What changed in this filing

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Item 1. Financial Statements

2020-11-04 compared with 2020-08-06 · 659 added, 602 removed, 985 unchanged (56% of the section changed)

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CONSOLIDATED BALANCE SHEETS

June 30, 2020

December 31, 2019

(Notes 2 and 3)

and cash equivalents

equity securities

note from Juvenescence (Note 5)

accounts and grants receivable, net

from affiliates, net

expenses and other current assets

current assets

Cash and cash equivalents

Marketable equity securities

Promissory note from Juvenescence (Note 5)

Trade accounts and grants receivable, net

Receivables from affiliates, net

Prepaid expenses and other current assets

Total current assets

NONCURRENT ASSETS

Property and equipment, net (Notes 6 & 15)

Deposits and other long-term assets

Intangible assets, net

LIABILITIES AND SHAREHOLDERS’ EQUITY

and equipment, net (Notes 6 and 15)

and other long-term assets

AND SHAREHOLDERS’ EQUITY

payable and accrued liabilities

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

classified warrants, current portion

current liabilities

Accounts payable and accrued liabilities

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

Deferred revenues, current portion

Liability classified warrants, current portion

Total current liabilities

LONG-TERM LIABILITIES

Deferred tax liability

Deferred revenues

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

Financing lease, net of current portion

Liability classified warrants, net of current portion

TOTAL LIABILITIES

Commitments and contingencies (Note 15)

tax liability

revenues, net of current portion

lease liability, net of current portion (Note 15)

lease, net of current portion

classified warrants, net of current portion

and contingencies (Note 15)

SHAREHOLDERS’

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

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

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

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

shares issued and outstanding as of December 31, 2019

other comprehensive loss

Cell Therapeutics, Inc.

shareholders’ equity

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

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

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

149,831 shares issued and outstanding as of June 30, 2020 and 149,804 shares issued and outstanding as of December 31, 2019

Accumulated other comprehensive loss

Accumulated deficit

Lineage Cell Therapeutics, Inc.

Noncontrolling

deficit (Note 2)

shareholders’ equity

Noncontrolling deficit

Total shareholders’ equity

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

LIABILITIES AND SHAREHOLDERS’ EQUITY

accompanying notes to the condensed consolidated interim financial statements.

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THOUSANDS, EXCEPT PER SHARE DATA)

Three Months Ended

Six Months Ended

Grant revenue

Royalties from product sales and license fees

Sale of research products and services

Total revenues

Cost of sales

from product sales and license fees

of research products and services

and development

and administrative

operating expenses

Research and development

General and administrative

Total operating expenses

Loss from operations

OTHER INCOME/(EXPENSES):

Interest income, net

Gain on sale of marketable securities

Unrealized (loss) gain on marketable equity securities

(Loss) gain on equity method investment in OncoCyte Corporation

(“OncoCyte”) at fair value

from operations

INCOME/(EXPENSES):

on sale of marketable securities

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

loss on marketable equity securities

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

gain on equity method investment in Asterias at fair value

Unrealized (loss) gain on warrant liability

Other income (expense), net

Total other (expense) income, net

(LOSS)/INCOME BEFORE INCOME TAXES

Deferred income tax benefit

NET (LOSS)/INCOME

Net loss attributable to noncontrolling interest

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

NET (LOSS)/INCOME PER COMMON SHARE:

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:

gain on warrant liability

other (expense) income, net

BEFORE INCOME TAXES

income tax benefit

loss attributable to noncontrolling interest

LOSS ATTRIBUTABLE TO LINEAGE CELL THERAPEUTICS, INC.

LOSS PER COMMON SHARE:

AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:

accompanying notes to the condensed consolidated interim financial statements.

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)/INCOME

Three Months Ended

Six Months Ended

NET (LOSS)/INCOME

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustment, net of tax

COMPREHENSIVE (LOSS)/INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

Other comprehensive loss, net of tax:

currency translation adjustment, net of tax

COMPREHENSIVE LOSS

Comprehensive loss attributable to noncontrolling interest

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

COMPREHENSIVE

LOSS ATTRIBUTABLE TO LINEAGE CELL THERAPEUTICS, INC.

COMMON SHAREHOLDERS

accompanying notes to the condensed consolidated interim financial statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

Net (loss) income attributable to Lineage Cell Therapeutics, Inc.

Net loss allocable to noncontrolling interest

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

FLOWS FROM OPERATING ACTIVITIES:

loss attributable to Lineage Cell Therapeutics, Inc.

loss allocable to noncontrolling interest

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

to net cash used in operating activities:

Unrealized gain on equity method investment in OncoCyte at fair value

Unrealized gain on equity method investment in Asterias at fair value

Gain on sale of marketable securities

Unrealized loss (gain) on

marketable equity securities

Deferred income tax benefit

Depreciation expense, including amortization of leasehold improvements

Amortization of right-of-use asset

Amortization of intangible assets

Stock-based compensation

Change in unrealized gain

on warrant liability

Write-off of security deposit

Foreign currency remeasurement and other (gain) loss

Changes in operating assets and liabilities:

Accounts and grants receivable, net

Accrued interest receivable

Receivables from OncoCyte and AgeX, net of payables

Prepaid expenses and other current assets

Accounts payable and accrued liabilities

Deferred revenue and other liabilities

Net cash used in operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from the sale of OncoCyte common shares

Proceeds from the sale of AgeX common shares

Cash and cash equivalents acquired in the Asterias Merger

Purchase of equipment and other assets

Security deposit paid and other

Net cash provided by investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Common shares received and retired for employee taxes paid

Reimbursement from landlord on tenant improvements

Repayment of financing lease liabilities

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

Proceeds from sale of subsidiary warrants

Repayment of principal portion of promissory notes

Net cash provided by financing activities

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

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

CASH, CASH EQUIVALENTS AND RESTRICTED CASH:

At beginning of the period

At end of the period

gain on equity method investment in OncoCyte at fair value

gain on equity method investment in Asterias at fair value

on sale of marketable securities

loss on marketable equity securities

income tax benefit

expense, including amortization of leasehold improvements

of right-of-use asset

of intangible assets

stock issued for services

on write-off and sales of assets

in unrealized gain on warrant liability

of security deposit

of deferred license fee

currency remeasurement and other gain

in operating assets and liabilities:

and grants receivable, net

interest receivable

from OncoCyte and AgeX, net of payables

expenses and other current assets

payable and accrued liabilities

revenue and other liabilities

cash used in operating activities

FLOWS FROM INVESTING ACTIVITIES:

from the sale of OncoCyte common shares

from the sale of AgeX common shares

from the sale of Hadasit common shares

and cash equivalents acquired in the Asterias Merger

of equipment and other assets

from sale of equipment

deposits and other

cash provided by investing activities

FLOWS FROM FINANCING ACTIVITIES:

from payment of Juvenescence promissory note

shares received and retired for employee taxes paid

Reimbursement

from landlord on tenant improvements

from sales of common shares

Payments for offering costs

of financing lease liabilities

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

from sale of subsidiary warrants

of principal portion of promissory notes

cash provided by financing activities

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

INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

CASH EQUIVALENTS AND RESTRICTED CASH:

beginning of the period

end of the period

accompanying notes to the condensed consolidated interim financial statements.

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in detecting and combating cancer.

Lineage’s programs are based on its proprietary cell-based therapy platform and associated

development and manufacturing capabilities.

