ATHERSYS, INC / NEW (Form: 10-Q, Received: 05/07/2020 17:06:55)

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, 2020



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission file number: 001-33876

Athersys, Inc.

(Exact name of registrant as specified in its charter)



Delaware		20-4864095
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)



3201 Carnegie Avenue, Cleveland, Ohio		44115-2634
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (216) 431-9900

Former name, former address and former fiscal year, if changed since last report: Not Applicable

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.001 per share	ATHX	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

The number of outstanding shares of the registrant’s common stock, $0.001 par value, as of May 4, 2020 was 196,474,528.

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ATHERSYS, INC.

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PART I. FINANCIAL INFORMATION
ITEM 1.	Financial Statements	4
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	17
ITEM 4.	Controls and Procedures	18
PART II. OTHER INFORMATION
ITEM 1A.	Risk Factors	18
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	18
ITEM 6.	Exhibits	19
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, 2020			December 31, 2019
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	32,692		$	35,041
Accounts receivable	17			17
Accounts receivable from Healios	259			945
Prepaid expenses and other	1,503			1,168
Total current assets	34,471			37,171
Equipment, net	3,039			2,882
Deposits and other	1,558			1,613
Total assets	$	39,068		$	41,666
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	10,650		$	9,048
Accounts payable to Healios	1,068			1,068
Accrued compensation and related benefits	872			773
Accrued clinical trial related costs	1,106			1,160
Accrued expenses and other	859			723
Deferred revenue - Healios	65			65
Total current liabilities	14,620			12,837
Advance from Healios	5,338			5,338
Other long-term liabilities	102			220
Stockholders’ equity:
Preferred stock, at stated value; 10,000,000 shares authorized, and no shares issued and outstanding at March 31, 2020 and December 31, 2019	—			—
Common stock, $0.001 par value; 300,000,000 shares authorized, and 170,770,089 and 159,791,585 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively	171			160
Additional paid-in capital	459,145			440,735
Stock subscription receivable from Healios	(7,040		)	—
Accumulated deficit	(433,268		)	(417,624		)
Total stockholders’ equity	19,008			23,271
Total liabilities and stockholders’ equity	$	39,068		$	41,666

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,
	2020			2019
Revenues
Contract revenue from Healios	$	—		$	1,441
Grant revenue	—			4
Total revenues	—			1,445
Costs and expenses
Research and development	12,095			11,415
General and administrative	3,474			3,106
Depreciation	190			184
Total costs and expenses	15,759			14,705
Loss from operations	(15,759		)	(13,260		)
Other income, net	115			304
Net loss and comprehensive loss	$	(15,644	)	$	(12,956	)
Net loss per share, basic and diluted	$	(0.10	)	$	(0.09	)
Weighted average shares outstanding, basic and diluted	162,715			145,964

See 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)

(Unaudited)



	Preferred Stock			Common Stock			Stock Subscription Receivable			Additional Paid-in Capital			Accumulated Deficit			Total Stockholders’ Equity
	Number of Shares	Stated Value		Number of Shares	Par Value		Stock Subscription Receivable			Additional Paid-in Capital			Accumulated Deficit			Total Stockholders’ Equity
Balance at December 31, 2019	—	$	—	159,791,585	$	160	$	—		$	440,735		$	(417,624	)	$	23,271
Stock-based compensation	—	—		—	—		—			1,280			—			1,280
Stock subscription receivable from Healios warrant exercise	—	—		4,000,000	4		(7,040		)	7,036			—			—
Issuance of common stock	—	—		6,825,000	7		—			10,243			—			10,250
Issuance of common stock under equity compensation plan	—	—		153,504	—		—			(149		)	—			(149		)
Net comprehensive loss	—	—		—	—		—			—			(15,644		)	(15,644		)
Balance at March 31, 2020	—	$	—	170,770,089	$	171	$	(7,040	)	$	459,145		$	(433,268	)	$	19,008



	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	—	—		3,825,000	4		5,603			—			5,607
Issuance of common stock under equity compensation plan	—	—		158,494	—		(69		)	—			(69		)
Net comprehensive loss	—	—		—	—		—			(12,956		)	(12,956		)
Balance at March 31, 2019	—	$	—	148,276,233	$	148	$	422,638		$	(385,998	)	$	36,788

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,
	2020			2019
Operating activities
Net loss	$	(15,644	)	$	(12,956	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	190			184
Stock-based compensation	1,280			1,090
Changes in operating assets and liabilities:
Accounts receivable	—			251
Accounts receivable from Healios - billed and unbilled	686			2,261
Prepaid expenses, deposits and other	(279		)	1,101
Accounts payable and accrued expenses	1,664			1,210
Deferred revenue - Healios	—			499
Advances and deposits from Healios	—			845
Net cash used in operating activities	(12,103		)	(5,515		)
Investing activities
Purchases of equipment	(347		)	(64		)
Net cash used in investing activities	(347		)	(64		)
Financing activities
Proceeds from issuance of common stock	10,250			5,607
Shares retained for withholding tax payments on stock-based awards	(149		)	(69		)
Net cash provided by financing activities	10,101			5,538
Decrease in cash and cash equivalents	(2,349		)	(41		)
Cash and cash equivalents at beginning of the period	35,041			51,059
Cash and cash equivalents at end of the period	$	32,692		$	51,018

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, 2020 and 2019

1. Background and Basis of Presentation

Background: We are an international biotechnology company focused in the field of regenerative medicine and operate in one business segment. Our operations consist of research, preclinical development and clinical development activities, and our most advanced program is in Phase 3 clinical development.

We have incurred losses since our inception in 1995 and had an accumulated deficit of $433.3 million at March 31, 2020, and we will not commence sales of our clinical product candidates until they receive regulatory approval for commercialization. We will require significant additional capital to continue our research and development programs, including progressing our clinical product candidates to commercialization and preparing for commercial-scale manufacturing and sales. At March 31, 2020, we had available cash and cash equivalents of $32.7 million. In April 2020, we completed an underwritten public offering of common stock generating gross proceeds of approximately $57.6 million. Also, in March 2020, HEALIOS K.K. (“Healios”), our collaborator in Japan, elected to exercise its warrant in full, and we generated proceeds of approximately $7.0 million received in April 2020. We believe that these recent proceeds combined with our cash on hand, expected cash receipts primarily attributed to our collaboration with Healios and proceeds from the equity facility that we have in place 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. We expect that our near-term milestones and clinical trial results, including the results of Healios’ clinical trials, will have a significant impact, favorable or unfavorable, on our ability to access capital from potential third-party commercial partners or the equity capital markets. Depending on the outcome of these milestones and clinical trial results, we may accelerate, defer or stage the timing of certain programs until we become cash flow positive from the sales of our clinical products, if they are approved for marketing.

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, 2019. The accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and Regulation S-X. Accordingly, since they are interim statements, the accompanying financial statements do not include all of the information and notes required by GAAP for complete financial statements. The accompanying financial statements reflect all adjustments, consisting of normal recurring adjustments, that are, in the opinion of management, necessary for a fair presentation of financial position and results of operations for the interim periods presented. Interim results are not necessarily indicative of results for a full year.

Use of Estimates: The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Our critical accounting policies, estimates and assumptions are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which is included in this Quarterly Report on Form 10-Q.

2. Recently Issued Accounting Standards

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This ASU replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. Subsequent to issuing ASU 2016-13, the FASB issued ASU 2019-10, Financial Instruments-Credit Losses (Topic 326): Effective Dates, delaying the effective date for smaller reporting companies until January 2023. We are currently evaluating the potential impact of adoption of this standard on our consolidated financial statements and disclosures, and we do not intend to early adopt.

In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract (“ASU 2018-15”). ASU 2018-15 requires implementation costs incurred by customers in cloud computing arrangements (i.e., hosting arrangements) to be capitalized under the same premises of authoritative guidance for internal-use software and deferred over the noncancellable term of the cloud computing arrangements plus any optional renewal periods reasonably certain to be exercised by the customer or for which exercise is controlled by the provider. ASU 2018-15 is effective for annual and interim

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periods beginning after December 15, 2019. The amendments in ASU 2018-15 should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. We adopted this standard on a prospective basis effective January 1, 2020 and such capitalized costs are recorded in Deposits and Other on our unaudited condensed consolidated balance sheet at March 31, 2020. The adoption of this standard did not have a significant impact on our consolidated financial statements.

In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (“Topic 808”): Clarifying the Interaction between Topic 808 and Topic 606. The amendments in this update: (i) clarify that certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606 when the collaborative arrangement participant is a customer in the context of a unit of account and in those situations, all the guidance in Topic 606 should be applied, including recognition, measurement, presentation and disclosure requirements; (ii) add unit-of-account guidance in Topic 808 to align with the guidance in Topic 606 (that is, a distinct good or service) when an entity is assessing whether the collaborative arrangement or a part of the arrangement is within the scope of Topic 606; and (iii) require that in a transaction with a collaborative arrangement participant that is not directly related to sales to third parties, presenting the transaction together with revenue recognized under Topic 606 is precluded if the collaborative arrangement participant is not a customer. The provisions of ASU 2018-18 are effective for years beginning after December 15, 2019. We have adopted the standard effective January 1, 2020 prospectively, which had no impact on our consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The ASU simplifies the accounting for income taxes, changes the accounting for certain income tax transactions, and other minor changes. This guidance is effective for fiscal years beginning after December 15, 2020, including interim periods, with early adoption permitted. We are currently assessing the impact that this ASU will have on our consolidated financial statements and disclosures.

3. Net Loss per Share

Basic and diluted net loss per share have been computed using the weighted-average number of shares of common stock outstanding during the period. We have outstanding stock-based awards that are not used in the calculation of diluted net loss per share because to do so would be anti-dilutive.

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,
	2020	2019
Stock-based awards	16,662	12,431
Healios warrant – see Note 6	—	17,000
Total	16,662	29,431

4. Collaborative Arrangements and Revenue Recognition

Healios Collaboration

We have a licensing collaboration with Healios to primarily develop and commercialize our cell therapy technologies for certain disease indications in Japan, pursuant to which we received nonrefundable license fee payments 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. Healios is responsible for the development and commercialization of the licensed products in the licensed territories, and we provide certain services to Healios for which we are paid.

Refer to Note 6 regarding Healios exercise of a warrant in 2020.

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Healios Revenue Recognition

At the inception of the Healios arrangement and again each time that the arrangement is modified, all material performance obligations are identified, which currently include (i) licenses to our technology, (ii) product supply services and (iii) services to transfer technology to a contract manufacturer on Healios’ behalf. It was determined that these performance obligations are separate and distinct within the context of the contract. We determine the standalone selling price of each performance obligation and the related transaction price, taking into account variable consideration using the expected value or most likely amount method and reassessing our estimates 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.

The remaining transaction price for the performance obligations that were not yet delivered is not significant at March 31, 2020. At March 31, 2020, the contract liability, included in Deferred Revenue - Healios on the unaudited condensed consolidated balance sheets, is properly classified as a current liability since the rights to consideration are expected to be satisfied, in all material respects, within one year.

Advance from Healios

Certain clinical product supply services that were concluded in 2019 involved a cost-sharing arrangement, the proceeds from which may either (i) result in a reduction in the proceeds we receive from Healios upon the achievement of two potential milestones and an increase to a commercial milestone under the license agreement for stroke or (ii) be repaid to Healios at our election, as defined. The cost-sharing proceeds received are recognized in Advance from Healios on the unaudited condensed consolidated balance sheets until the earlier of the milestones being achieved or such amounts being repaid to Healios at our election, at which time, the culmination of the earnings process or the repayment will be complete.

Disaggregation of Revenues

We recognize license-related amounts, including upfront payments, exclusivity fees, additional disease indication fees and milestones at a point in time when earned. Similarly, product supply revenue is recognized at a point in time upon delivery, as defined, while service revenue (e.g., technology transfer) is recognized when earned over time in proportion to the contractual services provided. 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.

