What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2021-03-11 compared with 2020-03-12 · 7 added, 811 removed, 10 unchanged (99% of the section changed)

FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES

common shares trade on the NYSE American and on the Tel Aviv Stock Exchange under the ticker symbol LCTX.

of February 20, 2020, there were 375 record holders of our common shares.

The number of beneficial owners is substantially greater

than the number of record holders because a large portion of our common shares is held of record through brokerage firms in “street

of March 1, 2021, there were 384 record holders of our common shares.

The number of beneficial owners is substantially

greater than the number of record holders because a large portion of our common shares is held of record through brokerage firms

in “street name.”

have not paid dividends on our common shares.

3 unchanged sentences

as previously reported in our quarterly reports on Form 10-Q and current reports on Form 8-K filed with the Securities and Exchange

Commission, during the year ended December 31, 2019, there were no unregistered sales of equity securities

by us during the year ended December 31, 2019.

Commission, during the year ended December 31, 2020, there were no unregistered sales of equity securities by us during

the year ended December 31, 2020.

FINANCIAL DATA

2 unchanged sentences

not required to provide the information required by this item in this Report.

MANAGEMENT’S

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

following Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide information

necessary to understand our audited consolidated financial statements for the two-year period ended December 31, 2019, and highlight

certain other information which, in the opinion of management, will enhance a reader’s understanding of our financial condition,

changes in financial condition and results of operations.

In particular, the discussion is intended to provide an analysis of

significant trends and material changes in our financial position and the operating results of our business during the year ended

December 31, 2019 as compared to the year ended December 31, 2018.

This discussion should be read in conjunction with our consolidated

financial statements and related notes included elsewhere in this Report.

These historical financial statements may not be indicative

of our future performance.

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

a number of forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties

and risks described throughout this Report, particularly in “Item 1A.

Risk Factors.”

are a clinical-stage biotechnology company developing novel cell therapies for unmet medical needs.

Our focus is to develop therapies

for degenerative retinal diseases, neurological conditions associated with demyelination, and aiding the body in detecting and

combating cancer.

Our programs are based on our proprietary cell-based therapy platform and associated development and manufacturing

capabilities.

From this platform, we develop and manufacture specialized, terminally or partially differentiated human cells from

established and well-characterized pluripotent cell lines.

These differentiated cells are developed either to replace or support

cells that are dysfunctional or absent due to degenerative disease or traumatic injury, or are administered as a means of helping

the body mount an effective immune response to cancer.

have three allogeneic, or “off-the-shelf,”

three cell therapy programs in clinical development:

OpRegen ®

a retinal pigment epithelium (“RPE”) cell replacement therapy currently in a Phase 1/2a multicenter clinical trial

for the treatment of advanced dry-age-related macular degeneration (“AMD”) with geographic atrophy.

There currently

are no therapies approved by the U.S.

Food and Drug Administration (“FDA”) for dry AMD, which accounts for approximately

85-90% of all AMD cases and is a leading cause of blindness in people over the age of 65.

an oligodendrocyte progenitor cell therapy for acute spinal cord injuries.

We have completed enrollment in a 25-patient Phase

1/2a multicenter clinical trial with OPC1;

this trial was partially funded by the California Institute for Regenerative Medicine

(“CIRM”).

There are currently no therapies approved by the FDA.

a cancer immunotherapy of antigen-presenting dendritic cells currently in a Phase 1 clinical trial in non-small cell lung

This clinical trial is being funded and conducted by Cancer Research UK, the world’s largest independent cancer

research charity.

are also currently working to identify a commercialization partner for Renevia, our proprietary three-dimensional scaffold designed

to support adipose tissue transplants that was granted a Conformité

Européenne (“CE”) Mark in

September 2019.

completed its merger (the “Asterias Merger”) with Asterias Biotherapeutics, Inc.

(“Asterias”) on March

8, 2019, which incorporated OPC1 and VAC2 into its cell therapy product portfolio.

addition to seeking to create value for shareholders by developing product candidates and other technologies through our clinical

development programs, we also seek to create value from our technologies through partnering and strategic transactions.

two companies that later became publicly traded companies:

OncoCyte Corporation (“OncoCyte”) and AgeX Therapeutics,

(“AgeX”).

As of March 5, 2020, we hold approximately 9.7% and 2.3% in OncoCyte and AgeX, respectively.

The combined value of these holdings as of March 5, 2020, was approximately $14.6 million, based on the closing price

of their common stock on that date.

We also hold a convertible promissory note from Juvenescence Limited (“Juvenescence”)

in connection with our sale of AgeX stock to Juvenescence in August 2018.

The value of the Juvenescence note of $23.6 million

at December 31, 2019 is based on the principal amount of $21.6 million plus accrued interest.

The values of OncoCyte and AgeX

are based on the closing price of their common stock on that date.

See “Risk Factors—Risks Related to Our Business

Operations and Capital Requirements—The value of our investments in public companies fluctuates based on their respective

stock prices and could be negatively affected by poor business performance”.

our principal focus is on advancing our three cell therapy programs in clinical development, we may seek to create additional

value through corporate transactions, as we have in the past.

Our securities holdings also may be a significant source of capital

to fund our operations as an alternative to issuing additional Lineage securities.

Accounting Policies

preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States

(“GAAP”) requires management to make estimates and assumptions that affect the reported amounts in our consolidated

financial statements and related notes.

Our significant accounting policies are described in Note 2 to our consolidated financial

statements included elsewhere in this Report.

We have identified below our critical accounting policies and estimates that we

believe require the greatest amount of judgment.

On an ongoing basis, we evaluate estimates which are subject to significant judgment,

including those related to going concern assessment of our consolidated financial statements, useful lives associated with long-lived

assets, including evaluation of asset impairment, allowances for uncollectible accounts and financing receivables, v aluing

shares owned in nonconsolidated companies using the equity method of accounting, loss contingencies, deferred income taxes

and tax reserves, including valuation allowances related to deferred income taxes, and assumptions used to value stock-based awards,

debt or other equity instruments.

Actual results could differ materially from those estimates.

On an ongoing basis, we evaluate

our estimates compared to historical experience and trends which form the basis for making judgments about the carrying value

of assets and liabilities.

