UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended ~~June~~September 30, 2023

☐	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	~~20-4864095~~
(State or other jurisdictionof incorporation or organization)		(I.R.S. EmployerIdentification No.)
(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

Title of each class

Trading Symbol

Name of each exchange on which registered

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 ☒ 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 ☒ 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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Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☐

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

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

The number of outstanding shares of the registrant’s common stock, $0.001 par value, as of ~~August~~ 9November 10, 2023 was 2261,~~501~~718,~~410~~815.

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ATHERSYS, INC.

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CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS		2		4
PART I. FINANCIAL INFORMATION
ITEM 1.	Financial Statements	4	~~Financial Statements~~	6
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18	~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~	20
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	27	~~Quantitative and Qualitative Disclosures About Market Risk~~	29
ITEM 4.	Controls and Procedures	27	~~Controls and Procedures~~	29
PART II. OTHER INFORMATION
ITEM 1.	Legal Proceedings	27	~~Legal Proceedings~~	29
ITEM 1A.	Risk Factors	27	~~Risk Factors~~	29
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	32
ITEM 3.	Defaults Upon Senior Securities	30	~~Defaults Upon Senior Securities~~	32
ITEM 4.	Mine Safety Disclosures	30	~~Mine Safety Disclosures~~	32
ITEM 5.	Other Information	30	~~Other Information~~	32
ITEM 6.	Exhibits	31	~~Exhibits~~	32
SIGNATURES

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CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Quarterly Report”) 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 timing of initiation of new clinical sites and patient enrollment in our clinical trials, the expected timetable for development of our product candidates, our growth strategy, and our future financial performance, including our operations, economic performance, financial condition, prospects, and other future events. We have attempted to identify forward-looking statements by using such words as “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “should,” “suggest,” “will,” or other similar expressions. These forward-looking statements are only predictions and are largely based on our current expectations. These forward-looking statements appear in a number of places in this Quarterly Report.

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

• our ability to raise capital to fund our operations in the near term and long term, including our ability to obtain funding through public or private equity offerings, debt financings, collaborations and licensing arrangements or other sources, on terms acceptable to us or at all, and to continue as a going concern; • in the event Athersys is unable in the near-term to enter into a strategic transaction or obtain adequate financing, it expects to have to file for protection under the bankruptcy laws to allow the Company to conduct an orderly wind down of operations;

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

• the possibility of unfavorable results from ongoing and additional clinical trials involving MultiStem;

• the risk that positive results in a clinical trial may not be replicated in subsequent or confirmatory trials or success in an early stage clinical trial may not be predictive of results in later stage or large scale clinical trials;

•~~our~~ ~~ability~~the totiming ~~regain~~and ~~compliance~~nature ~~with~~of ~~the~~results ~~requirement~~from toMultiStem ~~maintain~~clinical atrials, ~~minimum~~including ~~market~~the ~~value~~MASTERS-2 ofPhase ~~listed~~3 ~~securities~~clinical oftrial ~~$35~~evaluating ~~million~~the asadministration ~~set~~of ~~forth~~MultiStem infor ~~Nasdaq~~the ~~Listing~~treatment ~~Rule~~of ~~5550(b)(2)~~ischemic stroke;

• our ability to ~~regain~~meet ~~compliance~~milestones ~~with~~and ~~the~~earn ~~requirement~~royalties tounder ~~maintain~~our acollaboration ~~minimum~~agreements, ~~closing~~including ~~bid~~the ~~price~~success of ~~$1.00~~our ~~per~~collaboration ~~share~~with ~~as set forth in Nasdaq Listing Rule 5550(a)(2)~~Healios;

• the ~~timing~~success ~~and~~of ~~nature~~our ofMACOVIA ~~results~~clinical ~~from~~trial ~~MultiStem~~evaluating ~~clinical~~the ~~trials,~~administration ~~including~~of MultiStem for the ~~MASTERS~~treatment of ARDS induced by COVID-219 ~~Phase~~and 3other pathogens, and the MATRICS-1 clinical trial ~~evaluating~~being ~~the~~conducted ~~administration~~with ofUT ~~MultiStem~~Health ~~for~~evaluating the treatment of ~~ischemic~~patients ~~stroke~~with serious traumatic injuries;

•~~our~~ ~~ability~~the toavailability ~~meet~~of ~~milestones~~product ~~and~~sufficient ~~earn~~to ~~royalties~~meet ~~under~~ our ~~collaboration~~clinical ~~agreements,~~needs ~~including~~and ~~the~~potential ~~success~~commercial ofdemand ~~our~~following ~~collaboration~~any ~~with Healios~~approval;

•~~the~~ ~~success of our MACOVIA clinical trial evaluating~~ the ~~administration~~possibility of ~~MultiStem~~delays ~~for~~in, ~~the~~adverse ~~treatment~~results of ~~ARDS induced by COVID-19 and other pathogens~~, and ~~the~~excessive ~~MATRICS-1~~costs ~~clinical~~of ~~trial being conducted with UT Health evaluating~~ the ~~treatment~~development ~~of patients with serious traumatic injuries~~process;

•~~the~~ ~~availability~~our ofability ~~product sufficient~~ to ~~meet~~successfully ~~our~~initiate ~~clinical needs~~ and ~~potential~~complete ~~commercial~~clinical ~~demand~~trials ~~following~~of ~~any~~our ~~approval~~product candidates;

• the possibility of delays, work stoppages or interruptions in manufacturing by third parties or us, ~~adverse~~such ~~results~~as ofdue to material supply constraints, ~~and~~contamination, ~~excessive~~operational ~~costs~~restrictions ofdue to COVID-19 or other public health emergencies, labor constraints, regulatory issues or other factors that could negatively impact our trials and the ~~development~~trials ~~process~~of our collaborators;

• uncertainty regarding market acceptance of our product candidates and our ability to ~~successfully~~generate ~~initiate~~revenues, including MultiStem cell therapy for neurological, inflammatory and ~~complete~~immune, ~~clinical~~cardiovascular ~~trials~~and ofother ~~our~~critical ~~product~~care ~~candidates~~indications;

•~~the~~ ~~possibility~~changes ~~of delays, work stoppages or interruptions~~ in ~~manufacturing~~external bymarket third parties or us, such as due to material supply constraints, contamination, operational restrictions due to COVID-19 or other public health emergencies, labor constraints, regulatory issues or other factors ~~that could negatively impact our trials and the trials of our collaborators~~;

•~~uncertainty~~ ~~regarding~~changes ~~market~~in ~~acceptance of~~ our ~~product~~industry’s ~~candidates~~overall ~~and our ability to generate revenues, including MultiStem cell therapy for neurological, inflammatory and immune, cardiovascular and other critical care indications~~performance;

• changes in ~~external~~our ~~market~~business ~~factors~~strategy;

~~•changes in our industry’s overall performance;~~ 2

•changes in our business strategy;

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• 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; • the possibility that we will not be able to be successful in our defense of active litigation;

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

• the success of our efforts to enter into new strategic partnerships and advance our programs;

• 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~~ability ~~Report~~to onidentify, ~~Form 10-K for the year ended December 31~~evaluate, ~~2023~~and ~~under~~complete ~~Item~~any ~~1A,~~strategic ~~“Risk~~alternative ~~Factors.”~~that ~~and~~yields invalue for our ~~other~~stockholders; ~~filings with the SEC.~~and

•

the risks mentioned elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2022 under Item 1A, “Risk Factors.” and in our other filings with the SEC.

Any forward-looking statements in this Quarterly Report reflect our current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, operating results, growth strategy and liquidity. 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. You should not place undue reliance on these forward-looking statements because such statements speak only as of the date when made. 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 filed or 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.

5 3

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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)

				June 30,2023			December 31, 2022
	September 30,			December 31,
				(Unaudited)
	2023			2022
Assets
	(Unaudited)
Current assets:
Assets
Cash and cash equivalents				$	1,803		$	9,038
Current assets:
Accounts receivable from Healios				664			716
Cash and cash equivalents		1,020			9,038
Prepaid clinical trial costs				—			2,747
Accounts receivable from Healios		-			716
Prepaid expenses and other				1,225			1,034
Prepaid clinical trial costs		-			2,747
Total current assets				3,692			13,535
Prepaid expenses and other		1,210			1,034
Operating right-of-use assets, net				38			7,846
Total current assets		2,230			13,535
Property and equipment, net				4,633			4,214
Operating right-of-use assets, net		26			7,846
Deposits and other				2,114			2,136
Property and equipment, net		4,236			4,214
Total assets				$	10,477		$	27,731
Other Assets		936			2,136
Liabilities and stockholders’ equity
Total assets		7,428			27,731
Current liabilities:
Liabilities and stockholders’ equity
Accounts payable				$	8,701		$	27,765
Current liabilities:
Deferred accounts payable to Supplier				7,862			—
Accounts payable		9,295			27,765
Operating lease liabilities, current				8,390			746
Deferred accounts payable to Supplier		7,862			-
Accrued compensation and related benefits				419			1,090
Operating lease liabilities, current		7,792			746
Accrued clinical trial related costs				364			7,231
Accrued compensation and related benefits		890			1,090
Accrued expenses and other				1,321			1,078
Accrued clinical trial related costs		360			7,231
Note Payable				15,640			—
Accrued expenses and other		1,490			1,078
Warrant liability				—			534
Note Payable		10,785			-
Total current liabilities				42,697			38,444
Deferred revenue - Healios		150			-
Operating lease liabilities, non-current				—			7,939
Warrant liability		-			534
Advance from Healios				5,199			5,199
Total current liabilities		38,624			38,444
Stockholders’ equity:
Operating lease liabilities, non-current		-			7,939
Preferred stock, at stated value; 10,000,000 shares authorized, and no shares issued and outstanding at June 30, 2023 and December 31, 2022				—			—
Advance from Healios		5,199			5,199
Common stock, $0.001 par value; 600,000,000 shares authorized with 21,833,847 and 17,986,147 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively				21			18
Stockholders’ equity:
Additional paid-in capital				639,173			632,009
Preferred stock, at stated value; 10,000,000 shares authorized, and no shares issued and outstanding at September 30, 2023 and December 31, 2022		-			-
Accumulated deficit				(676,613)			(655,878)
Common stock, $0.001 par value; 600,000,000 shares authorized with 26,758,431 and 17,986,147 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively		27			18
Total stockholders’ equity (deficit)				(37,419)			(23,851)
Additional paid-in capital		642,754			632,009
Total liabilities and stockholders’ equity				10,477			27,731
Accumulated deficit		(680,384	)		(655,878	)
Accumulated other comprehensive income		1,208			-
Total stockholders’ deficit		(36,395	)		(23,851	)
Total liabilities and stockholders’ equity		7,428			27,731

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 endedJune 30,										Six months ended June 30,
	Three months ended September 30,						Nine months ended September 30,
	2023			~~2023~~2022			2023		~~2022~~		2022			~~2023~~		~~2022~~
Revenues
Contract revenue from Healios		-		$	4965			49	$	~~2,316~~		5,294		$	49	$	~~5,228~~
Total revenues		-		49	65			49	~~2,316~~			5,294		49		~~5,228~~
Costs and expenses
Research and development		3,995		~~10,649~~	12,424			19,111	~~20,794~~			54,162		~~15,116~~		~~41,738~~
General and administrative		2,808		~~2,345~~	3,737			7,968	~~5,162~~			12,999		~~5,160~~		~~9,261~~
Depreciation		977		43	617			1,072	~~618~~			1,482		95		~~865~~
Total costs and expenses		7,780		~~13,037~~	16,778			28,151	~~26,574~~			68,643		~~20,371~~		~~51,864~~
Loss from operations		(7,780	)	~~(12,988)~~	(16,713	)		(28,102	~~(24,258~~)			(63,349	)	~~(20,322)~~		~~(46,636)~~
Other (expense) income, net1				64					610					(413)		772
Other income, net1		4,009			3,044			3,596				3,816
Net loss and comprehensive loss				$	(12,924)				$	(23,648)				$	(20,735)	$	(45,864)
Net loss		(3,771	)		(13,669	)		(24,506	)			(59,533	)
Net loss per share, basic and diluted		(0.15	)	$	(01.~~62)~~15	)		(1.16	$)	~~(2.28)~~		(5.58	)	$	~~(1.06)~~	$	~~(4.55)~~
Weighted average shares outstanding, basic and diluted		24,492		~~20,700~~	11,855			21,184	~~10,383~~			10,676		~~19,502~~		~~10,077~~
Other comprehensive income
Net loss		(3,771	)		(13,669	)		(24,506	)			(59,533	)
Fair value change due to company credit risk		1,208			-			1,208				-
Total Other comprehensive income		1,208			-			1,208				-
Net loss and comprehensive loss		(2,563	)		(13,669	)		(23,298	)			(59,533	)

See accompanying notes to unaudited condensed consolidated financial statements.

1 See Footnote 10 for components of other ~~(expense)~~ income, net

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Athersys, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except share amounts)

(Unaudited)

	Preferred Stock	~~Preferred Stock~~				Common Stock			~~Common Stock~~	Additional				Accumulated			~~AdditionalPaid-inCapital~~		Total			~~AccumulatedDeficit~~		~~TotalStockholders’Equity~~
		Numberof Shares			StatedValue				Numberof Shares2				ParValue
	Number		Stated			Number		Par		Paid-in				Other Comprehensive		Accumulated			Stockholders’
Balance at December 31, 2022		—			$	—			17,986,147				$	18			$	632,009				$	(655,878)	$	(23,851)
	of Shares		Value			of Shares		Value		Capital				Loss		Deficit			Equity
Stock-based compensation		—			—				—				—				707					—		707
Balance at December 31, 2022		—	$	—			17,986,147	$	18	$	632,009			$	—	$	(655,878	)	$	(23,851	)
Stock Issue- warrant exercise		—			—				344,170				—				—					—		—
Stock-based compensation		—		—			—		—		707				—		—			707
Issuance of common stock under equity compensation plan		—			—				118,172				—				(56)					—		(56)
Stock Issue- warrant exercise		—		—			344,170		—		—				—		—			—
Net and comprehensive loss		—			—				—				—				—					(7,811)		(7,811)
Issuance of common stock under equity compensation plan		—		—			118,172		—		(56	)			—		—			(56	)
Balance at March 31, 2023		—			—				18,448,489				18				632,660					(663,689)		(31,011)
Net and comprehensive loss		—		—			—		—		—				—		(7,811	)		(7,811	)
Stock-based compensation		—			—				—				—				568					—		568
Balance at March 31, 2023		—		—			18,448,489		18		632,660				—		(663,689	)		(31,011	)
Stock Issue- warrant exercise		—			—				813,000				1				(1)					—		—
Stock-based compensation		—		—			—		—		568				—		—			568
Issuance of common stock		—			—				2,315,000				2				3,336					—		3,338
Stock Issue- warrant exercise		—		—			813,000		1		(1	)			—		—			—
Warrant Liability3		—			—				—				—				2,685					—		2,685
Issuance of common stock		—		—			2,315,000		2		3,336				—		—			3,338
Issuance of common stock under equity compensation plan		—			—				257,358				—				(75)					—		(75)
Warrant Liability		—		—			—		—		2,685				—		—			2,685
Net and comprehensive loss		—			—				—				—				—					(12,924)		(12,924)
Issuance of common stock under equity compensation plan		—		—			257,358		—		(75	)			—		—			(75	)
Balance at June 30, 2023		—			—				21,833,847				21				639,173					(676,613)		(37,419)
Net and comprehensive loss		—		—			—		—		—				—		(12,924	)		(12,924	)
Balance at June 30, 2023		—		—			21,833,847		21		639,173				—		(676,613	)		(37,419	)
Stock-based compensation		—		—			—		—		646				—		—			646
Stock Issue- warrant exercise		—		—			557,000		1		(1	)			—		—			—
Issuance of common stock		—		—			4,212,500		4		2,987				—		—			2,991
Other comprehensive income		—		—			—		—		—				1,208		—			1,208
Issuance of common stock under equity compensation plan		—		—			155,084		1		(51	)			—		—			(50	)
Net and comprehensive loss		—		—			—		—		—				—		(3,771	)		(3,771	)
Balance at September 30, 2023		—		—			26,758,431		27		642,754				1,208		(680,384	)		(36,395	)

	Preferred Stock	~~Preferred Stock~~				Common Stock			~~Common Stock~~	Additional				Accumulated			~~AdditionalPaid-inCapital~~		Total			~~AccumulatedDeficit~~		~~Total Stockholders’ Equity~~
		Numberof Shares			StatedValue				Numberof Shares 1				ParValue
	Number		Stated			Number		Par		Paid-in				Other Comprehensive		Accumulated			Stockholders’
Balance at December 31, 2021		—			$	—			9,713,767				$	10			$	599,703				$	(583,344)	$	16,369
	of Shares		Value			of Shares 1		Value		Capital				Loss		Deficit			Equity
Stock-based compensation		—			—				—				—				1,410					—		1,410
Balance at December 31, 2021		—	$	—			9,713,767	$	10	$	599,703			$	—	$	(583,344	)	$	16,369
Issuance of common stock		—			—				129,333				—				4,803					—		4,803
Stock-based compensation		—		—			—		—		1,410				—		—			1,410
Issuance of common stock under equity compensation plan		—			—				148,611				—				(58)					—		(58)
Issuance of common stock		—		—			129,333		—		4,803				—		—			4,803
Net and comprehensive loss		—			—				—				—				—					(22,216)		(22,216)
Issuance of common stock under equity compensation plan		—		—			148,611		—		(58	)			—		—			(58	)
Balance at March 31, 2022		—			—				9,991,711				10				605,858					(605,560)		308
Net and comprehensive loss		—		—			—		—		—				—		(22,216	)		(22,216	)
Stock-based compensation		—			—				—				—				1,945					—		1,945
Balance at March 31, 2022		—		—			9,991,711		10		605,858				—		(605,560	)		308
Issuance of common stock, net of issuance cost		—			—				784,724				1				9,697					—		9,698
Stock-based compensation		—		—			—		—		1,945				—		—			1,945
Issuance of common stock under equity compensation plan		—			—				227,955				—				(40)					—		(40)
Issuance of common stock, net of issuance cost		—		—			784,724		1		9,697				—		—			9,698
Net and comprehensive loss		—			—				—				—				$	—				(23,648)		(23,648)
Issuance of common stock under equity compensation plan		—		—			227,955		—		(40	)			—		—			(40	)
Balance at June 30, 2022		—			—				11,004,390				11				$	617,460				(629,208)		(11,737)
Net and comprehensive loss		—		—			—		—	$	—				—		(23,648	)		(23,648	)
Balance at June 30, 2022		—		—			11,004,390		11	$	617,460				—		(629,208	)		(11,737	)
Stock-based compensation		—		—			—		—		2,001				—		—			2,001
Issuance of common stock, net		—		—			1,200,000		1		4,592				—		—			4,593
Pre-funded warrant exercise		—		—			720,000		1		2,232				—		—			2,233
Issuance of common stock under equity compensation plan		—		—			9,346		—		(33	)			—		—			(33	)
Net and comprehensive loss		—		—			—		—		—				—		(13,669	)		(13,669	)
Balance at September 30, 2022		—	$	—			12,933,736	$	13	$	626,252			$	—	$	(642,877	)	$	(16,612	)

See accompanying notes to unaudited condensed consolidated financial statements.

