA, a platform technology incorporated within or utilized by a drug or biological product is eligible for designation as a designated platform technology if (1) the platform technology is incorporated in, or utilized by, a drug approved under a BLA or NDA; (2) preliminary evidence submitted by the sponsor of the approved or licensed drug, or a sponsor that has been granted a right of reference to data submitted in the application for such drug, demonstrates that the platform technology has the potential to be incorporated in, or utilized by, more than one drug without an adverse effect on quality, manufacturing, or safety; and (3) data or information submitted by the applicable person indicates that incorporation or utilization of the platform technology has a reasonable likelihood to bring significant efficiencies to the drug development or manufacturing process and to the review process. A sponsor may request the FDA to designate a platform technology as a designated platform technology concurrently with, or at any time after, submission of an IND application for a drug that incorporates or utilizes the platform technology that is the subject of the request. If so designated, the FDA may expedite the development and review of any subsequent original BLA or NDA for a drug that uses or incorporates the platform technology. Even if we believe our cell programming technology meets the criteria for such designation, the FDA may disagree and instead determine not to grant such designation. In addition, the receipt of such designation for a platform technology does not ensure that a drug will be developed more quickly or lead to a faster FDA review or approval process and does not assure ultimate FDA approval of a drug. Moreover, the FDA may revoke a designation if the FDA determines that a designated platform technology no longer meets the criteria for such designation.

We may be subject to certain regulations, including federal and state healthcare fraud and abuse laws, physician payment transparency laws, anti-bribery and anti-corruption laws and health information privacy and security laws. Any actual or perceived failure to comply with these regulations could have a material adverse effect on our business and financial condition.

If we obtain FDA approval for any of our product candidates and begin commercializing those products in the United States, our operations may be subject to various federal and state healthcare laws, including, without limitation, fraud and abuse laws, false claims laws, data privacy and security laws, as well as transparency laws regarding payments or other items of value provided to healthcare providers. These laws may impact, among other things, our proposed sales, marketing and education programs. ~~In addition,~~Additionally, we may be subject to state and foreign equivalents of such healthcare laws and regulations, some of which may be broader in scope and may apply regardless of the payor, as well as patient privacy regulation by both the federal government and the states in which we conduct our business. Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities could be subject to challenge and may not comply under one or more of such laws, regulations, and guidance. Law enforcement authorities are increasingly focused on enforcing fraud and abuse laws, and it is possible that some of our practices may be challenged under these laws. ~~Additionally, if~~Efforts to ensure that our current and future business arrangements with third parties, and our business generally, will comply with applicable healthcare laws and regulations will involve substantial costs. If our operations, including our arrangements with physicians and other healthcare providers are found to be in violation of any of ~~the~~such laws ~~described above~~ or any other governmental regulations that apply to us, we may be subject to penalties, including, without limitation, administrative, civil and criminal penalties, damages, fines, disgorgement, contractual damages, reputational harm, diminished profits and future earnings, the curtailment or restructuring of our operations, exclusion from participation in federal and state healthcare programs (such as Medicare and Medicaid), and imprisonment, as well as additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws, any of which could adversely affect our ability to operate our business and our ~~results~~financial results. For more information, please see “Business—Government Regulation—Other Healthcare Laws and Compliance Requirements” in our Annual Report on Form 10-K for the year ended December 31, 2022.

The scope and enforcement of ~~operations.~~these laws is uncertain and subject to rapid change in the current environment of healthcare reform, especially in light of the lack of applicable precedent and regulations. Federal and state enforcement has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry. Ensuring that our internal operations and future business arrangements with third parties comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices do not comply with current or future statutes, regulations, agency guidance or case law involving applicable fraud and abuse or other healthcare laws and regulations.

The provision of benefits or advantages to physicians to induce or encourage the prescription, recommendation, endorsement, purchase, supply, order or use of medicinal products is prohibited in the European Union. The provision of benefits or advantages to physicians is also governed by the national anti-bribery laws of European Union Member States, such as the UK Bribery Act 2010. Infringement of these laws could result in substantial fines and individual imprisonment.

Payments made to physicians in certain European Union Member States must be publicly disclosed. Moreover, agreements with physicians often must be the subject of prior notification and approval by the physician’s employer, his or her competent professional organization and/or the regulatory authorities of the individual European Union Member States. These requirements are provided in the national laws, industry codes or professional codes of conduct, applicable in the European Union Member States. Failure to comply with these requirements could result in reputational risk, public reprimands, administrative penalties, fines or individual imprisonment.

We are, and expect to continue to be, dependent on third parties to conduct some or all aspects of manufacturing of our product candidates for use in clinical trials and for commercial sale, if approved. Our business could be harmed if those third parties fail to perform satisfactorily.

While we currently ~~depend~~manufacture clinical supplies of our iPSC-derived cell product candidates at our cGMP facilities located in San Diego, California, we also rely on ~~third-party cell processing facilities~~third parties to manufacture certain components required for the manufacture of ~~ProTmune~~our product candidates, and ~~FATE-NK100 under specific conditions. Any failure~~we may rely on third parties to conduct some or all aspects of manufacturing of our product candidates for use in conducting later stage clinical trials and for commercial sale upon approval of any of our product candidates.

Reliance on third parties for manufacture of our product candidates and components utilized in manufacturing our product candidates entails certain risks, including reliance on the third party for regulatory compliance and quality assurance, the possibility that the third-party manufacturer does not maintain the financial, personnel or other resources to meet its obligations, the possibility that the third party fails to manufacture such components, or our product candidates or any products we may eventually commercialize, in accordance with our specifications, misappropriation of our proprietary information, including our trade secrets and know-how, and the possibility of termination of our manufacturing relationship by the third party, based on its own business priorities, at a time that is costly or damaging to us. In addition, the FDA and other regulatory authorities require that our product candidates and any products that we may eventually commercialize be manufactured according to cGMP, cGTP and similar jurisdictional standards. These requirements include, among other things, quality control, quality assurance and the maintenance of records and documentation. The FDA or similar foreign regulatory agencies may also implement new standards at any time, or change their interpretations and enforcement of existing standards for manufacture, packaging or testing of products. We have little control over our manufacturers’ compliance with these ~~facilities~~regulations and standards.

In some cases, the technical skills required to manufacture our product candidates ~~consistently~~may be unique or proprietary to a particular CMO, and ~~under~~we may have difficulty, or there may be contractual restrictions prohibiting us from, transferring such skills to a back-up or alternate supplier if needed, or we may be unable to transfer such skills at all. In addition, if we are required to change contract manufacturers for any reason, we will be required to verify that the ~~proper conditions may result in~~new CMO maintains facilities and procedures that comply with quality standards and with all applicable regulations. We will also need to verify, such as through a manufacturing comparability study, that any new manufacturing process will produce our product candidate according to the specifications previously submitted to the FDA or another regulatory authority. The delays ~~to our clinical development plans and impair~~associated with the verification of a new CMO could negatively affect our ability to ~~obtain approval for,~~develop product candidates or commercialize ~~these product candidates.~~

~~Clinical cell processing facilities operated by~~our products in a timely manner or ~~affiliated with~~within budget. In addition, changes in manufacturers often involve changes in manufacturing procedures and processes, which could require that we conduct bridging studies between our prior clinical ~~sites currently manufacture ProTmune and FATE-NK100 for use~~supply used in our clinical trials and that of ~~these product candidates.~~any new manufacturer. We ~~will~~may be ~~required~~unsuccessful in demonstrating the comparability of clinical supplies produced by different manufacturers, which could require the ~~FDA to standardize the manufacture~~conduct of ~~ProTmune and FATE-NK100, and any other product candidates~~additional clinical trials.

Further, we ~~may develop,~~depend in some instances on third party suppliers, including our oversight for facility and raw material and vendor qualification through to final product analytical testing and release. The manufacture of ProTmune and FATE-NK100 for use in registrational clinical trials and commercialization will be subject to the requirements of applicable regulatory authorities, including the FDA, and the anticipated manufacture of these product candidates for commercialization may require each of the clinical cell processing facilities at which ProTmune and FATE-NK100 are manufactured to comply with cGMP and other regulatory requirements, and be subject to inspections by the FDA or other applicable regulatory authorities that would be conducted after the submission of a biologics license application, or BLA, or other marketing application. Although we are responsible for ensuring compliance with applicable regulatory requirements and for overseeing all aspects of product manufacture and release prior to applying for marketing approval, we do not control the activities of these third-party cell processing facilities and are completely dependent on their ability to comply with the FDA’s requirements and to properly execute the protocolsole source suppliers, for the ~~manufacture~~provision of ~~any of~~reagents, materials, devices and equipment that are used by us and our ~~product candidates. In particular, if~~third-party contract manufacturers in the FDA requires each of the clinical cell processing facilities to comply with cGMP, there can be no guarantee that they will be able to do so. Because of these manufacturing requirements, if the applicable clinical cell processing facilities are unable to manufacture anyproduction of our product candidates, including ~~ProTmune~~certain of our iPSC-derived cell therapy product candidates. Any disruption to or loss of supply from any of these suppliers could delay our clinical development and ~~FATE-NK100,~~commercialization efforts, which would adversely affect our business, prospects, results of operations and financial condition.

The termination of our collaboration with Janssen has had a material impact on our business and could result in ~~a manner that conforms~~disruptions to our ~~specifications~~operations that have a material adverse effect on our business and ~~the FDA’s strict regulatory requirements,~~financial condition.

The termination of our Collaboration and Option Agreement with Janssen took effect on April 3, 2023. As a result of this termination, we ~~may be required~~have discontinued development of two collaboration candidates that were expected to identify alternative processes or facilities for the manufacture of such product candidate, which may require us to spend significant additional time and resources, and would impair our ability to manufacture, complete theenter clinical development ~~of,~~in 2023. We have also prioritized our pipeline and to commercialize, such product candidate. To comply with applicable regulatory and manufacturing requirements, the clinical cell processing facility may be required to possess or obtain certain equipment,substantially reduced our operating costs, including but not limited to biosafety cabinets, warming devices, cell washing devices, freezers or other materials, or to modify aspects of its operations, including its physical facility or layout, environmental systems, monitoring systems, quality systems or training procedures. Ifthrough a clinical cell processing facility is unwilling or unable to comply with these regulatory or manufacturing requirements, it will be restricted or prohibited from manufacturing such product candidate and making it available for administration to patients. Any failure by these clinical cell processing facilities to properly manufacture ProTmune or FATE-NK100 may adverselycompany-wide

reduction in force, to fund our operations into the ~~safety~~second half of 2025. The announcement of these events have had, and ~~efficacy profile of such product candidate or cause the FDA or other regulatory authorities~~our operations in accordance with our revised operating plan may continue to ~~impose restrictions or prohibitions on the manufacture and use of ProTmune or FATE-NK100 in both the clinical and the commercial setting, which would~~ have, an adverse effect on our ~~business.~~stock price.

We depend on strategic partnerships and collaboration arrangements for the development and commercialization of certain of our product candidates in certain indications or geographic territories, and if these arrangements are terminated or are unsuccessful, this could result in delays and other obstacles in the development, manufacture or commercialization of any of our product candidates and materially harm our results of operations.

Our strategy for fully developing and commercializing our product candidates is dependent upon maintaining our current arrangements and establishing new arrangements with research collaborators, corporate collaborators and other third parties. We currently have a corporate collaboration agreement with Ono; our collaboration with Janssen terminated effective April 2023. Our collaboration agreement with Ono provides for, among other things, research funding and significant future payments should certain development, regulatory and commercial milestones be achieved. Under our arrangement with Ono and any future corporate arrangements that we may form, our corporate collaborators may be responsible for:

As a result, we may not be able to conduct such corporate collaborations in the manner or on the time schedule we currently contemplate, which may negatively impact our business operations.

Our lack of control over the research funding for, and the development and commercialization of, certain of our product candidates being developed under the Ono Agreement and any other product candidates that we may develop under a future arrangement could cause delays or other difficulties in the development and commercialization of any of our product candidates, which may prevent completion of research and development activities and intended regulatory filings in a timely fashion, if at all. Because we expect to continue to rely on our current collaborator and to enter into new collaborations in the future, the development and commercialization of any of our product candidates could be substantially delayed, and our ability to receive future funding could be substantially impaired if one or more of our current or future collaborators:

In addition, the termination of the Ono Agreement or any future strategic partnership or collaboration arrangement that we enter into may prevent us from receiving any milestone, royalty payment, sharing of profits, and other benefits under such agreement. Furthermore, disagreements with these parties could require or result in litigation or arbitration, which would be time-consuming and expensive. Any of these events could have a material adverse effect on our ability to develop and commercialize any of our product candidates and may adversely impact our business, prospects, financial condition, and results of operations.

Cell-based therapies depend on the availability of reagents and specialized materials and equipment which in each case are required to be acceptable to the FDA and foreign regulatory agencies, and such reagents, materials, and equipment may not be available to us on acceptable terms or at all. We rely on third-party suppliers for various components, materials and equipment required for the conduct of our clinical trials and the manufacture of our product candidates and do not have supply arrangements for certain of these components.

The development and manufacturing of our product candidates requires many reagents and other specialty materials and equipment, some of which are manufactured or supplied by small companies with limited resources and experience to support commercial biologics production. To date, we and our CMOs have purchased equipment, materials and disposables used for the manufacture of our existing product candidates from third-party suppliers. Some of these suppliers may not have the capacity to support commercial products manufactured under cGMP by biopharmaceutical firms or may otherwise be ill-equipped to support our needs. Reagents and other key materials from these suppliers may have inconsistent attributes and introduce variability into our manufactured product candidates, which may contribute to variable patient outcomes and possible adverse events. We rely on the general commercial availability of materials and equipment required for the manufacture of our product candidates, and do not have supply ~~arrangements for certain~~contracts with many of these ~~components.~~

~~We currently rely, and expect to continue to rely, on third-party~~ suppliers ~~for components necessary for the manufacture of our product candidates, including ProTmune and FATE-NK100. We have not entered into,~~ and may not be able to ~~enter into, agreements for the~~obtain supply ~~of certain components.~~contracts with them on acceptable terms or at all. Even if we are able to enter into such ~~agreements,~~contracts, we may be limited to a sole third-party for the supply of certain required components ~~including our pharmacologic modulators~~ and ~~components for our cell processing media. Additionally, to date, we and our~~equipment.

In addition, the clinical cell processing facilities have purchased equipment, materials and disposables, such as automated cell washing devices, automated cell warming units, commercially available media and cell transfer and wash sets, used for the manufacture of ProTmune and FATE-NK100 from third parties. We rely on the general commercial availability of materials required for the manufacturedevelopment of our product candidates ~~and we do not have any current contractual relationships for~~depends on the ~~supply~~availability of ~~these materials. Accordingly, we may incur delays or increased costs due to any interruption in supply, and we cannot guarantee that we will have an adequate supply of components, equipment,~~certain materials and ~~disposables~~agents used in our clinical trials. For example, we intend to ~~complete our planned clinical development and commercialization~~develop certain of our product ~~candidates.~~candidates as a combination therapy with other cancer therapies, such as monoclonal antibodies, requiring availability and use of these monoclonal antibodies in certain of our clinical trial protocols. Any failure or delays by us or by our clinical sites to obtain sufficient quantities of materials and agents required under our protocols, or other components and agents necessary for the conduct of our clinical trials, may delay our ability to enroll and treat patients in, or complete, our current or future clinical trials of our product candidates on time, if at all.

