10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2013

OR

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

For the transition period from                      to                     .

Commission file number: 001-33876

Athersys, Inc.

(Exact name of registrant as specified in its charter)

Delaware	20-4864095
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
3201 Carnegie Avenue, Cleveland, Ohio	44115-2634
(Address of principal executive offices)	(Zip Code)

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

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes  x    No  ¨

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

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	x

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

The number of outstanding shares of the registrant’s common stock, $0.001 par value, as of August 1, 2013 was 57,024,430.

ATHERSYS, INC.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements	1
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	9
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk	17
ITEM 4. Controls and Procedures	18
PART II. OTHER INFORMATION
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds	19
ITEM 6. Exhibits	19
SIGNATURES	20
EXHIBIT INDEX	21

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

Athersys, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)

	June 30,			December 31,
	2013			2012
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	18,897		$	25,533
Accounts receivable		576			490
Prepaid expenses and other		328			286
Total current assets		19,801			26,309
Equipment, net		1,396			1,294
Total assets	$	21,197		$	27,603
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	2,818		$	1,767
Accrued compensation and related benefits		577			827
Accrued clinical trial costs		286			950
Accrued expenses		824			934
Deferred revenue		51			—
Total current liabilities		4,556			4,478
Note payable		172			169
Warrant liabilities		4,704			2,709
Stockholders’ equity:
Preferred stock, at stated value; 10,000,000 shares authorized, and no shares issued and outstanding at June 30, 2013 and December 31, 2012		—			—
Common stock, $0.001 par value; 150,000,000 and 100,000,000 shares authorized at June 30, 2013 and December 31, 2012, respectively, and 56,812,375 and 53,058,632 shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively		57			53
Additional paid-in capital		260,737			253,889
Accumulated deficit		(249,029	)		(233,695	)
Total stockholders’ equity		11,765			20,247
Total liabilities and stockholders’ equity	$	21,197		$	27,603

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 share and per share data)

(Unaudited)

	Three months ended June 30,						Six months ended June 30,
	2013			2012			2013			2012
Revenues
Contract revenue	$	194		$	2,270		$	278		$	4,733
Grant revenue		377			387			619			671
Total revenues		571			2,657			897			5,404
Costs and expenses
Research and development		5,107			5,027			10,683			10,596
General and administrative		1,555			1,162			3,062			2,421
Depreciation		86			80			171			155
Total costs and expenses		6,748			6,269			13,916			13,172
Loss from operations		(6,177	)		(3,612	)		(13,019	)		(7,768	)
Other income (expense), net		15			(5	)		32			(760	)
Income (expense) from change in fair value of warrants		216			(96	)		(2,347	)		479
Net loss	$	(5,946	)	$	(3,713	)	$	(15,334	)	$	(8,049	)
Basic and diluted net loss per share	$	(0.11	)	$	(0.13	)	$	(0.28	)	$	(0.29	)
Weighted average shares outstanding, basic and diluted		56,028,461			29,405,986			54,744,254			27,476,603
Items included in other comprehensive loss:
Proportional share of comprehensive loss of equity-method investment		—			—			—			(28	)
Comprehensive loss	$	(5,946	)	$	(3,713	)	$	(15,334	)	$	(8,077	)

See accompanying notes to unaudited condensed consolidated financial statements.

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Athersys, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Six months ended June 30,
	2013			2012
Operating activities
Net loss	$	(15,334	)	$	(8,049	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		171			155
Gain on sale of investment		—			(184	)
Stock-based compensation		313			269
Issuance of common stock to former lenders		—			714
Change in fair value of warrant liabilities		2,347			(479	)
Changes in operating assets and liabilities:
Accounts receivable		(86	)		(15	)
Prepaid expenses and other assets		(41	)		453
Accounts payable and accrued expenses		30			(132	)
Deferred revenue		51			(3,140	)
Net cash used in operating activities		(12,549	)		(10,408	)
Investing activities
Maturities of available-for-sale securities		—			4,237
Purchases of equipment		(273	)		(237	)
Net cash (used in) provided by investing activities		(273	)		4,000
Financing activities
Proceeds from issuance of common stock, net		5,834			8,430
Proceeds from exercise of warrants		352			—
Proceeds from note payable		—			50
Net cash provided by financing activities		6,186			8,480
(Decrease) increase in cash and cash equivalents		(6,636	)		2,072
Cash and cash equivalents at beginning of the period		25,533			8,785
Cash and cash equivalents at end of the period	$	18,897		$	10,857

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-Month Periods Ended June 30, 2013 and 2012

1. Background and Basis of Presentation

We are an international biotechnology company that is focused primarily on the field of regenerative medicine and operate in one business segment. Our operations consist primarily of research and product development activities.

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, 2012. The accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and Article 10 of Regulation S-X. Accordingly, since they are interim statements, the accompanying financial statements do not include all of the information and notes required by GAAP for complete financial statements. The accompanying financial statements reflect all adjustments, consisting of normal recurring adjustments, that are, in the opinion of management, necessary for a fair presentation of financial position and results of operations for the interim periods presented. Interim results are not necessarily indicative of results for a full year.

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 below in this Quarterly Report on Form 10-Q.

Certain prior year amounts have been reclassified to conform with current year presentations.

2. Net Loss per Share

Basic and diluted net loss per share have been computed using the weighted-average number of shares of common stock outstanding during the period. The table below reconciles the net loss and the number of shares used to calculate basic and diluted net loss per share for the three months ended June 30, 2013, in thousands.

	Three months ended June  30,						Six months ended June 30,
	2013			2012			2013			2012
Numerator – Diluted:
Net loss		(5,946	)		(3,713	)		(15,334	)		(8,049	)
Less: income from change in fair value of warrants		(164	)		—			—			—
Net loss used to calculate diluted net loss per share		(6,110	)		(3,713	)		(15,334	)		(8,049	)
Denominator – Diluted:
Weighted-average shares outstanding		56,028			29,406			54,744			27,477
Potentially dilutive common shares outstanding:
Warrants		1,813			—			—			—
Weighted-average shares used to calculate diluted net loss per share		57,841			29,406			54,744			27,477

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We have outstanding options, restricted stock units and warrants that are not used in the calculation of diluted net loss per share because to do so would be antidilutive. The following instruments were excluded from the calculation of diluted net loss per share because their effects would be antidilutive:

	Three months ended June 30,				Six months ended June 30,
	2013		2012		2013		2012
Stock options		5,133,518		4,213,501		5,133,518		4,213,501
Restricted stock units		2,910,093		86,197		2,910,093		86,197
Warrants		1,459,026		5,806,853		5,459,027		5,806,853
Total		9,502,637		10,106,551		13,502,638		10,106,551

3. Fair Value of Financial Instruments

Fair Value Measurements

We classify the inputs used to measure fair value into the following hierarchy:

Level 1	Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2	Adjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or significant inputs other than quoted prices that are observable for the asset or liability.
Level 3	Unobservable inputs for the asset or liability.

The following table provides a summary of the fair values of our assets and liabilities measured at fair value on a recurring basis as of June 30, 2013 (in thousands):

			Fair Value Measurements at June 30, 2013 Using
			Quoted Prices in Active		Significant Other
	Balance as of		Markets for Identical		Observable Inputs		Significant Unobservable
Description	June 30, 2013		Assets (Level 1)		(Level 2)		Inputs (Level 3)
Warrant liabilities	$	4,704	$	—	$	—	$	4,704

We review and reassess the fair value hierarchy classifications on a quarterly basis. Changes from one quarter to the next related to the observability of inputs in a fair value measurement may result in a reclassification between fair value hierarchy levels. There were no reclassifications for all periods presented.

The estimated fair value of warrants accounted for as liabilities, representing a level 3 fair value measure, was determined on the issuance date and subsequently marked to market at each financial reporting date. The fair value of the warrants is estimated using a Black-Scholes pricing model using the expected volatility based on the historical volatilities of comparable companies from a representative peer group selected based on industry and market capitalization. The fair value of the warrants issued in March 2012 is determined using probability weighted-average assumptions that give consideration to the exercise price repricing feature that is dependent upon the consummation of future qualified offerings, as defined, and requisite stockholder approval. The following inputs were used at June 30, 2013:

	Warrants Issued			Warrants Issued
	February 2011			March 2012
Expected volatility		71.4	%		70.9	%
Risk-free interest rate		0.66	%		0.66	%
Expected life (in years)		2.59			3.70
Fair value at June 30, 2013 (in thousands)	$	524		$	4,180

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A rollforward of fair value measurements using significant unobservable inputs (Level 3) for the warrants is as follows (in thousands):

	Three months ended				Six months ended
	June 30, 2013				June 30, 2013
				Balance January 1, 2013	$	2,709
Balance April 1, 2013	$	5,272
Exercise of warrants		(352	)	Exercise of warrants		(352	)
(Gain) loss included in income from change in fair value of warrants for the period		(216	)	Loss (gain) included in expense from change in fair value of warrants for the period		2,347
Balance June 30, 2013	$	4,704		Balance June 30, 2013	$	4,704

4. Collaborative Arrangements and Revenue Recognition

Pfizer

In 2009, we entered into a collaboration with Pfizer Inc. (“Pfizer”) to develop and commercialize our MultiStem^® product candidate to treat inflammatory bowel disease (“IBD”) for the worldwide market. Under the terms of the agreement, we received a non-refundable up-front payment from Pfizer and research funding and support through June 2012. In addition, we are eligible to receive milestone payments upon the successful achievement of certain development, regulatory and commercial milestones, for which we evaluated the nature of the events triggering these contingent payments and concluded that these events constituted substantive milestones that will be recognized as revenue in the period in which the underlying triggering event occurs. No significant milestone revenue has been recognized to date.

Pfizer pays us for manufacturing product for clinical development and commercialization purposes. Pfizer has responsibility for development, regulatory and commercialization and will pay us tiered royalties on worldwide commercial sales of MultiStem IBD products. Alternatively, in lieu of royalties and certain commercialization milestones, we may elect to co-develop with Pfizer and the parties will share development and commercialization expenses and profits/losses on an agreed basis beginning at Phase III clinical development.

We evaluated the facts and circumstances of the agreement and determined the Pfizer agreement had multiple deliverables that should be combined into a single unit of accounting. We recognized the license and technology access fee and research and development funding ratably on a straight-line basis over the estimated performance period, which was completed mid-2012, and measured manufacturing revenue beginning upon the culmination of the earnings process and recognized it over the performance period of the bundled unit of accounting.

RTI Biologics, Inc.

In 2010, we entered into an agreement with RTI Biologics, Inc. (“RTI”) to develop and commercialize biologic implants using our technology for certain orthopedic applications in the bone graft substitutes market. Under the terms of the agreement, we received a $5.0 million license fee in installments through December 2012.

We are also eligible to receive cash payments upon the successful achievement of certain commercial milestones. We evaluated the nature of the events triggering these contingent payments and concluded that these events are substantive and that revenue will be recognized in the period in which each underlying triggering event occurs. In addition, we will receive tiered royalties on worldwide commercial sales, if any, of implants using our technologies. No milestone or royalty revenue has been recognized to date.

5. Stock-based Compensation

Our equity incentive plans authorize an aggregate of 11,500,000 shares of common stock for awards to employees, directors and consultants, as amended in June 2013. These incentive plans authorize the issuance of equity-based compensation in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares and units, and other stock-based awards.

