ATHERSYS, INC / NEW (Form: 10-Q, Received: 05/08/2019 17:08:26)

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

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 March 31, 2019



☐	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

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.

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

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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

The number of outstanding shares of the registrant’s common stock, $0.001 par value, as of May 3, 2019 was 149,776,233 .

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ATHERSYS, INC.

TABLE OF CONTENTS



PART I. FINANCIAL INFORMATION
ITEM 1.	Financial Statements	4
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	21
ITEM 4.	Controls and Procedures	21
PART II. OTHER INFORMATION
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21
ITEM 6.	Exhibits	22
SIGNATURES

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

Athersys, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)



	March 31, 2019			December 31, 2018
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	51,018		$	51,059
Accounts receivable	11			262
Accounts receivable from Healios	1,227			1,108
Unbilled accounts receivable from Healios	1,240			3,620
Prepaid expenses and other	800			1,791
Total current assets	54,296			57,840
Equipment, net	2,882			3,002
Deposits and other	1,737			888
Total assets	$	58,915		$	61,730
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	11,454		$	9,163
Accrued compensation and related benefits	711			1,901
Accrued clinical trial related costs	1,567			1,276
Accrued expenses and other	887			461
Deposit from Healios	2,000			2,000
Deferred revenue - Healios	1,173			674
Total current liabilities	17,792			15,475
Advance from Healios	3,984			3,139
Other long-term liabilities	351			—
Stockholders’ equity:
Preferred stock, at stated value; 10,000,000 shares authorized, and no shares issued and outstanding at March 31, 2019 and December 31, 2018	—			—
Common stock, $0.001 par value; 300,000,000 shares authorized, and 148,276,233 and 144,292,739 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively	148			144
Additional paid-in capital	422,638			416,014
Accumulated deficit	(385,998		)	(373,042		)
Total stockholders’ equity	36,788			43,116
Total liabilities and stockholders’ equity	$	58,915		$	61,730

See accompanying notes to unaudited condensed consolidated financial statements.

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Athersys, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except per share data)

(Unaudited)



	Three months ended March 31,
	2019			2018
Revenues
Contract revenue from Healios	$	1,441		$	348
Royalty revenue	—			401
Grant revenue	4			317
Total revenues	1,445			1,066
Costs and expenses
Research and development	11,415			8,850
General and administrative	3,106			2,655
Depreciation	184			186
Total costs and expenses	14,705			11,691
Gain from insurance proceeds	—			363
Loss from operations	(13,260		)	(10,262		)
Other income, net	304			107
Net loss and comprehensive loss	$	(12,956	)	$	(10,155	)
Net loss per share, basic and diluted	$	(0.09	)	$	(0.08	)
Weighted average shares outstanding, basic and diluted	145,964			126,897

S ee accompanying notes to unaudited condensed consolidated financial statements.

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Athersys, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(In Thousands, Except Share Amounts)



	Preferred Stock			Common Stock			Additional Paid-in Capital			Accumulated Deficit			Total Stockholders’ Equity
	Number of Shares	Stated Value		Number of Shares	Par Value		Additional Paid-in Capital			Accumulated Deficit			Total Stockholders’ Equity
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, net of issuance costs	—	—		3,825,000	4		5,603						5,607
Issuance of common stock under equity compensation plan	—	—		158,494	—		(69		)				(69		)
Net and comprehensive loss	—	—		—	—		—			(12,956		)	(12,956		)
Balance at March 31, 2019	—	$	—	148,276,233	$	148	$	422,638		$	(385,998	)	$	36,788



	Preferred Stock			Common Stock			Additional Paid-in Capital			Accumulated Deficit			Total Stockholders’ Equity
	Number of Shares	Stated Value		Number of Shares	Par Value		Additional Paid-in Capital			Accumulated Deficit			Total Stockholders’ Equity
Balance at December 31, 2017	—	$	—	122,077,453	$	122	$	373,884		$	(350,630	)	$	23,376
Cumulative effect of accounting change	—	—		—	—		—			1,871			1,871
Stock-based compensation	—	—		—	—		813			—			813
Issuance of warrant to Healios at fair value	—	—		—	—		5,300			—			5,300
Issuance of common stock, net of issuance costs	—	—		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		)
Net and comprehensive loss	—	—		—	—		—			(10,155		)	(10,155		)
Balance at March 31, 2018	—	$	—	137,958,545	$	138	$	406,308		$	(358,914	)	$	47,532

See accompanying notes to unaudited condensed consolidated financial statements.

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Athersys, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)



	Three months ended March 31,
	2019			2018
Operating activities
Net loss	$	(12,956	)	$	(10,155	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	184			186
Stock-based compensation	1,090			813
Changes in operating assets and liabilities:
Accounts receivable	251			(173		)
Accounts receivable from Healios - billed and unbilled	2,261			(51		)
Prepaid expenses, deposits and other	1,101			127
Accounts payable and accrued expenses	1,210			1,992
Deferred revenue - Healios	499			—
Advances and deposits from Healios	845			1,583
Net cash used in operating activities	(5,515		)	(5,678		)
Investing activities
Purchases of equipment	(64		)	(292		)
Net cash used in investing activities	(64		)	(292		)
Financing activities
Proceeds from issuance of common stock, net	5,607			5,416
Proceeds from issuance of common stock to Healios, net	—			20,995
Shares retained for withholding tax payments on stock-based awards	(69		)	(84		)
Net cash provided by financing activities	5,538			26,327
(Decrease) increase in cash and cash equivalents	(41		)	20,357
Cash and cash equivalents at beginning of the period	51,059			29,316
Cash and cash equivalents at end of the period	$	51,018		$	49,673

See accompanying notes to unaudited condensed consolidated financial statements.

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Athersys, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Three Month Periods Ended March 31, 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 $386.0 million at March 31, 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. At March 31, 2019 , we had available cash and cash equivalents of $51.0 million . We believe that these funds, expected cash receipts primarily attributed to our collaboration with HEALIOS K.K. (“Healios”) and proceeds from our equity facility 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 facility, 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 August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 are currently evaluating the potential impact of adoption of this standard on our consolidated financial statements, and we do not intend to early adopt.

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

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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.

In June 2016, the FASB issued 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 will be effective for fiscal years beginning after December 15, 2019, including interim periods within such fiscal 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.

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 for the three months ended March 31, 2019 . As such, 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 for contract manufacturing assets based on an assessment of the contract terms. 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 March 31, 2019 . Associated lease liabilities are included in accrued expenses and other, and other long-term liabilities in our unaudited condensed consolidated balance sheet at March 31, 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 March 31, 2019 .

As of March 31, 2019 , ROU assets and lease liabilities were $0.9 million and $0.8 million, respectively. The weighted-average remaining term for lease contracts was 2.0 years at March 31, 2019 , with maturities ranging from 15 months to 59 months. The weighted-average discount rate was 5.3% at March 31, 2019 . We paid $0.1 million for operating leases included in the measurement of lease liabilities during the three months ended March 31, 2019 .

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.

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Lease Costs

The table below presents certain information related to the lease costs (in thousands) for operating leases as of March 31, 2019 :



	Three months ended March 31, 2019
Operating lease cost	$	120
Short-term lease cost	11
Variable lease cost ⁽¹⁾	106
Total lease cost	$	237

⁽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 March 31, 2019 :



2019 ⁽¹⁾	$	374
2020	405
2021	90
2022	12
2023	12
Thereafter	2
Total minimum lease payments	895
Less: amount of lease payments representing interest	48
Present value of operating lease liabilities	$	847

⁽¹⁾ Excluding the three months ended March 31, 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 antidilutive. 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 3,000,000 Warrant Shares expired prior to being exercisable. Of the remaining 17,000,000 Warrant Shares, Healios is currently permitted to exercise only a portion ( 4,000,000 ), and the exercise price for those 4,000,000 Warrant Shares is contractually stated to exceed the market price. Therefore, the entire Healios Warrant is anti-dilutive as of March 31, 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 March 31,
	2019	2018
Stock-based awards	12,431	10,295
Healios Warrant – see Note 7	17,000	20,000
Total	29,431	30,295

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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 being ischemic stroke and acute respiratory distress syndrome (“ARDS”) for commercialization in Japan. 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 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, in which Healios provides financial support to establish a contract manufacturer in Japan to produce 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.

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 payment from Healios, and Healios may make an additional $3.0 million payment to extend the ROFN Period for another six months through December 31, 2019. All such extension payments would be creditable against the option fee payable by Healios upon execution of a China option agreement, if entered into, or Healios may apply the extension payment amounts as credits against any potential milestone payments under the current licenses, subject to certain limitations.

Refer to Note 7 regarding the equity investment in us made by Healios in 2018 in connection with the 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 were both capable of being distinct 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.

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.

The remaining transaction price for the performance obligations that were not yet delivered amounted to $2.7 million at March 31, 2019 , which is expected to be recognized within one year as the goods and services are delivered. At March 31, 2019 , the contract liability, included in deferred revenue - Healios on the unaudited condensed consolidated balance sheets, is

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properly classified as a current liability since the rights to consideration are expected to be satisfied, in all material respects, within one year.

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 on the balance sheet as a non-current advance from customer until the related milestone is achieved, unless such amounts are repaid to Healios at our election, at which time, the culmination of the earnings process will be complete and revenue will be recognized.

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. The following table presents our contract revenues disaggregated by timing of revenue recognition and excludes royalty revenue (in thousands):



	Three months ended March 31, 2019				Three Months Ended March 31, 2018
	Point in Time		Over Time		Point in Time		Over Time
Contract Revenue from Healios
License fee revenue	$	—	$	—	$	—	$	—
Product supply revenue	966		—		227		—
Service revenue	—		475		—		121
Other contract revenue	—		—		—		—
Total disaggregated revenues	$	966	$	475	$	227	$	121

6. Stock-based Compensation

We have an equity incentive plan that authorized an aggregate of 20,035,000 shares of common stock for awards to employees, directors and consultants. The equity incentive plan authorizes the issuance of equity-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. In the three-month period ended March 31, 2019 , we granted 50,016 stock options to our employees. As of March 31, 2019 , a total of 5,325,184 shares (including 250,579 shares related to an expired plan) of common stock have been issued under our plan (including our expired plan).

