What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2023-03-09 compared with 2022-03-10 · 315 added, 404 removed, 181 unchanged (80% of the section changed)

15 unchanged sentences

and Business Overview

Lineage Cell Therapeutics,

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

novel cell therapies to address unmet medical needs.

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

and manufacturing capabilities.

From this platform, we design, develop, and manufacture specialized human cells with anatomical and physiological

functions which are similar or identical to cells found naturally in the human body.

These cells which we manufacture are created by

developmental differentiation protocols applied to established and well-characterized, pluripotent, and self-renewing cell lines.

functional cells are transplanted into patients to either 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 or infectious diseases.

strategy is to efficiently leverage our technology platform and manufacturing capabilities to develop and advance our programs internally

or in conjunction with strategic partners to further enhance their value.

As one example, on December 17, 2021, we entered into a Collaboration

and License Agreement with F.

Hoffmann-La Roche Ltd and Genentech, Inc., a member of the Roche Group (collectively, “Roche”),

wherein Lineage granted to Roche exclusive worldwide rights to develop and commercialize retinal pigment epithelium cell therapies, including its proprietary cell therapy known as OpRegen®, for the treatment of ocular disorders, including advanced

dry age-related macular degeneration with geographic atrophy.

Roche has paid Lineage a $50.0 million upfront payment under this alliance

and Lineage is eligible to receive up to an additional $620.0 million in certain developmental, regulatory, and commercialization milestone

Lineage also is eligible for tiered double-digit percentage royalties on net sales of OpRegen.

Lineage is working with Roche in support of the dry age-related macular degeneration (OpRegen) program and is clinically testing

therapies to treat spinal cord injuries and non-small cell lung cancer, as well as conducting research and preclinical development activities

intended to advance our pipeline into other therapeutic indications and target tissues or organs.

Candidates & Other Programs

have several allogeneic, or “off-the-shelf,” cell therapy programs in 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”) (also

known as atrophic AMD).

There are currently no therapies approved by the U.S.

Food and Drug Administration (“FDA”) for

As of December 17, 2021 this program has been partnered with Roche for further clinical development and commercialization.

an oligodendrocyte progenitor cell therapy currently in long-term follow-up for a Phase 1/2a multicenter clinical trial for spinal

cord injuries (“SCI”).

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

an allogeneic cancer immunotherapy of antigen-presenting dendritic cells.

One of the VAC

product candidates, VAC2, is currently in a Phase 1 clinical trial in non-small cell lung

cancer (NSCLC).

This clinical trial is being funded and conducted by Cancer Research UK,

one of the world’s largest independent cancer research charities.

We also have another

VAC-based product candidate in preclinical development with our partner, Immunomic Therapeutics,

(“ITI”), for the treatment of glioblastoma multiforme (“GBM”).

We have other product candidates in preclinical

development covering a range of therapeutic areas and target tissues or organs.

Generally, these candidates are based on the same

pluripotent platform technology and employ a similar guided cell differentiation and transplant approach as our current clinical-stage

addition to seeking to create value for shareholders by developing product candidates and other technologies through our clinical development

programs, we also seek to create value from our technologies through partnering and strategic transactions.

We founded two companies

that later became publicly traded companies:

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

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

the year ended December 31, 2021, we received approximately $10.1 million in gross proceeds in connection with our sale of shares of

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

and accrued interest under a promissory note we received in connection with our sale of AgeX shares to Juvenescence in August 2018.

are a clinical-stage biotechnology company developing novel cell therapies to address unmet medical needs.

Our programs are based on

our proprietary cell-based technology platform and associated development and manufacturing capabilities.

From this platform, we

design, develop, manufacture, and test specialized human cells with anatomical and physiological functions similar to, or identical

to, cells found naturally in the human body.

Cells which we manufacture are created by specific developmental biological

differentiation protocols that we apply to established, well-characterized, and self-renewing pluripotent cell lines.

are transplanted into patients and are designed to (a) replace or support cells that are absent or dysfunctional due to degenerative

disease, aging, or traumatic injury, and (b) restore or augment functional activity in the affected person.

strategy is to efficiently leverage our technology platform and our development, formulation, delivery, and manufacturing capabilities

to advance our programs internally, or in conjunction with strategic partners, to further enhance their value and probability of success.

As one example, in December 2021 we entered into a Collaboration and License Agreement with F.

Hoffmann-La Roche Ltd and Genentech, Inc.,

a member of the Roche Group, wherein we granted to Roche exclusive worldwide rights to develop and commercialize retinal pigment epithelium

cell therapies, including our proprietary cell therapy program known as OpRegen ® , for the treatment of ocular disorders,

including geographic atrophy (GA) secondary to age-related macular degeneration (AMD).

Under the terms of the Roche Agreement, Lineage

received a $50.0 million upfront payment and is eligible to receive up to $620.0 million in certain developmental, regulatory, and commercialization

milestone payments.