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As of June 30, 2013, a total of 3,438,958 shares were available for issuance under our equity incentive plans, and stock options and restricted stock units to purchase an aggregate of 8,043,611 shares of common stock were outstanding. In June 2013, we granted 1,077,928 stock options and 151,964 restricted stock units to our employees and directors pursuant to our annual incentive programs. In the three-month period ended June 30, 2013, we issued 7,612 shares of common stock related to restricted stock units that vested during the period.

In April 2013, our Board of Directors approved arrangements whereby our executive officers agreed to terminate prior incentive agreements in return for one-time grants of restricted stock units and for the ability to receive routine annual grants of equity-based awards. We had established the incentive agreements in 2005, prior to our common stock being publicly traded, in connection with restructuring our internal programs and as a retention and motivation tool, which provided our executives financial participation in the event of certain merger or acquisition or asset sale transactions. In June 2013, 2,700,000 restricted stock units that vest ratably on a quarterly basis over three years were granted to the executive officers in exchange for the termination of their incentive agreements. Also, our executive officers were awarded in June 2013 stock option grants as part of the routine annual awards.

For the three-month period ended June 30, 2013 and 2012, stock-based compensation expense was approximately $196,000 and $133,000, respectively. At June 30, 2013, total unrecognized estimated compensation cost related to unvested stock-based awards was approximately $6,723,000, which is expected to be recognized by the end of 2017 using the straight-line method.

6. Issuance of Common Stock and Warrants

In October 2012, we completed a public offering generating net proceeds of approximately $18.3 million through the issuance of 19,802,000 shares of common stock at a price of $1.01 per share. In November 2012, the underwriters exercised in full their right to purchase an additional 2,970,300 shares of common stock, solely to cover over-allotments. The exercise of the full over-allotment option generated an additional $2.8 million of net proceeds.

In March 2012, we completed a private placement financing generating net proceeds of approximately $8.1 million through the issuance of 4,347,827 shares of common stock and five-year warrants to purchase 4,347,827 shares of common stock with an exercise price of $2.07 per share. The securities were sold in multiples of a fixed combination of one share of common stock and a warrant to purchase one share of common stock at an offering price of $2.07 per fixed combination, and the warrants include price protection in the event we sell stock below the exercise price, as defined. As a result of the October 2012 public offering and in accordance with the terms of the warrants, we sought and obtained stockholder approval in February 2013 to reduce the exercise price of these warrants to $1.01 per share. In connection with this private placement, our former lenders were entitled to a milestone payment in the amount of $900,000, of which 75% was settled through the issuance of our common stock at $1.94 per share to the former lenders at our election.

In November 2011, we entered into an equity purchase agreement, which provides that Aspire Capital Fund, LLC (“Aspire Capital”) is committed to purchase up to an aggregate of $20.0 million of shares of our common stock over a two-year term, subject to our election to sell any such shares. Under the agreement, we have the right to sell shares, subject to certain volume limitations and a minimum floor price, at a modest discount to the prevailing market price. As part of the agreement, Aspire Capital made an initial investment of $1.0 million in us through the purchase of 666,667 shares of our common stock at $1.50 per share in 2011, and received 266,667 additional shares as compensation for its commitment. In 2012, we sold an additional 800,000 shares to Aspire Capital at an average price of $1.57 per share. During the quarter ended June 30, 2013, we sold 2,075,000 shares to Aspire Capital at an average price of $1.85 per share, and during the six-month period ended June 30, 2013, we sold 3,398,305 shares to Aspire Capital at an average price of $1.73 per share. From its inception through August 1, 2013, we have sold 5,064,972 shares and received aggregate gross proceeds of approximately $8.4 million under the equity purchase agreement.

As of June 30, 2013, we had the following outstanding warrants to purchase shares of common stock:

Number of Underlying  Shares		Exercise Price		Expiration
	149,026	$	5.00	June 8, 2014
	1,310,000	$	3.55	February 2, 2016
	4,000,001	$	1.01	March 14, 2017
	5,459,027

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7. Warrant Liabilities

We account for common stock warrants as either liabilities or as equity instruments depending on the specific terms of the warrant agreement. Registered common stock warrants that could require cash settlement are accounted for as liabilities. We classify these warrant liabilities on the consolidated balance sheet as a non-current liability, which is revalued at fair value at each balance sheet date subsequent to the initial issuance. We use the Black-Scholes valuation model to value the warrant liability at its fair value. Changes in the fair market value of the warrant are reflected in the consolidated statement of operations as income (expense) from change in fair value of warrants.

The warrants we issued in both the March 2012 private placement and the February 2011 registered direct offering each contain a provision for net cash settlement in the event that there is a fundamental transaction (e.g., merger, sale of substantially all assets, tender offer, or share exchange). If a fundamental transaction occurs in which the consideration issued consists of all cash or stock in a non-public company, then the warrant holder has the option to receive cash equal to a Black Scholes value of the remaining unexercised portion of the warrant. Further, the March 2012 warrants include price protection in the event we sell stock below the exercise price, as defined, and the exercise price was reduced in February 2013 to $1.01 per share as a result of the October 2012 public offering.

The warrants have been classified as liabilities, as opposed to equity, due to the potential cash settlement upon the occurrence of certain events as described above, and are recorded at their fair values at each balance sheet date. As of June 30, 2013, we have received proceeds of approximately $352,000 from the exercise of March 2012 warrants aggregating to 347,826 shares of common stock being issued.

8. Income Taxes

We have net operating loss and research and development tax credit carryforwards that may be used to reduce future taxable income and tax liabilities. Our deferred tax assets have been fully offset by a valuation allowance due to our cumulative losses. As a result of our most recent equity offerings, all of the net operating loss and credit carryforwards have been significantly limited for use under Section 382 of the Internal Revenue Code.

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

This discussion and analysis should be read in conjunction with our financial statements and notes thereto included in this Quarterly Report on Form 10-Q and the audited financial statement and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2012. Operating results are not necessarily indicative of results that may occur in future periods.

Overview and Recent Developments

We are an international biotechnology company that is focused primarily on the field of regenerative medicine. We have established a portfolio of therapeutic product development programs to address significant unmet medical needs in multiple disease areas. We are developing our lead platform product, MultiStem^®, a patented and proprietary allogeneic stem cell product that has been evaluated in two completed Phase I clinical trials and is currently being evaluated in two ongoing Phase II clinical trials. Our current clinical development programs are focused on treating inflammatory and immune disorders, neurological conditions, cardiovascular disease, and other conditions. We are also applying our pharmaceutical discovery capabilities to identify and develop small molecule compounds with potential applications in indications such as obesity, related metabolic conditions and certain neurological conditions. These represent major areas of clinical need, as well as substantial commercial opportunities.

Current Programs

By applying our proprietary MultiStem cell therapy product, we have established therapeutic product development programs treating inflammatory and immune disorders, neurological conditions, cardiovascular disease, and other conditions. To date, we have advanced five programs to the clinical development stage, including the following:

•  Inflammatory Bowel Disease: MultiStem is being evaluated in an ongoing Phase II clinical study involving administration of MultiStem to patients suffering from ulcerative colitis (“UC”), the most common form of IBD. This study is being conducted with our partner, Pfizer, in UC patients who have an inadequate response or are refractory to current treatment. It is a double blind, placebo controlled trial designed to include up to 126 patients and began enrolling in 2011. Enrollment is ongoing and initial results are expected in early 2014.

•  Ischemic Stroke: In an ongoing Phase II clinical study, we are evaluating the administration of MultiStem to patients who have suffered an ischemic stroke. In contrast to treatment with thrombolytics, which must be administered within 3 to 4 hours after a stroke, we are treating patients one to two days after the stroke has occurred. In preclinical studies, administration of a single dose of MultiStem, even several days after a stroke, resulted in significant and durable improvements. This double blind, placebo-controlled trial is being conducted at leading stroke centers across the United States and may include sites in Europe. The study is expected to enroll approximately 136 patients. We completed the first patient cohorts, and the independent safety monitoring committee found in 2012 that MultiStem was safe and well tolerated at both of the doses evaluated. Patient enrollment is ongoing and for the remainder of the trial, patients are being randomized to receive either high dose MultiStem or placebo. We anticipate having initial results for the study in the first half of 2014.

•  Acute Myocardial Infarction: We have evaluated the administration of MultiStem in a Phase I clinical study to patients who have suffered an acute myocardial infarction (“AMI”). In 2010, we announced preliminary results for this study, demonstrating a favorable safety profile and encouraging signs of improvement in heart function among patients that exhibited severely compromised heart function prior to treatment. This data was published in a leading peer reviewed scientific journal in 2012. One-year follow-up data suggested that the benefit observed was sustained over time. We have completed preliminary planning for a Phase II trial and plan to initiate a trial in 2014 with funding of up to $2.8 million from a federal grant in support of the study.

•  Hematopoietic Stem Cell Transplant / GvHD: We completed a Phase I clinical study of the administration of MultiStem to patients suffering from leukemia or certain other blood-borne cancers in which patients undergo radiation therapy and then receive a hematopoietic stem cell (“HSC”) transplant. Such patients are at significant risk for serious complications, including graft-versus-host disease (“GvHD”), an imbalance of immune system function caused by transplanted immune cells that attack various tissues and organs in the patient. In 2011 and in 2012, we released data from the study, which demonstrated the safety of MultiStem in this indication and suggested that MultiStem may have a beneficial effect in reducing the incidence and severity of GvHD, as well as providing other benefits. This program has been assigned orphan drug designation from the FDA, which provides us with seven years of market exclusivity upon approval and certain other benefits. We have met with the FDA and received feedback regarding our proposed plans for the next phase of clinical development in this area, and are finalizing the study design. Based on current plans, we are preparing to be ready to start this study in 2014, but the initiation will depend on the progress in our other clinical trials and the achievement of certain business development and financial objectives.

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We are also collaborating with a leading transplant group at the University of Regensburg in Germany that has recently obtained authorization to initiate an institutional sponsored clinical trial exploring the administration of MultiStem in patients following a liver transplant. We plan to provide some financial support for this investigator-sponsored Phase I study and provide the product to conduct the trial.

In addition to our current and anticipated clinical development activities, we are engaged in preclinical development and evaluation of MultiStem in other inflammatory and immune, neurological and cardiovascular disease areas, as well as certain other indications. We conduct such work both through our own internal research efforts and through a broad network of collaborations we have established with investigators at leading research institutions across the United States and in Europe.

We are in discussions with third parties about collaborating in the development of MultiStem for certain programs and may enter into one or more business partnerships to advance these programs.

We have also collaborated with RTI on the development of products for certain orthopedic applications in the bone graft substitutes market using our stem cell technologies, and have received $5.0 million in license fees. We will also receive royalty revenue from product sales should they occur, as well as potential additional milestone payments.

We are also engaged in the development of novel small molecule therapies to treat obesity and other conditions, such as schizophrenia. Currently, we are focused on the development of potent, highly selective compounds that act through stimulation of a specific receptor in the brain, the 5HT2c serotonin receptor. We are conducting preclinical evaluation of novel compounds that we have developed that exhibit favorable attributes, including outstanding receptor selectivity, as well as greater potency and activity than other 5HT2c agonists. We have also demonstrated our compounds are complementary with other agents and believe these compounds could achieve best in class weight loss, as well as a superior safety and tolerability profile. Furthermore, we have evaluated certain compounds in preclinical models of schizophrenia that exhibit an attractive selectivity profile and also observed that these compounds exhibit potent effects. We may elect to enter into a partnership to advance the development of our 5HT2c agonist program, either for the treatment of obesity, schizophrenia, or both indications.

