What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-08-12 compared with 2021-05-13 · 455 added, 312 removed, 56 unchanged (93% of the section changed)

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

matters addressed in this Item 2 that are not historical information constitute “forward-looking statements” within

the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,

as amended, (the “Exchange Act”) including statements about any of the following:

any projections of earnings, revenue,

gross profit, cash, effective tax rate, use of net operating losses, or any other financial items;

the plans, strategies and objectives

of management for future operations or prospects for achieving such plans;

and any statements of assumptions underlying any of

the foregoing.

Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking

Without limiting the foregoing, the words “believes,” “anticipates,” “plans,”

“expects,” “seeks,” “estimates,” and similar expressions are intended to identify forward-looking

While Lineage may elect to update forward-looking statements in the future, it specifically disclaims any obligation

to do so, even if Lineage’s estimates change, and readers should not rely on those forward-looking statements as representing

Lineage’s views as of any date subsequent to the date of the filing of this Report.

Although we believe that the expectations

reflected in these forward-looking statements are reasonable, such statements are inherently subject to risks and Lineage can

give no assurances that its expectations will prove to be correct.

Actual results could differ materially from those described

in this Report because of numerous factors, many of which are beyond the control of Lineage.

A number of important factors could

cause the results of the Company to differ materially from those indicated by such forward-looking statements, including those

detailed in Part II, Item IA, “Risk Factors” of this Report.

following discussion should be read in conjunction with Lineage condensed consolidated interim financial statements and the related

notes provided under “Item 1 - Financial Statements” above.

matters addressed in this Item 2 that are not historical information constitute “forward-looking statements” within the meaning

of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange

Act”) including statements about any of the following:

any projections of earnings, revenue, gross profit, cash, effective tax

rate, use of net operating losses, or any other financial items;

the plans, strategies and objectives of management for future operations

or prospects for achieving such plans;

and any statements of assumptions underlying any of the foregoing.

Any statements contained herein

that are not statements of historical fact may be deemed to be forward-looking statements.

Without limiting the foregoing, the words

“believes,” “anticipates,” “plans,” “expects,” “seeks,” “estimates,”

and similar expressions are intended to identify forward-looking statements.

While Lineage may elect to update forward-looking statements

in the future, it specifically disclaims any obligation to do so, even if Lineage’s estimates change, and readers should not rely

on those forward-looking statements as representing Lineage’s views as of any date subsequent to the date of the filing of this

Although we believe that the expectations reflected in these forward-looking statements are reasonable, such statements are inherently

subject to risks and Lineage can give no assurances that its expectations will prove to be correct.

Actual results could differ materially

from those described in this Report because of numerous factors, many of which are beyond the control of Lineage.

A number of important

factors could cause the results of the Company to differ materially from those indicated by such forward-looking statements, including

those detailed in Part II, Item IA, “Risk Factors” of this Report.

following discussion should be read in conjunction with Lineage condensed consolidated interim financial statements and the related notes

provided under “Item 1 - Financial Statements” above.

and Business Overview

1 unchanged sentence

Our 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.

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.

for degenerative retinal diseases, neurological conditions associated with demyelination, and aiding 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”).

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 one of the leading causes of blindness in people over the age of

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

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”) (also

known as atrophic AMD).

There are currently 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

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

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 lung cancer.

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.

two companies that later became publicly traded companies:

OncoCyte Corporation (“OncoCyte”) and AgeX Therapeutics,

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.

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.

value by initiating new programs using existing protocols or new protocols and cell lines, or through corporate transactions, as we have

Accounting Policies

Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses and analyzes data in our

unaudited Condensed Consolidated Interim Financial Statements, which we have prepared in accordance with generally accepted accounting

principles in the United States.

Preparation of these financial statements requires management to make estimates and assumptions

that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and

Management bases its estimates on historical experience and on various other assumptions that it believes to be reasonable

under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities

that are not readily apparent from other sources.

Senior management has discussed the development, selection and disclosure of

these estimates with the Audit Committee of our board of directors.

Actual conditions may differ from our assumptions and actual

results may differ from our estimates.

accounting policy is deemed critical if it requires an accounting estimate to be made based on assumptions about matters that

are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in

the estimate that are reasonably likely to occur could materially impact the financial statements.

Management believes that there

have been no significant changes to the items that we disclosed as our critical accounting policies and estimates in Management’s

Discussion and Analysis of Financial Condition and Results of Operations in our 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, except

account for business combinations, such as the Asterias Merger completed in March 2019, in accordance with Accounting Standards

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

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

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

We recognize estimated

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

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

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

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.

Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses and analyzes data in our unaudited

Condensed Consolidated Interim Financial Statements, which we have prepared in accordance with generally accepted accounting principles

in the United States.

Preparation of these financial statements requires management to make estimates and assumptions that affect the

reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities.

bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances,

the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent

from other sources.

Senior management has discussed the development, selection and disclosure of these estimates with the Audit Committee

of our board of directors.

Actual conditions may differ from our assumptions and actual results may differ from our estimates.

accounting policy is deemed critical if it requires an accounting estimate to be made based on assumptions about matters that are highly

uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that

are reasonably likely to occur could materially impact the financial statements.

Management believes that there have been no significant

changes to the items that we disclosed as our critical accounting policies and estimates in Management’s Discussion and Analysis

of Financial Condition and Results of Operations in our 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, except as follows:

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.

assets are indefinite-lived intangible assets until the completion or abandonment of the associated research and development (“R&D”)

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

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

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

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

in circumstances that would indicate the asset may be impaired.

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

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

In accordance with

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

Instead, they are

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

indicate the asset may be impaired.

account for leases in accordance with ASC 842, Leases .

We determine if an arrangement is a lease at inception.

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

statements of operations.

Under the available practical expedients for the adoption of ASC 842, we account for the lease and non-lease

components as a single lease component.

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

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

assets represent our right to use an underlying asset during the lease term and lease liabilities represent our obligation to

make lease payments arising from the lease.

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 our leases do not provide an implicit rate, we use our

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

We use the implicit rate when readily determinable.

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

lease incentives.

Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will

exercise that option.

Lease expense for lease payments is recognized on a straight-line basis over the lease term.

leases are included as ROU assets in property and equipment, 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 the condensed consolidated balance sheets.

Leases are classified

as either financing or operating, with classification affecting the pattern of expense recognition in the consolidated statements of

Under the available practical expedients for the adoption of ASC 842, we account for the lease and non-lease components as

a single lease component.

We recognize right-of-use (“ROU”) assets and lease liabilities for leases with terms greater than

twelve months in the condensed consolidated balance sheet.

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

payments arising from the lease.

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 our leases do not provide an implicit rate, we use our incremental borrowing

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

We use the implicit

rate when readily determinable.

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

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

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

leases are included as ROU assets in property and equipment, 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

the condensed consolidated balance sheets.

Concern Assessment

accordance with Accounting Standards Update (“ASU”) 2014-15, Presentation of Financial Statements – Going

Concern , we assess going concern uncertainty in our consolidated financial statements to determine if we have sufficient cash

and cash equivalents on hand and working capital to operate for a period of at least one year from the date our consolidated financial

statements are issued or are available to be issued, which is referred to as the “look-forward period” as defined

As part of this assessment, based on conditions that are known and reasonably knowable to us, we will consider

various scenarios, forecasts, projections, and estimates, and we will make certain key assumptions, including the timing and nature

of projected cash expenditures or programs, and our ability to delay or curtail those expenditures or programs, if necessary,

among other factors.

Based on this assessment, as necessary or applicable, we make certain assumptions concerning our ability

to curtail or delay research and development programs and expenditures to the extent we deem probable those implementations can

be achieved and we have the proper authority to execute them within the look-forward period in accordance with ASU 2014-15.

accordance with Accounting Standards Update (“ASU”) 2014-15, Presentation of Financial Statements – Going Concern ,

we assess going concern uncertainty in our consolidated financial statements to determine if we have sufficient cash and cash equivalents

on hand and working capital to operate for a period of at least one year from the date our consolidated financial statements are issued

or are available to be issued, which is referred to as the “look-forward period” as defined by ASU No.

this assessment, based on conditions that are known and reasonably knowable to us, we will consider various scenarios, forecasts, projections,

and estimates, and we will make certain key assumptions, including the timing and nature of projected cash expenditures or programs,

and our ability to delay or curtail those expenditures or programs, if necessary, among other factors.

Based on this assessment, as necessary

or applicable, we make certain assumptions concerning our ability to curtail or delay research and development programs and expenditures

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

period in accordance with ASU 2014-15.

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

(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.

applying the provisions of ASU 2014-09, Lineage has determined that government grants are out of the scope of ASU 2014-09 because the

government entities do not meet the definition of a “customer,” as defined by ASU 2014-09, as there is not considered to

be a transfer of control of goods or services to the government entities funding the grant.