Lineage also is eligible to receive tiered double-digit percentage royalties on net sales of OpRegen in the U.S.

major markets.

See Note 14 (Commitments and Contingencies) to our consolidated financial statements included elsewhere in this Report

for discussion on the Roche Agreement.

of December 31, 2022, we have five allogeneic, or “off-the-shelf,” cell therapy programs in development, of which three have

reached clinical testing:

an allogeneic retinal pigment epithelium cell replacement therapy currently in a Phase 2a multicenter clinical trial, being

conducted by Genentech, for the treatment of geographic atrophy (GA) secondary to age-related macular degeneration (AMD), also known

as atrophic or dry AMD.

A previous Phase 1/2a trial conducted by Lineage enrolled twenty-four (24) individuals with dry AMD with GA.

In December 2021, this program was partnered with Roche for further clinical development and commercialization.

an allogeneic oligodendrocyte progenitor cell therapy currently in long-term follow-up from a Phase 1/2a multicenter clinical trial

for cervical spinal cord injuries.

To date, five (5) patients with thoracic spinal cord injuries and twenty-five (25) patients with

cervical spinal cord injuries have been enrolled in clinical trials of OPC1.

The clinical development of OPC1 has been partially

funded by $14.3 million received under a grant from the California Institute for Regenerative Medicine.

Additional clinical trials

are being planned.

an allogeneic cancer immunotherapy comprised of antigen-presenting dendritic cells.

the VAC product candidates, VAC2, is 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.

An additional VAC-based

product candidate is in preclinical development with our partner, Immunomic Therapeutics,

Inc., for the treatment of glioblastoma multiforme.

an allogeneic auditory neuron progenitor cell transplant currently in preclinical development for the treatment of debilitating hearing

an allogeneic photoreceptor cell transplant currently in preclinical development for the treatment of vision loss due to photoreceptor

dysfunction or damage.

have additional undisclosed product candidates being considered for development, which cover a range of therapeutic areas and unmet medical

Generally, these product candidates are based on the same platform technology and employ a similar guided cell differentiation

and transplant approach as the product candidates detailed above, but in some cases may also include genetic modifications designed

to enhance efficacy and/or safety profiles.

addition to seeking to create value for shareholders by developing product candidates and advancing those candidates through

clinical development, we also may seek to create value from our large patent estate and additional related technologies and capabilities, through

partnering and/or strategic transactions.

Accounting Estimates

1 unchanged sentence

requires management to make estimates and assumptions that affect the reported amounts in our consolidated financial statements and related

Our significant accounting policies are described in Note 2 to our consolidated financial statements included elsewhere in this

We have identified below our critical accounting policies and estimates that we believe require the greatest amount of judgment.

On an ongoing basis, we evaluate estimates which are subject to significant judgment, including those related to going concern assessment

of our consolidated financial statements, useful lives associated with long-lived assets, including evaluation of asset impairment, allowances

for uncollectible accounts and financing receivables, v aluing shares owned in nonconsolidated companies

using the equity method of accounting, loss contingencies, deferred income taxes and tax reserves, including valuation allowances

related to deferred income taxes, and assumptions used to value stock-based awards, debt or other equity instruments.

Actual results

could differ materially from those estimates.

On an ongoing basis, we evaluate our estimates compared to historical experience and trends

which form the basis for making judgments about the carrying value of assets and liabilities.

To the extent that there are material differences

between our estimates and our actual results, our future financial statement presentation, financial condition, results of operations

and cash flows will be affected.

Our significant accounting policies are described in Note 2 (Significant Accounting Policies) to our consolidated financial statements

included elsewhere in this report.

We have identified below our critical accounting policies and estimates that we believe require the

greatest amount of judgment.

On an ongoing basis, we evaluate estimates which are subject to significant judgment, including those related

to going concern assessment of our consolidated financial statements, useful lives associated with long-lived assets, including evaluation

of asset impairment, allowances for uncollectible accounts and financing receivables, v aluing shares

owned in nonconsolidated companies using the equity method of accounting, loss contingencies, deferred income taxes and tax reserves,

including valuation allowances related to deferred income taxes, and assumptions used to value stock-based awards, debt or other equity

Actual results could differ materially from those estimates.

On an ongoing basis, we evaluate our estimates compared to

historical experience and trends which form the basis for making judgments about the carrying value of assets and liabilities.

extent that there are material differences between our estimates and our actual results, our future financial statement presentation,

financial condition, results of operations and cash flows will be affected.

believe the assumptions and estimates associated with the following have the greatest potential impact on our consolidated financial

and IPR&D – Goodwill is calculated as the difference between the acquisition date fair value of the consideration transferred

and the values assigned to the assets acquired and liabilities assumed.

Goodwill is tested for impairment in accordance with Accounting

Standards Update (“ASU”) 2017-04, Intangibles—Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill

In-process research and development (“IPR&D”) assets are indefinite-lived intangible assets until the

completion or abandonment of the associated research and development (“R&D”) efforts.

