What changed in this filing

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Item 1A. Risk Factors

2021-05-13 compared with 2020-11-04 · 381 added, 398 removed, 1057 unchanged (42% of the section changed)

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You should carefully consider the following risk factors, as well

as the other information in this Quarterly Report on Form 10-Q, before deciding whether to purchase, hold or sell our common shares.

The occurrence of any of the following risks could harm our business, financial condition, results of operations and/or growth

prospects or cause our actual results to differ materially from those contained in forward-looking statements we have made in

this Quarterly Report on Form 10-Q and those we may make from time to time.

You should consider all of the risk factors described

when evaluating our business.

We have marked with an asterisk (*) those risk factors that reflect changes from the similarly titled

risk factors included in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, as filed with

the Commission on March 12, 2020.

as the other information in this Report, before deciding whether to purchase, hold or sell our common shares.

The occurrence of

any of the following risks could harm our business, financial condition, results of operations and/or growth prospects or cause

our actual results to differ materially from those contained in forward-looking statements we have made in this Report and those

we may make from time to time.

You should consider all of the risk factors described when evaluating our business.

We have marked

with an asterisk (*) those risk factors that reflect changes from the similarly titled risk factors included in Item 1A of our

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

Related to Our Business Operations and Capital Requirements

have incurred operating losses since inception, and we do not know if or when we will attain profitability.*

total operating losses for the fiscal year ended December 31, 2019 were $38.9 million and our total operating losses for the nine

months ended September 30, 2020 were $20.6 million and we had an accumulated deficit of $296.1 million as of September 30, 2020.

Since inception, we have incurred significant operating losses and have funded our operations primarily through sales of our equity

total operating losses for the fiscal year ended December 31, 2020 were $26.4 million and our total operating losses for the three

months ended March 31, 2021 were $7.1 million, and we had an accumulated deficit of $295.5 million as of March 31, 2021.

inception, we have incurred significant operating losses and have funded our operations primarily through sales of our equity

securities and the equity securities of former subsidiaries, receipt of research grants, royalties on product sales, license revenues,

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We incurred research and development expenses amounting to approximately

$9.7 million during the nine months ended September 30, 2020, and $17.9 million during the fiscal year ended December 31, 2019.

If we successfully develop a new technology or product, refinement of the new technology or product and definition of the practical

$3.4 million during the three months ended March 31, 2021, and $12.3 million during the fiscal year ended December 31, 2020.

we successfully develop a new technology or product, refinement of the new technology or product and definition of the practical

applications and limitations of the technology or product may take years and require large sums of money.

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funds we have.*

September 30, 2020, we had $38.0 million of cash, cash equivalents and marketable equity securities.

There can be no assurance

that we will be able to raise additional funds on favorable terms or at all, or that any funds raised will be sufficient to permit

March 31, 2021, we had $62.4 million of cash, cash equivalents and marketable equity securities.

There can be no assurance that

we will be able to raise additional funds on favorable terms or at all, or that any funds raised will be sufficient to permit

us to develop and market our products and technology, if and when approved.

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We believe that our cash, cash equivalents and marketable

securities as of September 30, 2020 will be sufficient to fund our planned operations for at least the next 12 months.

based these estimates on assumptions that may prove to be wrong, and we may use our capital resources sooner than we currently

Our operating plans and other demands on our cash resources may change as a result of many factors currently unknown to

us, and we may need to seek additional funds sooner than planned.

Any equity capital raise could result in the dilution of the

interests of shareholders or may otherwise limit our ability to finance further in the future, which may negatively impact our

business and operations.

Any debt capital financing may involve covenants that restrict our operations, including limitations

on additional borrowing and on the use of our assets.

If we raise capital through licensing arrangements, it may be necessary

to grant licenses on terms that are not favorable to us.

There can be no assurance that we will be able to raise capital on favorable

terms, or at all, or at times and in amounts needed to successfully finance product development, clinical trials, and general

have been filed and other lawsuits may be filed against Lineage and certain members of the Lineage and Asterias Biotherapeutics,

(“Asterias”) boards of directors relating to our acquisition of Asterias (the “Asterias Merger”).

securities as of March 31, 2021 will be sufficient to fund our planned operations for at least the next 12 months.

We have based

these estimates on assumptions that may prove to be wrong, and we may use our capital resources sooner than we currently expect.

Our operating plans and other demands on our cash resources may change as a result of many factors currently unknown to us, and

we may need to seek additional funds sooner than planned.

Any equity capital raise could result in the dilution of the interests

of shareholders or may otherwise limit our ability to finance further in the future, which may negatively impact our business

and operations.

Any debt capital financing may involve covenants that restrict our operations, including limitations on additional

borrowing and on the use of our assets.

If we raise capital through licensing arrangements, it may be necessary to grant licenses

on terms that are not favorable to us.

There can be no assurance that we will be able to raise capital on favorable terms, or

at all, or at times and in amounts needed to successfully finance product development, clinical trials, and general operations.

have been filed and other lawsuits may be filed against our company and certain members of our company’s and Asterias Biotherapeutics,

Inc.’s (“Asterias”) boards of directors relating to our acquisition of Asterias (the “Asterias Merger”).

An adverse ruling in any such lawsuit may result in additional payments and costs.

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Chancery Court.

As of September 30, 2020, the defendants are certain former members of Asterias’ board of directors and

The complaint alleges that the merger process was conflicted, that the consideration was inadequate, and that the proxy

statement filed by Asterias was misleading.

The complaint seeks, among other things, certification of a class, rescission of the

merger or monetary damages, and attorneys’ fees and costs.

The defendants are certain former members of Asterias’ board of directors and our company’s board

of directors.

The complaint alleges that the merger process was conflicted, that the consideration was inadequate, and that the

proxy statement filed by Asterias was misleading.