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



	Three months ended March 31, 2020				Three months ended March 31, 2019
	Point in Time		Over Time		Point in Time		Over Time
Contract Revenue from Healios
Product supply revenue	$	—	$	—	$	966	$	—
Service revenue	—		—		—		475
Total disaggregated revenues	$	—	$	—	$	966	$	475

5. Stock-based Compensation

Our 2019 Equity and Incentive Compensation Plan (the “EICP”) authorized at inception an aggregate of approximately 18,500,000 shares of common stock for awards to employees, directors and consultants. In the three-month period ended March 31, 2020, we granted 80,000 stock options to our employees under the EICP. Also, in the first quarter of 2020 we awarded inducement stock options to purchase 1,000,000 shares of our common stock. The EICP authorizes the issuance of stock-based compensation in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares and units, and other stock-based awards.

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As of March 31, 2020, a total of 14,123,833 shares were available for issuance under our EICP, and stock-based awards to purchase 15,661,772 shares of common stock were outstanding under our current and former equity incentive plans, and 1,000,000 shares of common stock were outstanding as inducement awards granted outside of our equity incentive plans. For the three-month periods ended March 31, 2020 and 2019, stock-based compensation expense was approximately $1.3 million and $1.1 million, respectively. At March 31, 2020, total unrecognized estimated compensation cost related to unvested stock-based awards was approximately $8.3 million, which is expected to be recognized by the end of 2024 using the straight-line method.

6. Stockholders’ Equity

Equity Purchase Agreement

We have had equity purchase agreements in place since 2011 with Aspire Capital Fund LLC (“Aspire Capital”) that provide us the ability to sell shares to Aspire Capital from time to time. Currently, we have an agreement with Aspire Capital that was entered into on November 5, 2019 and includes Aspire Capital’s commitment to purchase up to an aggregate of $100.0 million shares of our common stock over a defined timeframe. The terms of the 2019 equity facility are similar to the previous equity facilities with Aspire Capital, and we issued 350,000 shares of our common stock to Aspire Capital as a commitment fee in November 2019 and filed a registration statement for the resale of 31,000,000 shares of common stock in connection with the equity facility. Our prior equity facility that was entered into in February 2018 was fully utilized and terminated during the first quarter of 2020.

We sold 6,825,000 shares to Aspire Capital at an average price of $1.50 per share in the first quarter of 2020, generating proceeds of $10.2 million. We sold 3,825,000 shares to Aspire Capital at an average price of $1.47 per share in the first quarter of 2019, generating proceeds of $5.6 million.

Healios Warrant

In March 2020, Healios elected to exercise its warrant in full, and we issued 4,000,000 shares of our common stock at an exercise price equal to the reference price of $1.76 per share, as defined in the warrant. The proceeds of approximately $7.0 million were received in April 2020 in accordance with the terms of the warrant and are reflected on the unaudited condensed consolidated balance sheet at March 31, 2020 as a subscription receivable.

7. 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.

8. Subsequent Events

In April 2020, we completed an underwritten public offering of common stock generating gross proceeds of approximately $57.6 million and net proceeds of approximately $53.7 million through the issuance of 25,587,500 shares of common stock at an offering price of $2.25 per share.

In April 2020, we were approved to receive loan proceeds in the amount of $1.3 million under the Paycheck Protection Program (“PPP”), established as part of the Coronavirus Aid, Relief and Economic Security Act to provide loans to qualifying businesses. We applied for the loan based on the initial criteria established by the PPP and guidance of the U.S. Department of the Treasury (“Treasury Department”). Because additional guidance recently issued by the Treasury Department after we had been approved for the PPP loan indicated that public companies may not be eligible for PPP loans, we did not accept the PPP loan.

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

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Form 10-K for the year ended December 31, 2019. 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. We are developing our MultiStem cell therapy product, a patented, adult-derived “off-the-shelf” stem cell product, initially for disease indications in the neurological, inflammatory and immune, cardiovascular and other critical care indications. We have ongoing clinical trials evaluating this potential regenerative medicine product, and our most advanced program is a Phase 3 clinical trial for treatment of ischemic stroke. We also launched in April 2020 a Phase 2/3 study for the treatment of patients with COVID-19 induced acute respiratory distress syndrome, or ARDS.

In December 2019, a novel strain of the coronavirus disease, or COVID-19, was identified in Wuhan, China, and has since spread to other countries, including the United States. In March 2020, the World Health Organization characterized COVID-19 as a pandemic. Several countries, including the United States, have taken steps to restrict travel, temporarily close businesses and issue quarantine orders, and it remains unclear how long such measures will remain in place.

As of the date of this Quarterly Report on Form 10-Q, the COVID-19 pandemic has not had a significant adverse effect on our business. However, it is possible that the COVID-19 pandemic could adversely affect our business, results of operations, financial condition or liquidity in the future. For example, it could impact the timing and enrollment of our collaborators’ planned or ongoing clinical trials, delaying clinical site initiation, regulatory review and the potential receipt of regulatory approvals, payment of milestones under our license agreements and commercialization of one or more of our product candidates, if approved. The COVID-19 pandemic could also disrupt the production capabilities of our contract manufacturing partners and materially and adversely impact our MultiStem trial supply chain. Further, the outbreak of COVID-19 has heightened the risk that a significant portion of our workforce will suffer illness or otherwise be unable to work. The impact of the COVID-19 pandemic is fluid and continues to evolve, and therefore, we cannot currently predict the extent to which our business, clinical trials, results of operations, financial condition or liquidity will ultimately be impacted.

Current Programs

Our MultiStem cell therapy product development programs in the clinical development stage include the following:

•Ischemic Stroke: We are conducting a pivotal Phase 3 clinical trial of MultiStem cell therapy for the treatment of ischemic stroke, referred to as MASTERS-2. The MASTERS-2 study has received several regulatory distinctions including Special Protocol Assessment designation, Fast Track designation and Regenerative Medicine Advanced Therapy designation from the U.S. Food and Drug Administration, or FDA, as well as a Final Scientific Advice positive opinion from the European Medicines Agency. We believe these designations could accelerate the development, regulatory review and subsequent commercialization of products like MultiStem cell therapy for ischemic stroke, if future clinical evaluation demonstrates appropriate safety and therapeutic effectiveness.

In addition, Healios K.K., or Healios, has an ongoing clinical trial, named TREASURE, evaluating the safety and efficacy of administration of MultiStem cell therapy for the treatment of ischemic stroke in Japan. TREASURE will be evaluated under the progressive framework for regenerative medicine therapies in Japan. Under the new framework, Healios’ ischemic stroke program has been awarded the SAKIGAKE designation by the Pharmaceuticals and Medical Devices Agency, which is designed to expedite regulatory review and approval, and is analogous to Fast Track designation from the FDA.

We initiated the MASTERS-2 study with a small number of high-enrolling sites and are bringing on additional sites over time in line with clinical product supply and clinical operations objectives. We look forward to the completion of both the MASTERS-2 and TREASURE trials and using the accelerated pathways afforded to us by the regulators in the United States, Europe and Japan.

•ARDS: In January 2020, we announced one-year follow-up results from our exploratory clinical study of the intravenous administration of MultiStem cell therapy to treat patients who are suffering from ARDS, or the MUST-ARDS study. The study results provide further confirmation that the MultiStem treatment was well-tolerated and importantly, there were lower mortality and a greater number of ventilator-free and ICU-free days in the MultiStem-treated patient group compared to the placebo group. In April 2020, the FDA authorized the initiation of a Phase 2/3 pivotal study to assess the safety and efficacy of MultiStem therapy in subjects with moderate to severe ARDS induced COVID-19, or the MACOVIA study, and the first patient was enrolled. The MACOVIA study features an open-label lead-in followed by a double-blinded, randomized, placebo-controlled Phase 2/3 portion, and the study is designed to enroll approximately 400 patients at leading pulmonary critical care centers throughout the United States.

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In Japan, Healios continues enrolling patients with pneumonia-induced ARDS in the ONE-BRIDGE study, and in April 2020, Healios announced the addition of a small cohort to examine the treatment of COVID-19 induced ARDS patients. We look forward to the results of this study.

•Trauma: In April 2020, the FDA authorized the initiation of a Phase 2 clinical trial evaluating MultiStem cell therapy for the early treatment of traumatic injuries and the subsequent complications that result following severe trauma. The trial will be conducted by The University of Texas Health Science Center at Houston at the Memorial Hermann-Texas Medical Center in Houston, Texas, one of the busiest Level 1 trauma centers in the United States. This study is being supported under a grant awarded to the University of Texas Health Science Center at Houston McGovern Medical School from the Medical Technology Enterprise Consortium, and the Memorial Hermann Foundation will provide additional funding. Athersys will provide the investigational clinical product for the trial, as well as regulatory and operational support.

As part of the U.S. Government’s response to the outbreak of the 2019 novel coronavirus, COVID-19, we have held discussions with and made presentations under the Medical Countermeasures TechWatch program to the Biomedical Advanced Research and Development Authority, or BARDA, and to the U.S. government interagency COVID-19 Medical Countermeasures task force led by BARDA that also included other relevant governmental agencies and public health institutions. As a result of this review, our program involving administration of MultiStem for the treatment of ARDS was designated as highly relevant by the Medical Countermeasures TechWatch program. Following infection with COVID-19, or other viruses or pathogens that trigger severe pulmonary inflammation, ARDS can occur, resulting in significant morbidity or death. Discussions between Athersys and BARDA are continuing, and our full proposal submitted to BARDA was rated as acceptable. We are currently in discussions with BARDA regarding the finalization and implementation of a potential collaboration.

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. In addition to our manufacturing efforts, we are also stepping up our planning and preparations for the potential commercialization of our MultiStem product candidate, including strategies for market access and reimbursement. 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.

We have a collaboration with Healios primarily for the development and commercialization in Japan of MultiStem cell therapy for ischemic stroke and ARDS. We provide manufacturing and related services to Healios for which we are compensated.

Financial

In connection with an equity investment in us made by Healios in March 2018, Healios received a warrant to purchase shares of our common stock. On March 26, 2020, Healios elected to exercise its warrant in full, and we issued 4,000,000 shares of our common stock at an exercise price equal to the reference price of $1.76 per share, as defined in the warrant. The proceeds of approximately $7.0 million were received on April 2, 2020 in accordance with the terms of the warrant and are reflected on the unaudited condensed consolidated balance sheet at March 31, 2020 as a subscription receivable.

In April 2020, we were approved to receive loan proceeds in the amount of $1.3 million under the Paycheck Protection Program, or PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act to provide loans to qualifying businesses. We applied for the loan based on the initial criteria established by the PPP and guidance of the U.S. Department of the Treasury, or the Treasury Department. Because additional guidance recently issued by the Treasury Department after we had been approved for the PPP loan indicated that public companies may not be eligible for PPP loans, we did not accept the PPP loan.

We have had equity purchase agreements in place since 2011 with Aspire Capital Fund LLC, or Aspire Capital, that provide us the ability to sell shares to Aspire Capital from time to time. Currently, we have an agreement with Aspire Capital that was entered into on November 5, 2019 and includes Aspire Capital’s commitment to purchase up to an aggregate of $100.0 million shares of our common stock over a defined timeframe. Our prior equity facility that was entered into in February 2018 was fully utilized and terminated during the first quarter of 2020. During the quarter ended March 31, 2020, we sold 6,825,000 shares of common stock to Aspire Capital at an average price of $1.50 per share, generating proceeds of $10.2 million.

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We have entered into a series of agreements with Healios, our collaborator in Japan and currently our largest stockholder. Under the collaboration that began in 2016, Healios is responsible for the development and commercialization of the MultiStem product for the licensed fields in the licensed territories, and we provide services to Healios for which we are compensated. Each license agreement with Healios has defined economic terms, and we may receive success-based milestone payments, some of which may be subject to credits. While there is no assurance that we will receive milestone proceeds under the Healios collaboration, any milestone payment we receive is non-refundable and non-creditable towards future royalties or any other payment due from Healios. Also, we are entitled to receive tiered royalties on net product sales, as defined in the license agreements.

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. Research and development expenses consist primarily of external clinical and preclinical study fees, manufacturing and process development 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, 2020 and 2019

Revenues. There were no revenues for the three months ended March 31, 2020 compared to $1.4 million for the three months ended March 31, 2019. The revenues in the prior period were primarily generated from our collaboration with Healios related to manufacturing services performed. Our collaboration revenues fluctuate from period-to-period based on new licenses conferred and the delivery of goods and services under our arrangement with Healios.

