What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-09 compared with 2022-03-10 · 951 added, 1203 removed, 761 unchanged (74% of the section changed)

FINANCIAL STATEMENTS

AND SUPPLEMENTARY DATA

STATEMENTS AND SUPPLEMENTARY DATA

to consolidated financial statements

Registered Public Accounting Firm - Audit Opinion

Financial Statements:

Independent Registered Public Accounting Firm - Audit Opinion

Consolidated Balance Sheets

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accompanying notes to consolidated financial statements.

Report of Independent Registered Public Accounting

the Shareholders and Board of Directors

of Independent Registered Public Accounting Firm

of Directors and Shareholders

Cell Therapeutics, Inc.

on the Financial Statements

have audited the accompanying consolidated balance sheet of Lineage Cell Therapeutics, Inc.

have audited the accompanying consolidated balance sheets of Lineage Cell Therapeutics, Inc.

and Subsidiaries (collectively, the “Company”)

as of December 31, 2021, the related consolidated statements of operations, comprehensive loss, changes in shareholders’ equity,

and cash flows for the year ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial

statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position

of the Company at December 31, 2021, and the results of its operations and its cash flows for the year ended December 31, 2021, in conformity

with accounting principles generally accepted in the United States of America.

consolidated financial statements of the Company as of and for the year ended December 31, 2020 were audited by OUM & Co.

joined WithumSmith+Brown, PC on July 15, 2021, and rendered their opinion on such statements on March 11, 2021.

as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive loss, changes in shareholders’

equity, and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred

to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in

all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its

cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted

in the United States of America.

consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion

on the Company’s consolidated financial statements based on our audit.

on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public

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and the PCAOB.

conducted our audit in accordance with the standards of the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain

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The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing

of our audits we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing

an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due

to error or fraud, and performing procedures that respond to those risks.

audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether

due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence

regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles

Our audits also included evaluating the accounting principles

used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

We believe that our audits provide a reasonable basis for our opinion.

critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that

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disclosures to which it relates.

for revenue and collaboration agreements

for revenue recognition

of the Matter

Company recorded deferred revenue and revenue from collaboration agreements of $50.4 million and $1.1 million, respectively, as of and

for the year ended December 31, 2021.

As described in Note 2, the terms of the Company’s collaboration agreements may include licenses

for the Company’s technology or programs, research and development services, and services or obligations in connection with participation

in research or steering committees.

Amounts received under these arrangements typically include nonrefundable upfront payments and license

fees, research funding, milestone and other contingent payments for the achievement of defined collaboration objectives and certain preclinical,

clinical, regulatory and sales-based events, as well as royalties on sales of any commercialized products.

the Company’s accounting for revenues from collaboration arrangements was complex and required significant judgments primarily

in identifying which elements represent revenue producing performance obligations, determining the measurement and allocation of arrangement

consideration, and evaluating estimates of the total expected inputs under the input method for revenue recognized over time.

Company recorded deferred revenue of $36.6 million as of December 31, 2022 and revenue of $13.4 million for the year ended December 31,

2022 from a collaboration agreement.

As described in Note 3, the Company has concluded that the grant of licenses for the Company’s

technology or programs, research and development services, and services or obligations in connection with participation in research or

steering committees represent a combined performance obligation for which the Company recognizes collaboration revenues as the services

are performed over time.

the Company’s accounting for revenues from this collaboration agreement was complex and required significant judgments, primarily

in evaluating the period in which the performance obligation was satisfied and evaluating estimates of total expected inputs under the

input method for revenue recognized over time.

We Addressed the Matter in Our Audit

test the accounting treatment for revenue from collaboration arrangements, we evaluated, among other things, whether the identified performance

obligations were properly determined, and the transaction price was properly measured and allocated to the identified performance obligations.

To test the measurement of efforts toward satisfying the performance obligation, our audit procedures included, among others, reviewing

management’s analysis for accuracy and completeness by agreeing data to the underlying contract, inspecting communications with

test the measurement of efforts toward satisfying the performance obligation, our audit procedures included, among others, reviewing

management’s analysis for accuracy and completeness by agreeing data to the underlying agreement, inspecting communications with

the collaborative partner, evaluating the application of the input method for the recognition of revenue and testing the estimated total

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ID Number 100

of Independent Registered Public Accounting Firm

and Board of Directors

CELL THERAPEUTICS, INC.

on the Consolidated Financial Statements

have audited the consolidated balance sheet of Lineage Cell Therapeutics, Inc.

and Subsidiaries (collectively, the “Company”)

as of December 31, 2020, and the related consolidated statements of operations, comprehensive loss, changes in shareholders’ equity,

and cash flows for the year ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial

statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position

of the Company at December 31, 2020, and the results of their operations and their cash flows for the year ended December 31, 2020 ,

in conformity with accounting principles generally accepted in the United States of America.

consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion

on the Company’s consolidated financial statements based on our audit.

We are a public accounting firm registered with the PCAOB

and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable

rules and regulations of the Securities and Exchange Commission and the PCAOB.

conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due

to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence

regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles

used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Francisco, California

We served as the Company’s auditor since 2014.

ID Number 252

CELL THERAPEUTICS, INC.

AND SUBSIDIARIES

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Cash and cash equivalents

Marketable equity securities

Marketable securities (Notes 4 and 5)

Accounts and grants receivable, net (Note 3)

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Lease liability, net of current portion (Note 14)

Financing lease, net of current portion

Liability classified warrants and other long-term liabilities

Financing lease, net of current portion (Note 14)

Other long-term liabilities

TOTAL LIABILITIES

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Loss from operations

OTHER INCOME, NET:

OTHER INCOME (EXPENSES):

Interest income, net

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Gain on extinguishment of debt

Unrealized gain (loss) on warrant liability

Other income, net

Total other income, net

Gain on revaluation of warrant liability

Other income (expense), net

Total other income/(expense)

LOSS BEFORE INCOME TAXES

Income tax benefit

Income tax expense (Note 13)

Net loss attributable to noncontrolling interest

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Other comprehensive loss, net of tax:

Foreign currency translation adjustments, net of tax

Foreign currency translation adjustments

Unrealized loss on marketable debt securities

COMPREHENSIVE LOSS

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STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

Accumulated Deficit

Comprehensive

Income/(Loss)

Shareholders’

Noncontrolling

Accumulated Deficit

Comprehensive

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Shareholders’

BALANCE AT DECEMBER

AT DECEMBER 31, 2020

$ ( 294,078 )

Shares issued through ATM

Shares issued upon vesting

of restricted stock units, net of shares retired to pay employees’ taxes

Shares issued for services

Stock-based compensation

Shares issued

upon exercise of stock options

Shares issued

upon exercise of stock options, shares

Financing related fees

Dissolution of BioTime Asia

Hadasit non-cash warrant exercise

Shares issued upon exercise

of stock options

Shares issued upon exercise

of stock options, shares

Foreign currency translation

BALANCE AT DECEMBER 31, 2020

issued through ATM

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

issued for services

issued upon exercise of stock options

issued for retirement of stock warrants

currency translation loss

AT DECEMBER 31, 2021

$ ( 337,097 )

Shares issued through ATM

Shares issued upon vesting

of restricted stock units, net of shares retired to pay employees’ taxes

Shares issued for services

Stock-based compensation

Shares issued upon exercise of stock options

Financing related fees

Shares issued upon exercise of stock options

Foreign currency translation

$ ( 337,097 )

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

issued upon exercise of stock options

warrant exercise, net

loss on marketable securities

currency translation gain

AT DECEMBER 31, 2022

$ ( 363,370 )

accompanying notes to the consolidated financial statements.

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Unrealized loss on marketable equity securities

Deferred tax benefit

Accretion of income on marketable debt securities

Depreciation expense, including amortization of leasehold improvements

Amortization of right-of-use assets

Change in right-of-use assets and liabilities

Amortization of intangible assets

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Common stock issued for services

Change in unrealized (gain) loss on warrant liability

Write-off of security deposit

Amortization of deferred license fee

Foreign currency remeasurement and other (gain)

Gain on revaluation of warrant liability

Foreign currency remeasurement and other loss/(gain)

Loss/(gain) on sale of assets

Realized loss on warrant exercise

Gain on extinguishment of debt

Changes in operating assets and liabilities:

Accounts and grants receivable

Accrued interest receivable

Receivables from affiliates, net of payables

Accounts and grants receivable (Note 3)

Prepaid expenses and other current assets

Accounts payable and accrued liabilities

Deferred revenue and other liabilities

Net cash used in operating activities

Accounts payable and accrued liabilities (Note 8)

Deferred revenue and other liabilities (Note 3)

Net cash provided by (used in) operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of marketable debt securities

Maturities of marketable debt securities

Purchases of property and equipment, net

Proceeds from sale of OncoCyte common shares

Proceeds from the sale of AgeX common shares

Proceeds from the sale of HBL common shares

Purchase of property and equipment

Proceeds from sale of assets

Security deposit paid and other

Net cash provided by investing activities

Net cash (used in) provided by investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from employee options exercised

Proceeds from payment of Juvenescence promissory note

Common shares received and retired for employee taxes paid

Proceeds from sale of common shares

Proceeds from exercise of subsidiary warrants, net

Repayments of financing lease liabilities

Payments for offering costs

Repayment of financing lease liabilities

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

Net cash provided by financing activities

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CELL THERAPEUTICS, INC.

AND SUBSIDIARIES

TO THE CONSOLIDATED FINANCIAL STATEMENTS

Organization, Basis of Presentation and Liquidity

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, Inc.

(“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 products.

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.

November 7, 2018, Lineage, Asterias Biotherapeutics, Inc.

(“Asterias”) and Patrick Merger Sub, Inc., a wholly owned subsidiary

of Lineage, entered into an Agreement and Plan of Merger (the “Merger Agreement”) whereby Lineage agreed to acquire all of

the outstanding common stock of Asterias in a stock-for-stock transaction (the “Asterias Merger”).

March 7, 2019, the shareholders of each of Lineage and Asterias approved the Merger Agreement.

Prior to the Asterias Merger, Lineage

owned approximately 38 % of Asterias’ issued and outstanding common stock and accounted for Asterias as an equity method investment.

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

The former stockholders of

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

Lineage issued

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

in connection with the closing of the Asterias Merger.

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

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

The total purchase price was $ 52.6 million.

Lineage also assumed warrants to purchase

shares of Asterias common stock.

Asterias Merger was accounted for using the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”)

Topic 805, Business Combinations , which requires, among other things, that the assets and liabilities assumed be recognized at

their fair values as of the acquisition date.

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.

preparation of consolidated financial statements in conformity with accounting principles generally accepted in the U.S.

requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent

assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during

the reporting period with consideration given to materiality.

Significant estimates and assumptions which are subject to significant

judgment include those related to going concern assessment of consolidated financial statements, useful lives associated with long-lived

assets, including evaluation of asset impairment, allowances for uncollectible accounts receivables, 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.

requires management

to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and

liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting

period with consideration given to materiality.

Significant estimates and assumptions which are subject to significant judgment include

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

evaluation of asset impairment, allowances for uncollectible accounts receivables, 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.

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Field of Business

Asterias BioTherapeutics, Inc.

based therapeutics to treat neurological conditions and cancer

Cell Cure Neurosciences Ltd (“Cell Cure”)

Manufacturing

of Lineage’s cell replacement platform technology

Lineage Ownership

Cell Cure Neurosciences Ltd

Manufacturing of Lineage’s product candidates

ES Cell International Pte.

and clinical grade cell lines

OrthoCyte Corporation (“OrthoCyte”)

in orthopedic diseases and injuries

was acquired by Lineage in March 2019.

Includes shares

owned by Lineage and ESI.

The operating activities and fields of business listed

under these subsidiaries are conducted primarily by Lineage as the parent company.

Research and clinical grade cell lines

shares owned by Lineage and ES Cell International Pte.

of December 31, 2021 our ownership percentage of Cell Cure was approximately 99 %.

In July 2022, Hadasit Bio-Holdings Ltd.

warrants to purchase 21,999 ordinary shares of Cell Cure.

Lineage’s ownership percentage of Cell Cure decreased as a result

of the warrant exercise.

As of December 31, 2022, our ownership percentage of Cell Cure was approximately 94 %.

material intercompany accounts and transactions have been eliminated in consolidation.

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equity on Lineage’s consolidated balance sheets.

has incurred significant operating losses and in recent years has funded its operations primarily through sale of common stock of AgeX

and OncoCyte, both former subsidiaries, sale of common stock of Hadasit Bio-Holdings Ltd (“HBL”), receipt of research grants,

royalties from product sales, license revenues, sales of research products and issuance of equity securities.

May 1, 2020, Lineage entered into a Controlled Equity Offering SM Sales Agreement (the “Sales Agreement”) with

Cantor Fitzgerald & Co., as sales agent (“Cantor Fitzgerald”), pursuant to which Lineage may offer and sell, from time

to time, through Cantor Fitzgerald, common shares of Lineage (“ATM Shares”) having an aggregate offering price of up to $ 25.0

Lineage is not obligated to sell any ATM Shares.

Subject to the terms and conditions of the Sales Agreement, Cantor Fitzgerald

will use commercially reasonable efforts, consistent with its normal trading and sales practices, applicable state and federal law, rules

and regulations, and the rules of the NYSE American, to sell the ATM Shares from time to time based upon Lineage’s instructions,

including any price, time or size limits specified by Lineage.

Under the Sales Agreement, Cantor Fitzgerald may sell the ATM Shares by

any method deemed to be an “at-the-market” offering as defined in Rule 415(a)(4) under the Securities Act of 1933, as amended,

or by any other method permitted by law, including in privately negotiated transactions.

Cantor Fitzgerald’s obligations to sell

the ATM Shares are subject to satisfaction of certain conditions, including the continued effectiveness of Lineage’s Registration

Statement on Form S-3 (File No.

333-237975), which was filed with the Commission on May 1, 2020 and was declared effective on May 8,

The Sales Agreement replaced the previous sales agreement with Cantor that had been entered into in April 2017.

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

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

As of December 21, 2021, $ 14.1 million remained

available for sale under the Sales Agreement.

On December 21, 2021, Lineage filed a prospectus supplement with the SEC in connection

with the offering and sale of up to $ 64.1 million of common shares (the “New Sales Agreement”), with Cantor Fitzgerald as

the sales agent, no additional sales will be made under the Sales Agreement.

The $ 64.1 million under the New Sales Agreement which may

be issued are registered pursuant to Lineage’s effective shelf registration on Form S-3 (File

333-237975), as filed with the SEC on May 1, 2020 and declared effective on May 8, 2020 (the “May 2020 Registration Statement”),

and Lineage’s effective shelf registration statement on Form S-3 (File No.