The complaint seeks, among other things, certification of a class, rescission

of the merger or monetary damages, and attorneys’ fees and costs.

defendants specifically deny all allegations in the litigation and intend to defend it vigorously.

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could be interpreted, changed, modified or applied adversely to us.

For example, legislation enacted in 2017, informally known

as the Tax Cuts and Jobs Act (the “2017 Tax Act”), enacted many significant changes to the U.S.

Future guidance

from the Internal Revenue Service and other tax authorities with respect to the 2017 Tax Act may affect us, and certain aspects

of the 2017 Tax Act could be repealed or modified in future legislation.

For example, the Coronavirus Aid, Relief, and Economic

Security Act (the “CARES Act”) modified certain provisions of the 2017 Tax Act.

In addition, it is uncertain if and

to what extent various states will conform to the 2017 Tax Act, the CARES Act, or any newly enacted federal tax legislation.

in corporate tax rates, the realization of net deferred tax assets relating to our operations, the taxation of foreign earnings,

and the deductibility of expenses under the 2017 Tax Act or future reform legislation could have a material impact on the value

of our deferred tax assets, could result in significant one-time charges, and could increase our future U.S.

ability to use net operating losses to offset future taxable income may be subject to limitations.*

For example, the 2017 Tax Act, enacted many significant changes

Future guidance from the Internal Revenue Service and other tax authorities with respect to the 2017 Tax

Act may affect us, and certain aspects of the 2017 Tax Act could be repealed or modified in future legislation.

For example, the

Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and the Consolidated Appropriations Act, 2021

(CA) modified certain provisions of the 2017 Tax Act.

In addition, it is uncertain if and to what extent various states will conform

to the 2017 Tax Act, the CARES Act, or any newly enacted federal tax legislation.

Changes in corporate tax rates, the realization

of net deferred tax assets relating to our operations, the taxation of foreign earnings, and the deductibility of expenses under

the 2017 Tax Act or future reform legislation could have a material impact on the value of our deferred tax assets, could result

in significant one-time charges, and could increase our future U.S.

ability to use net operating losses and other tax attributes to offset future taxable income or taxes may be subject to limitations.

of December 31, 2020, we had net operating loss (“NOL”) carryforwards for U.S.

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Under federal income tax law,

federal NOLs incurred in 2018 and in future years may be carried forward indefinitely.

It is uncertain if and to what extent various

states that we may operate in will conform to the federal tax law.

In addition, under Sections 382 and 383 of the Internal Revenue

Code of 1986, as amended (the “IRC”), and corresponding provisions of state law, if a corporation undergoes an “ownership

change,” which is generally defined as a greater than 50% change, by value, in its equity ownership over a three-year period,

the corporation’s ability to use its pre-change NOL carryforwards and other pre-change tax attributes to offset its post-change

income or taxes may be limited.

We may experience ownership changes in the future as a result of subsequent shifts in our stock

ownership, some of which may be outside of our control.

If an ownership change occurs and our ability to use our NOL carryforwards

is materially limited, it would harm our future operating results by effectively increasing our future tax obligations.

at the state level, there may be periods during which the use of net operating loss carryforwards is suspended or otherwise limited,

which could accelerate or permanently increase state taxes owed.

federal NOLs incurred in tax years beginning after December 31, 2017, may be carried forward indefinitely, but the deductibility

of such NOLs in tax years beginning after December 31, 2020, is limited to 80% of taxable income.

It is uncertain if and to what

extent various states that we may operate in will conform to the federal tax law.

In addition, under Sections 382 and 383 of the

Internal Revenue Code of 1986, as amended (the “IRC”), and corresponding provisions of state law, if a corporation

undergoes an “ownership change,” which is generally defined as a greater than 50% change, by value, in its equity

ownership over a three-year period, the corporation’s ability to use its pre-change NOL carryforwards and other pre-change

tax attributes to offset its post-change income or taxes may be limited.

We may experience ownership changes in the future as

a result of subsequent shifts in our stock ownership, some of which may be outside of our control.

If an ownership change occurs

and our ability to use our NOL carryforwards is materially limited, it would harm our future operating results by effectively

increasing our future tax obligations.

In addition, at the state level, there may be periods during which the use of net operating

loss carryforwards is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.

in 2020 California enacted A.B.

85 which imposed limits on the usability of California state net operating losses and certain

tax credits in tax years beginning after 2019 and before 2023.

part of the merger with Asterias, we acquired various tax attribute carryforwards including federal and California NOLs of $52.8

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As a result of

the merger, Asterias incurred an ownership change under Section 382 of the Internal Revenue Service Code, which places annual

limits on the amount of these NOLs that are available to offset income.

Because of the annual limitation, the total amount of

these NOLs are not immediately available to offset future income.

The California research and development credit of $2.4 million

has no expiration.

the merger, Asterias incurred an ownership change under Section 382 of the IRC, which places annual limits on the amount of these

NOLs that are available to offset income.

Because of the annual limitation, the total amount of these NOLs is not immediately

available to offset future income.

The California research and development credit of $2.4 million has no expiration date.

authorities could reallocate our taxable income among our subsidiaries, which could increase our overall tax liability.

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of each country generally will require that such arrangements be priced the same as those between unrelated companies dealing

at arm’s length and that appropriate documentation is maintained to support the value of such arrangements, or Transfer

Pricing Regulations.

Our transfer pricing policies were formulated with the assistance of third-party experts.

We are in the process

of obtaining a formal transfer pricing report.

However, after we receive such report, we do not intend to amend our returns for

Whether we obtain a formal transfer pricing study with outside experts or not, our transfer pricing procedures will

not be binding on applicable tax authorities.

at arm’s length and that appropriate documentation is maintained to support the value of such arrangements.

pricing policies were formulated with the assistance of third-party experts.

We are in the process of obtaining a formal transfer

pricing report.