Research and Development Expenses. Research and development expenses increased to $12.1 million for the three months ended March 31, 2020 from $11.4 million for the comparable period in 2019. The $0.7 million net increase is associated with increases in research supplies of $0.7 million, personnel costs of $0.3 million, outside services of $0.2 million, consulting costs of $0.1 million, stock compensation costs of $0.1 million and other research and development costs of $0.2 million, with such increases partially offset by decreases in clinical trial and manufacturing process development costs of $0.9 million. Our clinical development, clinical manufacturing and manufacturing process development expenses vary over time based on the timing and stage of clinical trials underway, manufacturing campaigns for clinical trials and manufacturing process development projects. These variations in activity level may also impact our accounts payable, accrued expenses, prepaid expenses and deposits balances from period-to-period. Other than external expenses for our clinical and preclinical programs, we generally do not track our research expenses by project; rather, we track such expenses by the type of cost incurred.

General and Administrative Expenses. General and administrative expenses increased to $3.5 million for the three months ended March 31, 2020 from $3.1 million in the comparable period in 2019. The $0.4 million increase was primarily due to increased personnel costs, outside services and stock compensation costs. We expect our annual 2020 general and administrative expenses to increase compared to 2019.

Depreciation. Depreciation expense was consistent at $0.2 million for the three months ended March 31, 2020 and March 31, 2019. We expect that our annual depreciation will increase in 2020 compared to 2019.

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

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Liquidity and Capital Resources

Our sources of liquidity include our cash balances. At March 31, 2020, we had $32.7 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 $433.3 million at March 31, 2020. 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, discover and develop therapeutic product candidates and develop business collaborations, and we may use our sources of capital to acquire certain technologies and assets.

We are entitled to receive potential milestones payments, subject to certain credits, and royalties from Healios under our licensed programs. We also receive payments from Healios for clinical product supply and other manufacturing-related services. Certain proceeds from Healios may be used by Healios to offset milestone payments that may become due in the future.

In March 2020, Healios elected to exercise a warrant in full, and we issued 4,000,000 shares of our common stock at an exercise price equal to the reference price of $1.76 per share, in accordance with the terms of the warrant. The proceeds of approximately $7.0 million were received in April 2020.

We have had equity purchase agreements in place since 2011 with Aspire Capital that provide us the ability to sell shares to Aspire Capital from time to time. Currently, we have an agreement with Aspire Capital that was entered into in November 5, 2019 and includes Aspire Capital’s commitment to purchase up to an aggregate of $100.0 million of shares of our common stock over a defined timeframe. Our prior equity facility that was entered into in February 2018 was fully utilized and terminated during the first quarter of 2020. During the quarter ended March 31, 2020, we sold 6,825,000 shares of common stock to Aspire Capital at an average price of $1.50 per share. During the quarter ended March 31, 2019, we sold 3,825,000 shares of common stock to Aspire Capital at an average price of $1.47 per share.

We will require substantial additional funding in order to continue our research and product development programs, including clinical trials of our product candidates and process development and manufacturing projects, and to prepare for possible approval and commercial activities. We intend to generate additional funding to meet our needs through business development and other transactions, collaborator achievement of milestones under our agreements, grant-funding activities, and other activities. At March 31, 2020, we had available cash and cash equivalents of $32.7 million. We intend to meet our short-term liquidity needs with available cash and recent proceeds from the underwritten public offering of common stock and Healios’ warrant exercise, combined with expected cash receipts from our collaboration with Healios and potential proceeds from business development. Over the longer term, we will continue to make use of available cash and may raise capital from time to time through our equity facility, subject to any volume and price limitations, and equity offerings. We may also manage our cash by deferring certain discretionary costs and staging certain development costs to extend our operational runway, as needed. Over time, we may consider borrowing from financing institutions.

Our capital requirements over time depend on a number of factors, including progress in our clinical development programs, our clinical and preclinical pipeline of additional opportunities and their stage of development, additional external costs such as payments to contract research organizations and contract manufacturing organizations, additional personnel costs and the costs in filing and prosecuting patent applications and enforcing patent claims. Furthermore, delays in product supply for our and Healios’ clinical trials may impact the timing and cost of such studies. The availability of funds impacts our ability to advance multiple clinical programs concurrently, and any shortfall in funding could result in our having to delay or curtail research and development efforts. Further, these requirements may change at any time due to technological advances, business development activity or competition from other companies. We cannot assure you that adequate funding will be available to us or, if available, that it will be available on acceptable terms.

We expect to continue to incur substantial losses through at least the next several years and may incur losses in subsequent periods. The amount and timing of our future losses are highly uncertain. Our ability to achieve and thereafter sustain

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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 $12.1 million for the three months ended March 31, 2020 compared to cash used of $5.5 million for the three months ended March 31, 2019. Net cash used in operating activities may fluctuate significantly on a quarter-to-quarter basis, as it has over the past several years, primarily due to the receipt of fees from our collaborators and payment of specific clinical trial costs, such as clinical manufacturing campaigns, contract research organization costs and manufacturing process development projects. These variations in activity level may also impact our accounts payable, accrued expenses, prepaid expenses and deposit balances from period-to-period.

Net cash used in investing activities was $0.3 million and $0.1 million for the three months ended March 31, 2020 and 2019, respectively. The fluctuations over the periods were due to timing of equipment purchases primarily for our manufacturing process development activities. We expect that our capital equipment expenditures for 2020 will be higher than our expenditures in 2019.

Financing activities provided cash of $10.1 million and $5.5 million for the three months ended March 31, 2020 and 2019, respectively, primarily from the issuance of common stock to Aspire Capital under our equity purchase agreements. Also included in financing activities for the three months ended March 31, 2020 and March 31, 2019 are shares retained for withholding tax payments on stock-based awards.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Critical Accounting Policies and Management Estimates

The SEC defines critical accounting policies as those that are, in management’s view, important to the portrayal of our financial condition and results of operations and demanding of management’s judgment. Our discussion and analysis of financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates on experience and on various assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from those estimates. A description of these accounting policies and estimates is included in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2019. 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, 2019.

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, 2019.

Cautionary Note on Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. These forward-looking statements relate to, among other things, the expected timetable for development of our product candidates, our growth strategy, and our future financial performance, including our operations, economic performance, financial condition, prospects, and other future events. We have attempted to identify forward-looking statements by using such words as “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “should,” “suggest,” “will,” or other similar expressions. These forward-looking statements are only predictions and are largely based on our current expectations. These forward-looking statements appear in a number of places in this Quarterly Report on Form 10-Q.

In addition, a number of known and unknown risks, uncertainties, and other factors could affect the accuracy of these statements. Some of the more significant known risks that we face are the risks and uncertainties inherent in the process of discovering, developing, and commercializing products that are safe and effective for use as therapeutics, including the uncertainty regarding market acceptance of our product candidates and our ability to generate revenues. The following risks and uncertainties may cause our actual results, levels of activity, performance, or achievements to differ materially from any future results, levels of activity, performance, or achievements expressed or implied by these forward-looking statements:

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•	our ability to raise capital to fund our operations;


•	our ability to successfully finalize and implement an alliance with BARDA, and the terms of any such alliance, including the amount, if any, of funding that we might receive;


•	the success of our MACOVIA study and MATRICS-1 clinical trial;

•

the timing and nature of results from MultiStem clinical trials, including the MASTERS-2 Phase 3 clinical trial, the Phase 2 clinical trial conducted by The University of Texas Health Science Center at Houston at the Memorial Hermann-Texas Medical Center evaluating MultiStem cell therapy for the early treatment of traumatic injuries, and the Healios TREASURE and ONE-BRIDGE clinical trials in Japan;


•	the impact on our business, results of operations and financial condition from the ongoing and global COVID-19 pandemic, or any other pandemic, epidemic or outbreak of infectious disease in the United States;


•	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, acute myocardial infarction and trauma, and the prevention of graft-versus-host disease and other disease indications;


•	changes in external market factors;


•	changes in our industry’s overall performance;


•	changes in our business strategy;


•	our ability to protect and defend our intellectual property and related business operations, including the successful prosecution of our patent applications and enforcement of our patent rights, and operate our business in an environment of rapid technology and intellectual property development;


•	our possible inability to realize commercially valuable discoveries in our collaborations with pharmaceutical and other biotechnology companies;


•	our ability to meet milestones and earn royalties under our collaboration agreements, including the success of our collaboration with Healios;


•	our collaborators’ ability to continue to fulfill their obligations under the terms of our collaboration agreements and generate sales related to our technologies;


•	the success of our efforts to enter into new strategic partnerships and advance our programs, including, without limitation, in North America, Europe and Japan;


•	our possible inability to execute our strategy due to changes in our industry or the economy generally;


•	changes in productivity and reliability of suppliers;


•	the success of our competitors and the emergence of new competitors; and


•	the risks mentioned elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2019 under Item 1A, “Risk Factors” and our other filings with the SEC.

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, 2019.

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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 Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) 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 Chief Financial Officer have concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective.

Changes in internal control over financial reporting

During the last fiscal quarter covered by this Quarterly Report on Form 10-Q, there has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1A. Risk Factors.

The following disclosure supplements the discussion of certain risks and uncertainties previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019. These risks and uncertainties, along with those previously disclosed, could materially adversely affect our business, results of operations, financial position or cash flows.

We face risks related to the current COVID-19 pandemic and other health epidemics and outbreaks.

The global outbreak of COVID-19 is currently impacting countries, communities, supply chains and markets. As of the date of this Quarterly Report on Form 10-Q, the COVID-19 pandemic has not had a significant adverse effect on our business. However, it is possible that the COVID-19 pandemic could adversely affect our business, results of operations, financial condition or liquidity in the future. For example, it could impact the timing and enrollment of our collaborators’ planned or ongoing clinical trials, delaying clinical site initiation, regulatory review and the potential receipt of regulatory approvals, payment of milestones under our license agreements and commercialization of one or more of our product candidates, if approved. The COVID-19 pandemic could also disrupt the production capabilities of our contract manufacturing partners and materially and adversely impact our MultiStem trial supply chain. Further, the outbreak of COVID-19 has heightened the risk that a significant portion of our workforce will suffer illness or otherwise be unable to work. The impact of the COVID-19 pandemic is fluid and continues to evolve, and therefore, we cannot currently predict the extent to which our business, clinical trials, results of operations, financial condition or liquidity will ultimately be impacted.

To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2019, such as those relating to our significant operating losses, our need for substantial additional funding to develop our products and support our operations, delays or difficulties in developing and commercializing our MultiStem product candidates, and delays in clinical trials and regulatory approvals relating to our products.

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

During the quarter ended March 31, 2020, we sold an aggregate of 6,825,000 shares of common stock to Aspire Capital under our equity purchase agreements, generating aggregate proceeds of $10.2 million. Each issuance of these unregistered shares qualifies as an exempt transaction pursuant to Section 4(a)(2) of the Securities Act. Each issuance qualified for exemption under Section 4(a)(2) of the Securities Act because none involved a public offering. Each offering was not a public offering due to the number of persons involved, the manner of the issuance and the number of securities issued. In addition, in each case Aspire Capital had the necessary investment intent.

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Item 6. Exhibits.



Exhibit No.		Description

10.1†		Offer Letter Agreement, dated as of January 9, 2020, by and between Athersys, Inc. and Ivor Macleod.

10.2†		Employment Agreement, dated as of January 31, 2020, by and between Athersys, Inc. and Ivor Macleod.

10.3†		Inducement Award Agreement, dated as of January 31, 2020, by and between Athersys, Inc. and Ivor Macleod.

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 Ivor Macleod, Chief Financial Officer, 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 Ivor Macleod, Chief Financial Officer, 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

†		Indicates management contract or compensatory plan, contract or arrangement in which one or more directors or executive officers of the registrant may be participants.

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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 7, 2020		/s/ Gil Van Bokkelen
		Gil Van Bokkelen
		Chairman and Chief Executive Officer
		(principal executive officer authorized to sign on behalf of the registrant)



		/s/ Ivor Macleod
		Ivor Macleod
		Chief Financial Officer
		(principal financial officer authorized to sign on behalf of the registrant)

EXHIBIT 10.1

CONFIDENTIAL

Sent by e-mail

January 9, 2020

Mr. Ivor Macleod

c/o Athersys, Inc.

