What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-03-11 compared with 2020-03-12 · 1259 added, 1532 removed, 815 unchanged (77% of the section changed)

FINANCIAL STATEMENTS

AND SUPPLEMENTARY DATA

STATEMENTS AND SUPPLEMENTARY DATA

to consolidated financial statements

LLP, Independent Registered Public Accounting Firm –

Audit Opinion

LLP, Independent Registered Public Accounting Firm –

Internal Controls Opinion

Report of OUM & CO.

LLP, Independent Registered Public Accounting Firm – Audit Opinion

Financial Statements:

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have audited the consolidated balance sheets of Lineage Cell Therapeutics, Inc.

and Subsidiaries (collectively, the “Company”)

as of December 31, 2020 and 2019, and the related consolidated statements of operations, comprehensive income (loss), changes

in shareholders’

equity, and cash flows for each of the two years in the period ended December 31, 2019, and the related

notes (collectively referred to as the “consolidated financial statements”).

in shareholders’ equity, and cash flows for each of the two years in the period ended December 31, 2020, and the related

notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial

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conformity with accounting principles generally accepted in the United States of America.

also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”),

the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal

Control –

Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission

(“COSO”) and our report dated March 12, 2020 expressed an unqualified opinion thereon.

in Accounting Principle

discussed in Note 2 to the accompanying financial statements, the Company has changed their method of accounting for revenue in

2018 due to the adoption of Financial Accounting Standards Board (United States) Accounting Standard Codification Topic No.

Revenue from Contracts with Customers.

consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an

opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered

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

Francisco, California

have served as the Company’s auditor since 2014.

of Independent Registered Public Accounting Firm

and Board of Directors

Cell Therapeutics, Inc.

on Internal Control over Financial Reporting

have audited Lineage Cell Therapeutics, Inc.

and Subsidiaries’

(the “Company’s”) internal control over

financial reporting as of December 31, 2019, based on criteria established in Internal Control –

Integrated Framework

(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”).

our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December

31, 2019, based on the COSO criteria .

also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”),

the consolidated balance sheets of the Company as of December 31, 2019 and 2018, the related consolidated statements of operations,

comprehensive income (loss), changes in shareholders’

equity, and cash flows for each of the two years in the period ended

December 31, 2019, and the related notes and our report dated March 12, 2020 expressed an unqualified opinion thereon.

Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment

of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A, Management’s

Report on Internal Control over Financial Reporting .

Our responsibility is to express an opinion on the Company’s internal

control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required

to be independent with respect to the Company in accordance with U.S.

federal securities laws and the applicable rules and regulations

of the Securities and Exchange Commission and the PCAOB.

conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB.

Those standards

require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial

reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial

reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness

of internal control based on the assessed risk.

Our audit also included performing such other procedures as we considered necessary

in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

and Limitations of Internal Control over Financial Reporting

company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the

reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally

accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures

that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and

dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit

preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures

of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide

reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s

assets that could have a material effect on the financial statements.

of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections

of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes

in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements

that was communicated or required to be communicated to the Audit Committee and that:

(1) relates to accounts or disclosures that

are material to the consolidated financial statements;

and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken

as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit

matter or on the accounts or disclosures to which it relates.

Assets Impairment Assessment - In-Process Research and Development

of the Matter

described in Note 7 to the consolidated financial statements, the Company’s in-process research and development indefinite-lived

intangible assets had a balance of $46.5 million as of December 31, 2020.

Indefinite-lived

intangible assets are tested for impairment annually and when events or changes in circumstances indicate that the asset might

As part of its indefinite-live intangible asset impairment assessment, management estimates the fair values of the

Company’s indefinite-lived intangible assets using an income approach that utilizes a discounted cash flow model or, where

appropriate, a market approach.

The discounted cash flow model is dependent upon management’s estimates of future cash flows

and other factors such as estimates of (i) future operating performance, including future sales, long-term growth rates, operating

margins, discount rates, variations in the amount and timing of cash flows and the probability of achieving the estimated cash

flows, and (ii) future economic conditions.

the Company’s impairment analysis of its indefinite-lived intangible assets is complex because of the significant judgment

and estimates used by management in developing the fair value measurement of in-process research and development intangible assets.

This in turn leads to significant audit effort and a high degree of auditor judgment and subjectivity in performing procedures

to evaluate management’s estimated cash flows, including significant assumptions related to future sales, long-term growth

rates, operating margins, discount rates, variations in the amount and timing of cash flows and the probability of achieving the

estimated cash flows, and future economic conditions in determining the fair value of each of the in-process research and development

intangible assets.

We Addressed the Matter in Our Audit

the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the

consolidated financial statements.

These procedures included, among others, obtaining an understanding of and evaluating management’s

process for identifying potential impairment events;

evaluating the appropriateness of the cash flow model used in the impairment

testing process;

testing the completeness, accuracy, and relevance of underlying data used in the model;

and evaluating the reasonableness

of the significant assumptions used by management, including the future cash flow projections and discount rates.

the reasonableness of management’s assumptions for future cash flow projections and discount rates in consideration of (i)

the current and past performance of the asset group, (ii) the consistency with external market and industry data, and (iii) whether

these assumptions were consistent with evidence obtained in other areas of the audit.

Francisco, California

have served as the Company’s auditor since 2014.

CELL THERAPEUTICS, INC.

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BALANCE SHEETS

and cash equivalents

equity securities

note from Juvenescence (Note 5)

accounts and grants receivable, net

from affiliates, net

expenses and other current assets

December 31, 2020

December 31, 2019

CURRENT ASSETS

and equipment, net (Notes 7 and 14)

and other long-term assets

note from Juvenescence (Note 5)

method investment in OncoCyte, at fair value (Note 4)

method investment in Asterias, at fair value (Note 3)

AND SHAREHOLDERS’

payable and accrued liabilities

lease and right-of-use liabilities, current portion (Note 14)

notes, current portion

grant revenue

Cash and cash equivalents

Marketable equity securities

Promissory note from Juvenescence (Note 5)

Trade accounts and grants receivable, net

Receivables from affiliates, net

Prepaid expenses and other current assets

Total current assets

NONCURRENT ASSETS

Property and equipment, net (Notes 6 and 14)

Deposits and other long-term assets

Intangible assets, net

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES

tax liability

rent liabilities, net of current portion

lease liability, net of current portion (Note 14)

lease, net of current portion

classified warrants and other long-term liabilities

and contingencies (Note 14)

SHAREHOLDERS’

shares, no par value, authorized 2,000 shares;

none issued and outstanding as of December 31, 2019 and 2018, respectively

shares, no par value, authorized 250,000 shares;

149,804 and 127,136 shares issued and outstanding as of December 31, 2019

and 2018, respectively

other comprehensive income (loss)

Cell Therapeutics, Inc.

shareholders’

Noncontrolling

interest (deficit)

shareholders’

LIABILITIES AND SHAREHOLDERS’

Accounts payable and accrued liabilities

Financing lease and right-of-use liabilities, current portion (Note 14)

Deferred revenues

Liability classified warrants, current portion

Total current liabilities

LONG-TERM LIABILITIES

Deferred tax liability

Deferred revenues, net of current portion

Right-of-use lease liability, net of current portion (Note 14)

Financing lease, net of current portion

Liability classified warrants and other long-term

TOTAL LIABILITIES

Commitments and contingencies (Note 14)

SHAREHOLDERS’ EQUITY

Preferred shares, no par value, authorized 2,000 shares;

none issued and

outstanding as of December 31, 2020 and 2019, respectively

Common shares, no par value, authorized 250,000 shares;

153,096 and 149,804 shares issued and

outstanding as of December 31, 2020 and 2019, respectively

Accumulated other comprehensive loss

Accumulated deficit

Lineage Cell Therapeutics, Inc.

shareholders’ equity

Noncontrolling interest (deficit)

Total shareholders’ equity

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

accompanying notes to the consolidated financial statements.

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THOUSANDS, EXCEPT PER SHARE DATA)

Ended December 31,

from product sales and license fees

and advertisement revenues

of research products and services

and development

in-process research and development

and administrative

Year Ended December 31,

Grant revenue

Royalties from product sales and license fees

Sale of research products and services

Total revenues

Cost of sales

OPERATING EXPENSES:

from operations

INCOME/(EXPENSES):

income (expense), net

on sale of marketable securities

on sale of equity method investment in OncoCyte

on sale of equity method investment in Ascendance

on sale of AgeX shares and deconsolidation of AgeX

(loss) gain on marketable equity securities

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

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

on equity method investment in AgeX at fair value

gain on warrant liability

income/(expense), net

other income (expenses), net

BEFORE INCOME TAXES

loss attributable to noncontrolling interest

LOSS ATTRIBUTABLE TO LINEAGE

LOSS PER COMMON SHARE:

AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:

Research and development

General and administrative

Total operating expenses

Loss from operations

OTHER INCOME, NET:

Interest income, net

Gain on sale of marketable securities

Gain on sale of equity method investment in OncoCyte

Unrealized loss on marketable equity securities

Unrealized gain on equity method investment in OncoCyte at fair value

Unrealized gain on equity method investment in Asterias at fair value

Unrealized (loss) gain on warrant liability

Other income, net

Total other income, net

LOSS BEFORE INCOME TAXES

Income tax benefit

Net loss attributable to noncontrolling interest

NET LOSS ATTRIBUTABLE TO LINEAGE

NET LOSS PER COMMON SHARE:

BASIC AND DILUTED

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:

BASIC AND DILUTED

accompanying notes to the consolidated financial statements.

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STATEMENTS OF COMPREHENSIVE LOSS

Ended December 31,

comprehensive income (loss), net of tax:

currency translation adjustments, net of tax

COMPREHENSIVE

comprehensive loss attributable to noncontrolling interest

COMPREHENSIVE

LOSS ATTRIBUTABLE TO LINEAGE COMMON SHAREHOLDERS

Year Ended December 31,

Other comprehensive loss, net of tax:

Foreign currency translation adjustments, net of tax

COMPREHENSIVE LOSS

comprehensive loss attributable to noncontrolling

COMPREHENSIVE LOSS ATTRIBUTABLE TO LINEAGE COMMON SHAREHOLDERS

accompanying notes to the consolidated financial statements.

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AND SUBSIDIARIES

STATEMENTS OF CHANGES IN SHAREHOLDERS’

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

Noncontrolling

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Income/(Loss)

Shareholders’

AT DECEMBER 31, 2017

Cumulative-effect

adjustment for adoption of ASU 2016-01 on January 1, 2018

Cumulative-effect

adjustment for adoption of Accounting Standard Codification, Topic 606, on January 1, 2018

issued upon vesting of restricted stock units, net of shares retired to pay employees’

compensation in subsidiaries

of subsidiary shares in AgeX

of subsidiary warrants in AgeX

Deconsolidation

of AgeX shares to Lineage shareholders, on a pro rata basis, at fair value as a dividend-in-kind

financing transactions with noncontrolling interests –

currency translation adjustments

financing and other transactions with noncontrolling interests –

of noncontrolling interests in Cell Cure

AT DECEMBER 31, 2018

issued in connection with the Asterias Merger

retired in connection with the Asterias Merger

issued for settlement of Lineage Warrants

issued upon vesting of restricted stock units, net of shares retired to pay employees’

compensation for shares issued upon vesting of Asterias restricted stock units attributable to post combination services

issued through ATM

upon adoption of leasing standard

currency translation loss

AT DECEMBER 31, 2019

Shareholders’

Noncontrolling

Interest/(Deficit)

Comprehensive

Income/(Loss)

Shareholders’

BALANCE AT DECEMBER 31, 2018

$ ( 261,856 )

Shares issued in connection with the Asterias Merger

Shares retired in connection with the Asterias Merger

Shares issued for settlement of Lineage Warrants

Shares issued upon vesting of restricted stock units, net of shares

retired to pay employees’ taxes

Shares issued for services

Stock-based compensation

Stock-based compensation for shares issued upon vesting of Asterias

restricted stock units attributable to post combination services

Shares issued through ATM

Adjustment upon adoption of leasing standard

Financing related fees

Dissolution of BioTime Asia

Hadasit non-cash warrant exercise

Foreign currency translation gain (loss)

BALANCE AT DECEMBER 31, 2019

$ ( 273,422 )

BALANCE AT DECEMBER 31, 2019

$ ( 273,422 )

Shares issued through ATM

Shares issued upon vesting of restricted stock units, net of shares

retired to pay employees’ taxes

Shares issued for services

Stock-based compensation

Financing related fees

Dissolution of BioTime Asia

Hadasit non-cash warrant exercise

Foreign currency translation gain (loss)

BALANCE AT DECEMBER 31, 2020

$ ( 294,078 )

accompanying notes to the consolidated financial statements.

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STATEMENTS OF CASH FLOWS

Ended December 31,

FLOWS FROM OPERATING ACTIVITIES:

loss attributable to Lineage

loss attributable to noncontrolling interest

to reconcile net loss attributable to Lineage to net cash used in operating activities:

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

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

on sale of investments in OncoCyte, AgeX and Hadasit

on sale of AgeX shares and deconsolidation of AgeX

on sale of equity method investment in Ascendance

in-process research and development

loss on equity method investment in AgeX at fair value

(gain) loss on marketable equity securities

expense, including amortization of leasehold improvements

of right-of-use assets

of intangible assets

in unrealized gain on warrant liability

currency remeasurement and other (gain) loss

loss on sale of assets

Year Ended December 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss attributable to Lineage

Net loss attributable to noncontrolling interest

Adjustments to reconcile net loss attributable to Lineage to net cash used in operating activities:

Unrealized gain on equity method investment in OncoCyte at fair value

Unrealized gain on equity method investment in Asterias at fair value

Gain on sale of marketable equity securities

Unrealized loss on marketable equity securities

Income tax benefit

Depreciation expense, including amortization of leasehold improvements

Amortization of right-of-use assets

Amortization of intangible assets

Stock-based compensation

Common stock issued for services

Change in unrealized loss (gain) on warrant liability

Write-off of security deposit

Amortization of deferred license fee

Foreign currency remeasurement and other (gain) loss

(Gain) loss on sale of assets

Realized loss on warrant exercise

Dividend received

in operating assets and liabilities:

and grants receivable, net

interest receivable

from affiliates, net of payables

expenses and other current assets

long-term assets and liabilities

payable and accrued liabilities

revenue and other liabilities

cash used in operating activities

FLOWS FROM INVESTING ACTIVITIES:

from sale of OncoCyte common shares

from the sale of AgeX common shares

from the sale of Hadasit common shares

and cash equivalents acquired in the Asterias Merger

of property and equipment

from sale of assets

Deconsolidation

of cash and cash equivalents of AgeX

from the sale of AgeX common stock to Juvenescence

from the sale of equity method investment in Ascendance

of in-process research and development by AgeX

on construction in progress

deposit paid and other

cash provided by investing activities

FLOWS FROM FINANCING ACTIVITIES:

shares received and retired for employee taxes paid

from sale of subsidiary common shares

from sale of subsidiary warrants

Changes in operating assets and liabilities:

Accounts and grants receivable, net

Accrued interest receivable

Receivables from affiliates, net of payables

Prepaid expenses and other current assets

Accounts payable and accrued liabilities

Deferred revenue and other liabilities

Net cash used in operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from sale of OncoCyte common shares

Proceeds from the sale of AgeX common shares

Proceeds from the sale of Hadasit common shares

Cash and cash equivalents acquired in the Asterias Merger

Purchase of property and equipment

Proceeds from sale of assets

Security deposit paid and other

Net cash provided by investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from payment of Juvenescence promissory note

Common shares received and retired for employee taxes paid

Proceeds from sale of subsidiary warrants

Proceeds from sale of common shares

of financing lease liabilities

Reimbursement

from landlord on tenant improvements

of principal portion of promissory notes

to repurchase subsidiary shares

cash provided by financing activities

of exchange rate changes on cash, cash equivalents and restricted cash

INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

beginning of year

DISCLOSURE OF CASH FLOW INFORMATION:

paid during year for interest

SCHEDULE OF NON-CASH FINANCING AND INVESTING ACTIVITIES:

of common shares for the Asterias Merger (Note 3)

of liabilities in the Asterias Merger

of warrants in the Asterias Merger

of common shares for settlement of Lineage Warrants

of AgeX common stock in exchange for a promissory note from Juvenescence

of AgeX common stock to Lineage shareholders, on a pro rata basis, as a dividend-in-kind, at fair value

receivable and lease liability

in progress in accounts payable and accrued expenses

Payments for offering costs

Repayment of financing lease liabilities

Proceeds from Paycheck Protection Program (“PPP”) Loan (Note

Reimbursement from landlord on tenant improvements

Repayment of principal portion of promissory notes

Net cash provided by financing activities

Effect of exchange rate changes on cash, cash equivalents and restricted

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

At beginning of year

At end of year

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid during year for interest

SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING AND INVESTING ACTIVITIES:

Receivable from sale of common shares in at the market offering

Receivable from sale of AgeX common shares

Issuance of common shares for the Asterias Merger (Note 3)

Assumption of liabilities in the Asterias Merger

Assumption of warrants in the Asterias Merger

Issuance of common shares for settlement of Lineage Warrants

accompanying notes to the consolidated financial statements.

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– Lineage Cell Therapeutics, Inc.

(“Lineage”) is a clinical-stage biotechnology company developing novel

cell therapies for unmet medical needs.

Lineage’s focus is to develop therapies for degenerative retinal diseases, neurological

conditions associated with demyelination, and aiding the body in detecting and combating cancer.

Lineage’s programs are

based on its proprietary cell-based therapy platform and associated development and manufacturing capabilities.

From this platform

Lineage develops and manufactures specialized, terminally differentiated human cells from its pluripotent and progenitor cell

starting materials.

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.

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

cell therapy programs in clinical development:

OpRegen ®

Specifically, Lineage is testing

therapies to treat dry age-related macular degeneration, spinal cord injuries, and non-small cell lung cancer.

programs are based on its proprietary cell-based therapy platform and associated development and manufacturing capabilities.

this platform, Lineage develops and manufactures specialized, terminally or functionally differentiated human cells

from its pluripotent and progenitor cell starting materials.

These differentiated cells are transplanted into a patient either

to replace or support cells that are dysfunctional or absent due to degenerative disease or traumatic injury, or administered

as a means of helping the body mount an effective immune response to cancer.

has three allogeneic, or “off-the-shelf,” cell therapy programs in clinical development:

a retinal pigment epithelium 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 for dry AMD, which accounts for approximately 85-90% of all AMD cases and

is the leading cause of blindness in people over the age of 60.

Food and Drug Administration (“FDA”) for dry AMD, which accounts for approximately 85-90%

of all AMD cases and is the leading cause of blindness in people over the age of 60.

an oligodendrocyte progenitor cell therapy currently in a Phase 1/2a multicenter clinical trial for acute spinal cord injuries

(“SCI”).

This clinical trial has been partially funded by the California Institute for Regenerative Medicine (“CIRM”).

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 (“CRUK”), the world’s largest

independent cancer research charity.

is also currently working to identify a commercialization partner for Renevia ®

, its proprietary three-dimensional

scaffold designed to support adipose tissue transplants that was granted a Conformité

Européenne (“CE”)

Mark in September 2019.

November 7, 2018, Lineage, Asterias and Patrick Merger Sub, Inc., a wholly owned subsidiary of Lineage, entered into an Agreement

and Plan of Merger (the “Merger Agreement”) whereby Lineage agreed to acquire all of the outstanding common stock

of Asterias in a stock-for-stock transaction (the “Asterias Merger”).

This clinical trial has been partially funded by the California Institute for Regenerative Medicine.

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

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

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,

the year ended December 31, 2020, we received approximately $ 12.6 million in gross proceeds in connection with our sale of shares

of OncoCyte and AgeX.

In August 2020, we also received $ 24.6 million from Juvenescence Limited (“Juvenescence”), representing

principal and accrued interest under a promissory note we received in connection with our sale of AgeX shares to Juvenescence in

no longer hold any common stock in AgeX.

The value of our OncoCyte holdings as of March 5, 2021, was approximately $ 4.2

million, based on the closing price of its common stock on that date.

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

value through corporate transactions, as we have in the past, or by initiating new programs using our protocols or with new protocols

and cell lines.

November 7, 2018, Lineage, Asterias Biotherapeutics, Inc.

