What changed in this filing

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Item 1. Financial Statements

2021-05-13 compared with 2020-11-04 · 720 added, 1243 removed, 401 unchanged (83% of the section changed)

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CONSOLIDATED 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

March 31, 2021

December 31, 2020

CURRENT ASSETS

and equipment, net (Notes 6 and 15)

and other long-term assets

AND SHAREHOLDERS’ EQUITY

payable and accrued liabilities

lease and right of use lease liabilities, current portion (Note 15)

classified warrants, current portion

Cash and cash equivalents

Marketable equity securities

Trade accounts and grants receivable, net

Prepaid expenses and other current assets

Total current assets

NONCURRENT ASSETS

Property and equipment, net (Notes 6 and 15)

Deposits and other long-term assets

Intangible assets, net

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES

tax liability

revenues, net of current portion

lease liability, net of current portion (Note 15)

lease, net of current portion

classified warrants, net of current portion

and contingencies (Note 15)

SHAREHOLDERS’

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

none issued and outstanding as of September 30, 2020 and December 31, 2019

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

149,991 shares issued and outstanding as of September 30, 2020 and 149,804

shares issued and outstanding as of December 31, 2019

other comprehensive loss

Cell Therapeutics, Inc.

Accounts payable and accrued liabilities

Financing lease and right of use lease liabilities, current portion (Note 15)

Deferred revenues

Liability classified warrants, current portion

Total current liabilities

LONG-TERM LIABILITIES

Deferred tax liability

Right-of-use lease liability, net of current portion (Note 15)

Financing lease, net of current portion

Liability classified warrants, net of current portion

TOTAL LIABILITIES

Commitments and contingencies (Note 15)

SHAREHOLDERS’ EQUITY

Noncontrolling

deficit (Note 2)

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

none issued and outstanding as of March 31, 2021 and December 31, 2020

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

162,067 and 153,096 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively

Accumulated other comprehensive loss

Accumulated deficit

Lineage Cell Therapeutics, Inc.

shareholders’ equity

LIABILITIES AND SHAREHOLDERS’ EQUITY

Noncontrolling interest (deficit)

Total shareholders’ equity

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

accompanying notes to the condensed consolidated interim financial statements.

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THOUSANDS, EXCEPT PER SHARE DATA)

from product sales and license fees

of research products and services

and development

and administrative

Three Months Ended

Grant revenue

Royalties from product sales and license fees

Total revenues

Cost of sales

OPERATING EXPENSES:

from operations

INCOME/(EXPENSES):

on sale of marketable securities

on sale of equity method in OncoCyte Corporation (“OncoCyte”)

loss on marketable equity securities

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

gain on equity method investment in Asterias at fair value

gain on warrant liability

other (expense) income, net

BEFORE INCOME TAXES

income tax benefit

loss attributable to noncontrolling interest

LOSS ATTRIBUTABLE TO LINEAGE CELL THERAPEUTICS, INC.

LOSS PER COMMON SHARE:

AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:

Research and development

General and administrative

Total operating expenses

Loss from operations

OTHER INCOME/(EXPENSES):

Interest income, net

Gain on sale of marketable securities

Unrealized gain (loss) on marketable equity securities

Unrealized gain on warrant liability

Other expenses, net

Total other income (expenses), net

LOSS BEFORE INCOME TAXES

Deferred income tax benefit

Net loss attributable to noncontrolling interest

NET LOSS ATTRIBUTABLE TO LINEAGE CELL THERAPEUTICS, INC.

NET LOSS PER COMMON SHARE:

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:

accompanying notes to the condensed consolidated interim financial statements.

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

Other comprehensive loss, net of tax:

currency translation adjustment, net of tax

COMPREHENSIVE LOSS

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)/INCOME

Three Months Ended

Other comprehensive income, net of tax:

Foreign currency translation adjustment, net of tax

COMPREHENSIVE (LOSS)/INCOME

Comprehensive loss attributable to noncontrolling interest

COMPREHENSIVE

LOSS ATTRIBUTABLE TO LINEAGE CELL THERAPEUTICS, INC.

COMPREHENSIVE (LOSS)/INCOME ATTRIBUTABLE TO LINEAGE CELL THERAPEUTICS, INC.

COMMON SHAREHOLDERS

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CONSOLIDATED STATEMENTS OF CASH FLOWS

FLOWS FROM OPERATING ACTIVITIES:

loss attributable to Lineage Cell Therapeutics, Inc.

loss allocable to noncontrolling interest

to reconcile net loss attributable to Lineage Cell Therapeutics, Inc.

Three Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss attributable to Lineage Cell Therapeutics, Inc.

Net loss allocable to noncontrolling interest

Adjustments to reconcile net loss attributable to Lineage Cell Therapeutics, Inc.

to net cash used in operating activities:

gain on equity method investment in OncoCyte at fair value

gain on equity method investment in Asterias at fair value

on sale of marketable securities

loss on marketable equity securities

income tax benefit

expense, including amortization of leasehold improvements

of right-of-use asset

of intangible assets

stock issued for services

on write-off and sales of assets

in unrealized gain on warrant liability

of security deposit

of deferred license fee

currency remeasurement and other gain

in operating assets and liabilities:

and grants receivable, net

interest receivable

from OncoCyte and AgeX, net of payables

expenses and other current assets

payable and accrued liabilities

revenue and other liabilities

cash used in operating activities

FLOWS FROM INVESTING ACTIVITIES:

from the 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 equipment and other assets

from sale of equipment

deposits and other

cash provided by investing activities

FLOWS FROM FINANCING ACTIVITIES:

from payment of Juvenescence promissory note

shares received and retired for employee taxes paid

Reimbursement

from landlord on tenant improvements

from sales of common shares

Gain on sale of marketable securities

Unrealized (gain)/loss on marketable equity securities

Depreciation expense, including amortization of leasehold improvements

Amortization of right-of-use asset

Amortization of intangible assets

Stock-based compensation

Common stock issued for services

Change in unrealized gain on warrant liability

Foreign currency remeasurement and other gain

Changes in operating assets and liabilities:

Accounts and grants receivable, net

Accrued interest receivable

Receivables from OncoCyte and AgeX, 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 the sale of OncoCyte common shares

Proceeds from the sale of AgeX common shares

Proceeds from the sale of Hadasit common shares

Purchase of equipment and other assets

Other deposits

Net cash provided by investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from employee options exercised

Common shares received and retired for employee taxes paid

Repayment of financing lease liabilities

Proceeds from sale of common shares

Payments for offering costs

of financing lease liabilities

from Paycheck Protection Program (“PPP”) Loan (Note 8)

from sale of subsidiary warrants

of principal portion of promissory notes

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

CASH EQUIVALENTS AND RESTRICTED CASH:

beginning of the period

end of the period

Net cash provided by (used in) financing activities

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

NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

CASH, CASH EQUIVALENTS AND RESTRICTED CASH:

At beginning of the period

At end of the period

accompanying notes to the condensed consolidated interim financial statements.

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Organization and Business Overview

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.

Specifically, Lineage is testing therapies to treat dry age-related macular degeneration,

spinal cord injuries, and non-small cell lung 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 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 (“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

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

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

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

research charity.

also is seeking to create value from additional assets, such as from patents or non-clinical candidates, including seeking to

identify a commercialization or development partner for Renevia ® .

Renevia is a proprietary three-dimensional scaffold

designed to support adipose tissue transplants that was granted a Conformité Européenne (“CE”) Mark

in September 2019.

Cell Therapeutics, Inc.

(“Lineage,” “we,” “us,” or “our”) is a clinical-stage

biotechnology company developing novel cell therapies for unmet medical needs.

Our focus is to develop therapies for degenerative

retinal diseases, neurological conditions associated with demyelination, and that aid the body in detecting and combating

Specifically, Lineage is testing therapies to treat dry age-related macular degeneration, spinal cord injuries, and non-small

cell lung cancer.

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

capabilities.

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

from established and well-characterized pluripotent cell lines.

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 are administered

as a means of helping the body mount a more robust and effective immune response to cancer.

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

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

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

currently are no therapies approved by the U.S.

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

approximately 85-90% of all AMD cases and is one of the leading causes 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”).

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

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

cancer research charities.

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.

We founded two companies

that later became publicly traded companies:

OncoCyte Corporation (“OncoCyte”) and AgeX Therapeutics, Inc.

We continue to hold common stock in OncoCyte as of March 31, 2021.

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 existing protocols or 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”).

(“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 investment.

