Lineage Cell Therapeutics, Inc.

1. Organization, Basis of Presentation and Liquidity

We are a clinical-stage biotechnology company developing cell replacement therapies to treat serious medical conditions. Certain diseases and medical events can arise from the loss of critical cellular activity and lead to devastating or difficult-to-treat conditions or impairments. Our work is grounded in the emerging evidence that replacing or supporting those cells that have become dysfunctional or “lost” (destroyed or dead) can restore or replenish normal function and improve treatment and recovery paradigms. We call this approach “Replace and Restore”. We believe cellular therapies aimed at replacing dysfunctional or destroyed cells may have more durable, broader, or suitable applicability than traditional pharmaceutical products, which often seek to affect just a single molecular target or group of biological pathways. Transplantation of replacement cells represents an emerging branch of medicine, and we believe we are uniquely positioned to capitalize on its opportunities by demonstrating the value of administering mature, differentiated cells to patients.

Our development programs are based on our proprietary, in-house, cell-based manufacturing platform, which we call AlloSCOPE™ (Allogeneic, Scalable, Consistent, Off-the-shelf, Pluripotent Cell Engineering), and supported by our associated development, formulation, manufacturing, and delivery capabilities. Our business strategy aims to efficiently leverage our AlloSCOPE platform and our development and manufacturing expertise to create a pipeline of related but discrete cell-based assets, some of which we may advance internally toward commercialization and some of which we may seek to partner during early or late development, if we believe doing so will enhance their probability of success and add value to Lineage and our shareholders.

Our lead program, OpRegen, an allogeneic retinal pigmented epithelial (RPE) cell replacement therapy, is currently in Phase 2a development under a worldwide collaboration and license agreement with F. Hoffmann-La Roche Ltd. and Genentech, Inc., a member of the Roche Group (collectively or individually, “Roche” or “Genentech”), for the treatment of geographic atrophy (GA) secondary to dry-AMD. Our second clinical-stage program, OPC1, is an allogeneic oligodendrocyte progenitor cell therapy designed to improve recovery following a spinal cord injury. Our most advanced preclinical program, ReSonance (ANP1), is an allogeneic auditory neuron progenitor cell transplant therapy currently in preclinical development under collaboration with William Demant Invest 2 Aps (WDI) for the treatment of auditory neuropathy. Our second most advanced preclinical program, COR1, is an allogeneic cell corneal endothelial cell (CEnC) transplant therapy candidate for the treatment of corneal endothelial disease, with applicable indications expected to include Fuchs Endothelial Corneal Dystrophy (FECD) and Bullous Keratopathy.

Basis of Presentation

The accompanying unaudited condensed consolidated interim financial statements were prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. In accordance with those rules and regulations, certain information and footnote disclosures normally included in comprehensive consolidated financial statements have been condensed or omitted. The condensed consolidated balance sheet as of December 31, 2025 was derived from the audited consolidated financial statements at that date but does not include all the information and footnotes required by GAAP. These accompanying unaudited condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the 2025 10-K.

The accompanying unaudited condensed consolidated interim financial statements, in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of our financial condition and results of operations. The condensed consolidated interim results of operations are not necessarily indicative of the results to be expected for any other interim period or for the entire year.

Segments and Principles of Consolidation

Our chief operating decision maker (“CODM”), our Chief Executive Officer, manages our business activities as asingle operating and reportable segment at the consolidated level. The information in our condensed consolidated interim financial statements is the only financial information regularly provided toour CODM and there are no other significant expense categories regularly reviewed by our CODM. Accordingly, our CODM uses consolidated net loss to measure segment profit or loss, allocate resources and assess performance. Further, our CODM reviews and utilizes revenue and functional expenses (cost of royalties, research and development, general and administrative, and loss on impairment of intangible asset) at the consolidated level to manage our operations. Other segment items included in consolidated net loss are interest income, gain (loss) on marketable equity securities, change in fair value of warrant liability, foreign currency transaction gain, and other income (expense), and the provision for income tax benefit (if appl icable), which are reflected in the condensed consolidated statements of operations.

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, 2026:

(1)

Includes shares owned by Lineage and ESI.

All material intercompany accounts and transactions have been eliminated in consolidation. Lineage consolidates its direct and indirect wholly owned or majority-owned subsidiaries because Lineage has the ability to control their operating and financial decisions and policies through its ownership, and the noncontrolling interest is reflected as a separate element of shareholders’ equity on Lineage’s unaudited condensed consolidated balance sheets.

Liquidity

On June 30, 2026, we had $50.8 million of cash, cash equivalents and marketable securities. Based on our current operating plan, we believe that our cash, cash equivalents and marketable securities will be sufficient to enable us to carry out our planned operations through at least twelve months from the issuance date of our accompanying condensed consolidated interim financial statements.

Capital Resources

Since inception, we have incurred significant operating losses and have funded our operations primarily through the issuance of equity securities, the sale of common stock of our former subsidiaries, receipt of proceeds from research grants, revenues from collaborations, royalties from product sales, and sales of research products and services.

As of June 30, 2026, we had $13.5 million of marketable securities. We may use our marketable securities for liquidity as necessary and as market conditions allow. See Note 4 (Marketable Securities) for additional information.

Additional Capital Requirements

Our financial obligations primarily consist of obligations to licensors under license agreements, obligations related to grants received from government entities, including the Israel Innovation Authority (“IIA”), obligations under contracts with vendors who provide research services and purchase commitments with suppliers.