However, after we receive such report, we do not intend to amend our returns for prior years.

Whether we obtain

a formal transfer pricing study with outside experts or not, our transfer pricing procedures will not be binding on applicable

tax authorities.

tax authorities in any of these countries were to successfully challenge our transfer prices as not reflecting arm’s length

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financial condition and results of operations.

disruptions of information technology systems or data security breaches could adversely affect our business.

are increasingly dependent on information technology systems and infrastructure to operate our business.

In the ordinary course

of our business, we collect, store, process and transmit large amounts of confidential information, including intellectual property,

proprietary business information and personal information.

It is critical that we do so in a secure manner to maintain the confidentiality,

integrity and availability of such information.

We have also outsourced some of our operations (including parts of our information

technology infrastructure) to a number of third-party vendors who may have, or could gain, access to our confidential information.

In addition, many of those third parties, in turn, subcontract or outsource some of their responsibilities to third parties.

information technology systems are large and complex and store large amounts of confidential information.

The size and complexity

of these systems make them potentially vulnerable to service interruptions or to security breaches from inadvertent or intentional

actions by our employees, third party vendors and/or business partners, or from cyber-attacks by malicious third parties.

of this nature are increasing in frequency, persistence, sophistication and intensity, and are being conducted by sophisticated

and organized groups and individuals with a wide range of motives (including, but not limited to, industrial espionage) and expertise,

including organized criminal groups, “hacktivists,” nation states and others.

In addition to the extraction of important

information, such attacks could include the deployment of harmful malware, ransomware, denial-of-service attacks, social engineering

and other means to affect service reliability and threaten the confidentiality, integrity and availability of our information.

Although the aggregate impact on our operations and financial condition has not been material to date, we have been the target

of events of this nature and expect them to continue.

disruptions of our, our third party vendors’ and/or business partners’ information technology systems or security

breaches could adversely affect our business operations and/or result in the loss, misappropriation, and/or unauthorized access,

use or disclosure of, or the prevention of access to, confidential information (including trade secrets or other intellectual

property, proprietary business information and personal information), and could result in financial, legal, business and reputational

Any such event that leads to unauthorized access, use or disclosure of personal information, including personal information

regarding our patients or employees, could harm our reputation, compel us to comply with federal and/or state breach notification

laws and foreign law equivalents, subject us to mandatory corrective action, require us to verify the correctness of database

contents and otherwise subject us to liability under laws and regulations that protect the privacy and security of personal information,

which could disrupt our business, result in increased costs or loss of revenue, and/or result in significant legal and financial

In addition, security breaches and other inappropriate access can be difficult to detect, and any delay in identifying

them may further harm us.

Moreover, the prevalent use of mobile devices to access confidential information increases the risk

of security breaches.

While we have implemented security measures to protect our information technology systems and infrastructure,

there can be no assurance that such measures will prevent service interruptions or security breaches that could adversely affect

our business.

In addition, failure to maintain effective internal accounting controls related to security breaches and cybersecurity

in general could impact our ability to produce timely and accurate financial statements and subject us to regulatory scrutiny.

business could be adversely affected if we lose the services of the key personnel upon whom we depend or if we fail to attract

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by business, regulatory and other risks applicable to them.*

of September 30, 2020, we had equity investments in two U.S.

publicly traded companies, OncoCyte and AgeX.

As of September 30,

2020, the value of our investments in OncoCyte and AgeX was approximately $5.0 million and $41,000, respectively, based on their

closing stock prices as of that date.

If these companies were to have delays in clinical trials or commercialization activities

or otherwise realize the specific business, regulatory and other risks applicable to them, the value of their common stock and

the valuation of our investment could be negatively affected.

If these companies were to fail and ultimately cease operations,

we may lose the entire value of our investments.

In addition, the value of our marketable equity securities may be significantly

and 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.

of our internal control over financial reporting could harm our business and financial results.

management is responsible for establishing and maintaining adequate internal control over financial reporting.

Because of its

inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement

of our financial statements would be prevented or detected.

Our growth and entry into new products, technologies and markets will

place significant additional pressure on our system of internal control over financial reporting.

Any failure to maintain an effective

system of internal control over financial reporting could limit our ability to report our financial results accurately and timely

or to detect and prevent fraud.

Operating our business through subsidiaries, some of which are located in foreign countries, also

adds to the complexity of our internal control over financial reporting and adds to the risk of a system failure, an undetected

improper use or expenditure of funds or other resources by a subsidiary, or a failure to properly report a transaction or financial

results of a subsidiary.

We allocate certain expenses among Lineage itself and one or more of our subsidiaries, which creates

a risk that the allocations we make may not accurately reflect the benefit of an expenditure or use of financial or other resources

by Lineage as the parent company and the subsidiaries among which the allocations are made.

An inaccurate allocation may impact

our consolidated financial results, particularly in the case of subsidiaries that we do not wholly own since our financial statements

include adjustments to reflect the minority ownership interests in our subsidiaries held by others.

we identify material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements

of Section 404 of the Sarbanes-Oxley Act in a timely manner or assert that our internal control over financial reporting is effective,

or if our independent registered public accounting firm is unable to express an opinion or expresses a qualified or adverse opinion

about the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness

of our financial reports and the market price of our common shares could be negatively affected.

In addition, we could become

subject to investigations by the NYSE American, the Securities and Exchange Commission, and other regulatory authorities, which

could require additional financial and management resources.

received a loan under the Paycheck Protection Program of the CARES Act, and all or a portion of the loan may not be forgivable.*

In April 2020, we received

a loan for $523,000 from Axos Bank under the PPP contained within the new 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, we are 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 we maintain our number of employees

and compensation within certain parameters during such period.

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

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

we cannot provide any assurance that any amount of the PPP loan will ultimately be forgiven by the SBA.