To the extent that there are material differences between our estimates and our actual results, our

future financial statement presentation, financial condition, results of operations and cash flows will be affected.

believe the assumptions and estimates associated with the following have the greatest potential impact on our consolidated financial

Combinations –

We account for business combinations, such as the Asterias Merger, in accordance with Accounting Standards

Codification (“ASC”) Topic 805, Business Combinations , which requires the purchase price to be measured at

When the purchase consideration consists entirely of our common shares, we calculate the purchase price by determining

the fair value, as of the acquisition date, of shares issued in connection with the closing of the acquisition.

We recognize estimated

fair values of the tangible assets and intangible assets acquired, including in-process research and development (“IPR&D”),

and liabilities assumed as of the acquisition date, and we record as goodwill any amount of the fair value of the tangible and

intangible assets acquired and liabilities assumed in excess of the purchase price.

and IPR&D –

Goodwill is calculated as the difference between the acquisition date fair value of the consideration

transferred and the values assigned to the assets acquired and liabilities assumed.

Goodwill is not amortized but is tested for

impairment at least annually, or more frequently if circumstances indicate potential impairment.

35 IPR&D assets are indefinite-lived

intangible assets until the completion or abandonment of the associated research and development (“R&D”) efforts.

Once the R&D efforts are completed or abandoned, the IPR&D will either be amortized over the asset life as a finite-lived

intangible asset or be impaired, respectively, in accordance with ASC 350, Intangibles –

Goodwill and Other .

In accordance

with ASC 350, goodwill and acquired IPR&D are determined to have indefinite lives and, therefore, are not amortized.

they are tested for impairment at least annually and between annual tests if we become aware of an event or a change in circumstances

that would indicate the asset may be impaired.

We account for leases in accordance with ASC 842, Leases .

We determine if an arrangement is a lease at inception.

Leases are classified as either financing or operating, with classification affecting the pattern of expense recognition in the

consolidated statements of operations.

Under the available practical expedients for the adoption of ASC 842, we account for the

lease and non-lease components as a single lease component.

We recognize right-of-use (“ROU”) assets and lease liabilities

for leases with terms greater than twelve months in the consolidated balance sheet.

ROU assets represent our right to use an underlying

asset during the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease

As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available

at commencement date in determining the present value of lease payments.

We use the implicit rate when readily determinable.

operating lease ROU asset also includes any lease payments made and excludes lease incentives.

Our lease terms may include options

to extend or terminate the lease when it is reasonably certain that we will exercise that option.

Lease expense for lease payments

is recognized on a straight-line basis over the lease term.

Operating leases are included as right-of-use assets in property and

equipment, and ROU lease liabilities, current and long-term, in the consolidated balance sheets.

Financing leases are included

in property and equipment, and in financing lease liabilities, current and long-term, in the consolidated balance sheets.

disclose the amortization of our ROU assets and operating lease payments as a net amount, “Amortization of ROU assets”,

on the consolidated statement of cash flows.

concern assessment –

In accordance with Accounting Standards Update (“ASU”) 2014-15, Presentation of

Financial Statements –

Going Concern , we assess going concern uncertainty in our consolidated financial statements to

determine if we have sufficient cash and cash equivalents on hand and working capital to operate for a period of at least one

year from the date our consolidated financial statements are issued or are available to be issued, which is referred to as the

“look-forward period”

as defined by ASU No.

As part of this assessment, based on conditions that are known

and reasonably knowable to us, we will consider various scenarios, forecasts, projections, and estimates, and we will make certain

key assumptions, including the timing and nature of projected cash expenditures or programs, and our ability to delay or curtail

those expenditures or programs, if necessary, among other factors.

Based on this assessment, as necessary or applicable, we make

certain assumptions concerning our ability to curtail or delay research and development programs and expenditures to the extent

we deem probable those implementations can be achieved and we have the proper authority to execute them within the look-forward

period in accordance with ASU 2014-15.

recognition –

During May 2014, the FASB issued ASU 2014-09 (“Topic 606”), Revenue from Contracts with

Customers which supersedes the revenue recognition requirements in Topic 605 Revenue Recognition (“Topic 605”).

Topic 606 describes principles an entity must apply to measure and recognize revenue and the related cash flows, using the following

(i) identify the contract(s) with a customer;

(ii) identify the performance obligations in the contract;

(iii) determine

the transaction price;

(iv) allocate the transaction price to the performance obligation(s) in the contract;

and (v) recognize

revenue when (or as) the entity satisfies a performance obligation.

Topic 606’s core principle is that it requires entities

to recognize revenue when control of the promised goods or services is transferred to customers at an amount that reflects the

consideration to which the entity expects to be entitled to in exchange for those goods or services.

adopted Topic 606 as of January 1, 2018 using the modified retrospective transition method applied to those contracts which were

not completed as of the adoption date.

Results for reporting periods beginning on January 1, 2018 and thereafter are presented

under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with Lineage’s historic

revenue recognition accounting under Topic 605.

January 1, 2018, the adoption and application of Topic 606 resulted in an immaterial cumulative effect adjustment of Lineage’s

beginning consolidated accumulated deficit balance.

In the applicable paragraphs below, Lineage has summarized its revenue recognition

policies for its various revenue sources in accordance with Topic 606.

from product sales and license fees –

Lineage’s performance obligations in agreements with certain customers is

to provide a license to allow customers to make, import and sell company licensed products or methods for preclinical studies

and commercial use.

Customers pay a combination of a license issue fee paid up front and a sales-based royalty, if any, in some

cases with yearly minimums.

The transaction price is deemed to be the license issue fee stated in the contract.

The license offered

by Lineage is a functional license with significant standalone functionality and provides customers with the right to use Lineage’s

intellectual property.

This allows Lineage to recognize revenue on the license issue fee at a point in time at the beginning of

the contract, which is when the customer begins to have use of the license.

Variable consideration related to sales-based royalties

is recognized only when (or as) the later of one or more of the following events occur:

(i) a sale or usage occurs;

performance obligation to which some, or all, of the sales-based or usage-based royalty that has been allocated and has been satisfied

or partially satisfied.

Due to the contract termination clauses, Lineage does not expect to receive all of the minimum royalty

payments throughout the term of the agreements.

Therefore, Lineage fully constrains recognition of the minimum royalty payments

as revenues until its customers are obligated to pay, which is generally within 60 days prior to the beginning of each year the

minimum royalty payments are due.

and development contracts with customers –

In its agreements with customers, Lineage’s performance obligations

of research and development are completed as services are performed and control passes to the customer, and accordingly revenues

are recognized over time.