From this platform Lineage develops and manufactures specialized, terminally-differentiated

human cells from its pluripotent and progenitor cell starting materials.

These differentiated cells are developed either to replace

or support cells that are dysfunctional or absent due to degenerative disease or traumatic injury, or administered as a means

of helping the body mount an effective immune response to cancer.

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

spinal cord injuries, and non-small cell lung cancer.

Lineage’s programs are based on its proprietary cell-based therapy

platform and associated development and manufacturing capabilities.

From this platform Lineage develops and manufactures specialized,

terminally differentiated human cells from its pluripotent and progenitor cell starting materials.

These differentiated cells

are transplanted into a patient either to replace or support cells that are dysfunctional or absent due to degenerative

disease or traumatic injury, or administered as a means of helping the body mount an effective immune response to cancer.

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

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research charity.

also is currently working to identify a commercialization partner for Renevia®, its proprietary three-dimensional scaffold

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

identify a commercialization or development partner for Renevia ® .

Renevia is a proprietary three-dimensional scaffold

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

in September 2019.

November 7, 2018, Lineage, 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”).

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.

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Note 3 for a full discussion of the Asterias Merger.

has significant equity holdings in OncoCyte Corporation (“OncoCyte”), a publicly traded company (NYSE American:

which Lineage founded and, in the past, was a majority-owned consolidated subsidiary until February 17, 2017, when Lineage deconsolidated

OncoCyte’s financial statements.

OncoCyte is developing confirmatory diagnostic tests for lung cancer utilizing novel liquid

biopsy technology.

As of June 30, 2020, Lineage owned approximately 3.6 million shares of OncoCyte common stock, or 5.4 % of its

outstanding shares (see Note 4).

has significant equity holdings in OncoCyte Corporation (“OncoCyte”), a publicly traded molecular diagnostic company

(NYSE American:

OCX), which Lineage founded and, in the past, was a majority-owned consolidated subsidiary until February 17,

2017, when Lineage deconsolidated OncoCyte’s financial statements.

OncoCyte is focused on developing and commercializing

laboratory-developed tests to serve unmet medical needs across the cancer care continuum.

As of September 30, 2020, Lineage owned

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

Basis of Presentation, Liquidity and Summary of Significant Accounting Policies

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

The following table reflects Lineage’s

ownership, directly or through one or more subsidiaries, of the outstanding shares of its operating subsidiaries as of June 30,

All material intercompany accounts

and transactions have been eliminated in consolidation.

The following table reflects Lineage’s ownership, directly or

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

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

Field of Business

Lineage Ownership

Asterias Biotherapeutics, Inc.

Cell therapy clinical development programs in spinal cord injury and oncology

Cell Cure Neurosciences Ltd.

BioTherapeutics, Inc.

therapy clinical development programs in spinal cord injury and oncology

Cure Neurosciences Ltd.

(“Cell Cure”)

Products to treat age-related macular degeneration

ES Cell International Pte.

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

OrthoCyte Corporation

Developing bone grafting products for orthopedic diseases and injuries

to treat age-related macular degeneration

Cell International Pte.

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

bone grafting products for orthopedic diseases and injuries

shares owned by Lineage and ESI.

material intercompany accounts and transactions have been eliminated in consolidation.

As of June 30, 2020, Lineage consolidated

As of September 30, 2020, Lineage consolidated

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

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with Cantor Fitzgerald & Co., as sales agent (“Cantor Fitzgerald”), pursuant to which Lineage may, but is not

obligated to, raise up to $ 25.0 million of common shares from time to time in at-the-market transactions under the Sales Agreement.

As of June 30, 2020, no sales had been made under the Sales Agreement.

June 30, 2020, Lineage had an accumulated deficit of approximately $ 288.3

obligated to, raise up to $ 25.0

million through the sale

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

As of September 30, 2020, no sales

had been made under the Sales Agreement.

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

million , working capital of $ 32.0

million and shareholders’ equity

Lineage has evaluated its projected

cash flows and believes that its $ 20.3

million of cash, cash equivalents and

marketable equity securities and its access to additional capital through the Sales Agreement at June 30, 2020, are sufficient

to fund Lineage’s planned operations for at least the next twelve months from the issuance date of the condensed consolidated

financial statements included herein.

If Lineage needs near term working capital or liquidity to supplement its cash and cash

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

the promissory note issued by Juvenescence in favor of Lineage discussed in Note 5 is converted into equity securities of Juvenescence

prior to its maturity date, the Juvenescence equity securities may be marketable securities that Lineage may use to supplement

its liquidity, as needed.

If such promissory note is not converted, it is payable in cash, plus accrued interest, at maturity

on August 30, 2020.

The value of the promissory note is $ 24.4 million as of June 30, 2020.

March 8, 2019, with the consummation of the Asterias Merger, Asterias became Lineage’s wholly owned subsidiary.

began consolidating Asterias’ operations and results with its operations and results beginning on March 8, 2019 (see Note

As Lineage integrates Asterias’ operations into its own, Lineage has made extensive reductions in headcount and reduced

non-clinical related spend, in each case, as compared to Asterias’ operations before the Asterias Merger.

Lineage has evaluated

its projected cash flows and believes that its $ 38.0

million of cash, cash equivalents and marketable

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

date of the condensed consolidated financial statements included herein.

If Lineage needs near term working capital or liquidity

to supplement its cash and cash equivalents for its operations, Lineage may sell some, or all, of its marketable equity securities,

as necessary.

March 8, 2019, Asterias became Lineage’s wholly owned subsidiary, and Lineage began consolidating Asterias’ operations

and results with its operations and results (see Note 3).

Lineage has made extensive reductions in headcount and reduced non-clinical

related spend, in each case, as compared to Asterias’ operations before the Asterias Merger.

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

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number of clinical trial sites, unless it is able to obtain adequate financing.

In addition, Lineage has incurred and expects

to continue incurring significant costs in connection with the acquisition of Asterias and with integrating its operations.

may incur additional costs to maintain employee morale and to retain key employees.

Lineage cannot assure that adequate financing

will be available on favorable terms, if at all.

Sales of additional equity securities by Lineage or its subsidiaries and affiliates

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

In addition, Lineage has incurred significant

costs in connection with the acquisition of Asterias and with integrating its operations.

Lineage may incur additional costs to

maintain employee morale and to retain key employees.

Lineage cannot assure that adequate financing will be available on favorable

terms, if at all.

Sales of additional equity securities by Lineage or its subsidiaries and affiliates could result in the dilution

of the interests of current shareholders.

accounts for business combinations, such as the Asterias Merger completed in March 2019, in accordance with ASC Topic 805, which

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significant influence over OncoCyte and is now accounting for its OncoCyte holdings as marketable equity securities.

the Asterias Merger completed on March 8, 2019 discussed in Note 3, Lineage accounted for its Asterias shares held at fair value,

using the equity method of accounting.

the first quarter of 2018, Lineage adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update

(“ASU”) ASU 2014-09, Revenues from Contracts with Customers (Topic 606) , which created a single, principle-based

revenue recognition model that supersedes and replaces nearly all existing U.S.

GAAP revenue recognition guidance.