As of March 31, 2019 , a total of 3,459,825 shares were available for issuance under our equity incentive plan, and stock-based awards to purchase 10,986,889 shares (including 930,447 shares related to an expired plan) of common stock were outstanding. For the three-month periods ended March 31, 2019 and 2018 , stock-based compensation expense was approximately $1.1 million and $0.8 million , respectively. At March 31, 2019 , total unrecognized estimated compensation cost related to unvested stock-based awards was approximately $ 7.4 million which is expected to be recognized by the end of 2022 using the straight-line method.

7. Stockholders’ Equity

Equity Issuance—Healios

In March 2018, 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 effective until the planned expansion was completed, which at that time included an option to commercialize in China. At the time of the June 2018

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expansion, however, the parties agreed to provide Healios with the right of first negotiation for China as opposed 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 agrees to execute an option for a license in China.

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 contingent 16,000,000 Warrant Shares began to expire according to their terms beginning in the fourth quarter of 2018, prior to their becoming exercisable. As of March 31, 2019 , 3,000,000 of the 16,000,000 Warrant Shares expired prior to being exercisable. Other Healios Warrant terms include a general expiration date in September 2020 , as defined, fixed and floating exercise price mechanisms, and an exercise cap triggered at Healios’ ownership of 19.9% of our common stock. The Healios Warrant may be terminated by us under certain conditions.

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 is 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 asset related to Healios and the asset 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 Warrant Shares 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, as appropriate. The current agreement with Aspire Capital 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 three -year period. The terms of the 2018 equity facility are similar to the previous arrangements, 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 this equity facility, in February 2018, Aspire Capital invested $1.0 million in us at $2.00 per share of common stock.

We sold 3,825,000 shares to Aspire Capital at an average price of $1.47 in the first quarter of 2019 , generating proceeds of $5.6 million . We sold 3,300,000 shares to Aspire Capital generating aggregate proceeds of $5.5 million in the first quarter of 2018 .

License Agreement and Settlement

In 2017, we entered into an agreement to settle longstanding intellectual property disagreements with a third party and paid $0.5 million and issued 1,000,000 shares of our common stock with a fair value of $2.3 million in 2017. In 2018, we paid an additional $1.0 million and issued 500,000 shares of our common stock related to a patent issuance. There are no royalty, milestone or other payments due to the third party associated with the development and commercialization of our cell therapy products, and our payment obligations are concluded.

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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, and enrollment commenced in the third quarter of 2018. We initiated the study with a small number of high-enrolling sites and plan to bring 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 300 patients who have suffered moderate to moderate-severe ischemic stroke in North America, Europe and certain other international locations. 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, and enrollment continues. 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 completing both the MASTERS-2 and TREASURE trials and using the accelerated pathway afforded to us by the regulators in the United States, Europe and Japan upon study completion.

• 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 provide further confirmation of tolerability and a favorable safety profile associated with MultiStem treatment. Importantly, MultiStem subjects had lower mortality and a greater number of ventilator-free and ICU-free days in the first month following diagnosis compared to patients receiving placebo. Furthermore, analysis of initial biomarker data reflects lower levels of inflammatory markers/cytokines following MultiStem treatment, an expected mechanism of action in this patient population. We will continue to evaluate the data as the one-year follow-up period is completed for all patients in the trial and plan to present additional results after further analyses. Also, Healios initiated a clinical trial for patients with pneumonia-induced ARDS, which we refer to as the ONE-BRIDGE study, and in April 2019, announced that the first patient was enrolled in this study.

• Trauma: In 2018, we 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 planning and preparation stage for this study and will provide further updates as preparations for the trial progress.

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• Acute Myocardial Infarction, or AMI: We are conducting an ongoing 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 a favorable safety profile 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. The double-blind, sham-controlled Phase 2 clinical study is currently enrolling patients, however, enrollment rates have continued to be below expectations due in part to changes in standard of care. We are evaluating our options related to this trial and will provide updates regarding the conduct of the study, as appropriate.

• Hematopoietic Stem Cell, or HSC, Transplant / 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 against 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 and 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.

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.

We also have a collaboration with RTI Surgical, Inc., or RTI, for the development of products for certain orthopedic applications using our stem cell technologies in the bone graft substitutes market. However, RTI has announced that it will cease distribution of its bone graft product that utilizes our technology, and as of March 31, 2019, we do not expect to receive any further royalties or milestone payments from RTI.

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

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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.

Healios has a time-limited right of first negotiation, or ROFN, to enter into an option for a license to develop and commercialize certain MultiStem treatments in China. The ROFN, as extended, currently expires in June 2019 and may be further extended to December 31, 2019 at Healios' election if it makes an additional payment of $3.0 million to us. All such extension payments would be creditable against the option fee payable by Healios upon execution of the China option agreement, if applicable, or otherwise, against milestone payments under the licensed programs.

In March 2018, Healios purchased 12,000,000 shares of our common stock and a warrant, or the Healios Warrant, to purchase up to an additional 20,000,000 shares of common stock for $21.1 million, or approximately $1.76 per share. The Healios Warrant is (i) not exercisable with respect to 16,000,000 shares unless during the ROFN period, we and Healios have entered into a China option agreement, and (ii) exercisable with respect to 4,000,000 shares at an exercise price equal to a reference price, as defined, but no less than $1.76 per share. As of March 31, 2019, 3,000,000 of the 16,000,000 shares underlying the Healios Warrant expired prior to being exercisable according to the terms of the Healios Warrant.

We have had equity purchase agreements in place since 2011 with Aspire Capital Fund LLC, or Aspire Capital, which provides us the ability to sell shares to Aspire Capital from time-to-time, as appropriate. The current agreement was entered into in February 2018 and includes Aspire Capital's commitment to purchase up to an aggregate of $100 million of shares of common stock over a three-year period. The terms of the 2018 equity facility are similar to the previous arrangements, 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 quarters ended March 31, 2019 and 2018, we sold 3,825,000 , and 3,300,000 shares, respectively, to Aspire Capital at average prices of $1.47 and $1.67 per share, respectively.

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 as of March 31, 2019, we do not expect any further royalties from our collaboration with 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.

Three Months Ended March 31, 2019 and 2018

Revenues . Revenues increased by $ 0.3 million to $ 1.4 million for the three months ended March 31, 2019 compared to $ 1.1 million for the three months ended March 31, 2018 . Revenues from our collaboration with Healios were $1.4 million in the first quarter of 2019 compared to $0.3 million for the same period last year. Royalty revenues from RTI have concluded with its discontinuation of distribution of the licensed product whereas it was $0.4 million in the quarter ended March 31, 2018. Grant revenue decreased approximately $ 0.3 million in the first quarter of 2019 compared to the prior year first quarter. Our revenues are generally derived from license fees, manufacturing-related activities for Healios, other royalty and related contract revenue from our collaborations and grant revenue.

Research and Development Expenses. Research and development expenses increased to $ 11.4 million for the three months ended March 31, 2019 from $ 8.9 million for the comparable period in 2018 . The increase is primarily associated with increased clinical trial and manufacturing process development costs of $ 1.9 million, increased personnel costs of $ 0.4 million, and increased stock compensation costs of $ 0.1 million. Our clinical development, clinical manufacturing and manufacturing process development costs 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

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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 $ 3.1 million for the three months ended March 31, 2019 compared to $ 2.7 million in the comparable period in 2018 . The $ 0.4 million increase was primarily due to increased legal and professional fees, consulting services and stock compensation costs. We expect our annual 2019 general and administrative expenses to increase as compared to 2018 mainly due to additional personnel costs.

Depreciation . Depreciation expense was consistent at $ 0.2 million for the three months ended March 31, 2019 and March 31, 2018 , respectively. We expect that our annual depreciation will remain relatively consistent in 2019 compared to 2018 .

Gain from Insurance Proceeds . In 2016, a flood caused damage to our primary facilities that required the reconstruction of certain laboratory space and was covered by insurance at replacement cost. We received $0.4 million in insurance proceeds during the three months ended March 31, 2018 .

Other Income, net. Other income, net, generally includes net foreign currency gains and losses, and net interest income and expense.

Liquidity and Capital Resources

Our sources of liquidity include our cash balances. At March 31, 2019 , we had $51.0 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 $386.0 million at March 31, 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 payment in connection with the 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. Furthermore, if Healios elects to enter into an option to license certain disease indications for development in China, for which Healios' ROFN period expires on June 30, 2019, we would receive additional proceeds. Healios paid us $2.0 million in December 2018 to extend its ROFN period for the China option to June 30, 2019 and has the ability to extend it further through December 31, 2019 for an additional $3.0 million payment. We also receive payments from Healios for clinical product supply and other manufacturing services. Certain proceeds from Healios may be used by Healios to offset milestone payments that may become due in the future.

In connection with the June 2018 expansion, Healios purchased 12,000,000 shares of our common stock for $21.1 million and received the Healios Warrant to purchase up to 20,000,000 shares of common stock in March 2018, subject to certain conditions. The Healios Warrant is currently exercisable with respect to 4,000,000 shares underlying the Healios Warrant. As of March 31, 2019 , of the 16,000,000 shares, 3,000,000 shares expired prior to being exercisable according to the terms of the Healios Warrant, and the remaining 13,000,000 shares will become exercisable only in the event that Healios executes an option to expand into the China territory. The Healios Warrant has an overall term that expires in September 2020, as defined, includes both fixed and floating exercise price mechanisms, and is capped such that in no event will Healios own more than 19.9% of our common stock. We may receive additional proceeds from the exercise of the Healios Warrant over its term, although there can be no assurances that Healios will exercise the Healios Warrant in whole or in part. As of March 31, 2019 , no shares have been issued under the Healios Warrant.