Lineage generally receives a fee at the inception of an agreement, with variable fees, if any, tied

to certain milestones, if achieved.

Lineage estimates this variable consideration using a single most likely amount.

historical experience, there has been no variable consideration related to milestones included in the transaction price due to

the significant uncertainty of achieving contract milestones and milestones not being met.

If a milestone is met, subsequent changes

in the single most likely amount may produce a different variable consideration, and Lineage will allocate any subsequent changes

in the transaction price on the same basis as at contract inception.

Amounts allocated to a satisfied performance obligation will

be recognized as revenue in the period in which the transaction price changes with respect to variable consideration, which could

result in a reduction of revenue.

Contracts of this kind are typically for a term greater than one year.

of research products and services –

Revenues from the sale of research

products and services are primarily derived from the sale of hydrogels and stem cell products for research use and are recognized

These revenues are recognized at a point-in-time when control of the product transfers to the customer, which is

typically upon shipment to the customer from the Alameda facility.

Cost of sales from the sale of research products include direct

and indirect overhead expenses incurred to purchase and manufacture those products, including lab supplies, personnel costs, freight,

and royalties paid, if any, in accordance with the terms of applicable licensing agreements for those products.

and advertisement revenues –

Lineage no longer has subscription and advertisement revenues due to the AgeX Deconsolidation.

Through August 30, 2018, Lineage recorded revenues of $691,000 from LifeMap Sciences, a direct majority-owned subsidiary of AgeX,

for subscription-based products , including research databases and software tools,

for b iomedical, gene, disease, and stem cell research.

LifeMap Sciences deferred

subscription revenues primarily represent subscriptions for which cash payment has been received for the subscription term, but

the subscription term has not been completed as of the balance sheet date reported.

revenues –

In applying the provisions of Topic 606, Lineage has determined that government grants are out of the scope

of Topic 606 because the government entities do not meet the definition of a “customer”, as defined by Topic 606,

as there is not considered to be a transfer of control of good or services to the government entities funding the grant.

has, and will continue to, account for grants received to perform research and development services in accordance with ASC 730-20,

Research and Development Arrangements , which requires an assessment, at the inception of the grant, of whether the grant

is a liability or a contract to perform research and development services for others.

If Lineage or a subsidiary receiving the

grant is obligated to repay the grant funds to the grantor regardless of the outcome of the research and development activities,

then Lineage is required to estimate and recognize that liability.

Alternatively, if Lineage or a subsidiary receiving the grant

is not required to repay, or if it is required to repay the grant funds only if the research and development activities are successful,

then the grant agreement is accounted for as a contract to perform research and development services for others, in which case,

grant revenue is recognized when the related research and development expenses are incurred.

grant revenues represent grant funds received from the governmental funding agencies for which the allowable expenses have not

yet been incurred as of the balance sheet date reported.

with multiple performance obligations –

Lineage’s contracts with customers may include multiple performance obligations.

For such arrangements, Lineage allocates revenue to each performance obligation based on its relative standalone selling price.

Lineage generally determines or estimates standalone selling prices based on the prices charged, or that would be charged, to

customers for that product or service.

As of, and for the year ended, December 31, 2019, Lineage did not have significant arrangements

with multiple performance obligations.

intangible assets –

Long-lived intangible assets, consisting primarily of acquired patents, patent applications, and

licenses to use certain patents are stated at acquired cost, less accumulated amortization.

Amortization expense is computed using

the straight-line method over the estimated useful lives of the assets, generally over five to ten years.

of long-lived assets –

Our long-lived assets, including long-lived intangible assets, are reviewed for impairment whenever

events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable.

If an impairment

indicator is present, we evaluate recoverability by a comparison of the carrying amount of the assets to future undiscounted net

cash flows expected to be generated by the assets.

If the assets are impaired, the impairment recognized is measured by the amount

by which the carrying amount exceeds the estimated fair value of the assets.

and development –

Research and development expenses consist of costs incurred for company-sponsored, collaborative and

contracted research and development activities.

These costs include direct and research-related overhead expenses including compensation

and related benefits, stock-based compensation, consulting fees, research and laboratory fees, rent of research facilities, amortization

of intangible assets, and license fees paid to third parties to acquire patents or licenses to use patents and other technology.

We expense research and development costs as incurred.

Research and development expenses incurred and reimbursed by grants from

third parties approximate the grant income recognized in the consolidated statements of operations.

compensation –

We follow accounting standards governing share-based payments, which require the measurement and recognition

of compensation expense for all share-based compensation awards made to directors and employees, including employee stock options,

based on estimated fair values.

Upon adoption of ASU 2016-09 on January 1, 2017, f orfeitures

are accounted for as they occur instead of based on the number of awards that were expected to vest prior to adoption of ASU 2016-09.

Based on the nature and timing of our grants, straight line expense attribution of stock-based compensation for the entire award

and the relatively low forfeiture rates on Lineage’s experience, the impact of adoption of ASU 2016-09 pertaining to forfeitures

was not material to our consolidated financial statements .

We utilize the Black-Scholes option pricing model.

Our determination

of fair value of share-based payment awards on the date of grant using an option-pricing model is affected by our stock price

as well as assumptions regarding a number of complex and subjective variables.

These variables include, but are not limited to,

expected stock price volatility over the term of the awards, and the expected term of options granted, derived from actual and

projected employee stock option exercise behaviors.

The expected term of options granted is derived from historical data on employee

exercises and post-vesting employment termination behavior.

The risk-free rate is based on the U.S.

Treasury rates in effect during

the corresponding period of grant.

of our privately held formerly consolidated subsidiaries have their own share-based compensation plans.

For share-based compensation

awards granted by those privately held consolidated subsidiaries under their respective equity plans, which are included in our

consolidated financial statements and results of operations for the years presented, we determined the expected stock price volatility

using historical prices of comparable public company’s common stock for a period equal to the expected term of the options.

The expected term of those privately held company options is based upon the “simplified

method”

provided under Staff Accounting Bulletin, Topic 14 , or SAB Topic 14.