As a result of any public health crises, the business and operations of our suppliers and other third parties which produce agents and materials used in our clinical trials or manufacturing of our product candidates may be disrupted or delayed, and we in turn may experience disruptions or delays in our supply chain. A delay or inability to continue to source product or materials from any of these suppliers or third parties, which could be due to the impacts of any public health crises, natural disasters (including due to the effects of climate change), the ongoing conflict in Ukraine, regulatory actions or requirements affecting the supplier, adverse financial or other strategic developments experienced by a supplier, labor disputes or shortages, unexpected demands, or quality issues, could adversely affect our ability to manufacture our product candidates and our ability to conduct clinical trials, which could significantly harm our business.

If we are required to change suppliers, or modify the components, equipment, materials or disposables used for the manufacture of our product candidates, we may be required to change our manufacturing operations or clinical trial protocols or to provide additional data to regulatory authorities in order to use any alternative components, equipment, materials or disposables, any of which could set back, delay, or increase the costs required to complete our clinical development and commercialization of our product ~~candidates, including ProTmune and FATE-NK100.~~candidates. Additionally, any such change or modification may adversely affect the safety, efficacy, stability, or potency of our product candidates, and could adversely affect our clinical development of our product candidates and harm our business.

~~We face a variety of challenges and uncertainties associated with our dependence on human mobilized peripheral blood, or mPB, for the manufacture of ProTmune.~~

ProTmune is manufactured using mPB, which is currently procured directly by the clinical cell processing facilities from the National Marrow Donor Program “NMDP” for our ongoing Phase 1/2 PROTECT clinical study. The availability of mPB for the manufacture of ProTmune depends on a number of regulatory, political, economic and technical factors outside of our control, including:

Additionally, we do not have control over the supply, availability, price or types of mPB that these clinical cell processing facilities use in the manufacture of ProTmune. We rely heavily on these third parties to procure mPB that is collected in compliance with government regulations and within the current standard of care. In addition, we may identify specific characteristics of specific units of mPB, such as the volume and red blood cell content, which may limit the ability to use such units in the manufacture of ProTmune even though this mPB may otherwise be suitable for use in allogeneic transplant. As a result, the requirement for mPB to meet our specifications may limit the potential inventory of mPB eligible for use in the manufacture of ProTmune.

In the United States, the banking and use of mPB does not require a BLA, and mPB is not an FDA licensed product. However, the FDA does require that units of mobilized peripheral blood adhere to and meet the standards set forth by the Foundation for Accreditation for Cell Therapy (FACT), the NMDP, and the American Association of Blood Banks (AABB), as applicable. In our current Phase 1/2 PROTECT clinical trial of ProTmune, ProTmune is manufactured using unlicensed mPB units. It may be possible that in the future, regulatory policy could change, and the FDA may later require that mPB units be licensed, and that ProTmune be manufactured using only licensed mPB units. Any inability to procure sufficient supplies of mPB will adversely affect our ability to develop and commercialize ProTmune.

We currently rely on third parties to conduct certain research and development activities and clinical trials of our product candidates. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to timely develop, manufacture, obtain regulatory approval for or commercialize our product candidates and our business could be substantially harmed.

We rely upon third parties, including medical institutions, clinical investigators, ~~cell processing laboratories,~~ and clinical research organizations ~~or CROs,~~(CROs) for the conduct of certain research and preclinical development activities, process development and manufacturing activities, and for the conduct, management, and supervision of clinical trials of our product candidates. We do not have direct control over the activities of these third parties, and may have limited influence over their actual performance. Our reliance on these third parties and CROs does not relieve us of our responsibilities to ensure that our clinical studies are conducted in accordance with the applicable protocol, legal and regulatory requirements and scientific standards.

We are responsible for complying, and we are responsible for ensuring that our third-party service providers and CROs comply, with applicable ~~good clinical practices, or~~ GCP for conducting activities for all of our product candidates in clinical development, including conducting our clinical trials, and recording and reporting data from these trials. Regulatory authorities enforce these regulations through periodic inspections of trial sponsors, principal investigators and trial sites. We cannot assure that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical trials comply with applicable GCP requirements. In addition, our registrational clinical trials must be conducted with product produced under applicable regulatory requirements.

If these third parties and CROs do not successfully carry out their contractual duties or obligations, meet expected deadlines or successfully complete activities as planned, or if the quality or accuracy of the research, preclinical development, process

development, manufacturing, or clinical data they obtain is compromised due to the failure to adhere to applicable regulatory and manufacturing requirements or for other reasons, our research, preclinical development, process development and manufacturing activities, and clinical trials, and the development of our product candidates, may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for or successfully commercialize our product candidates. Further, if our agreements with third parties or CROs are terminated for any reason, the development of our product candidates may be delayed or impaired, and we may be unable to advance our product candidates. As a result, our results of operations and the commercial prospects for our product candidates would be harmed, our costs could increase and our ability to generate revenues could be ~~delayed.~~delayed or impaired.

Our collaborators and strategic partners may control aspects of our clinical trials, which could result in delays and other obstacles in the development, manufacture or commercialization of any of our product candidates and materially harm our results of operations.

For some programs, we will depend on third party collaborators and strategic partners to design and conduct our clinical trials. As a result, we may not be able to conduct these programs in the manner or on the time schedule we currently contemplate, which may negatively impact our business operations. In addition, if any of these collaborators or strategic partners withdraw support for our programs or proposed products, or otherwise impair their development, our business could be negatively affected.

We expect to rely on third parties to conduct some or all aspects of manufacturing of our product candidates for use in clinical trials and for commercial sale, if approved, and these third parties may not perform satisfactorily.

~~We do not expect to independently conduct all aspects of manufacturing for each of our product candidates, and currently rely, and expect to continue to rely,~~ ~~on third parties, including cell processing facilities associated with clinical trial sites, to manufacture our product candidates for use in conducting clinical trials of our product candidates~~ and for commercial sale upon approval of any of our product candidates. In some cases these third parties are academic, research or similar institutions that may not apply the same quality control protocols utilized in certain commercial settings.

In addition, we do not own any facility that may be used as a clinical-scale manufacturing and processing facility. The facilities used to manufacture our product candidates must be approved by the FDA or other foreign regulatory agencies pursuant to inspections that will be conducted after we submit an application to the FDA or other foreign regulatory agencies. Because we will not control all aspects of the manufacturing operations for each of our product candidates, we will be dependent on third parties, including cell processing facilities at sites conducting clinical trials of our product candidates, for manufacture of our product candidates in compliance with regulatory requirements, known as cGMP requirements. If such third parties cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA or other regulatory authorities, they will not be able to secure and/or maintain regulatory approval for their manufacturing facilities. In addition, we have no control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or a comparable foreign regulatory authority does not approve these facilities for the manufacture of our product candidates or if it withdraws any such approval in the future, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval for or market our product candidates, if approved.

If third parties fail to meet the regulatory requirements of the FDA and other foreign regulatory agencies in manufacturing our product candidates, such failure could cause the delay of clinical studies, regulatory submissions, required approvals or commercialization of our product candidates, cause us to incur higher costs, and prevent us from commercializing our products successfully.

If conflicts arise between us and our collaborators or strategic partners, these parties may act in a manner adverse to us and could limit our ability to implement our strategies.

If conflicts arise between our corporate or academic collaborators or strategic partners and us, the other party may act in a manner adverse to us and could limit our ability to implement our strategies. Some of our academic collaborators and strategic partners are conducting multiple product development efforts within each area that is the subject of the collaboration with us. Our collaborators or strategic partners, however, may develop, either alone or with others, products in related fields that are competitive with the products or potential products that are the subject of these collaborations. Competing products, either developed by the collaborators or strategic partners or to which the collaborators or strategic partners have rights, may result in the withdrawal of our ~~collaborator’s~~collaborators' or ~~partner’s~~partners' support for our product candidates.

Some of our collaborators or strategic partners could also become our competitors in the future. Our collaborators or strategic partners could develop competing products, preclude us from entering into collaborations with their competitors, fail to obtain timely regulatory approvals, terminate their agreements with us prematurely, or fail to devote sufficient resources to the development and commercialization of ~~products.~~our product candidates. Any of these developments could harm our product development efforts.

If we are unable to protect our intellectual property, or obtain and maintain patent protection for our technology and product candidates, other companies could develop products based on our discoveries, which may reduce demand for our products and harm our business.

Our commercial success will depend in part on our ability to obtain and maintain intellectual property protection for our product candidates, the operations used to manufacture them and the methods for using them, and also for our cell programming technology in order to prevent third parties from making, using, selling, offering to sell or importing our product candidates or otherwise exploiting our cell programming approach. The scope of patent protection in the biotechnology and pharmaceutical field involves complex legal and scientific questions and can be uncertain. One aspect of the determination of patentability of our inventions depends on the scope and content of the “prior art,” information that was or is deemed available to a person of skill in the relevant art prior to the priority date of the claimed invention. There may be prior art of which we are not aware that may affect the patentability of our patent claims or, if issued, affect the validity or enforceability of a patent claim. Further, we may not be aware of all third-party intellectual property rights potentially relating to our product candidates or their intended uses, and as a result the impact of such third-party intellectual property rights upon the patentability of our own patents and patent applications, as well as the impact of such third-party intellectual property upon our freedom to operate, is highly uncertain. Because patent applications in the United States and most other countries are confidential for typically a period of 18 months after filing, or may not be published at all, we cannot be certain that we were the first to file any patent application related to our product candidates. As a result, the issuance, scope, validity, enforceability, and commercial value of our patent rights are uncertain. We own and have exclusive licenses to patent portfolios for our product candidates and cell programming technology, although we cannot be certain that our existing patents and patent applications provide adequate protection or that any additional patents will issue to us with claims that provide adequate protection of our other product candidates. Further, we cannot predict the breadth of claims that may be enforced in our patents if we attempt to enforce them or if they are challenged in court or in other proceedings. If we are unable to secure and maintain protection for our product candidates and cell programming technology, or if any patents we obtain or license are deemed invalid and unenforceable, our ability to commercialize or license our technology could be adversely affected.

Others have filed, and in the future are likely to file, patent applications covering products and technologies that are similar, identical or competitive to ours or important to our business. Since patent applications in the United States and most other countries are confidential for a period of time after filing, and some remain so until issued, we cannot be certain that any patent application owned by a third party will not have priority over patent applications filed or in-licensed by us, or that we or our licensors will not be involved in interference, opposition, reexamination, review, reissue, post grant review or invalidity proceedings before U.S. or non-U.S. patent offices. The scope, validity or enforceability of our patents or the patents of our licensors may be challenged in such proceedings in either the courts or patent offices in the United States and abroad, and our business may be harmed if the coverage of our patents or the patents of our licensors is narrowed, or if a patent of ours or our licensors is judged invalid or unenforceable, in any such proceedings. In addition, patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after it is filed. Various extensions may be available; however the life of a patent, and the protection it affords, is limited. Even if we obtain patents covering our product candidates, once the patent life has expired for a product, we may be open to competition from other products.

We also rely upon unpatented trade secrets and improvements, unpatented know-how and continuing technological innovation to develop and maintain our competitive position, which we seek to protect, in part, through confidentiality agreements with our commercial collaborators, employees and consultants. We also have invention or patent assignment agreements with our employees and some, but not all, of our commercial collaborators and consultants. However, if our employees, commercial collaborators or consultants breach these agreements, we may not have adequate remedies for any such breach, and our trade secrets may otherwise become known or independently discovered by our competitors, which would adversely affect our business position.

We depend on our licensors to prosecute and maintain patents and patent applications that are material to our business. Any failure by our licensors to effectively protect these intellectual property rights could adversely affect our business and operations.

Certain rights to our key technologies and product candidates, including intellectual property relating to ~~ProTmune, FATE-NK100, and~~ our ~~induced pluripotent stem cell~~iPSC technology, are licensed from third parties. As a licensee of ~~third party~~third-party intellectual property, we rely on our licensors to file and prosecute patent applications and maintain patents, and otherwise protect the licensed intellectual property under some of our license agreements. We have not had and do not have primary control over these activities for certain of our licensed patents, patent applications and other intellectual property rights, and we cannot be certain that such activities will result in valid and enforceable patents and other intellectual property rights. Additionally, our licensors may have the right to control enforcement of our licensed patents or defense of any claims asserting the invalidity of these patents and we cannot be certain that our licensors will allocate sufficient resources or prioritize enforcement of such patents or defense of such claims to protect our interests in the licensed patents. Even if we are not a party to these legal actions, an adverse outcome could harm our business because it might prevent us from continuing to license intellectual property that we may need to operate our business.

If we fail to comply with our obligations under our license agreements, we could lose rights to our product candidates or key technologies.

We have obtained rights to develop, market and sell some of our product candidates ~~including ProTmune and FATE-NK100,~~ through intellectual property license agreements with third parties. These license agreements impose various diligence, milestone payment, royalty and other obligations on us. In particular, under our Amended and Restated Exclusive License Agreement dated May 15, 2018 (Amended MSK License) with Memorial Sloan Kettering Cancer Center (MSK), in the event a licensed product achieves a specified clinical milestone, MSK is eligible to receive from us certain milestone payments totaling up to $75.0 million based on the price of our common stock, where the amount of such payments owed to MSK is contingent upon certain increases in the price of our common stock following the date of achievement of such clinical milestone. If we fail to comply with our obligations under our license agreements, including any payment obligations, we could lose some or all of our rights to develop, market and sell products covered by these licenses, and our ability to form collaborations or partnerships may be impaired. In addition, disputes may arise under our license agreements with third parties, which could prevent or impair our ability to maintain our current licensing arrangements on acceptable terms and to develop and commercialize the affected product candidates.

We may be involved in litigation or other proceedings from time to time relating to the enforcement or defense of patent and other intellectual property rights, which could cause us to divert our resources and could put our intellectual property at risk.

IfTo prevent infringement or unauthorized use of our intellectual property, we ~~choose~~have in the past, and may in the future, need to gofile infringement claims. For example, in May 2022, we filed a patent infringement lawsuit in the Southern District of California against Shoreline Biosciences, Inc. Refer to ~~court~~Item 3. Legal Proceedings in this Annual Report on Form 10-K for a more detailed description of this matter. When we pursue litigation to stop another party from using the inventions claimed in any patents we ~~obtain,~~own or control, that ~~individual or company~~party has the right to ask the court to rule that such patents are invalid or should not be enforced against that third party. In addition to patent infringement lawsuits, we may ~~be required~~decide to file interferences, oppositions, ex parte reexaminations, post-grant review, or inter partes review proceedings before the U.S. Patent and Trademark Office ~~or USPTO,~~(the USPTO) and corresponding foreign patent offices. Litigation and other proceedings relating to intellectual property are unpredictable and expensive and ~~would~~may consume time and resources and divert the attention of managerial and scientific ~~personnel even if we were successful in any such proceeding.~~personnel. Such ~~litigation or~~litigations and proceedings could substantially increase our operating losses and reduce the resources available for research, development, and other activities. We may not have sufficient financial or other resources to adequately conduct such litigation or ~~proceedings.~~proceedings or may be required to divert such resources from our ongoing and planned research and development activities. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing or misappropriating or successfully challenging our intellectual property rights. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the ~~marketplace~~marketplace.