(“Asterias”) and Patrick Merger Sub, Inc., a wholly owned

subsidiary of Lineage, entered into an Agreement and Plan of Merger (the “Merger Agreement”) whereby Lineage agreed

to acquire all of the outstanding common stock of Asterias in a stock-for-stock transaction (the “Asterias Merger”).

March 7, 2019, the shareholders of each of Lineage and Asterias approved the Merger Agreement.

Prior to the Asterias Merger, Lineage

owned approximately 38% of Asterias’

issued and outstanding common stock and accounted for Asterias as an equity method

owned approximately 38 % of Asterias’ issued and outstanding common stock and accounted for Asterias as an equity method

March 8, 2019, the Asterias Merger closed with Asterias surviving as a wholly owned subsidiary of Lineage.

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Asterias Merger has been accounted for using the acquisition method of accounting in accordance with Accounting Standards Codification

(“ASC”) Topic 805, Business Combinations , which requires, among other things, that the assets and liabilities

assumed be recognized at their fair values as of the acquisition date.

Note 3 for a full discussion of the Asterias Merger.

has significant equity holdings in OncoCyte Corporation (“OncoCyte”), a publicly traded company, which Lineage founded

and, in the past, was a majority-owned consolidated subsidiary until February 17, 2017, when Lineage deconsolidated OncoCyte’s

financial statements (the “OncoCyte Deconsolidation”).

OncoCyte (NYSE American:

OCX) is developing confirmatory diagnostic

tests for lung cancer utilizing novel liquid biopsy technology.

As of December 31, 2019, Lineage owned 8.4 million shares of OncoCyte

common stock, or 16% of its outstanding shares (see Note 4).

In January 2020, Lineage sold 2,383,090 shares of OncoCyte common

stock for net proceeds of $5.0 million and subsequently owns less than 10% of its outstanding shares (see Note 18).

has significant equity holdings in OncoCyte, which Lineage founded and, in the past, was a majority-owned consolidated subsidiary

until February 17, 2017, when Lineage deconsolidated OncoCyte’s financial statements.

OncoCyte is focused on developing

and commercializing laboratory-developed tests to serve unmet medical needs across the cancer care continuum.

As of December 31,

2020, Lineage owned approximately 3.6 million shares of OncoCyte common stock, or 5.4 % of its outstanding shares (see Note 4).

preparation of consolidated financial statements in conformity with accounting principles generally accepted in the U.S.

(“GAAP”)

requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure

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of consolidation

Lineage’s

consolidated financial statements include the accounts of its subsidiaries.

The following table reflects Lineage’s ownership,

directly or through one or more subsidiaries, of the outstanding shares of its operating subsidiaries as of December 31, 2020.

Cure Neurosciences Ltd (“Cell Cure”)

and manufacturing of Lineage’s cell replacement platform technology

Cell International Pte.

(“ESI”)

cell products for research, including clinical grade cell lines produced under cGMP

Corporation (“OrthoCyte”)

bone grafting products for orthopedic diseases and injuries

Schedule of Lineage's Ownership of Outstanding Shares of its Subsidiaries

Field of Business

Lineage Ownership

Asterias BioTherapeutics, Inc.

Cell therapy clinical development programs in spinal cord injury and oncology

Cell Cure Neurosciences Ltd (“Cell Cure”)

Development and manufacturing of Lineage’s cell replacement platform technology

ES Cell International Pte.

Stem cell products for research, including clinical grade cell lines produced under cGMP

OrthoCyte Corporation (“OrthoCyte”)

Developing bone grafting products for orthopedic diseases and injuries

shares owned by Lineage and ESI

3 unchanged sentences

and financial decisions and policies through its ownership, and the noncontrolling interest is reflected as a separate element

of shareholders’

equity on Lineage’s consolidated balance sheets.

of shareholders’ equity on Lineage’s consolidated balance sheets.

inception, Lineage has incurred significant operating losses and has funded its operations primarily through sale of common stock

of AgeX and OncoCyte, both former subsidiaries, sale of common stock of Hadasit Bio-Holdings (“HBL”), receipt of research

grants, royalties from product sales, license revenues, sales of research products and issuance of equity securities.

31, 2019, Lineage had an accumulated deficit of approximately $273.4 million, working capital of $51.0 million and

shareholders’

May 1, 2020, Lineage entered into a Controlled Equity Offering SM Sales Agreement (the “Sales Agreement”)

with Cantor Fitzgerald & Co., as sales agent (“Cantor Fitzgerald”), pursuant to which Lineage may, but is not

obligated to, raise up to $ 25.0

million through the sale of common shares

(“ATM Shares”) from time to time in at-the-market transactions under the Sales Agreement.

As of December 31, 2020,

Lineage raised $ 5.1

million in gross proceeds under

the Sales Agreement (which excludes $ 0.3 million in cash in transit related to 2020 sales that settled in 2021) and during

the first quarter through March 5, 2021, Lineage raised $ 19.9

million in gross proceeds under

the Sales Agreement (which includes $ 0.3 million in cash in transit related to 2020 sales that settled in 2021).

5, 2021, Lineage filed a prospectus supplement with the Securities and Exchange Commission (the “SEC”) in connection

with the offer and sale of an additional $ 25

million of ATM Shares.

December 31, 2020, Lineage had an accumulated deficit of approximately $ 294.1 million, working capital of $ 36.2 million and shareholders’

equity of $ 95.1 million.

Lineage has evaluated its projected cash flows and believes that its $30.7

million of cash, cash equivalents and marketable equity securities, including its positions in OncoCyte, AgeX and HBL, at December

31, 2019, provide sufficient cash, cash equivalents, and liquidity to carry out Lineage’s current planned operations through

at least twelve months from the issuance date of the consolidated financial statements included herein.

If Lineage needs near

term working capital or liquidity to supplement its cash and cash equivalents for its operations, Lineage may sell some, or all,

of its marketable equity securities, as necessary.

the promissory note issued by Juvenescence in favor of Lineage discussed in Note 5 is converted into equity securities of Juvenescence

prior to its maturity date, the Juvenescence equity securities may be marketable securities that Lineage may use to supplement

its liquidity, as needed.

If such promissory note is not converted, it is payable in cash, plus accrued interest, at maturity

on August 30, 2020.

March 8, 2019, with the consummation of the Asterias Merger, Asterias became Lineage’s wholly owned subsidiary.

began consolidating Asterias’

operations and results with its operations and results beginning on March 8, 2019 (see Note

As Lineage integrates Asterias’

operations into its own, Lineage has made extensive reductions in headcount and reduced

non-clinical related spend, in each case, as compared to Asterias’

operations before the Asterias Merger.

Lineage’s

Lineage has evaluated its projected cash flows and believes that its $ 41.6 million of cash, cash equivalents

and marketable equity securities are sufficient to fund Lineage’s planned operations for at least the next twelve months

from the issuance date of the condensed consolidated financial statements included herein.

If Lineage needs near term working

capital or liquidity to supplement its cash and cash equivalents for its operations, Lineage may sell some, or all, of its marketable

equity securities, as necessary.

March 8, 2019, Asterias became Lineage’s wholly owned subsidiary, and Lineage began consolidating Asterias’ operations

and results with its operations and results (see Note 3).

Lineage has made extensive reductions in headcount and reduced non-clinical

related spend, in each case, as compared to Asterias’ operations before the Asterias Merger.

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

future capital needs could force Lineage to modify, curtail, delay, or suspend some or all aspects of its planned operations.

Lineage’s determination as to when it will seek new financing and the amount of financing that it will need will be based

on Lineage’s evaluation of the progress it makes in its research and development programs, any changes to the scope and

Lineage’s determination as to when it will seek new financing and the amount of financing that it will need will be based

on Lineage’s evaluation of the progress it makes in its 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.

Lineage may be required to delay, postpone, or cancel clinical trials or limit the number of clinical

trial sites, unless it is able to obtain adequate financing.

In addition, Lineage has incurred and expects to continue incurring

significant costs in connection with the acquisition of Asterias and with integrating its operations.

Lineage may incur additional

costs to maintain employee morale and to retain key employees.

Lineage cannot assure that adequate financing will be available

on favorable terms, if at all.

Sales of additional equity securities by Lineage or its subsidiaries and affiliates could result

in the dilution of the interests of current shareholders.

Lineage’s ability to raise additional funds may be adversely impacted by deteriorating global

economic conditions and the disruptions to and volatility in the credit and financial markets in the United States and worldwide

resulting from the ongoing COVID-19 pandemic.

Lineage may be required to delay, postpone, or cancel clinical trials or limit the

number of clinical trial sites, unless it is able to obtain adequate financing.

In addition, Lineage has incurred significant

costs in connection with the acquisition of Asterias and with integrating its operations.

Lineage may incur additional costs to

maintain employee morale and to retain key employees.

Lineage cannot assure that adequate financing will be available on favorable

terms, if at all.

Sales of additional equity securities by Lineage or its subsidiaries and affiliates could result in the dilution

of the interests of current shareholders.

Summary of Significant Accounting Policies

Combinations –

Lineage accounts for business combinations, such as the Asterias Merger completed in March 2019, in accordance

with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations , which requires the purchase

price to be measured at fair value.

When the purchase consideration consists entirely of our common shares, Lineage calculates

the purchase price by determining the fair value, as of the acquisition date, of shares issued in connection with the closing

of the acquisition.

Lineage recognizes 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 records

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

Combinations – Lineage accounts for business combinations, such as the Asterias Merger completed in March 2019, in accordance

with ASC Topic 805, which requires the purchase price to be measured at fair value.

When the purchase consideration consists entirely

of Lineage common shares, Lineage calculates the purchase price by determining the fair value, as of the acquisition date, of

shares issued in connection with the closing of the acquisition.

Lineage recognizes 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 records as goodwill any amount of the fair value of the tangible and intangible assets acquired

and liabilities assumed in excess of the purchase price.

Equity Securities – Lineage accounts for the shares it holds in OncoCyte and HBL (and AgeX previously) as marketable

equity securities in accordance with ASC 320-10-25, Investments – Debt and Equity Securities , as amended by Accounting

Standards Update (“ASU”) 2016-01, Financial Instruments–Overall:

Recognition and Measurement of Financial

Assets and Financial Liabilities, further discussed below .

OncoCyte and AgeX shares have readily determinable fair values quoted on the NYSE American under trading symbols “OCX”

The HBL shares have a readily determinable fair value quoted on the Tel Aviv Stock Exchange (“TASE”)

under trading symbol “HDST” where share prices are denominated in New Israeli Shekels (NIS).

to September 11, 2019, Lineage accounted for its OncoCyte shares held at fair value, using the equity method of accounting.

September 11, 2019, Lineage’s ownership percentage decreased from 24 % to 16 % when it sold 4.0 million shares of OncoCyte

common stock.

Accordingly, as the ownership percentage was reduced to less than 20 % , Lineage is no longer considered to exercise

significant influence over OncoCyte and is now accounting for its OncoCyte holdings as marketable equity securities.

the Asterias Merger completed on March 8, 2019, Lineage accounted for its Asterias shares held at fair value, using the equity

method of accounting.

Recognition – Lineage recognizes revenue in accordance with Financial Accounting Standards Board (“FASB”)

Accounting Standards Update (“ASU”) ASU 2014-09, Revenues from Contracts with Customers (Topic 606), and 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

it is entitled to receive in exchange for such product or service.

In doing so, Lineage follows a five-step approach:

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.

Lineage considers the terms of a contract and all relevant facts and circumstances when applying

the revenue recognition standard.

Lineage applies the revenue recognition standard, including the use of any practical expedients,

consistently to contracts with similar characteristics and in similar circumstances.

largest source of revenue is currently related to government grants.

In applying the provisions of ASU 2014-09, Lineage has determined

that government grants are out of the scope of ASU 2014-09 because the government entities do not meet the definition of a “customer,”

as defined by ASU 2014-09, as there is not considered to be a transfer of control of good or services to the government entities

funding the grant.

Lineage 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.

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

(see Note 14).

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.

As of December 31, 2020, deferred grant revenue was $ 193,000 .

and diluted net income (loss) per share attributable to common shareholders – Basic earnings per share is calculated

by dividing net income or loss attributable to Lineage common shareholders by the weighted average number of common shares outstanding,

net of unvested restricted stock or restricted stock units, subject to repurchase by Lineage, if any, during the period.

earnings per share is calculated by dividing the net income or loss attributable to Lineage common shareholders by the weighted

average number of common shares outstanding, adjusted for the effects of potentially dilutive common shares issuable under outstanding

stock options and warrants, using the treasury-stock method, convertible preferred stock, if any, using the if-converted method,

and treasury stock held by subsidiaries, if any.

the years ended December 31, 2020 and 2019, respectively, Lineage reported a net loss attributable to common shareholders, and

therefore, all potentially dilutive common shares were considered antidilutive for those periods.

following common share equivalents were excluded from the computation of diluted net income (loss) per common share for the periods

presented because including them would have been antidilutive (in thousands):

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share

Stock options

Lineage Warrants (1)

Restricted stock units

the Lineage Warrants are classified as liabilities, these warrants are considered for dilutive earnings per share calculations

in accordance with ASC 260, Earnings Per Share , and determined to be anti-dilutive for the period presented.

Cash – In accordance with ASU 2016-18, Statement of Cash Flows (Topic 230):

Restricted Cash , Lineage explains

the change during the year in the total of cash, cash equivalents and restricted cash, and includes restricted cash with

cash and cash equivalents when reconciling the beginning-of-year and end-of-year total amounts shown on the condensed

consolidated statements of cash flows.

has several certificates of deposit as required under our facility leases and credit card program.

Lineage is restricted from

using this cash for working capital purposes.

At December 31, 2020, Lineage maintains $ 420,000 pursuant to the Cell Cure Leases,

$ 100,000 pursuant to its credit card program and $ 78,000 pursuant to the Alameda Lease.

Amounts related to the Cell Cure Leases

and credit card program are recorded in deposits and other long-term assets and the amount related to the Alameda Lease is recorded

in prepaid expenses and other current assets, as this certificate of deposit is expected to be released within the first quarter

following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated

balance sheet dates that comprise the total of the same such amounts shown in the condensed consolidated statements of cash flows

for all periods presented herein (in thousands):

Schedule of Reconciliation of Cash, Cash Equivalents, and Restricted Cash

Cash and cash equivalents

Restricted cash included in deposits and other long-term assets (see Note 14)

Restricted cash included in prepaid expenses and other current assets

(see Note 14)

Total cash, cash equivalents, and restricted cash as shown in the condensed

consolidated statements of cash flows

accounting and impact of adoption of the new lease standard – On January 1, 2019, Lineage adopted ASU 2016-02, Leases

(Topic 842, “ASC 842”) and its subsequent amendments affecting Lineage:

(i) ASU 2018-10, Codification Improvements

to Topic 842, Leases ;

and (ii) ASU 2018-11, Leases (Topic 842):

Targeted improvements, using the modified retrospective

management determines 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.

When determining whether

a lease is a finance lease or an operating lease, ASC 842 does not specifically define criteria to determine “major part

of remaining economic life of the underlying asset” and “substantially all of the fair value of the underlying asset.”

For lease classification determination, Lineage continues to use:

(i) greater than or equal to 75% to determine whether the lease

term is a major part of the remaining economic life of the underlying asset;

and (ii) greater than or equal to 90% to determine

whether the present value of the sum of lease payments is substantially all of the fair value of the underlying asset.

available practical expedients, Lineage accounts for the lease and non-lease components as a single lease component.

Lineage recognizes

right-of-use (“ROU”) assets and lease liabilities for leases with terms greater than twelve months in the condensed

consolidated balance sheet.

assets represent Lineage’s right to use an underlying asset during the lease term and lease liabilities represent Lineage’s

obligation to make lease payments arising from the lease.

Operating lease ROU assets and liabilities are recognized at commencement

date based on the present value of lease payments over the lease term.

As most of Lineage’s leases do not provide an implicit

rate, Lineage uses its incremental borrowing rate based on the information available at commencement date in determining the present

value of lease payments.

Lineage uses the implicit rate when readily determinable.

The operating lease ROU asset also includes

any lease payments made and excludes lease incentives.

Lineage’s lease terms may include options to extend or terminate

the lease when it is reasonably certain that Lineage will exercise that option.

Lease expense for lease payments is recognized

on a straight-line basis over the lease term.

leases are included as right-of-use assets in property and equipment (see Note 6), and ROU lease liabilities, current and long-term,

in the condensed consolidated balance sheets.

Financing leases are included in property and equipment, and in financing lease

liabilities, current and long-term, in Lineage’s condensed consolidated balance sheets.

connection with the adoption on ASC 842 on January 1, 2019, Lineage derecognized net book value of leasehold improvements and

corresponding lease liabilities of $ 1.9 million and $ 2.0 million, respectively, which was the carrying value of certain operating

leases as of December 31, 2018, included in property and equipment and lease liabilities, respectively, recorded pursuant to build

to suit lease accounting under the previous ASC 840 lease standard.

The derecognition of these amounts from the superseded ASC

840 lease standard was offset by a cumulative effect adjustment of $ 0.1 million as a reduction of Lineage’s accumulated

deficit on January 1, 2019.

These build to suit leases were primarily related to Lineage’s prior leases in Alameda, California

and Cell Cure’s leases in Jerusalem, Israel (See Note 14).

ASC 842 requires build to suit leases recognized on Lineage’s

consolidated balance sheets as of December 31, 2018 to be derecognized upon the adoption of the new lease standard and be recognized

in accordance with the new standard on January 1, 2019.

adoption of ASC 842 had a material impact in Lineage’s consolidated balance sheets, with the most significant impact resulting

from the recognition of ROU assets and lease liabilities for operating leases with remaining terms greater than twelve months

on the adoption date.

Lineage’s accounting for financing leases (previously referred to as “capital leases”)

remained substantially unchanged (see Note 14).

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.

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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 .

intangible asset or be impaired, respectively, in accordance with ASC 350, Intangibles – Goodwill and Other .

In accordance

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circumstances that would indicate the asset may be impaired.

Lineage accounts for leases in accordance with ASC 842, Leases .

Lineage determines 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, Lineage accounts

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

Lineage recognizes right-of-use (“ROU”) assets

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

ROU assets represent

the right to use an underlying asset during the lease term and lease liabilities represent the obligation to make lease payments

arising from the lease.

Operating lease ROU assets and liabilities are recognized at commencement date based on the present value

of lease payments over the lease term.

As most leases do not provide an implicit rate, Lineage uses an incremental borrowing rate

based on the information available at commencement date in determining the present value of lease payments.

Lineage uses the implicit

rate when readily determinable.

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

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.

We 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.

In connection with

the adoption on ASC 842 on January 1, 2019, Lineage derecognized net book value of leasehold improvements and corresponding lease

liabilities of $1.9 million and $2.0 million, respectively, which was the carrying value of certain operating leases as of December

31, 2018, included in property and equipment and lease liabilities, respectively, recorded pursuant to build to suit lease accounting

under the previous ASC 840 lease standard.

The derecognition of these amounts from the superseded ASC 840 lease standard was offset

by a cumulative effect adjustment of $0.1 million as a reduction of Lineage’s accumulated deficit on January 1, 2019.

build to suit leases were primarily related to the Alameda and the Cell Cure Leases described in Note 14.

ASC 842 requires build

to suit leases recognized on Lineage’s consolidated balance sheets as of December 31, 2018 to be derecognized upon the adoption

of the new lease standard and be recognized in accordance with the new standard on January 1, 2019.

The adoption of ASC

842 had a material impact in Lineage’s consolidated balance sheets, with the most significant impact resulting from the

recognition of ROU assets and lease liabilities for operating leases with remaining terms greater than twelve months on the adoption

date (see Note 14).

Lineage’s accounting for financing leases (previously referred to as “capital leases”) remained

substantially unchanged.

concern assessment –

Lineage assesses going concern uncertainty for its consolidated financial statements to determine

concern assessment – Lineage assesses going concern uncertainty for its consolidated financial statements to determine

if Lineage has sufficient cash and cash equivalents on hand and working capital to operate for a period of at least one year from

the date the consolidated financial statements are issued or are available to be issued, which is referred to as the “look-forward

period”

as defined by FASB’s ASU No.

the date the consolidated financial statements are issued or are available to be issued, which is referred to as the “look-forward

period” as defined by FASB’s ASU No.