In the absence of applicable guidance

GAAP, the Company’s policy is to recognize grant revenue when the related costs are incurred and the right to payment

Costs incurred are recorded in research and development and general and administrative expenses on the accompanying statements

of operations (see Note 14).

Collaborative

review collaborative agreements to determine if the accounting treatment falls under Accounting Standards Codification, Topic 606 ,

Revenue from Contracts with Customers (“ASC 606”) , or Accounting Standards Codification Topic 808, Collaborative

Arrangements (“ASC 808”).

While these agreements are typically within the scope of ASC 808, we may analogize to ASC 606

for some aspects of the agreements.

terms of our collaborative agreements typically include one or more of the following:

(i) up-front fees;

(ii) milestone payments related

to achievement of development or commercial goals;

(iii) royalties on net sales of licensed products;

and (iv) reimbursement of cost-sharing

of R&D expenses.

Each of these payments eventually result in collaboration revenues.

When a portion of non-refundable up-front fees

or other payments received are allocated to continuing performance obligations under the terms of a collaborative arrangement, they are

recorded as deferred revenue and recognized as collaboration revenue when (or as) the underlying performance obligation is satisfied.

part of the accounting treatment for these arrangements, we must develop estimates and assumptions that require judgement to determine

the underlying stand-alone selling price for each performance obligation which determines how the transaction price is allocated among

the performance obligations.

The following items are estimated in the calculation of the stand-alone selling price:

forecasted revenues

and development costs, development timelines, discount rates and probabilities of technical and regulatory success.

We evaluate each

performance obligation to determine if they can be satisfied at a point in time or over time, and we measure the services delivered to

our collaboration partners each reporting period, which is based on the progress of the related program.

If necessary, we adjust the

measure of performance and related revenue recognition.

Any such adjustments are recorded on a cumulative catch-up basis which would

affect revenue and net income (loss) in the period of adjustment.

In addition, variable consideration (e.g., milestone payments) must

be evaluated to determine if it is constrained and, therefore, excluded from the transaction price.

If a license to our intellectual property is determined to be distinct from the other performance obligations identified in

the arrangement, we recognize collaboration revenues from the transaction price allocated to the license when the license is transferred

to the licensee, and the licensee is able to use and benefit from the license.

When the license is determined to be non-distinct, we

utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation

is satisfied over time or at a point in time, and, if over time, the appropriate method of measuring progress for purposes of recognizing

collaboration revenue from the allocated transaction price.

For example, when we receive up-front fees for the performance of research

and development services, or when research and development services are not considered to be distinct from a license, we recognize collaboration

revenue for those units of account over time using a measure of progress.

We evaluate the measure of progress at each reporting period

and, if necessary, adjust the measure of performance and related revenue as a change in estimate.

At the inception of each collaboration agreement that includes milestone payments (variable consideration), we evaluate

whether the milestones are considered probable of being reached and estimate the amount to be included in the transaction price using

the most likely amount method.

If it is probable that a significant revenue reversal would not occur, the associated milestone value

is included in the transaction price.

Milestone payments that are not within our or the collaboration partner’s control, such as

non-operational developmental and regulatory approvals, are generally not considered probable of being achieved until those approvals

are received.

At the end of each reporting period, we re-evaluate the probability of achievement of milestones that are within our or

the collaboration partner’s control, such as operational developmental milestones and any related constraint, and if necessary,

adjust our estimate of the overall transaction price.

Any such adjustments are recorded on a cumulative catch-up basis, which would affect

collaboration revenues and net income (loss) in the period of adjustment.

Revisions to our estimate of the transaction price may also

result in negative collaboration revenues and net income (loss) in the period of adjustment.

For collaboration agreements that include sales-based royalties, including commercial milestone payments based on the level of sales,

and the license is deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of (i) when the

related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied

(or partially satisfied).

Reimbursement,

cost-sharing payments:

Under certain collaborative agreements, we will receive reimbursement for a portion of our R&D expenses.

Such reimbursements are reviewed for gross versus net reporting considerations and reflected either as a reduction of R&D expense

or as reimbursement revenue in our condensed consolidated statements of operations.

of Operations

of Three Months Ended March 31, 2021 and 2020

of Three and Six Months Ended June 30, 2021 and 2020

and Cost of Sales

1 unchanged sentence

Three Months Ended

March 31, (unaudited)

Grant revenue

June 30, (unaudited)

Grant revenues

Collaboration revenues

Royalties from product sales and license fees

1 unchanged sentence

Cost of sales

total revenues decreased by $0.1 million for the three months ended March 31, 2021 as compared to the same period in the prior

year, due to a $0.2 million decrease in grant revenues due to less grant-related activities during the period, offset by a

$0.1 million increase in royalties from product sales.