The fair value of the shares

of common stock underlying the stock options of these privately held formerly consolidated subsidiaries is determined by the Board

of Directors of those subsidiaries, as applicable, which is also used to determine the exercise prices of those stock options

at the time of grant.

the fair value of employee stock options is determined in accordance with FASB guidance, changes in the assumptions can materially

affect the estimated value and therefore the amount of compensation expense recognized in the consolidated financial statements.

management’s opinion, the existing valuation models may not provide an accurate measure of the fair value of employee stock

options because the option-pricing model value may not be indicative of the fair value that would be established in a willing

buyer/willing seller market transaction.

taxes –

We account for income taxes in accordance with ASC 740, Income Taxes , which prescribe the use of the

asset and liability method, whereby deferred tax asset or liability account balances are calculated at the balance sheet date

using current tax laws and rates in effect.

Valuation allowances are established when necessary to reduce deferred tax assets

when it is more likely than not that a portion or all of the deferred tax assets will not be realized.

ASC 740 guidance also prescribes

a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken

or expected to be taken in a tax return.

For benefits to be recognized, a tax position must be more-likely-than-not sustainable

upon examination by taxing authorities.

We file a U.S.

federal income tax return as well as various state and foreign income tax

Our judgments regarding future taxable income may change over time due to changes in market conditions, changes in tax

laws, tax planning strategies or other factors.

If our assumptions, and consequently the estimates, change in the future with

respect to our own deferred tax assets and liabilities, the valuation allowance may be increased or decreased, which may have

a material impact on our consolidated financial statements.

recognize accrued interest and penalties related to unrecognized tax benefits, if any, as income tax expense, however, no amounts

were accrued for the payment of interest and penalties as of December 31, 2019 and 2018.

December 22, 2017, the United States enacted major federal tax reform legislation, Public Law No.

115-97, commonly referred to

as the 2017 Tax Cuts and Jobs Act (“2017 Tax Act”), which enacted a broad range of changes to the Internal Revenue

Changes to taxes on corporations affected by the 2017 Tax Act include, among others, lowering the U.S.

rates to a 21% flat tax rate, elimination of the corporate alternative minimum tax, imposing additional limitations on the deductibility

of interest and net operating losses, allowing any net operating loss generated in tax years ending after December 31, 2017 to

be carried forward indefinitely and generally repealing carrybacks, reducing the maximum deduction for NOL carryforwards arising

in tax years beginning after 2017 to a percentage of the taxpayer’s taxable income, and allowing for the expensing of certain

capital expenditures.

The 2017 Tax Act also puts into effect a number of changes impacting operations outside of the United States

including, but not limited to, the imposition of a one-time tax “deemed repatriation”

on accumulated offshore earnings

not previously subject to U.S.

tax, and shifts the U.S taxation of multinational corporations from a worldwide system of taxation

to a territorial system.

ASC 740 requires the effects of changes in tax rates and laws on deferred tax balances (including the

effects of the one-time transition tax) to be recognized in the period in which the legislation is enacted.

in 2018, the 2017 Tax Act subjects a U.S.

shareholder to tax on Global Intangible Low Tax Income (“GILTI”) earned

by certain foreign subsidiaries.

In general, GILTI is the excess of a U.S.

shareholder’s total net foreign income over a

deemed return on tangible assets.

The provision further allows a deduction of 50 percent of GILTI;

however, this deduction is

limited by the company’s pre-GILTI U.S.

For the years ended December 31, 2018 and 2019, we incurred a net loss from

foreign activity, accordingly there was no GILTI inclusion in U.S.

income for 2018 and 2019.

Based on current interpretations

under ASC 740, an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences

expected to reverse as GILTI in future years or to provide for the tax expense related to GILTI in the year the tax is incurred

as a period expense only.

We have elected to account for GILTI as a current period expense when incurred.

December 22, 2017, the Securities and Exchange Commission (the “SEC”) staff issued Staff Accounting Bulletin

118 (“SAB 118”) to provide guidance for companies that are not able to complete their accounting for the income

tax effects of the 2017 Tax Act in the period of enactment.

SAB 118 allows us to record provisional amounts during a measurement

period not to extend beyond one year of the enactment date.

We applied the guidance in SAB 118 when accounting for the enactment-date

effects of the Tax Act in 2017 and throughout 2018.

At December 31, 2018, we have completed our accounting for all the enactment-date

income tax effects of the Tax Act.

ASC 740 requires the effects of changes in tax rates and laws on deferred tax balances (including

the effects of the one-time transition tax) to be recognized in the period in which the legislation is enacted (see Note 13 to

our consolidated financial statements included elsewhere in this Report).

of consolidation –

Our consolidated financial statements include the accounts of our wholly owned and majority-owned

subsidiaries.

All material intercompany accounts and transactions have been eliminated in consolidation.

The consolidated financial

statements are presented in accordance with accounting principles generally accepted in the U.S.

and with the accounting and reporting

requirements of SEC Regulation S-X.

further discussed in Notes 5 and 6 to the consolidated financial statements included elsewhere in this Report, on August 30, 2018,

we consummated the sale of AgeX Shares to Juvenescence (the “Juvenescence Transaction”).

Prior to the Juvenescence

Transaction, Juvenescence owned 5.6% of AgeX’s issued and outstanding common stock.

Upon completion of the Juvenescence

Transaction, our ownership in AgeX decreased from 80.4% to 40.2% of AgeX’s issued and outstanding shares of common stock,

and Juvenescence’s ownership in AgeX increased from 5.6% to 45.8% of AgeX’s issued and outstanding shares of common

As a result of the consummation of the Juvenescence Transaction on August 30, 2018, AgeX is no longer our subsidiary and,

as of that date, we experienced a “loss of control”

of AgeX, as defined by GAAP.

Loss of control is deemed to have

occurred when, among other things, a parent company owns less than a majority of the outstanding common stock of a subsidiary,

lacks a controlling financial interest in the subsidiary, and is unable to unilaterally control the subsidiary through other means

such as having, or being able to obtain, the power to elect a majority of the subsidiary’s Board of Directors based solely

on contractual rights or ownership of shares representing a majority of the voting power of the subsidiary’s voting securities.

All of these loss-of-control factors were present with respect to our ownership interest in AgeX as of August 30, 2018.

we have deconsolidated AgeX’s consolidated financial statements and consolidated results from our consolidated financial

further discussed in Note 3 to our consolidated financial statements included elsewhere in this Report, effective March 8, 2019,

we completed the Asterias Merger in which we acquired the approximate 62% remaining ownership interest in Asterias in a stock-for-stock

As of March 8, 2019, Asterias is our wholly owned subsidiary, Asterias ceased to exist as a public company, and we

consolidated Asterias’

operations and results with our operations and results beginning on that date.