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. The most current facility with Aspire Capital 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 new three-year period, and an investment in us of $1.0 million at $2.00 per share of common stock. During the quarter ended March 31, 2019 , we sold 3,825,000 shares to Aspire Capital at an average price of $ 1.47 per share. During the quarter ended March 31, 2018 , we sold 3,300,000 shares to Aspire Capital at an average price per share of $ 1.67 per share.

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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. At March 31, 2019 , we had available cash and cash equivalents of $51.0 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, but will have to continue to generate additional funding to meet our needs, through business development, collaborator achievement of milestones under our agreements, and grant-funding opportunities. Additionally, we may raise capital from time to time through our equity purchase agreement, subject to its volume and price limitations, equity offerings and Healios' potential exercise of its Healios Warrant from time to time. We 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 $5.5 million for the three months ended March 31, 2019 compared to cash used of $5.7 million for the three months ended March 31, 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 and prepaid expenses balances from period-to-period.

Net cash used by investing activities was $0.1 million and $0.3 million for the three months ended March 31, 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 will decrease in 2019 compared to 2018 .

Financing activities provided cash of $5.5 million for the three months ended March 31, 2019 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 $26.3 million for the three months ended March 31, 2018 , which constituted primarily the $21.0 million net 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 Securities and Exchange Commission, or 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

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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 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.

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 our 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 work with Healios to reach an agreement to license certain indications in China;


•	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;

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•	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.”

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, we finalized enhancements and modifications to existing internal controls and procedures to ensure compliance with new leasing guidance in accordance with Accounting Standards Codification Topic 842. These changes to our control environment were completed in the first quarter of 2019.

PART II. OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the quarter ended March 31, 2019 , we sold an aggregate of 3,825,000 shares of common stock to Aspire Capital under our equity purchase agreement, generating aggregate proceeds of $5.6 million. Each issuance of these unregistered shares qualifies as an exempt transaction pursuant to Section 4(a)(2) of the Securities Act of 1933. Each issuance qualified for exemption under Section 4(a)(2) of the Securities Act of 1933 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.

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Item 6. Exhibits.



Exhibit No.		Description

3.1		Bylaws of Athersys, Inc., as amended March 13, 2019.

31.1		Certification of Gil Van Bokkelen, Chairman and Chief Executive Officer, pursuant to SEC Rules 13a-14(a) and 15d-14(a) adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Laura K. Campbell, Senior Vice President of Finance, pursuant to SEC Rules 13a-14(a) and 15d-14(a) adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Gil Van Bokkelen, Chairman and Chief Executive Officer, and Laura Campbell, Senior Vice President of Finance, pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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

Table of Contents

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: May 8, 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)

Exhibit 3.1

BYLAWS

ATHERSYS, INC.

TABLE OF CONTENTS



		Page
ARTICLE I	OFFICES	1
Section 1.	Registered Office	1
Section 2.	Other Offices	1
ARTICLE II	STOCKHOLDERS	1
Section 1.	Place of Meetings	1
Section 2.	Annual Meeting	1
Section 3.	List of Stockholders	1
Section 4.	Special Meetings	2
Section 5.	Notice	5
Section 6.	Quorum	5
Section 7.	Voting	6
Section 8.	Method of Voting	6
Section 9.	Record Date	6
Section 10.	Notice of Stockholder Proposals	6
Section 11.	Notice of Director Nominations	9
Section 12.	Additional Provisions Relating to the Notice of Stockholder Business and Director Nominations	11
Section 13.	Action by Consent	12
ARTICLE III	BOARD OF DIRECTORS	13
Section 1.	Management	13
Section 2.	Qualification; Election; Term	13
Section 3.	Number; Election; Term; Qualification	14
Section 4.	Removal	14
Section 5.	Vacancies	14
Section 6.	Place of Meetings	14
Section 7.	Annual Meeting	14
Section 8.	Regular Meetings	14
Section 9.	Special Meetings	14
Section 10.	Quorum	15
Section 11.	Interested Directors	15
Section 12.	Action by Consent	15
Section 13.	Compensation of Directors	15
ARTICLE IV	COMMITTEES	16
Section 1.	Designation	16
Section 2.	Number; Qualification; Term	16
Section 3.	Authority	16
Section 4.	Change in Number	17
Section 5.	Removal	17
Section 6.	Vacancies	17
Section 7.	Meetings	17
Section 8.	Quorum; Majority Vote	17
Section 9.	Compensation	17



	i

TABLE OF CONTENTS

(continued)



		Page

ARTICLE V	NOTICE	17
Section 1.	Form of Notice	17
Section 2.	Waiver	17
ARTICLE VI	OFFICERS AND AGENTS	18
Section 1.	In General	18
Section 2.	Election	18
Section 3.	Other Officers and Agents	18
Section 4.	Compensation	18
Section 5.	Term of Office and Removal	18
Section 6.	Employment and Other Contracts	18
Section 7.	Chairman of the Board of Directors	19
Section 8.	Chief Executive Officer	19
Section 9.	President	19
Section 10.	Vice Presidents	19
Section 11.	Secretary	19
Section 12.	Assistant Secretaries	19
Section 13.	Treasurer	19
Section 14.	Assistant Treasurers	20
Section 15.	Bonding	20
ARTICLE VII	CERTIFICATES REPRESENTING SHARES	20
Section 1.	Form of Certificates	20
Section 2.	Lost Certificates	20
Section 3.	Transfer Agent and Registrar	21
Section 4.	Denial of Preemptive Rights	21
ARTICLE VIII	forum for adjudication of disputes	21
ARTICLE IX	GENERAL PROVISIONS	22
Section 1.	Dividends	22
Section 2.	Reserves	22
Section 3.	Telephone and Similar Meetings	22
Section 4.	Books and Records	22
Section 5.	Fiscal Year	22
Section 6.	Seal	22
Section 7.	Advances of Expenses	23
Section 8.	Indemnification	23
Section 9.	Employee Benefit Plans	23
Section 10.	Insurance	23
Section 11.	Resignation	23
Section 12.	Amendment of Bylaws	23
Section 13.	Construction	23
Section 14.	Relation to the Certificate of Incorporation	24



	ii

BYLAWS
OF
ATHERSYS, INC.

ARTICLE I

OFFICES

Section 1. Registered Office. The registered office and registered agent of ATHERSYS, Inc. (the “Corporation”) will be as from time to time set forth in the Corporation’s Certificate of Incorporation or in any certificate filed with the Secretary of State of the State of Delaware, and the appropriate county Recorder or Recorders, as the case may be, to amend such information.

Section 2. Other Offices. The Corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors (the “Board of Directors”) of the Corporation may from time to time determine or the business of the Corporation may require.

ARTICLE II

STOCKHOLDERS

Section 1. Place of Meetings. All meetings of the stockholders for the election of Directors will be held at such place, within or without the State of Delaware, as may be fixed from time to time by the Board of Directors. Meetings of stockholders for any other purpose may be held at such time and place, within or without the State of Delaware, as may be stated in the notice of the meeting or in a duly executed waiver of notice thereof.

Section 2. Annual Meeting. An annual meeting of the stockholders will be held at such time as may be determined by the Board of Directors, at which meeting the stockholders will elect a Board of Directors, and transact such other business as may properly be brought before the meeting.

Section 3. List of Stockholders. At least ten days before each meeting of stockholders, a complete list of the stockholders entitled to vote at said meeting, arranged in alphabetical order, with the address of and the number of voting shares registered in the name of each, will be prepared by the officer or agent having charge of the stock transfer books. Such list will be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, at the principal place of business of the Corporation. Such list will be produced and kept open at the time and place of the meeting during the whole time thereof, and will be subject to the inspection of any stockholder who may be present.

Section 4. Special Meetings.

(a) Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by law, the Certificate of Incorporation or these Bylaws, may be called by the Chairman of the Board of Directors, the Chief Executive Officer, the President, or the Board of Directors, or will be called by the Chief Executive Officer, President, or Secretary, at the request in writing of the holders of not less than a majority of all the shares issued, outstanding and entitled to vote (the “ Requisite Percentage ”). Such request will state the purpose or purposes of the proposed meeting. Business transacted at all special meetings will be confined to the purposes stated in the notice of the meeting unless all stockholders entitled to vote are present and consent. Stockholders may cause business to be specified in the notice of meeting only as and to the extent provided in Section 4(b) of Article II, and shall not otherwise be permitted to propose business to be brought before a special meeting of stockholders.

(b) In order for a special meeting requested by one or more stockholders (a “Stockholder Requested Special Meeting”) to be called by the Secretary, one or more written requests must have been received by the Secretary that the Board of Directors fix a record date (a “Record Date Request”) for the purpose of determining the stockholders entitled to request that the Secretary call such special meeting, which request shall be in proper form and delivered to, or mailed and received by, the Secretary at the principal executive offices of the Corporation.

(1) To be in proper form for purposes of this Section 4(b) of Article II, a Record Date Request by a stockholder shall set forth:

(i) as to each Requesting Person (as defined below), the information required to be provided by a Proposing Person pursuant to Section 10(b)(i) of Article II, except that for purposes of this Section 4(b) of Article II, the term “Requesting Person” shall be substituted for the term “Proposing Person” and “Stockholder Requested Special Meeting” shall be substituted for the term “annual meeting” in all places it appears in Section 10(b)(i) of Article II;

(ii) as to the purpose or purposes of the special meeting, the information required by Section 10(b)(ii) of Article II, except that for purposes of this Section 4(b) of Article II, the term “Stockholder Requested Special Meeting” will be substituted for the term “annual meeting” in all places where it appears in Section 10(b)(ii) of Article II; and

(iii) an agreement by the Requesting Person(s) to notify the Secretary immediately in the case of any disposition prior to the record date for the Stockholder Requested Special Meeting of voting shares owned of record and an acknowledgement that any such disposition shall be deemed a revocation of such Special Meeting Request to the extent of such disposition, such that the number of shares disposed of shall not be included in determining whether the Requisite Percentage has been reached.