Any forgiven amounts will

not be included in our taxable income.

We applied for full forgiveness of the PPP loan on September 30, 2020.

of March 31, 2021, we had an equity investment in OncoCyte, a U.S.

publicly traded company.

As of March 31, 2021, the value of

our investment in OncoCyte was approximately $5.8 million based on its closing stock price as of that date.

If OncoCyte were to

have delays in clinical trials or commercialization activities or otherwise realize the specific business, regulatory and other

risks applicable to them, the value of its common stock and the valuation of our investment could be negatively affected.

were to fail and ultimately cease operations, we may lose the entire value of our investment.

In addition, the value of our marketable

equity securities may be significantly and 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.

Related to Government Regulation

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If we are unable to comply, or have not fully

complied, with such laws, it could face substantial penalties.

complied, with such laws, we could face substantial penalties.*

current and future operations may be subject to various federal and state fraud and abuse laws, including, without limitation,

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as amended by the Health Information Technology for Economic and Clinical Health Act, (“HITECH”) and their implementing

regulations, which imposes certain requirements on covered entities,” including certain healthcare providers, health

plans, and healthcare clearinghouses, as well as their respective “business associates” that create, receive,

maintain or transmit individually identifiable health information for or on behalf of a covered entity, relating to the privacy,

regulations, which imposes certain requirements on “covered entities,” including certain healthcare providers,

health plans, and healthcare clearinghouses, as well as their respective “business associates” that create, receive,

maintain or transmit individually identifiable health information for or on behalf of a covered entity, and their subcontractors

that use, disclose, access, or otherwise process individually identifiable protected health information, relating to the privacy,

security, and transmission of individually identifiable health information;

Physician Payments Sunshine Act which requires manufacturers of drugs, devices, biologics, and medical supplies to report

annually to CMS information related to payments and other transfers of value to physicians, as defined by such law, and teaching

hospitals, and ownership and investment interests held by physicians and other healthcare providers and their immediate family

members and applicable group purchasing organizations;

annually to the Centers for Medicare & Medicaid Services (“CMS”), information related to payments and other

transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists, and chiropractors) and

teaching hospitals, and ownership and investment interests held by physicians and their immediate family members and applicable

group purchasing organizations, and, beginning in 2022 will require applicable manufacturers to report information regarding

payments and other transfers of value provided during the previous year to physician assistants, nurse practitioners, clinical

nurse specialists, certified nurse anesthetists and anesthesiologist assistants, and certified nurse-midwives;

law equivalents of each of the above federal laws, such as anti-kickback and false claims laws that may apply to items or

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constrain stem cell research, thereby limiting the market and demand for our products.

During March 2009, President Obama lifted

certain restrictions on federal funding of research involving the use of hES cells, and in accordance with President Obama’s

Executive Order, the National Institutes of Health (“NIH”) has adopted guidelines for determining the eligibility

of hES cell lines for use in federally funded research.

The central focus of the guidelines is to assure that hES cells used in

federally funded research were derived from human embryos that were created for reproductive purposes, were no longer needed for

this purpose, and were voluntarily donated for research purposes with the informed written consent of the donors.

The hES cells

that were derived from embryos created for research purposes rather than reproductive purposes, and other hES cells that were

not derived in compliance with the guidelines, are not eligible for use in federally funded research.

California law requires

that stem cell research be conducted under the oversight of a stem cell review oversight committee (“SCRO”).

kinds of stem cell research, including the derivation of new hES cell lines, may only be conducted in California with the prior

written approval of the SCRO.

During March 2009, the federal government,

pursuant to a presidential executive order, lifted certain restrictions on federal funding of research involving the use of

hES cells, and in accordance with the executive order, the National Institutes of Health (“NIH”) has adopted

guidelines for determining the eligibility of hES cell lines for use in federally funded research.

The central focus of the guidelines

is to assure that hES cells used in federally funded research were derived from human embryos that were created for reproductive

purposes, were no longer needed for this purpose, and were voluntarily donated for research purposes with the informed written

consent of the donors.

The hES cells that were derived from embryos created for research purposes rather than reproductive purposes,

and other hES cells that were not derived in compliance with the guidelines, are not eligible for use in federally funded research.

California law requires that stem cell research be conducted under the oversight of a stem cell review oversight committee (“SCRO”).

Many kinds of stem cell research, including the derivation of new hES cell lines, may only be conducted in California with the

prior written approval of the SCRO.

A SCRO could prohibit or impose restrictions on the research that we plan to do.

The use of hES

cells may give rise to religious, moral, and ethical issues.

These considerations could lead to more restrictive government regulations

or could generally constrain stem cell research, thereby limiting the market and demand for our products.

hES cells may give rise to religious, moral, and ethical issues.

These considerations could lead to more restrictive government

regulations or could generally constrain stem cell research, thereby limiting the market and demand for our products.

expect that the commercial opportunity for some of our products may depend on our ability to obtain reimbursement and continued

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have had to furlough critical FDA employees and stop critical activities.

in response to the global COVID-19 pandemic, on March 10, 2020, the FDA announced its intention to postpone most foreign inspections

of manufacturing facilities and products through April 2020, and subsequently, on March 18, 2020, the FDA announced its intention

to temporarily postpone routine surveillance inspections of domestic manufacturing facilities.

Regulatory authorities outside

the United States may adopt similar restrictions or other policy measures in response to the COVID-19 pandemic.

If a prolonged

government shutdown occurs, or if global health concerns continue to prevent the FDA or other regulatory authorities from conducting

their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA or other

regulatory authorities to timely review and process our regulatory submissions, which could have a material adverse effect on

our business.

in response to the global COVID-19 pandemic, in March 2020, the FDA announced its intention to postpone most foreign inspections

of manufacturing facilities and temporarily postponed routine surveillance inspections of domestic manufacturing facilities.

