Quarterly Report (10-q)

Date : 11/06/2019 @ 10:20PM
Source : Edgar (US Regulatory)
Stock : Athersys Inc (ATHX)
Quote : 1.4  -0.01 (-0.71%) @ 3:12PM

Quarterly Report (10-q)


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
 
FORM 10-Q

 
 
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2019
OR 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     .
Commission file number: 001-33876
 
 
 
Athersys, Inc.
(Exact name of registrant as specified in its charter)
 
 
 
 
Delaware
 
20-4864095
(State or other jurisdiction
of incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
3201 Carnegie Avenue, Cleveland, Ohio
 
44115-2634
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: (216) 431-9900
Former name, former address and former fiscal year, if changed since last report: Not Applicable
 
 
 
  
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common Stock, par value $0.001 per share
ATHX
The NASDAQ Stock Market LLC
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 
Large accelerated filer
 
  
Accelerated filer
 
x
Non-accelerated filer
 
  
Smaller reporting company
 
x
Emerging growth company
 
  
 
 
 



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  x
The number of outstanding shares of the registrant’s common stock, $0.001 par value, as of November 1, 2019 was 156,666,720.



ATHERSYS, INC.
TABLE OF CONTENTS
 





PART I. FINANCIAL INFORMATION
Item 1.    Financial Statements.
Athersys, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except share and per share data)
 
 
September 30,
2019
 
December 31,
2018
 
 
(Unaudited)
 
 
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
40,446

 
$
51,059

Accounts receivable
 
15

 
262

Accounts receivable from Healios
 
1,105

 
1,108

Unbilled accounts receivable from Healios
 
290

 
3,620

Prepaid expenses and other
 
614

 
1,791

Total current assets
 
42,470

 
57,840

Equipment, net
 
2,928

 
3,002

Deposits and other
 
2,033

 
888

Total assets
 
$
47,431

 
$
61,730

Liabilities and stockholders’ equity
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
10,517

 
$
9,163

Accounts payable to Healios
 
792

 

Accrued compensation and related benefits
 
1,003

 
1,901

Accrued clinical trial related costs
 
1,478

 
1,276

Accrued expenses and other
 
712

 
461

Deposit from Healios
 

 
2,000

Deferred revenue - Healios
 
351

 
674

Total current liabilities
 
14,853

 
15,475

Advance from Healios
 
5,375

 
3,139

Other long-term liabilities
 
201

 

Stockholders’ equity:
 
 
 
 
Preferred stock, at stated value; 10,000,000 shares authorized, and no shares issued and outstanding at September 30, 2019 and December 31, 2018
 

 

Common stock, $0.001 par value; 300,000,000 shares authorized, and 155,266,720 and 144,292,739 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively
 
155

 
144

Additional paid-in capital
 
434,548

 
416,014

Accumulated deficit
 
(407,701
)
 
(373,042
)
Total stockholders’ equity
 
27,002

 
43,116

Total liabilities and stockholders’ equity
 
$
47,431

 
$
61,730

See accompanying notes to unaudited condensed consolidated financial statements.

4


Athersys, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except per share data)
(Unaudited)
 
 
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
 
2019
 
2018
 
2019
 
2018
Revenues
 
 
 
 
 
 
 
 
Contract revenue from Healios
 
$
(368
)
 
$
1,906

 
$
5,266

 
$
21,009

Royalty and other contract revenue
 

 
312

 

 
1,304

Grant revenue
 
7

 
103

 
80

 
465

Total revenues
 
(361
)
 
2,321

 
5,346

 
22,778

Costs and expenses
 
 
 
 
 
 
 
 
Research and development
 
8,856

 
9,545

 
31,411

 
28,490

General and administrative
 
2,958

 
2,556

 
8,930

 
7,596

Depreciation
 
167

 
196

 
508

 
573

Total costs and expenses
 
11,981

 
12,297

 
40,849

 
36,659

Gain from insurance proceeds
 

 

 

 
383

Loss from operations
 
(12,342
)
 
(9,976
)
 
(35,503
)
 
(13,498
)
Other income, net
 
327

 
236

 
844

 
536

Net loss and comprehensive loss
 
$
(12,015
)
 
$
(9,740
)
 
$
(34,659
)
 
$
(12,962
)
Net loss per share, basic and diluted
 
$
(0.08
)
 
$
(0.07
)
 
$
(0.23
)
 
$
(0.10
)
Weighted average shares outstanding, basic and diluted
 
153,096

 
138,930

 
149,767

 
134,728

See accompanying notes to unaudited condensed consolidated financial statements.

5


Athersys, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(In Thousands, Except Share Amounts)
(Unaudited)

 
Preferred Stock
 
Common Stock
 
Additional
Paid-in
Capital
 
Accumulated
Deficit
 
Total
Stockholders’
Equity
 
Number
of Shares
 
Stated
Value
 
Number
of Shares
 
Par
Value
 
Balance at December 31, 2018

 
$

 
144,292,739

 
$144
 
$
416,014

 
$
(373,042
)
 
$
43,116

Stock-based compensation

 

 

 

 
1,090

 

 
1,090

Issuance of common stock

 

 
3,825,000

 
4

 
5,603

 

 
5,607

Issuance of common stock under equity compensation plan

 

 
158,494

 

 
(69
)
 

 
(69
)
Net comprehensive loss

 

 

 

 

 
(12,956
)
 
(12,956
)
Balance at March 31, 2019

 

 
148,276,233

 
148

 
422,638

 
(385,998
)
 
36,788

Stock-based compensation

 

 

 

 
1,152

 

 
1,152

Issuance of common stock, net

 

 
3,350,000

 
4

 
5,102

 

 
5,106

Issuance of common stock under equity compensation plan

 

 
151,518

 

 
(107
)
 

 
(107
)
Net comprehensive loss

 

 

 

 

 
(9,688
)
 
(9,688
)
Balance at June 30, 2019

 

 
151,777,751

 
152

 
428,785

 
(395,686
)
 
33,251

Stock-based compensation

 

 

 

 
1,309

 

 
1,309

Issuance of common stock

 

 
3,300,000

 
3

 
4,572

 

 
4,575

Issuance of common stock under equity compensation plan

 

 
188,969

 

 
(118
)
 

 
(118
)
Net comprehensive loss

 

 

 

 

 
(12,015
)
 
(12,015
)
Balance at September 30, 2019

 
$

 
155,266,720

 
$
155

 
$
434,548

 
$
(407,701
)
 
$
27,002


6


Athersys, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(In Thousands, Except Share Amounts)
(Unaudited)
 
Preferred Stock
 
Common Stock
 
Additional
Paid-in
Capital
 
Accumulated
Deficit
 
Total
Stockholders’
Equity
 
Number
of Shares
 
Stated
Value
 
Number
of Shares
 
Par
Value
 
Balance at December 31, 2017

 
$


122,077,453

 
$
122

 
$
373,884

 
$
(350,630
)
 
$
23,376

Stock-based compensation

 

 

 

 
813

 

 
813

Issuance of warrant to Healios at fair value

 

 

 

 
5,300

 

 
5,300

Issuance of common stock, net of issuance cost

 

 
3,750,000

 
4

 
5,412

 

 
5,416

Issuance of common stock to Healios, net of issuance costs

 

 
12,000,000

 
12

 
20,983

 

 
20,995

Issuance of common stock under equity compensation plan

 

 
131,092

 

 
(84
)
 

 
(84
)
Cumulative effect of accounting change

 

 

 

 

 
1,871

 
1,871

Net comprehensive loss

 

 

 

 

 
(10,155
)
 
(10,155
)
Balance at March 31, 2018

 


137,958,545

 
138

 
406,308

 
(358,914
)
 
47,532

Stock-based compensation

 

 

 

 
824

 

 
824

Issuance of common stock, net of issuance cost

 

 
500,000

 
1

 
1,214

 

 
1,215

Issuance of common stock to Healios, net of issuance costs

 

 

 

 
(149
)
 

 
(149
)
Issuance of common stock under equity compensation plan

 

 
125,128

 

 
(106
)
 

 
(106
)
Net comprehensive income

 

 

 

 

 
6,933

 
6,933

Balance at June 30, 2018

 

 
138,583,673


139

 
408,091

 
(351,981
)
 
56,249

Stock-based compensation

 

 

 

 
1,096

 

 
1,096

Issuance of common stock, net of issuance cost

 

 
1,500,000

 
1

 
2,841

 

 
2,842

Issuance of common stock under equity compensation plan

 

 
153,605

 

 
(110
)
 

 
(110
)
Net comprehensive loss

 

 

 

 

 
(9,740
)
 
(9,740
)
Balance at September 30, 2018

 
$

 
140,237,278

 
$
140

 
$
411,918

 
$
(361,721
)
 
$
50,337

See accompanying notes to unaudited condensed consolidated financial statements.