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

The former stockholders

of Asterias (other than Lineage) received 0.71 common shares of Lineage for every share of Asterias common stock they owned.

issued 24,695,898 common shares, including 58,085 shares issued in respect of restricted stock units issued by Asterias that immediately

vested in connection with the closing of the Asterias Merger.

The aggregate dollar value of such shares, based on the closing

price of Lineage common shares on March 8, 2019, was $ 32.4 million.

Lineage also assumed warrants to purchase shares of Asterias

common stock.

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 molecular diagnostic company

(NYSE American:

OCX), 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 September 30, 2020, Lineage owned

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

The former stockholders of

Asterias (other than Lineage) received 0.71 common shares of Lineage for every share of Asterias common stock they owned.

Lineage issued

24,695,898 common shares, including 58,085 shares issued in respect of restricted stock units issued by Asterias that immediately vested

in connection with the closing of the Asterias Merger.

The aggregate dollar value of such shares, based on the closing price of Lineage

common shares on March 8, 2019, was $ 32.4 million.

The total purchase price was $ 52.6 million.

Lineage also assumed warrants to purchase

shares of Asterias common stock.

Asterias Merger was 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 discussion of the Asterias Merger.

has an equity position in OncoCyte, a publicly traded molecular diagnostic company (NYSE American:

OCX), 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 March 31, 2021, Lineage owned approximately 1.1

million shares of OncoCyte common stock, or 1.3 %

of its outstanding shares (see Note 4).

Basis of Presentation, Liquidity and Summary of Significant Accounting Policies

unaudited condensed consolidated interim financial statements presented herein, and discussed below, have been prepared in accordance

with GAAP for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X.

In accordance

with those rules and regulations certain information and footnote disclosures normally included in comprehensive consolidated

financial statements have been condensed or omitted.

The condensed consolidated balance sheet as of December 31, 2019 was derived

from the audited consolidated financial statements at that date, but does not include all the information and footnotes required

These condensed consolidated interim financial statements should be read in conjunction with the audited consolidated

financial statements and notes thereto included in Lineage’s Annual Report on Form 10-K for the year ended December 31,

accompanying condensed consolidated interim financial statements, in the opinion of management, include all adjustments, consisting

only of normal recurring adjustments, necessary for a fair presentation of Lineage’s financial condition and results of

The condensed consolidated results of operations are not necessarily indicative of the results to be expected for

any other interim period or for the entire year.

with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and with the

instructions to Form 10-Q and Article 8 of Regulation S-X.

In accordance with those rules and regulations certain information and footnote

disclosures normally included in comprehensive consolidated financial statements have been condensed or omitted.

The condensed consolidated

balance sheet as of December 31, 2020 was derived from the audited consolidated financial statements at that date, but does not include

all the information and footnotes required by GAAP.

These condensed consolidated interim financial statements should be read in conjunction

with the audited consolidated financial statements and notes thereto included in Lineage’s Annual Report on Form 10-K for the year

ended December 31, 2020, as filed with the Securities and Exchange Commission (the “Commission”) on March 11, 2021.

accompanying condensed consolidated interim financial statements, in the opinion of management, include all adjustments, consisting only

of normal recurring adjustments, necessary for a fair presentation of Lineage’s financial condition and results of operations.

The condensed consolidated results of operations are not necessarily indicative of the results to be expected for any other interim period

or for the entire year.

of consolidation

condensed consolidated interim financial statements include the accounts of its subsidiaries.

All material intercompany accounts

and transactions have been eliminated in consolidation.

The following table reflects Lineage’s ownership, directly or

through one or more subsidiaries, of the outstanding shares of its operating subsidiaries as of September 30, 2020.

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

All material intercompany accounts and

transactions have been eliminated in consolidation.

The following table reflects Lineage’s ownership, directly or through one or

more subsidiaries, of the outstanding shares of its operating subsidiaries as of March 31, 2021.

of Lineage's Ownership of Outstanding Shares of its Subsidiaries

BioTherapeutics, Inc.

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(“Cell Cure”)

to treat age-related macular degeneration

and manufacturing of Lineage’s cell replacement platform technology

Cell International Pte.

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

Corporation (“OrthoCyte”)

bone grafting products for orthopedic diseases and injuries

shares owned by Lineage and ESI.

As of September 30, 2020, Lineage consolidated

its direct and indirect wholly owned or majority-owned subsidiaries because Lineage has the ability to control their operating

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.

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

of AgeX Therapeutics, Inc.

(“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.

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 from time to time in at-the-market transactions under the Sales Agreement.

As of September 30, 2020, no sales

had been made under the Sales Agreement.

September 30, 2020, Lineage had an accumulated deficit of approximately $ 296.1

million , working capital of $ 32.0

million and shareholders’ equity

Lineage has evaluated

its projected cash flows and believes that its $ 38.0

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

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’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.

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.

of March 31, 2021, Lineage consolidated its direct and indirect wholly owned or majority-owned subsidiaries because Lineage has the ability

to control their operating 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.

has incurred significant operating losses and in recent years 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.

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 from time to time in at-the-market transactions under the Sales Agreement.

As of March 31, 2021, Lineage had issued 11,035,444 common shares at a weighted average price per share of $ 2.27 for gross proceeds of

$ 25.0 million under the Sales Agreement.

On March 5, 2021, Lineage filed a prospectus supplement with the SEC in connection with the

offer and sale of an additional $ 25.0 million of common shares under the Sales Agreement increasing the total offering to $ 50.0 million.

No sales of the additional $25.0 million shares have been conducted as of May 7, 2021.

of March 31, 2021, Lineage had an accumulated deficit of approximately $ 295.5 million, working capital of $ 58.0 million and shareholders’

equity of $ 116.6 million.

Lineage has evaluated its projected cash flows and believes that its $ 62.4 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 interim 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.

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.

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’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.

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.

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

accounts for the shares it holds in OncoCyte, AgeX and HBL as marketable equity securities in accordance with ASC 320-10-25, Investments

accounts for the shares it holds in OncoCyte, 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.

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.

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:

shares have readily determinable fair values quoted on the NYSE American under trading symbol “OCX”.

The HBL shares have

a readily determinable fair value quoted on the Tel Aviv Stock Exchange (“TASE”) under the trading symbol “HDST”

where share prices are denominated in New Israeli Shekels (NIS).

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

(i) identify the contract with a customer;

(ii) identify

the performance obligations in the contract;

(iii) determine the transaction price;

(iv) allocate the transaction price to the

performance obligations;

and (v) recognize revenue when (or as) the customer obtains control of the product or service.

considers the terms of a contract and all relevant facts and circumstances when applying the revenue recognition standard.

applies the revenue recognition standard, including the use of any practical expedients, consistently to contracts with similar

characteristics and in similar circumstances.

(ii) identify the performance obligations in the contract;

(iii) determine the transaction

(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.

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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 15).

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 September 30, 2020, deferred grant revenue was $ 46,000 .

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

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.

If Lineage or a subsidiary receiving the grant

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

is required to estimate and recognize that liability.

Alternatively, if Lineage or a subsidiary receiving the grant is not required to

repay, or if it is required to repay the grant funds only if the research and development activities are successful, then the grant agreement

is accounted for as a contract to perform research and development services for others, in which case, grant revenue is recognized when

the related research and development expenses are incurred (see Note 15).

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

incurred as of the latest balance sheet date reported.

As of March 31, 2021, deferred grant revenue was $ 101,000 .

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

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.

Diluted 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 three and nine months ended September 30, 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 weighted average 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):

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

Diluted 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 three months ended March 31, 2021 and 2020, 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 loss per common share for the periods presented

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

of Antidilutive Securities Excluded from Computation of Earnings Per Share

Three Months Ended

Stock options

Lineage Warrants (1)

Lineage Warrants (1) (Note 3)

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.

the Lineage Warrants (as defined below) are classified as liabilities, the Lineage Warrants are considered for dilutive earnings

per share calculations in accordance with ASC 260, Earnings Per Share, and determined to be antidilutive for the period presented.

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

Restricted Cash , Lineage explains the change during the

period in the total of cash, cash equivalents and restricted cash, and includes restricted cash with cash and cash equivalents

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

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

and cash equivalents

cash included in deposits and other long-term assets (see Note 15)

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

January 1, 2019, Lineage adopted ASU 2016-02, Leases (Topic 842, “ASC 842”) and its subsequent amendments affecting

(i) ASU 2018-10, Codification Improvements to Topic 842, Leases ;

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

Targeted improvements, using the modified retrospective method.

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 15).

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 15).