3201 Carnegie Avenue

Cleveland, Ohio 44115-2634

Dear Ivor,

Speaking on behalf of the entire Athersys team, we have enjoyed our interactions over the past several weeks. We believe that you could bring substantial leadership and experience to Athersys, Inc. (the “Company”) and build on our established foundation to help successfully prepare and position the Company for its next stage of growth and development. As such, we are pleased to extend to you an offer to join the Company as Chief Financial Officer, with a start date of January 31, 2020 (or such later date as mutually agreed to by you and the Company). In that role, you will report to Gil Van Bokkelen, Chairman & Chief Executive Officer (“CEO”), you will work primarily at the Company’s office in Cleveland, Ohio, and your primary responsibilities will include, but will not be limited to, the following:


•	Work with the CEO and other members of the leadership team to provide strategic input and leadership for the organization;


•	Provide financial expertise and leadership as part of the Executive Management team;


•	Lead the financial planning process;


•	Analyze financial strengths and weaknesses, assess financial risks, provide strategic input and propose corrective actions where appropriate;


•	Ensure timely preparation and submission of accurate financial reports;


•	Work with other members of the executive team to ensure effective Investor Relations strategy and capabilities, including interactions with investment banks, analysts, institutional fund managers, other current and/or potential shareholders, and the media where appropriate;


•	Engage in effective communications with current and potential corporate partners, and provide strategic input and evaluate new business opportunities where and when appropriate;

Athersys, Inc. l 3201 Carnegie Avenue, Cleveland, Ohio 44115-2634 l Phone 216.431.9900 l Fax 216.361.9495

EXHIBIT 10.1


•	Help prepare the Company for the envisioned transition into commercialization;


•	Develop internal and external relationships and integrate fully into the Company, industry and its stakeholders; and


•	Expand and improve the reporting and analytical capabilities of our ERP system to support commercial operations.

In your role as a senior Company executive, you will participate in management discussions and decision-making with respect to Company operations, strategy and compliance.

In your capacity as Chief Financial Officer, your compensation will include the following:


•	An annual salary of $410,000 per year, payable monthly, during your employment with eligibility for merit increases from time to time at the discretion of the Board of Directors or its Compensation Committee;

•

Beginning in 2020, participation during your employment in the Company’s annual cash incentive compensation program on terms substantially similar as those that apply to other executive officers of the Company, with a target opportunity of 40% of your annual salary (and no guaranteed minimum payment), subject to Company and/or individual performance as designed annually for such program by the Board of Directors or its Compensation Committee. Such 40% target opportunity will be weighted 80% toward corporate goal achievement and 20% toward individual goal achievement. Each annual cash incentive award will be subject to the specific approval of the Board of Directors or its Compensation Committee;


•	As an inducement to your acceptance of the position, based on our negotiations with you, we are pleased to agree on providing you with the following initial equity award, effective on your start date (“Grant Date”), which award is subject to the specific approval of the Board of Directors or its Compensation Committee and the terms of the governing Company equity plan:

A stock option award to purchase 600,000 shares of Company common stock at a per share exercise price equal to the closing price of a share of Athersys common stock on the Grant Date, with the award generally vesting over a four-year period and with a ten-year term. Vesting shall occur during that period with a one-year “cliff” for the first tranche (150,000 shares) and the remainder vesting quarterly in substantially equal installments over the remaining three years. The remaining terms of the award will be based substantially on a form Company stock option agreement approved for the purposes of your award, as shared with you;

Athersys, Inc. l 3201 Carnegie Avenue, Cleveland, Ohio 44115-2634 l Phone 216.431.9900 l Fax 216.361.9495

EXHIBIT 10.1

•

Beginning in 2021, participation during your employment in the Company’s annual stock-based award program (e.g., stock options and RSUs) on terms substantially similar as those that apply to other executive officers of the Company. The terms of these awards will be determined annually at the discretion of the Board of Directors or its Compensation Committee. These awards will be subject to the specific approval of the Board of Directors or its Compensation Committee and the terms of the governing Company equity plan;


•	Coverage during your employment of reasonable commuting expense, including airfare, hotel/housing in Cleveland, and local transportation from your start date until July 31, 2020, up to an aggregate maximum value of $50,000 for such period;


•	$1 million of life insurance, in accordance with Company policy and practice, during your employment;


•	The Company will cover relocation-related costs for you and your family up to an aggregate of $50,000 if relocation has occurred by September 30, 2020; and


•	As will be further described in an Employment Agreement to be entered into between you and the Company, the Company will provide you with six months of severance payments based on your then-effective base salary rate, and the opportunity to continue participation in the Company’s health plans during such period in the event of a termination of your employment by the Company without cause.

Your compensation will be subject to all applicable payroll deductions and tax withholdings. In addition, you will be offered participation during your employment in the Company’s employee benefits plans on terms substantially similar to those that apply for other executive officers of the Company from time-to-time, as previously communicated to you, which benefits generally include health, dental and ancillary health benefits and 401(k) retirement plan participation. You will also benefit from 20 paid vacation days per year for full-time employment, as well as nine designated holidays, two floating holidays and five sick days per year. The Company reserves the right to change, alter or terminate any benefit plan or program in its sole discretion.

You are responsible for all federal, state, city or other taxes imposed on compensation and benefits provided pursuant to or otherwise related to your employment. The Company may withhold from any amounts payable to you under this letter or otherwise related to your employment all federal, state, city or other taxes as the Company or its affiliates is required to withhold pursuant to any applicable law, regulation or ruling. Notwithstanding any other provision of this letter, the Company is not obligated to guarantee any particular tax result for you with respect to any payment or benefit provided to you.

Athersys, Inc. l 3201 Carnegie Avenue, Cleveland, Ohio 44115-2634 l Phone 216.431.9900 l Fax 216.361.9495

EXHIBIT 10.1

This letter, including the at-will nature of the employment relationship between you and the Company, may be modified or terminated only in a writing signed by both you and an authorized representative of the Company.

To the extent applicable, it is intended that all of the benefits and payments under this letter satisfy, to the greatest extent possible and to the extent applicable, the exemptions from the application of Internal Revenue Code Section 409A provided under Treasury Regulations 1.409A-1(b)(4), 1.409A-1(b)(5) and 1.409A-1(b)(9), and this letter will be construed to the greatest extent possible as consistent with those provisions. If not so exempt, this letter (and any definitions hereunder) will be construed in a manner that complies with Code Section 409A and incorporates by reference all required definitions and payment terms. For purposes of Code Section 409A (including, without limitation, for purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii)), your right (if any) to receive any installment payments under this letter (whether reimbursements or otherwise) will be treated as a right to receive a series of separate payments and, accordingly, each installment payment hereunder will at all times be considered a separate and distinct payment.

Nothing in this letter prevents you from providing, without prior notice to the Company, information to governmental authorities regarding possible legal violations or otherwise testifying or participating in any investigation or proceeding by any governmental authorities regarding possible legal violations. Furthermore, no Company policy or individual agreement between the Company and you shall prevent you from providing information to government authorities regarding possible legal violations, participating in investigations, testifying in proceedings regarding the Company’s past or future conduct, engaging in any future activities protected under the whistleblower statutes administered by any government agency (e.g., EEOC, NLRB, SEC, etc.) or receiving a monetary award from a government-administered whistleblower award program for providing information directly to a government agency. The Company nonetheless asserts and does not waive its attorney-client privilege over any information appropriately protected by privilege.

This offer of employment is valid for ten (10) days, is contingent upon the Company’s receipt of your signed acceptance within that time and is revocable at any time at the discretion of the Company. This offer does not constitute a contract of employment, and your employment as Chief Financial Officer on these terms is subject to final Board of Directors approval and authorizations and your entry into an Employment Agreement and other standard employment contracts with the Company, including those covering non-competition, confidentiality and other restrictive covenant arrangements. If you should have any questions regarding this offer, please contact me at 216-235-7781.

Athersys, Inc. l 3201 Carnegie Avenue, Cleveland, Ohio 44115-2634 l Phone 216.431.9900 l Fax 216.361.9495

EXHIBIT 10.1

I look forward to working together.

Sincerely,

/s/ Gil Van Bokkelen

Gil Van Bokkelen

Chairman & CEO

Athersys, Inc.

Accepted by:

/s/ Ivor Macleod

Ivor Macleod

Athersys, Inc. l 3201 Carnegie Avenue, Cleveland, Ohio 44115-2634 l Phone 216.431.9900 l Fax 216.361.9495

EXHIBIT 10.2

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT by and between Athersys, Inc., a Delaware corporation with its principal place of business located at 201 Carnegie Avenue, Cleveland, Ohio 44115 (the “Company”) and Ivor Macleod (“Executive”), is dated as of the 31st day of January, 2020 (the “Agreement”).

The Company wishes to employ Executive on the terms and conditions, and for the consideration, hereinafter set forth, and Executive desires to be employed by the Company on such terms and conditions and for such consideration.

In consideration of the promises provided for in this Agreement, the Company and Executive agree as follows:

1.Employment Period. This Agreement shall become effective as of January 31, 2020 (the “Effective Date”). Except as otherwise provided in Section 3 of this Agreement, the Company hereby agrees to employ Executive, and Executive hereby agrees to be employed by the Company, on an at-will basis on the terms and conditions set-forth herein for the period commencing on the Effective Date and ending on the first anniversary thereof or, if earlier, Executive’s Date of Termination (as defined in Section 3(f)) (the “Employment Period”). On the first anniversary of the Effective Date and on each anniversary of the Effective Date thereafter, unless Executive’s Date of Termination has occurred or the Company shall have given Executive thirty (30) days prior written notice that the Employment Period will not be extended, the Employment Period shall be extended until the earlier of one year after such anniversary or the Executive’s Date of Termination.

2. Terms of Employment.

(a) Position and Duties.

(i) During the Employment Period, Executive shall (A) serve as Chief Financial Officer of the Company with such duties and responsibilities as are commensurate with such position, (B) report to the Chairman & Chief Executive Officer of the Company, and (C) perform his services primarily at the Company’s principal executive offices in Cleveland, Ohio (subject to reasonable travel requirements commensurate with Executive’s position).

(i) During the Employment Period and excluding any periods of vacation and sick leave to which Executive is entitled, Executive agrees to devote his full business time and attention to the business and affairs of the Company. During the Employment Period, it will not be a violation of this Agreement for Executive to (A) serve on civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities described in clauses (A), (B) and (C) do not significantly interfere with the performance of Executive’s responsibilities as an employee of the Company in accordance with this Agreement.

EXHIBIT 10.2

(b) Compensation.

(i) Base Salary. During the Employment Period, Executive shall receive an annual base salary (“Annual Base Salary”) of $410,000 payable in accordance with the normal payroll practices of the Company as may be in effect from time to time, which Annual Base Salary shall be reviewed for merit increases from time to time at the discretion of the Board of Directors of the Company (the “Board”) or the Compensation Committee of the Board (the “Compensation Committee”).

(i) Annual Incentive. During the Employment Period, beginning in 2020, Executive shall be eligible to participate in the Company’s annual cash incentive compensation program on terms and conditions substantially similar to those that apply to other executive officers of the Company. Pursuant to such participation, Executive shall be eligible to earn an annual cash incentive payment (the “Annual Incentive Payment”) for each applicable calendar year, with a target Annual Incentive Payment opportunity equal to 40% of Annual Base Salary, based on the achievement of specified Company and individual performance goals (as determined annually by the Board or the Compensation Committee); provided, that, with respect to each such Annual Incentive Payment opportunity, the payout with respect to 80% of the target opportunity shall be determined based on the achievement of Company performance goals, and the payout with respect to 20% of the target opportunity shall be determined based on the achievement of individual performance goals. Any Annual Incentive Payment opportunity will be subject to the terms and conditions of the Company’s annual cash incentive compensation program applicable thereto, including with respect to the timing of payment; provided, however, that an Annual Incentive Payment, to the extent earned, will be paid no later than March 15 of the calendar year following the calendar year for which such Annual Incentive Payment was earned. Notwithstanding the foregoing, each Annual Incentive Payment opportunity granted to Executive shall be subject to the specific approval of the Board and/or the Compensation Committee. There is no guaranteed Annual Incentive Payment under this Agreement, and for each applicable year, Executive’s Annual Incentive Payment could be as low as zero or as high as the maximum Annual Incentive Payment opportunity established for such year.