7


Athersys, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
 
 
Nine months ended
September 30,
 
 
2019
 
2018
Operating activities
 
 
 
 
Net loss
 
$
(34,659
)
 
$
(12,962
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
 
Depreciation
 
508

 
573

Stock-based patent license and settlement expense
 

 
315

Stock-based compensation
 
3,551

 
2,733

Discount on revenue from issuance of warrant
 

 
1,080

Deferred revenue from prior period
 

 
(250
)
Changes in operating assets and liabilities:
 
 
 
 
Accounts receivable
 
247

 
13

Accounts receivable from Healios - billed and unbilled
 
3,333

 
(7,069
)
Prepaid expenses, deposits and other
 
991

 
(1,743
)
Accounts payable and accrued expenses
 
151

 
5,335

Accounts payable to Healios
 
792

 

Deferred revenue - Healios
 
(323
)
 
996

Advances and deposits from Healios
 
236

 
2,195

Net cash used in operating activities
 
(25,173
)
 
(8,784
)
Investing activities
 
 
 
 
Purchases of equipment
 
(434
)
 
(1,369
)
Net cash used in investing activities
 
(434
)
 
(1,369
)
Financing activities
 
 
 
 
Proceeds from issuance of common stock, net
 
15,314

 
8,258

Proceeds from issuance of common stock to Healios, net
 

 
20,847

Shares retained for withholding tax payments on stock-based awards
 
(320
)
 
(301
)
Net cash provided by financing activities
 
14,994

 
28,804

(Decrease) increase in cash and cash equivalents
 
(10,613
)
 
18,651

Cash and cash equivalents at beginning of the period
 
51,059

 
29,316

Cash and cash equivalents at end of the period
 
$
40,446

 
$
47,967

See accompanying notes to unaudited condensed consolidated financial statements.


8


Athersys, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Three- and Nine- Month Periods Ended September 30, 2019 and 2018


1. Background and Basis of Presentation
Background: We are an international biotechnology company that is focused primarily in the field of regenerative medicine and operate in one business segment. Our operations consist of research and clinical-stage product development activities.
We have incurred losses since our inception in 1995 and had an accumulated deficit of $407.7 million at September 30, 2019. We will require additional capital to continue our research and development programs, including progressing our clinical product candidates to commercialization and preparing for commercial-scale manufacturing and potential product launch. At September 30, 2019, we had available cash and cash equivalents of $40.4 million. On November 5, 2019, we entered into a new three-year equity facility with $100.0 million of availability, pursuant to which we will have the ability to sell under in the near term once the related resale registration statement that we will file with the Securities and Exchange Commission (“SEC”) is declared effective. We believe that our cash on hand, expected cash receipts primarily attributed to our collaboration with HEALIOS K.K. (“Healios”) and proceeds from our equity facilities are sufficient to meet our obligations as they come due at least for a period of twelve months from the date of the issuance of these unaudited condensed consolidated financial statements. In the longer term, we will have to continue to generate additional capital to meet our needs through new and existing collaborations and related license fees and milestones, the sale of equity securities from time to time including through our equity facilities, grant-funding opportunities, deferring certain discretionary costs and staging certain development costs, as needed.
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2018. The accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and Article 10 of Regulation S-X. Accordingly, since they are interim statements, the accompanying financial statements do not include all of the information and notes required by GAAP for complete financial statements. The accompanying financial statements reflect all adjustments, consisting of normal recurring adjustments, that are, in the opinion of management, necessary for a fair presentation of financial position and results of operations for the interim periods presented. Interim results are not necessarily indicative of results for a full year.
Use of Estimates: The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Our critical accounting policies, estimates and assumptions are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which is included in this Quarterly Report on Form 10-Q.
2. Recently Issued Accounting Standards
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), and subsequently issued additional guidance that modified ASU 2016-13. ASU 2016-13 and the subsequent modifications are identified as Accounting Standards Codification (“ASC”) 326. The standard requires an entity to change its accounting approach in determining impairment of certain financial instruments, including trade receivables, from an “incurred loss” to a “current expected credit loss” model. The standard is currently effective for fiscal years beginning after December 15, 2019, including interim periods within such fiscal years although the FASB has tentatively decided to defer the effective date for smaller reporting companies for three years. Early adoption is permitted. We are currently assessing the effect that ASC 326 will have on our financial position, results of operations and disclosures.
In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract (“ASU 2018-15”). ASU 2018-15 requires implementation costs incurred by customers in cloud computing arrangements (i.e., hosting arrangements) to be capitalized under the same premises of authoritative guidance for internal-use software and deferred over the noncancellable term of the cloud computing arrangements plus any option renewal periods that are reasonably certain to be exercised by the customer or for which the exercise is controlled by the service provider. The guidance is effective for the annual and interim periods beginning after December 15, 2019, with early adoption permitted. We do not expect the adoption of this standard to have a material impact on our consolidated financial statements, and we do not intend to early adopt.

9


In August 2018, the FASB issued ASU 2018-13, Fair Value Measurements (“Topic 820”): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which adds, modifies and removes several disclosure requirements relative to the three levels of inputs used to measure fair value in accordance with Topic 820, Fair Value Measurement. This guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year. Early adoption is permitted. We are currently assessing the effect that this ASU will have on our disclosures.
In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (“Topic 808”): Clarifying the Interaction between Topic 808 and Topic 606. The amendments in this update: (i) clarify that certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606 when the collaborative arrangement participant is a customer in the context of a unit of account and in those situations, all the guidance in Topic 606 should be applied, including recognition, measurement, presentation and disclosure requirements; (ii) add unit-of-account guidance in Topic 808 to align with the guidance in Topic 606 (that is, a distinct good or service) when an entity is assessing whether the collaborative arrangement or a part of the arrangement is within the scope of Topic 606; and (iii) require that in a transaction with a collaborative arrangement participant that is not directly related to sales to third parties, presenting the transaction together with revenue recognized under Topic 606 is precluded if the collaborative arrangement participant is not a customer. The provisions of ASU 2018-18 are effective for years beginning after December 15, 2019, with early adoption permitted. We are currently evaluating the impact of this clarifying guidance, but do not expect it to materially impact our financial statements.
3. Leases Adoption
In February 2016, the FASB issued ASU 2016-02, Leases (“Topic 842”), which requires lessees to record most leases with a term greater than 12 months on their balance sheets, but recognize expenses on their statement of operations in a manner similar to current accounting practice. Under the guidance, lessees initially recognize a lease liability for the obligation to make lease payments and a right-of-use (“ROU”) asset for the right to use the underlying asset for the lease term. The lease liability is measured at the present value of the lease payments over the lease term. The ROU asset is measured at the lease liability amount, adjusted for lease prepayments, lease incentives received and the lessee’s initial direct costs.
We adopted Topic 842 effective January 1, 2019, using the modified retrospective transition option. The adoption of the standard resulted in the recording of ROU assets, primarily consisting of operating leases of facilities and minor equipment, and lease liabilities of $1.0 million as of the commencement date. The adoption did not have a material impact on our unaudited condensed consolidated statements of operations and comprehensive loss or cash flows related to existing leases. As a result, there was no cumulative-effect adjustment.
We elected certain practical expedients as part of the adoption, which allow us to not reassess our prior conclusions about lease identification, lease classification and initial direct costs. We also elected the short-term lease recognition exemption for all leases that qualify and will not recognize ROU assets or lease liabilities for those leases. Lastly, we elected to separate lease and non-lease components only for contract manufacturing assets based on an assessment of the contract terms. We did not separate lease and non-lease components for all other existing asset classes. Most leases do not contain an implicit discount rate, therefore, we estimate our incremental borrowing rate to discount the lease payments based on information available at lease commencement.
Our facilities leases contain one or more options to renew after the noncancellable term. The exercise of lease renewal options is not reasonably certain upon lease commencement and is at management's sole discretion. Our ROU assets are included within deposits and other in our unaudited condensed consolidated balance sheet at September 30, 2019. Associated lease liabilities are included in accrued expenses and other, and other long-term liabilities in our unaudited condensed consolidated balance sheet at September 30, 2019. Lease expense for lease payments is recognized on a straight-line basis over the lease term within loss from operations on the unaudited condensed consolidated statements of operations and comprehensive loss. Payments for certain lease agreements are adjusted annually for changes in an index or rate. We had no finance leases, residual value guarantees, restrictive covenants, subleases or sale leasebacks at September 30, 2019.
As of September 30, 2019, ROU assets and lease liabilities were each $0.6 million. The weighted-average remaining term for lease contracts was 1.6 years at September 30, 2019, with maturities ranging from nine months to 53 months. The weighted-average discount rate was 5.3% at September 30, 2019. We paid $0.1 million and $0.4 million for operating leases included in the measurement of lease liabilities during the three- and nine-month periods ended September 30, 2019, respectively.
Aside from facilities and minor equipment, we have various supply agreements with third-party manufacturers, which involve the lease of manufacturing facilities and equipment, as defined in Topic 842. We have elected to separate lease and non-lease components for these arrangements. These manufacturing agreements have variable lease payments, which typically become binding once certain manufacturing milestones are achieved, and as such, are not included in ROU assets and liabilities until such payments are no longer variable.

