LGVN US Equity☆

Item 1A. Risk Factors 35

Item 1B. Unresolved Staff Comments 65

Item 2. Properties 65

Item 3. Legal Proceedings 65

Item 4. Mine Safety Disclosures 65

Item 6. Selected Financial Data 66

Item 7A. Quantitative and Qualitative Disclosures about Market Risk. 78

Item 8. Financial Statements and Supplementary Data 78

Item 9A. Controls and Procedures 79

Item 9B. Other Information 79

PART III 80

Item 10. Directors, Executive Officers and Corporate Governance 80

Item 11. Executive Compensation 85

Item 14. Principal Accountant Fees and Services 95

Item 15. Exhibits and Financial Statement Schedules 96

SIGNATURES 98

i

CAUTIONARY

NOTE REGARDING FORWARD-LOOKING STATEMENTS

In

this document, the terms “Longeveron,” “Company,” “we,” “us,” and “our”

refer to Longeveron Inc. We have no subsidiaries.

This

Annual Report on Form 10-K (this “10-K”) contains forward-looking statements, within the meaning of the Private Securities

Litigation Reform Act of 1995, that reflect our current expectations about our future results, performance, prospects and opportunities. This

10-K contains forward-looking statements that can involve substantial risks and uncertainties. All statements other than statements

of historical facts contained in this report, including statements regarding our future results of operations and financial position,

business strategy, prospective products, product approvals, research and development costs, future revenue, timing and likelihood

of success, plans and objectives of management for future operations, future results of anticipated products and prospects, plans

and objectives of management are forward-looking statements. These statements involve known and unknown risks, uncertainties and

other important factors that may cause our actual results, performance or achievements to be materially different from any future

results, performance or achievements expressed or implied by the forward-looking statements.

In

some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “contemplate,”

“continue,” “could,” “estimate,” “expect,” “intend,” “may,”

“plan,” “potential,” “predict,” “project,” “should,” “target,”

“will,” or “would” or the negative of these terms or other similar expressions, although not all forward-looking

statements contain these words. Forward-looking statements contained in this report include, but are not limited to, statements

about:

● the success of competing therapies that are or may become available;

● our financial performance; and

We

have based these forward-looking statements largely on our current expectations and projections about our business, the industry

in which we operate and financial trends that we believe may affect our business, financial condition, results of operations and

prospects, and these forward-looking statements are not guarantees of future performance or development. These forward-looking

statements speak only as of the date of this report and are subject to a number of risks, uncertainties and assumptions described

in the section titled “Risk Factors” and elsewhere in this report. Because forward-looking statements are inherently

subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking

statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be

achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except as

required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein until

after we distribute this report, whether as a result of any new information, future events or otherwise.

In

addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject.

These statements are based upon information available to us as of the date of this report, and while we believe such information

forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be

read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information.

These statements are inherently uncertain and you are cautioned not to unduly rely upon these statements.

ii

PART

I

Item

1. Business

Overview

We

are a clinical stage biotechnology company developing cellular therapies for specific aging-related and life-threatening conditions.

Our lead investigational product is the LOMECEL-BTM cell-based therapy product (“Lomecel-B”), which is derived

from culture-expanded medicinal signaling cells (MSCs) that are sourced from bone marrow of young healthy adult donors. We believe

that by using the same cells that promote tissue repair, organ maintenance, and immune system function, we can develop safe and

effective therapies for some of the most difficult disorders associated with the aging process.

We

are currently sponsoring Phase 1 and 2 clinical trials in the following indications: Aging Frailty, Alzheimer’s disease

(AD), the Metabolic Syndrome, Acute Respiratory Distress Syndrome (ARDS), and hypoplastic left heart syndrome (HLHS). Our mission

is to advance Lomecel-B and other cell-based product candidates into pivotal Phase 3 trials, with the goal of achieving regulatory

approvals, subsequent commercialization and broad use by the healthcare community.

Our

philosophy is that healthy aging can be improved through regenerative medicine approaches. Life expectancy has substantially increased

over the past century as a result of medical and public health advancements. However, this increase in longevity has not been

paralleled by the number of years a person is expected to live in relatively good health, free of chronic disease and disabilities

of aging – a period known as healthspan. As we age, we experience: a profound decline in our own stem cells; a decrease

in immune system function, known as immunosenescence; diminished blood vessel functioning; chronic inflammation, known as “inflammaging”;

and other aging-related declines. Our clinical data suggest that Lomecel-B addresses these problems through multiple mechanisms

of action, or MOAs, that simultaneously target key aging-related processes.

Improving

healthspan is an imperative for governmental health agencies, and the NIA, an institute of the NIH, has promoted the concept of

geroscience – the idea that aging itself is the biggest risk factor for aging-related human diseases. The geroscience hypothesis

provides a strong rationale for the approach of treating underlying biological processes contributing to aging as a way to reduce

disease burden and advance global human health. Our investments into developing and testing product candidates are aimed at reducing

aging-related disease burden and improving healthspan.

Our

Strategy

Our

core business strategy is to become a world leading regenerative medicine company through the development and commercialization

of novel cell therapy products for unmet medical needs, with emphasis on aging-related indications. Key elements of our business

strategy are as follows.