July 2020 domestic inspections restarted only on a risk-based basis.

Regulatory authorities outside the United States may adopt

similar restrictions or other policy measures in response to the COVID-19 pandemic.

If a prolonged government shutdown occurs,

or if global health concerns continue to prevent the FDA or other regulatory authorities from conducting their regular inspections,

reviews, or other regulatory activities, it could significantly impact the ability of the FDA or other regulatory authorities

to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

ACA and future changes to that law may adversely affect our business.*

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research, along with funding for such research;

a Centers for Medicare & Medicaid Services (“CMS”) to test innovative payment and service delivery models

to lower Medicare and Medicaid spending, potentially including prescription drug spending;

a Center for Medicare & Medicaid Innovation at CMS to test innovative payment and service delivery models to lower Medicare

and Medicaid spending, potentially including prescription drug spending;

a licensure framework for follow on biologic products.

remain judicial and Congressional challenges to certain aspects of the ACA, as well as recent efforts by the Trump administration

have been executive, judicial and Congressional challenges to certain aspects of the ACA, as well as efforts by the Trump administration

to repeal or replace certain aspects of the ACA.

Since January 2017, President Trump has signed Executive Orders and other directives

designed to delay the implementation of certain provisions of the ACA.

Concurrently, Congress has considered legislation that

would repeal or repeal and replace all or part of the ACA.

While Congress has not passed comprehensive repeal legislation, it

has enacted laws that modify certain provisions of the ACA such as removing penalties, starting January 1, 2019, for not complying

with the ACA’s individual mandate to carry health insurance, and eliminating the implementation of certain ACA-mandated

On December 14, 2018, a Texas U.S.

District Court Judge ruled that the ACA is unconstitutional in its entirety because the

“individual mandate” was repealed by Congress as part of the 2017 Tax Act.

Additionally, on December 18, 2019, the

Court of Appeals for the 5th Circuit upheld the District Court ruling that the individual mandate was unconstitutional and

remanded the case back to the District Court to determine whether the remaining provisions of the ACA are invalid as well.

March 2, 2020, the United States Supreme Court granted the petitions for writs of certiorari to review this case, and has allotted

one hour for oral arguments, which are expected to occur in the fall.

It is unclear how such litigation and other efforts to repeal

and replace the ACA will impact the ACA and our business.

addition, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted.

For example, the

Budget Control Act of 2011, includes reductions to Medicare payments to providers of 2% per fiscal year, which went into effect

on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2030 unless additional

Congressional action is taken.

The CARES Act, which was signed into law in March 2020 and is designed to provide financial support

and resources to individuals and businesses affected by the COVID-19 pandemic, suspended the 2% Medicare sequester from May 1,

2020 through December 31, 2020, and extended the sequester by one year, through 2030.

On January 2, 2013, the American Taxpayer

Relief Act of 2012 was signed into law, which, among other things, reduced Medicare payments to several providers, including hospitals,

and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

While Congress has not passed comprehensive repeal legislation, it has enacted

laws that modify certain provisions of the ACA such as removing penalties, starting January 1, 2019, for not complying with the

ACA’s individual mandate to carry health insurance, and eliminating the implementation of certain ACA-mandated fees.

December 14, 2018, a Texas U.S.

District Court Judge ruled that the ACA is unconstitutional in its entirety because the “individual

mandate” was repealed by Congress as part of the 2017 Tax Act.

Additionally, on December 18, 2019, the U.S.

Court of Appeals

for the 5th Circuit upheld the District Court ruling that the individual mandate was unconstitutional and remanded the case back

to the District Court to determine whether the remaining provisions of the ACA are invalid as well.

Supreme Court is

currently reviewing the constitutionality of the ACA.

Although it is unknown when a decision will be made, on January 28, 2021,

President Biden issued an executive order to initiate a special enrollment period for purposes of obtaining health insurance coverage

through the ACA marketplace, which began February 15, 2021 and will remain open through August 15, 2021.

The executive order also

instructs certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare,

including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies

that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA.

Further, on February

10, 2021, the Biden administration withdrew the federal government’s support for overturning the ACA.

It is unclear how

the Supreme Court ruling, other such litigation, and the healthcare reform measures of the Biden administration will impact the

addition, other legislative changes have been proposed and adopted since the ACA was enacted.

For example, the Budget Control

Act of 2011, includes reductions to Medicare payments to providers of 2% per fiscal year, which went into effect on April 1, 2013

and, due to subsequent legislative amendments to the statute, will remain in effect through 2030, with the exception of a temporary

suspension from May 1, 2020 through December 31, 2021, unless additional Congressional action is taken.

On January 2, 2013, the

American Taxpayer Relief Act of 2012 was signed into law, which, among other things, reduced Medicare payments to several providers,

including hospitals, and increased the statute of limitations period for the government to recover overpayments to providers from

three to five years.

there has been heightened governmental scrutiny in the United States of pharmaceutical pricing practices in light of the rising

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relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for

At the federal level, the Trump administration’s budget proposal for fiscal year 2021 includes a $135 billion

allowance to support legislative proposals seeking to reduce drug prices, increase competition, lower out-of-pocket drug costs

for patients, and increase patient access to lower-cost generic and biosimilar drugs.

On March 10, 2020, the Trump administration

sent “principles” for drug pricing to Congress, calling for legislation that would, among other things, cap Medicare

Part D beneficiary out-of-pocket pharmacy expenses, provide an option to cap Medicare Part D beneficiary monthly out-of-pocket

expenses, and place limits on pharmaceutical price increases.

In addition, the Trump administration previously released a “Blueprint”

to lower drug prices and reduce out of pocket costs of drugs that contained proposals to increase drug manufacturer competition,

increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the list price of their

products, and reduce the out of pocket costs of drug products paid by consumers.