10


Lease Costs
The table below presents certain information related to the lease costs (in thousands) for operating leases as of September 30, 2019:
 
Three months ended September 30, 2019
 
Nine months ended
September 30, 2019
Operating lease cost
$
123

 
$
365

Short-term lease cost
15

 
37

Variable lease cost (1)
151

 
309

Total lease cost
$
289

 
$
711

(1) Includes lease components from our third-party manufacturing agreements.
Undiscounted Cash Flows
The following table summarizes future minimum lease payments (in thousands) for noncancellable operating leases as of September 30, 2019:
2019 (1)
$
121

2020
403

2021
102

2022
15

2023
12

Thereafter
2

Total minimum lease payments
655

Less: amount of lease payments representing interest
29

Present value of operating lease liabilities
$
626

(1) Excluding the nine months ended September 30, 2019.
4. Net Loss per Share
Basic and diluted net loss per share have been computed using the weighted-average number of shares of common stock outstanding during the period.
We have outstanding stock-based awards that are not used in the calculation of diluted net loss per share because to do so would be anti-dilutive. In connection with the purchase of shares of our common stock by Healios in March 2018, a warrant was issued to Healios (the “Healios Warrant”) to purchase up to 20,000,000 shares of common stock (the “Warrant Shares”), of which 16,000,000 Warrant Shares expired as of June 30, 2019 prior to being exercisable. The exercise price of Healios' remaining 4,000,000 Warrant Shares is contractually stated to exceed the market price and is therefore anti-dilutive as of September 30, 2019. Refer to Note 7 for additional details.
The following instruments (in thousands) were excluded from the calculation of diluted net loss per share because their effects would be antidilutive:
 
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
 
2019
 
2018
 
2019
 
2018
Stock-based awards
 
16,536

 
12,600

 
16,536

 
12,600

Healios Warrant – see Note 7
 
4,000

 
20,000

 
4,000

 
20,000

Total
 
20,536

 
32,600

 
20,536

 
32,600


11


5. Collaborative Arrangements and Revenue Recognition
Healios Collaboration
In 2016, we entered into a licensing collaboration with Healios to develop and commercialize our cell therapy technologies for certain disease indications in Japan, among other things. The collaboration was expanded in June 2018 to include additional indications and licenses, with the core programs under development in Japan being ischemic stroke and acute respiratory distress syndrome (“ARDS”). We received nonrefundable license fee payments from Healios and are entitled to royalties on net sales. We also have the right to receive development and commercial milestone payments from Healios, subject to certain potential credits that have been negotiated from time-to-time associated with modifications to the arrangement.
Under the collaboration, Healios is responsible for the development and commercialization of the licensed products in the licensed territories, and we provide certain services to Healios for which we are paid. In 2017, our agreement for clinical product supply services was amended to clarify a cost-sharing arrangement associated with our supply of clinical material for Healios' stroke trial, and certain adjustments were made to potential milestone payments that Healios may owe us in the future. Also, in 2017, we entered into a technology transfer services agreement with Healios, pursuant to which Healios provides financial support to establish a contract manufacturer in Japan to manufacture product for Healios. Both clinical supply and technology transfer services to Healios are ongoing and are modified from time-to-time to include, for example, expanded indications and manufacturing-related services.
Refer to Note 7 regarding the equity investment in us made by Healios in 2018 in connection with the June 2018 expansion.
Healios Revenue Recognition
At the inception of the Healios arrangement and again each time that the arrangement is modified, all material performance obligations are identified, which currently include (i) licenses to our technology, (ii) product supply services, and (iii) services to transfer technology to a contract manufacturer on Healios’ behalf. It was determined that these performance obligations are separate and distinct within the context of the contract. We develop assumptions that require judgment to determine the standalone selling price in order to account for our collaborative agreements, as these assumptions typically include probabilities of obtaining marketing approval for the product candidates, estimated timing of commercialization, estimated future cash flows from potential product sales of our product candidates, estimating the cost and markup of providing product supply and technical services, and appropriate discount rates.
In order to determine the transaction price, in addition to the fixed payments, we estimate the amount of variable consideration utilizing the expected value or most likely amount method, depending on the facts and circumstances relative to the contract, and the estimates for variable consideration are reassessed each reporting period. We constrain, or reduce, the estimates of variable consideration if it is probable that a significant reversal of previously recognized revenue could occur throughout the life of the contract, and both the likelihood and magnitude of a potential reversal of revenue are taken into consideration.
The pricing for certain product supply provided to Healios is driven off of the underlying cost per dose over the entire life of the agreement and is subject to variability as those costs change. During our evaluation of variable consideration in the third quarter of 2019, we determined that the estimated transaction price decreased due to a reduction in the underlying cost per dose of the product supply occurring during the quarter. We estimate the cost per dose for the life of the contract taking into consideration historical experience of our contract manufacturers and anticipated changes to production yields and other factors. During the third quarter of 2019, the price per dose from our contract manufacturers decreased for the first time under this arrangement. As such, we reduced the expected transaction price to the current estimated value and applied the reduction to the undelivered elements of the overall arrangement at the time this product supply performance obligation originated. Furthermore, unrelated to the cost per dose changes, the number of doses of clinical product requested by Healios was amended, and our revenues were further reduced during the period. These reductions collectively exceeded the amount of revenue generated during the quarter, resulting in negative contract revenue from Healios in the third quarter of 2019.
At inception and upon each modification date, once the estimated transaction price is established, amounts are allocated to each separate performance obligation on a relative standalone selling price basis. These performance obligations include any remaining, undelivered elements at the time of modifications and any new elements from a modification to the arrangement if the conditions are not met for being treated as a separate agreement.
For performance obligations satisfied over time, we apply an appropriate method of measuring progress each reporting period and, if necessary, adjust the estimates of performance and the related revenue recognition. Our technology transfer services are satisfied over time, and we recognize revenue in proportion to the contractual services provided. For performance obligations satisfied at a point in time (i.e., product supply), we recognize revenue upon delivery, as defined.

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The remaining transaction price for the performance obligations that were not yet delivered amounted to $0.8 million at September 30, 2019, which is expected to be recognized within one year as the goods and services are delivered. At September 30, 2019, the contract liability, included in Deferred Revenue - Healios on the unaudited condensed consolidated balance sheets, is properly classified as a current liability since the rights to consideration are expected to be satisfied, in all material respects, within one year.
Deposit from Healios
In connection with the June 2018 expansion, Healios obtained an exclusive, time-limited right of first negotiation (“ROFN Period”) to enter into an option for a license to develop and commercialize certain MultiStem treatments in China. In December 2018, the ROFN Period was extended to June 30, 2019 in exchange for a $2.0 million nonrefundable payment from Healios, which was recorded as a deposit from Healios on the unaudited condensed consolidated balance sheet until June 2019, when the ROFN Period expired. In June 2019, this extension payment was included in the transaction price of the overall Healios arrangement and was allocated to the performance obligations as of the related June 2018 expansion. As a result, $1.9 million of the extension payment was recognized as revenue in June 2019 and the remaining $0.1 million is being recognized as the remaining performance obligations are delivered.
Advance from Healios
In 2017, in connection with our amendment to the clinical supply agreement to clarify the cost-sharing arrangement, the proceeds from Healios that relate specifically to the cost-sharing arrangement may either (i) result in a reduction in the proceeds we receive from Healios upon the achievement of two potential milestones and an increase to a commercial milestone under the license agreement for stroke or (ii) be repaid to Healios at our election, as defined. The cost-sharing proceeds received are recognized in Advance from Healios on the unaudited condensed consolidated balance sheet until the earlier of the milestones being achieved or such amounts being repaid to Healios at our election, at which time, the culmination of the earnings process or the repayment will be complete.
Disaggregation of Revenues
We recognize license-related amounts, including upfront payments, exclusivity fees, additional disease indication fees and milestones at a point in time when earned. Similarly, product supply revenue is recognized at a point in time, while service revenue (e.g., technology transfer) is recognized when earned over time. As noted above, during the third quarter of 2019, we had certain variable consideration that decreased under the arrangement, which resulted in negative contract revenue from Healios in the third quarter of 2019. While the reduction in variable consideration during the 2019 third quarter related to product supply, the reduction was applied to the undelivered elements of the overall arrangement at the time the product supply performance obligation originated, and therefore impacted service revenue for the quarter, as well.