Once the R&D efforts are completed

or abandoned, the IPR&D will either be amortized over the asset’s estimated life as a finite-lived intangible asset or be impaired,

respectively, in accordance with ASC 350, Intangibles – Goodwill and Other (“ASC 350”).

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.

– We account for leases in accordance with ASC 842, Leases .

We determine if an arrangement is a lease at inception.

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

statements of operations.

Under the available practical expedients for the adoption of ASC 842, 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 consolidated balance sheet.

ROU 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 and finance 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 and finance lease

ROU assets 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 operating lease payments is recognized on

a straight-line basis over the lease term.

Lease expense for finance lease payments is recognized as amortization of ROU assets

and related interest.

Operating and finance leases are included as right-of-use assets in property and equipment, and ROU lease liabilities,

current and long-term, in the consolidated balance sheets.

We disclose the amortization of our ROU assets and operating lease

payments as a net amount, “Amortization of ROU assets”, on the consolidated statement of cash flows.

concern assessment – In accordance with Accounting Standards Update 2014-15, Presentation of Financial Statements –

26 unchanged sentences

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

from product sales and license fees – For 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, Lineage

recognizes 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).

Lineage estimates and recognizes royalty revenues based

on all available information, including estimates provided by the customer or licensee from which Lineage obtains such estimates

directly for each reporting period.

Actual revenues ultimately received may differ from those estimates recorded and are adjusted in

the period when information to actuals is available to Lineage.

Collaborative

15 unchanged sentences

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

identify the performance obligations within the collaboration agreements, we first identify all the promises in the contract (i.e.,

explicit and implicit), which may include a customer option to acquire additional goods or services for free or at a discount.

exclude any immaterial promises from the assessment of identifying performance obligations.

When an option is identified as providing

a customer with a material right, the option is identified as a performance obligation.

A portion of the transaction price is then allocated

to the option and recognized when (or as) the future goods or services related to the option are provided or when the option expires.

identify the performance obligations within the collaboration agreements, we first identify all the promises in the contract (i.e., explicit

and implicit), which may include a customer option to acquire additional goods or services for free or at a discount.

We exclude any

immaterial promises from the assessment of identifying performance obligations.

When an option is identified as providing a customer

with a material right, the option is identified as a performance obligation.

A portion of the transaction price is then allocated to

the option and recognized when (or as) the future goods or services related to the option are provided or when the option expires.

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

40 unchanged sentences

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.

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

to use certain patents are stated at acquired cost, less accumulated amortization.

Amortization expense is computed using the straight-line

method over the estimated useful lives of the assets, generally over five to ten years.

of long-lived assets – Our long-lived assets, including long-lived intangible assets, are reviewed for impairment whenever

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

If an impairment indicator

is present, we evaluate recoverability by a comparison of the carrying amount of the assets to future undiscounted net cash flows expected

to be generated by the assets.

If the assets are impaired, the impairment recognized is measured by the amount by which the carrying

amount exceeds the estimated fair value of the assets.

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

29 unchanged sentences

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

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

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

Treasury notes with maturities similar to the expected term of the awards.

Forfeitures are accounted for as they occur.

are accounted for as they occur.

restricted stock unit awards (“RSUs”) subject to service and/or performance vesting conditions, the grant-date fair value

is established based on the closing price of Lineage’s common shares on such date.

Stock-based compensation expense for RSUs subject

to only service conditions is recognized on a straight-line basis over the service period.

Stock-based compensation expense for RSUs

with both service and performance conditions is recognized on a graded basis only if it is probable that the performance condition will

Lineage accounts for forfeitures of RSUs as they occur in determining stock-based compensation expense.

For RSUs subject

to a market condition, the grant-date fair value is estimated using a Monte Carlo valuation model.

The model is based on random projections

of stock price paths and must be repeated numerous times to achieve a probabilistic assessment.

Lineage recognizes stock-based compensation

expense for RSUs subject to market-based vesting conditions regardless of whether it becomes probable that the vesting conditions will

be achieved, and stock-based compensation expense for such RSUs is not reversed if vesting does not actually occur.

the fair value of employee stock options is determined in accordance with FASB guidance, changes in the assumptions can materially affect

the estimated value and therefore the amount of compensation expense recognized in the consolidated financial statements.

management’s opinion, the existing valuation models may not provide an accurate measure of the fair value of employee stock options

because the option-pricing model value may not be indicative of the fair value that would be established in a willing buyer/willing seller

market transaction.

taxes – We account for income taxes in accordance with ASC 740, Income Taxes , which prescribe the use of the asset and

liability method, whereby deferred tax asset or liability account balances are calculated at the balance sheet date using current tax

laws and rates in effect.

Valuation allowances are established when necessary to reduce deferred tax assets when it is more likely than

not that a portion or all of the deferred tax assets will not be realized.

