What changed in this filing

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Item 1A. Risk Factors

2020-11-04 compared with 2020-08-06 · 87 added, 79 removed, 1368 unchanged (11% of the section changed)

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

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

months ended June 30, 2020 were $13.8 million and we had an accumulated deficit of $288.3 million as of June 30, 2020.

Since inception,

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

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

of research products, and revenues from subscription fees and advertising revenue from database products of a former subsidiary.

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

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

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

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

sales of research products, and revenues from subscription fees and advertising revenue from database products of a former subsidiary.

Substantially all of our losses have resulted from expenses incurred in connection with our research and development programs

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We incurred research and development expenses amounting to approximately

$6.1 million during the six months ended June 30, 2020, and $17.9 million during the fiscal year ended December 31, 2019.

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

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

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

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

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funds we have.*

June 30, 2020, we had $20.3 million of cash, cash equivalents and marketable equity securities.

There can be no assurance that

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

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

There can be no assurance

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

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

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We believe that our cash, cash equivalents and marketable

securities and our access to additional capital through the Sales Agreement as of June 30, 2020 will be sufficient to fund our

planned operations for at least the next 12 months.

We have based these estimates on assumptions that may prove to be wrong, and

we may use our capital resources sooner than we currently expect.

Our operating plans and other demands on our cash resources

may change as a result of many factors currently unknown to us, and we may need to seek additional funds sooner than planned.

Any equity capital raise could result in the dilution of the interests of shareholders or may otherwise limit our ability to finance

further in the future, which may negatively impact our business and operations.

Any debt capital financing may involve covenants

that restrict our operations, including limitations on additional borrowing and on the use of our assets.

If we raise capital

through licensing arrangements, it may be necessary to grant licenses on terms that are not favorable to us.

There can be no assurance

that we will be able to raise capital on favorable terms, or at all, or at times and in amounts needed to successfully finance

product development, clinical trials, and general operations.

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

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

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

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

Any equity capital raise could result in the dilution of the

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

business and operations.

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

on additional borrowing and on the use of our assets.

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

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

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

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

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

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Chancery Court.

The defendants are certain former members of Asterias’ board of directors, Lineage, Neal Bradsher, Broadwood

Capital, Inc.

and Broadwood Partners, L.P.

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

was inadequate, and that the proxy statement filed by Asterias was misleading.

The complaint seeks, among other things, certification

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

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

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

statement filed by Asterias was misleading.

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

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

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

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$164.0 million and $110.5 million, respectively.

A portion of the federal and state NOL carryforwards will begin to expire, if

not utilized, in varying amounts between 2027 and 2039.

NOLs that expire unused will be unavailable to offset future income tax

Under federal income tax law, federal NOLs incurred in 2018 and in future years may be carried forward indefinitely,

but the deductibility of such federal NOLs in tax years beginning after December 31, 2020, is limited.

It is uncertain if and

to what extent various states will conform to the federal tax law.

Included in these amounts are NOLs acquired through the merger with Asterias

A portion of the federal and state NOL carryforwards will begin to expire, if not utilized, in varying amounts between

2027 and 2039.

NOLs that expire unused will be unavailable to offset future income tax liabilities.

Under federal income tax law,

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

It is uncertain if and to what extent various

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

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

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

million each, as well as California research and development credits of $2.3 million.

As a result of the merger, Asterias incurred

an ownership change under Section 382 of the Internal Revenue Service Code, which places annual limits on the amount of these

NOLs that are available to offset income.

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

available to offset future income, and some will expire.

The California research and development credit of $2.3 million has no

million and $41.9 million, respectively, as well as California research and development credits of $2.4 million.

As a result of

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

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

Because of the annual limitation, the total amount of

these NOLs are not immediately available to offset future income.

The California research and development credit of $2.4 million

has no expiration.

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

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

have equity investments in two publicly traded companies, OncoCyte and AgeX.

As of June 30, 2020, the value of our investments

in OncoCyte and AgeX was approximately $6.9 million and $0.2 million, respectively, based on their closing stock prices as of

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

specific business, regulatory and other risks applicable to them, the value of their common stock and the valuation of our investment

could be negatively affected.

If these companies were to fail and ultimately cease operations, we may lose the entire value of

our investments.

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

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

worldwide resulting from the ongoing COVID-19 pandemic.

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

publicly traded companies, OncoCyte and AgeX.

As of September 30,

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

closing stock prices as of that date.

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

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

the valuation of our investment could be negatively affected.

If these companies were to fail and ultimately cease operations,

we may lose the entire value of our investments.

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

and adversely impacted by deteriorating global economic conditions and the disruptions to and volatility in the credit and financial

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

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

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

April 2020, we received a loan for $523,000 from Axos Bank under the PPP contained within the new CARES Act.

The PPP loan has

a term of two years, is unsecured, and is guaranteed by the U.S.

In April 2020, we received

a loan for $523,000 from Axos Bank under the PPP contained within the new CARES Act.

The PPP loan has a term of two years, is

unsecured, and is guaranteed by the U.S.

Small Business Administration (SBA).

The loan carries a fixed

interest rate of one percent per annum, with the first six months of interest deferred.

Under the CARES Act, we 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 we maintain our number of employees and compensation within certain

parameters during such period.

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

If the conditions outlined

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

However, we cannot provide any assurance

that we will be eligible for loan forgiveness or that any amount of the PPP loan will ultimately be forgiven by the SBA.

amounts will not be included in our 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, we are eligible to apply for forgiveness of all loan proceeds used to pay payroll costs, rent, utilities and other

qualifying expenses during the 24-week period following receipt of the loan, provided that we maintain our number of employees

and compensation within certain parameters during such period.

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

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

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

Any forgiven amounts will

not be included in our taxable income.

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

Related to Government Regulation

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

Under the formal

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

the Transition Period if required.

No such extension was agreed prior to such date.

No agreement has yet been reached between

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

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

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

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

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

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

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

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

of June 30, 2020, Lineage had 149,831,347 common shares outstanding, 16,795,105 common shares reserved for issuance

upon the exercise of outstanding options under our employee stock option plans, 123,600 common shares reserved for issuance

upon the vesting and settlement of restricted stock units under our equity incentive plan, and 1,089,900 common shares subject

of September 30, 2020, Lineage had 149,991,454 common shares outstanding, 16,559,980 common shares reserved for issuance

upon the exercise of outstanding options under our employee stock option plans, 108,150 common shares reserved for issuance upon

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

addition, in May 2020 we entered into a Controlled Equity Offering SM Sales Agreement (the “Sales Agreement”)

with Cantor Fitzgerald & Co., as sales agent (“Cantor Fitzgerald”), pursuant to which we may, but are 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.

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

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.

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

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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 1A. Risk Factors