Fair Value Measurements

3 Months Ended

Mar. 31, 2026

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 March 31, 2026 and December 31, 2025 (in thousands):


			Fair Value Measurements Using
	Balance at March 31, 2026		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)	$	24,803	$	24,803	$	—	$	—
Marketable debt securities (1)		3,030		3,030		—		—
Marketable debt securities		17,402		17,402		—		—
Marketable equity securities (2)		40		40		—		—
Total assets measured at fair value	$	45,275	$	45,275	$	—	$	—
Liabilities:
Warrant liabilities (3)	$	34,140	$	—	$	—	$	34,140
Total liabilities measured at fair value	$	34,140	$	—	$	—	$	34,140


			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

(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):


Common Share Warrant Liabilities	Three Months Ended March 31, 2026			Three Months Ended March 31, 2025
Balance - beginning of the year	$	43,906		$	6,161
Issued		—			2,205
Change in fair value of warrant liability recognized in the consolidated statement of operations		(2,324	)		(2,305	)
Derivative warrant liability reclassified to equity upon exercise of warrants		(7,442	)		—
Balance - end of the period	$	34,140		$	6,061

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


	Three Months Ended March 31, 2026		Three Months Ended March 31, 2025
Expected stock price volatility	80.36% - 80.37%		71.78% - 72.54%
Risk-free interest rate	3.51% - 3.79%		3.89% - 4.25%
Expected dividend yield		—		—
Expected term (in years)	2.14 - 2.22		3.14 - 3.32

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.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References

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Reference 2: http://www.xbrl.org/2003/role/exampleRef
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+ Details

Lineage Cell Therapeutics, Inc. 10-Q