LSTA 10-K Fiscal year ended Dec. 31, 2019

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•	our ability to obtain sufficient capital or strategic business arrangements to fund our operations and expansion plans, including meeting our financial obligations under various licensing and other strategic arrangements, the funding of our clinical trials for product candidates, and the commercialization of the relevant technology;

•	our ability to build and maintain the management and human resources infrastructure necessary to support the growth of our business;

•	whether a market is established for our cell-based products and services and our ability to capture a meaningful share of this market;

•	scientific, regulatory and medical developments beyond our control;

•	our ability to obtain and maintain, as applicable, appropriate governmental licenses, accreditations or certifications or comply with health care laws and regulations or any other adverse effect or limitations caused by government regulation of our business;

•	whether any of our current or future patent applications result in issued patents, the scope of those patents and our ability to obtain and maintain other rights to technology required or desirable for the conduct of our business; and our ability to commercialize products without infringing on the claims of third-party patents;

•	whether any potential strategic or financial benefits of various licensing agreements will be realized;

•	the results of our development activities; and

•	our ability to complete our other planned clinical trials (or initiate other trials) in accordance with our estimated timelines due to delays associated with enrolling patients due to the novelty of the treatment, the size of the patient population and the need of patients to meet the inclusion criteria of the trial or otherwise.

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•	Nine U.S. patents, three EU patents (each filed in 5 individual countries) and 7 other patents in Japan, Canada, Russia and Hong Kong;

•	Claims cover, inter alia , a pharmaceutical composition that contains a therapeutic concentration of non-expanded CD34+ stem cells that move in response to SDF-1 or VEGF, together with a stabilizing amount of serum, that can be delivered to repair an injury caused by vascular insufficiency;

•	Issued and pending claims can be applied to a broad range of conditions caused by underlying ischemia, including: acute myocardial infarction; chronic myocardial ischemia post-AMI; chronic heart failure; critical limb ischemia; and ischemic brain injury;

•	Two pending patent applications outside the United States.

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•	completion of preclinical laboratory tests, animal studies and formulation studies in compliance with the FDA's good laboratory practice or GLP regulations;

•	submission to the FDA of an IND, which includes the detailed clinical protocol and which must take effect before human clinical trials can commence;

•	approval of the clinical trial protocol and the sponsor's safeguards for human subjects by one or more institutional review boards, or "IRBs," depending on the numbers of clinical sites and other features of the study design, before each clinical trial may be initiated;

•	performance of adequate and well-controlled human clinical trials in accordance with good clinical practices, or "GCPs," to establish the safety and efficacy of the proposed drug or biological product for each proposed indication for which FDA approval is sought;

•	satisfactory completion of FDA audits of clinical trial sites to assure compliance with GCPs and the integrity of the clinical data;

•	preparation and submission to the FDA of an NDA or BLA, as appropriate;

•	review of the product by an FDA advisory committee, where appropriate or if applicable, as determined by the FDA at its discretion;

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satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities at which the product, or components thereof, are produced to assess compliance with the regulations establishing current Good Manufacturing Practices, or “cGMPs,” and current Good Tissue Practices or “cGTPs” (if applicable), and to assure that the facilities, methods and controls used for the manufacture, processing and packing of the drug or biological product are adequate to preserve the product’s identity, strength, quality and purity; and

•	payment of applicable user fees and securing FDA approval of the NDA or BLA.

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•	Phase 1 : Trials in this phase are initially conducted in a limited population of healthy volunteers to test the product candidate for safety, dose tolerance, absorption, metabolism, distribution and excretion in healthy humans or, on occasion, in patients, such as cancer patients, when the drug or biologic is too toxic to be ethically given to healthy individuals.

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Phase 2 : These clinical trials are generally conducted in a limited patient population to determine the presence and approximate magnitude of therapeutic effect of the product for specific targeted indications and to identify appropriate therapeutic dose and dose frequency as well as any corresponding additional possible adverse effects and safety risks. Multiple Phase 2 clinical trials may be conducted by the sponsor to obtain information prior to beginning larger and more expensive Phase 3 clinical trials.

