Item 3. Legal Proceedings
ITEM
3.
LEGAL
PROCEEDINGS
From
time to time, we are subject to legal proceedings and claims in the ordinary course of business. While management presently believes
that the ultimate outcome of these proceedings, individually and in the aggregate, will not materially harm our financial position,
cash flows, or overall trends in results of operations, legal proceedings are subject to inherent uncertainties, and unfavorable
rulings or outcomes could occur that have individually or in aggregate, a material adverse effect on our business, financial condition
or operating results. Except as described below, we are not currently subject to any pending material litigation, other than ordinary
routine litigation incidental to our business, as described above.
On
February 19, 2019, a putative shareholder class action lawsuit was filed (captioned Lampe v. Asterias Biotherapeutics, Inc.
et al ., Case No. RG19007391) in the Superior Court of the State of California, County of Alameda challenging the Asterias
Merger. 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”)
was filed. 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. The action was brought by two purported stockholders
of Asterias, on behalf of a putative class of Asterias stockholders, and asserted breach of fiduciary duty and aiding and abetting
claims under Delaware law. The Amended Complaint alleged, among other things, that the process leading up to the Asterias Merger
was conflicted and inadequate, and that the proxy statement filed by Asterias with the Commission omitted certain material information,
which allegedly rendered the information disclosed materially misleading. The Amended Complaint sought, among other things, that
a class be certified, the recovery of monetary damages, and attorneys’ fees and costs.
On
June 3, 2019, defendants filed demurrers to the Amended Complaint. On August 13, 2019, the parties submitted a stipulation to
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’ claim for
an award of attorneys’ fees and expenses in connection with the purported benefit conferred on Asterias stockholders by
the Supplemental Disclosures. The court granted the stipulation and dismissed the action August 14, 2019. 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
expenses.
On
October 14, 2019, another putative class action lawsuit was filed challenging the Asterias Merger. This action (captioned Ross
v. Lineage Cell Therapeutics, Inc., et al. , C.A. No. 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. The action was brought by a purported stockholder of Asterias, on behalf of a putative class of Asterias stockholders,
and asserts breach of fiduciary duty and aiding and abetting claims under Delaware law. The complaint alleges, among other things,
that the process leading up to the Asterias Merger was conflicted, that the Asterias Merger consideration was inadequate, and
that the proxy statement filed by Asterias with the Commission omitted certain material information, which allegedly rendered
the information disclosed materially misleading. The complaint seeks, among other things, that a class be certified, the recovery
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. On October
30, 2020, the remaining defendants filed an answer to the complaint.
Lineage
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. Therefore, in accordance with ASC 450, Contingencies, Lineage has not
recorded any accrual for a contingent liability associated with this legal proceeding based on its belief that a liability, while
possible, is not probable nor estimable, and any range of potential contingent liability amounts cannot be reasonably estimated
at this time. Lineage records legal expenses as incurred.
ITEM
4.
MINE
SAFETY DISCLOSURES
Not
applicable.
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PART
II