1

Clinical

Development Pipeline

Since

our founding in 2014, we have initiated six clinical studies under five U.S. Food and Drug Administration (FDA) Investigational

New Drug applications (INDs) for the purpose of evaluating the safety and efficacy of Lomecel-B (See Figure 2). As of the

first quarter of 2021, over 250 subjects have received Lomecel-B via peripheral intravenous infusion or direct injection, and

there have been no serious adverse events (SAEs) reported that were considered related to the product candidate.

Figure

2: Lomecel-B clinical development pipeline

2

The

first four indications are core to our geroscience approach for aging-related disorders (See Figure 3). While HLHS is a

non-aging-related indication, it illustrates the broader potential for our cell-based therapy.

3

Figure

3. Unhealthy aging. Aging-associated processes,

such as chronic inflammation and decline in MSC function,

are

thought to contribute to many aging-related disorders.

Clinical

Trial Grant Funding and Partnerships

We

have partnered with the NIA and NHLBI of NIH, the Alzheimer’s Association, and the MSCRF of Maryland TEDCO, to conduct our

clinical trials.

Product

Candidate Financial Overview

Since

2015, we have received approximately $56.1 million in equity financing, have been awarded approximately $16.0 million in non-dilutive

grant funds for our programs ($11.9 million which has been directly awarded to us and which are recognized as revenue when the

performance obligations are met), and generated approximately $3.8 million in non-grant revenue, primarily from clinical trial

revenue and strategic contract manufacturing agreements.

Lomecel-B

for Aging-Related Indications: a Geroscience Approach

While

the exact mechanisms of action of Lomecel-B, and MSCs in general, are still active areas of research, based on current evidence,

we believe Lomecel-B can treat multiple facets of aging-related disorders simultaneously through multiple mechanisms of actions

that include the following.

4

Biochemical

Properties of Lomecel-B

The

proposed mechanisms of action of Lomecel-B derive from intrinsic cellular features (See Figure 4). Lomecel-B cells secrete

numerous proteins that include cytokines and growth factors, which are believed to be responsible for decreasing inflammation

and promoting repair.

Lomecel-B

also secretes exosomes, which are biochemically active membrane spheres (called vesicles) that carry cargo composed of proteins,

ribonucleic acid (RNA), and other molecules. MSC exosomes have been found to include over a thousand proteins and hundreds of

different RNAs that can have beneficial effects on numerous pathways. Using exosomes as a therapeutic is an emerging therapeutic

principle that we are pursuing through our research and development.

Lomecel-B

cells can also potentially regulate endogenous cells through actions that include direct cell-cell interactions that can allow

for exchange of RNAs, proteins, and other cellular content between the cells through linkages called connexin-mediated gap-junctions.

MSCs can also form tunneling nanotubes (TNTs) that allow for exchange of larger cytoplasmic content, including mitochondria (the

energy-generating portions of cells). Such exchanges have been documented to occur between MSCs and neuronal stem cells, cardiomyocytes,

corneal epithelial cells, lung epithelial cells, retinal ganglion cells, renal epithelial cells, and macrophages.

In

the context of treating aging-related disorders, such exchange of mitochondria, proteins, RNA, and other cargo from Lomecel-B

sourced from young donors may suggest cellular regenerative mechanisms for older cells of the recipient which have depleted mitochondria,

reduced metabolic functioning, etc. In fact, mitochondria released from damaged cells appears to be a signal to induce regenerative

mechanisms in MSCs, which can promote a desired shift in energy metabolism in the recipient cells.

Figure

4. Potential mechanisms of action of Lomecel-B. (1) Lomecel-B cells release growth factors and other proteins, such as anti-inflammatory

cytokines. These have the potential to reduce inflammation, and stimulate nearby stem cells and other cells (called paracrine

activity) to promote regenerative and repair responses. There is also potential for these factors to be released into the blood

and work at a distance, called endocrine activity. (2) Lomecel-B cells also have the potential to engage in direct cell-cell interactions

to induce positive pathways in contacted cells. (3) Lomecel-B cells release exosomes, which have cargo consisting of RNA, proteins,

and other molecules that can be taken up by other cells to provide beneficial effects. (4) Lomecel-B cells also have the potential

to form nanotube bridges or TNTs, which can allow the exchange of mitochondria and other cellular contents between cells.

5

Key

Features and Potential Benefits of Lomecel-B

The

key features of Lomecel-B offer potential benefits as a possible geroscience therapeutic, including the following:

Our

Aging Frailty Research Program

Aging

Frailty is a clinically-defined and extreme form of unsuccessful aging. It is readily recognized by the hallmark signs of weakness,

slowness, fatigue, unintentional weight loss, and low activity. Those with Aging Frailty are disproportionately compromised in

their ability to cope with every day and acute stressors, are at high vulnerability to disease and injury, have lowered tolerance

to medications, and are at high risk for poor outcomes and death after surgery. Even normally “minor” insults (e.g.,

minor infection) can have devastating consequences, and lead to a spiral of decline to debility in these patients.

The

necessity for identifying patients with Aging Frailty is well-acknowledged in the geriatric community, and the treatment of Aging

Frailty and promotion of healthful aging are recognized priorities of the National Academy of Medicine and NIA/NIH. Despite the

pressing need for interventions, there are no FDA-approved therapies that can slow down, reverse, or prevent Aging Frailty.

