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:

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

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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.

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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 December 31, 2025 and 2024 (in thousands):


			Fair Value Measurements Using
	Balance at December 31, 2025		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Money market fund (1)	$	20,693	$	20,693	$	—	$	—
Marketable debt securities (1)		10,282		10,282		—		—
Marketable debt securities		14,973		14,973		—		—
Marketable equity securities (2)		17		17		—		—
Total assets measured at fair value	$	45,965	$	45,965	$	—	$	—
Liabilities:
Warrant liabilities (3)	$	43,906	$	—	$	—	$	43,906
Total liabilities measured at fair value	$	43,906	$	—	$	—	$	43,906


			Fair Value Measurements Using
	Balance at December 31, 2024		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Money market fund (1)	$	21,570	$	21,570	$	—	$	—
Marketable debt securities (1)		17,432		17,432		—		—
Marketable debt securities		1,992		1,992		—		—
Marketable equity securities (2)		24		24		—		—
Total assets measured at fair value	$	41,018	$	41,018	$	—	$	—
Liabilities:
Warrant liabilities (3)	$	6,161	$	—	$	—	$	6,161
Total liabilities measured at fair value	$	6,161	$	—	$	—	$	6,161

(1)

Included in cash and cash equivalents in the accompanying 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 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 consolidated statements of operations, and reflected as an adjustment to reconcile net loss to net cash used in operating activities in the 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):


Common Share Warrant Liabilities	Year Ended December 31, 2025			Year Ended December 31, 2024
Balance - beginning of the year	$	6,161		$	—
Issued		2,205			8,289
Change in fair value of warrant liability recognized in the consolidated statement of operations		35,727			(2,128	)
Derivative warrant liability reclassified to equity upon exercise of warrants		(187	)		—
Balance - end of the year	$	43,906		$	6,161

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


	Year Ended December 31, 2025		Year Ended December 31, 2024
Expected stock price volatility	71.78% - 79.50%		69.70% - 71.18%
Risk-free interest rate	3.50% - 4.25%		4.27% - 4.30%
Expected dividend yield		—		—
Expected term (in years)	2.39 - 3.32		3.39 - 3.50

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 will 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.

Historical Timeline

Fiscal Year	Filed
2025	Mar 5, 2026	Showing above
2024	Mar 10, 2025

2023	Mar 7, 2024

2022	Mar 9, 2023

2021	Mar 10, 2022

2020	Mar 11, 2021

2019	Mar 12, 2020

2018	Mar 14, 2019

2017	Mar 15, 2018

2016	Mar 16, 2017

About Fair Value Disclosures

Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.

Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.

Lineage Cell Therapeutics, Inc. Fair Value Disclosure

Historical Timeline

About Fair Value Disclosures

Other Available Disclosures