There also is a risk that a court or patent office in such proceeding will decide that our patents or the patents of our licensors are not valid or are not enforceable, and that we do not have the right to stop the other party from using the inventions. ~~There is also the risk that,~~Additionally, even if the validity of such patents is upheld, the court ~~will~~may refuse to stop the other party on the ground that such other party’s activities do not infringe our rights to such patents. If we ~~were~~are not successful in enforcing or defending our intellectual property, our competitors could develop and market products based on our discoveries and technologies, which may reduce the commercial viability of, and demand for, our product candidates and any future products.

We or our strategic partners may infringe the intellectual property rights of others, which may prevent or delay our product development efforts and stop us from commercializing, or increase the costs of commercializing, our product candidates.

Our success will depend, in part, on our ability to operate without infringing the proprietary rights of third parties. There is a substantial amount of litigation, both within and outside the United States, involving patent and other intellectual property rights in the biotechnology and pharmaceutical industries, including patent infringement lawsuits, interferences, oppositions, ex parte reexaminations, post-grant review, and inter partes review proceedings before the USPTO and corresponding foreign patent offices. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are developing product candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our product candidates may be subject to claims of infringement of the patent rights or misappropriation of other intellectual property rights of third parties.

39We cannot be certain that any of our patent searches or analyses, including the identification of relevant patents, the scope of patent claims or the expiration of relevant patents, are complete or thorough, nor can we be certain that we have identified each and every third-party patent and pending application in the United States and abroad that is relevant to or necessary for the commercialization of our product candidates in any jurisdiction. The scope of a patent claim is determined by an interpretation of the law, the written disclosure in a patent and the patent’s prosecution history. Our interpretation of the relevance or the scope of a patent or a pending application may be incorrect, which may negatively impact our ability to market our products. We may incorrectly determine that our products are not covered by a third-party patent or intellectual property rights or may incorrectly predict whether a third-party’s pending application will issue with claims of relevant scope. Our determination of the expiration date of any patent in the United States or abroad that we consider relevant may be incorrect, which may negatively impact our ability to develop and market our product candidates. Our failure to identify and correctly interpret relevant patents may negatively impact our ability to develop and market our products.

We cannot guarantee that the manufacture, use or marketing of ~~ProTmune, FATE-NK100,~~ our ~~iPSC-derived cell~~existing product candidates or any other product candidates that we develop, or the use of our cell programming technology, will not infringe third-party patents. There may be third-party patents or patent applications with claims to materials, cell compositions, methods of manufacture or methods for treatment related to the use or manufacture of our product candidates. Our competitors may have filed, and may in the future file, patent applications covering products and technologies similar to ours. Because patent applications can take many years to issue, there may be currently pending patent applications which may later result in issued patents that our product candidates may infringe. In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon these patents. ~~If any third-party patents were held by~~

Third parties asserting their patent or other intellectual property rights against us may seek and obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize our product candidates or force us to cease some of our business operations. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a ~~court~~substantial diversion of ~~competent jurisdiction~~management and other employee resources from our business, cause development delays, and may impact our reputation. In the event of a successful claim of infringement against us, we may have to ~~cover aspects~~pay substantial damages, including treble damages and attorneys’ fees for willful infringement, obtain one or more licenses from third parties, pay royalties, or redesign our infringing products, which may be impossible on a cost-effective basis or require substantial time and monetary expenditure. In that event, we would be unable to further develop and commercialize our product candidates, which could harm our business significantly. Claims that we have misappropriated the confidential information or trade secrets of ~~the~~third parties could have a similar negative impact on our business.

We may not be successful in obtaining or maintaining necessary rights to product components and processes for development or manufacture ~~of any~~ of our product candidates ~~any compositions formed during the~~which may cause us to operate our business in a more costly or otherwise adverse manner that was not anticipated.

We own or license from third parties certain intellectual property rights necessary to develop and manufacture ~~or any final~~our product ~~itself, the holders~~candidates. The growth of ~~any such patents may be able to block~~our business will likely depend in part on our ability to acquire or in-license additional proprietary rights, including to advance our research or allow commercialization of our product candidates. In that event, we may be required to expend considerable time and resources to develop or license replacement technology. For example, our programs may involve additional technologies or product candidates that may require the use of additional proprietary rights held by third parties. Furthermore, other pharmaceutical or biotechnology companies and academic institutions may also have filed or are planning to file patent applications potentially relevant to our business. From time to time, in order to avoid infringing these third-party patents, we may be required to license technology from additional third parties to further develop or commercialize our product candidates. We may be unable to acquire or in-license any relevant third-party intellectual property rights, including any such intellectual property rights required to manufacture, use or sell our product ~~candidate unless~~candidates, that we ~~obtained~~identify as necessary or important to our business operations. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all, and as a result we may be unable to develop or commercialize the affected product candidates, which would harm our business. We may need to cease use of the compositions or methods covered by such third-party intellectual property rights, and may need to seek to develop alternative approaches or technology that do not infringe on such intellectual property rights which may entail additional costs and development delays, even if

Additionally, we sometimes collaborate with academic institutions to accelerate our preclinical research or ~~until such patents expire. Such~~development under written agreements with these institutions. Typically, these institutions provide us with an option to negotiate a license ~~may not be available on commercially reasonable terms or at all.~~

~~If a patent infringement suit were brought against us,~~to any of the institution’s rights in technology resulting from the collaboration. Regardless of such option, we may be ~~forced~~unable to ~~stop~~negotiate a license within the specified timeframe or ~~delay developing, manufacturing, or selling potential products~~under terms that are ~~claimed~~acceptable to ~~infringe a third party’s intellectual property rights, unless that third party grants us rights to use its intellectual property.~~us. If we are unable to do so, the institution may offer the intellectual property rights to other parties, potentially blocking our ability to pursue our program. If we are unable to successfully obtain rights to required third-party intellectual property or to maintain the existing intellectual property rights we have, we may have to abandon development of such program and our business and financial condition could suffer.

The licensing and acquisition of third-party intellectual property rights is a competitive practice, and companies that may be more established, or have greater resources than we do, may also be pursuing strategies to license or ~~develop or obtain non-infringing technology, or if we fail to defend an infringement action successfully, or if we are found to have infringed a valid patent,~~acquire third-party intellectual property rights that we may ~~incur substantial monetary damages, encounter significant delays~~consider necessary or attractive in ~~bringing~~order to commercialize our product candidates. More established companies may have a competitive advantage over us due to their larger size and cash resources or greater clinical development and commercialization capabilities. In addition, it may be more costly for us to secure and maintain the necessary patent protection to block third parties from using our technology than to negotiate out-licenses or similar agreements with these parties to provide them with limited rights to use our technology. There can be no assurance that we will be able to successfully complete any such negotiations and ultimately acquire or maintain, on commercially viable terms, the rights to the intellectual property required for the successful development and commercialization of our product candidates.

Intellectual property rights do not necessarily address all potential threats to our competitive advantage.

The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations and may not adequately protect our business or permit us to maintain our competitive advantage. For example:

Should any of ~~which~~these events occur, they could significantly harm our business, ~~significantly.~~results of operations and prospects.

We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed alleged trade secrets.

~~As is common in the biotechnology~~In conducting our business operations, we have obtained confidential and ~~pharmaceutical industries,~~proprietary information from third parties. In addition, we employ individuals who were previously employed at other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees, consultants and independent contractors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former ~~employers.~~employers or other parties. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we could lose valuable intellectual property rights or personnel, which could adversely affect our business. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management.

We may be subject to claims challenging the inventorship of our patents and other intellectual property.

We may be subject to claims that former employees, collaborators, or other third parties have an interest in our patents or other intellectual property as an inventor or co-inventor. If we fail in defending any such claims, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property. We may also be subject to monetary damages, and any of these outcomes could have a material adverse impact on our business.

Proprietary information and invention assignment agreements with our employees and third parties may not prevent unauthorized disclosure of our trade secrets and other proprietary information.

In addition to the protection afforded by patents, we also rely upon unpatented trade secrets and improvements, proprietary know-how, and continuing technological innovation to develop and maintain our competitive position, which we seek to protect, in part, through confidentiality agreements with our collaborators, employees and consultants. We also have invention or patent assignment agreements with our employees and some, but not all, of our collaborators and consultants. Because we expect to rely on third parties in the development and manufacture of our product candidates, we must, at times, share trade secrets with them, which increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated or disclosed.

Trade secrets, however, may be difficult to protect, and any disclosure, either intentional or unintentional, by our employees or third-party consultants and vendors that we engage to perform research, clinical trials or manufacturing activities, or misappropriation by third parties (such as through a cybersecurity breach) of our trade secrets or proprietary information could enable competitors to duplicate or surpass our technological achievements, thus eroding our competitive position in our market. Although we use reasonable efforts to protect our trade secrets, our employees or former employees, consultants, outside scientific advisors, contractors, and collaborators might intentionally or inadvertently disclose our trade secret information to competitors. In addition, competitors may otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor or other third-party, we would have no right to prevent them from using that technology or information to compete with us. Furthermore, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the United States. As a result, we may encounter significant problems in protecting and defending our intellectual property both in the United States and abroad. If we are unable to prevent unauthorized material disclosure of our intellectual property to third parties, or misappropriation of our intellectual property by third parties, we will not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business, operating results, and financial condition.

We may not be able to protect our intellectual property rights throughout the world.

Filing, prosecuting and defending patents on our product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States can be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or

other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and may also export infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These products may compete with any products that we may develop and commercialize, and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets, and other intellectual property protection, particularly those relating to biotechnology and pharmaceutical products, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions, whether or not successful, could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

Changes in the patent law in the United States could diminish the value of patents in general, thereby impairing our ability to protect our product candidates and technology.

As is the case with other biotechnology companies, our success is heavily dependent on intellectual property rights, particularly patents. Obtaining and enforcing patents in the biotechnology industry involve both technological and legal complexity, and is therefore obtaining and enforcing biotechnology patents is costly, time-consuming and inherently uncertain. In addition, the United States has recently enacted and is currently implementing wide-ranging patent reform legislation. Recent U.S. Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future.

The term of our patents may not be sufficient to effectively protect our market position and products.

Patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after it is filed. Various extensions may be available; however, the life of a patent, and the protection it affords, is limited. Even if we obtain patents covering our product candidates, once the patent life has expired for a product, we may be open to competition from other products. If the lives of our patents are not sufficient to effectively protect our products and business, our business and results of operations will be adversely affected.

We do not have ~~limited~~experience marketing ~~experience~~any product candidates and do not have a sales force or distribution capabilities, and if our products are approved, we may be unable to commercialize them successfully.

We currently have ~~limited~~no experience in marketing and selling therapeutic ~~products.~~products, including obtaining and maintaining adequate pricing and reimbursements. If any of our product candidates are approved for marketing, we intend to establish marketing and sales capabilities internally or we may selectively seek to enter into partnerships with other entities to utilize their marketing and distribution capabilities. If we are unable to develop adequate marketing and sales capabilities on our own or effectively partner with third parties, our ability to generate product revenues will suffer.

The commercial success of our product candidates will depend upon the degree of market acceptance by physicians, patients, third-party payers and others in the medical community.

The commercial success of our products, if approved for marketing, will depend in part on the medical community, patients and third-party payers accepting our product candidates as effective and safe. If these products do not achieve an adequate level of acceptance, we may not generate significant product revenue and may not become profitable. The degree of market acceptance of our products, if approved for marketing, will depend on a number of factors, including:

The patient populations targeted by our autoimmune product candidates are also typically not at risk of near-term death, even if they may suffer life-threatening symptoms, so those patients will need to deem the benefits of cell therapy to be worth the risk of unknown potential adverse side effects. Our success in this space will depend upon physicians who specialize in the treatment of autoimmune diseases targeted by our product candidates prescribing treatments that involve the use of our product candidates in lieu of, or in addition to, existing treatments with which they are more familiar and for which greater clinical data may be available.

Even if a potential product displays a favorable efficacy and safety profile in preclinical studies and clinical trials, market acceptance of the product will not be known until after it is launched. Any failure to achieve market acceptance for our product candidates will harm our business, results and financial condition.

We expect to face uncertainty regarding the pricing of ~~ProTmune, FATE-NK100,~~our existing product candidates and any other product candidates that we may develop. If pricing policies for our product candidates are unfavorable, our commercial success will be impaired.

Due to the novel nature of our ~~product candidates, and the targeted indication of HSCT procedures in general and our~~ cellular immunotherapy product candidates, ~~in particular,~~ we face significant uncertainty as to the pricing of any such products for which we may receive marketing approval. While we anticipate that pricing for any cellular immunotherapy product candidates that we develop will be relatively high due to their anticipated use in the prevention or treatment of life-threatening diseases where therapeutic options are limited, the biopharmaceutical industry has recently experienced significant pricing ~~pressures, including in the area of orphan drug products.~~pressures. In particular, drug pricing and other healthcare costs continue to be subject to intense political and societal pressures, which we anticipate will continue and escalate on a global basis. These pressures may result in harm to our business and reputation, cause our stock price to decline or experience periods of volatility and adversely affect results of operations and our ability to raise funds.

The insurance coverage and reimbursement status of newly-approved products is uncertain. Failure to obtain or maintain adequate coverage and reimbursement for ~~new products~~our product candidates could limit our product revenues.

Our ability to commercialize any of our product candidates successfully will depend in part on the ~~extent to which~~availability of coverage and reimbursement for these products ~~and related treatments will be available~~ from third-party payors, including government health administration authorities, private health insurers, and other managed care organizations. The availability and extent of reimbursement by governmental and private ~~payers~~payors is essential for most patients who generally rely on third-party payors to ~~be able to afford expensive~~reimburse all or part of the costs of their care, including treatments such as ~~HSCT. There~~cellular immunotherapy. Because our product candidates represent new approaches to the treatment of cancer, there is significant uncertainty ~~related~~as to the insurance coverage and reimbursement status of ~~newly approved products~~any product candidates for which we may receive regulatory approval. In the United States, the principal decisions about reimbursement for new medicines are typically made by ~~government~~the Centers for Medicare & Medicaid Services (CMS), an agency within the U.S. Department of Health and ~~third-party payers. In particular, there is no body of established practices~~Human Services. CMS decides whether and ~~precedents for reimbursement of cellular immunotherapies,~~to what extent a new medicine will be covered and ~~it is difficult~~reimbursed under Medicare, and private payors tend to ~~predict what the regulatory authority or private payer will decide with respect~~follow CMS determinations to ~~reimbursement levels for novel products such as ours. Our products may not qualify for coverage or direct reimbursement, or may be subject to limited reimbursement.~~a substantial degree. If reimbursement or insurance coverage is not available for our product candidates, or is available only to limited levels, we may not be able to successfully commercialize our product candidates. Even if coverage is provided, the approved reimbursement amount may not be sufficient to allow us to establish or maintain pricing to generate income. Factors payors consider in determining reimbursement are based on whether the product is: (i) a covered benefit under its health plan; (ii) safe, effective and medically necessary; (iii) appropriate for the specific patient; (iv) cost-effective; and (v) neither experimental nor investigational. For more information, please see “Business—Government Regulation—Coverage and Reimbursement” in our Annual Report on Form 10-K for the year ended December 31, 2022.