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Phase 3 : These are commonly referred to as pivotal or registration studies. When Phase 2 evaluations demonstrate that a dose range of the product is effective and has an acceptable safety profile, Phase 3 clinical trials are typically undertaken in a larger patient population to further evaluate dosage, to provide substantial evidence of clinical efficacy and to further test for safety in an expanded and diverse patient population at multiple and geographically-dispersed clinical trial sites. In most cases, the FDA requires two adequate and well-controlled Phase 3 clinical trials to demonstrate the efficacy of the drug or biologic as a requirement for marketing authorization.

•	Phase 4 : In some cases, the FDA may condition approval of an NDA or BLA for a product candidate on the sponsor's agreement to conduct additional clinical trials after NDA or BLA approval. In other cases, a sponsor may voluntarily carry out additional trials post approval to gain more information about the drug or biologic.

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•	restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls;

•	fines, warning letters or holds on post-approval clinical trials;

•	refusal of the FDA to approve pending NDAs/BLAs or supplements to approved NDAs/BLAs, or suspension or revocation of product license approvals;

•	product seizure or detention, or refusal to permit the import or export of products;

•	injunctions or the imposition of civil or criminal penalties;

•	consent degrees, corporate integrity agreements, debarment, or exclusion from federal health care programs; or

•	mandated modification of promotional materials and labeling and the issuance of corrective information.

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•	state and local licensure, applicable to the processing and storage of human cells and tissues;

•	laws and regulations administered by the United States Department of Health and Human Services, including the Office for Human Research Protections and the Office of Inspector General;

•	state laws and regulations governing human subject research;

•	federal and state coverage and reimbursement laws and regulations, including laws and regulations administered by the Centers for Medicare & Medicaid Services and state Medicaid agencies;

•	the federal Medicare and Medicaid Anti-Kickback Law and similar state laws and regulations;

•	the federal Health Insurance Portability and Accountability Act of 1996 ("HIPAA"), as amended by the Health Information Technology for Economic and Clinical Health Act and similar state laws and regulations;

•	the federal physician self-referral prohibition commonly known as the Stark Law, and state equivalents of the Stark Law;

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the federal transparency requirements under the Physician Payments Sunshine Act that require manufacturers of FDA-approved drugs, devices, biologics and medical supplies covered by Medicare or Medicaid to report, on an annual basis, to the Department of Health and Human Services information related to payments and other transfers of value physicians, teaching hospitals, and certain advanced non-physician health care practitioners and physician ownership and investment interests;

•	Occupational Safety and Health Administration requirements;

•	state and local laws and regulations dealing with the handling and disposal of medical waste; and

•	the Intermediate Sanctions rules of the IRS providing for potential financial sanctions with respect to “Excess Benefit Transactions” with tax-exempt organizations.

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•	the scope, progress, results, costs, timing and outcomes of our cell therapy research and development programs and product candidates;

•	our ability to enter into any collaboration agreements with third parties for our product candidates and the timing and terms of any such agreements;

•	the costs associated with the consummation of one or more strategic transactions;

•	the timing of and the costs involved in obtaining regulatory approvals for our product candidates, a process which could be particularly lengthy, or complex given the FDA's limited experience with marketing approval for cell therapy products;

•	the costs of maintaining, expanding and protecting our intellectual property portfolio, including potential litigation costs and liabilities relating thereto;

•	the cost of expansion of our development operations and personnel; and

•	the availability of, or our access to, state or federal government awards.

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•	completing research regarding, and nonclinical and clinical development of, our product candidates;

•	obtaining regulatory approvals and marketing authorizations for product candidates for which we complete clinical trials;

•	developing a sustainable and scalable manufacturing process for our product candidates;

•	identifying and contracting with contract manufacturers that have the ability and capacity to manufacture our development products and make them at an acceptable cost;

•	launching and commercializing product candidates for which we obtain regulatory approvals and marketing authorizations, either directly or with a collaborator or distributor;

•	obtaining market acceptance of our product candidates as viable treatment options;

•	ensuring ongoing regulatory compliance post-approval and with respect to sales and marketing of future products;

•	addressing any competing technological and market developments;

•	identifying, assessing, acquiring and/or developing new product candidates;

•	negotiating favorable terms in any collaboration, licensing, or other arrangements into which we may enter;

•	maintaining, protecting, and expanding our portfolio of intellectual property rights, including patents, trade secrets, and know-how; and

•	attracting, hiring, and retaining qualified personnel.