(ii) Initial Inducement Award. Effective as of the Effective Date, as an inducement to Executive’s acceptance of employment with the Company, and subject to approval by the Compensation Committee and the Board, Executive shall be granted an initial equity-based award comprised of a stock option to purchase 600,000 shares of the Company’s common stock (at a per share exercise price equal to the closing price of one share of the Company’s common stock on the grant date of the award or, if there are no sales on such date, on the next preceding trading day on which a sale of the common stock occurred) (such award, the “Stock Option Award”). The Stock Option Award shall generally have a term of ten years and vest, subject to continued employment with the Company, over a four-year period with the Stock Option Award becoming exercisable as to 150,000 shares on the first anniversary of the grant date, and the remainder of the Stock Option Award becoming exercisable quarterly in substantially equal installments over the remaining three years. The Stock Option Award will be subject to the terms and conditions of the applicable award agreement (which shall otherwise be

EXHIBIT 10.2

substantially similar to the terms and conditions established under the Athersys, Inc. 2019 Equity and Incentive Compensation Plan).

(iii) Annual Equity Grant. During the Employment Period, beginning in 2021, Executive shall be eligible to participate in the Company’s annual stock-based award program on terms and conditions substantially similar to those that apply to other executive officers of the Company. The terms of such awards shall be determined annually at the discretion of the Board and/or the Compensation Committee and shall be subject to approval by the Board and/or the Compensation Committee. Such awards shall be granted in accordance with the Company’s policies, the applicable award agreements and the applicable equity compensation plans under which such awards are granted.

(iv) Relocation Expenses. During the Employment Period, the Company shall reimburse Executive for all relocation-related expenses incurred by Executive in connection with Executive's relocation of himself and his family to the Cleveland, Ohio area; provided, however, that such relocation has occurred by no later than September 30, 2020; provided further, that the aggregate amount of such reimbursement shall not exceed $50,000. Executive shall provide the Company with appropriate documentation relating to any such expense incurred by Executive within thirty (30) days after incurring such expense, and the Company will provide such reimbursement within thirty (30) days after Executive submits such documentation.

(v) Temporary Commuting Expenses. During the Employment Period, the Company shall reimburse Executive for reasonable expenses relating to Executive’s commute to the Cleveland, Ohio area (including airfare, hotel and/or housing in the Cleveland, Ohio area and local transportation) that are incurred during the period beginning on the Effective Date and ending on July 31, 2020, up to an aggregate maximum amount of $50,000 for such period. Executive shall provide the Company with appropriate documentation relating to any such expense within thirty (30) days after incurring such expense, and the Company will provide such reimbursement within thirty (30) days after Executive submits such documentation.

(vi) Employee Benefits. During the Employment Period, Executive shall be eligible to participate in the employee benefit plans, programs, and policies, as may be in effect from time to time, for executive officers of the Company generally.

(vii) Life Insurance. During the Employment Period, the Company shall provide Executive with life insurance benefits, in accordance with Company policy and practice, in the amount of $1,000,000.

(viii) Vacation. During the Employment Period, Executive shall be entitled to twenty (20) days of paid vacation during each calendar year in accordance with the Company’s paid time off policy as in effect from time to time. Executive shall also be entitled to all paid holidays and personal days provided by the Company to its executive officers generally.

(ix) Expenses. During the Employment Period, Executive shall be entitled to receive prompt reimbursement for all reasonable and customary expenses incurred by Executive

EXHIBIT 10.2

in accordance with the performance of Executive’s duties under this Agreement and in accordance with the Company’s business expense reimbursement policy.

3. Termination of Employment.

(a) Death or Disability. Executive’s employment shall terminate automatically if Executive dies during the Employment Period. If the Company determines in good faith that the Disability (as defined herein) of Executive has occurred during the Employment Period (pursuant to the definition of “Disability” set forth below), it may give to Executive written notice in accordance with Section 14(b) of its intention to terminate Executive’s employment. In such event, Executive’s employment with the Company shall terminate effective on the 30^th day after receipt of such notice by Executive (the “Disability Effective Date”), provided that, within the thirty (30) days after such receipt, Executive shall not have returned to full-time performance of Executive’s duties. “Disability” means, in the written opinion of a qualified physician selected by the Company and agreed to by Executive (or if no agreement is reached within thirty (30) days of the commencement of discussions between the Company and Executive, then of a qualified physician agreed upon by the physician selected by the Company and a physician selected by Executive), Executive becomes unable to perform his duties under this Agreement due to physical or mental illness.

(b) By the Company. The Company may terminate Executive’s employment during the Employment Period for any, or no reason, with or without Cause. For purposes of this Agreement, “Cause” will be deemed to exist upon:

(i) the commission by Executive of an act of fraud, embezzlement, theft or other criminal act constituting a felony;

(ii) Executive’s willful or wanton disregard of the rules or policies of the Company or its affiliates that results in a material loss, damage or injury to the Company or its affiliates;

(iii) the repeated failure of Executive to perform duties consistent with Executive’s position or to follow or comply with the reasonable directives of the Board or the Chairman & Chief Executive Officer of the Company after having been given notice thereof (e.g., the insubordination of Executive); or

(iv) Executive’s breach of any provision contained in Section 8 of this Agreement.

Notwithstanding the foregoing, Executive will not be deemed to have been terminated for Cause without (A) reasonable written notice to Executive specifying in detail the specific reasons for the Company’s intention to terminate for Cause, (B) an opportunity for Executive, together with his counsel, to be heard before the Board, and (C) delivery to Executive of a Notice of Termination, as defined in paragraph ‎(d) of this Section ‎3, approved by the affirmative vote of not less than a majority of the entire membership of the Board finding that in the good faith

EXHIBIT 10.2

opinion of the Board, Executive was guilty of conduct set forth in clause ‎(i), (ii), (iii) or ‎(iv) above.

(c) By Executive. Executive’s employment may be terminated during the Employment Period by Executive for Good Reason or by Executive without Good Reason. For purposes of this Agreement, “Good Reason”shall mean, in the absence of the prior written consent of Executive:

(i) a material diminution in Executive’s position, duties, responsibilities, authority, or reporting relationship (except during periods when Executive is unable to perform all or substantially all of Executive’s duties and/or responsibilities as a result of Executive’s illness (either physical or mental) or other incapacity);

(ii) a material reduction in either Executive’s Annual Base Salary or level of participation in any bonus or incentive plan for which he is eligible under Section ‎2(b)(ii);

(iii) an elimination or reduction by the Company of Executive’s participation in any benefit plan generally available to executive employees of the Company, unless the Company continues to offer Executive benefits substantially similar to those made available by such plan; provided, however, that a change to a plan in which executive employees of the Company generally participate, including termination of any such plan, if such change or termination applies to other executive employees of the Company generally or is required by law or a technical change, will not be deemed to be Good Reason;

(iv) failure of any successor (whether direct or indirect, by purchase of stock or assets, merger, consolidation or otherwise) to the Company to assume the Company’s obligations under this Agreement or failure by the Company to remain liable to Executive under this Agreement after an assignment by the Company of this Agreement, in each case as contemplated by Section ‎9;

(v) any purported termination by the Company of Executive’s employment which is not effected pursuant to a Notice of Termination satisfying the requirements of paragraph ‎(d) of this Section ‎3 (and for purposes of this Agreement no such purported termination will be effective);

(vi) a change in the location of the Company’s principal executive offices to a location that is greater than fifty (50) miles from such location as of the Effective Date; or

(vii) a material breach of this Agreement by the Company;

provided, however, that the circumstances described in clauses (i)–(vii) above shall not constitute Good Reason unless (A) Executive gives the Company notice of the existence of an event described in clause (i), (ii), (iii), (iv), (v), (vi), or (vii) above, as applicable, within ninety (90) days following the occurrence thereof, (B) the Company does not remedy such event described

EXHIBIT 10.2

in clause (i), (ii), (iii), (iv), (v), (vi), or (vii), as applicable, within thirty (30) days after receiving the notice described in the preceding clause (A), and (C) Executive terminates employment within 180 days after the end of the cure period specified in clause (B) above. Executive’s continued employment will not constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason; provided, however, that Executive will be deemed to have waived his rights pursuant to circumstances constituting Good Reason if he has not provided to the Company the notice described in clause (A) above within ninety (90) days following such circumstances. Executive’s right to terminate employment pursuant to this Section 3‎(c) will not be affected by Executive’s incapacity due to physical or mental illness.

(d) Notice of Termination. Any termination of Executive’s employment by the Company for Cause, or by Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 14(b) of this Agreement. “Notice of Termination” means a written notice that (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated, and (iii) if the Date of Termination (as defined in Section 3(f)) is other than the date of receipt of such notice, specifies the Date of Termination (which Date of Termination shall be not more than thirty (30) days after the giving of such notice). The failure by Executive or the Company to set forth in the Notice of Termination any fact or circumstance that contributes to a showing of Good Reason or Cause shall not waive any right of Executive or the Company, respectively, hereunder or preclude Executive or the Company, respectively, from asserting such fact or circumstance in enforcing Executive’s or the Company’s respective rights hereunder.

(e) Resignation. Upon any termination of Executive’s employment with the Company, Executive shall be deemed to resign from any position as an officer, director, or fiduciary of any Company-related entity.

(f) Date of Termination; Expiration of Employment Period. “Date of Termination” means (i) if Executive’s employment is terminated by the Company for Cause, or by Executive for Good Reason, the date of receipt of the Notice of Termination or such later date specified in the Notice of Termination, as the case may be, (ii) if Executive’s employment is terminated by the Company other than for Cause or Disability, the date on which the Company notifies Executive of such termination, (iii) if Executive resigns without Good Reason, the date on which Executive notifies the Company of such termination, and (iv) if Executive’s employment is terminated by reason of death or Disability, the date of Executive’s death or the Disability Effective Date, as the case may be. Notwithstanding the foregoing, in no event shall the Date of Termination occur until Executive experiences a “separation from service” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and the date on which such separation from service takes place shall be the “Date of Termination.” Upon the expiration of the Employment Period and in the event Executive continues employment with the Company, Executive’s employment will be at-will and the terms of this Agreement (other than Section 8) will have no further effect.

EXHIBIT 10.2

4. Obligations of the Company upon Termination.

(a) By Executive for Good Reason or by the Company other than for Cause, Death or Disability. If, during the Employment Period, the Company terminates Executive’s employment other than for Cause, death or Disability or Executive terminates his employment for Good Reason:

(i) The Company shall pay to Executive, in a lump sum in cash within thirty (30) days after the Date of Termination (or earlier, if required by applicable law), the aggregate of the following amounts: the sum of (A) Executive’s Annual Base Salary earned through the Date of Termination to the extent not theretofore paid, (B) Executive’s business expenses that are reimbursable pursuant to Section 2(b)(x) of this Agreement but have not been reimbursed by the Company as of the Date of Termination; (C) Executive’s Annual Incentive Payment for the fiscal year immediately preceding the fiscal year in which the Date of Termination occurs, if such bonus has been determined but not paid as of the Date of Termination; and (D) any accrued vacation pay to the extent not theretofore paid (the sum of the amounts described in subclauses (A), (B), (C) and (D), the “Accrued Obligations”);

(ii) Subject to Section 11(b), the Company shall continue to pay Executive Executive’s Annual Base Salary at the time of such termination for a period of six (6) months following such termination in accordance with the Company’s normal payroll practices; provided, however, that Executive executes and does not revoke the Release (as defined in Section 4(d)) as described in Section 4(d). Any payments pursuant to this Section 4(a)(ii) that would have been made during the 60-day period following the Date of Termination (as described in Section 4(d)) but that are not made because the Release has not yet been signed and become effective will be made in a lump sum on the first payroll date following the date the revocation period has expired without the signed Release being revoked. In the event that the period beginning on Executive’s Date of Termination and ending on the first payroll date following the 60^th day after Executive’s Date of Termination begins in one taxable year of Executive, and ends in a second taxable year of Executive, then, to the extent necessary to comply with Section 409A of the Code, the payments that would have otherwise been made in the first taxable year shall not be made until the second taxable year.

(iii) The Company will permit Executive, at Executive’s option and expense, to continue to participate for a period of six (6) months following the Date of Termination in all medical, life and other employee “welfare” benefit plans and programs in which Executive was entitled to participate immediately prior to the Date of Termination, provided that Executive’s continued participation is possible under the general terms and provisions of such plans and programs. Any such continued participation in a group health plan shall count toward such group health plan’s obligation to provide Executive with continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA); and

EXHIBIT 10.2

(iv) To the extent not theretofore paid or provided, the Company shall timely pay or provide to Executive any Other Benefits (as defined in Section 5) in accordance with the terms of the underlying plans or agreements.