ASC 740 guidance also prescribes a recognition threshold and

a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax

For benefits to be recognized, a tax position must be more-likely-than-not sustainable upon examination by taxing authorities.

We file a U.S.

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

Our judgments regarding future taxable

income may change over time due to changes in market conditions, changes in tax laws, tax planning strategies or other factors.

assumptions, and consequently the estimates, change in the future with respect to our own deferred tax assets and liabilities, the valuation

allowance may be increased or decreased, which may have a material impact on our consolidated financial statements.

recognize accrued interest and penalties related to unrecognized tax benefits, if any, as income tax expense, however, no amounts were

accrued for the payment of interest and penalties as of December 31, 2021 and 2020.

of consolidation – Our consolidated financial statements include the accounts of our wholly owned and majority-owned subsidiaries.

All material intercompany accounts and transactions have been eliminated in consolidation.

The consolidated financial statements are

presented in accordance with accounting principles generally accepted in the U.S.

and with the accounting and reporting requirements

of SEC Regulation S-X.

In management’s

opinion, the existing valuation models may not provide an accurate measure of the fair value of employee stock options because the option-pricing

model value may not be indicative of the fair value that would be established in a willing buyer/willing seller market transaction.

of Operations

7 unchanged sentences

revenues for the year ended December 31, 2022 were $14.7 million compared to $4.3 million for the year ended December 31, 2021.

increase of $2.5 million is primarily due to a $2.0 million increase in royalties, a $1.1 million increase in collaboration revenues

from our collaboration agreements with Roche and ITI, offset by a $0.6 million decrease in grant revenues due to less grant-related activities

during the year.

royalties are derived from product sales and license fees.

For the year ended December 31, 2021 royalties were $2.0 million higher compared

to the prior year, primarily due to additional royalty revenues of $1.8 million from a certain royalty customer, based on the customer’s

updated communication to us regarding royalties due.

Consequently, Lineage also recorded 50% of these additional royalties in cost of

sales during the year.

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 previously from a Small Business Innovation Research

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

The decreases in our grant

revenues for the year ended December 31, 2021 as compared to the year ended December 31, 2020, were primarily due to less grant-related

Grant revenues generated by Cell Cure from the IIA for the development of OpRegen and our bio retina program amounted to

$0.4 million and $0.7 million for the years ended December 31, 2021 and 2020, respectively, and grant revenues generated by the NIH Grant

amounted to $0.4 million for the year ended December 31, 2020.

$10.4 million increase was primarily due to a $12.2 million increase in collaboration revenues related to the current year recognition

of the $50.0 million upfront payment under the Roche Agreement, which was included in deferred revenues at December 31, 2021 (see Note

3 (Revenue) to our consolidated financial statements included in this report for additional information) ,

offset by a $1.4 million decrease in royalties which were significantly higher in the prior year resulting from the recording

of royalty revenues of approximately $1.8 million from a certain customer during the prior year based on the customers updated communication

to us regarding royalties due, and a $0.4 million decrease in grant revenues due to less grant-related

activities during the year.

Grant revenues are generated primarily by our subsidiary Cell Cure from the IIA for the development

of OpRegen and our bio retina program.

The decrease in our grant revenues for the year ended December 31, 2022 as compared to the year

ended December 31, 2021, were primarily due to less grant-related activities.

operating expenses consist of research and development expenses and general and administrative expenses.

and development expenses .

These 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.

Research and development expenses

that have an alternative future use will be capitalized as tangible assets, and costs with no future benefit or alternative use will

be expensed as incurred.

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

income recognized in our consolidated statements of operations.

Royalties and sublicensing fees are recorded as research and development

expenses, unless they are associated with royalties from product sales, which we classify as cost of sales in our consolidated statements

of operations.

and administrative expenses .

These expenses include employee and director compensation and related benefits, including stock-based

compensation, for executive and corporate personnel, professional and consulting fees, and allocated overhead such as facilities rent

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

and maintenance, stock exchange-related costs, depreciation expense, marketing costs, legal and accounting costs, and other miscellaneous.

following table shows our operating expenses for the years ended December 31, 2022 and 2021 (amounts in thousands, except percentages).

2 unchanged sentences

General and administrative expenses

Includes $21.0 million of royalty and redemption fee expense to Hadasit Medical Research and Development Ltd.

and the IIA, respectively, pursuant to Lineage’s financial obligations related to the Roche Agreement (see Note 14), in connection

with the receipt of the $50.0 million upfront payment received from Roche .

and development expenses .

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.

Research and development costs which have an alternative

future use will be capitalized as tangible assets, and costs with no future benefit or alternative use will be expensed as incurred.

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

consolidated statements of operations.

Royalty expenses or sublicensing fees are recorded as research and development costs, unless these

costs are associated with royalties from product sales, which we classify as cost of sales on our consolidated statements of operations.