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

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the look-forward period in accordance with ASU No.

and cash equivalents –

Lineage considers all highly liquid investments purchased with an original maturity of three

and cash equivalents – Lineage considers all highly liquid investments purchased with an original maturity of three

months or less to be cash equivalents.

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funds, respectively, considered to be cash equivalents.

Lineage has several certificates of deposit as required under our facility leases and credit card program.

is restricted from using this cash for working capital purposes.

At December 31, 2019, Lineage maintains $421,000 pursuant to

the Cell Cure Leases, $100,000 pursuant to its credit card program and $78,000 pursuant to the Alameda Lease in

deposits and other long-term assets.

accounts and grants receivable, net –

Net trade receivables amounted to $44,000 and $51,000 and grants receivable amounted

to $273,000 and $716,000 as of December 31, 2019 and 2018, respectively.

Net trade receivables include an allowance for doubtful

accounts of approximately $119,000 and $100,000 as of December 31, 2019 and 2018, respectively, for those amounts deemed uncollectible

Lineage establishes an allowance for doubtful accounts based on the evaluation of the collectability of its receivables

on a variety of factors, including the length of time receivables are past due, significant events that may impair the customer’s

ability to pay, such as a bankruptcy filing or deterioration in the customer’s operating results or financial position,

and historical experience.

If circumstances related to customers change, estimates of the recoverability of receivables would

be further adjusted.

receivable from Juvenescence –

Lineage accounts for the Promissory Note from Juvenescence as a financing receivable

under ASC 310-10, Receivables , since it both represents a contractual right to receive cash on a fixed date at maturity

and is recognized as an asset on Lineage’s consolidated balance sheet.

Under ASC 310-10, the Promissory Note was issued

at fair value on the Juvenescence Transaction date and subsequently carried at amortized cost with accrued interest, subject to

impairment testing under ASC 310.

Interest is accrued monthly under the provisions of the Promissory Note and all accrued interest,

along with the principal of the Promissory Note, is payable at maturity two years after the closing of the Juvenescence Transaction

(August 30, 2020), unless converted prior to that date (see Note 5).

Lineage considers the need for an allowance for doubtful

accounts based on the evaluation of the collectability of the Promissory Note and accrued interest on a variety of factors, as

applicable, including significant events that may impair Juvenescence’s ability to pay, such as a bankruptcy filing or deterioration

in Juvenescence’s operating results or financial position, the length of time receivable is past due and historical experience.

Lineage has the right to review Juvenescence’s financial statements twice per year.

Concentrations

of credit risk and significant sources of supply –

Financial instruments that potentially subject Lineage to significant

of credit risk and significant sources of supply – Financial instruments that potentially subject Lineage to significant

concentrations of credit risk consist primarily of cash and cash equivalents.

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candidates may be impeded.

Value Measurements –

Fair value is defined as the price that would be received to sell an asset or paid to transfer

a liability in an orderly transaction between market participants at the measurement date.

To increase the comparability of fair

value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value (ASC 820-10-50),

Fair Value Measurements and Disclosures :

Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active

Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, and

inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of

the financial instruments.

Inputs to the valuation methodology are unobservable;

that reflect management’s own assumptions about the

assumptions market participants would make and significant to the fair value.

determining fair value, Lineage utilizes valuation techniques that maximize the use of observable inputs and minimize the use

of unobservable inputs to the extent possible, and also considers counterparty credit risk in its assessment of fair value.

the periods presented, Lineage has no financial assets or liabilities recorded at fair value on a recurring basis, except for

cash and cash equivalents consisting of money market funds and the marketable equity securities in OncoCyte, AgeX and HBL ,

which are carried at fair value based on the applicable period-end quoted market prices as a Level 1 input.

Lineage also has certain

liability classified warrants issued by Cell Cure and assumed from the Asterias Merger, which are carried at fair value based

on Level 3 inputs (see Note 11).

fair value of Lineage’s assets and liabilities, which qualify as financial instruments under FASB guidance regarding disclosures

about fair value of financial instruments, approximate the carrying amounts presented in the accompanying consolidated balance

The carrying amounts of accounts receivable, prepaid expenses and other current assets, accounts payable, accrued expenses

and other current liabilities approximate fair values because of the short-term nature of these items.

equity securities –

Lineage accounts for the shares it holds in OncoCyte, AgeX and HBL as marketable equity securities

in accordance with ASC 320-10-25, Investments –

Debt and Equity Securities , as amended by Accounting Standards Update

(“ASU”) 2016-01, Financial Instruments–Overall:

Recognition and Measurement of Financial Assets and Financial

Liabilities , further discussed below.

The OncoCyte and AgeX shares have readily determinable fair values quoted on the NYSE

American under trading symbols “OCX”

and “AGE”.

The HBL shares have a readily determinable fair value

quoted on the Tel Aviv Stock Exchange (“TASE”) under trading symbol “HDST”

where share prices are denominated

in New Israeli Shekels (NIS).

These securities are measured at fair value and reported as current assets on the consolidated balance

sheets based on the closing trading price of the security as of the date being presented.

to September 11, 2019, Lineage accounted for its OncoCyte shares held at fair value, using the equity method of accounting.

September 11, 2019, Lineage’s ownership percentage decreased from 24% to 16% when it sold 4.0 million shares of OncoCyte

common stock.

Accordingly, as the ownership percentage is less than 20%, Lineage is no longer considered to exercise significant

influence over OncoCyte and is now accounting for its OncoCyte holdings as marketable equity securities.

Prior to the Asterias

Merger completed on March 8, 2019 discussed in Note 3, Lineage accounted for its Asterias shares held at fair value, using the

equity method of accounting.

and equipment, net and construction in progress –

Property and equipment

is stated at cost and is being depreciated using the straight-line method over their estimated useful lives ranging from 3 to

Leasehold improvements are amortized over the shorter of the useful life or the lease term.

in progress is not depreciated until the underlying asset is placed into service (see Note 7).

intangible assets –

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

and equipment, net – Property and equipment is stated at cost and is being depreciated using the straight-line method

over their estimated useful lives ranging from 3 to 10 years.

Leasehold improvements are amortized over the shorter of the useful

life or the lease term.

(See Note 6).

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.

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the straight-line method over the estimated useful lives of the assets, generally over 5 to 10 years.

of long-lived assets –

Long-lived assets, including long-lived intangible assets, are reviewed annually for impairment

of long-lived assets – Long-lived assets, including long-lived intangible assets, are reviewed annually for impairment

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

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

for warrants –

Lineage determines the accounting classification of warrants that it or its subsidiaries issue, as either

for warrants – Lineage determines the accounting classification of warrants that it or its subsidiaries issue, as either

liability or equity, by first assessing whether the warrants meet liability classification in accordance with ASC 480-10, Accounting

for Certain Financial Instruments with Characteristics of both Liabilities and Equity , and then in accordance with ASC 815-40,

Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock .

ASC 480, warrants are considered liability classified if the warrants are mandatorily redeemable, obligate the issuer to settle

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If the warrants do not require liability classification under ASC 815-40, in order to conclude equity classification, Lineage

assesses whether the warrants are indexed to its common stock or its subsidiary’s common stock, as applicable, and whether

the warrants are classified as equity under ASC 815-40 or other applicable GAAP.

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accounted for at fair value on the issuance date with no changes in fair value recognized subsequent to the issuance date.

2017, Cell Cure issued certain liability classified warrants (see Note 11) and in 2019, Lineage assumed certain warrants in connection

with the closing of the Asterias Merger (see Note 3).

with noncontrolling interests of subsidiaries –

Lineage accounts for a change in ownership interests in its subsidiaries

that does not result in a change of control of the subsidiary by Lineage under the provisions of ASC 810-10-45-23,

Consolidation –

Other Presentation Matters, which prescribes the accounting for changes in ownership interest

2017, Cell Cure issued certain liability classified warrants (see Note 11) and in 2019, Lineage assumed certain warrants

in connection with the closing of the Asterias Merger (see Note 3).

with noncontrolling interests of subsidiaries - Lineage accounts for a change in ownership interests in its subsidiaries that

does not result in a change of control of the subsidiary by Lineage under the provisions of ASC 810-10-45-23,

Consolidation – Other Presentation Matters, which prescribes the accounting for changes in ownership interest

that do not result in a change in control of the subsidiary, as defined by GAAP, before and after the transaction .

this guidance, changes in a controlling shareholder’s ownership interest that do not result in a change of control, as defined

by GAAP, in the subsidiary are accounted for as equity transactions.

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noncontrolling shareholders occurs based on the respective ownership percentages.

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.

and development expenses - 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

Research and development are expensed 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.

and administrative –

General and administrative expenses consist of compensation and related benefits, including stock-based

compensation, for executive and corporate personnel;

Research and development expenses incurred and reimbursed by grants

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

and administrative expenses - General and administrative expenses consist of compensation and related benefits, including

stock-based compensation, for executive and corporate personnel;

professional and consulting fees;

and allocated overhead such as facilities

and equipment rent and maintenance, insurance costs allocated to general and administrative expenses, costs of patent applications,

prosecution and maintenance, stock exchange-related costs, depreciation expense, marketing costs, and other miscellaneous expenses

which are allocated to general and administrative expense.

currency translation adjustments and other comprehensive income or loss –

In countries in which Lineage operates where

the functional currency is other than the U.S.

dollar, assets and liabilities are translated using published exchange rates in

effect at the consolidated balance sheet date.

Revenues and expenses and cash flows are translated using an approximate weighted

average exchange rate for the period.

Resulting foreign currency translation adjustments are recorded as other comprehensive income

or loss, net of tax, in the consolidated statements of comprehensive income or loss and included as a component of accumulated

other comprehensive income or loss on the consolidated balance sheets.

Foreign currency translation adjustments are primarily

attributable to Cell Cure and ESI, Lineage’s consolidated foreign subsidiaries.

For the years ended December 31, 2019 and

2018, comprehensive income (loss) includes foreign currency translation adjustments, net of tax, of ($2.1) million and $1.3 million,

respectively.

currency transaction gains and losses –

For transactions denominated in other than the functional currency of Lineage

or its subsidiaries, Lineage recognizes transaction gains and losses in the consolidated statements of operations and classifies

the gain or loss based on the nature of the item that generated it.

The majority of Lineage’s foreign currency transaction

gains and losses are generated by Cell Cure’s intercompany debt due to Lineage (see Notes 10 and 11), which are U.S.

dollar-denominated,

while Cell Cure’s functional currency is the Israeli New Shekel (“NIS”).

At each balance sheet date, Lineage

remeasures the intercompany debt using the current exchange rate at that date pursuant to ASC 830, Foreign Currency Matters.

These foreign currency remeasurement gains and losses are included in other income and expenses, net.

taxes –

Lineage accounts 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

and allocated overhead such

as facilities and equipment rent and maintenance, insurance costs allocated to general and administrative expenses, costs of patent

applications, prosecution and maintenance, stock exchange-related costs, depreciation expense, marketing costs, and other miscellaneous

expenses which are allocated to general and administrative expense.

currency translation adjustments and other comprehensive income or loss - In countries in which Lineage operates where the

functional currency is other than the U.S.

dollar, assets and liabilities are translated using published exchange rates in effect

at the consolidated balance sheet date.

Revenues and expenses and cash flows are translated using an approximate weighted average

exchange rate for the period.

Resulting foreign currency translation adjustments are recorded as other comprehensive income or

loss, net of tax, in the consolidated statements of comprehensive income or loss and included as a component of accumulated other

comprehensive income or loss on the consolidated balance sheets.

Foreign currency translation adjustments are primarily attributable

to Cell Cure and ESI, Lineage’s consolidated foreign subsidiaries.

For the years ended December 31, 2020 and 2019, comprehensive

loss includes foreign currency translation adjustments, net of tax, of $ 3.0 million and $ 2.1 million, respectively.

currency transaction gains and losses - For transactions denominated in other than the functional currency of Lineage or its

subsidiaries, Lineage recognizes transaction gains and losses in the consolidated statements of operations and classifies the

gain or loss based on the nature of the item that generated it.

The majority of Lineage’s foreign currency transaction gains

and losses are generated by Cell Cure’s intercompany debt due to Lineage, which are U.S.

dollar-denominated, while Cell

Cure’s functional currency is the Israeli New Shekel (“ILS”).

At each balance sheet date, Lineage remeasures

the intercompany debt using the current exchange rate at that date pursuant to ASC 830, Foreign Currency Matters.

foreign currency remeasurement gains and losses are included in other income and expenses, net.

taxes - Lineage accounts 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.

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

Lineage’s 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 Lineage assumptions, and consequently the estimates, change

in the future with respect to Lineage’s own deferred tax assets and liabilities, the valuation allowance may be increased

or decreased, which may have a material impact on Lineage’s consolidated financial statements.

in the future with respect to Lineage’s own deferred tax assets and liabilities, the valuation allowance may be increased

or decreased, which may have a material impact on Lineage’s consolidated financial statements.

Lineage recognizes 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 (see Note 13).

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

The provision further allows a deduction of 50% of GILTI, however this deduction is limited by the Company’s pre-GILTI

For the years ended December 31, 2018 and 2019, Lineage 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.

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

December 22, 2017, the SEC staff issued Staff Accounting Bulletin No.

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.

118 allows Lineage to record provisional amounts during a measurement period not to extend beyond one year of the enactment date

(see Note 13).

Lineage applied the guidance in SAB 118 when accounting for the enactment-date effects of the 2017 Tax Act during

the years ended December 31, 2018 and 2017.

As of December 31, 2018, Lineage completed its accounting for all the enactment-date

income tax effects of the 2017 Tax Act.

tax benefit or expense for each year is allocated to continuing operations, other comprehensive income and the cumulative effects

of accounting changes, if any, recorded directly to shareholders’

ASC 740-20-45 Income Taxes, Intraperiod Tax

Allocation, Other Presentation Matters includes an exception to the general principle of intraperiod tax allocations.

codification source states that the tax effect of pretax income or loss from continuing operations generally should be determined

by a computation that considers only the tax effects of items that are included in continuing operations.

The exception to that

incremental approach is that all items, including items of other comprehensive income, be considered in determining the amount

of tax benefit that results from a loss from continuing operations, and that benefit should be allocated to continuing operations.

That is, when a company has a current period loss from continuing operations, management must consider income recorded in other

categories in determining the tax benefit that is allocated to continuing operations.

This includes situations in which a company

has recorded a full valuation allowance at the beginning and end of the period, and the overall tax provision for the year is

The intraperiod tax allocation is performed once the overall tax provision has been computed and allocates that provision

to continuing operations and other comprehensive income and balance sheet captions.

While the intraperiod tax allocation does

not change the overall tax provision, it results in a gross-up of the individual components.

Additionally, different tax jurisdictions

must be considered separately.

For the year ended December 31, 2019, Lineage’s other comprehensive income is comprised entirely

of foreign currency translation adjustments primarily attributable to its majority-owned and consolidated Israeli subsidiary,

For the year ended December 31, 2018, Lineage’s other comprehensive income or loss items were comprised of foreign

currency translation adjustments and available-for-sale securities (see discussion under section Marketable equity securities

for adoption of ASU 2016-01 on January 1, 2018) (see Note 13).

compensation –

Lineage follows accounting standards governing share-based payments in accordance with ASC 718, Compensation

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, 2020 and 2019.

compensation - Lineage follows accounting standards governing share-based payments in accordance with ASC 718, Compensation

– Stock Compensation , which require the measurement and recognition of compensation expense for all share-based payment

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, forfeitures 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 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 the consolidated financial statements.

Lineage utilizes the Black-Scholes

option pricing model for valuing share-based payment awards.

Lineage’s determination of fair value of share-based payment

awards on the date of grant using that option-pricing model is affected by Lineage’s stock price as well as by assumptions

Lineage utilizes the

Black-Scholes option pricing model for valuing share-based payment awards.

Lineage’s determination of fair value of share-based

payment awards on the date of grant using that option-pricing model is affected by Lineage’s stock price as well as by assumptions

regarding a number of complex and subjective variables.

These variables include, but are not limited to, Lineage’s expected

stock price volatility over the term of the awards;

the expected term of options granted, derived from historical data on employee

exercises and post-vesting employment termination behavior;

and a risk-free interest rate based on the U.S.

Treasury rates in

effect during the corresponding period of grant.

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, which is derived using the simplified method,

which is an average of the contractual term of the option and its vesting period, as we do not have sufficient historical exercise

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

Treasury yield in effect at the time of grant for zero coupon U.S.

Treasury notes

with maturities similar to the expected term of the awards.

Forfeitures are accounted for as they occur.

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.

and diluted net income (loss) per share attributable to common shareholders –

Basic earnings (loss) per share is calculated

by dividing net income or loss attributable to Lineage common shareholders by the weighted average number of common shares outstanding,

net of unvested restricted stock or restricted stock units, subject to repurchase by Lineage, if any, during the period.

earnings per share is calculated by dividing the net income or loss attributable to Lineage common shareholders by the weighted

average number of common shares outstanding, adjusted for the effects of potentially dilutive common shares issuable under outstanding

stock options and warrants, using the treasury-stock method, convertible preferred stock, if any, using the if-converted method,

and treasury stock held by subsidiaries, if any.

the years ended December 31, 2019 and 2018, because Lineage reported a net loss attributable to common shareholders, all potentially

dilutive common shares are antidilutive.

following common share equivalents were excluded from the computation of diluted net income (loss) per common share for the periods

presented because including them would have been antidilutive (in thousands):

Year Ended December 31,

Stock options

Restricted stock units

Flows –

On January 1, 2018, Lineage adopted Financial Accounting Standards Board (“FASB”) ASU 2016-18, Statement

of Cash Flows (Topic 230):

Restricted Cash , which requires that the statement of cash flows explain the change during the

period in the total of cash, cash equivalents and restricted cash, and that restricted cash be included with cash and cash equivalents

when reconciling the beginning-of-period and end-of-period total amounts shown on the consolidated statements of cash flows.

adoption of ASU 2016-18 did not have a material effect on Lineage’s consolidated financial statements.

However, prior period

restricted cash balances included in prepaid expenses and other current assets, and in deposits and other long-term assets, on

the consolidated balance sheets was added to the beginning-of-period and end-of-period total consolidated cash and cash equivalents

in the consolidated statements of cash flows to conform to the current presentation shown below.

following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance

sheet dates that comprise the total of the same such amounts shown in the consolidated statements of cash flows for all periods

presented herein and effected by the adoption of ASU 2016-18 (in thousands):

Cash and cash equivalents

Restricted cash included in prepaid expenses and other current assets (see Note 14)

Restricted cash included in deposits and other long-term assets (see Note 14)

Total cash, cash equivalents, and restricted cash as shown in the consolidated statements of cash flows

January 1, 2019, Lineage also adopted ASU 2016-15, Statement of Cash Flows (Topic 230):

Classification of Certain Cash Receipts

and Cash Payments , which addresses eight specific cash flow issues with the objective of reducing diversity in how certain

cash receipts and cash payments are presented and classified in the statement of cash flows.

The adoption of ASU 2016-15 did not

have a material effect on Lineage’s consolidated financial statements.

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 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.

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

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

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:

(a) a sale or usage occurs, or (b) the

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 when earned.

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 –

Beginning August 30, 2018, Lineage no longer has subscription and advertisement revenues

due to the AgeX Deconsolidation (as defined in Note 6).

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 biomedical,

gene, disease, and stem cell research.

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.

The license offered by Lineage is

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

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:

(a) a sale or usage occurs, or (b) the 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

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,

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yet been incurred as of the balance sheet date reported.

Recognition by Source and Geography –

Revenues are recognized when control of the promised goods or services is transferred

Recognition by Source and Geography - Revenues are recognized when control of the promised goods or services is transferred

to customers, or in the case of governmental entities funding a grant, when allowable expenses are incurred, in an amount that

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to in exchange for those goods or services.

following table presents Lineage’s consolidated revenues disaggregated by source (in thousands).