Lineage adopted

ASU 2014-09 using the modified retrospective transition method applied to those contracts which were not completed as of the adoption

Results for reporting periods beginning on January 1, 2018 and thereafter are presented under Topic 606, while prior period

amounts are not adjusted and continue to be reported in accordance with Lineage’s historical revenue recognition accounting

under Topic 605.

recognizes revenue in a manner that depicts the transfer of control of a product or a service to a customer and reflects the amount

of the consideration it is entitled to receive in exchange for such product or service.

In doing so, Lineage follows a five-step

the Asterias Merger completed on March 8, 2019, Lineage accounted for its Asterias shares held at fair value, using the equity

method of accounting.

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

ASU 2014-09, Revenues from Contracts with Customers (Topic 606), and in a manner that depicts the transfer of control of

a product or a service to a customer and reflects the amount of the consideration it is entitled to receive in exchange for such

product or service.

In doing so, Lineage follows a five-step approach:

(i) identify the contract with a customer;

(ii) identify the performance obligations in the contract;

(iii) determine

the transaction price;

(iv) allocate the transaction price to the performance obligations;

and (v) recognize revenue when (or

as) the customer obtains control of the product or service.

Lineage considers the terms of a contract and all relevant facts and

circumstances when applying the revenue recognition standard.

Lineage applies the revenue recognition standard, including the

use of any practical expedients, consistently to contracts with similar characteristics and in similar circumstances.

(ii) identify

the performance obligations in the contract;

(iii) determine the transaction price;

(iv) allocate the transaction price to the

performance obligations;

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

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

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

characteristics and in similar circumstances.

largest source of revenue is currently related to government grants.

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yet been incurred as of the balance sheet date reported.

As of June 30, 2020, deferred grant revenue was $ 97 ,000.

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

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

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if any, using the if-converted method, and treasury stock held by subsidiaries, if any.

the three and six months ended June 30, 2020 and for the three months ended June 30, 2019, Lineage reported a net loss attributable

to common shareholders, and therefore, all potentially dilutive common shares were considered antidilutive for that period.

the six months ended June 30, 2019, Lineage reported net income attributable to common shareholders, and therefore, performed

an analysis of common share equivalents to determine their impact on diluted net income, and determined that none of the common

share equivalents were dilutive.

the three and nine months ended September 30, 2020 and 2019, respectively, Lineage reported a net loss attributable to common

shareholders, and therefore, all potentially dilutive common shares were considered antidilutive for those periods.

following weighted average common share equivalents were excluded from the computation of diluted net income (loss) per common

share for the periods presented because including them would have been antidilutive (in thousands):

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share

Three Months Ended

Six Months Ended

of Antidilutive Securities Excluded from Computation of Earnings Per Share

Stock options

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

Cash and cash equivalents

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

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

and cash equivalents

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

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

accounting and impact of adoption of the new lease standard

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of remaining economic life of the underlying asset” and “substantially all of the fair value of the underlying asset.”

For lease classification determination, Lineage continues to use (i) greater to or equal to 75% to determine whether the lease

term is a major part of the remaining economic life of the underlying asset and (ii) greater to or equal to 90% to determine whether

the present value of the sum of lease payments is substantially all of the fair value of the underlying asset .

Under the available

practical expedients, Lineage accounts for the lease and non-lease components as a single lease component.

For lease classification determination, Lineage continues to use:

(i) greater than or equal to 75% to determine whether the lease

term is a major part of the remaining economic life of the underlying asset;

and (ii) greater than or equal to 90% to determine

whether the present value of the sum of lease payments is substantially all of the fair value of the underlying asset.

available practical expedients, Lineage accounts for the lease and non-lease components as a single lease component.

Lineage recognizes

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deficit on January 1, 2019.

These build to suit leases were primarily related to the Alameda and the Cell Cure Leases described

ASC 842 requires build to suit leases recognized on Lineage’s consolidated balance sheets as of December 31,

2018 to be derecognized upon the adoption of the new lease standard and be recognized in accordance with the new standard on January

These build to suit leases were primarily related to Lineage’s prior leases in Alameda, California

and Cell Cure’s leases in Jerusalem, Israel (See Note 15).

ASC 842 requires build to suit leases recognized on Lineage’s

consolidated balance sheets as of December 31, 2018 to be derecognized upon the adoption of the new lease standard and be recognized

in accordance with the new standard on January 1, 2019.

adoption of ASC 842 had a material impact in Lineage’s consolidated balance sheets, with the most significant impact resulting

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All stock options to purchase shares of Asterias common stock outstanding immediately prior to the closing of the Asterias

Merger were cancelled at the closing for no consideration.

Merger were canceled at the closing for no consideration.

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

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

statement of operations of Lineage for the year ended December 31, 2019, as well as for the three and six months ended June 30,

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

of the purchase price

Schedule of Merger

Consideration Transferred

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

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

Schedule of Merger Consideration Transferred

(38% ownership

62% ownership

(38% ownership interest)

other than Lineage (approximate 62% ownership interest)

Asterias common stock as of March 8, 2019

34,783,333 (1)

56,530,902 (1)

common shares issuable

15,440,774 (2)

24,695,898 (3)

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

price (in $000s)

price (in thousands)

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

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Schedule of Identifiable Tangible and Intangible Assets Acquired and Liabilities Assumed

and cash equivalents

expenses and other assets, current and noncurrent

and equipment

intangible assets - royalty contracts

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

assets acquired

Cash and cash equivalents

Prepaid expenses and other assets, current and noncurrent

Machinery and equipment

Long-lived intangible assets - royalty contracts

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

Total assets acquired

liabilities and accounts payable

classified warrants

license revenue

deferred income tax liability

liabilities assumed

Accrued liabilities and accounts payable

Liability classified warrants

Deferred license revenue

Long-term deferred income tax liability

Total liabilities assumed

Net assets acquired, excluding goodwill (a)

Fair value of Lineage common shares held by Asterias (b)

Total purchase price (c)

Estimated goodwill (c-a-b)

assets acquired, excluding goodwill (a)

value of Lineage common shares held by Asterias (b)

purchase price (c)

goodwill (c-a-b)

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

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

(in thousands, except for useful life)

In process research and development (“IPR&D”)

Royalty contracts

thousands, except for useful life)

process research and development (“IPR&D”)

following is a discussion of the valuation methods used to determine the fair value of Asterias’ significant assets and

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million pertaining to the OPC1 program that is currently in a Phase 1/2a clinical trial for SCI, which has been partially funded

by the California Institute for Regenerative Medicine and $ 14.8 million pertaining to the VAC2 program, which is a non-patient-specific

(“off-the-shelf”) cancer immunotherapy derived from pluripotent stem cells for which a clinical trial in non-small

by the California Institute for Regenerative Medicine and $ 14.8 million pertaining to the VAC2 program, which is an allogeneic,

or “off-the-shelf,” cancer immunotherapy derived from pluripotent stem cells for which a clinical trial in non-small

cell lung cancer is being funded and sponsored by Cancer Research UK.

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of a probability weighted discounted cash flow method under the income approach further discussed below.

Lineage considered the

VAC1 program, an autologous product candidate, manufactured from cells that come from the patient, and due to significant risks,

substantial costs and limited opportunities in its current state associated with the VAC1 program, Lineage management considered

this program to have de minimis value.

Lineage considered Asterias’

VAC1 program, which is an autologous, or patient-specific, cancer immunotherapy derived from the patient’s own cells, to

have de minimis value due to significant risks, substantial costs and limited opportunities.

determined that the estimated aggregate fair value of the AST-Clinical programs was $ 46.5 million as of the acquisition date using

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for clinical trials.