Financial

We have incurred losses since inception of operations in 1995 and had an accumulated deficit of $249 million at June 30, 2013. Our losses have resulted principally from costs incurred in research and development, clinical and preclinical product development, acquisition and licensing costs, and general and administrative costs associated with our operations. We have used the financing proceeds from equity and debt offerings and other sources of capital to develop our technologies, to discover and develop therapeutic product candidates, to develop business collaborations and to acquire certain technologies and assets.

In August 2013, we were awarded a federal grant that is expected to provide up to $2.8 million in support for a Phase II clinical study evaluating the administration of MultiStem to patients who have suffered an AMI.

As of June 30, 2013, we have received proceeds of approximately $352,000 from the exercise of March 2012 warrants aggregating 347,826 shares of common stock.

In November 2011, we entered into an equity purchase agreement, which provides that Aspire Capital is committed to purchase up to an aggregate of $20.0 million of shares of our common stock over a two-year term, subject to our election to sell any such shares. Under the agreement, we have the right to sell shares, subject to certain volume limitations and a minimum floor price, at a modest discount to the prevailing market price. As part of the agreement, Aspire Capital made an initial investment of $1.0 million in us through the purchase of 666,667 shares of our common stock at $1.50 per share in 2011, and received 266,667 additional shares as compensation for its commitment. In 2012, we sold an additional 800,000 shares to Aspire Capital at an average price of $1.57 per share. During the quarter ended June 30, 2013, we sold 2,075,000 shares to Aspire Capital at an average price of $1.85 per share, and during the six-month period ended June 30, 2013, we sold 3,398,305 shares to Aspire Capital at an average price of $1.73 per share. From its inception through August 1, 2013, we have issued 5,064,972 shares and received aggregate gross proceeds of approximately $8.4 million under the equity purchase agreement.

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Results of Operations

Since our inception, our revenues have consisted of license fees, contract revenues and milestone payments from our collaborators, and grant proceeds primarily from federal, state and foundation grants. We have derived no revenue from the commercial sale of therapeutic products to date. Research and development expenses consist primarily of external clinical and preclinical study fees, manufacturing costs, salaries and related personnel costs, legal expenses resulting from intellectual property prosecution processes, facility costs, and laboratory supply and reagent costs. We expense research and development costs as they are incurred. We expect to continue to make significant investments in research and development to enhance our technologies, advance clinical trials of our product candidates, expand our regulatory affairs and product development capabilities, conduct preclinical studies of our product and manufacture our product candidates. General and administrative expenses consist primarily of salaries and related personnel costs, professional fees and other corporate expenses. We expect to continue to incur substantial losses through at least the next several years.

The following tables set forth our revenues and expenses for the periods indicated and amounts are stated in thousands.

Revenues

	Three months ended June 30,				Six months ended June 30,
	2013		2012		2013		2012
Contract revenue	$	194	$	2,270	$	278	$	4,733
Grant revenue		377		387		619		671
	$	571	$	2,657	$	897	$	5,404

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Research and development expenses

	Three months ended				Six months ended
	June 30,				June 30,
Type of expense	2013		2012		2013		2012
Personnel costs	$	1,440	$	1,280	$	2,751	$	2,623
Research supplies		268		334		815		732
Facilities		273		231		547		486
Clinical and preclinical development costs		2,090		2,235		4,547		4,775
Sponsored research		173		327		450		624
Patent legal fees		485		292		903		681
Other		298		294		550		599
Stock-based compensation		80		34		120		76
	$	5,107	$	5,027	$	10,683	$	10,596

General and administrative expenses

	Three months ended				Six months ended
	June 30,				June 30,
Type of expense	2013		2012		2013		2012
Personnel costs	$	575	$	517	$	1,151	$	1,057
Facilities		63		75		123		141
Legal and professional fees		264		192		677		479
Other		536		279		918		551
Stock-based compensation		117		99		193		193
	$	1,555	$	1,162	$	3,062	$	2,421

Three Months Ended June 30, 2013 and 2012

Revenues. Revenues decreased to $0.6 million for the three months ended June 30, 2013 from $2.7 million in the comparable period in 2012, reflecting a $2.0 million decrease in our Pfizer contract revenues. Our 2012 contract revenues included the amortization of Pfizer payments, including a $6.0 million non-refundable up-front license fee, research and development funding, and payments for manufacturing services over the estimated performance period that ended in June 2012. Absent any new collaborations, we expect our contract revenues to continue in 2013 at a reduced level from 2012, and to be comprised of reimbursements from Pfizer for outsourced central processing costs for the clinical product, potential RTI royalty payments, and potential license and milestone payments from Bristol-Myers Squibb. Grant revenue remained consistent at $0.4 million for the three months ended June 30, 2013 and 2012. Our grant revenues may fluctuate from period to period based on the timing of grant-related activities and the award of new grants, such as the federal grant that was awarded in August 2013 in support of our AMI program.

Research and Development Expenses. Research and development expenses increased to $5.1 million for the three months ended June 30, 2013 from $5.0 million in the comparable period in 2012. The increase related primarily to an increase in patent legal fees of $193,000 and an increase in personnel costs of $160,000 for the quarter ended June 30, 2013 from the comparable 2012 period. These increases were partially offset by a decrease in clinical and preclinical development costs of $145,000 and a decrease in sponsored research costs of $154,000 during the period. The increase in patent legal costs resulted from increased patent prosecution costs during the period. The increase in personnel costs related to the addition over the past twelve months of personnel supporting our preclinical and clinical programs and annual merit increases in salaries. The decrease in clinical and preclinical development costs for the three months ended June 30, 2013 related to costs associated with our MultiStem clinical trials, including contract research organization costs and clinical manufacturing costs. Sponsored research costs decreased primarily due to a decrease in grant-funded programs that require collaboration with certain academic research institutions. Our annual research and development expenses are not expected to increase significantly through 2013 as compared to 2012 unless we receive proceeds from additional financing or business development activities to fund advancement of additional clinical programs. Other than external expenses for our clinical and preclinical programs, we do not track our research expenses by project; rather, we track such expenses by the type of cost incurred.

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General and Administrative Expenses. General and administrative expenses increased to $1.6 million for the three months ended June 30, 2013 from $1.2 million in the comparable period in 2012. The $0.4 million increase was due primarily to an increase in other general and administrative costs of $257,000 related to advisory and other external service providers, an increase of $72,000 in legal and professional fees, and an increase in personnel costs of $58,000 for the three months ended June 30, 2013 from the comparable period in 2012. We expect our general and administrative expenses to continue at similar levels as 2012 for the remainder of 2013.

Depreciation. Depreciation expense increased to $86,000 for the three months ended June 30, 2013 from $80,000 in the comparable period in 2012 due to depreciation on new capital purchases.

Other Income (Expense), net. Other income (expense), net, for the three month period ended June 30, 2013 and 2012 was income of $15,000 and expense of $5,000, respectively, representing a combination of interest income and expense, foreign currency gains and losses, and any realized gains and losses on the sale of our assets.

Income (Expense) from Change in Fair Value of Warrants. Income of $216,000 was recognized during the three months ended June 30, 2013 for the market value change in our warrant liabilities, and expense of $96,000 was recognized during the three months ended June 30, 2012.

Six Months Ended June 30, 2013 and 2012

Revenues. Revenues decreased to $0.9 million for the six months ended June 30, 2013 from $5.4 million in the comparable period in 2012, reflecting, in part, a $3.9 million decrease in our Pfizer contract revenues. Our 2012 contract revenues included the amortization of Pfizer payments, including a $6.0 million non-refundable up-front license fee, research and development funding, and payments for manufacturing services over the estimated performance period that ended in June 2012. Absent any new collaboration, we expect our contract revenues to continue in 2013 at a reduced level from 2012, and to be comprised of reimbursements from Pfizer for outsourced central processing costs for the clinical product, potential RTI royalty payments, and potential license and milestone payments from Bristol-Myers Squibb. Grant revenue remained relatively consistent during the six month periods ended June 30, 2013 and 2012. Our grant revenues may fluctuate from period to period based on the timing of grant-related activities and the award of new grants.

Research and Development Expenses. Research and development expenses increased to $10.7 million for the six months ended June 30, 2013 from $10.6 million in the comparable period in 2012. The increase of $87,000 related primarily to an increase in patent legal fees of $222,000, an increase in personnel costs of $128,000 and an increase in research supplies of $83,000 during the six months ended June 30, 2013 compared to the 2012 period. These increases were partially offset by a decrease in clinical and preclinical development costs of $228,000 and a decrease in sponsored research costs of $174,000. The increase in patent legal costs resulted from increased patent prosecution costs during the period. The increase in personnel costs related to the addition over the past twelve months of personnel supporting our preclinical and clinical programs and annual merit increases in salaries. The decrease in clinical and preclinical development costs for the six months ended June 30, 2013 related primarily to costs associated with our MultiStem clinical trials, including contract research organization costs and clinical manufacturing costs. Sponsored research costs decreased primarily due to a decrease in grant-funded programs that require collaboration with certain academic research institutions. Our annual research and development expenses are not expected to increase significantly through 2013 as compared to 2012 unless we receive proceeds from additional financing or business development activities to fund advancement of additional clinical programs. Other than external expenses for our clinical and preclinical programs, we do not track our research expenses by project; rather, we track such expenses by the type of cost incurred.

General and Administrative Expenses. General and administrative expenses increased to $3.1 million for the six months ended June 30, 2013 from $2.4 million in the comparable period in 2012. The $0.7 million increase was due primarily to an increase in other general and administrative costs of $367,000 related to advisory and other external service providers, an increase in legal and professional fees of $198,000 and an increase of $94,000 in personnel costs for the six months ended June 30, 2013 from the comparable period in 2012. We expect our general and administrative expenses to continue at similar levels as 2012 for the remainder of 2013.

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Depreciation. Depreciation expense increased to $171,000 for the six months ended June 30, 2013 from $155,000 in the comparable period in 2012 due to depreciation on new capital purchases.

Other Income (Expense), net. Other income (expense), net, includes interest income and expense, foreign currency gains and losses, realized gains and losses on the sale of our assets, and cash and stock-based milestone payments (which aggregated $952,000 in the six month period ended June 30, 2012) paid to our former lenders in connection with our equity offerings. Also, in the six-month period ended June 30, 2012, we recognized a gain of $183,000 related to an equity-method investment that was liquidated in the period.

Income (Expense) from Change in Fair Value of Warrants. Expense of $2.3 million was recognized during the six months ended June 30, 2013 for the market value change in our warrant liabilities, and income of $479,000 was recognized during the six months ended June 30, 2012.

Liquidity and Capital Resources

Our sources of liquidity include our cash balances and any available-for-sale securities on hand. At June 30, 2013, we had $18.9 million in cash and cash equivalents and no available-for-sale securities. We have primarily financed our operations through business collaborations, grant funding and equity financings. We conduct all of our operations through our subsidiary, ABT Holding Company. Consequently, our ability to fund our operations depends on ABT Holding Company’s financial condition and its ability to make dividend payments or other cash distributions to us. There are no restrictions such as government regulations or material contractual arrangements that restrict the ability of ABT Holding Company to make dividend and other payments to us.

In October 2012, we completed a public offering generating net proceeds of approximately $18.3 million through the issuance of 19,802,000 shares of common stock at a price of $1.01 per share. In November 2012, the underwriters exercised in full their right to purchase an additional 2,970,300 shares of common stock, solely to cover over-allotments. The exercise of the full over-allotment option generated an additional $2.8 million of net proceeds.

In March 2012, we completed a private placement financing generating net proceeds of approximately $8.1 million through the issuance of 4,347,827 shares of common stock and five-year warrants to purchase 4,347,827 shares of common stock with an exercise price of $2.07 per share. The securities were sold in multiples of a fixed combination of one share of common stock and a warrant to purchase one share of common stock at an offering price of $2.07 per fixed combination. The warrants have anti-dilution price protection, subject to certain exceptions. As a result of the October 2012 public offering and in accordance with the terms of the warrants, we sought and obtained stockholder approval in February 2013 to reduce the exercise price of these warrants to $1.01 per share. As of June 30, 2013, we have received proceeds of approximately $352,000 from the exercise of March 2012 warrants aggregating 347,826 shares of common stock.

We entered into an equity purchase agreement in 2011, which provides that Aspire Capital is committed to purchase up to an aggregate of $20.0 million of shares of our common stock over a two-year term, subject to our election to sell any such shares. Under the agreement, we have the right to sell shares, subject to certain volume limitations and a minimum floor price, at a modest discount to the prevailing market price. As part of the agreement, Aspire Capital made an initial investment of $1.0 million in us through the purchase of 666,667 shares of our common stock at $1.50 per share in 2011, and received 266,667 additional shares as compensation for its commitment. In 2012, we sold an additional 800,000 shares to Aspire Capital at an average price of $1.57 per share. During the quarter ended June 30, 2013, we sold 2,075,000 shares to Aspire Capital at an average price of $1.85 per share, and during the six-month period ended June 30, 2013, we sold 3,398,305 shares to Aspire Capital at an average price of $1.73 per share. From its inception through August 1, 2013, we have issued 5,064,972 shares and received aggregate gross proceeds of approximately $8.4 million under the equity purchase agreement.

In connection with our equity offerings, our former lenders were entitled to milestone payments until the remaining balance of an original $2.25 million milestone was paid in cash and stock. We made cash and stock-based milestone payments of $1.3 million to our former lenders during the year ended December 31, 2012, which settled the final balance of this contingent obligation, paying 75% of the milestone through the issuance of our common stock. The former lenders also received in 2007 seven-year warrants to purchase 149,026 shares of common stock with an exercise price of $5.00. The exercise of such warrants could provide us with cash proceeds. None of these warrants were exercised as of June 30, 2013.

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Under the terms of our agreement with Pfizer, we are eligible to receive milestone payments of up to $105 million upon the successful achievement of certain development, regulatory and commercial milestones, though there can be no assurance that we will achieve any milestones. No significant milestone payments have been received as of June 30, 2013. Pfizer pays us for manufacturing product for clinical development and commercialization purposes. Pfizer has responsibility for development, regulatory and commercialization and will pay us tiered royalties on worldwide commercial sales of MultiStem IBD products. Alternatively, in lieu of royalties and certain commercialization milestones, we may elect to co-develop with Pfizer and the parties will share development and commercialization expenses and profits/losses on an agreed basis beginning at Phase III clinical development.

Under the terms of our RTI agreement, we are eligible to receive cash payments upon the successful achievement of certain commercial milestones, though there can be no assurance that such milestones will be achieved, and no milestone payments have been received as of June 30, 2013. In addition, we will receive tiered royalties on any worldwide commercial sales of implants using our technologies.

We remain entitled to receive license fees for targets that were delivered to Bristol-Myers Squibb under our completed 2001 collaboration, as well as milestone payments and royalties on compounds developed by Bristol-Myers Squibb using our technology, though there can be no assurance that we will achieve any such milestones or royalties.

In April 2012, we entered into an arrangement with the Global Cardiovascular Innovation Center and the Cleveland Clinic Foundation in which we are entitled to proceeds of up to $500,000 in the form of a forgivable loan to fund certain remaining preclinical work using MultiStem to treat congestive heart failure and for preparing the program for an investigational new drug application, or IND, with the FDA. Interest on the loan accrues at a fixed rate of 4.25% per annum, and is added to the outstanding principal. The loan will be forgiven based on the achievement of a certain milestone, unrelated to the preclinical work, within three to four years. As of June 30, 2013, we had drawn $166,000 of this financing.

We will require substantial additional funding in order to continue our research and product development programs, including preclinical evaluation and clinical trials of our product candidates. At June 30, 2013, we had available cash and cash equivalents of $18.9 million. As a result, we intend to meet our short-term liquidity needs with available cash. Over the longer term, we will make use of available cash, but will have to generate additional funding to meet our needs. We are actively exploring business development opportunities for certain of our MultiStem programs and our small molecule 5HT2c program, as well as grant-funding opportunities. Additionally, we are raising capital from time to time through the equity purchase agreement with Aspire Capital, subject to its volume and price limitations. We also manage our cash by deferring certain discretionary costs and staging certain development costs to extend our operational runway, as needed. Over time, we may consider the sale of additional equity securities, or possibly borrowing from financing institutions.

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

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

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Cash Flow Analysis

Net cash used in operating activities was $12.5 million for the six months ended June 30, 2013 and $10.4 million for the six months ended June 30, 2012, representing the use of cash to fund operations, clinical trials, and preclinical and process development activities. Net cash used in operating activities has fluctuated significantly over the past several quarters primarily due to the decline in contract revenues and the timing of the payment of clinical trial and process development costs. Our collaboration with Pfizer provided revenues over a performance period that ended in June 2012. We anticipate that net cash used in operating activities will continue at similar levels for the remaining quarters of 2013.

Net cash used in investing activities was $0.3 million for the six months ended June 30, 2013, and net cash provided by investing activities was $4.0 million for the six months ended June 30, 2012. The fluctuations from period to period were due primarily to the maturity dates of investments. Purchases of equipment were $273,000 and $237,000 for the six month periods ended June 30, 2013 and 2012, respectively. We anticipate that our overall capital equipment expenditures will be similar in 2013 compared to 2012.

Net cash provided from financing activities was $6.2 million for the six months ended June 30, 2013 and $8.5 million for the six months ended June 30, 2012 primarily as a result of our equity offerings during each of those periods and the use of the Aspire Capital equity purchase agreement.

Investors in our March 2012 private placement received five-year warrants to purchase an aggregate of 4,347,827 shares of common stock with an exercise price of $1.01 per share, as adjusted, and investors in our February 2011 registered direct offering received five-year warrants to purchase an aggregate of 1,310,000 shares of common stock with an exercise price of $3.55 per share. The exercise of such warrants could provide us with cash proceeds. As of June 30, 2013, we have received proceeds of approximately $352,000 from the exercise of March 2012 warrants aggregating in the issuance of 347,826 shares of common stock.

We have no off-balance sheet arrangements.

Critical Accounting Policies and Management Estimates

The SEC defines critical accounting policies as those that are, in management’s view, important to the portrayal of our financial condition and results of operations and demanding of management’s judgment. Our discussion and analysis of financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP. The preparation of these financial statements requires us to make estimates on experience and on various assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from those estimates. A description of these accounting policies and estimates is included in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2012. There have been no material changes in our accounting policies and estimates as described in our Annual Report. For additional information regarding our accounting policies, see Note B to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2012.

Cautionary Note on Forward-Looking Statements

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

In addition, a number of known and unknown risks, uncertainties, and other factors could affect the accuracy of these statements. Some of the more significant known risks that we face are the risks and uncertainties inherent in the process of discovering, developing, and commercializing products that are safe and effective for use as human therapeutics, including the uncertainty regarding market acceptance of our product candidates and our ability to generate revenues. These risks 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.

16

Other important factors to consider in evaluating our forward-looking statements include:

• uncertainty regarding market acceptance of our product candidates and our ability to generate revenues, including MultiStem for the treatment of IBD, AMI, stroke and other disease indications, and the prevention of GvHD;

• our ability to raise capital to fund our operations;

• final results from our MultiStem clinical trials;

• the possibility of delays in, adverse results of, and excessive costs of the development process;

• our ability to successfully initiate and complete clinical trials and obtain all necessary regulatory approvals to commercialize our product candidates;

• changes in external market factors;

• changes in our industry’s overall performance;

• changes in our business strategy;

• our ability to protect our intellectual property portfolio;

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

• our ability to meet milestones under our collaboration agreements;

• our collaborators’ ability to continue to fulfill their obligations under the terms of our collaboration agreement;

• 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; and

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

Although we currently believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee our future results, levels of activity or performance. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. You are advised, however, to consult any further disclosures we make on related subjects in our reports on Forms 10-Q, 8-K and 10-K furnished to the SEC. You should understand that it is not possible to predict or identify all risk factors. Consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Interest Rate Risk

Our exposure to interest rate risk is related to our investment portfolio and our borrowings. Fixed rate investments and borrowings may have their fair market value adversely impacted from changes in interest rates. Due in part to these factors, our future investment income may fall short of expectations. Further, we may suffer losses in investment principal if we are forced to sell securities that have declined in market value due to changes in interest rates. We invest our excess cash primarily in debt instruments of the United States government and its agencies and corporate debt securities, and as of June 30, 2013, we had no investments. When we invest, we have been investing conservatively due to the current economic conditions and have prioritized liquidity and the preservation of principal in lieu of potentially higher returns. As a result, we have experienced no losses on the principal of our investments.

We enter into loan arrangements with financial institutions when needed and when available to us. At June 30, 2013, we had no borrowings outstanding other than a $166,000 forgivable note payable associated with local grant funding bearing fixed, forgivable interest of 4.25% per annum.

17

Item 4. Controls and Procedures.

Disclosure controls and procedures

Our management, under the supervision of and with the participation of our Chief Executive Officer and our Vice President of Finance, has evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as of the end of the period covered by this quarterly report on Form 10-Q. Based upon this evaluation, our Chief Executive Officer and Vice President of Finance have concluded that, as of the end of the period covered by this quarterly report on Form 10-Q, our disclosure controls and procedures were effective.

Changes in internal control over financial reporting

During the second quarter of 2013, there has been no change in our internal control over financial reporting (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

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

During the quarter ended June 30, 2013, we sold an aggregate of 2,075,000 shares of common stock to Aspire Capital at an average purchase price of $1.85 per share. Each issuance of these unregistered shares qualifies as an exempt transaction pursuant to Section 4(2) of the Securities Act of 1933. Each issuance qualified for exemption under Section 4(2) of the Securities Act of 1933 because none involved a public offering. Each offering was not a public offering due to the number of persons involved, the manner of the issuance and the number of securities issued. In addition, in each case Aspire Capital had the necessary investment intent.

Item 6. Exhibits.