Prior to March 8,

2016, the fair value of the Asterias common stock we held was accounted for as an investment under the equity method.

of Operations

of Years Ended December 31, 2019 and 2018

following table shows our revenues for the years ended December 31, 2019 and 2018 (amounts in thousands).

Ended December 31,

from product sales and license fees

and advertising revenues

of research products and services

revenues for the year ended December 31, 2019 were $3.5 million compared to $5.0 million for the year ended December 31, 2018.

The decrease of $1.5 million is primarily due to a $1.5 million decrease in grant revenue

and a $0.7 million decrease in subscription and advertising revenues, partially offset by a $0.8 million increase in royalties

from product sales and license fees.

revenues are generated primarily by our subsidiary Cell Cure Neurosciences Ltd (“Cell Cure”) from the Israel

Innovation Authority (“IIA”) for the development of OpRegen®

and from a Small Business Innovation Research grant

from the National Institutes of Health for our vision restoration program (the “NIH grant”).

The decreases in our

grant revenues for the year ended December 31, 2019 as compared to the year ended December 31, 2018, were primarily due to timing

of grant-related activities.

Grant revenues generated by Cell Cure from the IIA for the development of OpRegen amounted to $1.4

million and $2.5 million for the years ended December 31, 2019 and 2018, respectively, and grant revenues generated by the NIH

grant amounted to $0.6 million and $1.1 million for the years ended December 31, 2019 and 2018, respectively.

and advertising revenues, including certain service revenues, were generated entirely by LifeMap Sciences, AgeX’s majority-owned

subsidiary, and are included in our consolidated revenues for periods through August 29, 2018, the date before the AgeX Deconsolidation.

The decrease in those revenues is due to the AgeX Deconsolidation on August 30, 2018.

Due to the AgeX Deconsolidation, we do not

expect to earn subscription and advertising revenues in future accounting periods.

from product sales and license fees are generated from non-exclusive license agreements with multiple third parties.

of our royalties from product sales and license fees for the year ended December 31, 2019 are related to technologies that were

acquired in the Asterias Merger.

The increase of $0.8 million for the year ended December 31, 2019 compared to the year ended

December 31, 2018 was primarily related to a $0.6 million upfront, non-refundable payment for a new license agreement with a third

party for the use of certain patents related to the culture of undifferentiated pluripotent stem cells in suspension.

following table shows our operating expenses for the years ended December 31, 2019 and 2018 (in thousands).

Ended December 31,

and development expenses

and administrative expenses

$5.1 million of acquisition related costs for the Asterias Merger.

$4.6 million of AgeX research and development expenses incurred before the AgeX Deconsolidation.

$3.1 million of AgeX general and administrative expenses incurred before the AgeX Deconsolidation.

and development expenses

and development expenses for the year ended December 31, 2019 were approximately $17.9 million as compared to $21.8 million for

the year ended December 31, 2018.

The decrease of $3.9 million was primarily attributable to:

of $4.6 million related to the AgeX Deconsolidation and the absence of AgeX R&D expenses incurred after August 30, 2018, $3.8 million in Renevia and HyStem expenses and $0.2 million in OpRegen expenses, offset by a net increase of

$4.8 million in OPC1 and VAC2 expenses (these programs were acquired in the Asterias Merger).

following table shows the amounts and percentages of our total research and development expenses of $17.9

million and $21.8 million allocated to our primary research and development programs during the years ended December 31,

2019 and 2018, respectively (amounts in thousands).

Ended December 31,

and subsidiaries (2)

OpRegen ®

vision restoration and other ophthalmic research

and subsidiaries (2)

Renevia ®

and other HyStem ®

including ReCyte (3)

PureStem ®

progenitor cell lines, brown adipose fat, iTR technology, and preclinical cardiovascular

therapy research and development

in-process research and development

gene, and disease databases and tools

research and development expenses

includes research and development expenses incurred directly by the named subsidiary and certain general research and development

expenses, such as lab supplies, lab expenses, rent, and insurance allocated to research and development expenses, incurred

directly by Lineage on behalf of the subsidiary and allocated to the subsidiary.

“Lineage

and subsidiaries”

includes Cell Cure, ES Cell International Pte.

(“ESI”), and OrthoCyte Corporation

(“OrthoCyte”).

and development expenses shown for 2018 are through August 29, 2018, the date prior to the AgeX Deconsolidation.

March 23, 2018, AgeX purchased certain in-process research and development assets, primarily related to stem cell derived

cardiomyocytes (heart muscle cells) to be developed by AgeX, for a total cash consideration of $800,000.

The transaction was

considered an asset acquisition rather than a business combination.

Accordingly, the $800,000 was expensed on the acquisition

date as acquired in-process research and development as those assets have no alternative future use.

Sciences is a subsidiary of AgeX.

Research and development expenses shown for the periods presented in 2018 are through August

29, 2018, the date prior to the AgeX Deconsolidation.

and administrative expenses

and administrative expenses include employee and director compensation allocated to general and administrative expenses, consulting

fees other than those paid for science-related consulting, facilities and equipment rent and maintenance related expenses, insurance

costs allocated to general and administrative expenses, costs of patent applications, prosecution and maintenance, stock

exchange-related costs, depreciation expense, marketing costs, board fees, legal and accounting costs, and other miscellaneous

expenses which are allocated to general and administrative expense.

following table shows the amount and percentages of our total general and administrative expenses of $24.0

million and $24.7 million incurred and allocated to Lineage and our subsidiaries

during the years ended December 31, 2019 and 2018, respectively (amounts in thousands).

Ended December 31,

and subsidiaries other than AgeX (2)

including ReCyte (3)

general and administrative expenses

includes general and administrative expenses incurred directly by the named subsidiary and allocations from Lineage for certain

general overhead expenses to the subsidiary.

and subsidiaries includes Cell Cure, ESI, and OrthoCyte.

and administrative expenses shown for the periods presented in 2018 are through August 29, 2018, the date prior to the AgeX

Deconsolidation.

Sciences is a subsidiary of AgeX.

General and administrative expenses shown for the periods presented in 2018 are through

August 29, 2018, the date prior to the AgeX Deconsolidation.

and administrative expenses for the year ended December 31, 2019 were $24.0 million as compared to $24.7 million for the

year ended December 31, 2018.