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The following table presents our contract revenues disaggregated by timing of revenue recognition and excludes royalty revenue (in thousands):
 
 
Three months ended September 30, 2019
 
Three months ended
September 30, 2018
 
 
Point in
Time
 
Over Time
 
Point in
Time
 
Over Time
Contract Revenue from Healios
 
 
 
 
 
 
 
 
Product supply revenue
 
$
(62
)
 
$

 
$
209

 
$

Service revenue
 

 
(306
)
 

 
1,697

Other contract revenue
 

 

 
1

 

Total disaggregated revenues
 
$
(62
)
 
$
(306
)
 
$
210

 
$
1,697

 
 
Nine months ended
September 30, 2019
 
Nine months ended
September 30, 2018
 
 
Point in
Time
 
Over Time
 
Point in
Time
 
Over Time
Contract Revenue from Healios
 
 
 
 
 
 
 
 
License fee revenue
 
$
1,624

 
$

 
$
17,682

 
$

Product supply revenue
 
1,809

 

 
651

 

Service revenue
 

 
1,833

 

 
2,676

Other contract revenue
 

 

 
251

 

Total disaggregated revenues
 
$
3,433

 
$
1,833

 
$
18,584

 
$
2,676

6. Stock-based Compensation
Our 2019 Equity and Incentive Compensation Plan (the “EICP”) authorizes an aggregate of approximately 18,500,000 shares of common stock for awards to employees, directors and consultants. The EICP was approved in June 2019 and replaced our prior long-term incentive plan. In the three-month period ended September 30, 2019, we granted 93,192 stock options to our employees. The EICP authorizes the issuance of stock-based compensation in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares and units, and other stock-based awards.
As of September 30, 2019, a total of 13,826,627 shares were available for issuance under our EICP, and stock-based awards to purchase 16,535,960 shares of common stock were outstanding under our current and former equity incentive plans. For the three-month periods ended September 30, 2019 and 2018, stock-based compensation expense was approximately $1.3 million and $1.1 million, respectively. At September 30, 2019, total unrecognized estimated compensation cost related to unvested stock-based awards was approximately $10.3 million, which is expected to be recognized by the end of 2023 using the straight-line method.
7. Stockholders’ Equity
Equity Issuance—Healios
In March 2018, in connection with a planned collaboration expansion, Healios purchased 12,000,000 shares of our common stock for $21.1 million, or approximately $1.76 per share, and the Healios Warrant to purchase up to an additional 20,000,000 shares. In connection with this investment, we entered into an Investor Rights Agreement that governs certain rights of Healios and us relating to Healios’ ownership of our common stock. As a result of Healios’ investment, Healios became a related party, and the transactions with Healios are separately identified within these financial statements as related party transactions.
At the time of the investment in March 2018, the 20,000,000 Warrant Shares would not become exercisable until the planned collaboration expansion was completed, which at that time included an option to commercialize in China. At the time of the June 2018 expansion, however, the parties had not reached agreement on the option so Athersys agreed to provide Healios with a right of first negotiation with respect to the option, and therefore, the parties bifurcated the Healios Warrant so that 4,000,000 Warrant Shares became exercisable with the June 2018 expansion and the remaining 16,000,000 Warrant Shares would only become exercisable if Healios agreed to execute an option for a license in China. As of June 30, 2019, 16,000,000 Warrant Shares were no longer exercisable and expired under the terms of the Healios Warrant, since an option for a license in China was not executed.
The 4,000,000 Warrant Shares are exercisable at the greater of $1.76 and a defined reference price, which is generally 110% of the average closing price per share of our common stock for the ten previous trading days. The 4,000,000 Warrant Shares may

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be terminated by us under certain conditions and are subject to a general expiration date in September 2020, as defined, and an exercise cap triggered at Healios’ ownership of 19.9% of our common stock.
The value of the Healios Warrant was considered as an element of compensation in the transaction price of the Healios collaboration expansion. We evaluated the various terms of the Healios Warrant and concluded that it was accounted for as an equity instrument at inception and $5.3 million was computed as the best estimate of the fair value of the Healios Warrant at the time of issuance in March 2018. The fair value was computed using a Monte Carlo simulation model that included probability-weighted estimates of potential milestone points in time that could impact the value of the Healios Warrant during its term. The fair value was recorded as additional paid-in capital in the first quarter of 2018, with the offset being included in other assets, which would be included as an element of compensation in the transaction price upon the consummation of the expansion that was planned at the time of the March 2018 investment.
Upon the modification of the Healios Warrant in June 2018 in connection with the expansion of the collaboration that included the bifurcation of the Healios Warrant due to the change related to China rights, we reassessed the fair value of the Healios Warrant immediately before and after the modification using the same valuation methodology, which resulted in no incremental fair value to be recorded. The value of the 4,000,000 tranche of Warrant Shares that became exercisable upon the June 2018 expansion of $1.1 million was recorded as a reduction to the revenue recognized for the delivered licenses in June 2018. However, since the June 2018 expansion agreements made the 16,000,000 Warrant Shares contingent on entering into an option for a license in China, we considered the ability to apply the $4.2 million value of such Warrant Shares as an element of compensation to be constrained. Therefore, the remaining $4.2 million asset was reversed against additional paid-in-capital.
Equity Purchase Agreement
We have had equity purchase agreements in place since 2011 with Aspire Capital Fund LLC (“Aspire Capital”) that provide us the ability to sell shares to Aspire Capital from time to time. Currently, we have an agreement with Aspire Capital that was entered into in February 2018 and includes Aspire Capital’s commitment to purchase up to an aggregate of $100.0 million of shares of our common stock over a defined timeframe. The terms of the 2018 equity facility are similar to the previous equity facilities with Aspire Capital, and we issued 450,000 shares of our common stock to Aspire Capital as a commitment fee in February 2018 and filed a registration statement for the resale of 24,700,000 shares of common stock in connection with the equity facility. Also, in connection with this equity facility, in February 2018, Aspire Capital invested $1.0 million in us at $2.00 per share of common stock.
On November 5, 2019, we entered into a new equity facility to replace the current facility once we begin to sell under the new facility, which new equity facility will provide us with access to up to $100.0 million to support operational and other initiatives over the next several years. The terms of the 2019 equity facility are similar to the previous equity facilities with Aspire Capital, and we issued 350,000 shares of our common stock to Aspire Capital as a commitment fee in November 2019 and intend to register the resale of our common stock under the Securities Act of 1933 in connection with this facility.
We sold 3,300,000 shares to Aspire Capital at an average price of $1.39 in the third quarter of 2019, generating proceeds of $4.6 million, and sold 10,475,000 shares to Aspire Capital at an average price of $1.46 per share during the nine months ended September 30, 2019, generating proceeds of $15.3 million. We sold 1,500,000 shares to Aspire Capital at an average price of $1.90 in the third quarter of 2018, generating proceeds of $2.9 million, and sold 4,800,000 shares to Aspire Capital at an average price of $1.74 per share during the nine months ended September 30, 2018, generating proceeds of $8.4 million.
Open Market Sale Agreement
In May 2019, we entered into an open market sale agreement with Jefferies LLC (“Jefferies”), as sales agent, pursuant to which we may offer and sell, from time to time, through Jefferies, shares of our common stock having an aggregate offering price of up to $50.0 million. The shares would be offered and sold pursuant to our effective “shelf” registration on Form S-3 that is on file with the SEC. As of September 30, 2019, we did not sell any shares of our common stock under this agreement.

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8. Income Taxes
We have United States (“U.S.”) federal net operating loss and research and development tax credit carryforwards, as well as state and city net operating loss carryforwards, which may be used to reduce future taxable income and tax liabilities. We also have foreign net operating loss and tax credit carryforwards, and the foreign net operating loss carryforwards do not expire. All of our deferred tax assets have been fully offset by a valuation allowance due to our cumulative losses. The carrying value of our deferred tax assets and liabilities is determined by the enacted U.S. corporate income tax rate. Consequently, any changes in the U.S. corporate income tax rate impacts the carrying value of our deferred tax assets and liabilities. Also, there are significant limitations on our ability to utilize our net operating loss and tax credit carryforwards under Section 382 of the Internal Revenue Code of 1986, as amended.