HHS has solicited feedback on some of these measures

and has implemented others under its existing authority.

For example, in May 2019, CMS issued a final rule to allow Medicare Advantage

plans the option to use step therapy for Part B drugs beginning January 1, 2020.This final rule codified CMS’s policy change

that was effective January 1, 2019.

While some of these and other measures may require additional authorization to become effective,

Congress and the Trump administration have each indicated that it will continue to seek new legislative and/or administrative

measures to control drug costs.

At the state level, legislatures have increasingly passed legislation and implemented regulations

designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions

on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation

from other countries and bulk purchasing.

At the federal level, the Trump administration used several means to propose or implement drug pricing reform, including

through federal budget proposals, executive orders and policy initiatives.

For example, on July 24, 2020 and September 13, 2020,

the Trump administration announced several executive orders related to prescription drug pricing that attempted to implement several

of the administration’s proposals.

As a result, the FDA released a final rule on September 24, 2020, effective November

30, 2020, providing guidance for states to build and submit importation plans for drugs from Canada.

Further, on November 20,

2020, the U.S.

Department of Health & Human Services finalized a regulation removing safe harbor protection for price reductions

from pharmaceutical manufacturers to plan sponsors under Medicare Part D, either directly or through pharmacy benefit managers,

unless the price reduction is required by law.

The implementation of the rule has been delayed by the Biden administration from

January 1, 2022 to January 1, 2023.

The rule also creates a new safe harbor for price reductions reflected at the point-of-sale,

as well as a new safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers, the implementation

of which have also been delayed by the Biden administration until January 1, 2023.

On November 20, 2020, CMS issued an interim

final rule implementing President Trump’s Most Favored Nation executive order, which would tie Medicare Part B payments

for certain physician-administered drugs to the lowest price paid in other economically advanced countries.

The Most Favored Nation

regulations mandate participation by identified Medicare Part B providers and will apply in all U.S.

states and territories for

a seven-year period beginning January 1, 2021, and ending December 31, 2027.

On December 28, 2020, the United States District

Court in Northern California issued a nationwide preliminary injunction against implementation of the interim final rule.

unclear whether the Biden administration will work to reverse these measures or pursue similar policy initiatives.

level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical product

pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing

cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk

addition, it is possible that additional governmental action is taken to address the COVID-19 pandemic.

For example, on April

18, 2020, CMS announced that qualified health plan issuers under the ACA may suspend activities related to the collection and

reporting of quality data that would have otherwise been reported between May and June 2020 given the challenges healthcare providers

are facing responding to the COVID-19 pandemic.

we fail to comply with the extensive legal and regulatory requirements affecting the health care industry, we could face increased

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may not demonstrate the potency and efficacy benefits observed in previous studies;

efforts to improve, standardize and automate the manufacture of our product candidates, including OpRegen, OPC1 and VAC2,

and any resulting deviations in the manufacture of our product candidates, may adversely affect the safety, purity, potency

or efficacy of such product candidates;

efforts to improve, standardize and automate the manufacture of our product candidates, including OpRegen ® ,

OPC1 and VAC2, and any resulting deviations in the manufacture of our product candidates, may adversely affect the safety,

purity, potency or efficacy of such product candidates;

in trial design, including differences in size, eligibility criteria, and patient populations;

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in preclinical and clinical tests may not be repeated in subsequent tests or be predictive of future results.

particular, data presented from the Phase 1/2a open-label trial showed that both the surgical procedure and the OpRegen cells

were generally well tolerated, with no treatment-related systemic serious adverse events reported to date in the first nine patients.

The best corrected visual acuity of these patients remained relatively stable.

In addition, the imaging of patients 8 and 9 suggested

early signs of structural improvement within the retina.

However, we do not know how OpRegen will perform in future clinical trials.

of May 3, 2021, data presented from the fully enrolled 24 patient Phase 1/2a open-label trial showed that both the surgical procedure

and the OpRegen cells were generally well tolerated, with no treatment-related systemic serious adverse events reported.

corrected visual acuity of the better vision Cohort 4 patients has improved or remained stable in 10/12 (83%) and these patients

are being closely monitored for additional evidence of clinical benefit.

However, we do not know how OpRegen will perform in future

clinical trials.

is not uncommon to observe results in clinical trials that are unexpected based on preclinical trials and early clinical trials,

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of advanced manufacturing techniques and process controls.

We do not currently have nor do we plan to acquire the infrastructure

or capability to internally manufacture Renevia or our other HyStem products on a clinical or commercial scale.

Although we have

manufacturing capability through Cell Cure for OpRegen in Israel, we will need greater manufacturing capacity if we are to successfully

commercialize our products.

Unless we can raise the capital required to construct our own commercial scale manufacturing facilities

and can develop the expertise to manage and operate a manufacturing facility of our own, we may need to rely on third-party manufacturers

to manufacture any products we develop.

There is no assurance that we will be able to identify manufacturers on acceptable terms

Regardless of whether we do our own manufacturing or rely on third parties to manufacture products for us, we will

face risks related to the manufacture of our products including these risks:

Although we have manufacturing capability through Cell Cure for OpRegen,

OPC1, and VAC2 in Israel, we will need greater manufacturing capacity if we are to successfully commercialize our products.

we can raise the capital required to construct our own commercial scale manufacturing facilities and can develop the expertise

to manage and operate a manufacturing facility of our own, we may need to rely on third-party manufacturers to manufacture any

products we develop.

There is no assurance that we will be able to identify manufacturers on acceptable terms or at all.

of whether we do our own manufacturing or rely on third parties to manufacture products for us, we will face risks related to

the manufacture of our products including these risks:

or any third-party manufacturers might not timely formulate and manufacture our products or produce the quantity and quality

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we or any third-party manufacturers we may engage were to encounter any of these difficulties, our ability to provide our product

candidates to patients in clinical trials or to the medical market place would be jeopardized.

candidates to patients in clinical trials or to the medical marketplace would be jeopardized.