~~2 Reflects the 1-for-25 reverse stock split that became effective August 26, 2022. Refer to Note 1, “Background and Basis of Presentation.”~~ 6

3 Warrant reclassification (Footnote 9 Fair Value Measurements)

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Athersys, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

				Six months endedJune 30,
	Nine months ended
				2023			2022
	September 30,
Operating activities
	2023			2022
Net loss				(20,735)			$	(45,864)
Operating activities
Adjustments to reconcile net loss to net cash used in operating activities:
Net loss	$	(24,506	)	$	(59,533	)
Depreciation				95			865
Adjustments to reconcile net loss to net cash used in operating activities:
Gain on debt extinguishment				(2,612)			—
Depreciation		1,072			1,482
Loss from impairment of assets				7,545			4,931
Gain on debt extinguishment		(2,611	)		—
Stock-based compensation				1,275			3,355
Loss from impairment of assets		7,746			5,435
Change in Paid-in-Kind (PIK) Interest Accrual				185			—
Allowance for doubtful accounts		664			—
Change in fair value of Note Payables				640			—
Stock-based compensation		1,921			5,356
Change in fair value of warrant liabilities				2,151			—
Change in Paid-in-Kind (PIK) Interest Accrual		568			—
Changes in operating assets and liabilities:
Change in fair value of Note Payables		(3,192	)		—
Accounts receivable from Healios - billed and unbilled				52			820
Gain on sale of assets		—			(11	)
Prepaid expenses, deposits and other				66			307
Loss on abandonment of fixed assets		427			—
Accounts payable, accrued expenses and other				787			2,320
Change in fair value of warrant liabilities		2,151			(2,784	)
Deferred revenue - Healios				—			(3,340)
Issuance costs allocated to warrant liabilities		—			560
Net cash used in operating activities				(10,551)			(36,606)
Changes in operating assets and liabilities:
Investing activities
Accounts receivable from Healios - billed and unbilled		52			3,754
Proceeds from the sale of equipment				105			—
Prepaid expenses, deposits and other		(163	)		(1,262	)
Purchases of equipment				—			(1,825)
Accounts payable, accrued expenses and other		1,323			4,472
Net cash used in investing activities				105			(1,825)
Accounts payable to Healios		—			(1,119	)
Financing activities
Deferred revenue - Healios		150			(3,340	)
Proceeds from issuance of common stock, net of issuance cost				3,342			14,500
Net cash used in operating activities		(14,398	)		(46,990	)
Shares retained for withholding tax payments on stock-based awards				(131)			(98)
Investing activities
Net cash provided by financing activities				3,211			14,402
Proceeds from the sale of equipment		227			41
Decrease in cash and cash equivalents				(7,235)			(24,029)
Purchases of equipment		—			(2,044	)
Cash and cash equivalents at beginning of the period				9,038			37,407
Net cash provided (used) in investing activities		227			(2,003	)
Cash and cash equivalents at end of the period				$	1,803		$	13,378
Financing activities
Proceeds from issuance of common stock, net of issuance cost		—			14,500
Proceeds from the issuance of common stock and warrants, net of issuance cost		6,334			10,997
Proceeds from the exercise of pre-funded warrants		1			2
Shares retained for withholding tax payments on stock-based awards		(182	)		(131	)
Net cash provided by financing activities		6,153			25,368
Decrease in cash and cash equivalents		(8,018	)		(23,625	)
Cash and cash equivalents at beginning of the period		9,038			37,407
Cash and cash equivalents at end of the period	$	1,020		$	13,782
Noncash financing activities
Issuance of warrants				$	413
Reclass of warrant liability to additional paid-in capital upon exercise	$	2,685		$	2,231

See accompanying notes to unaudited condensed consolidated financial statements.

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Athersys, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Three- and ~~Six~~Nine- Month Periods Ended ~~June~~ September 30, 2023 and 2022

1. Background and Basis of Presentation

Organization

Athersys, Inc., including its consolidated subsidiaries (collectively, “we,” “us,” “our,” “Athersys,” and the “Company”), is a biotechnology company focused in the field of regenerative medicine and operates in one business segment. Our operations consist of research, clinical development activities, manufacturing and manufacturing process development activities, and our most advanced program is in a pivotal Phase 3 clinical trial for the treatment of ischemic stroke.

Basis of Presentation

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, 2022, filed with the SEC on April 3, 2023. 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 and disclosures 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.

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 in Part I, Item 2.

Reverse Stock Split

On August 26, 2022, the Company amended its Certificate of Incorporation to implement a 1-for-25 reverse stock split of its common stock. The reverse stock split did not cause an adjustment to the par value or the authorized shares of the common stock. As a result of the reverse stock split, the Company adjusted the share amounts under its employee equity incentive plans, inducement awards and common stock warrant agreements with third parties. All disclosures of common shares and per common share data in the accompanying interim financial statements and related notes reflect the reverse stock split for all periods presented.

2. Going Concern

At September 30, 2023, we had cash and cash equivalents of $1.0 million. We will need substantial additional funding to develop our MultiStem product candidate and to continue our operations. Significant additional capital will be required to continue our research and development programs, including progressing our clinical product candidates to potential commercialization and preparing for commercial-scale manufacturing and sales. We intend to continue exploring available strategic options. However, in the event Athersys is unable in the near-term to enter into a strategic transaction or obtain adequate financing, it expects to have to file for protection under the bankruptcy laws to allow the Company to conduct an orderly wind down of operations. If we decide to dissolve and liquidate our assets or to seek protection under the bankruptcy laws, it is unclear to what extent we will be able to pay our obligations, and, accordingly, it is further unclear whether and to what extent any resources will be available for distributions to stockholders. For the foreseeable future, our ability to continue our operations is dependent upon the ability to obtain additional funding through public or private equity offerings, debt financings, collaborations and/or licensing arrangements. However, there can be no assurance that we will be able to obtain such funding on terms acceptable to us, on a timely basis or at all, particularly in light of our current stock price and liquidity. If we are unable to obtain funding, we may be required to further delay, reduce or eliminate our MultiStem product candidate approval and commercialization efforts, which would adversely affect our business prospects, and we likely will be unable to continue operations. Additionally, our ability to make timely payments on obligations to the supplier we have entered into the Forbearance Agreement, discussed in more detail below, is dependent on future capital raise. The supplier has the right to call the full amount of the debt due immediately if we are late on a payment and do not remedy the delinquent payment in the allotted cure period. The accompanying unaudited condensed consolidated financial statements do not include any adjustments to reflect the possible future effect on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of the uncertainty concerning our ability to continue as a going concern.

~~At June 30, 2023, we had cash and cash equivalents of $1.~~ 8 million. We will need substantial additional funding to develop our MultiStem product candidate and to continue our operations. Significant additional capital will be required to continue our research and development programs, including progressing our clinical product candidates to potential commercialization and preparing for commercial-scale manufacturing and sales. If we are unable to obtain adequate financing, we likely would have to file for protection under the bankruptcy laws to continue to pursue potential transactions and conduct a wind down of our Company. If we decide to dissolve and liquidate our assets or to seek protection under the bankruptcy laws, it is unclear to what extent we will be able to pay our obligations, and, accordingly, it is further unclear whether and to what extent any resources will be available for distributions to stockholders. For the foreseeable future, our ability to continue our operations is dependent upon the ability to obtain additional funding through public or private equity offerings, debt financings, collaborations and/or licensing arrangements. However, there can be no assurance that we will be able to obtain such funding on terms acceptable to us, on a timely basis or at all, particularly in light of our current stock price and liquidity. If we are unable to obtain funding, we may be required to further delay, reduce or eliminate our MultiStem product candidate approval and commercialization efforts, which would adversely affect our business prospects, and we likely will be unable to continue operations. Additionally, our ability to make timely payments on obligations to the supplier we have entered into the Forbearance Agreement, discussed in more detail below, is dependent on future capital raise. The supplier has the right to call the full amount of the debt due

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immediately if we are late on a payment and do not remedy the delinquent payment in the allotted cure period. The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effect on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of the uncertainty concerning our ability to continue as a going concern.

3. Accounting Standards Adopted

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326). 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. The impact of adoption of this standard did not have a material impact on the consolidated financial statements and disclosures.

4. Net Loss per Share

Basic and diluted net loss per share have been computed using the weighted-average number of shares of our common stock outstanding during the period.

As of September ~~June~~ 30, 2023, we have outstanding options, restricted stock units and warrants that were not used in the calculation of diluted net loss per share because to do so would be anti-dilutive. As of September ~~June~~ 30, 2023, we had warrants outstanding to purchase an aggregate of 400,000 shares of our common stock that were issued to HEALIOS K.K. (“Healios”) in August 2021 and are not yet exercisable according to their terms. Additionally, as of September ~~June~~ 30, 2023, we had outstanding warrants to purchase 1,920,000, 2,000,000, 9,109,090, ~~and~~ 3,685,000, and 28,600,000 shares of our common stock that were issued in August 2022, September 2022, November 2022, April 2023, and August ~~April~~ 2023, respectively. Additionally, we had shares related to the convertible note that have been excluded from the calculation, as these would be anti-dilutive.

The following instruments were excluded from the calculation of diluted net loss per share because their effect would be anti-dilutive.

			Three months endedJune 30,							Six months endedJune 30,
	Three months ended				Nine months ended
			2023				2022			2023	2022
	September 30,				September 30,
Stock options			1,132,606				1,224,505			1,132,606	1,224,505
	2023		2022		2023			2022
Restricted stock units			525,239				69,765			525,239	69,765
Stock options		1,119,369		1,280,173		1,119,369			1,280,173
Convertible Note - refer to Note 11			11,538,461				—			11,538,461	—
Restricted stock units		301,029		103,065		301,029			103,065
Warrants - refer to Note 8			17,114,090				400,000			17,114,090	400,000
Convertible Note - refer to Note 11		11,538,461		—		11,538,461			—
Total			30,310,396				1,694,270			30,310,396	1,694,270
Warrants - refer to Note 8		45,714,090		3,920,000		45,714,090			4,320,000
Total		58,672,949		5,303,238		58,672,949			5,703,238

5. Property and Equipment, net

	For the periods ended	~~For the periods ended~~
Property and equipment consists of (in thousands):		June 30,2023					December 31, 2022
	September 30,			December 31,
Laboratory equipment		$	7,224				$	7,576
Property and equipment consists of (in thousands):	2023			2022
Office equipment and leasehold improvements		3,933					3,934
Laboratory equipment	$	8,352		$	7,576
Equipment not yet in service		2,911					2,313
Office equipment and leasehold improvements		3,398			3,934
		14,068					13,823
Equipment not yet in service		2,850			2,313
Accumulated depreciation and amortization		(9,435)					(9,609)
		14,600			13,823
		$	4,633				$	4,214
Accumulated depreciation and amortization		(10,364	)		(9,609	)
	$	4,236		$	4,214

Long-lived assets are evaluated for impairment when events or changes in circumstances indicate that the carrying amount of the asset or related group of assets may not be recoverable. In June 2022, we announced a restructuring plan (the “Plan”) of our organization with the intention of significantly reducing expenses, conserving cash, improving the focus of the Company’s activities and becoming more attractive to potential financial and strategic partners. The Plan included a significant reduction in our workforce and changes to our management team. The Plan also includes the reduction of our internal research function, the decommissioning of certain equipment and pausing our manufacturing and process development efforts toward commercializing our MultiStem product candidate. As a result of these actions, during 2022, we recorded impairment charges of approximately $7.2 million to adjust the carrying amount of certain equipment assets to the estimated market value of similar assets.

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We have disposed of gross assets of approximately $71.20 million with accumulated depreciation of $0.4 million, for $0.3 million toin ~~adjust~~cash, ~~the~~which ~~carrying~~resulted ~~amount~~in a loss of $0.3 ~~certain~~million for ~~equipment~~the nine months ended September 30, 2023. We had no material disposals for the same period ended September 30, 2022. Additionally, we accelerated depreciation for assets no longer expected to be used in operations to their expected salvage values, which resulted in additional depreciation of $0.9 million being record for the three ~~estimated~~months ~~market~~ending September ~~value~~30, 2023. We reduced the useful lives of ~~similar~~equipment ~~assets~~resulting in additional depreciation of $0.4 million for the nine months ended September 30, 2022.

AsOn June ~~part~~9, of2023, our landlord for the ~~Plan~~property in Stow, weOhio, ~~have~~Seasons ~~disposed~~Business ofCenter ~~gross~~Four, ~~assets~~LLC, brought suit against the Company in the Summit County, Ohio Court of ~~approximately~~Common ~~$0.4 million~~Pleas ~~with~~asserting ~~accumulated~~claims ~~depreciation~~for Breach of ~~$0.3 million~~Contract (Lease), ~~for~~Promissory Estoppel, and Unjust Enrichment relating to the subject lease between the parties. As a ~~gain~~result of ~~approximately~~the ~~$0.1 million~~Company ~~for~~surrendering possession of the ~~six~~property ~~months~~and ~~ended~~returning ~~June 30,~~the ~~2023.~~keys Weto ~~had~~the nolandlord ~~disposals~~the ~~for~~Company recorded an impairment charge related to the ~~period~~right-of-use ~~ended~~asset. ~~June~~During the nine months ended September 30, ~~2022~~2023, ~~but~~we asrecorded ~~part~~$7.9 million of ~~the~~impairment ~~Plan~~charges weto ~~did~~fixed ~~reduce~~assets. ~~the~~The ~~useful~~impairment ~~lives~~charge ofis ~~equipment~~recorded ~~resulting~~ in ~~additional~~research ~~depreciation~~and development costs and expenses. The right-of-use $0liability has all been reclassified to current.~~4 million.~~

On June 9, 2023, the landlord, Seasons Business Center Four, LLC, brought suit against the Company in the Summit County, Ohio Court of Common Pleas asserting claims for Breach of Contract (Lease), Promissory Estoppel, and Unjust Enrichment relating to the subject Lease between the parties. As a result of the Company surrendering possession of the property and returning the keys to the landlord the Company recorded an impairment charge related to the right-of-use asset of $7.5 million. The impairment charge is recorded in research and development costs and expenses for the three-and-six months ended June 30, 2023. The right-of-use liability has all been reclassified to current.

6. Collaborative Arrangements and Revenue Recognition

Healios Collaboration

We have a licensing agreement 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 and are associated with modifications to the arrangement. Healios is responsible for the development and commercialization of the licensed products in the licensed territory, and we provide certain services to Healios for which we are paid.

In August ~~February~~ 2021, the Company, ~~Healios,~~ and ~~Dr.~~Healios ~~Tadahisa Kagimoto~~ entered into a ~~Cooperation~~Comprehensive Framework Agreement for Commercial Manufacturing and Ongoing Support, or the ~~Cooperation~~Framework ~~agreement~~Agreement, which ~~established~~provided ~~Director~~for ~~Nominations~~clarification under and ~~Related~~modified ~~Agreements~~the ~~and~~existing ~~established~~agreements between the ~~Standstill~~parties. ~~Provisions~~It also provided Healios with deferral of certain milestone payments. Under the Framework Agreement, the Company was entitled to payments for reimbursable services of $0.7 million. The amount, which was included in accounts receivable from Healios has been fully offset by an allowance for doubtful accounts at September 30, 2023 due to the length of time the receivable has been outstanding without collection.

In August 2021, the Company and Healios entered into a Comprehensive Framework Agreement for Commercial Manufacturing and Ongoing Support, or the Framework Agreement, which provided for clarification under and modified the existing agreements between the parties. It also provided Healios with deferral of certain milestone payments. Under the Framework Agreement, the Company was entitled to payments for reimbursable services of which $0.7 million and $0.6 million which are included in accounts receivable from Healios at June 30, 2023 and June 30, 2022, respectively.

In addition, under the Framework Agreement, the Company was entitled to a $3.0 million milestone payment from Healios and was obligated to pay Healios $1.1 million by December 31, 2022. In September 2022, we received $1.9 million from Healios, which represents the milestone payment net of amounts owed to Healios. Additionally, to assist Healios with the advancement of its ischemic stroke and acute respiratory distress syndrome (“ARDS”) programs in Japan, in September 2022, we granted to Healios, subject to the terms of the licensing agreement, a non-exclusive license to make and have made MultiStem for the treatment of ischemic stroke and ARDS worldwide solely for import for use in Japan. In connection with the execution of the Framework Agreement, the Cooperation Agreement was amended to extend certain customary standstill provisions until the conclusion of our 2023 annual meeting of stockholders.

In August 2021, we also issued two warrants (together, the “2021 Warrants”) to Healios in connection with the Framework Agreement to purchase up to a total of 400,000 shares of our common stock. The 2021 Warrants are being accounted for as consideration paid or payable to a customer according to Topic 606, Revenue from Contracts with Customers, and Topic 718, Compensation Stock Compensation, under which the recognition of such equity instruments is required at the time that the underlying performance conditions become probable or are satisfied. As of September ~~June~~ 30, 2023, the 2021 Warrants have not been recorded as the underlying performance conditions have not been satisfied and are not yet considered probable. Refer to Note 8, “Stockholders’ Equity and Warrants”, for further information.

In August 2023, the Company entered into a Memorandum of Understanding (“MOU”) with Healios, which memorializes the terms between the Company and Healios regarding consultation services the Company agreed to provide Healios as it explores its effort to join and participate in the Company’s ongoing MASTERS-2 Study. In exchange, Healios agreed to compensate the Company for consulting services. Healios made a $150,000 deposit which is recorded in Deferred revenue - Healios.

Healios has alleged that we are in material breach of our Framework Agreement for, among other things, not meeting our supply obligations and cooperation and assistance obligations. We strongly disagree with Healios’ allegations and will continue to work with Healios to try to resolve this dispute. However, there can be no assurance that we will be able to resolve this dispute without legal proceedings.

Healios Revenue Recognition

At the inception of the Healios arrangement and again each time that the arrangement has been modified, all material performance obligations were identified, which include (i) licenses to our technology, (ii) product supply services, and (iii) manufacturing services provided on Healios’ behalf.

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Under the Framework Agreement, it was determined there was one performance obligation for services necessary for regulatory approvals, manufacturing readiness, and commercial launch in Japan. We determined the transaction price included estimated payments for reimbursable services to be performed by us for Healios and the $3.0 million milestone payment. We allocated the total transaction price to this one performance obligation. We began recognizing revenue in the third quarter of 2021 as the services were being performed. At September ~~June~~ 30, 2023, the services related to this performance obligation are largely complete and consist of minimal close-out activities which are immaterial. During the three months ended September ~~June~~ 30, 2023, we recognized no revenue associated with this performance obligation, compared to $20.31 million for three months ended September ~~June~~ 30, 2022. We recognized no revenue for three months ended September ~~June~~ 30, 2023 and September ~~June~~ 30, 2022 from performance obligations satisfied in previous periods.

Accounts receivable from Healios

Accounts receivable from Healios are related to our contracts and are recorded when the right to consideration is unconditional at the amount that management expects to collect. Accounts receivable from Healios do not bear interest if paid when contractually due, and payments are generally due within thirty to forty-five days of invoicing. As of September 30, 2023, we have increased our allowance for doubtful accounts to cover the full amount of balance that we showed as outstanding, due to the length of time the invoices have been outstanding.

Deferred Revenue - Healios

The amounts included in deferred revenue - Healios are considered a contract liability connected to the funds received as part of the MOU. During the nine months ended September 30, 2023, no revenue was recognized from contract liabilities, compared to $2.8 million of revenue recognized during the nine months ended September 30, 2022.

Advance from Healios

In 2017, we amended the clinical trial supply agreement for the manufacturing of clinical product for TREASURE to clarify a cost-sharing arrangement. The proceeds from Healios that relate specifically to the cost-sharing arrangement may either (i) result in a reduction in the proceeds we receive from Healios upon the achievement of two potential milestones and an increase to a commercial milestone under the license agreement for stroke or (ii) be repaid to Healios at our election, as defined. The cost-sharing proceeds received are recognized in advance from Healios on the unaudited condensed consolidated balance 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 product supply revenue at a point in time upon delivery, as defined in the applicable product supply contracts, while service revenue is recognized when earned over time. The following table presents our contract revenues disaggregated by timing of revenue recognition (in thousands):

			Three months endedJune 30, 2023								Three months endedJune 30, 2022
	Three months ended				Three months ended
			Point inTime				Over Time				Point inTime		Over Time
	September 30, 2023				September 30, 2022
Contract Revenue from Healios
	Point in				Point in
Product supply revenue			$	49			$	—			$	—	$	—
	Time		Over Time		Time				Over Time
Service revenue			—				—				—		2,316
Contract Revenue from Healios
Total disaggregated revenues			$	49			$	—			$	—	$	2,316
Product supply revenue	$	—	$	—	$	—			$	—
Service revenue		—		—		—				65
Total disaggregated revenues	$	—	$	—	$	—			$	65

			Six months endedJune 30, 2023								Six months endedJune 30, 2022
	Nine months ended				Nine months ended
			Point inTime				Over Time				Point inTime		Over Time
	September 30, 2023				September 30, 2022
Contract Revenue from Healios
	Point in				Point in
Product supply revenue			$	49			$	—			$	—	$	—
	Time		Over Time		Time				Over Time
Service revenue			—				—				—		5,228
Contract Revenue from Healios
Total disaggregated revenues			$	49			$	—			$	—	$	5,228
Product supply revenue	$	49	$	—	$	—			$	—
Service revenue		—		—		—				5,294
Total disaggregated revenues	$	49	$	—	$	—			$	5,294

7. Stock-Based Compensation

Our 2019 Equity and Incentive Compensation Plan (the “EICP”) authorized at inception, an aggregate of approximately 13,700,000 shares of our common stock for awards to employees, directors and consultants. The EICP authorizes the issuance of stock-based compensation in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares and units, and other stock-based awards. As of September ~~June~~ 30, 2023, a total of ~~961~~1,~~333~~ 185,543 shares (including 11,289 shares related to an expired incentive plan) of common stock have been issued under our equity incentive plans.