In addition, reimbursement agencies in foreign jurisdictions may be more conservative than those in the United States. Accordingly, in markets outside the United States, the reimbursement for our products may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenues and profits. Moreover, increasing efforts by governmental and third-party ~~payers,~~payors, in the United States and abroad, to cap or reduce healthcare costs may cause such organizations to limit both coverage and level of reimbursement for new products approved and, as a result, they may not cover or provide adequate payment for our product candidates. Failure to obtain or maintain adequate reimbursement for any products for which we receive

marketing approval will adversely affect our ability to achieve commercial success, and could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products, and our overall financial condition.

If the market opportunities for our product candidates are restricted or smaller than we believe they are, our revenues may be adversely affected and our business may suffer. Because the target patient populations of our product candidates ~~are~~may be small and variable, we must be able to successfully identify patients and capture a significant market share to achieve and maintain profitability.

We focus our research and development on product candidates for ~~orphan diseases.~~ rare diseases, including cancer and autoimmune disorders. The FDA often approves new therapies initially for use in patients with relapsed or refractory disease. We expect to initially seek approval of our product candidates in these settings. Subsequently, for those products that prove to be sufficiently beneficial, if any, we would expect to seek approval in earlier lines of treatment. There is no guarantee that our product candidates, even if approved, would be approved for earlier lines of therapy, and, prior to any such approvals, we will have to conduct additional clinical trials, including potentially comparative trials against approved therapies. Certain of our product candidates also target similar patient populations as autologous cell therapy product candidates, including approved autologous CAR T products. Our therapies may not be as safe and effective as approved autologous CAR T therapies and as a result, such product candidates may only be approved for patients who are ineligible for autologous CAR T therapy.

Our projections of ~~both~~ the number of people who have ~~these~~or will have the diseases we may be targeting, as well as the subset of ~~people~~patients with these ~~diseases~~cancers in a position to receive second or later lines of therapy and who have the potential to benefit from treatment with our product candidates, ~~are based on estimates. These estimates~~ may prove to be ~~incorrect, and~~incorrect. Further, new studies may change the estimated incidence or prevalence of these diseases. The number of patients in the United States, Europe and elsewhere may turn out to be lower than expected, or the potentially addressable patient population for our product candidates may be limited or may not be ~~otherwise~~ amenable to treatment with our ~~products, or new patients may become increasingly difficult to identify or gain access to,~~product candidates, all of which would adversely affect our results of operations and our business. Additionally, because our target patient populations ~~are~~may be small and variable, we ~~will be required to capture~~may never achieve profitability without capturing a significant market share or obtaining regulatory approval for additional indications for our products.

Healthcare legislative or regulatory reform measures may have a negative impact on our business and results of operations.

In the United States and some foreign jurisdictions, there have been, and continue to be, several legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of product candidates, restrict or regulate post-approval activities, and affect our ability to profitably sell any product candidates for which we obtain marketing approval. Payors, whether domestic or foreign, or governmental or private, are developing increasingly sophisticated methods of controlling healthcare costs. In both the United States and certain foreign jurisdictions, there have been a number of legislative and regulatory changes to the health care system that could impact our ability to sell our products profitably. Additional changes that may affect our business include those governing enrollment in federal healthcare programs, reimbursement changes, rules regarding prescription drug benefits under the health insurance exchanges and fraud and abuse and enforcement. Continued implementation of the Affordable Care Act (ACA) and the passage of additional laws and regulations may result in the expansion of new programs such as Medicare payment for performance initiatives, and may impact existing government healthcare programs, such as by improving the physician quality reporting system and feedback program. For more information, please see “Business—Government Regulation—Healthcare Reform and Other Regulatory Changes” in our Annual Report on Form 10-K for the year ended December 31, 2022.

There has been increasing legislative and enforcement interest in the United States with respect to drug pricing practices.  Specifically, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several U.S. Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, and review the relationship between pricing and manufacturer patient programs. The Inflation Reduction Act of 2022, or IRA includes several provisions that may impact our business to varying degrees, including provisions that reduce the out-of-pocket spending cap for Medicare Part D beneficiaries from $7,050 to $2,000 starting in 2025, thereby effectively eliminating the coverage gap; impose new manufacturer financial liability on certain drugs under Medicare Part D, allow the U.S. government to negotiate Medicare Part B and Part D price caps for certain high-cost drugs and biologics without generic or biosimilar competition; require companies to pay rebates to Medicare for certain drug prices that increase faster than inflation; and delay until January 1, 2032 the implementation of the HHS rebate rule that would have limited the fees that pharmacy benefit managers can charge. Further, under the IRA, orphan drugs are exempted from the Medicare drug price negotiation program, but only if they have one orphan designation and for which the only approved indication is for that disease or condition.  If a product receives multiple rare disease designations or has multiple approved indications, it may not qualify for the orphan drug exemption. The implementation of the IRA is currently subject to ongoing litigation challenging the constitutionality of the IRA’s Medicare drug price negotiation program. The effects of the IRA on our business and the healthcare industry in general is not yet known.

In addition, President Biden has issued multiple executive orders that have sought to reduce prescription drug costs. In February 2023, HHS also issued a proposal in response to an October 2022 executive order from President Biden that includes a proposed prescription drug pricing model that will test whether targeted Medicare payment adjustments will sufficiently incentivize manufacturers to complete confirmatory trials for drugs approved through FDA’s accelerated approval pathway. Although a number of these and other proposed measures may require authorization through additional legislation to become effective, and the Biden administration may reverse or otherwise change these measures, both the Biden administration and Congress have indicated that they will continue to seek new legislative measures to control drug costs.

The continuing efforts of the government, insurance companies, managed care organizations and other payers of healthcare services to contain or reduce costs of healthcare may adversely affect:

We expect that additional U.S. federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that the U.S. federal government will pay for healthcare drugs and ~~maintain profitability.~~services, which could result in reduced demand for our drug candidates or additional pricing pressures. Individual states in the United States have also become increasingly active in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain drug access and marketing cost disclosure and transparency measures, and designed to encourage importation from other countries and bulk purchasing. Legally mandated price controls on payment amounts by third-party payors or other restrictions could harm our business, financial condition, results of operations and prospects. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs. This could reduce the ultimate demand for our drugs or put pressure on our drug pricing, which could negatively affect our business, financial condition, results of operations and prospects.

The success of our existing product candidates ~~including ProTmune and FATE-NK100,~~ is substantially dependent on developments within the field of ~~HSCT~~cellular immunotherapy, and specifically developments relating to the use of pluripotent or genome edited cells for the manufacture of cellular ~~immunotherapy,~~therapeutics, some of which are beyond our control.

Our product candidates ~~including ProTmune and FATE-NK100,~~ are designed and are being developed as therapeutic entities for use as cellular ~~immunotherapies.~~immunotherapies, and all of our current product candidates are based on our novel iPSC platform. Additionally, some of our product candidates utilize novel genome editing technologies. To date, there is limited clinical trial experience testing iPSC-derived therapeutic product candidates and genome edited therapeutics. The fields of cellular and genome edited therapies are evolving, and as more therapeutic product candidates derived from pluripotent and genome edited cells are reviewed by regulatory authorities, regulatory authorities may impose additional requirements for approval that were not previously anticipated. There have also been several significant adverse events from gene therapy treatments in the past, including reported cases of leukemia and death. There can be no assurance that any product candidates developed from or related to our iPSC platform or any of our research programs will not cause severe or undesirable side effects or result in significant delays or unanticipated costs, or that such development problems can be solved. Any adverse developments in the ~~field~~fields of cellular immunotherapy ~~generally, and in the practice of HSCT in particular,~~or genome edited therapy will negatively affect our ability to develop and commercialize our product candidates. If the market for HSCT procedures declines or fails to grow at anticipated levels for any reason, or if the need for patients to undergo HSCT procedures is obviated due to the development and commercialization of therapeutics targeting the underlying cause of diseases addressed by HSCT, our business prospects will be significantly harmed.

We face intense competition from other biotechnology and pharmaceutical companies that are commercializing, have developed or may develop product candidates for the treatment of the diseases that we may target, including companies developing novel therapies and platform technologies. If these companies develop product candidates or platform technologies more rapidly than we do, if their commercialized products or product candidates are more effective, more cost effective, or have fewer side effects, or if they compete in various other aspects of our ~~operating results~~business, our ability to develop and successfully commercialize product candidates and to execute on our business plans will ~~suffer if we fail to compete effectively.~~be adversely affected.

The biotechnology and pharmaceutical industries are intensely competitive and ~~subject to~~characterized by rapid and significant ~~technological change.~~innovation, particularly in the areas of immune-oncology and the development and commercialization of cell therapies. We ~~face competition from~~compete with a variety of large pharmaceutical companies, multinational biopharmaceutical companies, other biopharmaceutical companies and specialized biotechnology ~~and pharmaceutical~~ companies, as well as technology and/or therapeutics being developed at universities and other research ~~institutions, and many~~

institutions. Many of our competitors have greater financial and other resources, such as larger research and development staff, ~~and~~ more experienced ~~marketing and~~ manufacturing organizations and ~~facilities. In particular, there~~facilities and greater sales and marketing organizations. Third parties are ~~several companies and institutions~~commercializing, have developed, are developing ~~products that~~or may ~~obviate the need for HSCT, may be competitive to~~develop product candidates, platform technologies and processes that compete with ours. Competitive therapeutic treatments include those that have already been approved and accepted by the medical community, as well as novel treatments that are currently in ~~our research and~~preclinical or clinical development ~~pipeline,~~ or may ~~render~~otherwise enter the market. We believe that a significant number of product candidates are currently under development, including various cellular immunotherapies as well as multifunctional targeted antibodies, such as bi-specific and tri-specific T-cell engagers, which may become commercially available in the future for the treatment of indications, including a variety of cancers, for which we are developing or may try to develop our product ~~candidates obsolete or noncompetitive.~~candidates. Should one or more of these ~~products~~competing product candidates or other competing product candidates of which we are not aware receive regulatory approval or otherwise achieve clinical or commercial success, our regulatory strategy could be ~~successful,~~impaired, our ability to obtain regulatory approval could be delayed or prevented, or the market for our products may be reduced or eliminated, thereby harming or preventing our commercial success.

Even if we successfully obtain approval for any product candidate, we will face competition based on many different factors, including the relative safety and efficacy of our product candidates, the actual or perceived quality of patient life while undergoing treatment with our product candidates, the ease with which our product candidates can be administered, the timing and scope of regulatory approvals for these product candidates, the availability and cost of manufacturing, marketing and sales capabilities, pricing, reimbursement coverage and patent positions, and the relative prioritization of our product candidates by physicians and healthcare providers among available therapies. Competing products and product candidates could present superior treatment alternatives, including by being more effective, safer, less expensive or marketed and sold more effectively than any products we may ~~not achieve commercial success.~~

develop. Competitive products and product candidates may also make any product we develop obsolete or noncompetitive before we recover the expense of developing and commercializing such product. We ~~may not be able~~could also face competition from other companies for collaboration partners, employees, advisors and service providers, which could negatively impact our ability to ~~manage~~execute our business ~~effectively if we are unable~~plans.

The loss of any member of our senior management team or our inability to attract and retain key personnel and ~~consultants.~~consultants could adversely affect our business.

We may not be able to retain or attract qualified management, finance, scientific and clinical personnel and consultants due to the intense competition for a limited number of qualified personnel and consultants among biotechnology, pharmaceutical and other businesses. The loss of any members of our senior management team could adversely impact our operations if we experience difficulties in recruiting and hiring qualified successors. We may also experience difficulties in attracting or retaining personnel with sufficient experience and skills in the complex and emerging field of cellular therapeutic development and manufacture to support our ongoing and planned clinical development activities. We currently rely, and for the foreseeable future will continue to rely, in substantial part on certain independent organizations, advisors and consultants. There can be no assurance that the services of independent organizations, advisors and consultants will continue to be available to us on a timely basis when needed, or that we can find qualified replacements. We may also be subject to penalties or other liabilities if we mis-classify employees as consultants. In addition, if we are unable to effectively manage our outsourced activities or if the quality or accuracy of the services provided by consultants is compromised for any reason, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval of our product candidates or otherwise advance our business. There can be no assurance that we will be able to manage our existing consultants or find other competent outside contractors and consultants on economically reasonable terms, or at all.

Many of the biotechnology and pharmaceutical companies that we compete against for qualified personnel have greater financial and other resources and different risk profiles than we do. We may be required to provide compensation in excess of historical levels in order to recruit and retain personnel in the current market. If we are not able to retain and attract necessary personnel and consultants to perform the requisite operational roles and accomplish our business objectives, we may experience constraints that will significantly impede the achievement of our development objectives, our ability to raise additional capital and our ability to implement our business strategy.

IfOur recent reduction in force undertaken to better align our workforce with the needs of our business and product pipeline prioritization may not achieve our intended outcome.

In January 2023, we ~~fail~~implemented a reduction in force that affected approximately 60% of our workforce to ~~maintain~~better align our human resources with the needs of our business and focus our capital resources on select product candidates, in an ~~effective system of disclosure controls and procedures and internal controls, our ability~~effort designed to ~~produce accurate financial statements or comply with applicable regulations could be impaired.~~

~~As a public company,~~ensure we are ~~required~~appropriately structured and funded to ~~comply with~~operate into the ~~Sarbanes-Oxley Act~~second half of ~~2002,~~2025. The reduction in force was completed in the first quarter of 2023. This reduction in force may result in unintended consequences and costs, such as ~~amended, or~~ the ~~Sarbanes-Oxley Act,~~loss of institutional knowledge and expertise, attrition beyond the intended number of employees, decreased morale among our remaining employees, and the ~~related rules and regulations~~risk that we may not achieve the anticipated benefits of the ~~SEC, expanded disclosure requirements, accelerated reporting requirements~~reduction in force. In addition, while we have key talent necessary to run our operations, we may be unsuccessful in distributing the duties and more complex accounting rules. Company responsibilities required by the Sarbanes-Oxley Act include establishing and maintaining corporate oversight and adequate internal control over financial reporting and disclosure controls and procedures. Effective internal controls are necessaryobligations of departed employees among our remaining employees. The reduction in workforce could also make it difficult for us to ~~produce reliable financial reports~~ pursue, or prevent us from pursuing, new opportunities

~~We cannot assure that we will not have material weaknesses~~insufficient personnel, or ~~significant deficiencies in our internal control over financial reporting.~~require us to incur additional and unanticipated costs to hire new personnel to pursue such opportunities or initiatives. If we are unable to ~~successfully remediate any material weakness~~realize the anticipated benefits from the reduction in force, or if we experience significant ~~deficiency~~adverse consequences from the reduction in our internal control over financial reporting, or identify any material weaknesses or significant deficiencies that may exist, the accuracy and timing of our financial reporting may be adversely affected, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, and our stock price may decline materially as a result.