Schedule of Disaggregated Revenues

Year Ended December 31,

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Royalties from product sales and license fees

Subscription and advertisement revenues (2)

Sale of research products and services

Total revenues

recognized prior to adoption of Topic 606 have not been adjusted under the Topic 606 modified retrospective transition method.

revenues were generated by LifeMap Sciences, which is a subsidiary of AgeX, are included in Lineage consolidated revenues

for the period from January 1, 2018 through August 29, 2018, the date immediately preceding the AgeX Deconsolidation.

result of the AgeX Deconsolidation on August 30, 2018, Lineage does not expect to recognize subscription and advertisement

revenues during subsequent accounting periods.

following table presents consolidated revenues, disaggregated by geography, based on the billing addresses of customers, or in

the case of grant revenues, based on where the governmental entities that fund the grant are located (in thousands).

Schedule of Revenues Disaggregated

Year Ended December 31,

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Adopted Accounting Pronouncements

of ASU 2018-07, Compensation –

Stock Compensation (Topic 718):

Improvements to Nonemployee Share-Based Payment Accounting

In June 2018, the FASB issued ASU 2018-07, Compensation –

Stock Compensation (Topic 718):

Improvements to

Nonemployee Share-Based Payment Accounting , which simplifies the accounting for non-employee share-based payment transactions.

The new standard expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from

non-employees.

ASU 2018-07 is effective for fiscal years beginning after December 15, 2018 (including interim periods within that

fiscal year).

Lineage adopted ASU 2018-07 on January 1, 2019.

As Lineage does not have a significant number of nonemployee share

based awards, the application of the new standard did not have a material impact on its consolidated financial statements.

Issued Accounting Pronouncements Not Yet Adopted –

The following accounting standards, which are not yet effective,

are presently being evaluated by Lineage to determine the impact that they might have on its consolidated financial statements.

August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework – Changes to the Disclosure

Requirements for Fair Value Measurement , which modifies certain disclosure requirements for reporting fair value measurements.

ASU 2018-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.

adopted this standard on January 1, 2020 and it did not have a significant impact on our consolidated financial statements.

Issued Accounting Pronouncements Not Yet Adopted - The following accounting standards, which are not yet effective, are presently

being evaluated by Lineage to determine the impact that they might have on its consolidated financial statements.

December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes .

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fiscal years with early adoption permitted.

Lineage is currently evaluating the impact the adoption of this guidance may have

on its consolidated financial statements.

August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework –

Changes to the Disclosure

Requirements for Fair Value Measurement , which modifies certain disclosure requirements for reporting fair value measurements.

ASU 2018-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.

adoption is permitted.

Lineage will adopt this standard on January 1, 2020 and does not believe adoption of the guidance will

have a significant impact on its consolidated financial statements.

June 2016, the FASB issued ASU 2016-13, Financial Instruments –

Credit Losses (Topic 326):

Lineage adopted this standard as of January 1, 2021 and it is not expected to have

a material impact on the consolidated financial statements.

June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses

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of reasonable and supportable information to inform credit loss estimates.

This standard is currently effective for interim and

annual reporting periods beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption

permitted for annual periods beginning after December 15, 2018.

In October 2019, the FASB affirmed a proposed ASU deferring the

effective date of ASU 2016-13 for all entities except public companies that are not smaller reporting companies to fiscal years

beginning after December 15, 2022, including interim periods within those years.

This proposed ASU has not been finalized as of

the date of this report.

When finalized, Lineage plans to adopt ASU 2016-13 effective January 1, 2023.

Lineage has not yet completed

its assessment of the impact of the new standard on its consolidated financial statements.

ASU 2016-13 is effective for Lineage beginning January

Lineage has not yet completed its assessment of the impact of the new standard on its consolidated financial statements.

Asterias Merger

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The former stockholders

of Asterias (other than Lineage) received 0.71 common shares of Lineage (the “Merger Consideration”) for every share

of Asterias common stock they owned (the “Merger Exchange Ratio”).

of Asterias (other than Lineage) received 0.71 common shares of Lineage (the “Merger Consideration”) for every share

of Asterias common stock they owned (the “Merger Exchange Ratio”).

Lineage issued 24,695,898 common shares, including

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connection with the closing of the Asterias Merger, Lineage assumed outstanding warrants to purchase shares of Asterias common

stock, as further discussed below and in Note 11, and assumed sponsorship of the Asterias 2013 Equity Incentive Plan (see Note

All stock options to purchase shares of Asterias common stock outstanding immediately prior to the closing of the Asterias

Merger were canceled at the closing for no consideration.

of December 31, 2019, the assets and liabilities of Asterias have been included in the consolidated balance sheet of

The results of operations of Asterias from March 8, 2019 through December 31, 2019 have been included in the consolidated

statement of operations of Lineage for the year ended December 31, 2019.

stock, as further discussed below and in Note 11, and assumed sponsorship of the Asterias 2013 Equity Incentive Plan (see

All stock options to purchase shares of Asterias common stock outstanding immediately prior to the closing of

the Asterias Merger were canceled at the closing for no consideration.

of December 31, 2019, the assets and liabilities of Asterias have been included in the consolidated balance sheet of Lineage.

The results of operations of Asterias from March 8, 2019 through December 31, 2019 have been included in the consolidated statement

of operations of Lineage for the year ended December 31, 2019.

of the purchase price

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(in thousands, except for share and per share amounts):

62% ownership

Schedule of Merger Consideration Transferred

Outstanding Asterias common stock as of March 8, 2019

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of the purchase price as an immediate charge to stock-based compensation expense.

fair value for Lineage’s previously held 38% ownership interest in Asterias common stock is part of the total purchase

price of Asterias for purposes of the purchase price allocation under ASC 805 and for Lineage’s adjustment of its 38%

interest to fair value at the effective date of the Asterias Merger and immediately preceding the consolidation of Asterias’

fair value for Lineage’s previously held 38% ownership interest in Asterias common stock is part of the total purchase

price of Asterias for purposes of the purchase price allocation under ASC 805 and for Lineage’s adjustment of its 38 %

interest to fair value at the effective date of the Asterias Merger and immediately preceding the consolidation of Asterias’

results with Lineage.

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As of December 31, 2019, Lineage had finalized its purchase price allocation.

Schedule of Identifiable Tangible and Intangible Assets Acquired and Liabilities Assumed

Assets acquired:

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Long-lived intangible assets - royalty contracts

Acquired in-process research and development (“IPR&D”)

Total assets acquired

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valuation of identifiable intangible assets and their estimated useful lives are as follows (in thousands, except for useful life):

Preliminary Estimated Asset Fair Value

Schedule of Valuation of Identifiable Intangible Assets and Their Estimated Useful Lives

Preliminary Estimated Asset

(in thousands, except for useful life)

In process research and development (“IPR&D”)

Royalty contracts

following is a discussion of the valuation methods used to determine the fair value of Asterias’

significant assets and

following is a discussion of the valuation methods used to determine the fair value of Asterias’ significant assets and

liabilities in connection with the Asterias Merger:

In-Process Research and Development (“

IPR&D”) and Deferred Income Tax Liability - The fair value of identifiable

acquired in-process research and development intangible assets consisting of $31.7 million pertaining to the OPC1 program that

is currently in a Phase 1/2a clinical trial for SCI, which has been partially funded by CIRM, and $14.8 million pertaining to

the VAC2 program, which is a non-patient-specific (“off-the-shelf”) cancer immunotherapy derived from pluripotent

stem cells for which a clinical trial in non-small cell lung cancer is being funded and sponsored by Cancer Research UK.

The identification

of these intangible assets are based on consideration of historical experience and a market participant’s view further discussed

collectively, OPC1 and the VAC2 are referred to as the “AST-Clinical Programs”.

These intangible assets are

valued primarily through the use of a probability weighted discounted cash flow method under the income approach further discussed

Lineage considered the VAC1 program, an autologous product candidate, manufactured from cells that come from the patient,

and due to significant risks, substantial costs and limited opportunities in its current state associated with the VAC1 program,

Lineage management considered this program to have de minimis value.

and Deferred Income Tax Liability - The fair value of identifiable acquired IPR&D intangible assets consisting of $ 31.7

million pertaining to the OPC1 program that is currently in a Phase 1/2a clinical trial for SCI, which has been partially funded

by the California Institute for Regenerative Medicine and $ 14.8 million pertaining to the VAC2 program, which is an allogeneic,

or “off-the-shelf,” cancer immunotherapy derived from pluripotent stem cells for which a clinical trial in non-small

cell lung cancer is being funded and sponsored by Cancer Research UK.

The identification of these intangible assets are based

on consideration of historical experience and a market participant’s view further discussed below;

collectively, OPC1 and

VAC2 are referred to as the “AST-Clinical Programs”.

These intangible assets are valued primarily through the use

of a probability weighted discounted cash flow method under the income approach further discussed below.

Lineage considered Asterias’

VAC1 program, which is an autologous, or patient-specific, cancer immunotherapy derived from the patient’s own cells, to

have de minimis value due to significant risks, substantial costs and limited opportunities.

determined that the estimated aggregate fair value of the AST-Clinical programs was $ 46.5 million as of the acquisition date using

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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.

Instead, they are tested for impairment at least annually and between annual tests if Lineage becomes

aware of an event or a change in circumstances that would indicate the asset may be impaired.

the asset life as a finite-lived intangible asset or be impaired, respectively, in accordance with ASC 350, Intangibles - Goodwill

In accordance with ASC 350, goodwill and acquired IPR&D are determined to have indefinite lives and, therefore,

are not amortized.

Instead, they are tested for impairment at least annually and between annual tests if Lineage becomes aware

of an event or a change in circumstances that would indicate the asset may be impaired.

the IPR&D (prior to completion or abandonment of the R&D) is considered an indefinite-lived asset for accounting purposes,

the fair value of the IPR&D on the acquisition date creates a deferred income tax liability (“DTL”) in accordance

with ASC 740, Income Taxes (see Note 13).

This DTL is computed using the fair value of the IPR&D assets less any available

indefinite life tax attributes on the acquisition date multiplied by Lineage’s federal and state income tax rates.

this DTL would reverse on impairment or sale or commencement of amortization of the related intangible assets, those events are

not anticipated under ASC 740 for purposes of predicting reversal of a temporary difference to support the realization of deferred

tax assets, except for certain deferred tax assets and credit carryforwards that are also indefinite in nature as of the closing

of the Asterias Merger, which may be considered for reversal under ASC 740 as further discussed in Note 13.

contracts –

Asterias has certain royalty revenues for “research only use”

culture media for preclinical

This DTL is computed using the fair value of the IPR&D assets on the

acquisition date multiplied by Lineage’s federal and state income tax rates.

While this DTL would reverse on impairment

or sale or commencement of amortization of the related intangible assets, those events are not anticipated under ASC 740 for purposes

of predicting reversal of a temporary difference to support the realization of deferred tax assets, except for certain deferred

tax assets and credit carryforwards that are also indefinite in nature as of the closing of the Asterias Merger, which may be

considered for reversal under ASC 740 as further discussed in Note 13.

contracts – Asterias has certain royalty revenues for “research only use” culture media for preclinical

research applications under certain, specific patent families under contracts which preclude the customers to sell for commercial

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These royalty cash flows are generated under certain specific patent families which Asterias previously

acquired from Geron Corporation (“Geron”).

Asterias pays Geron a royalty for all royalty revenues received from these

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a rate of return that recognizes a lower level of risk associated with these assets as compared to the AST-Clinical programs discussed

license revenue –

In September 2018, Asterias and Novo Nordisk A/S (“Novo Nordisk”) entered into an option

license revenue – In September 2018, Asterias and Novo Nordisk A/S (“Novo Nordisk”) entered into an option

for Novo Nordisk or its designated U.S.

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Management has estimated those costs, plus a normal profit margin,

to be approximately $200,000 in the estimated purchase price allocation.

classified warrants –

On May 13, 2016, in connection with a common stock offering, Asterias issued warrants to purchase

2,959,559 shares of Asterias common stock (the “Asterias Warrants”) with an exercise price of $4.37 per share that

to be approximately $ 200,000 in the purchase price allocation.

This amount was originally recorded as deferred revenue and subsequently

recognized as revenue in September 2020 when Novo Nordisk did not exercise the option.

classified warrants – On May 13, 2016, in connection with a common stock offering, Asterias issued warrants to purchase

2,959,559 shares of Asterias common stock (the “Asterias Warrants”) with an exercise price of $ 4.37 per share that

expire in five years from the issuance date, or May 13, 2021 .

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The Asterias Warrants contain certain provisions in the event of a Fundamental Transaction, as defined in

the warrant agreement governing the Asterias Warrants (“Warrant Agreement”), that Asterias or any successor entity

will be required to purchase, at a holder’s option, exercisable at any time concurrently with or within thirty days after

the warrant agreement governing the Asterias Warrants (“Warrant Agreement”), that Asterias or any successor entity

will be required to purchase, at a holder’s option, exercisable at any time concurrently with or within thirty days after

the consummation of the fundamental transaction, the Asterias Warrants for cash in an amount equal to the calculated value of

the unexercised portion of such holder’s warrants, determined in accordance with the Black-Scholes option pricing model

with significant inputs as specified in the Warrant Agreement.

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approximately $ 495,000 in fair value as of March 31, 2019) were converted into warrants to purchase common shares of Lineage using

the Merger Exchange Ratio (the “Lineage Warrants”).

of December 31, 2020, the total number of common shares of Lineage subject to warrants that were assumed by Lineage in connection

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the Lineage Warrants at each reporting period thereafter included in the consolidated statement of operations (see Note 11).

value of Lineage common shares held by Asterias –

As of March 8, 2019, Asterias held 2,621,811 common shares of Lineage

value of Lineage common shares held by Asterias – As of March 8, 2019, Asterias held 2,621,811 common shares of Lineage

as marketable securities on its standalone financial statements.

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Although treasury shares are

not considered an asset and were retired upon Lineage’s acquisition of Asterias, the fair value of those shares is a part

of the purchase price allocation shown in the tables above.

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Goodwill recorded in the Asterias Merger is not expected to be deductible for tax purposes (see Note 13).

the year ended December 31, 2019, Lineage incurred $5.1 million in acquisition related costs which were recorded in general

and administrative expenses in the accompanying consolidated statements of operations.

the years ended December 31, 2020 and 2019, Lineage incurred $ 0.7 million and $ 5.1 million, respectively, in acquisition related

costs which were recorded in general and administrative expenses in the accompanying consolidated statements of operations.

to the Asterias Merger being consummated in March 2019, Lineage elected to account for its 21.7 million shares of Asterias common

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the change in fair value of Asterias common stock from December 31, 2018 to March 8, 2019.

For the year ended December 31, 2018,

Lineage recorded an unrealized loss of $35.4 million on the Asterias shares due to the decrease in Asterias’

from December 31, 2017 to December 31, 2018 from $2.25 per share to $0.62 per share.

All share prices were determined based on

the closing price of Lineage or Asterias common stock on the NYSE American on the applicable dates.

Merger Related Litigation –

See Note 14 Commitments and Contingencies for discussion regarding litigation related to

the Asterias Merger.

All share prices were determined based

on the closing price of Lineage or Asterias common stock on the NYSE American on the applicable dates.

Merger Related Litigation – See Note 14 Commitments and Contingencies for discussion regarding litigation related

to the Asterias Merger.

Accounting for Common Stock of OncoCyte, at Fair Value

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 11, 2019.

Lineage sold 2.25 million shares of OncoCyte common

stock for net proceeds of $4.2 million in July 2019.

Accordingly, Lineage’s ownership in OncoCyte was reduced from 28% to

Lineage sold an additional 4.0 million shares of OncoCyte common stock for net proceeds of $6.5 million on September 11,

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 securities.

The calculation of fair value is the same

under the equity method and as a marketable equity security.

of December 31, 2019, Lineage owned 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.

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;

and $0.8 million was recorded as an unrealized gain

to September 11, 2019, Lineage elected to account for its shares of OncoCyte common stock at fair value using the equity method

of accounting.

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

The calculation of fair value is the same under the equity method and as a marketable equity security.

of December 31, 2019, we 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 common stock of $ 2.25 per share on December 31, 2019.

the year ended December 31, 2020, Lineage sold approximately 4.8 million shares of OncoCyte common stock for net proceeds of $ 10.9

of December 31, 2020, we owned 3.6 million shares of OncoCyte common stock.

These shares had a fair value of $ 8.7 million, based

on the closing price of OncoCyte common stock of $ 2.39 per share on December 31, 2020.

the year ended December 31, 2020, we recorded a realized gain of $ 3.1 million due to sales of OncoCyte shares in the period.

the same period, we also recorded an unrealized loss of $ 2.5 million related to its OncoCyte shares.

The unrealized loss is comprised

of $ 3.7 million related to the difference between the book cost basis of OncoCyte shares sold in the period versus the applicable

prior month’s ending OncoCyte stock price, which is offset by $ 1.2 million related to the shares remaining at December 31,

2020 and the increase in OncoCyte’s stock price from $2.25 at December 31, 2019 to $ 2.39 at December 31, 2020.

the year ended December 31, 2019, we recorded a realized gain of $ 0.5 million due to sales of OncoCyte shares in the period.

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;

the remaining $ 0.8 million was recorded as an unrealized gain

on marketable equity securities.

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Sale of Significant Ownership Interest in AgeX to Juvenescence Limited

August 30, 2018, Lineage entered into a Stock Purchase Agreement with Juvenescence Limited and AgeX Therapeutics, Inc., pursuant

to which Lineage sold 14.4 million shares of the common stock of AgeX to Juvenescence for $3.00 per share, or an aggregate purchase

price of $43.2 million.

Juvenescence paid $10.8 million of the purchase price at closing, issued an unsecured convertible promissory

note dated August 30, 2018 in favor of Lineage for $21.6 million (the “Promissory Note”), and paid $10.8 million on

November 2, 2018.

The Stock Purchase Agreement contains customary representations, warranties and indemnities from Lineage relating

to the business of AgeX, including an indemnity cap of $4.3 million, which is subject to certain exceptions.

Promissory Note bears interest at 7% per annum, with principal and accrued interest payable at maturity two years after the closing

of the Juvenescence Transaction (August 30, 2020).

The Promissory Note cannot be prepaid prior to maturity or conversion.

maturity date, if a “Qualified Financing”

(as defined below) has not occurred, Lineage will have the right, but not

the obligation, to convert the principal balance of the Promissory Note and accrued interest then due into a number of Series

A Preferred Shares of Juvenescence at a conversion price of $15.60 per share.

Upon the occurrence of a Qualified Financing on

or before the maturity date, the principal balance of the Promissory Note and accrued interest will automatically convert into

a number of shares of the class of equity securities of Juvenescence sold in the Qualified Financing, at the price per share at

which the Juvenescence securities are sold in the Qualified Financing;

and, if AgeX common stock is listed on a national securities

exchange in the U.S., the number of shares of the class of equity securities issuable upon conversion may be increased depending

on the market price of AgeX common stock.

A Qualified Financing is generally defined as an underwritten initial public offering

of Juvenescence equity securities in which gross proceeds are not less than $50.0 million.

The Promissory Note is not transferable,

except in connection with a change of control of Lineage.

the year ended December 31, 2019, Lineage recognized $1.5 million in interest income on the Promissory Note.

As of December 31,

2019, the Promissory Note principal and accrued interest balance was $23.6 million.

and Juvenescence entered into a Shareholder Agreement, dated August 30, 2018, setting forth the governance, approval and voting

rights of the parties with respect to their holdings of AgeX common stock, including rights of representation on AgeX’s

board of directors, approval rights, preemptive rights, rights of first refusal and co-sale and drag-along and tag-along rights

for so long as either Lineage or Juvenescence continue to own at least 15% of the outstanding shares of AgeX common stock.

the Shareholder Agreement, Juvenescence and Lineage each had the right to designate two persons to a six-member AgeX board of

directors, with the remaining two individuals to be independent of Juvenescence and Lineage.

Following Juvenescence’s payment

of $10.8 million on November 2, 2018 under the Stock Purchase Agreement, Juvenescence had the right to designate an additional

member of the AgeX board of directors.

As of February 28, 2020, Juvenescence has not exercised such right.

Immediately following

the AgeX Distribution on November 28, 2018 (see Note 6), Lineage owned 1.7 million shares of AgeX common stock, representing 4.8%

of AgeX’s then issued and outstanding shares of common stock.

Accordingly, in accordance with the Shareholder Agreement,

as of November 28, 2018, Lineage had no right to designate any member to the AgeX board of directors.

connection with the Juvenescence Transaction, the termination provision of the Shared Facilities Agreement (see Note 10) entitling

AgeX or Lineage to terminate the agreement upon six months advance written notice was amended.