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AsOn September ~~of June 30~~27, ~~2023~~2022, athe ~~total~~stockholders of ~~84,103~~the ~~shares~~Company ~~were~~approved ~~available~~the ~~for~~amendment ~~issuance under our EICP,~~ and ~~stock-based~~restatement ~~awards~~of ~~representing~~the 1Athersys,~~228,345~~ ~~(including~~Inc. ~~21,092~~2019 ~~shares~~Equity ~~related~~and toIncentive anCompensation ~~expired~~Plan ~~incentive~~(the ~~plan)~~“Amended ~~of common stock were outstanding~~EICP”). ~~Additionally,~~The ~~inducement~~Amended ~~stock~~EICP ~~options~~continues ~~granted outside of our equity incentive plans~~ to ~~purchase~~provide ~~429,500 shares of common~~ stock ~~were outstanding at June 30, 2023. For the three months ended June 30, 2023 and 2022, stock~~-based compensation ~~expense~~as ~~was~~described ~~approximately $0~~above.6 ~~million~~Subject ~~and~~to ~~$1.9 million~~adjustment, ~~respectively.~~an Atadditional ~~June 30~~2, ~~2023~~000,000 ~~total~~shares ~~unrecognized~~of ~~estimated~~Company ~~compensation~~common ~~cost~~stock ~~related~~are toavailable ~~unvested~~for ~~stock-based~~ awards ~~was~~under ~~approximately $3.8 million, which is expected to be recognized by~~ the ~~end~~Amended ~~of 2026 using the straight-line method~~EICP.

As of September 30, 2023, a total of 2,095,332 shares were available for issuance under our EICP, and stock-based awards representing 990,898 (including 19,084 shares related to an expired incentive plan) of common stock were outstanding. Additionally, inducement stock options granted outside of our equity incentive plans to purchase 429,500 shares of common stock were outstanding at September 30, 2023. For the three months ended September 30, 2023 and 2022, stock-based compensation expense was approximately $0.7 million and $2.0 million, respectively. At September 30, 2023, total unrecognized estimated compensation cost related to unvested stock-based awards was approximately $3.2 million, which is expected to be recognized by the end of 2026 using the straight-line method.

8. Stockholders’ Equity and Warrants

At September ~~June~~ 30, 2023 and September ~~June~~ 30, 2022, we had 600,000,000 shares of common stock and 10,000,000 shares of undesignated preferred stock authorized. No shares of preferred stock have been issued as of September ~~June~~ 30, 2023 and 2022.

August 2022 Securities Purchase Agreement

On August 15, 2022, the Company entered into a placement agency agreement with A.G.P./Alliance Global Partners (“A.G.P.”), pursuant to which A.G.P. agreed to serve as exclusive placement agent for the issuance and sale of common stock and warrants. A.G.P. received a placement fee of approximately $0.8 million and approximately $0.1 million for the reimbursement of expenses.

On August 15, 2022, the Company entered into a securities purchase agreement (the “August 2022 Purchase Agreement”) with an investor, pursuant to which the Company agreed to issue and sell, in a registered direct offering, (i) an aggregate of 1,200,000 shares of the Company’s common stock, (ii) pre-funded warrants (the “August 2022 Pre-Funded Warrants”) exercisable for an aggregate of 720,000 shares of common stock and (iii) warrants (the “August 2022 Common Warrants”) exercisable for an aggregate of 1,920,000 shares of common stock, in combinations of one share of common stock or one August 2022 Pre-Funded Warrant and one August 2022 Common Warrant for a combined purchase price of $6.25 (less $0.0025 for any August 2022 Pre-Funded Warrant). Subject to certain ownership limitations, under the terms of the August 2022 Purchase Agreement, the August 2022 Pre-Funded Warrants were exercisable upon issuance, and the August 2022 Common Warrants were exercisable upon the six-month anniversary of issuance for a five-year period. Under the August 2022 Purchase Agreement, each August 2022 Pre-Funded Warrant was exercisable for one share of common stock at a price per share of $0.0025 and each August 2022 Common Warrant was exercisable for one share of common stock at a price per share of $6.385. The offering closed on August 17, 2022 and the Company received net proceeds of approximately $11.0 million, after giving effect to the payment of placement fees and expenses. On August 29, 2022, the August 2022 Pre-Funded Warrants were exercised in full and re-measured to fair value. Upon remeasurement and exercise, we recorded a gain of $0.8 million to adjust the warrant liability associated with the August 2022 Pre-Funded Warrants to fair value and reclassified the $3.8 million warrant liability to additional paid-in capital. The fair value adjustment is recorded in other income, net on the condensed consolidated statement of operations and comprehensive loss.

Pursuant to the August 2022 Purchase Agreement, in the event the Company proposes a future offering to sell shares of common stock during the twelve months following the closing date, the investor has the right to participate in each offering in an amount up to 30.0%.

On September 22, 2022, the Company entered into an amendment to the August 2022 Purchase Agreement (the “August 2022 Purchase Agreement Amendment”) with the investor to, among other things, (i) amend the August 2022 Common Warrants to be exercisable for a seven-year period after the six-month anniversary of the closing date, (ii) reduce the standstill period, (iii) reduce the term and the amount of the participation right, and (iv) require the investor, subject to certain conditions, to participate in future offerings to sell certain securities to investors primarily for capital raising purposes.

On September 22, 2022, in consideration of the August 2022 Purchase Agreement Amendment, and without receiving any cash proceeds, the Company issued to the investor additional warrants exercisable for 2,000,000 shares of common stock (the “September 2022 Warrants”) at a price of $6.385 for a seven-year period after the six-month anniversary of the date of issuance thereof.

The Company has assessed the August 2022 Pre-Funded Warrants, the August 2022 Common Warrants and the September 2022 Warrants (collectively, the “Warrants”) for appropriate equity or liability classification pursuant to the Company’s accounting policy as described in Note C, in the notes to consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2022. The Warrants contain a provision pursuant to which the warrant holder has the option to receive cash in the event there is a fundamental transaction (contractually defined to include various merger, acquisition or stock transfer activities). The Warrants met the definition of a derivative pursuant to ASC 815, Derivatives and Hedging and did not meet the derivative scope exception. As a result, the Warrants were initially recorded as liabilities and measured at fair value using the Black-Scholes valuation model. Issuance costs of $0.5 million were allocated to the Pre-Funded Warrants and Common Warrants and recorded in other income, net on the condensed consolidated statement of operations and comprehensive loss in the three ended September 30, 2022. The remaining issuance costs of $0.4 million were allocated to the common stock and recorded in additional paid-in capital.

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~~comprehensive~~On April ~~loss~~17, in2023, the ~~three~~Company ~~ended~~amended the August 2022 Warrants and the September 302022 Warrants to, ~~2022.~~among ~~The~~other ~~remaining~~things, ~~issuance~~reduce ~~costs~~the ofexercise price to $0.~~4 million~~96 ~~were~~per ~~allocated~~share with respect to 1,920,000 shares of common stock covered by the August 2022 Common Warrants and 1,760,000 shares of common stock covered by the September Warrants. As a result of the amended agreement, the August 2022 Common Warrants and the September 2022 Warrants now meet the guidance for equity classification in accordance with ASC 815, Derivatives and Hedging. Such warrants were adjusted to their fair value on April 17, 2023, inclusive of the change in exercise price and the change in fair value was recorded in other (expense) income, net and then the warrants were reclassified to additional paid-in -capital. (APIC).

On August ~~April~~ 17, 2023, the Company further amended the August Warrants and the September Warrants to, among other things, reduce the exercise price to $0.9632 per share with respect to 1,920,000 shares of ~~common~~Common ~~stock~~Stock covered by the August Warrants and 12,~~760~~000,000 shares of ~~common~~Common ~~stock~~Stock covered by the September Warrants. As a result of the amended agreement, the August and September Warrants now meet the guidance for equity classification in accordance with ASC 815, Derivatives and Hedging. The warrants were adjusted to their fair value on April 17, 2023, inclusive of the change in exercise price and the change in fair value was recorded in other (expense) income, net and then the warrants were reclassified to additional paid-in-capital (APIC).

During the three- and ~~six-~~nine months ended September ~~June~~ 30, 2023, the Company recognized no other expense ~~of $1.5~~ ~~million~~ and other expense of $2.2 million, respectively, for the fair value adjustment related to the warrant liabilities. During the three and nine months ended September 30, 2022, the Company recognized a net gain of $2.8 million for the fair value adjustment related to the warrant liabilities, which includes a charge of $0.4 million recorded upon issuance of the New Warrants.

November 2022 Securities Purchase Agreement

On November 9, 2022, the Company entered into a placement agency agreement with A.G.P. pursuant to which A.G.P. agreed to serve as exclusive placement agent for the issuance and sale of common stock and warrants. A.G.P received a placement fee of approximately $0.4 million and approximately $0.1 million for the reimbursement of expenses.

On November 9, 2022, the Company entered into a securities purchase agreement (the “November 2022 Purchase Agreement”) with investors, pursuant to which the Company agreed to issue and sell, in a public offering, (i) an aggregate of 3,927,275 shares of the Company’s common stock, (ii) pre-funded warrants (the “November 2022 Pre-Funded Warrants”) exercisable for an aggregate of 1,077,270 shares of common stock and (iii) warrants (the “November 2022 Common Warrants”) exercisable for an aggregate of 10,009,090 shares of common stock, in combinations of one share of common stock or one November 2022 Pre-Funded Warrant and two November 2022 Common Warrants for a combined purchase price of $1.10 (less $0.0001 for any November 2022 Pre-Funded Warrant). Subject to certain ownership limitations, under the terms of the November 2022 Purchase Agreement, the November 2022 Pre-Funded Warrants and November 2022 Common Warrants were exercisable upon issuance. Under the November 2022 Purchase Agreement, each November 2022 Pre-Funded Warrant was exercisable for one share of common stock at a price per share of $0.0001 and each November 2022 Common Warrant is exercisable for one share of common stock at a price per share of $1.10 for a five-year period after the date of issuance. The offering closed on November 10, 2022, and the Company received net proceeds of approximately $5.0 million, after giving effect to the payment of placement fees and expenses. The November 2022 Pre-Funded Warrants were exercised in full at the closing.

The November 2022 Common Warrants meet the requirements to be classified as equity in accordance with ASC 815, Derivatives and Hedging. The November 2022 Common Warrants were recorded at their relative fair value at issuance in the stockholders’ equity section of the balance sheet.

April 2023 Securities Purchase Agreement

On April 18, 2023, the Company entered into a placement agency agreement with A.G.P. pursuant to which A.G.P. agreed to serve as the exclusive placement agent for the issuance and sale of common stock and warrants. A.G.P. received a placement fee of approximately $0.2 million and approximately $0.1 million for the reimbursement of expenses.

On April 18, 2023, the Company entered into a securities purchase agreement (the “April 2023 Purchase Agreement”) with investors, pursuant to which the Company agreed to issue and sell, in a registered direct offering, (i) an aggregate of 2,315,000 shares of the Company’s common stock and (ii) pre-funded warrants (the “April 2023 Pre-Funded Warrants”) exercisable for an aggregate of 1,370,000 shares of common stock, together with warrants (the “April 2023 Common Warrants”) exercisable for an aggregate of 3,685,000 shares of the Company’s common stock in a private placement, in combinations of one share or one April 2023 Pre-Funded Warrant and one April 2023 Common Warrant for a combined purchase price of $1.00. Subject to certain ownership limitations, the April 2023 Pre-Funded Warrants are exercisable upon issuance, and the April 2023 Common Warrants are exercisable upon the six-month anniversary of issuance. Each April 2023 Pre-Funded Warrant is exercisable for one share of common stock at a price per share of $0.0001 (as adjusted from time to time in accordance with the terms thereof) and does not expire. Each April 2023 Common Warrant is exercisable into one share of common stock at a price per share of $0.96 (as adjusted from time to time in accordance with the terms thereof) for a seven-year period after the six-month anniversary of the date of issuance. The offering closed on April 19, 2023, and the Company received net proceeds of approximately $3.4 million, after giving effect to the payment of placement fees and expenses.

The April 2023 Common Warrants ~~and 557,000 of the remaining outstanding April 2023 Pre-Funded Warrants~~ meet the requirements to be classified as equity in accordance with ASC 815, Derivatives and Hedging. The April 2023 Common Warrants were recorded at their relative fair value at issuance in the stockholders’ equity section of the balance sheet.

15 August 2023 Securities Purchase Agreement

On August 17, 2023, the Company entered into a placement agency agreement with A.G.P. pursuant to which A.G.P. agreed to serve as the exclusive placement agent for the issuance and sale of common stock and warrants. A.G.P. received a placement fee of approximately $0.2 million and approximately $0.2 million for the reimbursement of expenses.

On August 17, 2023, the Company entered into a securities purchase agreement (the “August 2023 Purchase Agreement”) with investors, pursuant to which the Company agreed to issue and sell, in a registered direct offering, (i) an aggregate of 4,212,500 shares of the Company’s common stock, (ii) pre-funded warrants (the “August 2023 Pre-Funded Warrants”) exercisable for an aggregate of 6,725,000 shares of common stock, (iii) Series A common stock purchase warrants (the “Series A Common Warrants”) exercisable for an aggregate of 10,937,500 shares of the Company’s common stock, and (iv) Series B common stock purchase warrants (the “Series B Common Warrants” and together with the Series A Common Warrants, the “August 2023 Common Warrants”) exercisable for an aggregate of 10,937,500 shares of the Company’s common stock, in combinations of one share or one August 2023 Pre-Funded Warrant and one of each Series A Common Warrant and Series B Common Warrant for a combined purchase price of $0.32. Subject to certain ownership limitations, the August 2023 Pre-Funded Warrants and the August 2023 Common Warrants are exercisable upon issuance. Each August 2023 Pre-Funded Warrant is exercisable for one share of common stock at a price per share of $0.0001 (as adjusted from time to time in accordance with the terms thereof) and does not expire. Each Series A Common Warrant is exercisable into one share of common stock at a price per share of $0.32 (as adjusted from time to time in accordance with the terms thereof) for a five-year period, and each Series B Common Warrant is exercisable into one share of common stock at a price per share of $0.32 (as adjusted from time to time in accordance with the terms thereof) for a one and a half year period. The offering closed on August 21, 2023, and the Company received net proceeds of approximately $3.0 million, after giving effect to the payment of placement fees and expenses.

The August 2023 Common Warrants and 6,725,000 of the August 2023 Pre-Funded Warrants, which remain outstanding, meet the requirements to be classified as equity in accordance with ASC 815, Derivatives and Hedging. The August Common Warrants were recorded at their relative fair value at issuance in the stockholders’ equity section of the balance sheet.

On October 11, 2023, the Company entered into a warrant exercise inducement offer letter with a holder of certain existing warrants to receive new warrants to purchase up to a number of shares of common stock equal to 200% (the “Inducement Warrants”) of the number of warrant shares issued pursuant to the exercise of such certain existing warrants to purchase shares of common stock (the "Existing Warrants") pursuant to which the Holder agreed to exercise for cash their Existing Warrants to purchase up to 28,124,540 shares of the Company’s common stock, at a reduced exercise price of $0.1395 per share in exchange for the Company’s agreement to issue the Inducement Warrants to purchase up to 56,249,080 shares of the Company’s common stock (the “Inducement Warrant Shares”). The Existing Warrants consist of the Company’s common warrants issued on August 17, 2022, September 22, 2022, November 10, 2022, and August 21, 2023. We received aggregate gross proceeds of approximately $3.9 million from the exercise of the Existing Warrants before deducting financial advisory fees and other expenses payable by us.

On October 30, 2023, the Company entered into an offer letter with a holder of the Company's common stock Existing Warrants issued on October 16, 2023 to (1) reduce the exercise price of the Existing Warrants from $0.1395 to $0.01 per share (the “Reduced Exercise Price”), (2) issue to the Holder new common stock purchase warrants (the “New Warrants”) to purchase up to 20,000,000 shares of the Company’s common stock at an exercise price of $0.01 per share; and (3) make the Existing Warrants immediately exercisable.

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Healios 2021 Warrants

In August 2021, we issued the 2021 Warrants to Healios to purchase up to an aggregate of 400,000 shares of our common stock. One of the 2021 Warrants is for the purchase of up to 120,000 shares at an exercise price of $45.00 per share, subject to specified increases, and generally is only exercisable within 60 days of receipt of either conditional or full marketing approval from the Pharmaceuticals and Medical Devices Agency in Japan (the “PMDA”) for the intravenous administration of MultiStem to treat patients who are suffering from acute respiratory distress syndrome. The other 2021 Warrant is for the purchase of up to 280,000 shares at an exercise price of $60.0 00 per share, subject to specified increases, and generally is only exercisable within 60 days of receipt of either conditional or full marketing approval from the PMDA for the intravenous administration of MultiStem to treat patients who are suffering from ischemic stroke. The 2021 Warrants may be terminated by us under certain conditions and have an exercise cap triggered at Healios’ ownership of 19.9% of our common stock.

Equity Purchase Agreement

We previously had equity purchase agreements in place since 2011 with Aspire Capital Fund, LLC (“Aspire Capital”) that provided us with the ability to sell shares to Aspire Capital from time to time. On May 12, 2022, we entered into an agreement (the “2022 Equity Facility”) that included Aspire Capital’s commitment to purchase up to an aggregate of $100.0 million of shares of our common stock over a defined timeframe. The terms of the 2022 Equity Facility were similar to the previous equity facilities with Aspire Capital. Our prior equity facility ~~that~~ was entered into in on June ~~2021~~24, or 2021 (the "2021 Equity Facility, ") and ~~includes~~included Aspire Capital’s commitment to purchase up to an aggregate of $100.0 million of shares of our common stock over a defined timeframe. The terms of the 2021 Equity Facility ~~are~~were similar to the previous equity facilities with Aspire Capital,. The ~~and we filed a registration statement for the resale of 1,600,000 shares of our common stock in connection with the~~ 2021 Equity Facility. ~~Our prior equity facility that~~ was ~~entered into in 2019, that was~~ fully utilized and automatically terminated during the ~~third~~second quarter of ~~2021~~2022.

On July 6, 2022, Aspire Capital terminated the 2022 Equity Facility. Aspire Capital had the right to terminate the 2022 Equity Facility at the time or any time after any of the Company’s then current executive officers ceased to be an executive officer or full-time employee of the Company, which right was triggered in connection with the departures of William Lehmann, former president and Chief Operating Officer, John Harrington, Former Executive Vice President and Chief Scientific Officer, and Ivor MacLeod, former Chief Financial Officer.

During quarter ended September ~~June~~ 30, 2022, we sold ~~1,003,560~~no shares to Aspire Capital ~~at an average price of $9~~.~~67 per share.~~

9. Fair Value Measurements

The carrying amounts of certain financial instruments, including cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued expenses approximate their respective fair values due to the short-term nature of such instruments.

Liabilities Measured at Fair Value on a Recurring Basis

The Company evaluates its financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level in which to classify them for each reporting period. The requirement requires judgements to be made. Our Level 3 financial liabilities consist of ~~the~~ warrant liabilities prior to their reclassification to equity and a convertible note payable for which there is no current market such that the determination of fair value requires judgement or estimation. Changes in fair value measurements categorized within Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate. The Company uses the Black-Scholes option valuation model to value the Level 3 warrant liabilities at inception and on subsequent valuation dates. This model incorporates transaction detail such as the Company’s stock price, contractual terms, maturing, risk free rates as well as volatility. The unobservable input for the Level 3 warrant liabilities includes volatility, which is not significant to the fair value measurement of the warrant liabilities.

A reconciliation of the beginning and ending balances for the warrant liabilities which are measured at fair value on a recurring basis using significant unobservable inputs (Level 3) is as follows (in thousands):

	Warrant Liabilities	~~Warrant Liabilities~~
Balance December 31, 2022	$	$(534	~~(534~~)
Fair Value Adjustment - March 31, 2023		(629)	)
Balance March 31, 2023		(1,163)	)
Fair Value Adjustment - April 18, 2023		(1,522)	)
Reclassification to Additional paid in capital		2,685
Balance June 30, 2023	$	$—	—

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The Company uses the Lattice Model to value the Level 3 note payable liabilities at inception and for subsequent valuation dates. This model incorporates transaction detail such as the term of the note, the nominal value of the note at inception, the coupon rate of the note, the conversion price of the note, the Company’s stock price, risk-free rate and implied bond yield as well as volatility. The unobservable input for the Level 3 note payable includes volatility and implied bond yield, which are significant to the fair value measurement of the note payable. The Company’s stock is publicly traded and is readily determinable. The risk-free interest rate is based on the U.S. Treasury yield for a period consistent with the expected term of the Note. We determine volatility by using our historical stock volatility. The implied bond yield is based on the required rate of return for mezzanine financing for similar companies.