333-254167), which was filed with the SEC on March 5,

2021 and declared effective on March 19, 2021.

As of December 31, 2021, under the Sales Agreement, Lineage had issued 14,908,735 common

shares at a weighted average price per share of $ 2.41 for gross proceeds of $ 35.9 million.

As of December 31, 2021, under the New Sales

Agreement, Lineage had issued 108,200 common shares at a weighted average price per share of $ 2.55 for gross proceeds of $ 0.3 million

(which includes $ 0.2 million of cash in transit related to a 2021 transaction that settled in early 2022).

As a result, as of December

31, 2021, $ 63.9 million remained available for sale under the New Sales Agreement.

of December 31, 2021, Lineage had an accumulated deficit of approximately $ 337.1 million, working capital of $ 64.4 million and shareholders’

equity of $ 90.9 million.

Lineage has evaluated its projected cash flows and believes that its $ 58.4 million of cash, cash equivalents

and marketable equity securities are sufficient to fund Lineage’s planned operations for at least the next twelve months from the

issuance date of the consolidated financial statements included herein.

If Lineage needs near term working capital or liquidity to supplement

its cash and cash equivalents for its operations, Lineage may sell some, or all, of its marketable equity securities, as necessary.

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.

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

capital needs could force Lineage to modify, curtail, delay, or suspend some or all aspects of its planned operations.

determination as to when it will seek new financing and the amount of financing that it will need will be based on Lineage’s evaluation

of the progress it makes in its research and development programs, any changes to the scope and focus of those programs, any changes

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

Lineage’s ability

to raise additional funds may be adversely impacted by deteriorating global economic conditions and the disruptions to and volatility

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

Lineage may be required

to delay, postpone, or cancel clinical trials or limit the number of clinical trial sites, unless it is able to obtain adequate financing.

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

Sales of additional equity securities

by Lineage or its subsidiaries and affiliates could result in the dilution of the interests of current shareholders.

Summary of Significant Accounting Policies

equity securities -

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

– Debt and Equity Securities , as amended by Accounting Standards Update (“ASU”) 2016-01, Financial Instruments–Overall:

Recognition and Measurement of Financial Assets and Financial Liabilities, further discussed below.

December 31, 2022, we had $ 57.9 million of cash, cash equivalents and marketable securities.

Based on our current operating plan, we

believe that our cash, cash equivalents and marketable securities, together with our projected cash flows, will be sufficient to enable

us to carry out our planned operations through at least twelve months from the issuance date of our consolidated financial statements.

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, receipt of proceeds from research grants, revenues from collaborations, and royalties

from product sales.

of December 31, 2022, $ 63.8 million remained available for sale under our at the market offering program.

See Note 11 (Shareholders’

Equity) for additional information.

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

The market value of our marketable securities

may not represent the amount that could be realized in a sale of such securities due to various market and regulatory factors, including

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

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.

Capital Requirements

financial obligations primarily consist of vendor contracts to provide research services and other purchase commitments with suppliers.

In 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.

commitments include obligations to our licensors under our in-license agreements, and obligations related to grants received from government

These obligations may require us to make future payments relating to sublicense fees, milestone fees, redemption fees, royalties

and reimbursement of patent maintenance costs.

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

to third parties;

the fees are based on a percentage of the license fees we receive from sublicensees.

Milestone payments are due to

licensors upon our future achievement of certain development and regulatory milestones.

Royalties are payable to licensors based on a

percentage of net sales of licensed products.

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 these commitments on our consolidated balance sheet because the achievement and timing of these

events is not fixed and determinable.

Significant Accounting Policies

Debt Securities - Lineage accounts for its holdings of U.S.

Treasury securities in accordance with Accounting Standards Codification

(“ASC”) 320-10-50, Debt Securities .

All marketable debt securities have been classified as “available-for-sale”

and are carried at estimated fair value.

Unrealized gains and losses are excluded from earnings and are included in other comprehensive

income or loss and reported as a separate component of stockholders’ equity or deficit until realized.

Realized gains or losses

on available-for-sale debt securities are included in other income (expense), net.

The amortized cost of debt securities is adjusted

for amortization of premiums and accretion of discounts to maturity.

Such amortization and accretion, together with interest on securities,

are included in interest income on the Company’s consolidated statement of operations.

In accordance with the Company’s investment

policy, management invests in debt securities with high credit quality, including U.S.

government securities.

reviews all its investments for other-than-temporary declines in estimated fair value.

Our review includes the consideration of the cause

of the impairment, including the creditworthiness of the security issuers, the number of securities in an unrealized loss position, the

severity and duration of the unrealized losses, whether the Company has the intent to sell the security.

If a credit loss does exist

for available-for-sale debt securities and should be recognized, an allowance will be recorded rather than a write-down to the amortized

To date, no such credit losses have occurred or have been recorded.

See Note 4 (Marketable Debt Securities) for additional

equity securities - Lineage accounts for the shares it holds in OncoCyte and HBL as marketable equity securities in accordance with

ASC 320-10-25, Investments – Debt and Equity Securities , as amended by Accounting Standards Update (“ASU”) 2016-01,

Financial Instruments–Overall:

Recognition and Measurement of Financial Assets and Financial Liabilities, further discussed

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

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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 under

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

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

Deferred grant revenues represent grant funds received from the governmental funding agencies for which the allowable expenses have

not yet been incurred as of the balance sheet date reported.

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

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.

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

On April 16, 2021, Lineage entered a worldwide license and collaboration agreement with ITI for the development and commercialization

of the VAC platform.

Under the terms of this agreement, Lineage is entitled to upfront licensing fees totaling $ 2.0

million paid over the first year, and up to $ 67.0

million in development and commercial milestones

across multiple indications.

Lineage will also be eligible to receive royalties up to 10 %

agreements - In December 2021, Lineage entered into the Roche Agreement for the development and commercialization of OpRegen.

the terms of the Roche Agreement, Roche agreed to pay Lineage a $ 50.0 million upfront payment and Lineage is eligible to receive up to

an additional $ 620.0 million in certain developmental, regulatory and commercialization milestone payments.

Lineage is also eligible

to receive tiered double-digit percentage royalties on net sales of OpRegen.

See Note 14 (Commitments and Contingencies) for additional

information regarding this agreement.

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April 2021, Lineage entered a worldwide license and collaboration agreement with Immunomic Therapeutics, Inc.

for the development

and commercialization of an allogeneic version of an immunomic oncology target utilizing the VAC platform.

Under the terms of this

agreement, Lineage is entitled to upfront licensing fees totaling up to $ 2.0

million, which we have received $ 1.0 million, and up to $ 67.0

million in development and commercial milestones across multiple indications.

Lineage also will be eligible to receive royalties up

on net sales of future products.

On December 17, 2021, we entered into an exclusive worldwide collaboration and license agreement with

Roche, for the development and commercialization of OpRegen.

Roche paid a $ 50.0

million upfront payment and we are eligible to

receive up to $ 620.0

million in additional development, approval,

and sales milestone payments, in addition to tiered double-digit royalties.

of December 31, 2022, we recorded $ 36.3 million and $ 0.8 million of deferred revenue on the consolidated balance sheet, related to the

collaboration agreements with each of Roche and Immunomic Therapeutics, Inc., respectively.

For the twelve months ended December 31,

2022, we recognized $ 13.4 million of revenue on the consolidated statement of operations, related to the Roche Agreement.

(Revenue) for additional information.

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

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(ii) milestone payments related

to achievement of development or commercial goals;

to achievement of development or commercial milestones;

(iii) royalties on net sales of licensed products;

and (iv) reimbursement of cost-sharing

of research and development (“R&D”) expenses.

Each of these payments eventually result in collaboration revenues.

a portion of non-refundable upfront 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.

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

and (iv) reimbursement of

cost-sharing of research and development (“R&D”) expenses.

Each of these payments eventually result in collaboration

When a portion of non-refundable upfront fees or other payments received are allocated to continuing performance obligations

under the terms of a collaborative agreement, they are 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.

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

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

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

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

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

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

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or as reimbursement revenue in our consolidated statements of operations.

of December 31, 2021, we recorded $ 49.7

million and $ 0.8

million of deferred revenue on the consolidated

balance sheet, related to the Roche and ITI collaboration agreements.

For the year ended December 31, 2021, we recognized $ 0.3

million and $ 0.8

million of revenue on the statement of operations,

related to the Roche and ITI collaboration agreements, respectively.

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

Basic earnings per share is calculated by dividing net

income or loss attributable to Lineage common shareholders by the weighted average number of common shares outstanding, net of unvested

and diluted net income (loss) per share attributable to common shareholders - Basic earnings per share is calculated by dividing

net income or loss attributable to Lineage common shareholders by the weighted average number of common shares outstanding, net of unvested

restricted stock or restricted stock units, subject to repurchase by Lineage, if any, during the period.

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

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share

Ended December 31,

Schedule of Anti-dilutive Securities Excluded from Computation of Earnings Per Share

Years Ended December 31,

Stock options

Lineage Warrants

Restricted stock units

On February 11, 2022, the

Board of Directors of Lineage, approved restricted stock unit awards for an aggregate of 694,424 (see Note 12).

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

Restricted Cash , Lineage explains the change during the period

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

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

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

Restricted Cash , Lineage explains the change during

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

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

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following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheet

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Schedule of Reconciliation of Cash, Cash Equivalents, and Restricted Cash

December 31, 2022

December 31, 2021

Cash and cash equivalents

Restricted cash included in deposits and other long-term assets (see Note 14)

Restricted cash included in prepaid expenses and other current assets (see Note 14)

Restricted cash included in long-term assets (see Note 14 (Commitments and Contingencies))

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

and grants receivable, net – Net accounts receivables amounted to $ 50,640,000

and grants receivable amounted to $ 200,000

as of December 31, 2021 and 2020, respectively.

Net trade receivables include an allowance for doubtful accounts of approximately $ 74,000

as of December 31, 2021 and 2020, respectively,

for those amounts deemed uncollectible by Lineage.

Lineage establishes an allowance for doubtful accounts based on the evaluation of

the collectability of its receivables on a variety of factors, including the length of time receivables are past due, significant events

that may impair the customer’s ability to pay, such as a bankruptcy filing or deterioration in the customers operating results

or financial position, and historical experience.

If circumstances related to customers change, estimates of the recoverability of receivables

would be further adjusted.

and grants receivable, net – Net accounts receivables amounted to $ 0.3 million and $ 50.8 million as of December 31, 2022 and

2021, respectively.

Net trade receivables include an allowance for doubtful accounts of approximately $ 0.1 million and $ 0.1 million as

of December 31, 2022 and 2021, respectively, for those amounts deemed uncollectible by Lineage.

Lineage establishes an allowance for

doubtful accounts based on the evaluation of the collectability of its receivables on a variety of factors, including the length of time

receivables are past due, significant events that may impair the customer’s ability to pay, such as a bankruptcy filing or deterioration

in the customers operating results or financial position, and historical experience.

If circumstances related to customers change, estimates

of the recoverability of receivables would be further adjusted.

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

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

greater than twelve months in the condensed 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.

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.

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 ROU assets in property and equipment, and ROU lease liabilities, current

and long-term, in the consolidated balance sheets.

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

Operating and finance leases are included as assets in property and equipment;

finance and lease liabilities are included in

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

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

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ability to curtail or delay research and development programs and expenditures within the look-forward period in accordance with ASU

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and cash equivalents – Lineage considers all highly liquid investments purchased with an original maturity of three months

or less to be cash equivalents.

As of December 31, 2021 and 2020, Lineage had $ 52.3 million and $ 28.8 million in money market funds,

respectively, considered to be cash equivalents.

As of December 31, 2022 and 2021, Lineage had $ 4.1 million and $ 52.3 million in money market funds, respectively,

considered to be cash equivalents.

Concentrations

of credit risk and significant sources of supply – Financial instruments that potentially subject Lineage to significant concentrations

of credit risk consist primarily of cash and cash equivalents.

Lineage limits the amount of credit exposure of cash balances by maintaining

its accounts in high credit quality financial institutions.

Cash equivalent deposits with financial institutions may occasionally exceed

the limits of insurance on bank deposits;

of credit risk consist primarily of cash, cash equivalents and marketable debt securities.

Lineage limits the amount of credit exposure

of cash balances by maintaining its accounts in high credit quality financial institutions.

Cash equivalent deposits with financial institutions

may occasionally exceed the limits of insurance on bank deposits;

however, Lineage has not experienced any losses on such accounts.

mitigates its credit exposure on marketable debt securities by investing in short term U.S.

Treasuries securities.

relies on single-source, third-party suppliers for a few key components of our product candidates.

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Leasehold improvements are amortized over the shorter of the useful life or

the lease term (see Note 6).

the lease term.

See Note 6 (Property and Equipment, Net) for additional information.

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

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the issuance date.

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with noncontrolling interests of subsidiaries - Lineage accounts for a change in ownership interests in its subsidiaries that does

not result in a change of control of the subsidiary by Lineage under the provisions of ASC 810-10-45-23,

Consolidation – Other Presentation Matters, which prescribes the accounting for changes in ownership interest that

do not result in a change in control of the subsidiary, as defined by GAAP, before and after the transaction .

Under this guidance,

changes in a controlling shareholder’s ownership interest that do not result in a change of control, as defined by GAAP, in the

subsidiary are accounted for as equity transactions.

Thus, if the controlling shareholder retains control, no gain or loss is recognized

in the statements of operations of the controlling shareholder.

Similarly, the controlling shareholder will not record any additional

acquisition adjustments to reflect its subsequent purchases of additional shares in the subsidiary if there is no change of control.

Only a proportional and immediate transfer of carrying value between the controlling and the noncontrolling shareholders occurs based

on the respective ownership percentages.

not result in a change of control of the subsidiary by Lineage under the provisions of ASC 810-10-45-23, Consolidation –

Other Presentation Matters, which prescribes the accounting for changes in ownership interest that do not result in a change in

control of the subsidiary, as defined by GAAP, before and after the transaction.

Under this guidance, changes in a controlling shareholder’s

ownership interest that do not result in a change of control, as defined by GAAP, in the subsidiary are accounted for as equity transactions.

Thus, if the controlling shareholder retains control, no gain or loss is recognized in the statements of operations of the controlling

Similarly, the controlling shareholder will not record any additional acquisition adjustments to reflect its subsequent

purchases of additional shares in the subsidiary if there is no change of control.

Only a proportional and immediate transfer of carrying

value between the controlling and the noncontrolling shareholders occurs based on the respective ownership percentages.

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

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consolidated statements of operations.

and administrative expenses - General and administrative expenses consist of compensation and related benefits, including stock-based

compensation, for executive and corporate personnel;

and administrative expenses - General and administrative expenses consist of 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 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, and other miscellaneous expenses which are allocated

to general and administrative expense.