~~We are party to a loan and security agreement that contains operating and financial covenants that may restrict~~force, our business, ~~and financing activities.~~

In July 2014, we entered into an amended and restated loan and security agreement with Silicon Valley Bank, or SVB, pursuant to which we were extended term loans in the aggregate principal amount of $20.0 million. In July 2017, we entered into an amendment to the loan and security agreement, pursuant to which SVB extended an additional term loan to us in the aggregate principal amount of $15.0 million, a portion of which was applied to repay in full our previously outstanding debt to SVB under the agreement. Borrowings under the loan and security agreement, as amended, are secured by substantially all of our assets, excluding certain intellectual property rights. The loan and security agreement restricts our ability, among other things, to:

In addition, we are required under our loan agreement to maintain our deposit and securities accounts with Silicon Valley Bank and to comply with various operating covenants and default clauses that may restrict our ability to finance our operations, engage in business activities or expand or fully pursue our business strategies. A breach of any of these covenants or clauses could result in a default under the loan and security agreement, which could cause all of the outstanding indebtedness under the facility to become immediately due and payable.

If we are unable to generate sufficient cash to repay our debt obligations when they become due and payable, we may not be able to obtain additional debt or equity financing on favorable terms, if at all, which may negatively affect our business operations and financial ~~condition.~~

~~We have entered into a strategic research collaboration~~condition, and license agreement with Juno Therapeutics, Inc. to pursue the identification and application of small molecule modulators to program certain genetically-engineered T cells. Our collaboration may be terminated, or may not be successful, due to a number of factors, which could have a material adverse effect on our business and operating results.

We are party to a strategic research collaboration and license agreement with Juno Therapeutics, Inc., or Juno, for the identification and application of small molecule modulators for programming the therapeutic properties of genetically engineered chimeric antigen receptor (“CAR”) and T-cell receptor (“TCR”) based cellular immunotherapies directed against certain targets designated by Juno. Under the agreement, Juno has agreed to fund our collaboration research activities for an initial research term ending in May 2019, subject to a two-year extension under certain circumstances, and we are eligible to receive target selection fees and clinical, regulatory, and commercial milestones, as well as royalties on sales, should any therapies using our modulators be developed and commercialized. Our collaboration with Juno may be terminated, or may not be successful, due to a number of factors. For example, we may be unable to identify small molecule modulators that are effective in modulating genetically engineered T-cell therapies, or Juno may elect not to develop any genetically engineered T-cell therapies incorporating any modulators that are identified through the collaboration. Additionally, Juno may terminate the agreement upon six (6) months’ written notice to us. If the collaboration is unsuccessful for these or other reasons, or is otherwise terminated for any reason, we may not receive all or any of the research program funding, target selection fees, milestone payments or royalties under the agreement. Any of the foregoing could result in a material adverse effect on our business, results of operations ~~and prospects and would likely cause our stock price to decline.~~may be materially adversely affected.

In addition, during the term of our research activities under the agreement, we have agreed to collaborate exclusively with Juno on the research and development of small molecule modulators with respect to T cells (other than T cells derived from iPSCs) that have been genetically engineered to express chimeric antigen receptors or T-cell receptors against certain targets designated by Juno.

Furthermore, during the term of the agreement, we will be unable to conduct, or enable third parties to conduct, research, development and commercialization activities using small molecule modulators to program T-cell therapies that have been genetically engineered to express chimeric antigen receptors or T-cell receptors directed against certain targets selected by Juno, unless such T cells are derived from iPSCs. These restrictions may prevent us from exploiting our small molecule modulators or impair our ability to pursue research, development and commercialization opportunities that we would otherwise deem to be beneficial to our business.

If we engage in an acquisition, reorganization or business combination, we will incur a variety of risks that could adversely affect our business operations or our stockholders.

From time to time, we have considered, and we will consider in the future, strategic business initiatives intended to further the expansion and development of our business. These initiatives may include acquiring businesses, technologies or products or entering into business combinations with other companies. If we pursue such a strategy, we could, among other things:

Although we intend to evaluate and consider acquisitions, reorganizations and business combinations in the future, we have no agreements or understandings with respect to any acquisition, reorganization or business combination at this time.

We face potential product liability exposure far in excess of our limited insurance coverage.

The use of our product candidates in clinical trials, and the sale of any products for which we obtain marketing approval, exposes us to the risk of product liability claims. Product liability claims might be brought against us by participants in clinical trials, hospitals, medical centers, healthcare providers, pharmaceutical companies, and consumers, or by others selling, manufacturing or otherwise coming into contact with our product candidates. We carry product liability insurance and we believe our product liability insurance coverage is sufficient in light of our current clinical programs. In addition, if and when we obtain marketing approval for product candidates, we intend to expand our insurance coverage to include the sale of commercial products; however, we may be unable to obtain insurance coverage for any approved products on commercially reasonable terms or in sufficient amounts to protect us against losses due to liability.

On occasion, large judgments have been awarded in class action lawsuits based on drugs or medical treatments that had unanticipated adverse effects. In addition, under some of our agreements with clinical trial sites, we are required to indemnify the sites and their personnel against product liability and other claims. A successful product liability claim, or a series of claims, brought against us or any third parties whom we are required to indemnify could cause our stock price to decline and, if judgments exceed our insurance coverage, could adversely affect our results of operations and business.

Patients with the diseases targeted by our product candidates are often already in severe and advanced stages of disease and have both known and unknown significant pre-existing and potentially life-threatening health risks. During the course of treatment, patients may suffer adverse events, including death, for a variety of reasons. Such events, whether or not resulting from our product candidates, could subject us to costly litigation, require us to pay substantial amounts of money to injured patients, delay, negatively affect or end our opportunity to receive or maintain regulatory approval to market our products, or require us to suspend or abandon our commercialization efforts. Even in a circumstance in which we do not believe that an adverse event is related to our products, the investigation into the circumstance may be time-consuming or inconclusive. These investigations may interrupt our development and commercialization efforts, delay our regulatory approval process, or impact and limit the type of regulatory approvals our product candidates receive or maintain. As a result of these factors, a product liability claim, even if successfully defended, could have a material adverse effect on our business, financial condition or results of operations.

Our insurance policies are expensive and protect us from only some risks, which leaves us exposed to significant uninsured liabilities.

We ~~use hazardous chemicals, biological materials and infectious agents in~~do not carry insurance for all categories of risk to which our ~~business. Any claims relating to improper handling, storage~~business is or ~~disposal of these materials could be time consuming and costly.~~

Our research and development and manufacturing operations involve the controlled use of hazardous materials including chemicals, biological materials and infectious disease agents. Our operations produce hazardous waste products. We cannot eliminate

~~the risk of accidental contamination or discharge and any resultant injury from these materials. We~~ may be ~~sued for any injury~~exposed. Some of the policies we maintain include general liability, product liability, property, employee benefits liability, employment practices, workers’ compensation, cybersecurity, directors’ and officers’ insurance, and umbrella. We do not know, however, if we will be able to maintain insurance coverage at a reasonable cost or ~~contamination that results from our use~~in sufficient amounts or scope to protect us against losses. Even if we obtain

insurance, a claim could exceed the ~~use by third parties~~amount of ~~these materials, and our liability may exceed~~ our insurance coverage or it may be excluded from coverage under the terms of the policy. Further, insurance coverage may not be available or successfully secured for loss of profits or business interruptions relating to the COVID-19 pandemic and its impacts. Any significant uninsured liability may require us to pay substantial amounts, which would adversely affect our ~~total assets.~~cash position and results of operations.

Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements and insider trading.

We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with the regulations of the FDA or foreign regulators, to provide accurate information to the FDA or foreign regulators, to comply with healthcare fraud and abuse laws and regulations in the United States and abroad, to report financial information or data accurately or to disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. Employee and independent contractor misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and cause serious harm to our reputation. If any actions alleging such conduct are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant effect on our business, including the imposition of significant fines or other sanctions.

We face risks of potential liability related to the privacy of personal information, including health information we utilize in the development of our products, as well as information we obtain from clinical trials sponsored by us from research institutions and directly from individuals.

We and our partners and vendors may be subject to various federal, state, and foreign data protection laws and regulations (i.e., laws and regulations that address privacy and data security). In the United States, numerous federal and state laws and regulations, including federal health information privacy laws, state data breach notification laws, state health information privacy laws, and federal and state consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act), that govern the collection, use, disclosure and protection of health-related and other personal information could apply to our operations or the operations of our collaborators, including the federal Health Insurance Portability and Accountability Act of 1996 (HIPAA) and privacy and security requirements under HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (HITECH). Depending on the facts and circumstances, we could be subject to civil, criminal, and administrative penalties if we knowingly obtain, use, or disclose individually identifiable health information maintained by a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA. There is no certainty that all of our employees, agents, suppliers, manufacturers, contractors, or collaborators, or those of our affiliates, will comply with all applicable laws and regulations, particularly given the high level of complexity of these laws. Even when HIPAA does not apply, failing to take appropriate steps to keep consumers’ personal information secure may constitute a violation of the Federal Trade Commission Act. In addition, certain of the materials we use as starting material in our iPSC-derived product candidates are derived from human sources, which potentially contain sensitive identifiable personal information regarding the donor. In addition, in conducting our clinical trials, we may maintain sensitive identifiable personal information, including health information, that we receive throughout the clinical trial process, in the course of our research collaborations, and directly from individuals (or their healthcare providers) who enroll in our clinical trials. As such, we may become subject to further obligations under HIPAA. Our collection of personal information generally (e.g., of employees currently and/or of patients in the future) may subject us to state data privacy laws governing the processing of personal information and requiring notification of affected individuals and state regulators in the event of a breach of such personal information. These state laws include the California Consumer Privacy Act (CCPA) and its related regulations, and the California Privacy Rights Act (CPRA) amending the CCPA, which establish additional data privacy rights for residents of the State of California, with corresponding obligations on businesses related to transparency, deletion rights, and opt-out of the selling of personal information, and grants a private right of action for individuals in the event of certain security breaches. Similar laws relating to data privacy and security have been proposed in other states and at the federal level, and if passed, such laws may have potentially conflicting requirements that would make compliance challenging, require us to expend significant resources to come into compliance, and restrict our ability to process certain personal information.

Certain state laws may be more stringent or broader in scope than the CPRA, or offer greater individual rights, with respect to confidential, sensitive and personal information than federal, international or other state laws, and such laws may differ from each other, which may complicate compliance efforts.

An increasing number of foreign data protection laws, regulations and industry standards may also apply to personal information we obtain from individuals outside of the United States. For example, the European Union’s General Data Protection Regulation (GDPR), which came into effect on May 25, 2018, imposes strict requirements for processing the personal data of individuals within the European Economic Area, including health-related data, as well as potential fines for companies of up to the greater of €20 million or 4% of annual global revenue. In addition, under the GDPR, companies may face private litigation related to processing of personal data brought by classes of data subjects or consumer protection organizations authorized at law to protect their interests.

We are likely to be required to expend significant capital and other resources to ensure ongoing compliance with applicable data privacy and security laws. Claims that we have violated individuals’ privacy rights or breached our contractual obligations, even if we are not found liable, could be expensive and time-consuming to defend, and could result in adverse publicity that could harm our business. Moreover, even if we take all necessary action to comply with legal and regulatory requirements, we could be subject to a data breach or other unauthorized access of personal information, which could subject us to fines and penalties, as well as litigation and reputational damage. If we fail to keep apprised of and comply with applicable international, federal, state, or local regulatory requirements, we could be subject to a range of regulatory actions that could affect our or any collaborators’ ability to seek to commercialize our clinical candidates. Any threatened or actual government enforcement action or litigation where private rights of action are available could also generate adverse publicity, damage our reputation, result in liabilities, fines and loss of business, and require that we devote substantial resources that could otherwise be used in other aspects of our business.

We make public statements about our use and disclosure of personal information through our privacy policy information provided on our internet platform and press statements. Although we endeavor to comply with our public statements and documentation, we may at times fail to do so or be alleged to have failed to do so. Moreover, despite our efforts, we may not be successful in achieving compliance if our employees or contractual partners fail to comply with our published policies, certifications and documentation. The publication of our privacy policy and other statements that provide promises and assurances about data privacy and security can subject us to potential government or legal action if they are found to be deceptive, unfair or misrepresentative of our actual practices. Any failure, real or perceived, by us to comply with our posted privacy policies or with any legal or regulatory requirements, standards, certifications or orders or other privacy or consumer protection-related laws and regulations applicable to us could cause our customers to reduce their use of our products and services and could materially and adversely affect our business, financial condition and results of operations. In many jurisdictions, enforcement actions and consequences for non-compliance can be significant and are rising. In addition, from time to time, concerns may be expressed about whether our products, services or processes compromise the privacy of customers and others. Concerns about our practices with regard to the collection, use, retention, security, disclosure, transfer and other processing of personal information or other privacy-related matters, even if unfounded, could damage our reputation and materially and adversely affect our business, financial condition and results of operations.

Many statutory requirements, both in the United States and abroad, include obligations for companies to notify individuals of security breaches involving certain personal information, which could result from breaches experienced by us or our third-party service providers. For example, laws in all 50 U.S. states and the District of Columbia require businesses to provide notice to consumers whose sensitive personal information has been disclosed as a result of a data breach. These laws are not consistent, and compliance in the event of a widespread data breach is difficult and may be costly. Moreover, states have been frequently amending existing laws, requiring attention to changing regulatory requirements. We also may be contractually required to notify customers or other counterparties of a security breach. Although we may have contractual protections with our third-party service providers, contractors and consultants, any actual or perceived security breach could harm our reputation and brand, expose us to potential liability or require us to expend significant resources on data security and in responding to any such actual or perceived breach. Any contractual protections we may have from our third-party service providers, contractors or consultants may not be sufficient to adequately protect us from any such liabilities and losses, and we may be unable to enforce any such contractual protections.

In addition to the possibility of fines, lawsuits, regulatory investigations, public censure, other claims and penalties, and significant costs for remediation and damage to our reputation, we could be materially and adversely affected if legislation or regulations are expanded in a manner that requires changes in our data processing practices and policies or if governing jurisdictions interpret or implement their legislation or regulations in ways that negatively impact our business. Complying with these various laws could cause us to incur substantial costs or require us to change our business practices and compliance procedures in a manner adverse to our business. Any inability to adequately address data privacy or security-related concerns, even if unfounded, or to comply with applicable laws, regulations, standards and other obligations relating to data privacy and security, could result in additional cost and liability to us, harm our reputation and brand, damage our relationships with contract partners and the physician and patient community and have a material and adverse impact on our business.

Our internal computer systems, or those used by our third-party research institution collaborators, CROs or other contractors or consultants, may fail or suffer security breaches.

Despite the implementation of security measures, our internal computer systems and those of our CROs and other contractors, vendors, and consultants may be vulnerable to damage from cybersecurity risks, including attempts to gain unauthorized access to and to harm sensitive information and networks, insider threats, and ransomware. These vulnerabilities may be heightened as a result of flexible work arrangements, including hybrid or remote work policies implemented by us and our third-party contractors, that were first adopted in response to the COVID-19 pandemic and have continued by many businesses in an effort to attract and retain talent.

We have from time to time experienced, and may continue to experience in the future, cyber-attacks on our information technology systems despite our best efforts to prevent them. Although such incidents have been immaterial to our business to date, investigations into and remedial efforts in connection with any security incidents, even those with immaterial impact, can be costly

and time-consuming, and any future incidents could be material, or cause significant disruption, to our business. For example, the loss of clinical trial data from completed, ongoing or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Likewise, we rely on third parties for research and development, the manufacture and supply of drug product and drug substance and to conduct clinical trials. We depend on these third parties to implement adequate controls and safeguards to protect against and report cybersecurity incidents. If they fail to do so, we may suffer financial and other harm, including to our information, operations, performance, and reputation. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or systems, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development and commercialization of our product candidates could be delayed.

Cybersecurity threats, both on premises and in the cloud, are evolving and include, but are not limited to: malicious software, destructive malware, ransomware, attempts to gain unauthorized access to systems or data, disruption to operations, critical systems or denial of service attacks; unauthorized release of confidential, personal or otherwise protected information; corruption of data, networks or systems; harm to individuals; and loss of assets. In addition, we could be impacted by cybersecurity threats or other disruptions or vulnerabilities found in products or services we use that are provided to us by third-parties. The techniques used by criminal elements to attack computer systems are sophisticated, change frequently and may originate from less regulated and remote areas of the world. As a result, we may not be able to address these techniques proactively or implement adequate preventative measures. These events, if not prevented or effectively mitigated, could damage our reputation, require remedial actions and lead to loss of business, regulatory actions, potential liability and other financial losses.

Certain data breaches must also be reported to affected individuals and various government and/or regulatory agencies, and in some cases to the media, under provisions of HIPAA, as amended by HITECH, other U.S. federal and state law, and requirements of non-U.S. jurisdictions, including the European Union Data Protection Directive, and financial penalties may also apply.

Our insurance policies may not be adequate to compensate us for the potential losses arising from breaches, failures or disruptions of our infrastructure, catastrophic events and disasters or otherwise. In addition, such insurance may not be available to us in the future on economically reasonable terms, or at all. Further, our insurance may not cover all claims made against us and defending a suit, regardless of its merit, could be costly and divert management’s attention.

Inadequate funding for the FDA, the SEC and other government agencies, including from government shut downs, or other disruptions to these agencies’ operations, could hinder their ability to hire and retain key leadership and other personnel, prevent new products and services from being developed or commercialized in a timely manner or otherwise prevent those agencies from performing normal business functions on which the operation of our business may rely, which could negatively impact our business.

The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory and policy changes. Average review times at the agency have fluctuated in recent years as a result of these factors. Disruptions at the FDA and other agencies may also slow the time necessary for new product candidates to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. In addition, government funding of the SEC and other government agencies on which our operations may rely, including those that fund research and development activities, is subject to the political process, which is inherently fluid and unpredictable.

Disruptions at the FDA and other agencies may also slow the time necessary for new product candidates to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example, over the last several years the U.S. government has shut down several times and certain regulatory agencies, such as the FDA and the SEC, have had to furlough critical FDA, SEC and other government employees and stop critical activities. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business. Further, future government shutdowns could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.

Our ongoing and planned operations, including the development of our product candidates, will require substantial additional funding, without which we will be unable to complete preclinical or clinical development of, or obtain regulatory approval for, or commercialization of our product candidates.

We are currently advancing multiple product candidates through clinical development, and conducting preclinical research and development activities in other programs. Drug development is expensive, and we expect our research and development expenses to remain significant in connection with our ongoing activities, particularly as we advance our current product candidates in clinical trials and seek to initiate clinical development for additional product candidates.

As of June 30, 2023, our cash and cash equivalents and investments were $385.2 million. We intend to use our cash and cash equivalents and investments primarily to fund the advancement and clinical development of our current product candidates and our ongoing preclinical, discovery and research programs, and for working capital and general corporate purposes. However, our operating plan may change as a result of many factors currently unknown to us, and we may need to seek additional funds sooner than planned, through public or private equity or debt financings, government or other third-party funding, marketing and distribution arrangements and other collaborations, strategic and licensing arrangements or a combination of these approaches. In any event, we will require additional capital to obtain regulatory approval for, and to commercialize our existing product candidates and any other product candidates we may identify and develop. Even if we believe we have sufficient funds for our current or future operating plans, we may seek additional capital if market conditions are favorable or if we have specific strategic considerations. Our future capital requirements will depend on many factors, including, but not limited to:

Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates. In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all. Moreover, the terms of any financing may adversely affect the holdings or the rights of our stockholders and the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our shares to decline. The sale of additional equity or convertible securities would dilute all of our stockholders. The incurrence of indebtedness would result in increased fixed payment and interest obligations and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. We could also be required to seek funds through arrangements with collaborative partners or otherwise at a different stage than otherwise would be desirable and we may be required to relinquish rights to some of our technologies or product candidates or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our business, operating results and prospects. In addition, while the overall impacts of the COVID-19 pandemic and the ongoing conflict in Ukraine on the global economy remain unknown and difficult to predict, these events caused significant disruptions and created uncertainties in the global financial markets, and the economic impacts of these and other similar global events could materially and adversely affect our ability to raise capital through equity or debt financings in the future.

additional capital, or obtain adequate funds, will have a material adverse effect on our business, prospects, financial condition, results of operations, and market price of shares of our common stock.

We have a limited operating history, have incurred significant losses since our inception, and anticipate that we will continue to incur significant losses for the foreseeable future.

We are a clinical-stage biopharmaceutical company formed in 2007 with a limited operating history. We have not yet obtained regulatory approval for any of our product candidates or generated any revenues from therapeutic product sales. Since inception, we have incurred significant net losses in each year and, as of ~~September~~June 30, ~~2017,~~2023, we had an accumulated deficit of ~~$206.3 million.~~$1.1 billion. We expect to continue to incur losses for the foreseeable future as we continue to fund our ongoing and planned clinical trials of ~~ProTmune and FATE-NK100~~our product candidates, and our other ongoing and planned research and development activities. We also expect to incur significant operating and capital expenditures as we continue our research and development of, and seek regulatory approval for, our product candidates, in-license or acquire new product candidates for development, implement additional infrastructure and internal systems, and hire additional scientific, clinical, and administrative personnel. We anticipate that our net losses for the next several years could be significant as we conduct our planned operations.

Because of the numerous risks and uncertainties associated with pharmaceutical, biological, and cell therapy product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability. In addition, our expenses could increase if we are required by the FDA, or comparable foreign regulatory authorities, to perform studies or trials in addition to those currently expected, or if there are any delays in completing our clinical trials, preclinical studies, process development, manufacturing activities, or the research and development of any of our product candidates. The amount of our future net losses will depend, in part, on the rate of increase in our expenses, our ability to generate revenues and our ability to raise additional capital. These net losses have had, and will continue to have, an adverse effect on our stockholders’ equity and working capital.

The market price of shares of our common stock could be subject to wide fluctuations as a result of many risks listed in this section, and other risks beyond our control, including:

These and other market and industry factors, including the effects of any future public health crises or other public health concerns, the ongoing conflict in Ukraine, and global economic conditions, may cause the market price and demand for our common stock to fluctuate substantially regardless of our actual operating performance, which may limit or prevent investors from readily selling their shares of common stock and may otherwise negatively affect the liquidity of our common stock.

Changes in our stock price may also trigger financial obligations under our licensing arrangements. For example, pursuant to the terms of our license agreement with MSK, MSK is eligible to receive from us certain milestone payments totaling up to $75.0 million based on the price of our common stock, where the amount of such payments owed to MSK is contingent upon certain increases in the price of our common stock following the date of achievement of a specified clinical milestone. In ~~addition,~~July 2021, we achieved the specified clinical milestone for a licensed product under our license agreement with MSK and our ten-trading day trailing average common stock ~~market~~price exceeded the first, pre-specified threshold. Accordingly, MSK received the first milestone payment of $20.0 million in ~~general, and The NASDAQ Global Market and biotechnology companies~~November 2021; however, uncertainty of the price of our common stock results in ~~particular,~~an inability to ascertain the precise timing of any remaining future milestone payments in advance.

Additionally, a decrease in our stock price may cause our common stock to no longer satisfy the continued listing standards of Nasdaq. If we are not able to maintain the requirements for listing on Nasdaq, our common stock could be delisted, which could have ~~experienced extreme~~a materially adverse effect on our ability to raise additional funds as well as the price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. In the past, when the market price of a stock has been volatile, holders of that stock have instituted securities class action litigation against the company that issued the stock. If anyliquidity of our common stock.

Our principal stockholders ~~brought~~and management own a ~~lawsuit against us, we could incur substantial costs defending the lawsuit and this could divert the time and attention~~significant percentage of our ~~management.~~

~~Our principal stockholders~~stock and may be able to exercise significant control over our company.

As of ~~October 31, 2017,~~August 2, 2023, our executive officers, directors and entities affiliated with our five percent stockholders beneficially own, in the aggregate, shares representing approximately ~~73.4%~~67.0% of our outstanding voting stock. If, in accordance with the CoD (as such term is defined in Note 68 of the ~~Notes~~notes to the ~~Consolidated Financial Statements~~consolidated financial statements herewith) relating to the Class A Convertible Preferred Stock, Redmile (as such term is defined in Note 68 of the ~~Notes~~notes to the ~~Consolidated Financial Statements~~consolidated financial statements herewith) elects to remove certain limitations on the percentage of the ~~Company’s~~our outstanding common stock that it may own such that the ~~2,819,549~~2,761,108 shares of Class A Convertible Preferred Stock currently held by Redmile become fully convertible at Redmile’s option into ~~14,097,745~~13,805,540 shares of common stock, the beneficial ownership of our executive officers, directors and entities affiliated with our five percent stockholders would increase to ~~78.5%~~70.4%. Although we are not aware of any voting arrangements in place among these stockholders, if these stockholders were to choose to act together, as a result of their stock ownership, they would be able to influence our management and affairs and control all matters submitted to our stockholders for approval, including the election of directors and approval of any merger, consolidation or sale of all or substantially all of our assets. This concentration of ownership may have the effect of delaying or preventing a change in control of our company that our other stockholders may believe are in their best interests, or adversely affecting the liquidity, ~~and~~ volatility, ~~of our common stock,~~ and ~~might affect the~~ market price of our common stock. For example, if any of our directors, executive officers or other entities affiliated with our five percent stockholders elect to sell, transfer or otherwise dispose of a significant amount of shares of our common stock, this could result in a decrease in our stock price. Furthermore, any transferees or successors of all or a significant portion of our existing stockholders’ ownership in us will be able to exert a similar amount of control over us through their ownership position.

We may sell additional equity or debt securities or enter into other arrangements to fund our operations, which may result in dilution to our stockholders and impose restrictions or limitations on our business.

We expect that significant additional capital will be needed in the future to continue our planned operations, and we may seek additional funding through a combination of equity offerings, debt financings, state or government grants, strategic alliances, licensing and collaboration arrangements, or other third-party business arrangements. These financing activities may have an adverse effect on our stockholders’ rights, the market price of our common stock and on our operations and may require us to relinquish rights to some of our technologies, intellectual property or product candidates, issue additional equity or debt securities, or otherwise agree to terms unfavorable to us. Further, in November 2021, we filed a registration statement on Form S-3 pursuant to which we may issue up to $350.0 million in common stock in sales deemed to be an “at the market offering” as defined by the Securities Act of 1933, as amended (the Securities Act) and, so long as we qualify as a “well-known seasoned issuer” as defined in Rule 405 of the Securities Act, an unlimited amount of shares of our common stock, preferred stock, debt securities, warrants and/or units. Any sale or issuance of securities pursuant to a registration statement or otherwise may result in dilution to our stockholders and may cause the market price of our stock to decline, and new investors could gain rights superior to our existing stockholders. In addition, any debt financings that we may enter into in the future may subject us to unfavorable repayment terms, including increased interest rates, impose restrictive covenants or otherwise adversely affect the holdings or the rights of our stockholders, and any additional equity financings will be dilutive to our stockholders. Furthermore, additional equity or debt financing might not be available to us on reasonable terms, if at all.

A significant portion of our total outstanding shares may be sold into the market in the near future, which could cause the market price of our common stock to drop significantly.

Sales of a substantial number of shares of our common stock in the public market could occur at any time. A significant portion of our outstanding shares of common stock are held by a small number of stockholders, including our directors, officers and significant stockholders. Sales by our stockholders of a substantial number of shares, or the expectation that such sales may occur, could significantly reduce the market price of our common stock.

For example, we registered all of the 5,250,000 shares of common stock issued by us in our August 2016 private placement transaction for resale on a Form S-3, which was declared effective by the SEC in September 2016. We also registered all of the 6,766,915 shares of common stock issued by us and all 14,097,745 shares of common stock issuable upon the conversion of an aggregate of 2,819,549 shares of Class A Convertible Preferred Stock issued by us in our November 2016 private placement transaction for resale on a Form S-3, which was declared effective by the SEC in January 2017. AsAdditionally, we have registered the shares of common stock issued to Johnson & Johnson Innovation – JJDC, Inc. under the stock purchase agreement entered into in June 2020 in connection with the Janssen Agreement pursuant to a ~~result,~~registration statement on Form S-3. Moreover, we registered all of ~~these~~the 5,380,117 shares are currently available for resale to the public, which may result in dilution to our stockholders. In addition, a shelf registration statement declared effective by the SEC in August 2017 provides for the saleof common stock issued by us and all of upthe 257,310 prefunded warrants to ~~$100 million~~purchase common stock in ~~the aggregate of~~our public offering in January 2021.

We have also registered or intend to register all shares of our common stock ~~preferred~~subject to options, restricted stock ~~debt~~units or other equity awards issued or reserved for future issuance under our equity incentive plans. As a result, these shares will be available for sale in the public market subject to vesting arrangements and exercise of options, and restrictions under applicable securities ~~warrants and/or units,~~laws. In addition, certain of our executive officers, employees and affiliates have established and may in the future establish programmed selling plans under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended, for the ~~resale by Juno~~purpose of upeffecting sales of our common stock. If any of these events cause a large number of our shares to ~~one million shares of common stock held by Juno pursuant to~~be sold in the ~~Stock Purchase Agreement entered into in May 2015. Any sale or issuance of securities pursuant to a registration statement or otherwise may result in dilution to our stockholders and may cause~~public market, the ~~market~~sales could reduce the trading price of our common stock and impede our ability to decline, and new investors could gain rights superior to our existing stockholders. In addition, we are party to an amended and restated loan and security agreement, as amended, with SVB, which imposes restrictive covenants on our operations. Anyraise future ~~debt~~capital.

financings may impose additional restrictive covenants or otherwise adversely affect the holdings or the rights of our stockholders, and any additional equity financings will be dilutive to our stockholders. Furthermore, additional equity or debt financing might not be available to us on reasonable terms, if at all.

We have broad discretion over the use of our cash, ~~and~~ cash equivalents, and investments and may not use them effectively.

Our management has broad discretion to use our cash, cash equivalents, investments and any additional funds that we may raise to fund our operations and could spend these funds in ways that do not improve our results of operations or enhance the value of our common stock. The failure by our management to apply these funds effectively could result in financial losses that could have a material adverse effect on our business, cause the price of our common stock to decline or delay the development of our product candidates. We may invest our cash and cash equivalents in a manner that does not produce income or that loses value.