Restricted Cash, Lineage explains the change during the period in the

total of cash, cash equivalents and restricted cash, and includes restricted cash with cash and cash equivalents when reconciling the

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

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):

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 15)

Restricted cash included in prepaid expenses and other current assets (see Note 15)

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

Adopted Accounting Pronouncements

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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 recently issued accounting pronouncements applicable to Lineage that

are not yet effective should be read in conjunction with the recently issued accounting pronouncements, as applicable and disclosed

in Lineage’s Annual Report on Form 10-K for the year ended December 31, 2019.

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

Lineage adopted this

standard on January 1, 2020 and it did not have a significant impact on its condensed consolidated financial statements.

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

The ASU enhances and simplifies

various aspects of the income tax accounting guidance in ASC 740 and removes certain exceptions for recognizing deferred taxes

for investments, performing intraperiod allocation and calculating income taxes in interim periods.

The ASU also adds guidance

to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of

a consolidated group.

This ASU is effective for fiscal years beginning after December 15, 2020, and interim periods within those

fiscal years with early adoption permitted.

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

on its consolidated financial statements.

The ASU enhances and simplifies various aspects

of the income tax accounting guidance in ASC 740 and removes certain exceptions for recognizing deferred taxes for investments, performing

intraperiod allocation and calculating income taxes in interim periods.

The ASU also adds guidance to reduce complexity in certain areas,

including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group.

This ASU is effective

for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years with early adoption permitted.

adopted this standard as of January 1, 2021 and it is not expected to have a material impact on its condensed consolidated financial

Issued Accounting Pronouncements Not Yet Adopted - The recently issued accounting pronouncements applicable to Lineage that are not yet

effective should be read in conjunction with the recently issued accounting pronouncements, as applicable and disclosed in Lineage’s

Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the Commission on March 11, 2021.

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

Measurement of Credit Losses

on Financial Instruments .

ASU 2016-13 is intended to provide financial statement users with more decision-useful information

about the expected credit losses on financial instruments and other commitments and requires consideration of a broader range

of reasonable and supportable information to inform credit loss estimates.

Measurement of Credit Losses on Financial

ASU 2016-13 is intended to provide financial statement users with more decision-useful information about the expected credit

losses on financial instruments and other commitments and requires consideration of a broader range of reasonable and supportable information

to inform credit loss estimates.

ASU 2016-13 is effective for Lineage beginning January 1, 2023.

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

Lineage has not yet completed its assessment

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

Asterias Merger

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

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”).

Lineage issued 24,695,898 common shares, including

58,085 shares issued in respect of restricted stock units issued by Asterias that immediately vested in connection with the closing

of the Asterias Merger.

The fair value of such shares, based on the closing price of Lineage common shares on March 8, 2019, was

$ 32.4 million .

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 March 8, 2019, the assets and liabilities of Asterias have been included in the condensed consolidated balance sheet of Lineage.

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

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

of the purchase price

Schedule of Merger

Consideration Transferred

calculation of the purchase price for the Asterias Merger and the Merger Consideration transferred on March 8, 2019 was as follows

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

(38% ownership interest)

other than Lineage (approximate 62% ownership interest)

Asterias common stock as of March 8, 2019

34,783,333 (1)

56,530,902 (1)

common shares issuable

15,440,774 (2)

24,695,898 (3)

share price of Lineage common shares as of March 8, 2019

price (in thousands)

81,810 shares of Asterias restricted stock unit awards that immediately vested on March 8, 2019 and converted into the right

to receive common shares of Lineage based on the Merger Exchange Ratio, resulting in 58,085 common shares of Lineage issued

on March 8, 2019 as part of the Merger Consideration.

These restricted stock units were principally attributable to pre-combination

services and included as part of the purchase price in accordance with ASC 805.

See Note 12 for Asterias restricted stock

units that vested on the closing of the Asterias Merger attributable to post-combination services that were recorded outside

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’

results with Lineage.

No actual common shares of Lineage were issued to Lineage in connection with the Asterias Merger.

of a de minimis number of fractional shares which were paid in cash.

price allocation

allocated the acquisition consideration to tangible and identifiable intangible assets acquired and liabilities assumed based

on their estimated fair values as of the acquisition date.

The fair value of the acquired tangible and identifiable intangible

assets were determined based on inputs that are unobservable and significant to the overall fair value measurement.

based on estimates and assumptions made by management at the time of the acquisition.

As such, this was classified as Level 3

fair value hierarchy measurements and disclosures.

allocation of the purchase price in the table below is based on our estimates of the fair values of tangible and intangible assets

acquired, including IPR&D, and liabilities assumed as of the acquisition date, with the excess recorded as goodwill (in thousands).

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

Schedule of Identifiable Tangible and Intangible Assets Acquired and Liabilities Assumed

and cash equivalents

expenses and other assets, current and noncurrent

and equipment

intangible assets - royalty contracts

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

assets acquired

liabilities and accounts payable

classified warrants

license revenue

deferred income tax liability

liabilities assumed

assets acquired, excluding goodwill (a)

value of Lineage common shares held by Asterias (b)

purchase price (c)

goodwill (c-a-b)

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

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

thousands, except for useful life)

process research and development (“IPR&D”)

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:

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

a probability weighted discounted cash flow method for each respective program.

This approach estimates the probability of the

AST-Clinical Programs achieving successful completion of remaining clinical trials and related approvals into the valuation technique.

calculate fair value of the AST-Clinical programs under the discounted cash flow method, Lineage used probability-weighted, projected

cash flows discounted at a rate considered appropriate given the significant inherent risks associated with cell therapy development

by clinical-stage companies.

Cash flows were calculated based on estimated projections of revenues and expenses related to each

respective program.

Cash flows were assumed to extend through a seven-year market exclusivity period for the OPC1 program from

the date of market launch.

Revenues from commercialization of the AST-Clinical Programs were based on estimated market potential

for the indication of each program.

The resultant cash flows were then discounted to present value using a weighted-average cost

of capital for companies with profiles substantially similar to that of Lineage, which Lineage believes represents the rate that

market participants would use to value the assets.

Lineage compensated for the phase of development of the program by applying

a probability factor to its estimation of the expected future cash flows.

The projected cash flows were based on significant assumptions,

including the indications in which Lineage will pursue development of the AST-Clinical programs, the time and resources needed

to complete the development and regulatory approval, estimates of revenue and operating profit related to the program considering

its stage of development, the life of the potential commercialized product, market penetration and competition, and risks associated

with achieving commercialization, including delay or failure to obtain regulatory approvals to conduct clinical studies, failure

of clinical studies, delay or failure to obtain required market clearances, and intellectual property litigation.

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

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 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 pre-clinical research

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

for clinical trials.

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

from Geron Corporation (“Geron”).

The former stockholders of

Asterias (other than Lineage) received 0.71 common shares of Lineage for every share of Asterias common stock they owned.

Lineage issued

24,695,898 common shares, including 58,085 shares issued in respect of restricted stock units issued by Asterias that immediately vested

in connection with the closing of the Asterias Merger.

The aggregate dollar value of such shares, based on the closing price of Lineage

common shares on March 8, 2019, was $ 32.4 million.

The total purchase price was $ 52.6 million.

Lineage also assumed warrants to purchase

shares of Asterias common stock.

has two IPR&D intangible assets that were valued at $ 46.5 million as part of the purchase price allocation that was performed in

connection with the Asterias Merger.

The fair value of these assets consists 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

also has certain royalty revenues for “research only use” culture media for pre-clinical research applications under certain,

specific patent families under contracts which preclude the customers to sell for commercial use or for clinical trials.

These royalty

cash flows are generated under certain specific patent families that Asterias previously acquired from Geron Corporation (“Geron”).

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

Because these patents are a subset of the clinical programs discussed above, are expected to continue to generate revenues for

Asterias and are not to be used in the OPC1 or the VAC2 programs, these patents are considered to be separate long-lived intangible

assets under ASC 805.

These intangible assets are also valued primarily through the use of the discounted cash flow method under

the income approach, and will be amortized over their useful life, estimated to be five years .

The discounted cash flow method

estimated the amount of net royalty income that can be expected under the contracts in future years.

The amounts were based on

observed historical trends in the growth of these revenue streams, and were estimated to terminate in approximately five years,

when the key patents under these contracts will begin to expire.

The resulting cash flows were discounted to the valuation date

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

discussed above.

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.

affiliate to license, on a non-exclusive basis, certain intellectual property related to culturing

pluripotent stem cells, such as hES cells, in suspension.