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, and other miscellaneous

currency translation adjustments and other comprehensive income or loss - In countries in which Lineage operates where the functional

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foreign subsidiaries.

For the years ended December 31, 2021 and 2020, comprehensive loss includes foreign currency translation adjustments,

net of tax, of $ 1.5 million and $ 3.0 million, respectively.

For the years ended December 31, 2022, comprehensive gain includes foreign currency translation adjustments, net

of tax, of $ 1.8 million.

For the years ended December 31, 2021, comprehensive loss includes foreign currency translation adjustments,

net of tax, of $ 1.5 million.

currency transaction gains and losses - For transactions denominated in other than the functional currency of Lineage or its subsidiaries,

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however, no amounts were accrued for the payment of interest and penalties as of December 31, 2022 and 2021.

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December 22, 2017, the United States enacted major federal tax reform legislation, Public Law No.

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The provision further allows a deduction of 50% of GILTI, however this deduction is limited to the Company’s pre-GILTI

For the year ended December 31, 2020, our foreign subsidiaries operated at a loss, as a result there was no income inclusion.

For the year ended December 31, 2021, Lineage’s foreign subsidiaries generated income arising from an intercompany transaction.

As a result, there was in inclusion of $ 15.0 million included in federal income for 2021.

The income was fully offset by our federal

net operating loss carryforwards

See Note 13 (Income Taxes) for additional information.

interpretations under ASC 740 state that an entity can make an accounting policy election to either recognize deferred taxes for temporary

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We have elected to account for GILTI as a current period expense when incurred.

January 1, 2021, Lineage adopted ASU 2019-12, Simplifying the Accounting for Income Taxes .

The ASU enhances and simplifies various

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

performing intraperiod allocation and calculating income taxes in interim periods.

The ASU also adds guidance to reduce complexity in

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

The Company’s

adoption of ASU 2019-12 did not have a material impact on the Consolidated Financial Statements.

compensation - Lineage follows accounting standards governing share-based payments in accordance with ASC 718, Compensation –

Stock Compensation , which require the measurement and recognition of compensation expense for all share-based payment awards made

to directors and employees, including employee stock options, based on estimated fair values.

Lineage utilizes the Black-Scholes option

pricing model for valuing share-based payment awards.

Lineage’s determination of fair value of share-based payment awards on the

date of grant using that option-pricing model is affected by Lineage’s stock price as well as by assumptions regarding a number

of complex and subjective variables.

These variables include, but are not limited to, expected stock price volatility over the term of

the awards, and the expected term of options granted, which is derived using the simplified method, which is an average of the contractual

term of the option and its vesting period, as we do not have sufficient historical exercise data.

The risk-free rate is based on the

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

Treasury notes with maturities similar to the expected term of

Forfeitures are accounted for as they 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.

Adopted Accounting Pronouncements

August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework – Changes to the Disclosure

Requirements for Fair Value Measurement , which modifies certain disclosure requirements for reporting fair value measurements.

2018-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.

Lineage adopted

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

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

The ASU enhances and simplifies various

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

performing intraperiod allocation and calculating income taxes in interim periods.

The ASU also adds guidance to reduce complexity in

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

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

Lineage adopted this standard as of January 1, 2021 and it did not have a material impact on its consolidated financial statements.

January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment ,

which simplifies the accounting for goodwill impairments by eliminating the requirement to compare

the implied fair value of goodwill with its carrying amount as part of step two of the goodwill impairment test referenced in ASC 350,

Intangibles - Goodwill and Other .

As a result, an entity should perform its annual, or interim, goodwill impairment test by comparing

the fair value of a reporting unit with its carrying amount.

An impairment charge should be recognized for the amount by which the carrying

amount exceeds the reporting unit’s fair value.

However, the impairment loss recognized should not exceed the total amount of goodwill

allocated to that reporting unit.

ASU 2017-04 is effective for smaller reporting companies for annual reporting periods beginning after

December 15, 2022, including any interim impairment tests within those annual periods, with early application permitted.

On January 1,

2021, we elected to early adopt ASU 2017-04, and the adoption had no impact on our consolidated financial statements.

We will perform

goodwill impairment tests in accordance with ASU 2017-04.

to directors and employees based on estimated fair values.

employee and director stock options, we utilize the Black-Scholes option pricing model for valuing share-based payment awards.

determination of fair value of share-based payment awards on the date of grant using that option-pricing model is affected by the price

of Lineage’s common shares as well as by assumptions regarding a number of complex and subjective variables.

These variables include,

but are not limited to, expected stock price volatility over the term of the awards, and the expected term of options granted, which

is derived using the simplified method, which is an average of the contractual term of the option and its vesting period, as we do not

have sufficient historical exercise data upon which to estimate expected term.

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

Treasury yield

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

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

Stock option forfeitures

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 and RSUs are 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.

Issued Accounting Pronouncements Not Yet Adopted - The following accounting standards, which are not yet effective, are presently

being evaluated by Lineage to determine the impact that they might have on its consolidated financial statements.

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

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

Lineage has not yet completed

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

The Company plans to adopt

ASU 2016-13, effective January 1, 2023, and does not anticipate this will have a material effect on the Company’s consolidated

financial statements.

March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on

Financial Reporting .

This ASU provides optional guidance for a limited period of time to ease the burden in accounting for (or recognizing

the effects of) reference rate reform on financial reporting.

This would apply to companies meeting certain criteria that have contracts,

hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference

This standard is effective for us immediately and may be applied prospectively to contract modifications made and hedging

relationships entered into or evaluated on or before December 31, 2022.

During 2022, the FASB.

issued ASU 2022-06 Reference Rate Reform

Deferral of the Sunset Date of Topic 848.

This ASU extended the sunset date of Topic 848 to December 31, 2024.

currently assessing the impact the new guidance will have on our consolidated financial statements and disclosures.

disaggregated revenues were as follows (in thousands):

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Israel Innovation Authority (“IIA”)

National Institutes of Health (“NIH”)

Total grant revenues

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Total revenue

the year ended December 31, 2022 we recognized $ 14.7 million in total revenue, of which $ 13.4 million was recognized in collaboration

revenues related to the $ 50.0 million upfront payment from Roche, which was included in deferred revenues at December 31, 2021.

the year ended December 31, 2021 we recognized $ 4.3 million in total revenue.

We recognized $ 1.1 million in revenues from new license

agreements granted in the period, which were recorded as revenues under collaboration agreements.

This amount represents upfront license

fees and reimbursement revenues earned in the current year, as well as $ 0.1 million of variable consideration where development milestones

were achieved.

We also recognized revenue of $ 0.1 million during the period for grant revenues which had been included in deferred revenues

at December 31, 2020.

agreements entered into during the period, which were recorded as revenues under collaboration agreements.

This amount represents upfront

license fees and reimbursement revenues earned during the period as well as $ 0.1 million of variable consideration where development

milestones were achieved.

We also recognized revenue of $ 0.1 million during the period for grant revenues which had been included in

deferred revenues at December 31, 2020.

are recognizing the $ 50.0 million upfront payment under the Roche Agreement utilizing an input method of costs incurred over total estimated

costs to be incurred.

At each reporting period, we update our total estimated collaboration costs, and any resulting adjustments are

recorded on a cumulative basis which would affect revenue and net income (loss) in the period of adjustment.

We believe the input methodology

represents the most appropriate measure of progress towards satisfaction of the identified performance obligations.

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receivable and other receivable, net, and deferred revenues (contract liabilities) from contracts with customers, including collaboration

partners, consisted of the following (in thousands):

of Contract With Customer Asset and Liability

Accounts receivable

and other receivable, net (1 )(2)

Schedule of Contract with Customer Contract Liability and Receivable

Accounts receivable and other receivable, net (1)(2)(3)

Deferred revenues (1)(2)(3)

Increase in accounts receivable due to accrual of $ 50.0

million upfront payment related to Roche Agreement, offset to deferred revenues.

Excludes government grants

as Lineage has determined government grants are outside the scope of ASU 2014-09 - Revenue from Contracts with Customers (Topic 606).

receivable and other receivable, net, decreased primarily due to the receipt of the $ 50.0 million upfront payment under the Roche

Agreement received in January 2022, offset to deferred revenues.

See Note 14 (Commitments and Contingencies).

government grants as Lineage has determined government grants are outside the scope of ASU 2014-09 - Revenue from Contracts with

Customers (Topic 606).

As of January 1, 2021, our accounts receivable and other receivable, net

was $ 0.2 million, and no deferred revenue was recorded for our contracts with customers.

of December 31, 2022, the amounts in the transaction price of our contracts with customers, including collaboration partners, and allocated

good and services not yet provided were $ 52.1

million, of which $ 0.8

million has been collected and is reported as

deferred revenues, $ 49.7

million was accrued to deferred revenues, and

$ 1.7 million

relates to unfulfilled commitments.

The unfulfilled commitments are estimated to be delivered by the end of the fourth quarter of 2022.

goods and services not yet provided were $ 38.7 million, of which $ 37.1 million has been collected and is reported as deferred revenues,

and $ 1.6 million relates to unfulfilled commitments for the ITI collaboration (see Note 14 (Commitments and Contingencies)).

The unfulfilled

commitments are estimated to be delivered by the end of the fourth quarter of 2023.

Of the total deferred revenues of $ 37.1 million,

approximately $ 18.0

million is expected to be recognized within the next 12 months.

following table presents amounts under our collaboration agreements included in the transaction price (i.e., cumulative amounts

triggered or probable) as of December 31, 2021 (in thousands):

approximately $ 9.4 million is expected to be recognized within the next 12 months.

following table presents amounts under our collaboration agreements included in the transaction price (i.e., cumulative amounts triggered

or probable) as of December 31, 2022 (in thousands):

of Collaboration Agreements

3 unchanged sentences

ITI (April 2021) (4)

(December 2021) (5)

Roche (December 2021) (5)

Total amounts under our collaboration agreements included in the transaction price

Upfront license fees.

Event-based development

and regulatory milestones amounts.

Reimbursements and costs-sharing

Regarding the accounting treatment for the collaborative

agreement, the license and related development deliverables were determined to be highly interdependent and interrelated and have

been combined as one performance obligation.

Delivery is determined to be over time and revenue will be recognized utilizing an input

method of costs incurred over total estimated costs in the work plan.

The regulatory milestones are variable consideration that are

fully constrained until the uncertainty of each milestone has been resolved.

Sales-based milestones and royalties are variable consideration

that will not be included in the transaction price until the related commercialization and sales have occurred.

The cost reimbursements

are considered variable consideration and are included in the transaction price.

Revenues related to the cost reimbursements are

presented gross on the consolidated statement of operations instead of a reduction to the costs being reimbursed.

We currently estimate

the unsatisfied performance obligations within the contract to be completed by December 31, 2022.

Regarding the accounting treatment for the collaborative

agreement, the license, technology transfer and related clinical deliverables were determined to be highly interdependent and interrelated

and have been combined as one performance obligation.

Delivery is determined to be over time and revenue will be recognized utilizing

an input method of costs incurred over total estimated costs to complete the performance obligation.

A material customer option for

additional goods and services was included in the transaction price, and $ 12.0 million of the transaction price was allocated to

the second performance obligation.

The option will be recognized when the customer exercises the option or when the option expires.

Regulatory and development milestones are variable consideration that are fully constrained until the uncertainty of each milestone

has been resolved.

Sales-based milestones and royalties are variable consideration that will not be included in the transaction price

until the related commercialization milestones and sales targets have occurred.

We currently estimate the unsatisfied performance

obligations within the contract to be completed by December 31, 2026.

license fees.

development and regulatory milestones amounts.

Reimbursements

and costs-sharing payments.

the accounting treatment for the collaborative agreement, the license and related development deliverables were determined to be

highly interdependent and interrelated and have been combined as one performance obligation.

Delivery is determined to be over time

and revenue will be recognized utilizing an input method of costs incurred over total estimated costs in the work plan.

The regulatory

milestones are variable considerations that are fully constrained until the uncertainty of each milestone has been resolved.

milestones and royalties are variable considerations that will not be included in the transaction price until the related commercialization

and sales have occurred.

The cost reimbursements are considered variable consideration and are included in the transaction price.

Revenues related to the cost reimbursements are presented gross on the consolidated statement of operations instead of a reduction

to the costs being reimbursed.

We currently estimate the unsatisfied performance obligations within the contract to be completed

by December 31, 2023.

the accounting treatment for the collaborative agreement, the license, technology transfer and related clinical deliverables were

determined to be highly interdependent and interrelated and have been combined as one performance obligation.

Delivery is determined

to be over time and revenue will be recognized utilizing an input method of costs incurred over total estimated costs to complete

the performance obligation.

A material customer option for additional goods and services was included in the transaction price, and

$ 12.0 million of the transaction price was allocated to the second performance obligation.

The option will be recognized when the

customer exercises the option or when this option expires.

Regulatory and development milestones are variable considerations that

are fully constrained until the uncertainty of each milestone has been resolved.

Sales-based milestones and royalties are variable

considerations that will not be included in the transaction price until the related commercialization milestones and sales targets

have occurred.

We currently estimate the unsatisfied performance obligations within the contract to be completed by December 31,

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Marketable Debt Securities

following table is a summary of available-for-sale debt securities in cash and cash equivalents or marketable securities in the Company’s

consolidated balance sheet as of December 31, 2022 (in thousands):

of Available for Sale Debt Securities

Financial Assets:

Treasury securities

Company has not recognized an allowance for credit losses on any securities in an unrealized loss position as of December 31, 2022.

believe that the individual unrealized losses represent temporary declines resulting from changes in interest rates, and we intend to

hold these marketable securities to their maturity.

of December 31, 2022, the amortized cost and estimated fair value of the Company’s available-for-sale debt securities by contractual

maturity are shown below (in thousands):

of Amortized cost And Estimated fair Value

Available-for-sale debt securities maturing:

In one year or less

Total available-for-sale debt securities

Company currently does not intend to sell these securities prior to maturity and does not consider these investments to be other-than-temporarily

impaired at December 31, 2022.

of December 31, 2022 we did not have any marketable debt securities which were classified as cash equivalents on the consolidated balance

As of December 31, 2021 the Company did not have any marketable debt securities.

Marketable Equity Securities

6 unchanged sentences

closing price of OncoCyte of $ 2.17 per share on December 31, 2021.

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

also 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 period.

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 a net unrealized loss on marketable equity securities of $ 2.5 million related

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

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.

for the shares we hold in 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.

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

For the year ended December 31, 2020, Lineage

recorded realized gains of $ 0.8

million, due to sales of AgeX shares in the

For the year ended December 31, 2020, we recorded unrealized losses of $ 1.3

million, respectively, due to changes in fair market

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

the year ended December 31, 2022, Lineage recorded a net unrealized loss on marketable equity securities of $ 2.1 million related to changes

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

For the year ended December 31, 2021, Lineage recorded

a realized gain of $ 6.0 million due to sales of OncoCyte shares in the period.