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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This discussion and analysis should be read in conjunction with our unaudited financial statements and notes thereto included in this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2018. Operating results are not necessarily indicative of results that may occur in future periods.
Overview and Recent Developments
We are an international biotechnology company that is focused primarily in the field of regenerative medicine. Our MultiStem® cell therapy, a patented and proprietary allogeneic stem cell product, is our lead platform product and is currently in clinical development in several areas, the most advanced of which is an ongoing Phase 3 clinical trial for treatment of ischemic stroke. Our current clinical development programs are focused on treating neurological conditions, cardiovascular disease, inflammatory and immune disorders, certain pulmonary conditions and other conditions where the current standard of care is limited or inadequate for many patients, particularly in the critical care segment.
Current Programs
Our MultiStem cell therapy product development programs in the clinical development stage include the following:
Ischemic Stroke: In 2018, we launched our pivotal Phase 3 clinical trial of MultiStem cell therapy for the treatment of ischemic stroke, referred to as MASTERS-2. We initiated the study with a small number of high-enrolling sites and are bringing on additional sites over time in line with clinical product supply and clinical operations objectives. Our MASTERS-2 clinical trial is a randomized, double-blind, placebo-controlled clinical trial designed to enroll in North America, Europe and certain other international locations, 300 patients who have suffered moderate to moderate-severe ischemic stroke. The MASTERS-2 study has received several regulatory distinctions including Special Protocol Assessment, or SPA, designation, Fast Track designation and Regenerative Medicine Advanced Therapy designation, which was established under the 21st Century Cures Legislation from the United States Food and Drug Administration, or FDA, as well as a Final Scientific Advice positive opinion from the European Medicines Agency, or EMA.
In addition, HEALIOS K.K., or Healios, has an ongoing clinical trial, TREASURE, evaluating the safety and efficacy of administration of MultiStem cell therapy for the treatment of ischemic stroke in Japan. TREASURE will be evaluated under the progressive framework for regenerative medicine therapies in Japan. Under the new framework, Healios' ischemic stroke program has been awarded the SAKIGAKE designation by the Pharmaceuticals and Medical Devices Agency, which is designed to expedite regulatory review and approval, and is analogous to Fast Track designation from the FDA.
We look forward to the completion of both the MASTERS-2 and TREASURE trials and using the accelerated pathways afforded to us by the regulators in the United States, Europe and Japan.
Acute Respiratory Distress Syndrome, or ARDS: In January 2019, we announced summary results from our exploratory clinical study of the intravenous administration of MultiStem cell therapy to treat patients who are suffering from ARDS. The study results continue to demonstrate a predictable and well-tolerated safety profile with no new safety signals identified associated with MultiStem treatment. Importantly, there were lower mortality and a greater number of ventilator-free and ICU-free days in the first month following diagnosis in the MultiStem-treated patient group compared to the placebo group. Furthermore, inflammatory markers/cytokines were lower in the MultiStem treatment group than the placebo group. We will continue to evaluate the data as the one-year follow-up period is completed for all patients in the trial and may present additional results after further analyses. Also, Healios initiated a clinical trial for patients with pneumonia-induced ARDS, which is referred to as the ONE-BRIDGE study, which began enrolling patients in April 2019.
Trauma: We have previously announced with University of Texas Health Science Center at Houston, or UTHealth, our plans to conduct a Phase 2 clinical trial evaluating MultiStem cell therapy for early treatment and prevention of complications after severe traumatic injury. This first-ever study of a cell therapy for treatment of a wide range of traumatic injuries is intended to be conducted at Memorial Hermann-Texas Medical Center, one of the busiest Level 1 trauma centers in the United States. The study has grant support from the Medical Technology Enterprise Consortium and the Memorial Hermann Foundation. We intend to provide the clinical product for the conduct of the trial, as well as regulatory and operational support. We and UTHealth are in the preparation stage for this study.

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Acute Myocardial Infarction, or AMI: We have been conducting a double-blind, sham-controlled Phase 2 clinical study in the United States for the administration of MultiStem cell therapy to patients that have suffered a heart attack. In a previously completed Phase 1 clinical study, the results demonstrated tolerability and encouraging signs of improvement in heart function among patients that exhibited severely compromised heart function prior to treatment. This data was published in a leading peer reviewed scientific journal, and one-year follow-up data suggested that the benefit observed was sustained over time. Enrollment in the Phase 2 clinical study has been a challenge due in part to changes in standard of care. Due to the substantial enrollment challenges and the difficulties in addressing them and priorities in other clinical areas, we have elected to suspend the study for the time being and determine what has been learned. We will reconsider our development strategy before proceeding further.
Hematopoietic Stem Cell, or HSC, Transplant Support / Prevention of Graft-versus-Host Disease, or GvHD: Currently, this program is staged for future registration-directed development, which depends on the success and impact of potential alternative therapies for treating the underlying conditions leading to transplant, as well as other business and financial considerations. Following our completed Phase 1 clinical study of the administration of MultiStem cell therapy to patients suffering from leukemia or certain other blood-borne cancers, in which patients undergo radiation therapy and then receive a HSC transplant, we were granted orphan drug designation by the FDA and the EMA for MultiStem treatment in the prevention of GvHD, and the MultiStem product was granted Fast Track designation by the FDA for prophylaxis therapy for GvHD following HSC transplantation. Subsequently, our registration study design received a positive Scientific Advice opinion from the EMA and a SPA designation from the FDA.
We are engaged in preclinical development and evaluation of MultiStem cell therapy in other indications for human health, and certain indications in the animal health field, and we conduct such work both through our own internal research efforts and through a broad global network of collaborators. We also engage in discussions with third parties about collaborating in the development of MultiStem cell therapy for various programs and may enter into one or more business partnerships to advance these programs over time. We may also elect to advance the development of certain programs independently.
While the MultiStem product platform continues to advance, we are engaged in process development initiatives intended to increase manufacturing scale, reduce production costs and enhance process controls and product quality, among other things. These initiatives are being conducted both internally and outsourced to select contractors, and the related investments are meant to enable us to meet potential commercial demand in the event of eventual regulatory approval. Until such time as we are able to manufacture products ourselves in accordance with good manufacturing practices, we will continue to rely on third-party manufacturers to make our MultiStem product for clinical trials and eventual commercial sales. These third parties may not deliver sufficient quantities of our MultiStem product, manufacture MultiStem product in accordance with specifications, or comply with applicable government regulations. From time to time, such third-party manufacturers, or their material suppliers, may experience production delays, stoppages or interruptions in supply, which may affect the initiation, execution and timing of completion of our and our partners' clinical trials or commercial activities.
In addition to our manufacturing efforts, in other areas we are stepping up our planning and preparations for the potential commercialization of our MultiStem product candidate. We are advancing our strategies for market access and reimbursement, working with third party experts to plan and undertake initiatives to position the product appropriately and effectively communicate to payors its value to them and patients. We are developing our go-to-market strategies, which could include third-party marketing partners in certain areas and the creation of a commercial sales force in other areas. We are also working with outside experts to develop proprietary solutions to the unique requirements related to the cell therapy supply chain and clinical site logistics. For example, working with an outside partner, we have been developing a proprietary cryogenic system designed to securely store and dispense our product in hospital pharmacies or other suitable clinical locations. Our intention is to be prepared to enable commercialization as soon as reasonably possible following successful completion of pivotal studies, application and approval by regulators.
We have a collaboration with Healios that initially covered MultiStem cell therapy for ischemic stroke in Japan and the use of our technology for Healios’ organ bud program targeted to liver disease. In June 2018, the collaboration was expanded to include a license to our technologies for ARDS treatment and for additional indications for its organ bud technology, as well as certain other rights, including a license for the use of our MultiStem product to treat certain ophthalmological indications and a license to treat diseases of the liver, kidney, pancreas and intestinal tissue through administration of our products in combination with induced pluripotent stem cells, or iPSC-derived cells. We provide product supply and manufacturing technology transfer services to Healios, and in the event that we fail to perform our responsibilities to supply clinical trial product to Healios, then under certain circumstances, we may be required to grant Healios a license to make the product solely for use in its licensed fields and territories.

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Financial
We have entered into a series of agreements with Healios, our collaborator in Japan and currently our largest stockholder. Under the collaboration that began in 2016, Healios is responsible for the development and commercialization of the MultiStem product for the licensed fields in the licensed territories, and we provide services to Healios for which we are compensated. Each license agreement with Healios has defined economic terms, and we may receive success-based milestone payments, some of which may be subject to credits. While there is no assurance that we will receive milestone proceeds under the Healios collaboration, any milestone payment we receive is non-refundable and non-creditable towards future royalties or any other payment due from Healios. Also, we are entitled to receive tiered royalties on net product sales, as defined in the license agreements.
In connection with an equity investment in us made by Healios in March 2018, Healios has a warrant to purchase 4,000,000 shares of our common stock at an exercise price equal to a reference price, as defined, but no less than $1.76 per share, and the warrants generally expire in September 2020. While we may generate proceeds from this warrant in the future, no warrants have been exercised as of September 30, 2019.
We have had equity purchase agreements in place since 2011 with Aspire Capital Fund LLC, or Aspire Capital, which have provided us the ability to sell shares to Aspire Capital from time to time. We have an agreement with Aspire Capital that we entered into in February 2018 and includes Aspire Capital's commitment to purchase up to an aggregate of $100.0 million of shares of common stock over a three-year period. The terms of the 2018 equity facility are similar to the equity facilities with Aspire Capital, and we issued 450,000 shares of our common stock to Aspire Capital as a commitment fee in February 2018 and filed a registration statement for the resale of 24,700,000 shares of common stock in connection with the new equity facility. Also, in connection with the new equity facility, Aspire Capital invested $1.0 million to purchase 500,000 shares of common stock at $2.00 per share.
During the quarter ended September 30, 2019, we sold 3,300,000 shares of common stock to Aspire Capital at an average price of $1.39 per share. During the quarter ended September 30, 2018, we sold 1,500,000 shares of common stock to Aspire Capital at an average price of $1.90 per share.
On November 5, 2019, we entered into a new equity facility to replace the current facility once we have the ability to sell under the new facility, which will provide us with access to up to $100.0 million to support operational and other initiatives over the next several years. The terms of the 2019 equity facility are similar to the previous equity facilities with Aspire Capital, and we issued 350,000 shares of our common stock to Aspire Capital as a commitment fee in November 2019 and intend to register the resale of our common stock under the Securities Act of 1933, or the Securities Act, in connection with this facility.
On May 30, 2019, we entered into an open market sale agreement with Jefferies as sales agent, pursuant to which we may offer and sell, from time to time, through Jefferies, shares of our common stock having an aggregate offering price of up to $50.0 million. The shares would be offered and sold pursuant to our effective “shelf” registration on Form S-3 that is on file with the Securities and Exchange Commission, or SEC. As of September 30, 2019, we did not sell any shares of our common stock under this agreement.
Results of Operations
Since our inception, our revenues have consisted of license fees, contract revenues, royalties and milestone payments from our collaborators, and grant proceeds. We have not derived revenue from our commercial sale of therapeutic products to date since we are in clinical development and we do not expect any further royalties from our collaboration with RTI Surgical, Inc., or RTI. Research and development expenses consist primarily of external clinical and preclinical study fees, manufacturing costs, salaries and related personnel costs, legal expenses resulting from intellectual property prosecution processes, facility costs, and laboratory supply and reagent costs. We expense research and development costs as they are incurred. We expect to continue to make significant investments in research and development to enhance our technologies, advance clinical trials of our product candidates, expand our regulatory affairs and product development capabilities, conduct preclinical studies of our product, manufacture our product candidates and prepare for potential commercialization of our MultiStem cell therapy product. General and administrative expenses consist primarily of salaries and related personnel costs, professional fees and other corporate expenses. We expect to continue to incur substantial losses through at least the next several years.