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

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

from Geron Corporation (“Geron”).

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

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

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

The discounted cash flow method

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

This option is considered a performance

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

This option was considered a performance

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

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

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

under the contract after the acquisition date, assuming Novo Nordisk exercised its option, including, but not limited to, negotiation

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

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

to be approximately $ 200 ,000 in the purchase price allocation.

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

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

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

Management estimated those costs, plus a normal profit margin, to be approximately

$ 200 ,000 in the purchase price allocation.

This amount was originally recorded as deferred revenue and subsequently recognized

as revenue in September 2020 when Novo Nordisk did not exercise the option.

classified warrants - On May 13, 2016, in connection with a common stock offering, Asterias issued warrants to purchase 2,959,559

shares of Asterias common stock (the “Asterias Warrants”) with an exercise price of $ 4.37 per share that expire in

five years from the issuance date, or May 13, 2021 .

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

The Asterias Warrants contain certain provisions in the event of a Fundamental Transaction, as defined in the warrant

agreement governing the Asterias Warrants (“Warrant Agreement”), that Asterias or any successor entity will be required

to purchase, at a holder’s option, exercisable at any time concurrently with or within thirty days after the consummation

of the Fundamental Transaction, the Asterias Warrants for cash in an amount equal to the calculated value of the unexercised portion

of such holder’s warrants, determined in accordance with the Black-Scholes option pricing model with significant inputs

as specified in the Warrant Agreement.

shares of Asterias common stock (the “Asterias Warrants”) with an exercise price of $ 4.37 per share that expire on

May 13, 2021 .

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

The Asterias Warrants

contain certain provisions in the event of a Fundamental Transaction, as defined in the warrant agreement governing the Asterias

Warrants (“Warrant Agreement”), that Asterias or any successor entity will be required to purchase, at a holder’s

option, exercisable at any time concurrently with or within thirty days after the consummation of the Fundamental Transaction,

the Asterias Warrants for cash in an amount equal to the calculated value of the unexercised portion of such holder’s warrants,

determined in accordance with the Black-Scholes option pricing model with significant inputs as specified in the Warrant Agreement.

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

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

and net cash settlement occurring, using the contractual remaining term of the warrants.

In applying these models, these inputs

included key assumptions including the per share closing price of Lineage common shares on March 8, 2019, volatility computed

in accordance with the provisions of the Warrant Agreement and, to a large extent, assumptions based on discussions with a majority

of the holders of the Asterias Warrants since the closing of the Asterias Merger to settle the Asterias Warrants in cash or in

common shares of Lineage.

Based on such discussions, Lineage believes the fair value of the Asterias Warrants as of the closing

of the Asterias Merger is not subject to change significantly, however, to the extent any Asterias Warrants that were not settled

in cash or in Lineage common shares discussed below, were automatically converted to Lineage warrants 30 days after the closing

of the Asterias Merger.

In April 2019, Asterias Warrants representing approximately $ 372 ,000

and net cash settlement occurring, using

the contractual remaining term of the warrants.

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

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

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

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

Based on such

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

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

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

In April 2019,

Asterias Warrants representing approximately $ 372 ,000

in fair value were settled:

in fair value was settled in exchange for 251,835

common shares of Lineage, and $ 40 ,000

in fair value was settled in exchange for cash.

The Asterias Warrants settled in exchange for common shares of Lineage were held

by Broadwood Partners, L.P., an Asterias and Lineage shareholder.

The Asterias Warrants settled in exchange for cash were held

by other parties.

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

The Asterias Warrants settled in exchange

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

The Asterias Warrants

settled in exchange for cash were held by other parties.

The remaining Asterias Warrants (representing approximately $ 495,000

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Exchange Ratio (the “Lineage Warrants”).

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

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

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

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

related costs recorded in general and administrative expenses were $ 0.2 million and $ 0.9 million for the three months ended June

30, 2020 and 2019, and $ 0.7 million and $ 4.4 million for the six months ended June 30, 2020 and 2019, respectively.

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

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

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

ended September 30, 2020 and 2019, respectively.

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

stock at fair value using the equity method of accounting.

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share on such date.

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

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

All share prices were

determined based on the closing price of Lineage or Asterias common stock on the NYSE American on the applicable dates.

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

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

All share prices were determined based

on the closing price of Lineage or Asterias common stock on the NYSE American on the applicable dates.

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

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The calculation of fair value is the same under the equity method and as a marketable equity security.

the six months ended June 30, 2020, Lineage sold approximately 4.8 million shares of OncoCyte common stock for net proceeds of

$ 10.9 million.

Lineage’s ownership in OncoCyte was reduced to approximately 5.4 % as of June 30, 2020.

of June 30, 2020, Lineage owned 3.6 million shares of OncoCyte common stock.

These shares had a fair value of $ 6.9 million, based

on the closing price of OncoCyte of $ 1.91 per share on June 30, 2020.

As of December 31, 2019, Lineage had 8.4 million shares

of OncoCyte common stock.

These shares had a fair value of $ 19.0 million, based on the closing price of OncoCyte of $ 2.25 per

share on December 31, 2019.

the three months ended June 30, 2020, Lineage recorded a realized gain of $ 2.1

million due to sales of OncoCyte shares in the period.

of December 31, 2019, Lineage owned approximately 8.4 million shares of OncoCyte common stock.

These shares had a fair value of

$ 19.0 million , based on the closing price of OncoCyte of $ 2.25 per share on December 31, 2019.

During the nine months ended September

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

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

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

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

million related to the remaining shares

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

at June 30, 2020 to $ 1.39

at September 30, 2020.

For the three months

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

million due to sales of OncoCyte shares

in the period.

Lineage also recorded an unrealized loss of $ 8.7

million due to the decrease in OncoCyte’s

stock price from $ 2.49

per share at June 30, 2019 to $ 2.10

per share at September 30, 2019.

million of the unrealized loss was recorded

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

the remaining $ 0.4 million was recorded

as an unrealized loss on marketable equity securities.

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

million due to sales of OncoCyte shares

in the period.

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

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The unrealized loss is comprised of $ 3.7

million related to the difference between the book cost basis of OncoCyte shares sold in the period versus the applicable

prior month’s ending OncoCyte stock price and an additional $ 1.8

million related to the shares remaining at June 30, 2020 and the decrease in OncoCyte’s stock price from $ 2.45

at March 31, 2020 to $ 1.91

at June 30, 2020.

For the three months ended June 30, 2019, Lineage recorded an unrealized loss of $ 21.4

million due to the decrease in OncoCyte’s stock price from $ 3.95

per share at March 31, 2019 to $ 2.49

per share at June 30, 2019.

the six months ended June 30, 2020, Lineage recorded a realized gain of $ 3.1 million due to sales of OncoCyte shares in the period.

In the same period, Lineage also recorded an unrealized loss of $ 4.2 million related to its OncoCyte shares.

The unrealized loss

is comprised of $ 3.7 million related to the difference between the book cost basis of OncoCyte shares sold in the period versus

the applicable prior month’s ending OncoCyte stock price and an additional $ 0.5 million related to the shares remaining

at June 30, 2020 and the decrease in OncoCyte’s stock price from $ 2.25 at December 31, 2019 to $ 1.91 at June 30, 2020.

the six months ended June 30, 2019, Lineage recorded an unrealized gain of $ 16.3 million due to the increase in OncoCyte’s

stock price from $ 1.38 per share at December 31, 2018 to $2.49 per share at June 30, 2019.

million related to the difference between

the book cost basis of OncoCyte shares sold in the period versus the applicable prior month’s ending OncoCyte stock price

and an additional $ 2.4

million related to the shares remaining

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

at December 31, 2019 to $ 1.39

at September 30, 2020.