Lineage also recorded a net unrealized loss for 2021 on

marketable equity securities of $ 2.2 million related to changes in fair market value of OncoCyte’s common stock price during 2021.

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Sale of Significant Ownership Interest in AgeX to Juvenescence Limited

August 30, 2018, Lineage entered into a Stock Purchase Agreement with Juvenescence and AgeX, pursuant to which Lineage sold 14.4 million

shares of common stock of AgeX to Juvenescence for $ 3.00 per share, or an aggregate purchase price of $ 43.2 million (the “Purchase

Juvenescence paid $ 10.8 million of the Purchase Price at closing, issued an unsecured convertible promissory note dated

August 30, 2018 in favor of Lineage for $ 21.6 million (the “Promissory Note”), and paid $ 10.8 million on November 2, 2018.

The Stock Purchase Agreement contains customary representations, warranties and indemnities from Lineage relating to the business of

AgeX, including an indemnity cap of $ 4.3 million, which is subject to certain exceptions.

In connection with the sale, Lineage also entered

into a Shared Facilities Agreement with AgeX.

Promissory Note bore interest at 7 % per annum, with principal and accrued interest payable at maturity on August 30, 2020.

The Promissory

Note was paid in full on August 28, 2020 .

share prices are determined based on the closing price of OncoCyte common stock under the trading symbol (“OCX”) on the NYSE

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

account for the shares we hold in HBL as marketable equity securities as of December 31, 2022.

These securities were carried at fair

market value on our consolidated balance sheets, and the accounting transactions for the years ended December 31, 2022 and 2021 were

not material.

Property and Equipment, Net

6 unchanged sentences

Property and equipment, net

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

In September 2020, Lineage terminated

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

This resulted in a reduction to right-of-use

assets of approximately $ 1.4 million.

See additional information in Note 14.

and equipment for financing leases was $ 121,000 , and $ 118,000 on December 31, 2022 and 2021, respectively.

and amortization expense amounted to $ 582,000 and $ 663,000 for the years ended December 31, 2022 and 2021, respectively.

During the year

ended December 31, 2021, Lineage sold non-capitalized assets for a net gain of $ 30,000 , which was included in R&D expenses on the

consolidated statements of operations.

During the year ended December 31, 2021, Lineage sold equipment with a net book value of $ 9,000

and recognized a gain of $ 5,000 .

Additionally, Lineage wrote off assets with a net book value of $ 29,000 .

the year ended December 31, 2020, Lineage sold equipment with a net book value of $ 32,000 and recognized a loss of $ 9,000 .

wrote off assets with a net book value of $ 156,000 , with $ 104,000 of this amount related to the termination of its leases in Alameda.

Additionally, Lineage sold non-capitalized assets for a net gain of $ 72,000 .

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Goodwill and Intangible Assets, Net

December 31, 2021 and 2020, goodwill and intangible assets, net consisted of the following:

(in thousands):

December 31, 2022 and 2021, goodwill and intangible assets, net consisted of the following (in thousands):

Schedule of Goodwill and Intangible Assets Net

8 unchanged sentences

Intangible assets, net

Goodwill represents the

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

assumed in the Asterias Merger.

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

in connection with the Asterias Merger.

The fair value of these assets consisted of $ 31.7 million pertaining to the OPC1 program

and $ 14.8 million pertaining to the VAC2 program.

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

The Geron patents are expected to continue to generate revenue and are not used in the OPC1 or the VAC platform, these patents are

considered to be separate long-lived intangible assets under ASC 805.

As of December 31, 2021

the acquired patents were fully amortized and the acquired royalty contracts had a remaining unamortized balance of $ 282,000 .

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

liabilities assumed in the Asterias Merger.

had two IPR&D intangible assets that were valued at $ 46.5 million as part of the purchase

price allocation that was performed in connection with the Asterias Merger.

The fair value

of these assets consisted of $ 31.7 million pertaining to the OPC1 program and $ 14.8 million

pertaining to the VAC2 program.

had royalty cash flows under certain specific patent families that Asterias previously acquired

from Geron Corporation (“Geron”).

The Geron patents are expected to continue

to generate revenue and are not used in the OPC1 or the VAC platform, these patents are considered

to be separate long-lived intangible assets under ASC 805.

of December 31, 2022 the acquired patents were fully amortized and the acquired royalty contracts had a remaining unamortized balance

of $ 152,000 .

amortizes its intangible assets over an estimated period of 5 to 10 years on a straight-line basis.

Lineage recognized $ 0.2 million and

$ 1.2 million in amortization expense of intangible assets during the years ended December 31, 2021 and 2020, respectively.

Lineage recognized approximately

$ 0.1 million and $ 0.2 million in amortization expense of intangible assets during the years ended December 31, 2022 and 2021, respectively.

of intangible assets for periods subsequent to December 31, 2022 is as follows (in thousands):

Schedule of Intangible Assets Future Amortization Expense

Ended December 31,

Schedule of Intangible Assets Future Amortization Expenses

Year Ended December 31,

Amortization Expense

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5 unchanged sentences

Accrued liabilities (1)

PPP loan payable

Other current liabilities

(1) Includes $ 21.0

million of royalty and redemption fee expense to Hadasit and the IIA, respectively, pursuant to Lineage’s financial obligations

related to the Roche Agreement (see Note 14) .

April 2020, Lineage received a loan for $ 523,000 from Axos Bank under the Paycheck Protection Program (“PPP”) contained within

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

The PPP loan had a term of two years, was unsecured, and

was guaranteed by the U.S.

Small Business Administration (“SBA”).

The loan carried a fixed interest rate of one percent per

annum, of which the first six months of interest was deferred.

Under the CARES Act and Paycheck Protection Program Flexibility Act, Lineage

was eligible to apply for forgiveness of all loan proceeds used to pay payroll costs, rent, utilities and other qualifying expenses during

the 24-week period following receipt of the loan, provided that Lineage maintains its employment and compensation within certain parameters

during such period.

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

If the conditions outlined in the PPP loan

program were adhered to by Lineage, all or part of such loan could be forgiven.

Lineage applied for forgiveness of the PPP loan on September

30, 2020, and on May 13, 2021, received notice that the entire PPP loan principal balance and interest charges were forgiven in full,

which the Company recorded as a gain on debt extinguishment in the consolidated statements of operations.

The PPP loan forgiveness amount

was excluded from Lineage’s taxable income for federal and California purposes.

However, for California income taxes, public companies

cannot deduct expenses from loan proceeds which were forgiven.

decrease in accrued liabilities was primarily due to a $ 21.0

million payment by Lineage to Hadasit and IIA in accordance with its obligations to such parties related to the Roche Agreement (see

Note 14 (Commitments and Contingencies)), offset with accrual of litigation settlement amount of $ 3.5

million (see Note 14 (Commitments and Contingencies) and Note 19 (Subsequent Events)) .

Fair Value Measurements

3 unchanged sentences

the inputs to valuation methodologies used to measure fair value (ASC 820-10-50), Fair Value Measurements and Disclosures :

Level 1 – Inputs

to the valuation methodology are quoted prices for identical assets or liabilities in active markets.

Level 2 – Inputs

other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities;

prices in markets that are not active;

or other inputs that are observable or can be corroborated by observable market data for substantially

the full term of the assets or liabilities.

Level 3 – Inputs

to the valuation methodology are unobservable;

that reflect management’s own assumptions about the assumptions market participants

would make and significant to the fair value.

103 | P a g e

1 – Inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.

2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets

or liabilities;

quoted prices in markets that are not active;

or other inputs that are observable or can be corroborated by observable

market data for substantially the full term of the assets or liabilities.

3 – Inputs to the valuation methodology are unobservable;

that reflect management’s own assumptions about the assumptions

market participants would make and significant to the fair value.

have not transferred any instruments between the three levels of the fair value hierarchy.

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

3 unchanged sentences

December 31, 2022

Quoted Prices in Active Markets for Identical Assets

Quoted Prices

in Active Markets

for Identical Assets

Significant Other

Observable Inputs

Unobservable Inputs

Cash and cash equivalents

Marketable securities

Lineage Warrants

Cell Cure Warrants

Money market fund (1)

Marketable debt securities

Marketable equity securities

Warrants to purchase Cell Cure ordinary shares

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Fair Value Measurements Using

December 31, 2021

Quoted Prices in Active Markets for Identical Assets

Quoted Prices

in Active Markets

for Identical Assets

Significant Other

1 unchanged sentence

Unobservable Inputs

Cash and cash equivalents

Marketable securities

Lineage Warrants

Cell Cure Warrants

have not transferred any instruments between the three levels of the fair value hierarchy.

determining fair value, Lineage utilizes a Black-Scholes pricing model that maximizes the use of observable inputs and minimize the use

of unobservable inputs to the extent possible, and also considers counterparty credit risk in its assessment of fair value.

The significant

unobservable inputs used in the fair value measurement of the Company’s Level 3 Cell Cure warrant liabilities are volatility and

A significant increase or decrease in these Level 3 inputs could result in a significantly higher or lower fair value measurements.

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following table sets forth the establishment of the Company’s Level 3 liabilities, as well as a summary of the changes in the fair

value and other adjustments:

of Changes In Fair Value

(Dollars in thousands)

Money market fund (1)

Marketable equity securities

Warrants to purchase Cell Cure ordinary shares

in cash and cash equivalents in the accompanying consolidated balance sheet.

determining fair value of liability classified warrants, Lineage utilizes a Black-Scholes pricing model that maximizes the use of observable inputs and minimizes

the use of unobservable inputs to the extent possible, and also considers counterparty credit risk in its assessment of fair value.

The significant unobservable inputs used in the fair value measurement of the Company’s Level 3 Cell Cure warrant liabilities

are volatility and share value.

A significant increase or decrease in these Level 3 inputs could result in a significantly higher or

lower fair value measurements.

following table sets forth the establishment of the fair value of the Cell Cure warrants, as well as a summary of the changes in the

fair value and other adjustments (in thousands):

Schedule of Changes in Fair Value

Balance as of December 31, 2021

Change in fair value and other adjustments

Expiration of warrants

Balance as of December 31, 2022

equity securities include our positions in OncoCyte, and HBL.

Both of these securities have readily determinable fair values quoted on

the NYSE American or TASE stock exchanges.

These securities are measured at fair value and reported as current assets on the consolidated

marketable equity securities includes the shares of stock of OncoCyte and HBL.

Both securities have readily determinable fair values

quoted on the NYSE American or TASE.

These securities are measured at fair value and reported as current assets on the accompanying consolidated

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

1 unchanged sentence

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

The carrying amounts of accounts receivable, prepaid expenses and other current assets, accounts payable, accrued expenses and other

current liabilities approximate fair values because of the short-term nature of these items.

Related Party Transactions

incurred costs of $ 5,050

per month for the use of approximately 900

square feet of office space in New York City,

which was made available to Lineage on a month-by-month basis by one of its directors at an amount that approximates his cost (see Note

2021 , Lineage terminated without penalty its

leasing term related to the New York City office lease.

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

(see Note 14), Lineage has agreed to pay for the legal defense of Neal Bradsher, director, Broadwood Partners, L.P., a shareholder of

Lineage, and Broadwood Capital, Inc., which manages Broadwood Partners, L.P., all of which were named in the lawsuits.

Through December

31, 2021, Lineage has incurred a total of $ 593,782 in legal expenses on behalf of the director, shareholder and the manager of the shareholder.

part of financing transactions in which there were multiple other purchasers, Broadwood Partners, L.P.

purchased 623,090 shares of OncoCyte

common stock from Lineage in January 2020.

(see Note 14 (Commitments and Contingencies)), Lineage agreed to pay the expenses for the legal defense of Neal Bradsher, a member of

the Lineage board of directors, Broadwood Partners, L.P., a shareholder of Lineage, and Broadwood Capital, Inc., which serves as the

general partner of Broadwood Partners, L.P., all of which were named defendants in the lawsuits, prior to being dismissed.

As of December

31, 2022, and 2021, Lineage had incurred a cumulative total of approximately $ 620,000 and $ 594,000 , respectively, in legal expenses on

behalf of the foregoing parties.

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Shareholders’ Equity

is authorized to issue 2,000,000 shares of preferred stock.

The preferred shares may be issued in one or more series as the board of

directors may by resolution determine.

The board of directors is authorized to fix the number of shares of any series of preferred shares

and to determine or alter the rights, preferences, privileges, and restrictions granted to or imposed on the preferred shares as a class,

or upon any wholly unissued series of any preferred shares.

The board of directors may, by resolution, increase or decrease (but not

below the number of shares of such series then outstanding) the number of shares of any series of preferred shares subsequent to the

issue of shares of that series.

As of December 31, 2021, no shares of preferred stock were issued or outstanding.

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

As of December 31, 2021 and 2020, Lineage

had 169,477,347 and 153,095,883 issued and outstanding common shares, respectively.

the years ended December 31, 2021 and 2020, Lineage issued 40,000 and 47,000 common shares, net of shares withheld and retired for employee

taxes paid, respectively, for vested restricted stock units (see Note 12).

is authorized to issue 2,000,000 preferred shares, no par value.

The preferred shares may be issued in one or more series as the Lineage

board of directors may determine by resolution.

The Lineage board of directors is authorized to fix the number of shares of any series

of preferred shares and to determine or alter the rights, preferences, privileges, and restrictions granted to or imposed on the preferred

shares as a class, or upon any wholly unissued series of any preferred shares.

The Lineage board of directors may, by resolution, increase

or decrease (but not below the number of shares of such series then outstanding) the number of shares of any series of preferred shares

subsequent to the issue of shares of that series.

As of December 31, 2022 and December 31, 2021, there were no preferred shares issued

or outstanding.

is authorized to issue 250,000,000 common shares, no par value.

As of December 31, 2022 and December 31, 2021, there were 170,093,114

and 169,477,347 common shares issued and outstanding, respectively.

The Market Offering Program

May 2020, Lineage entered into a Controlled Equity Offering SM Sales Agreement (the “Sales Agreement”) with Cantor

Fitzgerald & Co., as sales agent (“Cantor Fitzgerald”), pursuant to which Lineage may sell its common shares from time

to time through an “at the market offering” program under the Sales Agreement.

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

through the ATM program under the Sales Agreement (“March 2021 Prospectus Supplement”).

December 2021, Lineage filed a prospectus supplement with the SEC in connection with the offer and sale of up to $ 64.1 million of common

shares (which included $ 14.1 million of its common shares which then remained unsold under the March 2021 Prospectus Supplement) through

the ATM program under the Sales Agreement (“December 2021 Prospectus Supplement”).