6

Biological

Underpinnings of Aging Frailty

Aging

Frailty is a multifaceted biologically-driven process that is distinct from normal aging. While all of the biological mechanisms

underlying frailty are still being elucidated, it is thought to involve a low-level chronic pro-inflammatory state referred to

as inflammaging. This loss of control over inflammation can be attributed to an imbalance between levels of inflammatory promoters

and anti-inflammatory mediators, as well as diminished capacity to restore equilibrium once an inflammatory stimulus has subsided.

The ultimate result is measurable elevated serum levels of pro-inflammatory signaling molecules, such as tumor necrosis factor-α

(TNF-α), and diminished anti-inflammatory mediators, such as interleukin-10 (IL-10). In particular, serum TNF-α positively

correlates to Aging Frailty severity.

Inflammation

can contribute to the physical decline in Aging Frailty through multiple mechanisms, including detrimental effects on muscles,

bone tissue, the immune system, cardiovascular function, and cognition. In muscle cells, pro-inflammatory mediators such as TNF-α

stimulate catabolic biochemical pathways that break down muscle tissue, which can explain the clinically observed atrophy, decreased

strength and endurance, and increased exhaustion seen in Aging Frailty. Inflammation can also severely diminish immune system

function, and accelerate the aging-related decline in the immune system, known as immunosenescence. This ultimately leads to an

immune system that is hyporesponsive, making these patients highly vulnerable to disease and cancer.

Aging

Frailty (and aging in general) is also characterized by reductions in the number and function of circulating MSCs. Therefore,

treatments that can positively affect and/or replenish these endogenous stem cell functions could be of therapeutic value for

Aging Frailty.

The

culmination of these organ system declines can explain the common clinical manifestations of Aging Frailty, such as sarcopenia

and cachexia, and forms the basis for the resulting heightened vulnerability to injury, disease, adverse health outcomes, and

mortality.

Lomecel-B

for the Potential Treatment of Aging Frailty

We

are evaluating Lomecel-B as a therapy for Aging Frailty because the potential mechanisms of action may suitably address many of

the features and underpinnings of this condition. Foremost, Lomecel-B has the potential to reduce inflammation associated with

Aging Frailty, and to promote an anti-inflammatory state by releasing anti-inflammatory molecules, which can promote physiological

restoration to a more normal state. As our early clinical data show, Lomecel-B may be able to improve aspects of physical functioning,

as well as immune function.

Market

Potential.

U.S.

leading geriatricians and epidemiologists from Johns Hopkins University estimate approximately 15% of community-dwelling individuals

65 years and older in the U.S. have Aging Frailty. Another 45% are considered at risk for becoming frail, or “pre-frail”.

These equate to 8.1 million and 24.3 million people, respectively. By 2035, the number of individuals with Aging Frailty is projected

to reach over 11.4 million. Those with Aging Frailty are disproportionately high consumers of healthcare resources with potentially

crippling economic consequences. Developing treatments for this unmet medical need is a priority for many single-payor healthcare

systems

Japan

is considered a “super-aged” society, with approximately 28% of its population over the age of 65. Aging Frailty and

pre-Aging Frailty prevalence estimates for community-dwelling individuals aged 65 and older are 7.4% and 48.1%, respectively.

Based on a 65 and older population of 35.9 million, this translates to approximately 2.65 million Aging Frailty patients in Japan.

Aging

Frailty Clinical Trials

We

are currently conducting two multicenter trials in the U.S. for Aging Frailty, have received Pharmaceuticals and Medical Devices

Agency (PMDA) approval to conduct a Phase 2 Aging Frailty clinical trial in Japan, and have government approval to use Lomecel-B

for Aging Frailty participants in a Registry Trial that is actively enrolling in The Bahamas (See Figure 5). We are the

only company that we are aware of that is developing an allogeneic cell therapy for Aging Frailty.

7

Figure

5. Longeveron’s international Aging Frailty program.

U.S.

Phase 2b Multicenter, Randomized, Double-Blinded, Placebo-Controlled Trial

The

Phase 2b Trial is our most advanced clinical trial in our Aging Frailty program (ClinicalTrials.gov #NCT03169231). The trial was

completed in Q1 2021, and we expect to announce top-line data in Q3 2021. The trial design was guided by input from FDA’s

Center for Biologics Evaluation and Research (CBER), and Longeveron’s scientific and clinical advisors. Longeveron has designated

this as a “Phase 2b” trial because its objectives include a preliminary assessment of Lomecel-B effectiveness. Longeveron

did not conduct a “Phase 2a” trial.

The

specific objectives of this trial are to evaluate the effectiveness of Lomecel-B in multiple domain measures of Aging Frailty:

physical functioning biomarkers; patient-reported outcomes (PROs); quality-of-life measures (QOLs); frailty status; and clinical

outcomes and other endpoints applicable to Aging Frailty. In addition, this trial will assess a dose-range of Lomecel-B and add

further to our understanding of the safety and efficacy profile of this product candidate. The target population comprises 70–85-year-old

individuals with mild to moderate Aging Frailty, and systemic inflammation evidenced by elevated tumor necrosis factor-α

(TNF-α).

The

primary efficacy endpoint in this clinical trial is the change from baseline in the six-minute walk test (6MWT) at six months

for Lomecel-B subjects compared to placebo subjects. The 6MWT is a commonly used assessment of physical function, and has been

used as the primary endpoint of clinical benefit for a number of FDA-approved products. The results of our Aging Frailty trials

will be evaluated, and depending on the data, discussed with FDA to determine a regulatory pathway to pivotal clinical trial(s).