The following weighted-average input assumptions were used in determining the fair value of the note at inception, as of June 30, 2023, and as of September ~~June~~ 30, 2023. Volatility was 49.5% on May 17, 2023, ~~and~~ 50.6% on June 30, 2023, and 77.9% on September 30, 2023, and the implied bond yield was 18.9% on May 17, 2023, ~~and~~ 19.6% on June 30, 2023, and 30.7% on September 30, 2023

	Note Payable		Accrued Interest		Total Fair Value
Balance March 31, 2023	$	—	$	—	$	—
Initial Transaction Fair Value - May 17	$15,000		—		15,000
Accrued Paid-in-Kind (PIK) Interest as of June 30, 2023	—		185		185
Fair Value Adjustment - June 30, 2023	640		—		640
Balance June 30, 2023	15,640		185		$	15,825

A reconciliation of the beginning and ending balances for the note payable which are measured at fair value on a recurring basis using significant unobservable inputs (Level 3) is as follows (in thousands):

	*Note Payable*			*Credit Risk Change*			*Accrued Interest*			*Total Fair Value*
Balance March 31, 2023	$—			$—			$—			$—
Initial Transaction Fair Value - May 17		15,000			—			—			15,000
Accrued Paid-in-Kind (PIK) Interest as of June 30, 2023		—			—			185			185
Fair Value Adjustment - June 30, 2023		640			—			—			640
Balance June 30, 2023		15,640			—			185			15,825
Accrued Paid-in-Kind (PIK) Interest added to Principal		185			—			(185	)		—
Accrued Paid-in-Kind (PIK) Interest as of September 30, 2023		—			—			383			383
Fair Value Adjustment - September 30, 2023		(3,832	)		(1,208	)		—			(5,040	)
Balance September 30, 2023	$	11,993		$	(1,208	)	$	383		$	11,168

10. Other Income and Expense

Other (expense) income consists of loss from extinguishment of debt, interest expense, foreign exchange gain/(loss), fair value change from warrants, gain/(loss) on disposal of assets and other.

		Three months endedJune 30,										Six months endedJune 30,
	Three months ended							Nine months ended
		2023					2022					2023		2022
	September 30,							September 30,
Gain/(Loss) from extinguishment of debt		$	2,612				$	—				$	2,612	$	—
	2023			2022				2023			2022
Change in fair value - note payable		(640)					—					(640)		—
Gain/(Loss) from extinguishment of debt	$	—		$	—			$	2,611		$	—
Interest expense		(366)					(6)					(376)		(14)
Change in fair value - note payable		3,832			—				3,192			—
Foreign exchange gain/(loss)		(80)					117					(178)		284
Interest expense		(211	)		44				(545	)		31
Fair value change - warrants		(1,522)					—					(2,151)		—
Foreign exchange gain/(loss)		287			631				109			915
Gain/(Loss) on disposal of assets		—					—					146		—
Fair value change - warrants		—			2,784				(2,151	)		2,784
Other		60					499					174		502
Gain/(Loss) on disposal of assets		(467	)		11				(321	)		11
		$	64				$	610				$	(413)	$	772
Other		568			(426	)			701			75
	$	4,009		$	3,044			$	3,596		$	3,816

11. Forbearance Agreement and Convertible Note

On May 17, 2023, the Company entered into a Forbearance, Restructuring and Settlement Agreement (the “Forbearance Agreement”) with a supplier, which amends certain supply agreements between the Company and the supplier.

The Forbearance Agreement provides that the supplier agrees to forbear from exercising rights and remedies available as a result of existing overdue amounts under existing agreements, so long as the Company pays to the supplier an aggregate of $11.8 million in deferred accounts payable, in monthly payments of $0.25 million, commencing in October 2023. Pursuant to the terms of the Forbearance Agreement, the Company also issued a convertible promissory note to the supplier in the principal amount of $15.0 million (the “Note”).

The Company accounted for the restructuring as an extinguishment and recorded the new liabilities at fair value of $7.9 million for the deferred accounts payable and $15.0 million for the Note. The Company recorded a gain on extinguishment of $2.6 million as a result of the restructuring.

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The Note bears interest at a rate of 10.0% per annum, which shall be capitalized and added to the principal amount semi-annually on January 1 and July 1, commencing on July 1, 2023, and must be repaid in full, including accrued and unpaid interest thereunder, on (or before, subject to certain conditions) May 17, 2026 ~~(the “Maturity Date”)~~. The Note provides for customary events of default, including nonpayment, failure to comply with covenants or other agreements in the Note, certain events of bankruptcy and an adverse judgment for payment of $3.0 million or more (each, an “Event of Default”). Upon and during the continuance of any Event of Default, the rate of interest shall increase to 14%. The obligations under the Note are guaranteed by certain of the Company’s existing subsidiaries. Subject to a beneficial ownership limitation of 19.99% of the Company’s outstanding common stock and any shareholder approval requirements, the supplier may elect, at its sole discretion, to convert any outstanding principal and interest on the Note into shares of common stock of the Company at a conversion price of $1.30 per share (subject to adjustment as provided under the Note), which amounts to 11,538,461 convertible shares, at any time after the 18-month anniversary of the date of issuance of the Note (or upon an Event of Default) until the total outstanding balance of the Note is paid.

The Company has elected the fair value option under ASC 825-10-25 to measure the Note at fair value at inception and in subsequent periods, with changes in fair value reported in earnings, except for changes in fair value caused by instrument-specific credit risk which is reported in other comprehensive income. The Note is eligible for the fair value option as it is a permissible instrument within the scope of ASC 825-10-15. The Company incurred debt issuance costs (legal fees) of $16,679 which were expensed at issuance. The fair value of the Note on June 30, 2023 was $15.8 ~~million~~ million and the change in fair value of $0.8 million was reported in other (expense) income, net, with $0.2 million being recorded as Paid-in-Kind interest and the remaining $0.6 million being the fair value adjustment, increasing the interest expense and note payable balance. As of September 30, 2023, the value of the Note was $10.8 million and the change in fair value for the nine months ended September 30, 2023 of $3.8 million was reported in other (expense) income, net, with the changes in fair value caused by instrument-specific credit risk of $1.2 million (net of tax) was reported in other comprehensive income, and with $0.4 million being recorded as Paid-in-Kind interest. See a reconciliation of the change in fair value of the Note in Note 9, “Fair Value Measurements”.

The Note is an unsecured obligation. The Note is unconditionally and irrevocably guaranteed by certain guarantors.

If an Event of Default occurs under points (1) through (6) below, the holder of the Note may request for acceleration of maturity of 100% of the Note principal. Upon the request for acceleration of maturity, the Note principal will be due immediately. If an Event of Default occurs under clause (4) and (5) below, 100% of the principal amount of the Note will be automatically and immediately due and payable to the holder of the note.

An Event of Default is defined in the Agreement as any of the following:

1. Company defaults in the payment of principal, accrued and unpaid interest or any other amounts owing under the Note

2. Any representation or warranty made by the Company proves to have been false

3. The Company defaults in the performance of, or fails to comply with, any other terms, provision, condition, covenant or agreement contained in the Note

4. Company files for bankruptcy

5. Court appoints a custodian, receiver, trustee or other officer for dissolution, winding-up, or liquation of the Company

6. One or more judgments for payment of money in excess of $3 million shall be rendered against the Company

The deferred accounts payable does not accrue interest as long as all monthly payments are made on or before the last day of each calendar month, starting in October 2023 and running for 48 months or until the full $11.8 million balance has been repaid. Any cash payment not paid when due shall be subject to interest at the rate of 10% per annum running from the date of the last cash payment made by or on behalf of the Company. If any cash payment remains unpaid for more than 60 days following the date such cash payment was due, the supplier has the right to declare the entire remaining balance due immediately and payable without further notice. Cash payments automatically become immediately due and payable upon the commercial readiness by the Company. The Company made the first payment before the end of October 2023.

12. Restructuring Charges

In June 2022, we announced ~~a restructuring of our organization (~~ the “Plan”), including an approximate 70% reduction in our workforce. As part of the Plan, we also announced changes to our executive team. Mr. Lehmann left the Company on May 31, 2022. Dr. Harrington and Mr. Macleod left the Company on June 30, 2022.

The Company’s restructuring efforts are intended to preserve cash and reduce operating expenses going forward. In addition to the workforce reductions, the Company’s restructuring efforts include the reduction of our internal research function, the decommissioning of certain equipment and pausing our manufacturing and process development efforts toward commercializing our MultiStem product candidate.

The following table sets forth certain details associated with the restructuring charges incurred in the three months ended June 30, 2023 and the obligations recorded for the expenses associated with the Plan (in thousands). It is anticipated the Plan will be completed by the end of 2023. 16

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19The following table sets forth certain details associated with the restructuring charges incurred in the three and nine months ended September 30, 2023 and the obligations recorded for the expenses associated with the Plan (in thousands). It is anticipated the Plan will be completed by the end of 2023.

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	*Balances*				*Cash*			*Balances*
	*January 1, 2023*		*Charges*		*(payments)*			*September 30, 2023*
Employee severance and benefits	$	935	$	—	$	(621	)	$	314
Legal and professional fees		35		61		(65	)		31
Other		15		—		(15	)		—
	$	985	$	61	$	(701	)	$	345

	Balances	~~Balances~~					Cash			Balances	~~Cash~~		~~Balances~~
		March 31, 2023				Charges					(payments)		June 30, 2023
	June 30, 2023			Charges			(payments)			September 30, 2023
Employee severance and benefits	$	~~565~~314		$	—	$	—$	—		$	~~(251)~~314		$	~~314~~
Legal and professional fees		27			30	16		(26	)		~~(16)~~31		27
Other		15—			—	—		—			~~(15)~~—		—
	$	$341	~~607~~	$	30	$	16$	(26	)	$	$345	~~(282)~~	$	~~341~~

The current portion of our restructuring accrual is included in accrued compensation and related benefits and accounts payable and there is no long-term portion of our restructuring accrual.

Restructuring charges are recorded general and administrative costs and expenses for the three months ended September ~~June~~ 30, 2023.

13. 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. Substantially 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 generated prior to October 2012 under Section 382 of the Internal Revenue Code of 1986, as amended. Utilization of some of the federal and state net operating loss and tax credit carryforwards generated after October 2012 may be subject to additional annual limitations due to the “change in ownership” provisions of the IRC and similar state provisions. The annual limitations may result in the expiration of net operating losses and credits before utilization. The Company has not performed a Section 382 study subsequent to October 2012 as of September ~~June~~ 30, 2023. We will update our analysis under Section 382 prior to using these attributes.

14. Subsequent Events

Animal Health Transaction

On October 3, 2023, the Company announced the signing of a licensing agreement with Ardent Animal Health ("Ardent"). Ardent is a privately held veterinary biotechnology company developing regenerative medicine and cancer therapies for animals. Under the terms of the agreement, Athersys will receive an initial fee of $0.1 million from Ardent in exchange for an exclusive license to Athersys’ Multipotent Adult Progenitor Cell (MAPC®) technology for non-human mammal applications in the United States and equipment fees. The agreement includes pre- and post-regulatory approval milestone payments to Athersys, including payments on conditional and full product approval for each species/indication combination. Athersys will also receive tiered, double-digit royalties on commercial sales. Athersys has also granted Ardent rights of first refusal to be the exclusive distributor for Athersys’ novel cryogenic storage system, the Secure Integrated Freezer Unit (SIFU) in the United States animal health space.

Healios Update

On October 10, 2023, ABT Holding Company ("ABT Holding") and Healios entered into a binding memorandum of understanding (the “October MOU”), pursuant to which, among other things, ABT Holding entered into (i) an amendment (the “Fifth Amendment to License Agreement”) to that certain license agreement, dated as of January 8, 2016, as amended (the “Existing License Agreement”), and (ii) an assignment agreement for ARDS (as defined below) clinical doses (the “Assignment Agreement”), each with Healios and dated of even date with the October MOU.

Under the Fifth Amendment to License Agreement, the Company agreed to grant Healios a non-exclusive worldwide license to develop and commercialize MultiStem with respect to treating acute respiratory distress syndrome (“ARDS”) in exchange for potential development and sales milestone payments and additional royalties totaling up to $150 million in the aggregate. The Assignment Agreement provides for ABT Holding’s assignment of certain MultiStem doses manufactured by using a 3D bioreactor process to Healios. On October 12, 2023, ABT Holding received the first milestone payment of $1.5 million, and then on November 9, 2023, the Company received the second milestone payment of $1.5 million. The Company may receive another $1.5 million which is contingent on Healios closing on financing.

Nasdaq Notices

On October 14, 2022, we received a written notice (the “October 2022 Notice”) from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) that we were not in compliance with the requirement to maintain a minimum market value of listed securities of $35 million, as set forth in Nasdaq Listing Rule 5550(b)(2) (the “Market Value Standard”) ~~Compliance~~because the market value of the common stock was below $35 million for 30 consecutive business days. The Company had been granted by the Nasdaq Hearings Panel (the “Panel”) until October 10, 2023, to regain compliance with the Market Value Standard, which represents the full extent of the Panel’s discretion to grant continued listing while the Company is non-compliant. On October 12, 2023, Nasdaq requested an update from the Company and, in response, the Company submitted an update to Nasdaq on October 13, 2023, and requested additional time to regain compliance.

On October 1416, ~~2022~~2023, wethe Company received a ~~written~~delisting ~~notice~~determination ~~(the~~letter ~~“October 2022 Notice”)~~ from ~~the Listing Qualifications Department of The~~ Nasdaq ~~Stock~~advising ~~Market~~the ~~LLC~~Company ~~(“Nasdaq”)~~ that wethe ~~are~~Panel ~~not~~had indetermined ~~compliance~~that ~~with~~ the ~~requirement~~Company towas ~~maintain~~unable ato ~~minimum~~demonstrate ~~market~~compliance ~~value~~with ~~of listed securities of $35 million, as set forth in Nasdaq Listing Rule 5550(b)(2) (~~the “Market Value Standard”). ~~because~~As ~~the~~a ~~market~~result, ~~value~~trading of the Company’s common stock was ~~below~~suspended ~~$35 million~~at ~~for~~the 30opening ~~consecutive~~of business ~~days. The~~ on October ~~2022 Notice provided that~~18, in2023. ~~accordance~~The ~~with~~Company ~~Nasdaq~~anticipates ~~Listing~~that ~~Rule 5810(c)(3)(C), we had~~ a ~~period~~Form of25-NSE ~~180~~will ~~calendar~~be ~~days~~filed ~~from~~with the ~~date~~U.S. ofSecurities ~~the~~and ~~October~~Exchange ~~2022 Notice~~Commission, orremoving ~~until~~the ~~April~~Company’s ~~12,~~securities ~~2023,~~from tolisting ~~regain~~and ~~compliance~~registration ~~under~~on ~~the Market Value Standard~~Nasdaq.

OnThe ~~April~~Company’s ~~13,~~common ~~2023,~~stock weis ~~received~~currently ~~notice~~quoted ~~from~~on ~~Nasdaq~~the ~~that~~Pink weOpen ~~had not regained compliance with the~~ Market ~~Value~~tier ~~Standard.~~operated Onby ~~April~~OTC ~~14,~~Markets ~~2023~~Group, weInc. ~~filed~~under ~~our request for a hearing, which was held before~~ the ~~Nasdaq~~symbol ~~Hearing Panel (the~~ “~~Panel”) on May 18, 2023~~ATHX.”

OnWarrant ~~June~~Inducement 26Offer, ~~2023,~~Warrant ~~the~~Restructure ~~Panel notified us that it had granted our request for an exception through September 15~~Transaction, ~~2023, to the continued listing requirements, subject to our demonstrating compliance with the Market Value Standard by September 15, 2023. In accordance with the Market Value Standard~~ and ~~Nasdaq~~Related Listing Rule 5810(c)(3)(C), compliance with the Market Value Standard may be achieved if at any time during the compliance period the market value of the listed securities closes at a value of at least $35 million for a minimum of ten consecutive business days.Agreements

~~The~~On October ~~Panel~~11, ~~noted~~2023, ~~that~~the itCompany ~~reserves~~entered ~~the~~into ~~right~~a towarrant ~~reconsider~~exercise inducement offer letter (the ~~terms~~“Inducement Letter”) with a holder of ~~this~~certain ~~exception~~existing ~~based~~warrants on(“Warrant ~~any~~Holder”) ~~event,~~to ~~condition~~receive ornew ~~circumstance~~warrants ~~that~~to ~~exists~~purchase orup ~~develops~~to ~~that~~a ~~would,~~number inof shares of common stock equal to 200% (the ~~opinion~~“Inducement Warrants”) of the ~~Panel,~~number ~~make~~of ~~continued~~warrant ~~listing~~shares issued pursuant to the exercise of ~~our~~such ~~securities~~certain onexisting ~~Nasdaq~~warrants ~~inadvisable~~to orpurchase ~~unwarranted.~~shares Inof ~~addition,~~common stock (the ~~Nasdaq~~“Existing ~~Listing~~Warrants”) ~~and~~pursuant ~~Hearing~~to ~~Review~~which ~~Council~~the ~~may~~Warrant Holder agreed to exercise for cash their Existing Warrants to purchase up to 28,124,540 onshares ~~its~~of ~~own~~the ~~motion~~Company’s common stock, ~~determine~~at a reduced exercise price in exchange for the Company’s agreement to ~~review~~issue ~~any~~the ~~Panel~~Inducement ~~decision~~Warrants ~~within~~to 45purchase ~~calendar~~up ~~days~~to ~~after~~56,249,080 ~~issuance~~shares of the ~~written~~Company’s ~~decision.~~common ~~There~~stock ~~can~~(the be“Inducement noWarrant ~~assurance~~Shares”). ~~that~~The weExisting ~~will~~Warrants beconsist ~~able~~of tothe ~~regain~~Company’s ~~compliance~~common ~~under~~warrants ~~the~~issued ~~Market~~on August ~~Value~~17, ~~Standard~~2022, September or22, ~~will~~2022, November ~~otherwise~~10, be2022, inand August ~~compliance~~21, ~~with~~2023. ~~other~~Pursuant ~~Nasdaq~~to ~~listing~~the ~~criteria.~~Inducement ~~While~~Letter, weupon ~~are~~the ~~exercising~~exercise ~~diligent~~of ~~efforts~~any toExisting ~~maintain~~Warrants, the ~~listing~~reduced exercise price of $0.1395 ~~our~~per ~~common~~share. ~~stock~~We onreceived ~~The~~aggregate ~~Nasdaq~~gross ~~Capital~~proceeds ~~Market,~~of ~~there~~approximately ~~can~~$3.9 bemillion nofrom ~~assurance~~the ~~that~~exercise weof ~~will~~the beExisting ~~able~~Warrants tobefore ~~regain~~deducting orfinancial ~~maintain~~advisory ~~compliance~~fees ~~with~~and ~~Nasdaq~~other ~~listing~~expenses ~~criteria~~payable by us.

~~Minimum~~On October ~~Closing~~30, ~~Bid~~2023, ~~Price~~the ~~Compliance~~Company entered into an offer letter (the “Letter Agreement”) with the Warrant Holder, to (1) reduce the exercise price of the Inducement Warrants from $0.1395 to $0.01 per share, (2) issue to the Warrant Holder new common stock purchase warrants (the “New Warrants”) to purchase up to 20,000,000 shares of the Company’s common stock at an exercise price of $0.01 per share; and (3) make the Inducement Warrants immediately exercisable. Pursuant to the Letter Agreement, the Holder agreed to (A) reduce the period of the subsequent equity sale restrictions contained in Section h)(i) of Annex A to the Inducement Letter from 60 days to 30 days; (B) reduce the applicable period in each and all of the provisions relating to restrictions on the Company (or any of its subsidiaries) involving a “Variable Rate Transaction” (as such term, or a term of similar meaning, is defined in the applicable document) so that each such period terminates on March 1, 2024 in all stock purchase agreements, related letter agreements, and all other related agreements with the Holder; and (C) vote as set forth below in connection with a Fundamental Transaction. The Warrant Holder agreed that upon the occurrence of a Fundamental Transaction (as defined in the New Warrants), if the Holder holds any shares of the Company’s common stock and a stockholder vote is required for such Fundamental Transaction, then the Warrant Holder agreed to vote all shares of its common stock that it holds as of any such record date that may be taken the vote of stockholders that are entitled to vote on such Fundamental Transaction in accordance with the recommendations of the Company’s board of directors. In addition, on October 30, 2023, the Company and the Warrant Holder entered into an Amendment to Series A Common Stock Purchase Warrants (the “Warrant Amendment”) which amended the Inducement Warrants to reflect (i) the reduced exercise price of $0.01 per share, (ii) that the Inducement Warrants are now immediately exercisable, and (iii) that the Inducement Warrants will terminate on October 30, 2028.

OnBiomedical ~~July~~Advanced ~~28,~~Research ~~2023,~~and ~~the~~Development ~~Company received a written notice~~ (~~the “July 2023 Notice”~~BARDA) from Nasdaq that the Company is not in compliance with the requirement to maintain a minimum closing bid price of $1.00 per share, as set forth in Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Requirement”), because the closing bid price of the Company’s common stock was below

20As previously disclosed, the Company responded to a request for proposal by the Biomedical Advanced Research and Development Authority, an agency within the U.S. Department of Health and Human Services (“BARDA”), with a view to include MultiStem in a BARDA-sponsored phase 2 platform clinical trial (“BARDA-Sponsored Clinical Trial”) for acute respiratory distress syndrome (“ARDS”).