No further sales will be made under the

March 2021 Prospectus Supplement.

of December 31, 2022, Lineage had sold 108,200 common shares under the December 2021 Prospectus Supplement at a weighted average price

per share of $ 2.55 for gross proceeds of $ 0.3 million.

As of December 31, 2022, $ 63.8 million remained available for sale under the December

2021 Prospectus Supplement.

During the year ended December 31, 2022, no shares were sold through the ATM program.

shares offered under the December 2021 Prospectus Supplement are registered pursuant to Lineage’s effective shelf registration

statement on Form S-3 (File No.

333-237975), which was filed with the SEC on May 1, 2020 and declared effective on May 8, 2020, and Lineage’s

effective shelf registration statement on Form S-3 (File No.

333-254167), which was filed with the SEC on March 5, 2021 and declared

effective on March 19, 2021.

agreed to pay Cantor Fitzgerald a commission of 3.0 % of the aggregate gross proceeds from the sale of shares under the Sales Agreement,

reimburse its legal fees and disbursements, and provide Cantor Fitzgerald with customary indemnification and contribution rights.

Sales Agreement may be terminated by Cantor Fitzgerald or Lineage at any time upon notice to the other party, or by Cantor Fitzgerald

at any time in certain circumstances, including the occurrence of a material and adverse change in Lineage’s business or financial

condition that makes it impractical or inadvisable to market the shares or to enforce contracts for the sale of the shares.

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At-the-Market

(“ATM”) Offering

May 1, 2020, Lineage entered into the Sales Agreement, pursuant to which Lineage may offer and sell, from time to time, through

Cantor Fitzgerald, common shares of Lineage (“ATM Shares”) having an aggregate offering price of up to $ 25.0 million.

Lineage is not obligated to sell any ATM Shares.

Subject to the terms and conditions of the Sales Agreement, Cantor Fitzgerald will

use commercially reasonable efforts, consistent with its normal trading and sales practices, applicable state and federal law, rules

and regulations, and the rules of the NYSE American, to sell the ATM Shares from time to time based upon Lineage’s

instructions, including any price, time or size limits specified by Lineage.

Under the Sales Agreement, Cantor Fitzgerald may sell

the ATM Shares by any method deemed to be an “at-the-market” offering as defined in Rule 415(a)(4) under the Securities

Act of 1933, as amended, or by any other method permitted by law, including in privately negotiated transactions.

Fitzgerald’s obligations to sell the ATM Shares are subject to satisfaction of certain conditions, including the continued

effectiveness of Lineage’s Registration Statement on Form S-3 (File No.

333-237975), which was filed with the Commission on

May 1, 2020 and was declared effective on May 8, 2020.

The Sales Agreement replaced the previous sales agreement with Cantor that

had been entered into in April 2017.

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

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

As of December 21, 2021, $ 14.1 million remained

available for sale under the Sales Agreement.

On December 21, 2021, Lineage filed a prospectus supplement with the SEC in connection

with the New Sales Agreement, with Cantor Fitzgerald as the sales agent, and no additional sales will be made under the Sales Agreement.

The $ 64.1 million under the New Sales Agreement which may be issued are registered pursuant to the May

2020 Registration Statement, and Lineage’s effective shelf registration statement on Form S-3 (File No.

333-254167), which was

filed with the SEC on March 5, 2021 and declared effective on March 19, 2021.

As of December 31, 2021, under the Sales Agreement, Lineage

had issued 14,908,735 common shares at a weighted-average price per share of $ 2.41 for gross proceeds of $ 35.9 million.

As of December

31, 2021, under the New Sales Agreement, Lineage had issued 108,200 common shares at a weighted-average price per share of $ 2.55 for

gross proceeds of $ 0.3 million (which includes $ 0.2 million of cash in transit related to a 2021 transaction that settled in early 2022).

As a result, as of December 31, 2021, $ 63.9 million remained available for issuance under the New Sales Agreement.

agreed to pay Cantor Fitzgerald a commission of 3.0 % of the aggregate gross proceeds from each sale of shares, reimburse legal fees and

disbursements and provide Cantor Fitzgerald with customary indemnification and contribution rights.

The Sales Agreement may be terminated

by Cantor Fitzgerald or Lineage at any time upon notice to the other party, or by Cantor Fitzgerald at any time in certain circumstances,

including the occurrence of a material and adverse change in Lineage’s business or financial condition that makes it impractical

or inadvisable to market the shares or to enforce contracts for the sale of the shares.

(previously Asterias) Warrants – Liability Classified

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

The total number of

common shares of Lineage subject to warrants that were assumed by Lineage in connection with the Asterias Merger was 1,089,900 ,

which were converted to Lineage Warrants 30

days after the closing of the Asterias Merger,

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

The Lineage Warrants had

an exercise price of $ 6.15

per warrant share and expired on May

Cure Warrants – Liability Classified

Cure has two sets of issued warrants (the “Cell Cure Warrants”).

Warrants to purchase 24,566 Cell Cure ordinary shares at

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

These warrants expire in July 2022 .

Warrants to purchase 13,738 Cell Cure

ordinary shares at exercise prices ranging from $ 32.02 to $ 40.00 per share were issued to consultants.

11,738 of these warrants were

cashless exercised in October 2020.

The expense related to the cashless exercise was approximately $ 44,000 and it was recorded as other

income/(expense), net on the statements of operations.

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

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July 2017, Cell Cure issued to HBL a warrant to purchase 24,566 ordinary shares of Cell Cure at an exercise price of $ 40.54 per share

with an expiration date in July 2022 .

In March 2022, HBL was issued 50 shares following its cash exercise of a portion of that warrant,

and an additional 50 shares were transacted as a net exercise.

In April 2022, HBL was issued 2,467 shares following its cash exercise

of a portion of that warrant, which resulted in net proceeds to Cell Cure of $ 0.1 million.

In July 2022, HBL was issued 21,999 shares

following its cash exercise of the remaining portion of that warrant, which resulted in net proceeds to Cell Cure of $ 0.9 million.

warrant to purchase 2,000 ordinary shares issued to Cell Cure consultants with an exercise price of $ 40.00 per share and which expires

in January 2024 is outstanding as of December 31, 2022.

815 requires freestanding financial instruments, such as warrants, with exercise prices denominated in currencies other than the functional

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or may apply other reasonable methods to determining the fair value, including a discount for lack of marketability.

In connection with

the cashless exercise in October 2020, Cell Cure had an independent third-party update the fair value of the Cell Cure shares.

determines the stock price volatility using historical prices of comparable public company common stock for a period equal to the remaining

term of the Cell Cure Warrants.

The Cell Cure Warrants are revalued each reporting period using the same methodology described above,

with changes in fair value included as gains or losses in other income and expenses, net, in the consolidated statements of operations.

the years ended December 31, 2021 and 2020, Lineage recorded a noncash gain of $ 0.2 million and a noncash loss of $ 0.2 million, respectively,

for the increase/decrease in the fair value of the Cell Cure Warrants included in other income and expenses, net for each period.

decrease in the fair value of the Cell Cure Warrants was mainly attributable to the time premium amortization, due to the shorter duration

of the warrants.

As of December 31, 2021 and 2020, the Cell Cure Warrants, valued at $ 0.2 million and $ 0.4 million, respectively, were

included in current and long-term liabilities on the consolidated balance sheets.

The Cell Cure Warrants

are revalued each reporting period using the same methodology described above, with changes in fair value included as gains or losses

in other income and expenses, net, in the consolidated statements of operations.

each of the years ended December 31, 2022 and 2021, Lineage recorded a noncash gain of $ 0.2 million for the decrease in the fair value

of the Cell Cure Warrants included in other income and expenses, net for each period.

The decrease in the fair value of the Cell Cure

Warrants was mainly attributable to the time premium amortization, due to the shorter duration of the warrants.

As of December 31, 2022

and 2021, the Cell Cure Warrants, were included in current and/or long-term liabilities on the consolidated balance sheets.

Stock-Based Awards

Incentive Plan Award s

September 13, 2021, the shareholders of Lineage approved the 2021 Equity Incentive Plan (the “2021 Plan”), and the plan became

The 2021 Plan provides for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted

stock awards, restricted stock units awards (“RSUs”), and other stock awards.

All of our employees (including our affiliates’),

Incentive Plan Awards

September 2021, our shareholders approved the Lineage Cell Therapeutics, Inc.

2021 Equity Incentive Plan (the “2021 Plan”),

which became effective upon such approval.

The 2021 Plan provides for the grant of incentive stock options, nonstatutory stock options,

stock appreciation rights, restricted stock awards, RSUs, and other stock awards.

All of our employees (including those of our affiliates),

non-employee directors and consultants are eligible to participate in the 2021 Plan.

to adjustment for certain changes in our capitalization, the aggregate number of our common shares that may be issued under the 2021

Plan will not exceed the sum of (i) 15,000,000 shares and (ii) the Prior Plan Returning Shares (“Prior Plan Returning Shares”).

The Prior Plan Returning Shares are defined as an award granted under the Lineage Cell Therapeutics Inc.

2012 Equity Incentive Plan (the

“2012 Plan”), which were outstanding when the 2021 Plan became effective, and are not issued because such Prior Plan Award

or any option thereof expires or otherwise terminates without all of the shares covered by such Prior Plan Award having been issued.

Given the approval of the 2021 Plan, no additional awards will be granted from the 2012 Plan or the Asterias 2013 Equity Incentive Award

(the “Asterias Equity Plan”).

As of December 31, 2021, there were no outstanding equity awards issued under the 2021 Plan.

As of December 31, 2021, there were 16,382,385 shares available for grant under the 2021 Plan.

February 11, 2022, the Board of Directors at Lineage, approved restricted stock unit awards for an aggregate amount of 694,424 .

were issued under the 2021 Plan, which defines restricted stock units as a full value award, which reduce the Plan’s common shares

available for grant by 1.50 shares for each share issued.

Plan will not exceed the sum of (i) 15,000,000 shares and (ii) the number of shares subject to awards granted under the Lineage Cell

Therapeutics Inc.

2012 Equity Incentive Plan (the “2012 Plan”) that were outstanding when the 2021 Plan became effective

and are not issued because such awards expire or otherwise terminate.

As of December 31, 2022, there were 10,847,914 shares available

for grant under the 2021 Plan.

a result of the approval of the 2021 Plan by our shareholders, no additional awards will be granted under the 2012 Plan or the Asterias

2013 Equity Incentive Award (the “Asterias Equity Plan”).

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summary of Lineage’s 2012 Plan activity and other stock option awards granted outside of the 2012 Plan related information is as

follows (in thousands, except per share amounts):

summary of activity under the 2021 Plan is as follows (in thousands, except per share amounts):

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

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Options granted

Options forfeited

Restricted stock units vested

December 31, 2020

Options granted

Options exercises

Options forfeited

Restricted units vested

Options expired/forfeited/cancelled

RSUs granted (1)

RSUs forfeited

December 31, 2022

Options exercisable at December 31, 2022

of December 31, 2021, options outstanding and options exercisable under the 2012 Plan have a weighted-average remaining contractual term

of 7.3 years and 5.3 years, respectively, and intrinsic value of $ 9.6 million and $ 5.2 million, respectively.

connection with the vested RSUs during the year ended December 31, 2021, Lineage paid $ 54,000 in minimum employee withholding taxes in

exchange for 21,000 vested Lineage common shares issuable to the employees and immediately retired those shares.

For the year ended December

31, 2021, Lineage recorded a noncash stock-based compensation expense of $ 0.1 million, in connection with the vested RSUs, included in

consolidated stock-based compensation expense.

connection with the vested RSUs during the year ended December 31, 2020, Lineage paid $ 27,000 in minimum employee withholding taxes in

exchange for 26,000 vested Lineage common shares issuable to the employees and immediately retired those shares.

For the year ended December

31, 2020, Lineage recorded a noncash stock-based compensation expense of $ 0.1 million, in connection with the vested RSUs, included in

consolidated stock-based compensation expense.

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summary of activity under the Asterias Equity Plan from the closing date of the Asterias Merger through December 31, 2021 is as follows

(in thousands, except per share amounts):

February 11, 2022, Lineage granted 694,424

RSUs to certain employees, including the Company’s executive officers, to further align management with the achievement of

certain development milestones under the Roche Agreement.

For each RSU, half of the common shares subject to the RSU will vest in

four equal annual installments beginning on the first anniversary of the grant date.

The other half of the common shares will vest

in connection with the achievement of certain development milestones set forth in the Roche Agreement.

Additionally, on March 10, 2022, Lineage granted 300,000 RSUs to Brian

Culley, its Chief Executive Officer.

100,000 of these RSUs will vest on or prior to March 9, 2023, and 100,000 will vest on or prior to

each of the second and third anniversaries of such date, in each case upon the achievement of certain per share performance targets, calculated

based on the trailing 20-day volume weighted average price of the Company’s common shares as of the date of determination.

per share performance targets are not achieved by the applicale vesting date, then such RSUs will be forfeited.

summary of activity of the 2012 Plan, and the 2018 inducement option (which was issued to a Lineage executive outside of all equity plans),

is as follows (in thousands, except per share amounts):

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

1 unchanged sentence

December 31, 2021

Options granted

Options forfeited

Options exercised

Options expired/forfeited/cancelled

December 31, 2022

Options granted

Options exercisable at December 31, 2022

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

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

Exercise Price

December 31, 2021

Options forfeited

1 unchanged sentence

Options exercisable at December 31, 2022

of December 31, 2021, options outstanding and options exercisable under the Asterias Equity Plan both have a weighted-average remaining

contractual term of 0.3 years and intrinsic value of $ 212,000 and $ 212,000 , respectively.

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compensation expense

6 unchanged sentences

Dividend yield

weighted-average estimated fair value of stock options granted under the 2012 Plan and other stock option awards granted outside of the

2012 Plan, during the years ended December 31, 2021 and 2020 was $ 1.62 and $ 0.43 per share, respectively.

expenses include stock-based compensation expense as follows (in thousands):

4 unchanged sentences

Total stock-based compensation expense

of December 31, 2021, total unrecognized compensation costs related to unvested stock options under Lineage’s 2012 Plan and the

Asterias Equity Plan was $ 8.5 million, which is expected to be recognized as expense over a weighted average period of approximately

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the year ended December 31, 2021, Lineage did no t

record a tax provision or deferred tax benefit.

For the year ended December 31, 2020, Lineage recorded a $ 1.2 million

deferred tax benefit for income taxes.

of December 31, 2022, total unrecognized compensation costs related to unvested stock options and unvested RSUs under all equity plans

(including the 2018 inducement option), were $ 8.7 million, which is expected to be recognized as expense over a weighted average period

of approximately 2.6 years.

the year ended December 31, 2022, Lineage recorded a withholding tax for the amount of $ 0.5

million on interest expense deemed paid to Lineage from Cell Cure on the purchase of intellectual property pursuant to the U.S.