It is expressly understood that the Company’s obligations under this Section 4(a) shall cease in the event Executive breaches any of the agreements in Section 8 hereof. Each payment under this subparagraph 4(a) shall be considered a separate payment and not one of a series of payments for purposes of Section 409A of the Code. Other than as set forth in this Section 4(a), in the event of a termination of Executive’s employment by the Company without Cause (other than due to death or Disability) or by Executive for Good Reason, the Company shall have no further obligation to Executive under this Agreement.

(b) Disability. During any period that Executive fails to perform his duties under this Agreement as a result of incapacity due to physical or mental illness, Executive will continue to receive his full Annual Base Salary at the rate then in effect for such period (offset by any payments to Executive received pursuant to disability benefit plans maintained by the Company) and all other compensation and benefits under this Agreement (including pro-rata payment for vacation days not taken) until his employment is terminated due to Executive’s Disability pursuant to Section 3(a). In addition, following the Date of Termination due to Executive’s Disability, the Company shall continue to pay Executive Executive’s Annual Base Salary at the time of such termination for a period of twelve (12) months following such termination in accordance with the Company’s normal payroll practices; provided, however, that Executive (or Executive’s guardian or legal representative) executes and does not revoke the Release (as defined in Section 4(d)) as described in Section 4(d). Any payments pursuant to this Section 4(b) that would have been made during the 60-day period following the Date of Termination (as described in Section 4(d)) but that are not made because the Release has not yet been signed and become effective will be made in a lump sum on the first payroll date following the date the revocation period has expired without the signed Release being revoked. In the event that the period beginning on Executive’s Date of Termination ending on the first payroll date following the 60^th day after Executive’s Date of Termination begins in one taxable year of Executive, and ends in a second taxable year of Executive, then, to the extent necessary to comply with Section 409A of the Code, the payments that would have otherwise been made in the first taxable year shall not be made until the second taxable year. Each payment under this Section 4(b) shall be considered a separate payment and not one of a series of payments for purposes of Section 409A of the Code.

(c) Cause; Death; Other than for Good Reason. If Executive’s employment is terminated by the Company for Cause during the Employment Period, the Company shall provide Executive with Executive’s Annual Base Salary earned through the Date of Termination, and the timely payment or delivery of the Other Benefits in accordance with the terms of the underlying plans or agreements, and shall have no further obligations under this Agreement. If Executive voluntarily terminates employment other than for Good Reason during the Employment Period, the Company shall provide to Executive the Accrued Obligations and the timely payment or delivery of the Other Benefits in accordance with the terms of the underlying plans or agreements, and shall have no further obligations under this Agreement. If Executive’s

EXHIBIT 10.2

employment is terminated by reason of Executive’s death during the Employment Period, the Company shall provide Executive’s estate or beneficiaries with the Accrued Obligations and the timely payment or delivery of the Other Benefits in accordance with the terms of the underlying plans or agreements, and shall have no further obligations under this Agreement. The Accrued Obligations shall be paid to Executive or, in the event of death, Executive’s estate or beneficiaries, in a lump sum in cash within thirty (30) days of the applicable Date of Termination.

(d) Release. Notwithstanding anything herein to the contrary, the Company shall not be obligated to make any payment under Section 4(a)(ii), 4(a)(iii), or 4(b) of this Agreement unless (i) prior to the 60^th day following the Date of Termination, Executive executes a release of claims against the Company and its affiliates in a form provided by the Company (the “Release”), and (ii) any applicable revocation period has expired during such 60-day period without Executive revoking such Release.

5. Non-Exclusivity of Rights. Amounts that Executive is otherwise entitled to receive under any plan, policy, practice or program of or any other contract or agreement with the Company at or subsequent to the Date of Termination (“Other Benefits”) shall be payable in accordance with such plan, policy, practice or program or contract or agreement, except as explicitly modified by this Agreement. Notwithstanding the foregoing, Executive shall not be eligible to participate in any other severance plan, program or policy of the Company.

6. Set-off; Mitigation. The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall be subject to set-off, counterclaim, recoupment, defense, or other claim, right or action that the Company may have against Executive to the extent such set-off or other action does not violate Section 409A of the Code. Executive shall be required to mitigate the amount of any payment or benefit provided for in Section 4(a)(ii) or 4(a)(iii) by seeking other employment or otherwise, and, to the extent permitted by Section 409A of the Code, the amount of any payment or benefit provided for in Section 4(a)(ii) and 4(a)(iii) will be reduced by any compensation earned or benefits received by Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by Executive to the Company, or otherwise.

7. Limitations on Payments Under Certain Circumstances. Notwithstanding any provision of any other plan, program, arrangement or agreement to the contrary, in the event that it shall be determined that any payment or benefit to be provided by the Company to Executive pursuant to the terms of this Agreement or any other payments or benefits received or to be received by Executive (a “Payment”) in connection with or as a result of any event which is deemed by the U.S. Internal Revenue Service or any other taxing authority to constitute a change in the ownership or effective control of the Company, or in the ownership of a substantial portion of the assets of the Company and subject to the tax (the “Excise Tax”) imposed by Section 4999 (or any successor section) of the Code, the Payments, whether under this Agreement or otherwise, shall be reduced so that the Payment, in the aggregate, is reduced to the greatest amount that could be paid to Executive without giving rise to any Excise Tax; provided that in

EXHIBIT 10.2

the event that Executive would be placed in a better after-tax position after receiving all Payments and not having any reduction of Payments as provided hereunder, Executive shall, notwithstanding the provisions of any other plan, program, arrangement or agreement to the contrary, receive all Payments and pay any applicable Excise Tax. All determinations under this Section 7 shall be made by a nationally recognized accounting firm selected by the Company (the “Accounting Firm”). Without limiting the generality of the foregoing, any determination by the Accounting Firm under this Section 7 shall take into account the value of any reasonable compensation for services to be rendered by Executive (or for holding oneself out as available to perform services and refraining from performing services (such as under a covenant not to compete)). If the Payments are to be reduced pursuant to this Section 7, the Payments shall be reduced in the following order: (a) Payments which do not constitute “nonqualified deferred compensation” subject to Section 409A of the Code shall be reduced first; and (b) all other Payments shall then be reduced, in each case as follows: (i) cash payments shall be reduced before non-cash payments and (ii) payments to be made on a later payment date shall be reduced before payments to be made on an earlier payment date.

8. Restrictive Covenants.

(a) Acknowledgements and Agreements. Executive hereby acknowledges and agrees that in the performance of Executive’s duties to the Company during the Employment Period, Executive shall be brought into frequent contact with existing and potential customers of the Company throughout the world. Executive also agrees that trade secrets and confidential information of the Company, more fully described in Section 8(i) gained by Executive during Executive’s association with the Company, have been developed by the Company through substantial expenditures of time, effort and money and constitute valuable and unique property of the Company. Executive further understands and agrees that the foregoing makes it necessary for the protection of the Company’s business that Executive not compete with the Company during Executive’s employment with the Company and not compete with the Company for a reasonable period thereafter, as further provided in the following sections.

(b) Competitive Activity During Employment. Executive will not compete with the Company anywhere in the world during Executive’s employment with the Company, including, without limitation:

(i) entering into or engaging in any business which competes with the Company’s Business;

(ii) soliciting customers, business, patronage or orders for, or selling, any products or services in competition with, or for any business that competes with, the Company’s Business;

(iii) diverting, enticing or otherwise taking away any customers, business, patronage or orders of the Company or attempting to do so; or

EXHIBIT 10.2

(iv) promoting or assisting, financially or otherwise, any person, firm, association, partnership, corporation or other entity engaged in any business which competes with the Company’s Business.

(c) Following Termination. For a period of twelve (12) months following Executive’s termination of employment with the Company, Executive will not:

(i) enter into or engage in any business which competes with the Company’s Business within the Restricted Territory (as hereinafter defined);

(ii) solicit customers, business, patronage or orders for, or sell, any products or services in competition with, or for any business, wherever located, that competes with, the Company’s Business within the Restricted Territory;

(iii) divert, entice or otherwise take away any customers, business, patronage or orders of the Company within the Restricted Territory, or attempt to do so; or

(iv) promote or assist, financially or otherwise, any person, firm, association, partnership, corporation or other entity engaged in any business which competes with the Company’s Business within the Restricted Territory.

For the purposes of Sections 8(a) and (b) above, inclusive, but without limitation thereof, Executive will be in violation thereof if Executive engages in any or all of the activities set forth therein directly as an individual on Executive’s own account, or indirectly as a partner, joint venturer, employee, agent, salesperson, consultant, officer and/or director of any firm, association, partnership, corporation or other entity, or as a stockholder of any corporation in which Executive or Executive’s spouse, child or parent owns, directly or indirectly, individually or in the aggregate, more than 5% of the outstanding stock.

(d) The “Company.” For the purposes of this Section 8, the “Company” shall include any and all direct and indirect subsidiaries, parents, and affiliated, or related companies of the Company for which Executive worked or had responsibility, or to which Executive had access to confidential or trade secret information, at the time of termination of Executive’s employment and at any time during the two year period prior to such termination.

(e) The Company’s “Business.” For the purposes of this Section 8, the Company’s Business is defined to be the business of researching, developing, marketing or selling any technology relating to the field of cell therapy or any other type of technology that is part of the Company’s intellectual property portfolio or that is substantially similar to that researched, developed, marketed or sold or contemplated to be researched, developed, marketed or sold by the Company prior to the Date of Termination, as evidenced by the books and records of the Company.

(f) “Restricted Territory.” For the purposes of this Section 8, the Restricted Territory shall be defined as and limited to any geographic areas in the United States or any countries outside the United States where the Company has researched, developed, marketed or

EXHIBIT 10.2

sold such technologies, or has plans to expand into, as evidenced by the business and marketing plans of the Company, prior to the Date of Termination.

(g) Extension. If it shall be judicially determined that Executive has violated any of Executive’s obligations under Section 8(b) or 8(c), then the period applicable to each obligation that Executive shall have been determined to have violated shall automatically be extended by a period of time equal in length to the period during which such violation(s) occurred.

(h) Non-Solicitation. Executive shall not, directly or indirectly, at any time solicit or induce or attempt to solicit or induce any employee(s), sales representative(s), agent(s) or consultant(s) of the Company and/or of its parents, or its other subsidiaries or affiliated or related companies to terminate their employment, representation or other association with the Company and/or its parent or its other subsidiary or affiliated or related companies.

(i) Further Covenants. (i) Executive shall not, directly or indirectly, at any time during or after Executive’s employment with the Company, disclose, furnish, disseminate, make available or, except in the course of performing Executive’s duties of employment, use any trade secrets or confidential business and technical information of the Company or its customers or vendors, including without limitation as to when or how Executive may have acquired such information. Such confidential information shall include, without limitation, the Company’s unique selling, manufacturing and servicing methods and business techniques, training, service and business manuals, promotional materials, training courses and other training and instructional materials, vendor and product information, customer and prospective customer lists, other customer and prospective customer information and other business information. Executive specifically acknowledges that all such confidential information, whether reduced to writing, maintained on any form of electronic media, or maintained in Executive’s mind or memory and whether compiled by the Company, and/or Executive, derives independent economic value from not being readily known to or ascertainable by proper means by others who can obtain economic value from its disclosure or use, that reasonable efforts have been made by the Company to maintain the secrecy of such information, that such information is the sole property of the Company and that any retention and use of such information by Executive during Executive’s employment with the Company (except in the course of performing Executive’s duties and obligations to the Company) or after the termination of Executive’s employment shall constitute a misappropriation of the Company’s trade secrets. Upon termination of Executive’s employment with the Company, for any reason, Executive shall return to the Company, in good condition, all property of the Company, including without limitation, the originals and all copies of any materials which contain, reflect, summarize, describe, analyze or refer or relate to any items of information listed in this Section 8(i).