For the nine months

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

million due to sales of OncoCyte shares

in the period.

Lineage also recorded an unrealized gain of $ 7.6

million due to the increase in OncoCyte’s

stock price from $ 1.38

per share at December 31, 2018 to $ 2.10

per share at September 30, 2019.

million of the unrealized gain was recorded

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

the remaining $0.4 million

was recorded as an unrealized loss on marketable equity securities.

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

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from Lineage relating to the business of AgeX, including an indemnity cap of $ 4.3 million, which is subject to certain exceptions.

The transactions contemplated by the Stock Purchase Agreement are referred to as the Juvenescence Transaction in this Report.

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

Promissory Note cannot be prepaid prior to maturity or conversion.

On the maturity date, if a “Qualified Financing”

(as defined below) has not occurred, Lineage will have the right, but not the obligation, to convert the principal balance of

the Promissory Note and accrued interest then due into Series A preferred shares of Juvenescence at a conversion price of $ 15.60 .

Upon the occurrence of a Qualified Financing on or before the maturity date, the principal balance of the Promissory Note and

accrued interest will automatically convert into a number of shares of the class of equity securities of Juvenescence sold in

the Qualified Financing, at the price per share at which the Juvenescence securities are sold in the Qualified Financing;

if AgeX common stock is listed on a national securities exchange in the U.S., the number of shares of the class of equity securities

issuable upon conversion may be increased depending on the market price of AgeX common stock.

A Qualified Financing is generally

defined as an underwritten initial public offering of Juvenescence equity securities in which gross proceeds are not less than

$ 50.0 million.

The Promissory Note is not transferable, except in connection with a change of control of Lineage.

the three and six months ended June 30, 2020, Lineage recognized $ 378 ,000 and $ 756 ,000, respectively, in interest income on the

Promissory Note.

As of June 30, 2020, the principal and accrued interest balance of the Promissory Note was $ 24.4 million.

connection with the Juvenescence Transaction, the termination provision of the Shared Facilities Agreement (see Note 10) entitling

AgeX or Lineage to terminate the agreement upon six months advance written notice was amended.

Pursuant to the amendment, each

party retained the right to terminate the Shared Facilities Agreement at any time by giving the other party six months advance

written notice, provided that Lineage could not do so prior to September 1, 2020.

services with AgeX were terminated on July 31, 2019 with respect to the use of Lineage’s office and laboratory facilities

In connection with the sale, Lineage also entered into a Shared Facilities Agreement with AgeX (see Note 10).

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

Promissory Note was paid in full on August 28, 2020.

the three and nine months ended September 30, 2020, Lineage recognized $ 252 ,000 and $ 1,008 ,000, respectively, in interest income

on the Promissory Note.

Shared Facilities Agreement was terminated on July 31, 2019 with respect to the use of Lineage’s office and laboratory facilities

and September 30, 2019 with respect to all other remaining shared services.

Property and Equipment, Net

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

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

Schedule of Property and Equipment, Net

Equipment, furniture and fixtures

Leasehold improvements

Right-of-use assets

Accumulated depreciation and amortization

Property and equipment, net

furniture and fixtures

depreciation and amortization

and equipment, net

adopted ASC 842 on January 1, 2019.

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Notes 2 and 15).

and equipment at both June 30, 2020 and December 31, 2019 includes $ 96 ,000

in financing leases.

Depreciation and amortization expense amounted to $ 210 ,000

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

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

This resulted

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

See additional information in Note 15.

and amortization expense amounted to $ 200 ,000

and $ 253 ,000

for the three months ended June 30, 2020 and 2019, and $ 423 ,000

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

and $ 766 ,000

for the six months ended June 30, 2020 and 2019, respectively.

During the three and six months ended June 30, 2020, Lineage sold

equipment with a net book value of $ 13 ,000

and recognized a loss of $ 2 ,000.

Additionally, Lineage sold non-capitalized assets for a gain of $ 46 ,000.

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

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

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

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

and $ 52 ,000,

respectively, and recognized losses of $ 32 ,000

and $ 34 ,000,

respectively.

Additionally, Lineage sold non-capitalized assets

for a net gain of $ 67 ,000.

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

Goodwill and Intangible Assets, Net

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

Schedule of Goodwill and Intangible Assets, Net

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

of Goodwill and Intangible Assets, Net

Intangible assets:

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

recognized in research and development expenses was $ 0.3 million and $ 0.5 million for the three months ended June 30, 2020 and

2019, and $ 0.8 million and $ 0.9 million for the six months ended June 30, 2020 and 2019, respectively.

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

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

Accounts Payable and Accrued Liabilities

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

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

Schedule of Accounts Payable and Accrued Liabilities

current liabilities

April 2020, Lineage received a loan for $ 523 ,000 from Axos Bank under the PPP contained within the new Coronavirus Aid, Relief

and Economic Security (“CARES”) Act.

The PPP loan has a term of two years, is unsecured, and is guaranteed by the

September 30, 2020

December 31, 2019

Accounts payable

Accrued compensation

Accrued liabilities

PPP loan payable

Other current liabilities

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

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

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

from Axos Bank under the PPP contained within the new Coronavirus Aid, Relief and Economic Security (“CARES”) Act.

The PPP loan has a term of two years, is unsecured, and is guaranteed by the U.S.

Small Business Administration (“SBA”).

The loan carries a fixed interest rate of one percent per annum, with

the first six months of interest deferred.

Under the CARES Act, Lineage will be eligible to apply for forgiveness of all loan

proceeds used to pay payroll costs, rent, utilities and other qualifying expenses during the 24-week period following receipt

of the loan, provided that Lineage maintains its employment and compensation within certain parameters during such period.

more than 40 % of the forgiven amount may be for non-payroll costs.

If the conditions outlined in the PPP loan program are adhered

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

Lineage believes that all or a substantial portion of the PPP loan

is eligible for forgiveness within one year and classifies the loan as a short-term liability.

However, Lineage cannot provide

any assurance regarding eligibility or whether the PPP loan will ultimately be forgiven by the SBA.

Any forgiven amounts will

not be included in Lineage’s taxable income.

The loan carries a fixed interest rate of one percent per annum, with the first six months of interest deferred.

Under the CARES

Act and Paycheck Protection Program Flexibility Act, Lineage will be eligible to apply for forgiveness of all loan proceeds

used to pay payroll costs, rent, utilities and other qualifying expenses during the 24-week period following receipt of the loan,

provided that Lineage maintains its employment and compensation within certain parameters during such period.

Not more than 40 %

of the forgiven amount may be for non-payroll costs.

If the conditions outlined in the PPP loan program are adhered to by Lineage,

all or part of such loan could be forgiven.

Lineage believes that all or a substantial portion of the PPP loan is eligible for

forgiveness within one year and classifies the loan as a short-term liability.

However, Lineage

cannot provide any assurance whether the PPP loan will ultimately be forgiven by the SBA.

Any forgiven amounts will not be included

in Lineage’s taxable income.