Our obligations to licensors under license agreements and our obligations related to grants received from government entities require us to make future payments, such as sublicense fees, milestone payments, redemption fees, royalty fees and patent maintenance fees. Sublicense fees are payable to licensors or government entities when we sublicense the applicable intellectual property to third parties; the fees are based on a percentage of the license-related revenue we receive from sublicensees. Milestone payments, including those related to the worldwide collaboration with Roche (“Roche Agreement”), are due to licensors or government entities upon achievement of commercial, development and regulatory milestones. Redemption fees due to the IIA under the Innovation Law are due upon receipt of milestone payments and royalties received under the Roche Agreement. See Note 13 (Commitments and Contingencies) for additional information. Royalties, including those related to royalties we may receive under the Roche Agreement, are payable to licensors or government entities based on a percentage of net sales of licensed products. Patent maintenance fees are payable to licensors as reimbursement for the cost of maintaining license patents. Due to the contingent nature of the payments, the amounts and timing of payments to licensors under our in-license agreements are uncertain and may fluctuate significantly from period to period. As of June 30, 2026, we had not included these commitments on our condensed consolidated balance sheet because the achievement of events that would trigger our payment obligations and the timing thereof were not fixed and determinable.

In the normal course of business, we enter into services agreements with contract research organizations, contract manufacturing organizations and other third parties. Generally, these agreements provide for termination upon notice, with specified amounts due upon termination based on the timing of termination and the terms of the agreement. The amounts and timing of payments under these agreements are uncertain and contingent upon the initiation and completion of the services to be provided.

2. Summary of Significant Accounting Policies

Significant Accounting Policies

We describe our significant accounting policies in Note 2 to the consolidated financial statements in Item 8 of the 2025 10-K. There have been no changes to our significant accounting policies during the six months ended June 30, 2026.

Recently Adopted Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): - Improvements to Income Tax Disclosures. The new standard requires a company to expand its existing income tax disclosures, specifically related to the rate reconciliation and income taxes paid. The standard is effective for annual periods beginning in fiscal year 2025 and itsadoptiondidnot have a material impact on our condensed consolidated financial statements.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The new standard provides a practical expedient related to the estimation of expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under ASC 606. The standard is effective for fiscal years beginning after December 15, 2025 and interim periods within those fiscal years and itsadoption, which was applied prospectively, didnot have a material impact on our condensed consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”). The purpose of ASU 2024-03 is to improve the disclosures about a public business entity’s expenses and address requests from investors for more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation, amortization, and depletion) in commonly presented expense captions (such as cost of royalties, SG&A, and research and development). ASU 2024-03 is effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. We are currently assessing the impact that this new guidance will have on our consolidated financial statements.

3. Revenue

Our revenue is primarily generated from our collaborative research and development agreements as well as royalty and other service agreement revenues.

Revenues under our agreements with Roche and WDI are within the scope of ASU 2014-09 – Revenue from Contracts with Customers (Topic 606) and are recognized over time as collaboration revenue using the input method as it represents the most appropriate measure of progress towards satisfaction of the identified performance obligation. Under the input method, the ratio of the costs incurred over total estimated costs to be incurred is used to measure progress toward completion of the performance obligation and to calculate the corresponding revenue to recognize each period. During each reporting period, we update our total estimated collaboration costs, and any resulting adjustments are recorded on a cumulative basis, which would affect revenue and deferred revenue (the latter, if applicable) in the period of adjustment.

Our disaggregated revenues were as follows for the periods presented (in thousands):

(1)

All of the upfront license fee revenue recognized each period was included within deferred revenue as contract liabilities at the beginning ofeach period. Effective June 30, 2025, Lineage notified ITI of the termination of the ITI Agreement in accordance with its terms, which resulted in approximately $0.7 million in revenues recognized out of the remaining deferred revenues from this customer. See Note 13 (Commitments and contingencies) for additional information.

(2)

$192,000 of the event-based milestones and other collaborative revenue recognized in the six months ended June 30, 2026 was included within deferred revenues as contract liabilities as of the beginning of the period.

(3)

Of the royalties, license and other revenues recognized each period, $42,000 and $12,000 were included within deferred revenues as contract liabilities as of January 1, 2026 and 2025, respectively.

For contracts with customers, including collaboration partners which are within the scope of Topic 606, the aggregate amount of the transaction price allocated to remaining performance obligations as of June 30, 2026 was $19.6 million, of which $14.0 million is reported as deferred revenues. The $19.6 million is estimated to be substantially recognized as revenue by December 2027.

Accounts receivable and deferred revenues (contract liabilities) from contracts with customers, including collaboration partners, consisted of the following (in thousands):

(1)

Contract assets consist of revenue recognized and performance obligations satisfied or partially satisfied in advance of customer billing and are included within prepaid expenses and other current assets on the condensed consolidated balance sheet.

4. Marketable Securities

The following table summarizes the fair value of marketable securities held by the Company and their location in the Company’s condensed consolidated balance sheet (in thousands):

Marketable Debt Securities

The following tables summarize the available-for-sale debt securities classified within cash and cash equivalents and within marketable securities in the Company’s condensed consolidated balance sheet (in thousands):

The Company has not recognized an allowance for credit losses on any securities in an unrealized loss position as of June 30, 2026 or December 31, 2025. The Company believes that any individual unrealized losses represent temporary declines resulting from changes in interest rates, and do not reflect a deterioration of the credit quality of the issuer. The Company does not intend to sell these securities before their maturity, and does not anticipate that these securities will be required to be sold before recovery. The cost basis of the available-for-sale debt securities upon sale or maturity is determined using the specific identification method.