Six Months Ended

June 30, (unaudited)

Grant revenues

Collaboration revenues

Royalties from product sales and license fees

Total revenues

Cost of sales

total revenues increased by $126,000 for the three months ended June 30, 2021 as compared to the same period in the prior year, due to

a $213,000 increase in collaboration revenues related to the Immunomic Therapeutics, Inc.

(“ITI”) collaborative agreement

and a $129,000 increase in royalties from product sales, offset by a $216,000 decrease in grant revenues due to less grant-related activities

during the period.

total revenues increased by $3,000 for the six months ended June 30, 2021 as compared to the same period in the prior year, due to a

$256,000 increase in royalties from product sales and a $213,000 increase in collaboration revenues related to the ITI collaborative

agreement, offset by a $466,000 decrease in grant revenues due to less grant-related activities during the period.

grant revenues are generated primarily by our subsidiary Cell Cure Neurosciences Ltd.

(“Cell Cure”) from the Israel

Innovation Authority (“IIA”) for the development of OpRegen and our bio retina program, and from a Small Business

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

decrease in our grant revenues for the three months ended March 31, 2021 as compared to the same period in the period year, were primarily

due to less U.S.

based grant-related activities during the period.

Grant revenues generated by Cell Cure from the IIA for the development

of OpRegen and our bio retina program was $0.1 million both for the three months ended March 31, 2021 and 2020.

Grant revenues generated

by the NIH grant were $0.2 million for the three months ended March 31, 2020.

NIH grant related activities were completed in the

third quarter of 2020.

(“Cell Cure”) from the Israel Innovation

Authority (“IIA”) for the development of OpRegen and our bio retina program, and from a Small Business Innovation Research

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

revenues generated by Cell Cure from the IIA for the development of OpRegen and our bio retina program amounted to $71,000 and $169,000

for the three and six months ended June 30, 2021 and $130,000 and $261,000 for the three and six months ended June 30, 2020, respectively.

revenues generated by the NIH grant were $157,000 and $374,000 for the three and six months ended June 30, 2020.

NIH grant related activities

were completed in the third quarter of 2020.

from product and license fees for the three months and six months ended June 30, 2021 increased due to higher royalty payments from STEMCELL

Technologies, Life Technologies, and AgeX Therapeutics.

amounts in the tables below are our consolidated operating expenses for the periods presented (in thousands).

Three Months Ended

March 31 (unaudited)

June 30 (unaudited)

Research and development expenses

General and administrative expenses

Six Months Ended

June 30 (unaudited)

Research and development expenses

General and administrative expenses

and development expenses

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

These costs include direct and research-related overhead expenses including compensation and related benefits, stock-based

compensation, consulting fees, research and laboratory fees, rent of research facilities, amortization of intangible assets, and

license fees paid to third parties to acquire patents or licenses to use patents and other technology.

We expense research and

development costs as incurred.

Research and development expenses incurred and reimbursed by grants from third parties approximate

the grant income recognized in the consolidated statements of operations.

following table shows the amount of our total research and development expenses allocated to our primary research and development

projects for the periods presented (in thousands).

Three Months Ended March 31,

and development expenses consist of costs incurred for company-sponsored, collaborative and contracted research and development activities.

These costs include direct and research-related overhead expenses including compensation and related benefits, stock-based compensation,

consulting fees, research and laboratory fees, rent of research facilities, amortization of intangible assets, and license fees paid

to third parties to acquire patents or licenses to use patents and other technology.

We expense research and development costs as incurred.

Research and development expenses incurred and reimbursed by grants from third parties approximate the grant income recognized in the

consolidated statements of operations.

following table shows the amount of our total research and development expenses allocated to our primary research and development projects

for the periods presented (in thousands).

Three Months Ended June 30,

Percent of Total

OpRegen ® and other ophthalmic applications

All other programs

Total research and development expenses

increase of $0.1 million in total research and development expenses for the three months ended March 31, 2021 as compared to the

same period in the prior year is mainly attributable to the following:

net decrease of $0.8 million in OpRegen and other ophthalmic application expenses, attributable primarily to

a decrease in manufacturing activities in 2021 as compared to 2020,

increase of $0.4 million in OPC1-related expenses, primarily related to an increase in manufacturing and development activities

for this program,

increase of $0.5 million in VAC program expenses, primarily related to manufacturing improvement activities.