Israeli tax treaty.

For the years ended December 31, 2022 and 2021, respectively, Lineage did not record a tax provision or deferred

domestic and foreign breakout of loss before net income tax benefit was as follows:

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Research and development and other credits

Withholding tax

Permanent differences

4 unchanged sentences

Income tax benefit

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primary components of the deferred tax assets and liabilities at December 31, 2022 and 2021 were as follows (in thousands):

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Operating lease liability

Capitalized research expense

Total deferred tax assets

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Net deferred tax liabilities

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A 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, 2021,

Lineage had taxable income and therefore did not generate any indefinite lived deferred tax assets as tax provision benefit.

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.

of December 31, 2021, Lineage has gross net operating loss carryforwards of approximately $ 155.6

million for federal purposes.

As of December

31, 2021, Lineage’s foreign subsidiaries have net operating loss carryforwards of approximately $ 60.2

million which carryforward indefinitely.

of December 31, 2021, Lineage has net operating losses of $ 151.8

million for state tax purposes.

of December 31, 2021, Lineage has research tax credit carryforwards for federal and state tax purposes of $ 3.7

million and $ 5.8

million, respectively.

These tax credits reflect

the amounts for Lineage, Asterias and OrthoCyte as of December 31, 2021.

For federal purposes, the

credits generated each year have a carryforward period of 20 years .

The federal tax credits expire in varying amounts between

2021 and 2041 , while the state tax credits have

no expiration period.

August 5, 2020, Lineage began the liquidation of its foreign subsidiary BioTime Asia.

At the time of the liquidation, BioTime Asia had

an intercompany payable due to Lineage.

For book purposes, the corresponding balances eliminate in consolidation.

ASC 740, a 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.

of December 31, 2022, Lineage has gross net operating loss carryforwards, of approximately $ 150.6 million for federal purposes.

December 31, 2022, Lineage’s foreign subsidiaries have net operating loss carryforwards of approximately $ 66.6 million which carryforward

indefinitely.

of December 31, 2022, Lineage has net operating losses of $ 160.2 million for state tax purposes.

of December 31, 2022, Lineage has research tax credit carryforwards for federal and state tax purposes of $ 4.5 million and $ 6.0 million,

respectively.

These tax credits reflect the amounts for Lineage and its’ subsidiaries as of December 31, 2022.

For federal purposes,

the activities of their foreign subsidiaries are not included in the consolidated tax return.

Accordingly, the payable was written off

for tax purposes by Lineage, creating a $ 3.6 million bad debt deduction increasing its NOL carryover.

For California, the activities

of its foreign subsidiaries, including BioTime Asia, are included in the combined tax return.

As such, the corresponding intercompany

balances are eliminated.

the credits generated each year have a carryforward period of 20 years .

The federal tax credits expire in varying amounts between 2022

and 2042 , while the state tax credits have no expiration period.

December 17, 2021, Lineage and its subsidiary, Cell Cure, entered into a Collaboration and License Agreement with Roche, wherein Lineage

granted to Roche exclusive worldwide rights to develop and commercialize RPE cell therapies.

Under the agreement Roche will pay Lineage

a $ 50.0 million upfront payment.

This payment was received in January of 2022 (see further discussion at Note 14).

Under the agreement Roche paid Lineage a

$ 50.0 million upfront payment, which was received in January of 2022.

See Note 14 (Commitments and Contingencies) for additional information.

the tax years beginning on or after January 1, 2022, the Tax Cuts and Jobs Act of 2017 (“TCJA”) eliminates the option to

currently deduct research and development expenses and requires taxpayers to capitalize and amortize them over five years for research

activities performed in the United States and 15 years for research activities performed outside the United States pursuant to IRC Section

Although Congress is considering legislation that would repeal or defer this capitalization and amortization requirement, it is

not certain that this provision will be repealed or otherwise modified.

If the requirement is not repealed or replaced, it will decrease

our tax deduction for research and development expense in future years.

December 2021, in an intercompany transaction, Lineage acquired the economic rights to Cell Cure’s interest in certain intellectual

This transaction generated a gain to Cell Cure of $ 31.7

million which was fully offset by net operating

loss carryforwards in Israel.

This transaction generated a gain to Cell Cure of $ 31.7 million which was fully offset by net operating loss carryforwards

For book and California income tax purposes, this transaction eliminates in consolidation.

income tax purposes, the activities of our foreign subsidiaries are not included in the consolidated tax return.

However, under

the provisions of GILTI the profits of our foreign subsidiaries may be included, see further discussion below.

in 2018, the 2017 Tax Act subjects a U.S.

stockholder to GILTI earned by certain foreign subsidiaries.

In general, GILTI is the excess

shareholder’s total net foreign income over a deemed return on tangible assets.

The provision further allows a deduction

of GILTI, however this deduction is limited to the company’s pre-GILTI U.S.

For the year ended December 31, 2020, our foreign

subsidiaries generated losses, as a result there was no inclusion.

For the year ended December 31, 2021, Lineage’s combined foreign

entities generated a profit arising from intercompany transactions.

As a result, there was an inclusion of $ 24.8

million for GILTI purposes for 2021.

resulting net income for federal income tax purposes was fully offset by their federal net operating loss carryforwards.

Transactions and Related Impact on Income Taxes

market value of the respective shares Lineage holds in OncoCyte and Asterias (through the merger date of March 8, 2019) creates a deferred

tax liability to Lineage based on the closing price of the security, less the tax basis of the security Lineage has in such shares.

deferred tax liability generated by shares that Lineage holds as of December 31, 2021 and 2020, is a source of future taxable income

to Lineage, as prescribed by ASC 740-10-30-17, that will more likely than not result in the realization of its deferred tax assets to

the extent of those deferred tax liabilities.

This deferred tax liability is determined based on the closing price of those securities

as of December 31, 2021 and 2020.

For federal income tax purposes,

the activities of our foreign subsidiaries are not included in the consolidated tax return.

However, under the regulations related to

global intangible low-taxed income (“GILTI”), the profits of our foreign subsidiaries may be included, see further discussion

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2017 Tax Act subjects a U.S.

stockholder to GILTI earned by certain foreign subsidiaries.

In general, GILTI is the excess of a U.S.

stockholder’s

total net foreign income over a deemed return on tangible assets.

The provision further allows a deduction of 50% of GILTI, however this

deduction is limited to the company’s pre-GILTI U.S.

For the years ended December 31, 2022 and 2021, Lineage’s combined

foreign entities generated a profit arising from intercompany transactions.

As a result, there was an inclusion of $ 1.7 million and $ 24.8

million for GILTI purposes for 2022 and 2021, respectively.

The resulting net income for federal income tax purposes was fully offset

by their federal net operating loss carryforwards.

Income Tax Matters

6 unchanged sentences

carryforwards may be subject to an annual limitation regarding their utilization against taxable income in future periods.

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

In general, Lineage is no longer subject

to tax examination by major taxing authorities for years before 2016.

Although the statute is closed for purposes of assessing additional

income and tax in these years, the taxing authorities may still make adjustments to the NOL and credit carryforwards used in open years.

federal income tax return as well as a California combined and foreign income tax returns.

In general, Lineage is no longer

subject to tax examination by major taxing authorities for years before 2018.

Although the statute is closed for purposes of assessing

additional income and tax in these years, the taxing authorities may still make adjustments to the NOL and credit carryforwards used

in open years.

Therefore, the statute should be considered open as it relates to the NOL and credit carryforwards used in open years.

8 unchanged sentences

tax positions should be recorded as of December 31, 2022 and 2021.

Lineage’s management does not expect that the total amount

of unrecognized tax benefits will materially change over the next twelve months.

Lineage’s management does not expect that the total amount of

unrecognized tax benefits will materially change over the next twelve months.

practice is to recognize interest and penalties related to income tax matters in tax expense.

2 unchanged sentences

Commitments and Contingencies

May 2019, Lineage entered into a lease for approximately 8,841 square feet of rentable space in an office park in Carlsbad, California

(the “Carlsbad Lease”).

The term of the Carlsbad Lease commenced on August 1, 2019 and expires on October 31, 2022.

rent under the Carlsbad Lease, beginning on August 1, 2021, is $ 23,959 per month and increases by 3 % on August 1, 2022 .

Base rent for

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

Base rent was abated for months

two through five of the lease.

Property Leases

May 2019, Lineage entered into a lease for approximately 8,841

square feet of rentable space in an office park in Carlsbad, California.

The lease was amended in December 2022 and the term was

extended for a period of thirty-seven months (the “Extended Term”) commencing on the later of (i) the date of

substantial completion of the landlord’s work or (ii) March 1, 2023 (the “Extended Term Commencement Date”).

lease expires on March

31, 2026 , and rent was abated for months two through four of the Extended Term.

The monthly base rent will be $ 24,666

through the Extended Term Commencement Date, at which time it will increase to $ 25,197 .

As security for the performance of its obligations under the lease, Lineage provided the landlord a security deposit of $ 17,850 ,

this amount is included in deposits and other long-term assets on the consolidated balance sheet as of December 31,

addition to base rent, Lineage pays a pro-rata portion of increases in certain expenses, including real property taxes, utilities (to

1 unchanged sentence

incurred by the landlord.

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

with a security deposit of $ 17,850 .

Leases and Alameda Sublease

December 2015, Lineage entered into leases of office and laboratory space located in two buildings in Alameda, California (the “Alameda

Leases”) comprised of 22,303 square feet (the “1010 Atlantic Premises”) and 8,492 square feet (the “1020 Atlantic

Base rent under the Alameda Leases beginning on February 1, 2020 was $ 72,676 per month with annual increases of approximately

In addition to base rent, Lineage paid a pro rata portion of increases in certain expenses,

including real property taxes, utilities (to the extent not separately metered to the leased space) and the landlord’s operating

expenses, over the amounts of those expenses incurred by the landlord.

As security for its obligations, Lineage provided the landlord

with a security deposit of approximately $ 424,000 , which was reduced to $ 78,000 on January 24, 2019 in accordance with the terms of the

The security deposit was returned to Lineage in March 2021.

These pro-rata charges are expensed as incurred and excluded from the calculation of the ROU assets and lease liabilities.

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

(“Industrial Microbes”) for the use of 10,000

square feet in the 1010 Atlantic Premises (the “Industrial Microbes Sublease”).

Base rent under the Industrial Microbes Sublease

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

Base rent for the first month

In addition to base rent and utilities, Industrial Microbes paid a pro-rata portion of increases in operating expenses, after

an abatement period of one year.

September 11, 2020, Lineage entered into a Lease Termination Agreement with the landlord terminating the Alameda Leases effective as

of August 31, 2020 for the 1020 Atlantic Premises and September 30, 2020 for the 1010 Atlantic Premises.

consideration for the termination of the leases, Lineage paid a termination fee of $ 130,000 and other amounts due under the terms of

the Alameda Leases through the applicable effective termination dates, except that no rent was due with respect to the 1020 Atlantic

Premises after July 31, 2020.

Lineage’s security deposit was received in March 2021.

paid a separate termination fee of $ 30,000 to Industrial Microbes in connection with the termination of the Industrial Microbes Sublease

and returned the $ 56,000 security deposit paid by Industrial Microbes.

For the period of sublease from mid-April 2020 through

September 2020, Lineage received $ 119,000 in rental income from Industrial Microbes.

continues to occupy approximately 2,432 square feet of the 1010 Atlantic Premises under a new sublease agreement (the “Alameda

The term of the Alameda Sublease is

from October 1, 2020 through January 31, 2023 .

Base rent under the Alameda Sublease is $ 14,592 per month with annual increases of 3 %

each October 1 thereafter during the lease term.

September 2022, Lineage, as sublessee, entered into a sublease for approximately 4,500

square feet of rentable industrial space in Carlsbad, California for a term that commenced on October

1, 2022 and expires on March

As security for the performance of its obligations under the sublease, Lineage provided the landlord with a

security deposit of $ 22,500 ,

this amount is included in deposits and other long-term assets on the consolidated balance sheet as of December 31, 2022.

Base rent is $ 22,500

per month until the lease expires.

Leases and Alameda Sublease

December 2015, Lineage entered into leases of office and laboratory space located in two

buildings in Alameda, California (the “Alameda Leases”) comprised of 22,303

square feet (the “1010 Atlantic Premises”) and 8,492

square feet (the “1020 Atlantic Premises”).

In April 2020, Lineage, as sublessor, subleased 10,000

square feet in the 1010 Atlantic Premises.

On September 11, 2020, the lease for the 1020 Atlantic Premises was terminated effective

as of August 31, 2020, and the lease for the 1010 Atlantic Premises was terminated effective as of September 30, 2020.

In connection

with the termination of the Alameda Leases, Lineage, as sublessee, entered into a sublease for approximately 2,432

square feet of the 1010 Atlantic Premises for a term that commenced on October

Base rent was initially $ 14,592

per month with annual increases of 3 %

each October 1 during the term.

Base rent for the first month was abated.

Lineage paid a security deposit of $ 16,000 ,

under the Alameda Sublease;

this amount is included in deposits and other long-term assets as of September 30, 2021 (see Note 2).

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

by approximately $ 780,000 over the remaining life of the original leases through January 31, 2023.

York Leased Office Space

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

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

that approximates his cost.

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

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

this amount is included in deposits and other long-term assets on the consolidated balance sheet as of December 31, 2022.

31, 2023, the sublease expired.

Cure leases 728.5 square meters (approximately 7,842 square feet) of office and laboratory space in Jerusalem, Israel under a lease that

expires December 31, 2025 , with an option to extend the lease for five years each (the “Original Cell Cure Lease”).

monthly rent is NIS 39,776 (approximately $ 12,200 per month using the December 7, 2020 exchange rate).

In addition to base rent, Cell

Cure pays a pro-rata share of real property taxes and certain costs related to the operation and maintenance of the building in which

the leased premises are located.

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

of office space in the same facility in Jerusalem, Israel under a lease that expires on December 31, 2025 , with two five-year extension

options (the “January 2018 Lease”).

The January 2018 Lease commenced on April 1, 2018 and included a leasehold improvement

construction allowance of up to NIS 4,000,000 (approximately up to US $ 1.1 million using the December 31, 2018 exchange rate) from the

The leasehold improvements were completed in December 2018 and the entire allowance was used.

Beginning on January 1, 2019,

combined base rent and construction allowance payments for the January 2018 Lease are NIS 93,827 per month (approximately $ 26,000 per

In December 2018, Cell Cure made a $ 420,000 deposit required under the January 2018 Lease, which is included in deposits and

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

January 2018 Lease.

expires December 31, 2027 , with an option to extend the lease for five years (the “Original Cell Cure Lease”).

rent is NIS 39,776 (approximately $ 12,200 per month).