Exhibit No.	Description
3.1	Certificate of Incorporation of Athersys, Inc., as amended as of June 28, 2013
10.1	Athersys, Inc. Amended and Restated 2007 Long-Term Incentive Plan (Amended and Restated Effective June 18, 2013) (incorporated herein by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 18, 2013)
10.2	Form of Amendment No. 2 to Incentive Agreement by and between Advanced Biotherapeutics, Inc. and Athersys, Inc.’s named executive officers, and acknowledged by Athersys, Inc. and ReGenesys, LLC (incorporated herein by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 20, 2013)
10.3	Form of Restricted Stock Unit Agreement (incorporated herein by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 20, 2013)
31.1	Certification of Gil Van Bokkelen, Chairman and Chief Executive Officer, pursuant to SEC Rules 13a-14(a) and 15d-14(a) adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Laura K. Campbell, Vice President of Finance, pursuant to SEC Rules 13a-14(a) and 15d-14(a) adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Gil Van Bokkelen, Chairman and Chief Executive Officer, and Laura Campbell, Vice President of Finance, pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

19

SIGNATURES

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

	ATHERSYS, INC.
Date: August 13, 2013	/s/ Gil Van Bokkelen
	Gil Van Bokkelen
	Chairman and Chief Executive Officer
	(principal executive officer authorized to sign on behalf of the registrant)
	/s/ Laura K. Campbell
	Laura K. Campbell
	Vice President of Finance
	(principal financial and accounting officer authorized to sign on behalf of the registrant)

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EXHIBIT INDEX

Exhibit No.	Description
3.1	Certificate of Incorporation of Athersys, Inc., as amended as of June 28, 2013
10.1	Athersys, Inc. Amended and Restated 2007 Long-Term Incentive Plan (Amended and Restated Effective June 18, 2013) (incorporated herein by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 18, 2013)
10.2	Form of Amendment No. 2 to Incentive Agreement by and between Advanced Biotherapeutics, Inc. and Athersys, Inc.’s named executive officers, and acknowledged by Athersys, Inc. and ReGenesys, LLC (incorporated herein by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 20, 2013)
10.3	Form of Restricted Stock Unit Agreement (incorporated herein by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 20, 2013)
31.1	Certification of Gil Van Bokkelen, Chairman and Chief Executive Officer, pursuant to SEC Rules 13a-14(a) and 15d-14(a) adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Laura K. Campbell, Vice President of Finance, pursuant to SEC Rules 13a-14(a) and 15d-14(a) adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Gil Van Bokkelen, Chairman and Chief Executive Officer, and Laura Campbell, Vice President of Finance, pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

21

EX-3.1

EXHIBIT 3.1

State of Delaware

Secretary of State

Division of Corporations

Delivered 06:44 PM 06/07/2005

FILED 06:05 PM 06/07/2005

SRV 050476444 — 3981772 FILE

CERTIFICATE OF INCORPORATION

OF

BTHC VI, INC.

FIRST

The name of the Corporation is BTHC VI, Inc.

SECOND

The Corporation will have perpetual existence.

THIRD

The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the Delaware General Corporation Law.

FOURTH

Section 1. Authorization of Shares.

The aggregate number of shares of capital stock which the Corporation will have authority to issue is 50,000,000 shares, consisting of 40,000,000 shares of common stock, having a par value of $.001 per share (“Common Stock”), and 10,000,000 shares of preferred stock, having a par value of $.001 per share (“Preferred Stock”).

Section 2. Common Stock.

2.1 Dividends. The holders of shares of Common Stock shall be entitled to receive such dividends as from time to time may be declared by the Board of Directors of the Corporation, subject to any preferential payments to which the holders of shares of any series of Preferred Stock shall be entitled as may be stated and expressed pursuant to the resolution establishing any such series of Preferred Stock.

2.2 Liquidation. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, after payment shall have been made to any holders of shares of any series of Preferred Stock then outstanding of the full amounts of preferential payments to which they shall respectively be entitled as may be stated and expressed pursuant to the resolution establishing any such series of Preferred Stock, the holders of shares of Common Stock then outstanding shall be entitled to share ratably based upon the number of shares of Common Stock held by them in all remaining assets of the Corporation available for distribution to its shareholders.

2.3 Voting Rights. All shares of Common Stock shall be identical with each other in every respect. The shares of Common Stock shall entitle the holders thereof to one vote for each share upon all matters upon which shareholders have the right to vote.

Section 3. Preferred Stock.

The Board of Directors is authorized to establish, from time to time, one or more series of any class of shares, to increase or decrease the number within each series, and to fix the designations, powers, preferences and relative, participating, optional or other rights of such series and any qualifications, limitations or restrictions thereof. All shares of any one series of Preferred Stock will be identical except as to the dates of issue and the dates from which dividends on shares of the series issued on different dates will cumulate, if cumulative. Authority is hereby expressly granted to the Board of Directors to authorize the issuance of one or more series of Preferred Stock, and to fix by resolution or resolutions providing for the issue of each such series the voting powers, designations, preferences, and relative, participating, optional, redemption, conversion, exchange or other special rights, qualifications, limitations or restrictions of such series, and the number of shares in each series, to the full extent now or hereafter permitted by law.

FIFTH

No stockholder of the Corporation will, solely by reason of holding shares of any class, have any preemptive or preferential right to purchase or subscribe for any shares of the Corporation, now or hereafter to be authorized, or any notes, debentures, bonds or other securities convertible into or carrying warrants, rights or options to purchase shares of any class, now or hereafter to be authorized, whether or not the issuance of any such shares or such notes, debentures, bonds or other securities would adversely affect the dividend, voting or any other rights of such stockholder. The Board of Directors may authorize the issuance of, and the Corporation may issue, shares of any class of the Corporation, or any notes, debentures, bonds or other securities convertible into or carrying warrants, rights or options to purchase any such shares, without offering any shares of any class to the existing holders of any class of stock of the Corporation.

SIXTH

At all meetings of stockholders, a quorum will be present if the holders of a majority of the shares entitled to vote at the meeting are represented at the meeting in person or by proxy.

SEVENTH

Stockholders of the Corporation will not have the right of cumulative voting for the election of directors or for any other purpose.

EIGHTH

In furtherance and not in limitation of the powers conferred by the laws of the State of Delaware, the Board of Directors is expressly authorized to adopt, alter, amend and repeal the Bylaws of the Corporation or to adopt new Bylaws. Directors need not be elected by written ballot unless expressly required by the Bylaws of the Corporation.

-2-

NINTH

The Corporation will, to the fullest extent permitted by the Delaware General Corporation Law, as the same exists or may hereafter be amended, indemnify any and all persons it has power to indemnify under such law from and against any and all of the expenses, liabilities or other matters referred to in or covered by such law. In addition, the Corporation shall indemnify each of the Corporation’s directors and officers in each and every situation where, under Delaware General Corporation Law (specifically Section 145) the Corporation is not obligated, but is permitted or empowered, to make such indemnification, except as otherwise set forth in the Bylaws of the Corporation. Such indemnification may be provided pursuant to any Bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his director or officer capacity and as to action in another capacity while holding such office, will continue as to a person who has ceased to be a director, officer, employee or agent, and will inure to the benefit of the heirs, executors and administrators of such a person.

If a claim under the preceding paragraph is not paid in full by the Corporation within thirty (30) days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant will be entitled to be paid also the expense of prosecuting such claim. It will be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct that make it permissible under the laws of the State of Delaware for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense will be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he has met the applicable standard of conduct set forth in the laws of the State of Delaware nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, will be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct.

TENTH

To the fullest extent permitted by the laws of the State of Delaware as the same exist or may hereafter be amended, a director of the Corporation will not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director; provided however, that this Article shall not eliminate or limit the liability of a director: (i) for any breach of the director’s duty of loyalty to the Corporation or stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. If the Delaware General Corporation Law is amended after the date of filing of this Certificate of Incorporation to authorize corporate action further limiting or eliminating the personal liability of a director, then the liability of the directors of the Corporation shall be limited or eliminated to the fullest extent permitted by the Delaware General Corporation Law, as so amended. Any repeal or modification of this Article by the stockholders of the Corporation or otherwise shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification. The provisions of this Article shall not be deemed to limit or preclude indemnification of a director by the Corporation for any liability of a director that has not been eliminated by the provisions of this Article.

-3-

ELEVENTH

The address of the Corporation’s initial registered office is 1209 Orange Street, Wilmington, Delaware 19801, County of New Castle, and the name of its initial registered agent at that address is The Corporation Trust Company.

TWELFTH

The number of directors constituting the initial Board of Directors of the Corporation is one and the name and mailing address of such person, who is to serve as director until the first annual meeting of the stockholders or until his successor is elected and qualified, is:

Name	Address
Timothy P. Halter	12890 Hilltop Road
	Argyle, Texas 76226

Hereafter, the number of directors will be determined in accordance with the Bylaws of the Corporation.

THIRTEENTH

The powers of the incorporator will terminate upon the filing of this Certificate. The name and mailing address of the incorporator are:

Name	Address
Timothy P. Halter	12890 Hilltop Road
	Argyle, Texas 76226

FOURTEENTH

The Corporation shall not be governed by Section 203 of the Delaware General Corporation Law. Executed as of the 7^th day of June, 2005.

By:	/s/ Timothy P. Halter
	Timothy P. Halter, Incorporator

-4-

State of Delaware

Secretary of State

Division of Corporations

Delivered 12:58 PM 04/11/2006

FILED 11:16 AM 04/11/2006

SRV 060337989 — 3981772 FILE

CERTIFICATE OF MERGER

of

BTHC VI, LLC

(a Texas limited liability company)

with and into

BTHC VI, INC.

(a Delaware corporation)

Pursuant to Section 264(c) of the Delaware General Corporation Law (the “DGCL”), the undersigned corporation has executed the following Certificate of Merger:

FIRST: The names of the two parties to the merger are BTHC VI, Inc., a Delaware corporation that will survive the merger, and BTHC VI, LLC, a Texas limited liability company that is being merged into BTHC VI, Inc.

SECOND: An Agreement and Plan of Merger has been approved, adopted, certified, executed and acknowledged by the surviving corporation and the merging limited liability company in accordance with Section 264(c) of the DGCL.

THIRD: The name of the sole surviving corporation is BTHC VI, Inc. (the “Surviving Corporation”).

FOURTH: The merger will be effective upon filing with the Secretary of State of Delaware.

FIFTH: The Certificate of Incorporation of the Surviving Corporation shall be its Certificate of Incorporation, without any changes thereto by reason of the merger.

SIXTH: The executed Agreement and Plan of Merger is on file at the Surviving Corporation’s principal place of business located at 12890 Hilltop Road, Argyle, Texas 76226.

SEVENTH: A copy of the Agreement and Plan of Merger will be furnished by the Surviving Corporation upon request, without cost, to any stockholder of BTHC VI, Inc. or member of BTHC VI, LLC.

IN WITNESS WHEREOF, the Surviving Corporation has caused this certificate to be signed by an authorized officer on this 10^th day of April, 2006.

BTHC VI, INC.
By:	/s/ Timothy P. Halter
	Timothy P. Halter, President

State of Delaware

Secretary of State

Division of Corporations

Delivered 11:09 AM 06/01/2007

FILED 10:54 AM 06/01/2007

SRV 070659983 — 3981772 FILE

CERTIFICATE OF AMENDMENT

OF

CERTIFICATE OF INCORPORATION

OF

BTHC VI, INC.

BTHC VI, INC., a corporation duly organized and existing under the General Corporation Law of the State of Delaware (the “Corporation”), does hereby certify that:

1. The Certificate of Incorporation of the Corporation is hereby amended by deleting the provisions of “Section 1. Authorization of Shares” thereof and inserting the following in lieu thereof:

“The total number of shares that the Corporation shall have authority to issue is 110,000,000 shares, consisting of 100,000,000 shares of common stock, having a par value of $.001 per share (“Common Stock”), and 10,000,000 shares of preferred stock, having a par value of $.001 per share (“Preferred Stock”).

Upon this Certificate of Amendment of Certificate of Incorporation becoming effective pursuant to the General Corporation Law of the State of Delaware (the “Effective Time”), each share of the corporation’s Common Stock, par value $.001 per share (the “Old Common Stock”), issued and outstanding immediately prior to the Effective Time will automatically be reclassified into 1/1.67th of a share of Common Stock, par value $.001 per share, of the Corporation (the “New Common Stock”). Each certificate that theretofore represented shares of Old Common Stock represented by such certificate shall thereafter represent that number of shares of New Common Stock into which the shares of Old Common Stock represented by such certificate shall have been reclassified; provided, that each person holding of record a stock certificate or certificates that represented shares of Old Common Stock shall receive, upon surrender of such certificate or certificates, a new certificate or certificates evidencing and representing the number of shares of New Common Stock to which such person is entitled under the foregoing reclassification. No fractional shares of New Common Stock will be issued to any stockholder. Accordingly, stockholders of record who would otherwise be entitled to receive fractional shares of New Common Stock will receive a full share of New Common Stock.”

2. The foregoing amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.

IN WITNESS WHEREOF, BTHC VI, Inc. has caused this Certificate to be executed by Timothy P. Halter, its President, on this 1^st day of June, 2007.

BTHC VI, Inc.
By:	/s/ Timothy P. Halter
	Name:	Timothy P. Halter
	Office:	President

State of Delaware

Secretary of State

Division of Corporations

Delivered 10:09 AM 08/31/2007

FILED 10:09 AM 08/31/2007

SRV 070976441 – 3981772 FILE

CERTIFICATE OF AMENDMENT

OF

CERTIFICATE OF INCORPORATION

OF

BTHC VI, INC.

BTHC VI, INC., a corporation duly organized and existing under the General Corporation Law of the State of Delaware (the “Corporation”), does hereby certify that:

FIRST: That in lieu of a meeting and vote of stockholders, the stockholder of the Corporation has approved and adopted by written consent in accordance with the provisions of Section 228 of the General Corporation Law of the State of Delaware, the following resolutions and amendment to the Certificate of Incorporation of the Corporation:

RESOLVED, that the Certificate of Incorporation of the Corporation is hereby amended by deleting the Article thereof numbered “FIRST” and inserting the following in lieu thereof:

“FIRST

The name of the Corporation is Athersys, Inc.”

SECOND: The foregoing amendment was duly adopted in accordance with the provisions of Sections 242 and 228 of the General Corporation Law of the State of Delaware.

IN WITNESS WHEREOF, BTHC VI, Inc. has caused this Certificate to be executed by Gil Van Bokkelen, its Chief Executive Officer, on this 31st day of August, 2007.

BTHC VI, Inc.
By:	/s/ Gil Van Bokkelen
Name:	Gil Van Bokkelen
Title:	Chief Executive Officer

CERTIFICATE OF AMENDMENT

OF

CERTIFICATE OF INCORPORATION

OF

ATHERSYS, INC.

Athersys, Inc., a corporation duly organized and existing under the General Corporation Law of the State of Delaware (the “Corporation”), does hereby certify that:

1. The Certificate of Incorporation of the Corporation is hereby amended by deleting the provisions of “Section 1. Authorization of Shares” thereof and inserting the following in lieu thereof:

“The total number of shares that the Corporation shall have authority to issue is 160,000,000 shares, consisting of 150,000,000 shares of common stock, having a par value of $.001 per share (“Common Stock”), and 10,000,000 shares of preferred stock, having a par value of $.001 per share (“Preferred Stock”).”

2. The foregoing amendment was duly adopted in accordance with the provisions of Sections 242 and 228 of the General Corporation Law of the State of Delaware.

[signature to follow]

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed by Gil Van Bokkelen, its Chief Executive Officer, on this 20th day of June, 2013.

ATHERSYS, INC.
By:	/s/ William Lehmann
	Name:	William Lehmann
	Title:	President & COO

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, Gil Van Bokkelen, certify that:

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

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

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

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

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

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

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

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

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

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

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

August 13, 2013

/s/ Gil Van Bokkelen

Gil Van Bokkelen

Chief Executive Officer and

Chairman of the Board of Directors

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, Laura K. Campbell, certify that:

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

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

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

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

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

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

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

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

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

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

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

August 13, 2013

/s/ Laura K. Campbell

Laura K. Campbell

Vice President of Finance

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Athersys, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to such officer’s knowledge:

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

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

Date: August 13, 2013

/s/ Gil Van Bokkelen
Name:	Gil Van Bokkelen
Title:	Chairman and Chief Executive Officer
/s/ Laura K. Campbell
Name:	Laura K. Campbell
Title:	Vice President of Finance

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

XML

Background and Basis of Presentation (Details)	6 Months Ended
	Jun. 30, 2013 Segment
Background and Basis of Presentation (Textual) [Abstract]
Number of business segments	1

XML

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Revenues
Contract revenue	$ 194	$ 2,270	$ 278	$ 4,733
Grant revenue	377	387	619	671
Total revenues	571	2,657	897	5,404
Costs and expenses
Research and development	5,107	5,027	10,683	10,596
General and administrative	1,555	1,162	3,062	2,421
Depreciation	86	80	171	155
Total costs and expenses	6,748	6,269	13,916	13,172
Loss from operations	(6,177)	(3,612)	(13,019)	(7,768)
Other income (expense), net	15	(5)	32	(760)
Income (expense) from change in fair value of warrants	216	(96)	(2,347)	479
Net loss	(5,946)	(3,713)	(15,334)	(8,049)
Basic and diluted net loss per share	$ (0.11)	$ (0.13)	$ (0.28)	$ (0.29)
Weighted average shares outstanding, basic and diluted	56,028,461	29,405,986	54,744,254	27,476,603
Items included in other comprehensive loss:
Proportional share of comprehensive loss of equity-method investment				(28)
Comprehensive loss	$ (5,946)	$ (3,713)	$ (15,334)	$ (8,077)

XML

Stock-based Compensation

6 Months Ended

Jun. 30, 2013

Stock-based Compensation [Abstract]

Stock-based Compensation

5. Stock-based Compensation

Our equity incentive plans authorize an aggregate of 11,500,000 shares of common stock for awards to employees, directors and consultants, as amended in June 2013. These incentive plans authorize the issuance of equity-based compensation in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares and units, and other stock-based awards.

As of June 30, 2013, a total of 3,438,958 shares were available for issuance under our equity incentive plans, and stock options and restricted stock units to purchase an aggregate of 8,043,611 shares of common stock were outstanding. In June 2013, we granted 1,077,928 stock options and 151,964 restricted stock units to our employees and directors pursuant to our annual incentive programs. In the three-month period ended June 30, 2013, we issued 7,612 shares of common stock related to restricted stock units that vested during the period.

In April 2013, our Board of Directors approved arrangements whereby our executive officers agreed to terminate prior incentive agreements in return for one-time grants of restricted stock units and for the ability to receive routine annual grants of equity-based awards. We had established the incentive agreements in 2005, prior to our common stock being publicly traded, in connection with restructuring our internal programs and as a retention and motivation tool, which provided our executives financial participation in the event of certain merger or acquisition or asset sale transactions. In June 2013, 2,700,000 restricted stock units that vest ratably on a quarterly basis over three years were granted to the executive officers in exchange for the termination of their incentive agreements. Also, our executive officers were awarded in June 2013 stock option grants as part of the routine annual awards.

For the three-month period ended June 30, 2013 and 2012, stock-based compensation expense was approximately $196,000 and $133,000, respectively. At June 30, 2013, total unrecognized estimated compensation cost related to unvested stock-based awards was approximately $6,723,000, which is expected to be recognized by the end of 2017 using the straight-line method.

XML

Stock-based Compensation (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Stock-based Compensation (Textual) [Abstract]
Common stock authorized for equity incentive plans	11,500,000		11,500,000
Shares available for issuance	3,438,958		3,438,958
Shares of common stock outstanding	8,043,611		8,043,611
Stock options granted			1,077,928
Common stock issued related to restricted stock units	7,612
Stock-based compensation expense	$ 196,000,000	$ 133,000,000	$ 313,000	$ 269,000
Total unrecognized estimated compensation cost	$ 6,723,000		$ 6,723,000
Restricted stock units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Restricted stock units granted			151,964
Restricted stock units vest on quarterly basis			3 years
Officer [Member] | Restricted stock units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Restricted stock units granted			2,700,000

XML

Net Loss per Share (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Numerator - Diluted:
Net loss	$ (5,946)	$ (3,713)	$ (15,334)	$ (8,049)
Less: income from change in fair value of warrants	(164)
Net loss used to calculate diluted net loss per share	$ (6,110)	$ (3,713)	$ (15,334)	$ (8,049)
Denominator - Diluted:
Weighted-average shares outstanding	56,028	29,406	54,744	27,477
Potentially dilutive common shares outstanding:
Warrants	1,813
Weighted-average shares used to calculate diluted net loss per share	57,841	29,406	54,744	27,477

XML

Warrant Liabilities (Details) (USD $)	6 Months Ended
	Jun. 30, 2013	Feb. 28, 2013	Mar. 31, 2012
Warrant Liabilities (Textual) [Abstract]
Exercise Price		1.01	2.07
Proceeds from Issuance of Warrants	$ 352,000
Share Issued on Exercise of Warrants	347,826

XML

Issuance of Common Stock and Warrants (Details Textual) (USD $)	1 Months Ended			3 Months Ended	6 Months Ended	12 Months Ended
	Oct. 31, 2012	Mar. 31, 2012	Nov. 30, 2011	Jun. 30, 2013	Jun. 30, 2013	Dec. 31, 2013	Feb. 28, 2013	Dec. 31, 2012	Nov. 30, 2012	Aug. 01, 2013 Subsequent Event [Member]
Subsequent Event [Line Items]
Common stock issuance (shares) under equity purchase agreement			666,667	2,075,000	2,075,000			800,000		5,064,972
Issuance of Common Stock and Warrants (Textual) [Abstract]
Equity purchase agreement, term			2 years
Equity purchase agreement, value			$ 20,000,000
Initial investment			1,000,000
Common stock issuance (shares) under equity purchase agreement			266,667		3,398,305
Common stock per share			$ 1.50
Common stock, shares authorized				150,000,000	150,000,000			100,000,000
Preferred stock, shares authorized				10,000,000	10,000,000			10,000,000
Preferred stock, shares issued
Proceeds from issuance of common stock, net	18,300,000	8,100,000
Issuance of common stock, new issues	19,802,000	4,347,827
Issuance of common stock shares per share	$ 1.01				$ 1.94
Additional shares of common stock									2,970,300
Sale of additional shares at an average price				$ 1.85	$ 1.73	$ 1.57
Common stock at an offering price of fixed combination		$ 2.07
Common stock exercise price		2.07					1.01
Common stock purchased under warrants		4,347,827		5,459,027	5,459,027
Common stock warrants period		5 years
Proceeds from issuance of common stock				8,400,000	8,400,000				2,800,000
Milestone payment to our former lenders					$ 900,000
Percentage of former lenders payment					75.00%

XML

Issuance of Common Stock and Warrants (Details)	Jun. 30, 2013	Feb. 28, 2013	Mar. 31, 2012
Outstanding warrants to purchase shares of common stock
Number of Underlying Shares	5,459,027		4,347,827
Exercise Price		1.01	2.07
June 8, 2014 [Member]
Outstanding warrants to purchase shares of common stock
Number of Underlying Shares	149,026
Exercise Price	5.00
Expiration	Jun. 08, 2014
February 2, 2016 [Member]
Outstanding warrants to purchase shares of common stock
Number of Underlying Shares	1,310,000
Exercise Price	3.55
Expiration	Feb. 02, 2016
March 14, 2017 [Member]
Outstanding warrants to purchase shares of common stock
Number of Underlying Shares	4,000,001
Exercise Price	1.01
Expiration	Mar. 14, 2017

XML

Background and Basis of Presentation

6 Months Ended

Jun. 30, 2013

Background and Basis of Presentation/Collaborative Arrangements and Revenue Recognition [Abstract]

Background and Basis of Presentation

1. Background and Basis of Presentation

We are an international biotechnology company that is focused primarily on the field of regenerative medicine and operate in one business segment. Our operations consist primarily of research and product development activities.

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, 2012. The accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and Article 10 of Regulation S-X. Accordingly, since they are interim statements, the accompanying financial statements do not include all of the information and notes required by GAAP for complete financial statements. The accompanying financial statements reflect all adjustments, consisting of normal recurring adjustments, that are, in the opinion of management, necessary for a fair presentation of financial position and results of operations for the interim periods presented. Interim results are not necessarily indicative of results for a full year.

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 below in this Quarterly Report on Form 10-Q.

Certain prior year amounts have been reclassified to conform with current year presentations.

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Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2013

Fair Value of Financial Instruments [Abstract]

Fair Value of Financial Instruments

3. Fair Value of Financial Instruments

Fair Value Measurements

We classify the inputs used to measure fair value into the following hierarchy:

Level 1	Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2	Adjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or significant inputs other than quoted prices that are observable for the asset or liability.
Level 3	Unobservable inputs for the asset or liability.

The following table provides a summary of the fair values of our assets and liabilities measured at fair value on a recurring basis as of June 30, 2013 (in thousands):

			Fair Value Measurements at June 30, 2013 Using
			Quoted Prices in Active		Significant Other
	Balance as of		Markets for Identical		Observable Inputs		Significant Unobservable
Description	June 30, 2013		Assets (Level 1)		(Level 2)		Inputs (Level 3)
Warrant liabilities	$	4,704	$	—	$	—	$	4,704

We review and reassess the fair value hierarchy classifications on a quarterly basis. Changes from one quarter to the next related to the observability of inputs in a fair value measurement may result in a reclassification between fair value hierarchy levels. There were no reclassifications for all periods presented.

The estimated fair value of warrants accounted for as liabilities, representing a level 3 fair value measure, was determined on the issuance date and subsequently marked to market at each financial reporting date. The fair value of the warrants is estimated using a Black-Scholes pricing model using the expected volatility based on the historical volatilities of comparable companies from a representative peer group selected based on industry and market capitalization. The fair value of the warrants issued in March 2012 is determined using probability weighted-average assumptions that give consideration to the exercise price repricing feature that is dependent upon the consummation of future qualified offerings, as defined, and requisite stockholder approval. The following inputs were used at June 30, 2013:

	Warrants Issued			Warrants Issued
	February 2011			March 2012
Expected volatility		71.4	%		70.9	%
Risk-free interest rate		0.66	%		0.66	%
Expected life (in years)		2.59			3.70
Fair value at June 30, 2013 (in thousands)	$	524		$	4,180

A rollforward of fair value measurements using significant unobservable inputs (Level 3) for the warrants is as follows (in thousands):

	Three months ended				Six months ended
	June 30, 2013				June 30, 2013
				Balance January 1, 2013	$	2,709
Balance April 1, 2013	$	5,272
Exercise of warrants		(352	)	Exercise of warrants		(352	)
(Gain) loss included in income from change in fair value of warrants for the period		(216	)	Loss (gain) included in expense from change in fair value of warrants for the period		2,347
Balance June 30, 2013	$	4,704		Balance June 30, 2013	$	4,704

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Issuance of Common Stock and Warrants

6 Months Ended

Jun. 30, 2013

Issuance of Common Stock and Warrants [Abstract]

Issuance of Common Stock and Warrants

6. Issuance of Common Stock and Warrants

In October 2012, we completed a public offering generating net proceeds of approximately $18.3 million through the issuance of 19,802,000 shares of common stock at a price of $1.01 per share. In November 2012, the underwriters exercised in full their right to purchase an additional 2,970,300 shares of common stock, solely to cover over-allotments. The exercise of the full over-allotment option generated an additional $2.8 million of net proceeds.

In March 2012, we completed a private placement financing generating net proceeds of approximately $8.1 million through the issuance of 4,347,827 shares of common stock and five-year warrants to purchase 4,347,827 shares of common stock with an exercise price of $2.07 per share. The securities were sold in multiples of a fixed combination of one share of common stock and a warrant to purchase one share of common stock at an offering price of $2.07 per fixed combination, and the warrants include price protection in the event we sell stock below the exercise price, as defined. As a result of the October 2012 public offering and in accordance with the terms of the warrants, we sought and obtained stockholder approval in February 2013 to reduce the exercise price of these warrants to $1.01 per share. In connection with this private placement, our former lenders were entitled to a milestone payment in the amount of $900,000, of which 75% was settled through the issuance of our common stock at $1.94 per share to the former lenders at our election.

In November 2011, we entered into an equity purchase agreement, which provides that Aspire Capital Fund, LLC (“Aspire Capital”) is committed to purchase up to an aggregate of $20.0 million of shares of our common stock over a two-year term, subject to our election to sell any such shares. Under the agreement, we have the right to sell shares, subject to certain volume limitations and a minimum floor price, at a modest discount to the prevailing market price. As part of the agreement, Aspire Capital made an initial investment of $1.0 million in us through the purchase of 666,667 shares of our common stock at $1.50 per share in 2011, and received 266,667 additional shares as compensation for its commitment. In 2012, we sold an additional 800,000 shares to Aspire Capital at an average price of $1.57 per share. During the quarter ended June 30, 2013, we sold 2,075,000 shares to Aspire Capital at an average price of $1.85 per share, and during the six-month period ended June 30, 2013, we sold 3,398,305 shares to Aspire Capital at an average price of $1.73 per share. From its inception through August 1, 2013, we have sold 5,064,972 shares and received aggregate gross proceeds of approximately $8.4 million under the equity purchase agreement.

As of June 30, 2013, we had the following outstanding warrants to purchase shares of common stock:

Number of Underlying  Shares		Exercise Price		Expiration
	149,026	$	5.00	June 8, 2014
	1,310,000	$	3.55	February 2, 2016
	4,000,001	$	1.01	March 14, 2017
	5,459,027

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Collaborative Arrangements and Revenue Recognition

6 Months Ended

Jun. 30, 2013

Background and Basis of Presentation/Collaborative Arrangements and Revenue Recognition [Abstract]

Collaborative Arrangements and Revenue Recognition

4. Collaborative Arrangements and Revenue Recognition

Pfizer

In 2009, we entered into a collaboration with Pfizer Inc. (“Pfizer”) to develop and commercialize our MultiStem ^® product candidate to treat inflammatory bowel disease (“IBD”) for the worldwide market. Under the terms of the agreement, we received a non-refundable up-front payment from Pfizer and research funding and support through June 2012. In addition, we are eligible to receive milestone payments upon the successful achievement of certain development, regulatory and commercial milestones, for which we evaluated the nature of the events triggering these contingent payments and concluded that these events constituted substantive milestones that will be recognized as revenue in the period in which the underlying triggering event occurs. No significant milestone revenue has been recognized to date.

Pfizer pays us for manufacturing product for clinical development and commercialization purposes. Pfizer has responsibility for development, regulatory and commercialization and will pay us tiered royalties on worldwide commercial sales of MultiStem IBD products. Alternatively, in lieu of royalties and certain commercialization milestones, we may elect to co-develop with Pfizer and the parties will share development and commercialization expenses and profits/losses on an agreed basis beginning at Phase III clinical development.

We evaluated the facts and circumstances of the agreement and determined the Pfizer agreement had multiple deliverables that should be combined into a single unit of accounting. We recognized the license and technology access fee and research and development funding ratably on a straight-line basis over the estimated performance period, which was completed mid-2012, and measured manufacturing revenue beginning upon the culmination of the earnings process and recognized it over the performance period of the bundled unit of accounting.

RTI Biologics, Inc.

In 2010, we entered into an agreement with RTI Biologics, Inc. (“RTI”) to develop and commercialize biologic implants using our technology for certain orthopedic applications in the bone graft substitutes market. Under the terms of the agreement, we received a $5.0 million license fee in installments through December 2012.

We are also eligible to receive cash payments upon the successful achievement of certain commercial milestones. We evaluated the nature of the events triggering these contingent payments and concluded that these events are substantive and that revenue will be recognized in the period in which each underlying triggering event occurs. In addition, we will receive tiered royalties on worldwide commercial sales, if any, of implants using our technologies. No milestone or royalty revenue has been recognized to date.

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Condensed Consolidated Balance Sheets [Abstract]
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	150,000,000	100,000,000
Common stock, shares issued	56,812,375	53,058,632
Common stock, shares outstanding	56,812,375	53,058,632

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Net Loss per Share (Tables)

6 Months Ended

Jun. 30, 2013

Net Loss per Share [Abstract]

Reconciles the net loss and the number of shares used to calculate basic and diluted net loss per share

The table below reconciles the net loss and the number of shares used to calculate basic and diluted net loss per share for the three months ended June 30, 2013, in thousands.

	Three months ended June  30,						Six months ended June 30,
	2013			2012			2013			2012
Numerator – Diluted:
Net loss		(5,946	)		(3,713	)		(15,334	)		(8,049	)
Less: income from change in fair value of warrants		(164	)		—			—			—
Net loss used to calculate diluted net loss per share		(6,110	)		(3,713	)		(15,334	)		(8,049	)
Denominator – Diluted:
Weighted-average shares outstanding		56,028			29,406			54,744			27,477
Potentially dilutive common shares outstanding:
Warrants		1,813			—			—			—
Weighted-average shares used to calculate diluted net loss per share		57,841			29,406			54,744			27,477

Instruments excluded from the calculation of diluted net loss per share

The following instruments were excluded from the calculation of diluted net loss per share because their effects would be antidilutive:

	Three months ended June 30,				Six months ended June 30,
	2013		2012		2013		2012
Stock options		5,133,518		4,213,501		5,133,518		4,213,501
Restricted stock units		2,910,093		86,197		2,910,093		86,197
Warrants		1,459,026		5,806,853		5,459,027		5,806,853
Total		9,502,637		10,106,551		13,502,638		10,106,551

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Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $)	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Operating activities
Net loss	$ (15,334,000)	$ (8,049,000)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	171,000	155,000
Gain on sale of investment		(184,000)
Stock-based compensation	313,000	269,000
Issuance of common stock to former lenders		714,000
Change in fair value of warrant liabilities	2,347,000	(479,000)
Changes in operating assets and liabilities:
Accounts receivable	(86,000)	(15,000)
Prepaid expenses and other assets	(41,000)	453,000
Accounts payable and accrued expenses	30,000	(132,000)
Deferred revenue	51,000	(3,140,000)
Net cash used in operating activities	(12,549,000)	(10,408,000)
Investing activities
Maturities of available-for-sale securities		4,237,000
Purchases of equipment	(273,000)	(237,000)
Net cash (used in) provided by investing activities	(273,000)	4,000,000
Financing activities
Proceeds from issuance of common stock, net	5,834,000	8,430,000
Proceeds from Issuance of Warrants	352,000
Proceeds from note payable		50,000
Net cash provided by financing activities	6,186,000	8,480,000
(Decrease) increase in cash and cash equivalents	(6,636,000)	2,072,000
Cash and cash equivalents at beginning of the period	25,533,000	8,785,000
Cash and cash equivalents at end of the period	$ 18,897,000	$ 10,857,000

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Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Current assets:
Cash and cash equivalents	$ 18,897	$ 25,533
Accounts receivable	576	490
Prepaid expenses and other	328	286
Total current assets	19,801	26,309
Equipment, net	1,396	1,294
Total assets	21,197	27,603
Current liabilities:
Accounts payable	2,818	1,767
Accrued compensation and related benefits	577	827
Accrued clinical trial costs	286	950
Accrued expenses	824	934
Deferred revenue	51
Total current liabilities	4,556	4,478
Note payable	172	169
Warrant liabilities	4,704	2,709
Stockholders' equity:
Preferred stock, at stated value; 10,000,000 shares authorized, and no shares issued and outstanding at June 30, 2013 and December 31, 2012
Common stock, $0.001 par value; 150,000,000 and 100,000,000 shares authorized at June 30, 2013 and December 31, 2012, respectively, and 56,812,375 and 53,058,632 shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively	57	53
Additional paid-in capital	260,737	253,889
Accumulated deficit	(249,029)	(233,695)
Total stockholders' equity	11,765	20,247
Total liabilities and stockholders' equity	$ 21,197	$ 27,603

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Collaborative Arrangements and Revenue Recognition (Details) (USD $)	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2011
Pfizer [Member]
Collaborative Arrangements and Revenue Recognition (Textual) [Abstract]
Milestone revenue	$ 0	$ 0	$ 0
RTI Biologics, Inc. [Member]
Collaborative Arrangements and Revenue Recognition (Textual) [Abstract]
Milestone revenue	0	0
License fee installment revenue	5,000,000
Royalty revenue	$ 0	$ 0

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Income Taxes

6 Months Ended

Jun. 30, 2013

Income Taxes [Abstract]

Income Taxes

8. Income Taxes

We have net operating loss and research and development tax credit carryforwards that may be used to reduce future taxable income and tax liabilities. Our deferred tax assets have been fully offset by a valuation allowance due to our cumulative losses. As a result of our most recent equity offerings, all of the net operating loss and credit carryforwards have been significantly limited for use under Section 382 of the Internal Revenue Code.

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Issuance of Common Stock and Warrants (Tables)

6 Months Ended

Jun. 30, 2013

Issuance of Common Stock and Warrants [Abstract]

Outstanding warrants to purchase shares of common stock

As of June 30, 2013, we had the following outstanding warrants to purchase shares of common stock:

Number of Underlying  Shares		Exercise Price		Expiration
	149,026	$	5.00	June 8, 2014
	1,310,000	$	3.55	February 2, 2016
	4,000,001	$	1.01	March 14, 2017
	5,459,027

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Warrant Liabilities

6 Months Ended

Jun. 30, 2013

Warrant Liabilities [Abstract]

Warrant Liabilities

7. Warrant Liabilities

We account for common stock warrants as either liabilities or as equity instruments depending on the specific terms of the warrant agreement. Registered common stock warrants that could require cash settlement are accounted for as liabilities. We classify these warrant liabilities on the consolidated balance sheet as a non-current liability, which is revalued at fair value at each balance sheet date subsequent to the initial issuance. We use the Black-Scholes valuation model to value the warrant liability at its fair value. Changes in the fair market value of the warrant are reflected in the consolidated statement of operations as income (expense) from change in fair value of warrants.

The warrants we issued in both the March 2012 private placement and the February 2011 registered direct offering each contain a provision for net cash settlement in the event that there is a fundamental transaction (e.g., merger, sale of substantially all assets, tender offer, or share exchange). If a fundamental transaction occurs in which the consideration issued consists of all cash or stock in a non-public company, then the warrant holder has the option to receive cash equal to a Black Scholes value of the remaining unexercised portion of the warrant. Further, the March 2012 warrants include price protection in the event we sell stock below the exercise price, as defined, and the exercise price was reduced in February 2013 to $1.01 per share as a result of the October 2012 public offering.

The warrants have been classified as liabilities, as opposed to equity, due to the potential cash settlement upon the occurrence of certain events as described above, and are recorded at their fair values at each balance sheet date. As of June 30, 2013, we have received proceeds of approximately $352,000 from the exercise of March 2012 warrants aggregating to 347,826 shares of common stock being issued.

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Net Loss per Share

6 Months Ended

Jun. 30, 2013

Net Loss per Share [Abstract]

Net Loss per Share

2. Net Loss per Share

Basic and diluted net loss per share have been computed using the weighted-average number of shares of common stock outstanding during the period. The table below reconciles the net loss and the number of shares used to calculate basic and diluted net loss per share for the three months ended June 30, 2013, in thousands.

	Three months ended June  30,						Six months ended June 30,
	2013			2012			2013			2012
Numerator – Diluted:
Net loss		(5,946	)		(3,713	)		(15,334	)		(8,049	)
Less: income from change in fair value of warrants		(164	)		—			—			—
Net loss used to calculate diluted net loss per share		(6,110	)		(3,713	)		(15,334	)		(8,049	)
Denominator – Diluted:
Weighted-average shares outstanding		56,028			29,406			54,744			27,477
Potentially dilutive common shares outstanding:
Warrants		1,813			—			—			—
Weighted-average shares used to calculate diluted net loss per share		57,841			29,406			54,744			27,477

We have outstanding options, restricted stock units and warrants that are not used in the calculation of diluted net loss per share because to do so would be antidilutive. The following instruments were excluded from the calculation of diluted net loss per share because their effects would be antidilutive:

	Three months ended June 30,				Six months ended June 30,
	2013		2012		2013		2012
Stock options		5,133,518		4,213,501		5,133,518		4,213,501
Restricted stock units		2,910,093		86,197		2,910,093		86,197
Warrants		1,459,026		5,806,853		5,459,027		5,806,853
Total		9,502,637		10,106,551		13,502,638		10,106,551

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Net Loss Per Share (Details 1)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Instruments excluded from the calculation of diluted net loss per share
Total	9,502,637	10,106,551	13,502,638	10,106,551
Stock options [Member]
Instruments excluded from the calculation of diluted net loss per share
Total	5,133,518	4,213,501	5,133,518	4,213,501
Restricted stock units [Member]
Instruments excluded from the calculation of diluted net loss per share
Total	2,910,093	86,197	2,910,093	86,197
Warrants [Member]
Instruments excluded from the calculation of diluted net loss per share
Total	1,459,026	5,806,853	5,459,027	5,806,853

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Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2013

Fair Value of Financial Instruments [Abstract]

Fair values of our assets and liabilities measured at fair value on a recurring basis

The following table provides a summary of the fair values of our assets and liabilities measured at fair value on a recurring basis as of June 30, 2013 (in thousands):

			Fair Value Measurements at June 30, 2013 Using
			Quoted Prices in Active		Significant Other
	Balance as of		Markets for Identical		Observable Inputs		Significant Unobservable
Description	June 30, 2013		Assets (Level 1)		(Level 2)		Inputs (Level 3)
Warrant liabilities	$	4,704	$	—	$	—	$	4,704

Fair value of the warrants based on the historical volatilities

The following inputs were used at June 30, 2013:

	Warrants Issued			Warrants Issued
	February 2011			March 2012
Expected volatility		71.4	%		70.9	%
Risk-free interest rate		0.66	%		0.66	%
Expected life (in years)		2.59			3.70
Fair value at June 30, 2013 (in thousands)	$	524		$	4,180

Roll-forward of fair value measurements using significant unobservable inputs (Level 3) for the warrants

A rollforward of fair value measurements using significant unobservable inputs (Level 3) for the warrants is as follows (in thousands):

	Three months ended				Six months ended
	June 30, 2013				June 30, 2013
				Balance January 1, 2013	$	2,709
Balance April 1, 2013	$	5,272
Exercise of warrants		(352	)	Exercise of warrants		(352	)
(Gain) loss included in income from change in fair value of warrants for the period		(216	)	Loss (gain) included in expense from change in fair value of warrants for the period		2,347
Balance June 30, 2013	$	4,704		Balance June 30, 2013	$	4,704

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Fair Value of Financial Instruments (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Roll-forward of fair value measurements using significant unobservable inputs (Level 3) for the warrants
(Gain) loss included in income from change in fair value of warrants for the period	$ (216)	$ 96	$ 2,347	$ (479)
Warrants [Member]
Roll-forward of fair value measurements using significant unobservable inputs (Level 3) for the warrants
Beginning Balance	5,272		2,709
Exercise of warrants	(352)		(352)
(Gain) loss included in income from change in fair value of warrants for the period	(216)		2,347
Ending Balance	$ 4,704		$ 4,704

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Fair Value of Financial Instruments (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Fair values of our assets and liabilities measured at fair value on a recurring basis
Warrant liabilities	$ 4,704	$ 2,709
Fair Value Measurements, Recurring basis [Member]
Fair values of our assets and liabilities measured at fair value on a recurring basis
Warrant liabilities	4,704
Fair Value Measurements, Recurring basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Fair values of our assets and liabilities measured at fair value on a recurring basis
Warrant liabilities
Fair Value Measurements, Recurring basis [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair values of our assets and liabilities measured at fair value on a recurring basis
Warrant liabilities
Fair Value Measurements, Recurring basis [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair values of our assets and liabilities measured at fair value on a recurring basis
Warrant liabilities	$ 4,704

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Document and Entity Information	6 Months Ended
	Jun. 30, 2013	Aug. 01, 2013
Document and Entity Information [Abstract]
Entity Registrant Name	ATHERSYS, INC / NEW
Entity Central Index Key	0001368148
Document Type	10-Q
Document Period End Date	Jun. 30, 2013
Amendment Flag	false
Entity Filer Category	Smaller Reporting Company
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q2
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		57,024,430

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Fair Value of Financial Instruments (Details 1) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2013
Warrants Issued February 2011 [Member]
Fair value of the warrants based on the historical volatilities
Expected volatility	71.40%
Risk-free interest rate	0.66%
Expected life (in years)	2 years 7 months 2 days
Fair value at June 30, 2013	$ 524
Warrants Issued March 2012 [Member]
Fair value of the warrants based on the historical volatilities
Expected volatility	70.90%
Risk-free interest rate	0.66%
Expected life (in years)	3 years 8 months 12 days
Fair value at June 30, 2013	$ 4,180