(2) For purposes of this Section 4(b) of Article II, the term “Requesting Person” shall mean (i) the stockholder making the Record Date Request to fix a record date for the purpose of determining the stockholders entitled to demand that the Secretary call a Stockholder Requested Special Meeting, (ii) the beneficial owner or beneficial owners, if

different, on whose behalf such request is made, and (iii) any affiliate or associate of such stockholder or beneficial owner.

(3) A Requesting Person must update and supplement such Record Date Request, if necessary, so that the information provided or required to be provided in such Record Date Request pursuant to this Section 4(b) of Article II or Section 10 of Article II or Section 11 of Article II, as applicable, is true and correct as of the record date for notice of the meeting and as of the date that is ten days prior to the meeting or any recess, adjournment or postponement thereof. Any such update and supplement must be delivered to, or mailed and received by, the Secretary at the principal executive offices of the Corporation, as promptly as practicable.

(4) Within ten days after receipt of a Record Date Request in proper form and otherwise in compliance with this Section 4(b) of Article II from any stockholder of record, the Board of Directors may adopt a resolution fixing a record date for the purpose of determining the stockholders entitled to request that the Secretary call a special meeting, which date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors. If no resolution fixing a record date has been adopted by the Board of Directors within the ten day period after the date on which such a Record Date Request was received, the record date in respect thereof shall be deemed to be the 20th day after the date on which such a request is received. Notwithstanding anything in this Section 4(b) of Article II to the contrary, no record date shall be fixed if the Board of Directors determines that the demand or demands that would otherwise be submitted following such record date could not comply with the requirements set forth in Section 4(b)(6) of Article II.

(5) Without qualification, a Stockholder Requested Special Meeting shall not be called pursuant to this Section 4(b) of Article II unless stockholders of record as of the record date established pursuant to Section 4(b)(4) of Article II who hold, in the aggregate, no less than the Requisite Percentage timely provide one or more requests to call such special meeting in writing and in proper form to the Secretary at the principal executive offices of the Corporation. Only stockholders of record on the record date shall be entitled to request that the Secretary call a Stockholder Requested Special Meeting pursuant to this Section 4(b) of Article II (each a “Special Meeting Request”). To be timely, a stockholder’s Special Meeting Request must be delivered to, or mailed and received at, the principal executive offices of the Corporation not later than the 90th day following the record date. To be in proper form for purposes of this Section 4(b) of Article II, a demand to call a special meeting shall set forth (i) the business proposed to be conducted at the special meeting, (ii) the text of the proposal or business (including the text of any resolutions proposed for consideration), if applicable, and (iii) with respect to any stockholder or stockholders submitting a request to call a special meeting (except for any stockholder that has provided such demand in response to a solicitation made pursuant to, and in accordance with, Section 14(a) of the Securities Exchange Act of 1934, as amended (such act, and the rules and regulations promulgated thereunder, the “Exchange Act”) by way of a solicitation statement filed on Schedule 14A) (a “Solicited Stockholder”) the information required to be provided pursuant to this Section 4(b) of Article II of a Requesting Person, which must be updated or supplemented, if necessary, so that the information required to be provided will be true and correct on the record date of such special meeting and as of such date that is ten

business days prior to such special meeting, or any adjournment or postponement thereof, which update shall be delivered to the Secretary no later than five business days after the record date for the special meeting and not later than eight business days prior to the special meeting. In determining whether a special meeting of stockholders has been requested by the record holders of shares (as of the record date established pursuant to Section 4(b)(4) of Article II) representing in the aggregate at least the Requisite Percentage, multiple Special Meeting Requests delivered to the Secretary will be considered together only if each such Special Meeting Request (x) identifies substantially the same purpose or purposes of the special meeting and substantially the same matters proposed to be acted on at the special meeting (in each case as determined in good faith by the Board of Directors), and (y) has been dated and delivered to the Secretary within 60 days of the earliest dated of such Special Meeting Requests. Any requesting stockholder may revoke his, her or its Special Meeting Request at any time by written revocation delivered to the Secretary at the principal executive offices of the Corporation; provided , however , that if following such revocation (or any deemed revocation pursuant to Section 4(b)(1)(iv) of Article II), the unrevoked valid Special Meeting Requests represent in the aggregate less than the Requisite Percentage there shall be no requirement to hold a special meeting. The first date on which unrevoked valid Special Meeting Requests constituting not less than the Requisite Percentage shall have been delivered to the Secretary is referred to herein as the “Request Receipt Date.”

(6) A Special Meeting Request shall not be valid if:

(i) the Special Meeting Request does not comply with the requirements of this Section 4(b) of Article II;

(ii) the Special Meeting Request relates to an item of business that is not a proper subject for stockholder action under applicable law;

(iii) the Special Meeting Request includes an item of business that was not included in the written Record Date Request that resulted in the establishment of the record date;

(iv) the Request Receipt Date is during the period commencing 90 days prior to the first anniversary of the date of the immediately preceding annual meeting and ending on the date of the next annual meeting;

(v) the purpose specified in the Special Meeting Request is not the election of directors and an identical or substantially similar item (as determined in good faith by the Board of Directors, a “Similar Item”) was presented at any meeting of stockholders held within the 12 months prior to the Request Receipt Date;

(vi) a Similar Item is included in the Corporation’s notice as an item of business to be brought before a stockholder meeting that has been called but not yet held or that is called for a date within 90 days after the Request Receipt Date; or

(vii) the information set forth in the Special Meeting Request fails to be true and complete on the record date for notice of the meeting and as of the date that is ten days prior to the meeting or any recess, adjournment or postponement thereof.

(7) A Stockholder Requested Special Meeting shall be held at such date and time as may be fixed by the Board of Directors; provided , however , that the Stockholder Requested Special Meeting shall be called for a date not more than 120 days after the Request Receipt Date.

(8) No Requesting Person will be entitled to have any matter proposed to be presented at a Stockholder Requested Meeting in any proxy statement or form of proxy that the Corporation may use in connection therewith solely as a result of such stockholder’s compliance with the foregoing provisions of this Section 4(b) of Article II.

(9) Business transacted at any Stockholder Requested Special Meeting shall be limited to (i) the purpose(s) stated in the valid Special Meeting Request(s) received from the Requisite Percentage of record holders and (ii) any additional matters that the Board of Directors determines to include in the Corporation’s notice of the meeting. The presiding officer of any such meeting will, if the facts warrant, determine that a proposal or nomination was not made in accordance with the procedures prescribed by Section 4 of Article II, Section 10 of Article II, Section 11 of Article II or Section 12 of Article II, as applicable, and if the presiding officer should so determine, he or she will so declare to the meeting and the defective proposal or nomination, as applicable, will be disregarded. If none of the stockholders who submitted the Special Meeting Request appears to present the matters to be presented for consideration that were specified in the Stockholder Meeting Request, the Corporation need not present such matters for a vote at such meeting, notwithstanding that proxies in respect of such matter may have been solicited, obtained or delivered.

Section 5. Notice. Written or printed notice stating the place, day and hour of any meeting of the stockholders and, in case of a special meeting, the purpose or purposes for which the meeting is called, will be delivered not less than ten nor more than 60 days before the date of the meeting, either personally or by mail, by or at the direction of the Chairman of the Board of Directors, the Chief Executive Officer, the President, the Secretary, or the officer or person calling the meeting, to each stockholder of record entitled to vote at the meeting. If mailed, such notice will be deemed to be delivered when deposited in the United States mail, addressed to the stockholder at his address as it appears on the stock transfer books of the Corporation, with postage thereon prepaid.

Section 6. Quorum. At all meetings of the stockholders, the presence in person or by proxy of the holders of a majority of the shares issued and outstanding and entitled to vote on that matter will be necessary and sufficient to constitute a quorum for the transaction of business except as otherwise provided by law, the Certificate of Incorporation or these Bylaws. If, however, such quorum is not present or represented at any meeting of the stockholders, the presiding officer of the meeting will have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present or represented. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting will be given to each stockholder of

record entitled to vote at the meeting. At such adjourned meeting at which a quorum is present or represented, any business may be transacted that might have been transacted at the meeting as originally notified.

Section 7. Voting. When a quorum is present at any meeting of the Corporation’s stockholders, the vote of the holders of a majority of the shares present in person or by proxy entitled to vote on, and voted for or against, any matter will decide any questions brought before such meeting other than the election of directors (who will be elected as set forth Section 2 of Article III), or if the question is one upon which, by express provision of law, the Certificate of Incorporation or these Bylaws, a different vote is required, in which case such express provision will govern and control the decision of such question. The stockholders present in person or by proxy at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.

Section 8. Method of Voting. Each outstanding share of the Corporation’s capital stock, regardless of class or series, will be entitled to one vote on each matter submitted to a vote at a meeting of stockholders, except to the extent that the voting rights of the shares of any class or series are limited or denied by the Certificate of Incorporation, as amended from time to time. At any meeting of the stockholders, every stockholder having the right to vote will be entitled to vote in person, or by proxy appointed by an instrument in writing subscribed by such stockholder and bearing a date not more than three years prior to such meeting, unless such instrument provides for a longer period. A telegram, telex, cablegram or similar transmission by the stockholder, or a photographic, photostatic, facsimile or similar reproduction of a writing executed by the stockholder, shall be treated as an execution in writing for purposes of the preceding sentence. Each proxy will be revocable unless expressly provided therein to be irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the Corporation generally. Such proxy will be filed with the Secretary of the Corporation prior to or at the time of the meeting. Voting on any question or in any election, other than for directors, may be by voice vote or show of hands unless the presiding officer orders, or any stockholder demands, that voting be by written ballot.