Under the terms of the option, Asterias received a one-time upfront

payment of $ 1.0 million , in exchange for a 24-month period option to negotiate a non-exclusive license during which time Asterias

has agreed to not grant any exclusive licenses inconsistent with the Novo Nordisk option.

This option was considered a performance

obligation as it provided Novo Nordisk with a material right that it would not receive without entering into the contract.

business combination purposes under ASC 805, the fair value of this performance obligation to Lineage, from a market participant

perspective, was the estimated costs Lineage may incur, plus a normal profit margin for the level of effort required to perform

under the contract after the acquisition date, assuming Novo Nordisk exercised its option, including negotiation costs, legal

fees, arbitration, if any, and other related costs.

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

May 13, 2021 .

As of the closing of the Asterias Merger, there were 2,813,159 Asterias Warrants outstanding.

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 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.

The Asterias Merger was a Fundamental Transaction for purposes of the Asterias Warrants.

fair value of the Asterias Warrants was determined by using Black-Scholes option pricing models which take into consideration

the probability of the Fundamental Transaction, which for purposes of the above valuation was assumed to be at 100 %

and net cash settlement occurring, using

the contractual remaining term of the warrants.

In applying these models, these inputs included key assumptions including the

per share closing price of Lineage common shares on March 8, 2019, volatility computed in accordance with the provisions of the

Warrant Agreement and, to a large extent, assumptions based on discussions with a majority of the holders of the Asterias Warrants

since the closing of the Asterias Merger to settle the Asterias Warrants in cash or in common shares of Lineage.

Based on such

discussions, Lineage believes the fair value of the Asterias Warrants as of the closing of the Asterias Merger is not subject

to change significantly, however, to the extent any Asterias Warrants that were not settled in cash or in Lineage common shares

discussed below, were automatically converted to Lineage warrants 30 days after the closing of the Asterias Merger.

In April 2019,

Asterias Warrants representing approximately $ 372 ,000

in fair value were settled:

in fair value was settled in exchange for 251,835

common shares of Lineage, and $ 40 ,000 in fair value was settled in exchange for cash.

The Asterias Warrants settled in exchange

for common shares of Lineage were held by Broadwood Partners, L.P., an Asterias and Lineage shareholder.

The Asterias Warrants

settled in exchange for cash were held by other parties.

The remaining Asterias Warrants (representing 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 September 30, 2020, the total number of common shares of Lineage subject to warrants that were assumed by Lineage in connection

with the Asterias Merger was 1,089,900 , with similar terms and conditions retained under the Lineage Warrants as per the original

Warrant Agreements.

The Lineage Warrants have an exercise price of $ 6.15 per warrant share and expire on May 13, 2021 .

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.

The fair value of those shares acquired by Lineage from Asterias

is determined based on the $ 1.31 per share closing price of Lineage common shares on March 8, 2019.

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.

These Lineage shares were retired at the completion of the Asterias

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

values assigned to the assets acquired and liabilities assumed.

Goodwill is not amortized but is tested for impairment at least

annually, or more frequently if circumstances indicate potential impairment.

on the structure of a particular acquisition, goodwill and identifiable intangible assets may not be deductible for tax purposes.

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

related costs recorded in general and administrative expenses for the three months ended September 30, 2020 and 2019 were immaterial.

Acquisition related costs recorded in general and administrative expenses were $ 0.7 million and $ 4.4 million for the nine months

ended September 30, 2020 and 2019, respectively.

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

stock at fair value using the equity method of accounting.

The fair value of the Asterias shares was approximately $20.2 million

as of March 8, 2019, the closing date of the Asterias Merger, based on $0.93 per share, which was calculated by multiplying:

$1.31, the closing price of Lineage common shares on such date;

by (b) the Merger Exchange Ratio.

The fair value of the Asterias

shares was approximately $ 13.5 million as of December 31, 2018, based on the closing price of Asterias common stock of $ 0.62 per

share on such date.

Accordingly, Lineage recorded an unrealized gain of $ 6.7 million for the year ended December 31, 2019, representing

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

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 15 Commitments and Contingencies for discussion regarding litigation related to the Asterias

Because these patents are expected to continue

to generate revenues for Asterias and are not to be used in the OPC1 or the VAC2 programs, these patents are considered to be separate

long-lived intangible assets under ASC 805.

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 12).

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.

Merger Related Litigation - See Note 15 Commitments and Contingencies for discussion regarding litigation related to the Asterias Merger.

Accounting for Common Stock of OncoCyte, at Fair Value

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, Lineage owned approximately 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.

During the nine months ended September

30, 2020, Lineage sold approximately 4.8 million shares of OncoCyte common stock for net proceeds of $ 10.9 million .

of September 30, 2020, Lineage owned approximately 3.6 million shares of OncoCyte common stock, or 5.4 %, which had a fair value

of approximately $ 5.0 million , based on the closing price of OncoCyte of $ 1.39 per share on September 30, 2020.

the three months ended September 30, 2020, Lineage recorded an unrealized loss of $ 1.9

million related to the remaining shares

owned by Lineage at September 30, 2020 and the decrease in OncoCyte’s stock price from $ 1.91

at June 30, 2020 to $ 1.39

at September 30, 2020.

For the three months

ended September 30, 2019, Lineage recorded a realized gain of $ 0.6

million due to sales of OncoCyte shares

in the period.

Lineage also recorded an unrealized loss of $ 8.7

million due to the decrease in OncoCyte’s

stock price from $ 2.49

per share at June 30, 2019 to $ 2.10

per share at September 30, 2019.

million of the unrealized loss was recorded

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

the remaining $ 0.4 million was recorded

as an unrealized loss on marketable equity securities.

the nine months ended September 30, 2020, Lineage recorded a realized gain of $ 3.1

million due to sales of OncoCyte shares

in the period.

In the same period, Lineage also recorded an unrealized loss of $ 6.1

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

and an additional $ 2.4

million related to the shares remaining

at September 30, 2020 and the decrease in OncoCyte’s stock price from $ 2.25

at December 31, 2019 to $ 1.39

at September 30, 2020.

For the nine months

ended September 30, 2019, Lineage recorded a realized gain of $ 0.6

million due to sales of OncoCyte shares

in the period.

Lineage also recorded an unrealized gain of $ 7.6

million due to the increase in OncoCyte’s

stock price from $ 1.38

per share at December 31, 2018 to $ 2.10

per share at September 30, 2019.

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 $0.4 million

was recorded as an unrealized loss on marketable equity securities.

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

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

of March 31, 2021, Lineage owned approximately 1.1 million shares of OncoCyte common stock.

These shares had a fair value of approximately

$ 5.8 million, based on the closing price of OncoCyte of $ 5.19 per share on March 31, 2021.

As of December 31, 2020, Lineage owned approximately

3.6 million shares of OncoCyte common stock.

These shares had a fair value of approximately $ 8.7 million, based on the closing price

of OncoCyte of $ 2.39 per share on December 31, 2020.

the three months ended March 31, 2021, Lineage recorded a realized gain of $ 6.0 million due to sales of OncoCyte shares in the period.

Lineage also recorded a net unrealized gain on marketable equity securities of $ 1.2 million related to changes in fair market value of

OncoCyte’s common stock price during the quarter.

the three months ended March 31, 2020, Lineage recorded a realized gain of $ 1.1 million due to sales of OncoCyte shares in the period.

Lineage also recorded a net unrealized loss on marketable equity securities of $ 0.3 million related to changes in fair market value of

OncoCyte’s common stock price in the quarter.

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

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

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, 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”).

August 30, 2018, Lineage entered into a Stock Purchase Agreement with Juvenescence Limited (“Juvenescence”) 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).

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.

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 on August 28, 2020.

the three and nine months ended September 30, 2020, Lineage recognized $ 252 ,000 and $ 1,008 ,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.

The Promissory

Note was paid in full on August 28, 2020 .

Property and Equipment, Net

September 30, 2020 and December 31, 2019, property and equipment was comprised of the following (in thousands):

Schedule of Property and Equipment, Net

furniture and fixtures

depreciation and amortization

and equipment, net

adopted ASC 842 on January 1, 2019.

For additional information on this standard and right-of-use assets and liabilities (see

Notes 2 and 15).

and equipment at September 30, 2020 and December 31, 2019 includes $ 80 ,000 and $ 96 ,000 in financing leases, respectively.

2020, Lineage terminated its leases in Alameda and entered into a new lease for a reduced amount of square footage.

This resulted

in a reduction to right-of-use assets of approximately $ 1.8 million.