Six Months Ended June 30,

Percent of Total

All other programs

Total research and development expenses

net increase of $0.1 million in total research and development expenses for the three months ended June 30, 2021 as compared to

the same period in the prior year is mainly attributable to the following:

net decrease of $0.4 million in OpRegen, attributable primarily to a decrease in manufacturing

activities in 2021 as compared to 2020,

increase of $0.3 million in OPC1-related expenses, primarily related to an increase in manufacturing and development activities for

this program,

increase of $0.2 million in VAC program expenses, primarily related to manufacturing improvement activities and support of the ITI

collaborative agreement.

net increase of $0.2 million in total research and development expenses for the six months ended June 30, 2021 as compared to

the same period in the prior year is mainly attributable to the following:

net decrease of $1.1 million in OpRegen, attributable primarily to a decrease in manufacturing

activities in 2021 as compared to 2020,

increase of $0.8 million in OPC1-related expenses, primarily related to an increase in manufacturing and development activities for

this program,

increase of $0.7 million in VAC program expenses, primarily related to manufacturing improvement activities and support of the ITI

collaborative agreement,

decrease of $0.2 million in Renevia and related expenses due to a reduction in research activities.

and administrative expenses

and administrative expenses include employee and director compensation, consulting fees other than those paid for science-related

consulting, facilities and equipment rent and maintenance related expenses, insurance costs allocated to general and administrative

expenses, costs of patent applications, prosecution and maintenance, stock exchange-related costs, depreciation expense, marketing

costs, legal and accounting costs, and other miscellaneous expenses which are allocated to general and administrative expense.

total net decrease of $0.6 million in general and administrative expenses for the three months ended March 31, 2021 compared to

the same period in 2020, was primarily attributable to a $0.4 million reduction in Asterias Merger-related expenses, a $0.1 million

reduction in legal and patent expenses, a $0.2 million reduction in rent and utilities expenses, and a $0.1 million reduction

in compensation expenses, offset by a $0.2 million increase in investor relations expenses.

and administrative expenses include employee and director compensation, consulting fees other than those paid for science-related consulting,

facilities and equipment rent and maintenance related expenses, insurance costs allocated to general and administrative expenses, costs

of patent applications, prosecution and maintenance, stock exchange-related costs, depreciation expense, marketing costs, legal and accounting

costs, and other miscellaneous expenses which are allocated to general and administrative expense.

total net increase of $0.6 million in general and administrative expenses for the three months ended June 30, 2021 compared to the same

period in 2020, was primarily attributable to a $0.3 million increase in investor relations expenses, a $0.3 million increase in litigation

and other expenses related to Lineage’s merger with Asterias, a $0.1 million increase in legal costs

and patent expenses, offset by a $0.1 million reduction in rent and utilities expenses.

and administrative expenses for the six months ended June 30, 2021 compared to the same period in 2020, were relatively unchanged.

line items had offsetting variances, investor relations expenses increased by $0.4 million, recruiting fees increased by $0.2 million,

rent and utilities expenses decreased by $0.3 million, patent expenses decreased by $0.2 million, and litigation and other expenses

related to Lineage’s merger with Asterias decreased by $0.1 million.

income and (expenses), net

1 unchanged sentence

Three Months Ended

March 31, (unaudited)

June 30, (unaudited)

Other income (expenses), net

Interest income, net

Interest income (expenses), net

Gain on sale of marketable equity securities

Gain on extinguishment of debt

Unrealized gain (loss) on marketable equity securities

Unrealized gain (loss) on warrant liability

Other income, net

Total other income (expenses), net

Six Months Ended

June 30, (unaudited)

Other income (expenses), net

Interest income (expenses), net

Gain on sale of marketable equity securities

Gain on extinguishment of debt

Unrealized gain (loss) on marketable equity securities

Unrealized gain on warrant liability

1 unchanged sentence

Total other income (expenses), net

income, net – During the three months ended March 31, 2020, we earned $0.4 million of interest income, from our promissory

note with Juvenescence.

In August 2020, Lineage received $24.6 million from Juvenescence, representing the outstanding principal

and accrued interest on the promissory note.

on investment in OncoCyte - As of March 31, 2021, Lineage owned 1.1 million shares of OncoCyte common stock.

had a fair value of $5.8 million, based on the closing price of OncoCyte common stock of $5.19 per share on March 31, 2021.

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

These shares had a fair value of $8.7 million,

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

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

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

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 during 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.

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

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

of operations for each period.

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

equity securities as of March 31, 2021 and 2020.