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•	suspensions, delays or changes in the design, initiation, enrollment, implementation or completion of required clinical trials;

•	adverse changes in our financial position or significant and unexpected increases in the cost of our clinical development program;

•	changes or uncertainties in, or additions to, the regulatory approval process that require us to alter our current development strategy;

•	clinical trial results that are negative, inconclusive or even less than desired as to safety and/or efficacy, which could result in the need for additional clinical trials or the termination of the product's development;

•	delays in our ability to manufacture the product in quantities or in a form that is suitable for any required clinical trials;

•	intellectual property constraints that prevent us from making, using, or commercializing any of our cell therapy product candidates;

•	the supply or quality of our product candidates or other materials necessary to conduct clinical trials of these product candidates may be insufficient or inadequate;

•	inability to generate sufficient preclinical, toxicology, or other in vivo or in vitro data to support the initiation of clinical trials;

•	delays in reaching agreement on acceptable terms with prospective contract research organizations ("CROs"), contract manufacturing organizations ("CMOs"), and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs, CMOs and clinical trial sites;

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•	delays in obtaining required IRB approval at each clinical trial site;

•	inability to file INDs with the FDA for our development candidates or comparable clinical trial applications with other regulatory authorities outside of the U.S.;

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imposition of a temporary or permanent clinical hold by the FDA or similar restrictions by other regulatory agencies for a number of reasons, including after review of an IND or amendment, or equivalent application or amendment; as a result of a new safety finding that presents unreasonable risk to clinical trial participants; a negative finding from an inspection of our clinical trial operations or clinical trial sites; developments on trials conducted by competitors or approved products post-market for related technology that raises FDA concerns about risk to patients of the technology broadly; or if the FDA finds that the investigational protocol or plan is clearly deficient to meet its stated objectives;

•	difficulty collaborating with patient groups and investigators;

•	failure by our CROs, CMOs other third parties, or us to adhere to clinical trial requirements;

•	failure to perform in accordance with the FDA or international GCP requirements;

•	failure to reach agreement with the FDA on a satisfactory development path of our development candidates;

•	delays in having patients qualify for or complete participation in a trial or return for post-treatment follow-up;

•	patients dropping out of a clinical trial;

•	occurrence of adverse events associated with the product candidate;

•	changes in the standard of care on which a clinical development plan was based, which may require new or additional trials or abandoning existing trials;

•	transfer of manufacturing processes from our academic collaborators to larger-scale facilities operated by either a contract manufacturing organization, or CMO, or by us, and delays or failure by our CMOs or us to make any necessary changes to such manufacturing process;

•	delays in manufacturing, testing, releasing, validating, or importing/exporting sufficient stable quantities of our product candidates for use in clinical trials or the inability to do any of the foregoing; and

•	the FDA may not accept clinical data from trials that are conducted in countries where the standard of care is potentially different from the United States.

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•	obtain approval for indications that are not as broad as the indications we sought;

•	have the product removed from the market after obtaining marketing approval;

•	encounter problems with respect to the manufacturing of commercial supplies;

•	be subject to additional post-marketing testing requirements; and/or

•	be subject to restrictions on how the product is distributed or used.

•	size of the target patient population;

•	severity of the disease or disorder under investigation;

•	eligibility criteria for the clinical trial in question;

•	other clinical trials being conducted at the same time involving patients who have the disease or disorder under investigation;

•	perceived risks and benefits of the product candidate under study;

•	approval and availability of other therapies to treat the disease or disorder that is being investigated in the clinical trial;

•	willingness or unwillingness to participate in a placebo controlled clinical trial;

•	efforts to facilitate timely enrollment in clinical trials;

•	patient referral practices of physicians;

•	the ability to monitor patients adequately during and after treatment; and

•	proximity and availability of clinical trial sites for prospective patients.