March 31, 2021 and December 31, 2020, property and equipment, net was comprised of the following (in thousands):

of Property and Equipment, Net

March 31, 2021

December 31, 2020

Equipment, furniture and fixtures

Leasehold improvements

Right-of-use assets

Accumulated depreciation and amortization

Property and equipment, net

and equipment at March 31, 2021 and December 31, 2020 includes $ 79,000 in financing leases.

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 reduction to right-of-use assets

of approximately $ 1.4 million.

See additional information in Note 15.

and amortization expense amounted to $ 200 ,000

and $ 253 ,000

for the three months ended September 30, 2020 and 2019, and $ 623 ,000

and $ 766 ,000

for the nine months ended September 30, 2020 and 2019, respectively.

During the three and nine months ended September 30, 2020,

Lineage sold equipment with net book values of $ 39 ,000

and $ 52 ,000,

respectively, and recognized losses of $ 32 ,000

and $ 34 ,000,

respectively.

Additionally, Lineage sold non-capitalized assets

for a net gain of $ 67 ,000.

Both the gain and losses are included in research and development expenses on the statement of operations.

and amortization expense amounted to $ 174,000 and $ 212,000 for the three months ended March 31, 2021 and 2020, respectively.

three months ended March 31, 2021 and 2020, Lineage sold non-capitalized assets for a net gain of $ 16,000 and $ 30,000 , respectively,

which was included in research and development expenses on the condensed consolidated statements of operations.

During the three months

ended March 31, 2020, Lineage sold equipment with a net book value of $ 13,000 and recognized a gain of $ 2,000 , which was included in

research and development expenses on the condensed consolidated statement of operations.

Goodwill and Intangible Assets, Net

September 30, 2020 and December 31, 2019, goodwill and intangible assets, net consisted of the following (in thousands):

of Goodwill and Intangible Assets, Net

March 31, 2021, and December 31, 2020, goodwill and intangible assets, net consisted of the following (in thousands):

Schedule of Goodwill and Intangible Assets, Net

December 31,2020

Intangible assets:

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Intangible assets, net

represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired

and liabilities assumed in the Asterias Merger (see Note 3).

represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired and

liabilities assumed in the Asterias Merger.

Note 3 for information on the Asterias Merger which was consummated on March 8, 2019.

recognized in research and development expenses was $ 0.2 million and $ 0.5 million for the three months ended September 30, 2020

and 2019, and $ 1.0 million and $ 1.4 million for the nine months ended September 30, 2020 and 2019, respectively.

recognized in research and development expenses was $ 0.1 million and $ 0.5 million for the three months ended March 31, 2021 and 2020,

respectively.

Accounts Payable and Accrued Liabilities

September 30, 2020 and December 31, 2019, accounts payable and accrued liabilities consisted of the following (in thousands):

March 31, 2021 and December 31, 2020, accounts payable and accrued liabilities consisted of the following (in thousands):

Schedule of Accounts Payable and Accrued Liabilities

September 30, 2020

December 31, 2019

March 31, 2021

Accounts payable

3 unchanged sentences

Other current liabilities

payable includes $ 0.6 million and accrued expenses includes $ 1.0 million for a total of $ 1.6 million (£ 1.25 million) related

to the signature fee owed to Cancer Research UK, as described in Note 15.

of March 31, 2021, accrued liabilities includes $ 0.3 million related to the signature fee owed to Cancer Research UK, as described in

April 2020, Lineage received a loan for $ 523,000

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 U.S.

from Axos Bank under the PPP contained

within the Coronavirus Aid, Relief and Economic Security (“CARES”) Act.

The PPP loan has a term of two years, is unsecured,

and is guaranteed by the U.S.

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.

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 liability.

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.

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.

Three of these

employees had employment agreements with Asterias which entitled them to change in control and separation payments in the aggregate

of $ 2.0 million, which such conditions were met on the Asterias Merger date.

Accordingly, $ 2.0 million was accrued and recorded

in general and administrative expenses on the merger date and paid in April 2019.

Additionally,

Lineage entered into a plan of termination with substantially all other previous employees of Asterias with potential separation

payments in the aggregate of $ 0.5 million.

Termination dates for these individuals ranged from May 31, 2019 to June 28, 2019.

These employees were required to provide services related to the transition and be an employee of the combined company as of their

date of termination in order to receive separation benefits.

Since the employees were required to render future services after

the merger date, Lineage recorded the aggregate liability ratably over their respective service periods from the Asterias Merger

date through the above termination dates, in accordance with ASC 420, Exit or Disposal Cost Obligations .

All payments were

completed by July 31, 2019.

connection with the relocation of Lineage’s corporate headquarters to Carlsbad, California, discussed in Note 15, 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 2019 through the above termination dates, in accordance with ASC 420.

As of December

31, 2019, all separation payments had been made.

of the forgiven amount may be for non-payroll

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 liability.

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.

California 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.

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

for federal or California purposes.

Lineage applied for forgiveness of the PPP loan on September 30, 2020, and on May 13, 2021,

received notice that the PPP loan was forgiven in full.

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 :

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;

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.

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 September 30, 2020 and December 31, 2019 (in thousands):

that reflect management’s own assumptions about the assumptions

market participants would make and significant to the fair value.

measure cash, cash equivalents, marketable equity securities and our liability classified warrants at fair value on a recurring basis.

The fair values of such assets were as follows for March 31, 2021 and December 31, 2020 (in thousands):

Schedule of Fair Value of Assets and Liabilities Valued on Recurring Basis

Fair Value Measurements Using

Balance at September 30, 2020

Prices in Active Markets for Identical Assets

Balance at March 31, 2021

Quoted Prices in Active Markets for Identical Assets

Significant Other Observable Inputs

1 unchanged sentence

Cash and cash equivalents

Marketable securities

Marketable equity securities

Lineage Warrants

Cell Cure Warrants

Value Measurements Using

at December 31, 2019

Prices in Active Markets for Identical Assets

Other Observable Inputs

Unobservable Inputs

and cash equivalents

Cure Warrants

Fair Value Measurements Using

Balance at December 31, 2020

Quoted Prices in Active Markets for Identical Assets

Significant Other Observable Inputs

Significant Unobservable Inputs

Cash and cash equivalents

Marketable equity 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, AgeX and HBL.

All of 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

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.

equity securities include our positions in OncoCyte, and HBL.

Both of 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 condensed

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

fair value of the Lineage Warrants is determined by using Black-Scholes option pricing models which take into consideration the

probability of a fundamental transaction, as defined in the warrant agreement, the exercise price of the warrants and the contractual

remaining term of the warrants.

The Lineage Warrants have an expiration date of May 13, 2021.

The Lineage Warrants are included

in current liabilities on the condensed consolidated balance sheets.

Changes in the fair value of the Lineage Warrants at each

reporting period are included in the condensed consolidated statements of operations under unrealized gain on warrant liability.

For the three and nine months ended September 30, 2020, Lineage recognized unrealized gains of $ 13 ,000 and $ 18 ,000

on the Lineage Warrants, respectively, which was primarily related to the reduction in the remaining life of the warrants.

fair value of the Cell Cure Warrants (defined below) is determined by using Black-Scholes option pricing models which take into

consideration the fair value of the Cell Cure ordinary shares, adjusted for lack of marketability, as appropriate, the contractual

remaining term of the warrants and the expected stock price volatility over the term.

The Cell Cure Warrants are included in current

(portion with terms expiring within the next twelve months) and long-term liabilities on the condensed consolidated balance sheets.

Changes in the fair value of the Cell Cure Warrants at each reporting period are included in the condensed consolidated statements

of operations under unrealized gain on warrant liability.

For the three and nine months ended September 30, 2020, Lineage recognized

unrealized gains of $ 41 ,000

and $ 66 ,000

on the Cell Cure Warrants, respectively, primarily related to

the reduction in the remaining life of the warrants.

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

the terms of 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

employees and use of equipment, insurance, leased space, professional services, software licenses, supplies and utilities.

allocation of costs depended on key cost drivers, including actual documented use, square footage of facilities used, time spent,

costs incurred by Lineage for OncoCyte and AgeX, or upon proportionate usage by Lineage, OncoCyte and AgeX, as reasonably estimated

Lineage, at its discretion, had the right to charge OncoCyte and AgeX a 5 % markup on such allocated costs.

The allocated

cost of Lineage employees and contractors who provided services was based upon the number of hours or estimated percentage of

efforts of such personnel devoted to the performance of services.

Use Fee was determined and invoiced to OncoCyte and AgeX on a regular basis, generally monthly or quarterly.