In addition to base rent, Cell Cure pays a pro-rata share of real property taxes

and certain costs related to the operation and maintenance of the building in which the leased premises are located.

These pro-rata charges are expensed as incurred and excluded from the calculation of the ROU assets and lease liabilities.

January 2018, Cell Cure entered into a lease for an additional 934

square meters (approximately 10,054

square feet) of office space in the same facility that expires on December

31, 2027 , with an option to extend the lease for five years (the “January 2018 Lease”).

Base rent and construction allowance payments are NIS 93,827

per month (approximately $ 26,000

Cell Cure has provided a $ 458,000

security deposit to the landlord to be held as restricted cash during the term of its facility lease, which is included in

deposits and other long-term assets on the consolidated balance sheet as of December 31, 2022.

November 2021, Cell Cure entered into a lease for an additional 133 square meters (approximately 1,432 square feet) of office space in

the same facility that commenced on December 1, 2021, and expires on December 31, 2027, with an option to extend the lease for five years .

The base monthly rent is NIS 11,880 (approximately US $ 3,757 ) and increased to NIS 12,494 (approximately US $ 3,951 ) on November 1, 2022.

August 2022, Cell Cure entered into a new lease for 300 square meters (approximately 3,229 square feet) of office and laboratory space

in Jerusalem, Israel that expires December 31, 2027 , with an option to extend the lease for five years .

Base monthly rent is 16,350 NIS

(approximately $ 4,800 per month) on August 1, 2022.

When executing the new lease, Cell Cure modified the expiration dates and options

terms for the leases identified above to align with the new lease.

The adjustment to the right-of-use asset and lease liability to reflect

the lease modification for the 2-year extension was $ 0.7 million, while the additional right-of-use asset and lease liability recorded

for the new lease was $ 0.2 million.

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November 30, 2021, Cell Cure entered into a lease agreement for an additional 133 square meters (approximately 1,432 square feet) of

office space in the same facility in Jerusalem, Israel under a lease that expires on December 31, 2025 , with one five year and one approximate

three-year extension options (the “November 2021 Lease”).

The November 2021 Lease commenced on December 1, 2021, with a twelve-month

base rent of NIS 11,880 (approximately US $ 3,757 using the November 30, 2021 exchange rate).

On November 1, 2022, the base monthly rent

increases to NIS 12,494 (approximately US $ 3,951 using the November 30, 2021 exchange rate).

below tables provide the amounts recorded in connection with the adoption of ASC 842 as of, and for the years ended December 31, 2021

and 2020, for Lineage’s operating and financing leases, as applicable.

cash flow information related to leases was as follows (in thousands):

Schedule of Supplemental Cash Flow Information Related to Leases

Year Ended December 31,

Information – Leases

cash flow information related to leases is as follows (in thousands):

of Supplemental Cash Flow Information Related to Leases

Twelve Months Ended

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

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balance sheet information related to leases was as follows (in thousands, except lease term and discount rate):

Schedule of Supplemental Balance Sheet Information Related to Leases

of Supplemental Balance Sheet Information Related to Leases

Operating leases

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Right-of-use assets, net

Property and equipment, gross

Accumulated depreciation

Property and equipment, net

Lease liabilities, current

Lease liabilities, noncurrent

Total finance lease liabilities

Total lease liabilities

Other current liabilities

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Finance leases

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minimum lease commitments are as follows (in thousands):

Schedule of Future Minimum Lease Commitments

minimum lease commitments are as follows as of December 31, 2022 (in thousands):

of Future Minimum Lease Commitments

Operating Leases

Finance Leases

Year Ending December 31,

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Less imputed interest

Collaboration Agreement

December 17, 2021, Lineage and its subsidiary, Cell Cure, entered into the Roche Agreement, wherein Lineage granted to Roche exclusive

worldwide rights to develop and commercialize RPE cell therapies, including its proprietary cell therapy known as OpRegen.

Lineage a $ 50.0 million upfront payment and Lineage is eligible to receive up to an additional $ 620.0 million in certain developmental,

regulatory and commercialization milestone payments.

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

All regulatory and commercial milestone payments, and royalty payments, are subject to the existence of certain intellectual

property rights related to OpRegen once such payments become due.

OpRegen program has been supported in part with contributions made by Hadasit, the technology transfer company of Hadassah Medical Center,

and the IIA, an independent agency created to address the needs of global innovation ecosystems.

A significant portion of early

development on the OpRegen program occurred at Cell Cure.

Cell Cure was established by the Hadassah Medical Center, where the intellectual

property underlying the differentiation and manufacture of RPE cells originated.

In addition, significant monetary support for the OpRegen

program was provided by the IIA through a series of separate research grants, beginning in 2007.

Under the Encouragement of Research,

Development and Technological Innovation in the Industry Law 5744, and the regulations, guidelines, rules, procedures and benefit tracks

thereunder (collectively, the “Innovation Law”), annual research and development programs that meet specified criteria and

were approved by a committee of the IIA which were eligible for grants.

The grants awarded were typically up to 50 % of the project’s

expenditures, as determined by the IIA committee and subject to the benefit track under which the grant was awarded.

terms of the grants under the Innovation Law generally require that the products developed as part of the programs under which the grants

were given be manufactured in Israel.

The know-how developed thereunder may not be transferred outside of Israel unless prior written

approval is received from the IIA.

Transfer of IIA-funded know-how outside of Israel is subject to approval and payment of a redemption

fee, to the IIA calculated according to the relevant formulas provided under the Innovation Law.

In November 2021, an application made

by Cell Cure to the research committee of the IIA, was approved granting an exclusive license and transfer of the technological know-how

for OpRegen to Roche.

Under the provisions for the redemption fee, Lineage is obligated to pay the IIA a portion of the upfront, milestone,

and royalty payments which may be received under the Agreement.

Lineage is obligated to pay approximately 24.3 % of the upfront, milestone,

and royalty payments it receives from Roche to the IIA, up to an aggregate cap on all payments.

As of December 31, 2021, the IIA cap

amount was calculated to be approximately $ 102.7 million.

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addition, pursuant to the Second Amended and Restated License Agreement, dated June 15, 2017, between Cell Cure and Hadasit, as amended,

and a certain letter agreement entered into on December 17, 2021, by and between Cell Cure and Hadasit, Cell Cure is obligated to pay

to Hadasit a sublicensing fee of 21.5% of the upfront payment (subject to certain reductions) and any milestone payments, and up to 50%

of all royalty payments (subject to a maximum payment of 5% of net sales of products) , Lineage receives from Roche.

The letter agreement

generally terminates upon the termination of the Agreement.

January 2022, Lineage received the $ 50.0

million upfront payment from Roche.

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.

Lineage reduced the Hadasit payment by $ 1.9

million, due to a $ 8.6

million budgetary commitment under the Agreement.

is required to pay Hadasit 21.5% of any portion of the commitment not incurred within five years after the execution of the Agreement .

Both the IIA and Hadasit payments were accrued as research and development expenses incurred, upon the execution of the Agreement within

the company’s year-end consolidated statement of operations.

earlier terminated by either party, the Agreement will expire on a product-by-product and country-by-country basis upon the expiration

Collaborations

December 2021, Lineage entered into the Roche Agreement, wherein Lineage granted to Roche exclusive worldwide rights to develop and commercialize

RPE cell therapies, including Lineage’s proprietary cell therapy known as OpRegen, for the treatment of ocular disorders, including

GA secondary to AMD.

the terms of the Roche Agreement, Roche paid Lineage a $ 50.0 million upfront payment and Lineage is eligible to receive up to an additional

$ 620.0 million in certain developmental, regulatory and commercialization milestone payments.

Lineage also is eligible for tiered double-digit

percentage royalties on net sales of OpRegen in the U.S and other major markets.

All regulatory and commercial milestone payments and

royalty payments are subject to the existence of certain intellectual property rights that cover OpRegen at the time such payments would

otherwise become due, and the royalty payments on net sales of OpRegen are subject to financial offsets based on the existence of competing

Roche assumed responsibility for further clinical development and commercialization of OpRegen.

Lineage is responsible for

completing activities related to the ongoing clinical study, for which enrollment is complete, and performing certain manufacturing and

process development activities.

earlier terminated by either party, the Roche Agreement will expire on a product-by-product and country-by-country basis upon the expiration

of all of Roche’s payment obligations under the agreement.

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Either party may terminate the agreement in its entirety with written

notice for the other party’s material breach if such party fails to cure the breach.

Either party also may terminate the Agreement

in its entirety upon certain insolvency events involving the other party.

notice for the other party’s material breach if such party fails to cure the breach or upon certain insolvency events involving

the other party.

January 2022, Lineage received the $ 50.0 million upfront payment from Roche.

Subsequently, Lineage, via Cell Cure, paid $ 12.1 million

to the IIA, and $ 8.9 million to Hadasit.

Such payments were made in accordance with obligations under the Innovation Law (as discussed

below) and under the terms of Cell Cure’s agreements with Hadasit (as discussed below).

The payment to Hadasit was reduced by $ 1.9

million in accordance with the provisions of such agreements discussed below that reduce the sublicensing fee payable to Hadasit for

costs related to Lineage’s performance obligations under the Roche Agreement.

To the extent such costs are not incurred within

five years after the execution of the Roche Agreement, Cell Cure will be required to pay Hadasit 21.5 % of the amount of costs not incurred.

Collaboration Agreement

our collaborative agreement with ITI we agreed to perform certain research, development, manufacturing, and oversight activities related

to a VAC-CMV product up to a budgeted amount of approximately $ 2.2 million.

ITI will reimburse the Company for material costs and full-time

employee costs with no markup related to the manufacturing of the VAC-CMV product.

Lineage’s collaborative agreement with Immunomic Therapeutics, Inc., Lineage agreed to perform up to approximately $ 2.2 million

worth of certain research, development, manufacturing, and oversight activities related to an allogeneic VAC-CMV product candidate.

will reimburse Lineage for these costs and full-time employee costs for the manufacturing of the VAC-CMV product candidate.

ITI has received

a research and development grade of the VAC-CMV product and is evaluating its next steps.

with Hadasit and IIA

OpRegen program was supported in part with licenses to technology obtained from Hadasit, the technology transfer company of Hadassah

Medical Center, and through a series of research grants from the IIA, an independent agency created to address the needs of global innovation

A subset of the intellectual property underlying OpRegen was originally generated at Hadassah Medical Center and licensed

to Cell Cure for further development.

the Encouragement of Research, Development and Technological Innovation in the Industry Law 5744, and the regulations, guidelines, rules,

procedures and benefit tracks thereunder, annual research and development programs that meet specified criteria and were approved by

a committee of the IIA were eligible for grants.

The grants awarded were typically up to 50 % of the project’s expenditures, as

determined by the IIA committee and subject to the benefit track under which the grant was awarded.

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terms of the grants under the Innovation Law generally require that the products developed as part of the programs under which the grants

were given be manufactured in Israel.

The know-how developed thereunder may not be transferred outside of Israel unless prior written

approval is received from the IIA.

Transfer of IIA-funded know-how outside of Israel is subject to approval and payment of a redemption

fee to the IIA calculated according to formulas provided under the Innovation Law.

In November 2021, the IIA research committee approved

an application made by Cell Cure with respect to the grant of an exclusive license and transfer of the technological know-how for OpRegen

Under the provisions for the redemption fee, Lineage is obligated to pay the IIA approximately 24.3 % of the upfront, milestone,

and royalty payments which may be received under the Roche Agreement, up to an aggregate cap on all payments, such cap growing over time

via interest accrual until paid in full.

As of December 31, 2022, the aggregate cap amount was approximately $ 91.2 million.

to the Second Amended and Restated License Agreement, dated June 15, 2017, between Cell Cure and Hadasit, and a certain letter agreement

entered into on December 17, 2021, Hadasit was entitled to, and was paid, a sublicensing fee of 21.5 % of the $ 50.0 million upfront payment

under the Roche Agreement (subject to certain reductions, including for costs related to Lineage’s performance obligations under

the Roche Agreement) and of any milestone payments, and up to 50 % of all royalty payments (subject to a maximum payment of 5% of net

sales of products), Lineage receives under the Roche Agreement.

The letter agreement generally terminates upon the termination of the

Roche Agreement.

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

May 6, 2020, Lineage and its wholly owned subsidiary Asterias entered into a Second Amendment to Clinical Trial and Option Agreement

(the “CTOA Amendment”) with Cancer Research UK (“CRUK”) and Cancer Research Technology Limited (“CRT”),

which amends the Clinical Trial and Option Agreement entered into between Asterias, CRUK and CRT dated September 8, 2014, as amended

September 8, 2014.

Pursuant to the CTOA Amendment, Lineage assumed all obligations of Asterias and exercised early its option to acquire

data generated in the Phase 1 clinical trial of VAC2 in non-small cell lung cancer being conducted by CRUK.

CRUK will continue conducting

the VAC2 study.

and CRT effectuated the option by simultaneously entering into a license agreement (the “License Agreement”) pursuant to

which Lineage agreed to pay the previously agreed signature fee of £ 1,250,000 (approximately $ 1.6 million).

In consideration of

Lineage’s agreement to exercise the option prior to completion of the study, the parties agreed to defer the signature fee as follows:

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

For the primary licensed product

for the first indication, the License Agreement provides for milestone fees of up to £ 8,000,000 based upon initiation of a Phase

3 clinical trial and the filing for regulatory approval and up to £ 22,500,000 in sales-based milestones payments.

Additional milestone

fees and sales-based milestone payments would be payable for other products or indications, and mid-single-digit royalty payments are

payable on sales of commercial products.

party may terminate the License Agreement for the uncured material breach of the other party.

CRT may terminate the License Agreement

in the case of Lineage’s insolvency or if Lineage ceases all development and commercialization of all products under the License

May 2020, Lineage and Asterias entered into a Second Amendment to Clinical Trial and Option Agreement (the “CTOA Amendment”)

with CRUK and CRT, which amends the Clinical Trial and Option Agreement entered into between Asterias, CRUK and CRT dated September 8,

2014, as amended September 8, 2014.

Pursuant to the CTOA Amendment, Lineage assumed all obligations of Asterias and exercised early its

option to acquire data generated in the Phase 1 clinical trial of VAC2 in non-small cell lung cancer being conducted by CRUK.

and CRT effectuated the option by simultaneously entering into a license agreement (the “CRT License Agreement”) pursuant

to which Lineage agreed to pay the previously agreed signature fee of £ 1,250,000 (approximately $ 1.6 million).

For the primary

licensed product for the first indication, the CRT License Agreement provides for milestone fees of up to £ 8,000,000 based upon

initiation of a Phase 3 clinical trial and the filing for regulatory approval and up to £ 22,500,000 in sales-based milestones payments.

Additional milestone fees and sales-based milestone payments would be payable for other products or indications, and mid-single-digit

royalty payments are payable on sales of commercial products.

party may terminate the CRT License Agreement for the uncured material breach of the other party.