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

Separation Payments

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

The fair values of such assets were as follows for June 30, 2020 and December 31, 2019 (in thousands):

The fair values of such assets were as follows for September 30, 2020 and December 31, 2019 (in thousands):

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

Fair Value Measurements Using

June 30, 2020

Quoted Prices in Active Markets for Identical Assets

Significant Other Observable Inputs

Significant Unobservable Inputs

Cash and cash equivalents

Marketable securities

Lineage Warrants

Cell Cure Warrants

Fair Value Measurements Using

Balance at December 31, 2019

Quoted Prices in Active Markets for Identical Assets

Balance at September 30, 2020

Prices in Active Markets for Identical Assets

Significant Other Observable Inputs

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Cell Cure Warrants

Value Measurements Using

at December 31, 2019

Prices in Active Markets for Identical Assets

Other Observable Inputs

Unobservable Inputs

and cash equivalents

Cure Warrants

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

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in current liabilities on the condensed consolidated balance sheets.

Changes in the fair value of the Lineage Warrants

at each reporting period are included in the condensed consolidated statements of operations under unrealized gain/(loss) on warrant

For the three and six months ended June 30, 2020, Lineage recognized an unrealized loss of $ 3 ,000

and an unrealized gain of $ 4 ,000

Changes in the fair value of the Lineage Warrants at each

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

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

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

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The Cell Cure Warrants are included in current

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

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

statements of operations under unrealized gain/(loss) on warrant liability.

For the three and six months ended June 30, 2020,

Lineage recognized an unrealized loss of $ 2 ,000

and an unrealized gain of $ 25 ,000

on the Cell Cure Warrants, respectively, primarily related to the reduction in the remaining life of the warrants.

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

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

of operations under unrealized gain on warrant liability.

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

unrealized gains of $ 41 ,000

and $ 66 ,000

on the Cell Cure Warrants, respectively, primarily related to

the reduction in the remaining life of the warrants.

fair value of Lineage’s assets and liabilities, which qualify as financial instruments under FASB guidance regarding disclosures

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

Related Party Transaction s

Related Party Transactions

Facilities and Service Agreements with Affiliates

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

the three months ended June 30, 2019, Lineage charged Use Fees of $ 670,000

to OncoCyte and AgeX;

$ 179,000 was offset against general and administrative

expenses and $ 491,000

was offset against research and development

the six months ended June 30, 2019, Lineage charged Use Fees of $ 1,395,000

to OncoCyte and AgeX;

was offset against general and administrative

expenses and $ 984,000

was offset against research and development

though shared services have been terminated, there are still a small number of vendors that are paid by Lineage on behalf of AgeX

These are typically repaid on a quarterly basis.

As of June 30, 2020, receivables for these items total $ 7,000 .

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

$ 236,000 was offset against

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

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

$ 647,000 was offset against

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

related party transactions

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

Through June 30, 2020, Lineage has incurred a total of $ 350,000 in legal expenses on behalf of the director, shareholder

Through September 30, 2020, Lineage has incurred a total of $ 357,000 in legal expenses on behalf of the director, shareholder

and the manager of the shareholder.

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There are no preferred shares issued and outstanding.

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

As of June 30, 2020, and December 31,

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

As of September 30, 2020, and December

31, 2019, Lineage had 149,991,454 and 149,804,284 issued and outstanding common shares, respectively.

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that had been entered into in April 2017.

As of June 30, 2020, no sales had been made under the Sales Agreement.

As of September 30, 2020, no sales had been made under the Sales Agreement.

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

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of Changes in Shareholders’ Equity

following tables document the changes in shareholders’ equity for the three and six months ended June 30, 2020 and 2019

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

2019 (unaudited and in thousands):

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Total Shareholders’

Preferred Shares

Common Shares

Noncontrolling

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Stock-based compensation

Foreign currency translation loss

Foreign currency translation gain (loss)

Financing related fees

Shares issued in connection with the Asterias Merger

Shares issued in connection with the Asterias Merger, shares

Shares retired in connection with the Asterias Merger

Shares retired in connection with the Asterias Merger, shares

Stock-based compensation for shares issued upon vesting of Asterias restricted stock units attributable to post combination services

Stock-based compensation for shares issued upon vesting of Asterias restricted stock units attributable to post

combination services, shares

Shares issued in connection with the Asterias Merge,

Shares retired in connection with the Asterias

Merger, shares

Shares issued for services

Shares issued for services, shares

Stock-based compensation for shares issued upon

vesting of Asterias restricted stock units attributable to post combination services

Stock-based compensation for shares issued upon

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

Adjustment upon adoption of leasing standard

Shares issued for settlement of BioTime Warrants

Shares issued for settlement of BioTime Warrants, shares

NET INCOME/(LOSS)

Shares issued for settlement of Lineage Warrants

Shares issued for settlement of Lineage Warrants,

Shares issued through ATM

Shares issued through ATM, shares

Dissolution of BioTime Asia

BALANCE AT MARCH 31, 2020

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Financing related fees

Foreign currency translation loss

NET INCOME/(LOSS)

Foreign currency translation gain (loss)

BALANCE AT JUNE 30, 2020

$ ( 288,343 )

BALANCE AT JULY 1, 2020

$ ( 288,343 )

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

retired to pay employees’ taxes

Shares issued for services

Stock-based compensation

Dissolution of BioTime Asia

Financing related fees

Foreign currency translation gain (loss)

BALANCE AT SEPTEMBER 30, 2020

$ ( 296,103 )

Preferred Shares

Common Shares Number

Noncontrolling Interest/

Noncontrolling

Accumulated Other

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Total Shareholders’

Preferred Shares

Common Shares

Noncontrolling

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Adjustment upon adoption of leasing standard

Foreign currency translation loss

Foreign currency translation gain (loss)

Shares issued through ATM

Shares issued through ATM, shares

NET INCOME/(LOSS)

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$ ( 222,403 )

Shares issued for settlement of BioTime Warrants

Shares issued for settlement of Lineage Warrants

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

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Stock-based compensation

Foreign currency translation loss

NET INCOME/(LOSS)

Foreign currency translation gain (loss)

BALANCE AT JUNE 30, 2019

$ ( 252,435 )

BALANCE AT JULY 1, 2019

$ ( 252,435 )

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

retired to pay employees’ taxes

Stock-based compensation

Shares issued through ATM

Foreign currency translation gain (loss)

BALANCE AT SEPTEMBER 30, 2019

$ ( 268,940 )

(previously Asterias) Warrants - Liability Classified

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

As of June 30,

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

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

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

The Lineage Warrants have an

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

As of September

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

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

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

The Lineage Warrants

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

Cure Warrants - Liability Classified

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

of Share-based Compensation, Employee Stock Purchase Plan, Activity and Other Stock Options

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

Exercise Price

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Options expired/forfeited/cancelled

June 30, 2020

Options exercisable at June 30, 2020

September 30, 2020

Options exercisable at September 30, 2020

the effective time of the Asterias Merger, Lineage assumed sponsorship of the Asterias 2013 Equity Incentive Plan (the “Asterias

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Options forfeited

June 30, 2020

Options exercisable at June 30, 2020

September 30, 2020

Options exercisable at September 30, 2020

compensation expense

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

Six Months Ended

June 30, (unaudited)

Nine Months Ended

September 30, (unaudited)

Expected life (in years)

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Three Months Ended

June 30, (unaudited)

Six Months Ended

June 30, (unaudited)

September 30, (unaudited)

Nine Months Ended

September 30, (unaudited)

Research and development

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Total stock-based compensation expense

expense related to 84,940 shares of Asterias restricted stock unit awards that immediately vested on the closing of the Asterias

Merger and converted into the right to receive common shares of Lineage based on the Merger Exchange Ratio, resulting in 60,304

common shares of Lineage issued on March 8, 2019, was included in stock-based compensation expense for the six months ended June

The expense was not included as part of the purchase price of the Asterias Merger because these awards were principally

attributable to post-combination services.

expense related to 84,940

shares of Asterias restricted stock unit

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

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

common shares of Lineage issued on March

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

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

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

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The deferred tax liability generated by the OncoCyte shares

that Lineage holds as of June 30, 2020, is a source of future taxable income to Lineage, as prescribed by ASC 740-10-30-17, that

will more likely than not result in the realization of its deferred tax assets to the extent of the deferred tax liability.