The $19.9 million year-over-year decrease in research and development expense is primarily the result of

$21.0 million of royalty and redemption fee expense recorded in 2021 for payments owed to Hadasit and the IIA pursuant to financial obligations

to each of them in connection with the $50.0 million upfront payment we received from Roche in January 2022 under the Roche Agreement

and for which there was no similar expense in 2022 (see Note 14 (Commitments and Contingencies) to our consolidated financial statements

included in this report).

and administrative expenses .

The $4.3 million year-over-year increase in general and administrative expenses was primarily attributable

to (i) a $2.1 million increase in legal and litigation expense, (ii) a $1.3 million increase in employee salaries and benefits, (iii)

a $0.9 million increase in stock-based compensation related expenses (see Note 12 (Stock Based-Awards) to our consolidated financial

statements included in this report for additional information), (iv) a $0.4 million increase for audit and tax services, (v) a $0.2 million

increase in insurance costs, (vi) a $0.2 million increase in consulting expenses, (vii) a $0.1 million increase in recruiting and hiring

fees, (viii) a $0.1 million increase in travel expenses, (ix) a $0.6 million decrease in patent related costs and (x) a $0.5 million

decrease in investor relations expenses.

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

2 unchanged sentences

Percent of Total

OpRegen ® and other ophthalmic applications

All other programs

Total research and development expenses

and development expenses for the year ended December 31, 2021 were $33.9 million as compared to $12.3 million for the year ended December

The increase of $21.6 million is mainly attributable

to the following:

increase of $19.9 million in OpRegen, attributable primarily to a $12.1 million redemption fee to the IIA and a royalty expense of

$8.9 million to Hadasit, related to Lineage’s financial obligations related to the Roche Agreement (see Note 14), in connection

with receipt of the $50.0 million upfront payment received from Roche.

an increase of $2.2 million

in OPC1 related expenses, primarily related to an increase in manufacturing and development activities for this program, and a return

of unspent project funds of approximately $0.8 million in the prior year from a former Asterias service provider,

a net decrease of $0.3 million in the VAC program expenses,

primarily driven by the prior year signature fee accrual of $1.6 million to Cancer Research UK related to our license agreement,

substantially offset with increased manufacturing activities in the current year, as well as activities to support the ITI collaboration

agreement, and

a net 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 allocated to general and administrative expenses, 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, board fees, legal and accounting costs, and other miscellaneous expenses

which are allocated to general and administrative expense.

and administrative expenses for the year ended December 31, 2021 were $18.2 million as compared to $15.6 million for the year ended December

The total net increase of $2.6 million was

primarily attributable to a $0.9 million increase in share-based compensation expense, a $0.7 million increase in litigation and other

expenses related to Lineage’s merger with Asterias, a $0.6 million increase in legal and patent expenses, a $0.3 million increase

in payroll and related benefits, a $0.3 million increase in investor relations expenses, a $0.2 million increase in consulting expense,

partially offset with a $0.4 million reduction in rent and utilities.

and development expenses .

For the year ended December 31, 2022, the $19.9 million decrease in total research and development expenses

is mainly attributable to:

(i) a $20.5 million net decrease in expenses related to our OpRegen program, attributable to last year’s

payment of $21.0 million for royalty and redemption fee expenses paid to Hadasit and the IIA, respectively;

(ii) a $1.1 million net decrease

in expenses related to our OPC1 program, primarily related to a decrease in manufacturing activities for the program;

(iii) a $0.4 million

increase in expense related to our VAC program, primarily related to manufacturing improvement activities;

(iv) a $0.7 million increase

in expenses related to our ANP1 program, primarily related to manufacturing activities for our allogeneic auditory neuron cell transplant

and (v) a $0.5 million increase in expenses related to our PNC1 program, primarily related to research and development activities

for our allogeneic photoreceptor cell transplant program.

Income and Expenses, Net

following table shows the amount of other income, net, during the year ended December 31, 2021 and 2020 (in thousands):

following table shows the amount of other income (expenses), net, during the year ended December 31, 2022 and 2021 (in thousands):

Year Ended December 31,

Other income, net

Other income (expenses), net

Interest income, net

2 unchanged sentences

Unrealized loss on marketable equity securities

Unrealized gain (loss) on warrant liability

Other income, net

Total other income, net

income and expense, net - During the year ended December 31, 2020, we earned $1.0 million of interest income from our promissory

note with Juvenescence.

equity securities - As of December 31, 2021, Lineage owned 1.1 million shares of OncoCyte common stock.

These shares had a fair value

of $2.4 million, based on the closing price of OncoCyte common stock of $2.17 per share on December 31, 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 year ended December 31, 2021, Lineage recorded a realized gain of $6.0 million due to sales of OncoCyte shares in the year.

recorded a net unrealized loss on marketable equity securities of $2.2 million related to changes in fair market value of OncoCyte’s

common stock price during the year.

For the year ended December 31, 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 $2.5 million related to

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

All 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.

account for the shares we hold in Hadasit Bio-Holdings Ltd (“HBL”) as marketable equity securities as of December 31, 2021.