Section 9. Record Date. The Board of Directors may fix in advance a record date for the purpose of determining stockholders entitled to notice of or to vote at a meeting of stockholders, which record date will not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date will not be less than ten nor more than 60 days prior to such meeting. In the absence of any action by the Board of Directors, the close of business on the date next preceding the day on which the notice is given will be the record date, or, if notice is waived, the close of business on the day next preceding the day on which the meeting is held will be the record date.

Section 10. Notice of Stockholder Proposals.

(a) At an annual meeting of stockholders, only such business may be conducted as has been properly brought before the meeting. To be properly brought before an annual meeting, business (other than the nomination of a person for election as a director, which

is governed by Section 11 of Article II, and, to the extent applicable, Section 12 of Article II) must be (1) brought before the meeting by or at the direction of the Board of Directors or (2) otherwise properly brought before the meeting by a stockholder who (i) has complied with all applicable requirements of this Section 10(a) of Article II and Section 12 of Article II in relation to such business, (ii) was a stockholder of record of the Corporation at the time of giving the notice required by Section 12(a) of Article II and is a stockholder of record of the Corporation at the time of the annual meeting, and (iii) is entitled to vote at the annual meeting. For the avoidance of doubt, the foregoing clause (2) will be the exclusive means for a stockholder to submit business before an annual meeting of stockholders (other than proposals properly made in accordance with Rule 14a-8 under the Exchange Act and included in the notice of meeting given by or at the direction of the Board of Directors).

(b) To be in proper form, a stockholder’s notice to the Corporation must set forth in writing the following information, which must be updated and supplemented, if necessary, so that the information provided or required to be provided will be true and correct on the record date of the annual meeting and as of such date that is ten business days prior to the annual meeting or any adjournment or postponement thereof; which update shall be delivered to the Corporation no later than five business days after the record date for the annual meeting and not later than eight business days prior to the date of the annual meeting.

(1) As to each Proposing Person (as such term is defined in Section 12(d) of Article II):

(i) the name and address of such Proposing Person, as they appear on the Corporation’s transfer book;

(ii) the class, series and number of shares of the Corporation directly or indirectly beneficially owned or held of record by such Proposing Person (including any shares of any class or series of the Corporation as to which such Proposing Person has a right to acquire beneficial ownership, whether such right is exercisable immediately or only after the passage of time);

(iii) a representation (A) that the stockholder giving the notice is a holder of record of stock of the Corporation entitled to vote at the annual meeting and intends to appear at the annual meeting to bring such business before the annual meeting and (B) as to whether any Proposing Person intends to deliver a proxy statement and form of proxy to holders of at least the percentage of shares of the Corporation entitled to vote and required to approve the proposal and, if so, identifying such Proposing Person;

(iv) a description of any (A) option, warrant, convertible security, stock appreciation right or similar right or interest (including any derivative securities, as defined under Rule 16a-1 under the Exchange Act or other synthetic arrangement having characteristics of a long position), assuming for purposes of these Bylaws presently exercisable, with an exercise or conversion privilege or a settlement or payment mechanism at a price related to any class or series of securities of the Corporation or with a value derived in whole or in part from the value of any class or series of securities of the Corporation, whether or not such instrument or right is subject to settlement in whole or in part in the underlying class or series of

securities of the Corporation or otherwise, directly or indirectly held of record or owned beneficially by such Proposing Person and whether or not such Proposing Person may have entered into transactions that hedge or mitigate the economic effects of such security or instrument and (B) each other direct or indirect right or interest that may enable such Proposing Person to profit or share in any profit derived from, or to manage the risk or benefit from, any increase or decrease in the value of the Corporation’s securities, in each case regardless of whether (x) such right or interest conveys any voting rights in such security to such Proposing Person, (y) such right or interest is required to be, or is capable of being, settled through delivery of such security or (z) such Proposing Person may have entered into other transactions that hedge the economic effect of any such right or interest (any such right or interest referred to in this clause (D) being a “Derivative Interest”);

(v) any proxy, contract, agreement, arrangement, understanding or relationship pursuant to which the Proposing Person has a right to vote any shares of the Corporation or which has the effect of increasing or decreasing the voting power of such Proposing Person;

(vi) any contract, agreement, arrangement, understanding or relationship including any repurchase or similar so called “stock borrowing” agreement or arrangement, the purpose or effect of which is to mitigate loss, reduce economic risk, increase or decrease voting power with respect to any capital stock of the Corporation or which provides any party, directly or indirectly, the opportunity to profit from any decrease in the price or value of the capital stock of the Corporation;

(vii) any material pending or threatened legal proceeding involving the Corporation, any affiliate of the Corporation or any of their respective directors or officers, to which such Proposing Person or its affiliates is a party;

(viii) any rights directly or indirectly held of record or beneficially by the Proposing Person to dividends on the shares of the Corporation that are separated or separable from the underlying shares of the Corporation;

(ix) any equity interests, including any convertible, derivative or short interests, in any principal competitor of the Corporation;

(x) any performance-related fees (other than an asset-based fee) to which the Proposing Person or any affiliate or immediate family member of the Proposing Person may be entitled as a result of any increase or decrease in the value of shares of the Corporation or Derivative Interests; and

(xi) any other information relating to such Proposing Person that would be required to be disclosed in a proxy statement or other filing required pursuant to Section 14(a) of the Exchange Act to be made in connection with a general solicitation of proxies or consents by such Proposing Person in support of the business proposed to be brought before the meeting.

(2) As to each item of business that the stockholder giving notice proposes to bring before the annual meeting:

(i) a description in reasonable detail of the business desired to be brought before the annual meeting and the reasons why such stockholder or any other Proposing Person believes that the taking of the action or actions proposed to be taken would be in the best interests of the Corporation and its stockholders;

(ii) a description in reasonable detail of any material interest of any Proposing Person in such business and a description in reasonable detail of all agreements, arrangements and understandings among the Proposing Persons or between any Proposing Person and any other person or entity (including their names) in connection with the proposal; and

(iii) the text of the proposal or business (including the text of any resolutions proposed for consideration).

(3) A stockholder is not entitled to have its proposal included in the Corporation’s proxy statement and form of proxy solely as a result of such stockholder’s compliance with the foregoing provisions of this Section 10 of Article II.

(4) If a stockholder does not appear at the annual meeting to present its proposal, such proposal will be disregarded (notwithstanding that proxies in respect of such proposal may have been solicited, obtained or delivered).

Section 11. Notice of Director Nominations.

(a) Only persons who are nominated in accordance with the procedures set forth in this Section 11 of Article II will be eligible to serve as directors. Nominations of persons for election as directors of the Corporation may be made only at an annual meeting of stockholders and only (1) by or at the direction of the Board of Directors or (2) by a stockholder who (i) has complied with all applicable requirements of this Section 11 of Article II and Section 12 of Article II in relation to such nomination, (ii) was a stockholder of record of the Corporation at the time of giving the notice required by Section 12(a) of Article II and is a stockholder of record of the Corporation at the time of the annual meeting and (iii) is entitled to vote at the annual meeting. Notwithstanding anything to the contrary in these Bylaws, this Section 11 of Article II will not diminish or otherwise alter any contractual rights a stockholder may have to nominate a person for election as a director of the Corporation, including pursuant to the (x) Investor Rights Agreement, dated as of March 13, 2018, between the Corporation and HEALIOS K.K. and (y) Securities Purchase Agreement, dated June 8, 2007, among the Corporation and the parties thereto.

(b) To be in proper form, a stockholder’s notice to the Corporation must set forth in writing:

(1) As to each Nominating Person (as such term is defined in Section 12(d) of Article II), the information set forth in Section 10(b)(1) of Article II (except that for

purposes of this Section 11 of Article II, the term “Nominating Person” will be substituted for the term “Proposing Person” in all places where it appears in Section 10(b)(1) of Article II, and any reference to “business” or “proposal” therein will be deemed to be a reference to the “nomination” contemplated by this Section 11 of Article II).

(2) As to each person whom the stockholder giving notice proposes to nominate for election as a director:

(i) all information with respect to such proposed nominee that would be required to be set forth in a stockholder’s notice pursuant to Section 10(b)(1) of Article II, if such proposed nominee was a Nominating Person;

(ii) all information relating to such proposed nominee that would be required to be disclosed in a proxy statement or other filing required pursuant to Section 14(a) under the Exchange Act to be made in connection with a general solicitation of proxies for an election of directors in a contested election (including such proposed nominee’s written consent to be named in the proxy statement as a nominee and to serve as a director if elected);

(iii) a reasonably detailed description of all direct and indirect compensation and other material monetary agreements, arrangements or understandings during the past three years, any other material relationships, between or among such Nominating Person and its affiliates and associates, or others acting in concert therewith, on the one hand, and each proposed nominee and his or her affiliates, associates or others acting in concert therewith, on the other hand, including all information that would be required to be disclosed pursuant to Items 403 and 404 under Regulation S-K if the stockholder giving the notice or any other Nominating Person were the “registrant” for purposes of such rule and the proposed nominee were a director or executive officer of such registrant;

(iv) a completed questionnaire (in the form provided by the Corporation upon written request) with respect to the identity, background and qualification of the proposed nominee and the background of any other person or entity on whose behalf the nomination is being made; and

(v) a written representation and agreement (in the form provided by the Corporation upon written request) that the proposed nominee (A) is not and will not become a party to (x) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how the proposed nominee, if elected as a director of the Corporation, will act or vote on any issue or question (a “Voting Commitment”) that has not been disclosed to the Corporation or (y) any Voting Commitment that could limit or interfere with the proposed nominee’s ability to comply, if elected as a director of the Corporation, with the proposed nominee’s fiduciary duties under applicable law, (B) is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director that has not been disclosed therein and (C) if elected as a director of the Corporation, the proposed nominee would be in compliance and will comply, with all applicable publicly disclosed corporate

governance, ethics, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the Corporation.