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Three Months Ended September 30, 2019 and 2018
Revenues. Revenues were negative $0.4 million for the three months ended September 30, 2019 compared to $2.3 million for the three months ended September 30, 2018. Revenues from our collaboration with Healios were negative $0.4 million in the third quarter of 2019 compared to $1.9 million for the same period last year. During our evaluation of variable consideration in the third quarter of 2019, we determined that the estimated transaction price decreased due to a reduction in the underlying cost per dose of the product supply occurring during the quarter. Furthermore, the number of doses of clinical product requested by Healios was amended, and our revenues were further reduced during the period. These reductions collectively exceeded the amount of revenue generated during the third quarter of 2019, resulting in negative revenue.
Royalty revenue from RTI ceased late in 2018 upon its decision to discontinue distribution of the licensed product. Our revenues are generally derived from license fees, manufacturing-related activities for Healios, other contract revenue from collaborations and grant revenue.
Research and Development Expenses. Research and development expenses decreased to $8.9 million for the three months ended September 30, 2019 from $9.5 million for the comparable period in 2018. The $0.6 million net decrease is associated with decreases in clinical trial and manufacturing process development costs of $1.1 million and license fees of $0.2 million, with such decreases partially offset by increases in personnel costs of $0.2 million, outside services of $0.2 million, stock compensation costs of $0.2 million and consulting costs of $0.1 million. Our clinical development, clinical manufacturing and manufacturing process development expenses vary over time based on the timing and stage of clinical trials underway, manufacturing campaigns for trials and manufacturing process development projects, and we expect our annual 2019 clinical development costs to increase as compared to 2018. These variations in activity level may also impact our accounts payable, accrued expenses, prepaid expenses and deposits balances from period-to-period. Other than external expenses for our clinical and preclinical programs, we generally do not track our research expenses by project; rather, we track such expenses by the type of cost incurred.
General and Administrative Expenses. General and administrative expenses increased to $3.0 million for the three months ended September 30, 2019 compared to $2.6 million in the comparable period in 2018. The $0.4 million increase was primarily due to increased legal and professional fees, outside services and stock compensation costs. We expect our annual 2019 general and administrative expenses to increase compared to 2018.
Depreciation. Depreciation expense was consistent at $0.2 million for the three months ended September 30, 2019 and September 30, 2018, respectively. We expect that our annual depreciation will remain relatively consistent in 2019 compared to 2018.
Other Income, net. Other income, net, generally includes net foreign currency gains and losses, and net interest income and expense.
Nine Months Ended September 30, 2019 and 2018
Revenues. Revenues were $5.3 million for the nine months ended September 30, 2019 compared to $22.8 million in the nine months ended September 30, 2018. Contract revenues from our collaboration with Healios decreased $15.7 million period-over-period, as the 2018 period included the impact of our collaboration expansion in June 2018 and the 2019 period included reductions in variable consideration under our Healios arrangement that occurred in the third quarter of 2019.
Research and Development Expenses. Research and development expenses increased to $31.4 million for the nine months ended September 30, 2019 from $28.5 million in the comparable period in 2018. The $2.9 million net increase is associated with increases in manufacturing process development and clinical and preclinical costs of $1.5 million, personnel costs of $1.0 million, research supplies of $0.3 million, stock compensation costs of $0.5 million and consulting costs of $0.4 million. These increases were partially offset by a decrease in license fee expense of $0.8 million. The increase in our clinical and preclinical expenses during the period is primarily a result of increased clinical product manufacturing costs, a portion of which are invoiced to Healios, our ongoing Phase 3 stroke clinical study, and process development activities to support large-scale manufacturing. Other than external expenses for our clinical and preclinical programs, we do not track our research expenses by project; rather, we track such expenses by the type of cost incurred.
General and Administrative Expenses. General and administrative expenses increased to $8.9 million for the nine months ended September 30, 2019 from $7.6 million in the comparable period in 2018. The increase of $1.3 million was due primarily to increases in stock compensation costs, legal and professional fees, consulting services and other outside services compared to the same period in 2018.

20


Depreciation. Depreciation expense of $0.5 million for the nine months ended September 30, 2019 was slightly lower compared to $0.6 million for the comparable period in 2018.
Gain from Insurance Proceeds. In 2018, we received the final installment of $0.4 million of insurance proceeds from a flood that occurred in 2016.
Other Income, net. Other income, net, was $0.8 million for the nine-month period ended September 30, 2019 and $0.5 million for the comparable 2018 period, and is typically comprised of interest income and expense, and foreign currency gains and losses.
Liquidity and Capital Resources
Our sources of liquidity include our cash balances. At September 30, 2019, we had $40.4 million in cash and cash equivalents. We have primarily financed our operations through business collaborations, grant funding and equity financings. We conduct all of our operations through our subsidiary, ABT Holding Company. Consequently, our ability to fund our operations depends on ABT Holding Company’s financial condition and its ability to make dividend payments or other cash distributions to us. There are no restrictions such as government regulations or material contractual arrangements that restrict the ability of ABT Holding Company to make dividend and other payments to us.
We incurred losses since inception of operations in 1995 and had an accumulated deficit of $407.7 million at September 30, 2019. Our losses have resulted principally from costs incurred in research and development, clinical and preclinical product development, acquisition and licensing costs, and general and administrative costs associated with our operations. We use all of our sources of capital to develop our technologies, to discover and develop therapeutic product candidates, develop business collaborations and to acquire certain technologies and assets.
In the first quarter of 2019, we received the final $2.5 million quarterly installment payment in connection with the June 2018 expansion of our collaboration with Healios. We are also entitled to receive potential milestones payments, subject to certain credits, and royalties from Healios under our licensed programs. We also receive payments from Healios for clinical product supply and other manufacturing-related services. Certain proceeds from Healios may be used by Healios to offset milestone payments that may become due in the future.
In connection with an equity investment in us made by Healios in March 2018, Healios has a warrant to purchase 4,000,000 shares of our common stock at an exercise price equal to a reference price, as defined, but no less than $1.76 per share, and the warrants generally expire in September 2020. While we may generate proceeds from this warrant in the future, no warrants have been exercised as of September 30, 2019.
We have had an equity purchase arrangement in place with Aspire Capital since 2011, through two-to-three-year equity facilities, each with similar terms. We have a facility with Aspire Capital that was entered into in February 2018 and includes Aspire Capital’s commitment to purchase up to an aggregate of $100.0 million of shares of our common stock over a defined time frame, and a $1.0 million investment to purchase 500,000 shares of our common stock. During the quarter ended September 30, 2019, we sold 3,300,000 shares to Aspire Capital at an average price of $1.39 per share. During the quarter ended September 30, 2018, we sold 1,500,000 shares to Aspire Capital at an average price of $1.90 per share.
On November 5, 2019, we entered into a new equity facility to replace the current facility once we begin to sell under the new facility, which new equity facility will provide us with access to up to $100.0 million to support operational and other initiatives over the next several years. The terms of the 2019 equity facility are similar to the previous equity facilities with Aspire Capital, and we issued 350,000 shares of our common stock to Aspire Capital as a commitment fee in November 2019 and intend to register the resale of our common stock under the Securities Act of 1933 in connection with this facility.
On May 30, 2019, we entered into an open market sale agreement with Jefferies, as sales agent, pursuant to which we may offer and sell, from time to time, through Jefferies, shares of our common stock having an aggregate offering price of up to $50.0 million. As of September 30, 2019, we did not sell any shares of our common stock under this agreement.
We will require substantial additional funding in order to continue our research and product development programs, including clinical trials of our product candidates and process development and manufacturing projects, and to prepare for possible approval and commercial activities. We intend to generate additional funding to meet our needs through business development and other transactions, collaborator achievement of milestones under our agreements, grant-funding activities, and other activities. At September 30, 2019, we had available cash and cash equivalents of $40.4 million, and we intend to meet our short-term liquidity needs with available cash. Over the longer term, we will continue to make use of available cash, and

21


additionally, we may raise capital from time to time through our equity purchase arrangements, subject to any volume and price limitations, and equity offerings and warrant exercises. We may also manage our cash by deferring certain discretionary costs and staging certain development costs to extend our operational runway, as needed. Over time, we may consider borrowing from financing institutions.
Our capital requirements over time depend on a number of factors, including progress in our clinical development programs, our clinical and preclinical pipeline of additional opportunities and their stage of development, additional external costs such as payments to contract research organizations and contract manufacturing organizations, additional personnel costs and the costs in filing and prosecuting patent applications and enforcing patent claims. Furthermore, delays in product supply for our and Healios’ clinical trials may impact the timing and cost of such studies. The availability of funds impacts our ability to advance multiple clinical programs concurrently, and any shortfall in funding could result in our having to delay or curtail research and development efforts. Further, these requirements may change at any time due to technological advances, business development activity or competition from other companies. We cannot assure you that adequate funding will be available to us or, if available, that it will be available on acceptable terms.
We expect to continue to incur substantial losses through at least the next several years and may incur losses in subsequent periods. The amount and timing of our future losses are highly uncertain. Our ability to achieve and thereafter sustain profitability will be dependent upon, among other things, successfully developing, commercializing and obtaining regulatory approval or clearances for our technologies and products resulting from these technologies.
Cash Flow Analysis
Net cash used in operating activities was $25.2 million for the nine months ended September 30, 2019 compared to cash used of $8.8 million for the nine months ended September 30, 2018. Net cash used in operating activities in the nine months ended September 30, 2018 included the favorable impact of our collaboration expansion with Healios in June 2018. Net cash used in operating activities may fluctuate significantly on a quarter-to-quarter basis, as it has over the past several years, primarily due to the receipt of fees from our collaborators and payment of specific clinical trial costs, such as clinical manufacturing campaigns, contract research organization costs and manufacturing process development projects. These variations in activity level may also impact our accounts payable, accrued expenses, prepaid expenses and deposit balances from period-to-period.
Net cash used by investing activities was $0.4 million and $1.4 million for the nine months ended September 30, 2019 and 2018, respectively. The fluctuations over the periods were due to timing of equipment purchases primarily for our manufacturing process development activities. We expect that our capital equipment expenditures for 2019 will be lower than our purchases in 2018.
Financing activities provided cash of $15.0 million for the nine months ended September 30, 2019 primarily from the issuance of common stock to Aspire Capital under our equity purchase agreement, net of shares retained for withholding tax payments on stock-based awards. Financing activities provided cash of $28.8 million for the nine months ended September 30, 2018, which included a $21.1 million investment in us by Healios, as well as proceeds from the issuance of common stock to Aspire Capital under our equity purchase agreement, net of offering costs and shares retained for withholding tax payments on stock-based awards.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Critical Accounting Policies and Management Estimates
The SEC defines critical accounting policies as those that are, in management’s view, important to the portrayal of our financial condition and results of operations and demanding of management’s judgment. Our discussion and analysis of financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates on experience and on various assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from those estimates. A description of these accounting policies and estimates is included in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2018. There have been no material changes in our accounting policies and estimates as described in our Annual Report on Form 10-K for the year ended December 31, 2018, except as it relates to the adoption of

22


Accounting Standards Updates 2016-02, Leases, on January 1, 2019, for which our accounting policy is included in Note 3 to the condensed consolidated financial statements.
For additional information regarding our accounting policies, see Note B to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2018.
Cautionary Note on Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. These forward-looking statements relate to, among other things, the expected timetable for development of our product candidates, our growth strategy, and our future financial performance, including our operations, economic performance, financial condition, prospects, and other future events. We have attempted to identify forward-looking statements by using such words as “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “should,” “suggest,” “will,” or other similar expressions. These forward-looking statements are only predictions and are largely based on our current expectations. These forward-looking statements appear in a number of places in this Quarterly Report on Form 10-Q.
In addition, a number of known and unknown risks, uncertainties, and other factors could affect the accuracy of these statements. Some of the more significant known risks that we face are the risks and uncertainties inherent in the process of discovering, developing, and commercializing products that are safe and effective for use as therapeutics, including the uncertainty regarding market acceptance of our product candidates and our ability to generate revenues. The following risks and uncertainties may cause our actual results, levels of activity, performance, or achievements to differ materially from any future results, levels of activity, performance, or achievements expressed or implied by these forward-looking statements:
 
our ability to raise capital to fund our operations;
the timing and nature of results from MultiStem clinical trials, including the MASTERS-2 Phase 3 clinical trial and the Healios TREASURE and ONE-BRIDGE clinical trials in Japan;
the possibility of delays in, adverse results of, and excessive costs of the development process;
our ability to successfully initiate and complete clinical trials of our product candidates;
the possibility of delays, work stoppages or interruptions in manufacturing by third parties or us, such as due to material supply constraints, contaminations, or regulatory issues, which could negatively impact our trials and the trials of our collaborators;
uncertainty regarding market acceptance of our product candidates and our ability to generate revenues, including MultiStem cell therapy for the treatment of ischemic stroke, ARDS, AMI and trauma, and the prevention of GvHD and other disease indications;
changes in external market factors;
changes in our industry’s overall performance;
changes in our business strategy;
our ability to protect and defend our intellectual property and related business operations, including the successful prosecution of our patent applications and enforcement of our patent rights, and operate our business in an environment of rapid technology and intellectual property development;
our possible inability to realize commercially valuable discoveries in our collaborations with pharmaceutical and other biotechnology companies;
our ability to meet milestones and earn royalties under our collaboration agreements, including the success of our collaboration with Healios;
our collaborators’ ability to continue to fulfill their obligations under the terms of our collaboration agreements and generate sales related to our technologies;
the success of our efforts to enter into new strategic partnerships and advance our programs, including, without limitation, in North America, Europe and Japan;
our possible inability to execute our strategy due to changes in our industry or the economy generally;
changes in productivity and reliability of suppliers;
the success of our competitors and the emergence of new competitors; and
the risks mentioned elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2018 under Item 1A, “Risk Factors.”

23


Although we currently believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee our future results, levels of activity or performance. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise, except as otherwise required by law. You are advised, however, to consult any further disclosures we make on related subjects in our reports on Forms 10-Q, 8-K and 10-K furnished to the SEC. You should understand that it is not possible to predict or identify all risk factors. Consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.
Item 3.    Quantitative and Qualitative Disclosures About Market Risk.
There were no material changes in our exposure to market risk since the disclosure included in Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2018.
Item 4.    Controls and Procedures.
Disclosure controls and procedures
Our management, under the supervision of and with the participation of our Chief Executive Officer and our Senior Vice President of Finance, has evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon this evaluation, our Chief Executive Officer and Senior Vice President of Finance have concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective.
Changes in internal control over financial reporting
During the last fiscal quarter covered by this Quarterly Report on Form 10-Q, there has been no change in our internal control over financial reporting (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION 


Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds
During the quarter ended September 30, 2019, we sold an aggregate of 3,300,000 shares of common stock to Aspire Capital under our equity purchase agreement, generating aggregate proceeds of $4.6 million. Each issuance of these unregistered shares qualifies as an exempt transaction pursuant to Section 4(a)(2) of the Securities Act. Each issuance qualified for exemption under Section 4(a)(2) of the Securities Act because none involved a public offering. Each offering was not a public offering due to the number of persons involved, the manner of the issuance and the number of securities issued. In addition, in each case Aspire Capital had the necessary investment intent.