•	patients failing to complete clinical trials due to dissatisfaction with the treatment, side effects or other reasons;

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•	failure by regulators, IRBs, or independent ethics committees to authorize us or our investigators at individual sites to commence a clinical trial;

•	suspension or termination by regulators of clinical research for many reasons, including concerns about patient safety or failure of our contract manufacturers to comply with applicable cGMP/cGTP requirements for the clinical supplies of the cell therapy candidate;

•	delays or failure to obtain clinical supply for our products necessary to conduct clinical trials from contract manufacturers, including commercial grade clinical supply for our trials;

•	our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all;

•	treatment candidates demonstrating a lack of efficacy during clinical trials;

•	inability to continue to fund clinical trials or to find a partner to fund the clinical trials;

•	competition with ongoing clinical trials and scheduling conflicts with participating clinicians; and

•	delays in completing data collection and analysis for clinical trials.

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•	the efficacy and potential advantages compared to alternative treatments or competitive products;

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•	the prevalence and severity of any side effects;

•	physician acceptance of our cell therapy approach to our target disease indications, include the ease or difficulty of administering the future products;

•	restrictions on how the product is distributed or used;

•	the strength of our marketing and distribution support, including whether we receive support from any patient advocacy groups;

•	the adequacy of product supply in light of complex manufacturing and distribution processes;

•	our ability to distinguish our products (which involve adult cells) from any ethical and political controversies associated with stem cell products derived from human embryonic or fetal tissue; and

•	the cost of the product, the reimbursement policies of government and third-party payors and our ability to obtain sufficient third-party coverage or reimbursement.

•	collaborators have significant discretion in determining the efforts and resources that they will apply to a collaboration;

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collaborators may not pursue development and commercialization of our product candidates or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in their strategic focus due to the acquisition of competitive products, availability of funding, or other external factors, such as a business combination that diverts resources or creates competing priorities;

•	collaborators may delay clinical trials, provide insufficient funding for a clinical trial, stop a clinical trial, abandon a product candidate, repeat or conduct new clinical trials, or require a new formulation of a product candidate for clinical testing;

•	collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our products or product candidates;

•	a collaborator with marketing and distribution rights to one or more products may not commit sufficient resources to their marketing and distribution;

•	collaborators may not properly maintain or defend our intellectual property rights or may use our intellectual property or proprietary information in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential liability;

•	disputes may arise between us and a collaborator that cause the delay or termination of the research, development or commercialization of our product candidates, or that result in costly litigation or arbitration that diverts management attention and resources;

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•	collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable product candidates; and

•	collaborators may own or co-own intellectual property covering our products that results from our collaborating with them, and in such cases, we would not have the exclusive right to commercialize such intellectual property.

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•	the product candidates require significant clinical testing to demonstrate safety and effectiveness before applications for marketing approval can be submitted to the FDA and other regulatory authorities;

•	data obtained from animal testing and other nonclinical testing and clinical trials can be interpreted in different ways, and regulatory authorities may not agree with our respective interpretations or may require us to conduct additional testing;

•	negative or inconclusive results or the occurrence of serious or unexpected adverse events during a clinical trial could cause us to delay or terminate development efforts for a product candidate; and/or

•	the FDA and other regulatory authorities may require expansion of the size and scope of the clinical trials.

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•	third-party clinical investigators do not perform the clinical trials on the anticipated schedule or consistent with the clinical trial protocol, GCPs required by the FDA and other regulatory requirements, or other third parties do not perform data collection and analysis in a timely or accurate manner;

•	inspections of clinical trial sites by the FDA or by IRBs of research institutions participating in the clinical trials, reveal regulatory violations that require the sponsor of the trial to undertake corrective action, suspend or terminate one or more sites, or prohibit use of some or all of the data in support of marketing applications; or

•	the FDA or one or more IRBs suspends or terminates the trial at an investigational site or precludes enrollment of additional subjects.

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•	warning letters or untitled letters or other actions requiring changes in product manufacturing processes or restrictions on product marketing or distribution;

•	product recalls or seizures or the temporary or permanent withdrawal of a product from the market; and

•	fines, restitution or disgorgement of profits or revenue, the imposition of civil penalties or criminal prosecution.