The decrease of $0.7 million is primarily attributable to:

a $3.1 million decrease

in AgeX related general and administrative expenses, a $1.4 million decrease in salaries, benefits and severance

costs due to reductions in headcount, a $1.1 million reduction in legal and patent expenses and a $0.7 million reduction in consulting

fees, offset by a $5.6 million increase in severance, legal, accounting and other expenses related to the Asterias Merger.

income and expenses, net

following table shows the amount of other income and expenses, net, during the year ended December 31, 2019 and 2018 (in thousands):

Ended December 31,

income/(expenses), net

income (expense), net

on sale of equity method investment in Ascendance

(loss) on equity method investment in OncoCyte at fair value

(loss) on equity method investment in Asterias at fair value

on deconsolidation of AgeX

on equity method investment in AgeX at fair value

(loss) gain on marketable equity securities

on sale of marketable securities

on sale of equity method investment in OncoCyte

gain on warrant liability

income (expenses), net

other income (expenses), net

income and expense, net –

During 2019, we earned $1.7 million of interest income;

$1.5 million earned from our Juvenescence

promissory note and $0.2 million earned from our money market funds.

During 2018, we earned $0.9 million of interest income principally

from our Juvenescence promissory note and our money market funds, which was offset by $0.2 million of interest expense.

Gain on sale of equity

method investment in Ascendance –

On March 23, 2018, Ascendance Biotechnology, Inc.

(“Ascendance”), a

company in which AgeX owned a minority stake, was acquired by a third party in a merger through which AgeX received approximately

$3.2 million in cash for its shares of Ascendance common stock.

AgeX recognized a $3.2 million gain as a sale of its equity method

investment in Ascendance, which is included in other income and expenses, net, for the year ended December 31, 2018.

(loss) on investment in OncoCyte –

Lineage elected to account for its shares of OncoCyte common stock at fair value

using the equity method of accounting beginning on February 17, 2017, the date of the OncoCyte Deconsolidation, through September

Lineage sold 2.25 million shares of OncoCyte common stock for net proceeds of $4.2 million in July 2019.

Lineage’s ownership in OncoCyte was reduced from 28% to 24%.

Lineage sold an additional 4.0 million shares of OncoCyte common

stock for net proceeds of $6.5 million on September 11, 2019.

Lineage’s ownership in OncoCyte was further reduced to 16%

at this time.

Effective September 11, 2019, Lineage began accounting for its shares of OncoCyte common stock as marketable equity

of December 31, 2019, Lineage had 8.4 million shares of OncoCyte common stock.

These shares had a fair value of $19.0 million,

based on the closing price of OncoCyte of $2.25 per share on December 31, 2019.

As of December 31, 2018, Lineage had 14.7 million

shares of OncoCyte common stock.

These shares had a fair value of $20.3 million, based on the closing price of OncoCyte of $1.38

per share on December 31, 2018.

For the year ended December 31, 2019, Lineage recorded a realized gain of $0.5 million due to

sales of OncoCyte shares in the period.

Lineage also recorded an unrealized gain of $8.8 million due to the increase in

OncoCyte’s stock price from $1.38 per share at December 31, 2018 to $2.25 per share at December 31, 2019;

$8.0 million of

the unrealized gain was recorded as an unrealized gain on an equity method investment as it was prior to September 11, 2019;

$0.8 million was recorded as an unrealized gain on marketable equity securities.

share prices are determined based on the closing price of OncoCyte common stock on the NYSE American on the applicable dates,

or the last day of trading of the applicable quarter, if the last day of a quarter fell on a weekend.

expect our other income and expenses, net, to continue to fluctuate each reporting period based on the changes in the market price

of our OncoCyte shares, which could significantly impact our net income or loss reported in our consolidated statements of operations

for each period.

Gain (loss) on equity

method investment in Asterias shares –

Prior to the closing of the Asterias Merger on March 8, 2019, where we acquired

100% of its outstanding shares, we owned 21.7 million shares of common stock of Asterias.

We elected to account for our shares

in Asterias at fair value using the equity method of accounting beginning on May 13, 2016, the date of the Asterias Deconsolidation.

The fair value of our Asterias shares was approximately $20.2 million as of March 8, 2019, the closing date of the Asterias Merger,

based on $0.93 per share, which was calculated by multiplying (a) $1.31, the closing price of our common shares on such date by

(b) the merger exchange ratio of 0.71.

The fair value of our Asterias shares was approximately $13.5 million as of December

31, 2018, based on the closing price of Asterias common stock of $0.62 per share on such date.

Accordingly, we recorded an unrealized

gain of $6.7 million for the year ended December 31, 2019, representing the change in fair value of Asterias common stock from

December 31, 2018 to March 8, 2019.

Asterias shares had a fair value of $13.5 million and $48.9 million as of December 31, 2018, and December 31, 2017, respectively,

based on the closing price of Asterias common stock on the NYSE American of $0.62 per share, and $2.25 per share, respectively,

on those dates or the last trading day of the quarter.

Accordingly, we recorded an unrealized loss of $35.4 million for the year

ended December 31, 2018.

equity securities –

We also account for the shares we hold in Hadasit Bio-Holdings (“HBL”) and AgeX as marketable

equity securities, carried at fair market value on our consolidated balance sheets.

Beginning on January 1, 2018, in accordance

with our adoption of ASU 2016-01, all gains and losses we generate each period due to changes in fair market value, including

changes in foreign currency exchange rates, from these securities are included in other income and expenses, net, in our consolidated

statements of operations.

For the year ended December 31, 2019, Lineage recorded a realized gain of $2.4 million due to sales

of HBL and AgeX shares in the period.

For the year ended December 31, 2019, we recorded an unrealized loss of $3.7 million due

to changes in fair market value of these marketable equity securities from December 31, 2018 to December 31, 2019.

the year ended December 31, 2018, we recorded an unrealized gain of $0.7 million due to the increase in fair market value of the

HBL marketable equity securities from January 1, 2018 to December 31, 2018.

For the year ended December 31, 2018, we recorded

an unrealized gain of $0.5 million due to the increase in fair market value of the AgeX marketable equity securities from November

28, 2018 to December 31, 2018.

on deconsolidation of AgeX –

On August 30, 2018, we sold 14.4 million shares of our AgeX common stock to Juvenescence

Limited for $3.00 per share, or aggregate consideration of $43.2 million.