On October 13, 2023, BARDA notified the Company that MultiStem has not been selected for inclusion in the BARDA-Sponsored Clinical Trial.

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$1.00 per share for 30 consecutive business days for the period of June 14, 2023 through July 27, 2023. The July 2023 Notice does not impact the listing of the Company’s common stock on The Nasdaq Capital Market at this time.

The July 2023 Notice provided that, in accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company has a period of 180 calendar days from the date of the July 2023 Notice, or until January 24, 2024, to regain compliance with the Bid Price Requirement. During this period, the Company’s common stock will continue to trade on The Nasdaq Capital Market. If at any time before January 24, 2024, the bid price of the Company’s common stock closes at or above $1.00 per share for a minimum of ten consecutive trading days, Nasdaq will provide written notification that the Company has achieved compliance with the Bid Price Requirement and the matter will be closed. However, under Nasdaq Listing Rule 5810(c)(3)(A), Nasdaq may exercise its discretion to extend this ten day period as discussed in Rule 5810(c)(3)(H).

The Company is considering all available options to regain compliance with the Bid Price Requirement. However, there can be no assurance that the Company will be able to regain compliance with the rule or will otherwise be in compliance with other Nasdaq listing criteria. In the event the Company does not regain compliance by January 24, 2024, the Company may be eligible for an additional 180 calendar day compliance period to demonstrate compliance with the Bid Price Requirement. To qualify for the additional 180-day period, the Company will be required to meet the continued listing requirements for market value of publicly held shares and all other initial listing standards (with the exception of the Bid Price Requirement). In addition, the Company will need to provide written notice to Nasdaq of its intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary. If the Company does not qualify for the second compliance period or fails to regain compliance during the second 180-day period, then Nasdaq will notify the Company that its common stock is subject to delisting. At that time, the Company may appeal the delisting determination to a Nasdaq Hearings Panel.

Healios Update

On August 9, 2023, ABT Holding Company, a wholly-owned subsidiary of Athersys, Inc. (together, the “ABT/ATHX”), entered into a Memorandum of Understanding (“MOU”) with HEALIOS, K.K. (“Healios”), which memorializes the terms between the ABT/ATHX and Healios regarding consultation services that ABT/ATHX agreed to provide Healios as it explores its effort to join and participate in the Company’s ongoing MASTERS-2 Study, a 300 patient Phase 3 clinical trial for the treatment of ischemic stroke using MultiStem (the “Masters-2 Trial”).

The MOU, among other things, provides that the ABT/ATHX will support Healios’ consultation with Japanese Pharmaceuticals and Medical Devices Agency (“PMDA”). In exchange, Healios agreed to compensate the ABT/ATHX for the aforementioned consultation services. Pursuant to the MOU, Healios has deposited $150,000 with the Company to be applied to the charges incurred for these consultation services. As outlined in the MOU, ABT/ATHX will work with Healios to facilitate regulatory consultation with PMDA and will make available to Healios certain information necessary to facilitate regulatory consultation. Consultation with the PMDA is a necessary step to enable Healios to elect to join the Masters-2 Trial. If Healios elects to join the Masters-2 Trial, additional compensation will be paid by Healios for support and clinical doses provided by the Company, per existing contracts.

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 condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q (this “Quarterly Report”) and the audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2022. Operating results are not necessarily indicative of results that may occur in future periods. See also “Cautionary Note on Forward-Looking Statements” preceding Part I.

Overview and Recent Developments

We are a biotechnology company that is focused primarily in the field of regenerative medicine. Our MultiStem® (invimestrocel) cell therapy, a patented and proprietary allogeneic stem cell product candidate, is our lead platform product and is currently in clinical development. Our most advanced program is an ongoing Phase 3 clinical trial for the treatment of ischemic stroke. Our clinical development programs are focused on treating neurological conditions, inflammatory and immune disorders, certain pulmonary conditions and other conditions where the current standard of care is limited or inadequate for many patients, particularly in the critical care segment. On October 10, 2023, the Company announced the interim analysis for its ongoing Phase 3 trial, which concluded that the current sample size of 300 patients is insufficiently powered to achieve the primary endpoint of mRS Shift analysis at Day 365. The Company has paused enrollment of new patients while evaluating strategic options.

Restructuring and Financial

In June 2022, we announced a restructuring of our organization, including an approximate 70% reduction in workforce. As part of the restructuring plan, we also announced changes to our executive team. William (B.J.) Lehmann, former President and Chief Operating Officer, left the Company on May 31, 2022. John Harrington, former Executive Vice President and Chief Scientific Officer, and Ivor Macleod, former Chief Financial Officer, left the Company on June 30, 2022.

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In addition to the workforce reductions, in an effort to conserve cash and maintain adequate liquidity, we suspended operations in a number of areas including the reduction of our internal research function, plans for decommissioning certain equipment and suspending our manufacturing and process development efforts toward commercializing our MultiStem product candidate, if approved, as discussed below. We are currently unable to predict the duration of the suspension, and we plan to continue limited operations until we obtain additional funding. Our current development activities are limited to progressing our pivotal Phase 3 clinical trial of MultiStem cell therapy for the treatment of ischemic stroke, referred to as MASTERS-2 and supporting the Phase 2 clinical trial evaluating MultiStem cell therapy for the early treatment of traumatic injuries and the subsequent complications that result following severe trauma being conducted by UTHealth, at the Memorial Hermann-Texas Medical Center, or UTHealth, in Houston, Texas one of the busiest Level 1 trauma centers in the United States.

As of ~~August~~ 9November 10, 2023, we had $05.~~8 million~~7 million of cash and cash equivalents and current liabilities of $27.1 million, which consists of accounts payable of $16.5 9 million, of which $8.~~7 million~~5 million is related to deferred accounts payable to supplier, accrued liabilities of $1.5 million, lease liabilities of $7.8 million, and accrued payroll and benefits of $0.9 million. To conserve cash, we have been managing our disbursements and working with our suppliers and service providers to address the outstanding accounts payable. To preserve liquidity in the Company, named executive officers, including severance to former executives, have agreed to defer compensation. The accumulated amount of compensation as of ~~July~~October 31, 2023, owed to these executives was approximately $0.3 million. In the near term, we will need to obtain significant capital through public or private equity offerings, debt financings, collaborations and licensing arrangements or other sources to continue to fund our operations. However, there can be no assurance that we will be able to obtain such funding on terms acceptable to us, on a timely basis or at all, particularly in light of our current stock price and liquidity. If we are unable to obtain adequate financing, we likely would have to file for protection under the bankruptcy laws to continue to pursue potential transactions and conduct a wind down of our Company. If we decide to dissolve and liquidate our assets or to seek protection under the bankruptcy laws, it is unclear to what extent we will be able to pay our obligations, and, accordingly, it is further unclear whether and to what extent any resources will be available for distributions to stockholders.

Current Programs

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

• Ischemic Stroke: Our MASTERS-2 clinical trial is a randomized, double-blind, placebo-controlled clinical trial that was designed to enroll 300 patients in the United States and certain other international locations. The ~~study~~interim isanalysis ~~evaluating~~completed ~~efficacy~~in ~~and~~October ~~safety~~2023, concluded that ofthe ~~MultiStem~~current ~~cell~~sample ~~therapy~~size inof 300 patients ~~who~~was ~~have~~insufficiently ~~suffered~~powered ~~moderate~~ to ~~moderate-severe~~achieve ~~ischemic~~the ~~stroke~~primary endpoint of mRS Shift analysis at Day 365. WeThere ~~initiated~~were no safety issues identified. Because the ~~study~~sample ~~with~~size arequired ~~limited~~to ~~number~~achieve ofstatistical ~~high-enrolling~~significance ~~sites~~is ~~and~~considerably ~~have~~larger, ~~been~~Athersys ~~bringing~~intends onto conduct additional ~~sites~~data ~~over~~analysis ~~time~~with inindependent ~~line~~statisticians. ~~with~~The ~~clinical~~Company ~~product~~plans ~~supply~~to ~~and~~pause ~~clinical~~enrollment ~~operations~~of ~~objectives.~~new patients while this analysis is being conducted.

The MASTERS-2 study has received several regulatory designations and regulatory agreements including Special Protocol Assessment agreement, or SPA, Fast Track designation, Regenerative Medicine Advanced Therapy, or RMAT, designation and initial pediatric study plan, or iPSP agreement, from the U.S. Food and Drug Administration, or FDA, as well as a Final Scientific Advice positive opinion, Advanced Therapy Medicinal Product, or ATMP, quality certification and pediatric investigation plan, or PIP, agreement from the European Medicines Agency, or EMA.

On March 21, 2023, we held a Type B meeting with the FDA to address proposed modifications to our primary and secondary endpoints for our MASTERS-2 clinical trial protocol. We proposed four modifications, all of which were accepted.

• Changed the timing of the primary endpoint assessed by shift analysis in modified Rankin Scale, or mRS, score to Day 365, from Day 90.

• Retained shift analysis in mRS score at Day 90 as a key secondary endpoint, along with other revised secondary endpoints.

• Removed eligibility caps on concomitant reperfusion therapy to ensure the final study population is reflective of the current standard of care in the population eligible for this therapy

• We may elect to have an independent statistician conduct an interim analysis to assess potential sample size adjustment.

The fact that we were previously granted RMAT, Fast Track Designation and SPA agreement for the use of MultiStem enabled sponsors to work closely with the FDA and receive guidance on expediting the advancement of the designation program. We believe the proposed changes allow us to thoroughly evaluate the mechanisms through which MutliStem treatment can provide benefit to patients suffering an acute ischemic stroke. We believe this outcome more accurately reflects our belief that MultiStem’s treatment effects extend beyond Day 90 and is better reflected with a Day 365 assessment of recovery.

In addition, ~~HEALIOS K.K., or~~ Healios, our collaborator in Japan, conducted a clinical trial, TREASURE, evaluating the safety and efficacy of administration of MultiStem cell therapy for the treatment of ischemic stroke. In May 2022, Healios reported topline results for the TREASURE study. While the TREASURE trial did not reach statistical significance on its primary endpoint, Excellent Outcome at 90 days, it did demonstrate improvement in pre-specified measures of functional “independence” and good outcomes, such as mRS < 2, Barthel Index > 95 and Global Recovery.

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statistical significance on its primary endpoint, Excellent Outcome at 90 days, it did demonstrate improvement in pre-specified measures of functional “independence” and good outcomes, such as mRS < 2, Barthel Index > 95 and Global Recovery.

The proposed adjustments to our MASTERS-2 trial, based on our Type B meeting with the FDA, will impact the timing of enrollment completion. In addition, given our liquidity issues, we have postponed initiating new clinical sites. To complete enrollment of our MASTERS-2 trial, we are dependent on our primary contract manufacturer to release clinical product. Due to these uncertainties, at this time, we are unable to predict when we will complete enrollment in our MASTERS-2 study, if at all. We will need to raise additional funding in order to complete our MASTERS-2 trial.

~~The Company continues to enroll patients in its MASTERS-2 trial, the Company’s pivotal Phase 3 trial evaluating MultiStem for the treatment of adults who have suffered an acute ischemic stroke.~~ As ~~of August 7, 2023, the Company has surpassed 2/3 patient enrollment in this 300-patient MASTERS-2 trial. As~~ previously announced in March 2023, the Company held a Type B Meeting with the U.S. Food & Drug Administration (the “FDA”) and received approval on recommended protocol changes to the MASTERS-2 trial, including changing the Primary Endpoint to mRS Shift Analysis at Day 365 and adding an unblinded interim analysis for the purpose of study size adjustment. ~~More~~On ~~than~~October ~~60%~~10, ~~of active clinical sites have implemented the FDA approved trial modifications and the Company expects the remaining clinical sites to be complete by the end of August~~ 2023~~. In addition~~, the Company ~~plans~~announced ~~to conduct~~ the ~~unblinded~~ interim analysis for inits ongoing ~~the~~Phase ~~next~~3 ~~few~~trial, ~~weeks~~which ~~and~~concluded ~~anticipates~~that the ~~results~~current ~~will~~sample besize ~~available~~of to300 ~~share~~patients inis ~~early~~insufficiently ~~October~~powered ~~2023. In addition~~ to ~~approving~~achieve the ~~request~~primary ~~for~~endpoint anof ~~interim~~mRS Shift analysis, ~~the~~at ~~FDA~~Day ~~is allowing the Company the opportunity to perform a subset analysis~~365.

• ARDS: In January 2019 and January 2020, we announced summary results and one-year follow up results, respectively, from our exploratory clinical study of the intravenous administration of MultiStem cell therapy to treat patients who are suffering from acute respiratory distress syndrome, or ARDS, which is referred to as the MUST-ARDS study. The study results demonstrated a predictable and favorable tolerability profile. Importantly, there were lower mortality and greater ventilator-free days. or VFD, and ICU-free days in the MultiStem-treated patient group compared to the placebo group. Average quality-of-life outcomes were higher in the MultiStem group compared to placebo through one year. In April 2019, the MultiStem cell therapy received Fast Track designation for the treatment of ARDS, and in September 2020, RMAT designation was received for the same program. In April 2020, in response to the COVID-19 pandemic, 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, or the MACOVIA study. The MACOVIA study features an open-label lead-in dose escalation portion of the study, followed by double-blinded, randomized, placebo-controlled study cohorts, and the study is designed to enroll up to approximately 400 patients at leading pulmonary critical care centers throughout the United States. During 2021, we amended the protocol with the FDA to adjust the scope of the MACOVIA study to include subjects with ARDS induced by pathogens other than COVID-19. We received approval from the FDA to use MultiStem product manufactured with our bioreactor-based technology in the study, an important product development milestone. We have suspended initiating new sites and enrolling patients in the Phase 2 part of the MACOVIA trial prior to enrolling patients using our bioreactor-based technology. We now have data evaluating two different dosing levels of MultiStem. Analysis of this data will help inform the design of the next phase of the trial once we are ready to restart utilizing bioreactor manufactured MultiStem product. However, we are currently focusing resources on our MASTERS-2 study. Until we receive additional financing or establish a partnership to move forward with the next phase of the study, the MACOVIA trial has been suspended.

Further, in 2019, Healios initiated the ONE-BRIDGE study in Japan for patients with pneumonia-induced and COVID-induced ARDS and, in August 2021, Healios reported top-line data from the ONE-BRIDGE study. We and Healios have conducted thorough analyses of the data from the MUST-ARDS and ONE-BRIDGE studies. The studies had comparable patient populations receiving the same MultiStem dose amount shortly following an ARDS diagnosis. Between the studies, excluding the COVID-ARDS cohort in the ONE-BRIDGE study, 60 ARDS subjects were enrolled in the studies with 40 receiving MultiStem treatment and the remaining 20 receiving placebo or standard of care. On a pooled basis, strong trends were observed in VFD, survival, improved quality-of-life and reduction of key inflammatory biomarkers. For example, MultiStem-treated subjects had, on average, 5.5 more VFD in the first 28 days following diagnosis than non-treated subjects (p=0.07) and, on a median basis, 10.5 more VFD. In April 2022, Healios announced that, while the PMDA did not disagree with the efficacy and safety conclusions of the ONE-BRIDGE study, the PMDA advised Healios that additional supporting data is necessary for application for approval of MultiStem treatment for the ARDS indication in Japan. As a result of the guidance from the PMDA, Healios disclosed that it will continue discussions with PMDA.

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• 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 is being conducted by UTHealth, 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 McGovern Medical School at UTHealth from the Medical Technology Enterprise Consortium, and the Memorial Hermann Foundation is providing additional funding. We are providing the investigational clinical product manufactured with our bioreactor-based technology for the trial as well as regulatory and operational support.

Although some of our collaborators continue to engage in preclinical development and evaluation of MultiStem cell therapy in other indications for human health, we have suspended all of our own internal research efforts at this time to conserve cash and decrease expenses.

Recent Developments

In connection with our restructuring plan, in the second quarter of 2022, we paused work performed at our Belgian subsidiary, ReGenesys, which was evaluating our cell therapy for use in treating disease and conditions in the animal health segment. We are exploring opportunities to out-license this program. The restructuring also resulted in the closing of Athersys’ ReGenesys facility in Belgium at the end of 2022, although we are still actively exploring potential business development partners for the animal health program.

On April 21, 2023, we made the decision to and notified our landlord for the facility in Stow, Ohio that we surrendered possession of the property and returned the keys to the landlord. As a result of this decision, we note there will be an impact on operating results and cash flows, the Company has determined impairment indicators exist. In the current period, we have expensed the amount that we had previously been carrying as a Right of Use Asset as a general and administrative expense in the Statements of Operations and Comprehensive Loss. Additionally, we have reclassified the full liability to be all current in the Balance Sheet. On June 9, 2023, ~~the~~our landlord for the property in Stow, Ohio, Seasons Business Center Four, LLC, brought suit against the Company, see further discussion in Item 1. Legal Proceedings.

We have agreements with our primary contract manufacturing organization for the manufacture of our MultiStem product candidate to supply our planned and ongoing clinical trials. In June 2022, we suspended these agreements and attempted to negotiate payment terms. On May 17, 2023, we entered into a Forbearance, Restructuring and Settlement Agreement (the “Forbearance Agreement”) with a supplier, which amends certain supply agreements between the Company and the supplier.

The Forbearance Agreement, among other things, restructures the Company’s matured and unmatured liabilities owed to the supplier under the Agreements, comprised of past due and current due obligations in the approximate amount of $20.9 million and future obligations in the approximate amount of $9.8 million, less (i) approximately $3.9 million in credits applied by the strategic supplier based upon prior agreements. The Forbearance Agreement provides that the supplier agrees to forbear from exercising rights and remedies available as a result of existing overdue amounts under the Agreements, so long as the Company pays to the supplier an aggregate of $11.8 million, in monthly payments of $0.25 million, commencing in October 2023. The first payment was made before the end of October 2023. The Forbearance Agreement also grants the supplier a right of first refusal in the form of an exclusive option to supply 50% of all material required for the manufacture of MultiStem® (invimestrocel) and any derivative products for five years after the date that MultiStem receives regulatory approval for commercial sale. Finally, under the Forbearance Agreement, the Company is granting a limited release and exculpation of the supplier for accrued or unaccrued claims arising out of the Agreements, except that the limited release does not release: (i) any claims arising out of the supplier’s contractual warranty relating to product delivered or services performed by the supplier pursuant to the Agreements or (ii) any claims that may arise out of the performance by the supplier of its obligations under the Agreements following the effective date of the Forbearance Agreement.

Pursuant to the terms of the Forbearance Agreement, on May 17, 2023, the Company issued a convertible promissory note to the supplier in the principal amount of $15.0 million (the “Note”). The Note bears interest at a rate of 10.0% per annum, which shall be capitalized and added to the principal amount semi-annually on January 1 and July 1, commencing on July 1, 2023, and must be repaid in full, including accrued and unpaid interest thereunder, on (or before, subject to certain conditions) May 17, 2026 (the “Maturity Date”). The Note provides for customary events of default, including nonpayment, failure to comply with covenants or other agreements in the Note, certain events of bankruptcy and an adverse judgment for payment of $3.0 million or more (each, an “Event of Default”). If an Event of Default occurs, then (i) the interest on the Note shall accrue at a rate of 14.0% per annum (or, if less, the maximum rate permitted by applicable law) and (ii) the Maturity Date may be accelerated. The obligations under the Note are guaranteed by certain of the Company’s existing subsidiaries. Subject to a beneficial ownership limitation of 19.99% of the Company’s outstanding common stock and any shareholder approval requirements, the supplier may elect, at its sole discretion, to convert any outstanding principal and interest on the Note into shares of common stock of the Company at a conversion price of $1.30 per share at any time after the 18-month anniversary of the date of issuance of the Note (or upon an Event of Default) until the total outstanding balance of the Note is paid.

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On August 15, 2022, the Company entered into a placement agency agreement with A.G.P./Alliance Global Partners, or A.G.P., pursuant to which A.G.P. agreed to serve as exclusive placement agent for the issuance and sale of common stock and warrants. A.G.P received a placement fee of approximately $0.8 million and approximately $0.1 million for the reimbursement of expenses.

On August 15, 2022, the Company entered into a securities purchase agreement, or the August 2022 Purchase Agreement, with an investor, pursuant to which the Company agreed to issue and sell, in a registered direct offering, (i) an aggregate of 1,200,000 shares of the Company’s common stock, (ii) pre-funded warrants, or the August 2022 Pre-Funded Warrants, exercisable for an aggregate of 720,000 shares of common stock and (iii) warrants, or the August 2022 Common Warrants, exercisable for an aggregate of 1,920,000 shares of common stock, in combinations of one share of common stock or one August 2022 Pre-Funded Warrant and one August 2022 Common Warrant for a combined purchase price of $6.25 (less $0.0025 for any August 2022 Pre-Funded Warrant). Subject to certain ownership limitations, under the terms of the August 2022 Purchase Agreement, the August 2022 Pre-Funded Warrants were exercisable upon issuance, and the August 2022 Common Warrants were exercisable upon the six-month anniversary of issuance for a five-year period. Under the August 2022 Purchase Agreement, each August 2022 Pre-Funded Warrant was exercisable for one share of common stock at a price per share of $0.0025 and each August 2022 Common Warrant is exercisable for one share of common stock at a price per share of $6.385. The offering closed on August 17, 2022, and the Company received net proceeds of approximately $11.0 million, after giving effect to the payment of placement fees and reimbursed expenses. On August 29, 2022, the August 2022 Pre-Funded Warrants were exercised in full.

On September 22, 2022, the Company entered into an amendment to the August 2022 Purchase Agreement, or the August 2022 Purchase Agreement Amendment, with the investor to, among other things, (i) amend the August 2022 Common Warrants to be exercisable for a seven-year period after the six-month anniversary of the closing date, (ii) reduce the standstill period, (iii) reduce the term and the amount of the participation right, and (iv) require the investor, subject to certain conditions, to participate in future offerings to sell certain securities to investors primarily for capital raising purposes.

On September 22, 2022, in consideration of the August 2022 Purchase Agreement Amendment, and without receiving any cash proceeds, the Company issued to the investor additional warrants exercisable for 2,000,000 shares of common stock, or the September 2022 Common Warrants, at a price of $6.385 for a seven-year period after the six-month anniversary of the date of issuance thereof.

On April 17, 2023, the Company amended the August 2022 Common Warrants and the September 2022 Common Warrants to, among other things, reduce the exercise price to $0.96 per share with respect to 1,920,000 shares of common stock covered by the August 2022 Common Warrants and 1,760,000 shares of common stock covered by the September 2022 Common Warrants.

On November 9, 2022, the Company entered into a placement agency agreement with A.G.P. pursuant to which A.G.P. agreed to serve as exclusive placement agent for the issuance and sale of common stock and warrants. A.G.P. received a placement fee of approximately $0.4 million and approximately $0.1 million for the reimbursement of expenses.

On November 9, 2022, the Company entered into a securities purchase agreement, or the November 2022 Purchase Agreement, with investors, pursuant to which the Company agreed to issue and sell, in a public offering, (i) an aggregate of 3,927,275 shares of the Company’s common stock, (ii) pre-funded warrants, or the November 2022 Pre-Funded Warrants, exercisable for an aggregate of 1,077,270 shares of common stock and (iii) warrants, or the November 2022 Common Warrants, exercisable for an aggregate of 10,009,090 shares of common stock, in combinations of one share of common stock or one November Pre-Funded 2022 Warrant and two November 2022 Common Warrants for a combined purchase price of $1.10 (less $0.0001 for any November 2022 Pre-Funded Warrant). Subject to certain ownership limitations, under the terms of the November 2022 Purchase Agreement, the November 2022 Pre-Funded Warrants and the November 2022 Common Warrants were exercisable upon issuance. Under the November 2022 Purchase Agreement, each November 2022 Pre-Funded Warrant was exercisable for one share of common stock at a price per share of $0.0001 and each November 2022 Common Warrant is exercisable for one share of common stock at a price per share of $1.10 for a five-year period after the date of issuance. The offering closed on November 10, 2022, and the Company received net proceeds of approximately $5.0 million, after giving effect to the payment of placement fees and reimbursed expenses. The November 2022 Pre-Funded Warrants were exercised in full at the closing.

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November 10, 2022, and the Company received net proceeds of approximately $5.0 million, after giving effect to the payment of placement fees and reimbursed expenses. The November 2022 Pre-Funded Warrants were exercised in full at the closing.

On April 18, 2023, the Company entered into a securities purchase agreement, or the April 2023 Purchase Agreement, with investors, pursuant to which the Company agreed to issue and sell, in a public offering, (i) an aggregate of 2,315,000 shares of the Company’s common stock and (ii) pre-funded warrants, or the April 2023 Pre-Funded Warrants, exercisable for an aggregate of 1,370,000 shares of common stock, together with warrants, or the April 2023 Common Warrants, exercisable for an aggregate of 3,685,000 shares of common stock in a private placement, in combinations of one share or one April 2023 Pre-Funded Warrant and one April 2023 Common Warrant for a combined purchase price of $1.00, in a private placement. Subject to certain ownership limitations, the April 2023 Pre-Funded Warrants are exercisable upon issuance, and the April 2023 Common Warrants are exercisable upon the six-month anniversary of issuance. Each April 2023 Pre-Funded Warrant is exercisable for one share of common stock at a price per share of $0.0001 (as adjusted from time to time in accordance with the terms thereof) and does not expire. Each April 2023 Common Warrant is exercisable into one share of common stock at a price per share of $0.96 (as adjusted from time to time in accordance with the terms thereof) for a seven-year period after the six-month anniversary of the date of issuance. The offering closed on April 19, 2023, and the Company received net proceeds of approximately $3.4 million, after giving effect to the payment of placement fees and expenses.

InOn August ~~2021~~17, we2023, the Company entered into a securities purchase agreement, or the ~~Framework~~August 2023 Purchase Agreement, with ~~Healios~~investors, pursuant to which ~~provides~~the ~~for~~Company ~~resolution~~agreed to issue and sell, in a registered direct offering, (i) an aggregate of ~~certain~~4,212,500 ~~issues~~shares ~~under~~of the ~~existing~~Company’s ~~agreements~~common ~~between~~stock, (ii) pre-funded warrants, or the ~~parties.~~August It2023 ~~also~~Pre-Funded ~~provides~~Warrants, ~~Healios~~exercisable ~~with~~for ~~the~~an ~~deferral~~aggregate of ~~certain~~6,725,000 ~~milestone~~shares ~~payments~~of ~~during~~common ~~the~~stock, ~~expensive~~(iii) ~~initial~~Series ~~commercial~~A ~~launch~~common ~~period.~~stock ~~Under~~purchase warrants, or the ~~Framework~~Series ~~Agreement~~A Common Warrants, weexercisable ~~were~~for ~~entitled~~an toaggregate aof ~~milestone~~10,937,500 ~~payment~~shares inof the ~~amount~~Company’s ofcommon ~~$3.0~~stock, ~~million.~~and ~~Additionally~~(iv) Series B common stock purchase warrants, ~~under~~or the ~~terms~~Series B Common Warrants, exercisable for an aggregate of 10,937,500 shares of the ~~Framework~~Company’s ~~Agreement~~common stock, wein ~~were~~combinations ~~obligated~~of toone ~~pay~~share ~~Healios~~or one August 2023 Pre-Funded Warrant and one of each Series A Common Warrant and Series B Common Warrant for a combined purchase price of $10.132. ~~million~~Subject byto ~~December~~certain 31ownership limitations, ~~2022.~~the InAugust ~~September~~2023 ~~2022~~Pre-Funded Warrants, wethe ~~received~~Series $1A Common Warrants, and the Series B Common Warrants are exercisable upon issuance.9 ~~million~~Each ~~from~~August ~~Healios,~~2023 ~~which~~Pre-Funded ~~represents~~Warrant ~~the~~is ~~milestone~~exercisable ~~payment~~for ~~net~~one share of ~~amounts~~common ~~owed~~stock toat ~~Healios~~a price per share of $0.0001 ~~Additionally,~~(as adjusted from time to ~~assist~~time ~~Healios~~in accordance with the ~~advancement~~terms thereof) and does not expire. Each Series A Common Warrant is exercisable into one share of ~~its~~common ~~ischemic~~stock ~~stroke~~at ~~and~~a ~~ARDS~~price ~~programs~~per inshare ~~Japan,~~of in$0.32 ~~September~~(as ~~2022,~~adjusted wefrom ~~granted~~time to ~~Healios,~~time ~~subject~~in toaccordance with the terms ofthereof) ~~the~~for ~~licensing~~a ~~agreement~~five-year period, and each Series B Common Warrant is exercisable into one share of common stock at a ~~non-exclusive~~price ~~license~~per share of $0.32 (as adjusted from time to ~~make~~time ~~and~~in ~~have~~accordance ~~made~~with ~~MultiStem~~the terms thereof) for a one and a half year period. The offering closed on August 21, 2023, and the ~~treatment~~Company received net proceeds of ~~ischemic~~approximately ~~stroke~~$2.9 ~~and~~million, ~~ARDS~~after ~~worldwide~~giving ~~solely~~effect ~~for~~to ~~import~~the ~~into~~payment ~~Japan~~of ~~for~~placement ~~use~~fees inand ~~Japan~~expenses.

We have entered into a series of agreements with Healios, our collaborator in Japan. 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. In August 2021, we entered into a Comprehensive Framework Agreement for Commercial Manufacturing and Ongoing Support, or the Framework Agreement, with Healios, which provides for resolution of certain issues under the existing agreements between the parties and reframes our collaboration to set the stage for productive efforts as Healios and our collaboration move towards commercialization of MultiStem in Japan. It also provides Healios with deferral of certain milestone payments during the expensive initial commercial launch period. Under the Framework Agreement, we were entitled to a milestone payment in the amount of $3.0 million. Additionally, under the terms of the Framework Agreement, we were obligated to pay Healios $1.1 million by December 31, 2022. In September 2022, we received $1.9 million from Healios, which represents the milestone payment net of amounts owed to Healios. Additionally, to assist Healios with the advancement of its ischemic stroke and ARDS programs in Japan, in September 2022, we granted to Healios, subject to the terms of the licensing agreement, a non-exclusive license to make and have made MultiStem for the treatment of ischemic stroke and ARDS worldwide solely for import into Japan for use in Japan.

Healios has alleged that we are in material breach of our Framework Agreement for, among other things, not meeting our supply obligations and cooperation and assistance obligations. We strongly disagree with Healios’ allegations and will continue to work with Healios to try to resolve this dispute. However, there can be no assurance that we will be able to resolve this dispute without legal proceedings.

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. In prior periods, research and development expenses consisted 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, restructuring charges and laboratory supply and reagent costs. We expense research and development costs as they are incurred. General and administrative expenses consist primarily of salaries and related personnel costs, professional fees, restructuring charges and other corporate expenses. We expect to continue to incur substantial losses through at least the next several years.

Three Months Ended ~~June~~ September 30, 2023 and 2022

Revenues. Revenues for the three months ended ~~June~~September 30, 2023 no ~~were~~revenue ~~$48.8~~was ~~thousand~~ recognized compared to $20.31 million for the three months ended ~~June~~September 30, 2022. The revenue related to 2022 was primarily associated with services provided to Healios under the Framework Agreement. At September 30, 2022, the services under the Framework Agreement are largely complete, and are limited to minimal close-out activities. Our collaboration revenues will fluctuate from period-to-period based on the services provided under our arrangement with Healios.

Research and Development Expenses. Research and development expenses decreased to $104.60 million for the three months ended ~~June~~September 30, 2023 from $2012.~~8 million~~4 million for the comparable period in 2022. The $108.~~2 million~~4 million decrease is due to our restructuring plan which resulted in reduced ~~salaries~~manufacturing ~~and benefits of $4.2~~cost ~~million, internal research supplies~~ of $15.09 million, ~~manufacturing costs of $9.7~~ ~~million,~~ preclinical costs of $1.5 1 million, ~~outside~~salaries ~~services~~and benefits of $01.7 3 million, and other research and development costs of $0.61 million~~, which was offset by $7~~.~~5 million related to recognizing the impairment of the right-of-use asset related to the Stow lease as a result of abandoning the facility.~~ 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.

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General and Administrative Expenses. General and administrative expenses decreased to $2.38 million for the three months ended ~~June~~September 30, 2023, from $53.~~2 million~~7 million for the comparable period in 2022. The $20.9 ~~million~~ million decrease is due to our restructuring plan which resulted in reduced salaries and benefits of $20.5 6 million, outside services of $0.3 million, and other general and administrative costs costs of $0.1 million. We expect our annual 2023 general and administrative expenses to decrease compared to 2022 in connection with our restructuring plan.

Depreciation. Depreciation expense was $~~43,282~~1.0 million for the three months ended ~~June~~September 30, 2023 and $0.6 ~~million~~ million for the comparable period in 2022. The ~~decrease~~increase is due to ~~the~~taking ~~sale~~additional ofaccelerated depreciation for ~~equipment~~assets ~~associated~~no ~~with~~longer ~~the~~expected ~~decommissioning~~to ofbe ~~certain~~used ~~equipment~~in operations to their expected salvage values, compared to the same period in 2022, as a result of our restructuring plan.

Other Income, net. Other ~~(loss)~~ income, net, was $04.10 million for the three months ended ~~June~~September 30, 2023, compared to $03.~~6 million~~0 million for the same period in 2022. The balance in 2023 is primarily made up of ~~gain~~the ~~from extinguishment of $2.6 million, loss of $1.5 million due to~~ change in ~~Warrant~~ fair value, ~~and~~of anote ~~loss~~payable of $03.8 ~~million~~ ~~due to change in fair value of the Note~~million.

~~Six~~Nine Months Ended ~~June~~ September 30, 2023 and 2022

Revenues. Revenues for the ~~six~~nine months ended ~~June~~ September 30, 2023 were $4948.~~1 thousand~~8 thousand compared to $5.~~2 million~~3 million for the ~~six~~nine months ended ~~June~~September 30, 2022. The revenue for the ~~six~~nine ~~month~~months ended ~~June~~September 30, 2022, was primarily associated with services provided to Healios under the Framework Agreement. At September 30, 2022, the services under the Framework Agreement are largely complete, and are limited to minimal close-out activities. Our collaboration revenues will fluctuate from period-to-period based on the services provided under our arrangement with Healios.

Research and Development Expenses. Research and development expenses decreased to $1519.1 ~~million~~ million for the ~~six~~nine months ended ~~June~~ September 30, 2023 from $4154.~~7 million~~2 million in the comparable period in 2022. The $2635.6 1 million decrease is due to our restructuring plan which resulted in reduced ~~salaries~~manufacturing ~~and benefits of $7.9~~cost ~~million, internal research supplies~~ of $325.0 4 million, ~~manufacturing~~salaries ~~costs~~and benefits of $199.2 million, ~~preclinical~~legal ~~costs~~and ofprofessional ~~$1.4~~costs ~~million, outside services~~ of $10.8 6 million, and ~~decreases in~~ other research and development costs of $0.82 million~~, which was offset by $7~~.5 ~~million related to recognizing the impairment of the right-of-use asset related to the Stow lease as a result of abandoning the facility.~~ 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 decreased to $58.~~2 million~~0 million for the nine ~~six~~ months ended ~~June~~ September 30, 2023 from $913.~~3 million~~0 million in the comparable period in 2022. The $45.1 0 million decrease is due to our restructuring plan which resulted in reduced salaries and benefits of $34.9 4 million, outside services of $0.1 4 million, and other general and administrative costs costs of $0.12 million. We expect our annual 2023 general and administrative expenses to decrease compared to 2022 in connection with our restructuring plan.

Depreciation. Depreciation expense of $01.1 ~~million~~ million for the ~~six~~nine months ended ~~June~~ September 30, 2023 ~~was lower~~ compared to $01.9 5 million for the comparable period in 2022. The decrease is due to both the sale of equipment associated with the decommissioning of certain equipment resulting in fewer depreciating assets in 2023 as well as recording accelerated depreciation on certain assets in 2022, as a result of our restructuring plan that exceeded accelerated depreciation of additional assets in the current period.

Other Income, net. Other ~~(loss)~~ income, net. was $(03.~~4) million~~6 million for the ~~six~~nine-month period ended ~~June~~ September 30, 2023 and $03.8 ~~million~~ million for the comparable 2022 period. The balance in 2023 is primarily made up of gain from extinguishment of $2.6 million, ~~loss of $2.2~~and ~~million due to~~ change in ~~Warrant~~ fair value, ~~and~~of anote ~~loss~~payable of $03.~~8 million~~2 ~~due to change in fair value of the Note~~million, offset by loss ~~interest income~~ of $02.12 million ~~and~~due ~~insurance~~to ~~recoveries~~change ofin ~~$0.1 million.~~Warrant fair value.

Liquidity and Capital Resources

Our primary source of liquidity is our cash balance. At ~~June~~ September 30, 2023, we had $1.80 million in cash and cash equivalents. We have primarily financed our operations through business collaborations, grant funding and equity financing. 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.

Our current capital requirements depend on a number of factors, including progress in our MASTERS-2 trial, additional external costs, such as payments to contract research organizations and contract manufacturing organizations, personnel costs and the costs of filing and prosecuting patent applications and enforcing patent claims. Furthermore, continued delays in product supply caused by nonpayment to our primary contract manufacturer for our clinical trials may impact the timing and cost of such studies.

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We are entitled to receive potential milestones payments, subject to certain credits, and royalties from Healios under our licensed programs. Under the Framework Agreement, in September 2022, we received $1.9 million from Healios which represents a milestone payment in the amount of $3.0 million, net of amounts payable to Healios. We invoice Healios for certain manufacturing support services. Payments from Healios may be used by Healios to offset milestone payments that may become due in the future.

We have prepared our unaudited condensed consolidated financial statements on a going concern basis, which assumes that we will realize our assets and satisfy our liabilities in the normal course of business. However, we have incurred losses since inception of our operations in 1995, have negative operating cash flows, including in each of the last three years, and had an accumulated deficit of $~~676~~682.6 million at ~~June~~ September 30, 2023. Our losses have resulted principally from costs incurred in research and development, clinical and preclinical product development, manufacturing and process development, acquisition and licensing costs, and general and administrative costs associated with our operations. These circumstances raise substantial doubt about our ability to continue as a going concern. The accompanying unaudited condensed financial statements do not include any adjustments to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of the uncertainty concerning our ability to continue as a going concern.

While we believe our restructuring plan will reduce costs and alleviate to some extent the conditions that raise substantial doubt, these plans are not entirely within our control and cannot be assessed as being probable of occurring. For the foreseeable future, our ability to continue our operations is dependent upon our ability to obtain additional capital, which may not be available to us on acceptable terms, on a timely basis or at all.

We expect to continue to incur substantial losses through at least the next several years and may incur losses in subsequent periods. The amount and timing of our future losses are highly uncertain. Our ability to achieve and thereafter sustain profitability will be dependent upon, among other things, successfully developing, commercializing and obtaining regulatory approval or clearances for our technologies and products resulting from these technologies.

Cash Flow Analysis

Net cash used in operating activities was $1014.64 million for the ~~six~~nine months ended ~~June~~ September 30, 2023 compared to $3647.60 million for the ~~six~~nine months ended ~~June~~ September 30, 2022. 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 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 receivable, accounts payable, accrued expenses, prepaid expenses and deposits balances from period to period.

Net cash ~~used~~ provided in investing activities was $0.10 million for the ~~six~~nine months ended ~~June~~ September 30, 2023 compared to cash used of $12.80 million for the ~~six~~nine months ended ~~June~~ September 30, 2022. The fluctuations over the periods were due to the timing of ~~additions~~ disposal to property and equipment primarily ~~for~~due our ~~manufacturing~~restructuring ~~process development activities in 2022 compared to significantly less investment in 2023~~efforts.

Financing activities provided cash of $36.2 million and $1425.4 million for the ~~six~~nine months ended ~~June~~ September 30, 2023 and 2022, respectively. The decrease from the comparable period is primarily related to the termination of our equity purchase agreement with Aspire Capital in July 2022. Also included in financing activities for the ~~six~~nine months ended ~~June~~ September 30, 2023 and ~~June~~ September 30, 2022 are shares retained for withholding tax payments on stock-based awards.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

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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 operation and demanding of management’s judgement. 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 United States 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. The following accounting estimates are deemed to be critical to us.

Stock-Based Compensation

We determine the estimated fair value of each stock option on the date of grant using the Black-Scholes option-pricing model. The expected term of stock options granted represent the period of time that stock option grants are expected to be outstanding and subsequent to June 2020, is determined based on our historical experience and patterns. Prior to June 2020, we used the “simplified” method to calculate the expected term of option grants. The risk-free interest rate is based on the U.S. Treasury yield for a period consistent with the expected term of the stock option at the time of the grant. We determine volatility by using our historical stock volatility. We account for forfeitures as they occur. We have never paid or declared dividends or paid dividends on our common stock and have no plans to do so in the foreseeable future. Changes in these assumptions may lead to variability with respect to the amount of stock compensation expense we recognize related to stock options.

Additionally, stock-based compensation for an award with a performance condition requires the judgement of management. For such awards, stock-based compensation is recognized when the achievement of such performance condition is determined to be probable. If the outcome of such performance condition is not determined to be probable or is not met, no compensation expense is recognized.