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

December 31, 2021, were not material.

For the year ended December 31, 2021, we did not hold any marketable securities related to AgeX.

the year ended December 31, 2020, Lineage recorded realized gains of $0.8 million and $0.6 million due to sales of AgeX shares and HBL

shares, respectively, in the period.

For the year ended December 31, 2020, we recorded unrealized losses of $1.3 million, due to changes

in fair market value of AgeX’s common stock price during the period.

on extinguishment of debt – For the year ended December 31, 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.

income, net – Other income, net, in 2021 and 2020 consist primarily of net foreign currency transaction gains recognized by

Cell Cure and ESI, and changes in the fair value of the Cell Cure liability classified warrants.

Foreign currency transaction gains 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 December 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 December 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.

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

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.

have concluded that an ownership change did occur after the Asterias Merger, and the acquired net 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 and $41.9 million

of their federal and California net operating losses, respectively, as of December 31, 2021.

valuation allowance is provided when it is more likely than not that some portion of the deferred tax assets will not be realized.

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.

ended December 31, 2021, Lineage did not record a tax provision or deferred tax benefit.

the year ended December 31, 2020, Lineage recorded a $1.2 million deferred tax benefit for income taxes.

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.

Gain on revaluation of warrant liability

Other income (expenses), net

Total other income (expenses), net

debt securities .

During the third quarter of 2022, we began to invest our excess cash in short-term U.S.

Treasury securities resulting

in an increase in interest income.

See Note 4 (Marketable Debt Securities) to our consolidated financial statements included in this

report for additional information regarding our marketable debt securities.

Marketable equity securities .

We expect our total other income (expenses), net, to fluctuate each reporting period based on the changes in the market price of the common

stock of OncoCyte Corporation (“OncoCyte”), which could impact our net income or loss reported in our consolidated statements

of operations for a particular reporting period.

also account for the shares we hold in Hadasit Bio-Holdings as marketable equity securities.

These shares are carried at fair market

value on our consolidated balance sheets.

The accounting transactions for these shares were not material for either of the years ended

December 31, 2022 and 2021.

Note 5 (Marketable Equity Securities) to our consolidated financial statements included in this report for additional information regarding

our marketable equity securities.

on extinguishment of debt.

For the year ended December 31, 2021, Lineage recognized a gain of $0.5 million on extinguishment of debt

in connection with the forgiveness in full of the loan it obtained under the Paycheck Protection Program.

Other income and (expenses),

Other expenses, net, for each of the years ended December 31, 2022 and 2021 consisted primarily of net foreign currency transaction

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

Foreign currency transaction gains and losses

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

dollar denominated notes payable and notes receivable

between Cell Cure and Lineage.

ASC 740, Income Taxes , a valuation allowance is provided when it is more likely than not that some portion of the deferred tax

assets will not be realized.

We established a full valuation allowance as of December 31, 2018 due to the uncertainty of realizing future

tax benefits from the net operating loss carryforwards and other deferred tax assets, including foreign net operating losses generated

by its subsidiaries.

the year ended December 31, 2022, Lineage recorded a withholding tax for $0.5 million on interest expense deemed paid to Lineage from

Cell Cure, related to the purchase of intellectual property pursuant to the US Israeli tax treaty.

For the years ended December 31, 2022,

and 2021, Lineage did not record a deferred tax benefit.

See Note 13 (Income Taxes) for additional information.

and Capital Resources

December 31, 2021, we had $58.4 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.

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.

Since 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, AgeX and OncoCyte, payments from research grants, royalties from product sales and sales

of research products and services.

At December 31, 2021, we had an accumulated deficit of approximately $337.1 million, working capital

of $64.4 million and shareholders’ equity of $90.9 million.

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

and we believe that our $58.4 million in cash, cash equivalents and marketable equity securities at December 31, 2021, 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 consolidated financial statements included elsewhere in this Report.

We believe we will meet the longer-term expected future cash

requirements and obligations, through our current cash and cash equivalents, milestone and other payments under our collaborative

agreements, and our available capacity on the At-the-Market (“ATM”) program (see Note 11).

We may, in the future, sell marketable

securities, including additional equity, to fund additional working capital, capital expenditures, or for other general

Our cash flows are dependent on a number of factors in addition to our operational results, including our contractual obligations.

We are obligated to make the following material rent payments under the terms of our operating leases at our Cell Cure facilities.

have three leases which aggregate to 1,796 rentable square meters (approximately 19,328 square feet) of office and laboratory space in

Jerusalem, Israel, the leases all expire in December 2025.

Total remaining rent payments due are $2.4 million, of which $0.5 million

is due in 2022.

See Note 14, for additional details on our contractual obligations.

January 2022, Lineage received a $50.0 million upfront payment related to the Roche Agreement.

Lineage made a subsequent payment of $12.1

million to the IIA, pursuant to Lineage’s obligations under the Innovation Law.