Provisions of Delaware law or our charter documents could delay or prevent an acquisition of our company, and could make it more difficult for you to change management.

Provisions of Delaware law, our amended and restated certificate of incorporation, and our amended and restated bylaws may discourage, delay or prevent a merger, acquisition or other change in control that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares. These provisions may also prevent or delay attempts by stockholders to replace or remove our current management or members of our board of directors. These provisions include:

~~As a result, these~~In addition, because we are incorporated in Delaware, we are governed by the provisions ~~could limit~~of Section 203 of the ~~price that investors are willing to pay~~Delaware General Corporation Law, which limits the ability of stockholders owning in ~~the future for shares~~excess of 15% of our ~~common stock. These provisions might also discourage~~outstanding voting stock to merge or combine with us. Any provision of our amended and restated certificate of incorporation or amended and restated bylaws or Delaware law that has the effect of delaying or discouraging a potential acquisition proposal or tender offer could limit the opportunity for our stockholders to achieve liquidity for their shares of our common stock, even if the acquisition proposal or tender offer is at a premium over the then-current market price for our common stock, and could also affect the price that some investors are willing to pay for our common stock.

Our amended and restated bylaws designate the Court of Chancery of the State of Delaware and the U.S. federal district courts as the exclusive forum for certain litigation that may be initiated by our stockholders, which could limit our stockholders’ ability to litigate disputes with us in a different judicial forum.

Pursuant to our amended and restated bylaws, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a claim of breach of a fiduciary duty or other wrongdoing by any of our directors, officers, or employees to us or our stockholders; (iii) any action asserting a claim against us arising pursuant to any provision of the General Corporation Law of the State of Delaware, our amended and restated certificate of incorporation or our amended and restated bylaws; or (iv) any action asserting a claim governed by the internal affairs doctrine. This exclusive forum provision will not apply to any causes of action arising under the Securities Act. Unless we consent in writing to the selection of an alternate forum, the U.S. federal district courts shall be the sole and exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. The forum selection clause in our amended and restated bylaws may limit our stockholders’ ability to litigate disputes with us in a different judicial forum.

Our ability to use our net operating loss carryforwards and certain other tax benefits may be limited and, as a result, our future tax liability may increase.

As of December 31, 2022, we had federal and California net operating loss carryforwards of $392.5 million and $452.2 million, respectively, some of which begin to expire in various amounts in 2027 and 2028, respectively. As of December 31, 2022, we also had federal and California research and development tax credit carryforwards of $35.1 million and $33.3 million, respectively. The federal research and development tax credit carryforwards will begin to expire in 2035 unless previously utilized, while the California carryforwards will carry forward indefinitely. These net operating loss and tax credit carryforwards could expire unused and be unavailable to offset future income tax liabilities. In addition, in general, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change net operating losses (NOLs) or tax credits, or NOLs or credits, to offset future taxable income or taxes. Generally, a change of more than ~~50%~~50 percentage points in the ownership of a corporation’s stock, by value, over a three-year period constitutes an ownership change for U.S. federal income tax purposes. An ownership change may limit a company’s ability to use its net operating loss carryforwards and other pre-change tax benefits (such as research tax credits) attributable to the period prior to such change. We have determined that we triggered an ownership change limitation in November 2009 and again in May 2015. We have determined that we do not believe there were noany ownership changes from May 2015 through ~~March 2017.~~December 2022. We have not analyzed periods subsequent to December 2022. We may experience additional ownership changes as a result of shifts in our stock ownership in the ~~future or subsequent to ownership change analyses. As a result, if we earn net taxable income,~~future. Limits on our ability to use our pre-change ~~net operating loss carryforwards~~NOLs or credits to offset U.S. federal taxable income ~~may become subject to limitations, which~~ could potentially result in increased future tax liability to us if we earn net taxable income in the future. The amount of NOLs generated in taxable periods beginning after December 31, 2022, that we are permitted to deduct in any taxable year is limited to 80% of our taxable income in such year, where taxable income is determined without regard to the NOL deduction itself. U.S. federal and certain state NOLs generated in taxable years beginning after December 31, 2017 are not subject to expiration.

We are and could be further subject to securities class action litigation and other types of stockholder litigation.

The stock market in general, and the Nasdaq Global Market and biotechnology companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Securities class action litigation has often been instituted against companies following periods of volatility in the market price of a company’s securities. For example, in January 2023, a purported stockholder filed a lawsuit against us and certain of our officers captioned Hadian v. Fate Therapeutics, Inc. et al. in the U.S. District Court for the Southern District of California and in June 2023 a derivative action was filed in the same court (see "Item 1. Legal Proceedings"). We could also be subject to other types of litigation, which may involve claims of breach of fiduciary duties by our directors or officers for misuse/mismanagement of company assets/resources or conflicts of interest. Any such litigation, if instituted, could result in substantial costs and a diversion of management’s attention and resources, which would harm our business, operating results, or financial condition. Additionally, the dramatic increase in the cost of directors’ and officers’ liability insurance may cause us to opt for lower overall policy limits or to forgo insurance that we may otherwise rely on to cover significant defense costs, settlements, and damages awarded to plaintiffs.

Our business operations may subject us to disputes, claims and lawsuits, which may be costly and time-consuming and could materially and adversely impact our financial position and results of operations.

From time to time, we may become involved in disputes, claims and lawsuits relating to our business operations. For example, we have in the past and we may, from time to time, face or initiate claims related to intellectual property matters, employment matters, or commercial disputes. Any dispute, claim or lawsuit may divert management’s attention away from our business, we may incur significant expenses in addressing or defending any dispute, claim or lawsuit, and we may be required to pay damage awards or settlements or become subject to equitable remedies that could adversely affect our operations and financial results. Litigation related to these disputes may be costly and time-consuming and could materially and adversely impact our financial position and results of

operations if resolved against us. In addition, the uncertainty associated with litigation could lead to increased volatility in our stock price.

Unfavorable global economic conditions could adversely affect our business, financial condition or results of operations.

Our ability to invest in and expand our business and meet our financial obligations, to attract and retain third-party contractors and collaboration partners and to raise additional capital depends on our operating and financial performance, which, in turn, is subject to numerous factors, including the prevailing economic and political conditions and financial, business, regulatory and other factors beyond our control, such as the rate of unemployment, rate of inflation, the number of uninsured persons in the United States, political influences and inflationary pressures, and fluctuations in costs, particularly due to changes in labor costs and material costs. For example, an overall decrease in or loss of insurance coverage among individuals in the United States due to high levels of unemployment, underemployment or the repeal of certain provisions of the ACA may decrease the demand for healthcare services and pharmaceuticals. If fewer patients are seeking medical care because they do not have insurance coverage or are unable to obtain medical care for their conditions due to resource constraints on the healthcare system, we may experience difficulties in any eventual commercialization of our product candidates and our business, results of operations, financial condition and cash flows could be adversely affected. In addition, if we are unable to manage cost fluctuations and inflationary pressures, including prices of materials, costs of labor, it may adversely impact our operating performance, expenses and results.

In addition, our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets upon which pharmaceutical and biopharmaceutical companies such as us are dependent for sources of capital. In the past, global financial crises have caused extreme volatility and disruptions in the capital and credit markets. A severe or prolonged economic downturn, the ongoing conflict in Ukraine, interest rate fluctuations, rising inflations or recession, could result in a variety of risks to our business, including a reduced ability to raise additional capital when needed on acceptable terms, if at all, and weakened demand for our product candidates. A weak or declining economy, and rising inflation could also strain our suppliers, possibly resulting in supply disruption. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the ongoing conflict in Ukraine, current economic climate and financial market conditions could adversely impact our business.

Volatility in capital markets and lower market prices for our securities may affect our ability to access new capital through sales of shares of our common stock or issuance of indebtedness, which may harm our liquidity, limit our ability to grow our business, pursue acquisitions or improve our operating infrastructure and restrict our ability to compete in our markets.

Our operations consume substantial amounts of cash, and we intend to continue to make significant investments to support our business growth, respond to business challenges or opportunities, develop new product candidates, retain or expand our current levels of personnel, improve our existing products, enhance our operating infrastructure, and potentially acquire complementary businesses and technologies. Our future capital requirements may be significantly different from our current estimates and will depend on many factors, including the need to:

Accordingly, we may need to pursue equity or debt financings to meet our capital needs. With uncertainty in the capital markets and other factors, such financing may not be available on terms favorable to us or at all. If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences, and privileges superior to those of holders of our common stock. Any debt financing secured by us in the future could involve additional restrictive covenants relating to our capital-raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. If we are unable to obtain adequate financing or financing on terms satisfactory to us, we could face significant limitations on our ability to invest in our operations and otherwise suffer harm to our business.

Recent increases in interest rates could affect our ability to obtain working capital through borrowings such as bank credit lines and public or private sales of debt securities, which may result in lower liquidity, reduced working capital and other adverse impacts on our business.

To meet our liquidity needs, we have previously relied, in part, on borrowed funds, and may do so again in the future. Continued increases in interest rates will increase the cost of new indebtedness and could materially and adversely affect our results of operations, financial condition, liquidity and cash flows.

Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults, or non-performance by financial institutions or transactional counterparties, could adversely affect our current and projected business operations and its financial condition and results of operations.

Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems. For example, on March 10, 2023, Silicon Valley Bank (SVB) was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. Similarly, on March 12, 2023, Signature Bank and Silvergate Capital Corp. were each swept into receivership. In these cases borrowers under credit agreements, letters of credit and certain other financial instruments with SVB, Signature Bank or any other financial institution that is placed into receivership by the FDIC may be unable to access undrawn amounts thereunder. We currently use deposit accounts to fund our operations and other financial instruments such as cash-collateralized letters of credit associated with our facilities leases. Our excess cash is invested according to a restrictive investment policy within custodial accounts at various financial institutions. If any of the financial institutions that hold our deposit accounts were to be placed into receivership, we may be unable to access the funds in those accounts, which could result in liquidity constraints or failures. In addition, if any of our collaboration partners, suppliers or other parties with whom we conduct business are unable to access funds pursuant to such instruments or lending arrangements with such a financial institution, such parties’ ability to pay their obligations to us or to enter into new commercial arrangements requiring additional payments to us could be adversely affected. In this regard, counterparties to SVB credit agreements and arrangements, and third parties such as beneficiaries of letters of credit (among others), may experience direct impacts from the closure of SVB, or the sale of its assets, and uncertainty remains over liquidity concerns in the broader financial services industry. Similar impacts have occurred in the past, such as during the 2008-2010 financial crisis.

Inflation and rapid increases in interest rates have led to a decline in the trading value of previously issued government securities. Although the U.S. Department of Treasury, FDIC and Federal Reserve Board have announced a program to provide up to $25 billion of loans to financial institutions secured by certain of such government securities held by financial institutions to mitigate the risk of potential losses on the sale of such instruments, widespread demands for customer withdrawals or other liquidity needs of financial institutions for immediately liquidity may exceed the capacity of such program. Additionally, there is no guarantee that the U.S. Department of Treasury, FDIC and Federal Reserve Board will provide access to uninsured funds in the future in the event of the closure of other banks or financial institutions, or that they would do so in a timely fashion.

Although we assess our banking and other business relationships as we believe necessary or appropriate, our access to funding sources and other credit arrangements in amounts adequate to finance or capitalize our current and projected future business operations could be significantly impaired by factors that affect us, the financial institutions with which we have credit agreements or arrangements directly, or the financial services industry or economy in general. These factors could include, among others, events such as liquidity constraints or failures, the ability to perform obligations under various types of financial, credit or liquidity agreements or arrangements, disruptions or instability in the financial services industry or financial markets or concerns or negative expectations about the prospects for companies in the financial services industry. These factors could involve financial institutions with which we have financial or business relationships but could also include factors involving financial markets or the financial services industry generally.

The results of events or concerns that involve one or more of these factors could include a variety of material and adverse impacts on our current and projected business operations and our financial condition and results of operations. These could include, but may not be limited to, the following:

In addition, investor concerns regarding the U.S. or international financial systems could result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources, thereby making it more difficult for us to acquire financing on acceptable terms or at all. Any decline in available funding or access to our cash and liquidity resources could, among other risks, adversely impact our ability to meet our operating expenses, financial obligations or fulfill our other obligations, result in breaches of our financial and/or contractual obligations or result in violations of federal or state wage and hour laws.

Any of these impacts, or any other impacts resulting from the factors described above or other related or similar factors not described above, could have material adverse impacts on our liquidity and our current and/or projected business operations and financial condition and results of operations.

In addition, any further deterioration in the macroeconomic economy or financial services industry could lead to losses or defaults by our collaboration partners, suppliers or other parties with whom we do business, which in turn, could have a material adverse effect on our current and/or projected business operations and results of operations and financial condition. Any bankruptcy or insolvency of a collaboration partner, supplier or other party with whom we do business, or the failure of any such party to make payments when due, or any breach or default by any such party, or the loss of any significant commercial relationships, could result in material losses to us and may have a material adverse impact on our business.

Geopolitical risks associated with the ongoing military conflict between Russia and Ukraine could have an adverse impact on our business, financial condition and results of operations, including our clinical trials.

In February 2022, Russia commenced a military invasion of Ukraine, and sustained conflict and disruption in the region is likely. Although the conflict has had little direct impact on our business to date, the uncertainty and ripple effects created by this conflict may have unknown indirect impacts. For instance, the ongoing conflict has resulted in significant volatility in certain equity, debt and currency markets, material increases in certain commodity prices, and economic uncertainty. It is not possible to predict the broader or longer-term consequences of this conflict, although a prolonged conflict may result in adverse effects on microeconomic conditions including inflation; disruptions to our global technology infrastructure, including through cyberattack, ransom attack, or cybersecurity-intrusion; adverse changes in international trade policies and relations; disruptions in global supply chains; our exposure to foreign currency fluctuations; and constraints, volatility, or disruption in the capital markets, any of which could negatively impact our business, financial performance and financial condition. Sanctions imposed by the U.S., Canada, EU, and other countries in response to the ongoing conflict between Russia and Ukraine and the potential response to such sanctions may also have an adverse impact our business, including our clinical trials, the financial markets and the global economy.

We continue to monitor any adverse impact that the outbreak of war in Ukraine and the subsequent institution of sanctions against Russia by the United States and other countries may have on the global economy in general, on our business and operations and on the businesses and operations of our suppliers and third parties with whom we conduct business.

We or the third parties upon whom we depend may be adversely affected by earthquakes, fires, or other natural disasters, including public health crises, and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.

Earthquakes, fires, or other natural disasters (including due to the effects of climate change or any public health crises) could severely disrupt our operations, and have a material adverse effect on our business, results of operations, financial condition and prospects. If a natural disaster, power outage or other event occurred that prevented us from using all or a significant portion of our headquarters, that damaged critical infrastructure, such as our manufacturing facilities or those of our CMOs, or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible for us to continue our business for a substantial period of time. Further, any measures taken by governmental authorities or businesses in response to any public health crisis, such as quarantines, stay-at-home orders or travel restrictions, could adversely affect our business, operations, financial condition, prospects or results of operations by restricting our ability to conduct our clinical trials and research and development activities, and limiting our and our third-party manufacturers’ ability to manufacture product and forcing temporary closure of our facilities and facilities that we rely upon. The disaster recovery and business continuity plans we have in place currently are limited and may not prove adequate for protecting and continuing our business in the event that our business is disrupted as a result of a public health crisis or other serious disaster or similar event. We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans, which, when taken together with our lack of earthquake insurance, could have a material adverse effect on our business.