These discussions would include evaluation of what may be an acceptable and appropriate primary efficacy endpoint(s), in an approvable

indication. In lieu of long-term clinical outcomes (e.g., reduction in falls, fractures, hospitalizations, debilitations, and

deaths) as endpoints requiring large expensive long trials, the U.S. FDA has indicated that the 6MWT could be a suitable endpoint

as part of a co-primary or composite primary endpoint in this indication, if included with a validated PRO and a suitable biomarker,

for example, but this will depend on the data, further discussion and other considerations.

Trial

Status. This Phase 2b Trial is Complete and we anticipate reporting data in the third quarter of 2021.

Grant

Funding Award. This study was supported by a grant award from the NIA/NIH.

U.S.

Phase 1/2 HERA Trial: Lomecel-B as a Potential Vaccine Adjuvant

The

aging-related diminution of the immune system (immunosenescence) makes Aging Frailty patients vulnerable to infection and disease.

Immunosenescence is the basis for a generally muted response to any type of immune challenge in these patients, including disproportionately

low response to vaccines, such as the influenza vaccine.

Many

efforts are made to try to boost vaccine effectiveness by manipulation of the vaccines themselves, such as increasing vaccine

dosage in the case of the High-Dose Flu Vaccine given to older recipients. However, this approach often falls short of providing

the sought-after immune protection because of the patients’ diminished intrinsic ability to mount an effective immune response

and furthermore, may be associated with increased incidence of adverse events. To date, there are no approved therapeutics shown

to improve the intrinsic competence of the immune system (immunocompetence). However, as supported by our preliminary data, Lomecel-B

may be a candidate for improving immunocompetence.

The

HERA Trial was designed to evaluate whether Lomecel-B can improve immune response to influenza vaccine, and to evaluate Lomecel-B’s

possible effects on Aging Frailty status and endpoints (ClinicalTrials.gov #NCT02982915).

8

Trial

Status. We have completed Phase 1, and all subject visits have been completed for Phase 2. Top-line are expected in the third

quarter of 2021. Phase 1 was a 22-patient multicenter, open-label, randomized trial. Phase 2 is a multicenter, randomized, double-blinded,

placebo-controlled trial. Lomecel-B has been well-tolerated in all trials to date, and no product-related adverse events have

been reported.

Grant

Funding Award. This study was supported in part by a grant award from the MSCRF, part of Maryland TEDCO.

HERA

Aging Frailty Preliminary Results. At the approximate mid-point of Phase 2 of the HERA Trial, we performed a planned

interim analysis in order to re-assess study powering. We evaluated the 6MWT and other physical function measures of Aging Frailty

as part of this analysis. The 6MWT is also the primary efficacy endpoint of our larger Phase 2b Aging Frailty trial.

The

6MWT is a functional assessment that engages several organ systems, is a reliable indicator of frailty status, and may correlate

with an individual’s ability to perform basic activities of daily living (ADLs). This validated and easily-administered

test measures how many meters a person can walk in six minutes, and integrates multiple physiological systems for strength, mobility,

and endurance. The HERA Phase 2 interim analysis showed that the 6MWT increased in the Lomecel-B arm by 45.20 ± 81.03 meters

(n=14) at six months post-administration, versus a decrease of 21.40 ± 81.87 meters (n=15) in the placebo

arm (mean ± standard deviation; six-month difference from placebo: 66.60 meters. 95%CI: -4.70 – 137.89. p

= 0.0656). A similar trend was seen in the open-label HERA Phase 1 (59.59 ± 140.57 meters. 95%CI: -12.68 – 131.86.

n=19. p=0.0996). We performed a combined analysis using the Lomecel-B arms from Phase 1 and the Phase 2 interim

analysis Lomecel-B arms, versus the placebo arm of the interim analysis (Figure 6). At six months post-infusion, there

was a significant improvement in the combined Lomecel-B arm relative to Baseline (six-month difference from placebo: 75.65 meters.

95%CI: 0.71 – 150.60. p=0.0480). By 12 months post-infusion, the improvements had waned in the Lomecel-B groups (Phase

1, Phase 2 interim analysis, and combined), and were no longer significantly different from Baseline (12-month difference from

placebo: 35.31 meters. 95%CI: -16.99 – 87.61. p=0.1796).

The

HERA Phase 2 interim analysis also showed a trending, but not significant, improvement in the Lomecel-B group on the short physical

performance battery (SPPB) relative to placebo. The SPPB is used to evaluate lower body function and balance, and consists of

three assessment domains (balance, gait speed, and chair stand). All three domains showed similar trending improvements. The other

physical function measures – the Tinetti Performance Oriented Mobility Assessment (POMA) and hand-grip strength –

showed minimal changes for Lomecel-B (both within group and relative to baseline).

Figure

6. 6MWT improved in Lomecel-B administered subjects, but not placebo-treated subjects. For this analysis, data were combined

from HERA Phase 1 and from a HERA Phase 2 planned interim analysis. The Phase 2 study is still ongoing, so the interim analysis

entailed only study group analyses of select endpoints to maintain the blind (individual patient data remains blinded). Plotted

are the mean ± SEM. *, p < 0.05.

9

HERA

Immune-Response Results. Phase 1 of the HERA Trial was an open-label study conducted during the 2017 – 2018 flu season.

The primary goal was to evaluate the safety of Lomecel-B as a vaccine adjuvant, and evaluate whether a short (1 week) or longer

(4 week) interval between Lomecel-B infusion and vaccination impacted the immune response. Subjects enrolled had mild to moderate

Aging Frailty, and received the Fluzone High-Dose Vaccine.

All

subjects of this Phase received Lomecel-B, and showed significant positive antibody responses as determined by the blood levels

of IgM and IgG antibodies raised against influenza A and B strains. IgM antibodies appear early in a normal immune response, and

are normally followed by IgG antibodies which appear later. Antibody levels ≥ 1.1 index value (IV) indicate positive antibody

response. Figure 7 shows IgM antibodies raised against influenza A virus, and is representative of the IgM and IgG responses

against both influenza A and B strains. IgM levels prior to receiving vaccine were < 1.1 IV at the Infusion Visit and Vaccination

Visit, where blood samples were taken prior to Lomecel-B administration and vaccination, respectively. Post-vaccination, these

increased to > 1.1 IV in every subject for all four antibodies (IgG and IgM for influenza A and B viruses). These increases

did not significantly differ between the two study arms (1-week and 4-week interval between Lomecel-B infusion and vaccination).

We

also examined potential to neutralize the specific influenza virus strains that the vaccine was directed against (Michigan, Hong

Kong, and Brisbane viruses). This used a test called the hemagglutinin inhibition (HAI) assay. Overall, the 1-week interval group

showed significantly higher HAI results (meaning better performance) compared to the 4-week interval group. Based on these preliminary

findings, we elected to use a 1-week interval between infusion with Lomecel-B and vaccination in Phase 2 of HERA. This study is

ongoing, with expected unblinding in the second half of 2021.

We

view these results as encouraging, in light of the reported suboptimal efficacy of the 2017 – 2018 Fluzone High-Dose Vaccine.

The Centers for Disease Control & Prevention (CDC) found an overall adjusted vaccine effectiveness (VE) of just 18% against

flu-associated medically-attended acute respiratory illness in those ≥ 65 years of age (CI = -25–47%).

The

cumulative Phase 1 and 2 results from our HERA Trial suggest that Lomecel-B has the potential to improve physical function and

immune response, supporting the concept of Lomecel-B as a geroscience product candidate.

Figure

7. Positive antibody response occurred in all subjects treated with Lomecel-B. Shown are IgM antibody levels against Influenza

A. Antibody levels ≥ 1.1 IV (Index Value) indicate positive antibody responses against influenza A virus. Blood samples for

antibody analyses at the Infusion Visit were obtained prior to administering Lomecel-B. Blood samples at the Vaccination Visit

were obtained prior to giving the Flu vaccine. Shown are mean ± SD. p-values are for the change at the respective

time-point versus Baseline. ***, p < 0.001.

10

Japanese

Phase 2 Aging Frailty Trial.

We

have advanced our clinical initiative in Japan with the objective of capitalizing on the country’s progressive regulatory

framework, which has legislation designed specifically to accelerate promising regenerative medicine therapeutics to market. In

2020, the PMDA approved an investigator-initiated Clinical Trial Notification (CTN) application for a multicenter Phase 2 clinical

study of Lomecel-B infusion in older Japanese subjects with mild to moderate Aging Frailty. The trial is similar in design to

our ongoing U.S. Phase 2b Trial, and is expected to begin in 2021. The CTN applicant is the National Center for Geriatrics (NCGG)

and Gerontology, and we are engaged in trial planning with the NCGG and Juntendo University Hospital, as the other clinical trial

site.

Under

the 2014 law passed by the Japanese government, two new Acts were added that regulate regenerative medicine development and offer

two pathways to market for regenerative medicine product candidates: The Act on the Safety of Regenerative Medicine (ASRM) and

the Pharmaceutical and Medical Devices Act (PMD Act). A summary of the primary differences and benefits of the two Acts is described

in “Japanese Laws and Regulations” on page 34 of this report.

The

Bahamas Registry Trial.

In

2017, we were granted approval by the Bahamian government to sponsor a Registry Trial in Nassau, The Bahamas. Eligible subjects

with Aging Frailty who meet Registry eligibility requirements may receive Lomecel-B at their own expense at one of two medical

centers with which we are partnered. The medical providers are responsible for the administration of Lomecel-B to these individuals

as well as their care and Registry Trial-specific follow-up. The program is regulated by the Stem Cell Research and Therapy Act

of 2013, and the Stem Cell Research and Therapy Regulations passed in 2014. Under the terms of the approval, participants in the

Registry pay a fee directly to us, and we in turn pay a fee to the medical providers who administer Lomecel-B to the participant.

Data collected from the Registry Trial contribute to our overall understanding of the safety profile of Lomecel-B, and for gathering

real-world evidence on possible efficacy. Lomecel-B is not licensed for commercial sale in the Bahamas and is considered an investigational

therapeutic.

In

2019, we received approval to expand the Registry for the following indications: mild cognitive impairment; AD and related dementias;

frailty due to reasons other than aging, including overuse and injury; and osteoarthritis.

The

Registry Trial has specified baseline assessments and a prescribed follow up schedule over a 12-month post-administration time

period. Participants are expected to follow up with their local physician at the specified time points so that we may collect

safety data and gain additional efficacy information, specifically with respect to physical function, the individual’s global

impressions of change, biomarkers, and other indication-specific measures.

Participation

in the Registry Trial has been adversely impacted by the COVID-19 pandemic due to travel restrictions. Starting on July 22, 2020,

the Bahamian government halted travel from the U.S. into The Bahamas, which resulted in the temporary cessation of participation

in The Bahamas Registry Trial. While this travel restriction has now been lifted, participation in the Bahamas Registry Trial

remains lower than anticipated, due in part to pandemic-related effects on international travel.

Lomecel-B

for Alzheimer’s Disease

AD

is the leading form of dementia. This disease affects millions of Americans, leads to early mortality, and creates a tremendous

burden on families and society that costs the U.S. hundreds of billions of dollars annually in direct costs and lost productivity.

Patients

afflicted with AD have characteristic brain changes that include abnormal protein deposits in the brain, called β-amyloid

deposits. Another feature that occurs within the neurons themselves is called neurofibrillary tangles, which interferes with the

structure and function of the neurons, and leads to neuron death. Inflammation in the brain – a process called neuroinflammation

– is also a key feature of AD. This pro-inflammatory state appears essential for the clinical manifestation of dementia

resulting from AD. In addition to affecting the brain tissue itself, neuroinflammation also impairs the blood vessels in the brain

and the exchange barrier between the blood and the brain, called the blood-brain barrier (BBB). Ultimately, these pathological

processes lead to the structural changes in the brain and resulting dementia.

Despite

decades of research, the biotechnology and pharmaceutical industries have not succeeded in developing a safe and effective FDA-approved

treatment that can prevent, slow-down, or reverse the progression of AD. Many of these failed investigational drugs narrowly target

just one aspect of AD, such as β-amyloid deposits. The five currently approved drugs for AD provide only partial symptomatic

relief, but do not treat disease progression. We believe reasons for these failures include the inability of these other approaches

to treat multiple pathological aspects of AD, and the inability to promote regenerative responses, which is highly muted in the

brain.

11

We

are testing Lomecel-B as a potential treatment for AD based on the hypothesis that its multiple possible MOAs can simultaneously

address multiple features of AD. Preclinical studies show that MSCs can potentially reduce AD-associated brain inflammation, improve

the function of blood vessels in the brain, and reduce brain damage due to AD progression, and promote regenerative responses.

We have completed a multicenter, randomized, placebo-controlled Phase 1 safety study of subjects with mild AD. Based on preliminary

results, we intend to initiate a larger Phase 2 study. If successful in clinical studies, we hope that Lomecel-B may prove to

be a disease-modifying therapy for AD.

Prevalence

of AD and Market Potential. The Alzheimer’s Association estimates that 5.7 million Americans have AD, and as many as

14 million Americans will be afflicted by 2050 barring significant medical breakthroughs. An estimated 35.6 million people are

affected with AD worldwide, and that number is expected to quadruple by 2050. Among individuals age 85 and older, half have AD.

AD is currently the sixth leading cause of death in the U.S., taking more lives annually than breast cancer and prostate cancer

combined, underscoring the critical importance for developing a therapeutic intervention that can delay or reverse the progression

of the disease. Arguably, AD represents the only leading cause of death that cannot be prevented, cured, or slowed using existing

approved therapies. This disease has a tremendous impact on the quality of lives of the patients and their caregivers, costing

American society an estimated $240 billion annually.

Analysts

have suggested that any disease-modifying AD drug that makes it all the way to market could rapidly achieve over $10 billion in

sales. Without a major market competitor, analysts have predicted that that figure could balloon to over $20 billion by 2030.

Phase

1 Alzheimer’s Disease Clinical Trial.

We

have conducted a double-blind, randomized, placebo-controlled Phase 1 trial using a single infusion of Lomecel-B in subjects with

mild AD (ClinicalTrials.gov #NCT02600130). The observation period was 12 months post-infusion. Our results support the safety

and tolerability of using Lomecel-B in individuals with AD, in which there have been no product-associated SAEs.

Results

from the AD Phase 1 Trial.

While

this Phase 1 study was powered for safety as the primary endpoint, it was also designed to evaluate the effects of Lomecel-B in

multiple efficacy domains that include cognition, activities of daily living (ADLs), quality-of-life (QOL), and biomarkers.

The

Mini Mental State Exam (MMSE) is a validated and commonly used assessment of cognitive function, in which decreasing scores indicate

worsening. Statistically significant differences in the mean MMSE score were found between the Lomecel-B and placebo groups (Figure

8). The placebo group showed a steady worsening in the MMSE (p < 0.05 at 3-, 9- and 12-months post-treatment versus

baseline). However, the rate of decline in the Lomecel-B group after treatment was slower, reaching statistical significance at

post-treatment month 9 (difference from placebo: p = 0.0403; 95%CI: 0.16 – 6.38). While other cognitive assessments

(“AD Assessment Scale – Cognitive” and the “Trail Making Test”) showed no significant differences

between the Lomecel-B and placebo groups, the Lomecel-B group showed trending improvements relative to the placebo group.