CRT may terminate the CRT License Agreement

in the case of Lineage’s insolvency or if Lineage ceases all development and commercialization of all products under the CRT License

Contingent Obligations

than disclosed above, we have obligations under various license agreements and grants received from government entities to make future

payments to third parties, which become due and payable on the achievement of certain development, regulatory and commercial milestones

or on the sublicense of our rights to another party.

These commitments include sublicense fees, milestone payments, redemption fees and

Sublicense fees are payable to licensors or government entities when we sublicense underlying intellectual property to third

the fees are based on a percentage of the license fees we receive from sublicensees.

Milestone payments are due to licensors

or government entities upon the future achievement of certain development and regulatory milestones.

Redemption fees due to the IIA under

the Innovation Law are due upon receipt of any milestone and royalties received under the Roche Agreement.

Royalties are payable to licensors

or government entities based on a percentage of net sales of licensed products.

As of December 31, 2022, we have not included these commitments

on our consolidated balance sheet because the achievement and timing of these events are not fixed and determinable.

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and Option Agreement

January 5, 2019, Lineage and Orbit Biomedical Limited (“Orbit”) entered into a Research and Option Agreement, which was assigned

by Orbit to Gyroscope Therapeutics Limited (“Gyroscope”) and amended on May 7, 2019, January 30, 2020, May 1, 2020 and September

4, 2020 (the “Gyroscope Agreement”).

As amended, the Gyroscope Agreement provided Lineage access to Gyroscope’s vitrectomy-free

subretinal injection device (the “Orbit Device”) as a means of delivering OpRegen in Lineage’s ongoing Phase 1/2a clinical

trial through the earlier of:

(i) December 1, 2020;

or (ii) or treatment of three additional patients with the Orbit Device between September

4, 2020 and December 1, 2020 (the “Access Period”).

Following the Access Period, Lineage also had an exclusive right to negotiate

a definitive agreement to distribute and sell the Orbit Device for the subretinal delivery of RPE cells for the treatment of dry AMD

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

Pursuant to the terms of the Gyroscope Agreement,

Lineage paid access fees totaling $ 2.5 million:

(i) $ 1.25 million in January 2019 upon execution of the Gyroscope Agreement;

$ 1.25 million in August 2019 upon completion of certain collaborative research activities using the Gyroscope technology for the OpRegen

Phase 1/2a clinical trial.

These access fees of $ 2.5 million were amortized on a straight-line basis throughout 2019 and included in

research and development expenses.

Lineage also agreed to reimburse Gyroscope for costs of consumables, training services, travel costs

and other out of pocket expenses incurred by Gyroscope for performing services under the Gyroscope Agreement.

In January 2020, Lineage

agreed to pay an additional $ 0.5 million to extend the Access Period to July 5, 2020, $ 0.2 million of which was paid in February 2020

and $ 0.3 million of which was paid in November 2020.

The Access Period was subsequently extended two additional times at no cost and

ended in accordance with the terms of the Gyroscope Agreement in November 2020.

In February 2021, Lineage exercised its right to extend

the initial Option Period for $ 0.5 million.

During the extended Option Period, Lineage determined not to pursue a definitive agreement

to distribute and sell the Orbit Device, and the Gyroscope Agreement terminated on May 11, 2021 upon expiration of the Option Period.

time to time, we are subject to legal proceedings and claims in the ordinary course of business.

3 unchanged sentences

outcomes could occur that have individually or in aggregate, a material adverse effect on our business, financial condition or operating

Except as described below, we are not currently subject to any pending material litigation, other than ordinary routine litigation

We are not currently subject to any pending material litigation, other than ordinary routine litigation

incidental to our business, as described above.

November 2018, Lineage, Asterias Biotherapeutics, Inc.

(“Asterias”), and Patrick Merger Sub, Inc., a wholly owned subsidiary

of Lineage, entered into an Agreement and Plan of Merger pursuant to which Lineage agreed to acquire all of the outstanding common stock

of Asterias in a stock-for-stock transaction (the “Asterias Merger”).

The Asterias Merger closed in March 2019.

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

This action (captioned Ross v.

Cell Therapeutics, Inc., et al.

2019-0822) was filed in Delaware Chancery Court and names Lineage, the Asterias board of

directors, one member of Lineage’s board of directors, and certain stockholders of both Lineage and Asterias as defendants.

action was brought by a purported stockholder of Asterias, on behalf of a putative class of Asterias stockholders, and asserts breach

The lawsuit (captioned Ross v.

Therapeutics, Inc., et al ., C.A.

2019-0822) was filed in Delaware Chancery Court and named, among other defendants, Lineage,

Mulroy, Alfred D.

Kingsley, Richard T.

LeBuhn and Aditya Mohanty.

Mulroy and Kingsley are members of the Lineage board

of directors and were former members of the Asterias board of directors.

LeBuhn and Mohanty were also former members of the Asterias

board of directors, and Mr.

Mohanty was a former member of the Lineage board of directors and a former chief executive officer of Lineage.

The lawsuit was brought by a purported stockholder of Asterias, on behalf of a putative class of Asterias stockholders, and asserts breach

of fiduciary duty and aiding and abetting claims under Delaware law.

The complaint alleges, among other things, that the process leading

up to the Asterias Merger was conflicted, that the Asterias Merger consideration was inadequate, and that the proxy statement filed by

Asterias with the Commission omitted certain material information, which allegedly rendered the information disclosed materially misleading.

The complaint seeks, among other things, that a class be certified, the recovery of monetary damages, and attorneys’ fees and costs.

On December 20, 2019, the defendants moved to dismiss the complaint.

On February 10, 2020, the plaintiff filed an opposition.

filed their replies on March 13, 2020.

On June 23, 2020, a hearing on the motions to dismiss occurred.

On September 21, 2020, the Chancery

Court denied the motion to dismiss as to Lineage and certain members of the Asterias board of directors, and it granted the motion to

dismiss as to all other defendants.

On October 30, 2020, the remaining defendants filed an answer to the complaint.

The parties are currently

engaged in discovery.

A five-day trial before the Chancery Court is currently scheduled for October 17-21, 2022.

believes the allegations in the action lack merit and intends to vigorously defend the claims asserted.

It is impossible at this time

to assess whether the outcome of this proceeding will have a material adverse effect on Lineage’s consolidated results of operations,

cash flows or financial position.

Therefore, in accordance with ASC 450, Contingencies, Lineage has not recorded any accrual for

a contingent liability associated with this legal proceeding based on its belief that a liability, while possible, is not probable nor

estimable, and any range of potential contingent liability amounts cannot be reasonably estimated at this time.

Lineage records legal

expenses as incurred.

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April 2022, the parties reached an agreement in principle to settle the lawsuit and, in October 2022, the plaintiff, on behalf of himself

and all others similarly situated, Lineage and Messrs.

Mulroy, Kingsley, LeBuhn and Mohanty entered into a Stipulation and Agreement

of Compromise and Settlement (the “Settlement Agreement”).

The effectiveness of the Settlement Agreement was subject to court

approval, which, as discussed in Note 19 (Subsequent Events), was obtained in February 2023.

accordance with ASC 450, Contingencies , Lineage has recorded an accrual for a liability associated with the proposed settlement,

acknowledging that a liability is probable, and the amount of the loss is estimable.

Note 19 (Subsequent Events) for an update on Asterias Merger Litigation .

has entered into employment agreements with certain executive officers.

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to incur severance obligations for matters relating to changes in control, as defined in the agreements, and involuntary terminations.

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Indemnification

the normal course of business, Lineage may provide indemnifications of varying scope under Lineage’s agreements with other companies

or consultants, typically Lineage’s clinical research organizations, investigators, clinical sites, suppliers and others.

to these agreements, Lineage will generally agree to indemnify, hold harmless, and reimburse the indemnified parties for losses and expenses

suffered or incurred by the indemnified parties arising from claims of third parties in connection with the use or testing of Lineage’s

products and services.

Indemnification provisions could also cover third party infringement claims with respect to patent rights, copyrights,

or other intellectual property pertaining to Lineage products and services.

The term of these indemnification agreements will generally

continue in effect after the termination or expiration of the particular research, development, services, or license agreement to which

The potential future payments Lineage could be required to make under these indemnification agreements will generally not

be subject to any specified maximum amount.

Historically, Lineage has not been subject to any claims or demands for indemnification.

Lineage also maintains various liability insurance policies that limit Lineage’s financial exposure.

As a result, Lineage believes

the fair value of these indemnification agreements is minimal.

Accordingly, Lineage has not recorded any liabilities for these agreements

as of December 31, 2021 and 2020.

the normal course of business, Lineage may agree to indemnify and reimburse other parties, typically Lineage’s clinical research

organizations, investigators, clinical sites, and suppliers, for losses and expenses suffered or incurred by the indemnified parties

arising from claims of third parties in connection with the use or testing of Lineage’s products and services.

Indemnification

could also cover third party infringement claims with respect to patent rights, copyrights, or other intellectual property pertaining

to Lineage products and services.

The term of these indemnification agreements generally continue in effect after the termination or

expiration of the particular research, development, services, or license agreement to which they relate.

The potential future payments

Lineage could be required to make under these indemnification agreements will generally not be subject to any specified maximum amount.

Generally, Lineage has not been subject to any material claims or demands for indemnification.

Lineage maintains liability insurance

policies that limit its financial exposure under the indemnification agreements.

Accordingly, Lineage has not recorded any liabilities

for these agreements as of December 31, 2022 or December 31, 2021.

Obligations and License Fees

and its subsidiaries or affiliates are parties to certain licensing agreements with research institutions, universities and other parties

for the rights to use those licenses and other intellectual property in conducting research and development activities.

These licensing

agreements provide for the payment of royalties by Lineage or the applicable party to the agreement on future product sales, if any.

In addition, in order to maintain these licenses and other rights during the product development, Lineage or the applicable party to

the contract must comply with various conditions including the payment of patent related costs and annual minimum maintenance fees.

minimum maintenance fees are expected to be approximately $ 30,000 to $ 60,000 per year.

part of the Asterias Merger, Lineage acquired certain royalty revenues for cash flows that were generated under certain specific patent

families that Asterias previously acquired from Geron.

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

Lineage continues to make royalty payments to Geron for royalties generated from these patents.

have licensing agreements with research institutions, universities and other parties providing us with certain rights to use intellectual

property in conducting research and development activities in exchange for the payment of royalties on future product sales, if any.

In addition, in order to maintain these licenses and other rights, we must comply with various conditions including the payment of patent

related costs and annual minimum maintenance fees.

part of the Asterias Merger, Lineage acquired certain royalty revenues for cash flows generated under certain patent families that Asterias

acquired from Geron Corporation.

Lineage continues to make royalty payments to Geron from royalties generated from these patents.

Employee Benefit Plan

4 unchanged sentences

not to exceed eligible limits, and subject to employee participation.

For the years ended December 31, 2021 and 2020, we incurred approximately

$ 164,000 and $ 149,000 , respectively, in expenses related to the safe harbor contribution.

For each of the years ended December 31, 2022 and 2021, we incurred

approximately $ 0.2 million in expenses related to the safe harbor contribution.

Segment Information

5 unchanged sentences

information related to Lineage’s sole operating segment.

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Enterprise-Wide Disclosures

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Total revenues

Foreign revenues are primarily

generated from grants in Israel.

revenues are primarily generated from grants in Israel.

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composition of Lineage’s long-lived assets, consisting of plant and equipment, net, between those in the United States and in foreign

countries, as of December 31, 2022 and 2021, is set forth below (in thousands):

Assets in foreign countries

principally include laboratory equipment and leasehold improvements in Israel.

in foreign countries principally include laboratory equipment and leasehold improvements in Israel.

Sources of Revenues

5 unchanged sentences

Total revenues

expenses and other current assets at December 31, 2021 includes $ 0.1 million of receivables related to cash in transit for sales of ATM

Shares in 2021 that settled in 2022, and $ 0.2 million of receivables related to cash in transit for the exercise of stock options in

2021 that settled in 2022.

following table shows Lineage’s major sources of revenues, as a percentage of total revenues, that were recognized during the years

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Grant revenues

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Selected Quarterly Financial Information (UNAUDITED, in thousands, except per share data)

21 unchanged sentences

Therefore, the sum of the per share amounts for the quarters may not agree with the per share amounts for the year.

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Subsequent Events

of Roche Upfront Payment

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 Hadasit License.

Lineage reduced the Hadasit payment

by $ 1.9 million, due to a $ 8.6 million budgetary commitment under the Roche Agreement.

Lineage is required to pay Hadasit 21.5% of any

portion of the commitment not incurred within five years after the execution of the Roche Agreement .

The IIA and Hadasit payments were

expensed on the consolidated statement of operations as of December 31, 2021, offset with an accrued liability on the consolidated balance

Stock Unit Awards

February 11, 2022, the Board of Directors at Lineage, approved restricted stock unit awards for an aggregate amount of 694,424 .

were issued under the 2021 Plan, which defines restricted stock units as a full value award, which reduce the Plan’s common shares

available for grant by 1.50 shares for each share issued.

As of December 31, 2021, there were 16,382,385 shares available for grant under

the 2021 Plan.

Merger Litigation Settlement

February 2023, the court approved the Settlement Agreement.

Pursuant to the terms of the Settlement Agreement, Lineage and certain insurers

of the defendants paid $ 10.65 million (the “Settlement Amount”) into a fund created for the benefit of the purported class

and in consideration for the full and final release, settlement and discharge of all claims.

Approximately $ 7.12 million of the Settlement

Amount was funded by certain insurers and approximately $ 3.53 million was paid by Lineage in cash.

and all defendants have denied, and continue to deny, the claims alleged in the lawsuit and the settlement does not reflect or constitute

any admission, concession, presumption, proof, evidence or finding of any liability, fault, wrongdoing or injury or damages, or of any

wrongful conduct, acts or omissions on the part any defendant.

Litigation Settlement

July 2019, the Company, along with other named defendants, was sued in the Superior Court of the State of California in a matter captioned

Aronowitz, M.D., et al .

The plaintiff asserted medical negligence and product liability causes of action relating

to the use in a clinical trial of a product candidate Premvia, that the Company is no longer developing and has no plans to pursue,

and that is not related to the cell therapy candidates the Company currently is developing.

In February 2023, the Company and the other

defendants each entered into settlement agreements with the plaintiff pursuant to which the defendants without admitting any liability,

which the defendants expressly denied, each agreed to pay specified amounts to the plaintiff in exchange for a full settlement and release

and discharge of claims.

The Company’s insurance covered the full amount paid by the Company excluding the $ 25,000 insurance deductible.

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CHANGES IN AND DISAGREEMENTS

WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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 8. Financial Statements and Supplementary Data