Each invoice was

payable in full within 30 days after receipt.

Any invoice, or portion thereof, not paid in full when due bore interest at the

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

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 were not reflected in revenues, but instead Lineage’s general and administrative expenses

and research and development expenses were shown net of those charges in the condensed consolidated statements of operations.

the three months ended September 30, 2019, Lineage charged Use Fees of $ 537,000 to OncoCyte and AgeX;

$ 236,000 was offset against

general and administrative expenses and $ 301,000 was offset against research and development expenses.

the nine months ended September 30, 2019, Lineage charged Use Fees of $ 1,932,000 to OncoCyte and AgeX;

$ 647,000 was offset against

general and administrative expenses and $ 1,285,000 was offset against research and development expenses.

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

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

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

incurred costs of $ 5,050 per month for the use of approximately 900 square feet of office space in New York City, which was made available

to Lineage on a month-by-month basis by one of its directors at an amount that approximates his cost (see Note 15).

These 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,

in exchange for the settlement of Asterias Warrants in connection with the Asterias Merger (see Note 3).

connection with the putative shareholder class action lawsuits filed in February 2019 and October 2019 challenging the Asterias

Merger (see Note 15), 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 September 30, 2020, Lineage has incurred a total of $ 357,000 in legal expenses on behalf of the director, shareholder

and the manager of the shareholder.

In March 2021 , Lineage

terminated without penalty its leasing term related to the New York City office lease.

connection with the putative shareholder class action lawsuits filed in February 2019 and October 2019 challenging the Asterias Merger

(see Note 15), Lineage has agreed to pay for the legal defense of Neal Bradsher, director, 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 March

31, 2021, Lineage has incurred a total of $ 375,000 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.

5 unchanged sentences

may determine by resolution.

Our 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.

Our 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.

Our 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.

Our 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.

There are no preferred shares issued and outstanding.

September 30, 2020, Lineage was authorized to issue 250,000,000 common shares, no par value.

As of September 30, 2020, and December

March 31, 2021, Lineage was authorized to issue 250,000,000 common shares, no par value.

As of March 31, 2021, and December 31, 2020,

Lineage had 162,066,897 and 153,095,883 issued and outstanding common shares, respectively.

At-The-Market

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 having an aggregate offering price of up to $ 25,000 ,000 .

Lineage 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 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 (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 September 30, 2020, no sales had been made under the Sales Agreement.

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.

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 having an aggregate offering price of up to $ 25,000,000 .

Lineage 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 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 (File

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 March 31, 2021, Lineage had issued 11,035,444

common shares at a weighted average price per share of $ 2.27 for gross proceeds of $ 25.0 million under the Sales Agreement.

5, 2021, Lineage filed a prospectus supplement with the SEC in connection with the offer and sale of an additional $ 25.0 million of common

shares under the Sales Agreement increasing the total offering to $ 50.0 million.

No sales of the additional $25.0 million shares have been conducted as of May 7, 2021.

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.

Reconciliation

of Changes in Shareholders’ Equity

following tables document the changes in shareholders’ equity for the three and nine months ended September 30, 2020 and

2019 (unaudited and in thousands):

following tables document the changes in shareholders’ equity for the three months ended March 31, 2021 and 2020 (unaudited and

in thousands):

Schedule of Shareholders' Equity

Preferred Shares

Common Shares Number

Common Shares

Noncontrolling

1 unchanged sentence

Comprehensive

Total Shareholders’

Noncontrolling

Comprehensive

Shareholders’

Income/(Loss)

BALANCE AT DECEMBER 31, 2020

$ ( 294,078 )

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

retired to pay employees’ taxes

Stock-based compensation

Foreign currency translation gain (loss)

Financing related fees

Shares issued in connection with the Asterias Merger

Shares issued in connection with the Asterias Merge,

Shares retired in connection with the Asterias

Merger, shares

Shares issued for services

Shares issued for services, shares

Stock-based compensation for shares issued upon

vesting of Asterias restricted stock units attributable to post combination services

Stock-based compensation for shares issued upon

vesting of Asterias restricted stock units attributable to post combination services, shares

Adjustment upon adoption of leasing standard

Shares issued for settlement of Lineage Warrants

Shares issued for settlement of Lineage Warrants,

Shares issued through ATM

Shares issued through ATM, shares

Dissolution of BioTime Asia

BALANCE AT MARCH 31, 2020

$ ( 281,821 )

BALANCE AT APRIL 1, 2020

$ ( 281,821 )

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

retired to pay employees’ taxes

Stock-based compensation

Financing related fees

Foreign currency translation gain (loss)

BALANCE AT JUNE 30, 2020

$ ( 288,343 )

BALANCE AT JULY 1, 2020

$ ( 288,343 )

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

retired to pay employees’ taxes

Shares issued for services

Stock-based compensation

Dissolution of BioTime Asia

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

Shares issued upon exercise of stock options

Financing related fees

Foreign currency translation gain (loss)

BALANCE AT SEPTEMBER 30, 2020

Stock-based compensation

Foreign currency translation gain

BALANCE AT MARCH 31, 2021

$ ( 295,494 )

Preferred Shares

Common Shares Number

Common Shares

Noncontrolling

1 unchanged sentence

Comprehensive

Total Shareholders’

Noncontrolling

Comprehensive

Shareholders’

Income/(Loss)

BALANCE AT DECEMBER 31, 2019

$ ( 273,422 )

Shares issued in connection with the Asterias Merger

Shares retired in connection with the Asterias Merger

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

retired to pay employees’ taxes

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

Stock-based compensation

Stock-based compensation for shares issued upon vesting of Asterias

restricted stock units attributable to post combination services

Adjustment upon adoption of leasing standard

Foreign currency translation gain (loss)

Shares issued through ATM

Shares issued through ATM, shares

NET INCOME/(LOSS)

Foreign currency translation gain

BALANCE AT MARCH 31, 2020

$ ( 281,821 )

BALANCE AT APRIL 1, 2019

$ ( 222,403 )

Shares issued for settlement of Lineage Warrants

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

retired to pay employees’ taxes

Stock-based compensation

Foreign currency translation gain (loss)

BALANCE AT JUNE 30, 2019

$ ( 252,435 )

BALANCE AT JULY 1, 2019

$ ( 252,435 )

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

retired to pay employees’ taxes

Stock-based compensation

Shares issued through ATM

Foreign currency translation gain (loss)

BALANCE AT SEPTEMBER 30, 2019

$ ( 268,940 )

(previously Asterias) Warrants - Liability Classified

March 2019, in connection with the closing of the Asterias Merger, Lineage assumed outstanding Asterias Warrants.

As of September

30, 2020, the total number of common shares of Lineage subject to warrants that were assumed by Lineage in connection with the

Asterias Merger was 1,089,900 , which were converted to Lineage Warrants 30 days after the closing of the Asterias Merger, with

similar terms and conditions retained under the Lineage Warrants as per the original Warrant Agreements.

March 2019, in connection with the closing of the Asterias Merger, Lineage assumed outstanding Asterias Warrants (the “Lineage

As of March 31, 2021, the total number of common shares of Lineage subject to warrants that were assumed by Lineage

in connection with the Asterias Merger was 1,089,900 , which were converted to Lineage Warrants 30 days after the closing of the Asterias

Merger, with similar terms and conditions retained under the Lineage Warrants as per the original Warrant Agreements.

The Lineage Warrants

have an exercise price of $ 6.15 per warrant share and expire on May 13, 2021 .

have an exercise price of $ 6.15 per share and expire on May 13, 2021 .

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.

Warrants to purchase 24,566 Cell Cure ordinary shares at

an exercise price of $ 40.5359 per share were issued to HBL in July 2017.

These warrants expire in July 2022 .

1 unchanged sentence

Cell Cure ordinary shares at exercise prices ranging from $ 32.02 to $ 40.00 per share have been issued to consultants.

These warrants

expire in October 2020 and January 2024 .

Of these warrants,

11,738 were cashless exercised in October 2020.

The remaining 2,000 warrants have an exercise price of $ 40.00 per share and expire in

January 2024 .

Stock-Based Awards

1 unchanged sentence

November 8, 2019, Lineage adopted an amendment changing the name of the BioTime, Inc.

2012 Equity Incentive Plan to the Lineage

Cell Therapeutics, Inc.

2012 Equity Incentive 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, 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.

The 2012 Plan provides for the grant of stock options, restricted

stock, restricted stock units (“RSUs”) and stock appreciation rights.