Figure

8. Impact of Lomecel-B on cognitive performance in patients with mild AD. The MMSE showed a steady decline (lowered score)

in the placebo group (red). The Lomecel-B group (blue) showed only a slight decline, which was statistically significant

at 9-months after the treatment. The gray-box indicates the MMSE inclusion score of 18 – 24 required for enrollment on the

trial. Plotted are means ± SEM. *, p < 0.05 for change in Lomecel-B arm versus placebo.

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The

subjects that received Lomecel-B showed on average no change in the ADCS-ADL, whereas the placebo group showed a significant decline

(decreased score) (six-month difference from placebo: 95% CI 2.26 – 13.67). The ADCS-ADL is an assessment given to the patient

caregiver, and provides an independent evaluation of how the AD patient is progressing. No significant differences between the

Lomecel-B and placebo arms were found in quality-of-life (QOL) measures.

Figure

9. Impact of Lomecel-B on ability to perform activities of daily living (ADLs) in patients with mild AD. The ADCS-ADL showed

a declined (lowered score) in the placebo group while the Lomecel-B group showed a slight improvement. These differences were

statistically significant at 6-months after the infusion. Plotted are means ± SEM. **, p < 0.01 for change in Lomecel-B

arm versus placebo.

Quarterly

magnetic resonance imaging (MRI) brain scans were performed on each subject to evaluate safety, as well as efficacy via brain

structure changes. No adverse imaging brain changes were noted, supporting the potential safety of Lomecel-B for patients with

mild AD.

Automated

image analysis of the MRI scans was used to obtain unbiased measurements of brain structures (Figure 10). One of these

structures, the hippocampus, is a brain region critical for memory formation, is one of the two major brain regions that undergoes

rapid constant neuron replacement (the other region being the olfactory bulb), and undergoes significant atrophy (shrinking) in

Alzheimer’s disease. Over the first 6 months post-treatment, the hippocampus on both sides of the brain showed trending

but not significant size decreases in the placebo group, while the Lomecel-B-treated group did not. At month 6, this divergence

reached significance in the left hippocampus between the placebo group and those treated with Lomecel-B at a 100 million cell

dose (p = 0.0396; 95% CI 29.7 – 1044.8 mm3). These results are consistent with a proposed mechanism of

action that Lomecel-B may stimulate intrinsic neuronal stem cells and regenerative mechanisms, thereby leading to increased volume

of the hippocampus. Many brain regions did not show significant changes over the follow-up period. Nevertheless, it is possible

that the changes observed in the imaging may be associated with the improvements in cognitive function.

Grant

Funding Award. This trial is being supported in part by two competitive grants from the Alzheimer’s Association.

Next

Steps. We are still evaluating final results from the Phase 1 trial but are preparing and planning for the next phase trial,

which is expected to be a larger, randomized, double-blind, placebo-controlled Phase 2 trial intended to explore the effects of

multiple doses of Lomecel-B in subjects with AD.

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Figure

10. Impact of Lomecel-B on brain architecture as assessed by brain MRI imaging. A – E, Representative brain scans

of one of the treated subjects from the trial. Automated brain structure analyses were performed using programs that included

the Automatic Segmentation of Hippocampal Subfields. Subregions of the whole hippocampus are shown color-coded (B – E).

F and G, Hippocampal size changes after treatment with placebo or a single 100 million cell dose (100M) of Lomecel-B.

At 6 months post-treatment, the left hippocampus showed a mean decrease in size in the placebo group that was statistically significantly

different from the Lomecel-B group, which remained relatively unchanged. The right hippocampus showed a similar trend, but the

difference was not statistically significant. Plotted are means ± SEM. *, p < 0.05 for Month 6 Lomecel-B versus

placebo group.

Lomecel-B

for the Metabolic Syndrome

We

have an ongoing Phase 1 sub-study exploring whether Lomecel-B can improve the Metabolic Syndrome, and if the Metabolic Syndrome

presents confounding issues for this treatment approach in Aging Frailty patients. This sub-study primarily focuses upon blood-based

biomarker changes, and non-invasive evaluation of vascular (blood vessel) functioning.

The

Metabolic Syndrome is a clinically-defined condition (ICD-10: code 277.7) that increases the chances of developing cardiovascular

disease (CVD) and Type II diabetes mellitus (T2DM). It is also known as X syndrome, insulin resistance syndrome, cardiometabolic

syndrome, and Reaven’s syndrome. The Metabolic Syndrome is defined as a cluster of risk factors for which at least three

of the following five criteria must be met.

● Elevated serum triglycerides.

● Reduced high-density lipoprotein (good cholesterol).

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● Elevated blood pressure.

● Elevated fasting glucose.

● Increased waist circumference (central or apple-shaped obesity).

The

Metabolic Syndrome is associated with vascular dysfunction and damage, and a proinflammatory state marked by elevated serum levels

of C-reactive protein (CRP), interleukin-6 (IL-6), and D-dimer. Obesity also directly contributes to this proinflammatory state

and the Metabolic Syndrome.

Compared

to unaffected individuals, patients with the Metabolic Syndrome are twice as likely to develop CVD in 5 – 10 years, five-times

as likely for developing T2DM, over twice as likely to have a stroke, over three-times as likely to have a heart attack, and have

double the risk of dying from such events.

The

incidence of the Metabolic Syndrome has reached epidemic proportions and continues to increase, as the overall prevalence in the

U.S. is approximately 35% of the total population, or over 80 million individuals.