The Corporation may require any proposed nominee to furnish such other information as may be reasonably required by the Corporation to determine the qualifications and eligibility of such proposed nominee to serve as a director.

(4) If a stockholder does not appear at the annual meeting to present its proposal, such proposal will be disregarded (notwithstanding that proxies in respect of such nomination may have been solicited, obtained or delivered).

Section 12. Additional Provisions Relating to the Notice of Stockholder Business and Director Nominations.

(a) To be timely, a stockholder’s notice required by Section 10(a) of Article II or Section 11(a) of Article II must be delivered to or mailed and received by the Corporation at the Corporation’s executive offices not less than 90 nor more than 120 days prior to the first anniversary of the date on which the Corporation held the preceding year’s annual meeting of stockholders; provided , however , that if the date of the annual meeting is scheduled for a date more than 30 days prior to or more than 30 days after the anniversary of the preceding year’s annual meeting, notice by the stockholder to be timely must be so delivered not later than the close of business on the later of the 90th day prior to such annual meeting and the tenth day following the day on which public disclosure of the date of such meeting is first made. In no event will a recess or adjournment of an annual meeting (or any announcement of any such recess or adjournment) commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above. Notwithstanding the foregoing, in the event the number of directors to be elected to the Board of Directors at the annual meeting is increased by the Board of Directors, and there is no public announcement by the Corporation naming the nominees for the additional directors at least 100 days prior to the first anniversary of the date on which the Corporation held the preceding year’s annual meeting of stockholders, a stockholder’s notice pursuant to Section 11 of Article II will be considered timely, but only with respect to nominees for the additional directorships, if it is delivered to or mailed and received by the Corporation at the Corporation’s executive offices not later than the close of business on the tenth day following the day on which such public announcement is first made by the Corporation.

(b) A stockholder providing notice of business proposed to be brought before an annual meeting pursuant to Section 10 of Article II or notice of any nomination to be made at an annual meeting pursuant to Section 11 of Article II must further update and supplement such notice, if necessary, so that the information provided or required to be provided in such notice pursuant to Section 10 of Article II or Section 11 of Article II, as applicable, is true and correct as of the record date for notice of the meeting and as of the date that is ten days prior to the meeting or any recess, adjournment or postponement thereof. Any such update and supplement must be

delivered to, or mailed and received by, the Corporation at the Corporation’s executive offices, as promptly as practicable.

(c) The Chairman of the Board of Directors or presiding officer of any annual meeting will, if the facts warrant, determine that a proposal was not made in accordance with the procedures prescribed by Section 10 of Article II and this Section 12 of Article II or that a nomination was not made in accordance with the procedures prescribed by Section 11 of Article II and this Section 12 of Article II, and if he or she should so determine, he or she will so declare to the meeting and the defective proposal or nomination, as applicable, will be disregarded. Notwithstanding anything in these Bylaws to the contrary: (1) no nominations shall be made or business shall be conducted at any annual meeting except in accordance with the procedures set forth in Section 10 of Article II, Section 11 of Article II and this Section 12 of Article II and (2) unless otherwise required by law, if a Proposing Person intending to propose business or a Nominating Person intending to make nominations at an annual meeting pursuant to Section 10 of Article II, Section 11 of Article II and this Section 12 of Article II, as applicable, does not provide the information required under Section 10 of Article II, Section 11 of Article II and this Section 12 of Article II to the Corporation in accordance with the applicable timing requirements set forth in these Bylaws, or the Proposing Person or Nominating Person (or a qualified representative thereof) does not appear at the meeting to present the proposed business or nominations, such business or nominations shall not be considered, notwithstanding that proxies in respect of such business or nominations may have been received by the Corporation.

(d) For purposes of Section 10 of Article II, Section 11 of Article II and this Section 12 of Article II, “public disclosure” means disclosure in a press release reported by the Dow Jones News Service, Bloomberg, Associated Press or comparable national news service or in a document filed or furnished by the Corporation with or to, as applicable, the Securities and Exchange Commission pursuant to Exchange Act or furnished by the Corporation to stockholders. For purposes of Section 10 of Article II and this Section 12 of Article II, “Proposing Person” means (1) the stockholder providing the notice of business proposed to be brought before an annual meeting, (2) the beneficial owner or beneficial owners, if different, on whose behalf the notice of the business proposed to be brought before the annual meeting is given and (3) any Affiliate or Associate (each within the meaning of Rule 12b-2 under the Exchange Act) of such stockholder or beneficial owner. For purposes of Section 11 of Article II and this Section 12 of Article II, “Nominating Person” means (1) the stockholder providing the notice of the nomination proposed made to be at an annual meeting, (2) the beneficial owner or beneficial owners, if different, on whose behalf the notice of nomination proposed to be made at the annual meeting is given, and (3) any Affiliate or Associate (each within the meaning of Rule 12b-2 under the Exchange Act) of such stockholder or beneficial owner.

Section 13. Action by Consent. Except as prohibited by law, any action required or permitted by law, the Certificate of Incorporation or these Bylaws to be taken at a meeting of the stockholders of the Corporation may be taken without a meeting if a consent or consents in writing, setting forth the action so taken, is signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and will be

delivered to the Corporation by delivery to its registered office in Delaware, its principal place of business or an officer or agent of the Corporation having custody of the minute book.

ARTICLE III

BOARD OF DIRECTORS

Section 1. Management. The business and affairs of the Corporation will be managed by or under the direction of its Board of Directors who may exercise all such powers of the Corporation and do all such lawful acts and things as are not by law, by the Certificate of Incorporation or by these Bylaws directed or required to be exercised or done by the stockholders.

Section 2. Qualification; Election; Term. Each Director must be a natural person at least 18 years of age. None of the Directors need be a stockholder of the Corporation or a resident of the State of Delaware. Through the annual meeting of the stockholders during the calendar year 2019, the Directors will be elected by written ballot, by plurality vote at the annual meeting of the stockholders. From and following the annual meeting of the stockholders during the calendar year 2020, the Directors will be elected by written ballot, by majority vote of votes cast at the annual meeting of the stockholders, except that if the Board of Directors determines that the number of candidates for Director exceeds the number of Directors to be elected, the Directors will be elected by written ballot, by plurality vote at the annual meeting of the stockholders. For purposes of this Section 2 of Article III, a majority of votes cast shall mean that the number of shares voted “for” a Director’s election exceeds 50% of the number of votes cast with respect to the Director’s election; votes cast shall include votes to withhold authority and exclude abstentions and broker non-votes with respect to the Director’s election.

If a nominee for Director is not elected and the nominee is an incumbent Director, the Director shall promptly tender his or her resignation to the Board of Directors, subject to acceptance by the Board of Directors. The Nominations and Corporate Governance Committee of the Board of Directors will make a recommendation to the Board of Directors as to whether to accept or reject the tendered resignation, or whether other action should be taken. The Board of Directors will act on the tendered resignation, taking into account the Nominations and Corporate Governance Committee’s recommendation, and publicly disclose (by a press release, a filing with the Securities and Exchange Commission or other broadly disseminated means of communication) its decision regarding the tendered resignation and the rationale behind the decision within 90 days from the date of certification of the election results. The Nominations and Corporate Governance Committee in making its recommendation and the Board of Directors in making its decision may each consider any factors or other information that they consider appropriate and relevant. The Director who tenders his or her resignation will not participate in the recommendation of the Nominations and Corporate Governance Committee or the decision of the Board of Directors with respect to his or her resignation.

Each Director elected will hold office until whichever of the following occurs first: his successor is elected and qualified, his resignation, his removal from office by the stockholders or his death.

Section 3. Number; Election; Term; Qualification. The number of Directors which shall constitute the Board of Directors shall be not less than one. The number of Directors which shall constitute the entire Board of Directors shall be determined by resolution of the Board of Directors at any meeting thereof, but shall never be less than one. No decrease in the number of Directors will have the effect of shortening the term of any incumbent Director. At each annual meeting of stockholders, Directors shall be elected to hold office until their successors are elected and qualified or until their earlier resignation, removal from office or death. No Director need be a stockholder, a resident of the State of Delaware, or a citizen of the United States.

Section 4. Removal. Any Director may be removed either for or without cause at any annual or special meeting of stockholders by the affirmative vote of the stockholders representing not less than a majority of the voting power of the issued and outstanding stock entitled to vote for the election of Directors; provided, that notice of intention to act upon such matter has been given in the notice calling such meeting.

Section 5. Vacancies. Newly created directorships resulting from any increase in the authorized number of Directors and any vacancies occurring in the Board of Directors caused by death, resignation, retirement, disqualification or removal from office of any Directors or otherwise, may be filled by the vote of a majority of the Directors then in office, though less than a quorum, or a successor or successors may be chosen at a special meeting of the stockholders called for that purpose. A Director elected to fill a vacancy will be elected for the unexpired term of his predecessor in office or until whichever of the following occurs first: his successor is elected and qualified, his resignation, his removal from office by the stockholders or his death.

Section 6. Place of Meetings. Meetings of the Board of Directors, regular or special, may be held at such place within or without the State of Delaware as may be fixed from time to time by the Board of Directors.

Section 7. Annual Meeting. The first meeting of each newly elected Board of Directors will be held without further notice immediately following the annual meeting of stockholders and at the same place, unless by unanimous consent, the Directors then elected and serving change such time or place.

Section 8. Regular Meetings. Regular meetings of the Board of Directors may be held with or without notice and at such time and place as is from time to time determined by resolution of the Board of Directors.

Section 9. Special Meetings. Special meetings of the Board of Directors may be called by the Chairman of the Board of Directors, the Chief Executive Officer, or the President, on oral or written notice to each Director, given either personally, by telephone, by facsimile or by mail, delivered not less than twenty-four hours in advance of the meeting; special meetings will be called by the Chairman of the Board of Directors, Chief Executive Officer, President, or

Secretary in like manner and on like notice on the written request of at least two Directors. Except as may be otherwise expressly provided by law, the Certificate of Incorporation or these Bylaws, neither the business to be transacted at, nor the purpose of, any special meeting need be specified in a notice or waiver of notice.