As of March 31, 2021, 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

Stock options generally vest over a four-year period based on continuous service;

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.

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 and Other Stock Options

however, the 2012 Plan allows for other vesting

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.

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

Exercise Price

4 unchanged sentences

Options expired/forfeited/cancelled

September 30, 2020

Options exercisable at September 30, 2020

March 31, 2021

Options exercisable at March 31, 2021

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.

There were 7,309,184 shares available under the Asterias Equity Plan immediately before the closing of the Asterias

Merger, which became 5,189,520 shares immediately following the Asterias Merger.

The shares available under the Asterias Equity

Plan will be for awards granted to those former Asterias employees who continued as Lineage employees upon consummation of the

Asterias Merger.

Equity Plan”), with references to Asterias and Asterias common stock therein to be deemed references to Lineage and Lineage common

There were 7,309,184 shares available under the Asterias Equity Plan immediately before the closing of the Asterias Merger, which

became 5,189,520 shares immediately following the Asterias Merger.

The shares available under the Asterias Equity Plan will be for awards

granted to those former Asterias employees who continued as Lineage employees upon consummation of the Asterias Merger.

summary of activity under the Asterias Equity Plan is as follows (in thousands, except per share amounts):

Schedule of Share-based Compensation, Employee Stock Purchase Plan, Activity

of Share-based Compensation, Employee Stock Purchase Plan, Activity

Exercise Price

3 unchanged sentences

Options forfeited

September 30, 2020

Options exercisable at September 30, 2020

March 31, 2021

Options exercisable at March 31, 2021

compensation expense

2 unchanged sentences

Schedule of Weighted Average Assumptions to Calculate Fair Value of Stock Options

Nine Months Ended

September 30, (unaudited)

Three Months Ended

March 31, (unaudited)

Expected life (in years)

4 unchanged sentences

Three Months Ended

September 30, (unaudited)

Nine Months Ended

September 30, (unaudited)

March 31, (unaudited)

Research and development

1 unchanged sentence

Total stock-based compensation expense

expense related to 84,940

shares of Asterias restricted stock unit

awards that immediately vested on the closing of the Asterias Merger and converted into the right to receive common shares of

Lineage based on the Merger Exchange Ratio, resulting in 60,304

common shares of Lineage issued on March

8, 2019, was included in stock-based compensation expense for the nine months ended September 30, 2019.

was not included as part of the purchase price of the Asterias Merger because these awards were principally attributable to post-combination

provision for income taxes for interim periods is generally determined using an estimated annual effective tax rate as prescribed

by ASC 740-270, Income Taxes, Interim Reporting .

The effective tax rate may be subject to fluctuations during the year

as new information is obtained, which may affect the assumptions used to estimate the annual effective tax rate, including factors

such as valuation allowances and changes in valuation allowances against deferred tax assets, the recognition or de-recognition

of tax benefits related to uncertain tax positions, if any, and changes in or the interpretation of tax laws in jurisdictions

where Lineage conducts business.

ASC 740-270 also states that if an entity is unable to reliably estimate some or a part of its

ordinary income or loss, the income tax provision or benefit applicable to the item that cannot be estimated shall be reported

in the interim period in which the item is reported.

items that Lineage cannot reliably estimate on an annual basis (principally unrealized gains or losses generated by changes in

the market prices of the OncoCyte, and AgeX shares of common stock Lineage holds, and prior to March 8, 2019, Asterias shares

Lineage held), Lineage uses the actual year to date effective tax rate rather than an estimated annual effective tax rate to determine

the tax effect of each item, including the use of all available net operating losses and other credits or deferred tax assets.

market value of the shares of OncoCyte common stock Lineage holds creates a deferred tax liability to Lineage based on the closing

prices of the shares, less Lineage’s tax basis in the shares.

The deferred tax liability generated by the OncoCyte shares

that Lineage holds as of September 30, 2020, is a source of future taxable income to Lineage, 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 the deferred tax liability.

This deferred tax liability is determined based on the closing prices of the OncoCyte shares as of September 30, 2020.

the inherent unpredictability of future prices of those shares, Lineage cannot reliably estimate or project those deferred tax

liabilities on an annual basis.

Therefore, the deferred tax liability pertaining to OncoCyte shares, determined based on the actual

closing prices on the last stock market trading day of the applicable accounting period, and the related impacts to the valuation

allowance and deferred tax asset changes, are recorded in the accounting period in which they occur.

to the Asterias Merger discussed in Note 3, the Asterias shares Lineage held generated similar deferred tax liabilities to Lineage

as the OncoCyte shares discussed above.

As of the Asterias Merger date and due to Asterias becoming a wholly owned subsidiary

of Lineage, the Asterias deferred tax liabilities were eliminated with a corresponding adjustment to Lineage’s valuation

allowance, resulting in no tax provision or benefit from this adjustment.

provision for income taxes for interim periods is generally determined using an estimated annual effective tax rate as prescribed by

ASC 740-270, Income Taxes, Interim Reporting.

The effective tax rate may be subject to fluctuations during the year as new information

is obtained, which may affect the assumptions used to estimate the annual effective tax rate, including factors such as valuation allowances

and changes in valuation allowances against deferred tax assets, the recognition or de-recognition of tax benefits related to uncertain

tax positions, if any, and changes in or the interpretation of tax laws in jurisdictions where Lineage conducts business.

also states that if an entity is unable to reliably estimate some or a part of its ordinary income or loss, the income tax provision

or benefit applicable to the item that cannot be estimated shall be reported in the interim period in which the item is reported.

items that Lineage cannot reliably estimate on an annual basis (principally unrealized gains or losses generated by changes in the market

prices of OncoCyte shares), Lineage uses the actual year to date effective tax rate rather than an estimated annual effective tax rate

to determine the tax effect of each item, including the use of all available net operating losses and other credits or deferred tax assets.

market value of the shares of OncoCyte common stock Lineage holds creates a deferred tax liability to Lineage based on the closing prices

of the shares, less Lineage’s tax basis in the shares.

The deferred tax liability generated by the OncoCyte shares that Lineage

holds as of March 31, 2021, is a source of future taxable income to Lineage, 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 the deferred tax liability.

This deferred tax liability

is determined based on the closing prices of the OncoCyte shares as of March 31, 2021.

Due to the inherent unpredictability of future

prices of those shares, Lineage cannot reliably estimate or project those deferred tax liabilities on an annual basis.

Therefore, the

deferred tax liability pertaining to OncoCyte shares, determined based on the actual closing prices on the last stock market trading

day of the applicable accounting period, and the related impacts to the valuation allowance and deferred tax asset changes, are recorded

in the accounting period in which they occur.

to the Asterias Merger discussed in Note 3, the Asterias shares Lineage held generated similar deferred tax liabilities to Lineage as

the OncoCyte shares discussed above.

As of the Asterias Merger date and due to Asterias becoming a wholly owned subsidiary of Lineage,

the Asterias deferred tax liabilities were eliminated with a corresponding adjustment to Lineage’s valuation allowance, resulting

in no tax provision or benefit from this adjustment.

connection with the Asterias Merger, a deferred tax liability of $ 10.8 million was recorded as part of the acquisition accounting.

(see Note 3).

The deferred tax liability (“DTL”) is related to fair value adjustments for the assets and liabilities

acquired in the Asterias Merger, principally consisting of IPR&D.

This estimate of deferred taxes was determined based on

the excess of the estimated fair values of the acquired assets and liabilities over the tax basis of the assets and liabilities

The statutory tax rate was applied, as appropriate, to the adjustment based on the jurisdiction in which the adjustment

is expected to occur.

Because 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

in accordance with ASC 740.

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

by Lineage’s respective 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 Asterias Merger date, which may be considered for reversal under ASC

740 as further discussed below.

deferred tax liability (“DTL”) is related to fair value adjustments for the assets and liabilities acquired in the Asterias

Merger, principally consisting of IPR&D.

This estimate of deferred taxes was determined based on the excess of the estimated fair

values of the acquired assets and liabilities over the tax basis of the assets and liabilities acquired.

The statutory tax rate was applied,

as appropriate, to the adjustment based on the jurisdiction in which the adjustment is expected to occur.

Because 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 created a deferred income tax liability in accordance with ASC 740.

This DTL is computed using the fair value

of the IPR&D assets on the acquisition date multiplied by Lineage’s respective federal and state income tax rates.

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 Asterias Merger date, which may

be considered for reversal under ASC 740 as further discussed below.