Additionally, Lineage made a subsequent

payment of $8.9 million to Hadasit, pursuant to Lineage’s obligations under the Second Amended and Restated License Agreement.

See Note 14 for a description of the Roche Agreement and related payment obligations.

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, 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.

used in operating activities

have historically funded our operations primarily through proceeds from the sale of shares of our common stock, the sale of common stock

of our former subsidiaries, research grants, revenues from collaborations, and royalties from product sales that are unrelated to our

current cell therapy product candidates.

During 2022, we funded our operations primarily through (a) the $50.0 million upfront payment

received under the Roche Agreement, (b) $1.6 million of proceeds from the exercise of warrants and employee stock options, and (c) $1.3

million in royalties received.

During 2022, we did not raise any proceeds from research grants, sales of our common stock or from sales

of common stock of our former subsidiaries.

of December 31, 2022, $63.8 million remained available for sale under our at the market offering program and we owned marketable

equity securities with a fair value of $0.4 million based on the closing price of such securities on that date.

(Marketable Equity Securities) and Note 11 (Shareholders’ Equity) to our consolidated financial statements included in this

report for additional information regarding the marketable equity securities we own and our at the market offering program,

respectively.

We may sell shares of our common stock and the marketable securities we own for liquidity.

However, when we can effect

such sales and the amount of shares we can sell depends on a variety of factors to be determined by us from time to time, including,

among others, market conditions, the trading price and volume of our common stock and of the marketable securities we own.

market value of our marketable equity securities may not represent the amount that could be realized in a sale of such securities

due to various market factors, including 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 pandemics, including the COVID-19 pandemic, geopolitical conflicts, rising

inflation and interest rates, and other macroeconomic factors.

provided by (used in) operating activities

cash provided by operating activities was $1.1 million for the year ended December 31, 2022, which primarily reflects the net changes

in assets and liabilities of $18.7 million, plus the $5.0 million in non-cash expenses for stock-based compensation and depreciation

and amortization, less the loss from operations of $22.5 million.

The change in assets and liabilities was impacted by the receipt of

the $50.0 million upfront payment under the Roche Agreement, and subsequent related payments to the IIA and Hadasit (see Note 14 (Commitments

and Contingencies) to the consolidated financial statements included in this report for further explanation), partially offset by the

accrual of the litigation settlement also as described in Note 14 (Commitments and Contingencies).

The unrealized loss on marketable

equity securities and foreign currency remeasurement had no effect on the cash flows.

cash used in operating activities of $23.6 million for the year ended December 31, 2021 primarily reflects the loss from operations of

4 unchanged sentences

and foreign currency remeasurement are non-cash items that had no effect on cash flows.

cash used in operating activities of $19.8 million for the year ended December 31, 2020 primarily reflects the loss from operations of

$26.4 million adjusted for the changes in assets and liabilities of $1.3 million.

These items were offset primarily by non-cash expenses

of $2.2 million for stock-based compensation and $2.1 million of depreciation and amortization.

The unrealized loss on marketable securities,

foreign currency remeasurement and deferred tax benefit are non-cash items that had no effect on cash flows.

used in investing activities

provided by (used in) investing activities

used in investing activities for the year ended December 31, 2022 was $46.2 million and consisted of $53.4 million related to the purchase

Treasury securities and $0.4 million for the purchase of equipment, offset with $7.7 million in U.S.

Treasuries which matured

during the year.

provided by investing activities of $9.7 million for the year ended December 31, 2021 was associated primarily with receipts of $10.1

million from sales of a portion of our OncoCyte holdings, offset with the purchase of equipment for $0.4 million.

provided by investing activities of $13.0 million for the year ended December 31, 2020 was associated primarily with receipts of $10.9

million from sales of a portion of our OncoCyte holdings, $1.3 million in sales of our AgeX holdings and $0.8 million in sales of a portion

of our HBL holdings.

provided by financing activities

provided by financing activities for the year ended December 31, 2022 was $1.6 million and consisted of $1.0 million of proceeds from

the exercise of warrants to purchase shares of Cell Cure and $0.6 million of proceeds from the exercise of employee stock options.

provided by financing activities of $36.9 million for the year ended December 31, 2021 was associated primarily with proceeds net of

2 unchanged sentences

and proceeds of $7.2 million from the exercise of employee stock options.

provided by financing activities of $29.9 million for the year ended December 31, 2020 was associated primarily with proceeds of $24.6

million from payment of the Juvenescence promissory note, gross proceeds of $5.1 million from sales of our common shares (which excludes

$0.3 million of cash in transit related to 2020 sales that settled in 2021), and proceeds of $0.5 million from a PPP loan under the Coronavirus

Aid, Relief, and Economic Security Act, all offset by $0.4 million in financing costs.