(ii) The U.S. Defend Trade Secrets Act of 2016 (“DTSA”) provides that an individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (A) is made in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney, and solely for the purpose of reporting or investigating a suspected violation of law; or (B) is

EXHIBIT 10.2

made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. In addition, the DTSA provides that an individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual files any document containing the trade secret under seal and does not disclose the trade secret, except pursuant to court order.

(j) Discoveries and Inventions. Executive does hereby assign to the Company, its successors, assigns or nominees, all of Executive’s rights to any discoveries, inventions and improvements, whether patentable or not, made, conceived or suggested, either solely or jointly with others, by Executive while in the Company’s employ, whether in the course of Executive’s employment with the use of the Company’s time, material or facilities or that is in any way within or related to the existing or contemplated scope of the Company’s business. Any discovery, invention or improvement relating to any subject matter with which the Company was concerned during Executive’s employment and made, conceived or suggested by Executive, either solely or jointly with others, within one year following termination of Executive’s employment under this Agreement or any successor agreements shall be irrebuttably presumed to have been so made, conceived or suggested in the course of such employment with the use of the Company’s time, materials or facilities. Upon request by the Company with respect to any such discoveries, inventions or improvements, Executive will execute and deliver to the Company, at any time during or after Executive’s employment, all appropriate documents for use in applying for, obtaining and maintaining such domestic and foreign patents as the Company may desire, and all proper assignments therefor, when so requested, at the expense of the Company, but without further or additional consideration.

(k) Work Made For Hire. Executive acknowledges that, to the extent permitted by law, all work papers, reports, documentation, drawings, photographs, negatives, tapes and masters therefore, prototypes and other materials (hereinafter, “items”), including without limitation, any and all such items generated and maintained on any form of electronic media, generated by Executive during Executive’s employment with the Company shall be considered a “work made for hire” and that ownership of any and all copyrights in any and all such items shall belong to the Company. The item will recognize the Company as the copyright owner, will contain all proper copyright notices, e.g., “(creation date) Athersys, Inc., All Rights Reserved,” and will be in condition to be registered or otherwise placed in compliance with registration or other statutory requirements throughout the world.

(l) Remedies. The parties acknowledge and agree that any breach by Executive of the terms of this Agreement may cause the Company irreparable harm and injury for which money damages would be inadequate. Accordingly, the Company, in addition to any other remedies available at law or equity, shall be entitled, as a matter of right, to injunctive relief in any court of competent jurisdiction. The parties agree that such injunctive relief may be granted without the necessity of proving actual damages. Nothing in this Agreement shall limit the Company’s remedies under state for federal law or elsewhere.

EXHIBIT 10.2

(m) Reasonableness. Executive acknowledges that Executive’s obligations under this Section 8 are reasonable in the context of the nature of the Company’s Business and the competitive injuries likely to be sustained by the Company if Executive were to violate such obligations. Executive further acknowledges that this Agreement is made in consideration of, and is adequately supported by, the agreement of the Company to perform its obligations under this Agreement and by other consideration, which Executive acknowledges constitutes good, valuable and sufficient consideration.

(n) Additional Acknowledgements. Executive acknowledges and agrees that, in the event that Executive becomes subject to any other contractual arrangements with the Company regarding competition with the Company, the restrictive covenants set forth in this Agreement were executed first and shall be deemed supplemented, and in no event diminished or replaced, by such other contractual arrangements.

9. Successors.

(a) This Agreement is personal to Executive and without the prior written consent of the Company shall not be assignable by Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of, and be enforceable by, Executive’s legal representatives.

(b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. As used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.

10. Indemnification. The Company shall indemnify Executive to the maximum extent permitted under applicable law for acts taken within the scope of his employment and his service as an officer or director of the Company or any of its subsidiaries or affiliates. To the extent that the Company obtains coverage under a director and officer indemnification policy, Executive will be entitled to such coverage on a basis that is no less favorable than the coverage provided to any other officer or director of the Company.

11. Section 409A of the Code.

(a) The intent of the parties is that payments and benefits under this Agreement comply with, or be exempt from, Section 409A of the Code and the regulations and guidance promulgated thereunder (collectively “Section 409A”) and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith.

(b) Notwithstanding any provision of this Agreement to the contrary, in the event that Executive is a “specified employee” within the meaning of Section 409A (as determined in accordance with the methodology established by the Company as in effect on the Date of Termination) (a “Specified Employee”), any payments or benefits that are considered non-qualified deferred compensation under Section 409A payable under this Agreement on account of a “separation from service” during the six-month period immediately following the

EXHIBIT 10.2

Date of Termination shall, to the extent necessary to comply with Section 409A, instead be paid, or provided, as the case may be, on the first business day after the date that is six months following Executive's “separation from service” within the meaning of Section 409A. For purposes of Section 409A, Executive’s right to receive any installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments. In no event may Executive, directly or indirectly, designate the calendar year of any payment to be made under this Agreement that is considered nonqualified deferred compensation, subject to Section 409A.

(c) With regard to any provision herein that provides for reimbursement of costs and expenses or in-kind benefits that are deferred compensation subject to Section 409A, (i) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, (ii) the amount of expenses eligible for reimbursement, or in-kind benefits, provided during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year and (iii) such payments shall be made on or before the last day of Executive’s taxable year following the taxable year in which the expense occurred.

12. Compensation Recovery Policy. Notwithstanding anything in this Agreement to the contrary, Executive acknowledges and agrees that this Agreement and any compensation described herein are subject to the terms and conditions of the Company's clawback policy (if any) as may be in effect from time to time, including specifically to implement Section 10D of the Securities Exchange Act of 1934, as amended, and any applicable rules or regulations promulgated thereunder (including applicable rules and regulations of any national securities exchange on which the shares of the Company’s common stock may be traded) (the “Compensation Recovery Policy”), and that applicable sections of this Agreement and any related documents shall be deemed superseded by and subject to the terms and conditions of the Compensation Recovery Policy from and after the effective date thereof.

13. Complete Agreement. This Agreement sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein, and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party hereto in respect of the subject matter contained herein; provided, however, that this Section 13 shall not apply to any provisions that are (or may be) contained in any other agreement between the Company and Executive that pertain to non-competition, confidentiality, non-disclosure, or other restrictive covenants to which Executive is or may be bound.

14. Miscellaneous.

(a) This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio, without reference to principles of conflict of laws. Executive agrees that the state and federal courts located in the State of Ohio shall have jurisdiction in any action, suit or proceeding against Executive based on or arising out of this Agreement and Executive hereby: (i) submits to the personal jurisdiction of such courts; (ii) consents to service of process in connection with any action, suit or proceeding against Executive; and (iii) waives

EXHIBIT 10.2

any other requirement (whether imposed by statute, rule of court or otherwise) with respect to personal jurisdiction, venue or service of process. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives.

(b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:


If to Executive:	At the most recent address on file at the Company.

If to the Company: Athersys, Inc.

3201 Carnegie Avenue

Cleveland, Ohio 44115-2634

or to such other address as either party shall have furnished to the other in writing in accordance herewith (including via electronic mail). Notice and communications shall be effective when actually received by the addressee.

(c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

(d) The Company, its subsidiaries and affiliates may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes or social security charges as shall be required to be withheld pursuant to any applicable law or regulation. None of the Company, its subsidiaries or affiliates guarantees any tax result with respect to payments or benefits provided hereunder. Executive is responsible for all taxes owed with respect to all such payments and benefits.

(e) Subject to any limits on applicability contained therein, Section 8 of this Agreement shall survive and continue in full force in accordance with its terms notwithstanding any termination or expiration of the Employment Period.

(f) This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

(g) Executive’s or the Company’s failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right Executive or the Company may have hereunder shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.

EXHIBIT 10.2

(h) With respect to any controversy or claim arising out of or relating to or concerning injunctive relief for Executive’s breach or purported breach of Section 8 of this Agreement, the Company shall have the right, in addition to any other remedies it may have, to seek specific performance and injunctive relief with a court of competent jurisdiction, without the need to post a bond or other security.

15. Other Acknowledgements. Nothing in this Agreement prevents Executive from providing, without prior notice to the Company, information to governmental authorities regarding possible legal violations or otherwise testifying or participating in any investigation or proceeding by any governmental authorities regarding possible legal violations.

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EXHIBIT 10.2

IN WITNESS WHEREOF, Executive and the Company have executed this Agreement on the date first above written.

EXECUTIVE

/s/ Ivor Macleod
Ivor Macleod

ATHERSYS, INC.

By /s/ Gil Van Bokkelen
Name: Dr. Gil Van Bokkelen
Title: Chairman & Chief Executive Officer

EXHIBIT 10.3

ATHERSYS, INC.

NONQUALIFIED STOCK OPTION INDUCEMENT AGREEMENT

This Nonqualified Stock Option Inducement Agreement (“Agreement”) is made as of January 31, 2020 (the “Date of Grant”) by and between Athersys, Inc., a Delaware corporation (the “Company”), and Ivor Macleod (the “Optionee”) with respect to the grant of a nonqualified stock option by the Company to the Optionee (the “Grant”). This Grant is intended to be an inducement that is material to Grantee, who is entering into employment with the Company, and to encourage stock ownership by Grantee, thereby aligning Grantee’s interests with those of the stockholders of the Company. This Agreement is intended to comply with Rule 5635(c)(4) of the Nasdaq Stock Market Listing Rules, which provide an exception to the Nasdaq Stock Market Listing Rules’ shareholder approval requirement for the issuance of securities with regards to grants to employees of the Company as an inducement material to such individuals entering into employment with the Company, and shall be administered and interpreted consistent with such intent. Although this Grant and Agreement are not made pursuant to the Athersys, Inc. 2019 Equity and Incentive Compensation Plan (the “Plan”), any capitalized term used herein but not defined herein shall have the meaning set forth in the Plan.


1.	Grant of Stock Option. Subject to and upon the terms, conditions, and restrictions set forth in this Agreement, the Company grants to the Optionee as of the Date of Grant an Option Right (the “Option”) to purchase Six Hundred Thousand (600,000) Common Shares (the “Option Shares”). The Option may be exercised from time to time in accordance with the terms of this Agreement.


2.	Type of Option. The Option is intended to be a nonqualified stock option and shall not be treated as an Incentive Stock Option.


3.	Option Price. The Option Shares may be purchased pursuant to this Option at a price of One Dollar and Thirty-Six Cents ($1.36) per Common Share, subject to adjustment as hereinafter provided (the “Option Price”).


4.	Term of Option/Agreement. The term of the Option shall commence on the Date of Grant and, unless earlier terminated in accordance with Section 7 hereof, shall terminate and expire automatically and without further notice ten (10) years from the Date of Grant.


5.	Right to Exercise.

(a)

Subject to Section 5(b) and (c), Section 7 and Section 11, the Option will vest and become exercisable as provided in the attached Exhibit A, for so long as the Optionee remains continuously employed with the Company or any Subsidiary. To the extent the Option is exercisable, it may be exercised in whole or in part. In no event shall the Optionee be entitled to acquire a fraction of one Option Share pursuant to this Option. The Optionee shall be entitled to the privileges of

NAI-1510707263v3

EXHIBIT 10.3

ownership, including dividends, only with respect to Option Shares purchased and delivered to the Optionee upon the exercise of all or part of this Option.


(b)	Notwithstanding Section 5(a) above, the Option shall become immediately exercisable in full, if at any time prior to the termination of the Option, a Change in Control shall occur.

(c)

Notwithstanding Section 5(a) above, if the Optionee should die or become permanently disabled while in the employ of the Company or any Subsidiary, this Option shall immediately become exercisable in full and shall remain exercisable until terminated in accordance with Section 7 below. The Optionee shall be considered to have become permanently disabled if the Optionee’s employment terminates on account of the Optionee having become “permanently and totally disabled”, as defined in Section 22(e)(3) of the Code.