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

Due to the inherent

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

on an annual basis.

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

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

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

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

to Lineage as the OncoCyte shares discussed above.

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

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

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

that Lineage holds as of September 30, 2020, is a source of future taxable income to Lineage, as prescribed by ASC 740-10-30-17,

that will more likely than not result in the realization of its deferred tax assets to the extent of the deferred tax liability.

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

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

liabilities on an annual basis.

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

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

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

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

as the OncoCyte shares discussed above.

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

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

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

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

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is expected to occur.

Because the IPR&D (prior to completion or

abandonment of the R&D) is considered an indefinite-lived asset for accounting purposes, the fair value of the IPR&D on

the acquisition date creates a deferred income tax liability in accordance with ASC 740.

This DTL is computed using the fair value

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

this DTL would reverse on impairment or sale or commencement of amortization of the related intangible assets, those events are

not anticipated under ASC 740 for purposes of predicting reversal of a temporary difference to support the realization of deferred

tax assets, except for certain deferred tax assets and credit carryforwards that are also indefinite in nature as of the Asterias

Merger date, which may be considered for reversal under ASC 740 as further discussed below.

Because the IPR&D (prior to completion or abandonment of the R&D) is considered an indefinite-lived

asset for accounting purposes, the fair value of the IPR&D on the acquisition date creates a deferred income tax liability

in accordance with ASC 740.

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

by Lineage’s respective federal and state income tax rates.

While this DTL would reverse on impairment or sale or commencement

of amortization of the related intangible assets, those events are not anticipated under ASC 740 for purposes of predicting reversal

of a temporary difference to support the realization of deferred tax assets, except for certain deferred tax assets and credit

carryforwards that are also indefinite in nature as of the Asterias Merger date, which may be considered for reversal under ASC

740 as further discussed below.

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

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subsidiaries.

During the year ended December 31, 2019, a portion of the valuation allowance was released as it relates

to Lineage’s indefinite lived assets that can be used against the indefinite lived liabilities.

The amount of the valuation

allowance released was $ 7.4

as new indefinite lived deferred

tax assets are generated, we will continue to book provision benefits until the deferred tax liability position is exhausted,

barring any new developments.

the three and six months ended June 30, 2020, Lineage did not record any provision or benefit for income taxes, as Lineage had

taxable income related to a gain on the sale of OncoCyte shares in the applicable periods.

This taxable income was offset by net

operating loss carryforwards.

the three and six months ended June 30, 2019, Lineage recorded a $ 1.2 million and $ 5.6 million valuation allowance release and

corresponding tax benefit, respectively, that were primarily related to state research and development credits, including federal net operating losses generated for the three and six months ended June 30, 2019, both of which are available and

indefinite in nature.

During the year ended December 31, 2019, a portion of the valuation allowance was released as it relates to Lineage’s

indefinite lived assets that can be used against the indefinite lived liabilities.

The amount of the valuation allowance released

was $ 7.4 million;

as new indefinite lived deferred tax assets are generated, we will continue to book provision benefits until

the deferred tax liability position is exhausted, barring any new developments.

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

million and $ 6.6

million valuation allowance release

and corresponding benefit for income taxes.

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

million deferred tax benefit for

income taxes.

Supplemental Cash Flow Information

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

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

Schedule of Supplemental Cash Flow Information

Six Months Ended

June 30, (unaudited)

Nine Months Ended

September 30, (unaudited)

Cash paid during period for interest

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Assumptions of warrants in the Asterias Merger (Note 3)

Issuance of common shares for settlement of Lineage Warrants

Commitments and Contingencies

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of 7,000 square feet.

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

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

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

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

December 2015, Lineage entered into a lease for approximately 30,795 square feet of rentable space in two buildings located in

an office park in Alameda, California (the “Alameda Lease”).

The term of the Alameda Lease is seven years and Lineage

has an option to renew the term for an additional five years .

The term of the Alameda Lease commenced effective February 1, 2016

and expires on January 31, 2023 , unless the renewal option is exercised.

rent under the Alameda Lease beginning on February 1, 2020 is $ 72,676 per month and will increase by approximately 3 % annually

on every February 1 thereafter during the lease term.

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

(to the extent not separately metered to the leased space) and the landlord’s operating expenses, over the amounts of those

expenses incurred by the landlord.

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

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

with the terms of the lease.

The security deposit amount is considered restricted cash and $ 78,000 is included in deposits and

other long-term assets as of June 30, 2020 (see Note 2).

Leases and Alameda Sublease

December 2015, Lineage entered into leases of office and laboratory space located in two

buildings in Alameda, California (the “Alameda Leases”) comprised of 22,303

square feet (the “1010 Atlantic Premises”) and 8,492

square feet (the “1020 Atlantic Premises”).

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

per month with annual increases of approximately 3 %.

addition to base rent, Lineage paid a pro rata portion of increases in certain expenses, including real property taxes,

utilities (to the extent not separately metered to the leased space) and the landlord’s operating expenses, over the

amounts of those expenses incurred by the landlord.

As security for its obligations, Lineage provided the landlord

with a security deposit of approximately $ 424,000 ,

which was reduced to $ 78,000

on January 24, 2019 in accordance with the terms of the lease.

The security deposit amount is considered

restricted cash and is included in deposits and other long-term assets as of September 30, 2020 (See Note 2).

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

for the usage of 10,000 square feet in one of its leased

Alameda buildings.

The lease commenced on April 24, 2020 and expires on January 31, 2023 .

rent under the sublease is $ 28,00 0 per month and will increase by 3 % annually on every February 1 during the lease term.

(“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 %.

rent for the first month was abated.

In addition to base rent and utilities, Industrial Microbes will pay a pro-rata portion of

increases in operating expenses, after an abatement period of one year.

security for the performance of its obligations under the sublease, Industrial Microbes provided Lineage with a security deposit

of $ 56,000 .

In addition to base rent and utilities, Industrial Microbes paid a pro-rata portion of increases

in operating expenses, after an abatement period of one year.

September 11, 2020, Lineage entered into a Lease Termination Agreement with the landlord terminating the Alameda Leases effective

as of August 31, 2020 for the 1020 Atlantic Premises and September 30, 2020 for the 1010 Atlantic Premises.

consideration for the termination of the leases, Lineage paid a termination fee of $ 130,000

amounts due under the terms of the Alameda Leases through the applicable effective termination dates, except that no rent was

due with respect to the 1020 Atlantic Premises after July 31, 2020.