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;

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.

the three and nine months ended September 30, 2019, Lineage recorded a $ 1.0

million and $ 6.6

million valuation allowance release

and corresponding benefit for income taxes.

the three and nine months ended September 30, 2020, Lineage recorded a $ 0.2

million deferred tax benefit for

income taxes.

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, 2020, 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 $ 1.2 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.

the three months ended March 31, 2021, and 2020, Lineage did not record any provision or benefit for income taxes, as Lineage had taxable

income related to a gain on the sale of OncoCyte common stock in the periods.

This taxable income was offset by net operating loss carryforwards.

Supplemental Cash Flow Information

disclosure of cash flow information for the nine months ended September 30, 2020 and 2019 is as follows (in thousands):

disclosure of cash flow information for the three months ended March 31, 2021 and 2020 is as follows (in thousands):

Schedule of Supplemental Cash Flow Information

Nine Months Ended

September 30, (unaudited)

Three Months Ended

March 31, (unaudited)

Cash paid during period for interest

Supplemental disclosures of non-cash investing and financing activities:

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

Assumption of liabilities in the Asterias Merger (Note 3)

Assumptions of warrants in the Asterias Merger (Note 3)

Issuance of common shares for settlement of Lineage Warrants

Commitments and Contingencies

2 unchanged sentences

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

1 thereafter during the lease term.

Base rent for the first twenty-four months of the lease is based upon a deemed rentable area

of 7,000 square feet.

rent under the Carlsbad Lease beginning on August 1, 2020 is $ 18,386 per month and increases by 3 % annually on every August 1 thereafter

during the lease term.

Base rent for the first twenty-four months of the lease is based upon a deemed rentable area of 7,000 square feet.

Base rent was abated for months two through five of the lease.

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.

As security for the performance of its obligations under the Carlsbad Lease, Lineage provided

the landlord with a security deposit of $ 17,850 .

addition to base rent, Lineage pays 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 Carlsbad Lease, Lineage provided the landlord

with a security deposit of $ 17,850 .

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 Premises”).

Base rent under the Alameda Leases beginning on February 1, 2020 was

per month with annual increases of approximately 3 %.

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.

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 deposits and other long-term assets as of September 30, 2020 (See Note 2).

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

The security deposit was returned to Lineage in March 2021.

April 2020, Lineage entered into a sublease with Industrial Microbes, Inc.

1 unchanged sentence

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

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.

security deposit is expected to be returned to Lineage by January 2021.

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

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 Sublease”).

term of the Alameda Sublease is from October

1, 2020 through January

Base rent under the Alameda

Sublease is $ 14,592

per month with annual increases of 3 %

Base rent under the Industrial Microbes Sublease

was $ 28,000 per month with annual increases of approximately 3 %.

Base rent for the first month

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 was received in March 2021.

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 Microbes.

continues 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.

2 unchanged sentences

under the Alameda Sublease;

is considered restricted cash and is included in deposits and other long-term assets as of September 30, 2020 (see Note

this amount is considered restricted cash and is included in deposits and other long-term assets as of March

31, 2021 (see Note 2).

on the smaller footprint, and after taking into consideration the fees disclosed above, Lineage has reduced its contractual obligations

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York Leased Office Space

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 for use in conducting meetings and other business affairs, on a month-by-month basis, by one of its directors at an

amount that approximates his cost.

This lease is not in the scope of ASC 842 because it is a month to month lease (see Note 2).

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 five years each (the “Original Cell Cure Lease”).

Negotiations are currently ongoing for a lease extension.

Base monthly rent is NIS 37,882

(approximately US $ 11,000

per month using the December 31, 2018

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.

incurred costs of $ 5,050 per month for the use of approximately 900 square feet of office space in New York City, which was made available

to Lineage for use in conducting meetings and other business affairs, on a month-by-month basis, by one of its directors at an amount

that approximates his cost.

In March 2021, Lineage terminated without penalty its leasing term related to the New York City office lease.

The lease was not in the scope of ASC 842 because it is a month-to-month lease.

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, 2025 , with an option to extend the lease for five years each (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.

January 28, 2018, Cell Cure entered into another lease agreement for an additional 934 square meters (approximately 10,054 square

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December 2018, Cell Cure made a $ 420,000 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.

other long-term assets on the consolidated balance sheet as of March 31, 2021, to be held as restricted cash during the term of

the January 2018 Lease.

below table provides supplemental cash flow information related to leases as follows (in thousands):

Schedule of Supplemental Cash Flow Information Related to Leases

Nine Months Ended

September 30,

of Supplemental Cash Flow Information Related to Leases

Three Months Ended

Cash paid for amounts included in the measurement of lease liabilities:

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Schedule of Supplemental Balance Sheet Information Related to Leases

March 31, 2021

December 31, 2020

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Finance leases

minimum lease commitments are as follows as of September 30, 2020 (in thousands):

Schedule of Future Minimum Lease Commitments

Operating Leases

Finance Leases

Year Ending December 31,

Total lease payments

Less imputed interest

Alameda Sublease is not included in the table above as it does not commence until October 1, 2020.

Future minimum payments under

the Alameda Sublease are as follows:

$ 29,000 , $ 176,000 , $ 182,000 and $ 16,000 for the years ended December 31, 2020, 2021, 2022

and 2023, respectively.

minimum lease commitments are as follows as of March 31, 2021 (in thousands):

of Future Minimum Lease Commitments

Ending December 31,

lease payments

imputed interest

and Option Agreement

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:

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 provided 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”).

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;

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 had 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

(the “Option Period”), which was initially set to expire in February 2021.

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.

fees of $ 2.5 million

were amortized on a straight-line basis throughout 2019 and included in research and development expenses.

Lineage 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.

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.

Lineage 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 $ 0.5

million to extend the Access Period to

July 5, 2020, $ 0.2

million of which was paid on January 30,

2020 and $ 0.3

million of which will be paid in November

The Access Period was subsequently extended at no cost as described above.

has exclusive rights to the Gyroscope technology and its injection device for the delivery of retinal pigment epithelium cells

for the treatment of dry AMD during the term of the Gyroscope Agreement.

million to extend the Access Period to July 5,

million of which was paid in January 2020 and

million of which was paid in November 2020.

Access Period was subsequently extended two additional times at no cost and ended in accordance with the terms of the Gyroscope Agreement

in November 2020.

In February 2021, Lineage exercised its right to extend the initial Option Period for $ 0.5

During the extended Option Period, Lineage

determined not to pursue a definitive agreement to distribute and sell the Orbit Device, and the Gyroscope Agreement terminated on May

11, 2021 upon expiration of 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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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.

class members, and disclosed 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

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.

October 14, 2019, another putative class action lawsuit was filed challenging the Asterias Merger.

This action (captioned

This action (captioned Ross

Lineage Cell Therapeutics, Inc., et al.

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

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.

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Accordingly, Lineage has not recorded any liabilities

for these agreements as September 30, 2020 and December 31, 2019.

for these agreements as of March 31, 2021 and December 31, 2020.

Amendment to Clinical Trial and Option Agreement and License Agreement with Cancer Research UK

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fee as follows:

£ 500,000 in September 2020, £ 500,000 in January 2021 and £ 250,000 in April 2021.

£ 500,000 in September 2020, £ 500,000 in February 2021 and £ 250,000 in April 2021.

For the primary

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the aggregate, may be up to $ 3.5 million.

As of September 30, 2020, Cell Cure had not accrued any milestone payments under the

License Agreement.

As of March 31, 2021, Cell Cure had not accrued any milestone payments under the License

License Agreement terminates upon the expiration of Cell Cure’s obligation to pay royalties for all licensed products, unless

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Subsequent Events

of Hadasit Marketable Equity Securities

October 2020, Lineage sold 315,000 shares of its Hadasit common stock for gross proceeds of approximately $ 831 ,000 .

Therapeutics Inc.

License Agreement

April 16, 2021, Lineage entered a worldwide license and development collaboration with Immunomic Therapeutics, Inc (ITI).

is the sole and exclusive owner of the rights to the VAC platform and has licensed to ITI patents and materials for the development

and commercialization of novel cancer immunotherapy agent derived from this platform utilizing an antigen provided by ITI.

terms of the Agreement, Lineage is entitled to upfront licensing fees totaling $ 2.0 million paid over the first year, and up to

$ 67.0 million in development and commercial milestones across multiple indications.

Lineage will also be eligible to receive royalties

up to 10 % on net sales of future products.

May 13, 2021, Lineage received notice that its PPP loan was forgiven in full.

See Note 8 for additional information.

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-Q

Item 1. Financial Statements