Fair Value of Warrant Liabilities

In August 2022, we entered into the August 2022 Purchase Agreement, which resulted in the issuance of common stock, the August 2022 Pre-Funded Warrants, and the August 2022 Common Warrants, exercisable for a specified price, starting after a specified period of time, and for a specified period of time after the deal had closed. The August 2022 Common Warrants meet the definition of a derivative pursuant to ASC 815, Derivatives and Hedging, and do not meet the derivative scope exception. As a result, the August 2022 Common Warrants were initially recorded as liabilities and measured at fair value using the Black-Scholes valuation model. The warrants are adjusted to fair value at the end of each quarter. The adjustment to fair value is recorded in Other Income in the Statement of Operations and Comprehensive Loss

We use a valuation expert to help us determine the fair value of the August 2022 Common Warrants, using the Black-Scholes model to estimate the fair value of the August 2022 Common Warrants. The risk-free interest rate is based on the U.S. Treasury yield for a period consistent with the expected term of the common warrants at the time of the issuance. We determine volatility by using our historical stock volatility. We have never paid or declared dividends or paid dividends on our common stock and have no plans to do so in the foreseeable future. Changes in these assumptions may lead to variability with respect to the amount of gain or loss in fair value of the August 2022 Common Warrants.

The issuance of the November 2022 Common Warrants was deemed to be equity accounting and no estimates are required for this transaction.

Fair Value of Note Payable

On May 17, 2023, we entered into a Forbearance, Restructuring and Settlement Agreement (the “Forbearance Agreement”) with a supplier, which amends certain supply agreements between the Company and the supplier. Pursuant to the terms of the Forbearance Agreement, on May 17, 2023, the Company issued a convertible promissory note to the supplier in the principal amount of $15.0 million (the “Note”).The Company has elected the fair value option under ASC 825-10-25 to measure the Note at fair value at inception and in subsequent periods, with changes in fair value reported in earnings. The Note is eligible for fair value option as it is a permissible instrument within the scope of ASC 825-10-15. As a result, the Note is recorded as a liability and measured at fair value using the Lattice Model valuation model. The Note is adjusted to fair value at the end of each quarter. The adjustment to fair value is recorded in Other Income in the Statement of Operations and Comprehensive Loss, except for changes in fair value caused by instrument-specific credit risk which is reported in other comprehensive income.

We use a valuation expert to assist us in determine the fair value of the Note using the Lattice Model valuation model to estimate the fair value of the Note. This model incorporates transaction detail such as the term of the Note, the nominal value of the Note at inception, the coupon rate of the Note, the conversion price of the Note, the Company’s stock price, risk-free rate and implied bond yield as well as volatility. The Company’s stock is a publicly traded stock and is readily determinable. The risk-free interest rate is based on the U.S. Treasury yield for a period consistent with the expected term of the Note. We determine volatility by using our historical stock volatility. The implied bond yield is based on the required rate of return for mezzanine financing of similar companies. Changes in these assumptions may lead to variability with respect to the amount of gain or loss in fair value of the Note.

29 26

Table of Contents

mezzanine financing of similar companies. Changes in these assumptions may lead to variability with respect to the amount of gain or loss in fair value of the Note.

Refer to Note C, Accounting Policies, in the notes to consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2022, for a discussion of our accounting policies and recently issued accounting standards.

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, 2022.

Item 4. Controls and Procedures.

Disclosure ~~controls~~Controls and ~~procedures~~Procedures

Our management, under the supervision of and with the participation of our Chief Executive Officer and our interim 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 amended (the “Exchange Act”), 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 interim Chief Financial Officer have concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, certain of our disclosure controls and procedures were not effective due to material weaknesses in internal control over financial reporting, as a result of insufficient resources with appropriate knowledge and expertise to design, implement, document and operate effective internal controls over financial reporting relating to complex transactions, including accounting for the issuance of convertible notes.

Remediation Efforts to Address Disclosed Material Weakness

Our management, with oversight from our audit committee, is in the process of implementing steps to use third party specialists to assist with accounting and finance technical issues as needed.

Changes in ~~internal~~Internal ~~control~~Control ~~over~~Over ~~financial~~Financial ~~reporting~~Reporting

During the last fiscal quarter covered by this Quarterly Report on Form 10-Q, there has been a change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

As of ~~June~~September 30, 2023, management has concluded that there was a material weakness as described above in “Disclosure ~~controls~~Controls and ~~procedures~~Procedures”.

Inherent ~~limitations~~Limitations

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting.

However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, the Company is involved in various disputes and litigation matters that arise in the ordinary course of business. On June 9, 2023, ~~the~~our landlord for the property in Stow, Ohio, Seasons Business Center Four, LLC, brought suit against the Company in the Summit County, Ohio Court of Common Pleas asserting claims for Breach of Contract (Lease), Promissory Estoppel, and Unjust Enrichment relating to the subject Lease between the parties. The amount sought is undetermined but in excess of $25,000. The Company filed its Answer and Affirmative Defenses by the August 15, 2023 deadline and intends to defend against the claims asserted.

Item 1A. Risk Factors.

In addition to the other information set forth elsewhere in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors set forth below and the other risk factors discussed in Part I, Item 1A “Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Those factors, if they were to occur, could cause our actual results to differ materially from those expressed in our forward-looking statements in this report, and materially adversely affect our financial condition or future results. Although we are not aware of any other factors that we currently anticipate will cause our forward-looking statements to differ materially from our future actual results, or materially affect the Company’s financial condition or future results, additional risks and uncertainties not currently known to us or that we currently deem to be immaterial might materially adversely affect our actual business, financial condition and/or operating results.

30 27

Table of Contents

toThere ~~differ~~is ~~materially~~substantial ~~from~~doubt ~~those~~about ~~expressed~~our inability ~~our~~to ~~forward-looking~~continue ~~statements~~as ina ~~this~~going ~~report~~concern, ~~and~~which ~~materially~~may ~~adversely~~ affect our ~~financial~~ability ~~condition~~to orobtain future ~~results.~~financing ~~Although~~and wemay ~~are~~require ~~not~~us ~~aware~~to ofcurtail ~~any~~our ~~other~~operations. ~~factors~~We ~~that we currently anticipate~~ will ~~cause~~need ~~our~~substantial ~~forward-looking~~additional ~~statements~~funding to ~~differ~~develop ~~materially~~our ~~from~~products and for our future ~~actual~~operations. ~~results,~~If orwe ~~materially~~are ~~affect~~unable ~~the~~to ~~Company’s~~obtain ~~financial~~the ~~condition~~funds ornecessary ~~future~~to ~~results~~do so, ~~additional~~we ~~risks~~may ~~and~~be ~~uncertainties~~required ~~not~~to ~~currently~~further ~~known~~delay, toscale usback or ~~that~~eliminate weour ~~currently~~product ~~deem~~development toactivities beor ~~immaterial~~may ~~might~~be ~~materially~~unable ~~adversely~~to ~~affect~~continue our ~~actual~~ business~~, financial condition and/or operating results~~.

~~There~~The isaudited ~~substantial~~financial ~~doubt~~statements ~~about~~and accompanying notes presented in our ~~ability~~Annual toReport ~~continue~~on asForm a10-K ~~going~~for ~~concern~~the year ended December 31, 2022 ~~which~~include ~~may~~disclosures ~~affect~~and an opinion from our ~~ability~~independent toregistered ~~obtain~~public ~~future~~accounting ~~financing~~firm ~~and~~stating ~~may~~that ~~require~~our usrecurring tolosses ~~curtail~~and ~~our~~negative ~~operations.~~cash Weflows ~~will~~from ~~need~~operations raise substantial ~~additional~~doubt ~~funding~~about our ability to ~~develop~~continue ~~our~~as ~~products~~a ~~and~~going ~~for~~concern. ~~our~~Our ~~future~~financial ~~operations.~~statements Ifas weof ~~are~~December ~~unable~~31, to2022 ~~obtain~~and 2021 ~~the~~were ~~funds~~prepared ~~necessary~~under tothe doassumption ~~so,~~that we ~~may~~will becontinue ~~required~~as toa ~~further~~going ~~delay,~~concern ~~scale~~and ~~back~~do ornot ~~eliminate~~include ~~our~~any ~~product~~adjustments ~~development~~that ~~activities~~might orresult ~~may~~from bethe ~~unable~~outcome toof ~~continue~~this ~~our business~~uncertainty.

The ~~audited~~development ~~financial~~of ~~statements~~our ~~and~~product ~~accompanying~~candidates ~~notes~~will ~~presented~~require ina ~~our~~commitment ~~Annual~~of ~~Report~~substantial onfunds ~~Form~~to ~~10-K~~conduct ~~for~~ the ~~year ended December 31~~research, ~~2022~~which may include ~~disclosures~~preclinical and anclinical ~~opinion~~testing, ~~from~~necessary ~~our~~to ~~independent~~obtain ~~registered~~regulatory ~~public~~approvals ~~accounting~~and ~~firm~~bring ~~stating that~~ our ~~recurring~~products ~~losses~~to ~~and~~market. ~~negative~~Net cash ~~flows~~used ~~from~~in ~~operations raise substantial doubt about~~ our ~~ability~~operations towas ~~continue as a going concern~~$59.0 ~~Our~~million ~~financial~~in ~~statements as of December 31~~2022, ~~2022~~$76.2 ~~and~~million in 2021 ~~were prepared under the assumption that we will continue as a going concern~~ and do$61.8 ~~not~~million ~~include~~in ~~any adjustments that might result from the outcome of this uncertainty~~2020.

~~The~~At ~~development~~December 31, of2022, ~~our~~we ~~product~~had ~~candidates~~$9.0 ~~will~~million of ~~require~~cash aand ~~commitment~~cash equivalents. As of ~~substantial~~September ~~funds~~30, to2023, ~~conduct~~we ~~the~~had ~~research,~~accounts ~~which~~payable ~~may~~of ~~include~~$9.3 ~~preclinical~~million and we only had cash and ~~clinical~~cash ~~testing~~equivalents of $1.0 million. Accordingly, ~~necessary~~we towill ~~obtain~~need ~~regulatory~~substantially ~~approvals~~more ~~and~~funding ~~bring~~to advance our ~~products~~product tocandidates ~~market.~~through ~~Net~~development ~~cash~~and ~~used~~into commercialization, including to put in ~~our~~place ~~operations~~manufacturing ~~was~~capacity ~~$59.0~~to ~~million~~support insuch ~~2022,~~commercial ~~$76~~activity.2 ~~million~~Our infuture ~~2021~~capital ~~and~~requirements ~~$61.8~~will ~~million~~depend inon ~~2020.~~many factors, including:

At• ~~December 31,~~our ~~2022,~~ability ~~we had $9.0 million of cash and cash equivalents. As of June 30, 2023, we had accounts payable of $8.7 million, of which approximately 71% is owed~~ to araise ~~supplier,~~capital ~~that was subsequently agreed~~ to befund ~~settled for a convertible note, and we only had cash and cash equivalents of $1.8 million. Accordingly, we will need substantially more funding to advance~~ our product candidates through development and into commercialization, including to put in place manufacturing capacity to support such commercial activity. Our future capital requirements will depend on many factors, including:operations;

•~~our~~ ~~ability~~the toprogress, ~~raise~~scope, ~~capital~~costs toand ~~fund~~results of our ~~operations~~clinical and preclinical testing of any current or future product candidates;

• the ~~progress,~~possibility ~~scope,~~of ~~costs~~delays ~~and~~in, ~~results~~adverse events of ~~our clinical~~ and ~~preclinical~~excessive ~~testing~~costs of ~~any~~the ~~current~~development ~~or future product candidates~~process;

• the ~~possibility~~cost of ~~delays~~manufacturing ~~in,~~our ~~adverse~~product ~~events of and excessive costs of the development process~~candidates;

• the cost of ~~manufacturing~~prosecuting, ~~our~~defending ~~product~~and ~~candidates~~enforcing patent claims and other intellectual property rights;

• the ~~cost~~time ~~of prosecuting, defending~~ and ~~enforcing~~cost ~~patent~~involved ~~claims~~in ~~and~~obtaining ~~other~~regulatory ~~intellectual property rights~~approvals;

•~~the~~ ~~time~~expenses ~~and~~related ~~cost~~to ~~involved~~complying inwith ~~obtaining~~cGMP ~~regulatory~~of ~~approvals~~therapeutic product candidates;

•~~expenses~~ ~~related~~costs toof ~~complying~~financing ~~with~~or ~~cGMP~~acquiring ofadditional ~~therapeutic~~capital ~~product~~equipment ~~candidates~~and development technologies;

•~~costs~~ ofcompeting ~~financing~~technological ~~or acquiring additional capital equipment~~ and ~~development~~market ~~technologies~~developments;

•~~competing~~ ~~technological~~our ability to establish and maintain collaborative and other arrangements with third parties to assist in bringing our products to market ~~developments~~and the cost of such arrangements;

•~~our~~ ~~ability~~the toamount ~~establish~~ and ~~maintain~~timing ~~collaborative~~of ~~and~~payments ~~other~~or ~~arrangements~~equity ~~with~~investments ~~third~~that ~~parties~~we toreceive ~~assist~~from collaborators or changes in ~~bringing~~or ~~our~~terminations ~~products~~of tofuture ~~market~~or existing collaboration and licensing arrangements and the ~~cost~~timing and amount of ~~such~~expenses ~~arrangements~~we incur to support these collaborations and license agreements;

•~~the~~ ~~amount~~costs ~~and~~associated ~~timing~~with ofthe ~~payments~~integration orof ~~equity~~any ~~investments~~new ~~that~~operation, weincluding ~~receive~~costs ~~from~~relating ~~collaborators~~to ~~or changes in or terminations of~~ future ormergers ~~existing collaboration~~ and ~~licensing~~acquisitions ~~arrangements~~with ~~and~~companies ~~the~~that ~~timing~~have ~~and~~complementary ~~amount of expenses we incur to support these collaborations and license agreements~~capabilities;

•~~costs~~ ~~associated~~expenses ~~with~~related to the ~~integration~~establishment of ~~any~~sales ~~new~~and ~~operation,~~marketing ~~including~~capabilities ~~costs~~for ~~relating~~products toawaiting ~~future~~approval ~~mergers~~or ~~and~~products ~~acquisitions with companies~~ that have ~~complementary~~been ~~capabilities~~approved;

• expenses related to ~~the~~establishing ~~establishment~~manufacturing ~~of sales and marketing~~ capabilities ~~for products awaiting approval or products that have been approved~~;

•~~expenses~~ ~~related~~the tolevel ~~establishing~~of ~~manufacturing~~our ~~capabilities~~sales and marketing expenses; and

•~~the~~ ~~level~~our ofability ~~our~~to ~~sales~~introduce and ~~marketing~~sell ~~expenses;~~new ~~and~~products.

•We have secured capital historically from grant revenues, collaboration proceeds and debt and equity offerings. We will need to secure substantial additional capital to fund our ~~ability~~future operations. We cannot be certain that additional capital will be available on acceptable terms or at all. To the extent we raise additional capital through the sale of equity securities, the ownership position of our existing stockholders could be substantially diluted. If additional funds are raised through the issuance of preferred stock or debt securities, these securities are likely to ~~introduce~~have rights, preferences and ~~sell~~privileges ~~new~~senior ~~products~~to our common stock. Fluctuating interest rates could also increase the costs of any debt financing we may obtain.

We have secured capital historically from grant revenues, collaboration proceeds and debt and equity offerings. We will need to secure substantial additional capital to fund our future operations. We cannot be certain that additional capital will be available on acceptable terms or at all. To the extent we raise additional capital through the sale of equity securities, the ownership position of our existing stockholders could be substantially diluted. If additional funds are raised through the issuance of 28

31 Table of Contents

~~Table~~Importantly, we expect that the results of ~~Contents~~our MASTERS-2 clinical trial, 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 nature of these results, we may accelerate or may delay certain programs. In the longer term, we will have to continue to generate additional capital to meet our needs until we would become cash flow positive as a result of the sales of our clinical products, if they are approved for marketing.

~~preferred~~Failure ~~stock~~to orsuccessfully ~~debt~~address ~~securities,~~ongoing ~~these~~liquidity ~~securities~~requirements will have a material adverse effect on our business. If we are ~~likely~~unable to ~~have~~obtain ~~rights~~additional capital on acceptable terms when needed, ~~preferences~~we ~~and~~may ~~privileges~~be ~~senior~~required to take actions that harm our ~~common~~business ~~stock.~~and ~~Fluctuating~~our ~~interest~~ability ~~rates~~to ~~could~~achieve ~~also~~cash ~~increase~~flow in the ~~costs~~future, including possibly the surrender of ~~any~~our ~~debt~~rights ~~financing~~to wesome ~~may~~technologies ~~obtain~~or product opportunities, delaying our clinical trials or curtailing or ceasing operations.

~~Importantly,~~Risks weRelated ~~expect that the results of our MASTERS-2 clinical trial, will have a significant impact, favorable or unfavorable, on our ability~~ to ~~access~~Our ~~capital~~Common from potential third-party commercial partners or the equity capital markets. Depending on the nature of these results, we may accelerate or may delay certain programs. In the longer term, we will have to continue to generate additional capital to meet our needs until we would become cash flow positive as a result of the sales of our clinical products, if they are approved for marketing.Stock

~~Failure~~Currently tothere ~~successfully~~is ~~address ongoing liquidity requirements will have~~ a ~~material~~limited ~~adverse~~public ~~effect~~market onfor our ~~business.~~common ~~If we are unable to obtain additional capital on acceptable terms when needed~~stock, ~~we may be required to take actions that harm our business~~ and ~~our~~we ~~ability~~cannot topredict ~~achieve cash flow in~~ the future, ~~including~~prices ~~possibly~~or the ~~surrender~~amount of ~~our~~liquidity ~~rights~~of ~~to some technologies or product opportunities, delaying~~ our ~~clinical~~common ~~trials or curtailing or ceasing operations~~stock.

WeCurrently, ~~are~~there is a limited public market for our common stock. Our common stock is quoted on the OTC Pink under the symbol “ATHX.” However, the OTC Pink is not ~~currently~~a liquid market in ~~compliance~~contrast ~~with~~to ~~Nasdaq’s~~the ~~continued~~major ~~listing~~stock ~~requirements~~exchanges. IfPrices wefor ~~are~~securities traded solely on the OTC Pink may be difficult to obtain and holders of common stock may be unable to ~~comply~~resell ~~with~~their ~~Nasdaq’s~~securities ~~continued~~at ~~listing~~or ~~requirements,~~near their original offering price or at any price. We cannot assure you as to the liquidity or the future market prices of our common stock ~~could~~if bea ~~delisted,~~market ~~which~~does ~~could~~develop. ~~affect~~If an active market for our common stock does not develop, the ~~price~~fair market value of our common stock ~~and~~could ~~liquidity~~be ~~and~~materially ~~reduce~~adversely ~~our~~affected. ~~ability~~We tocannot ~~raise~~predict ~~capital~~the future prices of our common stock.

~~Our~~Trading in our common stock ~~is currently listed~~ on ~~The~~the ~~Nasdaq~~OTC ~~Capital~~Pink ~~Market. The Nasdaq Capital Market~~ has ~~established~~been ~~certain~~subject ~~quantitative criteria and qualitative standards that companies must meet~~ to ~~remain~~wide ~~listed for trading on this market~~fluctuations.

OnOur ~~October~~common ~~14,~~stock ~~2022,~~is wecurrently ~~received~~quoted afor ~~written~~public ~~notice~~trading (on the ~~“October~~OTC ~~2022~~Pink. ~~Notice”)~~The ~~from~~trading ~~the~~price ~~Listing~~of ~~Qualifications~~our ~~Department~~common ofstock ~~The~~has ~~Nasdaq~~been ~~Stock~~subject ~~Market~~to ~~LLC~~wide ~~(“Nasdaq”)~~fluctuations. ~~that~~Trading weprices ~~are~~of ~~not~~our incommon ~~compliance~~stock ~~with~~may ~~the~~fluctuate ~~requirement~~in response to ~~maintain~~ a ~~minimum~~number ~~market~~of ~~value~~factors, many of ~~listed~~which ~~securities~~will ofbe ~~$35~~beyond ~~million,~~our ascontrol. ~~set~~The ~~forth~~stock inmarket ~~Nasdaq~~has ~~Listing~~generally ~~Rule~~experienced ~~5550(b)(2)~~extreme ~~(the~~price ~~“Market~~and ~~Value~~volume ~~Standard”)~~fluctuations ~~because~~that have often been unrelated or disproportionate to the ~~market~~operating ~~value~~performance of companies with limited business operation. There can be no assurance that trading prices and price earnings ratios previously experienced by our common stock ~~was~~will ~~below~~be ~~$35~~matched ~~million~~or ~~for~~maintained. 30These ~~consecutive~~broad ~~business~~market ~~days.~~and ~~The~~industry ~~October~~factors ~~2022~~may ~~Notice~~adversely ~~does~~affect ~~not~~the ~~impact~~market price of our common stock, regardless of our operating performance. In the ~~listing~~past, following periods of volatility in the ~~common~~market ~~stock~~price onof ~~The~~a ~~Nasdaq~~company’s ~~Capital~~securities, ~~Market~~securities atclass-action ~~this~~litigation ~~time~~has often been instituted. Such litigation, if instituted, could result in substantial costs for us and a diversion of management’s attention and resources.