Section 10. Quorum. At all meetings of the Board of Directors the presence of a majority of the number of Directors then in office will be necessary and sufficient to constitute a quorum for the transaction of business, and the affirmative vote of at least a majority of the Directors present at any meeting at which there is a quorum will be the act of the Board of Directors, except as may be otherwise specifically provided by law, the Certificate of Incorporation or these Bylaws. If a quorum is not present at any meeting of the Board of Directors, the Directors present thereat may adjourn the meeting from time to time without notice other than announcement at the meeting, until a quorum is present.

Section 11. Interested Directors. No contract or transaction between the Corporation and one or more of its Directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of the Corporation’s Directors or officers are directors or officers or have a financial interest, will be void or voidable solely for this reason, solely because the Director or officer is present at or participates in the meeting of the Board of Directors or committee thereof that authorizes the contract or transaction, or solely because his or their votes are counted for such purpose, if: (i) the material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board of Directors or committee in good faith authorizes the contract or transaction by the affirmative vote of a majority of the disinterested Directors, even though the disinterested Directors be less than a quorum, (ii) the material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders or (iii) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified by the Board of Directors, a committee thereof or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee that authorizes the contract or transaction.

Section 12. Action by Consent. Any action required or permitted to be taken at any meeting of the Board of Directors or any committee of the Board of Directors may be taken without such a meeting if a consent or consents in writing, setting forth the action so taken, is signed by all the members of the Board of Directors or such committee, as the case may be.

Section 13. Compensation of Directors. Directors will receive such compensation for their services and reimbursement for their expenses as the Board of Directors, by resolution, may establish; provided that nothing herein contained will be construed to preclude any Director from serving the Corporation in any other capacity and receiving compensation therefor.

ARTICLE IV

COMMITTEES

Section 1. Designation. The Board of Directors may, by resolution adopted by a majority of the whole Board, designate from among its members an executive committee and one or more such other committees as it may determine necessary.

Section 2. Number; Qualification; Term. The executive committee and any other designated committees shall consist of one or more Directors. The committees shall serve at the pleasure of the Board of Directors.

Section 3. Authority. Each committee, to the extent provided in such resolution, shall have and may exercise all of the authority of the Board of Directors in the management of the business and affairs of the Corporation, except in the following matters and except where action of the full Board of Directors is required by statute or by the Certificate of Incorporation:

(a) Amending the Certificate of Incorporation;

(b) Amending, altering or repealing the Bylaws of the Corporation or adopting new Bylaws;

(1) Merger

(2) Consolidation

(3) sale, lease (as lessor), exchange or other disposition of all or substantially all the property and assets of the Corporation;

(4) dissolution;

(d) Filling vacancies in the Board of Directors or any such committee;

(e) Electing or removing officers of the Corporation or members of any such committee;

(f) Fixing compensation of any person who is a member of any such committee;

(g) Declaring dividends; and

(h) Altering or repealing any resolution of the Board of Directors.

Section 4. Change in Number. The number of committee members may be increased or decreased (but not below one) from time to time by resolution adopted by a majority of the whole Board of Directors.

Section 5. Removal. Any committee member may be removed by the Board of Directors by the affirmative vote of a majority of the whole Board, whenever in its judgment the best interests of the Corporation will be served thereby.

Section 6. Vacancies. A vacancy occurring in any committee (by death, resignation, removal or otherwise) may be filled by the Board of Directors in the manner provided for original designation in Section 1 of this Article IV.

Section 7. Meetings. Time, place and notice (if any) of all committee meetings shall be determined by the respective committee. Unless otherwise determined by a particular committee, meetings of the committees may be called by any Director of the Corporation on not less than 12 hours’ notice to each member of the committee, either personally or by mail, telephone (including voice mail), email or other electronic or other delivery means. Neither the business to be transacted at, nor the purpose of, any meeting need be specified in a notice or waiver of notice of any meeting. (See also Section 3 of Article IX).

Section 8. Quorum; Majority Vote. At meetings of any committee, a majority of the number of members designated by the Board of Directors shall constitute a quorum for the transaction of business. The act of a majority of the members present at any meeting at which a quorum is present shall be the act of the committee, except as otherwise specifically provided by statute or by the Certificate of Incorporation or by these Bylaws. If a quorum is not present at a meeting of the committee, the members present thereat may adjourn the meeting from time to time, without notice other than an announcement at the meeting until a quorum is present.

Section 9. Compensation. Compensation of committee members shall be fixed pursuant to the provisions of Section 13 of Article III of these Bylaws.

ARTICLE V

NOTICE

Section 1. Form of Notice. Whenever by law, the Certificate of Incorporation or of these Bylaws, notice is to be given to any Director or stockholder, and no provision is made as to how such notice will be given, such notice may be given: (i) in writing, by mail, postage prepaid, addressed to such Director or stockholder at such address as appears on the books of the Corporation or (ii) in any other method permitted by law. Any notice required or permitted to be given by mail will be deemed to be given at the time the same is deposited in the United States mail.

Section 2. Waiver. Whenever any notice is required to be given to any stockholder or Director of the Corporation as required by law, the Certificate of Incorporation or these Bylaws, a waiver thereof in writing signed by the person or persons entitled to such notice, whether

before or after the time stated in such notice, will be equivalent to the giving of such notice. Attendance of a stockholder or Director at a meeting will constitute a waiver of notice of such meeting, except where such stockholder or Director attends for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the ground that the meeting has not been lawfully called or convened.

ARTICLE VI

OFFICERS AND AGENTS

Section 1. In General. The officers of the Corporation will be elected by the Board of Directors and will be a Chief Executive Officer, a President, a Secretary, and a Treasurer. The Board of Directors may also elect a Chairman of the Board of Directors, Vice Presidents, Assistant Vice Presidents, Assistant Secretaries, and Assistant Treasurers. Any two or more offices may be held by the same person.

Section 2. Election. The Board of Directors, at its first meeting after each annual meeting of stockholders, will elect the officers, none of whom need be a member of the Board of Directors.

Section 3. Other Officers and Agents. The Board of Directors may also elect and appoint such other officers and agents as it deems necessary, who will be elected and appointed for such terms and will exercise such powers and perform such duties as may be determined from time to time by the Board of Directors.

Section 4. Compensation. The compensation of all officers and agents of the Corporation will be fixed by the Board of Directors or any committee of the Board of Directors, if so authorized by the Board of Directors.

Section 5. Term of Office and Removal. Each officer of the Corporation will hold office until his death, his resignation or removal from office, or the election and qualification of his successor, whichever occurs first. Any officer or agent elected or appointed by the Board of Directors may be removed at any time, for or without cause, by the affirmative vote of a majority of the entire Board of Directors, but such removal will not prejudice the contract rights, if any, of the person so removed. If the office of any officer becomes vacant for any reason, the vacancy may be filled by the Board of Directors.

Section 6. Employment and Other Contracts. The Board of Directors may authorize any officer or officers or agent or agents to enter into any contract or execute and deliver any instrument in the name or on behalf of the Corporation, and such authority may be general or confined to specific instances. The Board of Directors may, when it believes the interest of the Corporation will best be served thereby, authorize executive employment contracts that will have terms no longer than ten years and contain such other terms and conditions as the Board of Directors deems appropriate. Nothing herein will limit the authority of the Board of Directors to authorize employment contracts for shorter terms.

Section 7. Chairman of the Board of Directors. If the Board of Directors has elected a Chairman of the Board of Directors, he will preside at all meetings of the stockholders and the Board of Directors.

Section 8. Chief Executive Officer. The Chief Executive Officer will have general charge and supervision of the business of the Corporation and will exercise and perform all the duties incident to the office of the Chief Executive Officer. He will have direct supervision of the other officers and will also exercise and perform such powers and duties as may be assigned to him by the Board of Directors. During the absence or disability of the President, the Chief Executive Officer will exercise the powers and perform the duties of the President.

Section 9. President. The President will, in the absence of the Chairman of the Board of Directors, preside at all meetings of the stockholders and the Board of Directors. The President will have all powers and perform all duties incident to the office of President and will have such other powers and perform such other duties as the Board of Directors may from time to time prescribe or as the Chief Executive Officer may from time to time delegate to him.

Section 10. Vice Presidents. Each Vice President will have the usual and customary powers and perform the usual and customary duties incident to the office of Vice President, and will have such other powers and perform such other duties as the Board of Directors or any committee thereof may from time to time prescribe or as the Chief Executive Officer or the President may from time to time delegate to him. In the absence or disability of the President and the Chairman of the Board of Directors, a Vice President designated by the Board of Directors, or in the absence of such designation the Vice Presidents in the order of their seniority in office, will exercise the powers and perform the duties of the President.

Section 11. Secretary. The Secretary will attend all meetings of the stockholders and record all votes and the minutes of all proceedings in a book to be kept for that purpose. The Secretary will perform like duties for the Board of Directors and committees thereof when required. The Secretary will give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors. The Secretary will keep in safe custody the seal of the Corporation. The Secretary will be under the supervision of the Chief Executive Officer and the President. The Secretary will have such other powers and perform such other duties as the Board of Directors may from time to time prescribe or as the Chief Executive Officer or the President may from time to time delegate to him.

Section 12. Assistant Secretaries. The Assistant Secretaries in the order of their seniority in office, unless otherwise determined by the Board of Directors, will, in the absence or disability of the Secretary, exercise the powers and perform the duties of the Secretary. They will have such other powers and perform such other duties as the Board of Directors may from time to time prescribe or as the Chief Executive Officer or the President may from time to time delegate to them.