Any delay or interruption in the

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loss for the treatment of facial lipoatrophy.

The CE Mark provides us, or our authorized agent, the authority to market and distribute

Renevia throughout the European Union (“EU”) and in other countries that recognize the CE Mark.

because we have no commercial infrastructure, we are seeking a commercialization partner in the EU.

We can give no assurance that

we will secure a commercialization partner for Renevia or otherwise commercialize Renevia.

ongoing COVID-19 pandemic may adversely affect our operations, including the conduct of our clinical trials.*

We continue to seek a commercialization partner in the EU but we can give no assurance

that we will secure a partner or commercialize Renevia in any territory.

ongoing COVID-19 pandemic has affected and may adversely affect our operations, including the conduct of our clinical trials.*

December 2019, a novel strain of coronavirus and the resulting illness known as COVID-19 emerged in Wuhan, China.

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disruptions in our operations could negatively impact our business, operating results and financial condition.

COVID-19 continues to spread in the United States and Israel, we have experienced and may continue to experience disruptions that

COVID-19 continues to impact the United States and Israel, we have experienced and may continue to experience disruptions that

could adversely affect our operations and clinical trials, including:

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liquidity and financial position.

In addition, the trading prices for other biotechnology companies have been highly volatile

as a result of the COVID-19 pandemic.

As a result, we may face difficulties raising capital through sales of our common shares

or such sales may be on unfavorable terms.

In addition, the trading prices for other biotechnology companies have been volatile as a result

of the COVID-19 pandemic.

As a result, we may face difficulties raising capital through sales of our common shares or such sales

may be on unfavorable terms.

and actions taken to reduce its spread continue to rapidly evolve.

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withdrawal of the United Kingdom (the “U.K.”) from the EU, commonly referred to as “Brexit,” may adversely

impact our ability to obtain regulatory approvals of our product candidates in the EU, result in restrictions or imposition of

taxes and duties for importing our product candidates into the EU, and may require us to incur additional expenses in order to

develop, manufacture and commercialize our product candidates in the EU.*

June 23, 2016, the U.K.

held a referendum in which a majority of the eligible members of the electorate voted for the U.K.

leave the EU.

formally left the EU on January 31, 2020, which is commonly referred to as Brexit.

to a transition period until December 31, 2020 (the “Transition Period”), during which EU rules continue to apply.

During the Transition Period, negotiations between the U.K.

and the EU are expected to continue in relation to the customs and

trading relationship between the U.K.

and the EU following the expiry of the Transition Period.

Due to the COVID-19 global pandemic,

negotiations between the U.K.

and the EU that were scheduled for March and April were either being postponed or occurring in a

reduced forum via video conference.

There is, therefore, an increased likelihood that the Transition Period may need to be extended

beyond December 31, 2020 (although it remains the position of the UK government that it will not be extended).

Under the formal

withdrawal arrangements between the United Kingdom and the European Union, the parties had until June 30, 2020 to agree to extend

the Transition Period if required.

No such extension was agreed prior to such date.

No agreement has yet been reached between

the United Kingdom and the European Union and it may be the case that no formal customs and trading agreement will be reached

prior to the expiry of the Transition Period on December 31, 2020.

impact our ability to obtain regulatory approvals of our product candidates in the EU and the U.K., result in restrictions or

imposition of taxes and duties for importing our product candidates into the EU and the U.K., and may require us to incur additional

expenses in order to develop, manufacture and commercialize our product candidates in the EU and the U.K.*

the result of a referendum in 2016, the U.K.

left the EU on January 31, 2020, commonly referred to as Brexit.

Pursuant to the

formal withdrawal arrangements agreed between the U.K.

and the EU, the U.K.

was subject to a transition period until December

31, 2020 (the “Transition Period”) during which EU rules continued to apply.

A trade and cooperation agreement (the

“Trade and Cooperation Agreement”) that outlines the future trading relationship between the United Kingdom and the

European Union was agreed in December 2020.

a significant proportion of the regulatory framework in the U.K.

applicable to our business and our product candidates is derived

from EU directives and regulations, Brexit, following the Transition Period, could materially impact the regulatory regime with

from EU directives and regulations, Brexit has had, and may continue to have, a material impact upon the regulatory regime with

respect to the development, manufacture, importation, approval and commercialization of our product candidates in the U.K.

For example, as a result of the uncertainty surrounding Brexit, the European Medicines Agency (the “EMA”)

relocated to Amsterdam from London.

Following the Transition Period, the U.K.

will no longer be covered by the centralized procedures

for obtaining EU-wide marketing authorization from the EMA and, unless a specific agreement is entered into, a separate process

for authorization of drug products, including our product candidates, will be required in the U.K., the potential process for

which is currently unclear.

Any delay in obtaining, or an inability to obtain, any marketing approvals, as a result of Brexit

or otherwise, would prevent us from commercializing our product candidates in the U.K.

or the EU and restrict our ability to generate

revenue and achieve and sustain profitability.

In addition, we may be required to pay taxes or duties or be subjected to other

hurdles in connection with the importation of our product candidates into the EU, or we may incur expenses in establishing a manufacturing

facility in the EU in order to circumvent such hurdles.

If any of these outcomes occur, we may be forced to restrict or delay

efforts to seek regulatory approval in the U.K.

or the EU for our product candidates, or incur significant additional expenses

to operate our business, which could significantly and materially harm or delay our ability to generate revenues or achieve profitability

of our business.

Any further changes in international trade, tariff and import/export regulations as a result of Brexit or otherwise

may impose unexpected duty costs or other non-tariff barriers on us.