~~The~~Our ~~October~~common ~~2022~~stock ~~Notice~~is ~~provided~~currently ~~that,~~quoted inonly ~~accordance~~on ~~with Nasdaq Listing Rule 5810(c)(3)(C),~~ the ~~Company~~OTC ~~has a period of 180 calendar days from the date of the October 2022 Notice~~Pink, orwhich ~~until~~may ~~April~~have ~~12,~~an ~~2023,~~unfavorable toimpact ~~regain~~on ~~compliance~~our ~~under~~stock ~~the~~price ~~Market~~and ~~Value Standard~~liquidity.

OnOur ~~April~~common 13stock is quoted on the OTC Pink, ~~2023~~which is a significantly more limited market than the New York Stock Exchange, wethe ~~received~~NYSE ~~notice~~American, ~~from~~or The Nasdaq Stock Market. ~~that~~The wequotation ~~had~~of ~~not~~our ~~regained~~shares ~~compliance~~of ~~with~~common ~~the~~stock ~~Market~~on ~~Value~~the ~~Standard.~~OTC OnPink ~~April~~may ~~14,~~result ~~2023,~~in wea ~~filed~~less ~~our~~liquid ~~request~~market available for aexisting ~~hearing,~~and ~~which~~potential ~~was~~stockholders ~~held~~to ~~before~~trade ~~the~~shares ~~Nasdaq~~of ~~Hearing~~our ~~Panel~~common (stock, could depress the ~~“Panel”)~~trading price of our common stock and could have a long-term adverse impact on ~~May~~our ~~18,~~ability ~~2023~~to raise capital in the future.

OnThere ~~June~~can ~~26,~~be ~~2023,~~no assurance that there will be an active market for our shares of common stock either now or in the ~~Panel~~future. ~~notified~~Market liquidity will depend on the ~~Company~~perception ~~that~~of itour ~~had~~operating ~~granted~~business and any steps that our ~~request~~management ~~for~~might antake ~~exception~~to ~~through~~bring ~~September~~us ~~15,~~to ~~2023~~the awareness of investors. There can be no assurance given that there will be any awareness generated. Consequently, investors may not be able to liquidate their investment in our shares of common stock or liquidate at a price that reflects the ~~continued~~value ~~listing~~of ~~requirements~~the business. As a result, ~~subject~~holders of our shares of common stock may not find purchasers for such shares should they desire to ~~the~~sell ~~Company~~them. ~~demonstrating~~Consequently, ~~compliance~~our ~~with~~shares ~~the~~of ~~Market~~common ~~Value~~stock ~~Standard~~should be purchased only by ~~September~~investors ~~15,~~having ~~2023~~no need for liquidity in their investment and who can hold such shares for an indefinite period of time.

The Panel noted that it reserves the right to reconsider the terms of this exception based on any event, condition or circumstance that exists or develops that would, in the opinion of the Panel, make continued listing of the Company’s ~~securities~~common onstock ~~Nasdaq~~is ~~inadvisable~~considered ora ~~unwarranted.~~“penny Instock” ~~addition, the Nasdaq Listing~~ and ~~Hearing Review Council~~ may, onbe ~~its~~difficult ~~own motion, determine~~ to ~~review any Panel decision within 45 calendar days after issuance of the written decision~~sell.

~~There~~The ~~can~~Company’s becommon nostock ~~assurance~~is ~~that~~considered ~~the~~to ~~Company will~~ be ~~able~~a to“penny ~~regain~~stock” ~~compliance~~under ~~with~~rules ~~the~~promulgated ~~Market~~pursuant ~~Value~~to ~~Standard,~~the orExchange ~~will~~Act. ~~otherwise~~Reasons befor incategorization ~~compliance~~as ~~with~~a ~~other~~penny ~~Nasdaq~~stock ~~listing~~include ~~criteria.~~but ~~While~~are ~~the~~not ~~Company~~limited ~~is exercising diligent efforts~~ to ~~maintain~~ the ~~listing~~following: of(i) the ~~Company’s common~~ stock ontrades ~~The~~at ~~Nasdaq~~a ~~Capital~~price ~~Market,~~less ~~there~~than ~~can~~$5.00 beper noshare; ~~assurance~~(ii) ~~that~~it ~~the~~is ~~Company~~not ~~will~~traded beon ~~able~~a to“recognized” ~~regain~~national orexchange; ~~maintain~~(iii) ~~compliance~~it ~~with~~is ~~Nasdaq~~not ~~listing~~quoted ~~criteria.~~on IfThe ~~the Company fails to regain compliance with~~ Nasdaq’s ~~continued~~Stock ~~listing~~Market, ~~standards~~or ~~during~~even ~~the~~if ~~exception period granted by the Panel~~so, ~~our~~has ~~common~~a ~~stock~~price ~~will~~less bethan ~~subject to delisting from Nasdaq~~$5.00 ~~Any~~per ~~delisting~~share; ofor ~~our~~(iv) ~~common~~it ~~stock~~is ~~could~~issued ~~adversely~~by ~~affect~~a ~~the~~company ~~market~~with ~~liquidity~~net oftangible ~~our~~assets ~~common~~less ~~stock~~than ~~and~~$2.0 ~~the~~million, ~~market~~if ~~price~~in ofbusiness ~~our~~more ~~common~~than ~~stock~~a ~~could~~continuous ~~decrease.~~three ~~Furthermore~~years, ifor ~~our~~with ~~common~~average ~~stock~~revenues ~~were~~of ~~delisted~~less itthan ~~could~~$6.0 ~~adversely~~million ~~affect~~for ~~our~~the ~~ability~~past tothree ~~obtain~~years. ~~financing~~The ~~for~~principal ~~the~~result ~~continuation~~or effect of ~~our~~being ~~operations~~designated ~~and~~a ~~our~~“penny ~~ability~~stock” tois ~~attract~~that ~~and~~securities ~~retain~~broker-dealers ~~employees~~cannot byrecommend ~~means~~the ofstock ~~equity~~but ~~compensation~~must ~~and/or~~trade ~~result~~ in ~~the~~it ~~loss~~on ofan ~~confidence~~unsolicited ~~by investors~~basis.

~~In addition~~Additionally, onSection ~~July 28, 2023, we received a written notice~~ 15(~~the “July 2023 Notice”~~g) ~~from~~of ~~Nasdaq that~~ the ~~Company~~Exchange isAct ~~not~~and ~~in compliance with the requirement to maintain a minimum closing bid price of $1.00 per share, as set forth in Nasdaq Listing~~ Rule ~~5550(a)(~~15g-2) ~~(the~~promulgated ~~“Bid~~thereunder ~~Price~~by ~~Requirement”), because~~ the ~~closing~~SEC ~~bid~~require ~~price~~broker-dealers ofdealing ~~the~~in ~~Company’s~~penny ~~common~~stocks ~~stock~~to ~~was~~provide ~~below~~potential ~~$1.00~~investors ~~per~~with ~~share~~a ~~for~~document 30disclosing ~~consecutive business days for~~ the ~~period~~risks of ~~June~~penny ~~14,~~stocks ~~2023~~and ~~through~~to ~~July~~obtain ~~27,~~a ~~2023.~~manually ~~The~~signed ~~July~~and ~~2023~~dated ~~Notice~~written ~~does~~receipt ~~not~~of ~~impact~~ the ~~listing~~document ofbefore ~~the~~effecting ~~common~~any ~~stock~~transaction onin ~~The~~a ~~Nasdaq~~penny ~~Capital~~stock ~~Market~~for atthe ~~this~~investor’s ~~time~~account.

~~The~~Holders ~~July~~in ~~2023~~the ~~Notice~~Company’s ~~provided~~common stock are urged to obtain and read such disclosure carefully before purchasing any shares that, inare ~~accordance~~deemed ~~with~~to ~~Nasdaq~~be ~~Listing~~“penny ~~Rule~~stock.” ~~5810(c)(3)(A)~~Moreover, ~~the~~Rule ~~Company~~15g-9 ~~has~~requires abroker-dealers ~~period~~in penny stocks to approve the account of ~~180~~any ~~calendar~~investor ~~days~~for ~~from~~transactions in such stocks before selling any penny stock to that investor. This procedure requires the ~~date~~broker-dealer ofto: (i) obtain from the ~~July~~investor ~~2023~~information ~~Notice~~concerning its financial situation, orinvestment ~~until~~experience ~~January~~and 24investment objectives; (ii) reasonably determine, ~~2024~~based on that information, tothat ~~regain~~transactions ~~compliance~~in ~~with~~penny stocks are suitable for the ~~Bid~~investor ~~Price~~and ~~Requirement.~~that ~~During~~the ~~this~~investor ~~period,~~has ~~our~~sufficient ~~common~~knowledge ~~stock~~and ~~will~~experience ~~continue~~as to ~~trade~~be onreasonably ~~The~~capable ~~Nasdaq~~of ~~Capital~~evaluating ~~Market.~~the Ifrisks atof ~~any~~penny ~~time~~stock ~~before~~transactions; ~~January~~(iii) ~~24,~~provide ~~2024,~~the investor with a written statement setting forth the ~~bid~~basis ~~price~~on ofwhich ~~our~~the ~~common~~broker-dealer ~~stock~~made ~~closes~~the atdetermination orin (ii) above; ~~$1.00~~and ~~per~~(iv) ~~share~~receive ~~for~~ a ~~minimum~~signed and dated copy of ~~ten~~such ~~consecutive~~statement ~~trading~~from ~~days~~the investor, ~~Nasdaq~~confirming ~~will~~that ~~provide~~it ~~written~~accurately ~~notification~~reflects ~~that~~the investor’s financial situation, investment experience and investment objectives. Compliance with these requirements may make it more difficult for holders of the Company’s ~~has~~common ~~achieved~~stock ~~compliance~~to ~~with~~resell their shares to third parties or to otherwise dispose of them in the ~~Bid~~market ~~Price~~or otherwise.

32The Financial Industry Regulatory Authority (“FINRA”), has adopted sales practice requirements that may also limit a stockholder’s ability to buy and sell our stock.

~~Table~~In addition to the “penny stock” rules described above, FINRA has adopted rules that require that, in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of ~~Contents~~these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

~~Requirement and the matter will be closed. However, under Nasdaq Listing Rule 5810(c)(3)(A), Nasdaq may exercise its discretion to extend this ten day period as discussed in Rule 5810(c)(3)(H).~~ 29

~~The~~ Table Company is considering all available options to regain compliance with the Bid Price Requirement. However, there can be no assurance that the Company will be able to regain compliance with the rule or will otherwise be in compliance with other Nasdaq listing criteria. In the event the Company does not regain compliance by January 24, 2024, the Company may be eligible for an additional 180 calendar day compliance period to demonstrate compliance with the Bid Price Requirement. To qualify for the additional 180-day period, the Company will be required to meet the continued listing requirements for market value of publicly held shares and all other initial listing standards (with the exception of the Bid Price Requirement). In addition, the Company will need to provide written notice to Nasdaq of its intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary. If the Company does not qualify for the second compliance period or fails to regain compliance during the second 180-day period, then Nasdaq will notify the Company that its common stock is subject to delisting. At that time, the Company may appeal the delisting determination to a Nasdaq Hearings Panel.Contents

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

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

~~None~~On October 10, 2023, our subsidiary, ABT Holding Company (“ABT Holding”), and HEALIOS K.K. (“Healios”) entered into a binding memorandum of understanding (the “October MOU”), pursuant to which, among other things, ABT Holding entered into (i) an amendment (the “Fifth Amendment to License Agreement”) to that certain license agreement, dated as of January 8, 2016, as amended (the “Existing License Agreement”), and (ii) an assignment agreement for ARDS (as defined below) clinical doses (the “Assignment Agreement”), each with Healios and dated of even date with the October MOU.

~~Item 6~~Under the Fifth Amendment to License Agreement, the Company agreed to grant Healios a non-exclusive worldwide license to develop and commercialize MultiStem with respect to treating acute respiratory distress syndrome (“ARDS”) in exchange for potential development and sales milestone payments and additional royalties totaling up to $150 million in the aggregate. ~~Exhibits~~ The Assignment Agreement provides for ABT Holding’s assignment of certain MultiStem doses manufactured by using a 3D bioreactor process to Healios. On October 12, 2023, ABT Holding received the first milestone payment of $1.5 million, and then on November 9, 2023, the Company received the second milestone payment of $1.5 million. The Company may receive another $1.5 million which is contingent on Healios closing on financing.

33Copies of the October MOU, the Fifth Amendment to License Agreement, and the Assignment Agreement are filed as exhibits to this Quarterly Report, and the description of such documents is qualified in its entirety by reference to such exhibits.

~~Table of Contents~~ 30

. Table of Contents

34Item 6. Exhibits.

Table of Contents

Exhibit No.		Description

3.1		Certificate of Incorporation of Athersys, Inc., as amended as of June 20, 2013 (incorporated herein by reference to Exhibit 3.1 to the registrant’s Quarterly Report on Form 10-Q (Commission No. 001-33876) filed with the Commission on May 8, 2019).

3.2		Certificate of Amendment to Certificate of Incorporation of Athersys, Inc., as amended as of June 7, 2017 (incorporated herein by reference to Exhibit 3.1 to the registrant’s Quarterly Report on Form 10-Q (Commission No. 001-33876) filed with the Commission on August 9, 2017).

3.3		Bylaws of Athersys, Inc., as amended and restated as of March 13, 2019 (incorporated herein by reference to Exhibit 3.1 to the registrant’s Quarterly Report on Form 10-Q (Commission No. 001-33876) filed with the Commission on May 8, 2019).

3.4		Certificate of Amendment to Certificate of Incorporation of Athersys, Inc., as amended, effective as of June 16, 2021 (incorporated herein by reference to Exhibit 3.3 to the registrant’s Registration Statement on Form S-3 (Commission No. 333-257409) filed with the Commission on June 25, 2021).

3.5		Certificate of Amendment to Certificate of Incorporation of Athersys, Inc., as amended, effective as of August 26, 2022 (incorporated herein by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K (Commission No. 001-33876) filed with the Commission on August 29, 2022).

4.1		Form of Series A Common Stock Purchase Warrant (incorporated herein by reference to Exhibit 4.1 to the registrant’s Current Report on Form 8-K (Commission No. 001-33876) filed with the Commission on October 12, 2023).

4.2		Form of Common Stock Purchase Warrant (incorporated herein by reference to Exhibit 4.1 to the registrant’s Current Report on Form 8-K (Commission No. 001-33876) filed with the Commission on October 30, 2023).

4.3		Form of Warrant Amendment (incorporated herein by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K (Commission No. 001-33876) filed with the Commission on October 30, 2023).

10.1		Forbearance, Restructuring and Settlement Agreement, dated as of May 17, 2023, between Athersys, Inc., certain subsidiaries of Athersys, Inc., and Lonza (incorporated herein by reference to Exhibit 10.2 to the registrant’s Quarterly Report on Form 10-Q (Commission No. 001-33876) filed with the Commission on August 16, 2023).

10.2		Athersys, Inc. 2019 Equity and Incentive Compensation Plan, as amended and restated (incorporated herein by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K (Commission No. 001-33876) filed with the Commission on October 2, 2023).

10.3*		Memorandum of Understanding, dated October 10, 2023, by and between ABT Holding Company and HEALIOS K.K.

10.4*		Fifth Amendment to License Agreement, dated October 10, 2023, by and between ABT Holding Company and HEALIOS K.K.

10.5*		Assignment Agreement, dated October 10, 2023, by and between ABT Holding Company and HEALIOS K.K.

31.1*		Certification of Daniel Camardo, 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 Kasey Rosado, interim 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 Daniel Camardo, Chief Executive Officer, and Kasey Rosado, interim Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101		The following materials from Athersys’ Quarterly Report on Form 10-Q for the period ended September 30, 2023, are formatted in Inline XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Operations and Comprehensive Loss; (iii) the Condensed Consolidated Statements of Stockholders’ Equity; (iv) the Condensed Consolidated Statements of Cash Flows; (v) Notes to Unaudited Condensed Consolidated Financial Statements; and (vi) document and entity information.

104		Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101).

Exhibit No.

Description

3.1

Certificate of Incorporation of Athersys, Inc., as amended as of June 20, 2013 (incorporated herein by reference to Exhibit 3.1 to the registrant’s Quarterly Report on Form 10-Q (Commission No. 001-33876) filed with the Commission on May 8, 2019).

3.2

Certificate of Amendment to Certificate of Incorporation of Athersys, Inc., as amended as of June 7, 2017 (incorporated herein by reference to Exhibit 3.1 to the registrant’s Quarterly Report on Form 10-Q (Commission No. 001-33876) filed with the Commission on August 9, 2017).

3.3

Bylaws of Athersys, Inc., as amended and restated as of March 13, 2019 (incorporated herein by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K (Commission No. 001-33876) filed with the Commission on March 14, 2019).

3.4

Certificate of Amendment to Certificate of Incorporation of Athersys, Inc., as amended, effective as of June 16, 2021 (incorporated herein by reference to Exhibit 3.3 to the registrant’s Registration Statement on Form S-3 (Commission No. 333-257409) filed with the Commission on June 25, 2021).

3.5

Certificate of Amendment to Certificate of Incorporation of Athersys, Inc., as amended, effective as of August 26, 2022 (incorporated herein by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K (Commission No. 001-33876) filed with the Commission on August 29, 2022).

4.1

Form of Pre-Funded Warrant (incorporated herein by reference to Exhibit 4.1 to the registrant’s Current Report on Form 8-K (Commission No. 001-33876) filed with the Commission on April 18, 2023).

4.2

Form of Warrant (incorporated herein by reference to Exhibit 4.2 to the registrant’s Current Report on Form 8-K (Commission No. 001-33876) filed with the Commission on April 18, 2023).

4.3

Form of Warrant Amendment No. 1 to Common Stock Purchase Warrant(incorporate herein by reference to Exhibit 4.3 to the registrant’s Current Report on Form 8-K (Commission No. 001-33876) filed with the Commission on April 18, 2023).

4.4

Form of Warrant Amendment No. 2 to Common Stock Purchase Warrant (incorporate herein by reference to Exhibit 4.4 to the registrant’s Current Report on Form 8-K (Commission No. 001-33876) filed with the Commission on April 18, 2023).

4.5

Form of Convertible Promissory Note, dated May 17, 2023 (incorporated herein by reference to Exhibit 4.1 to the registrant’s Current Report on Form 8-K (Commission No. 001-33876) filed with the Commission on May 23, 2023).

10.1

Form of Securities Purchase Agreement, dated as of April 18, 2023, between the Company and each purchaser named in the signature pages thereto (incorporated herein by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K (Commission No. 001-33876) filed with the Commission on April 18, 2023).

10.2*

Forbearance, Restructuring and Settlement Agreement, dated as of May 17, 2023, between Athersys, Inc., certain subsidiaries of Athersys, Inc., and Lonza

31.1*

Certification of Daniel Camardo,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 Kasey Rosado, interim 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 Daniel Camardo, Chief Executive Officer, and Kasey Rosado, interim Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.1

Placement Agency Agreement, dated as of April 18, 2023, between the Company and A.G.P./Alliance Global Partners (incorporated herein by reference to Exhibit 99.1 to the registrant’s Current Report on Form 8-K (Commission No. 001-33876) filed with the Commission on April 18, 2023).

101

The following materials from Athersys’ Quarterly Report on Form 10-Q for the period ended June 30, 2023, are formatted in Inline XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Operations and Comprehensive Loss; (iii) the Condensed Consolidated Statements of Stockholders’ Equity; (iv) the Condensed Consolidated Statements of Cash Flows; (v) Notes to Unaudited Condensed Consolidated Financial Statements; and (vi) document and entity information.

104

Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101).

*	Filed herewith

35** The certification attached as Exhibit 32.1 accompanying this quarterly report on Form 10-Q pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, shall not be deemed “filed” by the registrant for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

* Filed herewith 31

** Table of Contents

The certification attached as Exhibit 32.1 accompanying this quarterly report on Form 10-Q pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, shall not be deemed “filed” by the registrant for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.SIGNATURES

~~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.

~~Pursuant to the requirements of the Securities Exchange Act of 1934~~ATHERSYS, ~~the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized~~INC.

ATHERSYS, INC.

Date: November 16, 2023		/s/ Daniel Camardo
		Daniel Camardo
		Chief Executive Officer and Duly Authorized Officer

Date: August 16, 2023						/s/ Daniel Camardo
						Daniel Camardo
						Chief Executive Officer and Duly Authorized Officer
Date: August 16, 2023						/s/ Kasey Rosado
						Kasey Rosado
						Interim Chief Financial Officer

Filing Compare · ATHERSYS, INC / NEW