•	regulatory authorities may withdraw their approval of the product;

•	regulatory authorities may require a recall of the product or we may voluntarily recall a product;

•	regulatory authorities may require the addition of warnings or contradictions in the product labeling, narrowing of the indication in the product label or issuance of field alerts to physicians and pharmacies;

•	we may be required to create a medication guide outlining the risks of such side effects for distribution to patients or institute a REMS;

•	we may be subject to limitation as to how we promote the product;

•	we may be required to change the way the product is administered or modify the product in some other way;

•	the FDA or applicable foreign regulatory authority may require additional clinical trials or costly post-marketing testing and surveillance to monitor the safety or efficacy of the product;

•	sales of the product may decrease significantly;

•	we could be sued and held liable for harm caused to patients; and

•	our brand and reputation may suffer.

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•	differing regulatory requirements in foreign countries;

•	differing coverage and reimbursement requirements in foreign countries;

•	unexpected changes in tariffs, trade barriers, price and exchange controls, and other regulatory requirements;

•	economic weakness, including inflation, or political instability in particular foreign economies and markets;

•	compliance with tax, employment, immigration, and labor laws for employees living or traveling abroad;

•	foreign taxes, including withholding of payroll taxes;

•	foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doing business in another country;

•	difficulties staffing and managing foreign operations;

•	workforce uncertainty in countries where labor unrest is more common than in the United States;

•	potential liability under the Foreign Corrupt Practices Act of 1977 or comparable foreign laws, such as the U.K. Anti-Bribery Act;

•	challenges enforcing our contractual and intellectual property rights, especially in those foreign countries that do not respect and protect intellectual property rights to the same extent as the United States;

•	production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and

•	business interruptions resulting from geo-political actions, including war and terrorism.

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•	low levels of trading volume for our shares;

•	capital-raising or other transactions that are, or may in the future be, dilutive to existing stockholders or that involve the issuance of debt securities;

•	delays in our clinical trials, negative clinical trial results or adverse regulatory decisions relating to our product candidates;

•	adverse fluctuations in our revenues or operating results or financial results that otherwise fall below the market's expectations;

•	disappointing developments concerning our cell therapy product candidates;

•	positive developments concerning our cell therapy product candidates that lead to the need for additional capital to complete the development process; and

•	legal challenges, disputes and/or other adverse developments impacting our patents or other proprietary rights that protect our products.

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(1)	Includes stock options only; does not include purchase rights accruing under the Amended 2017 ESPP Plan because the purchase price (and therefore the number of shares to be purchased) will not be determined until the end of the purchase period.

(2)	Consists of the 2018 Plan, the 2015 Plan, the 2009 Plan, the 2003 Plan, and the Amended 2017 ESPP.

(3)	Includes shares available for future issuance under the 2018 Plan and the Amended 2017 ESPP.

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•	Research and development expenses were approximately $10.8 million for the year ended December 31, 2019 compared to $7.6 million for the year ended December 31, 2018 , representing an increase of approximately $3.2 million , or 42% . Research and development in both periods focused on the advancement of our ischemic repair platform and related to:

◦	ongoing registration-eligible study expenses for CLBS12 in critical limb ischemia in Japan, whereby we continue to focus spending on our patient enrollment, and anticipate completing enrollment in the first half of 2020;

◦	ongoing Phase proof-of-concept study expenses for CLBS16 in coronary microvascular dysfunction, whereby study enrollment was completed in the second quarter of 2019, preliminary top-line results were reported in November 2019 and full results expected in the first half of 2020; and

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expenses associated with preparation our confirmatory Phase 3 study of CLBS14 in NORDA. In late 2019, we projected that the Phase 3 study would cost approximately $70 million in external expenses over the next several years to complete, and as a result, we elected to postpone the initiation of the study until we have confidence that we can access sufficient capital to allow us to complete the study uninterrupted.

•	General and administrative expenses were approximately $9.3 million for the year ended December 31, 2019 , compared to $9.4 million for the year ended December 31, 2018 , representing a decrease of approximately $0.1 million , or 1% . Our general and administrative expenses focus on general corporate-related activities.

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•	Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

•	Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and the board of directors of the Company; and

•	Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

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