If we fail to maintain an effective system of disclosure controls and procedures and internal controls, our ability to produce accurate financial statements or comply with applicable regulations could be impaired.

As a public company, we are required to comply with the Sarbanes-Oxley Act of 2002, as amended (the Sarbanes-Oxley Act), and the related rules and regulations of the SEC, expanded disclosure requirements, accelerated reporting requirements and more complex accounting rules. Company responsibilities required by the Sarbanes-Oxley Act include establishing and maintaining corporate oversight and adequate internal control over financial reporting and disclosure controls and procedures. Effective internal controls are necessary for us to produce reliable financial reports and are important to help prevent financial fraud.

We cannot assure that we will not have material weaknesses or significant deficiencies in our internal control over financial reporting. If we are unable to successfully remediate any material weakness or significant deficiency in our internal control over financial reporting, or identify any material weaknesses or significant deficiencies that may exist, the accuracy and timing of our

financial reporting may be adversely affected, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, and our stock price may decline materially as a result.

If we fail to comply with environmental, health, and safety laws and regulations, including regulations governing the handling, storage or disposal of hazardous materials, we could become subject to fines or penalties or incur costs that could harm our business.

We are subject to numerous environmental, health, and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment, and disposal of hazardous materials and wastes. Our operations involve the use of hazardous materials, including chemicals, biological materials and infectious agents. Our operations also may produce hazardous waste products. We generally contract with third parties for the disposal of these materials and wastes. We will not be able to eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from any use by us of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties for failure to comply with such laws and regulations.

Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological or hazardous materials.

In addition, we may incur substantial costs in order to comply with current or future environmental, health, and safety laws and regulations. These current or future laws and regulations may impair our research, development, or production efforts. Our failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.

The rules dealing with U.S. federal, state and local income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Service (IRS) and the U.S. Treasury Department. Changes to tax laws (which changes may have retroactive application) could adversely affect us or holders of our common stock. In recent years, many such changes have been made and changes are likely to continue to occur in the future. For example, the Tax Cuts and Jobs Act was enacted in 2017 and made significant changes to corporate taxation, including the reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, the limitation of the tax deduction for net interest expense to 30% of adjusted taxable income (except for certain small businesses), the limitation of the deduction for net operating losses to 80% of current year taxable income and the elimination of net operating loss carrybacks (though any such net operating losses may be carried forward indefinitely), and the modification or repeal of many business deductions and credits. In addition, under Section 174 of the Internal Revenue Code of 1986, as amended, in taxable years beginning after December 31, 2021, expenses that are incurred for research and development in the U.S. will be capitalized and amortized, which may have an adverse effect on our cash flow. It cannot be predicted whether, when, in what form, or with what effective dates, tax laws, regulations and rulings may be enacted, promulgated or issued, which could result in an increase in our or our stockholders’ tax liability or require changes in the manner in which we operate in order to minimize or mitigate any adverse effects of changes in tax law.

c) On April 5, 2023, Edward Dulac III, Chief Financial Officer, entered into a 10b5-1 trading plan. Mr. Dulac's plan provides for the sale of up to 451,235 shares of the Company's common stock. Sales of the shares of the Company's common stock set forth in Mr. Dulac's trading plan, if any, will be made at or above specified market prices. The trading plan will expire on December 31, 2024. Mr. Dulac's trading plan was entered into during an open insider trading window and is intended to satisfy Rule 10b5-1(c) under the Exchange Act and the Company's policies regarding insider transactions.

On April 21, 2023, Cindy Tahl, General Counsel and Corporate Secretary, entered into a 10b5-1 trading plan which was subsequently modified on June 26, 2023. Ms. Tahl's plan provides for the sale of up to 24,363 shares of the Company's common stock. Sales of the shares of the Company's common stock set forth in Ms. Tahl's trading plan, if any, will be made at or above specified market prices. The trading plan will expire on April 22, 2024. Ms. Tahl's trading plan was entered into and subsequently modified during an open insider trading window and is intended to satisfy Rule 10b5-1(c) under the Exchange Act and the Company's policies regarding insider transactions.

On June 13, 2023, William Rastetter, Chairman of our Board of Directors, entered into a 10b5-1 trading plan. Dr. Rastetter’s plan provides for the sale of up to 5,000 shares of the Company’s common stock. Sales of the shares of the Company’s common stock set forth in Dr. Rastetter's trading plan, if any, will be made at or above specified market prices. The trading plan will expire on June 6, 2024. Dr. Rastetter’s trading plan was entered into during an open insider trading window and is intended to satisfy Rule 10b5-1(c) under the Exchange Act and the Company’s policies regarding insider transactions.

Pursuant to the requirements 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.


Delaware		65-1311552
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

~~3535 General Atomics Court, Suite 200,~~ 12278 Scripps Summit Drive, San Diego, CA		~~92121~~92131
(Address of principal executive offices)		(Zip Code)


Large accelerated filer	☐☒		Accelerated filer	☐
Non-accelerated filer	☐	~~(Do not check if a smaller reporting company)~~	Smaller reporting company	☒☐
Emerging growth company	☒☐


		Page
SUMMARY OF RISK FACTORS		3

PART I. FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	35
	Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2017 (unaudited)~~2023 (Unaudited) and December 31, ~~2016 (unaudited)~~2022	35
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016 (unaudited)~~2022 (Unaudited)	46
	Condensed Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016 (unaudited)~~2022 (Unaudited)	57
	Notes to Condensed Consolidated Financial Statements ~~(unaudited)~~(Unaudited)	68
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1824
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2635
Item 4.	Controls and Procedures	2735

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	2836
Item 1A.	Risk Factors	2836
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4776
Item 3.	Defaults Upon Senior Securities	4776
Item 4.	Mine Safety Disclosures	4776
Item 5.	Other Information	4876
Item 6.	Exhibits	4878

SIGNATURES		4979


	September 30,			December 31,			June 30,			December 31,
	2017			2016			2023			2022
	(unaudited)						(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	43,231		$	88,609		$	46,802		$	61,333
Accounts receivable								2,833			38,480
Short-term investments and related maturity receivables		25,983			3,503			331,133			374,894
Prepaid expenses and other current assets		825			1,211			11,414			27,367
Total current assets		70,039			93,323			392,182			502,074
Long-term investments								7,291			4,942
Property and equipment, net		2,490			1,579			106,331			110,020
Operating lease right-of-use assets								63,743			66,069
Restricted cash		122			122			15,177			15,227
Collaboration contract assets								—			7,196
Other assets		24			24			33			33
Total assets	$	72,675		$	95,048		$	584,757		$	705,561

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	2,198		$	934		$	7,506		$	8,265
Accrued expenses		5,413			3,957			29,469			53,932
Current portion of deferred rent		—			4
Current portion of deferred revenue		2,105			2,105
Long-term debt, current portion		—			8,187
CIRM award liability, current portion								—			4,000
Deferred revenue								1,929			42,226
Operating lease liabilities, current portion								5,786			5,628
Total current liabilities		9,716			15,187			44,690			114,051
Deferred rent		1,090			101
Deferred revenue		1,250			2,829
Accrued expenses		81			1,276
Long-term debt, net of current portion		14,789			2,501
Commitments and contingencies (Note 5)
Operating lease liabilities, net of current portion								100,562			103,710
Stock price appreciation milestones								1,750			3,861
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value; authorized shares—5,000,000 at September 30, 2017 and December 31, 2016; 2,819,549 Class A Convertible Preferred shares issued and outstanding at September 30, 2017 and December 31, 2016		3			3
Common stock, $0.001 par value; authorized shares—150,000,000 at September 30, 2017 and December 31, 2016; issued and outstanding—41,457,155 at September 30, 2017 and 41,386,506 at December 31, 2016		41			41
Preferred stock, $0.001 par value; authorized shares—5,000,000 at June 30, 2023 and December 31, 2022; Class A Convertible Preferred shares issued and outstanding—2,761,108 at June 30, 2023 and 2,794,549 December 31, 2022								3			3
Common stock, $0.001 par value; authorized shares—250,000,000 at June 30, 2023 and December 31, 2022; issued and outstanding—98,522,718 at June 30, 2023 and 97,294,917 at December 31, 2022								99			97
Additional paid-in capital		252,019			248,957			1,560,680			1,536,497
Accumulated other comprehensive loss		(13	)		(1	)		(587	)		(1,854	)
Accumulated deficit		(206,301	)		(175,846	)		(1,122,440	)		(1,050,804	)
Total stockholders’ equity		45,749			73,154			437,755			483,939
Total liabilities and stockholders’ equity	$	72,675		$	95,048		$	584,757		$	705,561


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016			2023			2022			2023			2022
	(unaudited)												(unaudited)						(unaudited)
Collaboration revenue	$	1,026		$	1,026		$	3,079		$	3,375		$	933		$	18,549		$	59,913		$	36,963
Operating expenses:
Research and development		8,578			6,804			24,471			20,222			40,876			81,307			106,505			153,446
General and administrative		2,788			2,611			8,489			7,462			22,622			20,351			44,565			41,093
Total operating expenses		11,366			9,415			32,960			27,684			63,498			101,658			151,070			194,539
Loss from operations		(10,340	)		(8,389	)		(29,881	)		(24,309	)		(62,565	)		(83,109	)		(91,157	)		(157,576	)
Other income (expense):
Other income:
Interest income		152			37			400			95			4,381			757			8,075			1,175
Interest expense		(378	)		(385	)		(856	)		(1,308	)
Loss on extinguishment of debt		(118	)		—			(118	)		—
Total other expense, net		(344	)		(348	)		(574	)		(1,213	)
Change in fair value of stock price appreciation milestones														393			5,881			2,111			14,240
Other income														5,036			366			9,335			366
Total other income														9,810			7,004			19,521			15,781
Net loss	$	(10,684	)	$	(8,737	)	$	(30,455	)	$	(25,522	)	$	(52,755	)	$	(76,105	)	$	(71,636	)	$	(141,795	)
Other comprehensive income (loss):
Unrealized gain (loss) on available-for-sale securities, net		26			(8	)		(12	)		3			59			(531	)		1,267			(2,619	)
Comprehensive loss	$	(10,658	)	$	(8,745	)	$	(30,467	)	$	(25,519	)	$	(52,696	)	$	(76,636	)	$	(70,369	)	$	(144,414	)
Net loss per common share, basic and diluted	$	(0.26	)	$	(0.27	)	$	(0.74	)	$	(0.85	)	$	(0.54	)	$	(0.79	)	$	(0.73	)	$	(1.47	)
Weighted-average common shares used to compute basic and diluted net loss per share		41,428,845			32,090,174			41,407,995			29,920,075			98,400,355			96,704,413			98,228,476			96,524,968


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock	FATE	Nasdaq Global Market

	September 30, 2017
Cash and cash equivalents	$	43,231
Restricted cash		122
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$	43,353

	September 30, 2017		December 31, 2016
Accrued payroll and other employee benefits	$	1,597	$	1,505
Accrued clinical trial related costs		2,287		1,043
Accrued other		1,529		1,409
Current accrued expenses	$	5,413	$	3,957

	September 30, 2017			December 31, 2016
Long-term debt	$	15,000		$	10,765
Less debt issuance costs and discount, net of current portion		(211	)		(7	)
Long-term debt, net of long-term portion of debt issuance costs and discount		14,789			10,758
Less current portion of long-term debt		—			(8,257	)
Long-term debt, net	$	14,789		$	2,501
Current portion of long-term debt	$	—		$	8,257
Less current portion of debt issuance costs and discount		—			(70	)
Current portion of long-term debt, net	$	—		$	8,187

	Number of Options			Weighted- Average Price
Balance at December 31, 2016		3,910,350		$	3.77
Granted		2,438,980			3.04
Canceled		(559,571	)		3.59
Exercised		(70,649	)		2.74
Balance at September 30, 2017		5,719,110		$	3.49


	Three Months Ended September 30,				Increase/			Three Months Ended June 30,				Increase/
	2017		2016		(Decrease)			2023		2022		(Decrease)
Collaboration revenue	$	1,026	$	1,026	$	—		$	933	$	18,549	$	(17,616	)
Research and development expense		8,578		6,804		1,774			40,876		81,307		(40,431	)
General and administrative expense		2,788		2,611		177			22,622		20,351		2,271
Total other expense, net		344		348		(4	)
Total other income									9,810		7,004		2,806


Exhibit Number	Exhibit Title	Form	File No.	Exhibit	Filing Date	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	Amended and Restated Certificate of Incorporation of the Registrant	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	Certificate of Amendment to Amended and Restated Certificate of Incorporation of the Registrant, as currently in effect	8-K	001-36076	3.1	June 7, 2021

3.3	Amended and Restated Bylaws of the Registrant, as currently in effect	S-1/A	333-190608	3.4	August 29, 2013	Certificate of Designation of Preferences, Rights and Limitations of Class A Convertible Preferred Stock	8-K	001-36076	3.1	November 29, 2016

3.4						Amended and Restated Bylaws of the Registrant, as currently in effect	10-K	001-36076	3.3	February 24, 2021

3.5						Certificate of Amendment to Certificate of Designation of Preferences, Rights and Limitation of Class A Convertible Preferred Stock of Fate Therapeutics, Inc.	8-K	001-36076	3.1	April 19, 2023

4.1	Specimen Common Stock Certificate	S-1/A	333-190608	4.1	August 29, 2013	Specimen Common Stock Certificate	S-1/A	333-190608	4.1	August 29, 2013

4.2						Form of Pre-Funded Warrant	8-K	001-36076	4.1	January 8, 2021

10.1						Amended and Restated Non-Employee Director Compensation Policy	—	—	—	Filed herewith

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

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 and 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	Certification of Principal Executive Officer and 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	XBRL Instance Document	—	—	—	Filed herewith	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.	—	—	—	Filed herewith

101.SCH	XBRL Taxonomy Extension Schema Document	—	—	—	Filed herewith	Inline XBRL Taxonomy Extension Schema Document	—	—	—	Filed herewith

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document	—	—	—	Filed herewith	Inline XBRL Taxonomy Extension Calculation Linkbase Document	—	—	—	Filed herewith

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	—	—	—	Filed herewith	Inline XBRL Taxonomy Extension Definition Linkbase Document	—	—	—	Filed herewith

101.LAB	XBRL Taxonomy Extension Label Linkbase Document	—	—	—	Filed herewith	Inline XBRL Taxonomy Extension Label Linkbase Document	—	—	—	Filed herewith

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document	—	—	—	Filed herewith	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


	Fate Therapeutics, Inc.

Date: ~~November 1, 2017~~August 8, 2023	By:	/s/ J. Scott Wolchko
		J. Scott Wolchko
		President and Chief Executive Officer and Director
		(Principal Executive Officer)



Date: August 8, 2023	By:	/s/ Edward J. Dulac III
		Edward J. Dulac III
		Chief Financial Officer
		(Principal Financial ~~Officer~~ and ~~Principal~~ Accounting Officer)