These developments, or the perception that any of them could

occur, may significantly reduce global trade and, in particular, trade between the affected nations and the U.K.

It is also possible

that Brexit may negatively affect our ability to attract and retain employees, particularly those from the EU.

For example, Great Britain is no longer covered by the centralized procedures for obtaining EU-wide marketing authorization

from the European Medicines Agency and a separate process for authorization of drug products, including our product candidates,

will be required in Great Britain.

It is currently unclear whether the Medicines & Healthcare

products Regulatory Agency in the U.K.

is sufficiently prepared to handle the increased volume of marketing authorization applications

that it is likely to receive.

Any delay in obtaining, or an inability to obtain, any marketing approvals, as a result of

Brexit or otherwise, would prevent us from commercializing our product candidates in the U.K.

or the EU and restrict our ability

to generate revenue and achieve and sustain profitability.

the Trade and Cooperation Agreement provides for the tariff-free trade of medicinal products between the U.K.

and the EU, there

may be additional non-tariff costs to such trade which did not exist prior to the end of the Transition Period.

Further, should

diverge from the EU from a regulatory perspective in relation to medicinal products, tariffs could be put into place

in the future.

We could therefore, both now and in the future, face significant additional expenses (when compared to the position

prior to the end of the Transition Period) to operate our business, which could significantly and materially harm or delay our

ability to generate revenues or achieve profitability of our business.

Any further changes in international trade, tariff and

import/export regulations as a result of Brexit or otherwise may impose unexpected duty costs or other non-tariff barriers on

These developments, or the perception that any of them could occur, may significantly reduce global trade and, in particular,

trade between the affected nations and the U.K.

face potential product liability, and, if successful claims are brought against us, we may incur substantial liability and costs.

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restrictions on the conduct of business operations could occur, related to COVID-19 or other infectious diseases could impact

personnel at these third parties, which could disrupt our clinical timelines, which could have a material adverse impact on

our business, prospects, financial condition and results of operations.

personnel at these third parties, which could disrupt our clinical timelines, which could have a material adverse impact on our

business, prospects, financial condition and results of operations.

have relied on CIRM to fund past clinical trials of OPC1 and we do not know if they will provide additional funding for future

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There can be no assurance

we will able to negotiate distribution or sales agreements with third parties on favorable terms to justify our investment in

our products or achieve sufficient revenues to support our operations.

we will be able to negotiate distribution or sales agreements with third parties on favorable terms to justify our investment

in our products or achieve sufficient revenues to support our operations.

Pertaining to Our Common Shares

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clinical trials or a delay or failure to obtain FDA approval.

The failure of our earnings to meet analysts’ expectations

could result in a significant rapid decline in the market price of our common shares.

economic and stock market conditions may adversely affect the price of our common shares.

stock market has been experiencing extreme price and volume fluctuations which have affected the market price of the equity securities

without regard to the operating performance of the issuing companies.

Broad market fluctuations, as well as general economic,

political and other conditions (such as the recent coronavirus outbreak), may adversely affect the market price of our common

For example, from January 1, 2021 through May 7, 2021 the closing

price of our common shares has ranged between $1.77 and $3.10 per shares.

In addition, the failure of our earnings

to meet analysts’ expectations could result in a significant rapid decline in the market price of our common shares.

we do not pay cash dividends, our common shares may not be a suitable investment for anyone who needs to earn dividend income.

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directors, executive officers and their affiliates, in the aggregate, owned approximately 25.6% of our outstanding common shares

as of December 31, 2019.

as of March 31, 2021.

As a result, these shareholders, if acting together, will be able to heavily influence or control matters

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affect the market price of our common shares.

we or our subsidiaries issue additional common shares or preferred shares, investors in our common shares may experience dilution

of their ownership interests.*

and our subsidiaries may issue additional common shares or other securities convertible into or exercisable for common shares

to raise additional capital or to hire or retain employees or consultants, or in connection with future acquisitions of companies

or licenses to technology or rights, or for other business purposes.

The future issuance of additional securities may be dilutive

to our shareholders and may create downward pressure on the trading price of our common shares.

are currently authorized to issue an aggregate of 252,000,000 shares of capital stock consisting of 250,000,000 common shares

and 2,000,000 “blank check” preferred shares, which means we may issue, without stockholder approval, one or more

series of preferred stock having such designation, powers, privileges, preferences, including preferences over our common shares

respecting dividends and distributions, terms of redemption and relative participation, optional, or other rights, if any, of

the shares of each such series of preferred stock and any qualifications, limitations or restrictions thereof, as our board of

directors may determine.

The terms of one or more series of preferred stock could dilute the voting power or reduce the value

of our common shares.

Any preferred shares may also be convertible into common shares on terms that would be dilutive to holders

of common shares.

Our subsidiaries may also issue their own preferred shares with a similar impact on our ownership of the subsidiaries.

of March 31, 2021, Lineage had 162,066,897 common shares outstanding, 19,256,924 common shares reserved for issuance upon the

exercise of outstanding options under our employee stock option plans, 77,250 common shares reserved for issuance upon the vesting

and settlement of restricted stock units under our equity incentive plan, and 1,089,900 common shares subject to warrants.

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.

operation of some of our subsidiaries has been financed in part through the sale of shares of capital stock and warrants to purchase

securities of those subsidiaries to private investors.

Future sales of such securities by our subsidiaries could reduce our ownership

interest in the applicable subsidiary, and correspondingly dilute our shareholder’s ownership interests in our consolidated

Certain of our subsidiaries also have their own stock option plans and the exercise of stock options or the sale of

restricted stock under those plans would also reduce our ownership interest in the applicable subsidiary, with a resulting dilutive

effect on the ownership interest of our shareholders in our consolidated enterprise.

disruptions of information technology systems or data security breaches, including the theft of our intellectual property, could

adversely affect our business.