At June 30, 2026, the amortized cost and estimated fair value of the Company’s available-for-sale debt securities by contractual maturity are shown below (in thousands):

Marketable Equity Securities

Marketable equity securities with readily determinable fair values are reported at fair value with unrealized gains and losses related to mark-to-market adjustments included in income. Lineage’s marketable equity securities are classified as trading securities and for the periods reported have consisted of shares of common stock of Hadasit Bio-Holdings Ltd. (“HBL”). The value of marketable equity securities is based on the closing price of HBL common stock on the last trading day of the applicable quarter.

The following table represents the realized and unrealized gain (loss) on marketable equity securities for the periods presented (in thousands):

5. Property and Equipment, Net

At June 30, 2026 and December 31, 2025, property and equipment, net was comprised of the following (in thousands):

Depreciation and amortization expense was $187,000 and $171,000 for the three months ended June 30, 2026 and 2025, respectively, and $375,000 and $335,000 for the six months ended June 30, 2026 and 2025, respectively. These amounts include amortization expense for right-of-use finance lease assets of $8,000 and $14,000 for the three months ended June 30, 2026 and 2025, respectively, and $21,000 and $28,000 for the six months ended June 30, 2026 and 2025, respectively.

6. Goodwill and Intangible Assets, Net

At June 30, 2026 and December 31, 2025, goodwill and intangible assets, net consisted of the following (in thousands):

(1)

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired and liabilities assumed inconnection with our acquisition of Asterias Biotherapeutics, Inc. (“Asterias”) in March 2019 (the “Asterias Merger”). The Company conducted a qualitative goodwill assessment for the second quarter of 2025 and took into consideration the impairment of the VAC indefinite-lived intangible asset. After assessing the totality of relevant events and circumstances, there was no impairment to the goodwill carrying value as of June 30, 2025, and through June 30, 2026, the Company has not recognized any goodwill impairment.

(2)

Asterias had royalty cash flows under patent families it acquired from Geron Corporation. Such patent families are expected to continue to generate revenue, are not used in the other acquired IPR&D intangible assets, and are considered to be separate intangible assets under ASC Topic 805, Business Combinations.

(3)

The acquired patents and acquired royalty contracts were fully amortized as of March 31, 2024.

7. Accounts Payable and Accrued Liabilities

At June 30, 2026 and December 31, 2025, accounts payable and accrued liabilities consist of the following (in thousands):

8. Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value in accordance with (ASC 820-10-50), Fair Value Measurements and Disclosures:

•

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

•

Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

•

Level 3 – Inputs to the valuation methodology that are unobservable. Unobservable inputs are those in which little or no market data exists and are therefore determined using estimates and assumptions developed by the Company, which reflect those that a market participant would use.

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

The carrying value of cash, restricted cash, accounts receivable, accounts payable, and accrued liabilities approximate their respective fair values due to their relative short maturities. We measure our cash equivalents, marketable securities and our liability classified warrants at fair value on a recurring basis. The fair values of such assets and liabilities were as follows as of June 30, 2026 and December 31, 2025 (in thousands):

(1)

Included in cash and cash equivalents in the accompanying condensed consolidated balance sheet. Marketable debt securities purchased with an original maturity of three months or less have been classified as cash equivalents.

(2)

Lineage’s marketable equity securities include the shares of stock of HBL which has a readily determinable fair value quoted on the TASE (Level 1). These securities are measured at fair value and reported as current assets on the accompanying condensed consolidated balance sheet based on the closing trading price of the security as of the date being presented.

(3)

Liability-classified warrants are valued at issuance, upon warrant exercise, and at each reporting period end date while the warrants are outstanding using a Black-Scholes option pricing model that maximizes the use of observable inputs and minimizes the use of unobservable inputs to the extent possible. Changes in the fair value of liability-classified warrants are recorded in the condensed consolidated statements of operations, and reflected as an adjustment to reconcile net loss to net cash used in operating activities in the condensed consolidated statements of cash flows. A significant increase or decrease in these Level 3 inputs could result in a significantly higher or lower fair value measurement. See Note 10 (Shareholders’ Equity) for additional information on the warrants.

The following table sets forth a summary of changes to Level 3 fair value measurements (in thousands):

Level 3 inputs -Significant assumptions used in valuing the warrant liabilities were as follows:

The expected stock price volatility assumption is determined using historical volatility of the Company’s common stock. The risk-free interest rate assumption is based on the U.S. Treasury yield curve whose term is consistent with the expected term of the stock options. The expected dividend yield is 0%as the Company has not paid and does not anticipate paying dividends on its common stock. The expected term represents the period from the date of warrant issuance to May 21, 2028. At each reporting period end date, the expected term is reduced to reflect the remaining term of the warrants. Because the term of the warrants could expire earlier than May 21, 2028 upon the occurrence of a future event and subject to specified conditions being satisfied, the expected term could be shortened in subsequent periods. See Note 10 (Shareholders’ Equity) for additional information regarding the warrants.

9. Related Party Transactions

In January 2025, we sold 7,894,737 common shares and an accompanying warrant to purchase up to 7,894,737 common shares to Broadwood Partners, L.P. (“Broadwood Partners”), an affiliate of Neal Bradsher, a member of our board of directors. See Note 10 (Shareholders’ Equity) for additional information regarding such offering.