These securities were carried at fair market value on our consolidated balance

For the three months ended March 31, 2021, we did not hold any marketable securities related to AgeX, and the accounting

transactions for HBL were not material.

the three months ended March 31, 2020 Lineage recorded a realized gain of $0.2 million due to sales of AgeX shares in the period,

and an unrealized loss of $1.0 million due to the changes in fair market value of these marketable securities from December 31,

2019 to March 31, 2020.

expenses, net - Other expenses, net, in 2021 and 2020 consist primarily of net foreign currency transaction

gains and losses recognized by our subsidiaries Cell Cure and ES Cell International Pte.

(“ESI”), changes in

the fair value of warrants issued by Cell Cure, dividend income and interest income, net.

Foreign currency transaction gains and

losses for the periods presented are principally related to the remeasurement of the U.S.

dollar denominated notes payable by

Cell Cure to Lineage.

market value of the shares of OncoCyte common stock we hold creates a deferred tax liability based on the closing prices of the

shares, less our tax basis in the shares.

The deferred tax liability generated by the OncoCyte shares that we hold as of March

31, 2021, is a source of future taxable income to us, as prescribed by ASC 740-10-30-17, that will more likely than not result

in the realization of our 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, we 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.

income, net – During the three and six months ended June 30, 2020 we earned $0.4 million and $0.8 million of interest income,

respectively.

In August 2020, Lineage received $24.6 million from Juvenescence, representing the outstanding principal and accrued interest

on the promissory note.

on investment in OncoCyte - As of June 30, 2021, Lineage owned 1.1 million shares of OncoCyte common stock.

These shares had a fair

value of $6.4 million, based on the closing price of OncoCyte common stock of $5.74 per share on June 30, 2021.

As of December 31, 2020,

Lineage owned 3.6 million shares of OncoCyte common stock.

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

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

the three months ended June 30, 2021, Lineage recorded a net unrealized gain on marketable equity securities of $0.6 million related

to changes in fair market value of OncoCyte’s common stock price during the quarter.

For the three months ended June 30, 2020,

Lineage recorded a realized gain of $2.1 million due to sales of OncoCyte shares in the period.

Lineage recorded an unrealized loss

on marketable equity securities of $4.0 million related to changes in fair market value of OncoCyte’s common stock price during

the six months ended June 30, 2021, Lineage recorded a realized gain of $6.0 million due to sales of OncoCyte shares in the period.

Lineage recorded a net unrealized gain on marketable equity securities of $1.8 million related to changes in fair market value of OncoCyte’s

common stock price during the quarter.

For the six months ended June 30, 2020, Lineage recorded a realized gain of $3.1 million due to

sales of OncoCyte shares in the period.

Lineage also recorded an unrealized loss on marketable equity securities of $4.2 million related

to changes in fair market value of OncoCyte’s common stock price during 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.

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

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

for each period.

Marketable equity securities

- We account for the shares we hold in Hadasit Bio-Holdings (“HBL”) as marketable equity securities as

of June 30, 2021.

These securities were carried at fair market value on our consolidated balance sheets, and the accounting transactions

for the three and six months ended were not material.

For the three and six months ended June 30, 2021, we did not hold any marketable

securities related to AgeX.

the three and six months ended June 30, 2020, Lineage recorded realized gains of $0.4 million and $0.6 million, respectively,

due to sales of AgeX shares in the period.

For the three and six months ended June 30, 2020, we recorded unrealized losses of $0.2 million

and $1.2 million, respectively, due to changes in fair market value of AgeX’s common stock price during the period.

on extinguishment of debt – For the three and six months ended June 30, 2021, Lineage recognized a gain of $0.5 million on

extinguishment of debt related to the Paycheck Protection Program (PPP) loan from Axos Bank.

Lineage applied for forgiveness on the PPP

loan on September 30, 2020, and on May 13, 2021, received notice that the PPP loan was forgiven in full.

expenses, net - Other expenses, net, in 2021 and 2020 consist primarily of net foreign currency transaction gains and losses recognized

by our subsidiaries Cell Cure and ES Cell International Pte.

(“ESI”), changes in the fair value of warrants issued by

Cell Cure, dividend income and interest income, net.

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

related to the remeasurement of the U.S.

dollar denominated notes payable by Cell Cure to Lineage.

market value of the shares of OncoCyte common stock we hold creates a deferred tax liability based on the closing prices of the shares,

less our tax basis in the shares.

The deferred tax liability generated by the OncoCyte shares that we hold as of June 30, 2021, is a

source of future taxable income to us, as prescribed by ASC 740-10-30-17, that will more likely than not result in the realization of

our 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 June 30, 2021.