Upon completion of the sale, our percentage ownership

in AgeX decreased from 80.4% to 40.2% and Juvenescence’s percentage ownership in AgeX increased from 5.6% to 45.8%.

result, on August 30, 2018, we experienced a loss of control of AgeX in accordance with GAAP and deconsolidated AgeX’s consolidated

financial statements and consolidated results from ours.

In connection with this transaction, we recorded a gain on deconsolidation

of $78.5 million, which includes a gain on the sale of the AgeX shares of $39.2 million, during the year ended Dec ember

31, 2018, included in other income and expenses, net.

income and expenses, net –

Other income and expenses, net, in 2019 and 2018 consist primarily of net foreign currency

transaction gains and losses recognized by Cell Cure and ESI, and changes in the fair value of the Cell Cure liability classified

Foreign currency transaction gains and losses for the periods presented are principally related to the remeasurement

dollar denominated notes payable by Cell Cure to Lineage.

deconsolidation of Asterias and OncoCyte financial statements from Lineage were not taxable transactions and did not create a

current income tax payment obligation.

The market values of the Asterias and OncoCyte shares we hold create a deferred tax liability

to us based on the closing market prices of the shares, less our tax basis in the shares.

The deferred tax liability generated

by the Asterias and OncoCyte shares that we hold is a source of taxable income to us that

will more likely than not result in the realization of our deferred tax assets to the extent of those deferred tax liabilities.

Because the deferred tax liabilities are determined based on the closing prices of those shares and, due to the inherent

unpredictability of future prices of those shares, we cannot reliably estimate or project those deferred tax liabilities on an

annual basis.

Therefore, the deferred tax liabilities pertaining to Asterias and OncoCyte shares, measured as of the period end

being reported, and the related impact to the valuation allowance and deferred tax assets, are recorded in the period in which

The income tax consequences of the AgeX Deconsolidation are discussed below.

March 23, 2018, Ascendance was acquired by a third party in a merger though which AgeX received approximately $3.2 million in

cash for its shares of Ascendance common stock.

For financial reporting purposes, AgeX recognized a $3.2 million gain as a sale

of its equity method investment in Ascendance.

sale was a taxable transaction to AgeX generating a taxable gain of approximately $2.2 million.

We have sufficient net operating

losses to offset the entire gain resulting in no income taxes due.

Juvenescence Transaction was a taxable event for us that resulted in a gross taxable gain of approximately $29.4 million, which

we expect to be fully offset with available net operating losses (“NOL”) and NOL carryforwards, resulting in no net

income taxes due.

Although the AgeX Deconsolidation

on August 30, 2018 was not a taxable transaction to us and did not result in a current tax payment obligation, the financial reporting

gain on the AgeX Deconsolidation generated a deferred tax liability, primarily representing the difference between book and tax

basis of AgeX common stock on the AgeX Deconsolidation date.

We expect this deferred tax liability to be fully offset by a corresponding

release of our valuation allowance on deferred tax assets, resulting in no income tax provision or benefit from the AgeX Deconsolidation.

The deferred tax liabilities on our investments in OncoCyte and Asterias, combined with the deferred tax liability generated by

the fair value of our retained marketable securities in AgeX, are considered to be sources of taxable income that will more likely

than not result in the realization of its deferred tax assets to the extent of those deferred tax liabilities, thereby reducing

the need for a valuation allowance.

distribution of AgeX shares of common stock to Lineage shareholders on November 28, 2018 was a taxable event for us that resulted

in a gross taxable gain of approximately $26.4 million, which we expect to be fully offset with available net operating losses,

resulting in no income taxes due.

a result of the Asterias Merger, Lineage wrote off the equity method investment in Asterias, as well as any mark to market adjustments

that had been recorded since inception for tax purposes.

This write off was fully offset by a corresponding increase to the existing

valuation allowance, therefore there was no net impact to tax expense or benefit.

connection with the Asterias Merger, IPR&D was acquired with an indefinite life.

Pursuant to ASC 360-10-45, “naked credits”

are deferred tax liabilities that have an indefinite reversal pattern, such as a deferred tax liability that relates to an asset

with an indefinite useful life (e.g., land, goodwill, indefinite-lived intangible asset).

Naked credits would not ordinarily serve

as a source of income for the realization of deferred tax assets with a finite loss carryforward period.

In situations when another

source of taxable income is not available, a valuation allowance on deferred tax assets is necessary even though an entity may

be in an overall net deferred tax liability position.

If we can determine the expected timing of the reversal of the temporary

difference, it may be appropriate to consider a deferred tax liability as a source of income for the realization of deferred tax

The recording of the IPR&D related to the Asterias Merger generated a deferred tax liability with a corresponding

entry to goodwill in the amount of $10.8 million.

portion of the valuation allowance was released as it relates to Lineage’s indefinite lived assets that can be used against

the indefinite lived liabilities.

During the year ended December 31, 2019, we released $7.4 million of the valuation allowance

and recorded a tax provision benefit.

As new indefinite lived deferred tax assets are generated, we will continue to book a provision

benefit until the deferred tax liability position is exhausted, barring any new developments.

valuation allowance is provided when it is more likely than not that some portion of the deferred tax assets will not be realized.

For federal and state income tax purposes, as a result of the deconsolidation of AgeX, Asterias and OncoCyte and the deferred

tax liabilities generated from the fair values of AgeX, Asterias and OncoCyte shares from the respective deconsolidation dates,

including the changes to those deferred tax liabilities due to changes in the AgeX, Asterias and OncoCyte stock prices, our deferred

tax assets exceeded our deferred tax liabilities as of December 31, 2018.

As a result, we established a full valuation allowance

as of December 31 , 2018 due to the uncertainty of realizing future tax benefits from

our net operating loss carryforwards and other deferred tax assets.

the year ended December 31, 2018, because we experienced a loss from continuing operations but generated other comprehensive income

attributable to foreign currency translation adjustments, we allocated income tax expense against the component of foreign currency

translation adjustment in 2018 using a 21% tax rate.

Income tax benefit related to continuing operations for the year ended December

31, 2018 includes a tax benefit of $0.3 million due to the required intraperiod tax allocation.

Conversely, other comprehensive

income attributable to foreign currency translation adjustments for the year ended December 31, 2018 is net of an income tax expense

of $0.3 million.

state income tax purposes, we established a full valuation allowance on our state deferred tax assets for all periods presented

and, accordingly, no state tax provision or benefit was recorded for any period presented.

expect that deferred income tax expense or benefit we record each reporting period, if any, will vary depending on the change

in the closing stock prices of OncoCyte shares, including any changes in the fair value of our AgeX shares, from period to period

and the related changes in those deferred tax liabilities and our deferred tax assets and other credits, including changes in

the valuation allowance, for each period.

Note 3 to our consolidated financial statements included elsewhere in this Report for the Asterias Merger that was completed on

March 8, 2019.

We have concluded that an ownership change did occur after the Asterias Merger, and the acquired operating loss

carryforwards are subject to limitation under Section 382 of the Internal Revenue Service Code;

Lineage will only be able to utilize

$52.9 million of these operating loss carryforwards.

and Capital Resources

December 31, 2019, we had $30.7 million of cash, cash equivalents and marketable equity securities on hand, which includes our

investments in HBL, AgeX and OncoCyte.

We may use our marketable equity securities for liquidity, as necessary, and as market

conditions allow.

The market value may not represent the amount that could be realized in a sale of investment shares due to various

market and regulatory factors, including trading volume or market depth factors and volume and manner of sale restrictions under

Federal securities laws, prevailing market conditions and prices at the time of any sale, and subsequent sales of securities by

the entities.

inception, we have incurred significant net losses and have funded our operations primarily through the issuance of equity securities,

sale of common stock of a former subsidiary, receipt of research grants, royalties from product sales, license revenues and sales

of research products.

At December 31, 2019, we had an accumulated deficit of approximately $273.4 million, working capital

of $51.0 million and shareholders’

equity of $111.2 million.

We evaluated the projected cash flows for Lineage

and our subsidiaries, and we believe that our $30.7 million in cash, cash equivalents and marketable equity securities at December

31, 2019, provide sufficient cash, cash equivalents, and liquidity to carry out our current planned operations through at least

twelve months from the issuance date of our consolidated financial statements included elsewhere in this Report.

If we need near

term working capital or liquidity to supplement our cash and cash equivalents for our operations, we may sell some, or all, of

our investments, as necessary.

March 8, 2019, the Asterias Merger closed and Asterias became our wholly owned subsidiary.

We began consolidating Asterias’

operations and results with our operations and results beginning on March 8, 2019.

As we integrate Asterias’

into our own, we have made extensive reductions in headcount and reduced non-clinical related spend, in each case, as compared

to Asterias’

operations before the merger.

We have implemented significant cost savings initiatives and anticipate reduced

operational spend in 2020 compared to prior periods.

projected cash flows are subject to various risks and uncertainties, and the unavailability or inadequacy of financing to meet

future capital needs could force us to modify, curtail, delay, or suspend some or all aspects of our current planned operations.

Our determination as to when we will seek new financing and the amount of financing that we will need will be based on our evaluation

of the progress we make in our research and development programs, any changes to the scope and focus of those programs, any changes

in grant funding for certain of those programs, and projection of future costs, revenues, and rates of expenditure.

required to delay, postpone, or cancel our clinical trials or limit the number of clinical trial sites, unless we are able to

obtain adequate financing.

In addition, we have incurred and expect to continue incurring significant costs in connection with

the acquisition of Asterias and with integrating its operations.

We may incur additional costs to maintain employee morale and

to retain key employees.

We cannot assure that adequate financing will be available on favorable terms, if at all.

Sales of additional

equity securities by us or our subsidiaries and affiliates could result in the dilution of the interests of our current shareholders.

used in operating activities

Net cash used in operating

activities of $31.9 million for the year ended December 31, 2019 primarily reflects the loss from operations of $38.9

million adjusted for the changes in assets and liabilities of $2.1 million.

These items were offset primarily

by non-cash expenses of $3.6 million for stock-based compensation and $3.1 million of depreciation and amortization.

unrealized gains on equity method investments and marketable securities and deferred tax benefit are non-cash items that had no

effect on cash flows.

cash used in operating activities of $30.9 million for the year ended December 31, 2018 primarily reflects the loss from operations

of $41.8 million adjusted for the changes in assets and liabilities of $0.6 million.

These items were offset primarily

by non-cash expenses of $5.4 million for stock-based compensation and $3.3 million of depreciation and amortization.

unrealized gains on equity method investments and marketable securities and deferred tax benefit are non-cash items that had no

effect on cash flows.

The unrealized gains and losses on equity method investments and marketable securities and gain on AgeX

Deconsolidation are non-cash items that had no effect on cash flows.

used in investing activities

provided by investing activities of $17.0 million for the year ended December 31, 2019 was associated primarily with receipts

of $10.7 million from sales of a portion of our OncoCyte holdings, $1.7 million in sales of a portion of our AgeX holdings

and $1.7 million in sales of a portion of our HBL holdings as well as the receipt of $3.1 million of cash that Asterias had on

the closing date of the Asterias Merger, offset by $0.4 million in purchases of equipment and other assets.

provided by investing activities of $11.8 million for the year ended December 31, 2018 was associated primarily with proceeds

of $21.6 million related to the sale of our AgeX shares to Juvenescence and $3.2 million related to the sale of the equity method

investment in Ascendance, offset by a $9.7 million deconsolidation of AgeX’s cash and cash equivalents as part of the AgeX

Deconsolidation, $1.9 million for the purchase of in-process research and development and $1.4 million in purchases of equipment

and other assets.

provided by financing activities

provided by financing activities of $0.6 million for the year ended December 31, 2019 was associated primarily with $0.8 million

in landlord reimbursements for tenant improvements, offset by $0.1 million in common shares received and retired for employee

provided by financing activities of $5.8 million for the year ended December 31, 2018 was associated primarily with $5.0 million

in proceeds from the sale of subsidiary stock and $1.0 million in proceeds from the sale of subsidiary warrants, offset by $0.2

million for repayment of lease liabilities.

Sheet Arrangements

of December 31, 2019, we did not have any off-balance sheet arrangements, as defined under the rules of the SEC.

AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

rules and regulations of the Securities and Exchange Commission, as a smaller reporting company, we are not required to

provide the information required by this item.

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

What changed 10-K

Item 5. Market for Registrant’s Common Equity