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EXHIBIT 10.3

Notice of Exercise; Payment. To the extent then exercisable, the Option may be exercised in whole or in part by written notice to the Company stating the number of Option Shares for which the Option is being exercised and the intended manner of payment. The date of such notice shall be the exercise date. The Option Price shall be payable (a) in cash or by check acceptable to the Company or by wire transfer of immediately available funds, (b) by actual or constructive transfer to the Company of nonforfeitable, unrestricted Common Shares that have been owned by the Optionee for more than six (6) months prior to the date of exercise, (c) for exercises of Options that occur more than one (1) year following the Date of Grant, by transfer to the Company of shares or vested Options under this Agreement for the purchase of Common Shares having a fair market value (net of the exercise price) at the time of exercise equal to the portion of the Option Price for which such transfer is made, or (d) by a combination of such methods of payment. The requirement of payment in cash shall be deemed satisfied if the Optionee shall have made arrangements satisfactory to the Company with a bank or a broker who is a member of the National Association of Securities Dealers, Inc. to sell on the exercise date a sufficient number of the shares being purchased so that the net proceeds of the sale transaction will at least equal the Option Price plus payment of any applicable withholding taxes and pursuant to which the bank or broker undertakes to deliver the full Option Price plus payment of any applicable withholding taxes to the Company on a date satisfactory to the Company, but not later than the date on which the sale transaction will settle in the ordinary course of business. As soon as practicable upon the Company’s receipt of the Optionee’s notice of exercise and payment, the Company shall direct the due issuance of the Option Shares so purchased.

As a further condition precedent to the exercise of this Option in whole or in part, the Optionee shall comply with all regulations and the requirements of any regulatory authority having control of, or supervision over, the issuance of the Common Shares and in connection therewith shall execute any documents which the Board shall in its sole discretion deem necessary or advisable.


7.	Termination. This Option shall terminate on the earliest of the following dates:

(a)

The date on which the Optionee ceases to be an employee of the Company or any Subsidiary, if the Optionee’s employment with the Company or a Subsidiary is terminated for Cause (“Cause” being defined as: (i) the commission of an act of fraud, embezzlement, theft or other criminal act constituting a felony; or (ii) the material breach of any provision contained in a written non-competition, confidentiality or non-disclosure agreement between the Company or any of its Subsidiaries and the Optionee);


(b)	Three (3) months after the Optionee ceases to be an employee of the Company or a Subsidiary, unless the Optionee ceases to be such employee by reason of death, permanent and total disability, Retirement or termination for Cause;


(c)	One (1) year after the death of the Optionee if the Optionee dies (i) while an employee of the Company or a Subsidiary (in which case the Option becomes

NAI-1510707263v3

EXHIBIT 10.3

immediately exercisable in full pursuant to Section 5(c) herein), (ii) within the three (3) month period following a termination without Cause or (iii) within the three (3) month period following Retirement;


(d)	One (1) year after the permanent and total disability of the Optionee if the Optionee becomes permanently and totally disabled (as described in Section 5(c) above) while an employee of the Company or a Subsidiary (in which case the Option becomes immediately exercisable in full pursuant to Section 5(c) herein);

(e)

Five (5) years after the date that the Optionee shall Retire. For this purpose, “Retire” (or similar terms) shall mean that the Optionee terminates the Optionee’s employment by reason of the Optionee’s retirement entitling the Optionee to early, normal or late retirement benefits under the provisions of any retirement plan of the Company or its Subsidiaries in which the Optionee participates (or if no such plan exists, at or after age sixty-five (65)); and


(f)	Ten (10) years from the Date of Grant.

Option Nontransferable. This Option is not transferable by the Optionee otherwise than by will or the laws of descent and distribution. In no event will any such award granted under this Agreement be transferred for value. This Option may be exercised, during the lifetime of the Optionee, only by the Optionee, or in the event of the Optionee’s legal incapacity, by the Optionee’s guardian or legal representative acting on behalf of the Optionee in a fiduciary capacity under state law or court supervision.

Administration. This Section 9 shall apply to the Grant in lieu of Section 10 of the Plan. This Agreement will be administered by the Compensation Committee of the Board (or its successors) or a group of Board members consisting solely of all of the members of the Board who meet the requirements for independence under the Nasdaq Stock Market Listing Rules (the “Committee”). For purposes of this Agreement and the Grant, any references to “Committee” in the Plan shall be deemed references to the Committee as defined herein. The interpretation and construction by the Committee of any provision of this Agreement and any determination by the Committee pursuant to any provision of this Agreement or of any notification or document related hereto will be final and conclusive. No member of the Committee shall be liable for any such action or determination made in good faith. In addition, subject to Section 17, the Committee is authorized to take any action it determines in its sole discretion to be appropriate subject only to the express limitations contained or referenced in this Agreement, and no authorization in any section or other provision of this Agreement is intended or may be deemed to constitute a limitation on the authority of the Committee.


10.	Compliance with Law. This Option shall not be exercisable if such exercise would involve a violation of any applicable federal, state or other securities law.


11.	Adjustments. This Option and the Option Shares subject thereto, and the other terms and conditions of the grant evidenced by this Agreement, are subject to mandatory

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EXHIBIT 10.3

adjustment upon the same terms and conditions as those set forth in Section 12 of the Plan.

12.

Taxes and Withholding. To the extent that the Company is required to withhold federal, state, local or foreign taxes or other amounts in connection with any payment made or benefit realized by the Grantee or another person under this Agreement, the Grantee agrees that the Company will withhold any taxes required to be withheld by the Company under federal, state, local or foreign law from the Option Shares in an amount sufficient to satisfy the minimum statutory withholding amount permissible (unless the Committee takes action subsequent to the Date of Grant requiring such withholding amount to be paid by the Grantee in cash). The Option Shares so retained shall be credited against any such withholding requirement at the market value of such Common Shares on the date of such withholding. In no event will the market value of the Common Shares to be withheld pursuant to this Section 11 to satisfy applicable withholding taxes exceed the maximum amount of taxes or other amounts that could be required to be withheld.

13.

Continuous Employment. For purposes of this Agreement, the continuous employment of the Optionee with the Company or a Subsidiary shall not be deemed to have been interrupted, and the Optionee shall not be deemed to have ceased to be an employee of the Company or Subsidiary, by reason of the (a) transfer of the Optionee’s employment among the Company and its Subsidiaries or (b) an approved leave of absence.

14.

No Employment Contract. This Option is a voluntary, discretionary award being made on a one-time basis and it does not constitute a commitment to make any future awards. This Option and any payments made hereunder will not be considered salary or other compensation for purposes of any severance pay or similar allowance, except as otherwise required by law. Nothing in this Agreement will give the Optionee any right to continue employment with the Company or any Subsidiary, as the case may be, or interfere in any way with the right of the Company or a Subsidiary to terminate the employment of the Optionee.

15.

Information. Information about the Optionee and the grant of the Option to the Optionee may be collected, recorded and held, used and disclosed for any purpose related to the administration of this Agreement. The Optionee understands that such processing of this information may need to be carried out by the Company and its Subsidiaries and by third party administrators whether such persons are located within the Optionee’s country or elsewhere, including the United States of America. The Optionee consents to the processing of information relating to the Optionee and the grant of the Option to the Optionee in any one or more of the ways referred to above.

16.

Relation to Plan. This Grant has not been awarded pursuant to the Plan, but this Grant and Agreement are subject to terms and conditions that are substantially the same as those set forth in the Plan that are applicable to Option Rights. Notwithstanding the foregoing, and for the avoidance of doubt, the Share limitations and share counting and recycling rules set forth in the Plan shall not apply with respect to the Grant. Notwithstanding anything in this Agreement to the contrary, Grantee acknowledges and agrees that this

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EXHIBIT 10.3

Agreement and the award described herein (and any settlement thereof) are subject to the terms and conditions of the Company’s clawback policy (if any) as may be in effect from time to time including to implement Section 10D of the Exchange Act and any applicable rules or regulations promulgated thereunder (including applicable rules and regulations of any national securities exchange on which the Common Shares may be traded) (the “Compensation Recovery Policy”), and that relevant sections of this Agreement shall be deemed superseded by and subject to the applicable terms and conditions of the Compensation Recovery Policy from and after the effective date thereof.


17.	Amendments.

(a)

The Committee may at any time and from time to time amend this Agreement in whole or in part; provided, however, that if an amendment to this Agreement requires approval by the Stockholders in order to comply with applicable law or the rules of the Nasdaq Stock Market or, if the Common Shares are not traded on the Nasdaq Stock Market, the principal national securities exchange upon which the Common Shares are traded or quoted, then, such amendment will be subject to Stockholder approval and will not be effective unless and until such approval has been obtained; provided further, that no amendment shall materially adversely affect the rights of the Grantee under this Agreement without the Grantee’s consent.

(b)

For the avoidance of doubt, except in connection with a corporate transaction or event described in Section 12 of the Plan or in connection with a Change in Control, the terms of this Agreement may not be amended to reduce the Option Price of the Option Right, or cancel the Option if it is outstanding and “underwater” in exchange for cash, other awards or Option Rights with an Option Price that is less than the Option Price of the Optionee’s original Option Right, without Stockholder approval. This Section 17 is intended to prohibit the repricing of “underwater” Option Rights and will not be construed to prohibit the kinds of adjustments described in Section 12 of the Plan. Notwithstanding any provision of this Agreement to the contrary, this Section 17 may not be amended without approval by the Stockholders.

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EXHIBIT 10.3

18.

Severability. If any provision of this Agreement or the application of any provision hereof to any person or circumstances is held invalid, unenforceable or otherwise illegal, the remainder of this Agreement and the application of such provision to any other person or circumstances shall not be affected, and the provisions so held to be invalid, unenforceable or otherwise illegal shall be reformed to the extent (and only to the extent) necessary to make it enforceable, valid and legal.


19.	Successors and Assigns. Without limiting Section 8 hereof, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, administrators, heirs, legal representatives and assigns of the Optionee, and the successors and assigns of the Company.


20.	Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same Agreement.


21.	Governing Law. This Agreement shall be governed by and construed in accordance with the internal substantive laws of the State of Delaware, without giving effect to any principle of law that would result in the application of the law of any other jurisdiction.

22.

Notices. Any notice to the Company provided for herein shall be in writing to the Company, marked Attention: President, and any notice to the Optionee shall be addressed to said Optionee at the Optionee’s address on file with the Company at the time of such notice. Except as otherwise provided herein, any written notice shall be deemed to be duly given if and when delivered personally or deposited in the United States mail, first class registered mail, postage and fees prepaid, and addressed as aforesaid. Any party may change the address to which notices are to be given hereunder by written notice to the other party as herein specified (provided that for this purpose any mailed notice shall be deemed given on the third business day following deposit of the same in the United States mail).

23.

Compliance with or Exemption From Section 409A of the Code. To the extent applicable, it is intended that this Agreement comply with or be exempt from the provisions of Section 409A of the Code, so that the income inclusion provisions of Section 409A(a)(1) do not apply to the Optionee. This Agreement shall be administered in a manner consistent with this intent and, for the avoidance of doubt, in accordance with the terms that apply under Section 17 of the Plan.

[Remainder of page left blank intentionally]

NAI-1510707263v3

EXHIBIT 10.3

Executed in the name and on behalf of the Company, at 3201 Carnegie Avenue, Cleveland, Ohio, 44115, as of the 31st day of January 2020.

ATHERSYS, INC.

/s/ William O. Lehmann

Name: William O. Lehmann (BJ)

Title: President & COO

Inducement Grant

The undersigned Optionee hereby accepts the Option evidenced by this Nonqualified Stock Option Inducement Agreement on the terms and conditions set forth herein.

Dated: January 31, 2020 /s/ Ivor Macleod

Ivor Macleod

NAI-1510707263v3

EXHIBIT 10.3

EXHIBIT A

Optionee Name: Ivor Macleod

Option Shares Granted: 600,000

Award Type: Nonqualified Stock Option

Option Price: $1.36

Date of Grant: January 31, 2020

Expiration date: January 31, 2030

Vesting Schedule:

The Option will vest and become exercisable over a four-year period as follows, subject to the Optionee’s continuous employment with the Company through each applicable date: (1) with respect to 150,000 of the Option Shares, on the first anniversary of the Date of Grant; and (2) with respect to the remaining 450,000 Option Shares, in substantially equal installments on each of the 12 quarterly anniversaries of the first anniversary of the Date of Grant.

NAI-1510707263v3

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 7, 2020

/s/ Gil Van Bokkelen

Gil Van Bokkelen

Chief Executive Officer and

Chairman of the Board of Directors

EXHIBIT 31.2

CERTIFICATIONS

I, Ivor Macleod, 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 7, 2020

/s/ Ivor Macleod

Ivor Macleod

Chief Financial Officer

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, 2020, 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 7, 2020

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





			/s/ Ivor Macleod
			Name: Ivor Macleod
			Title: Chief Financial Officer

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.