Lomecel-B

may be a potential candidate for the Metabolic Syndrome through multiple potential mechanisms of action that include the potential

to reduce associated inflammation and improve vascular function. Preclinical studies support the clinical benefits of allogeneic

MSC therapy for treating the Metabolic Syndrome, which resulted in improvements in vascular function, atherosclerosis, and glucose

homeostasis.

For

the purpose of analysis, we are evaluating the Metabolic Syndrome in subjects who have been enrolled in our Phase 2b Trial and

HERA Trial, and dividing them into two groups: those with and without the Metabolic Syndrome. We will look at the effect of Lomecel-B

relative to placebo on the two groups with respect to effect changes relevant to the Metabolic Syndrome. Forty percent of Aging

Frailty patients have been reported to have the Metabolic Syndrome, which we have empirically confirmed from our Phase 2b Trial

and HERA clinical trial, in which we have identified approximately 45% and 33% of enrolled subjects, respectively, who meet the

criteria for the Metabolic Syndrome. The Metabolic Syndrome is also becoming a well-recognized contributor to AD and related dementias.

Grant

Funding Award. This study was being supported in part by a grant award from the NIA/NIH.

Lomecel-B

for Acute Respiratory Distress Syndrome (ARDS)

We

are conducting a multicenter, double-blinded, randomized, placebo-controlled trial for ARDS due to COVID-19 or influenza virus

infection.

ARDS

can be rapidly induced by a variety of insults, such as coronavirus and influenza virus infection. Approximately 200,000 people

suffer from ARDS in the U.S. annually, with a mortality rate of about 40%. These numbers are likely to dramatically increase as

a result of COVID-19, which could become a seasonal epidemic. Older persons, those with Aging Frailty, and those with the Metabolic

Syndrome, are at significantly increased risk for severely poor outcomes from ARDS due to viral infection, including prolonged

hospitalization and death.

Viral

infection leading to ARDS can results in severe inflammation called a “cytokine storm”, most pronounced by severely

elevated serum levels of C reactive protein (CRP) and interleukin-6 (IL-6). This in turn leads to disruption of the lung cell

layers (the endothelial and epithelial barriers), and consequently, to severe inhibition of pulmonary exchange. ARDS can result

in long-term adverse effects on patients, such as lung scarring (fibrosis). As now widely appreciated due to COVID-19, there is

a dearth of treatment options available for ARDS, and first-line defense measures often have sub-optimal palliative effects.

Lomecel-B

has the potential to be a treatment for ARDS due to the previously described mechanisms of action. These include the potential

to treat the cytokine storm induced in ARDS without leading to toxic immunosuppression, reduce fibrotic damage, promote reparative

mechanisms, and improve immune functioning.

Status

of Clinical Trial. This trial is currently enrolling and we expect the trial to complete enrollment in 2022.

Grant

Funding Award. This study is being supported in part by a grant award from the MSCRF, part of Maryland TEDCO.

Emergency

Use Expanded Access. In addition to our clinical trial, we have treated patients with ARDS with Lomecel-B under FDA emergency-use

expanded-access. The two patients treated had severe ARDS, were on extracorporeal membrane oxygenation (ECMO), and failed to respond

to other attempted interventions. One of these patients responded after being given three doses of Lomecel-B. The other died shortly

after being given a single dose of Lomecel-B.

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Lomecel-B

for Hypoplastic Left Heart Syndrome (HLHS)

We

are testing Lomecel-B as a potential combinatorial therapy candidate to surgical intervention for HLHS. The scientific goal underlying

this study builds on surgical advances of the past thirty years, and is intended to address remaining obstacles to improving long-term

cardiac function in HLHS patients.

HLHS

is a severe congenital birth defect in which the left ventricle of the heart is either severely underdeveloped or missing. As

a consequence, babies born with this condition have severely diminished systemic blood flow, which previously used to lead to

a 100% mortality rate shortly after birth. Babies born with HLHS now undergo a complex three stage heart reconstruction over the

course of years, in which the single remaining right ventricle is used to support systemic circulation (the right ventricle is

normally used for lung circulation, which is a much lower load). While these children can now live into adulthood, early mortality

is still extremely high in this population due to right ventricle failure, which is not meant for the increased load demanded

for systemic circulation. Furthermore, HLHS patients after undergoing heart reconstructive surgery are often not ideal candidates

for a heart transplant. As such, there is an important unmet medical need to improve right ventricular function in these patients

to improve both short-term and long-term outcomes.

We

believe that Lomecel-B has potential as a combinatorial therapy with HLHS surgery to improve both short- and long-term clinical

outcomes. We are evaluating whether a direct injection in the heart can improve right ventricle function by promoting regenerative

and repair responses. In animal studies, this combinatorial approach resulted in a 10 – 15% improvement in right ventricle

function.

Prevalence

of HLHS. HLHS is an ultra-rare indication, occurring at approximately 2 – 3 cases per 10,000 live births, or roughly

1,000 children annually in the U.S. This indication would therefore meet the prevalence requirements for an orphan drug designation

(ODD) if the other designation requirements are met. A sponsor may request an ODD any time before the marketing application for

the product for the rare disease or condition is submitted. If we request an ODD for Lomecel-B, which we have not yet done, and