Due to the inherent unpredictability of future prices of those shares, we cannot reliably

estimate or project those deferred tax liabilities on an annual basis.

Therefore, the deferred tax 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.

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

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 acquired.

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

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 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.

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.

We have concluded that an

ownership change did occur after the Asterias Merger, and the acquired operating loss carryforwards are subject to limitation under Section

382 of the Internal Revenue Service Code;

Lineage will only be able to utilize $52.8 million of these operating loss carryforwards.

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, 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 shares in both periods.

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 and six months ended June 30, 2021, Lineage recorded a $169,000 deferred tax benefit that was primarily related to federal

net operating losses generated for the three and six months ended June 30, 2021, which was available and indefinite in nature.

the three and six months ended June 30, 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 applicable periods.

This taxable income was offset by net operating

loss carryforwards.

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

in the closing stock prices of OncoCyte shares from period to period and the related changes in those deferred tax liabilities

and our deferred tax assets and other credits, including changes in the valuation allowance, for each period.

Note 3 to our condensed consolidated interim financial statements included elsewhere in this Report for a description of the Asterias

Merger that was completed on March 8, 2019.

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

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

will only be able to utilize $52.8 million of these operating loss carryforwards.

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

closing stock prices of OncoCyte shares from period to period and the related changes in those deferred tax liabilities and our deferred

tax assets and other credits, including changes in the valuation allowance, for each period.

and Capital Resources

March 31, 2021, we had $62.4 million of cash, cash equivalents and marketable equity securities on hand, which includes our investments

June 30, 2021, we had $68.7 million of cash, cash equivalents and marketable equity securities on hand, which includes our investments

in OncoCyte and HBL.

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

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

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

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

In addition, the value of our marketable equity securities may be significantly and adversely impacted by deteriorating global

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

worldwide resulting from the ongoing COVID-19 pandemic.

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

securities, the sale of common stock of our former subsidiaries, OncoCyte and AgeX, payments from research grants, royalties from

product sales and sales of research products and services.

At March 31, 2021, we had an accumulated deficit of $295.5 million,

working capital of $58.0 million and shareholders’ equity of $116.6 million.

We evaluated the projected cash flows for Lineage

and our subsidiaries, and we believe that our $62.4 million in cash, cash equivalents and marketable equity securities provide

sufficient cash, cash equivalents, and liquidity to carry out our current planned operations through at least twelve months from

the issuance date of our condensed consolidated interim financial statements included elsewhere in this Report.

If we need near

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

our investments, as necessary.

COVID-19 pandemic has impacted patient enrollment in our OpRegen Phase 1/2a multicenter clinical trial and the VAC2 Phase 1 multicenter

clinical trial.

In particular, we saw sites pause enrollment to focus on, and direct resources to, the COVID-19 pandemic.

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

including trading volume or market depth factors and volume and manner of sale restrictions under Federal securities laws, prevailing

market conditions and prices at the time of any sale, and subsequent sales of securities by the entities.

In addition, the value of our

marketable equity securities may be significantly and adversely impacted by deteriorating global economic conditions and the recent disruptions

to and volatility in the credit and financial markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic.

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

the sale of common stock of our former subsidiaries, OncoCyte and AgeX, payments from research grants, royalties from product sales and

sales of research products and services.

At June 30, 2021, we had an accumulated deficit of $300.3 million, working capital of $64.8

million and shareholders’ equity of $123.6 million.

We evaluated the projected cash flows for Lineage and our subsidiaries, and

we believe that our $68.7 million in cash, cash equivalents and marketable equity securities provide sufficient cash, cash equivalents,

and liquidity to carry out our current planned operations through at least twelve months from the issuance date of our condensed consolidated

interim financial statements included elsewhere in this Report.

If we need near term working capital or liquidity to supplement our cash

and cash equivalents for our operations, we may sell some, or all, of our investments, as necessary.

The COVID-19 pandemic previously impacted patient enrollment in our OpRegen

Phase 1/2a multicenter clinical trial and is currently affecting the VAC2 Phase 1 multicenter clinical trial.

In particular, we saw sites

pause enrollment to focus on, and direct resources to, the COVID-19 pandemic or adhere to national or local guidelines.

Additionally,

patients may choose not to enroll or continue participating in clinical trials as a result of the pandemic.

At this point in time,

the majority of our sites are back up and enrolling.

We are unable to predict with confidence if there will be future patient

enrollment delays and difficulties as the COVID-19 pandemic continues.