10. Shareholders’ Equity

Preferred Shares

Lineage is authorized to issue 2,000,000 preferred shares. The preferred shares may be issued in one or more series as the Lineage board of directors may determine by resolution. The Lineage board of directors is authorized to fix the number of shares of any series of preferred shares and to determine or alter the rights, preferences, privileges, and restrictions granted to or imposed on the preferred shares as a class, or upon any wholly unissued series of any preferred shares. The Lineage board of directors may, by resolution, increase or decrease (but not below the number of shares of such series then outstanding) the number of shares of any series of preferred shares subsequent to the issue of shares of that series. There wereno preferred shares issued or outstanding as of either June 30, 2026 or December 31, 2025.

Common Shares

Lineage is authorized to issue 450,000,000 common shares. As of June 30, 2026 and December 31, 2025, there were 252,907,464 and 243,121,801 common shares issued and outstanding, respectively.

At-The-Market Offering Program

In March 2024, Lineage entered into a sales agreement (the “ATM Sales Agreement”) with B. Riley Securities, Inc., as sales agent (“Sales Agent”), under which Lineage may offer and sell its common shares from time to time through an ATM program.

During the three and six months ended June 30, 2026,3.6 million common shares were sold under the ATM program at a weighted average price per share of $1.28 for gross proceeds of $4.6 million. During the three and six months ended June 30, 2025 no common shares were sold under the ATM program.

Lineage agreed to pay Sales Agent a commission of up to 3.0% of the aggregate gross proceeds from the sale of shares under the ATM Sales Agreement, reimburse its legal fees and disbursements, and provide Sales Agent with customary indemnification and contribution rights. The Sales Agreement may be terminated by Sales Agent or Lineage at any time upon notice to the other party, or by Sales Agent at any time in certain circumstances, including the occurrence of a material and adverse change in Lineage’s business or financial condition that makes it impractical or inadvisable to market the shares or to enforce contracts for the sale of the shares.

Additionally, in connection with the 12.0 million shares sold under the ATM program in November 2025 for gross proceeds of $21.0 million, Lineage paid another financial advisor a 6% placement agent fee.

The shares sold under the ATM Program are offered and sold under our shelf registration statement on Form S-3 (File No. 333-277758), which was filed with the SEC on March 7, 2024 and declared effective on May 14, 2024, and the prospectus, as updated, amended and supplemented from time to time, that forms a part thereof. The most recent prospectus supplement was filed on March 11, 2026, pursuant to which we may offer and sell from time to time under the ATM Sales Agreement an aggregate of up to $60.0 million, excluding the $22.6 million in aggregate gross sales price of our common shares we sold pursuant to prior prospectus supplements and the prospectus dated May 14, 2024.

November 2024 Registered Direct Offering - January 2025 Closing

In November 2024, we entered into securities purchase agreements with unaffiliated healthcare focused institutional investors and with Broadwood Partners relating to the purchase and sale in a registered direct offering of an aggregate of up to 39,473,688 of our common shares and accompanying warrants to purchase an aggregate of up to 39,473,688 of our common shares at a combined purchase price of $0.76 per common share and accompanying warrant (the “November 2024 RDO”). In connection with the first closing of this offering, which occurred in November 2024, we issued to the unaffiliated healthcare focused institutional investors an aggregate of 31,578,951 common shares and accompanying warrants to purchase an aggregate of up to 31,578,951 of our common shares.

The offering of the securities to Broadwood Partners was subject to obtaining shareholder approval to satisfy applicable NYSE American rules, which was obtained at our special meeting of shareholders on January 27, 2025. Following such meeting, we issued to Broadwood Partners 7,894,737 common shares and an accompanying warrant to purchase up to 7,894,737 common shares, and we received aggregate gross proceeds of $6.0 million, with approximately $0.6 million for related issuance costs (the “January 2025 Closing”). The warrant issued to Broadwood Partners had a fair value of approximately $2.1 million at issuance and is classified as a warrant liability in the Company’s condensed consolidated financial statements.

The warrants issued in the November 2024 RDO have an exercise price of $0.91 per common share, have been exercisable since May 21, 2025, and will expire on the earlier of (a) May 21, 2028, and (b) the 90th day following the date of the public disclosure of the intent to advance OpRegen (also known as RG6501) into a multi-center phase 2 or 3 clinical trial which includes a control or comparator arm, subject to extension if certain conditions, including equity conditions, some of which are outside of our control, are not satisfied. The warrants provide for cashless exercise in certain circumstances, including if the shares issuable upon exercise thereof are not covered by an effective registration statement.

We entered into an engagement letter with H.C. Wainwright & Co., LLC (“Wainwright”), pursuant to which Wainwright agreed to serve as our exclusive placement agent, on a reasonable best efforts basis, in connection with the November 2024 RDO. We paid Wainwright a cash fee equal to 7.0% and a management fee equal to 1.0%, in each case, of the aggregate gross proceeds we received at each closing. In addition, at each closing, we issued to Wainwright (or its designees) warrants to purchase our common shares with terms that are substantially similar to those described above except that the warrants issued to Wainwright (or its designees) have an exercise price of $0.95 per share. In the aggregate we issued to Wainwright (or its designees) warrants to purchase up to 1,973,684 of our common shares. The warrants issued to Wainwright (or its designees) in connection with the January 2025 Closinghad a fair value of approximately $0.1 million at issuance and are classified as warrant liabilities in the Company’scondensed consolidated financial statements. See Note 8 (Fair Value Measurements) for additional information regarding the warrants issued in connection with the November 2024 RDO.

Summary of Common Stock Warrant Activity and Outstanding

The following roll-forward presents the Company’s common stock warrants outstanding as of June 30, 2026 (in thousands, except per share amounts):

See Note 8 (Fair Value Measurements) for additional information on the warrants.

11. Stock-Based Awards

Equity Incentive Plan Awards

In September 2021, our shareholders approved the Lineage Cell Therapeutics, Inc. 2021 Equity Incentive Plan, and our shareholders approved amendments to increase the number of common shares that may be issued thereunder by 19,500,000 in September 2023 and by an additional 19,500,000 in June 2025(as amended to date, the “2021 Plan”). The 2021 Plan provides for the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock units (“RSUs”), and other stock awards. Generally, all of our employees (including those of our affiliates), non-employee directors and consultants are eligible to participate in the 2021 Plan.

Subject to adjustment for certain changes in our capitalization, the aggregate number of our common shares that may be issued under the 2021 Plan will not exceed the sum of (i)54,500,000 shares and (ii) the number of shares subject to awards granted under the Lineage Cell Therapeutics Inc. 2012 Equity Incentive Plan (the “2012 Plan”) that were outstanding when the 2021 Plan initially became effective in 2021 and are not issued because such awards expire or otherwise terminate. As a result of the approval of the 2021 Plan by our shareholders in 2021, no additional awards will be granted under the 2012 Plan. As of June 30, 2026, there were 27,194,208 shares available for grant under the 2021 Plan.

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

A summary of activity of the 2012 Plan, and the 2018 inducement option (which was issued to a Lineage executive outside of all equity plans), is as follows (in thousands, except per share amounts):

Stock-based Compensation Expense

Operating expenses within the condensed consolidated statements of operations include stock-based compensation expense as follows (in thousands):

As of June 30, 2026, total unrecognized compensation costs related to unvested stock options and unvested RSUs under all equity plans, were $15.0 million, which is expected to be recognized as expense over a weighted average period of approximately 2.9 years for stock options and 0.3 years for RSUs.

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

Basic earnings per share is calculated by dividing net income or loss attributable to Lineage common shareholders by the weighted average number of common shares outstanding, net of stock options, RSUs, and warrants, subject to repurchase by Lineage, if any, during the period. Diluted earnings per share is calculated by dividing the net income or loss attributable to Lineage common shareholders by the weighted average number of common shares outstanding, adjusted for the effects of potentially dilutive common shares issuable under outstanding stock options, restricted stock awards and warrants, using the treasury-stock method, convertible preferred stock, if any, using the if-converted method, and treasury stock held by subsidiaries, if any. Our liability-classified warrants are treated as equity in the calculation of diluted loss per share in both the computation of the numerator and denominator, if dilutive.

The following table sets forth the calculations of basic and diluted earnings per share for the three and six months ended June 30, 2026. The warrants were deemed to be anti-dilutive for the three and six months ended June 30, 2025, and therefore no diluted loss per share computation is presented for the prior year periods:

The following common share equivalents were excluded from the computation of diluted net loss per common share for the periods presented because including them would have been antidilutive (in thousands):

(1)

The warrants outstanding for the three and six months ended June 30, 2026 were deemed to be dilutive, and therefore included in the computation of diluted net loss per common share.

12. Income Taxes

The provision for income taxes for interim periods is generally determined using an estimated annual effective tax rate as prescribed by ASC 740-270, Income Taxes, Interim Reporting. The effective tax rate may be subject to fluctuations during the year as new information is obtained, which may affect the assumptions used to estimate the annual effective tax rate, including factors such as valuation allowances and changes in valuation allowances against deferred tax assets, the recognition or de-recognition of tax benefits related to uncertain tax positions, if any, and changes in or the interpretation of tax laws in jurisdictions where Lineage conducts business. ASC 740-270 also states that if an entity is unable to reliably estimate some or a part of its ordinary income or loss, the income tax provision or benefit applicable to the item that cannot be estimated shall be reported in the interim period in which the item is reported. For items that Lineage cannot reliably estimate on an annual basis, Lineage uses the actual year to date effective tax rate rather than an estimated annual effective tax rate to determine the tax effect of each item, including the use of all available net operating losses and other credits or deferred tax assets.

Under ASC 740, a valuation allowance is provided when it is more likely than not that some portion of the deferred tax assets will not be realized. As of December 31, 2025, Lineage released the valuation allowance associated with the Israel subsidiary’s deferred tax assets based on sustained profitability and other positive evidence. Lineage continues to maintain a full valuation allowance against the U.S. and Singapore deferred tax assets due to the uncertainty of realizing future tax benefits from its net operating loss carryforwards and other deferred tax assets in those jurisdictions.

The Company’s income tax provision and effective tax rate may fluctuate from period to period as a result of several factors, including fluctuations in foreign currency exchange rates. Significant or unexpected movements in foreign currency exchange rates could adversely affect the Company’s income tax expense and effective tax rate in future periods.

Lineage didnot record adeferred tax benefit or provision expense during the three and six months ended June 30, 2026 or 2025.

13. Commitments and Contingencies

Real Property Leases

Lineage Lease

In May 2019, Lineage entered into a lease for approximately 8,841 square feet of rentable space in an office park in Carlsbad, California. The lease was amended in December 2022 and again in September 2025. Under the amendment entered into in September 2025, the term of the lease was extended for 36 months commencing on April 1, 2026, and commencing on December 1, 2025, the monthly base rent was reduced from $26,700 to $24,800, subject to 3% annual increases and rent will be abated for April 2026 through July 2026. As security for the performance of its obligations under the lease, Lineage provided the landlord a security deposit of $17,850, which is incl uded in deposits and other long-term assets on the condensed consolidated balance sheet as of June 30, 2026.

In addition to base rent, Lineage pays 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. These pro-rata charges are expensed as incurred and excluded from the calculation of the right-of-use assets and lease liabilities.

Lineage Subleases

In September 2022, Lineage entered into a sublease for approximately 4,500 square feet of rentable industrial space in Carlsbad, California for a term that commenced on October 1, 2022. In February 2024, Lineage extended the term of the sublease for 24 months through March 31, 2026. The base rent was $23,000 per month for the first twelve months of the extended term and was $23,500 for the remaining twelve months through March 31, 2026. As security for the performance of its obligations under the sublease, Lineage had provided the landlord with a security deposit of $22,500, which was returned to Lineage during the second quarter of 2026 upon the termination of the sublease.

In connection with the termination of the above sublease, Lineage entered into a new sublease in December 2025 for approximately 1,674 square feet of rentable industrial space in San Diego, California, for a 38-month term that commenced in February 2026. The base rent is $5,189 per month, plus a 4% management fee, for the first twelve months with an annual increase of 3.5%, with rent abatements in March 2026 and February 2027. As security for the performance of its obligations under the sublease, Lineage provided the landlord with a security deposit of $10,378, which is included in deposits and other long term assets, on the condensed consolidated balance sheet as of June 30, 2026.

CCN Leases

As of June 30, 2026, CCN leases approximately 2,096 square meters (approximately 22,600 square feet) of combined office and laboratory space in Jerusalem, Israel under a master lease, as amended, that expires December 31, 2027. Cumulative base rent and construction allowance payments are approximately 165,000 Israeli New Shekels (“ILS”) per month (approx imately $55,000 asof June 30, 2026), excluding any future rent escalations, and includes options to extend the lease term for five years. The U.S. dollar value of the ILS denominated base rent and construction allowance payments fluctuates based upon currency exchange rates. In addition to base rent, CCN 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, including parking usage fees. These pro-rata charges are expensed as incurred and excluded from the calculation of the ROU assets and lease liabilities.

CCN has security deposits denominated in ILS with the landlord for this master lease which is classified as restricted cash during the term of the lease. The U.S. dollar value of the ILS denominated security deposits fluctuates based upon currency exchange rates and was $562,000 as of June 30, 2026, which is included in deposits and other long-term assets on the condensed consolidated balance sheet.

Supplemental Information – Leases

Supplemental cash flow information related to leases is as follows (in thousands):

Supplemental balance sheet information related to leases is as follows (in thousands, except lease term and discount rate):

Future minimum lease commitments are as follows as of June 30, 2026 (in thousands):

Operating lease expense was $0.3 million and $0.6 million for each of the three and six months ended June 30, 2026 and 2025, respectively.

Collaborations

Roche Agreement

In December 2021, Lineage entered into a worldwide collaboration and license agreement with Roche, wherein Lineage granted to Roche exclusive worldwide rights to develop and commercialize RPE cell therapies, including OpRegen, for the treatment of ocular disorders, including GA secondary to AMD.

Under the terms of this Agreement, Roche paid Lineage a $50.0 million upfront payment (which was received in January 2022) and another $5.0 million milestone payment (which was received in December 2025). Lineage is eligible to receive up to an additional $615.0 million in developmental, regulatory and commercialization milestone payments. Lineage also is eligible for tiered double-digit percentage royalties on net sales of OpRegen in the U.S. and other major markets. All regulatory and commercial milestone payments and royalty payments are subject to the existence of certain intellectual property rights that cover OpRegen at the time such payments would otherwise become due, and the royalty payments on net sales of OpRegen are subject to financial offsets based on the existence of competing products. Roche assumed responsibility for further clinical development and commercialization of OpRegen. Lineage is responsible for completing activities related to its ongoing phase 1/2a clinical study, for which enrollment is complete, and performing certain manufacturing and process development activities.

Unless earlier terminated by either party, the Roche Agreement will expire on a product-by-product and country-by-country basis upon the expiration of all of Roche’s payment obligations under the agreement. Roche may terminate the agreement in its entirety, or on a product-by-product or country-by-country basis, at any time with advance written notice. Either party may terminate the agreement in its entirety with written notice for the other party’s material breach if such party fails to cure the breach or upon certain insolvency events involving the other party.

Agreements with Hadasit and IIA

The OpRegen program was supported in part with licenses to technology obtained from Hadasit, the technology transfer company of Hadassah Medical Center, and through a series of research grants from the IIA, an independent agency created to address the needs of global innovation ecosystems. A subset of the intellectual property underlying OpRegen was originally generated at Hadassah Medical Center and licensed to CCN for further development.

Under the Encouragement of Research, Development and Technological Innovation in the Industry Law 5744, and the regulations, guidelines, rules, procedures and benefit tracks thereunder (collectively, the “Innovation Law”), annual research and development programs that meet specified criteria and were approved by a committee of the IIA were eligible for grants. The grants awarded were typically up to 50% of the project’s expenditures, as determined by the IIA committee and subject to the benefit track under which the grant was awarded.

The terms of the grants under the Innovation Law generally require that the products developed as part of the programs under which the grants were given be manufactured in Israel. The know-how developed thereunder may not be transferred outside of Israel unless prior written approval is received from the IIA. Transfer of IIA-funded know-how outside of Israel is subject to approval and payment of a redemption fee to the IIA calculated according to formulas provided under the Innovation Law. In November 2021, the IIA research committee approved an application made by CCN with respect to the grant of an exclusive license and transfer of the technological know-how for OpRegen to Roche. Under the provisions for the redemption fee, Lineage paid the IIA approximately 24.1% of each of the $50.0 million upfront payment and the $5.0 million milestone payment it received under the Roche Agreement, or $12.1 million and $1.2 million, respectively, and is obligated to pay the IIA approximately 24.1% of any milestone and royalty payments which may be received under the Roche Agreement, up to an aggregate cap on all payments, such cap growing over time via interest accrual until paid in full. As of June 30, 2026, the aggregate cap amount was appro ximately $97.2 million. In accordance with obligations under the Innovation Law, Lineage continues to fund CCN to pay the downstream payments to the IIA.

Pursuant to the Second Amended and Restated License Agreement, dated June 15, 2017, between CCN and Hadasit, and a certain letter agreement entered into on December 17, 2021, CCN paid a sublicensing fee to Hadasit of $8.9 million or 21.5% of the $50.0 million upfront payment under the Roche Agreement (subject to certain reductions), and CCN is obligated to pay Hadasit (i) a maximum of 21.5% of all milestone payments Lineage receives under the Roche Agreement (subject to certain reductions, including for costs related to Lineage’s performance obligations under the Roche Agreement), and (ii) up to 50% of all royalty payments (subject to a maximum payment of 5% of net sales of products), Lineage receives under the Roche Agreement. In accordance with the foregoing, in respect of the $5.0 million milestone payment received under the Roche Agreement in December 2025, Lineage funded CCN to pay $1.1 million to Hadasit in January 2026. The letter agreement generally terminates upon the termination of the Roche Agreement. In accordance with the terms of these agreements, the initial sublicensing fee payment to Hadasit was reduced for costs related to Lineage’s performance obligations under the Roche Agreement. To the extent such costs were not incurred within five years after the execution of the Roche Agreement, CCN would have been required to pay Hadasit 21.5% of the amount of costs not incurred; however to date, all such costs have been incurred.

Second Amendment to Clinical Trial and Option Agreement and License Agreement with Cancer Research UK

In May 2020, Lineage and Asterias entered into a Second Amendment to the Clinical Trial and Option Agreement (the “Second CTOA Amendment”) with CRUK and Cancer Research Technology (“CRT”). The Second CTOA Amendment amended the initial agreement and the first amendment to the Clinical Trial and Option Agreement, each of which is dated September 8, 2014, between Asterias, CRUK and CRT. Pursuant to the Second 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. Lineage and CRT effectuated the option by simultaneously entering into a license agreement (the “CRT License Agreement”) pursuant towhich Lineage paid a signature fee of £1,250,000 (approximately $1.6 million based upon exchange rates in effect when the fee was paid).

Effective June 30, 2025, Lineage determined that it was no longer going to pursue the VAC2 program, and was going to cease development and commercialization of all products under the CRT License Agreement. In conjunction therewith, CRT notified Lineage of CRT’s termination of the CRT License Agreement, which it had the right to do if Lineage ceased all development and commercialization of all products under the CRT License Agreement. Further, in conjunction therewith, Lineage notified Immunomic Therapeutics, Inc. (“ITI”) of the termination of the collaboration agreement that Lineage had entered into with ITI in April 2021 (the “ITI Agreement”) in accordance with its terms. Since June 30, 2025, the Company has abandoned all future development efforts and no longer prosecutes any of the issued patents related to the VAC platform. Accordingly, in June 2025, the Company performed an impairment assessment of the VAC platform IPR&D intangible asset which resulted in a non-cash, pre-tax impairment charge during the quarter ended June 30, 2025 of $14.8 million. Additionally, Lineage recognized the remaining deferred revenue amount of approximately $0.7 million, as of the June 30, 2025 effective date of the termination of the ITI Agreement, since Lineage hadno remaining performance obligations under such agreement. See Note 6 (Goodwill and Intangible Assets, Net) to our consolidated financial statements included in this report for additional information.

WDI Collaboration

In August 2025, Lineage and WDI entered into a research collaboration agreement (the “RCA”) to advance the preclinical development of ReSonance (ANP1) for the treatment of hearing loss (the “Project”). WDI has agreed to fund up to $12 million in research collaboration costs over the approximate three-year term of the RCA, a portion of which has been expended to date for activities conducted in accordance with a schedule of planned activities and budget agreed to by the parties (the “RCA Budget”). The main objective of the RCA is for the parties to complete a preclinical phase achieving readiness to potentially progress to human clinical trials under one or more separate clinical agreements, the terms of which would be negotiated in good faith before the expiration of the RCA. The nature and scope of the Project, and the RCA Budget, are dynamic and actual program activities and costs may vary during the term from the originally planned activities. Lineage may incur costs in excess or below the original RCA Budget, and any actual program costs incurred that are below the funding designated to Lineage will not result in additional cash inflows to Lineage.

All intellectual property owned by a party prior to the date of the RCA will remain such party’s sole and exclusive property. The parties will jointly own all results, data, reports, know-how and patent(s) conceived or otherwise generated in the course of and resulting from the Project, other than discoveries or developments relating to Lineage’s proprietary platform technology.

If a party (the “abandoning party”) informs the other party (the “continuing party”) that it will not continue the research with the other party under a clinical agreement, the continuing party may purchase the abandoning party’s ownership interest in the intellectual property resulting from the Project for exploitation for the treatment of hearing loss and a license to the abandoning party’s background intellectual property to the extent necessary for such exploitation for an amount and on terms to be determined by the mutual agreement of the parties, and if such mutual agreement is not reached, by an independent third-party.

Other Contingent Obligations

We have obligations under license agreements and grants received from government entities to make future payments to third parties, which become due and payable on the achievement of certain development, regulatory and commercial milestones or on the sublicense of our rights to another party. These commitments include sublicense fees, milestone payments, redemption fees and royalties. Sublicense fees are payable to licensors or government entities when we sublicense underlying intellectual property to third parties; the fees are based on a percentage of the license-related revenue we receive from sublicensees. Milestone payments are due to licensors or government entities upon the future achievement of certain development and regulatory milestones. Redemption fees due to the IIA under the Innovation Law are due upon receipt of any milestone or royalty payment received in respect of IIA-funded programs. Royalties are payable to licensors or government entities based on a percentage of net sales of licensed products. As of June 30, 2026, we have not included these commitments on our condensed consolidated balance sheet because the achievement and timing of these events are not fixed and determinable.

Litigation – General

From time to time, we are subject to legal proceedings and claims in the ordinary course of business. While management presently believes that the ultimate outcome of these proceedings, individually and in the aggregate, will not materially harm our financial position, cash flows, or overall trends in results of operations, legal proceedings are subject to inherent uncertainties, and unfavorable rulings or outcomes could occur that have individually or in aggregate, a material adverse effect on our business, financial condition or operating results. We are not currently subject to any pending material litigation, other than ordinary routine litigation incidental to our business.

HBL Books and Records Request

In April 2023, CCN received a motion for disclosure of documents pursuant to Section 198A of the Israeli Companies Law 5759-1999. The motion was filed in the district court in Tel Aviv-Yafo (the “Court”) by HBL, currently an approximately 5% shareholder of CCN. According to the motion, the requested production of documents was intended to allow HBL to examine the possibility of pursuing a derivative action related to, among other things, the validity of an intercompany Collaboration and License Agreement (the “Intercompany Agreement”) entered into between Lineage and CCN pursuant to which CCN conveyed certain rights and other assets to Lineage, and Lineage agreed to undertake certain liabilities and obligations of CCN relating to the OpRegen program. In its motion, HBL alleged, among other things, that Lineage, in its capacity as CCN’s controlling shareholder, and members of CCN’s board of directors, caused damage to CCN because the Intercompany Agreement was an interested party transaction that was not fairly priced and that exploited CCN’s resources for the benefit of Lineage. The motion sought an order to compel CCN to disclose and deliver to HBL the documents described in the motion, such additional, cumulative, or alternative relief as the Court deemed appropriate, and reimbursement of HBL’s expenses, including attorneys’ fees. The Court held a hearing on the motion in March 2024 after which the parties retained a third-party valuation firm to assess the fairness of the valuation that was performed in support of the Intercompany Agreement. In June 2025, the third-party valuation firm delivered its report stating that, in its opinion, the consideration paid by Lineage to CCN under the Intercompany Agreement was insufficient. The Court subsequently notified the parties that they were to advise the Court whether they had settled the matter between themselves. On January 14, 2026, HBL notified the Court that the parties had failed to reach a settlement and moved the Court to terminate the proceedings in order to potentially initiate separate proceedings. CCN responded to HBL’s motion on February 10, 2026 requesting that the Court deny HBL’s motion. On March 12, 2026, the Court granted HBL’s motion. As of the date of this report, HBL has not initiated any separate proceedings.

Employment Contracts

Lineage has employment agreements with all of its executive officers. Under the provisions of the agreements, Lineage may be required to incur severance obligations for matters relating to changes in control, as defined in the agreements, and involuntary terminations.

Indemnification

In the normal course of business, Lineage may agree to indemnify and reimburse other parties, typically clinical research organizations, investigators, clinical sites, and suppliers, for losses and expenses suffered or incurred by the indemnified parties arising from claims of third parties in connection with the use or testing of Lineage’s product candidates and services. Indemnification could also cover third party infringement claims with respect to patent rights, copyrights, or other intellectual property pertaining to Lineage products and services. The term of these indemnification agreements generally continue in effect after the termination or expiration of the particular research, development, services, or license agreement to which they relate. In addition, Lineage has entered into indemnification agreements with its officers and members of its board of directors that will require Lineage, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as officers or directors. The potential future payments Lineage could be required to make under the indemnification agreements described in this paragraph will generally not be subject to any specified maximum amount. Generally, Lineage has not been subject to any material claims or demands for indemnification. Lineage maintains liability insurance policies that are intended to limit its financial exposure under certain of the indemnification agreements described in this paragraph. Lineage has not recorded any liabilities for these agreements as of June 30, 2026 or December 31, 2025.

Royalty Obligations and License Fees

We have licensing agreements with research institutions, universities and other parties providing us with certain rights to use intellectual property in our research, development and commercialization activities, in exchange for which we have agreed to pay potential developmental, regulatory and/or commercial milestone payments and/or royalties on future product sales, if any. In addition, in order to maintain these licenses and other rights, we must comply with various conditions including the payment of patent related costs and annual minimum maintenance fees.

As part of the Asterias Merger, Lineage acquired royalty revenues for cash flows generated under patent families that Asterias acquired from Geron Corporation. Lineage continues to make royalty payments to Geron from royalties generated from these patents. Royalty revenues and royalty payments are included within royalties, license and other revenues and cost of royalties, respectively, in our condensed consolidated statements of operations.