Pursuant to the amendment, following

the AgeX Deconsolidation on August 30, 2018 (see Note 6), each party retained the right to terminate the Shared Facilities Agreement

at any time by giving the other party six months advance written notice, provided that Lineage could not do so prior to September

services with AgeX were terminated on July 31, 2019 with respect to the use of Lineage’s office and laboratory facilities

August 30, 2018, Lineage entered into a Stock Purchase Agreement with Juvenescence Limited and AgeX, pursuant to which Lineage

sold 14.4 million shares of common stock of AgeX to Juvenescence for $ 3.00 per share, or an aggregate purchase price of $ 43.2

million (the “Purchase Price”).

Juvenescence paid $ 10.8 million of the Purchase Price at closing, issued an unsecured

convertible promissory note dated August 30, 2018 in favor of Lineage for $ 21.6 million (the “Promissory Note”), and

paid $ 10.8 million on November 2, 2018.

The Stock Purchase Agreement contains customary representations, warranties and indemnities

from Lineage relating to the business of AgeX, including an indemnity cap of $ 4.3 million, which is subject to certain exceptions.

In connection with the sale, Lineage also entered into a Shared Facilities Agreement with AgeX (see Note 10).

Promissory Note bore interest at 7 % per annum, with principal and accrued interest payable at maturity on August 30, 2020.

Promissory Note was paid in full for a total of $ 24.6 million on August 28, 2020 .

the years ended December 31, 2020, and 2019, Lineage recognized $ 1,008,000 and $ 1,512,000 , respectively, in interest income on

the Promissory Note.

Shared Facilities Agreement was terminated on July 31, 2019 with respect to the use of Lineage’s office and laboratory facilities

and September 30, 2019 with respect to all other remaining shared services.

Deconsolidation and Distribution of AgeX

Deconsolidation

August 30, 2018, Lineage sold 14.4 million shares of the common stock of AgeX to Juvenescence (see Note 5).

Immediately before

that sale, Lineage and Juvenescence owned 80.4% and 5.6%, respectively, of AgeX’s outstanding common stock.

following that sale, Lineage and Juvenescence owned 40.2% and 45.8%, respectively, of AgeX’s outstanding common stock.

a result, on August 30, 2018, AgeX was no longer a subsidiary of Lineage and, as of that date, Lineage 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 Lineage’s ownership interest in AgeX as of August 30, 2018.

Accordingly, Lineage has deconsolidated AgeX’s

consolidated financial statements and consolidated results from Lineage’s consolidated financial statements and consolidated

results effective on August 30, 2018, in accordance with ASC, 810-10-40-4(c) (the “AgeX Deconsolidation”).

connection with the Juvenescence Transaction discussed in Note 5 and the AgeX Deconsolidation on August 30, 2018, in accordance

with ASC 810-10-40-5, Lineage recorded a gain on deconsolidation of $78.5 million, which includes a financial reporting gain on

the sale of the AgeX shares of $39.2 million, during the year ended December 31, 2018, included in other income and expenses,

net, in the consolidated statements of operations.

of AgeX Shares

November 28, 2018, Lineage distributed 12.7 million shares of AgeX common stock owned by Lineage to holders of Lineage common

shares, on a pro rata basis, in the ratio of one share of AgeX common stock for every 10 Lineage common shares owned.

Distribution was accounted for at fair value as a dividend-in-kind in the aggregate amount of $34.4 million.

This amount was determined

by valuing the 12.7 million shares of AgeX common stock distributed to Lineage shareholders at the $2.71 per share closing price

of AgeX common stock, as quoted on the NYSE American, on November 29, 2018, the first trading day of AgeX common stock.

Lineage has an accumulated deficit in its consolidated shareholders’

equity, the entire fair value of the AgeX Distribution

was charged against common stock equity included in the consolidated statements of changes in shareholders’

equity for the

year ended December 31, 2018.

following the distribution, Lineage owned 1.7 million shares of AgeX common stock.

During the year ended December 31, 2019, Linage

sold a total of 765,889 shares of AgeX common stock for net proceeds of $1.8 million.

As of December 31, 2019, Lineage owns 1.0

million shares of common stock, which represents approximately 2.5% of AgeX’s outstanding common stock as of December 31,

2019 and which shares Lineage holds as marketable equity securities.

Property and Equipment, Net

December 31, 2019 and 2018, property and equipment, net and construction in progress were comprised of the following (in thousands):

December 31, 2020 and 2019, property and equipment, net were comprised of the following (in thousands):

Schedule of Property and Equipment, Net

Equipment, furniture and fixtures

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Property and equipment, net

Construction in progress

Property and equipment, net and construction in progress

adopted ASC 842 on January 1, 2019.

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Notes 2 and 14.

and equipment at December 31, 2019 and 2018 includes $96,000 and $146,000 financed by capital leases, respectively.

and amortization expense amounted to $1.1 million for both years ended December 31, 2019 and 2018, respectively.

During the year

ended December 31, 2019, Lineage sold equipment with a net book value of $209,000 and recognized a loss of $109,000, which is

included in research and development expenses on the statement of operations.

Primarily in connection with the close out of the

Asterias facility, Lineage also sold non-capitalized assets for a net gain of $337,000 which is included in research and development

expenses on the statement of operations.

in progress of $1.3 million as of December 31, 2018 entirely relates to the leasehold improvements made at Cell Cure’s lease

facilities in Jerusalem, Israel, primarily financed by the landlord (see Note 14).

The leasehold improvements were substantially

completed in December 2018 and the assets placed in service in January 2019.

Property and equipment

at December 31, 2020 and 2019 includes $ 79 ,000 and $ 96 ,000 financed by capital leases, respectively.

In September 2020,

Lineage terminated its leases in Alameda and entered into a new lease for a reduced amount of square footage.

This resulted in

a net reduction to right-of-use assets of approximately $ 1.4 million.

In December 2020, Cell Cure extended ones of its

leases (“the Original Cell Cure Lease”) for an additional five years, which resulted in a net increase to right-of-use

assets of $ 0.6 million.

See additional information in Note 14.

and amortization expense amounted to $ 0.9 million and $ 1.1 million for the years ended December 31, 2020 and 2019, respectively.

the year ended December 31, 2020, Lineage sold equipment with a net book value of $ 32 ,000 and recognized a loss of $ 9 ,000 .

also wrote off assets with net book values of $ 156 ,000 , with $ 104 ,000 of this amount related to the termination of its

leases in Alameda.

Additionally, Lineage sold non-capitalized assets for a net gain of $ 72 ,000 .

the year ended December 31, 2019, Lineage sold equipment with a net book value of $ 209 ,000 and recognized a loss of $ 109 ,000 .

Primarily in connection with the close out of the Asterias facility, Lineage also sold non-capitalized assets for a net gain of

Gains related to the

sale of assets are included in research and development expenses on the statement of operations.

Write offs of assets are included

in other income, net on the statement of operations.

Goodwill and Intangible Assets, Net

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(in thousands):

Schedule of Goodwill and Intangible Assets, Net

Intangible assets:

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Acquired patents

Acquired royalty contracts (2)

royalty contracts (2)

Total intangible assets

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of intangible assets for periods subsequent to December 31, 2020 is as follows (in thousands):

Schedule of Intangible Assets Future Amortization Expense

Year Ended December 31,

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December 31, 2020 and 2019, accounts payable and accrued liabilities consist of the following (in thousands):

Schedule of Accounts Payable and Accrued Liabilities

Accounts payable

Accrued liabilities

Accrued compensation

Accrued liabilities

PPP loan payable

Other current liabilities

liabilities includes $ 1.0 million related to the signature fee owed to Cancer Research UK, as described in Note 14.

April 2020, Lineage received a loan for $ 523,305 from Axos Bank under the PPP contained within the new Coronavirus Aid, Relief

and Economic Security (“CARES”) Act.

The PPP loan has a term of two years, is unsecured, and is guaranteed by the

Small Business Administration (“SBA”).

The loan carries a fixed interest rate of one percent per annum, with

the first six months of interest deferred.

Under the CARES Act and Paycheck Protection Program Flexibility Act, Lineage will be

eligible to apply for forgiveness of all loan proceeds used to pay payroll costs, rent, utilities and other qualifying expenses

during the 24-week period following receipt of the loan, provided that Lineage maintains its employment and compensation within

certain parameters during such period.

Not more than 40 % of the forgiven amount may be for non-payroll costs.

If the conditions

outlined in the PPP loan program are adhered to by Lineage, all or part of such loan could be forgiven.

Lineage believes that

all or a substantial portion of the PPP loan is eligible for forgiveness within one year and classifies the loan as a short-term

On December 27, 2020, the Consolidated Appropriations Act, 2021 (CAA) was signed into law, retroactively allowing a

deduction of the expenses that gave rise to the PPP loan forgiveness, that was previously denied under the CARES Act.

has partially adopted the federal tax treatment.

On February 17, 2021, California issued an Immediate Action Agreement, allowing

companies to deduct up to $ 150,000 in expenses covered by the PPP loan.

However, Lineage cannot provide any assurance whether

the PPP loan will ultimately be forgiven by the SBA.

Any forgiven amounts will not be included in Lineage’s taxable income

for federal or California purposes.

Lineage applied for full forgiveness of the PPP loan on September 30, 2020.

Separation Payments

connection with the Asterias Merger, several Asterias employees were terminated as of the Asterias Merger date.

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completed by July 31, 2019.

connection with the relocation of Lineage’s corporate headquarters to Carlsbad, California, discussed in Note 14, Lineage

entered into a plan of termination with certain Lineage employees with potential separation payments in the aggregate of $0.7

Termination dates for these individuals range from August 9, 2019 to September 30, 2019.

These employees had to provide

services related to the transition of services and activities in connection with the relocation and be an employee of Lineage

as of their date of termination in order to receive separation benefits.

Lineage recorded the aggregate liability ratably over

their respective service periods from June through the above termination dates, in accordance with ASC 420.

As of December 31,

2019, all separation payments had been made.

connection with the relocation of Lineage’s corporate headquarters to Carlsbad, California, Lineage entered into a plan

of termination with certain Lineage employees with potential separation payments in the aggregate of $ 0.7 million.

dates for these individuals range from August 9, 2019 to September 30, 2019.

These employees had to provide services related to

the transition of services and activities in connection with the relocation and be an employee of Lineage as of their date of

termination in order to receive separation benefits.

Lineage recorded the aggregate liability ratably over their respective service

periods from June 2019 through the above termination dates, in accordance with ASC 420.

As of December 31, 2019, all separation

payments had been made.

Fair Value Measurements

value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction

between market participants at the measurement date.

To increase the comparability of fair value measures, the following hierarchy

prioritizes the inputs to valuation methodologies used to measure fair value (ASC 820-10-50), Fair Value Measurements and Disclosures :

1 – Inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.

2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar

assets or liabilities;

quoted prices in markets that are not active;

or other inputs that are observable or can be corroborated

by observable market data for substantially the full term of the assets or liabilities.

3 – Inputs to the valuation methodology are unobservable;

that reflect management’s own assumptions about the

assumptions market participants would make and significant to the fair value.

measure cash, cash equivalents, marketable securities and our liability classified warrants at fair value on a recurring basis.

The fair values of such assets were as follows for December 31, 2020 and 2019 (in thousands):

Schedule of Fair Value of Assets and Liabilities Valued on Recurring Basis

Fair Value Measurements Using

Balance at December 31, 2020

Prices in Active Markets for Identical Assets

Other Observable Inputs

Unobservable Inputs

Cash and cash equivalents

Marketable securities

Lineage Warrants

Cell Cure Warrants

Fair Value Measurements Using

Balance at December 31, 2019

Prices in Active Markets for Identical Assets

Other Observable Inputs

Unobservable Inputs

Cash and cash equivalents

Marketable securities

Lineage Warrants

Cell Cure Warrants

have not transferred any instruments between the three levels of the fair value hierarchy.

determining fair value, Lineage utilizes valuation techniques that maximize the use of observable inputs and minimize the use

of unobservable inputs to the extent possible, and also considers counterparty credit risk in its assessment of fair value.

securities include our positions in OncoCyte and HBL.

These securities have readily determinable fair values quoted on the NYSE

American or TASE stock exchanges.

These securities are measured at fair value and reported as current assets on the consolidated

balance sheets based on the closing trading price of the security as of the date being presented.

fair value of Lineage’s assets and liabilities, which qualify as financial instruments under FASB guidance regarding disclosures

about fair value of financial instruments, approximate the carrying amounts presented in the accompanying consolidated balance

The carrying amounts of accounts receivable, prepaid expenses and other current assets, accounts payable, accrued expenses

and other current liabilities approximate fair values because of the short-term nature of these items.

Related Party Transactions

Facilities and Service Agreements with Affiliates

receivables from affiliates shown on the consolidated balance sheet as of December 31, 2018, primarily represent amounts owed

to Lineage by OncoCyte and AgeX under separate Shared Facilities and Service Agreements (each a “Shared Facilities Agreement”),

with amounts owed by OncoCyte comprising most of that amount.

These outstanding amounts were paid in full in the first quarter

Under the terms of the Shared Facilities Agreements, Lineage allowed OncoCyte and AgeX to use Lineage’s premises

and equipment located at Lineage’s headquarters in Alameda, California for the purpose of conducting business.

provided accounting, billing, bookkeeping, payroll, treasury, payment of accounts payable, and other similar administrative services

to OncoCyte and AgeX.

The Shared Facilities Agreements also allowed Lineage to provide the services of attorneys, accountants,

and other professionals who may provide professional services to Lineage.

Lineage also provided OncoCyte and AgeX with the services

of laboratory and research personnel, including Lineage employees and contractors, for the performance of research and development

work for OncoCyte and AgeX at the premises.

Shared services with AgeX were terminated on July 31, 2019 with respect to the use

of Lineage’s office and laboratory facilities and September 30, 2019 with respect to all other remaining shared services.

Shared services with OncoCyte were terminated on September 30, 2019, and December 31, 2019 with respect to all other remaining

shared services.

charged OncoCyte and AgeX a “Use Fee”

for services provided and for use of Lineage facilities, equipment, and supplies.

the terms of the Shared Facilities Agreements, Lineage allowed OncoCyte and AgeX to use Lineage’s premises and equipment

located at Lineage’s headquarters in Alameda, California for the purpose of conducting business.

Lineage also provided accounting,

billing, bookkeeping, payroll, treasury, payment of accounts payable, and other similar administrative services to OncoCyte and

The Shared Facilities Agreements also allowed Lineage to provide the services of attorneys, accountants, and other professionals

who may provide professional services to Lineage.

Lineage also provided OncoCyte and AgeX with the services of laboratory and

research personnel, including Lineage employees and contractors, for the performance of research and development work for OncoCyte

and AgeX at the premises.

Shared services with AgeX were terminated on July 31, 2019 with respect to the use of Lineage’s

office and laboratory facilities and September 30, 2019 with respect to all other remaining shared services.

Shared services with

OncoCyte were terminated on September 30, 2019, and December 31, 2019 with respect to all other remaining shared services.

charged OncoCyte and AgeX a “Use Fee” for services provided and for use of Lineage facilities, equipment, and supplies.

For each billing period, Lineage prorated and allocated to OncoCyte and AgeX costs incurred, including costs for services of Lineage

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rate of 15 % per annum until paid, unless the failure to make a payment was due to any inaction or delay in making a payment by

Through December 31, 2019, Lineage did not charge OncoCyte or AgeX any interest.

In addition to the Use Fee, OncoCyte

and AgeX reimbursed Lineage for any out of pocket costs incurred by Lineage for the purchase of office supplies, laboratory supplies,

and other goods and materials and services for the account or use of OncoCyte or AgeX.

Lineage was not obligated to purchase or

acquire any office supplies or other goods and materials or any services for OncoCyte or AgeX, and if any such supplies, goods,

materials or services were obtained, Lineage could arrange for the suppliers to invoice OncoCyte or AgeX directly.

the aggregate, Lineage charged Use Fees to OncoCyte and AgeX as follows (in thousands):

Year Ended December 31,

Research and development

General and administrative

Total use fees

Use Fees charged to OncoCyte and AgeX shown above are not reflected in revenues, but instead Lineage’s general and administrative

Lineage did not charge OncoCyte or AgeX any interest.

addition to the Use Fee, OncoCyte and AgeX reimbursed Lineage for any out of pocket costs incurred by Lineage for the purchase

of office supplies, laboratory supplies, and other goods and materials and services for the account or use of OncoCyte or AgeX.

Lineage was not obligated to purchase or acquire any office supplies or other goods and materials or any services for OncoCyte

or AgeX, and if any such supplies, goods, materials or services were obtained, Lineage could arrange for the suppliers to invoice

OncoCyte or AgeX directly.

Use Fees charged to OncoCyte and AgeX shown above were not reflected in revenues, but instead Lineage’s general and administrative

expenses and research and development expenses are shown net of those charges in the consolidated statements of operations.

of December 31, 2019, Lineage has an immaterial amount receivable from OncoCyte and AgeX included in receivable from affiliates,

As of December 31, 2018, Lineage had a $2.1 million receivable from OncoCyte included in receivable from affiliates, net.

accounts for receivables from affiliates, net of payables to affiliates, if any, for similar shared services and other transactions

Lineage’s consolidated subsidiaries may enter into with nonconsolidated affiliates.

Lineage and the affiliates record those

receivables and payables on a net basis since Lineage and the affiliates intend to exercise a right of offset of the receivable

and the payable and to settle the balances net by having the party that owes the other party pay the net balance owed.

the year ended December 31, 2019, Lineage charged Use Fees of $ 2,176 ,000 to OncoCyte and AgeX;

$ 890 ,000 was offset against general

and administrative expenses and $ 1,286 ,000 was offset against research and development expenses.

related party transactions

February 2018, Alfred D.

Kingsley, the Chairman of our board of directors and a former officer and director of AgeX, purchased

AgeX stock purchase warrants entitling him to purchase 248,600 shares of AgeX common stock at an exercise price of $2.50 per share.

AgeX received $124,300, or $0.50 per warrant, from Mr.

The warrants were sold to Mr.

Kingsley on the same terms as other

warrants were sold by AgeX to other unaffiliated investors.

currently pays $ 5,050 per month for the use of approximately 900 square feet of office space in New York City, which is made available

to Lineage on a month-by-month basis by one of its directors at an amount that approximates his cost (see Note 14).

payments are expected to cease in March 2021 when the office space lease expires.

April 2019, Lineage issued 251,835 common shares of Lineage to Broadwood Partners, L.P., an Asterias and Lineage shareholder,

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connection with the putative shareholder class action lawsuits filed in February 2019 and October 2019 challenging the Asterias

Merger (see Note 14), Lineage has agreed to pay for the legal defense of Neal Bradsher, director, and Broadwood Partners, L.P.,

a shareholder of Lineage, and Broadwood Capital, Inc., which manages Broadwood Partners, L.P., all of which were named in the

Through December 31, 2019, Lineage has incurred a total of $221,000 in legal expenses on behalf of the director, shareholder

and the manager of the shareholder.

part of financing transactions, Broadwood Partners, L.P.

purchased 1,000,000 shares, 2,000,000 shares and 623,090 shares of OncoCyte

common stock from Lineage in July 2019, September 2019 and January 2020, respectively.

Shareholders’

is authorized to issue 2,000,000 shares of preferred stock.

The preferred shares may be issued in one or more series as the board

of directors may by resolution determine.

The board of directors is authorized to fix the number of shares of any series of preferred

shares and to determine or alter the rights, preferences, privileges, and restrictions granted to or imposed on the preferred

shares as a class, or upon any wholly unissued series of any preferred shares.

The board of directors may, by resolution, increase

or decrease (but not below the number of shares of such series then outstanding) the number of shares of any series of preferred

shares subsequent to the issue of shares of that series.

As of December 31, 2019, no shares of preferred stock were issued or

Merger (see Note 14), Lineage has agreed to pay for the legal defense of Neal Bradsher, director, and Broadwood Partners,

L.P., a shareholder of Lineage, and Broadwood Capital, Inc., which manages Broadwood Partners, L.P., all of which were named in

the lawsuits.

Through December 31, 2020, Lineage has incurred a total of $ 359 ,000 in legal expenses on behalf of the director,

shareholder and the manager of the shareholder.

part of financing transactions in which there were multiple other purchasers, Broadwood Partners, L.P.

purchased 1,000,000 shares,

2,000,000 shares and 623,090 shares of OncoCyte common stock from Lineage in July 2019, September 2019 and January 2020, respectively.

Shareholders’ Equity

is authorized to issue 2,000,000

shares of preferred stock.

The preferred shares may

be issued in one or more series as the board of directors may by resolution determine.

The board of directors is authorized to

fix the number of shares of any series of preferred shares and to determine or alter the rights, preferences, privileges, and

restrictions granted to or imposed on the preferred shares as a class, or upon any wholly unissued series of any preferred shares.

The board of directors may, by resolution, increase or decrease (but not below the number of shares of such series then outstanding)

the number of shares of any series of preferred shares subsequent to the issue of shares of that series.

As of December 31, 2020,

no shares of preferred stock were issued or outstanding.

December 31, 2020, Lineage was authorized to issue 250,000,000 common shares, no par value.

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Lineage had 153,095,883 and 149,804,284 issued and outstanding common shares, respectively.

the years ended December 31, 2019 and 2018, Lineage issued 189,000 and 270,000 common shares, net of shares withheld and retired

for employee taxes paid, respectively, for vested restricted stock units (see Note 12).

April 2017, Lineage entered into a Controlled Equity Offering SM Sales Agreement (the “Sales Agreement”)

with Cantor Fitzgerald & Co., as sales agent (“Cantor Fitzgerald”), pursuant to which Lineage may offer and sell,

from time to time, through Cantor Fitzgerald, Lineage common shares having an aggregate offering price of up to $25,000,000.

is not obligated to sell any shares under the Sales Agreement.

Subject to the terms and conditions of the Sales Agreement, Cantor

Fitzgerald will use commercially reasonable efforts, consistent with its normal trading and sales practices, applicable state

and federal law, rules and regulations, and the rules of the NYSE American, to sell the shares from time to time based upon Lineage’s

the years ended December 31, 2020 and 2019, Lineage issued 47,000

common shares, net of shares withheld

and retired for employee taxes paid, respectively, for vested restricted stock units (see Note 12).

At-the-Market

(“ATM”) Offering

May 1, 2020, Lineage entered into the Sales Agreement, pursuant to which Lineage may offer and sell, from time to time, through

Cantor Fitzgerald, common shares of Lineage (“ATM Shares”) having an aggregate offering price of up to $ 25,000 ,000.

Lineage is not obligated to sell any ATM Shares.

Subject to the terms and conditions of the Sales Agreement, Cantor Fitzgerald

will use commercially reasonable efforts, consistent with its normal trading and sales practices, applicable state and federal

law, rules and regulations, and the rules of the NYSE American, to sell the ATM Shares from time to time based upon Lineage’s

instructions, including any price, time or size limits specified by Lineage.

Under the Sales Agreement, Cantor Fitzgerald may

sell the shares by any method deemed to be an “at-the-market”

offering as defined in Rule 415(a)(4) under the Securities

Act of 1933, as amended, or by any other method permitted by law, including in privately negotiated transactions.

Cantor Fitzgerald’s

obligations to sell the shares under the Sales Agreement are subject to satisfaction of certain conditions, including the continued

effectiveness of Lineage’s Registration Statement on Form S-3 which became effective on May 5, 2017.

As of December 31,

2019, $24.1 million remained available for sale through the Sales Agreement under the Registration Statement.

will pay Cantor Fitzgerald a commission of 3.0% of the aggregate gross proceeds from each sale of shares, reimburse legal fees

and disbursements and provide Cantor Fitzgerald with customary indemnification and contribution rights.

The Sales Agreement may

be terminated by Cantor Fitzgerald or Lineage at any time upon notice to the other party, or by Cantor Fitzgerald at any time

in certain circumstances, including the occurrence of a material and adverse change in Lineage’s business or financial condition

sell the ATM Shares by any method deemed to be an “at-the-market” offering as defined in Rule 415(a)(4) under the

Securities Act of 1933, as amended, or by any other method permitted by law, including in privately negotiated transactions.

Fitzgerald’s obligations to sell the ATM Shares are subject to satisfaction of certain conditions, including the continued

effectiveness of Lineage’s Registration Statement on Form S-3 (File No.

333-237975), which was filed with the Commission

on May 1, 2020 and was declared effective on May 8, 2020.

The Sales Agreement replaced the previous sales agreement with Cantor

that had been entered into in April 2017.

As of December 31, 2020, Lineage sold 3,094,322

ATM Shares for gross and net proceeds

million and $ 5.0

million, respectively (in each

case, which excludes $ 0.3 million of cash in transit related to 2020 sales that settled in 2021).

In the first quarter of

2021 through March 5, 2021, Lineage sold an additional 7,941,122 ATM Shares for gross and net proceeds of $ 19.9

million and $ 19.3

million, respectively (in each

case, which includes $ 0.3 million of cash in transit related to 2020 sales that settled in 2021).

On March 5, 2021,

Lineage filed a prospectus supplement with the SEC in connection with the offer and sale of an additional $ 25

million of ATM Shares under the Sales

agreed to pay Cantor Fitzgerald a commission of 3.0 % of the aggregate gross proceeds from each sale of shares, reimburse legal

fees and disbursements and provide Cantor Fitzgerald with customary indemnification and contribution rights.

The Sales Agreement

may be terminated by Cantor Fitzgerald or Lineage at any time upon notice to the other party, or by Cantor Fitzgerald at any time

in certain circumstances, including the occurrence of a material and adverse change in Lineage’s business or financial condition

that makes it impractical or inadvisable to market the shares or to enforce contracts for the sale of the shares.

with Noncontrolling Interests of Cell Cure

July 10, 2017, Lineage purchased all of the outstanding Cell Cure Convertible Notes and Cell Cure ordinary shares held by HBL,

a former Cell Cure shareholder that owned 21.2% of the issued and outstanding Cell Cure ordinary shares and substantially all

of the Cell Cure Convertible Notes issued by Cell Cure shareholders other than Lineage.

On the same date, Lineage also purchased

all of the Cell Cure ordinary shares owned by Teva Pharmaceutical Industries, Ltd.

(“Teva”), a former Cell Cure shareholder

that owned 16.1% of the issued and outstanding Cell Cure ordinary shares.

Teva did not have any Cell Cure Convertible Notes.

acquire the Cell Cure ordinary shares from HBL and Teva, Lineage issued 1,220,207 and 927,673 common shares, valued at $3.8 million

and $2.8 million, to HBL and Teva, respectively, based on the closing price of Lineage common shares on the NYSE American.

to the consummation of the transactions with HBL and Teva, Lineage held 62.5% of the issued and outstanding Cell Cure ordinary

shares and upon the consummation of the transactions Lineage held 99.8%.

Accordingly, Lineage recorded a corresponding charge

to equity of $10.1 million and a proportional transfer of carrying value of $3.5 million for purchase of noncontrolling interests

in Cell Cure, included in the consolidated statement of shareholders’

equity for the year ended December 31, 2017, in accordance

with ASC 810-10-45-23.

October 2017, an unaffiliated third party exercised stock options to purchase 4,400 Cell Cure ordinary shares, reducing Lineage’s

ownership from 99.8% to 98.8% of outstanding Cell Cure ordinary shares.

May 2018, Lineage purchased 937 shares of Cell Cure ordinary shares for $40.5359 per share, the same Cell Cure price per ordinary

share paid by Lineage to each of HBL and Teva discussed above, resulting in an increase in Lineage’s ownership from 98.8%

Accordingly, Lineage recorded a $1.9 million net proportional equity transfer, at carrying value, from noncontrolling

interests in Cell Cure to Lineage included in consolidated shareholders’

equity for the year ended December 31, 2018, in

accordance with ASC 810-10-45-23.

(previously Asterias) Warrants –

Liability Classified

(previously Asterias) Warrants – Liability Classified

March 2019, in connection with the closing of the Asterias Merger, Lineage assumed outstanding Asterias Warrants.

5 unchanged sentences

have an exercise price of $ 6.15 per warrant share and expire on May 13, 2021 .

Lineage is accounting for the outstanding Lineage

Warrants as a liability at fair value, with subsequent changes to the fair value of the Lineage Warrants at each reporting period

thereafter included in the consolidated statement of operations (see Note 3).

the year ended December 31, 2019, Lineage recorded an unrealized gain of $476,000 due to the decline in the fair value of the

Lineage Warrants from the Asterias Merger date through December 31, 2019.

The decrease in the fair value of the Lineage Warrants

was mainly attributable to the short remaining life of the warrants, the low probability of a fundamental transaction occurring

in that short timeframe and an exercise price considerably higher than market price of Lineage common shares.

As of December 31,

2019, the fair value of the Lineage Warrants was $20,000 included in long-term liabilities on the consolidated balance sheets.

Cure Warrants –

Liability Classified

July 2017, as an inducement to HBL to sell their Cell Cure ordinary shares to Lineage, Cell Cure issued warrants to HBL (the “HBL

Warrants”) to purchase up to 24,566 Cell Cure ordinary shares at an exercise price of $40.5359 per share, payable in U.S.

dollars, the same Cell Cure price per ordinary share paid by Lineage to each of HBL and Teva for the purchase of their Cell Cure

ordinary shares discussed above.

No warrants were issued to Teva.

The HBL Warrants are immediately exercisable and expire on the

earliest of the lapse of 5 years from the issuance date or immediately prior to the closing of a Corporate Transaction or an initial

public offering, as defined in the HBL Warrant Agreement.

Cure also has issued warrants to purchase up to 13,738 Cell Cure ordinary shares at exercise prices ranging from $32.02 to $40.00

per share, payable in U.S.

dollars, to consultants (the “Consultant Warrants”), expiring in October 2020 and January

The HBL Warrants and the Consultant Warrants are collectively referred to as the “Cell Cure Warrants”.

Cure Warrants – Liability Classified

Cure has two sets of issued warrants (the “Cell Cure Warrants”).

Warrants to purchase 24,566 Cell Cure ordinary shares

at an exercise price of $ 40.5359 were issued to HBL in July 2017.

These warrants expire in July 2022 .

Warrants to purchase 13,738

Cell Cure ordinary shares at exercise prices ranging from $ 32.02 to $ 40.02 per share were issued to consultants.

11,738 of these

warrants were cashless exercised in October 2020.

The expense related to the cashless exercise was approximately $ 44,000

and it was recorded as other income/(expense), net on the statements of operations.

The remaining 2,000 warrants have an exercise

price of $ 40.00 and expire in January 2024 .

815 requires freestanding financial instruments, such as warrants, with exercise prices denominated in currencies other than the

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adjusted for lack of marketability, as appropriate, and the expected stock price volatility over the term of the Cell Cure Warrants.

The fair value of the Cell Cure ordinary shares is determined by Cell Cure’s Board of Directors, which may engage a valuation

specialist to assist it in estimating the fair value, or may use recent transactions in Cell Cure shares, if any, as a reasonable

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of marketability.

Lineage determines the stock price volatility using historical prices of comparable public company common stock

for a period equal to the remaining term of the Cell Cure Warrants.

The Cell Cure Warrants are revalued each reporting period

using the same methodology described above, with changes in fair value included as gains or losses in other income and expenses,

net, in the consolidated statements of operations.

Changes in any of the key assumptions used to value the Cell Cure Warrants

could materially impact the fair value of the Cell Cure Warrants and Lineage’s consolidated financial statements.

the years ended December 31, 2019 and 2018, Lineage recorded a noncash gain of $0.1 million and $0.4 million, respectively, for

the decrease in the fair value of the Cell Cure Warrants included in other income and expenses, net for each period.

in the fair value of the Cell Cure Warrants was mainly attributable to the reduced remaining life of the warrants from the prior

period, and management’s assumption on the lack of marketability discount adjustment on the fair value of Cell Cure ordinary

As of December 31, 2019 and 2018, the Cell Cure Warrants, valued at $0.3 million and $0.4 million, respectively, were

included in long-term liabilities on the consolidated balance sheets.

In connection with the cashless exercise in October 2020, Cell Cure had an independent third-party update the

fair value of the Cell Cure shares.

Lineage determines the stock price volatility using historical prices of comparable public

company common stock for a period equal to the remaining term of the Cell Cure Warrants.

The Cell Cure Warrants are revalued each

reporting period using the same methodology described above, with changes in fair value included as gains or losses in other income

and expenses, net, in the consolidated statements of operations.

the years ended December 31, 2020 and 2019, Lineage recorded a noncash loss of $ 0.2 million and a noncash gain of $ 0.1 million,

respectively, for the increase/decrease in the fair value of the Cell Cure Warrants included in other income and expenses, net

for each period.

The increase in the fair value of the Cell Cure Warrants was mainly attributable to an increase in the fair value

of the Cell Cure shares due to additional progress made on the OpRegen program in 2020.

As of December 31, 2020 and 2019, the

Cell Cure Warrants, valued at $ 0.4 million and $ 0.3 million, respectively, were included in long-term liabilities on the consolidated

balance sheets.

Stock-Based Awards

Incentive Plan Awards

Effective November 8, 2019,

Lineage adopted an amendment changing the name of the BioTime, Inc.

2012 Equity Incentive 2012 Plan to the Lineage Cell Therapeutics,

2012 Equity Incentive Plan (the “2012 Plan”).

The 2012 Plan provides for the grant of stock options, restricted

stock, restricted stock units (“RSUs”) and stock appreciation rights.

As of December 31, 2019, a maximum of

24,000,000 common shares were available for grant under the 2012 Plan.

Recipients of stock options are eligible to purchase

common shares at an exercise price equal to the fair market value of such shares on the date of grant.

The maximum term of options

granted under the 2012 Plan is 10 years.

November 8, 2019, Lineage adopted an amendment changing the name of the BioTime, Inc.

2012 Equity Incentive 2012 Plan to the Lineage

Cell Therapeutics, Inc.

2012 Equity Incentive Plan (the “2012 Plan”).

The 2012 Plan provides for the grant of stock

options, restricted stock, restricted stock units (“RSUs”) and stock appreciation rights.

As of December 31, 2020,

a maximum of 24,000,000 common shares were available for grant under the 2012 Plan.

Recipients of stock options are eligible to

purchase common shares at an exercise price equal to the fair market value of such shares on the date of grant.

The maximum term

of options granted under the 2012 Plan is 10 years.

Stock options generally vest over a four-year period based on continuous service;

the 2012 Plan allows for other vesting periods.

Upon the expiration of the restrictions applicable to an RSU, Lineage will either

issue to the recipient, without charge, one common share per RSU or cash in an amount equal to the fair market value of one common

however, the 2012 Plan allows for other vesting periods.

Upon the expiration of the restrictions applicable to an RSU, Lineage

will either issue to the recipient, without charge, one common share per RSU or cash in an amount equal to the fair market value

of one common share.

RSUs granted from the 2012 Plan reduce the shares available for grant by two shares for each RSU granted.

A summary of Lineage’s

2012 Plan activity and other stock option awards granted outside of the 2012 Plan related information is as follows (in thousands,

except per share amounts):

Exercise Price

summary of Lineage’s 2012 Plan activity and other stock option awards granted outside of the 2012 Plan related information

is as follows (in thousands, except per share amounts):

Schedule of Share-based Compensation, Employee Stock Purchase Plan, Activity

December 31, 2018

Board mandated restriction restored (1)

Exchange of options with Cell Cure (2)

Restricted stock units granted (3)

Inducement option grant (4)

Adjustment due to the AgeX Distribution

Increase to the 2012 Plan

Options granted

Options forfeited

Adjustment due to the AgeX Distribution (5)

Adjustment to inducement options due to the AgeX Distribution (5)

Adjustment to restricted stock units due to the AgeX Distribution (5)

Restricted stock units vested

Restricted stock units expired unvested

December 31, 2019

Adjustment due to the AgeX Distribution (5)

Increase to the 2012 Plan

December 31, 2019

Options granted

Options forfeited

Restricted stock units vested

Restricted units vested

December 31, 2020

Options exercisable at December 31, 2020

disclosures below regarding share-based awards that were granted on or before November 28, 2018 are before the applicable adjustments

made to such awards to maintain intrinsic value before and after the AgeX Distribution, as discussed above.

October 13, 2017, Lineage’s Board of Directors determined to temporarily set a 5.0 million total share limit on shares

available for the grant of share-based awards pursuant to the 2012 Plan.

As of December 31, 2017, the total 2.5 million shares

available for grant was net of this 5.0 million share restriction.

On May 4, 2018, Lineage’s Board of Directors removed

this restriction, thereby increasing shares available for the grant of share-based awards pursuant to the 2012 Plan.

July 9, 2018, Lineage’s Board of Directors terminated the Cell Cure Equity Incentive Plan (the “Cell Cure Plan”),

under which Cell Cure employees and certain consultants (“Cell Cure Option Holders”) held outstanding options

to purchase shares of common stock in Cell Cure, and Lineage granted the Cell Cure Option Holders Lineage options of equivalent

value under the 2012 Plan in exchange for their Cell Cure options (the “Lineage Exchange”).

The Lineage Exchange

resulted in 866,000 grants of Lineage stock options under the 2012 Plan, all issued with an exercise price of $2.16 per share

to the Cell Cure Option Holders, based on Lineage’s closing stock price on July 9, 2018.

Of the total options granted

under the Lineage Exchange, 275,000 are subject to continued service-based vesting from the original terms under the Cell

Cure Plan, and 591,000 were immediately vested on the exchange date to reflect the fact that the Cell Cure Options Holders

held prior to the exchange were already vested.

Equivalent value of the Lineage Exchange was determined using the Black-Scholes

option pricing model.

The Lineage Exchange was accounted for as a modification under ASC 718, and Lineage recorded a noncash

stock-based compensation expense of $298,000 for the year ended December 31, 2018 included in consolidated stock-based compensation

May 24, 2018 and August 10, 2018, Lineage granted 485,000 and 8,000 RSUs, respectively, to employees.

The RSUs vest in increments

upon the attainment of specified performance conditions, as determined by Lineage’s Board of Directors, including the

completion of the AgeX Distribution and certain clinical milestones in the development of OpRegen and Renevia.

compensation expense for these performance-based RSUs is recognized when it is probable that the respective milestone will

be achieved, as determined by Lineage’s Board of Directors.

On October 4, 2018, Lineage’s Board of Directors determined

that Lineage had achieved the AgeX Distribution performance condition and as a result 25%, or 123,250, of the RSUs granted

in May and August 2018 vested.

On December 18, 2018, Lineage’s Board of Directors determined that Lineage had achieved

other milestones related to the RSUs and as a result an additional 50%, or 246,500, of the RSUs granted in May and August

The remaining 25%, or 123,250 RSUs, expired unvested on December 31, 2018.

September 17, 2018, Lineage granted Lineage’s new President and Chief Executive Officer, Brian M.

Culley, two RSU awards

under the 2012 Plan:

(1) an award of 200,000 restricted stock units (“RSU Award No.

1”) and (2) an award of 100,000

restricted stock units (“RSU Award No.

and together with RSU Award No.

1, the “RSU Awards”).

Culley’s continued service with Lineage, 25% of the shares subject to RSU Award No.

1 will vest on the first

anniversary of the date of grant, and the balance of the shares subject to RSU Award No.

1 will vest in 12 equal quarterly

installments at the end of each quarter thereafter.

RSU Award No.

2 vested in full on January 1, 2019.

September 17, 2018 (the “Start Date”), Brian M.

Culley became President and Chief Executive Officer of Lineage.

In connection with Mr.

Culley’s employment, Lineage granted Mr.

Culley an inducement option to purchase 1,500,000 of

Lineage’s common shares (the “Culley Option”).

The exercise price of the Culley Option is $2.31 per share,

which was the closing stock price on September 17, 2018.

This grant was made outside of the 2012 Plan and was approved by

the independent members of the Board of Directors.

Subject to Mr.

Culley’s continued service with Lineage on the applicable

vesting date, the Culley Option will vest and become exercisable with respect to 25% of the shares on the first anniversary

of the Start Date, and the balance of the Culley Option will vest and become exercisable in 36 equal monthly installments

the equitable adjustment to the exercise prices and number of outstanding stock options, and to restricted stock units, necessary

to maintain the intrinsic value of those awards immediately prior to and following the AgeX Distribution.

of December 31, 2020, options outstanding and options exercisable under the 2012 Plan have a weighted-average remaining contractual

term of 6.1 years and 4.7 years, respectively, and intrinsic value of $23,000 and zero, respectively.

connection with the vested RSUs during the year ended December 31, 2019, Lineage paid $0.1 million in minimum employee withholding

term of 6.3 years and 4.1 years, respectively, and intrinsic value of $ 7.4 million and $ 0.9 million, respectively.

connection with the vested RSUs during the year ended December 31, 2020, Lineage paid $ 27,000 in minimum employee withholding

taxes in exchange for 26,000 vested Lineage common shares issuable to the employees and immediately retired those shares.

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taxes in exchange for 109,000 vested Lineage common shares issuable to the employees and immediately retired those shares.

the year ended December 31, 2018, Lineage recorded a noncash stock-based compensation expense of $1.2 million, which includes

$1.0 million related to the performance-based awards discussed above, in connection with the vested RSUs, included in consolidated

stock-based compensation expense.

the effective time of the Asterias Merger, Lineage assumed sponsorship of the Asterias 2013 Equity Incentive Plan (the “Asterias

Equity Plan”), with references to Asterias and Asterias common stock therein to be deemed references to Lineage and Lineage

the year ended December 31, 2019, Lineage recorded a noncash stock-based compensation expense of $ 0.3 million, in connection with

the vested RSUs, included in consolidated stock-based compensation expense.

the effective time of the Asterias Merger, Lineage assumed sponsorship of the Asterias 2013 Equity Incentive Plan (the “Asterias

Equity Plan”), with references to Asterias and Asterias common stock therein to be deemed references to Lineage and Lineage

common shares.

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31, 2020 is as follows (in thousands, except per share amounts):

Exercise Price

Schedule of Share-based Compensation, Employee Stock Purchase Plan, Activity

March 8, 2019

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December 31, 2019

Options granted

Options forfeited

December 31, 2020

Options exercisable at December 31, 2020

of December 31, 2019, options outstanding under the Asterias Equity Plan have a weighted-average remaining contractual term of

9.2 years and intrinsic value of zero.

of December 31, 2020, options outstanding and options exercisable under the Asterias Equity Plan both have a weighted-average

remaining contractual term of 8.2 years and intrinsic value of $ 67,000 and $ 29,000 , respectively.

compensation expense

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assumptions noted in the following table:

Schedule of Weighted Average Assumptions to Calculate Fair Value of Stock Options

Year Ended December 31,

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Dividend yield

weighted-average estimated fair value of stock options granted under the 2012 Plan and other stock option awards granted

outside of the 2012 Plan, during the years ended December 31, 2019 and 2018 was $0.68 and $1.24 per share, respectively,

Operating expenses include stock-based compensation expense as follows (in thousands):

weighted-average estimated fair value of stock options granted under the 2012 Plan and other stock option awards granted outside

of the 2012 Plan, during the years ended December 31, 2020 and 2019 was $ 0.43 and $ 0.68 per share, respectively.

expenses include stock-based compensation expense as follows (in thousands):

Schedule of Stock Based Compensation Expense

Year Ended December 31,

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attributable to post-combination services.

of December 31, 2019, total unrecognized compensation costs related to unvested stock options under Lineage’s 2002 Plan

and 2012 Plan was $4.1 million, which is expected to be recognized as expense over a weighted average period of approximately

and RSU Adjustment

connection with the AgeX Distribution discussed in Note 6 and in accordance with the provisions of the 2012 Plan and awards granted

outside of the 2012 Plan, Lineage awards issued and outstanding as of November 28, 2018 were adjusted to maintain the intrinsic

value of those awards immediately prior to and following the AgeX Distribution shown below.

The adjustments to the number of shares

subject to each RSU, stock option and the option exercise prices were based on the relative market capitalization of Lineage and

AgeX as of the AgeX Distribution date.

Since the adjustments were done to maintain intrinsic value of the Lineage options and

RSUs in accordance with the 2012 Plan and awards issued outside of the 2012 Plan, there was no modification in accordance with

recorded a federal and state deferred income tax benefit of $3.6 million and $3.8 million, respectively, for the year ended

December 31, 2019 due to the indefinite lived assets generated in the period and the release of the valuation allowance.

Company recorded a current foreign income tax expense of $31,000 for the year ended December 31, 2019.

Accordingly, the net

impact for the year ended December 31, 2019 was a net income tax benefit of $7.4 million.

For the year ended December 31, 2018, Lineage recorded a federal

current income tax benefit of $0.3 million due to the intraperiod allocation discussed in Note 2.

No income tax expense or benefit

was recorded for state or foreign purposes for the period ended December 31, 2018.

of December 31, 2020, total unrecognized compensation costs related to unvested stock options under Lineage’s 2012 Plan

was $ 3.9 million, which is expected to be recognized as expense over a weighted average period of approximately 2.6 years.

the year ended December 31, 2020, Lineage recorded a $ 1.2 million deferred tax benefit for income taxes.

the year ended December 31, 2019, Lineage recorded a $ 7.4 million valuation allowance release and corresponding benefit for income

This was comprised of a federal and state deferred income tax benefit of $ 3.6 million and $ 3.8 million, respectively, for

the year ended December 31, 2019 due to the indefinite lived assets generated in the period and the release of the valuation allowance.

The Company also recorded a current foreign income tax expense of $ 31,000 for the year ended December 31, 2019.

domestic and foreign breakout of loss before net income tax benefit was as follows:

Schedule of Income before Income Tax, Domestic and Foreign

Loss before net income tax benefit

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operations as a result of the following:

Schedule of Income Tax Rate Reconciliation

Year Ended December 31,

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Establish DTL for deferred assets from Asterias Merger

Establish DTL for AgeX/OncoCyte shares at deconsolidation

Deconsolidation of AgeX and subsidiaries net deferred tax assets

State tax benefit, net of effect on federal income taxes

Foreign rate differential

Foreign rate differential and other

Income tax benefit

primary components of the deferred tax assets and liabilities at December 31, 2020 and 2019 were as follows (in thousands):

Schedule of Components of Deferred Tax Assets and Liabilities

Deferred tax assets/(liabilities):

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Net deferred tax liabilities

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

Lineage established a full valuation allowance as of December 31, 2018 due to the uncertainty of realizing future tax

benefits from its net operating loss carryforwards and other deferred tax assets, including foreign net operating losses generated

by its subsidiaries.

At December 31, 2019, a portion of the valuation allowance was released as it relates to Lineage’s

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

Lineage established a full valuation allowance as of December 31, 2018 due to the uncertainty of realizing future tax benefits

from its net operating loss carryforwards and other deferred tax assets, including foreign net operating losses generated by its

subsidiaries.

During the year ended December 31, 2019, a 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.

The amount of the valuation allowance released

was $7.4 million year to date;

as new indefinite lived deferred tax assets are generated, we will continue to book provision benefits

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

was $ 7.4 million;

as new indefinite lived deferred tax assets are generated, we will continue to book provision benefits until the deferred tax

liability position is exhausted, barring any new developments.

of December 31, 2020, Lineage has gross net operating loss carryforwards of approximately $ 169.9 million for federal purposes.

As of December 31, 2019, Lineage’s foreign subsidiaries have net operating loss carryforwards of approximately $84.8 million

As of December 31, 2020, Lineage’s foreign subsidiaries have net operating loss carryforwards of approximately $ 88.3 million

which carryforward indefinitely.

of December 31, 2020, Lineage has net operating losses of $ 118.6 million for state tax purposes.

net operating losses generated on or prior to December 31, 2017, expire in varying amounts between 2027 and 2037, while federal

net operating losses generated after December 31, 2017, carryforward indefinitely.

The state net operating losses expire in varying

amounts between 2030 and 2039.

of December 31, 2020, Lineage has research tax credit carryforwards for federal and state tax purposes of $ 3.2 million and $ 5.7

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These tax credits reflect the amounts for Lineage, Asterias and OrthoCyte as of December 31, 2020.

federal purposes, the credits generated each year have a carryforward period of 20 years.

The federal tax credits expire in varying

amounts between 2020 and 2039, while the state tax credits have no expiration period.

Federal Income Tax Reform

December 22, 2017, in response to the enactment of the 2017 Tax Act (see Note 2), the SEC staff issued SAB 118 that allows companies

to record provisional amounts during a measurement period not to extend beyond one year from the enactment date.

The repatriation

tax is based primarily on LifeMap Sciences Ltd, an Israeli subsidiary of LifeMap Sciences, accumulated foreign earnings and profits

that Lineage previously excluded from U.S.

income taxes.

As a result, LifeMap Sciences included $227,000 in foreign earnings in

federal income for the year ended December 31, 2017.

The federal taxable income was offset by the LifeMap Sciences’

operating loss carryforwards resulting in no federal income tax due.

addition, for the year ended December 31, 2017, Lineage remeasured certain deferred tax assets and liabilities based on the enacted

tax rate at which they are expected to reverse in the future.

The estimated tax effected amount related to the remeasurement of

these balances was a reduction of Lineage’s net deferred tax assets by $8.9 million with a corresponding decrease in the

valuation allowance by the same amount, recognized as of December 31, 2017, discussed below.

Lineage applied the guidance in SAB

118 when accounting for the enactment-date effects of the 2017 Tax Act for the years ended December 31, 2019 and 2018.

As of December

31, 2018, Lineage completed its accounting for all the enactment-date income tax effects of the 2017 Tax Act.

income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial

reporting purposes and the amounts used for income tax purposes.

As of December 31, 2017, the federal portion of the deferred

tax assets and liabilities for 2017 were re-rated from 34% to 21% pursuant to the 2017 Tax Act.

Other Transactions and Related Impact on Income Taxes

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.

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.

Lineage has sufficient net operating

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

Juvenescence Transaction discussed in Note 5 was a taxable event for Lineage that resulted in a gross taxable gain of approximately

$29.4 million, which Lineage expects to be fully offset with available current year 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 Lineage and did not result in a current tax payment obligation, the unrealized financial reporting gain (see Note

6) on the AgeX Deconsolidation generated a deferred tax liability in accordance with ASC 740, Income Taxes , primarily representing

Lineage’s difference between book and tax basis of AgeX common stock on the AgeX Deconsolidation date.

Lineage expects this

deferred tax liability to be fully offset by a corresponding release of Lineage’s valuation allowance on deferred tax assets,

resulting in no income tax provision or benefit from the AgeX Deconsolidation.

The deferred tax liabilities on Lineage’s

investments in OncoCyte, Asterias and AgeX are considered to be sources of taxable income as prescribed by ASC 740-10-30-17 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 (see Note 6) on November 28, 2018 was a taxable event for

Lineage that resulted in a gross taxable gain of approximately $26.4 million, which Lineage fully offset with available net operating

losses, resulting in no income taxes due.

the OncoCyte Deconsolidation on February 17, 2017 was not a taxable transaction to Lineage and did not result in a tax payment

obligation, the $71.7 million unrealized gain on the OncoCyte Deconsolidation generated a deferred tax liability that was fully

offset by Lineage’s net operating losses.

Subsequent to the OncoCyte Deconsolidation, an unrealized loss of $2.9 million

was recorded on the OncoCyte shares during the year ended December 31, 2017, which was fully offset by a corresponding increase

in Lineage’s valuation allowance.

An unrealized loss of $48.0 million was recorded on the OncoCyte shares during the year

ended December 31, 2018, which was fully offset by a corresponding increase in Lineage’s valuation allowance.

the announcement of the California agreement with the Senate, allowing a deduction of up to $ 150,000 for expenses paid with the

PPP loan proceeds, any amount disallowed for California, that relates to R&D wages, may be limited.

For federal purposes,

the credits generated each year have a carryforward period of 20 years .

The federal tax credits expire in varying amounts between

2020 and 2040 , while the state tax credits have no expiration period.

August 5, 2020, Lineage began the liquidation of its foreign subsidiary BioTime Asia.

At the time of the liquidation, BioTime

Asia had an intercompany payable due to Lineage.

For book purposes, the corresponding balances eliminate in consolidation.

federal purposes, the activities of their foreign subsidiaries are not included in the consolidated tax return.

Accordingly, the

payable was written off for tax purposes by Lineage, creating a $ 3.6 million bad debt deduction increasing its NOL carryover.

For California, the activities of its foreign subsidiaries, including BioTime Asia, are included in the combined tax return.

such, the corresponding intercompany balances are eliminated.

Transactions and Related Impact on Income Taxes

market value of the respective shares Lineage holds in OncoCyte, AgeX and Asterias (through the merger date of March 8, 2019)

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Income Tax Matters

Revenue Code Section 382 places a limitation (“Section 382 Limitation”) on the amount of taxable income that can be

offset by NOL carryforwards after a change in control (generally greater than 50 % change in ownership within a three-year period)

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carryforwards in excess of the Section 382 Limitation.

Due to these “change in ownership”

provisions, utilization

Due to these “change in ownership” provisions, utilization

of the NOL and tax credit carryforwards may be subject to an annual limitation regarding their utilization against taxable income

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state and foreign tax laws.

Lineage’s management does not expect

that the total amount of unrecognized tax benefits will materially change over the next twelve months.

Lineage’s

practice is to recognize interest and penalties related to income tax matters in tax expense.

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May 2019, Lineage entered into a lease for approximately 8,841 square feet of rentable space in an office park in Carlsbad, California

(the “Carlsbad Lease”).

The term of the Carlsbad Lease commenced on August 1, 2019 and expires on October 31, 2022 .

rent under the Carlsbad Lease beginning on August 1, 2019 is $17,850 per month and will increase by 3% annually on every August

Base rent under the

Carlsbad Lease as of August 1, 2020 is $ 18,386 per month and will increase by 3 % annually on every August

1 thereafter during the lease term.

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addition to base rent, Lineage will pay a pro rata portion of increases in certain expenses, including real property taxes, utilities

(to the extent not separately metered to the leased space) and the landlord’s operating expenses, over the amounts of those

expenses incurred by the landlord.

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the landlord with a security deposit of $ 17,850 .

December 2015, Lineage entered into a lease for approximately 30,795 square feet of rentable space in two buildings located in

an office park in Alameda, California (the “Alameda Lease”).

The term of the Alameda Lease is seven years and Lineage

has an option to renew the term for an additional five years.

The term of the Alameda Lease commenced effective February 1, 2016

and expires on January 31, 2023, unless the renewal option is exercised.

rent under the Alameda Lease beginning on February 1, 2019 is $70,521 per month and will increase by approximately 3% annually

on every February 1 thereafter during the lease term.

to the adoption of ASC 842 on January 1, 2019 (see Note 2), the lease payments allocated to the lease liability for leasehold

improvements reimbursed by the landlord were amortized as debt service on that liability using the effective interest method over

the lease term.

Note 2 for discussion of the impact of adoption of ASC 842 on January 1, 2019, and below for the ROU assets and liabilities recorded

in connection with the adoption of ASC 842 as of, and during the year ended December 31, 2019 for the Alameda Lease.

to base rent, Lineage will pay a pro rata portion of increases in certain expenses, including real property taxes, utilities (to

the extent not separately metered to the leased space) and the landlord’s operating expenses, over the amounts of those

expenses incurred by the landlord.

As security for the performance of its obligations under the Alameda Lease, Lineage provided

the landlord with a security deposit of approximately $424,000, which was reduced to $78,000 on January 24, 2019 in accordance

with the terms of the lease.

The security deposit amount is considered restricted cash (see Note 2) and $78,000 is included in

deposits and other long-term assets as of December 31, 2019 (see Note 2).

Leases and Alameda Sublease

December 2015, Lineage entered into leases of office and laboratory space located in two

buildings in Alameda, California (the “Alameda

Leases”) comprised of 22,303

square feet (the “1010 Atlantic

Premises”) and 8,492

square feet (the “1020 Atlantic

Base rent under the Alameda Leases beginning on February 1, 2020 was $ 72,636

per month with annual increases of approximately

In addition to base rent, Lineage paid a pro rata portion of increases in certain expenses,

including real property taxes, utilities (to the extent not separately metered to the leased space) and the landlord’s operating

expenses, over the amounts of those expenses incurred by the landlord.

As security for its obligations, Lineage provided

the landlord with a security deposit of approximately $ 424,000 ,

which was reduced to $ 78,000

on January 24, 2019 in accordance with

the terms of the lease.

The security deposit amount is considered restricted cash and is included in prepaid expenses and other

current assets as of December 31, 2020 (See Note 2).

April 2020, Lineage entered into a sublease with Industrial Microbes, Inc.

(“Industrial Microbes”) for the use of

10,000 square feet in the 1010 Atlantic Premises (the “Industrial Microbes Sublease”).

Base rent under the Industrial

Microbes Sublease was $ 28,000 per month with annual increases of approximately 3 %.

rent for the first month was abated.

In addition to base rent and utilities, Industrial Microbes paid a pro-rata portion of increases

in operating expenses, after an abatement period of one year.

September 11, 2020, Lineage entered into a Lease Termination Agreement with the landlord terminating the Alameda Leases effective

as of August 31, 2020 for the 1020 Atlantic Premises and September 30, 2020 for the 1010 Atlantic Premises.

consideration for the termination of the leases, Lineage paid a termination fee of $ 130,000 and other amounts due under the terms

of the Alameda Leases through the applicable effective termination dates, except that no rent was due with respect to the 1020

Atlantic Premises after July 31, 2020.

Lineage’s security deposit is expected to be returned to Lineage by March

Lineage paid a separate termination fee of $ 30,000 to Industrial Microbes in connection

with the termination of the Industrial Microbes Sublease and returned the $ 56,000 security deposit paid by Industrial Microbes.

For the period of sublease from mid-April 2020 through September 2020, Lineage received $ 119,000 in rental income from Industrial

will continue to occupy approximately 2,432 square feet of the 1010 Atlantic Premises under a new sublease agreement (the “Alameda

The term of the Alameda Sublease

is from October 1, 2020 through January 31, 2023 .

Base rent under the Alameda Sublease is $ 14,592 per month with annual increases

of 3 % each October 1 thereafter during the lease term.

Base rent for the first month was abated.

Lineage paid a security deposit

of $ 16,000 under the Alameda Sublease;

this amount is considered restricted cash and is included in deposits and other long-term

assets as of December 31, 2020 (see Note 2).

on the smaller footprint, and after taking into consideration the fees disclosed above, Lineage has reduced its contractual obligations

by approximately $ 780,000 over the remaining life of the original leases through January 31, 2023.

York Leased Office Space

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This lease was not in the scope of ASC 842 because it is a month to month lease (see Note 2).

These payments are expected to cease in March 2021 when the office space lease expires .

Cure leases 728.5 square meters (approximately 7,842 square feet) of office and laboratory space in Jerusalem, Israel under a

lease that expires December 31, 2020, with two options to extend the lease for 5 years each (the “Original Cell Cure

Lease”).

lease that expires December 31, 2025 , with an option to extend the lease for 5 years (the “Original Cell Cure Lease”).

Base monthly rent is NIS 39,776 (approximately US $ 12,200 per month using the December 7, 2020 exchange rate).

In addition to base rent, Cell Cure pays a pro rata share of real property taxes and certain costs related to the operation and

maintenance of the building in which the leased premises are located.

In addition to

base rent, Cell Cure pays a pro rata share of real property taxes and certain costs related to the operation and maintenance of

the building in which the leased premises are located.

January 28, 2018, Cell Cure entered into another lease agreement for an additional 934 square meters (approximately 10,054 square

feet) of office space in the same facility in Jerusalem, Israel under a lease that expires on December 31, 2025 , with two options

to extend the lease for 5 years each (the “January 2018 Lease”).

The January 2018 Lease commenced on April 1, 2018

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Lease are NIS 93,827 per month (approximately $ 26,000 per month).

to the adoption of ASC 842 on January 1, 2019, Cell Cure was considered the owner of the tenant improvements under construction

under ASC 840-40-55 as Cell Cure, among other things, had the primary obligation to pay for construction costs and Cell Cure retains

exclusive use of the leased facilities for its office, research and cGMP manufacturing facility requirements after construction

was completed (“build to suit”

In accordance with the ASC 840 guidance, amounts expended by Cell Cure for

construction was reported as construction in progress, and the proceeds received from the landlord, if any, are reported as a

lease liability.

As of December 31, 2018, approximately $1.1 million under the January 2018 Lease was incurred and recorded as

leasehold improvement construction in progress (see Note 7), with a corresponding amount included in long term lease liability

representing the full amount utilized from the landlord’s leasehold improvement construction allowance.

By March 2019, the

landlord paid the complete leasehold improvement construction allowance and the property was placed in service.

Prior to the adoption

of ASC 842 on January 1, 2019, Cell Cure was considered the owner of the tenant improvements under construction under ASC 840-40-55

as Cell Cure, among other things, had the primary obligation to pay for construction costs and Cell Cure retains exclusive use

of the leased facilities for its office, research and cGMP manufacturing facility requirements after construction was completed

(“build to suit” lease).

In accordance with the ASC 840 guidance, amounts expended by Cell Cure for construction was

reported as construction in progress, and the proceeds received from the landlord, if any, are reported as a lease liability.

of December 31, 2018, approximately $ 1.1 million under the January 2018 Lease was incurred and recorded as leasehold improvement

construction in progress, with a corresponding amount included in long term lease liability representing the full amount utilized

from the landlord’s leasehold improvement construction allowance.

By March 2019, the landlord paid the complete leasehold

improvement construction allowance and the property was placed in service.

Note 2 for discussion of the impact of adoption of ASC 842 on January 1, 2019, and below for the ROU assets and liabilities recorded

in connection with the adoption of ASC 842 as of, and during the year ended December 31, 2019 for the Original

Cell Cure Lease and January 2018 Lease (the “Cell Cure Leases”).

December 2018, Cell Cure made a $388,000 deposit required under the January 2018 Lease, which amount is included in deposits and

other long-term assets on the consolidated balance sheet as of December 31, 2018, to be held as restricted cash during the term

of the January 2018 Lease.

below tables provide the amounts recorded in connection with the adoption of ASC 842 as of, and during the year ended December

31, 2019, for Lineage’s operating and financing leases, as applicable.

in connection with the adoption of ASC 842 as of, and during the year ended December 31, 2019 for the Original Cell Cure Lease

and January 2018 Lease (the “Cell Cure Leases”).

December 2018, Cell Cure made a deposit required under the January 2018 Lease, which amount of $ 420,000 is included in

deposits and other long-term assets on the consolidated balance sheet as of December 31, 2020, to be held as restricted cash during

the term of the January 2018 Lease.

below tables provide the amounts recorded in connection with the adoption of ASC 842 as of, and for the years ended December 31,

2020 and 2019, for Lineage’s operating and financing leases, as applicable.

cash flow information related to leases was as follows (in thousands):

paid for amounts included in the measurement of lease liabilities:

cash flows from operating leases

cash flows from financing leases

assets obtained in exchange for lease obligations:

Schedule of Supplemental Cash Flow Information Related to Leases

Ended December 31,

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases

Operating cash flows from financing leases

Financing cash flows from financing leases

Right-of-use assets obtained in exchange for lease obligations:

Operating leases

Financing leases

balance sheet information related to leases was as follows (in thousands, except lease term and discount rate):

lease liabilities, current

lease liabilities, noncurrent

operating lease liabilities

and equipment, gross

and equipment, net

finance lease liabilities

Weighted average remaining

Weighted average discount

Schedule of Supplemental Balance Sheet Information Related to Leases

Operating leases

Right-of-use assets, net

Right-of-use lease liabilities, current

Right-of-use lease liabilities, noncurrent

Total operating lease liabilities

Financing leases

Property and equipment, gross

Accumulated depreciation

Property and equipment, net

Current liabilities

Long-term liabilities

Total finance lease liabilities

Weighted average remaining lease term

Operating leases

Finance leases

Weighted average discount rate

Operating leases

Finance leases

minimum lease commitments are as follows (in thousands):

Ending December 31,

lease payments

imputed interest

Schedule of Future Minimum Lease Commitments

Year Ending December 31,

Total lease payments

Less imputed interest

and Option Agreement

January 5, 2019, Lineage and Orbit Biomedical Limited (“Orbit”) entered into a Research and Option Agreement (the

“Orbit Agreement”) for an exclusive partnership to assess Orbit’s vitrectomy-free subretinal injection device

as a means of delivering OpRegen in Lineage’s ongoing Phase 1/2a clinical trial.

The term of the Orbit Agreement is for

one year unless certain research activities and related data specified in the Orbit Agreement is obtained sooner.

The access fees

payable by Lineage to Orbit for its technology and the injection device are $2.5 million in the aggregate, of which $1.25 million

was paid in January 2019 upon execution of the Orbit Agreement and the remaining $1.25 million payment which was due on the earlier

of (i) six months from the Orbit Agreement date or, (ii) upon completion of certain collaborative research activities using the

Orbit technology for the OpRegen Phase 1/2a clinical trial, as specified in the Orbit Agreement.

In addition to the access fees,

Lineage reimburses Orbit for costs of consumables, training services, travel costs and other out of pocket expenses incurred by

Orbit for performing services under the Orbit Agreement.

Lineage has exclusive rights to the Orbit technology and its injection

device for the treatment of dry-AMD during the term of the Orbit Agreement and may extend the term for an additional three months

by paying Orbit a cash fee of $500,000.

In July 2019, Lineage completed the collaborative research activities referred to above

and the second $1.25 million payment was made in August 2019.

The Orbit fees of $2.5 million were amortized on a straight-line

basis throughout 2019 and included in research and development expenses.

January 5, 2019, Lineage and Orbit Biomedical Limited (“Orbit”) entered into a Research and Option Agreement, which

was assigned by Orbit to Gyroscope Therapeutics, Limited (“Gyroscope”) and amended on May 7, 2019, January 30, 2020,

May 1, 2020 and September 4, 2020 (the “Gyroscope Agreement”).

As amended, the Gyroscope Agreement provides Lineage

access to Gyroscope’s vitrectomy-free subretinal injection device (the “Orbit Device”) as a means of delivering

OpRegen in Lineage’s ongoing Phase 1/2a clinical trial through the earlier of:

(i) December 1, 2020;

or (ii) or treatment

of three additional patients with the Orbit Device between September 4, 2020 and December 1, 2020 (the “Access Period”).

Following the Access Period, Lineage also has an exclusive right to negotiate a definitive agreement to distribute and sell the

Orbit Device for the subretinal delivery of RPE cells for the treatment of dry AMD, which was extended through May 2021 (the “Option

Pursuant to the terms of the Gyroscope Agreement, Lineage paid access fees totaling $ 2.5

million in January 2019 upon execution of the Gyroscope Agreement;

and (ii) $ 1.25

million in August 2019 upon completion of certain collaborative research activities using the Gyroscope technology for

the OpRegen Phase 1/2a clinical trial.

These access fees of $ 2.5

million were amortized on a straight-line basis throughout 2019 and included in research and development expenses.

also agreed to reimburse Gyroscope for costs of consumables, training services, travel costs and other out of pocket expenses

incurred by Gyroscope for performing services under the Gyroscope Agreement.

In January 2020, Lineage agreed to pay an additional

million to extend the Access Period to July 5, 2020, $ 0.2

million of which was paid in February 2020 and $ 0.3

million of which was paid in November 2020.

The Access Period was subsequently extended at no cost as described above.

In February 2021, Lineage paid $ 0.5

million to extend the Option Period.

is subject to various claims and contingencies in the ordinary course of its business, including those related to litigation,

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On March 1, 2019, Asterias made certain amendments and supplements to its public disclosures regarding the Asterias Merger

(the “Supplemental Disclosures”).

On May 3, 2019, an amended class action complaint (the “Amended Complaint”)

The Amended Complaint named Lineage, Patrick Merger Sub, Inc., the Asterias board of directors, one member of Lineage’s

(the “Supplemental Disclosures”).

On May 3, 2019, an amended class action complaint (the “Amended Complaint”)

The Amended Complaint named Lineage, Patrick Merger Sub, Inc., the Asterias board of directors, one member of Lineage’s

board of directors, and certain stockholders of both Lineage and Asterias.

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The Amended Complaint sought, among other things, that

a class be certified, the recovery of monetary damages, and attorneys’

fees and costs.

a class be certified, the recovery of monetary damages, and attorneys’ fees and costs.

June 3, 2019, defendants filed demurrers to the Amended Complaint.

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the court seeking dismissal of the action with prejudice as to the named Plaintiffs and without prejudice as to the unnamed putative

class members, and disclosing to the court the parties’

agreement to resolve, for $200,000, Plaintiffs’

an award of attorneys’

fees and expenses in connection with the purported benefit conferred on Asterias stockholders by

class members, and disclosing to the court the parties’ agreement to resolve, for $ 200,000 , Plaintiffs’ claim for

an award of attorneys’ fees and expenses in connection with the purported benefit conferred on Asterias stockholders by

the Supplemental Disclosures.

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Lineage continues to

believe that the claims and allegations in the action lack merit, but believed that it was in Lineage’s shareholders’

best interest for the action to be dismissed and to resolve the fee claim in a timely manner without additional costly litigation

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2019-0822) was filed in Delaware Chancery Court and names Lineage, the

Asterias board of directors, one member of Lineage’s board of directors, and certain stockholders of both Lineage and Asterias

as defendants.

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The complaint seeks, among other things, that a class be certified, the recovery

of monetary damages, and attorneys’

fees and costs.

of monetary damages, and attorneys’ fees and costs.

On December 20, 2019, the defendants moved to dismiss the complaint.

On February 10, 2020, the plaintiff filed an opposition.

Defendants filed their replies on March 13, 2020.

On June 23, 2020, a

hearing on the motions to dismiss occurred.

On September 21, 2020, the Chancery Court denied the motion to dismiss as to Lineage

and certain members of the Asterias board of directors, and it granted the motion to dismiss as to all other defendants.

30, 2020, the remaining defendants filed an answer to the complaint.

believes the allegations in the action lack merit and intends to vigorously defend the claims asserted.

It is impossible at this

time to assess whether the outcome of this proceeding will have a material adverse effect on Lineage’s consolidated results

of operations, cash flows or financial position.

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Indemnification

the normal course of business, Lineage may provide indemnifications of varying scope under Lineage’s agreements with other

companies or consultants, typically Lineage’s clinical research organizations, investigators, clinical sites, suppliers

the normal course of business, Lineage may provide indemnifications of varying scope under Lineage’s agreements with other

companies or consultants, typically Lineage’s clinical research organizations, investigators, clinical sites, suppliers

Pursuant to these agreements, Lineage will generally agree to indemnify, hold harmless, and reimburse the indemnified

parties for losses and expenses suffered or incurred by the indemnified parties arising from claims of third parties in connection

with the use or testing of Lineage’s products and services.

Indemnification provisions could also cover third party infringement

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Lineage also maintains various liability insurance policies

that limit Lineage’s financial exposure.

As a result, Lineage believes the fair value of these indemnification agreements

Accordingly, Lineage has not recorded any liabilities for these agreements as of December 31, 2020 and 2019.

Amendment to Clinical Trial and Option Agreement and License Agreement with Cancer Research UK

May 6, 2020, Lineage and its wholly owned subsidiary Asterias entered into a Second Amendment to Clinical Trial and Option Agreement

(the “CTOA Amendment”) with Cancer Research UK (“CRUK”) and Cancer Research Technology Limited (“CRT”),

which amends the Clinical Trial and Option Agreement entered into between Asterias, CRUK and CRT dated September 8, 2014, as amended

September 8, 2014.

Pursuant to the CTOA Amendment, Lineage assumed all obligations of Asterias and exercised early its option

to acquire data generated in the Phase 1 clinical trial of VAC2 in non-small cell lung cancer being conducted by CRUK.

continue conducting the VAC2 study.

and CRT effectuated the option by simultaneously entering into a license agreement (the “License Agreement”) pursuant

to which Lineage agreed to pay the previously agreed signature fee of £ 1,250,000 (approximately $ 1.6 million).

In consideration

of Lineage’s agreement to exercise the option prior to completion of the study, the parties agreed to defer the signature

fee as follows:

£ 500,000 in September 2020, £ 500,000 in January 2021 and £ 250,000 in April 2021.

For the primary

licensed product for the first indication, the License Agreement provides for milestone fees of up to £ 8,000,000 based upon

initiation of a Phase 3 clinical trial and the filing for regulatory approval and up to £ 22,500,000 in sales-based milestones

Additional milestone fees and sales-based milestone payments would be payable for other products or indications, and

mid-single-digit royalty payments are payable on sales of commercial products.

party may terminate the License Agreement for the uncured material breach of the other party.

CRT may terminate the License Agreement

in the case of Lineage’s insolvency or if Lineage ceases all development and commercialization of all products under the

License Agreement.

Amended and Restated License Agreement

June 15, 2017, Cell Cure entered into a Second Amended and Restated License Agreement (the “License Agreement”) with

Hadasit Medical Research Services and Development Ltd.

(“Hadasit”), the commercial arm and a wholly owned subsidiary

of Hadassah Medical Organization.

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bearing license (with the right to grant sublicenses) in its intellectual property portfolio of materials and technology related

to human stem cell derived photoreceptor cells and retinal pigment epithelial cells (the “Licensed IP”), to use, commercialize

and exploit any part thereof, in any manner whatsoever in the fields of the development and exploitation of (i) human stem cell

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License Agreement.

License Agreement terminates upon the expiration of Cell Cure’s obligation to pay royalties for all licensed products, unless

earlier terminated.

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annual minimum maintenance fees.

Prior to the AgeX Distribution, annual minimum maintenance fees were approximately $135,000 to

$150,000 per year.

For 2019 and future years, we now expect annual minimum maintenance fees to be approximately $30,000 to $60,000

License fees and related expenses under these agreements were $47,000 and $133,000 for the years ended December 31,

2019 and 2018, respectively.

the terms of the grant agreement between Cell Cure and Israel Innovation Authority (“IIA”) (formerly the Office of

the Chief Scientist of Israel) of the Ministry of Economy and Industry, for the development of OpRegen ®

Annual minimum maintenance fees are expected to be approximately $ 30,000 to $ 60,000 per year.

the terms of the grant agreement between Cell Cure and Israel Innovation Authority (“IIA”) (formerly the Office of

the Chief Scientist of Israel) of the Ministry of Economy and Industry, for the development of OpRegen ® , Cell Cure

will be required to pay royalties on future product sales, if any, up to the amounts received from the IIA, plus interest indexed

Cell Cure’s research and product development activities under the grant are subject to substantial risks and uncertainties

and performed on a best efforts basis.

As a result, Cell Cure is not required to make any payments under the grant agreement unless

it successfully commercializes OpRegen ®

it successfully commercializes OpRegen ® .

Accordingly, pursuant to ASC 730-20, the Cell Cure grant is considered

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of intellectual property, or the manufacture, or both, of products developed under the grant outside of Israel, as defined by

Employee Benefit Plan

have a defined contribution 401(k) plan for all employees.

Under the terms of the plan, employees may make voluntary contributions

as a percentage or defined amount of compensation.

We provide a safe harbor contribution of up to 5.0 % of the employee’s

compensation, not to exceed eligible limits, and subject to employee participation.

For the years ended December 31, 2020 and

2019, we incurred approximately $ 149,000 and $ 287,000 , respectively, in expenses related to the safe harbor contribution.

Segment Information

Lineage’s

executive management team, as a group, represents the entity’s chief operating decision makers.

Lineage’s executive

management team views Lineage’s operations as one segment that includes, the research and development of therapeutic products

for retinal, orthopedics, oncology, and neurological diseases and disorders, blood and vascular system diseases and disorders,

blood plasma volume expansion, diagnostic products for the early detection of cancer, and hydrogel products that may be used in

surgery, and products for pluripotent cell technologies.

As a result, the financial information disclosed materially represents

all of the financial information related to Lineage’s sole operating segment.

executive management team, as a group, represents the entity’s chief operating decision makers.

Lineage’s executive

management team views Lineage’s operations as one segment that includes the research and development of therapeutic products

for retinal diseases, neurological diseases and disorders and oncology.

As a result, the financial information disclosed materially

represents all of the financial information related to Lineage’s sole operating segment.

Enterprise-Wide Disclosures

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that fund the grant are located (in thousands).

Ended December 31,

recognized prior to adoption of Topic 606 have not been adjusted under the Topic 606 modified retrospective transition method.

Schedule of Geographic Area Information

Year Ended December 31,

Geographic Area

United States

Total revenues

revenues are primarily generated from grants in Israel.

composition of Lineage’s long-lived assets, consisting of plant and equipment, net, between those in the United States and

in foreign countries, as of December 31, 2020 and 2019, is set forth below (in thousands):

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Sources of Revenues

following table presents Lineage’s consolidated revenues disaggregated by source (in thousands).

Ended December 31,

following table presents Lineage’s consolidated revenues disaggregated by source (in thousands).

of Revenues Disaggregated by Source

Year Ended December 31,

Grant revenue

Royalties from product

sales and license fees

Subscription and advertisement

of research products and services

recognized prior to adoption of Topic 606 have not been adjusted under the Topic 606 modified retrospective transition method.

revenues were generated by LifeMap Sciences, a subsidiary of AgeX.

The revenues shown for 2018 are for the period January

1, 2018 through August 29, 2018.

As a result of the AgeX Deconsolidation on August 30, 2018, Lineage does not expect to recognize

this type of revenue in subsequent accounting periods.

Prepaid expenses and

other current assets at December 31, 2019 includes $0.8 million of receivables related to royalties from product sales and license

following table shows Lineage’s major sources of revenues, as a percentage of total revenues, that were recognized during

Royalties from product sales and license fees

Sale of research products and services

Total revenues

expenses and other current assets at December 31, 2020 includes $ 0.2

million of receivables related to royalties

from product sales and license fees, and $ 0.3 million of receivables related to cash in transit for sales of ATM Shares in

2020 that settled in 2021.

following table shows Lineage’s major sources of revenues, as a percentage of total revenues, that were recognized during

the years ended December 31, 2020 and 2019:

Ended December 31,

IIA (formerly OCS)

grant income (Cell Cure, Israel)

Royalties, licenses,

subscriptions, advertising and other

Schedule of Sources of Revenues

Year Ended December 31,

Sources of Revenues

NIH grant income

IIA grant income (Cell Cure Neurosciences, Ltd, Israel)

Royalties, licenses, subscriptions, advertising and other

Sale of research products

Selected Quarterly Financial Information (UNAUDITED, in thousands, except per share data)

has derived this data from the unaudited consolidated interim financial statements that, in Lineage’

s opinion, have been

Selected Quarterly Financial Information (UNAUDITED,

in thousands, except per share data)

has derived this data from the unaudited consolidated interim financial statements that, in Lineage’ s opinion, have been

prepared on substantially the same basis as the audited consolidated financial statements contained herein and include all normal

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be expected for any future period.

Ended December 31, 2019

Schedule of Selected Quarterly Financial Information

Year Ended December 31, 2020

Revenues, net

Operating expenses

Loss from operations

Net income (loss) attributable

Basic net income (loss)

Ended December 31, 2018

Net income (loss) attributable to Lineage

Basic net income (loss) per share

Year Ended December 31, 2019

Revenues, net

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Loss from operations

Net income (loss) attributable

Basic net income (loss)

Net income (loss) attributable to Lineage

Basic net income (loss) per share

and year-to-date computations of net income (loss) per share amounts are calculated using the respective period weighted average

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of OncoCyte Shares

sold 2,383,090 shares of OncoCyte common stock for net proceeds of $5.0 million on January 2, 2020.

Lineage’s ownership

in OncoCyte was reduced to 9.98% at this time.

CHANGES IN AND

DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

January and February 2021, Lineage sold 2.5 million shares of OncoCyte common stock for gross proceeds of $ 10.1 million.

these sales, Lineage owns 1,122,401 shares of OncoCyte common stock, which has a value of $ 4.2 million as of March 5, 2021.

of Lineage Shares Under the ATM

the first quarter of 2021 through March 5, 2021, Lineage sold 7,941,122 common

shares of Lineage ATM Shares for gross and net proceeds of $ 19.9 million

and $ 19.3 million,

respectively (in each case, which includes $ 0.3 million

of proceeds in transit related to 2020 sales that settled in 2021).

See Note 11 for additional information.

On March 5, 2021, Lineage filed a prospectus supplement with the SEC in

connection with the offer and sale of an additional $ 25 million

of ATM Shares.

and Option Agreement

February 2021, Lineage extended the Option Period with Gyroscope for $ 0.5 million for an additional three months.

for additional information.

IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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 8. Financial Statements and Supplementary Data