Section 13. Treasurer. The Treasurer will have responsibility for the receipt and disbursement of all corporate funds and securities, will keep full and accurate accounts of such receipts and disbursements, and will deposit or cause to be deposited all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be

designated by the Board of Directors. The Treasurer will render to the Directors whenever they may require it an account of the operating results and financial condition of the Corporation, and will have such other powers and perform such other duties as the Board of Directors may from time to time prescribe or as the Chief Executive Officer or the President may from time to time delegate to him.

Section 14. Assistant Treasurers. The Assistant Treasurers in the order of their seniority in office, unless otherwise determined by the Board of Directors, will, in the absence or disability of the Treasurer, exercise the powers and perform the duties of the Treasurer. They will have such other powers and perform such other duties as the Board of Directors may from time to time prescribe or as the Chief Executive Officer or the President may from time to time delegate to them.

Section 15. Bonding. The Corporation may secure a bond to protect the Corporation from loss in the event of defalcation by any of the officers, which bond may be in such form and amount and with such surety as the Board of Directors may deem appropriate.

ARTICLE VII

CERTIFICATES REPRESENTING SHARES

Section 1. Form of Certificates. Certificates, in such form as may be determined by the Board of Directors, representing shares to which stockholders are entitled will be delivered to each stockholder, provided that the Board of Directors may provide by resolution or resolutions that some or all of any of the classes or series of the Corporation’s stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Any certificates for shares of stock shall be in such form as the Board of Directors may from time to time prescribe. Any certificates of stock shall be signed by the Chief Executive Officer, the President, or a Vice President and the Secretary or an Assistant Secretary, and may be sealed with the seal of the Corporation or a facsimile thereof. If any certificate is countersigned by a transfer agent or an assistant transfer agent or registered by a registrar, either of which is other than the Corporation or an employee of the Corporation, the signatures of the Corporation’s officers may be facsimiles. In case any officer or officers who have signed, or whose facsimile signature or signatures have been used on such certificate or certificates, ceases to be such officer or officers of the Corporation, whether because of death, resignation or otherwise, before such certificate or certificates have been delivered by the Corporation or its agents, such certificate or certificates may nevertheless be adopted by the Corporation and be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature or signatures have been used thereon had not ceased to be such officer or officers of the Corporation.

Section 2. Lost Certificates. The Board of Directors may direct that a new certificate be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate to be lost or destroyed. When authorizing such issue of a new certificate, the Board of Directors, in its discretion and as a condition precedent to the issuance thereof, may require the

owner of such lost or destroyed certificate, or his legal representative, to advertise the same in such manner as it may require and/or to give the Corporation a bond, in such form, in such sum, and with such surety or sureties as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost or destroyed. When a certificate has been lost, apparently destroyed or wrongfully taken, and the holder of record fails to notify the Corporation within a reasonable time after such holder has notice of it, and the Corporation registers a transfer of the shares represented by the certificate before receiving such notification, the holder of record is precluded from making any claim against the Corporation for the transfer of a new certificate.

Section 3. Transfer Agent and Registrar. The Board of Directors may appoint one or more transfer agents and one or more registrars, and may require all certificates for shares, if any, to bear the manual or facsimile signature or signatures of any of them. Any such transfer agent and registrar shall transfer stock in accordance with its customary transfer procedures and in accordance with applicable laws, regulations, and these Bylaws.

Section 4. Denial of Preemptive Rights. No stockholder of the Corporation nor other person shall have any preemptive rights whatsoever.

ARTICLE VIII

FORUM FOR ADJUDICATION OF DISPUTES

Unless the Corporation consents in writing to the selection of an alternative forum, the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of the Corporation, (b) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation’s stockholders, (c) any action asserting a claim arising pursuant to any provision of the General Corporation Law of the State of Delaware (the “DGCL”) or the Corporation’s Certificate of Incorporation or these Bylaws (as either may be amended from time to time) or (d) any action asserting a claim governed by the internal affairs doctrine, shall be the Court of Chancery in the State of Delaware (or, if the Court of Chancery does not have subject-matter jurisdiction, another state or federal court within the State of Delaware). If any stockholder files an action within the scope of the preceding sentence in a court other than a court located within the State of Delaware (a “Foreign Action”), such stockholder shall be deemed to have consented to (x) the personal jurisdiction of the state and federal courts located within the State of Delaware in connection with any action brought in any such court to enforce the preceding sentence and (y) having service of process made upon such stockholder in any such action by service upon such stockholder’s counsel in the Foreign Action as agent for such stockholder. To the fullest extent permitted by law, any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Article VIII.

ARTICLE IX

GENERAL PROVISIONS

Section 1. Dividends. Dividends upon the outstanding shares of the Corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting. Dividends may be declared and paid in cash, in property, or in shares of the Corporation, subject to the provisions of the DGCL, as it may be amended from time to time, and the Certificate of Incorporation. The Board of Directors may fix in advance a record date for the purpose of determining stockholders entitled to receive payment of any dividend, such record date to be not more than 60 days prior to the payment date of such dividend or the Board of Directors may close the stock transfer books for such purpose for a period of not more than sixty days prior to the payment date of such dividend. In the absence of any action by the Board of Directors, the date upon which the Board of Directors adopts the resolution declaring such dividend will be the record date.

Section 2. Reserves. There may be created by resolution of the Board of Directors out of the surplus of the Corporation such reserve or reserves as the Directors from time to time, in their discretion, deem proper to provide for contingencies, or to equalize dividends, or to repair or maintain any property of the Corporation, or for such other purpose as the Directors may deem beneficial to the Corporation, and the Directors may modify or abolish any such reserve in the manner in which it was created. Surplus of the Corporation to the extent so reserved will not be available for the payment of dividends or other distributions by the Corporation.

Section 3. Telephone and Similar Meetings. Stockholders, Directors and committee members may participate in and hold meetings by means of conference telephone or similar communications equipment by which all persons participating in the meeting can hear each other. Participation in such a meeting will constitute presence in person at the meeting, except where a person participates in the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the ground that the meeting has not been lawfully called or convened.

Section 4. Books and Records. The Corporation will keep correct and complete books and records of account and minutes of the proceedings of its stockholders and Board of Directors, and will keep at its registered office or principal place of business, or at the office of its transfer agent or registrar, a record of its stockholders, giving the names and addresses of all stockholders and the number and class of the shares held by each.

Section 5. Fiscal Year. The fiscal year of the Corporation will be fixed by resolution of the Board of Directors.

Section 6. Seal. The Corporation may have a seal, and the seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. Any officer of the Corporation will have authority to affix the seal to any document requiring it.

Section 7. Advances of Expenses. Expenses (including attorneys’ fees) incurred by a Director or officer in defending any civil, criminal, administrative or investigative action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such Director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation as authorized in this Article IX. Such expenses (including attorneys’ fees) incurred by former Directors and officers or other employees and agents may be so paid upon such terms and conditions, if any, as the Corporation deems appropriate.

Section 8. Indemnification. The Corporation will indemnify its Directors to the fullest extent permitted by the DGCL and may, if and to the extent authorized by the Board of Directors, so indemnify its officers and any other person whom it has the power to indemnify against liability, reasonable expense or other matter whatsoever.

Section 9. Employee Benefit Plans. For purposes of this Article IX, the Corporation shall be deemed to have requested a Director or officer to serve as a trustee, employee, agent, or similar functionary of an employee benefit plan whenever the performance by him of his duties to the Corporation also imposes duties on or otherwise involves services by him to the plan or participants or beneficiaries of the plan. Excise taxes assessed on a Director or officer with respect to an employee benefit plan pursuant to applicable law are deemed fines. Action taken or omitted by a Director or officer with respect to an employee benefit plan in the performance of his duties for a purpose reasonably believed by him to be in the interest of the participants and beneficiaries of the plan is deemed to be for a purpose which is not opposed to the best interests of the Corporation.

Section 10. Insurance. The Corporation may at the discretion of the Board of Directors purchase and maintain insurance on behalf of the Corporation and any person whom it has the power to indemnify pursuant to law, the Certificate of Incorporation, these Bylaws or otherwise.

Section 11. Resignation. Any Director, officer or agent may resign by giving written notice to the Chief Executive Officer, the President, or the Secretary. Such resignation will take effect at the time specified therein or immediately if no time is specified therein. Unless otherwise specified therein, the acceptance of such resignation will not be necessary to make it effective.

Section 12. Amendment of Bylaws. These Bylaws may be altered, amended, or repealed at any meeting of the Board of Directors at which a quorum is present, by the affirmative vote of a majority of the Directors present at such meeting.

Section 13. Construction. Whenever the context so requires, the masculine shall include the feminine and neuter, and the singular shall include the plural, and conversely.

If any portion of these Bylaws shall be invalid or inoperative, then, so far as is reasonable and possible:

(a) The remainder of these Bylaws shall be considered valid and operative, and

(b) Effect shall be given to the intent manifested by the portion held invalid or inoperative.

Section 14. Relation to the Certificate of Incorporation. These Bylaws are subject to, and governed by, the Certificate of Incorporation of the Corporation.

EXHIBIT 31.1

CERTIFICATIONS

I, Gil Van Bokkelen, certify that:


1.	I have reviewed this quarterly report on Form 10-Q of Athersys, Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

May 8, 2019

/s/ Gil Van Bokkelen

Gil Van Bokkelen

Chief Executive Officer and

Chairman of the Board of Directors

EXHIBIT 31.2

CERTIFICATIONS

I, Laura K. Campbell, certify that:


1.	I have reviewed this quarterly report on Form 10-Q of Athersys, Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

May 8, 2019

/s/ Laura K. Campbell

Laura K. Campbell

Senior Vice President of Finance

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Athersys, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2019 , as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to such officer’s knowledge:


(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.



Date: May 8, 2019

			/s/ Gil Van Bokkelen
			Name: Gil Van Bokkelen
			Title: Chairman and Chief Executive Officer





			/s/ Laura K. Campbell
			Name: Laura K. Campbell
			Title: Senior Vice President of Finance

The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.