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

Lineage paid a separate

termination fee of $ 30,000

to Industrial

Microbes in connection with the termination of the Industrial Microbes Sublease and returned the

security deposit paid by Industrial Microbes.

For the period of sublease from mid-April 2020 through September 2020, Lineage received $119,000 in rental income from Industrial

will continue to occupy approximately 2,432

square feet of

the 1010 Atlantic Premises under a new sublease agreement (the “Alameda Sublease”).

term of the Alameda Sublease is from October

1, 2020 through January

Base rent under the Alameda

Sublease is $ 14,592

per month with annual increases of 3 %

each October 1 thereafter during the lease term.

Base rent for the first month was abated.

Lineage paid a security deposit of

under the Alameda Sublease;

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

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

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

Cure leases 728.5 square meters (approximately 7,842 square feet) of office and laboratory space in Jerusalem, Israel under a

lease that expires December 31, 2020 , with two options to extend the lease for five years each (the “Original Cell Cure

Base monthly rent is NIS 37,882 (approximately US $ 11,000 per month using the December 31, 2018 exchange rate).

In addition to base rent, Cell Cure pays a pro-rata share of real property taxes and certain costs related to the operation and

maintenance of the building in which the leased premises are located.

Cure leases 728.5

square meters (approximately 7,842

square feet) of office and laboratory

space in Jerusalem, Israel under a lease that expires December

31, 2020 , with two options to extend the

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

Negotiations are currently ongoing for a lease extension.

Base monthly rent is NIS 37,882

(approximately US $ 11,000

per month using the December 31, 2018

exchange rate).

In addition to base rent, Cell Cure pays a pro-rata share of real property taxes and certain costs related to

the operation and maintenance of the building in which the leased premises are located.

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

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Schedule of Supplemental Cash Flow Information Related to Leases

Six Months Ended

Nine Months Ended

September 30,

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

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Schedule of Supplemental Balance Sheet Information Related to Leases

December 31, 2019

Operating leases

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Finance leases

minimum lease commitments are as follows (in thousands):

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

Schedule of Future Minimum Lease Commitments

Operating Leases

Finance Leases

Year Ending December 31,

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Less imputed interest

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

Future minimum payments under

the Alameda Sublease are as follows:

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

and 2023, respectively.

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 January 30, 2020 and May 1,

2020 (the “Gyroscope Agreement”).

As amended, the Gyroscope Agreement provides Lineage access to Gyroscope’s

vitrectomy-free subretinal injection device as a means of delivering OpRegen in Lineage’s ongoing Phase 1/2a clinical trial

through September 10, 2020 (the “Access Period”).

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;

and (ii) $ 1.25 million

in August 2019 upon completion of certain collaborative research activities using the Gyroscope technology for the OpRegen Phase

1/2a clinical trial.

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.

2020, Lineage agreed to pay an additional $ 0.5 million to extend the Access Period to July 5, 2020, $ 0.2 million of which was

paid on January 30, 2020 and $ 0.3 million of which is payable upon the maturity of the Juvenescence promissory note.

due to the COVID-19 pandemic and the impact on clinical trial enrollment, the parties agreed to a no-cost extension to the Access

Period through September 10, 2020.

has exclusive rights to the Gyroscope technology and its injection device for the treatment of dry AMD during the term of the

Gyroscope Agreement.

was assigned by Orbit to Gyroscope Therapeutics, Limited (“Gyroscope”) and amended on May 7, 2019, January 30, 2020,

May 1, 2020 and September 4, 2020 (the “Gyroscope Agreement”).

As amended, the Gyroscope Agreement provides Lineage

access to Gyroscope’s vitrectomy-free subretinal injection device (the “Orbit Device”) as a means of delivering

OpRegen in Lineage’s ongoing Phase 1/2a clinical trial through the earlier of:

(i) December 1, 2020;

or (ii) or treatment

of three additional patients with the Orbit Device between September 4, 2020 and December 1, 2020 (the “Access Period”).

Pursuant to the terms of the Gyroscope Agreement, Lineage paid access fees totaling $ 2.5

million in January 2019 upon execution

of the Gyroscope Agreement;

and (ii) $ 1.25

million in August 2019 upon completion

of certain collaborative research activities using the Gyroscope technology for the OpRegen Phase 1/2a clinical trial.

fees of $ 2.5 million

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

Lineage also agreed

to reimburse Gyroscope for costs of consumables, training services, travel costs and other out of pocket expenses incurred by

Gyroscope for performing services under the Gyroscope Agreement.

In January 2020, Lineage agreed to pay an additional $ 0.5

million to extend the Access Period to

July 5, 2020, $ 0.2

million of which was paid on January 30,

2020 and $ 0.3

million of which will be paid in November

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

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

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

is subject to various claims and contingencies in the ordinary course of its business, including those related to litigation,

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October 15, 2019, another putative class action lawsuit was filed challenging the Asterias Merger.

This action (captioned Ross

This action (captioned

Lineage Cell Therapeutics, Inc., et al.

2019-0822) was filed in Delaware Chancery Court and names Lineage, the

Asterias board of directors, one member of Lineage’s board of directors, and certain stockholders of both Lineage and Asterias

as defendants.

The action was brought by a purported stockholder of Asterias, on behalf of a putative class of Asterias stockholders,

and asserts breach of fiduciary duty and aiding and abetting claims under Delaware law.

The complaint alleges, among other things,

that the process leading up to the Asterias Merger was conflicted, that the Asterias Merger consideration was inadequate, and

that the proxy statement filed by Asterias with the Commission omitted certain material information, which allegedly rendered

2019-0822) was filed in Delaware Chancery Court and names Lineage,

the Asterias board of directors, one member of Lineage’s board of directors, and certain stockholders of both Lineage and

Asterias as defendants.

The action was brought by a purported stockholder of Asterias, on behalf of a putative class of Asterias

stockholders, and asserts breach of fiduciary duty and aiding and abetting claims under Delaware law.

The complaint alleges, among

other things, that the process leading up to the Asterias Merger was conflicted, that the Asterias Merger consideration was inadequate,

and that the proxy statement filed by Asterias with the Commission omitted certain material information, which allegedly rendered

the information disclosed materially misleading.

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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.

30, 2020, the remaining defendants filed an answer to the complaint.

believes the allegations in the action lack merit and intends to vigorously defend the claims asserted.

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Accordingly, Lineage has not recorded any liabilities

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

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

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 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

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.

(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.

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 .

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:

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 January 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.

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

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.

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the aggregate, may be up to $ 3.5 million.

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

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

License Agreement.

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

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Annual minimum maintenance fees are expected to be approximately $ 30,000 to $ 60,000 per year.

License fees and related expenses under these agreements were $ 5,000 and $ 33,000 for the six months ended June 30, 2020 and 2019,

respectively.

the terms of the grant agreement between Cell Cure and Israel Innovation Authority (“IIA”) (formerly the Office of

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Subsequent Events

Termination of Services

and Related Return of Project Funds

On August 4, 2020, Lineage

agreed to terminate a services agreement with a former service provider that Asterias had not used since 2018.

provider returned unspent project funds of approximately $ 0.8

million and is in the process of returning Asterias materials in its possession.

The unspent project funds

will be recorded as an offset to research and development expenses in the third quarter of 2020.

of Hadasit Marketable Equity Securities

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

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

What changed 10-Q

Item 1. Financial Statements