Item 5.    Other Information
After market close on November 5, 2019, we entered into a common stock purchase agreement (the “Purchase Agreement”) with Aspire Capital, which provides that, upon the terms and subject to the conditions and limitations set forth therein, Aspire Capital is committed to purchase up to an aggregate of $100.0 million of shares of our common stock over the term of the Purchase Agreement, which expires on February 1, 2023. In consideration for entering into the Purchase Agreement, concurrently with the execution of the Purchase Agreement, we issued to Aspire Capital 350,000 shares of our common stock (the “Commitment Shares”).
Concurrently with entering into the Purchase Agreement, we also entered into a registration rights agreement with Aspire Capital (the “Registration Rights Agreement”), pursuant to which we agreed to file one or more registration statements, as permissible and necessary to register under the Securities Act of 1933, the resale of the shares of our common stock that have been and may be issued to Aspire Capital under the Purchase Agreement.
Pursuant to the Purchase Agreement and the Registration Rights Agreement, we intend to register under the Securities Act the sale of 31,000,000 shares of our common stock, which includes the Commitment Shares and an additional 30,650,000 shares of

24


common stock that we may issue to Aspire Capital after the registration statement referred to above (the “Registration Statement”) is declared effective under the Securities Act.
After the SEC has declared the Registration Statement effective, on any business day on which the closing sale price of our common stock equals or exceeds $0.50 per share, we have the right, in our sole discretion, to present Aspire Capital with a purchase notice (each, a “Purchase Notice”), directing Aspire Capital (as principal) to purchase up to 200,000 shares of our common stock per trading day, provided that the aggregate price of such purchase shall not exceed $500,000 per trading day, up to an additional $100 million of our common stock in the aggregate. The purchase price per Purchase Share pursuant to such Purchase Notice (the “Purchase Price”) is the lower of (i) the lowest sale price for our common stock on the date of sale or (ii) the arithmetic average of the three lowest closing sale prices for our common stock during the ten (10) consecutive business days ending on the business day immediately preceding the purchase date of those securities. The applicable Purchase Price will be determined prior to delivery of any Purchase Notice.
The Purchase Agreement provides that the number of shares that may be sold pursuant to the Purchase Agreement shall be limited to 31,317,677 (the “Exchange Cap”), which represents 19.99% of our outstanding shares of common stock as of November 5, 2019, unless stockholder approval or an exception pursuant to the rules of the NASDAQ Capital Market is obtained to issue more than 19.99%. This limitation shall not apply if, at any time the Exchange Cap is reached and at all times thereafter, the average price paid for all shares issued under the Purchase Agreement is equal to or greater than $1.3020, which was the average closing price of our common stock for the five trading days ending on November 5, 2019. We are not required or permitted to issue any shares of common stock under the Purchase Agreement if such issuance would breach our obligations under the rules or regulations of the NASDAQ Capital Market. If we elect to sell more than the Exchange Cap, we must first obtain the approval of our stockholders to do so, if necessary, and register under the Securities Act the sale of any additional shares we may elect to sell to Aspire Capital before we can put such additional shares to Aspire Capital under the Purchase Agreement.
In addition, on any date on which we submit a Purchase Notice to Aspire Capital in an amount of at least 100,000 shares, we also have the right, in our sole discretion, to present Aspire Capital with a volume-weighted average price purchase notice (each, a “VWAP Purchase Notice”) directing Aspire Capital to purchase an amount of our common stock equal to a percentage (not to exceed 30%) of the aggregate shares of common stock traded on the NASDAQ Capital Market on the next business day (the “VWAP Purchase Date”), subject to a maximum number of shares determined by us (the “VWAP Purchase Share Volume Maximum”). The purchase price per Purchase Share pursuant to such VWAP Purchase Notice (the “VWAP Purchase Price”) shall be the lower of (i) the closing sale price on the date of sale and (ii) 95% of the volume weighted average price for our common stock traded on the NASDAQ Capital Market on (i) the VWAP Purchase Date if the aggregate shares to be purchased on that date does not exceeded the VWAP Purchase Share Volume Maximum and the sale price of our common stock has not fallen below the price set by us in the VWAP Purchase Notice (the “VWAP Minimum Price Threshold”) (to be appropriately adjusted for any reorganization, recapitalization, non-cash dividend stock split, reverse stock split or other similar transaction), or (ii) the portion of such business day until such time as the aggregate shares to be purchased will equal the VWAP Purchase Share Volume Maximum. Further, if the sale price of our common stock falls on the VWAP Purchase Date below the greater of (i) 90% of the closing price of our common stock on the business day immediately preceding the VWAP Purchase Date or (ii) the VWAP Minimum Price Threshold, the VWAP Purchase Price will be determined using the percentage in the VWAP Purchase Notice of the total shares traded for such portion of the VWAP Purchase Date prior to the time that the sale price of our common stock fell below the VWAP Minimum Price Threshold and the volume weighted average price of our common stock sold during such portion of the VWAP Purchase Date prior to the time that the sale price of our common stock fell below the VWAP Minimum Price Threshold.
The Floor Price and the respective prices and share numbers in the preceding paragraphs shall be appropriately adjusted for any reorganization, recapitalization, stock dividend, stock split, reverse stock split or other similar transaction. Additionally, the Purchase Agreement provides that we and Aspire Capital shall not effect any sales under the Purchase Agreement if such shares proposed to be issued and sold, when aggregated with all other shares of our common stock that Aspire Capital and its affiliates beneficially own, would result in Aspire Capital and its affiliates beneficially owning more than 19.99% of our then issued and outstanding common stock.
There are no trading volume requirements or restrictions under the Purchase Agreement, and we will control the timing and amount of any sales of our common stock to Aspire Capital. Aspire Capital has no right to require any sales by us, but is obligated to make purchases from us as we direct in accordance with the Purchase Agreement. We may deliver multiple Purchase Notices and VWAP Purchase Notices to Aspire Capital from time to time during the term of the Purchase Agreement, so long as the most recent purchase has been completed. There are no limitations on use of proceeds, financial or business covenants, restrictions on future fundings, rights of first refusal, participation rights, penalties or liquidated damages in the Purchase Agreement. The Purchase Agreement may be terminated by us at any time, at our discretion, without any penalty or cost to us. Also, Aspire Capital has agreed that neither it nor any of its agents, representatives and affiliates shall engage in any

25


direct or indirect short-selling or hedging, which establishes a net short position with respect to our common stock during any time prior to the termination of the Purchase Agreement.
The Purchase Agreement provides for customary events of default, upon the occurrence of which Aspire Capital may terminate the Purchase Agreement. Such events of default include, without limitation:
the lapse, or unavailability to Aspire Capital for the sale of shares of our common stock, of any registration statement that is required to be maintained effective pursuant to the terms of the Registration Rights Agreement, subject to specified cure periods;
the suspension from trading or failure of our common stock to be listed on a Principal Market (as defined in the Purchase Agreement) for a period of three consecutive business days;
the delisting of our common stock from the Principal Market, provided our common stock is not immediately thereafter trading on the New York Stock Exchange, the NYSE American, the NASDAQ Global Select Market, the NASDAQ Global Market, or the NASDAQ Capital Market;
the failure for any reason by our transfer agent to issue Purchase Shares to Aspire Capital within five business days after the applicable Purchase Date that Aspire Capital is entitled to receive;
if any proceeding against us is commenced pursuant to or within the meaning of any bankruptcy law;
if at any time the number of shares sold pursuant to the Purchase Agreement exceeds the Exchange Cap, if applicable, unless and until stockholder approval is obtained; and
any breach by us of the representations, warranties, covenants or other term or condition contained in the Purchase Agreement or any related agreements that would reasonably be expected to have a material adverse effect except, in the case of a breach of a covenant which is reasonably curable, only if such breach continues for a period of at least five business days.
The issuance of the Commitment Shares and all other shares of common stock that may be issued from time to time to Aspire Capital under the Purchase Agreement is exempt from registration under the Securities Act, pursuant to the exemption for transactions by an issuer not involving any public offering under Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder.
The foregoing is a summary description of certain terms of the Purchase Agreement and the Registration Rights Agreement. For a full description of all terms, please refer to copies of the Purchase Agreement and the Registration Rights Agreement that are filed herewith as Exhibits 10.1 and 10.2, respectively, to this Quarterly Report on Form 10-Q and are incorporated herein by reference. All readers are encouraged to read the entire text of the Purchase Agreement and the Registration Rights Agreement.


26



Item 6.    Exhibits.
Exhibit No.
  
Description
 
 
10.1
 
 
 
 
10.2
 
 
 
 
31.1
  
 
 
31.2
  
 
 
32.1
  
 
 
101.INS
  
XBRL Instance Document
 
 
101.SCH
  
XBRL Taxonomy Extension Schema Document
 
 
101.CAL
  
XBRL Taxonomy Extension Calculation Linkbase Document
 
 
101.DEF
  
XBRL Taxonomy Extension Definition Linkbase Document
 
 
101.LAB
  
XBRL Taxonomy Extension Label Linkbase Document
 
 
101.PRE
  
XBRL Taxonomy Extension Presentation Linkbase Document

27


SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
 
ATHERSYS, INC.
 
 
 
 
Date: November 6, 2019
 
/s/ Gil Van Bokkelen
 
 
 
Gil Van Bokkelen
 
 
 
Chairman and Chief Executive Officer
 
 
 
(principal executive officer authorized to sign on behalf of the registrant)
 
 
 
 
/s/ Laura K. Campbell
 
 
 
Laura K. Campbell
 
 
 
Senior Vice President of Finance
 
 
 
(principal financial and accounting officer authorized to sign on behalf of the registrant)
 


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