QUANTITATIVE AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK

rules and regulations of the Securities and Exchange Commission, as a smaller reporting company, we are not required to provide the information

required by this item.

financial obligations primarily consist of obligations to our licensors under our in-license agreements, obligations related to grants

received from government entities, including the IIA, obligations under vendor contracts to provide research services and other purchase

commitments with suppliers.

obligations under our in-license agreements require us to make future payments relating to sublicense fees, milestone fees, royalties

and reimbursement of patent maintenance costs.

Sublicense fees are payable to licensors when we sublicense underlying intellectual property

to third parties and are based on a percentage of the license fees we receive from sublicensees.

Milestone fees, including those related

to the Roche Agreement, are due to licensors upon future achievement of certain commercial, development and regulatory milestones.

including those related to royalties we may receive under the Roche Agreement, are payable to licensors based on a percentage of net

sales of licensed products.

Reimbursement of patent maintenance costs are payable to licensors as reimbursement for the cost of maintaining

license patents.

Due to the contingent nature of these payments, the amounts may fluctuate significantly from period to period.

December 31, 2022, we have not included any financial obligations under our in-license agreements in our consolidated balance sheet because

the achievement and timing of the events that would require the payment of such financial obligations is not fixed and determinable.

discussed in “Part I—Item 1.

Business—Grants from Government Entities,” above, we have received grants under

the Innovation Law and are required to pay royalties to the IIA from the revenues generated from the sale of product candidates and

related services developed, in whole or in part pursuant to, or as a result of, a research and development program funded by the

Under the Innovation Law, we are also required to pay redemption fees to the IIA.

To date, through a series of separate grants

beginning in 2007, Cell Cure has received a total of $15.4 million from the IIA to support the OpRegen program.

We are obligated to

pay approximately 24.3% of any future payments received under the Roche Agreement to the IIA, up to an aggregate cap on all payments

to IIA, such cap growing over time via interest accrual until paid in full, which currently stands at approximately $91.2 million.

Redemption fees due to the IIA under the Innovation Law are due upon receipt of any milestone and royalties received under the Roche

As of December 31, 2022, we have not included any future financial obligations due to the IIA under the Innovation Law in

our consolidated balance sheet because the achievement and timing of the events that would require future payments to the IIA under

the Innovation Law is not fixed and determinable.

See Note 14 (Commitments and Contingencies) to our consolidated financial

statements included in this report for additional information.

the terms of the leases for the facilities from which Cell Cure and Lineage operate, a total of $4.3 million of rent payments will become

due, of which $1.1 million will become due in 2023.

the normal course of business, we enter into services agreements with contract research organizations, contract manufacturing organizations

and other third parties.

Generally, these agreements provide for termination upon notice, with specified amounts due upon termination

based on the timing of termination and the terms of the agreement.

The amounts and timing of payments under these agreements are uncertain

and contingent upon the initiation and completion of the services to be provided.

Funding Requirements

December 31, 2022, we had an accumulated deficit of approximately $363.4 million.

We expect to continue to incur losses for at least

the next several years.

We expect that our operating expenses will continue to increase for the foreseeable future as we continue the

development of, and seek regulatory approval for, our product candidates.

As a result, we will need significant additional capital to

fund our operations.

Our determination as to when we will seek additional capital and the amount of additional capital that we will need

will be based on our evaluation of the progress we make in our research and development programs, changes to the scope and focus of those

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

If we are unable to raise additional capital when and as needed, we may be required to delay, postpone, or cancel our clinical trials

or limit the number of clinical trial sites.

may seek to obtain the additional capital we may need through one or more equity offerings, debt financings or other third-party funding,

including potential strategic alliances and licensing or collaboration agreements.

We cannot assure that adequate additional capital

will be available on favorable terms, if at all.

The issuance of additional securities, whether equity or debt, or the possibility of

such issuance, may cause the market price of our common shares to decline, and the issuance of additional equity securities could result

in the dilution of the interests of our current shareholders.

If we obtain additional capital through strategic alliances and licensing

or collaboration agreements, we may be required to relinquish rights to our intellectual property, our product candidates or otherwise

agree to terms unfavorable to us.

The unavailability or inadequacy of additional capital to meet future capital needs could force us

to modify, curtail, delay, or suspend some or all aspects of our current planned operations.

Our ability to raise additional capital

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 pandemics, including the COVID-19 pandemic, the conflict in Ukraine,

rising inflation and interest rates, and other macroeconomic factors.

believe that our $57.9 million in cash, cash equivalents and marketable securities at December 31, 2022, provide sufficient liquidity

to carry out our current planned operations (including after taking into account the amount we contributed to the settlement of the litigation

discussed in Note 14 (Commitments and Contingencies) to the consolidated financial statements included in this report), through at least

twelve months from the issuance date of our consolidated financial statements included elsewhere in this report.

We believe we will meet

our longer-term expected future cash requirements and obligations with our current cash and cash equivalents, milestone and other payments

we expect to receive under our collaboration agreements, and proceeds we receive from sales under our at the market offering program.

AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

rules and regulations of the SEC, 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-K

Item 7. Management’s Discussion and Analysis