If patient enrollment is delayed for an extended period

of time, such clinical trials could be delayed or otherwise adversely affected.

Our inability to enroll a sufficient number of

patients for any of our current or future clinical trials could result in significant delays.

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

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

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

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

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

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.

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

obtain adequate financing.

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

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

shareholders.

currently enrolled patients may decide not to enroll or continue participating in follow-up visits as part of the ongoing clinical trials,

as a result of the pandemic.

At this point in time, the majority of our sites are back to normal daily operations.

However, we are unable

to predict with confidence if there will be future patient enrollment delays or missed study visits as the COVID-19 pandemic continues

or gets worse.

If patient enrollment or study follow-up is delayed for an extended period of time, our clinical trials could be delayed

or otherwise adversely affected.

Additionally, an inability to enroll or follow a sufficient number of patients for any of our current

or future clinical trials could result in significant delays.

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

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

Our determination

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

make in our research and development programs, any changes to the scope and focus of those programs, any changes in grant funding for

certain of those programs, and projection of future costs, revenues, and rates of expenditure.

Our 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.

We may be required to delay, postpone, or cancel

our clinical trials or limit the number of clinical trial sites, unless we are able to obtain adequate financing.

We cannot assure that

adequate financing will be available on favorable terms, if at all.

Sales of additional equity securities by us or our subsidiaries and

affiliates could result in the dilution of the interests of our current shareholders.

flows used in operating activities

cash used in operating activities of $7.4 million for the three months ended March 31, 2021 primarily reflects the loss from operations

cash used in operating activities of $12.8 million for the six months ended June 30, 2021 primarily reflects the loss from operations

of $14.1 million plus the changes in assets and liabilities of $0.9 million.

These items were offset primarily by non-cash expenses

of $0.5 million for stock-based compensation and $0.3 million of depreciation and amortization.

The unrealized gain on marketable

equity securities had no effect on cash flows.

cash used in operating activities of $5.0 million for the three months ended March 31, 2020 primarily reflects the loss from operations

These items were offset primarily by non-cash expenses of

$1.5 million for stock-based compensation and $0.5 million of depreciation and amortization.

The unrealized gain on marketable equity

securities, foreign currency remeasurement, and deferred tax benefit had no effect on cash flows.

cash used in operating activities of $9.3 million for the six months ended June 30, 2020 primarily reflects the loss from operations

of $13.8 million less the changes in assets and liabilities of $1.1 million.

1 unchanged sentence

$1.3 million of depreciation and amortization and $1.2 million for stock-based compensation.

The unrealized loss on marketable securities had no effect on cash flows.

The unrealized loss on marketable securities

and foreign currency remeasurement had no effect on cash flows.

flows provided by investing activities

provided by investing activities of $10.1 million for the three months ended March 31, 2021 was associated primarily with receipts

of $10.1 million from sales of a portion of our OncoCyte holdings.

provided by investing activities of $5.3 million for the three months ended March 31, 2020 was associated primarily with receipts

of $5.0 million from sales of a portion of our OncoCyte holdings and $0.3 million from sales of a portion of our AgeX holdings.

provided by investing activities of $10.0 million for the six months ended June 30, 2021 was associated primarily with receipts of $10.1

million from sales of a portion of our OncoCyte holdings, offset by purchases of equipment for $0.1 million.

provided by investing activities of $12.0 million for the six months ended June 30, 2020 was associated primarily with receipts of $10.9

million from sales of a portion of our OncoCyte holdings and $1.0 million from sales of a portion of our AgeX holdings.

flows provided by financing activities

provided by financing activities of $21.0 million for the three months ended March 31, 2021 was associated primarily with net

proceeds of $19.3 million from the sale of common shares and proceeds of $1.7 million from the exercise of employee stock options.

used in financing activities for the three months ended March 31, 2020 was $10,000.

provided by financing activities of $32.3 million for the six months ended June 30, 2021 was associated primarily with net proceeds of

$26.9 million from the sale of common shares and proceeds of $5.3 million from the exercise of employee stock options.

provided by financing activities of $0.5 million for the six months ended June 30, 2020 was associated primarily with proceeds of $0.5

million from a PPP loan.

Sheet Arrangements

of March 31, 2021 and December 31, 2020, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii)

of Commission Regulation S-K.

of June 30, 2021 and December 31, 2020, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Commission

Regulation S-K.

Quantitative and Qualitative Disclosures about Market Risk

Commission rules and regulations, as a smaller reporting company, we are not required to provide the information required by this

Commission rules and regulations, as a smaller reporting company, we are not required to provide the information required by this item.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis