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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>As filed with the Securities and Exchange Commission on October 9, 2012 </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Registration No.&nbsp;333-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></P>
<P STYLE="font-size:2px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="font-size:2px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:0px;margin-top:0px;margin-bottom:0px;border-bottom:0.5pt solid #000000">&nbsp;</P>
<P STYLE="line-height:2px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:2px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="5"><B>UNITED STATES </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="5"><B>SECURITIES AND EXCHANGE COMMISSION </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>WASHINGTON,&nbsp;D.C. 20549 </B></FONT></P> <P STYLE="font-size:2px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center>
<P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:0.8pt solid #000000;width:29%">&nbsp;</P></center> <P STYLE="margin-top:2px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="5"><B>FORM S-1
</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="5"><B>REGISTRATION STATEMENT </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="3"><B><I>UNDER </I></B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="3"><B><I>THE SECURITIES ACT OF 1933 </I></B></FONT></P>
<P STYLE="font-size:2px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:0.8pt solid #000000;width:29%">&nbsp;</P></center>
<P STYLE="margin-top:2px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="6"><B>Athersys, Inc. </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>(Exact name of registrant as specified in its charter) </B></FONT></P> <P STYLE="font-size:2px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center>
<P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:0.8pt solid #000000;width:29%">&nbsp;</P></center> <P STYLE="font-size:2px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Delaware</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>2834</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>20-4864095</B></FONT></TD></TR>
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<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>(State or other jurisdiction of</B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>incorporation or organization)</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>(Primary Standard Industrial</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="1"><B>Classification Code Number)</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>(I.R.S. Employer</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="1"><B>Identification Number)</B></FONT></P></TD></TR>
</TABLE> <P STYLE="margin-top:4px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>3201 Carnegie Avenue </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="1"><B>Cleveland, Ohio 44115-2634 </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>(216) 431-9900 </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>(Address, including zip code, and telephone number, including area code, of registrant&#146;s principal executive offices)
</B></FONT></P> <P STYLE="font-size:2px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:0.8pt solid #000000;width:29%">&nbsp;</P></center>
<P STYLE="margin-top:2px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Gil Van Bokkelen </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="1"><B>Chief Executive Officer </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>3201 Carnegie Avenue </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Cleveland, Ohio 44115-2634 </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="1"><B>(216) 431-9900 </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>(Name, address, including zip code, and telephone number,
including area code, of agent for service) </B></FONT></P> <P STYLE="font-size:2px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center>
<P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:0.8pt solid #000000;width:29%">&nbsp;</P></center> <P STYLE="margin-top:2px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B><I>Copies
to: </I></B></FONT></P>
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<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Christopher M. Kelly, Esq.</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="1"><B>Michael J. Solecki, Esq.</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Jones Day</B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>North Point</B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>901 Lakeside Avenue</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="1"><B>Cleveland, Ohio 44114</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Tel: (216) 586-3939</B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Fax: (216) 579-0212</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Michael D. Maline, Esq.</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="1"><B>Goodwin Procter LLP</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>The New York Times Building</B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>620 Eighth Avenue</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="1"><B>New York, New York 10018</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Tel: (212) 813-8800</B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Fax: (212) 355-3333</B></FONT></P></TD></TR>
</TABLE> <P STYLE="font-size:2px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:0.8pt solid #000000;width:29%">&nbsp;</P></center>
<P STYLE="margin-top:2px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Approximate date of commencement of proposed sale to the public</B>: As soon as practical after this Registration Statement becomes effective.
</FONT></P> <P STYLE="margin-top:3px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="1">If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule&nbsp;415 under the
Securities Act of 1933, check the following box.&nbsp;&nbsp;<FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT> </FONT></P> <P STYLE="margin-top:3px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="1">If this Form is filed to
register additional securities for an offering pursuant to Rule&nbsp;462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same
offering.&nbsp;&nbsp;<FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT> </FONT></P> <P STYLE="margin-top:3px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="1">If this Form is a post-effective amendment filed pursuant to
Rule&nbsp;462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same
offering.&nbsp;&nbsp;<FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT> </FONT></P> <P STYLE="margin-top:3px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="1">If this Form is a post-effective amendment filed pursuant to
Rule&nbsp;462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same
offering.&nbsp;&nbsp;<FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT> </FONT></P> <P STYLE="margin-top:3px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="1">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 &#147;large accelerated filer,&#148; &#147;accelerated filer,&#148; and &#147;smaller reporting company&#148; in Rule 12b-2 of the Exchange
Act. </FONT></P> <P STYLE="font-size:3px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1">Large&nbsp;accelerated&nbsp;filer</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1">Accelerated&nbsp;filer</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></FONT></TD></TR>
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<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1">Non-accelerated filer</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT>&nbsp;&nbsp;(Do&nbsp;not&nbsp;check&nbsp;if&nbsp;a&nbsp;smaller&nbsp;reporting&nbsp;company)</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1">Smaller&nbsp;reporting&nbsp;company</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#120;</FONT></FONT></TD></TR>
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<P STYLE="margin-top:2px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>CALCULATION OF REGISTRATION FEE </B></FONT></P> <P STYLE="font-size:4px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD VALIGN="bottom" ALIGN="center" STYLE="BORDER-TOP:1px solid #000000"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Title of Each Class of</B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Securities to be Registered</B></FONT></P></TD>
<TD VALIGN="bottom" STYLE="BORDER-LEFT:1px solid #000000; BORDER-TOP:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center" STYLE="BORDER-TOP:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Amount to
be<BR>Registered<SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(1)</SUP></B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-LEFT:1px solid #000000; BORDER-TOP:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center" STYLE="BORDER-TOP:1px solid #000000"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Proposed</B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Maximum</B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Offering Price<BR>per&nbsp;Unit<SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(2)</SUP></B></FONT></P></TD>
<TD VALIGN="bottom" STYLE="BORDER-LEFT:1px solid #000000; BORDER-TOP:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center" STYLE="BORDER-TOP:1px solid #000000"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Proposed</B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Maximum<BR>Aggregate<BR>Offering&nbsp;
Price<SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(2)</SUP></B></FONT></P></TD>
<TD VALIGN="bottom" STYLE="BORDER-LEFT:1px solid #000000; BORDER-TOP:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center" STYLE="BORDER-TOP:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Amount of<BR>Registration Fee</B></FONT></TD></TR>
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<TD VALIGN="top" STYLE="BORDER-TOP:1px solid #000000"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="1">Common Stock, $0.001 par value per share</FONT></P></TD>
<TD VALIGN="bottom" STYLE="BORDER-LEFT:1px solid #000000; BORDER-TOP:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center" STYLE="BORDER-TOP:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1">19,550,000</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-LEFT:1px solid #000000; BORDER-TOP:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center" STYLE="BORDER-TOP:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1">$1.31</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-LEFT:1px solid #000000; BORDER-TOP:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center" STYLE="BORDER-TOP:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1">$25,610,500</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-LEFT:1px solid #000000; BORDER-TOP:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center" STYLE="BORDER-TOP:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1">$3,494</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD COLSPAN="9" VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD></TR>
<TR STYLE="font-size:1px">
<TD COLSPAN="9" VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD></TR>
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<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(1)</SUP>&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1">Includes shares of common stock issuable pursuant to an option granted to the underwriter. </FONT></P></TD></TR></TABLE>
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<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(2)</SUP>&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1">Estimated solely for calculating the amount of the registration fee, pursuant to Rule 457(c) promulgated under the Securities Act of 1933, on the basis
of the average of the high and low sale prices of the Common Stock on The NASDAQ Capital Market on October 4, 2012, within five business days prior to filing. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:3px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="1"><B>The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically
states that this Registration Statement shall thereafter become effective in accordance with Section&nbsp;8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange
Commission, acting pursuant to said Section&nbsp;8(a), may determine. </B></FONT></P> <P STYLE="font-size:8px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<P STYLE="line-height:0px;margin-top:0px;margin-bottom:0px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="line-height:2px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P>

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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#a03245"><B>The information in this prospectus is not complete and may be changed. We may not sell
these securities under this registration statement until the registration statement filed with the Securities and Exchange Commission is declared effective. This prospectus is not an offer to sell any securities, and we are not soliciting an offer
to buy these securities in any state where the offer or sale is not permitted. </B></FONT></P> <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#a03245"><B>SUBJECT TO COMPLETION, DATED OCTOBER 9, 2012 </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><U>PROSPECTUS </U></B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="5" COLOR="#465361"><B></B>17<B>,000,000&nbsp;Shares </B></FONT></P> <P STYLE="font-size:24px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="right">


<IMG SRC="g417938g32i80.jpg" ALT="LOGO">
 </P> <P STYLE="margin-top:24px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="5" COLOR="#465361"><B>Athersys, Inc. </B></FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="5" COLOR="#465361"><B>Common Stock </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<P STYLE="line-height:4px;margin-top:0px;margin-bottom:2px;border-bottom:0.8pt solid #465361">&nbsp;</P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We are offering 17,000,000
shares of our common stock. Our common stock is listed on The NASDAQ Capital Market under the symbol &#147;ATHX.&#148; The last sale price of our common stock on October 8, 2012, as reported by The NASDAQ Capital Market, was $1.32 per share.
</FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center>
<P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:0.8pt solid #465361;width:19%">&nbsp;</P></center> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Investing in our common stock involves risk. Please read carefully the section entitled &#147;<A HREF="#toc417938_2">Risk Factors</A>&#148; beginning on page 7 of this prospectus.
</B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of
these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. </B></FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<P STYLE="line-height:0px;margin-top:0px;margin-bottom:0px;border-bottom:0.5pt solid #465361">&nbsp;</P> <P STYLE="line-height:2px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #465361">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD WIDTH="79%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Per&nbsp;Share</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Total</B></FONT></TD></TR>


<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Public Offering Price</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Underwriting Discounts and Commissions</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Proceeds to Us, Before Expenses</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD></TR>
</TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:0px;margin-top:0px;margin-bottom:0px;border-bottom:0.5pt solid #465361">&nbsp;</P>
<P STYLE="line-height:2px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #465361">&nbsp;</P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We have granted the underwriter
the right to purchase, exercisable within a 30-day period, up to an additional 2,550,000 shares of our common stock solely to cover over-allotments. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The underwriter expects to deliver the shares of common stock against payment on or about &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2012. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="5" COLOR="#465361"><B>Piper Jaffray </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Prospectus dated&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; , 2012 </B></FONT></P>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><A NAME="toc"></A>TABLE OF CONTENTS </B></FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #465361"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Page</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>


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<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:2.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><A HREF="#toc417938_1">PROSPECTUS SUMMARY</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">1</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-left:2.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><A HREF="#toc417938_2">RISK FACTORS</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">7</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-left:2.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><A HREF="#toc417938_3">CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">24</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-left:2.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><A HREF="#toc417938_4">USE OF PROCEEDS</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">26</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-left:2.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><A HREF="#toc417938_5">CAPITALIZATION</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">27</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-left:2.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><A HREF="#toc417938_6">COMMON STOCK PRICE RANGE</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">28</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-left:2.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><A HREF="#toc417938_7">DIVIDEND POLICY</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">28</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-left:2.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><A HREF="#toc417938_8">DILUTION</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">29</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-left:2.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><A HREF="#toc417938_9">SELECTED CONSOLIDATED FINANCIAL DATA</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">31</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-left:2.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><A HREF="#toc417938_10">MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">33</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-left:2.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><A HREF="#toc417938_11">BUSINESS</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">49</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-left:2.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><A HREF="#toc417938_12">MANAGEMENT</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">70</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-left:2.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><A HREF="#toc417938_13">CERTAIN RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">85</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-left:2.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><A HREF="#toc417938_14">BENEFICIAL OWNERSHIP OF COMMON STOCK</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">86</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-left:2.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><A HREF="#toc417938_15">DESCRIPTION OF CAPITAL STOCK</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">88</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-left:2.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><A HREF="#toc417938_16">MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">89</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-left:2.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><A HREF="#toc417938_17">UNDERWRITING</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">92</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-left:2.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><A HREF="#toc417938_18">LEGAL MATTERS</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">94</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-left:2.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><A HREF="#toc417938_19">EXPERTS</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">94</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-left:2.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><A HREF="#toc417938_20">WHERE YOU CAN FIND MORE INFORMATION</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">94</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-left:2.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><A HREF="#toc417938_21">INFORMATION WE INCORPORATE BY REFERENCE</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">94</FONT></TD>
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</TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:0.8pt solid #465361;width:39%">&nbsp;</P></center>
<P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>We have not authorized anyone to provide any information other than that contained in or incorporated by reference into this prospectus
or in any free writing prospectus prepared by or on behalf of us or to which we have referred you. We have not authorized any other person to provide you with different information. We take no responsibility for, and can provide no assurance as to
the reliability of, any other information that others may give you. We are not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus
is accurate only as of the date on the front cover of this prospectus. Our business, financial condition, operating results and prospects may have changed since that date. </B></FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="line-height:0px;margin-top:0px;margin-bottom:2px;border-bottom:0.8pt solid #465361">&nbsp;</P> <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>PROSPECTUS SU<A NAME="toc417938_1"></A>MMARY </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><I>This summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider before investing in our common stock. You
should read this entire prospectus carefully, including the sections entitled &#147;Risk Factors&#148; and &#147;Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations,&#148; and our historical consolidated
financial statements and related notes incorporated herein by reference. In this prospectus, unless the context requires otherwise, references to &#147;Athersys,&#148; &#147;we,&#148; &#147;our&#148; or &#147;us&#148; refer to Athersys, Inc. and its
consolidated subsidiaries. </I></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Company Overview </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px;padding-bottom:0px;"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We are an international biotechnology company that is focused primarily in the field of regenerative medicine. We are
committed to the discovery and development of best-in-class therapies designed to extend and enhance the quality of human life. 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<FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT>, 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&nbsp;&amp; immune disorders, neurological conditions, cardiovascular disease, and other conditions. These represent major areas of clinical need, as well as substantial commercial opportunities. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We believe MultiStem represents a breakthrough in the field of regenerative medicine and stem cell therapy and could be used to treat a
range of disease indications. MultiStem is a patented and proprietary product that enhances tissue repair and healing in multiple ways, including reducing inflammatory damage, protecting tissue that is at risk following acute or ischemic injury, and
promoting formation of new blood vessels in regions of ischemic injury. The cells comprising MultiStem appear to be responsive to the environment in which they are administered, homing to sites of injury and active disease response and producing
proteins that may provide benefit in acute or chronic conditions. In contrast to traditional pharmaceutical products or biologics that generally act through a single biological mechanism of action, the MultiStem product can enhance healing and
tissue repair through multiple distinct mechanisms acting simultaneously, by producing a range of therapeutic factors and dynamically responding to the needs of the body&#151;resulting in a more effective therapeutic response. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The MultiStem product is unique among regenerative medicine approaches, because it can be manufactured on a large scale, may be
administered in an &#147;off-the-shelf&#148; manner with minimal processing, and can augment healing in multiple ways, providing biological potency other cell therapy approaches cannot. Additionally, the MultiStem product has demonstrated a
consistent safety profile in both preclinical and clinical studies. Like drugs and biologics, the product is cleared from the body over time, enhancing product safety relative to other types of stem cell therapy. While the product does not
permanently engraft in the patient, the therapeutic effects of treatment with MultiStem cells appear to be quite durable. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We
believe the therapeutic and commercial potential for MultiStem to be very broad, applying to many areas of significant unmet medical need. We are pursuing opportunities in several potential multi-billion dollar markets. While traditional
pharmaceuticals or biologic therapies typically may be used to treat only a single disease or narrowly defined set of related conditions, MultiStem appears to have far broader potential and could be developed in different formulations and with
different delivery approaches to efficiently treat a range of disease indications. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We have already evaluated the use of
MultiStem as a potential treatment for a range of disease indications. Working with an international network of leading investigators and prominent research and </FONT></P>
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<P STYLE="line-height:0px;margin-top:0px;margin-bottom:2px;border-bottom:0.8pt solid #465361">&nbsp;</P>
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clinical institutions, and through our own internal efforts, we have explored the potential for MultiStem to be used in acute and chronic forms of inflammatory&nbsp;&amp; immune disorders,
neurological conditions, cardiovascular disease, certain pulmonary conditions, and other areas. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">To date, we have successfully
advanced MultiStem into five clinical stage programs, each of which addresses a significant area of medical need and represents a large commercial market opportunity. MultiStem has been evaluated in two completed clinical trials, one exploring the
potential to treat patients that have suffered a heart attack, and the other evaluating the potential to reduce graft versus host disease, or GvHD, as well as other complications, and to provide supportive care to patients being treated for leukemia
or related conditions. MultiStem is currently being evaluated in two additional clinical programs in the inflammatory&nbsp;&amp; immune disease and neurological areas. In one study, which is being conducted with our partner Pfizer&nbsp;Inc., or
Pfizer, MultiStem is being administered to patients with inflammatory bowel disease, or IBD. In another ongoing study, we are evaluating the potential to treat patients that have suffered neurological damage from a stroke. In addition, a leading
clinical center in Europe, and a research collaborator, has recently received authorization to conduct an initial clinical trial evaluating administration of MultiStem in patients that have received a solid organ transplant. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">In addition to our MultiStem programs, we have applied our pharmaceutical discovery capabilities to identify and develop novel
pharmaceuticals to treat obesity, related metabolic conditions such as diabetes, and certain neurological indications, such as schizophrenia, as well as small molecule compounds that may be used to enhance the production or therapeutic effectiveness
of MultiStem or related products, increase the product&#146;s biological potency for certain indications and lead to second or third generation products in the regenerative medicine area. Our 5HT2c agonist program for obesity works by the same
mechanism as Lorcaserin, which was recently approved by the U.S. Food and Drug Administration, or FDA, for the treatment of obesity, and we believe our compounds may have the potential for providing superior weight loss performance, while also
achieving a superior safety and tolerability profile. In addition, we have demonstrated our compounds are complementary with other agents that have been approved by the FDA for treating obesity. Furthermore, certain compounds that we developed may
also have relevance in other disease areas, such as the treatment of schizophrenia. We are actively exploring partnership opportunities for our 5HT2c program in both the obesity and schizophrenia areas. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Business Strategy </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Our principal business objective is to discover, develop and commercialize novel therapeutic products for disease indications that represent significant areas of clinical need and
commercial opportunity. The key elements of our strategy are outlined below. </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Efficiently Conduct Clinical Development to Establish Clinical Proof of Concept and Biological Activity with our Lead Product
Candidates.</I></B>&nbsp;&nbsp;&nbsp;&nbsp;MultiStem represents a novel therapeutic modality for the treatment of inflammatory&nbsp;&amp; immune system disorders, neurological conditions and cardiovascular disease, as well as in other areas.
MultiStem may be administered like other biologics, intravenously, via catheter, or by local injection. The cells appear to be responsive to their environment, homing to sites of injury and active disease response and producing proteins that may
provide benefit in acute or chronic conditions. Additionally, MultiStem cell therapy may deliver therapeutic benefit through several distinct mechanisms of action, including reducing inflammatory damage, protecting tissue that is at risk following
acute or ischemic injury, and promoting formation of new blood vessels in regions of ischemic injury. We are conducting a number of clinical studies with the intent to establish proof of concept and/or proof of biological activity in a number of
important disease areas where the cell therapies would be expected to have benefit &#150; inflammatory&nbsp;&amp; immune system dysfunctions, neurological conditions and cardiovascular
</FONT></P></TD></TR></TABLE> <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="font-size:4px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<P STYLE="line-height:0px;margin-top:0px;margin-bottom:2px;border-bottom:0.8pt solid #465361">&nbsp;</P>
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disease. Our focus is on conducting well-designed studies early in the clinical development process to establish a robust foundation for subsequent development, partnership and expansion into
complementary areas. We are committed to a rigorous clinical and regulatory framework, which we believe has helped to advance our programs efficiently, and is also a result of the quality of our regulatory submissions and transparency in our
discussions with the FDA have resulted in a successful regulatory partnership that has helped to advance our programs efficiently. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Continue to Refine and Improve our Manufacturing and Related Processes and Deepen our Understanding of Therapeutic Mechanisms of
Action.</I></B>&nbsp;&nbsp;&nbsp;&nbsp;A key aspect of MultiStem is its substantial expansion capacity <I>ex vivo</I> relative to other cell types. This enables large scale production of the clinical product, which enables greater consistency,
specificity and cost of goods advantages over other cell therapies. We plan to build on this intrinsic biological advantage by continuing to advance and optimize our production and process development approaches, further developing new manufacturing
approaches including our bioreactor platform, and optimizing the plant to bedside supply chain to support late stage development and commercialization. Additionally, we will continue to refine our understanding of our products&#146; activities and
mechanisms of action to enable optimization of administration and dosing and to prepare the foundation for product enhancements and next generation opportunities. </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Enter into Licensing or Product Co-Development Arrangements in Certain Areas, while Out-Licensing Opportunities in Non-Core
Areas.</I></B>&nbsp;&nbsp;&nbsp;&nbsp;In addition to our internal development efforts, an important part of our product development strategy is to work with collaborators and partners to accelerate product development, reduce our development costs,
and broaden our commercialization capabilities. We have entered into licensing and product co-development arrangements with qualified commercial partners to achieve these objectives. We anticipate that this strategy will help us to develop a
portfolio of high quality product development opportunities, enhance our clinical development and commercialization capabilities, and increase our ability to generate value from our proprietary technologies. Over the past decade, we have entered
into technology licensing arrangements and established product commercialization and co-development partnerships with companies such as Pfizer, Angiotech Pharmaceuticals, Inc., or Angiotech, Bristol-Myers Squibb Company, or Bristol-Myers Squibb,
Johnson&nbsp;&amp; Johnson, Wyeth and RTI Biologics, Inc., or RTI. These partnerships generate revenue and provide capital that allows us to advance certain programs further in development. </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Efficiently Explore New High Potential Therapeutic Applications, Leveraging Third-Party Research Collaborations and our Results
from Related Areas.</I></B>&nbsp;&nbsp;&nbsp;&nbsp;Our product candidates have shown promise in multiple disease areas, including in treating inflammatory&nbsp;&amp; immune disorders, neurological conditions, cardiovascular disease, and other areas.
We are committed to exploring potential clinical indications where our therapies may achieve best-in-class profile, and where we can address significant unmet medical needs.<I> </I>In order to achieve this goal, over the past decade, we have
established collaborative research relationships with investigators from many leading research and clinical institutions across the United States and Europe, including the Cleveland Clinic, Case Western Reserve University, University of Minnesota,
the Medical College of Georgia, the University of Oregon Health Sciences Center, the University of Texas Health Science Center at Houston, the University of Pittsburgh Medical Center, the Katholieke Universiteit Leuven, or KUL, and other
institutions. Through this network of collaborations, we have studied MultiStem in a range of preclinical models that reflect various types of human disease or injury in the </FONT></P></TD></TR></TABLE>
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cardiovascular, neurological, and immunological areas. These collaborative relationships have enabled us to cost effectively explore where MultiStem may have therapeutic relevance, and how it may
be utilized to advance treatment over current clinical care. Additionally, we have shown that we can leverage clinical safety data and preclinical results from some programs to support accelerated clinical development efforts in other areas, saving
substantial development time and resources compared to traditional drug development where generally each program is separately developed. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Continue to Expand our Intellectual Property Portfolio.&nbsp;&nbsp;&nbsp;&nbsp;</I></B>We have a broad intellectual property
estate that covers our proprietary products and technologies, as well as methods of production and methods of use. Our intellectual property is important to our business and we take significant steps to protect its value. We have ongoing research
and development efforts, both through internal activities and through collaborative research activities with others, which aim to develop new intellectual property and enable us to file patent applications that cover new applications of our existing
technologies or product candidates, including MultiStem and other opportunities. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Risks Related to Our
Business </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Investing in our common stock involves substantial risk. You should carefully consider all of the information in
this prospectus prior to investing in our common stock. There are numerous risk factors related to our business that are described under &#147;Risk Factors&#148; and elsewhere in this prospectus. Among these important risks are the following:
</FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">our clinical trials may not be successful, and clinical results may not reflect results seen in previously conducted preclinical
studies; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">we do not have adequate funding to complete development in some areas, and may not be able to access additional capital on reasonable
terms or at all to complete development; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">our current or future partners may not be able to adequately support development in designated areas, or they may elect to change their
strategic or business priorities, and these changes may have an adverse impact on us, our development plans, or our business; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">we may encounter unexpected regulatory changes that delay or impede our development and commercialization efforts;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">there may be unexpected changes in intellectual property law; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">product reimbursement challenges; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">we may encounter manufacturing and distribution challenges; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">we may not be able to recruit or retain well qualified personnel that are necessary for us to conduct our business.
</FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Corporate Information </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We were incorporated in Delaware on October&nbsp;24, 1995. On June&nbsp;8, 2007, we merged with a wholly owned subsidiary of BTHC VI, Inc., a Delaware corporation, and, on August&nbsp;31,
2007, BTHC VI, Inc. changed its name to Athersys, Inc. Our headquarters are located at 3201 Carnegie Avenue, Cleveland, Ohio 44115. Our telephone number is (216)&nbsp;431-9900. Our website is http://www.athersys.com. The information contained on or
accessible through our website is not part of this prospectus, other than documents that we file with the SEC that are incorporated by reference into this prospectus. </FONT></P>
<p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="font-size:4px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<P STYLE="line-height:0px;margin-top:0px;margin-bottom:2px;border-bottom:0.8pt solid #465361">&nbsp;</P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">4 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="line-height:0px;margin-top:0px;margin-bottom:2px;border-bottom:0.8pt solid #465361">&nbsp;</P> <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>The Offering </B></FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD WIDTH="51%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD WIDTH="46%"></TD></TR>


<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Common stock offered by us</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">17,000,000 shares (or 19,550,000 shares if the underwriter exercises its option to purchase additional shares to cover over-allotments in this offering in
full).</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Common stock to be outstanding immediately after this offering</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:1px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">46,515,343 shares (or 49,065,343 shares if the
underwriter exercises its option to purchase additional shares to cover over-allotments in this offering in full).</FONT></P></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Use of proceeds</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We currently expect to use the net proceeds from this offering for working capital and general corporate purposes. See &#147;Use of Proceeds.&#148;</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Risk factors</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">You should carefully read and consider the information set forth in &#147;Risk Factors&#148; beginning on page&nbsp;7 of this prospectus before investing in our
common stock.</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">NASDAQ Capital Market symbol</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">ATHX.</FONT></TD></TR>
</TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The number of shares of common stock to be outstanding after the offering is based on
29,515,343&nbsp;shares of common stock outstanding as of June&nbsp;30, 2012. Unless otherwise indicated, all information this prospectus assumes no exercise by the underwriter of its option to purchase additional shares of common stock to cover
over-allotments in this offering and excludes: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">4,299,698 shares of common stock reserved for issuance upon the exercise of options and restricted stock units granted under our equity
compensation plans with a weighted average exercise price of $4.37 per option share as of June&nbsp;30, 2012; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">5,806,853 shares of common stock that may be issued upon exercise of outstanding warrants with a weighted average exercise price of
$2.48 per share as of June 30, 2012, 4,347,827 of which are issuable pursuant to warrants that currently have an exercise price of $2.07 with full ratchet anti-dilution price protection, subject to certain exceptions; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">500,000 shares of common stock that we issued from June 30, 2012 through September 30, 2012, and any additional shares that we may
issue, to Aspire Capital Fund, LLC , or Aspire Capital, pursuant to a common stock purchase agreement we entered into on November&nbsp;11, 2011 (the agreement, as amended, is referred to in this prospectus as the Aspire Purchase Agreement), which
provides that, upon the terms and subject to the conditions and limitations set forth therein and as of September&nbsp;30, 2012, Aspire Capital is committed to purchase up to an aggregate of an additional $17.7 million of shares of our common stock
over the term of the Aspire Purchase Agreement, should we elect to sell shares to Aspire Capital; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">37,500 shares of common stock that we issued from June 30, 2012 through September 30, 2012, and additional shares we intend to issue,
to our former lenders as milestone payments under the terms of our loan agreement, as further described in the section entitled &#147;Dilution&#148; in this prospectus. </FONT></P></TD></TR></TABLE> <p STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P> <P STYLE="font-size:4px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:0px;margin-top:0px;margin-bottom:2px;border-bottom:0.8pt solid #465361">&nbsp;</P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">5 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="line-height:0px;margin-top:0px;margin-bottom:2px;border-bottom:0.8pt solid #465361">&nbsp;</P> <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Summary Consolidated Financial Data </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The following is a summary of our results of operations and financial position. The summary consolidated financial data set forth below should be read in conjunction with &#147;Selected
Consolidated Financial Data&#148; and &#147;Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations&#148; included elsewhere in this prospectus and the financial statements and the notes thereto incorporated by
reference into this prospectus. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD WIDTH="51%"></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Year Ended December&nbsp;31,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Six&nbsp;Months<BR>Ended&nbsp;June 30,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>2011</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>2012</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>2011</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="18" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>(in thousands, except per share data)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>


<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Consolidated Statement of Operations Data:</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Contract and grant revenues</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">10,344</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">8,939</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">2,159</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">5,404</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">5,425</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Operating expenses</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">24,124</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">20,450</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">17,774</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">13,172</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">11,770</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Loss from operations</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">(13,780</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">(11,511</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">(15,615</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">(7,768</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">(6,345</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">)&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Other income (expense), net</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">34</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">134</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">249</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">(281</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">(808</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">)&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Net loss</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">(13,746</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">(11,377</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">(15,366</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">(8,049</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">(7,153</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">)&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Basic and diluted net loss per common share</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">(0.59</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">(0.60</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">(0.81</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">(0.29</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">(0.32</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">)&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Weighted average shares used in computing basic and diluted net loss per common share</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">23,239</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">18,930</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">18,928</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">27,477</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">22,693</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
</TABLE> <P STYLE="margin-top:2px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Please see Note B to our audited consolidated financial statements incorporated by reference into this
prospectus for an explanation of the method used to calculate net loss attributable to common stockholders, basic and diluted net loss per common share, and the number of shares used in the computation of per share amounts. </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD WIDTH="77%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>December&nbsp;31,<BR>2011</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>June&nbsp;30,<BR>2012</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>(in thousands)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>


<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Consolidated Balance Sheet Data:</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Cash, cash equivalents and available-for-sale securities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">12,784</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">10,857</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Working capital</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">6,986</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">7,810</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Total assets</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">15,701</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">13,335</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Warrant liabilities and note payable</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">983</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">4,684</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Total stockholders&#146; equity</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">7,298</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">4,503</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
</TABLE> <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="font-size:4px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<P STYLE="line-height:0px;margin-top:0px;margin-bottom:2px;border-bottom:0.8pt solid #465361">&nbsp;</P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">6 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>RIS<A NAME="toc417938_2"></A>K FACTORS </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><I>An investment in our common stock involves a high degree of risk. Accordingly, you should carefully consider the following risk
factors, together with all of the other information contained in or incorporated by reference into this prospectus, including our consolidated financial statements and related notes incorporated by reference into this prospectus, before making an
investment in our common stock. If any of the following risks actually occurs, we may not be able to conduct our business as currently planned, and our business, operating results and financial condition could be harmed. In that case, the market
price of our common stock could decline, and you could lose all or a part of your investment. </I></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Risks Related To Our
Business and Our Industry </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>We have incurred losses since inception and we expect to incur significant net losses in
the foreseeable future and may never become profitable. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Since our inception in 1995, we have incurred significant
losses and negative cash flows from operations. We incurred net losses of $14 million in 2011, $11 million in 2010 and $15 million in 2009 and $8&nbsp;million for the six months ended June&nbsp;30, 2012. As of June&nbsp;30, 2012, we had an
accumulated deficit of $227 million, and anticipate incurring additional losses for at least the next several years. We expect to spend significant resources over the next several years to enhance our technologies and to fund research and
development of our pipeline of potential products. To date, substantially all of Athersys&#146; revenue has been derived from corporate collaborations, license agreements and government grants. In order to achieve profitability, we must develop
products and technologies that can be commercialized by us or through our existing or future collaborations. Our ability to generate revenues and become profitable will depend on our ability, alone or with potential collaborators, to timely,
efficiently and successfully complete the development of our product candidates. We have never earned revenue from selling a product and we may never do so, as none of our product candidates have been approved for sale, since they are currently
being tested in humans and animal studies. We cannot assure you that we will ever earn revenue or that we will ever become profitable. If we sustain losses over an extended period of time, we may be unable to continue our business. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>We will need substantial additional funding to develop our products and for our future operations. If we are unable to obtain the
funds necessary to do so, we may be required to delay, scale back or eliminate our product development activities or may be unable to continue our business. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The development of our product candidates will require a commitment of substantial funds to conduct the costly and time-consuming research, which may include preclinical and clinical
testing, necessary to obtain regulatory approvals and bring our products to market. Net cash used in our operations was $14&nbsp;million in 2011, $11 million in 2010 and $5 million in 2009, and $10 million for the six months ended June&nbsp;30,
2012. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">At June&nbsp;30, 2012, we had $10.9 million of cash and cash equivalents, and we will need substantially more to
advance our product candidates through development. Furthermore, we will need to add additional capital to fund our operations through the completion of our current clinical trials. Our future capital requirements will depend on many factors,
including: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">our ability to raise capital to fund our operations; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">the progress and costs of our research and development programs, including our ability to develop our current portfolio of therapeutic
products, or discover and develop new ones; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
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<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">our ability, or our partners ability and willingness, to advance partnered products or programs, and the speed in which they are
advanced; </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">7 </FONT></P>


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<h5 align="left"><a href="#toc">Table of Contents</a></h5>


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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">the cost of prosecuting, defending and enforcing patent claims and other intellectual property rights; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">the progress, scope, costs, and results of our preclinical and clinical testing of any current or future pharmaceutical or MultiStem
related products; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">the time and cost involved in obtaining regulatory approvals; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">the cost of manufacturing our product candidates; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">expenses related to complying with good manufacturing practices, or GMP, of therapeutic product candidates;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
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<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">costs of financing the purchases of additional capital equipment and development technologies; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">competing technological and market developments; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
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<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">our ability to establish and maintain collaborative and other arrangements with third parties to assist in bringing our products to
market and the cost of such arrangements; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">the amount and timing of payments or equity investments that we receive from collaborators or changes in or terminations of future or
existing collaboration and licensing arrangements and the timing and amount of expenses we incur to supporting these collaborations and license agreements; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">costs associated with the integration of any new operation, including costs relating to future mergers and acquisitions with companies
that have complementary capabilities; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">expenses related to the establishment of sales and marketing capabilities for products awaiting approval or products that have been
approved; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">the level of our sales and marketing expenses; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
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<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">our ability to introduce and sell new products. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The extent to which we utilize the Aspire Purchase Agreement with Aspire Capital as a source of funding will depend on a number of factors, including the prevailing market price of our
common stock, the volume of trading in our common stock and the extent to which we are able to secure funds from other sources. The number of shares that we may sell to Aspire Capital under the Aspire Purchase Agreement on any given day and during
the term of the agreement is limited. Additionally, we and Aspire Capital may not effect any sales of shares of our common stock under the Aspire Purchase Agreement during the continuance of an event of default or at a purchase price of less than
$1.45. Even if we are able to access the full $17.7 million remaining under the Aspire Purchase Agreement as of September&nbsp;30, 2012, we will still need additional capital to fully implement our business, operating and development plans.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We have secured capital historically from grant revenues, collaboration proceeds, and debt and equity offerings. We will need
to secure substantial additional capital to fund our future operations. We cannot be certain that additional capital will be available on acceptable terms or at all. In recent years, it has been difficult for companies to raise capital due to a
variety of factors, which may or may not continue. To the extent we raise additional capital through the sale of equity securities, including to Aspire Capital, the ownership position of our existing stockholders could be substantially diluted. If
additional funds are raised through the issuance of preferred stock or debt securities, these securities are likely to have rights, preferences and privileges senior to our common stock. Fluctuating interest rates could also increase the costs of
any debt financing we may obtain. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Failure to successfully address ongoing liquidity requirements will have a material adverse
effect on our business. If we are unable to obtain additional capital on acceptable terms when needed, we may be </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">8 </FONT></P>


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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">
required to take actions that harm our business and our ability to achieve cash flow in the future, including possibly the surrender of our rights to some technologies or product opportunities,
delaying our clinical trials or curtailing or ceasing operations. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>We are heavily dependent on the successful
development and commercialization of MultiStem products, and if we encounter delays or difficulties in the development of this product candidate, our business could be harmed. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Our success is heavily dependent upon the successful development of MultiStem products for certain diseases and conditions involving acute or ischemic injury or immune system dysfunction.
Our business could be materially harmed if we encounter difficulties in the development of this product candidate, such as: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">delays in the ability to manufacture the product in quantities or in a form that is suitable for any required preclinical studies or
clinical trials; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">delays in the design, enrollment, implementation or completion of required preclinical studies and clinical trials;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">an inability to follow our current development strategy for obtaining regulatory approval from the FDA because of changes in the
regulatory approval process; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">less than desired or complete lack of efficacy or safety in preclinical studies or clinical trials; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">intellectual property constraints that prevent us from making, using, or commercializing the product candidate.
</FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>The results seen in animal testing of our product candidates may not be replicated in humans.
</I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">This prospectus discusses the safety and efficacy seen in preclinical testing of our lead product candidates,
including MultiStem, in animals, but we may not see positive results when our other product candidates undergo clinical testing in humans in the future. Preclinical studies and Phase I clinical trials are not primarily designed to test the efficacy
of a product candidate in humans, but rather to: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
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<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">test short-term safety and tolerability; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">study the absorption, distribution, metabolism and elimination of the product candidate; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">study the biochemical and physiological effects of the product candidate and the mechanisms of the drug action and the relationship
between drug levels and effect; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">understand the product candidate&#146;s side effects at various doses and schedules. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Success in preclinical studies or completed clinical trials does not ensure that later studies or trials, including continuing
non-clinical studies and large-scale clinical trials, will be successful nor does it necessarily predict future results. The rate of failure in drug development is quite high, and many companies in the biotechnology and pharmaceutical industries
have suffered significant setbacks in advanced clinical trials, even after promising results in earlier trials. Product candidates may fail to show desired safety and efficacy in larger and more diverse patient populations in later stage clinical
trials, despite having progressed through early stage trials. Negative or inconclusive results from any of our ongoing preclinical studies or clinical trials could result in delays, modifications, or abandonment of ongoing or future clinical trials
and the termination of our development of a product candidate. Additionally, even if we are able to successfully complete pivotal Phase III clinical trials, the FDA still may not approve our product candidates. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Our product candidates are in an early stage of development and we currently have no
therapeutic products approved for sale. If we are unable to develop, obtain regulatory approval or market any of our product candidates, our financial condition will be negatively affected, and we may have to curtail or cease our operations.
</I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We are in the early stage of product development, and we are dependent on the application of our technologies to
discover or develop therapeutic product candidates. We currently do not sell any approved therapeutic products and do not expect to have any products commercially available for several years, if at all. You must evaluate us in light of the
uncertainties and complexities affecting an early stage biotechnology company. Our product candidates require additional research and development, preclinical testing, clinical testing and regulatory review and/or approvals or clearances before
marketing. To date, no one to our knowledge has commercialized any therapeutic products using our technologies and we might never commercialize any product using our technologies and strategy. In addition, we may not succeed in developing new
product candidates as an alternative to our existing portfolio of product candidates. If our current product candidates are delayed or fail, or we fail to successfully develop and commercialize new product candidates, our financial condition may be
negatively affected, and we may have to curtail or cease our operations. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>We may not successfully maintain our existing
collaborative and licensing arrangements, or establish new ones, which could adversely affect our ability to develop and commercialize our product candidates. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">A key element of our business strategy is to commercialize some of our product candidates through collaborations with other companies. Our strategy includes establishing collaborations and
licensing agreements with one or more pharmaceutical, biotechnology or device companies, preferably after we have advanced product candidates through the initial stages of clinical development. However, we may not be able to establish or maintain
such licensing and collaboration arrangements necessary to develop and commercialize our product candidates. Even if we are able to maintain or establish licensing or collaboration arrangements, these arrangements may not be on favorable terms and
may contain provisions that will restrict our ability to develop, test and market our product candidates. Any failure to maintain or establish licensing or collaboration arrangements on favorable terms could adversely affect our business prospects,
financial condition or ability to develop and commercialize our product candidates. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Our agreements with our collaborators and
licensees may have provisions that give rise to disputes regarding the rights and obligations of the parties. These and other possible disagreements could lead to termination of the agreement or delays in collaborative research, development, supply,
or commercialization of certain product candidates, or could require or result in litigation or arbitration. Moreover, disagreements could arise with our collaborators over rights to intellectual property or our rights to share in any of the future
revenues of products developed by our collaborators. These kinds of disagreements could result in costly and time-consuming litigation. Any such conflicts with our collaborators could reduce our ability to obtain future collaboration agreements and
could have a negative impact on our relationship with existing collaborators. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px;padding-bottom:0px;"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Currently, our material
collaborations and licensing arrangements are our collaboration with Pfizer to develop and commercialize
MultiStem<FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT> for the treatment of IBD, our collaboration with RTI to develop and commercialize
Multipotent Adult Progenitor Cell, or MAPC<FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT>, technology-based biologic implants for certain
orthopedic applications in the bone graft substitutes market, and our license with the University of Minnesota pursuant to which we license certain aspects of the MultiStem technology. These arrangements do not have specific termination dates;
rather, each arrangement terminates upon the occurrence of certain events. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>If our collaborators do not devote sufficient time and resources to successfully
carry out their contracted duties or meet expected deadlines, we may not be able to advance our product candidates in a timely manner or at all. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Our success depends on the performance by our collaborators of their responsibilities under our collaboration arrangements. Some potential collaborators may not perform their obligations
in a timely fashion or in a manner satisfactory to us. Typically, we cannot control the amount of resources or time our collaborators may devote to our programs or potential products that may be developed in collaboration with us. We are currently
involved in multiple research and development collaborations with academic and research institutions. These collaborators frequently depend on outside sources of funding to conduct or complete research and development, such as grants or other
awards. In addition, our academic collaborators may depend on graduate students, medical students, or research assistants to conduct certain work, and such individuals may not be fully trained or experienced in certain areas, or they may elect to
discontinue their participation in a particular research program, creating an inability to complete ongoing research in a timely and efficient manner. As a result of these uncertainties, we are unable to control the precise timing and execution of
any experiments that may be conducted. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Additionally, our current or future corporate collaborators will retain the ability to
pursue other research, product development or commercial opportunities that may be directly competitive with our programs. If these collaborators elect to prioritize or pursue other programs in lieu of ours, we may not be able to advance product
development programs in an efficient or effective manner, if at all. If a collaborator is pursuing a competitive program and encounters unexpected financial or capability limitations, they may be motivated to reduce the priority placed on our
programs or delay certain activities related to our programs or be unwilling to properly fund their share of the development expenses for our programs. Any of these developments could harm our product and technology development efforts, which could
seriously harm our business. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Even if we or our collaborators receive regulatory approval for our products, those
products may never be commercially successful. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Even if we develop pharmaceuticals or MultiStem related products that
obtain the necessary regulatory approval, and we have access to the necessary manufacturing, sales, marketing and distribution capabilities that we need, our success depends to a significant degree upon the commercial success of those products. If
these products fail to achieve or subsequently maintain market acceptance or commercial viability, our business would be significantly harmed because our future royalty revenue or other revenue would be dependent upon sales of these products. Many
factors may affect the market acceptance and commercial success of any potential products that we may discover, including: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">health concerns, whether actual or perceived, or unfavorable publicity regarding our obesity drugs, stem cell products or those of our
competitors; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">the timing of market entry as compared to competitive products; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">the rate of adoption of products by our collaborators and other companies in the industry; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">any product labeling that may be required by the FDA or other United States or foreign regulatory agencies for our products or
competing or comparable products; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">convenience and ease of administration; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">pricing; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">perceived efficacy and side effects; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>

<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
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<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">marketing; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">availability of alternative treatments; </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">levels of reimbursement and insurance coverage; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">activities by our competitors. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>We may experience delays in clinical trials and regulatory approval relating to our products that could adversely affect our financial results and our commercial prospects for our
pharmaceutical or stem cell products. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">In addition to the regulatory requirements for our pharmaceutical programs, we
will also require regulatory approvals for each distinct application of our stem cell product. In each case, we will be required to conduct clinical trials to demonstrate safety and efficacy of MultiStem, or various products that incorporate or use
MultiStem. For product candidates that advance to clinical testing, we cannot be certain that we or a collaborator will successfully complete the clinical trials necessary to receive regulatory product approvals. This process is lengthy and
expensive. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We intend to seek approval for our product candidates through the FDA approval process. To obtain regulatory
approvals, we must, among other requirements, complete clinical trials showing that our products are safe and effective for a particular indication. Under the approval process, we must submit clinical and non-clinical data to demonstrate the
medication is safe and effective. For example, we must be able to provide data and information, which may include extended pharmacology, toxicology, reproductive toxicology, bioavailability and genotoxicity studies to establish suitability for Phase
II or large scale Phase III clinical trials. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">All of our product candidates are at an early stage of development. As these
programs enter and progress through early stage clinical development, or complete additional non-clinical testing, an indication of a lack of safety or lack of efficacy may result in the early termination of an ongoing trial, or may cause us or any
of our collaborators to forego further development of a particular product candidate or program. The FDA or other regulatory agencies may require extensive clinical trials or other testing prior to granting approval, which could be costly and time
consuming to conduct. Any of these developments would hinder, and potentially prohibit, our ability to commercialize our product candidates. We cannot assure you that clinical trials will in fact demonstrate that our products are safe or effective.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Additionally, we may not be able to find acceptable patients or may experience delays in enrolling patients for our currently
planned or any future clinical trials. The FDA or we may suspend our clinical trials at any time if either believes that we are exposing the subjects participating in the trials to unacceptable health risks. The FDA or institutional review boards
and/or institutional biosafety committees at the medical institutions and healthcare facilities where we seek to sponsor clinical trials may not permit a trial to proceed or may suspend any trial indefinitely if they find deficiencies in the conduct
of the trials. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Product development costs to us and our potential collaborators will increase if we have delays in testing or
approvals or if we need to perform more or larger clinical trials than planned. We expect to continue to rely on third party clinical investigators at medical institutions and healthcare facilities to conduct our clinical trials, and, as a result,
we may face additional delaying factors outside our control. Significant delays may adversely affect our financial results and the commercial prospects for our product candidates and delay our ability to become profitable. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>If our pharmaceutical product candidates do not successfully complete the clinical trial process, we will not be able to partner or
market them. Even successful clinical trials may not result in a partnering transaction or a marketable product and may not be entirely indicative of a product&#146;s safety or efficacy. </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Many factors, known and unknown, can adversely affect clinical trials and the ability to evaluate a product&#146;s efficacy. During the
course of treatment, patients can die or suffer other adverse events for </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">
reasons that may or may not be related to the proposed product being tested. Even if unrelated to our product, certain events can nevertheless adversely impact our clinical trials. As a result,
our ability to ultimately develop and market the products and obtain revenues would suffer. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Even promising results in
preclinical studies and initial clinical trials do not ensure successful results in later clinical trials, which test broader human use of our products. Many companies in our industry have suffered significant setbacks in advanced clinical trials,
despite promising results in earlier trials. Even successful clinical trials may not result in a marketable product or be indicative of the efficacy or safety of a product. Many factors or variables could affect the results of clinical trials and
cause them to appear more promising than they may otherwise be. Product candidates that successfully complete clinical trials could ultimately be found to be unsafe or ineffective. In addition, our ability to complete clinical trials depends on many
factors, including obtaining adequate clinical supplies and having a sufficient rate of patient recruitment. For example, patient recruitment is a function of many factors, including: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">the size of the patient population; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
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<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">the proximity of patients to clinical sites; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">the eligibility criteria for the trial; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">the perceptions of investigators and patients regarding safety; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">the availability of other treatment options. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Even if we obtain regulatory approval of any of our product candidates, the approved products may be subject to post-approval studies and will remain subject to ongoing regulatory
requirements. If we fail to comply, or if concerns are identified in subsequent studies, our approval could be withdrawn and our product sales could be suspended. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">If we are successful at obtaining regulatory approval for MultiStem or any of our other product candidates, regulatory agencies in the United States and other countries where a product
will be sold may require extensive additional clinical trials or post-approval clinical studies that are expensive and time consuming to conduct. In particular, therapeutic products administered for the treatment of persistent or chronic conditions,
such as obesity, are likely to require extensive follow-up studies and close monitoring of patients after regulatory approval has been granted, for any signs of adverse effects that occur over a long period of time. These studies may be expensive
and time consuming to conduct and may reveal side effects or other harmful effects in patients that use our therapeutic products after they are on the market, which may result in the limitation or withdrawal of our drugs from the market.
Alternatively, we may not be able to conduct such additional trials, which might force us to abandon our efforts to develop or commercialize certain product candidates. Even if post-approval studies are not requested or required, after our products
are approved and on the market, there might be safety issues that emerge over time that require a change in product labeling or that require withdrawal of the product from the market, which would cause our revenue to decline. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Additionally, any products that we may successfully develop will be subject to ongoing regulatory requirements after they are approved.
These requirements will govern the manufacturing, packaging, marketing, distribution, and use of our products. If we fail to comply with such regulatory requirements, approval for our products may be withdrawn, and product sales may be suspended. We
may not be able to regain compliance, or we may only be able to regain compliance after a lengthy delay, significant expense, lost revenues and damage to our reputation. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>We may rely on third parties to manufacture our MultiStem product candidate.
</I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Our current business strategy relies on third parties to manufacture our MultiStem product candidates in accordance
with good manufacturing practices established by the FDA, or similar regulations in other countries. These third parties may not deliver sufficient quantities of our MultiStem product candidates, manufacture MultiStem product candidates in
accordance with specifications, or comply with applicable government regulations. Additionally, if the manufactured products fail to perform as specified, our business and reputation could be severely impacted. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We expect to enter into additional manufacturing agreements for the production of product materials. If any manufacturing agreement is
terminated or any third party collaborator experiences a significant problem that could result in a delay or interruption in the supply of product materials to us, there are very few contract manufacturers who currently have the capability to
produce our MultiStem product on acceptable terms, or on a timely and cost-effective basis. We cannot assure you that manufacturers on whom we will depend will be able to successfully produce our MultiStem product on acceptable terms, or on a timely
or cost-effective basis. We cannot assure you that manufacturers will be able to manufacture our products in accordance with our product specifications or will meet FDA or other requirements. We must have sufficient and acceptable quantities of our
product materials to conduct our clinical trials and ultimately to market our product candidates, if and when such products have been approved by the FDA for marketing. If we are unable to obtain sufficient and acceptable quantities of our product
material, we may be required to delay the clinical testing and marketing of our products. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>If we do not comply with
applicable regulatory requirements in the manufacture and distribution of our product candidates, we may incur penalties that may inhibit our ability to commercialize our products and adversely affect our revenue. </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Our failure or the failure of our potential collaborators or third party manufacturers to comply with applicable FDA or other regulatory
requirements including manufacturing, quality control, labeling, safety surveillance, promoting and reporting may result in criminal prosecution, civil penalties, recall or seizure of our products, total or partial suspension of production or an
injunction, as well as other regulatory action against our product candidates or us. Discovery of previously unknown problems with a product, supplier, manufacturer or facility may result in restrictions on the sale of our products, including a
withdrawal of such products from the market. The occurrence of any of these events would negatively impact our business and results of operations. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>If we are unable to create and maintain sales, marketing and distribution capabilities or enter into agreements with third parties to perform those functions, we will not be able to
commercialize our product candidates. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We currently have no sales, marketing or distribution capabilities. Therefore,
to commercialize our product candidates, if and when such products have been approved and are ready for marketing, we expect to collaborate with third parties to perform these functions. We will either need to share the value generated from the sale
of any products and/or pay a fee to the contract sales organization. If we establish any such relationships, we will be dependent upon the capabilities of our collaborators or contract service providers to effectively market, sell, and distribute
our product. If they are ineffective at selling and distributing our product, or if they choose to emphasize other products over ours, we may not achieve the level of product sales revenues that we would like. If conflicts arise, we may not be able
to resolve them easily or effectively, and we may suffer financially as a result. If we cannot rely on the sales, marketing and distribution capabilities of our collaborators or of contract service providers, we may be forced to establish our own
capabilities. We have no experience in developing, training or managing a sales force and will incur substantial additional expenses if we decide to market any of our future products directly. Developing a marketing and sales force is also time
consuming and could delay launch of our future products. In addition, we will compete with many companies that currently have extensive </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">
and well-funded marketing and sales operations. Our marketing and sales efforts may be unable to compete successfully against these companies. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>If we are unable to attract and retain key personnel and advisors, it may adversely affect our ability to obtain financing, pursue
collaborations or develop our product candidates. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We are highly dependent on our executive officers Gil Van Bokkelen,
Ph.D., our Chief Executive Officer, as well as other executive and scientific officers, including William Lehmann, J.D., M.B.A., President and Chief Operating Officer, John Harrington, Ph.D., Chief Scientific Officer and Executive Vice President,
Robert Deans, Ph.D., Executive Vice President, Regenerative Medicine, and Laura Campbell, CPA, Vice President of Finance, as well as other personnel. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">These individuals are integral to the development and integration of our technologies and to our present and future scientific collaborations, including managing the complex research
processes and the product development and potential commercialization processes. Given their leadership, extensive technical, scientific and financial expertise and management and operational experience, these individuals would be difficult to
replace. Consequently, the loss of services of one or more of these named individuals could result in product development delays or the failure of our collaborations with current and future collaborators, which, in turn, may hurt our ability to
develop and commercialize products and generate revenues. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Our future success depends on our ability to attract, retain and
motivate highly qualified management and scientific, development and commercial personnel and advisors. If we are unable to attract and retain key personnel and advisors, it may negatively affect our ability to successfully develop, test and
commercialize our product candidates. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Our ability to compete in the biopharmaceutical market may decline if we are not
successful in adequately protecting our proprietary technologies. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Our success depends in part on our ability to obtain
and maintain intellectual property that protects our technologies and our pharmaceutical products. Patent positions may be highly uncertain and may involve complex legal and factual questions, including the ability to establish patentability of
compounds and methods for using them for which we seek patent protection. We cannot predict the breadth of claims that will ultimately be allowed in our patent applications, if any, including those we have in-licensed or the extent to which we may
enforce these claims against our competitors. We have filed multiple patent </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">applications that seek to protect the composition
of matter and method of use related to our small molecule programs. In addition, we are prosecuting numerous distinct patent families directed to composition, methods of production, and methods of use of MultiStem and related technologies. If we are
unsuccessful in obtaining and maintaining these patents related to products and technologies, we may ultimately be unable to commercialize products that we are developing or may elect to develop in the future. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The degree of future protection for our proprietary rights is therefore highly uncertain and we cannot assure you that: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">we were the first to file patent applications or to invent the subject matter claimed in patent applications relating to the
technologies or product candidates upon which we rely; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">others will not independently develop similar or alternative technologies or duplicate any of our technologies;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
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<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">others did not publicly disclose our claimed technology before we conceived the subject matter included in any of our patent
applications; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
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<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">any of our pending or future patent applications will result in issued patents; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">any of our patent applications will not result in interferences or disputes with third parties regarding priority of invention;
</FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">any patents that may be issued to us, our collaborators or our licensors will provide a basis for commercially viable products or will
provide us with any competitive advantages or will not be challenged by third parties; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">we will develop additional proprietary technologies that are patentable; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">the patents of others will not have an adverse effect on our ability to do business; or </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">new proprietary technologies from third parties, including existing licensors, will be available for licensing to us on reasonable
commercial terms, if at all. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">In addition, patent law outside the United States is uncertain and in many
countries intellectual property laws are undergoing review and revision. The laws of some countries do not protect intellectual property rights to the same extent as domestic laws. It may be necessary or useful for us to participate in opposition
proceedings to determine the validity of our competitors&#146; patents or to defend the validity of any of our or our licensor&#146;s future patents, which could result in substantial costs and would divert our efforts and attention from other
aspects of our business. With respect to certain of our inventions, we have decided not to pursue patent protection outside the United States, both because we do not believe it is cost effective and because of confidentiality concerns. Accordingly,
our international competitors could develop and receive foreign patent protection for gene sequences and functions for which we are seeking United States patent protection, enabling them to sell products that we have developed. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Technologies licensed to us by others, or in-licensed technologies, are important to our business. The scope of our rights under our
licenses may be subject to dispute by our licensors or third parties. Our rights to use these technologies and to practice the inventions claimed in the licensed patents are subject to our licensors abiding by the terms of those licenses and not
terminating them. In particular, we depend on certain technologies relating to our MultiStem technology licensed from the University of Minnesota, and the termination of this license could result in our loss of some of the rights that enable us to
utilize this technology, and our ability to develop products based on MultiStem could be seriously hampered. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">In addition, we
may in the future acquire rights to additional technologies by licensing such rights from existing licensors or from third parties. Such in-licenses may be costly. Also, we generally do not control the patent prosecution, maintenance or enforcement
of in-licensed technologies. Accordingly, we are unable to exercise the same degree of control over this intellectual property as we do over our internally developed technologies. Moreover, some of our academic institution licensors, collaborators
and scientific advisors have rights to publish data and information to which we have rights. If we cannot maintain the confidentiality of our technologies and other confidential information in connection with our collaborations, our ability to
protect our proprietary information or obtain patent protection in the future may be impaired, which could have a significant adverse effect on our business, financial condition and results of operations. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>We may not have adequate protection for our unpatented proprietary information, which could adversely affect our competitive
position. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">In addition to patents, we will substantially rely on trade secrets, know-how, continuing technological
innovations and licensing opportunities to develop and maintain our competitive position. However, others may independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets or
disclose our technology. To protect our trade secrets, we may enter into confidentiality agreements with employees, consultants and potential collaborators. However, these agreements may not provide meaningful protection of our trade secrets or
adequate remedies in the event of unauthorized use or disclosure of such information. Likewise, our trade secrets or know-how may become known through other means or be independently discovered by our competitors. Any of these events could prevent
us from developing or commercializing our product candidates. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Disputes concerning the infringement or misappropriation of our proprietary rights or
the proprietary rights of others could be time consuming and extremely costly and could delay our research and development efforts. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Our commercial success, if any, will be significantly harmed if we infringe the patent rights of third parties or if we breach any license or other agreements that we have entered into
with regard to our technology or business. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We are aware of other companies and academic institutions that have been
performing research in the areas of adult derived stem cells. In particular, other companies and academic institutions have announced that they have identified nonembryonic stem cells isolated from bone marrow or other tissues that have the ability
to form a range of cell types, or display the property of pluripotency. To the extent any of these companies or academic institutions currently have, or obtain in the future, broad patent claims, such patents could block our ability to use various
aspects of our discovery and development process and might prevent us from developing or commercializing newly discovered applications of our MultiStem technology, or otherwise conducting our business. In addition, it is possible that some of the
pharmaceutical product candidates we are developing may not be patentable or may be covered by intellectual property of third parties. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We are not currently a party to any litigation, interference, opposition, protest, reexamination or any other potentially adverse governmental, ex parte or inter-party proceeding with
regard to our patent or trademark positions. However, the life sciences and other technology industries are characterized by extensive litigation regarding patents and other intellectual property rights. Many life sciences and other technology
companies have employed intellectual property litigation as a way to gain a competitive advantage. If we become involved in litigation, interference proceedings, oppositions, reexamination, protest or other potentially adverse intellectual property
proceedings as a result of alleged infringement by us of the rights of others or as a result of priority of invention disputes with third parties, we might have to spend significant amounts of money, time and effort defending our position and we may
not be successful. In addition, any claims relating to the infringement of third-party proprietary rights or proprietary determinations, even if not meritorious, could result in costly litigation, lengthy governmental proceedings, divert
management&#146;s attention and resources, or require us to enter into royalty or license agreements that are not advantageous to us. If we do not have the financial resources to support such litigation or appeals, we may forfeit or lose certain
commercial rights. Even if we have the financial resources to continue such litigation or appeals, we may lose. In the event that we lose, we may be forced to pay very substantial damages; we may have to obtain costly license rights, which may not
be available to us on acceptable terms, if at all; or we may be prohibited from selling products that are found to infringe the patent rights of others. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Should any person have filed patent applications or obtained patents that claim inventions also claimed by us, we may have to participate in an interference proceeding declared by the
relevant patent regulatory agency to determine priority of invention and, thus, the right to a patent for these inventions in the United States. Such a proceeding could result in substantial cost to us even if the outcome is favorable. Even if
successful on priority grounds, an interference action may result in loss of claims based on patentability grounds raised in the interference action. Litigation, interference proceedings or other proceedings could divert management&#146;s time and
efforts. Even unsuccessful claims could result in significant legal fees and other expenses, diversion of management&#146;s time and disruption in our business. Uncertainties resulting from initiation and continuation of any patent proceeding or
related litigation could harm our ability to compete and could have a significant adverse effect on our business, financial condition and results of operations. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">An adverse ruling arising out of any intellectual property dispute, including an adverse decision as to the priority of our inventions, could undercut or invalidate our intellectual
property position. An adverse </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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ruling could also subject us to significant liability for damages, including possible treble damages, prevent us from using technologies or developing products, or require us to negotiate
licenses to disputed rights from third parties. Although patent and intellectual property disputes in the technology area are often settled through licensing or similar arrangements, costs associated with these arrangements may be substantial and
could include license fees and ongoing royalties. Furthermore, necessary licenses may not be available to us on satisfactory terms, if at all. Failure to obtain a license in such a case could have a significant adverse effect on our business,
financial condition and results of operations. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Many potential competitors, including those who have greater resources
and experience than we do, may develop products or technologies that make ours obsolete or noncompetitive. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We face
significant competition with respect to our product candidates. With regard to our efforts to develop MultiStem as a novel stem cell therapy, currently, there are a number of companies that are actively developing stem cell products, which encompass
a range of different cell types, including embryonic stem cells, adult-derived stem cells, and processed bone marrow derived cells. Our future success will depend on our ability to maintain a competitive position with respect to technological
advances. Technological developments by others may result in our MultiStem product platform and technologies, as well as our pharmaceutical formulations, becoming obsolete. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We are subject to significant competition from pharmaceutical, biotechnology and diagnostic companies, academic and research institutions, and government or other publicly funded agencies
that are pursuing or may pursue the development of therapeutic products and technologies that are substantially similar to our proposed therapeutic products and technologies, or that otherwise address the indications we are pursuing. Our most
significant competitors include major pharmaceutical companies such as Pfizer, F. Hoffmann-La Roche, Ltd., or Roche, Johnson&nbsp;&amp; Johnson, Sanofi U.S., or Sanofi, and GlaxoSmithKline plc, or GlaxoSmithKline, as well as smaller biotechnology or
biopharmaceutical companies such as Celgene Corporation, or Celgene, Osiris Therapeutics, Inc., or Osiris, Aastrom Biosciences, Inc., or Aastrom Biosciences, Stem Cells Inc., Cytori Therapeutics, Inc., or Cytori, Mesoblast Limited, or Mesoblast,
Pluristem Therapeutics Inc., or Pluristem, Arena Pharmaceuticals, Inc., or Arena Pharmaceuticals, Orexigen Therapeutics, Inc., or Orexigen Therapeutics, and Vivus, Inc., or Vivus. Most of our current and potential competitors have substantially
greater research and development capabilities and financial, scientific, regulatory, manufacturing, marketing, sales, human resources, and experience than we do. Many of our competitors have several therapeutic products that have already been
developed, approved and successfully commercialized, or are in the process of obtaining regulatory approval for their therapeutic products in the United States and internationally. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Many of these companies have substantially greater capital resources, research and development resources and experience, manufacturing capabilities, regulatory expertise, sales and
marketing resources, established relationships with consumer products companies and production facilities. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Universities and
public and private research institutions are also potential competitors. While these organizations primarily have educational objectives, they may develop proprietary technologies related to stem cells or secure patent protection that we may need
for the development of our technologies and products. We may attempt to license these proprietary technologies, but these licenses may not be available to us on acceptable terms, if at all. Our competitors, either alone or with their collaborative
partners, may succeed in developing technologies or products that are more effective, safer, more affordable or more easily commercialized than ours, and our competitors may obtain intellectual property protection or commercialize products sooner
than we do. Developments by others may render our product candidates or our technologies obsolete. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Our current product
discovery and development collaborators are not prohibited from entering into research and development collaboration agreements with third parties in any product field. Our failure to </FONT></P>
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compete effectively would have a significant adverse effect on our business, financial condition and results of operations. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>We will use hazardous and biological materials in our business. Any claims relating to improper handling, storage or disposal of these materials could be time consuming and costly.
</I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Our products and processes will involve the controlled storage, use and disposal of certain hazardous and biological
materials and waste products. We and our suppliers and other collaborators are subject to federal, state and local regulations governing the use, manufacture, storage, handling and disposal of materials and waste products. Even if we and these
suppliers and collaborators comply with the standards prescribed by law and regulation, the risk of accidental contamination or injury from hazardous materials cannot be completely eliminated. In the event of an accident, we could be held liable for
any damages that result, and any liability could exceed the limits or fall outside the coverage of any insurance we may obtain and exceed our financial resources. We may not be able to maintain insurance on acceptable terms, or at all. We may incur
significant costs to comply with current or future environmental laws and regulations. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>If we acquire products,
technologies or other businesses, we will incur a variety of costs, may have integration difficulties and may experience numerous other risks that could adversely affect our business. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">To remain competitive, we may decide to acquire additional businesses, products and technologies. We currently have no commitments or agreements with respect to, and are not actively
seeking, any material acquisitions. We have limited experience in identifying acquisition targets, successfully acquiring them and integrating them into our current infrastructure. We may not be able to successfully integrate any businesses,
products, technologies or personnel that we might acquire in the future without a significant expenditure of operating, financial and management resources, if at all. In addition, future acquisitions could require significant capital infusions and
could involve many risks, including, but not limited to the following: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">we may have to issue convertible debt or equity securities to complete an acquisition, which would dilute our stockholders and could
adversely affect the market price of our common stock; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">an acquisition may negatively impact our results of operations because it may require us to incur large one-time charges to earnings,
amortize or write down amounts related to goodwill and other intangible assets, or incur or assume substantial debt or liabilities, or it may cause adverse tax consequences, substantial depreciation or deferred compensation charges;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">we may encounter difficulties in assimilating and integrating the business, technologies, products, personnel or operations of
companies that we acquire; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">certain acquisitions may disrupt our relationship with existing collaborators who are competitive to the acquired business;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">acquisitions may require significant capital infusions and the acquired businesses, products or technologies may not generate
sufficient revenue to offset acquisition costs; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">an acquisition may disrupt our ongoing business, divert resources, increase our expenses and distract our management;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">acquisitions may involve the entry into a geographic or business market in which we have little or no prior experience; and
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">key personnel of an acquired company may decide not to work for us. </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Any of the foregoing risks could have a significant adverse effect on our business,
financial condition and results of operations. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>To the extent we enter markets outside of the United States, our
business will be subject to political, economic, legal and social risks in those markets, which could adversely affect our business. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">There are significant regulatory and legal barriers in markets outside the United States that we must overcome to the extent we enter or attempt to enter markets in countries other than
the United States. We will be subject to the burden of complying with a wide variety of national and local laws, including multiple and possibly overlapping and conflicting laws. We also may experience difficulties adapting to new cultures, business
customs and legal systems. Any sales and operations outside the United States would be subject to political, economic and social uncertainties including, among others: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">changes and limits in import and export controls; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">increases in custom duties and tariffs; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">changes in currency exchange rates; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">economic and political instability; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">changes in government regulations and laws; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">absence in some jurisdictions of effective laws to protect our intellectual property rights; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">currency transfer and other restrictions and regulations that may limit our ability to sell certain products or repatriate profits to
the United States. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Any changes related to these and other factors could adversely affect our business to
the extent we enter markets outside the United States. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Foreign governments often impose strict price controls on
approved products, which may adversely affect our future profitability in those countries, and the re-importation of drugs to the United States from foreign countries that impose price controls may adversely affect our future profitability.
</I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Frequently foreign governments impose strict price controls on newly approved therapeutic products. If we obtain
regulatory approval to sell products in foreign countries, we may be unable to obtain a price that provides an adequate financial return on our investment. Furthermore, legislation in the United States may permit re-importation of drugs from foreign
countries into the United States, including re-importation from foreign countries where the drugs are sold at lower prices than in the United States due to foreign government-mandated price controls. Such a practice, especially if it is conducted on
a widespread basis, may significantly reduce our potential United States revenues from any drugs that we are able to develop. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>If we elect not to sell our products in foreign countries that impose government mandated price controls because we decide it is
uneconomical to do so, a foreign government or patent office may attempt to terminate our intellectual property rights in that country, enabling competitors to make and sell our products. </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">In some cases we may choose not to sell a product in a foreign country because it is uneconomical to do so under a system of
government-imposed price controls, or because it could severely limit our profitability in the United States or other markets. In such cases, a foreign government or patent office may terminate any intellectual property rights we may obtain with
respect to that product. Such a termination could enable competitors to produce and sell our product in that market. Furthermore, such products may be exported into the United States through legislation that authorizes the importation of drugs from
outside the United States. In such an event, we may have to reduce our prices, or we may be unable to compete with low-cost providers of our drugs, and we could be financially harmed as a result. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>We may encounter difficulties managing our growth, which could adversely affect our
business. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">At various times we have experienced periods of rapid growth in our employee numbers as a result of a
dramatic increase in activity in technology programs, genomics programs, collaborative research programs, discovery programs, and scope of operations. At other times, we have had to reduce staff in order to bring our expenses in line with our
financial resources. Our success will also depend on the ability of our officers and key employees to continue to improve our operational capabilities and our management information and financial control systems, and to expand, train and manage our
work force. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>We may be sued for product liability, which could adversely affect our business. </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Because our business strategy involves the development and sale by either us or our collaborators of commercial products, we may be sued
for product liability. We may be held liable if any product we develop and commercialize, or any product our collaborators commercialize that incorporates any of our technology, causes injury or is found otherwise unsuitable during product testing,
manufacturing, marketing, sale or consumer use. In addition, the safety studies we must perform and the regulatory approvals required to commercialize our pharmaceutical products, will not protect us from any such liability. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We carry product liability insurance that includes coverage for human clinical trials. Currently, we carry a $5 million per event, $5
million annual aggregate coverage for both our products liability policy and our clinical trials protection. We also intend to seek product liability insurance for any approved products that we may develop or acquire. However, in the event there are
product liability claims against us, our insurance may be insufficient to cover the expense of defending against such claims, or may be insufficient to pay or settle such claims. Furthermore, we may be unable to obtain adequate product liability
insurance coverage for commercial sales of any of our approved products. If such insurance is insufficient to protect us, our results of operations will suffer. If any product liability claim is made against us, our reputation and future sales will
be damaged, even if we have adequate insurance coverage. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>The availability, manner, and amount of reimbursement for our
product candidates from government and private payers are uncertain, and our inability to obtain adequate reimbursement for any products could severely limit our product sales. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We expect that many of the patients who seek treatment with any of our products that are approved for marketing will be eligible for Medicare benefits. Other patients may be covered by
private health plans. If we are unable to obtain or retain adequate levels of reimbursement from Medicare or from private health plans, our ability to sell our products will be severely limited. The application of existing Medicare regulations and
interpretive coverage and payment determinations to newly approved products is uncertain and those regulations and interpretive determinations are subject to change. The Medicare Prescription Drug Improvement and Modernization Act, enacted in
December 2003, provides for a change in reimbursement methodology that reduces the Medicare reimbursement rates for many drugs, which may adversely affect reimbursement for any products we may develop. Medicare regulations and interpretive
determinations also may determine who may be reimbursed for certain services, and may limit the pool of patients our product candidates are being developed to serve. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Federal, state and foreign governments continue to propose legislation designed to contain or reduce health care costs. Legislation and regulations affecting the pricing of products like
our potential products may change further or be adopted before any of our potential products are approved for marketing. Cost control initiatives by governments or third-party payers could decrease the price that we receive for any one or all of our
potential products or increase patient coinsurance to a level that make our products under development become unaffordable. In addition, government and private health plans persistently </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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challenge the price and cost-effectiveness of therapeutic products. Accordingly, these third parties may ultimately not consider any or all of our products under development to be cost effective,
which could result in products not being covered under their health plans or covered only at a lower price. Any of these initiatives or developments could prevent us from successfully marketing and selling any of our products that are approved for
commercialization. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Public perception of ethical and social issues surrounding the use of adult-derived stem cell
technology may limit or discourage the use of our technologies, which may reduce the demand for our therapeutic products and technologies and reduce our revenues. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Our success will depend in part upon our ability to develop therapeutic products incorporating or discovered through our adult-derived stem cell technology. For social, ethical, or other
reasons, governmental authorities in the United States and other countries may call for limits on, or regulation of the use of, adult-derived stem cell technologies. Although we do not use the more controversial stem cells derived from embryos or
fetuses, claims that adult-derived stem cell technologies are ineffective, unethical or pose a danger to the environment may influence public attitudes. The subject of stem cell technologies in general has received negative publicity and aroused
public debate in the United States and some other countries. Ethical and other concerns about our adult-derived stem cell technology could materially hurt the market acceptance of our therapeutic products and technologies, resulting in diminished
sales and use of any products we are able to develop using adult-derived stem cells. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Risks Related to This Offering and
Our Common Stock </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Future sales, or availability for sale, of shares of common stock by stockholders could depress the
market price of our common stock. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Sales of a substantial number of shares of our common stock in the public market, or
the perception that large sales could occur, could depress the market price of our common stock. As of June&nbsp;30, 2012, we had 29,515,343 shares of our common stock outstanding. All of these shares are freely tradable, except for any shares held
by our &#147;affiliates&#148; as defined in Rule 144 under the Securities Act. Also, as of June&nbsp;30, 2012, up to 5,806,853 shares of common stock were issuable upon exercise of outstanding warrants with a weighted average exercise price of $2.48
per share, 4,347,827 of which are issuable pursuant to warrants that currently have an exercise price of $2.07 with full ratchet anti-dilution price protection, subject to certain exceptions. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>You will experience immediate and substantial dilution in the net tangible book value per share of the common stock you purchase. </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Since the price per share of our common stock being offered is substantially higher than the net tangible book value per share of our
common stock, you will suffer substantial dilution in the net tangible book value of the common stock you purchase in this offering. Based on an assumed offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per
share, if you purchase shares of common stock in this offering, you will suffer immediate and substantial dilution of approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per share in the net tangible book value of
the common stock. See the section entitled &#147;Dilution&#148; in this prospectus for a more detailed discussion of the dilution you will incur if you purchase common stock in this offering. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Sales of shares issuable upon the exercise of warrants will dilute your ownership interest in our company and may cause the market price of our shares to decline. </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">On March&nbsp;14, 2012, we closed a private placement in which we issued 4,347,827 shares of common stock and warrants to purchase up to
4,347,827 shares of common stock. The exercise of those warrants will dilute your investment. Additionally, the warrants issued in the March 2012 offering contain full-ratchet anti-dilution provision that would be triggered upon an issuance by us of
shares of our common stock or securities convertible into or exchangeable for shares of our common stock at a price per share </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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below the then current exercise price of the warrants, subject to certain exceptions, such as sales of common stock to Aspire Capital. To the extent that these anti-dilution provisions are
triggered, including as a result of this offering, we would be required to reduce the exercise price of all of the March 2012 warrants on a full-ratchet basis, which would increase the dilutive effect that the exercise of warrants would have on your
investment. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>If we do not continue to meet the listing standards established by The NASDAQ Capital Market, the common
stock may not remain listed for trading. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The NASDAQ Capital Market has established certain quantitative criteria and
qualitative standards that companies must meet in order to remain listed for trading on these markets. We cannot guarantee that we will be able to maintain all necessary requirements for listing; therefore, we cannot guarantee that our common stock
will remain listed for trading on The NASDAQ Capital Market or other similar markets. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><A NAME="toc417938_3"></A>CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">This prospectus, including the documents incorporated by reference and the sections entitled &#147;Prospectus
Summary,&#148; &#147;Risk Factors,&#148; &#147;Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations&#148; and &#147;Business,&#148; contains forward-looking statements that represent our beliefs, projections and
predictions about future events or our future performance. You can identify forward-looking statements by terminology such as &#147;may,&#148; &#147;will,&#148; &#147;would,&#148; &#147;could,&#148; &#147;should,&#148; &#147;expect,&#148;
&#147;intend,&#148; &#147;plan,&#148; &#147;anticipate,&#148; &#147;believe,&#148; &#147;estimate,&#148; &#147;predict,&#148; &#147;potential,&#148; &#147;continue&#148; or the negative of these terms or other similar expressions or phrases. These
forward-looking statements are necessarily subjective and involve known and unknown risks, uncertainties and other important factors that could cause our actual results, performance or achievements or industry results to differ materially from any
future results, performance or achievement described in or implied by such statements. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Factors that may cause actual results
to differ materially from expected results described in forward-looking statements include, but are not limited to: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">uncertainty regarding market acceptance of our product candidates and our ability to generate revenues, including MultiStem for the
treatment of IBD, acute myocardial infarction, or AMI, stroke and other disease indications, and the prevention of GvHD; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">our ability to raise capital to fund our operations; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">final results from our MultiStem clinical trials; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">the possibility of delays in, adverse results of, and excessive costs of the development process; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">our ability to successfully initiate and complete clinical trials and obtain all necessary regulatory approvals to commercialize our
product candidates; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">changes in external market factors; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">changes in our industry&#146;s overall performance; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">changes in our business strategy; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">our ability to protect our intellectual property portfolio; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">our possible inability to realize commercially valuable discoveries in our collaborations with pharmaceutical and other biotechnology
companies; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">our ability to meet milestones under our collaboration agreements; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">our collaborators&#146; ability to continue to fulfill their obligations under the terms of our collaboration agreement;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">our possible inability to execute our strategy due to changes in our industry or the economy generally; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">changes in productivity and reliability of suppliers; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">the success of our competitors and the emergence of new competitors. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">See &#147;Risk Factors&#148; for a more complete discussion of these risks and uncertainties and for other risks and uncertainties. Any
forward-looking statement you read in this prospectus reflects our current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, operating results, growth strategy and
liquidity. You should not place undue reliance on these forward-looking statements because such statements speak only as to the date when made. We assume no obligation to publicly update or revise these forward-looking statements for any
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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reason, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future, except
as otherwise required by applicable law. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">This prospectus also contains statistical data and estimates we obtained from
industry publications and reports generated by third parties. Although we believe that the publications and reports are reliable, we have not independently verified their data. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">25 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><A NAME="toc417938_4"></A>USE OF PROCEEDS </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We expect to receive net proceeds of approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; million from the sale of shares of
our common stock in this offering (or $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; million if the underwriter exercises its option to purchase additional shares of common stock to cover over-allotments in this offering in full) after deducting
underwriting discounts and commissions and estimated offering expenses. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We currently intend to use the net proceeds from this
offering for working capital and general corporate purposes. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Pending the application of the net proceeds as described above,
we may invest the net proceeds from this offering in short-term, investment grade, interest-bearing securities. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><A NAME="toc417938_5"></A>CAPITALIZATION </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The following table shows our cash and cash equivalents and capitalization as of June&nbsp;30, 2012 on an actual basis and on an as
adjusted basis to reflect the sale of 17,000,000 shares of our common stock offered in this offering, after deducting underwriting discounts and commissions and estimated offering expenses. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">This table should be read in conjunction with &#147;Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations&#148; contained elsewhere in this prospectus
and our financial statements and the accompanying notes incorporated by reference into this prospectus. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="70%"></TD>
<TD VALIGN="bottom" WIDTH="9%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="9%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>As of June&nbsp;30, 2012</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Actual&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As&nbsp;Adjusted&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>

<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>(in&nbsp;thousands<BR>except&nbsp;share&nbsp;and&nbsp;per&nbsp;share&nbsp;data)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>


<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="4"></TD>
<TD HEIGHT="16" COLSPAN="4"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Cash and cash equivalents</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;10,857</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:1px; margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Warrant liabilities and note payable</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">4,684</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Stockholders&#146; equity:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Preferred stock, at stated value; 10,000,000 shares authorized, and no shares issued and outstanding at
June&nbsp;30, 2012, actual and as adjusted</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Common stock, $0.001 par value; 100,000,000 shares authorized, and 29,515,343 shares issued and outstanding at
June&nbsp;30, 2012, actual, and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares issued and outstanding at June&nbsp;30, 2012, as adjusted</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">30</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Additional paid-in capital</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">231,482</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Accumulated deficit</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">(227,009</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Total stockholders&#146; equity</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">4,503</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Total capitalization</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">9,187</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">27 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><A NAME="toc417938_6"></A>COMMON STOCK PRICE RANGE </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Our common stock is listed on The NASDAQ Capital Market under the symbol &#147;ATHX.&#148; The following table sets forth, for the
periods indicated, the high and low sales prices for our common stock as reported on The NASDAQ Capital Market. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="75%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD WIDTH="81%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>High</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Low</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>


<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Year ended December&nbsp;31, 2012:</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">First Quarter</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">2.33</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">1.49</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Second Quarter</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">1.71</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">1.25</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Third Quarter</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">1.75</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">1.35</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Fourth Quarter (through October 8, 2012)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">1.47</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">1.25</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Year ended December&nbsp;31, 2011:</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">First Quarter</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">3.08</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">2.35</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Second Quarter</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">3.10</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">2.50</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Third Quarter</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">2.86</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">1.00</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Fourth Quarter</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">2.42</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">1.13</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Year ended December&nbsp;31, 2010:</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">First Quarter</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">4.40</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">2.32</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Second Quarter</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">3.63</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">2.56</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Third Quarter</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">3.55</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">2.34</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Fourth Quarter</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">3.19</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">2.42</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
</TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The last reported sales price for our common stock on October 8, 2012 is set forth on the cover page of
this prospectus. As of September&nbsp;30, 2012, there were approximately 629 holders of record of our common stock. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><A NAME="toc417938_7"></A>DIVIDEND POLICY </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We would have
to rely upon dividends and other payments from our wholly-owned subsidiary, ABT Holding Company, to generate the funds necessary to make dividend payments, if any, on our common stock. ABT Holding Company, however, is legally distinct from us and
has no obligation to pay amounts to us. The ability of ABT Holding Company to make dividend and other payments to us is subject to, among other things, the availability of funds and applicable state laws. However, there are no restrictions such as
government regulations or material contractual arrangements that restrict the ability of ABT Holding Company to make dividend and other payments to us. We did not pay cash dividends on our common stock during the past two years or for the six months
ended June&nbsp;30, 2012. We do not anticipate that we will pay any dividends on our common stock in the foreseeable future. Rather, we anticipate that we will retain earnings, if any, for use in the development of our business. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">28 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><A NAME="toc417938_8"></A>DILUTION </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Investors in shares of our common stock offered in this offering will experience an immediate dilution in the net tangible book value of
their common stock from the public offering price of the common stock. The net tangible book value of our common stock as of June&nbsp;30, 2012 was approximately $4.5 million, or approximately $0.15 per share of common stock. Net tangible book value
per share of our common stock is calculated by subtracting our total liabilities from our total tangible assets, which is equal to total assets less intangible assets, and dividing this amount by the number of shares of common stock outstanding.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Dilution per share represents the difference between the public offering price per share of our common stock and the adjusted
net tangible book value per share of our common stock included in this offering after giving effect to this offering. After giving effect to the sale of shares of common stock offered in this offering at the offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per share and sales of common stock from June&nbsp;30, 2012 through September&nbsp;30, 2012, and after deducting underwriting discounts and commissions and estimated offering
expenses payable by us, our net tangible book value as of June&nbsp;30, 2012 would have been approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; million, or approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per share of common stock. This change represents an immediate increase in the net tangible book value of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per share of common stock to our existing stockholders and an immediate and substantial dilution in net tangible book value of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per share of common stock to new investors. The following table illustrates this per share dilution: </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="75%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD WIDTH="81%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>


<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Offering price per share</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Net tangible book value per share as of June&nbsp;30, 2012</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">0.15</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Increase in net tangible book value per share attributable to new investors</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Net tangible book value per share after this offering</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Dilution per share to new investors</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The table and calculations set forth above are based on the number of shares of common stock outstanding
as of June&nbsp;30, 2012 and assumes no exercise of any outstanding options or warrants. To the extent that options or warrants are exercised, there will be further dilution to new investors. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The above information excludes: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">4,299,698 shares of common stock reserved for issuance upon the exercise of options and restricted stock units granted under our equity
compensation plans with a weighted average exercise price of $4.37 per option share as of June&nbsp;30, 2012; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">5,806,853 shares of common stock that may be issued upon exercise of outstanding warrants with a weighted average exercise price of
$2.48 per share as of June 30, 2012, 4,347,827 of which are issuable pursuant to warrants that currently have an exercise price of $2.07 with full ratchet anti-dilution price protection, subject to certain exceptions; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">shares of common stock that we may issue to Aspire Capital pursuant to the Aspire Purchase Agreement; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">shares of common stock that we intend to issue to our former lenders as milestone payments under the terms of our loan agreement, which
was repaid in June 2008. Under the Loan and Security Agreement, and Supplement, dated as of November&nbsp;2, 2004, by and among ABT Holding Company (formerly known as Athersys, Inc.), Advanced Biotherapeutics, Inc., Venture Lending&nbsp;&amp;
Leasing IV, Inc., and Costella Kirsch IV, L.P., as amended, the former lenders retain a right to receive a milestone payment of a portion of the amount from </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">29 </FONT></P>


<p Style='page-break-before:always'>
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<h5 align="left"><a href="#toc">Table of Contents</a></h5>


<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="11%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"> <P><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">
proceeds of certain equity financings of an amount equal to 10% of the proceeds above $5.0&nbsp;million in cumulative gross proceeds. The balance of this milestone obligation at
September&nbsp;30, 2012 is approximately $300,000. As the loan agreement permits, we intend to pay 75% of the milestone payment in shares of common stock at the per-share offering price of this offering. </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">30 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><A NAME="toc417938_9"></A>SELECTED CONSOLIDATED FINANCIAL DATA
</B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The selected consolidated financial data set forth below should be read in conjunction with &#147;Management&#146;s
Discussion and Analysis of Financial Condition and Results of Operations&#148; included elsewhere in this prospectus and the consolidated financial statements and the notes thereto incorporated by reference into this prospectus. </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="25%"></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="18" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Year Ended December&nbsp;31,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Six Months Ended June&nbsp;30,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>2011</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>2008</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>2007</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>2012</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>2011</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom" COLSPAN="28" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>(in thousands, except share and per share data)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>


<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Consolidated Statement of Operations Data:</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">Revenues:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">Contract revenue</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">9,015</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">6,685</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"> 1,079</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">1,880</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">1,433</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">4,733</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">4,641</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">Grant revenue</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">1,329</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">2,254</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">1,080</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">1,225</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">1,827</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">671</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">784</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">Total revenues</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">10,344</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">8,939</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">2,159</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">3,105</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">3,260</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">5,404</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">5,425</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">Costs and expenses:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">Research and development</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">18,930</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">14,779</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">11,920</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">16,500</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">15,817</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">10,596</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">9,032</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">General and administrative</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">4,916</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">5,387</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">5,621</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">5,479</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">7,975</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">2,421</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">2,611</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">Depreciation</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">278</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">284</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">233</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">218</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">283</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">155</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">127</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">Loss from operations</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">(13,780</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">(11,511</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">(15,615</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">(19,092</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">(20,815</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">(7,768</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">(6,345</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">)&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">Other (expense) income:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">Other (expense) income, net</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">(51</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">(69</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">(126</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">48</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">2,017</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">(296</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">(874</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">)&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">Interest income</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">85</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">203</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">375</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">1,146</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">1,591</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">15</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">66</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">Interest expense</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">(94</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">(1,263</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">Accretion of premium on convertible debt</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">(456</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Net loss</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">(13,746</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">(11,377</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">(15,366</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">(17,992</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">(18,926</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">(8,049</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">(7,153</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">)&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">Preferred stock dividends</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">(659</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">Deemed dividend resulting from induced conversion of convertible preferred stock</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">(4,800</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Net loss attributable to common stockholders</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">(13,746</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">(11,377</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">(15,366</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">(17,992</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">(24,385</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">(8,049</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">(7,153</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">)&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Basic and diluted net loss per common share attributable to common stockholders</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">(0.59</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">(0.60</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">(0.81</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">(0.95</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">(2.26</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">(0.29</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">(0.32</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">)&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">Weighted average shares outstanding, basic and diluted</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">23,239,019</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">18,929,749</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">18,928,379</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">18,927,988</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">10,811,119</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">27,476,603</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">22,693,155</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD WIDTH="44%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="18" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>December&nbsp;31,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>June&nbsp;30,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>2011</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>2008</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>2007</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>2012</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>2011</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="26" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>(in thousands)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>


<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Consolidated Balance Sheet Data:</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">Cash and cash equivalents</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">8,785</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">2,105</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">11,167</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">12,552</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">13,248</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">10,857</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">4,719</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">Available-for-sale securities, short-term</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">3,999</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">13,076</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">10,135</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">15,460</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">22,477</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">16,194</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">Working capital</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">6,986</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">9,106</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">16,291</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">26,789</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">32,849</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">7,810</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">13,483</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">Available-for-sale securities, long-term</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">5,080</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">3,601</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">13,850</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">Total assets</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">15,701</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">19,106</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">28,331</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">33,877</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">52,225</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">13,335</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">23,088</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">Warrant liabilities and note payable</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">983</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">4,684</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">1,873</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">Total stockholders&#146; equity</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">7,298</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">9,005</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">18,957</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">31,563</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">47,631</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">4,503</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">12,843</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
</TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">31 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Effective January&nbsp;1, 2012, we adopted the Financial Accounting Standards Board&#146;s,
or FASB&#146;s, Accounting Standards Update, or ASU, No.&nbsp;2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income, as amended by ASU 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments
to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No.&nbsp;2011-05. These updates revise the manner in which entities present comprehensive income in their financial
statements. The following selected financial information revises historical information to illustrate the new presentation required by this pronouncement for the periods presented. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS </B></FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="75%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD WIDTH="54%"></TD>
<TD VALIGN="bottom" WIDTH="9%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Year&nbsp;Ended</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>December&nbsp;31,<BR>2011</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>December&nbsp;31,<BR>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>December&nbsp;31,<BR>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>(in thousands)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>


<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Net loss</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">(13,746</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">(11,377</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">(15,366</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">)&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Items included in other comprehensive income (loss):</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Proportional share of comprehensive income of equity-method investment</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">28</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Unrealized loss on available-for-sale securities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">(26</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">(45</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">(49</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">)&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Other comprehensive income (loss) items</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">(45</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">(49</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">)&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Comprehensive loss</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">(13,744</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">(11,422</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">(15,415</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">)&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">32 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><A NAME="toc417938_10"></A>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF
</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>FINANCIAL CONDITION AND RESULTS OF OPERATIONS </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><I>The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes
incorporated herein by reference. The following discussion and analysis contains forward-looking statements that reflect our plans, estimates and beliefs and involves risks and uncertainties. Our actual results could differ materially from those
discussed in these forward-looking statements as a result of various factors, including those discussed below, under the headings &#147;Risk Factors&#148; and &#147;Cautionary Note Regarding Forward-Looking Statements&#148; and in other parts of
this prospectus. </I></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Overview and Recent Developments </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px;padding-bottom:0px;"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">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 areas. Our current clinical development programs are focused on treating inflammatory&nbsp;&amp; immune disorders,
neurological conditions, cardiovascular disease, and other conditions. We are developing our lead platform product, MultiStem<FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT>, 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 ongoing
Phase II clinical trials. 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, and for the modulation of stem cells or related applications in the regenerative medicine area. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><I>Current Programs </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">By applying our proprietary MultiStem cell therapy product, we have established therapeutic product development programs treating inflammatory&nbsp;&amp; immune disorders, neurological
conditions, cardiovascular disease, and other conditions. To date, we have advanced five programs to the clinical development stage, including the following: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><U><B><I>Inflammatory Bowel Disease</I></B>:</U>&nbsp;&nbsp;&nbsp;&nbsp;IBD affects an estimated 4&nbsp;million patients or more in the
United States, Europe, and Japan. Current therapies for treating IBD consist of pharmaceutical and biologic drugs, representing an annual market of more than $5 billion globally. Currently available therapies provide temporary relief or are not
effective for many patients, and novel approaches are needed to improve the standard of care and help patients avoid surgical intervention. MultiStem is being evaluated in an ongoing Phase II clinical study involving administration of MultiStem to
patients suffering from ulcerative colitis, or 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, and is a double blind,
placebo controlled trial that began enrolling patients in 2011. Enrollment of the trial is ongoing and is expected to include approximately 130 patients, with initial results expected to be reported in 2013. </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><U><B><I>Ischemic Stroke</I></B>:</U>&nbsp;&nbsp;&nbsp;&nbsp;Ischemic stroke affects approximately 15 million people globally each
year, and approximately 2 million in the United States, Europe and Japan combined. In an ongoing Phase II clinical study, we are evaluating the administration of MultiStem to patients that 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&nbsp;patients. We completed the first patient cohorts, and </FONT></P></TD></TR></TABLE>
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the independent safety monitoring committee found 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 will be randomized to receive either high dose MultiStem or placebo. We believe this represents a potential market opportunity of more than $15&nbsp;billion annually. </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><U><B><I>Acute Myocardial Infarction</I></B>:</U>&nbsp;&nbsp;&nbsp;&nbsp;We have evaluated the administration of MultiStem in a Phase I
clinical study to patients that have suffered an 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. One-year follow-up data suggested that the benefit observed was sustained over time. We have completed preliminary planning for a Phase II trial, which has been discussed with the FDA. Our plans to move
the AMI program forward into subsequent development will depend on the availability of capital resources, progress in our other clinical studies and our business development activities. </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><U><B><I>Hematopoietic Stem Cell Transplant / GvHD</I></B>:</U>&nbsp;&nbsp;&nbsp;&nbsp;We have 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 transplant. Such patients are at risk for serious
complications, including 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 February 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 met with the FDA to discuss the results of the clinical study and our proposed plans for the next phase of clinical development in this area.
We are currently preparing our detailed clinical study plans and look forward to finalizing our design and undertaking operational planning. Based on current plans, we intend to be ready to start this study in the second half of 2013, but the
initiation will depend on the progress in our clinical trials and the achievement of certain business development and financial objectives. There are approximately 25,000 bone marrow or peripheral blood stem cell allografts performed annually, but
we believe many more transplants could be performed if the risks of GvHD could be meaningfully reduced. We believe this indication represents a potential market opportunity of $500&nbsp;million annually or more. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">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 limited financial support for this investigator-sponsored Phase I study and
provide clinical grade product to conduct the trial. According to a report by Reuter&#146;s Business Insight, in 2009, approximately 91,000 organ transplants were conducted. We estimate that this represents a potential market of more than
$1.5&nbsp;billion annually. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">In addition to our current and anticipated clinical development activities, we are engaged in
preclinical development and evaluation of MultiStem in other inflammatory&nbsp;&amp; 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. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We are in discussions with third parties about collaborating in the development of MultiStem for our current clinical programs (outside of IBD) and preclinical programs and may, under the
right terms, enter into one or more business partnership(s) to advance these programs. </FONT></P>
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 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">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. RTI&#146;s product development activities are progressing, and in September 2012, we amended our agreement with RTI to accelerate $2.0 million of contingent
milestone payments in connection with ongoing technical support to assist RTI in its initial product launch. As a result, we will receive these milestone payments in 2012, and in addition, RTI will compensate us for this technical assistance. We
will also receive royalty revenue from product sales when they occur, as well as potential additional milestone payments. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We
are also engaged in the development of novel small molecule therapies to treat obesity and other conditions. 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 that exhibit a particular type of selectivity profile in preclinical models of schizophrenia and observed that these compounds exhibit potent effects. We are in discussions with multiple companies and 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. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><I>Financial </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We have incurred losses since inception of
operations in 1995 and had an accumulated deficit of $227&nbsp;million at June&nbsp;30, 2012. 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, develop business collaborations and to acquire certain technologies and assets. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">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. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">In November 2011, we entered into the Aspire 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 Aspire Purchase 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 of September&nbsp;30, 2012, we have received aggregate gross proceeds of $2.3 million under the Aspire Purchase Agreement since its inception. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">In February 2011, we completed a registered direct offering with net proceeds of $11.8 million through the issuance of 4,366,667 shares
of common stock and five-year warrants to purchase 1,310,000 shares of common stock with an exercise price of $3.55 per share. The securities were sold in multiples of a fixed combination of one share of common stock and a warrant to purchase 0.3 of
a share of common stock at an offering price of $3.00 per fixed combination. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">In 2012, we were awarded grant funding
aggregating $3.6 million to further advance our MultiStem programs and cell therapy platform, including further development of MultiStem for the treatment of </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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traumatic brain injury, or TBI, and further development of our cell therapy formulations and manufacturing capabilities. The sources of funding including federal, state and European organizations
and are generally focused on the advancement of our preclinical MultiStem programs, as well as process development and manufacturing activities. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Results of Operations </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">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. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The following tables set forth our revenues and expenses for the periods indicated. The following tables are stated in thousands. </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD VALIGN="bottom" NOWRAP> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Revenues</B></FONT></P>
<P STYLE="font-size:2px;margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000;width:0pt"><FONT SIZE="1">&nbsp;</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD COLSPAN="18" VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Year Ended December&nbsp;31,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center">
<P STYLE="border-bottom:1px solid #000000;width:95pt" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Six&nbsp;Months&nbsp;Ended&nbsp;June&nbsp;30,</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>2011</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>2012</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>2011</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>


<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Contract revenue</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">9,015</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">6,685</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">1,079</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">4,733</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">4,641</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Grant revenue</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">1,329</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">2,254</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">1,080</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">671</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">784</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">10,344</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">8,939</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">2,159</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">5,404</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">5,425</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD WIDTH="42%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD></TR>
<TR>
<TD VALIGN="bottom" COLSPAN="4" NOWRAP> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Research and Development Expenses</B></FONT></P>
<P STYLE="font-size:2px;margin-top:0px;margin-bottom:1px"><FONT SIZE="1">&nbsp;</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD COLSPAN="2" VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD COLSPAN="2" VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD COLSPAN="2" VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD COLSPAN="2" VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Year Ended December&nbsp;31,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center">
<P STYLE="border-bottom:1px solid #000000;width:95pt" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Six&nbsp;Months&nbsp;Ended&nbsp;June&nbsp;30,</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><I>Type of expense</I></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>2011</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>2012</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>2011</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>


<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Personnel costs</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">4,641</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">4,124</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">3,607</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">2,623</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">2,392</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Research supplies</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">1,316</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">1,218</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">907</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">732</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">659</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Facilities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">944</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">870</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">826</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">486</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">479</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Clinical and preclinical development costs</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">7,495</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">4,394</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">1,904</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">4,775</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">3,078</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Sponsored research</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">1,408</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">1,149</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">878</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">624</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">803</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Patent legal fees</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">1,703</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">1,477</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">1,351</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">681</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">835</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Other</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">1,218</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">1,002</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">1,151</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">599</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">672</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Stock-based compensation</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">205</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">545</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">1,296</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">76</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">114</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">18,930</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">14,779</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">11,920</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">10,596</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">9,032</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">36 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>General and Administrative Expenses </B></FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD WIDTH="46%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Year Ended December 31,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center">
<P STYLE="border-bottom:1px solid #000000;width:95pt" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Six&nbsp;Months&nbsp;Ended&nbsp;June&nbsp;30,</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><I>Type of expense</I></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>2011</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>2012</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>2011</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>


<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Personnel costs</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">1,927</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">1,897</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">1,975</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">1,057</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">1,060</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Facilities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">270</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">279</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">299</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">141</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">134</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Legal and professional fees</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">1,008</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">1,007</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">916</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">479</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">569</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Other</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">1,364</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">1,283</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">919</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">551</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">696</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Stock-based compensation</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">347</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">921</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">1,512</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">193</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">152</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">4,916</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">5,387</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">5,621</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">2,421</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">2,611</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Six Months Ended June&nbsp;30, 2012 and 2011 </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><I></I><B><I>Revenues</I></B><I>.</I>&nbsp;&nbsp;&nbsp;&nbsp;Revenues remained consistent at $5.4 million for the six months ended
June&nbsp;30, 2012 and 2011. Contract revenue increased $92,000 for the six months ended June&nbsp;30, 2012 compared to the comparable period in 2011 and reflects the impact of our arrangements with Pfizer and RTI. Our contract revenues reflect 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, as well as the
amortization of a $3.0 million guaranteed license fee from the RTI collaboration over the estimated performance period that ended in 2011. Our contract revenues may also include license fees, milestone payments and royalties on compounds developed
by Bristol-Myers Squibb using one of our technologies. We expect our contract revenues to decline in the second half of 2012, absent any new collaborations, and will be comprised primarily of manufacturing service revenue under the Pfizer
arrangement and RTI milestone payments. Grant revenue decreased $113,000 for the six months ended June&nbsp;30, 2012 compared to the six months ended June&nbsp;30, 2011 primarily due to the timing of expenditures that are reimbursed with grant
proceeds and the completion of grants in 2011. Our grant revenues may fluctuate from period to period based on the timing of grant-related activities and the award of new grants. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><I></I><B><I>Research and Development Expenses.</I></B><I></I>&nbsp;&nbsp;&nbsp;&nbsp;Research and development expenses increased to $10.6 million for the six months ended June&nbsp;30,
2012 from $9.0 million in the comparable period in 2011. The increase of $1.6 million related primarily to an increase in clinical and preclinical development costs of $1.7 million, an increase in personnel costs of $231,000 and an increase in
research supplies of $73,000 for the six months ended June&nbsp;30, 2012 from the comparable period in 2011. These increases were partially offset by a decrease in sponsored research costs of $179,000, a decrease in patent legal fees of $154,000, a
decrease in other research and development expenses of $73,000 and a decrease in stock compensation expense of $38,000. The increase in clinical and preclinical development costs for the six months ended June&nbsp;30, 2012 related primarily to costs
associated with our MultiStem clinical trials, including contract research organization costs and clinical manufacturing costs. 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. Sponsored research costs decreased primarily due to a decrease in grant-funded programs that require collaboration with certain academic research institutions. The decrease in
patent legal costs resulted from reduced patent prosecution costs during the period. Our annual research and development expenses are not expected to increase significantly through 2012 as compared to 2011 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. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><I></I><B><I>General and Administrative
Expenses.</I></B><I></I>&nbsp;&nbsp;&nbsp;&nbsp;General and administrative expenses decreased to $2.4 million for the six months ended June&nbsp;30, 2012 from $2.6 million in the comparable period in 2011. The $190,000 decrease was due primarily to
a decrease in legal and professional fees of $90,000 and a </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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decrease in other general and administrative costs of $145,000 related to outside services, offset by an increase of $41,000 in stock compensation expense for the six months ended June&nbsp;30,
2012 from the comparable period in 2011. We expect our general and administrative expenses to continue at similar levels during 2012. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Depreciation.</I></B>&nbsp;&nbsp;&nbsp;&nbsp;Depreciation expense increased to $155,000 for the six months ended June&nbsp;30, 2012 from $127,000 in the comparable period in 2011 due
to depreciation on new capital purchases. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Interest Income.</I></B>&nbsp;&nbsp;&nbsp;&nbsp;Interest income represents
interest earned on our cash and available-for-sale securities. Interest income represents interest earned on our cash and available-for-sale securities. Interest income decreased to $15,000 for the six months ended June&nbsp;30, 2012 from $66,000
for the comparable period in 2011 due to the decline in our investment balances as they are used to fund our operations. We expect our 2012 interest income to reflect the impact of declining cash balances resulting from our ongoing and planned
clinical and preclinical development, and interest earned on proceeds from any new financings or business transactions. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Other (Expense) Income, net.</I></B>&nbsp;&nbsp;&nbsp;&nbsp;Other (expense) income, net, includes foreign currency gains and losses
related to our activities in Europe, realized gains and losses on the sale of our assets, and increase and decreases in our warrant liabilities. Also included in other expense are cash and stock-based milestone payments aggregating $952,000 and
$810,000 for the six months ended June&nbsp;30, 2012 and 2011, respectively, paid to our former lenders in connection with our equity offerings. The market value change in our warrant liabilities was income of $479,000 for the six months ended
June&nbsp;30, 2012 and expense of $78,000 for the six months ended June&nbsp;30, 2011. Also, in the six-month period ended June&nbsp;30, 2012, we recognized a gain of $183,000 related to an equity-method investment that was liquidated in the period.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Year Ended December&nbsp;31, 2011 Compared to Year Ended December&nbsp;31, 2010 </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Revenues.</I></B>&nbsp;&nbsp;&nbsp;&nbsp;Revenues increased to $10.3 million for the year ended December&nbsp;31, 2011 from
$8.9&nbsp;million for 2010. Our contract revenues reflect 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, as well as the amortization of a $3.0&nbsp;million guaranteed license fee from the RTI collaboration over the estimated performance period. Our contract revenues may also include license fees, milestone payments and royalties on
compounds developed by Bristol-Myers Squibb using one of our technologies. Contract revenue increased $2.3&nbsp;million for the year ended December&nbsp;31, 2011 compared to the year ended December&nbsp;31, 2010 primarily as a result of our
arrangements with Pfizer and RTI. The estimated performance period under the Pfizer arrangement ends mid-2012 and the RTI performance period was completed in 2011. Therefore, we expect our contract revenues to decline in the second half of 2012,
absent any new collaborations, and will be comprised primarily of manufacturing service revenue under the Pfizer arrangement and potential RTI milestone payments. Grant revenue decreased $0.9 million for the year ended December&nbsp;31, 2011
compared to the year ended December&nbsp;31, 2010 primarily due to the timing of expenditures that are reimbursed with grant proceeds and a grant received in October 2010 from the Internal Revenue Service under section 48D of the Internal Revenue
Code aggregating $733,000 for qualifying therapeutic discovery investments. Our grant revenues may fluctuate from period to period based on the timing of grant-related activities and the award of new grants. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><I></I><B><I>Research and Development Expenses</I></B><I>.</I>&nbsp;&nbsp;&nbsp;&nbsp;Research and development expenses increased to
$18.9 million for the year ended December&nbsp;31, 2011 from $14.8 million in 2010. The increase of approximately $4.1&nbsp;million related primarily to an increase in clinical and preclinical development costs of $3.1 million, an increase in
personnel costs of $517,000, an increase in sponsored research costs of $259,000, an increase in patent legal fees of $226,000, an increase in other costs of $216,000, and an increase in research supply and facilities costs of $172,000 for the year
ended December&nbsp;31, 2011 compared to </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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2010. These increases were partially offset by a decrease in stock-based compensation expense of $340,000, which declined as a result of a significant number of options becoming fully vested in
2010. The increase in clinical and preclinical development costs for the year ended December&nbsp;31, 2011 related primarily to costs associated with our MultiStem clinical trials, including increased manufacturing and process development costs. Our
clinical costs for the year ended December&nbsp;31, 2011 and 2010 are reflected net of Angiotech&#146;s cost-sharing amount of $312,000 and $628,000, respectively. The Angiotech collaboration was terminated late in 2011. 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. Sponsored research costs increased primarily due to an increase in grant-funded programs
that require collaboration with certain academic research institutions. Patent legal fees increased related to international patent prosecution activities. We expect our research and development expenses to remain relatively consistent in 2012, but
would be expected to increase if we receive proceeds from additional financing or business development activities. 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. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>General and Administrative
Expenses.</I></B>&nbsp;&nbsp;&nbsp;&nbsp;General and administrative expenses decreased to $4.9 million in 2011 from $5.4 million in 2010. The $471,000 decrease in 2011 compared to 2010 was due primarily to a decrease in stock-based compensation
expense of $574,000 from a significant number of options becoming fully vested in 2010, partially offset by an increase in other expenses of $81,000. We expect our general and administrative expenses to continue at similar levels in 2012.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Depreciation.</I></B>&nbsp;&nbsp;&nbsp;&nbsp;Depreciation expense remained fairly consistent at $278,000 in 2011 and
$284,000 in 2010. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Interest Income.</I></B>&nbsp;&nbsp;&nbsp;&nbsp;Interest income represents interest earned on our
cash and available-for-sale securities. Interest income decreased to $85,000 in 2011 from $203,000 in 2010 due to the decline in our investment balances as they are used to fund our operations. We expect our 2012 interest income to reflect the
impact of declining cash balances resulting from our ongoing and planned clinical and preclinical development, and interest earned on proceeds from any new financings or business transactions. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Other Expense, net.</I></B>&nbsp;&nbsp;&nbsp;&nbsp;Other expense, net, includes foreign currency gains and losses related to our
activities in Europe and any realized gains and losses on the sale of our assets. Also included in other expense in 2011 are milestone payments aggregating $910,000 to our former lenders that was paid in connection with our February 2011 registered
direct offering and our Aspire Capital equity purchase agreement, 75% of which was settled in shares of common stock. Also included in net other income is $812,000 recorded in 2011, reflecting a decrease in the warrant liability that resulted from
our February 2011 registered direct offering, with changes in market value reflected as either other income or expense. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Year Ended December&nbsp;31, 2010 Compared to Year Ended December&nbsp;31, 2009 </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Revenues.</I></B>&nbsp;&nbsp;&nbsp;&nbsp;Revenues increased to $8.9 million for the year ended December&nbsp;31, 2010 from $2.2
million for 2009. Contract revenue increased $5.6 million for the year ended December&nbsp;31, 2010 compared to the year ended December&nbsp;31, 2009 primarily as a result of our collaboration with Pfizer that we entered into in December 2009 and
our collaboration with RTI that we entered into in September 2010. Contract revenues for the year ended December&nbsp;31, 2010 primarily consist of the recognition of revenue from these multi-element arrangements. Grant revenue increased $1.2
million for the year ended December&nbsp;31, 2010 compared to the year ended December&nbsp;31, 2009 primarily due a grant received in October 2010 from the Internal Revenue Service under section 48D of the Internal Revenue Code aggregating $733,000
for qualifying therapeutic discovery investments, as well as additional new grants that began late in 2009 and in 2010. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Research and Development Expenses</I></B>.&nbsp;&nbsp;&nbsp;&nbsp;Research and
development expenses increased to $14.8 million for the year ended December&nbsp;31, 2010 from $11.9 million in 2009. The increase of approximately $2.9&nbsp;million related primarily to an increase in clinical and preclinical development costs of
$2.5 million, an increase in personnel costs of $517,000, an increase in research supply costs of $311,000 and an increase in sponsored research costs of $271,000 for the year ended December&nbsp;31, 2010 compared to 2009. These increases were
partially offset by a decrease in stock-based compensation expense of $751,000, which declined as a result of a significant number of options becoming fully vested mid-2010. The increase in clinical and preclinical development costs for the year
ended December&nbsp;31, 2010 related primarily to increased manufacturing and process development costs, and costs associated with our MultiStem clinical trials. Our clinical costs for the year ended December&nbsp;31, 2010 and 2009 are reflected net
of Angiotech&#146;s cost-sharing amount of $628,000 and $847,000, respectively. The increase in personnel costs and research supplies related to the addition of personnel in support of our preclinical and clinical programs and regulatory affairs.
Sponsored research costs increased primarily due to grant-funded programs that require collaboration with certain academic research institutions. 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. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>General and Administrative
Expenses.&nbsp;&nbsp;&nbsp;&nbsp;</I></B>General and administrative expenses decreased to $5.4 million in 2010 from $5.6 million in 2009. The $234,000 decrease was due primarily to a decrease in stock-based compensation expense of $591,000,
partially offset by an increase in other expenses of $364,000 in 2010 compared to 2009. The decrease in stock-based compensation expense related to a significant number of options becoming fully vested mid-2010. The increase in other expenses for
2010 was primarily a result of increased investor and public relations costs and travel costs. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Depreciation.</I></B>&nbsp;&nbsp;&nbsp;&nbsp;Depreciation expense increased to $284,000 in 2010 from $233,000 in 2009. The increase
in depreciation expense was due to depreciation on capital purchases made in 2010. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Other Expense,
net.&nbsp;&nbsp;&nbsp;&nbsp;</I></B>Included in other expense are impairment losses of $46,000 and $115,000 in 2010 and 2009, respectively, related to an investment in a privately-held company. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Interest Income.&nbsp;&nbsp;&nbsp;&nbsp;</I></B>Interest income decreased to $203,000 in 2010 from $375,000 in 2009. The change in
interest income was due to the decline in cash and investment balances during the period. We expect our 2011 interest income to continue at similar levels in 2011, taking into consideration the expected increase in our clinical development costs in
2011 and the investment of the proceeds from the February 2011 registered direct offering. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Liquidity and Capital Resources
</B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Our sources of liquidity include our cash balances and any available-for-sale securities on hand. At June&nbsp;30, 2012
and September&nbsp;30, 2012, respectively, we had $10.9 million and $7.9 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&#146;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&nbsp;us. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">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 full ratchet anti-dilution price protection, subject to certain exceptions </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">40 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">In November 2011, we entered into the Aspire 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 Aspire Purchase 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. During the quarter ended June&nbsp;30, 2012, we sold 100,000 shares to Aspire Capital at an average price of $1.45 per share, and during
the six-month period ended June&nbsp;30, 2012, we sold 300,000 shares to Aspire Capital at an average price of $1.72 per share. As of September&nbsp;30, 2012, we received aggregate gross proceeds of $2.3 million under the equity purchase agreement
since its inception. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">In February 2011, we completed a registered direct offering with net proceeds of $11.8 million through
the issuance of 4,366,667 shares of common stock and five-year warrants to purchase 1,310,000 shares of common stock with an exercise price of $3.55 per share. The securities were sold in multiples of a fixed combination of one share of common stock
and a warrant to purchase 0.3 of a share of common stock at an offering price of $3.00 per fixed combination. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">In connection
with our equity offerings, our former lenders are entitled to milestone payments until the remaining balance of an original $2.25 million milestone is paid, and we can elect to settle up to 75% of any milestone payments through the issuance of our
common stock. The remaining balance of the milestone is $389,000 at June&nbsp;30, 2012. We made cash and stock-based milestone payments of $952,000 to our former lenders during the six-month period ended June&nbsp;30, 2012. Further payments will be
made upon the occurrence of certain events as follows: (1)&nbsp;the entire amount upon (a)&nbsp;the merger with or into another entity where our stockholders do not hold at least a majority of the voting power of the surviving entity, (b)&nbsp;the
sale of all or substantially all of our assets, or (c)&nbsp;our liquidation or dissolution; or (2)&nbsp;a portion of the amount from proceeds of equity financings not tied to specific research and development activities that are part of a research
or development collaboration, in which case, the lenders will receive an amount equal to 10% of proceeds until the milestone amount is paid in full. The milestone payment is payable in cash, except that if the milestone event is (2)&nbsp;above, we
may elect to pay 75% of the milestone in shares of common stock at the per-share offering price. The lenders also received seven-year warrants to purchase 149,026 shares of common stock with an exercise price of $5.00 upon the closing of our equity
offering in June 2007. The exercise of such warrants could provide us with cash proceeds. No warrants were exercised as of June&nbsp;30, 2012. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">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&nbsp;30, 2012. 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 would then share development and commercialization expenses and profits/losses on an agreed basis beginning at Phase III clinical development. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">In November 2011, we reached an agreement with Angiotech to terminate the collaboration agreement and license between the parties,
reflecting a change in Angiotech&#146;s business and financial strategy. As a result of the termination, we regained ownership of all rights for developing our stem cell technologies and products for cardiovascular disease indications, including
AMI, congestive heart failure, chronic ischemia, and peripheral vascular disease, and Angiotech no longer has any license rights or options with respect to our technologies and products. In the case of a new AMI collaboration, Angiotech will be
entitled to a future payment from us equal to a percentage of cash license fee payments we receive within the first six months from a third-party related to such AMI collaboration, and is not entitled to other downstream payments, such as milestone
payments, royalties or any profit-sharing payments. The future </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">41 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">
payment, if any, will be either (i)&nbsp;25% of third-party license fees if an AMI collaboration is established prior to the initiation of enrollment in a Phase II AMI clinical trial and within
12 months of the termination agreement, (ii)&nbsp;15% of third-party license fees if an AMI collaboration is established after the initiation of enrollment in a Phase II AMI clinical trial, but before we have spent $5.0 million on the clinical
trial, and within 24 months of the termination agreement, or (iii)&nbsp;10% of third-party license fees up to a maximum of $5.0 million to Angiotech if an AMI collaboration is established after the initiation of enrollment in a Phase II AMI clinical
trial, and after we have spent $5.0 million on the clinical trial, and within 36 months of the termination agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Under
the terms of our RTI agreement, we initially received $3.0 million of guaranteed license fee payments and were entitled to an additional $2.0 million in license fee payments that were contingent upon future events. In September 2012, RTI agreed to
make these payments in full by December&nbsp;31, 2012, and we agreed to provide RTI with certain technical support. In accordance with the agreement, we are also eligible to receive an additional $35.5 million in cash payments upon the successful
achievement of certain commercial milestones, though there can be no assurance that such milestones will be achieved. In addition, we will receive tiered royalties on worldwide commercial sales of implants using our technologies. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">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. As of June&nbsp;30, 2012, we
received an aggregate amount of $1.7 million in milestone payments and $9.6 million in license fees since the inception of our collaboration with Bristol-Myers Squibb. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">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%&nbsp;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&nbsp;30, 2012,
we have drawn $50,000 of this financing. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">In February 2012, we were awarded grant funding aggregating $3.6 million to further
advance our MultiStem product programs and cell therapy platform. Specifically, we were awarded a Small Business Innovation Research Fast-Track grant of up to $1.9 million from the National Institute of Neurological Disorders and Stroke to develop
MultiStem for the treatment of traumatic brain injury. In addition, our subsidiary based in Belgium was awarded a $1.2 million (&#128;0.9 million) grant from Belgium&#146;s Agency for Innovation by Science and Technology to further develop cell
therapy formulations and manufacturing capabilities, as well as $0.5 million in funding from a local grant to work in other areas, such as using MultiStem to treat chronic cardiovascular disease. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">In 2011, we entered into an alliance with Fast Forward, a nonprofit subsidiary of the National Multiple Sclerosis Society, pursuant to
which Fast Forward will fund the development of MultiStem for the treatment of multiple sclerosis, or MS, through the filing of an IND. Fast Forward will commit up to $640,000 to fund the advancement of the program to clinical development stage. In
return, upon successful achievement of certain development and commercialization milestones, we would remit certain milestone payments to Fast Forward. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">When we hold investments, our available-for-sale securities typically include United States government obligations and corporate debt securities. We have been investing conservatively due
to the ongoing economic conditions and have prioritized liquidity and the preservation of principal in lieu of potentially </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">42 </FONT></P>


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higher returns. As a result, we have experienced no losses on the principal of our investments and have held our investments until maturity. All available-for-sale securities were matured as of
June&nbsp;30, 2012. Also, although the unfavorable market and economic conditions have resulted in a decrease to our market capitalization, there has been no impairment to the value of our assets. Our fixed assets are used for internal research and
development and, therefore, are not directly impacted by these external factors. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">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&nbsp;30, 2012, we had available cash and cash equivalents of $10.9 million. Assuming
no new financings or collaborations and based on our current business and operational plans, we would expect to have available cash to fund our planned operations into the first quarter of 2013. However, we expect to have access to additional
capital through business development opportunities, which we are actively exploring for certain of our MultiStem programs and our 5HT2c small molecule program for obesity and potentially other indications, as well as grant-funding opportunities. We
will continue to explore and consider new opportunities for funding our operations through grants and business partnerships involving our technologies and product candidates. Additionally, we expect to raise capital over the next twelve months by
accessing the capital markets through the sale of equity, including pursuant to this offering and through the Aspire Purchase Agreement, subject to its volume and price limitations. Further, we may consider alternative financing approaches, such as
debt or monetizing future royalty streams. Although no assurance on the future success of the aforementioned actions can be provided, we also manage our cash through deferring certain discretionary costs and staging certain development costs to
extend our operational runway, as needed. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">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 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. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">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. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><I>Cash Flow Analysis </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Net cash used in operating activities was $10.4 million for the six months ended June&nbsp;30, 2012 and $5.8&nbsp;million for the six months ended June&nbsp;30, 2011, and represented the
use of cash in funding preclinical and clinical product development activities. Net cash used in operating activities has fluctuated significantly over the past several quarters primarily due to the receipt of milestone payments and specific
clinical trial costs. Taking into account working capital fluctuations, which reflect the receipt of milestone payments and timing of certain payments related to clinical activities, the increase in recent quarters reflects predominantly an increase
in clinical development costs during the periods. Such increases include the cost impact of the Phase II stroke trial and the upfront costs associated with its launch, and the timing of payments for manufacturing product for the Phase II IBD
clinical trial and reimbursements from Pfizer. We anticipate that net cash used in operating activities will fluctuate in the </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">43 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">
remaining quarters of 2012 in connection with the fluctuations and changes in activity associated with the MultiStem clinical trials, the timing of clinical manufacturing, and the receipt of
potential milestone payments. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Net cash provided by investing activities was $4.0 million for the six months ended
June&nbsp;30, 2012, and net cash used in investing activities was $3.4 million for the six months ended June&nbsp;30, 2011. The fluctuations from period to period were due to the timing of purchases and maturity dates of investments and the purchase
of equipment. Purchases of equipment were $237,000 and $377,000 for the first half of 2012 and 2011, respectively. We anticipate that our overall capital equipment expenditures will be similar in 2012 compared to 2011. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Net cash provided from financing activities was $8.5 million for the six months ended June&nbsp;30, 2012 and $11.8 million for the six
months ended June&nbsp;30, 2011 primarily as a result of our equity offerings during each of those periods. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Net cash used in
operating activities was $14.5 million, $10.6 million and $4.6 million in 2011, 2010 and 2009, respectively, and represented the use of cash in funding preclinical and clinical development activities. We expect that net cash used in operating
activities will increase in 2012 compared to 2011 in connection with increased research and development expenses of our MultiStem clinical trials and later stage clinical development. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Net cash provided by investing activities was $8.6 million, $1.5 million and $3.2 million in 2011, 2010 and 2009, respectively. The fluctuations from period to period were due to the
timing of purchases and maturity dates of investments and the purchase of equipment. Purchases of equipment were $590,000, $390,000 and $381,000 in 2011, 2010 and 2009, respectively. We expect that our capital equipment expenditures will continue at
similar levels in 2012 compared to 2011. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Financing activities provided cash of $12.6 million in 2011 related to the February
2011 registered direct offering and the initial Aspire Capital investment in November 2011, and financing activities neither used nor provided cash in 2010 and 2009. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">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 $2.07 per share, 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. Our former lenders also received seven-year warrants to
purchase 149,026 shares of common stock with an exercise price of $5.00 upon the closing of our equity offering in June 2007. The exercise of such warrants could provide us with cash proceeds. No warrants have been exercised at June&nbsp;30, 2012.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Our contractual payment obligations as of December&nbsp;31, 2011 are as follows: </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD WIDTH="53%"></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="18" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Payment due by Period</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:83pt"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Contractual Obligations</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Total</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Less
than</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>1 Year</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>1&#151;3<BR>Years</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>3&#151;5<BR>Years</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>More&nbsp;than<BR>5&nbsp;Years</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>


<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Operating leases for facilities and equipment leases</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">456,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">384,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">72,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Research funding</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">135,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">135,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Total</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">591,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">519,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">72,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
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<TD>&nbsp;</TD>
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<TD>&nbsp;</TD></TR>
</TABLE>
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 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We lease office and laboratory space under an operating lease. The lease began in 2000 and
currently expires in March 2013, and we expect to extend the lease option periods. Our rent is $267,000 per year and our rental rate has not changed since the lease inception in 2000. Also, we lease office and laboratory space for our Belgian
subsidiary that includes options to renew annually through December 2014 and the annual rent is subject to adjustments based on an inflationary index. We executed an option to renew this lease through December&nbsp;31, 2012. Our annual rent in
Belgium was $93,000 in 2011. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The research funding in the table above represents our current funding commitment for a research
program that began in 2007 and ended in August 2012. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">In connection with our private placement in March 2012, we were required
to file a resale registration statement with the SEC for 8,695,654 shares of common stock, which includes all shares of common stock issued in the equity offering in March 2012 and shares of common stock issuable upon exercise of the warrants issued
in the offering. If the registration statement, which has been declared effective, ceases to remain effective, a 1% cash penalty will be assessed upon a default under the registration rights agreement and for each 30-day period until the default is
cured during the first year after the closing of the private placement, capped at 10% the aggregate gross proceeds we received from the private placement. Because the penalty is based on the number of unregistered shares of common stock held by
investors in the offering, our maximum penalty exposure will decline over time as investors sell their shares of common stock that are required to be included in the registration statement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We have no off-balance sheet arrangements. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Critical
Accounting Policies and Management Estimates </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The SEC defines critical accounting policies as those that are, in
management&#146;s view, important to the portrayal of our financial condition and results of operation and demanding of management&#146;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 United States generally accepted accounting principles. The preparation of these financial statements requires us to make estimates on experience and on various
assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may
differ from those estimates. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">A discussion of the material implications of uncertainties associated with the methods,
assumptions and estimates underlying our critical accounting polices is as follows: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Revenue Recognition
</I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Our license and collaboration agreements may contain multiple elements, including license and technology access fees,
research and development funding, manufacturing revenue, cost-sharing, milestones and royalties. The deliverables under such an arrangement are evaluated under Accounting Standards Codification, or ASC, 605-25, <I>Multiple-Element Arrangements.</I>
Effective January&nbsp;1, 2011, we adopted ASU 2009-13, Multiple-Deliverable Revenue Arrangements, or ASU 2009-13, which amended the guidance in ASC 605-25 on the accounting for arrangements involving the delivery of more than one element. Pursuant
to the new standard, each required deliverable is evaluated to determine whether it qualifies as a separate unit of accounting based on whether the deliverable has &#147;stand&#150;alone value&#148; to the customer. The arrangement&#146;s
consideration that is fixed or determinable is then allocated to each separate unit of accounting based on the relative selling price of each deliverable. In general, the consideration allocated to each unit of accounting is recognized as the
related goods or services are delivered, limited to the consideration that is not contingent upon future deliverables. </FONT></P>
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 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We adopted this new accounting standard on a prospective basis for agreements containing
multiple elements entered into on or after January&nbsp;1, 2011, and for any agreements entered into prior to January&nbsp;1, 2011, but materially modified on or after that date. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The primary impact of adopting the new standard is expected to be the earlier recognition of revenue for multiple element arrangements. The adoption of ASU 2009-13 did not have a material
impact on our consolidated results of operations for the year ended December&nbsp;31, 2011, or on our financial position as of December&nbsp;31, 2011. The impact of adopting this new accounting standard is dependent on the terms and conditions of
any future arrangements that we may enter into that include multiple elements and arrangements entered into prior to January&nbsp;1, 2011 that are materially modified. Depending on the terms of any such arrangements, the adoption of this accounting
standard may have a material impact on our consolidated results of operations or financial position as it may have the potential effect of less revenue deferral for new collaborations than we have historically experienced. We recognized revenue of
$7.9 million for the year ended December&nbsp;31, 2011 and deferred revenue of $3.0 million as of December&nbsp;31, 2011 pertaining to collaborations which were entered into prior to our adoption of ASU 2009-13 and which were not modified on or
after January&nbsp;1, 2011. The performance period for our multiple element arrangements has concluded. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">For agreements
entered into prior to January&nbsp;1, 2011 and not materially modified thereafter, we continue to apply our prior accounting policy with respect to such arrangements. Under this policy, the deliverables under the arrangement are evaluated to assess
whether they have standalone value and objective and reliable evidence of fair value, and if so, are accounted for as a single unit. We then recognize revenue for each unit based on the culmination of the earnings process under ASC 605-S25, issued
as Staff Accounting Bulletin, or SAB, Topic 13, and our estimated performance period for the single units of accounting based on the specific terms of each collaborative agreement. We subsequently adjust the estimated performance periods, if
appropriate, on a prospective basis based upon available facts and circumstances. Future changes in estimates of the performance period may materially impact the timing of future revenue recognized. Amounts received prior to satisfying the revenue
recognition criteria for contract revenues are recorded as deferred revenue in the accompanying balance sheets. Reimbursement amounts (other than those accounted for using collaboration accounting) paid to us are recorded on a gross basis in the
statements of operations as contract revenues. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Effective January&nbsp;1, 2011, we adopted ASU 2010 &#150; 17, <I>Revenue
Recognition&#151;Milestone Method</I>. The adoption of the new standard did not have a material impact on our consolidated results of operations for the year ended December&nbsp;31, 2011 or on our financial position as of December&nbsp;31, 2011 as
we had been recognizing revenue from at-risk, performance milestones that are substantive in the period that the milestone is achieved, as defined in the respective contracts. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We entered into collaboration agreements with Pfizer and RTI that contain multiple elements and deliverables. For a description of the collaboration agreement and the determination of
contract revenues, see Note E to our audited consolidated financial statements incorporated by reference into this prospectus. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Also included in contract revenue are license fees received from Bristol-Myers Squibb, which are specifically set forth in the license
and collaboration agreement as amounts due to us based on our completion of certain tasks (e.g., delivery and acceptance of a cell line) and development milestones (e.g., clinical trial Phases), and as such, are not based on estimates that are
susceptible to change. Such amounts are invoiced and recorded as revenue as tasks are completed and as milestones are achieved. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Similarly, grant revenue consists of funding under cost reimbursement programs primarily from federal and state sources for qualified
research and development activities performed by us, and as such, are not based on estimates that are susceptible to change. Such amounts are invoiced (unless prepaid) and recorded as revenue as tasks are completed. </FONT></P>
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 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I></I></B><B><I>Collaborative Arrangements </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Collaborative arrangements that involve cost or future profit sharing are reviewed to determine the nature of the arrangement and the
nature of the collaborative parties&#146; businesses. The arrangements are also reviewed to determine if one party has sole or primary responsibility for an activity, or whether the parties have shared responsibility for the activity. If
responsibility for an activity is shared and there is no principal party, then the related costs of that activity are recognized by us on a net basis in the statement of operations (e.g., total cost less reimbursement from collaborator). If we are
deemed to be the principal party for an activity, then the costs and revenues associated with that activity are recognized on a gross basis in the statement of operations. The accounting may be susceptible to change if the nature of a
collaborator&#146;s business changes. Currently, our only collaboration accounted for on a net basis is our cost-sharing collaboration with Angiotech, which was terminated in 2011. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Clinical Trial Costs </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Clinical trial costs are
accrued based on work performed by outside contractors, who manage and perform the trials. We obtain initial estimates of total costs based on enrollment of subjects, project management estimates and other activities. Actual costs are typically
charged to us and recognized as the tasks are completed by the contractor, and if we are invoiced based on progress payments as opposed to actual costs, we develop estimates of work completed to date. Accrued clinical trial costs may be subject to
revisions as clinical trials progress, and any revisions are recorded in the period in which the facts that give rise to the revisions become known. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Investments in Available-for-Sale Securities </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We
determine the appropriate classification of investment securities at the time of purchase and re-evaluate such designation as of each balance sheet date. Our investments typically consist primarily of United States government obligations and
corporate debt securities, which are classified as available-for-sale and are valued based on quoted prices in active markets for identical assets (Level 1). Available-for-sale securities are carried at fair value, with the unrealized gains and
losses, net of tax, reported as a component of accumulated other comprehensive income. The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization or accretion is included
in interest income. Realized gains and losses on available-for-sale securities are included in interest income. The cost of securities sold is based on the specific identification method. Interest earned on securities classified as
available-for-sale is included in interest income. Since the elements related to accounting for these investments are reflected on monthly statements, the amounts are not based on estimates that are susceptible to change. None of our financial
assets are in markets that are not active. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Stock-Based Compensation </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We recognize stock-based compensation expense on the straight-line method and use a Black-Scholes option-pricing model to estimate the
grant-date fair value of share-based awards. The expected term of options granted represent the period of time that option grants are expected to be outstanding. We use the &#147;simplified&#148; method to calculate the expected life of option
grants given our limited history and beginning in 2010, determine volatility by using our historical stock volatility. Prior to 2010, we determined volatility by using the historical stock volatility of other companies with similar characteristics
since we did not have meaningful historical volatility of our own stock at that time. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by persons who receive equity awards. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those
estimates and if our expectations on forfeitures changes. If actual forfeitures vary from the estimate, we will recognize the difference in compensation expense in the period the actual forfeitures occur or when options vest. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">All of the aforementioned estimates and assumptions are evaluated on a quarterly basis and
may change as facts and circumstances warrant. Changes in these assumptions can materially affect the estimate of the fair value of our share-based payments and the related amount recognized in our financial statements. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Recently Issued Accounting Standards Not Yet Adopted at December&nbsp;31, 2011 </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">In May 2011, the FASB issued changes to fair value measurement. This change clarifies the concepts related to highest and best use and
valuation premise, blockage factors and other premiums and discounts, the fair value measurement of financial instruments held in a portfolio and of those instruments classified as a component of shareholders&#146; equity. The guidance includes
enhanced disclosure requirements about recurring Level 3 fair value measurements, the use of nonfinancial assets, and the level in the fair value hierarchy of assets and liabilities not recorded at fair value. The provisions are effective
prospectively for interim and annual periods beginning on or after December&nbsp;15, 2011 and became effective for us on January&nbsp;1, 2012. Early application was prohibited. This required changes in presentation only and did not have a material
impact on our consolidated financial statements. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">In June 2011, the FASB issued changes to the presentation of comprehensive
income. These changes give an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two
separate but consecutive statements; the option to present components of other comprehensive income as part of the statement of changes in shareholders&#146; equity was eliminated. The items that must be reported in other comprehensive income or
when an item of other comprehensive income must be reclassified to net income were not changed. Additionally, no changes were made to the calculation and presentation of earnings per share. These changes became effective for us on January&nbsp;1,
2012. We chose to present comprehensive income in a single continuous statement. Other than the change in presentation, which is further described elsewhere in this prospectus under &#147;Selected Consolidated Financial Data,&#148; the adoption of
this pronouncement did not have an impact on our consolidated financial statements. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Quantitative and Qualitative
Disclosures about Market Risk </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Interest Rate Risk </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">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. As of June&nbsp;30, 2012, we had no investments. 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. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We enter into loan arrangements with financial institutions when needed and when available to us. At June&nbsp;30, 2012, we had no
borrowings outstanding other than a forgivable note payable associated with local grant funding bearing fixed, forgivable interest of 4.25%&nbsp;per annum. </FONT></P>
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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><A NAME="toc417938_11"></A>BUSINESS </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px;padding-bottom:0px;"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We are an international biotechnology company that is focused primarily in the field of regenerative medicine. We are
committed to the discovery and development of best-in-class therapies designed to extend and enhance the quality of human life 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<FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT>, 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&nbsp;&amp; immune disorders, neurological conditions, cardiovascular disease, and other conditions. These represent major areas of clinical need, as well as substantial commercial opportunities. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We believe MultiStem represents a breakthrough in the field of regenerative medicine and stem cell therapy and could be used to treat a
range of disease indications. MultiStem is a patented and proprietary product that enhances tissue repair and healing in multiple ways, including reducing inflammatory damage, protecting tissue that is at risk following acute or ischemic injury, and
promoting formation of new blood vessels in regions of ischemic injury. The cells comprising MultiStem appear to be responsive to the environment in which they are administered, homing to sites of injury and active disease response and producing
proteins that may provide benefit in acute or chronic conditions. In contrast to traditional pharmaceutical products or biologics that generally act through a single biological mechanism of action, the MultiStem product can enhance healing and
tissue repair through multiple distinct mechanisms acting simultaneously, by producing a range of therapeutic factors and dynamically responding to the needs of the body&#151;resulting in a more effective therapeutic response. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The MultiStem product is unique among regenerative medicine approaches, because it can be manufactured on a large scale, may be
administered in an &#147;off-the-shelf&#148; manner with minimal processing, and can augment healing in multiple ways, providing biological potency other cell therapy approaches cannot. Additionally, the MultiStem product has demonstrated a
consistent safety profile in both preclinical and clinical studies. Like drugs and biologics, the product is cleared from the body over time, enhancing product safety relative to other types of stem cell therapy. While the product does not
permanently engraft in the patient, the therapeutic effects of treatment with MultiStem cells appear to be quite durable. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We
believe the therapeutic and commercial potential for MultiStem to be very broad, applying to many areas of significant unmet medical need. We are pursuing opportunities in several potential multi-billion dollar markets. While traditional
pharmaceuticals or biologic therapies typically may be used to treat only a single disease or narrowly defined set of related conditions, MultiStem appears to have far broader potential and could be developed in different formulations and with
different delivery approaches to efficiently treat a range of disease indications. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We have already evaluated the use of
MultiStem as a potential treatment for a range of disease indications. Working with an international network of leading investigators and prominent research and clinical institutions, and through our own internal efforts, we have explored the
potential for MultiStem to be used in acute and chronic forms of inflammatory&nbsp;&amp; immune disorders, neurological conditions, cardiovascular disease, certain pulmonary conditions, and other areas. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">To date, we have successfully advanced MultiStem product candidates into five clinical stage programs, each of which addresses a
significant area of medical need, and represents a large commercial market opportunity. MultiStem has been evaluated in two completed clinical trials, one exploring the potential to treat patients that have suffered a heart attack and the other
evaluating the potential to reduce GvHD, as well as other complications, and to provide supportive care to patients being treated for leukemia or related conditions. MultiStem is currently being evaluated in two additional clinical programs in the
inflammatory&nbsp;&amp; immune disease and neurological areas. In one study, which is being conducted with our </FONT></P>
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partner Pfizer, MultiStem is being administered to patients with IBD. In another ongoing study, we are evaluating the potential to treat patients that have suffered neurological damage from a
stroke. In addition, a leading clinical center in Europe, and a research collaborator, has recently received authorization to conduct an initial clinical trial evaluating administration of MultiStem in patients that have received a solid organ
transplant. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">In addition to our MultiStem programs, we have applied our pharmaceutical discovery capabilities to identify and
develop novel pharmaceuticals to treat obesity, related metabolic conditions such as diabetes, and certain neurological indications such as schizophrenia, as well as small molecule compounds that may be used to enhance the production or therapeutic
effectiveness of MultiStem or related products, increase the product&#146;s biological potency for certain indications and lead to second or third generation products in the regenerative medicine area. Our 5HT2c agonist program for obesity works by
the same mechanism as Lorcaserin, which was recently approved by the FDA for the treatment of obesity. However, we believe our compounds may have the potential for providing superior weight loss performance, while also achieving a superior safety
and tolerability profile. In addition, we have demonstrated our compounds are complementary with other agents that have been approved by the FDA for treating obesity. Furthermore, certain compounds that we developed may also have relevance in other
disease areas, such as the treatment of schizophrenia. We are actively exploring partnership opportunities for our 5HT2c program in born the obesity and schizophrenia areas. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Business Strategy </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Our principal business objective is to
discover, develop and commercialize novel therapeutic products for disease indications that represent significant areas of clinical need and commercial opportunity. The key elements of our strategy are outlined below. </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Efficiently Conduct Clinical Development to Establish Clinical Proof of Concept and Biological Activity with our Lead Product
Candidates.</I></B>&nbsp;&nbsp;&nbsp;&nbsp;MultiStem represents a novel therapeutic modality for the treatment of inflammatory&nbsp;&amp; immune system disorders, neurological conditions and cardiovascular disease, as well as in other areas.
MultiStem may be administered like other biologics, intravenously, via catheter, or by local injection. The cells appear to be responsive to their environment, homing to sites of injury and active disease response and producing proteins that may
provide benefit in acute or chronic conditions. Additionally, MultiStem cell therapy may deliver therapeutic benefit through several distinct mechanisms of action, including reducing inflammatory damage, protecting tissue that is at risk following
acute or ischemic injury, and promoting formation of new blood vessels in regions of ischemic injury. We are conducting a number of clinical studies with the intent to establish proof of concept and/or proof of biological activity in a number of
important disease areas where the cell therapies would be expected to have benefit &#150; inflammatory&nbsp;&amp; immune system dysfunctions, neurological conditions and cardiovascular disease. Our focus is on conducting well-designed studies early
in the clinical development process to establish a robust foundation for subsequent development, partnership and expansion into complementary areas. We are committed to a rigorous clinical and regulatory framework, which we believe has helped to
advance our programs efficiently, and is also a result of the quality of our regulatory submissions and transparency in our discussions with the FDA have resulted in a successful regulatory partnership that has helped to advance our programs
efficiently. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Continue to Refine and Improve our Manufacturing and Related Processes and Deepen our Understanding of Therapeutic Mechanisms of
Action.</I></B>&nbsp;&nbsp;&nbsp;&nbsp;A key aspect of MultiStem is its substantial expansion capacity <I>ex vivo</I> relative to other cell types. This enables large scale production of the clinical product, which enables greater consistency,
specificity and cost of goods advantages over other cell therapies. We plan to build on this intrinsic biological advantage by continuing to advance and optimize our production and process development
</FONT></P></TD></TR></TABLE>
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approaches, further developing new manufacturing approaches including our bioreactor platform, and optimizing the plant to bedside supply chain to support late stage development and
commercialization. Additionally, we will continue to refine our understanding of our products&#146; activities and mechanisms of action to enable optimization of administration and dosing and to prepare the foundation for product enhancements and
next generation opportunities. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Enter into Licensing or Product Co-Development Arrangements in Certain Areas, while Out-Licensing Opportunities in Non-Core
Areas.</I></B>&nbsp;&nbsp;&nbsp;&nbsp;In addition to our internal development efforts, an important part of our product development strategy is to work with collaborators and partners to accelerate product development, reduce our development costs,
and broaden our commercialization capabilities. We have entered into licensing and product co-development arrangements with qualified commercial partners to achieve these objectives. We anticipate that this strategy will help us to develop a
portfolio of high quality product development opportunities, enhance our clinical development and commercialization capabilities, and increase our ability to generate value from our proprietary technologies. Over the past decade, we have entered
into technology licensing arrangements and established product commercialization and co-development partnerships with companies such as Pfizer, Angiotech, Bristol-Myers Squibb, Johnson&nbsp;&amp; Johnson, Wyeth and RTI. These partnerships generate
revenue and provide capital that allows us to advance certain programs further in development. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Efficiently Explore New High Potential Therapeutic Applications, Leveraging Third-Party Research Collaborations and our Results
from Related Areas.</I></B>&nbsp;&nbsp;&nbsp;&nbsp;Our product candidates have shown promise in multiple disease areas, including in treating inflammatory&nbsp;&amp; immune disorders, neurological conditions, cardiovascular disease, and other areas.
We are committed to exploring potential clinical indications where our therapies may achieve best-in-class profile, and where we can address significant unmet medical needs.<I> </I>In order to achieve this goal, over the past decade, we have
established collaborative research relationships with investigators from many leading research and clinical institutions across the United States and Europe, including the Cleveland Clinic, Case Western Reserve University, University of Minnesota,
the Medical College of Georgia, the University of Oregon Health Sciences Center, the University of Texas Health Science Center at Houston, the University of Pittsburgh Medical Center, KUL, and other institutions. Through this network of
collaborations, we have studied MultiStem in a range of preclinical models that reflect various types of human disease or injury in the cardiovascular, neurological, and immunological areas. These collaborative relationships have enabled us to cost
effectively explore where MultiStem may have therapeutic relevance, and how it may be utilized to advance treatment over current clinical care. Additionally, we have shown that we can leverage clinical safety data and preclinical results from some
programs to support accelerated clinical development efforts in other areas, saving substantial development time and resources compared to traditional drug development where generally each program is separately developed.
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Continue to Expand our Intellectual Property Portfolio.&nbsp;&nbsp;&nbsp;&nbsp;</I></B>We have a broad intellectual property
estate that covers our proprietary products and technologies, as well as methods of production and methods of use. Our intellectual property is important to our business and we take significant steps to protect its value. We have ongoing research
and development efforts, both through internal activities and through collaborative research activities with others, which aim to develop new intellectual property and enable us to file patent applications that cover new applications of our existing
technologies or product candidates, including MultiStem and other opportunities. </FONT></P></TD></TR></TABLE>
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 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Our Current Programs </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">By applying our proprietary MultiStem cell therapy product, we have established therapeutic product development programs treating inflammatory&nbsp;&amp; immune disorders, neurological
conditions, cardiovascular disease, and other conditions. To date, we have advanced five programs to the clinical development stage, including the following: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><U><B><I>Inflammatory Bowel Disease</I></B>:</U>&nbsp;&nbsp;&nbsp;&nbsp;IBD affects an estimated 4&nbsp;million patients or more in the
United States, Europe, and Japan. Current therapies for treating IBD consist of pharmaceutical and biologic drugs, representing an annual market of more than $5 billion globally. Currently available therapies provide temporary relief or are not
effective for many patients, and novel approaches are needed to improve the standard of care and help patients avoid surgical intervention. MultiStem is being evaluated in an ongoing Phase II clinical study involving administration of MultiStem to
patients suffering from 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, and is a double blind, placebo controlled trial
that began enrolling patients in 2011. Enrollment of the trial is ongoing and designed to include approximately 130 patients, with initial results expected to be reported in 2013. </FONT></P></TD></TR></TABLE>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><U><B><I>Ischemic Stroke</I></B>:</U>&nbsp;&nbsp;&nbsp;&nbsp;Ischemic stroke affects approximately 15 million people globally each year
and approximately 2 million in the United States, Europe and Japan combined. The clot-dissolving drug tPA must be administered within 3 to 4 hours after the stroke, and as a result of this narrow window, a limited number of patients are treated with
it. We are evaluating in a Phase II clinical study the administration of MultiStem to patients one to two days after they have suffered an ischemic stroke. 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 include
approximately 136 patients. We completed the first patient cohorts, and the independent safety monitoring committee found 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 will be randomized to receive either high dose MultiStem or placebo. We believe this represents a potential market opportunity of more than $15&nbsp;billion annually. </FONT></P></TD></TR></TABLE>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><U><B><I>Acute Myocardial Infarction</I></B>:</U>&nbsp;&nbsp;&nbsp;&nbsp;We have evaluated the administration of MultiStem in a Phase I
clinical study to patients that have suffered an 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. One-year follow-up data suggested that the benefit observed was sustained over time. We have completed preliminary planning for a Phase II trial, which has been discussed with the FDA. Our plans to move
the AMI program forward into subsequent development will depend on the availability of capital resources, progress in our other clinical studies and our business development activities. </FONT></P></TD></TR></TABLE>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><U><B><I>Hematopoietic Stem Cell Transplant / GvHD</I></B>:</U>&nbsp;&nbsp;&nbsp;&nbsp;We have 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 transplant. Such patients are at risk for serious
complications, including 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 February 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
</FONT></P></TD></TR></TABLE>
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orphan drug designation from the FDA, which provides us with seven years of market exclusivity upon approval, and certain other benefits. We met with the FDA to discuss the results of the
clinical study and our proposed plans for the next phase of clinical development in this area. We are currently preparing our detailed clinical study plans and look forward to finalizing our design and undertaking operational planning. Based on
current plans, we intend to be ready to start this study in the second half of 2013, but the initiation will depend on the progress in our clinical trials and the achievement of certain business development and financial objectives. There are
approximately 25,000 bone marrow or peripheral blood stem cell allografts performed annually, but we believe many more transplants could be performed if the risks of GvHD could be meaningfully reduced. We believe this indication represents a
potential market opportunity of $500 million annually or more. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">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 limited financial support for this investigator-sponsored Phase I study and provide clinical grade product to conduct the trial. According to a report by Reuter&#146;s Business Insight, in 2009, approximately 91,000 organ transplants were
conducted. We estimate that this represents a potential market of more than $1.5&nbsp;billion annually. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">In addition to our
current and anticipated clinical development activities, we are engaged in preclinical development and evaluation of MultiStem in other disease indications in the inflammatory&nbsp;&amp; immune disorder, neurological and cardiovascular disease
areas. 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. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We are in discussions with third parties about collaborating in the development of MultiStem for our current clinical programs (outside
of IBD) and preclinical programs and may, under the right terms, enter into one or more business partnership(s) to advance the programs. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">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. RTI&#146;s
product development activities are progressing, and in September 2012, we amended our agreement with RTI to accelerate $2.0 million of contingent milestone payments in connection with ongoing technical support to assist RTI in its initial product
launch. As a result, we will receive these milestone payments in 2012, and in addition, RTI will compensate us for this technical assistance. We will also receive royalty revenue from product sales when they occur, as well as potential additional
milestone payments. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We are also engaged in the development of novel small molecule therapies to treat obesity and other
conditions. 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 complementarity of our compounds 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 that exhibit a particular type of selectivity profile in preclinical
models of schizophrenia and observed that these compounds exhibit potent effects. We are in discussions with multiple companies and 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. </FONT></P>
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 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Regenerative Medicine Programs </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><I>MultiStem&#151;A Novel Therapeutic Modality </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We are developing a proprietary non-embryonic, allogeneic stem cell product candidate, MultiStem, that we believe has potential utility for treating a broad range of diseases and could
have widespread application in the field of clinical regenerative medicine. Unlike traditional bone marrow transplants or other stem cell therapies, MultiStem may be manufactured on a large scale and may be administered without tissue matching or
the need for immune suppression, analogous to type O blood. Potential applications of MultiStem include the treatment of cardiovascular disease, neurological disease or injury and conditions involving the immune system, including autoimmune disease
and other conditions. We believe that MultiStem represents a significant advancement in the field of stem cell therapy and could have broad clinical application. We currently have open INDs for the study of MultiStem in distinct clinical
indications, and a collaborating institution recently obtained authorization in Europe to initiate a clinical program through an investigator sponsored clinical trial application, obtained with our permission and support. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">MultiStem is a patented biologic product that is manufactured from human stem cells obtained from adult bone marrow, although these cells
may alternatively be obtained from other tissue sources, which are also covered under our intellectual property. The product consists of a special class of human stem cells that have the ability to express a range of therapeutically relevant
proteins and other factors, as well as form multiple cell types. Factors expressed by MultiStem have the potential to deliver a therapeutic benefit in several ways, such as the reduction of inflammation, regulation of immune system function,
protection of damaged or injured tissue, the formation of new blood vessels in regions of ischemic injury and augmenting tissue repair and healing in other ways. Like drugs, these cells may be stored for an extended period of time (in frozen form)
and used off-the-shelf. Following administration, the cells have been shown to express multiple therapeutically relevant proteins, but unlike a traditional transplant, are subsequently cleared from the body over time like a drug or biologic.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The therapeutic benefit of bone marrow transplantation has been recognized for decades, and its clinical use has grown since
Congress passed the National Organ Transplant Act in 1984 and the National Marrow Donor Registry was established in 1990. However, widespread bone marrow or stem cell transplantation has yet to become a reality. Some of the limitations that have
prevented broader clinical application of bone marrow or stem cell transplantation include the requirement for tissue matching between donor and recipient, the typical need for one donor for each patient (a reflection of the inability to expand
cells in a controlled and reproducible manner), frequent use of immune suppressive drugs to avoid rejection or immune system complications, the inability to efficiently produce significant quantities of stem cells and a range of potential safety
issues. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">A stem cell therapy that has the potential to address the challenges mentioned above could represent a breakthrough
in the field of regenerative medicine, since it could greatly expand the clinical application of stem cell therapy or other forms of regenerative medicine. In 2003, we acquired technology originally developed at the University of Minnesota related
to a novel stem cell type, MAPC, that may be isolated from adult bone marrow as well as other nonembryonic tissues. Over the past several years, we have further developed this technology and the manufacturing of these cells for use in ongoing
clinical trials. We refer to the current product platform as MultiStem. During several years of preclinical work, MultiStem has demonstrated the potential to address many of the fundamental limitations observed with traditional bone marrow or
hematopoietic stem cell transplants. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We believe that MultiStem represents a potential best-in-class stem cell therapy because
it exhibits each of the following characteristics based on research and development to date: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B></B><B><I>Broad Plasticity and Multiple Potential Mechanisms of Action.&nbsp;&nbsp;&nbsp;&nbsp;</I></B>MultiStem cells have a
demonstrated ability in animal models to form a range of cell types and also appear to be </FONT></P></TD></TR></TABLE>
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able to deliver therapeutic benefit through multiple mechanisms, such as producing factors that protect tissues against damage and inflammation, as well as enhancing or playing a direct role in
revascularization or tissue regeneration. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B></B><B><I>Large Scale Production.&nbsp;&nbsp;&nbsp;&nbsp;</I></B>Unlike conventional stem cells, such as blood-forming or
hematopoietic stem cells, mesenchymal stem cells, or other cell types, MultiStem cells may be produced on a large scale, processed, and cryogenically preserved, and then used clinically in a rapid and efficient manner. Material obtained from a
single donor may be used to produce hundreds of thousands or millions of individual doses, representing a yield far greater than other stem cells have been able to achieve. </FONT></P></TD></TR></TABLE>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B></B><B><I>&#147;Off-the-Shelf&#148; Utility.&nbsp;&nbsp;&nbsp;&nbsp;</I></B>Unlike traditional bone marrow or hematopoietic stem
cell transplants that require extensive genetic matching between donor and recipient, MultiStem is administered without tissue matching or the requirement for immune suppressive drugs. MultiStem is administered as a cryogenically preserved
allogeneic product, meaning that these cells are not genetically matched between donor and recipient. This feature, combined with the ability to establish large MultiStem banks, could make it practical for clinicians to efficiently deliver stem cell
therapy to a large number of patients. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B></B><B><I>Safety.&nbsp;&nbsp;&nbsp;&nbsp;</I></B>Other stem cell types, such as embryonic stem cells or induced pluripotent stem
cells have shown the capacity to form ectopic tissue or teratomas, which are tumor-like growths. These could pose serious safety risks to patients. In contrast, MultiStem cells have shown a consistent and outstanding safety profile that has been
compiled over several years of preclinical study in a range of animal models by a variety of investigators and that is supported by emerging clinical data. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">At each step of the MultiStem production process, cells are analyzed according to pre-established criteria to ensure that a consistent, well characterized product candidate is produced.
Cells are harvested from a pre-qualified donor and then expanded to form a Master Cell Bank from which we subsequently produce clinical grade material. In multiple animal models, MultiStem has been shown to be non-immunogenic, and is administered
without the genetic matching that is typically required for conventional bone marrow or stem cell transplantation. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The
distinctive profile of MultiStem allows us to pursue multiple high value commercial opportunities from a single product platform. Based upon work that we and independent collaborators have conducted over the past several years, we believe that
MultiStem has the potential to treat a range of distinct disease indications, including ischemic injury and cardiovascular disease, certain neurological diseases, autoimmune disease, transplant support (including in oncology patients and solid organ
transplant areas), and a range of orphan disease indications. As a result, we believe we will be able to leverage our foundation of safety and efficacy data to add clinical indications efficiently, enabling us to reduce development costs and
timelines substantially. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><I>MultiStem for Treating Immune System Disorders, and Neurological Conditions and Cardiovascular
Disease </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Healthcare represents a significant part of the global economy. In the United States, it represented approximately
18% of all economic activity in 2009, or about $2.49 trillion dollars annually. However, the United States, along with many other nations, is experiencing an unprecedented demographic shift that is resulting in a significantly expanded population of
older individuals. According to United States Census data, in the next few years there will be a dramatic increase in the number of individuals over the age of 65, as this segment of the population increases from 40.2&nbsp;million individuals in
2010 to more than 72&nbsp;million people in 2030, representing an increase of approximately 80%. The aging of the population will create enormous financial pressure on the healthcare system in the United States and other countries around the world,
resulting in significant clinical challenges, but also resulting in substantial commercial opportunities. </FONT></P>
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 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Data from the National Center for Health Statistics shows that as people get older, they
are more susceptible to a variety of age related conditions, including heart disease, stroke, certain forms of cancer, diabetes, progressive neurological disorders, various chronic inflammatory&nbsp;&amp; immune conditions, renal disease and a range
of others. As a consequence, as people get older they spend far more on healthcare&#151;on average they spend three to seven times more on healthcare annually at age 65 than when they are young and healthy. According to the Alliance for Aging
Research, 83% of healthcare spending is associated with chronic conditions, and other research shows that 62% of healthcare spending is associated with multiple chronic conditions. Traditional medical approaches have failed to adequately address
this problem. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Working with independent investigators at a number of leading institutions, such as the Cleveland Clinic,
University of Minnesota, the National Institutes of Health, the Medical College of Georgia, the University of Oregon Health Sciences Center, the University of Texas Health Science Center at Houston, KUL and other institutions. Through this network
of collaborations, we have studied MultiStem in a range of preclinical models that reflect various types of human disease or injury in the cardiovascular, neurological, and immunological areas. To date, we and our collaborators have published
research results illustrating the potential benefits of MultiStem in a range of indications including myocardial infarction, vascular disease, ischemic stroke, TBI, brain damage due to restricted blood flow in newborns, spinal cord injury, and bone
marrow transplant support/GvHD. In addition, we have explored and intend to further explore, the potential application of MultiStem in the treatment of a range of other conditions, including other forms of cardiovascular disease, neurological
conditions, and immune related disorders. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">As stated above, we have consistently observed that MultiStem is safe and effective
in animal models. As a result, we have advanced MultiStem to clinical development stage in four clinical indications or disease areas: treatment of IBD (initially focused on UC); support in the hematologic malignancy setting to reduce certain
complications associated with traditional bone marrow or HSC transplantation; treatment for stroke caused by a blockage of blood flow in the brain; and treatment of damage caused by myocardial infarction. Additionally, in collaboration with a
leading transplant center in Europe, a fifth program in the solid organ transplant area has been advanced to clinical development. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We may expand to other clinical indication areas as results warrant and resources permit. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I><U>Immunological Disorders&#151;MultiStem for IBD and HSC Transplant Support </U></I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Inflammatory&nbsp;&amp; immune disorders also represent a significant burden to society. There are over 80&nbsp;recognized autoimmune disorders, which are conditions caused by an acute or
chronic imbalance in the immune system. In these conditions, cells of the immune system begin to attack certain tissues or organs in the body, resulting in tissue damage and loss of function. Some inflammatory&nbsp;&amp; immune conditions are
associated with aging related conditions (e.g., rheumatoid arthritis), but some are due to other causes that may be genetic, environmental or a combination of both (e.g., Type 1 diabetes, IBD). Still other conditions may reflect complications
associated with the treatment of other conditions (e.g., GvHD, a frequent complication associated with transplant procedures used to treat leukemia or related blood-borne cancers). Each of these conditions shares certain biological characteristics,
in that the immune system imbalance results from the inappropriate activation of certain populations of immune cells that results in significant tissue damage and destruction. This immune imbalance may result in a complex cascade of inflammation
that can result in pain, progressive tissue deterioration and loss of function. While currently available immunomodulatory drugs have proven to be effective for many patients, they have failed to adequately address the needs of many other patients
that suffer from inflammatory&nbsp;&amp; immune disorders. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">In multiple studies, MultiStem has shown potent immunomodulatory
properties, including the ability to reduce active inflammation through various modes of action, and restore immune system imbalance. </FONT></P>
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Accordingly, we believe that MultiStem could have broad application in the area of treating immune system disorders, including certain autoimmune diseases and other conditions, including GvHD,
which is a frequent immunological complication associated with bone marrow or HSC transplantation. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">In 2009, we entered into a
collaboration agreement with Pfizer to develop and commercialize MultiStem for the treatment of IBD for the worldwide market. IBD is a group of inflammatory and autoimmune conditions that affect the colon and small intestine, typically resulting in
severe abdominal pain, weight loss, vomiting and diarrhea. The most common forms of the disease include UC and Crohn&#146;s disease, which are estimated to affect 4&nbsp;million people or more in the United States, five major European markets
(United Kingdom, Germany, France, Italy and Spain) and Japan. Chronic IBD can be a severely debilitating condition, and advanced cases may require surgery to remove the affected region of the bowel, and may also require temporary or permanent
colostomy or ileostomy. In many cases, surgery does not achieve a permanent cure, and patients suffer a return of the disease. In 2011, enrollment commenced in our Phase II clinical study being conducted with our partner, Pfizer, to administer
MultiStem to patients suffering from UC. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Another area of focus is the use of MultiStem as adjunctive treatment for HSC/bone
marrow transplant used as therapy in hematologic malignancy. For many types of cancer, such as leukemia or other blood-borne cancers, treatment typically involves radiation therapy or chemotherapy, alone or in combination. Such treatment can
substantially deplete the cells of the blood and immune system, by reducing the number of stem cells in the bone marrow from which they arise. The more intense the radiation treatment or chemotherapy, the more severe the resulting depletion is of
the bone marrow, blood, and immune system. Other tissues may also be affected, such as cells in the digestive tract and in the pulmonary system. The result may be severe anemia, immunodeficiency, substantial reduction in digestive capacity, and
other problems that may result in significant disability or death. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">One strategy for treating the depletion of bone marrow is
to perform a peripheral blood stem cell transplant or a bone marrow transplant. This approach may augment the patient&#146;s ability to form new blood and immune cells and provide a significant survival advantage. However, finding a closely matched
donor is frequently difficult or even impossible. Even when such a donor is found, in many cases there are immunological complications, such as GvHD, which may result in serious disability or death. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Working with leading experts in the stem cell and bone marrow transplantation field, we have studied MultiStem in animal models of
radiation therapy and GvHD. In multiple animal models, MultiStem has been shown to be non-immunogenic, even when administered without the genetic matching that is typically required for conventional bone marrow or stem cell transplantation.
Furthermore, in animal model systems testing immune reactivity of T-cells against unrelated donor tissue, MultiStem has been shown to suppress the T-cell-mediated immune responses that are an important factor in causing GvHD. MultiStem-treated
animals also displayed a significant increase in survival relative to controls. As a result, we believe that the administration of MultiStem in conjunction with or following standard HSC transplantation may have the potential to reduce the incidence
or severity of complications and may enhance gastrointestinal function, which is frequently compromised as a result of radiation treatment or chemotherapy. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We completed a Phase I clinical trial examining the safety and tolerability of a single dose or repeat dosing of MultiStem administered intravenously to patients receiving a bone marrow or
hematopoietic stem cell transplant as part of their treatment of leukemia or other hematological condition. The trial was an open label, multicenter trial that involved leading experts in the field of bone marrow transplantation. In February 2012,
we announced the top-line results from the trial. We observed a consistent safety profile in both the single and multiple dose arms of the study, and at all dose levels tested. Although the trial was not specifically designed to demonstrate
efficacy, we also observed </FONT></P>
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clinically meaningful improvement in medically important parameters relative to historical clinical experience, including reduced incidence and severity of acute GvHD, improved relapse free
survival, no graft failures, and enhanced engraftment rates relative to other forms of treatment. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">In September 2010, we
announced that we had been granted orphan drug designation by the FDA for MultiStem in the prevention of GvHD. We met with the FDA to review the results from the Phase I trial and discuss plans for the next phase of clinical development, which could
include a Phase II/III study of MultiStem for GvHD prophylaxis and HSCT support. We are currently preparing our detailed clinical study plans and look forward to finalizing our design and undertaking operational planning. Based on current plans, we
intend to be ready to start this study in the second half of 2013, but the initiation will depend on the progress in our clinical trials and the achievement of certain business development and financial objectives. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I><U>Neurological Disease&#151;MultiStem for Ischemic Stroke </U></I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Another focus of our regenerative medicine program is the use of MultiStem for the treatment of neurological injury as a result of acute or chronic conditions. Neurological injury and
disease represents an area of significant unmet medical need, a major burden on the healthcare system, and also represents a huge commercial opportunity. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Many neurological conditions require extensive long-term therapy, and many require extended hospitalization and/or institutional care, creating an enormous cost burden. Stroke represents
an area where the clinical need is particularly significant, since it represents a leading cause of death and significant long term disability. Currently, there are approximately 800,000 individuals in the United&nbsp;States that suffer a stroke
each year, more than two million stroke victims in the United States, Europe and Japan combined, and approximately 15&nbsp;million people that suffer a stroke each year globally. The vast majority of these (approximately 85% to 90%) are ischemic
strokes, that are caused by a blockage of blood flow in the brain, that cuts off the supply of oxygen and nutrients, resulting in eventual tissue loss and long-term damage and disability. The remainder of these are hemorrhagic strokes, which occur
when a blood vessel bursts and bleeding into the brain ensues. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Studies show that in recent years there has been a dramatic
rise in ischemic strokes among young adults (i.e., individuals in the 25 to 45 age group), which is likely due to a combination of rising rates of obesity and other factors. Unfortunately, current therapeutic options for ischemic stroke victims are
limited, as the only available therapy, a clot dissolving agent or &#147;thrombolytic,&#148; must be administered within several hours of the occurrence of the stroke. As a consequence of this limited time window, only a small percentage of stroke
victims are treated with the currently available therapy&#151;most simply receive supportive or &#147;palliative&#148; care. The long-term costs of stroke are substantial, with many patients requiring extended hospitalization, extended physical
therapy or rehabilitation (for those patients that are capable of entering such programs), and many require long-term institutional or family care. Similarly, there are other acute and progressive neurological conditions that require substantial
healthcare resources, with limited existing treatment options that are only marginally clinically effective. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We have
published research with independent collaborating investigators that demonstrates that MultiStem conveys biological benefits in preclinical models of ischemic stroke, as well as other models of neurological damage and injury, including TBI, neonatal
hypoxic ischemia (a cause of neurological damage in infants), and spinal cord injury. We have also conducted preclinical work in other neurological areas, and have been awarded grants to support work in areas such as the indications described above
and for evaluating the potential of MultiStem to treat chronic conditions such as Multiple Sclerosis, or MS, or Parkinson&#146;s disease. Our research has shown that MultiStem conveys benefits through distinct mechanisms, including reducing
inflammatory damage, protecting at risk tissue at the site of injury, and through direct neurotrophic effects that stimulate the recovery of damaged neurons. As a result, we believe that MultiStem may have relevance to multiple forms of neurological
injury and disease. </FONT></P>
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 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Our initial clinical focus in the neurological area involves evaluating administration of
MultiStem to treat ischemic stroke. Ischemic stroke is a leading cause of death and disability globally, and accounts for approximately 85% of all strokes. Recent progress toward the development of safer and more effective treatments for ischemic
stroke has been disappointing. Despite the fact that ischemic stroke is one of the leading causes of death and disability in the United States, there has been little progress toward the development of treatments that improve the prognosis for stroke
victims. The only FDA-approved drug currently available for ischemic stroke is the anti-clotting factor, tPA. According to current clinical guidelines, tPA must be administered to stroke patients within several hours after the occurrence of the
ischemic stroke to remove the clot while minimizing potential risks, such as bleeding into the brain. Administration of tPA after three to four hours is not recommended, since it can cause cerebral bleeding or even death. Given this limited
therapeutic window, it is estimated that less than 5% of ischemic stroke victims in the United States currently receive treatment with tPA. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">In preclinical studies conducted by investigators, including at both the University of Minnesota, the Medical College of Georgia, and the University of Texas Health Science Center at
Houston, significant functional improvements have been observed in rodents that have undergone an experimentally induced stroke, or that have incurred significant neurological damage due to similar types of ischemic events, such as a result of
neonatal hypoxic ischemia or TBI, and then received treatment with MultiStem. Published research has demonstrated that administration of MultiStem even one week after a surgically induced stroke results in substantial long-term therapeutic benefit,
as evidenced by the improvement of treated animals compared with controls in a battery of tests examining mobility, strength, fine motor skills, and other aspects of neurological functional improvement. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Based on the research we and our collaborators have conducted, we believe MultiStem conveys significant benefits through several
mechanisms, including reduction of inflammation and immune system modulation in the ischemic area, and the protection and rescue of damaged or injured cells, including neuronal tissue. Research results presented at the 2011 and 2012 American Heart
Association International Stroke Conference by collaborators from the University of Texas Health Science Center at Houston demonstrated that administration of MultiStem 24 hours following a stroke reduced inflammatory damage in the brain and
resulted in significant functional improvement, and that some of these results were achieved by reducing the inflammatory response emanating from the spleen. These results confirm that MultiStem treatment is well tolerated, does not require
immunosuppression and results in a robust and durable therapeutic benefit, and are consistent with prior results that show MultiStem can provide significant benefits even when administered up to one week after the initial stroke event. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We are currently enrolling patients in a 136-patient Phase II clinical trial exploring the administration of MultiStem to patients that
have suffered an ischemic stroke. In this trial, MultiStem is administered 24 to 36 hours after a stroke has occurred. If shown to be safe and effective, this would represent a significant extension of the treatment window relative to existing
standard of care and could provide an important new therapeutic option for stroke patients. We believe that the potential market for a new therapy to treat stroke could be $15 billion or more annually. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We are also interested in the application of MultiStem for other neurological indications that represent areas of significant unmet
medical need, such as TBI, which represents the leading cause of disability among children and young adults, and a leading cause of death. Approximately 1.7&nbsp;million cases of TBI are seen in the United States each year, nearly half a million
cases of which are children age 0 to 14 years old. The CDC estimates that more than 5.3 million individuals are living with a disability and have a long-term or lifelong need for help to perform activities of daily living as a result of a TBI. The
annual direct and indirect costs for TBI are approximately $60 billion a year, according to the National Institute of Neurological Disorders and Stroke, which is part of the National Institutes of Health. In preclinical studies of TBI,
administration of MultiStem dramatically reduced the extent of damage caused by a TBI, </FONT></P>
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and promoted accelerated healing of the blood-brain barrier. Early in 2012, we announced grant funding aggregating $3.6 million to further advance our MultiStem programs and cell therapy
platform, including further development of MultiStem for the treatment of TBI and further development of our cell therapy formulations and manufacturing capabilities. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We are also conducting preclinical work exploring the application of MultiStem toward in other neurological indications. In June 2010, we announced that we and collaborators at the Center
for Stem Cell and Regenerative Medicine and Case Western Reserve University were awarded $1.0 million through the Ohio Third Frontier Biomedical Program to support preclinical and translational research into the treatment of spinal cord injury, or
SCI, with MultiStem. In October 2011, we announced the award of grant funding of up to $640,000 to investigate the potential for MultiStem to treat chronic progressive MS based on initial results in preclinical models. In October 2012, in
collaboration with scientists from Case Western Reserve University, and with the support of Fast Forward and the National Multiple Sclerosis Society, we reported research results that demonstrate the potential benefits of MultiStem therapy for
treating MS. In standard preclinical models of MS, researchers observed that MultiStem administration results in sustained behavioral improvements, arrests the demyelination process that is central to the pathology of MS, and supports remyelination
of affected axons. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I><U>Cardiovascular Disease&#151;Evaluating MultiStem for Treating Damage from a Heart Attack
</U></I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Cardiovascular disease is an area of significant clinical need that is expected to expand significantly in the
years ahead. Despite treatment advances in recent years, cardiovascular disease remains the leading cause of death, and represents one of the leading causes of disability around the world. In the United&nbsp;States, approximately 1,255,000 patients
suffer a heart attack each year, and approximately 5.7&nbsp;million individuals in the United States are currently suffering from heart failure. Another eight million suffer from peripheral arterial disease, which is associated with significant
morbidity and mortality. According to projections published recently by the American Heart Association in February 2011 in the journal <I>Circulation</I>, aggregate costs for treating heart disease in the United States are expected to soar in the
coming years. In 2010, annual direct costs for treating cardiovascular disease were $273 billion, but by 2030 these are expected to nearly triple, to a projected $818 billion per year. This increase will occur primarily as a result of the aging
population, and may not fully reflect the impact of the dramatic escalation in obesity rates that has occurred for both adults and children in recent years, which could further exacerbate the long-term challenges and increase costs associated with
cardiovascular disease and other conditions. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">In a Phase I clinical trial, we have explored the use of MultiStem as a
treatment for damage caused by AMI. Myocardial infarction is one of the leading causes of death and disability in the United States. Myocardial infarction is caused by the blockage of one or more arteries that supply blood to the heart. Such
blockages can be caused, for example, by the rupture of an atherosclerotic plaque deposit. According to the American Heart Association 2012 Statistical Update, there were approximately 935,000 cases of myocardial infarction that occurred in the
United States in 2008 and approximately 7.9&nbsp;million individuals living in the United States that had previously suffered a heart attack. In addition, there were approximately 812,000 deaths that occurred from all forms of cardiovascular
disease, including 462,000 individuals that died as a result of coronary heart disease or heart failure. A variety of risk factors are associated with an elevated risk of myocardial infarction or atherosclerosis, including age, high blood pressure,
smoking, sedentary lifestyle and genetics. While advances in the diagnosis, prevention and treatment of heart disease have had a positive impact, there is clearly room for improvement&#151;myocardial infarction remains a leading cause of death and
disability in the United&nbsp;States and the rest of the world. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">MultiStem has been studied in validated animal models of AMI,
including at both the Cleveland Clinic and the University of Minnesota. Investigators demonstrated that the administration of allogeneic MultiStem into the hearts of animals damaged by experimentally induced heart attacks resulted in
</FONT></P>
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significant functional improvement in cardiac output and other functional parameters compared with animals that received placebo or no treatment. Furthermore, the administration of
immunosuppressive drug was not required and provided no additional benefit in this study, and supports the concept of using MultiStem as an allogeneic product. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Working with a contract research organization, we completed additional preclinical studies in established pig models of AMI using catheter delivery and examining various factors such as
the route and method of MultiStem administration, dose ranging, and timing of treatment. In 2008, we initiated a multicenter, open-label Phase I clinical trial in this indication, and the study is now completed. In July 2010, we announced the
preliminary results from this trial, which showed that MultiStem was well tolerated at all dose levels and exhibited a favorable safety profile. In addition, patients that received treatment with MultiStem exhibited meaningful improvements in
cardiovascular function, including left ventricular ejection fraction, wall motion scores, and other parameters. These results were recently published in <I>Circulation Research </I>in November 2011. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Pharmaceutical Programs </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><I>Novel 5HT2c Agonists for the Treatment of Obesity and Other Conditions </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Obesity is a substantial contributing factor to a range of diseases that represent the major causes of death and disability in the developed world today. Individuals that are clinically
obese have elevated rates of cardiovascular disease, stroke, certain types of cancer and diabetes. According to the CDC, the incidence of obesity in the United States has increased at an epidemic rate during the past 20 years. CDC now estimates that
almost 70% of all Americans are overweight, including more than one-third that are considered clinically obese. The percentage of young people who are overweight has more than tripled since 1980. There has also been a dramatic rise in the rate of
obesity in Europe and Asia. Despite the magnitude of this problem, current approaches to clinical obesity are largely ineffective, and we are aware of relatively few new therapeutic approaches in clinical development. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px;padding-bottom:0px;"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We are developing novel pharmaceutical treatments for obesity, which are compounds designed to act by stimulating a
key receptor in the brain that regulates appetite and food intake&#151;the 5HT2c receptor. The role of this receptor in regulating food intake is well understood in both animal models and humans. In 1996, Wyeth launched the anti-obesity drug Redux<FONT
STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT> (dexfenfluramine), a non-specific serotonin receptor agonist that was used with the stimulant
phentermine in a combination commonly known as fen-phen. This diet drug combination gained rapid and widespread acceptance in the clinical marketplace and was shown to be highly effective at regulating appetite, reducing food intake, and causing
significant weight loss. Unfortunately, in addition to stimulating the 5HT2c receptor, Redux also stimulated the 5HT2b receptor that is found in the heart. The activation of 5HT2b by Redux is believed to have caused significant cardiovascular
problems in a number of patients and, as a result, Redux was withdrawn from the market in 1997. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Since the withdrawal of Redux
from the market, several groups have published research and clinical data that implicate stimulation of the 5HT2b receptor as the underlying cause of the cardiovascular problems. These findings suggest that highly selective compounds that stimulate
the 5HT2c receptor, but that do not appreciably stimulate the 5HT2b receptor, could be developed that maintain the desired appetite suppressive effects without the cardiovascular toxicity. Recent clinical data supports this hypothesis and also
suggests that the 5HT2c agonists may also cause a statistically significant reduction in the amount of sugar in the blood, as measured by fasting blood glucose and HbA1c levels, which are both clinically relevant measures for patients suffering from
diabetes. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Recently, the FDA approved Lorcaserin, a 5HT2c agonist, for the treatment of obesity. We believe this represents a
significant event for our program because it illustrates that the FDA recognizes and agrees with the concept that 5HT2c agonists that display appropriate selectivity, biological activity and clinical safety are approvable for indications such as
obesity. </FONT></P>
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 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Our drug development program is focused on creating potent and selective compounds that
stimulate the 5HT2c receptor, but that avoid the 5HT2b receptor and other receptors, such as 5HT2a. Our specific goal has been to develop an orally administered pill that reduces appetite by stimulating the 5HT2c receptor, but that does not
stimulate the 5HT2b receptor, the 5HT2a receptor, or other receptors that could cause adverse side effects. Based on extensive preclinical studies that we have conducted with compounds that we have generated, we have demonstrated the ability to
develop compounds that are highly potent and selective for the 5HT2c receptor, and that lack activity at either 5HT2a or 5HT2b. We believe that this achievement represents a significant advance in the field, and that the potency and selectivity
profile displayed by compounds we are developing will result in substantially better efficacy and a cleaner safety and tolerability profile in clinical trials, as well as a more convenient dosing schedule than other 5HT2c agonist programs including
Lorcaserin. We also evaluated certain of our compounds when administered as a monotherapy or in conjunction with other weight loss agents, and have observed effectiveness with both approaches and complementarity with other agents. We are conducting
preclinical evaluation of novel compounds that we have developed that exhibit outstanding receptor selectivity and are working toward the selection of a clinical development candidate for this program. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Certain potent and highly selective compounds that we have developed display a profile that we believe may have utility in treating
schizophrenia. We evaluated some of these compounds in preclinical models of schizophrenia and have observed that they exhibit efficacy in these models. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We are currently exploring partnering opportunities for this program and may elect to enter into a partnership to advance the development of this program for the treatment of obesity and
related indications, schizophrenia, or multiple indications. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><I>Other Small Molecule Programs&nbsp;&amp; Key Technologies
</I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">In addition to our other programs, we believe that there are significant opportunities for synergy between our small
molecule platform and related capabilities and our MultiStem technology. Specifically, we believe that substantial opportunities exist for identifying and utilizing small molecule modulators of therapeutically relevant biological activity exhibited
by MultiStem or other stem cell types. We believe that applying our capabilities in both areas could lead to next generation product development opportunities, including more potent stem cell based therapies that have been optimized for use in
specific indication areas. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">In addition to our current product development programs, we developed our patented RAGE technology
that provides us with the ability to produce human cell lines that express specific, biologically well validated drug targets without relying upon cloned and isolated gene sequences. While our RAGE technology is not a therapeutic product, it is a
commercial technology that we have successfully applied for the benefit of our partners and that we have also used for our own internal drug development programs. Modern drug screening approaches typically require the physical isolation and
structural modification of a gene of interest, an approach referred to as gene cloning, in order to create a cell line that expresses a drug target of interest. Researchers may then use the genetically modified cell line to identify pharmaceutical
compounds that inhibit or stimulate the target of interest. The RAGE technology enables us to turn on or amplify the expression of a drug target without having to physically clone or isolate the gene. In effect, the technology works through the
random insertion of tiny, proprietary genetic switches that randomly turn genes on without requiring their physical isolation, or any advance knowledge of their structure. This technology provides us with broad freedom to work with targets that may
be otherwise unavailable as a result of intellectual property restrictions on the use of specific cloned and isolated genes. Over the past several years, we have produced cell lines that express drug targets in a range of disease areas such as
metabolic disease, infectious disease, oncology, cardiovascular disease, inflammation, and central nervous system disorders. Many of these were produced for drug development programs at major pharmaceutical companies that we have collaborated with,
such as Bristol-Myers Squibb, and some have been produced for our internal drug development programs. </FONT></P>
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 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Collaborations and Partnerships </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Pfizer </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Late in 2009, we entered into a collaboration agreement with Pfizer to develop and commercialize MultiStem for the treatment of IBD for the worldwide market. Under the terms of the
agreement, we received a non-refundable up-front cash payment of $6.0 million from Pfizer and will receive research funding and support during the initial phase of the collaboration. In addition, we are also 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 these milestones, and no significant milestone payments were received as of
June&nbsp;30, 2012. We are responsible for manufacturing and 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. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The Pfizer
collaboration does not have a specific termination date, but will terminate upon the last to expire royalty term, unless terminated earlier by either party. Either party can terminate the agreement for an uncured material breach or default. Pfizer
is permitted to terminate the agreement upon advance written notice to us if we sustain certain turnover levels for employees working on the program, if our license with the University of Minnesota is terminated, if we experience a specified change
of control event, or in its sole discretion. We can terminate the agreement if a certain milestone event has not occurred by a defined period of time, or if we reasonably believe that Pfizer has failed to satisfy its obligations to progress the
development of the program. Following termination of the agreement by us, all licenses granted to Pfizer to develop and commercialize MultiStem for IBD will terminate, other than certain more limited research licenses, and ownership of regulatory
and clinical data will revert to us. Following termination of the agreement by Pfizer, the licenses granted to Pfizer will remain in effect according to their terms, unless the termination is due to our breach, employee turnover or termination of
the license with University of Minnesota, in which case payments to us will be reduced from what was otherwise payable. Also, if Pfizer terminates in its sole discretion, then Pfizer retains its obligation to fund our research and development costs
as set forth in the agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>RTI </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">In 2010, we entered into an agreement with RTI to develop and commercialize MAPC technology-based biologic implants for certain orthopedic applications in the bone graft substitutes
market. Under the terms of our RTI agreement, we are entitled to a $5.0 million license fee in installments, of which $3.0&nbsp;million was received in 2010 and 2011, and $2.0 million was contingent upon future events. In September 2012, RTI agreed
to make these $2.0 million license fee payments by December&nbsp;31, 2012, and we agreed to provide RTI with certain technical support. In accordance with the agreement, we are also eligible to receive an additional $35.5 million in cash payments
upon the successful achievement of certain commercial milestones, though there can be no assurance that such milestones will be achieved. In addition, we will receive tiered royalties on worldwide commercial sales of implants using our technologies.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Angiotech </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">In November 2011, we reached an agreement with Angiotech to terminate the collaboration agreement and license between the parties, reflecting a change in Angiotech&#146;s business and
financial strategy. As a result of the termination, we regained ownership of all rights for developing our stem cell technologies and products for cardiovascular disease indications, including AMI, congestive heart failure, chronic ischemia, and
peripheral vascular disease, and Angiotech no longer has any license rights or options with </FONT></P>
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respect to our technologies and products. Angiotech made its final cost-sharing payment in 2011 in connection with collaboration activities and has no further obligations to us. Though the
termination will affect our future costs of development for ongoing cardiovascular programs, such as AMI, it significantly improves our ability to explore cardiovascular and more comprehensive collaborative development and commercialization
arrangements with other pharmaceutical, biotechnology and medical products companies. In the case of a new AMI collaboration, Angiotech will be entitled to a future payment from us equal to a percentage of cash license fee payments we receive within
the first six months from a third-party related to such AMI collaboration, and is not entitled to other downstream payments, such as milestone payments, royalties or any profit-sharing payments. The future payment, if any, will be either
(i)&nbsp;25% of third-party license fees if an AMI collaboration is established prior to the initiation of enrollment in a Phase II AMI clinical trial and within 12 months of the termination agreement, (ii)&nbsp;15% of third-party license fees if an
AMI collaboration is established after the initiation of enrollment in a Phase II AMI clinical trial, but before we have spent $5.0 million on the clinical trial, and within 24&nbsp;months of the termination agreement, or (iii)&nbsp;10% of
third-party license fees up to a maximum of $5.0&nbsp;million to Angiotech if an AMI collaboration is established after the initiation of enrollment in a Phase II AMI clinical trial, and after we have spent $5.0 million on the clinical trial, and
within 36&nbsp;months of the termination agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Bristol-Myers Squibb </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">In 2000, we entered into a collaboration with Bristol-Myers Squibb to provide cell lines expressing well validated drug targets produced
using our RAGE technology for compound screening and development. This initial collaboration was expanded in 2002 and again in 2006, and was in its final phase as amended in 2009. Bristol-Myers Squibb uses the cell lines in its internal drug
development programs and, in exchange, we receive license fee and milestone payments and will be entitled to receive royalties on the sale of any approved products. Depending on the use of a cell line by Bristol-Myers Squibb and the progress of drug
development programs benefiting from the use of such a cell line, we may receive as much as approximately $5.5 million per cell line in additional license fees and milestone payments, though we cannot assure you that any further milestones will be
achieved or that we will receive any additional milestone payments. In 2008, Bristol-Myers Squibb successfully advanced into Phase II clinical development a drug candidate discovered using a target provided by us, thereby triggering a clinical
development milestone payment to us. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We remain entitled to receive license fees for targets that were delivered to
Bristol-Myers Squibb under our completed 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. As of June&nbsp;30, 2012, we received an aggregate amount of $1.7 million in milestone payments and $9.6 million in license fees since the inception of our collaboration with Bristol-Myers Squibb. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The Bristol-Myers Squibb collaboration does not have a specific termination date, but will terminate when Bristol-Myers Squibb no longer
has an obligation to pay us royalties, which obligation generally continues until the later of the expiration of the Bristol-Myers Squibb patent covering an approved product and ten years after commercial sales of that product began. Though we
expect Bristol-Myers Squibb to file for and be issued patents for products developed under the collaboration, we are not aware of any patents issued to Bristol-Myers Squibb covering any potential products related to the collaboration. If either
party breaches its material obligations and fails to cure that breach within 60 days after notice from the non-breaching party, the non-breaching party may terminate the collaboration. </FONT></P>
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 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Competition </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We face significant competition with respect to the various dimensions of our business. With regard to our efforts to develop MultiStem as a novel stem cell therapy, currently, there are a
number of companies that are actively developing stem cell products, which encompass a range of different cell types, including embryonic stem cells, umbilical cord stem cells, adult-derived stem cells and processed bone marrow derived cells.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Osiris is currently engaged in Phase II and Phase III clinical trials involving Prochymal, an allogeneic stem cell product
based on mesenchymal stem cells, or MSCs, that are obtained from healthy consenting donors, and are administered without tissue matching. However, in contrast to MultiStem, MSCs display greater donor to donor variability, limited expansion
potential, and limited biological plasticity. In November 2008, Osiris announced a partnership in which Genzyme acquired development rights to Prochymal and Chondrogen for certain markets outside the United&nbsp;States and Canada in exchange for
$130 million in license fees, up to $1.25 billion in clinical and sales milestones, and royalties. In February 2011, Sanofi acquired Genzyme, and in October 2012, Sanofi announced that the partnership had been terminated, and Osiris had regained
commercial development rights to Prochymal and Chondrogen. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Mesoblast is currently engaged in clinical trials evaluating the
safety and efficacy of Revascor, an allogeneic stem cell product based on mesenchymal stem cell precursors that are obtained from healthy consenting donors. These cells also appear to display limited expansion potential and biological plasticity. In
December 2010, Mesoblast announced a partnership with Cephalon, Inc., or Cephalon, in which Cephalon paid an upfront license fee of $130 million, and agreed to invest an additional $220&nbsp;million in equity for a 19.9% stake in Mesoblast. In
addition, total regulatory milestone payments to Mesoblast could reach $1.7 billion, assuming that the agreement results in commercial treatments for conditions including congestive heart failure, AMI, Parkinson&#146;s disease and Alzheimer&#146;s
disease. In October 2011, Teva Pharmaceuticals announced that it had acquired Cephalon. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Other public companies are developing
stem-related therapies, including Aastrom Biosciences, Stem Cells Inc., Johnson&nbsp;&amp; Johnson, Celgene, Advanced Cell Technology, Inc., CRYO-CELL International, Inc., Pluristem and Cytori. In addition, private companies, such as Gamida Cell
Ltd., Plureon Corporation, NeoStem, Inc., Tigenix NV and others, are also developing cell therapy related products or capabilities. Given the magnitude of the potential opportunity for stem cell therapy, we expect competition in this area to
intensify in the coming years. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We also face competition in our efforts to develop compounds for the treatment of obesity.
Recently, two new treatments were approved by the FDA for the treatment of obesity, Belviq (Lorcaserin), which was developed by Arena Pharmaceuticals, and Qsymia (a proprietary combination of phentermine and topiramate), which was developed by
Vivus. Prior to these recent approvals, there was one approved therapeutic product on the market for obesity, Xenical (also known as Alli), which is marketed by Roche. Potential side effects associated with taking Xenical / Alli include cramping,
intestinal discomfort, flatulence, diarrhea, and leakage of oily stool. Another obesity drug, Meridia, was approved for clinical use and marketed by Abbott Pharmaceuticals, but was withdrawn from the market due to concerns regarding increased risk
of cardiovascular disease and stroke among patients taking the drug. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">There are many other companies that have previously
attempted or are attempting to develop novel treatments for obesity, and a wide range of approaches are being taken. Some of these companies include large, multinational pharmaceutical companies such as Bristol-Myers Squibb, Merck&nbsp;&amp; Co.,
Inc., Roche, Sanofi, GlaxoSmithKline, Eli Lilly and Company and others. There are also a variety of biotechnology companies developing treatments for obesity, including Orexigen Therapeutics, Neurosearch, Amgen Inc., or Amgen, Regeneron
Pharmaceuticals, Inc., Nastech Pharmaceutical Company, Alizyme plc, Amylin Pharmaceuticals, Inc., Neurocrine Biosciences, Inc., Shionogi&nbsp;&amp; Co., Ltd., Metabolic Pharmaceuticals Limited, Kyorin Pharmaceutical Co., Ltd., and others. It is
likely that, given the </FONT></P>
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magnitude of the market opportunity, many companies will continue to focus on the obesity area, and that competition will remain high. If we are successful at developing a 5HT2c agonist as a safe
and effective treatment for obesity, it is likely that other companies will attempt to develop safer and more effective compounds in the same class, or will attempt to combine therapies in an effort to establish a safer and more effective
therapeutic product. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We believe our most significant competitors are fully integrated pharmaceutical companies and
biotechnology companies that have substantially greater financial, technical, sales, marketing, and human resources than we do. These companies may succeed in obtaining regulatory approval for competitive products more rapidly than we can for our
products. In addition, our competitors may develop technologies and products that are cheaper, safer or more effective than those being developed by us or that would render our technology obsolete. Furthermore, some of these companies may feel
threatened by our activities and attempt to delay or impede our efforts to develop our products or apply our technologies. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Intellectual Property </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We rely on a combination of patent applications, patents, trademarks, and contractual provisions to protect our proprietary rights. We believe that to have a competitive advantage, we must
develop and maintain the proprietary aspects of our technologies. Currently, we require our officers, employees, consultants, contractors, manufacturers, outside scientific collaborators and sponsored researchers, and other advisors to execute
confidentiality agreements in connection with their employment, consulting, or advisory relationships with us, where appropriate. We also require our employees, consultants, and advisors who we expect to work on our products to agree to disclose and
assign to us all inventions conceived during the work day, developed using our property, or which relate to our business. We currently have an aggregate of 129 patents for our technologies. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We have a broad patent estate with claims directed to compositions, methods of production, and methods of use of certain non-embryonic stem cells and related technologies. We acquired
ownership of part of our stem cell technology and intellectual property as a result of our 2003 acquisition of a holding company, which held the rights to the technology originally discovered at the University of Minnesota. We also have an exclusive
license to additional MAPC-related inventions (or in other words, improvements) developed by the University of Minnesota through May 2009, and, under a collaborative research agreement with KUL, we have an exclusive license to MAPC-related
inventions developed at KUL using the MAPC technology or intellectual property or that result from sponsored research funded by us. We also own and license additional intellectual property develop by us and others. Our broad intellectual property
portfolio consists of more than 78 issued patents (of which eleven are United States patents) and more than 183 global patent applications around our stem cell technology and MultiStem product platform. This includes nine United States patents and
39 international patents that apply to MAPC and related products, such as MultiStem. The current intellectual property estate, which incorporates additional filings and may broaden over time, could provide coverage for our stem cell product
candidates, manufacturing processes and methods of use through 2030 and beyond. Furthermore, an extended period of market exclusivity may apply for certain products (e.g., exclusivity periods for orphan drug designation or biologics). </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We have established a broad intellectual property portfolio related to our functional genomics technologies and small molecule product
candidates. We have a broad patent estate with claims directed to compositions, methods of making, and methods of using our small molecule drug candidates. We have six United States patents and two patent applications with broad claims directed to
selective 5HT2c agonists discovered at Athersys that currently provide patent coverage through as late as 2029. From our Histamine H3 program, we have six United States patents with broad claims directed to compounds discovered at Athersys from two
distinct chemical series that currently provide patent coverage through as late as 2028. In addition, we currently have 35 issued patents (sixteen United States patents and </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">
nineteen international patents) and three patent applications relating to compositions and methods for the RAGE technology that currently provide patent coverage through as late as 2017, and four
United States patents and seven patent applications relating to human proteins and candidate drug targets that we identified through the application of RAGE and our other technologies that currently provide patent coverage through as late as 2022.
The RAGE technology was developed by Dr.&nbsp;John Harrington and other Athersys scientists internally in the mid-1990s. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We
believe that we have broad freedom to use and commercially develop our technologies and product candidates. However, if successful, a patent infringement suit brought against us may force us or any of our collaborators or licensees to stop or delay
developing, manufacturing, or selling potential products that are claimed to infringe a third party&#146;s intellectual property, unless that party grants us rights to use its intellectual property. In such cases, we may be required to obtain
licenses to patents or proprietary rights of others to continue to commercialize our products. However, we may not be able to obtain any licenses required under any patents or proprietary rights of third parties on acceptable terms, or at all. Even
if we were able to obtain rights to the third party&#146;s intellectual property, these rights may be non-exclusive, thereby giving our competitors access to the same intellectual property. Ultimately, we may be unable to commercialize some of our
potential products or may have to cease some of our business operations as a result of patent infringement claims, which could severely harm our business. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Research and Development </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Our research and development
costs, which consist primarily of costs associated with external clinical trial costs, preclinical study fees, manufacturing costs, salaries and related personnel costs, legal expenses resulting from intellectual property application processes, and
laboratory supply and reagent costs, were $10.6 million for the six months ended June&nbsp;30, 2012, $18.9 million in 2011, $14.8 million in 2010 and $11.9 million in 2009. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Government Regulation </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Any products we may develop and our
research and development activities are subject to stringent government regulation in the United States by the FDA and, in many instances, by corresponding foreign and state regulatory agencies. The European Union, or EU, has vested centralized
authority in the European Medicines Agency and Committee on Proprietary Medicinal Products to standardize review and approval across EU member nations. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">These regulatory agencies enforce comprehensive statutes, regulations and guidelines governing the drug development process. This process involves several steps. Initially, a company must
generate preclinical data to show safety before human testing may be initiated. In the United States, a drug company must submit an IND to the FDA prior to securing authorization for human testing. The IND must contain adequate data on product
candidate chemistry, toxicology and metabolism and, where appropriate, animal research testing to support initial safety. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">A
Clinical Trial Agreement, or CTA, is the European equivalent of the IND. CTA requirements are issued by each competent authority within the European Union and are enacted by local laws and Directives. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Any of our product candidates will require regulatory approval and compliance with regulations made by United States and foreign
government agencies prior to commercialization in such countries. The process of obtaining FDA or foreign regulatory agency approval has historically been extremely costly and time consuming. The FDA regulates, among other things, the development,
testing, manufacture, safety, efficacy, record keeping, labeling, storage, approval, advertising, promotion, sale, and distribution of biologics and new drugs. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The standard process required by the FDA before a pharmaceutical agent may be marketed in
the United&nbsp;States includes: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">preclinical tests in animals that demonstrate a reasonable likelihood of safety and effectiveness in human patients;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">submission to the FDA of an IND, which must become effective before clinical trials in humans can commence. If Phase I clinical trials
are to be conducted initially outside the United States, a different regulatory filing is required, depending on the location of the trial; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">adequate and well controlled human clinical trials to establish the safety and efficacy of the drug or biologic in the intended disease
indication; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">for drugs, submission of a New Drug Application, or NDA, or a Biologic License Application, or BLA, with the FDA; and
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">FDA approval of the NDA or BLA before any commercial sale or shipment of the drug. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Preclinical studies can take several years to complete, and there is no guarantee that an IND based on those studies will become
effective to permit clinical trials to begin. The clinical development phase generally takes five to seven years, or longer, to complete (i.e., from the initiation of Phase I through completion of Phase III studies). After successful completion of
clinical trials for a new drug or biologic product, FDA approval of the NDA or BLA must be obtained. This process requires substantial time and effort and there is no assurance that the FDA will accept the NDA or BLA for filing and, even if filed,
that the FDA will grant approval. In the past, the FDA&#146;s approval of an NDA or BLA has taken, on average, one to two years, but in some instances may take substantially longer. If questions regarding safety or efficacy arise, additional studies
may be required, followed by a resubmission of the NDA or BLA. Review and approval of an NDA or BLA can take up to several years. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">In addition to obtaining FDA approval for each product, each drug manufacturing facility must be inspected and approved by the FDA. All manufacturing establishments are subject to
inspections by the FDA and by other federal, state, and local agencies, and must comply with good manufacturing practices, or GMP, requirements. We do not currently have any GMP manufacturing capabilities, and will rely on contract manufacturers to
produce material for any clinical trials that we may conduct. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We must also obtain regulatory approval in other countries in
which we intend to market any drug. The requirements governing conduct of clinical trials, product licensing, pricing, and reimbursement vary widely from country to country. FDA approval does not ensure regulatory approval in other countries. The
current approval process varies from country to country, and the time spent in gaining approval varies from that required for FDA approval. In some countries, the sale price of the drug must also be approved. The pricing review period often begins
after market approval is granted. Even if a foreign regulatory authority approves a drug product, it may not approve satisfactory prices for the product. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">In addition to regulations enforced by the FDA, we are also subject to regulation under the Occupational Safety and Health Act, the Environmental Protection Act, the Toxic Substances
Control Act, the Resource Conservation and Recovery Act, and other present and potential future federal, state, or local regulations. Our research and development involves the controlled use of hazardous materials, chemicals, biological materials,
and various radioactive compounds. Although we believe that our safety procedures for handling and disposing of such materials currently comply in all material respects with the standards prescribed by state and federal regulations, the risk of
accidental contamination or injury from these materials cannot be completely eliminated. In the event of such an accident, we could be held liable for any damages that result and any such liability could exceed our available resources. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Employees </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We believe that our success will be based on, among other things, the quality of our clinical programs, our ability to invent and develop superior and innovative technologies and products,
and our ability to attract and retain capable management and other personnel. We have assembled a high quality team of scientists, clinical development managers, and executives with significant experience in the biotechnology and pharmaceutical
industries. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">As of September&nbsp;30, 2012, we employed 48 employees, 17 with Ph.D. degrees. In addition to our employees, we
also use the service and support of outside consultants and advisors. None of our employees is represented by a union, and we believe relationships with our employees are good. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Legal Proceedings </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">From time to time, we may become subject
to various legal proceedings that are incidental to the ordinary conduct of our business. Currently, there are no such proceedings. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Properties </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Our principal offices are located at 3201
Carnegie Avenue in Cleveland, Ohio. We currently lease approximately 45,000 square feet of space for our corporate offices and laboratories, with state-of-the-art laboratory space. The lease began in 2000 and currently expires in March 2013, and we
expect to extend the lease option periods. Our rent is $267,000 per year and our rental rate has not changed since the lease inception in 2000. Also, we currently lease office and laboratory space for our Belgian subsidiary. The lease currently
expires on December&nbsp;31, 2012, and we have an option to renew annually through December 2014. The annual rent in Belgium is subject to adjustments based on an inflationary index. Our annual rent in Belgium was $93,000 in 2011. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><A NAME="toc417938_12"></A>MANAGEMENT </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Executive Officers and Directors </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The following table sets forth certain information regarding our executive officers and directors as of September&nbsp;30, 2012. </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD></TD>
<TD></TD>
<TD></TD>
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<TD WIDTH="52%"></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:20pt"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Name</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Age</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Position</B></FONT></P></TD></TR>


<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Gil Van Bokkelen, Ph.D.&nbsp;</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">51</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Chief Executive Officer and Chairman</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">William (BJ) Lehmann, Jr., J.D.&nbsp;</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">46</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">President and Chief Operating Officer</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">John J. Harrington, Ph.D.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">45</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Chief Scientific Officer, Executive Vice President and Director</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Robert J. Deans, Ph.D.&nbsp;</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">61</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Executive Vice President, Regenerative Medicine</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Laura K. Campbell, CPA</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">48</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Vice President of Finance</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Lee E. Babiss</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">56</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Director</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Ismail Kola</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">55</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
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<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Lorin J. Randall</FONT></P></TD>
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<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Kenneth H. Traub</FONT></P></TD>
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<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Jack L. Wyszomierski</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
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<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">56</FONT></TD>
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</TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><I>Dr.&nbsp;Van Bokkelen</I> co-founded Athersys in October 1995 and has served as our Chief Executive
Officer and Chairman since August 2000. Dr.&nbsp;Van Bokkelen served as Chief Executive Officer and Director since Athersys&#146; founding. Prior to May 2006, he also served as Athersys&#146; President. Dr.&nbsp;Van Bokkelen is the current Chairman
of the Alliance for Regenerative Medicine, a Washington D.C. based consortium of companies, patient advocacy groups, disease foundations, and clinical and research institutions that are committed to the advancement of the field of regenerative
medicine. He is also the Chairman of the Board of Governors for the National Center for Regenerative Medicine, and has served on a number of other boards, including the Biotechnology Industry Organization&#146;s ECS board of directors (from 2001 to
2004, and from 2008 to present). He received his Ph.D. in Genetics from Stanford University, his B.A. in Economics from the University of California at Berkeley, and his B.A. in Molecular Biology from the University of California at Berkeley.
<B></B>Dr. Van Bokkelen brings to the Board leadership, extensive business, operating, financial and scientific experience, and tremendous knowledge of our Company and the biopharmaceutical industry. Dr. Van Bokkelen also brings his broad strategic
vision for our Company to the Board of Directors and his service as the Chairman and CEO of Athersys creates a critical link between management and the Board, enabling the Board to perform its oversight function with the benefit of management&#146;s
perspectives on the business. In addition, having the CEO, and Dr. Van Bokkelen, in particular, on our Board of Directors provides our Company with ethical, decisive and effective leadership. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><I>Mr.&nbsp;Lehmann</I> joined Athersys in September 2001 and has served as our President and Chief Operating Officer since June 2006. Prior to that time, Mr.&nbsp;Lehmann was
Athersys&#146; Executive Vice President of Corporate Development and Finance from August 2002 until June 2006, when he became Athersys&#146; President and Chief Operating Officer. From 1994 to 2001, Mr.&nbsp;Lehmann was with McKinsey&nbsp;&amp;
Company, Inc., an international management consulting firm, where he worked extensively with new technology and service-based businesses in the firm&#146;s Business Building practice. Prior to joining McKinsey, he worked at Wilson, Sonsini,
Goodrich&nbsp;&amp; Rosati, a Silicon Valley law firm, and worked with First Chicago Corporation, a financial institution. Mr.&nbsp;Lehmann received his J.D. from Stanford University, his M.B.A. from the University of Chicago, and his B.A. from the
University of Notre Dame. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><I>Dr.&nbsp;Harrington</I> co-founded Athersys in October 1995 and has served as our Chief
Scientific Officer, Executive Vice President and Director since our founding. Dr.&nbsp;Harrington led the development of the RAGE technology as well as its application for gene discovery, drug discovery and commercial protein
</FONT></P>
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production applications. He is a listed inventor on over 20 issued or pending United States patents, has authored numerous scientific publications, and has received numerous awards for his work,
including being named one of the top international young scientists by MIT Technology Review in 2002. Dr.&nbsp;Harrington has overseen the therapeutic product development programs at Athersys since their inception, and during his career, he has also
held positions at Amgen and Scripps Clinic. He received his B.A. in Biochemistry and Cell Biology from the University of California at San Diego and his Ph.D. in Cancer Biology from Stanford University. Dr. Harrington&#146;s scientific experience
and deep understanding of our Company, combined with his drive for innovation and excellence, position him well to serve on the Board of Directors. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><I>Dr.&nbsp;Deans</I> joined Athersys in February 2003 to lead the Company&#146;s regenerative medicine research and development activities and has served as our Executive Vice President
since June 2011. Prior to that time, Dr.&nbsp;Deans was Vice President of Regenerative Medicine, until he was named Senior Vice President of Regenerative Medicine in June 2006, and Executive Vice President in June 2011. Dr.&nbsp;Deans is highly
regarded as an expert in stem cell therapeutics, with over twenty years of experience in this field. From 2001 to 2003, Dr.&nbsp;Deans worked for early-stage biotechnology companies. Dr.&nbsp;Deans was formerly the Vice President of Research at
Osiris, a biotechnology company, from 1998 to 2001 and Director of Research and Development with the Immunotherapy Division of Baxter International, Inc., a global healthcare company, from 1992 to 1998. Dr.&nbsp;Deans was also previously on faculty
at USC Medical School in Los Angeles, between 1981 and 1998, in the departments of Microbiology and Neurology at the Norris Comprehensive Cancer Center. Dr.&nbsp;Deans was an undergraduate at MIT, received his Ph.D. at the University of Michigan,
and did his post-doctoral work at UCLA in Los Angeles. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><I>Ms.&nbsp;Campbell</I> joined Athersys in January 1998 and has
served as our Vice President of Finance since June 2006. Ms.&nbsp;Campbell joined Athersys initially as Controller, followed by Director of Finance and Senior Director of Finance, and has served as Vice President of Finance since June 2006. Prior to
joining Athersys, she was at Ernst&nbsp;&amp; Young LLP, a public accounting firm, for 11 years, in the firm&#146;s audit practice. During her tenure with Ernst&nbsp;&amp; Young LLP, Ms.&nbsp;Campbell specialized in entrepreneurial services and the
biotechnology industry sector and participated in several initial public offerings. Ms.&nbsp;Campbell received her B.S., with distinction, in Business Administration from The Ohio State University. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><I>Dr.&nbsp;Babiss</I> has served as our Director since August 2010. Dr.&nbsp;Babiss is currently Chief Scientific Officer and Executive
Vice President of Global Laboratory Services of PPD, Inc., a contract research organization, where he has served since February 2010, providing strategic direction and scientific leadership. Dr.&nbsp;Babiss was formerly President and Director of
Global Pharmaceutical Research at Roche in Switzerland, a pharmaceutical company, from 1998 until his appointment at PPD, Inc. Prior to Roche, Dr.&nbsp;Babiss spent seven years with Glaxo, Inc., now GlaxoSmithKline, a pharmaceutical company, where
he held senior positions, including Vice President of Biological Sciences and Genetics. Dr.&nbsp;Babiss received his doctorate in Microbiology from Columbia University and completed his postdoctoral fellowship at the Rockefeller University, where he
served as an assistant and associate professor. Dr.&nbsp;Babiss has received numerous fellowship awards and grants and serves on several scientific advisory committees. Dr.&nbsp;Babiss has authored over 60 technical publications in scientific and
medical journals. Dr.&nbsp;Babiss&#146; brings over 20 years of experience developing and leading research and development programs. His strategic leadership and product development knowledge provide a valuable perspective to the Board. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><I>Dr.&nbsp;Kola</I> has served as a Director since October 2010. Dr.&nbsp;Kola serves as Executive Vice President of UCB S.A. in
Belgium, a biopharmaceutical company dedicated to the development of innovative medicines focused on the fields of central nervous system and immunology disorders, and President of UCB New Medicines, UCB&#146;s discovery research through
proof-of-concept organization, since November 2009. Dr.&nbsp;Kola was formerly Senior Vice President, Discovery Research and Early Clinical Research&nbsp;&amp; Experimental Medicine at Schering-Plough Research Institute, the pharmaceutical research
arm of </FONT></P>
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Schering-Plough Corporation, and Chief Scientific Officer at Schering-Plough Corporation, a pharmaceutical company, from March 2007 until his appointment at UCB. Prior to Schering-Plough,
Dr.&nbsp;Kola held senior positions from January 2003 to March 2007 at Merck, a pharmaceutical company, where he was Senior Vice President and Site Head, Basic Research. From 2000 to 2003, Dr.&nbsp;Kola was Vice President, Research, and Global Head,
Genomics Science and Biotechnology, at Pharmacia Corporation. Prior to his position with Pharmacia, Dr.&nbsp;Kola spent 15 years as Professor of Human Molecular Genetics and was Director of the Centre for Functional Genomics and Human Disease at
Monash Medical School in Australia. Dr.&nbsp;Kola received his Ph.D. in Medicine from the University of Cape Town, South Africa, his B.Sc. from the University of South Africa, and his B.Pharm. from Rhodes University, South Africa. Dr.&nbsp;Kola
currently serves on the boards of directors of Astex Therapeutics (NASDAQ: ASTX) since May 2010, Biotie Therapies (and previously Synosia who merged with Biotie) since February 2011, and previously served on the board of directors of Ondek Pty Ltd
from 2009 to 2011 and Promega Corporation from 2003 to 2007. Dr.&nbsp;Kola has authored 160 technical publications in scientific and medical journals and is the named inventor on at least a dozen patents. Dr.&nbsp;Kola holds Adjunct Professorships
of Medicine at Washington University in St. Louis, Missouri, and Monash University Medical School; a Foreign Adjunct Professorship at the Karolinska Institute in Stockholm, Sweden; and was elected William Pitt Fellow at Pembroke College, Cambridge
University, United&nbsp;Kingdom in 2008. Dr.&nbsp;Kola has also been appointed a Visiting Professor at Oxford University, Nuffield School of Medicine, Oxford UK since September 2012. For more than 20 years, Dr.&nbsp;Kola has created a bridge between
the scientific and academic worlds though various projects funded by renowned institutes, and Dr.&nbsp;Kola&#146;s experience and leadership in taking numerous drugs from the research stage to market or late stage development brings a unique and
valuable perspective to our Board. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><I>Mr.&nbsp;Randall</I> has served as a Director since September 2007. Mr.&nbsp;Randall is
an independent financial consultant and previously was Senior Vice President and Chief Financial Officer of Eximias Pharmaceutical Corporation, a development-stage drug development company, from 2004 to 2006. From 2002 to 2004, Mr.&nbsp;Randall
served as Senior Vice President and Chief Financial Officer of i-STAT Corporation, a publicly-traded manufacturer of medical diagnostic devices that was acquired by Abbott Laboratories in 2004. From 1995 to 2001, Mr.&nbsp;Randall was Vice President
and Chief Financial Officer of CFM Technologies, Inc., a publicly-traded manufacturer of semiconductor manufacturing equipment. Mr.&nbsp;Randall currently serves on the boards of directors of Acorda Therapeutics, Inc. (NASDAQ: ACOR) since 2006,
where he serves as chairman of the audit committee and is a member of the compensation and nominations and governance committees, Nanosphere, Inc. (NASDAQ: NSPH) since 2008, where he serves as chairman of the audit committee, and Tengion, Inc.
(OTCQB: TNGN) since 2008, where he serves as chairman of the audit committee and a member of the compensation committee. He previously served on the board of directors of Opexa Therapeutics, Inc. (NASDAQ: OPXA) from 2007 to 2009, where he served as
chair of the audit committee. Mr.&nbsp;Randall received a B.S. in accounting from The Pennsylvania State University and an M.B.A. from Northeastern University. Mr.&nbsp;Randall&#146;s strong financial and human resources background and his service
on the audit and compensation committees of other companies provides expertise to the Board, including an understanding of financial statements, compensation policies and practices, corporate finance, developing and maintaining effective internal
controls, accounting, employee benefits, investments and capital markets. These qualities also formed the basis for the Board&#146;s decision to appoint Mr.&nbsp;Randall as chairman of the Audit Committee and the Compensation Committee. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><I>Mr.&nbsp;Traub</I> has served as a Director since June 2012. Mr.&nbsp;Traub has been the President and Chief Executive Officer of
Ethos Management LLC, a private consulting and investment firm since 2009. Mr.&nbsp;Traub served as President, Chief Executive Officer and a director of American Bank Note Holographics, Inc., or ABNH, a global leader in product and document
security, from 1999 until its sale in 2008 to JDS Uniphase Corporation, or JDSU, a provider of optical products and measurement solutions for the communications industry. Mr.&nbsp;Traub managed the rebuilding, growth and sale of ABNH. Following the
sale of ABNH, Mr.&nbsp;Traub served as vice president of JDSU in 2008. In 1994, </FONT></P>
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Mr.&nbsp;Traub co-founded Voxware, Inc., a pioneer in &#145;Voice over IP&#146;, and acted as its Executive Vice President, Chief Financial Officer and director until January 1998. Prior to
Voxware, he was Vice President of Finance of Trans-Resources, Inc. Mr.&nbsp;Traub currently serves on the boards of the following publicly traded companies: MRV Communications, Inc. (OTC: MRVC) since November 2011 and as Chairman since January 2012
where he is a member of the Audit Committee, Compensation Committee and Nominating and Governance Committee; iPass Inc. (NASDAQ: IPAS) since June 2009, where he is a member of the Compensation Committee and Corporate Governance and Nominating
Committee; DSP Group, Inc. (NASDAQ: DSPG) since May 2012; and MIPS Technologies, Inc. (NASDAQ: MIPS) since December 2011 where he is a member of the Audit Committee. Mr.&nbsp;Traub also served on the board of Phoenix Technologies Ltd. (NASDAQ: PTEC)
from November 2009 through its sale in December 2010, where he was a member of the Audit Committee and Compensation Committee. Mr.&nbsp;Traub received a Master&#146;s in Business Administration from Harvard Business School in 1988 and a Bachelor of
Arts degree from Emory University in 1983. As a director for Athersys, Mr.&nbsp;Traub contributes his extensive experience and expertise in managing and growing companies to maximize shareholder value. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><I>Mr.&nbsp;Wyszomierski</I> has served as a Director since June 2010 and is currently retired. From 2004 until his retirement in June
2009, Mr.&nbsp;Wyszomierski served as the Executive Vice President and Chief Financial Officer of VWR International, LLC, a supplier and distributor of laboratory supplies, equipment and supply chain solutions to the global research laboratory
industry. From 1982 to 2004, Mr.&nbsp;Wyszomierski held positions of increasing responsibility within the finance group at Schering-Plough Corporation, a pharmaceutical company, culminating with his appointment as Executive Vice President and Chief
Financial Officer in 1996. Prior to joining Schering-Plough, he was responsible for capitalization planning at Joy Manufacturing Company, a producer of mining equipment, and was a management consultant at Data Resources, Inc., a distributor of
economic data. Mr.&nbsp;Wyszomierski currently serves on the board of directors of Xoma Corporation (NASDAQ: XOMA) since 2010, where he serves as chairman of the compensation committee and as a member of the audit committee, Unigene Laboratories,
Inc. (OTC:UGNE) since 2012, where he serves as chairman of the audit committee, and Exelixis, Inc. (NASDAQ: EXEL) since 2004, where he serves as chairman of the audit committee. Mr.&nbsp;Wyszomierski holds a M.S. in Industrial Administration and a
B.S. in Administration, Management Science and Economics from Carnegie Mellon University. Mr.&nbsp;Wyszomierski&#146;s extensive financial reporting, accounting and finance experience and his service on the audit committees of other public
companies, as well as his experience in the healthcare and life sciences industries, provides financial expertise to the Board, including an understanding of financial statements, corporate finance, developing and maintaining effective internal
controls, accounting, investments and capital markets. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Director Independence </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The Board reviews the independence of each Director at least annually. During these reviews, the Board will consider transactions and
relationships between each Director (and his or her immediate family and affiliates) and the Company and our management to determine whether any such transactions or relationships are inconsistent with a determination that the Director was
independent. The Board conducted its annual review of Director independence to determine if any transactions or relationships exist that would disqualify any of the individuals who serve as a Director under the rules of The NASDAQ Capital Market or
require disclosure under Securities and Exchange Commission, or SEC, rules. Based upon the foregoing review, the Board determined the following individuals are independent under the rules of The NASDAQ Capital Market: Lee E. Babiss, Ismail Kola,
Lorin J. Randall, Kenneth H. Traub and Jack L. Wyszomierski. In making this determination with respect to Dr.&nbsp;Babiss, the Board determined that the provision of certain contract research services to the Company by PPD, Inc., of which
Dr.&nbsp;Babiss serves as an executive officer, did not create a material relationship or impair the independence of Dr.&nbsp;Babiss because Dr.&nbsp;Babiss receives no material direct or indirect benefit from such transactions, which were
undertaken in the ordinary course of business. Currently, we have two members of management who also serve on the Board: Dr.&nbsp;Van Bokkelen, who is also our Chairman and </FONT></P>
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Chief Executive Officer, and Dr.&nbsp;Harrington, who is our Executive Vice President and Chief Scientific Officer. Neither Dr.&nbsp;Van Bokkelen nor Dr.&nbsp;Harrington is considered independent
under the independence rules of The NASDAQ Capital Market. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Compensation Discussion and Analysis </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Executive Summary </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">This section discusses the principles underlying our executive compensation policies and decisions and the most important factors relevant to an analysis of these policies and decisions.
It provides qualitative information regarding the manner and context in which compensation is awarded to and earned by our named executive officers, which include Dr.&nbsp;Gil Van Bokkelen, our Chief Executive Officer, Ms.&nbsp;Laura Campbell, our
Vice President of Finance, Mr.&nbsp;William (B.J.) Lehmann, Jr., our President and Chief Operating Officer, Dr.&nbsp;John Harrington, our Executive Vice President and Chief Scientific Officer, and Dr.&nbsp;Robert Deans, our Executive Vice President
of Regenerative Medicine, and places in perspective the data presented in the compensation tables and narratives that follow. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We are an international biotechnology company that is focused in the field of regenerative medicine. We are committed to the discovery
and development of best-in-class therapies designed to extend and enhance the quality of human life, and we have established a portfolio of therapeutic product development programs to address significant unmet medical needs in multiple disease
areas. As further discussed in this section, our compensation and benefit programs help us attract, retain and motivate individuals who will maximize our business results by working to meet or exceed established company or individual objectives. In
addition, we reward our executive officers for meeting certain developmental milestones, such as completing advancements in product candidate development, strategic partnerships or other financial transactions that add to our capital resources or
create value for stockholders. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The following are the highlights of our 2011 compensation and benefit programs: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">increased the base salaries of our named executive officers; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">made awards of cash bonuses to our named executive officers. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The following discussion and analysis of our compensation and benefit programs for 2011 should be read together with the compensation
tables and related disclosures that follow this section. This discussion includes forward-looking statements based on our current plans, considerations, expectations and determinations about our compensation program. Actual compensation decisions
that we may make for 2012 and beyond may differ materially from our recent past. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Compensation Objectives and Philosophy
</I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Our compensation programs are designed to: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">recruit, retain, and motivate executives and employees that can help us achieve our core business goals; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
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<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">provide incentives to promote and reward superior performance throughout the organization; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">facilitate stock ownership and retention by our executives and other employees; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">promote alignment between executives and other employees and the long-term interests of stockholders. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The Compensation Committee seeks to achieve these objectives by: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">establishing a compensation program that is market competitive and internally fair; </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">74 </FONT></P>


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<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">linking performance with certain elements of compensation through the use of equity grants, cash performance bonuses or other means of
compensation, the value of which is substantially tied to the achievement of company goals; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">when appropriate, given the nature of our business, rewarding our executive officers for both company and individual achievements with
discretionary bonuses. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Components of Compensation </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Our executive compensation program includes the following elements: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Base salary; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Cash bonuses; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Long-term equity incentive plan awards; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Retirement and health insurance benefits. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Our Compensation Committee has not adopted any formal or informal policies or guidelines for allocating compensation between long-term and currently paid-out compensation, between cash and
non-cash compensation or among different forms of non-cash compensation. We consider competitive practices, relative management level and operating responsibilities of each executive officer when determining the compensation elements to reward his
or her ability to impact short-term and long-term results. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Role of the Chief Executive Officer </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Historically, our Chief Executive Officer has taken the lead in providing our Board of Directors with advice regarding executive
compensation. For 2011, the Compensation Committee considered recommendations from our Chief Executive Officer regarding the compensation for and performance of our executive officers in relation to company-specific strategic goals that were
established by the Compensation Committee and approved by the Board of Directors related to potential bonus payments and salary adjustments. The Compensation Committee considers the recommendations made by our Chief Executive Officer because of his
knowledge of the business and the performance of the other executive officers. The Compensation Committee is not bound by the input it receives from our Chief Executive Officer. Instead, the Compensation Committee exercises independent discretion
when making executive compensation decisions. We describe and discuss the particular compensation decisions made by the Compensation Committee regarding the 2011 compensation of our named executive officers below under &#147;Elements of Executive
Compensation.&#148; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Elements of Executive Compensation </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><I>Base Salary. </I>We pay base salaries to attract executive officers and provide a basic level of financial security. We establish base salaries for our executives based on the scope of
their responsibilities, taking into account competitive market compensation paid by other companies for similar positions. Base salaries are generally reviewed annually, with adjustments based on the individual&#146;s responsibilities, performance
and experience during the year. This review generally occurs each year following an annual review of individual performance. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">In 2011, the Compensation Committee and the Board of Directors approved that each of the named executive officers be entitled to receive
a 3.52% increase in such officer&#146;s salary for 2011 as compared to 2010 based primarily on Company performance for the year ending December&nbsp;31, 2010. Effective April&nbsp;1, 2011, Dr.&nbsp;Deans&#146; salary was further increased to a base
of $300,000 per annum based on his performance. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">75 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">In 2011, the Compensation Committee and the Board of Directors approved that the Chief
Executive Officer will be entitled to receive a 6.30% increase in salary for 2012 as compared to 2011, an adjustment based primarily on competitive information provided to the Compensation Committee by its independent compensation consultant. Also
for 2012, the Compensation Committee and the Board of Directors approved that each of the named executive officers be entitled to receive an increase in such officer&#146;s salary for 2012 as compared to 2011 based primarily on company performance
for the year ended December&nbsp;31, 2011. The increases are as follows: Mr.&nbsp;Lehmann&#151;3.5%; Dr.&nbsp;Harrington&#151;3.0%; Dr.&nbsp;Deans&#151;2.5% (taking into consideration his salary adjustment in April 2011); and
Ms.&nbsp;Campbell&#151;2.75%. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Cash Bonuses.&nbsp;&nbsp;&nbsp;&nbsp;</I></B>We utilize annual incentive bonuses to
reward officers and other employees for achieving financial and operational goals and for achieving individual annual performance objectives. These objectives vary depending on the individual executive and employee, but relate generally to strategic
factors, including establishment and maintenance of key strategic relationships, advancement of our product candidates, identification and advancement of additional programs or product candidates, and to financial factors, including raising capital
and improving our results of operations. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">In 2005, in connection with a restructuring of our internal programs, the Board
established an incentive program designed to retain and motivate our executives. The program provided for payments to the executives upon the occurrence of certain business transactions and time-limited financing milestones. The program continues to
provide the named executive officers financial participation in the event of certain merger or acquisition or asset sale transactions. In the event of a defined transaction, we would be obligated to make a payment to the named executive officers
representing five percent of the consideration received from the transaction, and in the event of a stock-based transaction, the executives would receive fifty percent of any payments due to them in stock. There were no payments under this program
in 2011. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">In addition, given the nature of our business, when appropriate, we reward our executive officers with discretionary
bonuses. Discretionary bonuses were paid to our named executive officers in 2012, for the year ended December&nbsp;31, 2011, as described in the following paragraph. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The Compensation Committee recommended and the Board approved a cash bonus incentive program for the year ended December&nbsp;31, 2011 for our named executive officers. Under the 2011
incentive program, each participant is eligible to earn a target bonus of a specified percentage of the named executive officer&#146;s salary during the award term, weighted on the achievement of specific corporate goals, with the remainder based on
individual/functional performance, as set forth below: </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
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<TD VALIGN="bottom" WIDTH="18%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="17%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="17%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD COLSPAN="2" VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Weighted on</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Target&nbsp;Bonus</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Corporate&nbsp;Goals</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Functional&nbsp;Performance</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>


<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Dr. Van Bokkelen</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">40</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">100</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">%&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Dr. Harrington</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">33</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">80</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">20</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">%&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Mr. Lehmann</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">33</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">80</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">20</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">%&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Dr. Deans</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">30</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">60</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">40</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">%&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Ms. Campbell</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">25</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">60</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">40</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">%&nbsp;</FONT></TD></TR>
</TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The evaluation of goal achievement is at the discretion of the Compensation Committee of the Board of
Directors based on input from the Chief Executive Officer (with respect to the named executive officers other than the Chief Executive Officer, whose bonus potential is based 100% on achievement of specified corporate goals). The 2011 corporate
goals included progress on MultiStem clinical development, execution against the established budget and operating plan, and achievement of one or more strategic partnerships. However, any bonus ultimately paid under the 2011 incentive program is at
the discretion of the Board of Directors based on the recommendation of the Compensation Committee, after good faith consideration of executive officer performance, overall company performance, market
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">76 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">
conditions and cash availability. There was no formally adopted plan document for the 2011 incentive program, although the Compensation Committee recommended and the Board of Directors approved
the specific corporate goals, target bonus levels and weightings between corporate and functional performance. The Compensation Committee and the Board of Directors agreed that each of our named executive officers would be entitled to a bonus under
the 2011 incentive program as a result of individual performance and the achievement of operational and strategic objectives in 2011, specifically the achievement of patient enrollment goals for the Company&#146;s clinical trials and other program
development goals, resulting in the payment of bonuses based on a percentage of such officers&#146; 2011 base salaries as follows: </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="75%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD WIDTH="65%"></TD>
<TD VALIGN="bottom" WIDTH="14%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="13%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Bonus&nbsp;Achieved</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Cash&nbsp;Bonus&nbsp;Paid</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>


<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Dr. Van Bokkelen</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">9.9</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">40,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Dr. Harrington</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">7.8</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">27,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Mr. Lehmann</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">7.8</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">27,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Dr. Deans</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">8.1</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">24,300</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Ms. Campbell</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">6.8</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">15,300</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
</TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">For the year ending December&nbsp;31, 2012, the Compensation Committee recommended and the Board of
Directors approved a similar cash bonus incentive plan for our named executive officers. The 2012 plan has no change to the target bonus percentage or the functional performance weightings for our named executive officers. The 2012 corporate goals
include advancing and achieving enrollment goals for our clinical programs for MultiStem, executing against the established operating plan and capital acquisition objectives, and advancement of strategic partnership and program activities.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Long-Term Incentive Program</I></B>.&nbsp;&nbsp;&nbsp;&nbsp;We believe that we can encourage superior long-term
performance by our executive officers and employees through encouraging them to own, and assisting them with the acquisition of, our common stock. Our equity compensation plans provide our employees, including named executive officers, with
incentives to help align their interests with the interests of our stockholders. We believe that the use of common stock and stock-based awards offers the best approach to achieving our objective of fostering a culture of ownership, which we believe
will, in turn, motivate our named executive officers to create and enhance stockholder value. We have not adopted stock ownership guidelines, but our equity compensation plans provide a principal method for our executive officers to acquire equity
in our Company. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Our equity compensation plans authorize us to grant, among other types of awards, options, restricted stock
and restricted stock units to our employees, Directors and consultants. Historically, we elected to use stock options as our primary long-term equity incentive vehicle. To date, we have not granted any restricted stock or restricted stock units
under our equity compensation plans to our named executive officers or Directors. However, in 2011, we granted restricted stock units to our other employees. We expect to continue to use equity-based awards as a long-term incentive vehicle because
we believe: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">equity-based awards align the interests of our executives with those of our stockholders, support a pay-for-performance culture, foster
an employee stock ownership culture and focus the management team on increasing value for our stockholders; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">the value of equity-based awards is based on our performance, because all the value received by the recipient of equity-based awards is
based on the growth of our stock price; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">equity-based awards help to provide a balance to the overall executive compensation program because, while base salary and our
discretionary annual bonus program focus on short-term performance, vesting equity-based awards reward increases in stockholder value over the longer term; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">the vesting period of equity-based awards encourages executive retention and efforts to preserve stockholder value.
</FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">77 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">In the past, in determining the number of equity-based awards to be granted to executives,
we took into account the individual&#146;s position, scope of responsibility, ability to affect results and stockholder value, the individual&#146;s historic and recent performance and the value of equity-based awards in relation to other elements
of the individual executive&#146;s total compensation. Currently, awards of equity-based awards are granted from time to time under the guidance and approval of the Compensation Committee and the Board of Directors. The Compensation Committee and
the Board of Directors periodically review and approve equity-based awards to executive officers based upon a review of competitive compensation data, an assessment of individual performance, a review of each executive&#146;s existing long-term
incentives, retention considerations and a subjective determination of the individual&#146;s potential to positively impact future stockholder value. No equity-based awards were conferred to our named executive officers in 2011. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Retirement and Health Insurance Benefits.&nbsp;&nbsp;&nbsp;&nbsp;</I></B>Consistent with our compensation philosophy, we maintain
benefits for our executive officers, including medical, dental, vision, life and disability insurance coverage and the ability to contribute to a 401(k) retirement plan. The executive officers and employees have the ability to participate in these
benefits at the same levels. We began making employer contributions to our 401(k) retirement plan in 2011 and contributed approximately $88,000 in 2011. We provide such retirement and health insurance benefits to our employees to retain qualified
personnel. In addition, Dr.&nbsp;Van Bokkelen, Dr.&nbsp;Harrington, Mr.&nbsp;Lehmann, Dr.&nbsp;Deans and Ms.&nbsp;Campbell also receive company-paid life insurance benefits in the amounts of $2 million for Dr.&nbsp;Van Bokkelen, Dr.&nbsp;Harrington
and Mr.&nbsp;Lehmann, and $1 million for Dr.&nbsp;Deans and Ms.&nbsp;Campbell. These additional life insurance policies are provided to these officers due to their extensive travel requirements and contributions to our company. We have no current
plans to change the level of these benefits provided to our named executive officers. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Severance Arrangements
</I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">See the disclosure under &#147;Potential Payments Upon Termination or Change of Control&#148; for more information
about severance arrangements with our named executive officers. We provide such severance arrangements to attract and retain qualified personnel. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Employment Agreements and Arrangements </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We believe
that entering into employment agreements with each of our named executive officers was necessary for us to attract and retain talented and experienced individuals for our senior level positions. In this way, the employment agreements help us meet
the initial objective of our compensation program. Each agreement contains terms and arrangements that we agreed to through arms-length negotiation with our named executive officers. We view these employment agreements as reflecting the minimum
level of compensation that our named executive officers require to remain employed with us, and thus the bedrock of our compensation program for our named executive officers. For more details of our employment agreements and arrangements, see the
disclosure under &#147;2011 Summary Compensation Table.&#148; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The 2005 incentive program for our named executive officers
provides substantial equity participation in the event of the sale of the Company or substantially all of its assets. The Compensation Committee believes that this program coupled with existing, vested stock option holdings provides strong equity
incentives to our named executive officers. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>General Tax Deductibility of Executive Compensation </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We structure our compensation program to comply with Internal Revenue Code Section&nbsp;162(m). Under Section&nbsp;162(m) of the Internal
Revenue Code, there is a limitation on tax deductions of any publicly-held corporation for individual compensation to certain executives of such corporation exceeding $1.0 million in any taxable year, unless the compensation is performance-based.
The Compensation Committee </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">78 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">
manages our incentive programs to qualify for the performance-based exemption; however, it also reserves the right to provide compensation that does not meet the exemption criteria if, in its
sole discretion, it determines that doing so advances our business objectives. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>2011 Summary Compensation
Table </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The following table and narrative set forth certain information with respect to the compensation earned during the
fiscal year ended December&nbsp;31, 2011 by our named executive officers. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD WIDTH="37%"></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:39pt"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Name and Principal<BR>Position (a)</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Year<BR>(b)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Salary<BR>($) (c)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Bonus ($)<BR>(d)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Option<BR>Awards&nbsp;
($)<SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(1)</SUP><BR>(f)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>All Other<BR>Compensation<BR>($) (i)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Total<SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(4)</SUP><BR>(j)</B>
</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>


<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Gil Van Bokkelen,</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px; margin-left:2.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Chief Executive</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:1px; margin-left:2.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Officer</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(2)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT><BR> <P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></P></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">2011</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">2010</FONT></P> <P STYLE="margin-bottom:1px; margin-top:0px" ALIGN="right"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">2009</FONT></P></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT><BR> <P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">404,500</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">390,741</FONT></P> <P STYLE="margin-bottom:1px; margin-top:0px" ALIGN="right"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">383,079</FONT></P></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT><BR> <P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">40,000</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">52,750</FONT></P> <P STYLE="margin-bottom:1px; margin-top:0px" ALIGN="right"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">76,616</FONT></P></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT><BR> <P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">0</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">0</FONT></P> <P STYLE="margin-bottom:1px; margin-top:0px" ALIGN="right"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">98,250</FONT></P></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT><BR> <P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">12,620</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">9,620</FONT></P> <P STYLE="margin-bottom:1px; margin-top:0px" ALIGN="right"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">5,000</FONT></P></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT><BR> <P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">457,120</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">453,111</FONT></P> <P STYLE="margin-bottom:1px; margin-top:0px" ALIGN="right"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">562,945</FONT></P></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Laura Campbell,</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px; margin-left:2.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Vice President</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:1px; margin-left:2.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">of Finance</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT><BR> <P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></P></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">2011</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">2010</FONT></P> <P STYLE="margin-bottom:1px; margin-top:0px" ALIGN="right"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">2009</FONT></P></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT><BR> <P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">225,365</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">217,699</FONT></P> <P STYLE="margin-bottom:1px; margin-top:0px" ALIGN="right"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">213,430</FONT></P></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT><BR> <P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">15,300</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">29,389</FONT></P> <P STYLE="margin-bottom:1px; margin-top:0px" ALIGN="right"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">42,686</FONT></P></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT><BR> <P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">0</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">0</FONT></P> <P STYLE="margin-bottom:1px; margin-top:0px" ALIGN="right"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">68,775</FONT></P></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT><BR> <P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">5,109</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">2,109</FONT></P> <P STYLE="margin-bottom:1px; margin-top:0px" ALIGN="right"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">0</FONT></P></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT><BR> <P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">245,774</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">249,197</FONT></P> <P STYLE="margin-bottom:1px; margin-top:0px" ALIGN="right"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">324,891</FONT></P></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">William&nbsp;(BJ)&nbsp;Lehmann,&nbsp;Jr.,&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px; margin-left:2.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">President and</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:1px; margin-left:2.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Chief&nbsp;Operating Officer</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT><BR> <P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></P></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">2011</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">2010</FONT></P> <P STYLE="margin-bottom:1px; margin-top:0px" ALIGN="right"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">2009</FONT></P></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT><BR> <P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">346,714</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">334,921</FONT></P> <P STYLE="margin-bottom:1px; margin-top:0px" ALIGN="right"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">328,354</FONT></P></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT><BR> <P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">27,000</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">45,214</FONT></P> <P STYLE="margin-bottom:1px; margin-top:0px" ALIGN="right"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">65,671</FONT></P></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT><BR> <P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">0</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">0</FONT></P> <P STYLE="margin-bottom:1px; margin-top:0px" ALIGN="right"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">88,425</FONT></P></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT><BR> <P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">4,673</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">1,673</FONT></P> <P STYLE="margin-bottom:1px; margin-top:0px" ALIGN="right"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">1,000</FONT></P></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT><BR> <P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">378,387</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">381,808</FONT></P> <P STYLE="margin-bottom:1px; margin-top:0px" ALIGN="right"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">483,450</FONT></P></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">John Harrington,</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px; margin-left:2.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Chief Scientific Officer</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px; margin-left:2.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">and Executive Vice</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:1px; margin-left:2.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">President</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(2)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT><BR> <P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></P></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">2011</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">2010</FONT></P> <P STYLE="margin-bottom:1px; margin-top:0px" ALIGN="right"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">2009</FONT></P></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT><BR> <P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">346,714</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">334,921</FONT></P> <P STYLE="margin-bottom:1px; margin-top:0px" ALIGN="right"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">328,354</FONT></P></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT><BR> <P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">27,000</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">45,214</FONT></P> <P STYLE="margin-bottom:1px; margin-top:0px" ALIGN="right"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">65,671</FONT></P></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT><BR> <P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">0</FONT><BR> <P STYLE="margin-bottom:0px; margin-top:0px" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">0</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">88,425</FONT></P></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT><BR> <P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">4,355</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">1,355</FONT></P> <P STYLE="margin-bottom:1px; margin-top:0px" ALIGN="right"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">1,000</FONT></P></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT><BR> <P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">378,069</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">381,490</FONT></P> <P STYLE="margin-bottom:1px; margin-top:0px" ALIGN="right"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">483,450</FONT></P></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Robert Deans,</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px; margin-left:2.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Executive Vice President,</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:1px; margin-left:2.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Regenerative Medicine</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT><BR> <P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></P></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">2011</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">2010</FONT></P> <P STYLE="margin-bottom:1px; margin-top:0px" ALIGN="right"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">2009</FONT></P></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT><BR> <P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">292,898</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">262,355</FONT></P> <P STYLE="margin-bottom:1px; margin-top:0px" ALIGN="right"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">257,211</FONT></P></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT><BR> <P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">24,300</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">35,418</FONT></P> <P STYLE="margin-bottom:1px; margin-top:0px" ALIGN="right"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">51,442</FONT></P></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT><BR> <P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">0</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">0</FONT></P> <P STYLE="margin-bottom:1px; margin-top:0px" ALIGN="right"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">78,600</FONT></P></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT><BR> <P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">5,620</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">5,620</FONT></P> <P STYLE="margin-bottom:1px; margin-top:0px" ALIGN="right"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">6,000</FONT></P></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT><BR> <P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></P></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">322,818</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">303,393</FONT></P> <P STYLE="margin-bottom:1px; margin-top:0px" ALIGN="right"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">393,253</FONT></P></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT><BR>
<P STYLE="margin-bottom:0px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P>
<P STYLE="margin-bottom:1px; margin-top:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></P></TD></TR>
</TABLE> <P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.8pt solid #465361;width:39%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(1)</SUP>&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">Amounts in column (f)&nbsp;do not necessarily reflect compensation actually received by our named executive officers. The amounts in
column (f)&nbsp;reflect the full grant date fair value of the equity awards made during the fiscal year ended December&nbsp;31, 2009 in accordance with Accounting Standards Codification 718, or ASC 718. Assumptions used in the calculation of these
amounts are included in the notes to the audited consolidated financial statements included in the Company&#146;s Annual Report on Form 10-K for the fiscal year ended December&nbsp;31, 2011. </FONT></P></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(2)</SUP>&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">Drs. Van Bokkelen and Harrington also served as our Directors for 2011, 2010 and 2009, but did not receive any compensation as our
Directors. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Employment Agreements and Arrangements </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Dr.&nbsp;Gil Van Bokkelen.</I></B>&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;1, 1998, we entered into a one-year employment agreement,
effective April&nbsp;1, 1998, with Dr.&nbsp;Gil Van Bokkelen, to serve initially as President and Chief Executive Officer. The agreement automatically renews for subsequent one-year terms on April&nbsp;1 of each year unless either party gives notice
of termination at least thirty days before the end of any term. Under the terms of the agreement, Dr.&nbsp;Van Bokkelen was entitled to an initial base salary of $150,000, which may be increased at the discretion of the Board of Directors, and an
annual discretionary incentive bonus of up to 33% of his base salary. His salary for 2012 is $430,000 and his target annual incentive bonus is 40% of his base salary. Dr.&nbsp;Van Bokkelen also received options to purchase shares of Common Stock
upon his employment that were terminated in 2007, and his current stock options are described in the table below. Dr.&nbsp;Van Bokkelen is also entitled to life insurance coverage for the benefit of his family in the amount of at least $1.0 million
(which is $2.0 million for 2012) and is provided the use of a company automobile for business use. For more information about severance arrangements under the agreement, see the disclosure under &#147;Potential Payments Upon Termination or Change of
Control.&#148; Dr.&nbsp;Van Bokkelen has also entered into a non-competition and confidentiality agreement with us under which, during his employment and for a period of 18 months thereafter, he is restricted from, among other things, competing with
us. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">79 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Dr.&nbsp;John&nbsp;J. Harrington.</I></B>&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;1,
1998, we entered into a one-year employment agreement, effective April&nbsp;1, 1998, with Dr.&nbsp;John&nbsp;J. Harrington to serve initially as Executive Vice President and Chief Scientific Officer. The agreement automatically renews for subsequent
one-year terms on April&nbsp;1 of each year unless either party gives notice of termination at least thirty days before the end of any term. Under the terms of the agreement, Dr.&nbsp;Harrington was entitled to an initial base salary of $150,000,
which may be increased at the discretion of the Board of Directors, and an annual discretionary incentive bonus of up to 33% of his base salary. His salary for 2012 is $357,116 and his target annual incentive bonus is 33% of his base salary.
Dr.&nbsp;Harrington also received options to purchase shares of Common Stock upon his employment that were terminated in 2007, and his current stock options are described in the table below. Dr.&nbsp;Harrington is also entitled to life insurance
coverage for the benefit of his family in the amount of at least $1.0 million (which is $2.0 million for 2012). For more information about severance arrangements under the agreement, see the disclosure under &#147;Potential Payments Upon Termination
or Change of Control.&#148; Dr.&nbsp;Harrington has also entered into a non-competition and confidentiality agreement with us under which, during his employment and for a period of 18 months thereafter, he is restricted from, among other things,
competing with us. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Laura K. Campbell.</I></B>&nbsp;&nbsp;&nbsp;&nbsp;On May&nbsp;22, 1998, we entered into a two-year
employment agreement with Laura&nbsp;K. Campbell to serve initially as Controller. The agreement automatically renews for subsequent one-year terms on May&nbsp;22 of each year unless either party gives notice of termination at least thirty days
before the end of any term. Under the terms of the agreement, Ms.&nbsp;Campbell was entitled to an initial base salary of $70,200, which may be increased at the discretion of the Board of Directors. Her salary for 2012 is $231,562 and her target
annual incentive bonus is 25% of her base salary. Ms.&nbsp;Campbell also received options to purchase shares of Common Stock upon her employment that were terminated in 2007, and her current stock options are described in the table below. For more
information about severance arrangements under the agreement, see the disclosure under &#147;Potential Payments Upon Termination or Change of Control.&#148; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>William (B.J.) Lehmann, Jr</I></B>.&nbsp;&nbsp;&nbsp;&nbsp;On January&nbsp;1, 2004, we entered into a four-year employment agreement with Mr.&nbsp;Lehmann to serve initially as
Executive Vice President of Corporate Development and Finance. The agreement automatically renews for subsequent one-year terms on January&nbsp;1 of each year unless either party gives notice of termination at least thirty days before the end of any
term. Under the terms of the agreement, Mr.&nbsp;Lehmann was entitled to an initial base salary of $250,000, which may be increased at the discretion of the Board of Directors. His salary for 2012 is $358,849 and his target annual incentive bonus is
33% of his base salary. Mr.&nbsp;Lehmann also received options to purchase shares of Common Stock upon his employment that were terminated in 2007, and his current stock options are described in the table below. For more information about severance
arrangements under the agreement, see the disclosure under &#147;Potential Payments Upon Termination or Change of Control.&#148; Mr.&nbsp;Lehmann has also entered into a non-competition and confidentiality agreement with us under which, during his
employment and for a period of six months thereafter, he is restricted from, among other things, competing with us. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Dr.&nbsp;Robert Deans</I></B>.&nbsp;&nbsp;&nbsp;&nbsp;On October&nbsp;3, 2003, we entered into a four-year employment agreement
with Dr.&nbsp;Robert Deans to serve initially as Vice President of Regenerative Medicine. The agreement automatically renews for subsequent one-year terms on October&nbsp;3 of each year unless either party gives notice of termination at least thirty
days before the end of any term. Under the terms of the agreement, Dr.&nbsp;Deans was entitled to an initial base salary of $200,000, which may be increased at the discretion of the Board of Directors, and an annual discretionary incentive bonus of
up to 30% of his base salary. His salary for 2012 is $307,500 and his target annual incentive bonus is 30% of his base salary. Dr.&nbsp;Deans also received options to purchase shares of Common Stock upon his employment that were terminated in 2007,
and his current stock options are described in the table below. For more information about severance arrangements under the agreement, see the disclosure under &#147;Potential Payments Upon Termination or Change of Control.&#148; Dr.&nbsp;Deans has
also entered into a non-competition and </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">80 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">
confidentiality agreement with us under which, during his employment and for a period of six months thereafter, he is restricted from, among other things, competing with us. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Equity Compensation Plans </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">In June 2007, we adopted two equity compensation plans, which authorize the Board of Directors, or a committee thereof, to provide equity-based compensation in the form of stock options,
restricted stock, restricted stock units and other stock-based awards, which are used to attract and retain qualified employees, Directors and consultants. Equity awards are granted from time to time under the guidance and approval of the
Compensation Committee. Total awards under these plans, as amended, are limited to 5,500,000 shares of common stock. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>401(k) Plan </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We have a tax-qualified employee savings and retirement plan, also known as a 401(k) plan that covers all of our employees. Under our 401(k) plan, eligible employees may elect to reduce
their current compensation by up to the statutorily prescribed annual limit, which was $16,500 in both 2011 and 2010, and have the amount of the reduction contributed to the 401(k) plan. The trustees of the 401(k) plan, at the direction of each
participant, invest the assets of the 401(k) plan in designated investment options. We may make matching or profit-sharing contributions to the 401(k) plan in amounts to be determined by the Board of Directors. We made matching contributions to the
401(k) plan during fiscal 2011 at a maximum rate of fifty cents for every dollar of the first 6% of participant contributions, up to a dollar maximum of $3,000 per participant, which amounted to approximately $88,000 in 2011. We did not make any
matching or profit-sharing contributions to the 401(k) plan during fiscal 2010 or 2009. The 401(k) plan is intended to qualify under Section&nbsp;401 of the Internal Revenue Code, so that contributions to the 401(k) plan and income earned on the
401(k) plan contributions are not taxable until withdrawn, and so that any contributions we make will be deductible when made. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Outstanding Equity Awards at 2011 Fiscal Year-End </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The
following table sets forth outstanding options held by our named executive officers at December&nbsp;31, 2011. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD WIDTH="47%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="14" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Option Awards</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:32pt"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Name (a)</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Number
of</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Securities</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Underlying</B></FONT><br><FONT
STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Unexercised</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Options</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>(#)
</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Exercisable</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>(b)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Number
of</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Securities</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Underlying</B></FONT><br><FONT
STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Unexercised</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Options</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>(#)
</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Unexercisable</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>(c)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Option</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Exercise
</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Price</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>($)(e)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Option Expiration</B></FONT><br><FONT
STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Date</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>(f)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>


<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Gil Van Bokkelen</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">712,500</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">5.00</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"></FONT><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT>
<FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">June&nbsp;8,&nbsp;2017</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(1)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"></FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"></FONT><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT>
<FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">25,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">5.28</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"></FONT><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">December&nbsp;23,&nbsp;2019</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(2)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"></FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"></FONT><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT>
<FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Laura Campbell</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">200,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">5.00</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"></FONT><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">June 8, 2017</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(1)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"></FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"></FONT><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT>
<FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">17,500</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">5.28</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"></FONT><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">December&nbsp;23,&nbsp;2019</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(2)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"></FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"></FONT><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT>
<FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">William (BJ) Lehmann, Jr.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">400,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">5.00</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"></FONT><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">June 8, 2017</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(1)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"></FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"></FONT><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT>
<FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">22,500</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">5.28</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"></FONT><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">December&nbsp;23,&nbsp;2019</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(2)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"></FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"></FONT><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT>
<FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">John Harrington</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">700,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">5.00</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"></FONT><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">June 8, 2017</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(1)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"></FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"></FONT><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT>
<FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">22,500</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">5.28</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"></FONT><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">December&nbsp;23,&nbsp;2019</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(2)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"></FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"></FONT><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT>
<FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Robert Deans</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">240,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">5.00</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"></FONT><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">June 8, 2017</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(1)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"></FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"></FONT><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT>
<FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">20,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">5.28</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"></FONT><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT>
<FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">December&nbsp;23,&nbsp;2019</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(2)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"></FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"></FONT><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT>
<FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
</TABLE> <P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.8pt solid #465361;width:39%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(1)</SUP>&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">These options were granted on June&nbsp;8, 2007, vested at a rate of 40% on the grant date and vested 20% in each of the three years
thereafter (on a quarterly basis), and were fully exercisable on June&nbsp;8, 2010. </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">81 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(2)</SUP>&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">These options were granted on December&nbsp;23, 2009, vested at a rate of 25%&nbsp;per quarter and were fully exercisable on
December&nbsp;24, 2010. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>2011 Options Exercised and Stock Vested </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">None of our named executive officers exercised any stock options during 2011. As of December&nbsp;31, 2011, our named executive officers
did not have any other stock awards other than options. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Potential Payments Upon Termination or Change in
Control </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Under their employment agreements, the named executive officers may be entitled to certain potential payments
upon termination. In the event that an executive officer is terminated without cause or terminates employment for good reason, as defined in the agreements, we would be obligated to pay full base salary and other benefits for a defined period,
subject to mitigation related to other employment. For Dr.&nbsp;Gil Van Bokkelen and Dr.&nbsp;John Harrington, the defined payment period is 18 months and, for all other executive officers, the period is six months. We would also be obligated to
continue the participation of Dr.&nbsp;Gil Van Bokkelen and Dr.&nbsp;John Harrington in all other medical, life and employee &#147;welfare&#148; benefit programs for a period of eighteen months at our expense, to the extent available and possible
under the programs. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The agreements define &#147;cause&#148; to mean willful and continuous neglect of such executive
officer&#146;s duties or responsibilities or willful misconduct by the executive officer that is materially and manifestly injurious to Athersys. &#147;Good reason&#148; includes, among other things, demotion, salary reduction, relocation, failure
to provide an executive officer with adequate and appropriate facilities and termination by the executive officer within 90 days of a change in control. A &#147;change in control&#148; occurs when (1)&nbsp;a person or group of persons purchases 50%
or more of our consolidated assets or a majority of our voting shares, or (2)&nbsp;if, following a public offering, the directors of Athersys immediately following the offering no longer constitute a majority of the Board of Directors. Upon a change
in control, or if the named executive officer should die or become permanently disabled, all unvested stock options become immediately vested and exercisable. As of December&nbsp;31, 2011, none of the named executive officers held unvested stock
options. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">In the event that an executive officer is terminated for cause or as a result of death, we would be obligated to pay
full base salary and other benefits, including any unpaid expense reimbursements, through the date of termination, and would have no further obligations to the executive officer. In the event that an executive officer is unable to perform duties as
a result of a disability, we would be obligated to pay full base salary and other benefits until employment is terminated and for a period of twelve months from the date of such termination. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Additionally, in 2005, in connection with the restructuring of the Company&#146;s internal programs, the Board of Directors established an incentive program intended to promote retention
and motivation of our executives. The program provides the named executive officers financial participation in the event of certain merger or acquisition or asset sale transactions, obligating us to make a payment to the named executive officers
representing five percent of the consideration received from the transaction. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">82 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The table below reflects the amount of compensation payable to each named executive officer
in the event of termination of such executive&#146;s employment, pursuant to such executive&#146;s employment agreement. The amounts shown assume that such termination was effective as of December&nbsp;31, 2011 and thus includes amounts earned
through such time and are estimates of the amounts that would be paid out to executives upon their termination. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="76%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD WIDTH="33%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD WIDTH="45%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000">
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Executive&nbsp;Benefit&nbsp;and</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Payments&nbsp;Upon</B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Separation</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Termination</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">
<B>Without<BR>Cause or<BR>Voluntary&nbsp;For<BR>Good Reason</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>


<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Gil&nbsp;Van&nbsp;Bokkelen</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Cash Severance Payment</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">606,750</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Continuation of Benefits</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"> 23,944</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Total</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">630,694</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>William&nbsp;(BJ)&nbsp;Lehmann,&nbsp;Jr.</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Cash Severance Payment</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">173,357</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Continuation of Benefits</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Total</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">173,357</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>John Harrington</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Cash Severance Payment</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">520,071</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Continuation of Benefits</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"> 23,944</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Total</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">544,015</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Robert Deans</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Cash Severance Payment</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">150,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Continuation of Benefits</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Total</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">150,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Laura Campbell</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Cash Severance Payment</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">112,682</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Continuation of Benefits</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Total</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">112,682</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.8pt solid #465361;width:39%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(1)</SUP>&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">Does not include any amounts payable upon a change in control pursuant to the incentive program established in 2005 as described on the
preceding page. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Director Compensation Table for 2011 </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The following table summarizes compensation paid to our non-employee Directors in 2011: </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="75%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD WIDTH="58%"></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:30pt"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Name(a)</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Fees&nbsp;Earned&nbsp;or</B></FONT><br><FONT
STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Paid in Cash<BR>($)(b)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Option<BR>Awards<BR>($)<SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(1)
</SUP>(d)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Total<BR>($)(h)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>


<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Lee E. Babiss</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">47,250</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">34,950</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">82,200</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Ismail Kola</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">44,625</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">34,950</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">79,575</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">George M. Milne, Jr.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">52,625</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">34,950</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">87,575</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Lorin J. Randall</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">66,500</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">34,950</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">101,450</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Jack L. Wyszomierski</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">53,125</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">34,950</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">88,075</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
</TABLE> <P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.8pt solid #465361;width:39%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(1)</SUP>&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">Amounts in column (d)&nbsp;do not necessarily reflect compensation actually received by our Directors. The amounts in column
(d)&nbsp;reflect the full grant date fair value of the equity awards made during the fiscal year ended December&nbsp;31, 2011, in accordance with ASC 718. Assumptions used in the calculation of these amounts are included in the notes to the 2011
audited consolidated financial statements included in the Company&#146;s Annual Report on Form 10-K for the fiscal year ended December&nbsp;31, 2011. The Directors had option awards outstanding as of December&nbsp;31, 2011 for shares of Common Stock
as follows: Lee Babiss&#151;90,000; Ismail Kola 90,000; George Milne&#151;135,000; Lorin Randall&#151;135,000; and Jack Wyszomierski&#151;90,000. </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">83 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Under our Director compensation program for non-employee Directors prior to 2011, new
Directors received an initial stock option grant to purchase 75,000 shares of common stock at fair market value on the date of grant, which options vest at a rate of 50% in the first year (on a quarterly basis) and 25% in each of the two years (on a
quarterly basis) thereafter. Effective April&nbsp;1, 2011, after consultation with the independent compensation advisor, the Board approved a revised initial grant for new directors equal to 30,000 shares of common stock, which options vest at a
rate of 50% in the first year (on a quarterly basis) and 25% in each of the two years (on a quarterly basis) thereafter. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Additionally, the non-employee Directors receive, at each anniversary of service, an option award to purchase 15,000 shares of common
stock at fair market value on the date of grant. These additional awards vest at a rate of 50% in the first year (on a quarterly basis), and 25% in each of the two years (on a quarterly basis) thereafter. Effective April&nbsp;1, 2011, after
consultation with the independent compensation advisor, the Board approved a change to the vesting schedule for anniversary stock option awards such that new awards vest quarterly over a one-year period, with such anniversary awards issued in June
of each year, in connection with our annual stockholder meeting. In June 2011, all five of our non-employee Directors each received such an anniversary stock option award. Also, effective April&nbsp;1, 2011, all new initial and anniversary stock
option awards granted to non-employee Directors have a term of ten years and upon the termination of the Director&#146;s service, the Director will have 18 months in which to exercise the vested portion of his options prior to forfeiture.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">For 2010, the non-employee Directors also received cash compensation of $30,000 per year, paid quarterly, plus daily fees of
$1,500 for participating in person, or $500 for participating by telephone, at Board meetings. The chair of the Audit Committee received additional cash compensation of $10,000 per year, paid quarterly, and the chair of the Compensation Committee
received additional cash compensation of $6,000 per year, paid quarterly. All Audit Committee and Compensation Committee members also received additional meeting fees of $1,000 for participating in person, or $500 for participating by telephone, at
each Audit Committee or Compensation Committee meeting. Directors, however, could not receive more than $2,500 in any one day for participation in Board and committee meetings. Effective April&nbsp;1, 2011, the Board approved a revised cash
compensation program for Directors with annual retainers paid quarterly as set forth below, with no meeting fees: </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="75%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD WIDTH="86%"></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>


<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Board Member</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">40,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Audit Committee&#151;Chairman</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">15,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Audit Committee&#151;Member</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">7,500</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Compensation Committee&#151;Chairman</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">10,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Compensation Committee&#151;Member</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">5,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Nominations and Corporate Governance Committee&#151;Chairman</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">6,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Nominations and Corporate Governance Committee&#151;Member</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">3,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD></TR>
</TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Directors are reimbursed for reasonable out-of-pocket expenses incurred while attending Board of Director
and committee meetings. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">84 </FONT></P>


<p Style='page-break-before:always'>
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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><A NAME="toc417938_13"></A>CERTAIN RELATIONSHIPS AND RELATED-PARTY
TRANSACTIONS </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We give careful attention to related person transactions because they may present the potential for conflicts
of interest. We refer to &#147;related person transactions&#148; as those transactions, arrangements, or relationships in which: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">we were, are or are to be a participant; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">the amount involved exceeds $120,000; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">any of our directors, director nominees, executive officers or greater-than five percent stockholders (or any of their immediate family
members) had or will have a direct or indirect material interest. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">To identify related person transactions
in advance, we rely on information supplied by our executive officers, Directors and certain significant stockholders. We maintain a comprehensive written policy for the review, approval or ratification of related person transactions, and our Audit
Committee reviews all related person transactions identified by us. The Audit Committee approves or ratifies only those related person transactions that are determined by it to be, under all of the circumstances, in the best interest of our company
and its stockholders. No related person transactions occurred in the last three fiscal years that required a review by the Audit Committee. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">In November 2011, we entered into the Aspire Purchase Agreement with Aspire Capital, 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, and the terms and conditions set forth therein. As part of the Aspire Purchase 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&nbsp;per share, and received 266,667 additional shares as compensation for its commitment. As a result of this transaction, combined with shares of our common stock that Aspire
Capital held prior to the November 2011 transaction, Aspire Capital became one of our largest stockholders, owning more than 5% of our shares of common stock outstanding upon completion of the transaction. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">As of September&nbsp;30, 2012, we sold an additional 800,000 shares to Aspire Capital pursuant to the Aspire Purchase Agreement at an
average price of $1.57 per share. Also, in our March 2012 private placement, Aspire Capital purchased an additional 966,184 shares of common stock and five-year warrants to purchase 966,184 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, for a total purchase price to Aspire Capital of
approximately $2.0 million. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">85 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><A NAME="toc417938_14"></A>BENEFICIAL OWNERSHIP OF COMMON STOCK
</B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The following table sets forth certain information known to us regarding the beneficial ownership of our common stock as
of October <B>5</B>, 2012 by: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">each person known by us to beneficially own more than 5% of our common stock; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">each of our directors; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">each of our named executive officers; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">all of our directors and executive officers as a group. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We have determined beneficial ownership in accordance with the rules of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that
person, shares of common stock that could be issued upon the exercise of outstanding options and warrants held by that person that are exercisable within 60 days of October 5, 2012 are considered outstanding. These shares, however, are not
considered outstanding when computing the percentage ownership of each other person. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Percentage ownership calculations for
beneficial ownership for each person or entity are based on 30,052,843 shares of common stock outstanding as of October 5, 2012. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Except as indicated in the footnotes to this table and pursuant to state community property laws, each stockholder named in the table has sole voting and investment power for the shares
shown as beneficially owned by them. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD WIDTH="75%"></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:92pt"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Name of Beneficial Owner</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Number of<BR>Shares</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Percent&nbsp;of&nbsp;Class</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>


<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Greater Than 5% Stockholders</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Radius Venture Partners and affiliates</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(1)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">1,600,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">5.3</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">%&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Angiotech Pharmaceuticals, Inc.</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(2)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">1,885,890</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">6.3</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">%&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Aspire Capital Fund, LLC</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(3)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">2,728,967</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">9.1</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">%&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Directors, Director Nominees and Executive Officers</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Gil Van Bokkelen</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(4)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">976,986</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">3.2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">%&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Lee Babiss</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(5)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">79,688</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">*&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">John Harrington</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(6)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">819,144</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">2.7</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">%&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Ismail Kola</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(7)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">75,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">*&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Lorin Randall</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(8)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">60,938</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">*&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Kenneth Traub</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(9)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">3,750</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">*&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Jack Wyszomierski</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(10)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">79,688</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">*&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Laura Campbell</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(11)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">240,563</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">*&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Robert Deans</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(12)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">264,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">*&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">William (BJ) Lehmann, Jr.</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(13)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">429,400</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">1.4</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">%&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">All directors and executive officers as a group (10&nbsp;persons)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">3,029,157</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">9.3</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">%&nbsp;</FONT></TD></TR>
</TABLE> <P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.8pt solid #465361;width:39%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&nbsp;&nbsp;&nbsp;</SUP>*</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">Less than 1%. </FONT></P></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&nbsp;&nbsp;(1)</SUP></FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">A Schedule 13D/A filed with the SEC on May&nbsp;7, 2008 reported that Radius Venture Partners (defined below) beneficially owned
1,600,000 shares (800,000 shares beneficially owned by Radius Venture Partners II, L.P., or Radius II, 103,766 shares beneficially owned by Radius Venture Partners III, L.P., or Radius III, and 696,234 shares beneficially owned by Radius Venture
Partners III QP, L.P., or Radius III QP) of common stock. Radius Venture Partners II, LLC is the general partner of Radius II. </FONT></P></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">Radius Venture Partners III, LLC (which together with Radius Venture Partners II, LLC, we refer to as Radius Venture Partners) is the general partner of
Radius III and Radius III QP. Daniel C. Lubin and Jordan S. Davis are the managing members of Radius </FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="right"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><I>footnotes continued on following page </I></FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">86 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">
Venture Partners. Radius II has the sole power to vote or direct the vote and to dispose or direct the disposition of the shares beneficially owned by Radius II. Messrs. Lubin and Davis, by
virtue of their positions as managing members of the general partner of Radius II, may be deemed to have the shared power to vote or direct the vote of and shared power to dispose or direct the disposition of the shares held by Radius II. Radius III
has the sole power to vote or direct the vote and to dispose or direct the disposition of the shares beneficially owned by Radius III, and Radius III QP has the sole power to vote or direct the vote and to dispose or direct the disposition of the
shares beneficially owned by Radius III QP. Messrs. Lubin and Davis, by virtue of their positions as managing members of the general partner of Radius III and Radius III QP, may be deemed to have the shared power to vote or direct the vote of and
shared power to dispose or direct the disposition of the shares beneficially owned by Radius III and Radius III QP. Additionally, each of Daniel C. Lubin, Jordan S. Davis, Radius Venture Partners II, LLC and Radius Venture Partners III, LLC disclaim
beneficial ownership of the shares beneficially owned by Radius II, Radius III and Radius III QP. The address for Radius Venture Partners and its affiliates is 400 Madison Avenue, 8th Floor, New York, New York 10017. </FONT></P></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&nbsp;&nbsp;(2)</SUP></FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">A Schedule 13G filed with the SEC on June&nbsp;18, 2007 reported that Angiotech beneficially owned 1,885,890 shares of common stock and
that Angiotech has sole voting and dispositive power over such shares. The address for Angiotech is 1618 Station Street, Vancouver, British Columbia, Canada V6A 1B6. </FONT></P></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&nbsp;&nbsp;(3)</SUP></FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">To our knowledge, Aspire Capital has direct beneficial ownership of 2,728,967 shares of common stock. Aspire Capital also holds
warrants to purchase 1,066,084 shares of common stock; however, these warrants are exercisable only if the holder beneficially owns less than 4.99% of the outstanding shares of common stock and, therefore, the shares underlying these warrants are
not beneficially owned by Aspire Capital as of the date hereof. Aspire Capital Partners, LLC, or Aspire Partners, as the managing member of Aspire Capital, SGM Holdings Corp., or SGM, as the managing member of Aspire Partners, Steven G. Martin, the
president and sole shareholder of SGM and a principal of Aspire Partners, Erik J. Brown, a principal of Aspire Partners, and Christos Komissopoulos, a principal of Aspire Partners, may be deemed to have shared voting and investment power over shares
of common stock owned by Aspire Capital. Each of Aspire Partners, SGM, Mr.&nbsp;Martin, Mr.&nbsp;Brown and Mr.&nbsp;Komissopoulos disclaims beneficial ownership of the shares of common stock held by Aspire Capital. The address for Aspire Capital and
its affiliates is 155 North Wacker Drive, Suite 1600, Chicago, Illinois 60606. </FONT></P></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&nbsp;&nbsp;(4)</SUP></FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">Includes vested options for 737,500 shares of common stock at a weighted average exercise price of $5.01 per share.
</FONT></P></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&nbsp;&nbsp;(5)</SUP></FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">Includes vested options for 79,688 shares of common stock at a weighted average exercise price of $3.02 per share.
</FONT></P></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&nbsp;&nbsp;(6)</SUP></FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">Includes vested options for 722,500 shares of common stock at a weighted average exercise price of $5.01 per share.
</FONT></P></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&nbsp;&nbsp;(7)</SUP></FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">Includes vested options for 75,000 shares of common stock at a weighted average exercise price of $2.72 per share.
</FONT></P></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&nbsp;&nbsp;(8)</SUP></FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">Includes vested options for 60,938 shares of common stock at a weighted average exercise price of $2.20 per share.
</FONT></P></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&nbsp;&nbsp;(9)</SUP></FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">Includes vested options for 3,750 shares of common stock at a weighted average exercise price of $1.43 per share.
</FONT></P></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(10)</SUP>&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">Includes vested options for 79,688 shares of common stock at a weighted average exercise price of $2.94 per share.
</FONT></P></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(11)</SUP>&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">Includes vested options for 217,500 shares of common stock at a weighted average exercise price of $5.02 per share.
</FONT></P></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(12)</SUP>&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">Includes vested options for 260,000 shares of common stock at a weighted average exercise price of $5.02 per share.
</FONT></P></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(13)</SUP>&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">Includes vested options for 422,500 shares of common stock at a weighted average exercise price of $5.01 per share.
</FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>DESCRIPTION OF CA<A NAME="toc417938_15"></A>PITAL STOCK </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We are authorized to issue 100,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares of preferred stock, par
value $0.001 per share. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Common Stock </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">This section describes the general terms and provisions of our common stock. For more detailed information, you should refer to our Certificate of Incorporation and Bylaws, copies of which
have been filed as exhibits to the registration statement of which this prospectus forms a part. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Holders of shares of common
stock will be entitled to receive dividends if and when declared by the board of directors from funds legally available therefor, and, upon liquidation, dissolution or winding-up of our company, will be entitled to share ratably in all assets
remaining after payment of liabilities. The holders of shares of common stock will not have any preemptive rights, but will be entitled to one vote for each share of common stock held of record. Stockholders will not have the right to cumulate their
votes for the election of directors. The shares of common stock offered hereby, when issued, will be fully paid and nonassessable. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Preferred Stock </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">This section describes the general terms
and provisions of our preferred stock. For more detailed information, you should refer to our Certificate of Incorporation and Bylaws, copies of which have been filed as exhibits to the registration statement of which this prospectus forms a part.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Our board of directors is authorized, without action by our stockholders, to designate and issue up to 10,000,000 shares of
preferred stock, par value $0.001 per share, in one or more series. The board of directors can fix the rights, preferences and privileges of the shares of each series and any of its qualifications, limitations or restrictions. Our board of directors
may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of common stock. The issuance of preferred stock, while providing flexibility in connection
with possible future financings, acquisitions and other corporate purposes could, under certain circumstances, have the effect of delaying, deferring or preventing a change in control of us and could adversely affect the market price of our common
stock. We do not have any shares of preferred stock outstanding, and we have no current plans to issue any preferred stock. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Transfer Agent and Registrar </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We have appointed Computershare Investor Services as the transfer agent and registrar for our common stock. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Listing </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Our common stock is listed on The NASDAQ Capital
Market under the symbol &#147;ATHX.&#148; </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">88 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><A NAME="toc417938_16"></A>MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
TO NON-U.S. HOLDERS </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>General </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The following is a discussion of the material U.S. federal income tax consequences of the acquisition, ownership, and disposition of our common stock by a non-U.S. holder, as defined
below, that acquires our common stock pursuant to this offering. This discussion assumes that a non-U.S. holder will hold our common stock issued pursuant to this offering as a capital asset within the meaning of Section&nbsp;1221 of the Code. This
discussion does not address all aspects of U.S. federal income taxation that may be relevant to a particular investor in light of the investor&#146;s individual circumstances. In addition, this discussion does not address (i)&nbsp;U.S. federal
non-income tax laws, such as gift or estate tax laws, (ii)&nbsp;state, local or non-U.S. tax consequences, (iii)&nbsp;the special tax rules that may apply to certain investors, including, without limitation, banks, insurance companies, financial
institutions, controlled foreign corporations, passive foreign investment companies, broker-dealers, grantor trusts, personal holding companies, taxpayers who have elected mark-to-market accounting, tax-exempt entities, regulated investment
companies, real estate investment trusts, a partnership or other entity or arrangement classified as a partnership for United States federal income tax purposes or other pass-through entities, or an investor in such entities or arrangements, or U.S.
expatriates or former long-term residents of the United States, (iv)&nbsp;the special tax rules that may apply to an investor that acquires, holds, or disposes of our common stock as part of a straddle, hedge, constructive sale, conversion or other
integrated transaction, or (v)&nbsp;the impact, if any, of the alternative minimum tax. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">This discussion is based on current
provisions of the Code, applicable U.S. Treasury Regulations promulgated thereunder, judicial opinions, and published rulings of the Internal Revenue Service, or the IRS, all as in effect on the date of this prospectus and all of which are subject
to differing interpretations or change, possibly with retroactive effect. We have not sought, and will not seek, any ruling from the IRS or any opinion of counsel with respect to the tax consequences discussed herein, and there can be no assurance
that the IRS will not take a position contrary to the tax consequences discussed below or that any position taken by the IRS would not be sustained. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">As used in this discussion, the term &#147;U.S. person&#148; means a person that is, for U.S. federal income tax purposes, (i)&nbsp;a citizen or individual resident of the United States,
(ii)&nbsp;a corporation (or other entity taxed as a corporation) created or organized (or treated as created or organized) in the United States or under the laws of the United States or any state thereof or the District of Columbia, (iii)&nbsp;an
estate the income of which is subject to U.S. federal income taxation regardless of its source, or (iv)&nbsp;a trust if (A)&nbsp;a court within the United States is able to exercise primary supervision over the administration of the trust and one or
more U.S. persons have the authority to control all substantial decisions of the trust, or (B)&nbsp;it has in effect a valid election under applicable U.S. Treasury Regulations to be treated as a U.S. person. As used in this discussion, the term
&#147;non-U.S. holder&#148; means a beneficial owner of our common stock (other than a partnership or other entity treated as a partnership or as a disregarded entity for U.S. federal income tax purposes) that is not a U.S. person. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The tax treatment of a partnership and each partner thereof will generally depend upon the status and activities of the partnership and
such partner. A holder that is treated as a partnership for U.S. federal income tax purposes or a partner in such partnership should consult its own tax advisor regarding the U.S. federal income tax consequences applicable to it and its partners of
the acquisition, ownership and disposition of our common stock. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">THIS DISCUSSION IS ONLY A SUMMARY OF MATERIAL U.S. FEDERAL
INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK. IT IS NOT TAX ADVICE. EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR WITH RESPECT TO THE
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">
PARTICULAR TAX CONSEQUENCES OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL, AND NON-U.S. TAX LAWS, AS WELL AS U.S.
FEDERAL ESTATE AND GIFT TAX LAWS, AND ANY APPLICABLE TAX TREATY. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Income Tax Consequences of an Investment in Common Stock
</B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Distributions on Common Stock </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">As discussed under &#147;Dividend Policy,&#148; we do not anticipate paying dividends. If we pay cash or distribute property to holders of shares of common stock, such distributions
generally will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Distributions in excess of current and
accumulated earnings and profits will constitute a return of capital that will be applied against and reduce (but not below zero) the holder&#146;s adjusted tax basis in our common stock. Any remaining excess will be treated as gain from the sale or
exchange of the common stock and will be treated as described under &#147;&#151;Gain or Loss on Sale, Exchange or Other Taxable Disposition of Common Stock&#148; below. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Dividends paid to a non-U.S. holder that are not effectively connected with the non-U.S. holder&#146;s conduct of a trade or business in the United States generally will be subject to
withholding of U.S. federal income tax at a rate of 30% or such lower rate as may be specified by an applicable income tax treaty. A non-U.S. holder that wishes to claim the benefit of an applicable tax treaty withholding rate generally will be
required to (i)&nbsp;complete IRS Form W-8BEN (or other applicable form) and certify under penalties of perjury that such holder is not a U.S. person and is eligible for the benefits of the applicable tax treaty or (ii)&nbsp;if our common stock is
held through certain foreign intermediaries, satisfy the relevant certification requirements of applicable U.S. Treasury Regulations. These forms may need to be periodically updated. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">A non-U.S. holder eligible for a reduced rate of withholding of U.S. federal income tax pursuant to an income tax treaty may obtain a refund of any excess amounts withheld by timely filing
an appropriate claim for refund with the IRS. Non-U.S. holders should consult their own tax advisors regarding their entitlement to benefits under an applicable income tax treaty and the manner of claiming the benefits of such treaty (including,
without limitation, the need to obtain a U.S. taxpayer identification number). </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Dividends that are effectively connected with
a non-U.S. holder&#146;s conduct of a trade or business in the United States, and, if required by an applicable income tax treaty, attributable to a permanent establishment or fixed base maintained by the non-U.S. holder in the United States, are
subject to U.S. federal income tax on a net income basis at the U.S. federal income tax rates generally applicable to a U.S. holder and are not subject to withholding of U.S. federal income tax, provided that the non-U.S. holder establishes an
exemption from such withholding by complying with certain certification and disclosure requirements. Any such effectively connected dividends (and, if required, dividends attributable to a U.S. permanent establishment or fixed base) received by a
non-U.S. holder that is treated as a foreign corporation for U.S. federal income tax purposes may be subject to an additional branch profits tax at a 30% rate, or such lower rate as may be specified by an applicable income tax treaty. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><I>Gain or Loss on Sale, Exchange or Other Taxable Disposition of Common Stock </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Any gain recognized by a non-U.S. holder on a sale or other taxable disposition of our common stock generally will not be subject to U.S.
federal income tax, unless: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">(i)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">the gain is effectively connected with a trade or business of the non-U.S. holder in the United States (and, if required by an applicable income tax
treaty, is attributable to a U.S. permanent establishment or fixed base of the non-U.S. holder), </FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">90 </FONT></P>


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<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">(ii)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">the non-U.S. holder is an individual who is present in the United States for 183 days or more in the taxable year of that disposition, and certain other
conditions are met, or </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">(iii)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">we are or have been a United States real property holding corporation, or a USRPHC, for U.S. federal income tax purposes at any time during the shorter
of the five-year period ending on the date of disposition or the period that the non-U.S. holder held the common stock, and, in the case where the shares of our common stock are regularly traded on an established securities market, the non-U.S.
holder holds or held (at any time during the shorter of the five-year period ending on the date of disposition or the non-U.S. holder&#146;s holding period) more than 5% of our common stock. A corporation generally is a USRPHC if the fair market
value of its U.S. real property interests equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests plus its other assets used or held for use in a trade or business. We believe that we currently are a
USRPHC, and we expect to remain a USRPHC. </FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Any gain recognized by a non-U.S. holder that is described in clause
(i)&nbsp;or (iii)&nbsp;of the preceding paragraph generally will be subject to tax at the U.S. federal income tax rates generally applicable to a U.S. person and be required to file a U.S. tax return. Such non-U.S. holders are urged to consult their
tax advisors regarding the possible application of these rules. Any gain of a corporate non-U.S. holder that is described in clause (i)&nbsp;above may also be subject to an additional branch profits tax at a 30% rate, or such lower rate as may be
specified by an applicable income tax treaty. An individual non-U.S. holder that is described in clause (ii)&nbsp;of such paragraph generally will be subject to a flat 30% tax (or a lower applicable tax treaty rate) on the U.S. source capital gain
derived from the disposition, which may be offset by U.S. source capital losses during the taxable year of the disposition. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>Information Reporting and Backup Withholding </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We generally must report annually to the IRS and to each non-U.S. holder of our common stock the amount of dividends paid to such holder on our common stock and the tax, if any, withheld
with respect to those dividends. Copies of the information returns reporting those dividends and withholding may also be made available to the tax authorities in the country in which the non-U.S. holder is a resident under the provisions of an
applicable income tax treaty or agreement. Information reporting also is generally required with respect to the proceeds from sales and other dispositions of our common stock to or through the U.S. office (and in certain cases, the foreign office)
of a broker. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Under some circumstances, U.S. Treasury Regulations require backup withholding of U.S. federal income tax,
currently at a rate of 28%, on reportable payments with respect to our common stock. A non-U.S. holder generally may eliminate the requirement for information reporting (other than in respect to dividends, as described above) and backup withholding
by providing certification of its foreign status, under penalties of perjury, on a duly executed applicable IRS Form W-8 or by otherwise establishing an exemption. Notwithstanding the foregoing, backup withholding and information reporting may apply
if either we or our paying agent has actual knowledge, or reason to know, that a holder is a U.S. person. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Backup withholding
is not a tax. Rather, the amount of any backup withholding will be allowed as a credit against a non-U.S. holder&#146;s U.S. federal income tax liability, if any, and may entitle such non-U.S. holder to a refund, provided that certain required
information is timely furnished to the IRS. Non-U.S. holders should consult their own tax advisors regarding the application of backup withholding and the availability of and procedure for obtaining an exemption from backup withholding in their
particular circumstances. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">91 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><A NAME="toc417938_17"></A>UNDERWRITING </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We are offering the shares of common stock described in this prospectus through Piper Jaffray &amp; Co. as underwriter. Subject to the
terms and conditions of the underwriting agreement, we have agreed to sell to the underwriter, and the underwriter has agreed to purchase from us, 17,000,000 shares of common stock. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The underwriter is committed to purchase all the shares of common stock offered by us if it purchases any shares, other than those shares covered by the over-allotment option described
below. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The underwriter has advised us that it proposes to offer the shares of common stock directly to the public at the
initial public offering price set forth on the cover page of this prospectus and to certain dealers at that same price less a concession not in excess of $ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share. The underwriter may allow and the
dealers may re-allow a concession of not more than $ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share on sales to certain other brokers and dealers. After the offering, these figures may be changed by the underwriter. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We have granted to the underwriter an option to purchase up to an additional 2,550,000 shares of common stock from us at the same price
to the public as set forth above to cover over-allotments. The underwriter may exercise this option any time during the 30-day period after the date of this prospectus, but only to cover over-allotments, if any. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The underwriting fee is equal to the public offering price per share of common stock less the amount paid by the underwriter to us per
share of common stock. The following table shows the per share and total underwriting discounts to be paid to the underwriter in connection with this offering. These amounts are shown assuming both no exercise and full exercise of the over-allotment
option. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="76%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD WIDTH="68%"></TD>
<TD VALIGN="bottom" WIDTH="16%"></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="16%"></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>No&nbsp;Exercise</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Full&nbsp;Exercise</B></FONT></TD></TR>


<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Per share</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Total</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD></TR>
</TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We estimate that the total fees and expenses payable by us, excluding underwriting discounts and
commissions, will be approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We have agreed
to indemnify the underwriter against certain liabilities, including liabilities under the Securities Act, or to contribute to payments that the underwriter may be required to make in respect of those liabilities. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We and each of our directors and executive officers are subject to lock-up agreements that prohibit us and them from offering for sale,
pledging, announcing the intention to sell, selling, contracting to sell, selling any option or contract to purchase, purchasing any option or contract to sell, granting any option, right or warrant to purchase, or otherwise transferring or
disposing of, directly or indirectly, any shares of our common stock or any securities convertible into or exercisable or exchangeable for shares of our common stock, or from entering into any swap or other agreement that transfers, in whole or in
part, any of the economic consequences of ownership of the common stock, for a period of at least 90 days following the date of the underwriting agreement without the prior written consent of Piper Jaffray &amp; Co. The lock-up agreements do not
prohibit our directors and executive officers from transferring shares of our common stock for bona fide estate or tax planning purposes, subject to certain requirements, including that the transferee be subject to the same lock-up terms,
participating in any exchange of &#147;underwater&#148; options with us, acquiring or exercising stock options issued pursuant to our existing stock option plans, or entering into plans that satisfy the requirements of Rule 10b5-1(c)(1)(i)(B) under
the Exchange Act, provided that no sales are made under such plans during the lock-up period. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">92 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The lock-up agreements do not prohibit us from issuing shares upon the exercise or
conversion of securities outstanding on the date of this prospectus. The lock-up provisions do not prevent us from selling shares to the underwriter pursuant to the underwriting agreement, or prevent us from granting options to acquire securities
under our existing stock option plans or issuing shares upon the exercise or conversion of securities outstanding on the date of this prospectus. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The 90-day lock-up period in all of the lock-up agreements is subject to extension if (i)&nbsp;during the last 17&nbsp;days of the lock-up period we issue an earnings release or material
news or a material event relating to us occurs or (ii)&nbsp;prior to the expiration of the lock-up period, we announce that we will release earnings results during the 16-day period beginning on the last day of the lock-up period, in which case the
restrictions imposed in these lock-up agreements shall continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event, unless Piper Jaffray &amp;
Co. waives the extension in writing. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Our shares are quoted on The NASDAQ Capital Market under the symbol &#147;ATHX.&#148;
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">To facilitate the offering, the underwriter may engage in transactions that stabilize, maintain or otherwise affect the price
of our common stock during and after the offering. Specifically, the underwriter may over-allot or otherwise create a short position in the common stock for its own account by selling more shares of common stock than we have sold to it. Short sales
involve the sale by the underwriter of a greater number of shares than it is required to purchase in the offering. The underwriter may close out any short position by either exercising its option to purchase additional shares or purchasing shares in
the open market. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The underwriter may also engage in passive market making transactions in our common stock. Passive market
making consists of displaying bids on The NASDAQ Capital Market limited by the prices of independent market makers and effecting purchases limited by those prices in response to order flow. Rule 103 of Regulation M promulgated by the SEC limits the
amount of net purchases that each passive market maker may make and the displayed size of each bid. Passive market making may stabilize the market price of our common stock at a level above that which might otherwise prevail in the open market and,
if commenced, may be discontinued at any time. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">This prospectus in electronic format may be made available on web sites
maintained by the underwriter, and the underwriter may distribute prospectus supplements electronically. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">From time to time in
the ordinary course of their respective businesses, the underwriter and certain of its affiliates may in the future engage in commercial banking or investment banking transactions with us and our affiliates. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">93 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><A NAME="toc417938_18"></A>LEGAL MATTERS </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The validity of the issuance of the common stock offered by this prospectus will be passed upon for us by Jones Day. Goodwin Procter LLP,
New York, New York has acted as counsel for the underwriter in connection with certain legal matters related to this offering. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><A NAME="toc417938_19"></A>EXPERTS </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The consolidated
financial statements of Athersys, Inc. appearing in Athersys, Inc.&#146;s Annual Report (Form 10-K) for the year ended December&nbsp;31, 2011 have been audited by Ernst&nbsp;&amp; Young LLP, independent registered public accounting firm, as set
forth in their report thereon, included therein and incorporated herein by reference. Such consolidated financial statements are incorporated herein by reference in reliance upon such report given on the authority of such firm as experts in
accounting and auditing. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><A NAME="toc417938_20"></A>WHERE YOU CAN FIND MORE INFORMATION </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We have filed with the SEC a registration statement on Form S-1 under the Securities Act to register our common stock being offered in
this prospectus. This prospectus, which constitutes a part of the registration statement, does not contain all the information set forth in the registration statement or the exhibits and schedules filed thereto. For further information about us and
the our common stock offered by this prospectus, we refer you to the registration statement and the exhibits and schedules filed with the registration statement. Any statement contained in this prospectus regarding the contents of any contract or
any other document that is filed as an exhibit to the registration statement is not necessarily complete and each such statement is qualified in all respects by reference to the full text of such contract or other document filed as an exhibit to the
registration statement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">You may read and copy any materials we file with the SEC, including the registration statement, at
the SEC&#146;s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549, on official business days during the hours of 10:00 a.m. to 3:00 p.m. You may obtain information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. The SEC also maintains an Internet website that contains reports, proxy statements and other information about issuers, like us, that file electronically with the SEC. The address of that website is http://www.sec.gov. Information on
or accessible through the SEC&#146;s website is not a part of this prospectus. You may also inspect our SEC reports and other information at our website at www.athersys.com. Information on or accessible through our website is not a part of this
prospectus. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We are subject to the information reporting requirements of the Exchange Act, as amended, and file reports, proxy
statements and other information with the SEC. These reports, proxy statements and other information are available for inspection and copying at the public reference room and website of the SEC referred to above. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B><A NAME="toc417938_21"></A>INFORMATION WE INCORPORATE BY REFERENCE </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The SEC allows us to &#147;incorporate by reference&#148; into this prospectus the information in documents we file with it, which means
that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be a part of this prospectus, and information that we file later with the SEC will automatically update
and supersede this information. Any statement contained in any document incorporated or deemed to be incorporated by reference in this prospectus shall be deemed to be modified or superseded to the extent that a statement contained in or omitted
from this prospectus, or in any other subsequently filed document that also is or is deemed to be incorporated by reference, modifies or supersedes such statement. Any such statement so modified or
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">94 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">
superseded shall not be deemed, except as so modified or superseded, to constitute a part of this prospectus. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We incorporate by reference the documents listed below: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">our annual report on Form&nbsp;10-K for the year ended December&nbsp;31, 2011; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">our quarterly reports on Form&nbsp;10-Q for the quarters ended March&nbsp;31, 2012 and June&nbsp;30, 2012;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">our definitive proxy statement on Schedule 14A filed with the SEC on April&nbsp;27, 2012; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">our current reports on Form&nbsp;8-K filed on February&nbsp;27, 2012,&nbsp;March&nbsp;15, 2012 and June&nbsp;22, 2012; and
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">the description of our common stock set forth in the registration statement on Form&nbsp;8-A filed on December&nbsp;6, 2007, and all
amendments and reports filed for the purpose of updating that description. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">We do not, however, incorporate
by reference in this prospectus any documents or portions thereof that are not deemed &#147;filed&#148; with the SEC, including any information furnished pursuant to Item&nbsp;2.02 or Item&nbsp;7.01 of our current reports on Form&nbsp;8-K.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">You may obtain copies of these filings without charge by accessing the investors section of www.athersys.com or by requesting
the filings in writing or telephoning us at the following address and telephone number: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Athersys, Inc.
</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">3201 Carnegie Avenue </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Cleveland, Ohio 44115-2634 </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">(216) 431-9900 Attn:
Secretary </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">95 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="5" COLOR="#465361"><B>17,000,000&nbsp;Shares </B></FONT></P>
<P STYLE="font-size:24px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center">


<IMG SRC="g417938g32i80.jpg" ALT="LOGO">
 </P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="5" COLOR="#465361"><B>Athersys, Inc. </B></FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="5" COLOR="#465361"><B>Common Stock </B></FONT></P> <P STYLE="font-size:189px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center>
<P STYLE="line-height:5px;margin-top:0px;margin-bottom:2px;border-bottom:0.8pt solid #465361;width:20%">&nbsp;</P></center>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="4" COLOR="#465361"><B>PROSPECTUS </B></FONT></P><center>
<P STYLE="line-height:5px;margin-top:0px;margin-bottom:2px;border-bottom:0.8pt solid #465361;width:20%">&nbsp;</P></center>
<P STYLE="margin-top:189px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;, 2012 </B></FONT></P>

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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>PART II </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>INFORMATION NOT REQUIRED IN THE PROSPECTUS </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="9%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Item&nbsp;13.</B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Other Expenses of Issuance and Distribution. </B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">The following table shows the costs and expenses to be paid by the registrant in connection with this offering. All amounts shown except the SEC registration fee and The NASDAQ Capital Market listing fee
are estimates. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD WIDTH="90%"></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Amount</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>


<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">SEC Registration Fee</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">3,494</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">FINRA Filing Fee</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">*</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">NASDAQ Capital Market Listing Fee</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">*</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Accounting Fees and Expenses</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">*</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Legal Fees and Expenses</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">*</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Printing and Engraving Expenses</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">*</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Transfer Agent and Registrar Fees and Expenses</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">*</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Miscellaneous Expenses</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">*</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Total</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">*</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
</TABLE> <P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.8pt solid #000000;width:39%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1">*</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="1">To be provided by amendment. </FONT></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Item&nbsp;14.&nbsp;&nbsp;&nbsp;&nbsp;Indemnification of Officers and Directors. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Delaware law provides that directors of a company will not be personally liable for monetary damages for breach of their fiduciary duty as directors, except for liabilities: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">for any breach of their duty of loyalty to the company or its stockholders; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">for unlawful payment of dividend or unlawful stock repurchase or redemption, as provided under Section&nbsp;174 of the General Corporation Law of the
State of Delaware (the &#147;DGCL&#148;); or </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">for any transaction from which the director derived an improper personal benefit. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">The provisions of Delaware law that relate to indemnification expressly state that the rights provided by the statute are not exclusive and are in
addition to any rights provided in bylaws, by agreement, or otherwise. Our certificate of incorporation also provides that if Delaware law is amended to further eliminate or limit the liability of directors, then the liability of our directors shall
be eliminated or limited, without further stockholder action, to the fullest extent permissible under Delaware law as so amended. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our
certificate of incorporation requires us to indemnify, to the fullest extent permitted by the DGCL, any and all persons we have the power to indemnify under the DGCL from and against any and all expenses, liabilities or other matters covered by the
DGCL. Additionally, our certificate of incorporation requires us to indemnify each of our directors and officers in each and every situation where the DGCL permits or empowers us (but does not obligate us) to provide such indemnification, subject to
the provisions of our bylaws. Our bylaws requires us to indemnify our directors to the fullest extent permitted by the DGCL, and permits us, to the extent authorized by the board of directors, to indemnify our officers and any other person we have
the power to indemnify against liability, reasonable expense or other matters. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">II-1
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Under our certificate of incorporation, indemnification may be provided to directors and officers acting in
their official capacity, as well as in other capacities. Indemnification will continue for persons who have ceased to be directors, officers, employees or agents, and will inure to the benefit of their heirs, executors and administrators.
Additionally, under our certificate of incorporation, except under certain circumstances, our directors are not personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director. At present, there is no
pending litigation or proceeding involving any of our directors, officers, or employees in which indemnification is sought, nor are we aware of any threatened litigation that may result in claims for indemnification. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our bylaws also permit us to secure insurance on behalf of any officer, director, employee, or agent for any liability arising out of actions in his or
her capacity as an officer, director, employee, or agent. We have obtained an insurance policy that insures our directors and officers against losses, above a deductible amount, from specified types of claims. Finally, we have entered into
indemnification agreements with most of our directors and executive officers, which agreements, among other things, require us to indemnify them and advance expenses to them relating to indemnification suits to the fullest extent permitted by law.
</FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="9%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Item&nbsp;15.</B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Recent Sales of Unregistered Securities. </B></FONT></TD></TR></TABLE>
<P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">On each of September&nbsp;25, 2012,&nbsp;September&nbsp;6, 2012,&nbsp;August&nbsp;8, 2012,&nbsp;July&nbsp;18, 2012,&nbsp;July&nbsp;9,
2012,&nbsp;June&nbsp;27, 2012,&nbsp;February&nbsp;8, 2012 and February&nbsp;3, 2012, we issued 7,500 shares of our common stock to our former lenders pursuant to a 2004 loan agreement. Also pursuant to the 2004 loan agreement, we issued shares of
our common stock to our former lenders as follows: 347,937 on March&nbsp;9, 2012, 50,000 on November&nbsp;11, 2011, and 205,236 on February&nbsp;2, 2011. Each issuance of these unregistered shares qualifies as an exempt transaction pursuant to
Section&nbsp;4(2) of the Securities Act of 1933. Each issuance qualified for exemption under Section&nbsp;4(2) of the Securities Act of 1933 because the issuance by us did not involve a public offering. The offerings were not public offerings due to
the number of persons involved, the manner of the issuance and the number of securities issued. In addition, the lenders acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof and
appropriate legends were affixed to the securities issued in these transactions, and the lenders had the necessary investment intent since they agreed to and received share certificates bearing a legend stating that such securities are restricted.
We did not receive any proceeds from these issuances. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">On each of September&nbsp;7, 2011 and September&nbsp;9, 2010, we issued 1,345 shares of
our common stock to Katholieke Universiteit Leuven, or KUL, pursuant to a license agreement with KUL. Each issuance of these unregistered shares qualifies as an exempt transaction pursuant to Section&nbsp;4(2) of the Securities Act of 1933. Each
issuance qualified for exemption under Section&nbsp;4(2) of the Securities Act of 1933 because the issuance by us did not involve a public offering. The offerings were not public offerings due to the number of persons involved, the manner of the
issuance and the number of securities issued. In addition, KUL had the necessary investment intent since KUL agreed to and received share certificates bearing a legend stating that such securities are restricted. We did not receive any proceeds from
these issuances. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">On November&nbsp;11, 2011, we issued to Aspire Capital 266,667 shares of our common stock as the commitment shares for a new
financing of up to $20.0 million, which may be provided to us by Aspire Capital, and Aspire Capital purchased 666,667 shares of common stock, for an aggregate purchase price of $1.0 million. The issuance of these unregistered shares qualifies as an
exempt transaction pursuant to Section&nbsp;4(2) of the Securities Act of 1933. The issuance qualified for exemption under Section&nbsp;4(2) of the Securities Act of 1933 because the issuance by us did not involve a public offering. The 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, Aspire Capital had the necessary investment intent since Aspire Capital agreed to and received share
certificates bearing a legend stating that such securities are restricted. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">II-2
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">On each of
February&nbsp;3,&nbsp;February&nbsp;8,&nbsp;June&nbsp;27,&nbsp;July&nbsp;9,&nbsp;July&nbsp;18,&nbsp;August&nbsp;8,&nbsp;September&nbsp;6 and September&nbsp;25, 2012, we sold an additional 100,000 shares of common stock, or 800,000 shares in the
aggregate, to Aspire Capital at purchase prices of $185,000, $185,000, $145,000, $145,000, $151,000, $149,000, $148,000 and $147,670, respectively. Each issuance of these unregistered shares qualifies as an exempt transaction pursuant to
Section&nbsp;4(2) of the Securities Act of 1933. Each issuance qualified for exemption under Section&nbsp;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 since Aspire Capital agreed to and received share certificates each bearing a legend
stating that such securities are restricted. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">On March&nbsp;14, 2012, we sold 4,347,827 shares of our common stock and warrants to purchase up
to 4,347,827 shares of common stock to various purchasers for an aggregate purchase price of approximately $9.0 million. The total purchase price for one share of common stock and a warrant to purchase one share of common stock was $2.07. The
issuance of these unregistered securities qualifies as an exempt transaction pursuant to Section&nbsp;4(2) of the Securities Act of 1933. The issuance qualified for exemption under Section&nbsp;4(2) of the Securities Act of 1933 because the issuance
by us did not involve a public offering. The 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, the purchasers had the necessary investment intent
since they agreed to and received share certificates and warrant certificates each bearing a legend stating that such securities are restricted. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="9%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Item&nbsp;16.</B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Exhibits and Financial Statement Schedules. </B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>(a) Exhibits </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom" WIDTH="9%"></TD>
<TD WIDTH="88%"></TD></TR>
<TR>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center"> <P STYLE="border-bottom:1px solid #000000;width:40pt" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Exhibit&nbsp;No.</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="border-bottom:1px solid #000000"> <P STYLE="margin-top:0px;margin-bottom:1px"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Exhibit Description</B></FONT></P></TD></TR>


<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;1.1</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">**&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Form of Underwriting Agreement</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">3.1</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Certificate of Incorporation of Athersys, Inc., as amended as of August 31, 2007 (incorporated herein by reference to Exhibit 3.1 to the registrant&#146;s Registration Statement
on Form S-3/A (Registration No. 333-144433) filed with the Commission on October 10, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">3.2</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Bylaws of Athersys, Inc., as amended as of October 30, 2007 (incorporated herein by reference to Exhibit 3.1 to the registrant&#146;s Current Report on Form 8-K
(Commission&nbsp;No.&nbsp;000-52108) filed with the Commission on October 31, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">4.1</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Form of Warrant (incorporated herein by reference to Exhibit 4.1 to the registrant&#146;s Current Report on Form 8-K (Commission No. 001-33876) filed with the Commission on March
15, 2012)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">4.2</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Form of Warrant (incorporated herein by reference to Exhibit 4.1 to the registrant&#146;s Current Report on Form 8-K (Commission No. 001-33876) filed with the Commission on
January 28, 2011)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.1</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">**&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Opinion of Jones Day</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.1</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Research Collaboration and License Agreement, dated as of December 8, 2000, by and between Athersys, Inc. and Bristol-Myers Squibb Company (incorporated herein by reference to
Exhibit 10.1 to the registrant&#146;s Current Report on Form 8-K (Commission&nbsp;No.&nbsp;000-52108) filed with the Commission on June 14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.2</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Cell Line Collaboration and License Agreement, dated as of July 1, 2002, by and between Athersys, Inc. and Bristol-Myers Squibb Company (incorporated herein by reference to
Exhibit 10.2 to the registrant&#146;s Current Report on Form 8-K/A (Commission&nbsp;No.&nbsp;000-52108) filed with the Commission on September 27, 2007)</FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">II-3
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD WIDTH="87%"></TD></TR>

<TR>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center"> <P STYLE="border-bottom:1px solid #000000;width:40pt" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Exhibit&nbsp;No.</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="border-bottom:1px solid #000000"> <P STYLE="margin-top:0px;margin-bottom:1px"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Exhibit Description</B></FONT></P></TD></TR>


<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.3</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Extended Collaboration and License Agreement, dated as of January 1, 2006, by and between Athersys, Inc. and Bristol-Myers Squibb Company (incorporated herein by reference to
Exhibit 10.3 to the registrant&#146;s Current Report on Form 8-K/A (Commission No. 000-52108) filed with the Commission on September 27, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.4&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">License Agreement, effective as of May 5, 2006, by and between Athersys, Inc. and Angiotech Pharmaceuticals (incorporated herein by reference to Exhibit 10.4 to the
registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.5&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Sublicense Agreement, effective as of May 5, 2006, by and between Athersys, Inc. and Angiotech Pharmaceuticals (incorporated herein by reference to Exhibit 10.5 to the
registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.6&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Amended and Restated Registration Rights Agreement, dated as of April&nbsp;28, 2000, by and among Athersys, Inc. and the stockholders of Athersys, Inc. parties thereto
(incorporated herein by reference to Exhibit 10.6 to the registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June&nbsp;14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.7&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Amendment No. 1 to Athersys, Inc. Amended and Restated Registration Rights Agreement, dated as of January 29, 2002, by and among Athersys, Inc., the New Stockholders, the
Investors, Biotech and the Stockholders (each as defined in the Amended and Restated Registration Rights Agreement, dated as April 28, 2000, by and among Athersys, Inc. and the stockholders of Athersys, Inc. parties thereto) (incorporated herein by
reference to Exhibit 10.7 to the registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.8&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Amendment No. 2 to Athersys, Inc. Amended and Restated Registration Rights Agreement, dated as of November 19, 2002, by and among Athersys, Inc., the New Stockholders, the
Investors, Biotech and the Stockholders (each as defined in the Amended and Restated Registration Rights Agreement, dated as April 28, 2000, as amended, by and among Athersys, Inc. and the stockholders of Athersys, Inc. parties thereto)
(incorporated herein by reference to Exhibit 10.8 to the registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.9&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Amendment No. 3 to Amended and Restated Registration Rights Agreement, dated as of May&nbsp;15, 2007, by and among Athersys, Inc. and the Existing Stockholders (as defined
therein) (incorporated herein by reference to Exhibit 10.9 to the registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June&nbsp;14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.10&#134;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Athersys, Inc. Equity Incentive Compensation Plan (incorporated herein by reference to Exhibit 10.11 to the registrant&#146;s Current Report on Form 8-K (Commission No.
000-52108) filed with the Commission on June 14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.11&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Loan and Security Agreement, and Supplement, dated as of November 2, 2004, by and among Athersys, Inc., Advanced Biotherapeutics, Inc., Venture Lending &amp; Leasing IV, Inc.,
and Costella Kirsch IV, L.P. (incorporated herein by reference to Exhibit 10.1 to the registrant&#146;s Quarterly Report on Form 10-Q (Commission No. 000-52108) filed with the Commission on November 14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.12&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Second Amendment to Loan and Security Agreement, dated as of October 30, 2007, by and among ABT Holding Company, Advanced Biotherapeutics, Inc., Venture Lending and Leasing IV,
Inc., and Costella Kirsch IV, L.P. (incorporated herein by reference to Exhibit&nbsp;10.2 to the registrant&#146;s Quarterly Report on Form 10-Q (Commission No. 000-52108) filed with the Commission on November 14,
2007)</FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">II-4
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD WIDTH="87%"></TD></TR>

<TR>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center"> <P STYLE="border-bottom:1px solid #000000;width:40pt" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Exhibit&nbsp;No.</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="border-bottom:1px solid #000000"> <P STYLE="margin-top:0px;margin-bottom:1px"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Exhibit Description</B></FONT></P></TD></TR>


<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.13&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Amendment to Loan and Security Agreement, dated as of September 29, 2006, by and among Athersys, Inc., Advanced Biotherapeutics, Inc., Venture Lending &amp; Leasing IV, Inc., and
Costella Kirsch IV, L.P. (incorporated herein by reference to Exhibit 10.13 to the registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.14&#134;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Amended and Restated Employment Agreement, dated as of December 1, 1998 but effective as of April 1, 1998, by and between Athersys, Inc. and Dr. Gil Van Bokkelen (incorporated
herein by reference to Exhibit 10.14 to the registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.15&#134;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Amendment No. 1 to Amended and Restated Employment Agreement, dated as of May&nbsp;31, 2007, by and between Advanced Biotherapeutics, Inc. and Gil Van Bokkelen (incorporated
herein by reference to Exhibit 10.15 to the registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June&nbsp;14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.16&#134;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Non-Competition and Confidentiality Agreement, dated as of December 1, 1998, by and between Athersys, Inc. and Dr. Gil Van Bokkelen (incorporated herein by reference to Exhibit
10.16 to the registrant&#146;s Current Report on Form 8-K (Commission&nbsp;No.&nbsp;000-52108) filed with the Commission on June 14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.17&#134;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Amended and Restated Employment Agreement, dated as of December 1, 1998 but effective as of April 1, 1998, by and between Athersys, Inc. and Dr. John J. Harrington (incorporated
herein by reference to Exhibit 10.17 to the registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.18&#134;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Amendment No. 1 to Amended and Restated Employment Agreement, dated as of May 31, 2007, by and between Advanced Biotherapeutics, Inc. and John Harrington (incorporated herein by
reference to Exhibit 10.18 to the registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.19&#134;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Non-Competition and Confidentiality Agreement, dated as of December 1, 1998, by and between Athersys, Inc. and Dr. John J. Harrington (incorporated herein by reference to Exhibit
10.19 to the registrant&#146;s Current Report on Form 8-K (Commission&nbsp;No.&nbsp;000-52108) filed with the Commission on June 14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.20&#134;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Employment Agreement, dated as of May&nbsp;22, 1998, by and between Athersys, Inc. and Laura K. Campbell (incorporated herein by reference to Exhibit 10.20 to the
registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June&nbsp;14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.21&#134;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Amendment No. 1 to Employment Agreement, dated as of May 31, 2007, by and between Advanced Biotherapeutics, Inc. and Laura Campbell (incorporated herein by reference to Exhibit
10.21 to the registrant&#146;s Current Report on Form 8-K (Commission&nbsp;No.&nbsp;000-52108) filed with the Commission on June 14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.22&#134;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Employment Agreement, dated as of October 3, 2003, by and between Advanced Biotherapeutics, Inc. and Robert Deans, Ph.D. (incorporated herein by reference to Exhibit&nbsp;10.25
to the registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.23&#134;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Amendment No. 1 to Employment Agreement, dated as of May 31, 2007, by and between Advanced Biotherapeutics, Inc. and Robert Deans (incorporated herein by reference to Exhibit
10.26 to the registrant&#146;s Current Report on Form 8-K (Commission&nbsp;No.&nbsp;000-52108) filed with the Commission on June 14, 2007)</FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">II-5
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD WIDTH="87%"></TD></TR>

<TR>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center"> <P STYLE="border-bottom:1px solid #000000;width:40pt" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Exhibit&nbsp;No.</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="border-bottom:1px solid #000000"> <P STYLE="margin-top:0px;margin-bottom:1px"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Exhibit Description</B></FONT></P></TD></TR>


<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;10.24&#134;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Non-Competition and Confidentiality Agreement, dated as of October 3, 2003, by and among Athersys, Inc., Advanced Biotherapeutics, Inc. and Robert Deans (incorporated herein by
reference to Exhibit 10.27 to the registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;10.25&#134;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Employment Agreement, dated as of January 1, 2004, by and between Advanced Biotherapeutics, Inc. and William Lehmann (incorporated herein by reference to Exhibit&nbsp;10.28 to
the registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;10.26&#134;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Amendment No. 1 to Employment Agreement, dated as of May&nbsp;31, 2007, by and between Advanced Biotherapeutics, Inc. and William Lehmann (incorporated herein by reference to
Exhibit 10.29 to the registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June&nbsp;14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;10.27&#134;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Non-Competition and Confidentiality Agreement, dated as of September 10, 2001, by and among Athersys, Inc., Advanced Biotherapeutics, Inc. and William Lehmann (incorporated
herein by reference to Exhibit 10.30 to the registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;10.28&#134;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Form Incentive Agreement by and between Advanced Biotherapeutics, Inc. and named executive officers, and acknowledged by Athersys, Inc. and ReGenesys, LLC (incorporated herein by
reference to Exhibit 10.31 to the registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;10.29&#134;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Form Amendment No. 1 to Incentive Agreement by and between Advanced Biotherapeutics, Inc. and named executive officers, and acknowledged by Athersys, Inc. and ReGenesys, LLC
(incorporated herein by reference to Exhibit 10.32 to the registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.30&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Securities Purchase Agreement, dated as of June 8, 2007, by and among Athersys, BTHC VI, Inc. and Investors (as defined therein) (incorporated herein by reference to Exhibit
10.33 to the registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.31*</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Exclusive License Agreement, dated as of May&nbsp;17, 2002, by and between Regents of the University of Minnesota and MCL LLC, assumed by ReGenesys, LLC through operation of
merger on November&nbsp;4, 2003 (incorporated herein by reference to Exhibit 10.34 to the registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June&nbsp;14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.32*</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Strategic Alliance Agreement, by and between Athersys, Inc. and Angiotech, dated as of May 5, 2006 (incorporated herein by reference to Exhibit 10.35 to the registrant&#146;s
Current Report on Form 8-K/A (Commission No. 000-52108) filed with the Commission on October 9, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.33&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Amendment No. 1 to Cell Line Collaboration and License Agreement, dated as of January&nbsp;1, 2006, by and between Athersys, Inc. and Bristol-Myers Squibb Company (incorporated
herein by reference to Exhibit 10.36 to the registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.34&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Form Indemnification Agreement for Directors, Officers and Directors and Officers (incorporated herein by reference to Exhibit 10.1 to the registrant&#146;s Current Report on
Form 8-K (Commission No. 000-52108) filed with the Commission on August 6, 2007)</FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">II-6
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD WIDTH="87%"></TD></TR>

<TR>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center"> <P STYLE="border-bottom:1px solid #000000;width:40pt" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Exhibit&nbsp;No.</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="border-bottom:1px solid #000000"> <P STYLE="margin-top:0px;margin-bottom:1px"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Exhibit Description</B></FONT></P></TD></TR>


<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.35&#134;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Summary of Athersys, Inc. 2011 Cash Bonus Incentive Plan (incorporated herein by reference to Exhibit 10.41 to the registrant&#146;s Annual Report on Form 10-K for the year ended
December 31, 2010 (Commission No. 001-33876) filed with the Commission on March 25, 2011)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.36&#134;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Summary of Athersys, Inc. 2012 Cash Bonus Incentive Plan (incorporated herein by reference to Exhibit 10.36 to the registrant&#146;s Annual Report on Form 10-K for the year ended
December 31, 2011 (Commission No. 001-33876) filed with the Commission on March 28, 2012)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.37*</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Collaboration and License Agreement, dated as of December&nbsp;18, 2009, by and between Athersys, Inc., ABT Holding Company, and Pfizer (incorporated herein by reference to
Exhibit 10.42 to the registrant&#146;s Annual Report on Form 10-K for the year ended December&nbsp;31, 2009 (Commission No. 001-33876) filed with the Commission on March&nbsp;11, 2010)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.38*</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Stand-by License Agreement, dated as of December 18, 2009, by and between Regents of the University of Minnesota, ABT Holding Company and Pfizer Inc. (incorporated herein by
reference to Exhibit 10.43 to the registrant&#146;s Annual Report on Form 10-K for the year ended December 31, 2009 (Commission No. 001-33876) filed with the Commission on March 11, 2010)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.39&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Amendment dated as of March 31, 2009 to the Extended Collaboration and License Agreement, by and between Athersys, Inc. and Bristol-Myers Squibb Company effective January 1, 2006
(incorporated herein by reference to Exhibit 10.1 to the registrant&#146;s Current Report on Form 8-K (Commission No. 001-33876) filed with the Commission on April 9, 2009)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.40&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Amendment No. 4 to Amended and Restated Registration Rights Agreement, dated as of March 8, 2010, by and among Athersys, Inc. and the Existing Stockholders (as defined therein)
(incorporated herein by reference to Exhibit 10.45 to the registrant&#146;s Annual Report on Form 10-K for the year ended December 31, 2009 (Commission&nbsp;No.&nbsp;001-33876) filed with the Commission on March 11, 2010)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.41*</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">License and Technical Assistance Agreement, dated as of September 10, 2010, between ABT Holding Company and RTI Biologics, Inc. (incorporated herein by reference to Exhibit 10.1
to the registrant&#146;s Quarterly Report on Form 10-Q (Commission&nbsp;No.&nbsp;001-33876) filed with the Commission on November 8, 2010)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.42&#134;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Form of Incentive Stock Option Agreement (incorporated herein by reference to Exhibit&nbsp;10.47 to the registrant&#146;s Annual Report on Form 10-K for the year ended December
31, 2010 (Commission No. 001-33876) filed with the Commission on March&nbsp;25, 2011)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.43&#134;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Form of Nonqualified Stock Option Agreement for Non-Employee Directors (incorporated herein by reference to Exhibit 10.48 to the registrant&#146;s Annual Report on Form 10-K for
the year ended December&nbsp;31, 2010 (Commission No. 001-33876) filed with the Commission on March&nbsp;25, 2011)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.44&#134;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Athersys, Inc. Amended and Restated 2007 Long-Term Incentive Plan (Amended and Restated Effective June 16, 2011) (incorporated herein by reference to Exhibit 10.1 to
registrant&#146;s Current Report on Form 8-K (Commission No. 001-33876) filed with the Commission on June 20, 2011)</FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">II-7
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD WIDTH="87%"></TD></TR>

<TR>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center"> <P STYLE="border-bottom:1px solid #000000;width:40pt" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Exhibit&nbsp;No.</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="border-bottom:1px solid #000000"> <P STYLE="margin-top:0px;margin-bottom:1px"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Exhibit Description</B></FONT></P></TD></TR>


<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.45&#134;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Form of Nonqualified Stock Option Agreement for Non-Employee Directors pursuant to the Athersys, Inc. Amended and Restated 2007 Long-Term Incentive Plan (Amended and Restated
Effective June 16, 2011) (incorporated herein by reference to Exhibit 10.49 to the registrant&#146;s Quarterly Report on Form 10-Q (Commission No. 001-33876) filed with the Commission on May 6, 2011)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.46&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Common Stock Purchase Agreement, dated as of November 11, 2011, by and between Athersys, Inc. and Aspire Capital Fund, LLC (incorporated herein by reference to Exhibit&nbsp;10.1
to the registrant&#146;s Current Report on Form 8-K (Commission No. 001-33876) filed with the Commission on November 14, 2011)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.47&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Termination Agreement, dated as of November&nbsp;11, 2011, by and between Athersys, Inc. and ABT Holding Company (f/k/a Athersys, Inc.) and Angiotech (incorporated by reference
to Exhibit 10.1 to the registrant&#146;s Current Report on Form 8-K (Commission&nbsp;No.&nbsp;001-33876) filed with the Commission on November&nbsp;14, 2011)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.48&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">First Amendment to Common Stock Purchase Agreement, dated as of November 17, 2011, by and between Athersys, Inc. and Aspire Capital Fund, LLC (incorporated by reference to
Exhibit 10.47 to the registrant&#146;s Registration Statement on Form S-1 (Commission No. 333-178418) filed with the Commission on December 9, 2011)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.49&#134;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Form of Restricted Stock Unit Agreement (incorporated herein by reference to Exhibit 10.2 to the registrant&#146;s Quarterly Report on Form 10-Q (Commission No. 001-33876) filed
with the Commission on August 10, 2011)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.50&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Registration Rights Agreement, dated as of November 11, 2011, by and between Athersys, Inc. and Aspire Capital Fund, LLC (incorporated herein by reference to Exhibit 10.2 to the
registrant&#146;s Current Report on Form 8-K (Commission No. 001-33876) filed with the Commission on November 14, 2011)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.51&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Amendment No. 3 to Extended Collaboration and License Agreement, dated January 31, 2012, by and between ABT Holding Company and Bristol-Myers Squibb Company (incorporated by
reference to Exhibit 10.3 to the registrant&#146;s Quarterly Report on Form&nbsp;10-Q (Commission No. 001-33876) filed with the Commission on May 14, 2012)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.52&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">First Amendment to License and Technical Assistance Agreement, dated September 17, 2012, by and between ABT Holding, Inc. and RTI Biologics, Inc.</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.53&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Registration Rights Agreement, dated as of March 9, 2012, by and between Athersys, Inc. and the signatories thereto (incorporated herein by reference to Exhibit 10.2 to the
registrant&#146;s Current Report on Form 8-K (Commission No. 001-33876) filed with the Commission on March 15, 2012)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">21.1&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">List of Subsidiaries (incorporated herein by reference to Exhibit 21.1 to the registrant&#146;s Annual Report on Form 10-K for the year ended December 31, 2011
(Commission&nbsp;No.&nbsp;001-33876) filed with the Commission on March 28, 2012)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">23.1&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Consent of Ernst &amp; Young LLP, Independent Registered Public Accounting Firm</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">23.2**</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Consent of Jones Day (included in Exhibit 5.1)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">24.1&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Power of Attorney</FONT></TD></TR>
</TABLE> <P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.8pt solid #000000;width:39%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">*</SUP>&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1">Confidential treatment requested as to certain portions, which portions have been filed separately with the Commission. </FONT></P></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">**</SUP>&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1">To be filed by amendment. </FONT></P></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&#134;</SUP>&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1">Indicates management contract or compensatory plan, contract or arrangement in which one or more directors or executive officers of the registrant may
be participants. </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">II-8
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(b) Financial Statement Schedules </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">No financial statement schedules are provide because the information called for is not applicable or is shown in the financial statements or notes thereto incorporated by reference herein. </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="9%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Item&nbsp;17.</B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Undertakings. </B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">The undersigned registrant
hereby undertakes: </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in
the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b) (1)&nbsp;or (4)&nbsp;or 497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">For the purpose of determining any liability under the Securities Act of 1933, each
post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide
offering thereof. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">II-9
</FONT></P>


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<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>SIGNATURES </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Cleveland, Ohio, on the 9th day of October, 2012. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><DIV ALIGN="right">
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="40%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE">


<TR>
<TD WIDTH="7%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="92%"></TD></TR>


<TR>
<TD VALIGN="top" COLSPAN="3"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Athersys, Inc.</FONT></P></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">By:</FONT></P></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #465361"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="BORDER-BOTTOM:1px solid #465361"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">/s/&nbsp;&nbsp;&nbsp;&nbsp;Gil Van
Bokkelen&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Gil Van Bokkelen</B></FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Chief Executive Officer</B></FONT></TD></TR>
</TABLE></DIV> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Pursuant to the requirements of the Securities Act of 1933, this registration statement has been
signed by the following persons in the capacities and on the dates indicated. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD WIDTH="39%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="38%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="19%"></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP ALIGN="center"> <P STYLE="border-bottom:1px solid #465361;width:32pt" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Signature</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"> <P STYLE="border-bottom:1px solid #465361;width:16pt" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Title</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"> <P STYLE="border-bottom:1px solid #465361;width:16pt" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Date</B></FONT></P></TD></TR>


<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:0px;border-bottom:1px solid #465361" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">/s/&nbsp;&nbsp;&nbsp;&nbsp;Gil Van
Bokkelen&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Gil Van Bokkelen</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Chief Executive Officer and Chairman of the Board of Directors (Principal Executive Officer)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">October 9, 2012</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:0px;border-bottom:1px solid #465361" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">/s/&nbsp;&nbsp;&nbsp;&nbsp;Laura K.
Campbell&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Laura K. Campbell</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Vice President of Finance (Principal Financial Officer and Principal Accounting Officer)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">October 9, 2012</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:0px;border-bottom:1px solid #465361" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">*</FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>John J. Harrington</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Executive Vice President, Chief Scientific Officer and Director</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">October 9, 2012</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:0px;border-bottom:1px solid #465361" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">*</FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Lorin J. Randall</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Director</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">October 9, 2012</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:0px;border-bottom:1px solid #465361" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">*</FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Kenneth Traub</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Director</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">October 9, 2012</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:0px;border-bottom:1px solid #465361" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">*</FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Jack L. Wyszomierski</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Director</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">October 9, 2012</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:0px;border-bottom:1px solid #465361" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">*</FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Lee Babiss</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Director</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">October 9, 2012</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:0px;border-bottom:1px solid #465361" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Ismail Kola</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Director</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">October 9, 2012</FONT></TD></TR>
</TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">*</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">The undersigned by signing his name hereto does sign and execute this registration statement on Form&nbsp;S-1 pursuant to the Power of Attorney executed
by the above-named directors and officers of the registrant, which is being filed herewith on behalf of such directors and officers. </FONT></TD></TR></TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="40%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE">


<TR>
<TD WIDTH="7%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="92%"></TD></TR>


<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">By:</FONT></P></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #465361"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #465361"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">/s/&nbsp;&nbsp;&nbsp;&nbsp;Gil Van Bokkelen</FONT></P></TD></TR>
<TR>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Attorney-in-Fact</B></FONT></TD></TR>
</TABLE>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361"><B>EXHIBIT INDEX </B></FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom" WIDTH="10%"></TD>
<TD WIDTH="88%"></TD></TR>
<TR>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP> <P STYLE="border-bottom:1px solid #465361;width:40pt"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Exhibit&nbsp;No.</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="border-bottom:1px solid #465361;width:67pt"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Exhibit Description</B></FONT></P></TD></TR>


<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;1.1</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">**&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Form of Underwriting Agreement</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;3.1</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Certificate of Incorporation of Athersys, Inc., as amended as of August 31, 2007 (incorporated herein by reference to Exhibit 3.1 to the registrant&#146;s
Registration Statement on Form S-3/A (Registration No. 333-144433) filed with the Commission on October 10, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;3.2</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Bylaws of Athersys, Inc., as amended as of October 30, 2007 (incorporated herein by reference to Exhibit 3.1 to the registrant&#146;s Current Report on Form 8-K
(Commission No. 000-52108) filed with the Commission on October 31, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;4.1</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Form of Warrant (incorporated herein by reference to Exhibit 4.1 to the registrant&#146;s Current Report on Form 8-K (Commission No. 001-33876) filed with the
Commission on March 15, 2012)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;4.2</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Form of Warrant (incorporated herein by reference to Exhibit 4.1 to the registrant&#146;s Current Report on Form 8-K (Commission No. 001-33876) filed with the
Commission on January 28, 2011)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;5.1</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">**&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Opinion of Jones Day</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">10.1</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Research Collaboration and License Agreement, dated as of December 8, 2000, by and between Athersys, Inc. and Bristol-Myers Squibb Company (incorporated herein by
reference to Exhibit 10.1 to the registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">10.2</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Cell Line Collaboration and License Agreement, dated as of July 1, 2002, by and between Athersys, Inc. and Bristol-Myers Squibb Company (incorporated herein by
reference to Exhibit 10.2 to the registrant&#146;s Current Report on Form 8-K/A (Commission No. 000-52108) filed with the Commission on September 27, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">10.3</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Extended Collaboration and License Agreement, dated as of January 1, 2006, by and between Athersys, Inc. and Bristol-Myers Squibb Company (incorporated herein by
reference to Exhibit 10.3 to the registrant&#146;s Current Report on Form 8-K/A (Commission No. 000-52108) filed with the Commission on September 27, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">10.4</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">License Agreement, effective as of May 5, 2006, by and between Athersys, Inc. and Angiotech Pharmaceuticals (incorporated herein by reference to Exhibit 10.4 to
the registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">10.5</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Sublicense Agreement, effective as of May 5, 2006, by and between Athersys, Inc. and Angiotech Pharmaceuticals (incorporated herein by reference to Exhibit 10.5
to the registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">10.6</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Amended and Restated Registration Rights Agreement, dated as of April 28, 2000, by and among Athersys, Inc. and the stockholders of Athersys, Inc. parties thereto
(incorporated herein by reference to Exhibit 10.6 to the registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">10.7</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Amendment No. 1 to Athersys, Inc. Amended and Restated Registration Rights Agreement, dated as of January 29, 2002, by and among Athersys, Inc., the New
Stockholders, the Investors, Biotech and the Stockholders (each as defined in the Amended and Restated Registration Rights Agreement, dated as April 28, 2000, by and among Athersys, Inc. and the stockholders of Athersys, Inc. parties thereto)
(incorporated herein by reference to Exhibit 10.7 to the registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)</FONT></TD></TR></TABLE>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD WIDTH="87%"></TD></TR>

<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #465361;width:40pt"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Exhibit&nbsp;No.</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="border-bottom:1px solid #465361;width:67pt"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Exhibit Description</B></FONT></P></TD></TR>


<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">10.8</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Amendment No. 2 to Athersys, Inc. Amended and Restated Registration Rights Agreement, dated as of November&nbsp;19, 2002, by and among Athersys, Inc., the New
Stockholders, the Investors, Biotech and the Stockholders (each as defined in the Amended and Restated Registration Rights Agreement, dated as April&nbsp;28, 2000, as amended, by and among Athersys, Inc. and the stockholders of Athersys, Inc.
parties thereto) (incorporated herein by reference to Exhibit 10.8 to the registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June&nbsp;14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">10.9</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Amendment No. 3 to Amended and Restated Registration Rights Agreement, dated as of May&nbsp;15, 2007, by and among Athersys, Inc. and the Existing Stockholders
(as defined therein) (incorporated herein by reference to Exhibit 10.9 to the registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June&nbsp;14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;&nbsp;&nbsp;10.10&#134;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Athersys, Inc. Equity Incentive Compensation Plan (incorporated herein by reference to Exhibit 10.11 to the registrant&#146;s Current Report on Form 8-K
(Commission No. 000-52108) filed with the Commission on June 14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;10.11</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Loan and Security Agreement, and Supplement, dated as of November 2, 2004, by and among Athersys, Inc., Advanced Biotherapeutics, Inc., Venture Lending &amp;
Leasing IV, Inc., and Costella Kirsch IV, L.P. (incorporated herein by reference to Exhibit 10.1 to the registrant&#146;s Quarterly Report on Form 10-Q (Commission No. 000-52108) filed with the Commission on November 14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;10.12</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Second Amendment to Loan and Security Agreement, dated as of October 30, 2007, by and among ABT Holding Company, Advanced Biotherapeutics, Inc., Venture Lending
and Leasing IV, Inc., and Costella Kirsch IV, L.P. (incorporated herein by reference to Exhibit 10.2 to the registrant&#146;s Quarterly Report on Form 10-Q (Commission No. 000-52108) filed with the Commission on November 14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;10.13</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Amendment to Loan and Security Agreement, dated as of September 29, 2006, by and among Athersys, Inc., Advanced Biotherapeutics, Inc., Venture Lending &amp;
Leasing IV, Inc., and Costella Kirsch IV, L.P. (incorporated herein by reference to Exhibit 10.13 to the registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;&nbsp;&nbsp;10.14&#134;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Amended and Restated Employment Agreement, dated as of December 1, 1998 but effective as of April 1, 1998, by and between Athersys, Inc. and Dr. Gil Van Bokkelen
(incorporated herein by reference to Exhibit 10.14 to the registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;&nbsp;&nbsp;10.15&#134;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Amendment No. 1 to Amended and Restated Employment Agreement, dated as of May 31, 2007, by and between Advanced Biotherapeutics, Inc. and Gil Van Bokkelen
(incorporated herein by reference to Exhibit 10.15 to the registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;&nbsp;&nbsp;10.16&#134;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Non-Competition and Confidentiality Agreement, dated as of December 1, 1998, by and between Athersys, Inc. and Dr. Gil Van Bokkelen (incorporated herein by
reference to Exhibit 10.16 to the registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;&nbsp;&nbsp;10.17&#134;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Amended and Restated Employment Agreement, dated as of December&nbsp;1, 1998 but effective as of April&nbsp;1, 1998, by and between Athersys, Inc. and Dr. John J.
Harrington (incorporated herein by reference to Exhibit 10.17 to the registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June&nbsp;14,
2007)</FONT></TD></TR></TABLE>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD WIDTH="87%"></TD></TR>

<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #465361;width:40pt"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Exhibit&nbsp;No.</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="border-bottom:1px solid #465361;width:67pt"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Exhibit Description</B></FONT></P></TD></TR>


<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">10.18&#134;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Amendment No. 1 to Amended and Restated Employment Agreement, dated as of May 31, 2007, by and between Advanced Biotherapeutics, Inc. and John Harrington
(incorporated herein by reference to Exhibit 10.18 to the registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">10.19&#134;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Non-Competition and Confidentiality Agreement, dated as of December 1, 1998, by and between Athersys, Inc. and Dr. John J. Harrington (incorporated herein by
reference to Exhibit 10.19 to the registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">10.20&#134;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Employment Agreement, dated as of May&nbsp;22, 1998, by and between Athersys, Inc. and Laura K. Campbell (incorporated herein by reference to Exhibit 10.20 to the
registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June&nbsp;14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">10.21&#134;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Amendment No. 1 to Employment Agreement, dated as of May 31, 2007, by and between Advanced Biotherapeutics, Inc. and Laura Campbell (incorporated herein by
reference to Exhibit 10.21 to the registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">10.22&#134;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Employment Agreement, dated as of October 3, 2003, by and between Advanced Biotherapeutics, Inc. and Robert Deans, Ph.D. (incorporated herein by reference to
Exhibit&nbsp;10.25 to the registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">10.23&#134;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Amendment No. 1 to Employment Agreement, dated as of May 31, 2007, by and between Advanced Biotherapeutics, Inc. and Robert Deans (incorporated herein by
reference to Exhibit 10.26 to the registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">10.24&#134;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Non-Competition and Confidentiality Agreement, dated as of October 3, 2003, by and among Athersys, Inc., Advanced Biotherapeutics, Inc. and Robert Deans
(incorporated herein by reference to Exhibit 10.27 to the registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">10.25&#134;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Employment Agreement, dated as of January 1, 2004, by and between Advanced Biotherapeutics, Inc. and William Lehmann (incorporated herein by reference to
Exhibit&nbsp;10.28 to the registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">10.26&#134;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Amendment No. 1 to Employment Agreement, dated as of May 31, 2007, by and between Advanced Biotherapeutics, Inc. and William Lehmann (incorporated herein by
reference to Exhibit 10.29 to the registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">10.27&#134;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Non-Competition and Confidentiality Agreement, dated as of September 10, 2001, by and among Athersys, Inc., Advanced Biotherapeutics, Inc. and William Lehmann
(incorporated herein by reference to Exhibit 10.30 to the registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">10.28&#134;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Form Incentive Agreement by and between Advanced Biotherapeutics, Inc. and named executive officers, and acknowledged by Athersys, Inc. and ReGenesys, LLC
(incorporated herein by reference to Exhibit 10.31 to the registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June&nbsp;14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">10.29&#134;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Form Amendment No. 1 to Incentive Agreement by and between Advanced Biotherapeutics, Inc. and named executive officers, and acknowledged by Athersys, Inc. and
ReGenesys, LLC (incorporated herein by reference to Exhibit 10.32 to the registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14,
2007)</FONT></TD></TR></TABLE>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD WIDTH="87%"></TD></TR>

<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #465361;width:40pt"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Exhibit&nbsp;No.</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="border-bottom:1px solid #465361;width:67pt"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Exhibit Description</B></FONT></P></TD></TR>


<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">10.30</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Securities Purchase Agreement, dated as of June 8, 2007, by and among Athersys, BTHC VI, Inc. and Investors (as defined therein) (incorporated herein by reference
to Exhibit 10.33 to the registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;10.31*</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Exclusive License Agreement, dated as of May&nbsp;17, 2002, by and between Regents of the University of Minnesota and MCL LLC, assumed by ReGenesys, LLC through
operation of merger on November&nbsp;4, 2003 (incorporated herein by reference to Exhibit 10.34 to the registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June&nbsp;14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;10.32*</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Strategic Alliance Agreement, by and between Athersys, Inc. and Angiotech, dated as of May 5, 2006 (incorporated herein by reference to Exhibit 10.35 to the
registrant&#146;s Current Report on Form 8-K/A (Commission No. 000-52108) filed with the Commission on October 9, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">10.33</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Amendment No. 1 to Cell Line Collaboration and License Agreement, dated as of January 1, 2006, by and between Athersys, Inc. and Bristol-Myers Squibb Company
(incorporated herein by reference to Exhibit 10.36 to the registrant&#146;s Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">10.34</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Form Indemnification Agreement for Directors, Officers and Directors and Officers (incorporated herein by reference to Exhibit 10.1 to the registrant&#146;s
Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on August 6, 2007)</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;10.35&#134;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Summary of Athersys, Inc. 2011 Cash Bonus Incentive Plan (incorporated herein by reference to Exhibit 10.41 to the registrant&#146;s Annual Report on Form 10-K
for the year ended December 31, 2010 (Commission No. 001-33876) filed with the Commission on March 25, 2011)</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;10.36&#134;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Summary of Athersys, Inc. 2012 Cash Bonus Incentive Plan (incorporated herein by reference to Exhibit 10.36 to the registrant&#146;s Annual Report on Form 10-K
for the year ended December 31, 2011 (Commission No. 001-33876) filed with the Commission on March 28, 2012)</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;10.37*</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Collaboration and License Agreement, dated as of December 18, 2009, by and between Athersys, Inc., ABT Holding Company, and Pfizer (incorporated herein by
reference to Exhibit 10.42 to the registrant&#146;s Annual Report on Form 10-K for the year ended December 31, 2009 (Commission No. 001-33876) filed with the Commission on March 11, 2010)</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;10.38*</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Stand-by License Agreement, dated as of December 18, 2009, by and between Regents of the University of Minnesota, ABT Holding Company and Pfizer Inc.
(incorporated herein by reference to Exhibit 10.43 to the registrant&#146;s Annual Report on Form 10-K for the year ended December 31, 2009 (Commission No. 001-33876) filed with the Commission on March 11, 2010)</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">10.39</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Amendment dated as of March&nbsp;31, 2009 to the Extended Collaboration and License Agreement, by and between Athersys, Inc. and Bristol-Myers Squibb Company
effective January&nbsp;1, 2006 (incorporated herein by reference to Exhibit 10.1 to the registrant&#146;s Current Report on Form 8-K (Commission No. 001-33876) filed with the Commission on April&nbsp;9, 2009)</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">10.40</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Amendment No. 4 to Amended and Restated Registration Rights Agreement, dated as of March 8, 2010, by and among Athersys, Inc. and the Existing Stockholders (as
defined therein) (incorporated herein by reference to Exhibit 10.45 to the registrant&#146;s Annual Report on Form 10-K for the year ended December 31, 2009 (Commission No. 001-33876) filed with the Commission on March 11,
2010)</FONT></TD></TR></TABLE>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD WIDTH="87%"></TD></TR>

<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #465361;width:40pt"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Exhibit&nbsp;No.</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="border-bottom:1px solid #465361;width:67pt"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Exhibit Description</B></FONT></P></TD></TR>


<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;10.41*</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">License and Technical Assistance Agreement, dated as of September 10, 2010, between ABT Holding Company and RTI Biologics, Inc. (incorporated herein by reference
to Exhibit 10.1 to the registrant&#146;s Quarterly Report on Form 10-Q (Commission No. 001-33876) filed with the Commission on November 8, 2010)</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;10.42&#134;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Form of Incentive Stock Option Agreement (incorporated herein by reference to Exhibit 10.47 to the registrant&#146;s Annual Report on Form 10-K for the year ended
December 31, 2010 (Commission No. 001-33876) filed with the Commission on March 25, 2011)</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;10.43&#134;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Form of Nonqualified Stock Option Agreement for Non-Employee Directors (incorporated herein by reference to Exhibit 10.48 to the registrant&#146;s Annual Report
on Form 10-K for the year ended December&nbsp;31, 2010 (Commission No. 001-33876) filed with the Commission on March&nbsp;25, 2011)</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;10.44&#134;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Athersys, Inc. Amended and Restated 2007 Long-Term Incentive Plan (Amended and Restated Effective June 16, 2011) (incorporated herein by reference to Exhibit 10.1
to registrant&#146;s Current Report on Form 8-K (Commission No. 001-33876) filed with the Commission on June 20, 2011)</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;10.45&#134;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Form of Nonqualified Stock Option Agreement for Non-Employee Directors pursuant to the Athersys, Inc. Amended and Restated 2007 Long-Term Incentive Plan (Amended and
Restated Effective June 16, 2011) (incorporated herein by reference to Exhibit 10.49 to the registrant&#146;s Quarterly Report on Form 10-Q (Commission No. 001-33876) filed with the Commission on May 6, 2011)</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">10.46</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Common Stock Purchase Agreement, dated as of November 11, 2011, by and between Athersys, Inc. and Aspire Capital Fund, LLC (incorporated herein by reference to
Exhibit&nbsp;10.1 to the registrant&#146;s Current Report on Form 8-K (Commission No. 001-33876) filed with the Commission on November 14, 2011)</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">10.47</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Termination Agreement, dated as of November 11, 2011, by and between Athersys, Inc. and ABT Holding Company (f/k/a Athersys, Inc.) and Angiotech (incorporated by
reference to Exhibit 10.1 to the registrant&#146;s Current Report on Form 8-K (Commission No. 001-33876) filed with the Commission on November 14, 2011)</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">10.48</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">First Amendment to Common Stock Purchase Agreement, dated as of November 17, 2011, by and between Athersys, Inc. and Aspire Capital Fund, LLC (incorporated by
reference to Exhibit 10.47 to the registrant&#146;s Registration Statement on Form S-1 (Commission No. 333-178418) filed with the Commission on December 9, 2011)</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;10.49&#134;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Form of Restricted Stock Unit Agreement (incorporated herein by reference to Exhibit 10.2 to the registrant&#146;s Quarterly Report on Form 10-Q (Commission No.
001-33876) filed with the Commission on August&nbsp;10, 2011)</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">10.50</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Registration Rights Agreement, dated as of November 11, 2011, by and between Athersys, Inc. and Aspire Capital Fund, LLC (incorporated herein by reference to
Exhibit 10.2 to the registrant&#146;s Current Report on Form 8-K (Commission No. 001-33876) filed with the Commission on November 14, 2011)</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">10.51</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Amendment No. 3 to Extended Collaboration and License Agreement, dated January 31, 2012, by and between ABT Holding Company and Bristol-Myers Squibb Company
(incorporated by reference to Exhibit 10.3 to the registrant&#146;s Quarterly Report on Form&nbsp;10-Q (Commission No. 001-33876) filed with the Commission on May 14, 2012)</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">10.52</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">First Amendment to License and Technical Assistance Agreement, dated September 17, 2012, by and between ABT Holding, Inc. and RTI Biologics,
Inc.</FONT></TD></TR></TABLE>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD WIDTH="87%"></TD></TR>

<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #465361;width:40pt"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Exhibit&nbsp;No.</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="border-bottom:1px solid #465361;width:67pt"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361"><B>Exhibit Description</B></FONT></P></TD></TR>


<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;10.53</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Registration Rights Agreement, dated as of March 9, 2012, by and between Athersys, Inc. and the signatories thereto (incorporated herein by reference to Exhibit
10.2 to the registrant&#146;s Current Report on Form 8-K (Commission No. 001-33876) filed with the Commission on March 15, 2012)</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">21.1</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">List of Subsidiaries (incorporated herein by reference to Exhibit 21.1 to the registrant&#146;s Annual Report on Form 10-K for the year ended December 31, 2011
(Commission No. 001-33876) filed with the Commission on March 28, 2012)</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">23.1</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Consent of Ernst &amp; Young LLP, Independent Registered Public Accounting Firm</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">&nbsp;&nbsp;&nbsp;&nbsp;23.2**</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Consent of Jones Day (included in Exhibit 5.1)</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">24.1</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#465361">Power of Attorney</FONT></TD></TR>
</TABLE> <P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #465361;width:39%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="1" COLOR="#465361">*</FONT></TD>
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S-1
Table of Contents
As filed with the Securities and Exchange Commission on October 9, 2012
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Athersys, Inc.
(Exact name of registrant as specified in its charter)
Delaware
2834
20-4864095
(State or other jurisdiction of
incorporation or organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification Number)
3201 Carnegie Avenue
Cleveland, Ohio 44115-2634
(216) 431-9900
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)
Gil Van Bokkelen
Chief Executive Officer
3201 Carnegie Avenue
Cleveland, Ohio 44115-2634
(216) 431-9900
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies
to:
Christopher M. Kelly, Esq.
Michael J. Solecki, Esq.
Jones Day
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Tel: (216) 586-3939
Fax: (216) 579-0212
Michael D. Maline, Esq.
Goodwin Procter LLP
The New York Times Building
620 Eighth Avenue
New York, New York 10018
Tel: (212) 813-8800
Fax: (212) 355-3333
Approximate date of commencement of proposed sale to the public
: As soon as practical after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box.
¨
If this Form is filed to
register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same
offering.
¨
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same
offering.
¨
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same
offering.
¨
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.
Large accelerated filer
¨
Accelerated filer
¨
Non-accelerated filer
¨
(Do not check if a smaller reporting company)
Smaller reporting company
x
CALCULATION OF REGISTRATION FEE
Title of Each Class of
Securities to be Registered
Amount to
be
Registered
(1)
Proposed
Maximum
Offering Price
per Unit
(2)
Proposed
Maximum
Aggregate
Offering 
Price
(2)
Amount of
Registration Fee
Common Stock, $0.001 par value per share
19,550,000
$1.31
$25,610,500
$3,494
(1)
Includes shares of common stock issuable pursuant to an option granted to the underwriter.
(2)
Estimated solely for calculating the amount of the registration fee, pursuant to Rule 457(c) promulgated under the Securities Act of 1933, on the basis
of the average of the high and low sale prices of the Common Stock on The NASDAQ Capital Market on October 4, 2012, within five business days prior to filing.
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically
states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange
Commission, acting pursuant to said Section 8(a), may determine.
Table of Contents
The information in this prospectus is not complete and may be changed. We may not sell
these securities under this registration statement until the registration statement filed with the Securities and Exchange Commission is declared effective. This prospectus is not an offer to sell any securities, and we are not soliciting an offer
to buy these securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED OCTOBER 9, 2012
PROSPECTUS
17
,000,000 Shares
Athersys, Inc.
Common Stock
We are offering 17,000,000
shares of our common stock. Our common stock is listed on The NASDAQ Capital Market under the symbol "ATHX." The last sale price of our common stock on October 8, 2012, as reported by The NASDAQ Capital Market, was $1.32 per share.
Investing in our common stock involves risk. Please read carefully the section entitled "
Risk Factors
" beginning on page 7 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of
these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
Per Share
Total
Public Offering Price
Underwriting Discounts and Commissions
Proceeds to Us, Before Expenses
We have granted the underwriter
the right to purchase, exercisable within a 30-day period, up to an additional 2,550,000 shares of our common stock solely to cover over-allotments.
The underwriter expects to deliver the shares of common stock against payment on or about                 ,
2012.
Piper Jaffray
Prospectus dated                 , 2012
Table of Contents
TABLE OF CONTENTS
Page
PROSPECTUS SUMMARY
1
RISK FACTORS
7
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
24
USE OF PROCEEDS
26
CAPITALIZATION
27
COMMON STOCK PRICE RANGE
28
DIVIDEND POLICY
28
DILUTION
29
SELECTED CONSOLIDATED FINANCIAL DATA
31
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
33
BUSINESS
49
MANAGEMENT
70
CERTAIN RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS
85
BENEFICIAL OWNERSHIP OF COMMON STOCK
86
DESCRIPTION OF CAPITAL STOCK
88
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS
89
UNDERWRITING
92
LEGAL MATTERS
94
EXPERTS
94
WHERE YOU CAN FIND MORE INFORMATION
94
INFORMATION WE INCORPORATE BY REFERENCE
94
We have not authorized anyone to provide any information other than that contained in or incorporated by reference into this prospectus
or in any free writing prospectus prepared by or on behalf of us or to which we have referred you. We have not authorized any other person to provide you with different information. We take no responsibility for, and can provide no assurance as to
the reliability of, any other information that others may give you. We are not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus
is accurate only as of the date on the front cover of this prospectus. Our business, financial condition, operating results and prospects may have changed since that date.
i
Table of Contents
PROSPECTUS SU
MMARY
This summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider before investing in our common stock. You
should read this entire prospectus carefully, including the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," and our historical consolidated
financial statements and related notes incorporated herein by reference. In this prospectus, unless the context requires otherwise, references to "Athersys," "we," "our" or "us" refer to Athersys, Inc. and its
consolidated subsidiaries.
Company Overview
We are an international biotechnology company that is focused primarily in the field of regenerative medicine. We are
committed to the discovery and development of best-in-class therapies designed to extend and enhance the quality of human life. 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 & immune disorders, neurological conditions, cardiovascular disease, and other conditions. These represent major areas of clinical need, as well as substantial commercial opportunities.
We believe MultiStem represents a breakthrough in the field of regenerative medicine and stem cell therapy and could be used to treat a
range of disease indications. MultiStem is a patented and proprietary product that enhances tissue repair and healing in multiple ways, including reducing inflammatory damage, protecting tissue that is at risk following acute or ischemic injury, and
promoting formation of new blood vessels in regions of ischemic injury. The cells comprising MultiStem appear to be responsive to the environment in which they are administered, homing to sites of injury and active disease response and producing
proteins that may provide benefit in acute or chronic conditions. In contrast to traditional pharmaceutical products or biologics that generally act through a single biological mechanism of action, the MultiStem product can enhance healing and
tissue repair through multiple distinct mechanisms acting simultaneously, by producing a range of therapeutic factors and dynamically responding to the needs of the body—resulting in a more effective therapeutic response.
The MultiStem product is unique among regenerative medicine approaches, because it can be manufactured on a large scale, may be
administered in an "off-the-shelf" manner with minimal processing, and can augment healing in multiple ways, providing biological potency other cell therapy approaches cannot. Additionally, the MultiStem product has demonstrated a
consistent safety profile in both preclinical and clinical studies. Like drugs and biologics, the product is cleared from the body over time, enhancing product safety relative to other types of stem cell therapy. While the product does not
permanently engraft in the patient, the therapeutic effects of treatment with MultiStem cells appear to be quite durable.
We
believe the therapeutic and commercial potential for MultiStem to be very broad, applying to many areas of significant unmet medical need. We are pursuing opportunities in several potential multi-billion dollar markets. While traditional
pharmaceuticals or biologic therapies typically may be used to treat only a single disease or narrowly defined set of related conditions, MultiStem appears to have far broader potential and could be developed in different formulations and with
different delivery approaches to efficiently treat a range of disease indications.
We have already evaluated the use of
MultiStem as a potential treatment for a range of disease indications. Working with an international network of leading investigators and prominent research and
1
Table of Contents
clinical institutions, and through our own internal efforts, we have explored the potential for MultiStem to be used in acute and chronic forms of inflammatory & immune disorders,
neurological conditions, cardiovascular disease, certain pulmonary conditions, and other areas.
To date, we have successfully
advanced MultiStem into five clinical stage programs, each of which addresses a significant area of medical need and represents a large commercial market opportunity. MultiStem has been evaluated in two completed clinical trials, one exploring the
potential to treat patients that have suffered a heart attack, and the other evaluating the potential to reduce graft versus host disease, or GvHD, as well as other complications, and to provide supportive care to patients being treated for leukemia
or related conditions. MultiStem is currently being evaluated in two additional clinical programs in the inflammatory & immune disease and neurological areas. In one study, which is being conducted with our partner Pfizer Inc., or
Pfizer, MultiStem is being administered to patients with inflammatory bowel disease, or IBD. In another ongoing study, we are evaluating the potential to treat patients that have suffered neurological damage from a stroke. In addition, a leading
clinical center in Europe, and a research collaborator, has recently received authorization to conduct an initial clinical trial evaluating administration of MultiStem in patients that have received a solid organ transplant.
In addition to our MultiStem programs, we have applied our pharmaceutical discovery capabilities to identify and develop novel
pharmaceuticals to treat obesity, related metabolic conditions such as diabetes, and certain neurological indications, such as schizophrenia, as well as small molecule compounds that may be used to enhance the production or therapeutic effectiveness
of MultiStem or related products, increase the product's biological potency for certain indications and lead to second or third generation products in the regenerative medicine area. Our 5HT2c agonist program for obesity works by the same
mechanism as Lorcaserin, which was recently approved by the U.S. Food and Drug Administration, or FDA, for the treatment of obesity, and we believe our compounds may have the potential for providing superior weight loss performance, while also
achieving a superior safety and tolerability profile. In addition, we have demonstrated our compounds are complementary with other agents that have been approved by the FDA for treating obesity. Furthermore, certain compounds that we developed may
also have relevance in other disease areas, such as the treatment of schizophrenia. We are actively exploring partnership opportunities for our 5HT2c program in both the obesity and schizophrenia areas.
Business Strategy
Our principal business objective is to discover, develop and commercialize novel therapeutic products for disease indications that represent significant areas of clinical need and
commercial opportunity. The key elements of our strategy are outlined below.
•
Efficiently Conduct Clinical Development to Establish Clinical Proof of Concept and Biological Activity with our Lead Product
Candidates.
MultiStem represents a novel therapeutic modality for the treatment of inflammatory & immune system disorders, neurological conditions and cardiovascular disease, as well as in other areas.
MultiStem may be administered like other biologics, intravenously, via catheter, or by local injection. The cells appear to be responsive to their environment, homing to sites of injury and active disease response and producing proteins that may
provide benefit in acute or chronic conditions. Additionally, MultiStem cell therapy may deliver therapeutic benefit through several distinct mechanisms of action, including reducing inflammatory damage, protecting tissue that is at risk following
acute or ischemic injury, and promoting formation of new blood vessels in regions of ischemic injury. We are conducting a number of clinical studies with the intent to establish proof of concept and/or proof of biological activity in a number of
important disease areas where the cell therapies would be expected to have benefit – inflammatory & immune system dysfunctions, neurological conditions and cardiovascular
2
Table of Contents
disease. Our focus is on conducting well-designed studies early in the clinical development process to establish a robust foundation for subsequent development, partnership and expansion into
complementary areas. We are committed to a rigorous clinical and regulatory framework, which we believe has helped to advance our programs efficiently, and is also a result of the quality of our regulatory submissions and transparency in our
discussions with the FDA have resulted in a successful regulatory partnership that has helped to advance our programs efficiently.
•
Continue to Refine and Improve our Manufacturing and Related Processes and Deepen our Understanding of Therapeutic Mechanisms of
Action.
A key aspect of MultiStem is its substantial expansion capacity
ex vivo
relative to other cell types. This enables large scale production of the clinical product, which enables greater consistency,
specificity and cost of goods advantages over other cell therapies. We plan to build on this intrinsic biological advantage by continuing to advance and optimize our production and process development approaches, further developing new manufacturing
approaches including our bioreactor platform, and optimizing the plant to bedside supply chain to support late stage development and commercialization. Additionally, we will continue to refine our understanding of our products' activities and
mechanisms of action to enable optimization of administration and dosing and to prepare the foundation for product enhancements and next generation opportunities.
•
Enter into Licensing or Product Co-Development Arrangements in Certain Areas, while Out-Licensing Opportunities in Non-Core
Areas.
In addition to our internal development efforts, an important part of our product development strategy is to work with collaborators and partners to accelerate product development, reduce our development costs,
and broaden our commercialization capabilities. We have entered into licensing and product co-development arrangements with qualified commercial partners to achieve these objectives. We anticipate that this strategy will help us to develop a
portfolio of high quality product development opportunities, enhance our clinical development and commercialization capabilities, and increase our ability to generate value from our proprietary technologies. Over the past decade, we have entered
into technology licensing arrangements and established product commercialization and co-development partnerships with companies such as Pfizer, Angiotech Pharmaceuticals, Inc., or Angiotech, Bristol-Myers Squibb Company, or Bristol-Myers Squibb,
Johnson & Johnson, Wyeth and RTI Biologics, Inc., or RTI. These partnerships generate revenue and provide capital that allows us to advance certain programs further in development.
•
Efficiently Explore New High Potential Therapeutic Applications, Leveraging Third-Party Research Collaborations and our Results
from Related Areas.
Our product candidates have shown promise in multiple disease areas, including in treating inflammatory & immune disorders, neurological conditions, cardiovascular disease, and other areas.
We are committed to exploring potential clinical indications where our therapies may achieve best-in-class profile, and where we can address significant unmet medical needs.
In order to achieve this goal, over the past decade, we have
established collaborative research relationships with investigators from many leading research and clinical institutions across the United States and Europe, including the Cleveland Clinic, Case Western Reserve University, University of Minnesota,
the Medical College of Georgia, the University of Oregon Health Sciences Center, the University of Texas Health Science Center at Houston, the University of Pittsburgh Medical Center, the Katholieke Universiteit Leuven, or KUL, and other
institutions. Through this network of collaborations, we have studied MultiStem in a range of preclinical models that reflect various types of human disease or injury in the
3
Table of Contents
cardiovascular, neurological, and immunological areas. These collaborative relationships have enabled us to cost effectively explore where MultiStem may have therapeutic relevance, and how it may
be utilized to advance treatment over current clinical care. Additionally, we have shown that we can leverage clinical safety data and preclinical results from some programs to support accelerated clinical development efforts in other areas, saving
substantial development time and resources compared to traditional drug development where generally each program is separately developed.
•
Continue to Expand our Intellectual Property Portfolio.
We have a broad intellectual property
estate that covers our proprietary products and technologies, as well as methods of production and methods of use. Our intellectual property is important to our business and we take significant steps to protect its value. We have ongoing research
and development efforts, both through internal activities and through collaborative research activities with others, which aim to develop new intellectual property and enable us to file patent applications that cover new applications of our existing
technologies or product candidates, including MultiStem and other opportunities.
Risks Related to Our
Business
Investing in our common stock involves substantial risk. You should carefully consider all of the information in
this prospectus prior to investing in our common stock. There are numerous risk factors related to our business that are described under "Risk Factors" and elsewhere in this prospectus. Among these important risks are the following:
•
our clinical trials may not be successful, and clinical results may not reflect results seen in previously conducted preclinical
studies;
•
we do not have adequate funding to complete development in some areas, and may not be able to access additional capital on reasonable
terms or at all to complete development;
•
our current or future partners may not be able to adequately support development in designated areas, or they may elect to change their
strategic or business priorities, and these changes may have an adverse impact on us, our development plans, or our business;
•
we may encounter unexpected regulatory changes that delay or impede our development and commercialization efforts;
•
there may be unexpected changes in intellectual property law;
•
product reimbursement challenges;
•
we may encounter manufacturing and distribution challenges; and
•
we may not be able to recruit or retain well qualified personnel that are necessary for us to conduct our business.
Corporate Information
We were incorporated in Delaware on October 24, 1995. On June 8, 2007, we merged with a wholly owned subsidiary of BTHC VI, Inc., a Delaware corporation, and, on August 31,
2007, BTHC VI, Inc. changed its name to Athersys, Inc. Our headquarters are located at 3201 Carnegie Avenue, Cleveland, Ohio 44115. Our telephone number is (216) 431-9900. Our website is http://www.athersys.com. The information contained on or
accessible through our website is not part of this prospectus, other than documents that we file with the SEC that are incorporated by reference into this prospectus.
4
Table of Contents
The Offering
Common stock offered by us
17,000,000 shares (or 19,550,000 shares if the underwriter exercises its option to purchase additional shares to cover over-allotments in this offering in
full).
Common stock to be outstanding immediately after this offering
46,515,343 shares (or 49,065,343 shares if the
underwriter exercises its option to purchase additional shares to cover over-allotments in this offering in full).
Use of proceeds
We currently expect to use the net proceeds from this offering for working capital and general corporate purposes. See "Use of Proceeds."
Risk factors
You should carefully read and consider the information set forth in "Risk Factors" beginning on page 7 of this prospectus before investing in our
common stock.
NASDAQ Capital Market symbol
ATHX.
The number of shares of common stock to be outstanding after the offering is based on
29,515,343 shares of common stock outstanding as of June 30, 2012. Unless otherwise indicated, all information this prospectus assumes no exercise by the underwriter of its option to purchase additional shares of common stock to cover
over-allotments in this offering and excludes:
•
4,299,698 shares of common stock reserved for issuance upon the exercise of options and restricted stock units granted under our equity
compensation plans with a weighted average exercise price of $4.37 per option share as of June 30, 2012;
•
5,806,853 shares of common stock that may be issued upon exercise of outstanding warrants with a weighted average exercise price of
$2.48 per share as of June 30, 2012, 4,347,827 of which are issuable pursuant to warrants that currently have an exercise price of $2.07 with full ratchet anti-dilution price protection, subject to certain exceptions;
•
500,000 shares of common stock that we issued from June 30, 2012 through September 30, 2012, and any additional shares that we may
issue, to Aspire Capital Fund, LLC , or Aspire Capital, pursuant to a common stock purchase agreement we entered into on November 11, 2011 (the agreement, as amended, is referred to in this prospectus as the Aspire Purchase Agreement), which
provides that, upon the terms and subject to the conditions and limitations set forth therein and as of September 30, 2012, Aspire Capital is committed to purchase up to an aggregate of an additional $17.7 million of shares of our common stock
over the term of the Aspire Purchase Agreement, should we elect to sell shares to Aspire Capital; and
•
37,500 shares of common stock that we issued from June 30, 2012 through September 30, 2012, and additional shares we intend to issue,
to our former lenders as milestone payments under the terms of our loan agreement, as further described in the section entitled "Dilution" in this prospectus.
5
Table of Contents
Summary Consolidated Financial Data
The following is a summary of our results of operations and financial position. The summary consolidated financial data set forth below should be read in conjunction with "Selected
Consolidated Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus and the financial statements and the notes thereto incorporated by
reference into this prospectus.
Year Ended December 31,
Six Months
Ended June 30,
2011
2010
2009
2012
2011
(in thousands, except per share data)
Consolidated Statement of Operations Data:
Contract and grant revenues
$
10,344
$
8,939
$
2,159
$
5,404
$
5,425
Operating expenses
24,124
20,450
17,774
13,172
11,770
Loss from operations
(13,780
)
(11,511
)
(15,615
)
(7,768
)
(6,345
)
Other income (expense), net
34
134
249
(281
)
(808
)
Net loss
$
(13,746
)
$
(11,377
)
$
(15,366
)
$
(8,049
)
$
(7,153
)
Basic and diluted net loss per common share
$
(0.59
)
$
(0.60
)
$
(0.81
)
$
(0.29
)
$
(0.32
)
Weighted average shares used in computing basic and diluted net loss per common share
23,239
18,930
18,928
27,477
22,693
Please see Note B to our audited consolidated financial statements incorporated by reference into this
prospectus for an explanation of the method used to calculate net loss attributable to common stockholders, basic and diluted net loss per common share, and the number of shares used in the computation of per share amounts.
December 31,
2011
June 30,
2012
(in thousands)
Consolidated Balance Sheet Data:
Cash, cash equivalents and available-for-sale securities
$
12,784
$
10,857
Working capital
6,986
7,810
Total assets
15,701
13,335
Warrant liabilities and note payable
983
4,684
Total stockholders' equity
7,298
4,503
6
Table of Contents
RIS
K FACTORS
An investment in our common stock involves a high degree of risk. Accordingly, you should carefully consider the following risk
factors, together with all of the other information contained in or incorporated by reference into this prospectus, including our consolidated financial statements and related notes incorporated by reference into this prospectus, before making an
investment in our common stock. If any of the following risks actually occurs, we may not be able to conduct our business as currently planned, and our business, operating results and financial condition could be harmed. In that case, the market
price of our common stock could decline, and you could lose all or a part of your investment.
Risks Related To Our
Business and Our Industry
We have incurred losses since inception and we expect to incur significant net losses in
the foreseeable future and may never become profitable.
Since our inception in 1995, we have incurred significant
losses and negative cash flows from operations. We incurred net losses of $14 million in 2011, $11 million in 2010 and $15 million in 2009 and $8 million for the six months ended June 30, 2012. As of June 30, 2012, we had an
accumulated deficit of $227 million, and anticipate incurring additional losses for at least the next several years. We expect to spend significant resources over the next several years to enhance our technologies and to fund research and
development of our pipeline of potential products. To date, substantially all of Athersys' revenue has been derived from corporate collaborations, license agreements and government grants. In order to achieve profitability, we must develop
products and technologies that can be commercialized by us or through our existing or future collaborations. Our ability to generate revenues and become profitable will depend on our ability, alone or with potential collaborators, to timely,
efficiently and successfully complete the development of our product candidates. We have never earned revenue from selling a product and we may never do so, as none of our product candidates have been approved for sale, since they are currently
being tested in humans and animal studies. We cannot assure you that we will ever earn revenue or that we will ever become profitable. If we sustain losses over an extended period of time, we may be unable to continue our business.
We will need substantial additional funding to develop our products and for our future operations. If we are unable to obtain the
funds necessary to do so, we may be required to delay, scale back or eliminate our product development activities or may be unable to continue our business.
The development of our product candidates will require a commitment of substantial funds to conduct the costly and time-consuming research, which may include preclinical and clinical
testing, necessary to obtain regulatory approvals and bring our products to market. Net cash used in our operations was $14 million in 2011, $11 million in 2010 and $5 million in 2009, and $10 million for the six months ended June 30,
2012.
At June 30, 2012, we had $10.9 million of cash and cash equivalents, and we will need substantially more to
advance our product candidates through development. Furthermore, we will need to add additional capital to fund our operations through the completion of our current clinical trials. Our future capital requirements will depend on many factors,
including:
•
our ability to raise capital to fund our operations;
•
the progress and costs of our research and development programs, including our ability to develop our current portfolio of therapeutic
products, or discover and develop new ones;
•
our ability, or our partners ability and willingness, to advance partnered products or programs, and the speed in which they are
advanced;
7
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•
the cost of prosecuting, defending and enforcing patent claims and other intellectual property rights;
•
the progress, scope, costs, and results of our preclinical and clinical testing of any current or future pharmaceutical or MultiStem
related products;
•
the time and cost involved in obtaining regulatory approvals;
•
the cost of manufacturing our product candidates;
•
expenses related to complying with good manufacturing practices, or GMP, of therapeutic product candidates;
•
costs of financing the purchases of additional capital equipment and development technologies;
•
competing technological and market developments;
•
our ability to establish and maintain collaborative and other arrangements with third parties to assist in bringing our products to
market and the cost of such arrangements;
•
the amount and timing of payments or equity investments that we receive from collaborators or changes in or terminations of future or
existing collaboration and licensing arrangements and the timing and amount of expenses we incur to supporting these collaborations and license agreements;
•
costs associated with the integration of any new operation, including costs relating to future mergers and acquisitions with companies
that have complementary capabilities;
•
expenses related to the establishment of sales and marketing capabilities for products awaiting approval or products that have been
approved;
•
the level of our sales and marketing expenses; and
•
our ability to introduce and sell new products.
The extent to which we utilize the Aspire Purchase Agreement with Aspire Capital as a source of funding will depend on a number of factors, including the prevailing market price of our
common stock, the volume of trading in our common stock and the extent to which we are able to secure funds from other sources. The number of shares that we may sell to Aspire Capital under the Aspire Purchase Agreement on any given day and during
the term of the agreement is limited. Additionally, we and Aspire Capital may not effect any sales of shares of our common stock under the Aspire Purchase Agreement during the continuance of an event of default or at a purchase price of less than
$1.45. Even if we are able to access the full $17.7 million remaining under the Aspire Purchase Agreement as of September 30, 2012, we will still need additional capital to fully implement our business, operating and development plans.
We have secured capital historically from grant revenues, collaboration proceeds, and debt and equity offerings. We will need
to secure substantial additional capital to fund our future operations. We cannot be certain that additional capital will be available on acceptable terms or at all. In recent years, it has been difficult for companies to raise capital due to a
variety of factors, which may or may not continue. To the extent we raise additional capital through the sale of equity securities, including to Aspire Capital, the ownership position of our existing stockholders could be substantially diluted. If
additional funds are raised through the issuance of preferred stock or debt securities, these securities are likely to have rights, preferences and privileges senior to our common stock. Fluctuating interest rates could also increase the costs of
any debt financing we may obtain.
Failure to successfully address ongoing liquidity requirements will have a material adverse
effect on our business. If we are unable to obtain additional capital on acceptable terms when needed, we may be
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required to take actions that harm our business and our ability to achieve cash flow in the future, including possibly the surrender of our rights to some technologies or product opportunities,
delaying our clinical trials or curtailing or ceasing operations.
We are heavily dependent on the successful
development and commercialization of MultiStem products, and if we encounter delays or difficulties in the development of this product candidate, our business could be harmed.
Our success is heavily dependent upon the successful development of MultiStem products for certain diseases and conditions involving acute or ischemic injury or immune system dysfunction.
Our business could be materially harmed if we encounter difficulties in the development of this product candidate, such as:
•
delays in the ability to manufacture the product in quantities or in a form that is suitable for any required preclinical studies or
clinical trials;
•
delays in the design, enrollment, implementation or completion of required preclinical studies and clinical trials;
•
an inability to follow our current development strategy for obtaining regulatory approval from the FDA because of changes in the
regulatory approval process;
•
less than desired or complete lack of efficacy or safety in preclinical studies or clinical trials; and
•
intellectual property constraints that prevent us from making, using, or commercializing the product candidate.
The results seen in animal testing of our product candidates may not be replicated in humans.
This prospectus discusses the safety and efficacy seen in preclinical testing of our lead product candidates,
including MultiStem, in animals, but we may not see positive results when our other product candidates undergo clinical testing in humans in the future. Preclinical studies and Phase I clinical trials are not primarily designed to test the efficacy
of a product candidate in humans, but rather to:
•
test short-term safety and tolerability;
•
study the absorption, distribution, metabolism and elimination of the product candidate;
•
study the biochemical and physiological effects of the product candidate and the mechanisms of the drug action and the relationship
between drug levels and effect; and
•
understand the product candidate's side effects at various doses and schedules.
Success in preclinical studies or completed clinical trials does not ensure that later studies or trials, including continuing
non-clinical studies and large-scale clinical trials, will be successful nor does it necessarily predict future results. The rate of failure in drug development is quite high, and many companies in the biotechnology and pharmaceutical industries
have suffered significant setbacks in advanced clinical trials, even after promising results in earlier trials. Product candidates may fail to show desired safety and efficacy in larger and more diverse patient populations in later stage clinical
trials, despite having progressed through early stage trials. Negative or inconclusive results from any of our ongoing preclinical studies or clinical trials could result in delays, modifications, or abandonment of ongoing or future clinical trials
and the termination of our development of a product candidate. Additionally, even if we are able to successfully complete pivotal Phase III clinical trials, the FDA still may not approve our product candidates.
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Our product candidates are in an early stage of development and we currently have no
therapeutic products approved for sale. If we are unable to develop, obtain regulatory approval or market any of our product candidates, our financial condition will be negatively affected, and we may have to curtail or cease our operations.
We are in the early stage of product development, and we are dependent on the application of our technologies to
discover or develop therapeutic product candidates. We currently do not sell any approved therapeutic products and do not expect to have any products commercially available for several years, if at all. You must evaluate us in light of the
uncertainties and complexities affecting an early stage biotechnology company. Our product candidates require additional research and development, preclinical testing, clinical testing and regulatory review and/or approvals or clearances before
marketing. To date, no one to our knowledge has commercialized any therapeutic products using our technologies and we might never commercialize any product using our technologies and strategy. In addition, we may not succeed in developing new
product candidates as an alternative to our existing portfolio of product candidates. If our current product candidates are delayed or fail, or we fail to successfully develop and commercialize new product candidates, our financial condition may be
negatively affected, and we may have to curtail or cease our operations.
We may not successfully maintain our existing
collaborative and licensing arrangements, or establish new ones, which could adversely affect our ability to develop and commercialize our product candidates.
A key element of our business strategy is to commercialize some of our product candidates through collaborations with other companies. Our strategy includes establishing collaborations and
licensing agreements with one or more pharmaceutical, biotechnology or device companies, preferably after we have advanced product candidates through the initial stages of clinical development. However, we may not be able to establish or maintain
such licensing and collaboration arrangements necessary to develop and commercialize our product candidates. Even if we are able to maintain or establish licensing or collaboration arrangements, these arrangements may not be on favorable terms and
may contain provisions that will restrict our ability to develop, test and market our product candidates. Any failure to maintain or establish licensing or collaboration arrangements on favorable terms could adversely affect our business prospects,
financial condition or ability to develop and commercialize our product candidates.
Our agreements with our collaborators and
licensees may have provisions that give rise to disputes regarding the rights and obligations of the parties. These and other possible disagreements could lead to termination of the agreement or delays in collaborative research, development, supply,
or commercialization of certain product candidates, or could require or result in litigation or arbitration. Moreover, disagreements could arise with our collaborators over rights to intellectual property or our rights to share in any of the future
revenues of products developed by our collaborators. These kinds of disagreements could result in costly and time-consuming litigation. Any such conflicts with our collaborators could reduce our ability to obtain future collaboration agreements and
could have a negative impact on our relationship with existing collaborators.
Currently, our material
collaborations and licensing arrangements are our collaboration with Pfizer to develop and commercialize
MultiStem
®
for the treatment of IBD, our collaboration with RTI to develop and commercialize
Multipotent Adult Progenitor Cell, or MAPC
®
, technology-based biologic implants for certain
orthopedic applications in the bone graft substitutes market, and our license with the University of Minnesota pursuant to which we license certain aspects of the MultiStem technology. These arrangements do not have specific termination dates;
rather, each arrangement terminates upon the occurrence of certain events.
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If our collaborators do not devote sufficient time and resources to successfully
carry out their contracted duties or meet expected deadlines, we may not be able to advance our product candidates in a timely manner or at all.
Our success depends on the performance by our collaborators of their responsibilities under our collaboration arrangements. Some potential collaborators may not perform their obligations
in a timely fashion or in a manner satisfactory to us. Typically, we cannot control the amount of resources or time our collaborators may devote to our programs or potential products that may be developed in collaboration with us. We are currently
involved in multiple research and development collaborations with academic and research institutions. These collaborators frequently depend on outside sources of funding to conduct or complete research and development, such as grants or other
awards. In addition, our academic collaborators may depend on graduate students, medical students, or research assistants to conduct certain work, and such individuals may not be fully trained or experienced in certain areas, or they may elect to
discontinue their participation in a particular research program, creating an inability to complete ongoing research in a timely and efficient manner. As a result of these uncertainties, we are unable to control the precise timing and execution of
any experiments that may be conducted.
Additionally, our current or future corporate collaborators will retain the ability to
pursue other research, product development or commercial opportunities that may be directly competitive with our programs. If these collaborators elect to prioritize or pursue other programs in lieu of ours, we may not be able to advance product
development programs in an efficient or effective manner, if at all. If a collaborator is pursuing a competitive program and encounters unexpected financial or capability limitations, they may be motivated to reduce the priority placed on our
programs or delay certain activities related to our programs or be unwilling to properly fund their share of the development expenses for our programs. Any of these developments could harm our product and technology development efforts, which could
seriously harm our business.
Even if we or our collaborators receive regulatory approval for our products, those
products may never be commercially successful.
Even if we develop pharmaceuticals or MultiStem related products that
obtain the necessary regulatory approval, and we have access to the necessary manufacturing, sales, marketing and distribution capabilities that we need, our success depends to a significant degree upon the commercial success of those products. If
these products fail to achieve or subsequently maintain market acceptance or commercial viability, our business would be significantly harmed because our future royalty revenue or other revenue would be dependent upon sales of these products. Many
factors may affect the market acceptance and commercial success of any potential products that we may discover, including:
•
health concerns, whether actual or perceived, or unfavorable publicity regarding our obesity drugs, stem cell products or those of our
competitors;
•
the timing of market entry as compared to competitive products;
•
the rate of adoption of products by our collaborators and other companies in the industry;
•
any product labeling that may be required by the FDA or other United States or foreign regulatory agencies for our products or
competing or comparable products;
•
convenience and ease of administration;
•
pricing;
•
perceived efficacy and side effects;
•
marketing;
•
availability of alternative treatments;
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•
levels of reimbursement and insurance coverage; and
•
activities by our competitors.
We may experience delays in clinical trials and regulatory approval relating to our products that could adversely affect our financial results and our commercial prospects for our
pharmaceutical or stem cell products.
In addition to the regulatory requirements for our pharmaceutical programs, we
will also require regulatory approvals for each distinct application of our stem cell product. In each case, we will be required to conduct clinical trials to demonstrate safety and efficacy of MultiStem, or various products that incorporate or use
MultiStem. For product candidates that advance to clinical testing, we cannot be certain that we or a collaborator will successfully complete the clinical trials necessary to receive regulatory product approvals. This process is lengthy and
expensive.
We intend to seek approval for our product candidates through the FDA approval process. To obtain regulatory
approvals, we must, among other requirements, complete clinical trials showing that our products are safe and effective for a particular indication. Under the approval process, we must submit clinical and non-clinical data to demonstrate the
medication is safe and effective. For example, we must be able to provide data and information, which may include extended pharmacology, toxicology, reproductive toxicology, bioavailability and genotoxicity studies to establish suitability for Phase
II or large scale Phase III clinical trials.
All of our product candidates are at an early stage of development. As these
programs enter and progress through early stage clinical development, or complete additional non-clinical testing, an indication of a lack of safety or lack of efficacy may result in the early termination of an ongoing trial, or may cause us or any
of our collaborators to forego further development of a particular product candidate or program. The FDA or other regulatory agencies may require extensive clinical trials or other testing prior to granting approval, which could be costly and time
consuming to conduct. Any of these developments would hinder, and potentially prohibit, our ability to commercialize our product candidates. We cannot assure you that clinical trials will in fact demonstrate that our products are safe or effective.
Additionally, we may not be able to find acceptable patients or may experience delays in enrolling patients for our currently
planned or any future clinical trials. The FDA or we may suspend our clinical trials at any time if either believes that we are exposing the subjects participating in the trials to unacceptable health risks. The FDA or institutional review boards
and/or institutional biosafety committees at the medical institutions and healthcare facilities where we seek to sponsor clinical trials may not permit a trial to proceed or may suspend any trial indefinitely if they find deficiencies in the conduct
of the trials.
Product development costs to us and our potential collaborators will increase if we have delays in testing or
approvals or if we need to perform more or larger clinical trials than planned. We expect to continue to rely on third party clinical investigators at medical institutions and healthcare facilities to conduct our clinical trials, and, as a result,
we may face additional delaying factors outside our control. Significant delays may adversely affect our financial results and the commercial prospects for our product candidates and delay our ability to become profitable.
If our pharmaceutical product candidates do not successfully complete the clinical trial process, we will not be able to partner or
market them. Even successful clinical trials may not result in a partnering transaction or a marketable product and may not be entirely indicative of a product's safety or efficacy.
Many factors, known and unknown, can adversely affect clinical trials and the ability to evaluate a product's efficacy. During the
course of treatment, patients can die or suffer other adverse events for
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reasons that may or may not be related to the proposed product being tested. Even if unrelated to our product, certain events can nevertheless adversely impact our clinical trials. As a result,
our ability to ultimately develop and market the products and obtain revenues would suffer.
Even promising results in
preclinical studies and initial clinical trials do not ensure successful results in later clinical trials, which test broader human use of our products. Many companies in our industry have suffered significant setbacks in advanced clinical trials,
despite promising results in earlier trials. Even successful clinical trials may not result in a marketable product or be indicative of the efficacy or safety of a product. Many factors or variables could affect the results of clinical trials and
cause them to appear more promising than they may otherwise be. Product candidates that successfully complete clinical trials could ultimately be found to be unsafe or ineffective. In addition, our ability to complete clinical trials depends on many
factors, including obtaining adequate clinical supplies and having a sufficient rate of patient recruitment. For example, patient recruitment is a function of many factors, including:
•
the size of the patient population;
•
the proximity of patients to clinical sites;
•
the eligibility criteria for the trial;
•
the perceptions of investigators and patients regarding safety; and
•
the availability of other treatment options.
Even if we obtain regulatory approval of any of our product candidates, the approved products may be subject to post-approval studies and will remain subject to ongoing regulatory
requirements. If we fail to comply, or if concerns are identified in subsequent studies, our approval could be withdrawn and our product sales could be suspended.
If we are successful at obtaining regulatory approval for MultiStem or any of our other product candidates, regulatory agencies in the United States and other countries where a product
will be sold may require extensive additional clinical trials or post-approval clinical studies that are expensive and time consuming to conduct. In particular, therapeutic products administered for the treatment of persistent or chronic conditions,
such as obesity, are likely to require extensive follow-up studies and close monitoring of patients after regulatory approval has been granted, for any signs of adverse effects that occur over a long period of time. These studies may be expensive
and time consuming to conduct and may reveal side effects or other harmful effects in patients that use our therapeutic products after they are on the market, which may result in the limitation or withdrawal of our drugs from the market.
Alternatively, we may not be able to conduct such additional trials, which might force us to abandon our efforts to develop or commercialize certain product candidates. Even if post-approval studies are not requested or required, after our products
are approved and on the market, there might be safety issues that emerge over time that require a change in product labeling or that require withdrawal of the product from the market, which would cause our revenue to decline.
Additionally, any products that we may successfully develop will be subject to ongoing regulatory requirements after they are approved.
These requirements will govern the manufacturing, packaging, marketing, distribution, and use of our products. If we fail to comply with such regulatory requirements, approval for our products may be withdrawn, and product sales may be suspended. We
may not be able to regain compliance, or we may only be able to regain compliance after a lengthy delay, significant expense, lost revenues and damage to our reputation.
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We may rely on third parties to manufacture our MultiStem product candidate.
Our current business strategy relies on third parties to manufacture our MultiStem product candidates in accordance
with good manufacturing practices established by the FDA, or similar regulations in other countries. These third parties may not deliver sufficient quantities of our MultiStem product candidates, manufacture MultiStem product candidates in
accordance with specifications, or comply with applicable government regulations. Additionally, if the manufactured products fail to perform as specified, our business and reputation could be severely impacted.
We expect to enter into additional manufacturing agreements for the production of product materials. If any manufacturing agreement is
terminated or any third party collaborator experiences a significant problem that could result in a delay or interruption in the supply of product materials to us, there are very few contract manufacturers who currently have the capability to
produce our MultiStem product on acceptable terms, or on a timely and cost-effective basis. We cannot assure you that manufacturers on whom we will depend will be able to successfully produce our MultiStem product on acceptable terms, or on a timely
or cost-effective basis. We cannot assure you that manufacturers will be able to manufacture our products in accordance with our product specifications or will meet FDA or other requirements. We must have sufficient and acceptable quantities of our
product materials to conduct our clinical trials and ultimately to market our product candidates, if and when such products have been approved by the FDA for marketing. If we are unable to obtain sufficient and acceptable quantities of our product
material, we may be required to delay the clinical testing and marketing of our products.
If we do not comply with
applicable regulatory requirements in the manufacture and distribution of our product candidates, we may incur penalties that may inhibit our ability to commercialize our products and adversely affect our revenue.
Our failure or the failure of our potential collaborators or third party manufacturers to comply with applicable FDA or other regulatory
requirements including manufacturing, quality control, labeling, safety surveillance, promoting and reporting may result in criminal prosecution, civil penalties, recall or seizure of our products, total or partial suspension of production or an
injunction, as well as other regulatory action against our product candidates or us. Discovery of previously unknown problems with a product, supplier, manufacturer or facility may result in restrictions on the sale of our products, including a
withdrawal of such products from the market. The occurrence of any of these events would negatively impact our business and results of operations.
If we are unable to create and maintain sales, marketing and distribution capabilities or enter into agreements with third parties to perform those functions, we will not be able to
commercialize our product candidates.
We currently have no sales, marketing or distribution capabilities. Therefore,
to commercialize our product candidates, if and when such products have been approved and are ready for marketing, we expect to collaborate with third parties to perform these functions. We will either need to share the value generated from the sale
of any products and/or pay a fee to the contract sales organization. If we establish any such relationships, we will be dependent upon the capabilities of our collaborators or contract service providers to effectively market, sell, and distribute
our product. If they are ineffective at selling and distributing our product, or if they choose to emphasize other products over ours, we may not achieve the level of product sales revenues that we would like. If conflicts arise, we may not be able
to resolve them easily or effectively, and we may suffer financially as a result. If we cannot rely on the sales, marketing and distribution capabilities of our collaborators or of contract service providers, we may be forced to establish our own
capabilities. We have no experience in developing, training or managing a sales force and will incur substantial additional expenses if we decide to market any of our future products directly. Developing a marketing and sales force is also time
consuming and could delay launch of our future products. In addition, we will compete with many companies that currently have extensive
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and well-funded marketing and sales operations. Our marketing and sales efforts may be unable to compete successfully against these companies.
If we are unable to attract and retain key personnel and advisors, it may adversely affect our ability to obtain financing, pursue
collaborations or develop our product candidates.
We are highly dependent on our executive officers Gil Van Bokkelen,
Ph.D., our Chief Executive Officer, as well as other executive and scientific officers, including William Lehmann, J.D., M.B.A., President and Chief Operating Officer, John Harrington, Ph.D., Chief Scientific Officer and Executive Vice President,
Robert Deans, Ph.D., Executive Vice President, Regenerative Medicine, and Laura Campbell, CPA, Vice President of Finance, as well as other personnel.
These individuals are integral to the development and integration of our technologies and to our present and future scientific collaborations, including managing the complex research
processes and the product development and potential commercialization processes. Given their leadership, extensive technical, scientific and financial expertise and management and operational experience, these individuals would be difficult to
replace. Consequently, the loss of services of one or more of these named individuals could result in product development delays or the failure of our collaborations with current and future collaborators, which, in turn, may hurt our ability to
develop and commercialize products and generate revenues.
Our future success depends on our ability to attract, retain and
motivate highly qualified management and scientific, development and commercial personnel and advisors. If we are unable to attract and retain key personnel and advisors, it may negatively affect our ability to successfully develop, test and
commercialize our product candidates.
Our ability to compete in the biopharmaceutical market may decline if we are not
successful in adequately protecting our proprietary technologies.
Our success depends in part on our ability to obtain
and maintain intellectual property that protects our technologies and our pharmaceutical products. Patent positions may be highly uncertain and may involve complex legal and factual questions, including the ability to establish patentability of
compounds and methods for using them for which we seek patent protection. We cannot predict the breadth of claims that will ultimately be allowed in our patent applications, if any, including those we have in-licensed or the extent to which we may
enforce these claims against our competitors. We have filed multiple patent
applications that seek to protect the composition
of matter and method of use related to our small molecule programs. In addition, we are prosecuting numerous distinct patent families directed to composition, methods of production, and methods of use of MultiStem and related technologies. If we are
unsuccessful in obtaining and maintaining these patents related to products and technologies, we may ultimately be unable to commercialize products that we are developing or may elect to develop in the future.
The degree of future protection for our proprietary rights is therefore highly uncertain and we cannot assure you that:
•
we were the first to file patent applications or to invent the subject matter claimed in patent applications relating to the
technologies or product candidates upon which we rely;
•
others will not independently develop similar or alternative technologies or duplicate any of our technologies;
•
others did not publicly disclose our claimed technology before we conceived the subject matter included in any of our patent
applications;
•
any of our pending or future patent applications will result in issued patents;
•
any of our patent applications will not result in interferences or disputes with third parties regarding priority of invention;
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•
any patents that may be issued to us, our collaborators or our licensors will provide a basis for commercially viable products or will
provide us with any competitive advantages or will not be challenged by third parties;
•
we will develop additional proprietary technologies that are patentable;
•
the patents of others will not have an adverse effect on our ability to do business; or
•
new proprietary technologies from third parties, including existing licensors, will be available for licensing to us on reasonable
commercial terms, if at all.
In addition, patent law outside the United States is uncertain and in many
countries intellectual property laws are undergoing review and revision. The laws of some countries do not protect intellectual property rights to the same extent as domestic laws. It may be necessary or useful for us to participate in opposition
proceedings to determine the validity of our competitors' patents or to defend the validity of any of our or our licensor's future patents, which could result in substantial costs and would divert our efforts and attention from other
aspects of our business. With respect to certain of our inventions, we have decided not to pursue patent protection outside the United States, both because we do not believe it is cost effective and because of confidentiality concerns. Accordingly,
our international competitors could develop and receive foreign patent protection for gene sequences and functions for which we are seeking United States patent protection, enabling them to sell products that we have developed.
Technologies licensed to us by others, or in-licensed technologies, are important to our business. The scope of our rights under our
licenses may be subject to dispute by our licensors or third parties. Our rights to use these technologies and to practice the inventions claimed in the licensed patents are subject to our licensors abiding by the terms of those licenses and not
terminating them. In particular, we depend on certain technologies relating to our MultiStem technology licensed from the University of Minnesota, and the termination of this license could result in our loss of some of the rights that enable us to
utilize this technology, and our ability to develop products based on MultiStem could be seriously hampered.
In addition, we
may in the future acquire rights to additional technologies by licensing such rights from existing licensors or from third parties. Such in-licenses may be costly. Also, we generally do not control the patent prosecution, maintenance or enforcement
of in-licensed technologies. Accordingly, we are unable to exercise the same degree of control over this intellectual property as we do over our internally developed technologies. Moreover, some of our academic institution licensors, collaborators
and scientific advisors have rights to publish data and information to which we have rights. If we cannot maintain the confidentiality of our technologies and other confidential information in connection with our collaborations, our ability to
protect our proprietary information or obtain patent protection in the future may be impaired, which could have a significant adverse effect on our business, financial condition and results of operations.
We may not have adequate protection for our unpatented proprietary information, which could adversely affect our competitive
position.
In addition to patents, we will substantially rely on trade secrets, know-how, continuing technological
innovations and licensing opportunities to develop and maintain our competitive position. However, others may independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets or
disclose our technology. To protect our trade secrets, we may enter into confidentiality agreements with employees, consultants and potential collaborators. However, these agreements may not provide meaningful protection of our trade secrets or
adequate remedies in the event of unauthorized use or disclosure of such information. Likewise, our trade secrets or know-how may become known through other means or be independently discovered by our competitors. Any of these events could prevent
us from developing or commercializing our product candidates.
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Disputes concerning the infringement or misappropriation of our proprietary rights or
the proprietary rights of others could be time consuming and extremely costly and could delay our research and development efforts.
Our commercial success, if any, will be significantly harmed if we infringe the patent rights of third parties or if we breach any license or other agreements that we have entered into
with regard to our technology or business.
We are aware of other companies and academic institutions that have been
performing research in the areas of adult derived stem cells. In particular, other companies and academic institutions have announced that they have identified nonembryonic stem cells isolated from bone marrow or other tissues that have the ability
to form a range of cell types, or display the property of pluripotency. To the extent any of these companies or academic institutions currently have, or obtain in the future, broad patent claims, such patents could block our ability to use various
aspects of our discovery and development process and might prevent us from developing or commercializing newly discovered applications of our MultiStem technology, or otherwise conducting our business. In addition, it is possible that some of the
pharmaceutical product candidates we are developing may not be patentable or may be covered by intellectual property of third parties.
We are not currently a party to any litigation, interference, opposition, protest, reexamination or any other potentially adverse governmental, ex parte or inter-party proceeding with
regard to our patent or trademark positions. However, the life sciences and other technology industries are characterized by extensive litigation regarding patents and other intellectual property rights. Many life sciences and other technology
companies have employed intellectual property litigation as a way to gain a competitive advantage. If we become involved in litigation, interference proceedings, oppositions, reexamination, protest or other potentially adverse intellectual property
proceedings as a result of alleged infringement by us of the rights of others or as a result of priority of invention disputes with third parties, we might have to spend significant amounts of money, time and effort defending our position and we may
not be successful. In addition, any claims relating to the infringement of third-party proprietary rights or proprietary determinations, even if not meritorious, could result in costly litigation, lengthy governmental proceedings, divert
management's attention and resources, or require us to enter into royalty or license agreements that are not advantageous to us. If we do not have the financial resources to support such litigation or appeals, we may forfeit or lose certain
commercial rights. Even if we have the financial resources to continue such litigation or appeals, we may lose. In the event that we lose, we may be forced to pay very substantial damages; we may have to obtain costly license rights, which may not
be available to us on acceptable terms, if at all; or we may be prohibited from selling products that are found to infringe the patent rights of others.
Should any person have filed patent applications or obtained patents that claim inventions also claimed by us, we may have to participate in an interference proceeding declared by the
relevant patent regulatory agency to determine priority of invention and, thus, the right to a patent for these inventions in the United States. Such a proceeding could result in substantial cost to us even if the outcome is favorable. Even if
successful on priority grounds, an interference action may result in loss of claims based on patentability grounds raised in the interference action. Litigation, interference proceedings or other proceedings could divert management's time and
efforts. Even unsuccessful claims could result in significant legal fees and other expenses, diversion of management's time and disruption in our business. Uncertainties resulting from initiation and continuation of any patent proceeding or
related litigation could harm our ability to compete and could have a significant adverse effect on our business, financial condition and results of operations.
An adverse ruling arising out of any intellectual property dispute, including an adverse decision as to the priority of our inventions, could undercut or invalidate our intellectual
property position. An adverse
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ruling could also subject us to significant liability for damages, including possible treble damages, prevent us from using technologies or developing products, or require us to negotiate
licenses to disputed rights from third parties. Although patent and intellectual property disputes in the technology area are often settled through licensing or similar arrangements, costs associated with these arrangements may be substantial and
could include license fees and ongoing royalties. Furthermore, necessary licenses may not be available to us on satisfactory terms, if at all. Failure to obtain a license in such a case could have a significant adverse effect on our business,
financial condition and results of operations.
Many potential competitors, including those who have greater resources
and experience than we do, may develop products or technologies that make ours obsolete or noncompetitive.
We face
significant competition with respect to our product candidates. With regard to our efforts to develop MultiStem as a novel stem cell therapy, currently, there are a number of companies that are actively developing stem cell products, which encompass
a range of different cell types, including embryonic stem cells, adult-derived stem cells, and processed bone marrow derived cells. Our future success will depend on our ability to maintain a competitive position with respect to technological
advances. Technological developments by others may result in our MultiStem product platform and technologies, as well as our pharmaceutical formulations, becoming obsolete.
We are subject to significant competition from pharmaceutical, biotechnology and diagnostic companies, academic and research institutions, and government or other publicly funded agencies
that are pursuing or may pursue the development of therapeutic products and technologies that are substantially similar to our proposed therapeutic products and technologies, or that otherwise address the indications we are pursuing. Our most
significant competitors include major pharmaceutical companies such as Pfizer, F. Hoffmann-La Roche, Ltd., or Roche, Johnson & Johnson, Sanofi U.S., or Sanofi, and GlaxoSmithKline plc, or GlaxoSmithKline, as well as smaller biotechnology or
biopharmaceutical companies such as Celgene Corporation, or Celgene, Osiris Therapeutics, Inc., or Osiris, Aastrom Biosciences, Inc., or Aastrom Biosciences, Stem Cells Inc., Cytori Therapeutics, Inc., or Cytori, Mesoblast Limited, or Mesoblast,
Pluristem Therapeutics Inc., or Pluristem, Arena Pharmaceuticals, Inc., or Arena Pharmaceuticals, Orexigen Therapeutics, Inc., or Orexigen Therapeutics, and Vivus, Inc., or Vivus. Most of our current and potential competitors have substantially
greater research and development capabilities and financial, scientific, regulatory, manufacturing, marketing, sales, human resources, and experience than we do. Many of our competitors have several therapeutic products that have already been
developed, approved and successfully commercialized, or are in the process of obtaining regulatory approval for their therapeutic products in the United States and internationally.
Many of these companies have substantially greater capital resources, research and development resources and experience, manufacturing capabilities, regulatory expertise, sales and
marketing resources, established relationships with consumer products companies and production facilities.
Universities and
public and private research institutions are also potential competitors. While these organizations primarily have educational objectives, they may develop proprietary technologies related to stem cells or secure patent protection that we may need
for the development of our technologies and products. We may attempt to license these proprietary technologies, but these licenses may not be available to us on acceptable terms, if at all. Our competitors, either alone or with their collaborative
partners, may succeed in developing technologies or products that are more effective, safer, more affordable or more easily commercialized than ours, and our competitors may obtain intellectual property protection or commercialize products sooner
than we do. Developments by others may render our product candidates or our technologies obsolete.
Our current product
discovery and development collaborators are not prohibited from entering into research and development collaboration agreements with third parties in any product field. Our failure to
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compete effectively would have a significant adverse effect on our business, financial condition and results of operations.
We will use hazardous and biological materials in our business. Any claims relating to improper handling, storage or disposal of these materials could be time consuming and costly.
Our products and processes will involve the controlled storage, use and disposal of certain hazardous and biological
materials and waste products. We and our suppliers and other collaborators are subject to federal, state and local regulations governing the use, manufacture, storage, handling and disposal of materials and waste products. Even if we and these
suppliers and collaborators comply with the standards prescribed by law and regulation, the risk of accidental contamination or injury from hazardous materials cannot be completely eliminated. In the event of an accident, we could be held liable for
any damages that result, and any liability could exceed the limits or fall outside the coverage of any insurance we may obtain and exceed our financial resources. We may not be able to maintain insurance on acceptable terms, or at all. We may incur
significant costs to comply with current or future environmental laws and regulations.
If we acquire products,
technologies or other businesses, we will incur a variety of costs, may have integration difficulties and may experience numerous other risks that could adversely affect our business.
To remain competitive, we may decide to acquire additional businesses, products and technologies. We currently have no commitments or agreements with respect to, and are not actively
seeking, any material acquisitions. We have limited experience in identifying acquisition targets, successfully acquiring them and integrating them into our current infrastructure. We may not be able to successfully integrate any businesses,
products, technologies or personnel that we might acquire in the future without a significant expenditure of operating, financial and management resources, if at all. In addition, future acquisitions could require significant capital infusions and
could involve many risks, including, but not limited to the following:
•
we may have to issue convertible debt or equity securities to complete an acquisition, which would dilute our stockholders and could
adversely affect the market price of our common stock;
•
an acquisition may negatively impact our results of operations because it may require us to incur large one-time charges to earnings,
amortize or write down amounts related to goodwill and other intangible assets, or incur or assume substantial debt or liabilities, or it may cause adverse tax consequences, substantial depreciation or deferred compensation charges;
•
we may encounter difficulties in assimilating and integrating the business, technologies, products, personnel or operations of
companies that we acquire;
•
certain acquisitions may disrupt our relationship with existing collaborators who are competitive to the acquired business;
•
acquisitions may require significant capital infusions and the acquired businesses, products or technologies may not generate
sufficient revenue to offset acquisition costs;
•
an acquisition may disrupt our ongoing business, divert resources, increase our expenses and distract our management;
•
acquisitions may involve the entry into a geographic or business market in which we have little or no prior experience; and
•
key personnel of an acquired company may decide not to work for us.
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Any of the foregoing risks could have a significant adverse effect on our business,
financial condition and results of operations.
To the extent we enter markets outside of the United States, our
business will be subject to political, economic, legal and social risks in those markets, which could adversely affect our business.
There are significant regulatory and legal barriers in markets outside the United States that we must overcome to the extent we enter or attempt to enter markets in countries other than
the United States. We will be subject to the burden of complying with a wide variety of national and local laws, including multiple and possibly overlapping and conflicting laws. We also may experience difficulties adapting to new cultures, business
customs and legal systems. Any sales and operations outside the United States would be subject to political, economic and social uncertainties including, among others:
•
changes and limits in import and export controls;
•
increases in custom duties and tariffs;
•
changes in currency exchange rates;
•
economic and political instability;
•
changes in government regulations and laws;
•
absence in some jurisdictions of effective laws to protect our intellectual property rights; and
•
currency transfer and other restrictions and regulations that may limit our ability to sell certain products or repatriate profits to
the United States.
Any changes related to these and other factors could adversely affect our business to
the extent we enter markets outside the United States.
Foreign governments often impose strict price controls on
approved products, which may adversely affect our future profitability in those countries, and the re-importation of drugs to the United States from foreign countries that impose price controls may adversely affect our future profitability.
Frequently foreign governments impose strict price controls on newly approved therapeutic products. If we obtain
regulatory approval to sell products in foreign countries, we may be unable to obtain a price that provides an adequate financial return on our investment. Furthermore, legislation in the United States may permit re-importation of drugs from foreign
countries into the United States, including re-importation from foreign countries where the drugs are sold at lower prices than in the United States due to foreign government-mandated price controls. Such a practice, especially if it is conducted on
a widespread basis, may significantly reduce our potential United States revenues from any drugs that we are able to develop.
If we elect not to sell our products in foreign countries that impose government mandated price controls because we decide it is
uneconomical to do so, a foreign government or patent office may attempt to terminate our intellectual property rights in that country, enabling competitors to make and sell our products.
In some cases we may choose not to sell a product in a foreign country because it is uneconomical to do so under a system of
government-imposed price controls, or because it could severely limit our profitability in the United States or other markets. In such cases, a foreign government or patent office may terminate any intellectual property rights we may obtain with
respect to that product. Such a termination could enable competitors to produce and sell our product in that market. Furthermore, such products may be exported into the United States through legislation that authorizes the importation of drugs from
outside the United States. In such an event, we may have to reduce our prices, or we may be unable to compete with low-cost providers of our drugs, and we could be financially harmed as a result.
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We may encounter difficulties managing our growth, which could adversely affect our
business.
At various times we have experienced periods of rapid growth in our employee numbers as a result of a
dramatic increase in activity in technology programs, genomics programs, collaborative research programs, discovery programs, and scope of operations. At other times, we have had to reduce staff in order to bring our expenses in line with our
financial resources. Our success will also depend on the ability of our officers and key employees to continue to improve our operational capabilities and our management information and financial control systems, and to expand, train and manage our
work force.
We may be sued for product liability, which could adversely affect our business.
Because our business strategy involves the development and sale by either us or our collaborators of commercial products, we may be sued
for product liability. We may be held liable if any product we develop and commercialize, or any product our collaborators commercialize that incorporates any of our technology, causes injury or is found otherwise unsuitable during product testing,
manufacturing, marketing, sale or consumer use. In addition, the safety studies we must perform and the regulatory approvals required to commercialize our pharmaceutical products, will not protect us from any such liability.
We carry product liability insurance that includes coverage for human clinical trials. Currently, we carry a $5 million per event, $5
million annual aggregate coverage for both our products liability policy and our clinical trials protection. We also intend to seek product liability insurance for any approved products that we may develop or acquire. However, in the event there are
product liability claims against us, our insurance may be insufficient to cover the expense of defending against such claims, or may be insufficient to pay or settle such claims. Furthermore, we may be unable to obtain adequate product liability
insurance coverage for commercial sales of any of our approved products. If such insurance is insufficient to protect us, our results of operations will suffer. If any product liability claim is made against us, our reputation and future sales will
be damaged, even if we have adequate insurance coverage.
The availability, manner, and amount of reimbursement for our
product candidates from government and private payers are uncertain, and our inability to obtain adequate reimbursement for any products could severely limit our product sales.
We expect that many of the patients who seek treatment with any of our products that are approved for marketing will be eligible for Medicare benefits. Other patients may be covered by
private health plans. If we are unable to obtain or retain adequate levels of reimbursement from Medicare or from private health plans, our ability to sell our products will be severely limited. The application of existing Medicare regulations and
interpretive coverage and payment determinations to newly approved products is uncertain and those regulations and interpretive determinations are subject to change. The Medicare Prescription Drug Improvement and Modernization Act, enacted in
December 2003, provides for a change in reimbursement methodology that reduces the Medicare reimbursement rates for many drugs, which may adversely affect reimbursement for any products we may develop. Medicare regulations and interpretive
determinations also may determine who may be reimbursed for certain services, and may limit the pool of patients our product candidates are being developed to serve.
Federal, state and foreign governments continue to propose legislation designed to contain or reduce health care costs. Legislation and regulations affecting the pricing of products like
our potential products may change further or be adopted before any of our potential products are approved for marketing. Cost control initiatives by governments or third-party payers could decrease the price that we receive for any one or all of our
potential products or increase patient coinsurance to a level that make our products under development become unaffordable. In addition, government and private health plans persistently
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challenge the price and cost-effectiveness of therapeutic products. Accordingly, these third parties may ultimately not consider any or all of our products under development to be cost effective,
which could result in products not being covered under their health plans or covered only at a lower price. Any of these initiatives or developments could prevent us from successfully marketing and selling any of our products that are approved for
commercialization.
Public perception of ethical and social issues surrounding the use of adult-derived stem cell
technology may limit or discourage the use of our technologies, which may reduce the demand for our therapeutic products and technologies and reduce our revenues.
Our success will depend in part upon our ability to develop therapeutic products incorporating or discovered through our adult-derived stem cell technology. For social, ethical, or other
reasons, governmental authorities in the United States and other countries may call for limits on, or regulation of the use of, adult-derived stem cell technologies. Although we do not use the more controversial stem cells derived from embryos or
fetuses, claims that adult-derived stem cell technologies are ineffective, unethical or pose a danger to the environment may influence public attitudes. The subject of stem cell technologies in general has received negative publicity and aroused
public debate in the United States and some other countries. Ethical and other concerns about our adult-derived stem cell technology could materially hurt the market acceptance of our therapeutic products and technologies, resulting in diminished
sales and use of any products we are able to develop using adult-derived stem cells.
Risks Related to This Offering and
Our Common Stock
Future sales, or availability for sale, of shares of common stock by stockholders could depress the
market price of our common stock.
Sales of a substantial number of shares of our common stock in the public market, or
the perception that large sales could occur, could depress the market price of our common stock. As of June 30, 2012, we had 29,515,343 shares of our common stock outstanding. All of these shares are freely tradable, except for any shares held
by our "affiliates" as defined in Rule 144 under the Securities Act. Also, as of June 30, 2012, up to 5,806,853 shares of common stock were issuable upon exercise of outstanding warrants with a weighted average exercise price of $2.48
per share, 4,347,827 of which are issuable pursuant to warrants that currently have an exercise price of $2.07 with full ratchet anti-dilution price protection, subject to certain exceptions.
You will experience immediate and substantial dilution in the net tangible book value per share of the common stock you purchase.
Since the price per share of our common stock being offered is substantially higher than the net tangible book value per share of our
common stock, you will suffer substantial dilution in the net tangible book value of the common stock you purchase in this offering. Based on an assumed offering price of $             per
share, if you purchase shares of common stock in this offering, you will suffer immediate and substantial dilution of approximately $             per share in the net tangible book value of
the common stock. See the section entitled "Dilution" in this prospectus for a more detailed discussion of the dilution you will incur if you purchase common stock in this offering.
Sales of shares issuable upon the exercise of warrants will dilute your ownership interest in our company and may cause the market price of our shares to decline.
On March 14, 2012, we closed a private placement in which we issued 4,347,827 shares of common stock and warrants to purchase up to
4,347,827 shares of common stock. The exercise of those warrants will dilute your investment. Additionally, the warrants issued in the March 2012 offering contain full-ratchet anti-dilution provision that would be triggered upon an issuance by us of
shares of our common stock or securities convertible into or exchangeable for shares of our common stock at a price per share
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below the then current exercise price of the warrants, subject to certain exceptions, such as sales of common stock to Aspire Capital. To the extent that these anti-dilution provisions are
triggered, including as a result of this offering, we would be required to reduce the exercise price of all of the March 2012 warrants on a full-ratchet basis, which would increase the dilutive effect that the exercise of warrants would have on your
investment.
If we do not continue to meet the listing standards established by The NASDAQ Capital Market, the common
stock may not remain listed for trading.
The NASDAQ Capital Market has established certain quantitative criteria and
qualitative standards that companies must meet in order to remain listed for trading on these markets. We cannot guarantee that we will be able to maintain all necessary requirements for listing; therefore, we cannot guarantee that our common stock
will remain listed for trading on The NASDAQ Capital Market or other similar markets.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This prospectus, including the documents incorporated by reference and the sections entitled "Prospectus
Summary," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business," contains forward-looking statements that represent our beliefs, projections and
predictions about future events or our future performance. You can identify forward-looking statements by terminology such as "may," "will," "would," "could," "should," "expect,"
"intend," "plan," "anticipate," "believe," "estimate," "predict," "potential," "continue" or the negative of these terms or other similar expressions or phrases. These
forward-looking statements are necessarily subjective and involve known and unknown risks, uncertainties and other important factors that could cause our actual results, performance or achievements or industry results to differ materially from any
future results, performance or achievement described in or implied by such statements.
Factors that may cause actual results
to differ materially from expected results described in forward-looking statements include, but are not limited to:
•
uncertainty regarding market acceptance of our product candidates and our ability to generate revenues, including MultiStem for the
treatment of IBD, acute myocardial infarction, or 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;
•
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.
See "Risk Factors" for a more complete discussion of these risks and uncertainties and for other risks and uncertainties. Any
forward-looking statement you read in this prospectus reflects our current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, operating results, growth strategy and
liquidity. You should not place undue reliance on these forward-looking statements because such statements speak only as to the date when made. We assume no obligation to publicly update or revise these forward-looking statements for any
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reason, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future, except
as otherwise required by applicable law.
This prospectus also contains statistical data and estimates we obtained from
industry publications and reports generated by third parties. Although we believe that the publications and reports are reliable, we have not independently verified their data.
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USE OF PROCEEDS
We expect to receive net proceeds of approximately $         million from the sale of shares of
our common stock in this offering (or $         million if the underwriter exercises its option to purchase additional shares of common stock to cover over-allotments in this offering in full) after deducting
underwriting discounts and commissions and estimated offering expenses.
We currently intend to use the net proceeds from this
offering for working capital and general corporate purposes.
Pending the application of the net proceeds as described above,
we may invest the net proceeds from this offering in short-term, investment grade, interest-bearing securities.
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CAPITALIZATION
The following table shows our cash and cash equivalents and capitalization as of June 30, 2012 on an actual basis and on an as
adjusted basis to reflect the sale of 17,000,000 shares of our common stock offered in this offering, after deducting underwriting discounts and commissions and estimated offering expenses.
This table should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained elsewhere in this prospectus
and our financial statements and the accompanying notes incorporated by reference into this prospectus.
As of June 30, 2012
Actual
As Adjusted
(in thousands
except share and per share data)
Cash and cash equivalents
$
10,857
$
Warrant liabilities and note payable
$
4,684
$
Stockholders' equity:
Preferred stock, at stated value; 10,000,000 shares authorized, and no shares issued and outstanding at
June 30, 2012, actual and as adjusted
—
—
Common stock, $0.001 par value; 100,000,000 shares authorized, and 29,515,343 shares issued and outstanding at
June 30, 2012, actual, and              shares issued and outstanding at June 30, 2012, as adjusted
30
Additional paid-in capital
231,482
Accumulated deficit
(227,009
)
Total stockholders' equity
4,503
Total capitalization
$
9,187
$
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COMMON STOCK PRICE RANGE
Our common stock is listed on The NASDAQ Capital Market under the symbol "ATHX." The following table sets forth, for the
periods indicated, the high and low sales prices for our common stock as reported on The NASDAQ Capital Market.
High
Low
Year ended December 31, 2012:
First Quarter
$
2.33
$
1.49
Second Quarter
$
1.71
$
1.25
Third Quarter
$
1.75
$
1.35
Fourth Quarter (through October 8, 2012)
$
1.47
$
1.25
Year ended December 31, 2011:
First Quarter
$
3.08
$
2.35
Second Quarter
$
3.10
$
2.50
Third Quarter
$
2.86
$
1.00
Fourth Quarter
$
2.42
$
1.13
Year ended December 31, 2010:
First Quarter
$
4.40
$
2.32
Second Quarter
$
3.63
$
2.56
Third Quarter
$
3.55
$
2.34
Fourth Quarter
$
3.19
$
2.42
The last reported sales price for our common stock on October 8, 2012 is set forth on the cover page of
this prospectus. As of September 30, 2012, there were approximately 629 holders of record of our common stock.
DIVIDEND POLICY
We would have
to rely upon dividends and other payments from our wholly-owned subsidiary, ABT Holding Company, to generate the funds necessary to make dividend payments, if any, on our common stock. ABT Holding Company, however, is legally distinct from us and
has no obligation to pay amounts to us. The ability of ABT Holding Company to make dividend and other payments to us is subject to, among other things, the availability of funds and applicable state laws. However, there are no restrictions such as
government regulations or material contractual arrangements that restrict the ability of ABT Holding Company to make dividend and other payments to us. We did not pay cash dividends on our common stock during the past two years or for the six months
ended June 30, 2012. We do not anticipate that we will pay any dividends on our common stock in the foreseeable future. Rather, we anticipate that we will retain earnings, if any, for use in the development of our business.
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DILUTION
Investors in shares of our common stock offered in this offering will experience an immediate dilution in the net tangible book value of
their common stock from the public offering price of the common stock. The net tangible book value of our common stock as of June 30, 2012 was approximately $4.5 million, or approximately $0.15 per share of common stock. Net tangible book value
per share of our common stock is calculated by subtracting our total liabilities from our total tangible assets, which is equal to total assets less intangible assets, and dividing this amount by the number of shares of common stock outstanding.
Dilution per share represents the difference between the public offering price per share of our common stock and the adjusted
net tangible book value per share of our common stock included in this offering after giving effect to this offering. After giving effect to the sale of shares of common stock offered in this offering at the offering price of
$             per share and sales of common stock from June 30, 2012 through September 30, 2012, and after deducting underwriting discounts and commissions and estimated offering
expenses payable by us, our net tangible book value as of June 30, 2012 would have been approximately $             million, or approximately
$             per share of common stock. This change represents an immediate increase in the net tangible book value of
$             per share of common stock to our existing stockholders and an immediate and substantial dilution in net tangible book value of
$             per share of common stock to new investors. The following table illustrates this per share dilution:
Offering price per share
$
Net tangible book value per share as of June 30, 2012
$
0.15
Increase in net tangible book value per share attributable to new investors
$
Net tangible book value per share after this offering
$
Dilution per share to new investors
$
The table and calculations set forth above are based on the number of shares of common stock outstanding
as of June 30, 2012 and assumes no exercise of any outstanding options or warrants. To the extent that options or warrants are exercised, there will be further dilution to new investors.
The above information excludes:
•
4,299,698 shares of common stock reserved for issuance upon the exercise of options and restricted stock units granted under our equity
compensation plans with a weighted average exercise price of $4.37 per option share as of June 30, 2012;
•
5,806,853 shares of common stock that may be issued upon exercise of outstanding warrants with a weighted average exercise price of
$2.48 per share as of June 30, 2012, 4,347,827 of which are issuable pursuant to warrants that currently have an exercise price of $2.07 with full ratchet anti-dilution price protection, subject to certain exceptions;
•
shares of common stock that we may issue to Aspire Capital pursuant to the Aspire Purchase Agreement; and
•
shares of common stock that we intend to issue to our former lenders as milestone payments under the terms of our loan agreement, which
was repaid in June 2008. Under the Loan and Security Agreement, and Supplement, dated as of November 2, 2004, by and among ABT Holding Company (formerly known as Athersys, Inc.), Advanced Biotherapeutics, Inc., Venture Lending &
Leasing IV, Inc., and Costella Kirsch IV, L.P., as amended, the former lenders retain a right to receive a milestone payment of a portion of the amount from
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proceeds of certain equity financings of an amount equal to 10% of the proceeds above $5.0 million in cumulative gross proceeds. The balance of this milestone obligation at
September 30, 2012 is approximately $300,000. As the loan agreement permits, we intend to pay 75% of the milestone payment in shares of common stock at the per-share offering price of this offering.
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SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus and the consolidated financial statements and the notes thereto incorporated by reference into this prospectus.
Year Ended December 31,
Six Months Ended June 30,
2011
2010
2009
2008
2007
2012
2011
(in thousands, except share and per share data)
Consolidated Statement of Operations Data:
Revenues:
Contract revenue
$
9,015
$
6,685
$
1,079
$
1,880
$
1,433
$
4,733
$
4,641
Grant revenue
1,329
2,254
1,080
1,225
1,827
671
784
Total revenues
10,344
8,939
2,159
3,105
3,260
5,404
5,425
Costs and expenses:
Research and development
18,930
14,779
11,920
16,500
15,817
10,596
9,032
General and administrative
4,916
5,387
5,621
5,479
7,975
2,421
2,611
Depreciation
278
284
233
218
283
155
127
Loss from operations
(13,780
)
(11,511
)
(15,615
)
(19,092
)
(20,815
)
(7,768
)
(6,345
)
Other (expense) income:
Other (expense) income, net
(51
)
(69
)
(126
)
48
2,017
(296
)
(874
)
Interest income
85
203
375
1,146
1,591
15
66
Interest expense
—
—
—
(94
)
(1,263
)
—
—
Accretion of premium on convertible debt
—
—
—
—
(456
)
—
—
Net loss
$
(13,746
)
$
(11,377
)
$
(15,366
)
$
(17,992
)
$
(18,926
)
$
(8,049
)
$
(7,153
)
Preferred stock dividends
—
—
—
—
(659
)
—
—
Deemed dividend resulting from induced conversion of convertible preferred stock
—
—
—
—
(4,800
)
—
—
Net loss attributable to common stockholders
$
(13,746
)
$
(11,377
)
$
(15,366
)
$
(17,992
)
$
(24,385
)
$
(8,049
)
$
(7,153
)
Basic and diluted net loss per common share attributable to common stockholders
$
(0.59
)
$
(0.60
)
$
(0.81
)
$
(0.95
)
$
(2.26
)
$
(0.29
)
$
(0.32
)
Weighted average shares outstanding, basic and diluted
23,239,019
18,929,749
18,928,379
18,927,988
10,811,119
27,476,603
22,693,155
December 31,
June 30,
2011
2010
2009
2008
2007
2012
2011
(in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents
$
8,785
$
2,105
$
11,167
$
12,552
$
13,248
$
10,857
$
4,719
Available-for-sale securities, short-term
3,999
13,076
10,135
15,460
22,477
—
16,194
Working capital
6,986
9,106
16,291
26,789
32,849
7,810
13,483
Available-for-sale securities, long-term
—
—
5,080
3,601
13,850
—
—
Total assets
15,701
19,106
28,331
33,877
52,225
13,335
23,088
Warrant liabilities and note payable
983
—
—
—
—
4,684
1,873
Total stockholders' equity
7,298
9,005
18,957
31,563
47,631
4,503
12,843
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Effective January 1, 2012, we adopted the Financial Accounting Standards Board's,
or FASB's, Accounting Standards Update, or ASU, No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income, as amended by ASU 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments
to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05. These updates revise the manner in which entities present comprehensive income in their financial
statements. The following selected financial information revises historical information to illustrate the new presentation required by this pronouncement for the periods presented.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
Year Ended
December 31,
2011
December 31,
2010
December 31,
2009
(in thousands)
Net loss
$
(13,746
)
$
(11,377
)
$
(15,366
)
Items included in other comprehensive income (loss):
Proportional share of comprehensive income of equity-method investment
28
—
—
Unrealized loss on available-for-sale securities
(26
)
(45
)
(49
)
Other comprehensive income (loss) items
2
(45
)
(49
)
Comprehensive loss
$
(13,744
)
$
(11,422
)
$
(15,415
)
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes
incorporated herein by reference. The following discussion and analysis contains forward-looking statements that reflect our plans, estimates and beliefs and involves risks and uncertainties. Our actual results could differ materially from those
discussed in these forward-looking statements as a result of various factors, including those discussed below, under the headings "Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements" and in other parts of
this prospectus.
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 areas. Our current clinical development programs are focused on treating inflammatory & immune disorders,
neurological conditions, cardiovascular disease, and other conditions. 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 ongoing
Phase II clinical trials. 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, and for the modulation of stem cells or related applications in the regenerative medicine area.
Current Programs
By applying our proprietary MultiStem cell therapy product, we have established therapeutic product development programs treating inflammatory & 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
:
IBD affects an estimated 4 million patients or more in the
United States, Europe, and Japan. Current therapies for treating IBD consist of pharmaceutical and biologic drugs, representing an annual market of more than $5 billion globally. Currently available therapies provide temporary relief or are not
effective for many patients, and novel approaches are needed to improve the standard of care and help patients avoid surgical intervention. MultiStem is being evaluated in an ongoing Phase II clinical study involving administration of MultiStem to
patients suffering from ulcerative colitis, or 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, and is a double blind,
placebo controlled trial that began enrolling patients in 2011. Enrollment of the trial is ongoing and is expected to include approximately 130 patients, with initial results expected to be reported in 2013.
•
Ischemic Stroke
:
Ischemic stroke affects approximately 15 million people globally each
year, and approximately 2 million in the United States, Europe and Japan combined. In an ongoing Phase II clinical study, we are evaluating the administration of MultiStem to patients that 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
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the independent safety monitoring committee found 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 will be randomized to receive either high dose MultiStem or placebo. We believe this represents a potential market opportunity of more than $15 billion annually.
•
Acute Myocardial Infarction
:
We have evaluated the administration of MultiStem in a Phase I
clinical study to patients that have suffered an 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. One-year follow-up data suggested that the benefit observed was sustained over time. We have completed preliminary planning for a Phase II trial, which has been discussed with the FDA. Our plans to move
the AMI program forward into subsequent development will depend on the availability of capital resources, progress in our other clinical studies and our business development activities.
•
Hematopoietic Stem Cell Transplant / GvHD
:
We have 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 transplant. Such patients are at risk for serious
complications, including 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 February 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 met with the FDA to discuss the results of the clinical study and our proposed plans for the next phase of clinical development in this area.
We are currently preparing our detailed clinical study plans and look forward to finalizing our design and undertaking operational planning. Based on current plans, we intend to be ready to start this study in the second half of 2013, but the
initiation will depend on the progress in our clinical trials and the achievement of certain business development and financial objectives. There are approximately 25,000 bone marrow or peripheral blood stem cell allografts performed annually, but
we believe many more transplants could be performed if the risks of GvHD could be meaningfully reduced. We believe this indication represents a potential market opportunity of $500 million annually or more.
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 limited financial support for this investigator-sponsored Phase I study and
provide clinical grade product to conduct the trial. According to a report by Reuter's Business Insight, in 2009, approximately 91,000 organ transplants were conducted. We estimate that this represents a potential market of more than
$1.5 billion annually.
In addition to our current and anticipated clinical development activities, we are engaged in
preclinical development and evaluation of MultiStem in other inflammatory & 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 our current clinical programs (outside of IBD) and preclinical programs and may, under the
right terms, enter into one or more business partnership(s) to advance these programs.
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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. RTI's product development activities are progressing, and in September 2012, we amended our agreement with RTI to accelerate $2.0 million of contingent
milestone payments in connection with ongoing technical support to assist RTI in its initial product launch. As a result, we will receive these milestone payments in 2012, and in addition, RTI will compensate us for this technical assistance. We
will also receive royalty revenue from product sales when 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. 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 that exhibit a particular type of selectivity profile in preclinical models of schizophrenia and observed that these compounds exhibit potent effects. We are in discussions with multiple companies and 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 $227 million at June 30, 2012. 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, develop business collaborations and to acquire certain technologies and assets.
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.
In November 2011, we entered into the Aspire 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 Aspire Purchase 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 of September 30, 2012, we have received aggregate gross proceeds of $2.3 million under the Aspire Purchase Agreement since its inception.
In February 2011, we completed a registered direct offering with net proceeds of $11.8 million through the issuance of 4,366,667 shares
of common stock and five-year warrants to purchase 1,310,000 shares of common stock with an exercise price of $3.55 per share. The securities were sold in multiples of a fixed combination of one share of common stock and a warrant to purchase 0.3 of
a share of common stock at an offering price of $3.00 per fixed combination.
In 2012, we were awarded grant funding
aggregating $3.6 million to further advance our MultiStem programs and cell therapy platform, including further development of MultiStem for the treatment of
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traumatic brain injury, or TBI, and further development of our cell therapy formulations and manufacturing capabilities. The sources of funding including federal, state and European organizations
and are generally focused on the advancement of our preclinical MultiStem programs, as well as process development and manufacturing activities.
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. The following tables are stated in thousands.
Revenues
Year Ended December 31,
Six Months Ended June 30,
2011
2010
2009
2012
2011
Contract revenue
$
9,015
$
6,685
$
1,079
$
4,733
$
4,641
Grant revenue
1,329
2,254
1,080
671
784
$
10,344
$
8,939
$
2,159
$
5,404
$
5,425
Research and Development Expenses
Year Ended December 31,
Six Months Ended June 30,
Type of expense
2011
2010
2009
2012
2011
Personnel costs
$
4,641
$
4,124
$
3,607
$
2,623
$
2,392
Research supplies
1,316
1,218
907
732
659
Facilities
944
870
826
486
479
Clinical and preclinical development costs
7,495
4,394
1,904
4,775
3,078
Sponsored research
1,408
1,149
878
624
803
Patent legal fees
1,703
1,477
1,351
681
835
Other
1,218
1,002
1,151
599
672
Stock-based compensation
205
545
1,296
76
114
$
18,930
$
14,779
$
11,920
$
10,596
$
9,032
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General and Administrative Expenses
Year Ended December 31,
Six Months Ended June 30,
Type of expense
2011
2010
2009
2012
2011
Personnel costs
$
1,927
$
1,897
$
1,975
$
1,057
$
1,060
Facilities
270
279
299
141
134
Legal and professional fees
1,008
1,007
916
479
569
Other
1,364
1,283
919
551
696
Stock-based compensation
347
921
1,512
193
152
$
4,916
$
5,387
$
5,621
$
2,421
$
2,611
Six Months Ended June 30, 2012 and 2011
Revenues
.
Revenues remained consistent at $5.4 million for the six months ended
June 30, 2012 and 2011. Contract revenue increased $92,000 for the six months ended June 30, 2012 compared to the comparable period in 2011 and reflects the impact of our arrangements with Pfizer and RTI. Our contract revenues reflect 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, as well as the
amortization of a $3.0 million guaranteed license fee from the RTI collaboration over the estimated performance period that ended in 2011. Our contract revenues may also include license fees, milestone payments and royalties on compounds developed
by Bristol-Myers Squibb using one of our technologies. We expect our contract revenues to decline in the second half of 2012, absent any new collaborations, and will be comprised primarily of manufacturing service revenue under the Pfizer
arrangement and RTI milestone payments. Grant revenue decreased $113,000 for the six months ended June 30, 2012 compared to the six months ended June 30, 2011 primarily due to the timing of expenditures that are reimbursed with grant
proceeds and the completion of grants in 2011. 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 $10.6 million for the six months ended June 30,
2012 from $9.0 million in the comparable period in 2011. The increase of $1.6 million related primarily to an increase in clinical and preclinical development costs of $1.7 million, an increase in personnel costs of $231,000 and an increase in
research supplies of $73,000 for the six months ended June 30, 2012 from the comparable period in 2011. These increases were partially offset by a decrease in sponsored research costs of $179,000, a decrease in patent legal fees of $154,000, a
decrease in other research and development expenses of $73,000 and a decrease in stock compensation expense of $38,000. The increase in clinical and preclinical development costs for the six months ended June 30, 2012 related primarily to costs
associated with our MultiStem clinical trials, including contract research organization costs and clinical manufacturing costs. 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. Sponsored research costs decreased primarily due to a decrease in grant-funded programs that require collaboration with certain academic research institutions. The decrease in
patent legal costs resulted from reduced patent prosecution costs during the period. Our annual research and development expenses are not expected to increase significantly through 2012 as compared to 2011 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 decreased to $2.4 million for the six months ended June 30, 2012 from $2.6 million in the comparable period in 2011. The $190,000 decrease was due primarily to
a decrease in legal and professional fees of $90,000 and a
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decrease in other general and administrative costs of $145,000 related to outside services, offset by an increase of $41,000 in stock compensation expense for the six months ended June 30,
2012 from the comparable period in 2011. We expect our general and administrative expenses to continue at similar levels during 2012.
Depreciation.
Depreciation expense increased to $155,000 for the six months ended June 30, 2012 from $127,000 in the comparable period in 2011 due
to depreciation on new capital purchases.
Interest Income.
Interest income represents
interest earned on our cash and available-for-sale securities. Interest income represents interest earned on our cash and available-for-sale securities. Interest income decreased to $15,000 for the six months ended June 30, 2012 from $66,000
for the comparable period in 2011 due to the decline in our investment balances as they are used to fund our operations. We expect our 2012 interest income to reflect the impact of declining cash balances resulting from our ongoing and planned
clinical and preclinical development, and interest earned on proceeds from any new financings or business transactions.
Other (Expense) Income, net.
Other (expense) income, net, includes foreign currency gains and losses
related to our activities in Europe, realized gains and losses on the sale of our assets, and increase and decreases in our warrant liabilities. Also included in other expense are cash and stock-based milestone payments aggregating $952,000 and
$810,000 for the six months ended June 30, 2012 and 2011, respectively, paid to our former lenders in connection with our equity offerings. The market value change in our warrant liabilities was income of $479,000 for the six months ended
June 30, 2012 and expense of $78,000 for the six months ended June 30, 2011. 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.
Year Ended December 31, 2011 Compared to Year Ended December 31, 2010
Revenues.
Revenues increased to $10.3 million for the year ended December 31, 2011 from
$8.9 million for 2010. Our contract revenues reflect 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, as well as the amortization of a $3.0 million guaranteed license fee from the RTI collaboration over the estimated performance period. Our contract revenues may also include license fees, milestone payments and royalties on
compounds developed by Bristol-Myers Squibb using one of our technologies. Contract revenue increased $2.3 million for the year ended December 31, 2011 compared to the year ended December 31, 2010 primarily as a result of our
arrangements with Pfizer and RTI. The estimated performance period under the Pfizer arrangement ends mid-2012 and the RTI performance period was completed in 2011. Therefore, we expect our contract revenues to decline in the second half of 2012,
absent any new collaborations, and will be comprised primarily of manufacturing service revenue under the Pfizer arrangement and potential RTI milestone payments. Grant revenue decreased $0.9 million for the year ended December 31, 2011
compared to the year ended December 31, 2010 primarily due to the timing of expenditures that are reimbursed with grant proceeds and a grant received in October 2010 from the Internal Revenue Service under section 48D of the Internal Revenue
Code aggregating $733,000 for qualifying therapeutic discovery investments. 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
$18.9 million for the year ended December 31, 2011 from $14.8 million in 2010. The increase of approximately $4.1 million related primarily to an increase in clinical and preclinical development costs of $3.1 million, an increase in
personnel costs of $517,000, an increase in sponsored research costs of $259,000, an increase in patent legal fees of $226,000, an increase in other costs of $216,000, and an increase in research supply and facilities costs of $172,000 for the year
ended December 31, 2011 compared to
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2010. These increases were partially offset by a decrease in stock-based compensation expense of $340,000, which declined as a result of a significant number of options becoming fully vested in
2010. The increase in clinical and preclinical development costs for the year ended December 31, 2011 related primarily to costs associated with our MultiStem clinical trials, including increased manufacturing and process development costs. Our
clinical costs for the year ended December 31, 2011 and 2010 are reflected net of Angiotech's cost-sharing amount of $312,000 and $628,000, respectively. The Angiotech collaboration was terminated late in 2011. 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. Sponsored research costs increased primarily due to an increase in grant-funded programs
that require collaboration with certain academic research institutions. Patent legal fees increased related to international patent prosecution activities. We expect our research and development expenses to remain relatively consistent in 2012, but
would be expected to increase if we receive proceeds from additional financing or business development activities. 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 decreased to $4.9 million in 2011 from $5.4 million in 2010. The $471,000 decrease in 2011 compared to 2010 was due primarily to a decrease in stock-based compensation
expense of $574,000 from a significant number of options becoming fully vested in 2010, partially offset by an increase in other expenses of $81,000. We expect our general and administrative expenses to continue at similar levels in 2012.
Depreciation.
Depreciation expense remained fairly consistent at $278,000 in 2011 and
$284,000 in 2010.
Interest Income.
Interest income represents interest earned on our
cash and available-for-sale securities. Interest income decreased to $85,000 in 2011 from $203,000 in 2010 due to the decline in our investment balances as they are used to fund our operations. We expect our 2012 interest income to reflect the
impact of declining cash balances resulting from our ongoing and planned clinical and preclinical development, and interest earned on proceeds from any new financings or business transactions.
Other Expense, net.
Other expense, net, includes foreign currency gains and losses related to our
activities in Europe and any realized gains and losses on the sale of our assets. Also included in other expense in 2011 are milestone payments aggregating $910,000 to our former lenders that was paid in connection with our February 2011 registered
direct offering and our Aspire Capital equity purchase agreement, 75% of which was settled in shares of common stock. Also included in net other income is $812,000 recorded in 2011, reflecting a decrease in the warrant liability that resulted from
our February 2011 registered direct offering, with changes in market value reflected as either other income or expense.
Year Ended December 31, 2010 Compared to Year Ended December 31, 2009
Revenues.
Revenues increased to $8.9 million for the year ended December 31, 2010 from $2.2
million for 2009. Contract revenue increased $5.6 million for the year ended December 31, 2010 compared to the year ended December 31, 2009 primarily as a result of our collaboration with Pfizer that we entered into in December 2009 and
our collaboration with RTI that we entered into in September 2010. Contract revenues for the year ended December 31, 2010 primarily consist of the recognition of revenue from these multi-element arrangements. Grant revenue increased $1.2
million for the year ended December 31, 2010 compared to the year ended December 31, 2009 primarily due a grant received in October 2010 from the Internal Revenue Service under section 48D of the Internal Revenue Code aggregating $733,000
for qualifying therapeutic discovery investments, as well as additional new grants that began late in 2009 and in 2010.
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Research and Development Expenses
.    Research and
development expenses increased to $14.8 million for the year ended December 31, 2010 from $11.9 million in 2009. The increase of approximately $2.9 million related primarily to an increase in clinical and preclinical development costs of
$2.5 million, an increase in personnel costs of $517,000, an increase in research supply costs of $311,000 and an increase in sponsored research costs of $271,000 for the year ended December 31, 2010 compared to 2009. These increases were
partially offset by a decrease in stock-based compensation expense of $751,000, which declined as a result of a significant number of options becoming fully vested mid-2010. The increase in clinical and preclinical development costs for the year
ended December 31, 2010 related primarily to increased manufacturing and process development costs, and costs associated with our MultiStem clinical trials. Our clinical costs for the year ended December 31, 2010 and 2009 are reflected net
of Angiotech's cost-sharing amount of $628,000 and $847,000, respectively. The increase in personnel costs and research supplies related to the addition of personnel in support of our preclinical and clinical programs and regulatory affairs.
Sponsored research costs increased primarily due to grant-funded programs that require collaboration with certain academic research institutions. 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 decreased to $5.4 million in 2010 from $5.6 million in 2009. The $234,000 decrease was due primarily to a decrease in stock-based compensation expense of $591,000,
partially offset by an increase in other expenses of $364,000 in 2010 compared to 2009. The decrease in stock-based compensation expense related to a significant number of options becoming fully vested mid-2010. The increase in other expenses for
2010 was primarily a result of increased investor and public relations costs and travel costs.
Depreciation.
Depreciation expense increased to $284,000 in 2010 from $233,000 in 2009. The increase
in depreciation expense was due to depreciation on capital purchases made in 2010.
Other Expense,
net.
Included in other expense are impairment losses of $46,000 and $115,000 in 2010 and 2009, respectively, related to an investment in a privately-held company.
Interest Income.
Interest income decreased to $203,000 in 2010 from $375,000 in 2009. The change in
interest income was due to the decline in cash and investment balances during the period. We expect our 2011 interest income to continue at similar levels in 2011, taking into consideration the expected increase in our clinical development costs in
2011 and the investment of the proceeds from the February 2011 registered direct offering.
Liquidity and Capital Resources
Our sources of liquidity include our cash balances and any available-for-sale securities on hand. At June 30, 2012
and September 30, 2012, respectively, we had $10.9 million and $7.9 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 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 full ratchet anti-dilution price protection, subject to certain exceptions
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In November 2011, we entered into the Aspire 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 Aspire Purchase 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. During the quarter ended June 30, 2012, we sold 100,000 shares to Aspire Capital at an average price of $1.45 per share, and during
the six-month period ended June 30, 2012, we sold 300,000 shares to Aspire Capital at an average price of $1.72 per share. As of September 30, 2012, we received aggregate gross proceeds of $2.3 million under the equity purchase agreement
since its inception.
In February 2011, we completed a registered direct offering with net proceeds of $11.8 million through
the issuance of 4,366,667 shares of common stock and five-year warrants to purchase 1,310,000 shares of common stock with an exercise price of $3.55 per share. The securities were sold in multiples of a fixed combination of one share of common stock
and a warrant to purchase 0.3 of a share of common stock at an offering price of $3.00 per fixed combination.
In connection
with our equity offerings, our former lenders are entitled to milestone payments until the remaining balance of an original $2.25 million milestone is paid, and we can elect to settle up to 75% of any milestone payments through the issuance of our
common stock. The remaining balance of the milestone is $389,000 at June 30, 2012. We made cash and stock-based milestone payments of $952,000 to our former lenders during the six-month period ended June 30, 2012. Further payments will be
made upon the occurrence of certain events as follows: (1) the entire amount upon (a) the merger with or into another entity where our stockholders do not hold at least a majority of the voting power of the surviving entity, (b) the
sale of all or substantially all of our assets, or (c) our liquidation or dissolution; or (2) a portion of the amount from proceeds of equity financings not tied to specific research and development activities that are part of a research
or development collaboration, in which case, the lenders will receive an amount equal to 10% of proceeds until the milestone amount is paid in full. The milestone payment is payable in cash, except that if the milestone event is (2) above, we
may elect to pay 75% of the milestone in shares of common stock at the per-share offering price. The lenders also received seven-year warrants to purchase 149,026 shares of common stock with an exercise price of $5.00 upon the closing of our equity
offering in June 2007. The exercise of such warrants could provide us with cash proceeds. No warrants were exercised as of June 30, 2012.
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, 2012. 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 would then share development and commercialization expenses and profits/losses on an agreed basis beginning at Phase III clinical development.
In November 2011, we reached an agreement with Angiotech to terminate the collaboration agreement and license between the parties,
reflecting a change in Angiotech's business and financial strategy. As a result of the termination, we regained ownership of all rights for developing our stem cell technologies and products for cardiovascular disease indications, including
AMI, congestive heart failure, chronic ischemia, and peripheral vascular disease, and Angiotech no longer has any license rights or options with respect to our technologies and products. In the case of a new AMI collaboration, Angiotech will be
entitled to a future payment from us equal to a percentage of cash license fee payments we receive within the first six months from a third-party related to such AMI collaboration, and is not entitled to other downstream payments, such as milestone
payments, royalties or any profit-sharing payments. The future
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payment, if any, will be either (i) 25% of third-party license fees if an AMI collaboration is established prior to the initiation of enrollment in a Phase II AMI clinical trial and within
12 months of the termination agreement, (ii) 15% of third-party license fees if an AMI collaboration is established after the initiation of enrollment in a Phase II AMI clinical trial, but before we have spent $5.0 million on the clinical
trial, and within 24 months of the termination agreement, or (iii) 10% of third-party license fees up to a maximum of $5.0 million to Angiotech if an AMI collaboration is established after the initiation of enrollment in a Phase II AMI clinical
trial, and after we have spent $5.0 million on the clinical trial, and within 36 months of the termination agreement.
Under
the terms of our RTI agreement, we initially received $3.0 million of guaranteed license fee payments and were entitled to an additional $2.0 million in license fee payments that were contingent upon future events. In September 2012, RTI agreed to
make these payments in full by December 31, 2012, and we agreed to provide RTI with certain technical support. In accordance with the agreement, we are also eligible to receive an additional $35.5 million in cash payments upon the successful
achievement of certain commercial milestones, though there can be no assurance that such milestones will be achieved. In addition, we will receive tiered royalties on 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. As of June 30, 2012, we
received an aggregate amount of $1.7 million in milestone payments and $9.6 million in license fees since the inception of our collaboration with Bristol-Myers Squibb.
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, 2012,
we have drawn $50,000 of this financing.
In February 2012, we were awarded grant funding aggregating $3.6 million to further
advance our MultiStem product programs and cell therapy platform. Specifically, we were awarded a Small Business Innovation Research Fast-Track grant of up to $1.9 million from the National Institute of Neurological Disorders and Stroke to develop
MultiStem for the treatment of traumatic brain injury. In addition, our subsidiary based in Belgium was awarded a $1.2 million (€0.9 million) grant from Belgium's Agency for Innovation by Science and Technology to further develop cell
therapy formulations and manufacturing capabilities, as well as $0.5 million in funding from a local grant to work in other areas, such as using MultiStem to treat chronic cardiovascular disease.
In 2011, we entered into an alliance with Fast Forward, a nonprofit subsidiary of the National Multiple Sclerosis Society, pursuant to
which Fast Forward will fund the development of MultiStem for the treatment of multiple sclerosis, or MS, through the filing of an IND. Fast Forward will commit up to $640,000 to fund the advancement of the program to clinical development stage. In
return, upon successful achievement of certain development and commercialization milestones, we would remit certain milestone payments to Fast Forward.
When we hold investments, our available-for-sale securities typically include United States government obligations and corporate debt securities. We have been investing conservatively due
to the ongoing economic conditions and have prioritized liquidity and the preservation of principal in lieu of potentially
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higher returns. As a result, we have experienced no losses on the principal of our investments and have held our investments until maturity. All available-for-sale securities were matured as of
June 30, 2012. Also, although the unfavorable market and economic conditions have resulted in a decrease to our market capitalization, there has been no impairment to the value of our assets. Our fixed assets are used for internal research and
development and, therefore, are not directly impacted by these external factors.
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, 2012, we had available cash and cash equivalents of $10.9 million. Assuming
no new financings or collaborations and based on our current business and operational plans, we would expect to have available cash to fund our planned operations into the first quarter of 2013. However, we expect to have access to additional
capital through business development opportunities, which we are actively exploring for certain of our MultiStem programs and our 5HT2c small molecule program for obesity and potentially other indications, as well as grant-funding opportunities. We
will continue to explore and consider new opportunities for funding our operations through grants and business partnerships involving our technologies and product candidates. Additionally, we expect to raise capital over the next twelve months by
accessing the capital markets through the sale of equity, including pursuant to this offering and through the Aspire Purchase Agreement, subject to its volume and price limitations. Further, we may consider alternative financing approaches, such as
debt or monetizing future royalty streams. Although no assurance on the future success of the aforementioned actions can be provided, we also manage our cash through deferring certain discretionary costs and staging certain development costs to
extend our operational runway, as needed.
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 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.
Cash Flow Analysis
Net cash used in operating activities was $10.4 million for the six months ended June 30, 2012 and $5.8 million for the six months ended June 30, 2011, and represented the
use of cash in funding preclinical and clinical product development activities. Net cash used in operating activities has fluctuated significantly over the past several quarters primarily due to the receipt of milestone payments and specific
clinical trial costs. Taking into account working capital fluctuations, which reflect the receipt of milestone payments and timing of certain payments related to clinical activities, the increase in recent quarters reflects predominantly an increase
in clinical development costs during the periods. Such increases include the cost impact of the Phase II stroke trial and the upfront costs associated with its launch, and the timing of payments for manufacturing product for the Phase II IBD
clinical trial and reimbursements from Pfizer. We anticipate that net cash used in operating activities will fluctuate in the
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remaining quarters of 2012 in connection with the fluctuations and changes in activity associated with the MultiStem clinical trials, the timing of clinical manufacturing, and the receipt of
potential milestone payments.
Net cash provided by investing activities was $4.0 million for the six months ended
June 30, 2012, and net cash used in investing activities was $3.4 million for the six months ended June 30, 2011. The fluctuations from period to period were due to the timing of purchases and maturity dates of investments and the purchase
of equipment. Purchases of equipment were $237,000 and $377,000 for the first half of 2012 and 2011, respectively. We anticipate that our overall capital equipment expenditures will be similar in 2012 compared to 2011.
Net cash provided from financing activities was $8.5 million for the six months ended June 30, 2012 and $11.8 million for the six
months ended June 30, 2011 primarily as a result of our equity offerings during each of those periods.
Net cash used in
operating activities was $14.5 million, $10.6 million and $4.6 million in 2011, 2010 and 2009, respectively, and represented the use of cash in funding preclinical and clinical development activities. We expect that net cash used in operating
activities will increase in 2012 compared to 2011 in connection with increased research and development expenses of our MultiStem clinical trials and later stage clinical development.
Net cash provided by investing activities was $8.6 million, $1.5 million and $3.2 million in 2011, 2010 and 2009, respectively. The fluctuations from period to period were due to the
timing of purchases and maturity dates of investments and the purchase of equipment. Purchases of equipment were $590,000, $390,000 and $381,000 in 2011, 2010 and 2009, respectively. We expect that our capital equipment expenditures will continue at
similar levels in 2012 compared to 2011.
Financing activities provided cash of $12.6 million in 2011 related to the February
2011 registered direct offering and the initial Aspire Capital investment in November 2011, and financing activities neither used nor provided cash in 2010 and 2009.
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 $2.07 per share, 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. Our former lenders also received seven-year warrants to
purchase 149,026 shares of common stock with an exercise price of $5.00 upon the closing of our equity offering in June 2007. The exercise of such warrants could provide us with cash proceeds. No warrants have been exercised at June 30, 2012.
Our contractual payment obligations as of December 31, 2011 are as follows:
Payment due by Period
Contractual Obligations
Total
Less
than
1 Year
1—3
Years
3—5
Years
More than
5 Years
Operating leases for facilities and equipment leases
$
456,000
$
384,000
$
72,000
$
—
$
—
Research funding
135,000
135,000
—
—
—
Total
$
591,000
$
519,000
$
72,000
$
—
$
—
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We lease office and laboratory space under an operating lease. The lease began in 2000 and
currently expires in March 2013, and we expect to extend the lease option periods. Our rent is $267,000 per year and our rental rate has not changed since the lease inception in 2000. Also, we lease office and laboratory space for our Belgian
subsidiary that includes options to renew annually through December 2014 and the annual rent is subject to adjustments based on an inflationary index. We executed an option to renew this lease through December 31, 2012. Our annual rent in
Belgium was $93,000 in 2011.
The research funding in the table above represents our current funding commitment for a research
program that began in 2007 and ended in August 2012.
In connection with our private placement in March 2012, we were required
to file a resale registration statement with the SEC for 8,695,654 shares of common stock, which includes all shares of common stock issued in the equity offering in March 2012 and shares of common stock issuable upon exercise of the warrants issued
in the offering. If the registration statement, which has been declared effective, ceases to remain effective, a 1% cash penalty will be assessed upon a default under the registration rights agreement and for each 30-day period until the default is
cured during the first year after the closing of the private placement, capped at 10% the aggregate gross proceeds we received from the private placement. Because the penalty is based on the number of unregistered shares of common stock held by
investors in the offering, our maximum penalty exposure will decline over time as investors sell their shares of common stock that are required to be included in the registration statement.
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 operation 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 United States generally accepted accounting principles. The preparation of these financial statements requires us to make estimates on experience and on various
assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may
differ from those estimates.
A discussion of the material implications of uncertainties associated with the methods,
assumptions and estimates underlying our critical accounting polices is as follows:
Revenue Recognition
Our license and collaboration agreements may contain multiple elements, including license and technology access fees,
research and development funding, manufacturing revenue, cost-sharing, milestones and royalties. The deliverables under such an arrangement are evaluated under Accounting Standards Codification, or ASC, 605-25,
Multiple-Element Arrangements.
Effective January 1, 2011, we adopted ASU 2009-13, Multiple-Deliverable Revenue Arrangements, or ASU 2009-13, which amended the guidance in ASC 605-25 on the accounting for arrangements involving the delivery of more than one element. Pursuant
to the new standard, each required deliverable is evaluated to determine whether it qualifies as a separate unit of accounting based on whether the deliverable has "stand–alone value" to the customer. The arrangement's
consideration that is fixed or determinable is then allocated to each separate unit of accounting based on the relative selling price of each deliverable. In general, the consideration allocated to each unit of accounting is recognized as the
related goods or services are delivered, limited to the consideration that is not contingent upon future deliverables.
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We adopted this new accounting standard on a prospective basis for agreements containing
multiple elements entered into on or after January 1, 2011, and for any agreements entered into prior to January 1, 2011, but materially modified on or after that date.
The primary impact of adopting the new standard is expected to be the earlier recognition of revenue for multiple element arrangements. The adoption of ASU 2009-13 did not have a material
impact on our consolidated results of operations for the year ended December 31, 2011, or on our financial position as of December 31, 2011. The impact of adopting this new accounting standard is dependent on the terms and conditions of
any future arrangements that we may enter into that include multiple elements and arrangements entered into prior to January 1, 2011 that are materially modified. Depending on the terms of any such arrangements, the adoption of this accounting
standard may have a material impact on our consolidated results of operations or financial position as it may have the potential effect of less revenue deferral for new collaborations than we have historically experienced. We recognized revenue of
$7.9 million for the year ended December 31, 2011 and deferred revenue of $3.0 million as of December 31, 2011 pertaining to collaborations which were entered into prior to our adoption of ASU 2009-13 and which were not modified on or
after January 1, 2011. The performance period for our multiple element arrangements has concluded.
For agreements
entered into prior to January 1, 2011 and not materially modified thereafter, we continue to apply our prior accounting policy with respect to such arrangements. Under this policy, the deliverables under the arrangement are evaluated to assess
whether they have standalone value and objective and reliable evidence of fair value, and if so, are accounted for as a single unit. We then recognize revenue for each unit based on the culmination of the earnings process under ASC 605-S25, issued
as Staff Accounting Bulletin, or SAB, Topic 13, and our estimated performance period for the single units of accounting based on the specific terms of each collaborative agreement. We subsequently adjust the estimated performance periods, if
appropriate, on a prospective basis based upon available facts and circumstances. Future changes in estimates of the performance period may materially impact the timing of future revenue recognized. Amounts received prior to satisfying the revenue
recognition criteria for contract revenues are recorded as deferred revenue in the accompanying balance sheets. Reimbursement amounts (other than those accounted for using collaboration accounting) paid to us are recorded on a gross basis in the
statements of operations as contract revenues.
Effective January 1, 2011, we adopted ASU 2010 – 17,
Revenue
Recognition—Milestone Method
. The adoption of the new standard did not have a material impact on our consolidated results of operations for the year ended December 31, 2011 or on our financial position as of December 31, 2011 as
we had been recognizing revenue from at-risk, performance milestones that are substantive in the period that the milestone is achieved, as defined in the respective contracts.
We entered into collaboration agreements with Pfizer and RTI that contain multiple elements and deliverables. For a description of the collaboration agreement and the determination of
contract revenues, see Note E to our audited consolidated financial statements incorporated by reference into this prospectus.
Also included in contract revenue are license fees received from Bristol-Myers Squibb, which are specifically set forth in the license
and collaboration agreement as amounts due to us based on our completion of certain tasks (e.g., delivery and acceptance of a cell line) and development milestones (e.g., clinical trial Phases), and as such, are not based on estimates that are
susceptible to change. Such amounts are invoiced and recorded as revenue as tasks are completed and as milestones are achieved.
Similarly, grant revenue consists of funding under cost reimbursement programs primarily from federal and state sources for qualified
research and development activities performed by us, and as such, are not based on estimates that are susceptible to change. Such amounts are invoiced (unless prepaid) and recorded as revenue as tasks are completed.
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Collaborative Arrangements
Collaborative arrangements that involve cost or future profit sharing are reviewed to determine the nature of the arrangement and the
nature of the collaborative parties' businesses. The arrangements are also reviewed to determine if one party has sole or primary responsibility for an activity, or whether the parties have shared responsibility for the activity. If
responsibility for an activity is shared and there is no principal party, then the related costs of that activity are recognized by us on a net basis in the statement of operations (e.g., total cost less reimbursement from collaborator). If we are
deemed to be the principal party for an activity, then the costs and revenues associated with that activity are recognized on a gross basis in the statement of operations. The accounting may be susceptible to change if the nature of a
collaborator's business changes. Currently, our only collaboration accounted for on a net basis is our cost-sharing collaboration with Angiotech, which was terminated in 2011.
Clinical Trial Costs
Clinical trial costs are
accrued based on work performed by outside contractors, who manage and perform the trials. We obtain initial estimates of total costs based on enrollment of subjects, project management estimates and other activities. Actual costs are typically
charged to us and recognized as the tasks are completed by the contractor, and if we are invoiced based on progress payments as opposed to actual costs, we develop estimates of work completed to date. Accrued clinical trial costs may be subject to
revisions as clinical trials progress, and any revisions are recorded in the period in which the facts that give rise to the revisions become known.
Investments in Available-for-Sale Securities
We
determine the appropriate classification of investment securities at the time of purchase and re-evaluate such designation as of each balance sheet date. Our investments typically consist primarily of United States government obligations and
corporate debt securities, which are classified as available-for-sale and are valued based on quoted prices in active markets for identical assets (Level 1). Available-for-sale securities are carried at fair value, with the unrealized gains and
losses, net of tax, reported as a component of accumulated other comprehensive income. The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization or accretion is included
in interest income. Realized gains and losses on available-for-sale securities are included in interest income. The cost of securities sold is based on the specific identification method. Interest earned on securities classified as
available-for-sale is included in interest income. Since the elements related to accounting for these investments are reflected on monthly statements, the amounts are not based on estimates that are susceptible to change. None of our financial
assets are in markets that are not active.
Stock-Based Compensation
We recognize stock-based compensation expense on the straight-line method and use a Black-Scholes option-pricing model to estimate the
grant-date fair value of share-based awards. The expected term of options granted represent the period of time that option grants are expected to be outstanding. We use the "simplified" method to calculate the expected life of option
grants given our limited history and beginning in 2010, determine volatility by using our historical stock volatility. Prior to 2010, we determined volatility by using the historical stock volatility of other companies with similar characteristics
since we did not have meaningful historical volatility of our own stock at that time. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by persons who receive equity awards.
Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those
estimates and if our expectations on forfeitures changes. If actual forfeitures vary from the estimate, we will recognize the difference in compensation expense in the period the actual forfeitures occur or when options vest.
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All of the aforementioned estimates and assumptions are evaluated on a quarterly basis and
may change as facts and circumstances warrant. Changes in these assumptions can materially affect the estimate of the fair value of our share-based payments and the related amount recognized in our financial statements.
Recently Issued Accounting Standards Not Yet Adopted at December 31, 2011
In May 2011, the FASB issued changes to fair value measurement. This change clarifies the concepts related to highest and best use and
valuation premise, blockage factors and other premiums and discounts, the fair value measurement of financial instruments held in a portfolio and of those instruments classified as a component of shareholders' equity. The guidance includes
enhanced disclosure requirements about recurring Level 3 fair value measurements, the use of nonfinancial assets, and the level in the fair value hierarchy of assets and liabilities not recorded at fair value. The provisions are effective
prospectively for interim and annual periods beginning on or after December 15, 2011 and became effective for us on January 1, 2012. Early application was prohibited. This required changes in presentation only and did not have a material
impact on our consolidated financial statements.
In June 2011, the FASB issued changes to the presentation of comprehensive
income. These changes give an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two
separate but consecutive statements; the option to present components of other comprehensive income as part of the statement of changes in shareholders' equity was eliminated. The items that must be reported in other comprehensive income or
when an item of other comprehensive income must be reclassified to net income were not changed. Additionally, no changes were made to the calculation and presentation of earnings per share. These changes became effective for us on January 1,
2012. We chose to present comprehensive income in a single continuous statement. Other than the change in presentation, which is further described elsewhere in this prospectus under "Selected Consolidated Financial Data," the adoption of
this pronouncement did not have an impact on our consolidated financial statements.
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. As of June 30, 2012, we had no investments. 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, 2012, we had no
borrowings outstanding other than a forgivable note payable associated with local grant funding bearing fixed, forgivable interest of 4.25% per annum.
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BUSINESS
We are an international biotechnology company that is focused primarily in the field of regenerative medicine. We are
committed to the discovery and development of best-in-class therapies designed to extend and enhance the quality of human life 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 & immune disorders, neurological conditions, cardiovascular disease, and other conditions. These represent major areas of clinical need, as well as substantial commercial opportunities.
We believe MultiStem represents a breakthrough in the field of regenerative medicine and stem cell therapy and could be used to treat a
range of disease indications. MultiStem is a patented and proprietary product that enhances tissue repair and healing in multiple ways, including reducing inflammatory damage, protecting tissue that is at risk following acute or ischemic injury, and
promoting formation of new blood vessels in regions of ischemic injury. The cells comprising MultiStem appear to be responsive to the environment in which they are administered, homing to sites of injury and active disease response and producing
proteins that may provide benefit in acute or chronic conditions. In contrast to traditional pharmaceutical products or biologics that generally act through a single biological mechanism of action, the MultiStem product can enhance healing and
tissue repair through multiple distinct mechanisms acting simultaneously, by producing a range of therapeutic factors and dynamically responding to the needs of the body—resulting in a more effective therapeutic response.
The MultiStem product is unique among regenerative medicine approaches, because it can be manufactured on a large scale, may be
administered in an "off-the-shelf" manner with minimal processing, and can augment healing in multiple ways, providing biological potency other cell therapy approaches cannot. Additionally, the MultiStem product has demonstrated a
consistent safety profile in both preclinical and clinical studies. Like drugs and biologics, the product is cleared from the body over time, enhancing product safety relative to other types of stem cell therapy. While the product does not
permanently engraft in the patient, the therapeutic effects of treatment with MultiStem cells appear to be quite durable.
We
believe the therapeutic and commercial potential for MultiStem to be very broad, applying to many areas of significant unmet medical need. We are pursuing opportunities in several potential multi-billion dollar markets. While traditional
pharmaceuticals or biologic therapies typically may be used to treat only a single disease or narrowly defined set of related conditions, MultiStem appears to have far broader potential and could be developed in different formulations and with
different delivery approaches to efficiently treat a range of disease indications.
We have already evaluated the use of
MultiStem as a potential treatment for a range of disease indications. Working with an international network of leading investigators and prominent research and clinical institutions, and through our own internal efforts, we have explored the
potential for MultiStem to be used in acute and chronic forms of inflammatory & immune disorders, neurological conditions, cardiovascular disease, certain pulmonary conditions, and other areas.
To date, we have successfully advanced MultiStem product candidates into five clinical stage programs, each of which addresses a
significant area of medical need, and represents a large commercial market opportunity. MultiStem has been evaluated in two completed clinical trials, one exploring the potential to treat patients that have suffered a heart attack and the other
evaluating the potential to reduce GvHD, as well as other complications, and to provide supportive care to patients being treated for leukemia or related conditions. MultiStem is currently being evaluated in two additional clinical programs in the
inflammatory & immune disease and neurological areas. In one study, which is being conducted with our
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partner Pfizer, MultiStem is being administered to patients with IBD. In another ongoing study, we are evaluating the potential to treat patients that have suffered neurological damage from a
stroke. In addition, a leading clinical center in Europe, and a research collaborator, has recently received authorization to conduct an initial clinical trial evaluating administration of MultiStem in patients that have received a solid organ
transplant.
In addition to our MultiStem programs, we have applied our pharmaceutical discovery capabilities to identify and
develop novel pharmaceuticals to treat obesity, related metabolic conditions such as diabetes, and certain neurological indications such as schizophrenia, as well as small molecule compounds that may be used to enhance the production or therapeutic
effectiveness of MultiStem or related products, increase the product's biological potency for certain indications and lead to second or third generation products in the regenerative medicine area. Our 5HT2c agonist program for obesity works by
the same mechanism as Lorcaserin, which was recently approved by the FDA for the treatment of obesity. However, we believe our compounds may have the potential for providing superior weight loss performance, while also achieving a superior safety
and tolerability profile. In addition, we have demonstrated our compounds are complementary with other agents that have been approved by the FDA for treating obesity. Furthermore, certain compounds that we developed may also have relevance in other
disease areas, such as the treatment of schizophrenia. We are actively exploring partnership opportunities for our 5HT2c program in born the obesity and schizophrenia areas.
Business Strategy
Our principal business objective is to
discover, develop and commercialize novel therapeutic products for disease indications that represent significant areas of clinical need and commercial opportunity. The key elements of our strategy are outlined below.
•
Efficiently Conduct Clinical Development to Establish Clinical Proof of Concept and Biological Activity with our Lead Product
Candidates.
MultiStem represents a novel therapeutic modality for the treatment of inflammatory & immune system disorders, neurological conditions and cardiovascular disease, as well as in other areas.
MultiStem may be administered like other biologics, intravenously, via catheter, or by local injection. The cells appear to be responsive to their environment, homing to sites of injury and active disease response and producing proteins that may
provide benefit in acute or chronic conditions. Additionally, MultiStem cell therapy may deliver therapeutic benefit through several distinct mechanisms of action, including reducing inflammatory damage, protecting tissue that is at risk following
acute or ischemic injury, and promoting formation of new blood vessels in regions of ischemic injury. We are conducting a number of clinical studies with the intent to establish proof of concept and/or proof of biological activity in a number of
important disease areas where the cell therapies would be expected to have benefit – inflammatory & immune system dysfunctions, neurological conditions and cardiovascular disease. Our focus is on conducting well-designed studies early
in the clinical development process to establish a robust foundation for subsequent development, partnership and expansion into complementary areas. We are committed to a rigorous clinical and regulatory framework, which we believe has helped to
advance our programs efficiently, and is also a result of the quality of our regulatory submissions and transparency in our discussions with the FDA have resulted in a successful regulatory partnership that has helped to advance our programs
efficiently.
•
Continue to Refine and Improve our Manufacturing and Related Processes and Deepen our Understanding of Therapeutic Mechanisms of
Action.
A key aspect of MultiStem is its substantial expansion capacity
ex vivo
relative to other cell types. This enables large scale production of the clinical product, which enables greater consistency,
specificity and cost of goods advantages over other cell therapies. We plan to build on this intrinsic biological advantage by continuing to advance and optimize our production and process development
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approaches, further developing new manufacturing approaches including our bioreactor platform, and optimizing the plant to bedside supply chain to support late stage development and
commercialization. Additionally, we will continue to refine our understanding of our products' activities and mechanisms of action to enable optimization of administration and dosing and to prepare the foundation for product enhancements and
next generation opportunities.
•
Enter into Licensing or Product Co-Development Arrangements in Certain Areas, while Out-Licensing Opportunities in Non-Core
Areas.
In addition to our internal development efforts, an important part of our product development strategy is to work with collaborators and partners to accelerate product development, reduce our development costs,
and broaden our commercialization capabilities. We have entered into licensing and product co-development arrangements with qualified commercial partners to achieve these objectives. We anticipate that this strategy will help us to develop a
portfolio of high quality product development opportunities, enhance our clinical development and commercialization capabilities, and increase our ability to generate value from our proprietary technologies. Over the past decade, we have entered
into technology licensing arrangements and established product commercialization and co-development partnerships with companies such as Pfizer, Angiotech, Bristol-Myers Squibb, Johnson & Johnson, Wyeth and RTI. These partnerships generate
revenue and provide capital that allows us to advance certain programs further in development.
•
Efficiently Explore New High Potential Therapeutic Applications, Leveraging Third-Party Research Collaborations and our Results
from Related Areas.
Our product candidates have shown promise in multiple disease areas, including in treating inflammatory & immune disorders, neurological conditions, cardiovascular disease, and other areas.
We are committed to exploring potential clinical indications where our therapies may achieve best-in-class profile, and where we can address significant unmet medical needs.
In order to achieve this goal, over the past decade, we have
established collaborative research relationships with investigators from many leading research and clinical institutions across the United States and Europe, including the Cleveland Clinic, Case Western Reserve University, University of Minnesota,
the Medical College of Georgia, the University of Oregon Health Sciences Center, the University of Texas Health Science Center at Houston, the University of Pittsburgh Medical Center, KUL, and other institutions. Through this network of
collaborations, we have studied MultiStem in a range of preclinical models that reflect various types of human disease or injury in the cardiovascular, neurological, and immunological areas. These collaborative relationships have enabled us to cost
effectively explore where MultiStem may have therapeutic relevance, and how it may be utilized to advance treatment over current clinical care. Additionally, we have shown that we can leverage clinical safety data and preclinical results from some
programs to support accelerated clinical development efforts in other areas, saving substantial development time and resources compared to traditional drug development where generally each program is separately developed.
•
Continue to Expand our Intellectual Property Portfolio.
We have a broad intellectual property
estate that covers our proprietary products and technologies, as well as methods of production and methods of use. Our intellectual property is important to our business and we take significant steps to protect its value. We have ongoing research
and development efforts, both through internal activities and through collaborative research activities with others, which aim to develop new intellectual property and enable us to file patent applications that cover new applications of our existing
technologies or product candidates, including MultiStem and other opportunities.
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Our Current Programs
By applying our proprietary MultiStem cell therapy product, we have established therapeutic product development programs treating inflammatory & 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
:
IBD affects an estimated 4 million patients or more in the
United States, Europe, and Japan. Current therapies for treating IBD consist of pharmaceutical and biologic drugs, representing an annual market of more than $5 billion globally. Currently available therapies provide temporary relief or are not
effective for many patients, and novel approaches are needed to improve the standard of care and help patients avoid surgical intervention. MultiStem is being evaluated in an ongoing Phase II clinical study involving administration of MultiStem to
patients suffering from 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, and is a double blind, placebo controlled trial
that began enrolling patients in 2011. Enrollment of the trial is ongoing and designed to include approximately 130 patients, with initial results expected to be reported in 2013.
•
Ischemic Stroke
:
Ischemic stroke affects approximately 15 million people globally each year
and approximately 2 million in the United States, Europe and Japan combined. The clot-dissolving drug tPA must be administered within 3 to 4 hours after the stroke, and as a result of this narrow window, a limited number of patients are treated with
it. We are evaluating in a Phase II clinical study the administration of MultiStem to patients one to two days after they have suffered an ischemic stroke. 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 include
approximately 136 patients. We completed the first patient cohorts, and the independent safety monitoring committee found 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 will be randomized to receive either high dose MultiStem or placebo. We believe this represents a potential market opportunity of more than $15 billion annually.
•
Acute Myocardial Infarction
:
We have evaluated the administration of MultiStem in a Phase I
clinical study to patients that have suffered an 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. One-year follow-up data suggested that the benefit observed was sustained over time. We have completed preliminary planning for a Phase II trial, which has been discussed with the FDA. Our plans to move
the AMI program forward into subsequent development will depend on the availability of capital resources, progress in our other clinical studies and our business development activities.
•
Hematopoietic Stem Cell Transplant / GvHD
:
We have 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 transplant. Such patients are at risk for serious
complications, including 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 February 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
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orphan drug designation from the FDA, which provides us with seven years of market exclusivity upon approval, and certain other benefits. We met with the FDA to discuss the results of the
clinical study and our proposed plans for the next phase of clinical development in this area. We are currently preparing our detailed clinical study plans and look forward to finalizing our design and undertaking operational planning. Based on
current plans, we intend to be ready to start this study in the second half of 2013, but the initiation will depend on the progress in our clinical trials and the achievement of certain business development and financial objectives. There are
approximately 25,000 bone marrow or peripheral blood stem cell allografts performed annually, but we believe many more transplants could be performed if the risks of GvHD could be meaningfully reduced. We believe this indication represents a
potential market opportunity of $500 million annually or more.
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 limited financial support for this investigator-sponsored Phase I study and provide clinical grade product to conduct the trial. According to a report by Reuter's Business Insight, in 2009, approximately 91,000 organ transplants were
conducted. We estimate that this represents a potential market of more than $1.5 billion annually.
In addition to our
current and anticipated clinical development activities, we are engaged in preclinical development and evaluation of MultiStem in other disease indications in the inflammatory & immune disorder, neurological and cardiovascular disease
areas. 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 our current clinical programs (outside
of IBD) and preclinical programs and may, under the right terms, enter into one or more business partnership(s) to advance the 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. RTI's
product development activities are progressing, and in September 2012, we amended our agreement with RTI to accelerate $2.0 million of contingent milestone payments in connection with ongoing technical support to assist RTI in its initial product
launch. As a result, we will receive these milestone payments in 2012, and in addition, RTI will compensate us for this technical assistance. We will also receive royalty revenue from product sales when 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. 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 complementarity of our compounds 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 that exhibit a particular type of selectivity profile in preclinical
models of schizophrenia and observed that these compounds exhibit potent effects. We are in discussions with multiple companies and 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.
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Regenerative Medicine Programs
MultiStem—A Novel Therapeutic Modality
We are developing a proprietary non-embryonic, allogeneic stem cell product candidate, MultiStem, that we believe has potential utility for treating a broad range of diseases and could
have widespread application in the field of clinical regenerative medicine. Unlike traditional bone marrow transplants or other stem cell therapies, MultiStem may be manufactured on a large scale and may be administered without tissue matching or
the need for immune suppression, analogous to type O blood. Potential applications of MultiStem include the treatment of cardiovascular disease, neurological disease or injury and conditions involving the immune system, including autoimmune disease
and other conditions. We believe that MultiStem represents a significant advancement in the field of stem cell therapy and could have broad clinical application. We currently have open INDs for the study of MultiStem in distinct clinical
indications, and a collaborating institution recently obtained authorization in Europe to initiate a clinical program through an investigator sponsored clinical trial application, obtained with our permission and support.
MultiStem is a patented biologic product that is manufactured from human stem cells obtained from adult bone marrow, although these cells
may alternatively be obtained from other tissue sources, which are also covered under our intellectual property. The product consists of a special class of human stem cells that have the ability to express a range of therapeutically relevant
proteins and other factors, as well as form multiple cell types. Factors expressed by MultiStem have the potential to deliver a therapeutic benefit in several ways, such as the reduction of inflammation, regulation of immune system function,
protection of damaged or injured tissue, the formation of new blood vessels in regions of ischemic injury and augmenting tissue repair and healing in other ways. Like drugs, these cells may be stored for an extended period of time (in frozen form)
and used off-the-shelf. Following administration, the cells have been shown to express multiple therapeutically relevant proteins, but unlike a traditional transplant, are subsequently cleared from the body over time like a drug or biologic.
The therapeutic benefit of bone marrow transplantation has been recognized for decades, and its clinical use has grown since
Congress passed the National Organ Transplant Act in 1984 and the National Marrow Donor Registry was established in 1990. However, widespread bone marrow or stem cell transplantation has yet to become a reality. Some of the limitations that have
prevented broader clinical application of bone marrow or stem cell transplantation include the requirement for tissue matching between donor and recipient, the typical need for one donor for each patient (a reflection of the inability to expand
cells in a controlled and reproducible manner), frequent use of immune suppressive drugs to avoid rejection or immune system complications, the inability to efficiently produce significant quantities of stem cells and a range of potential safety
issues.
A stem cell therapy that has the potential to address the challenges mentioned above could represent a breakthrough
in the field of regenerative medicine, since it could greatly expand the clinical application of stem cell therapy or other forms of regenerative medicine. In 2003, we acquired technology originally developed at the University of Minnesota related
to a novel stem cell type, MAPC, that may be isolated from adult bone marrow as well as other nonembryonic tissues. Over the past several years, we have further developed this technology and the manufacturing of these cells for use in ongoing
clinical trials. We refer to the current product platform as MultiStem. During several years of preclinical work, MultiStem has demonstrated the potential to address many of the fundamental limitations observed with traditional bone marrow or
hematopoietic stem cell transplants.
We believe that MultiStem represents a potential best-in-class stem cell therapy because
it exhibits each of the following characteristics based on research and development to date:
•
Broad Plasticity and Multiple Potential Mechanisms of Action.
MultiStem cells have a
demonstrated ability in animal models to form a range of cell types and also appear to be
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able to deliver therapeutic benefit through multiple mechanisms, such as producing factors that protect tissues against damage and inflammation, as well as enhancing or playing a direct role in
revascularization or tissue regeneration.
•
Large Scale Production.
Unlike conventional stem cells, such as blood-forming or
hematopoietic stem cells, mesenchymal stem cells, or other cell types, MultiStem cells may be produced on a large scale, processed, and cryogenically preserved, and then used clinically in a rapid and efficient manner. Material obtained from a
single donor may be used to produce hundreds of thousands or millions of individual doses, representing a yield far greater than other stem cells have been able to achieve.
•
"Off-the-Shelf" Utility.
Unlike traditional bone marrow or hematopoietic stem
cell transplants that require extensive genetic matching between donor and recipient, MultiStem is administered without tissue matching or the requirement for immune suppressive drugs. MultiStem is administered as a cryogenically preserved
allogeneic product, meaning that these cells are not genetically matched between donor and recipient. This feature, combined with the ability to establish large MultiStem banks, could make it practical for clinicians to efficiently deliver stem cell
therapy to a large number of patients.
•
Safety.
Other stem cell types, such as embryonic stem cells or induced pluripotent stem
cells have shown the capacity to form ectopic tissue or teratomas, which are tumor-like growths. These could pose serious safety risks to patients. In contrast, MultiStem cells have shown a consistent and outstanding safety profile that has been
compiled over several years of preclinical study in a range of animal models by a variety of investigators and that is supported by emerging clinical data.
At each step of the MultiStem production process, cells are analyzed according to pre-established criteria to ensure that a consistent, well characterized product candidate is produced.
Cells are harvested from a pre-qualified donor and then expanded to form a Master Cell Bank from which we subsequently produce clinical grade material. In multiple animal models, MultiStem has been shown to be non-immunogenic, and is administered
without the genetic matching that is typically required for conventional bone marrow or stem cell transplantation.
The
distinctive profile of MultiStem allows us to pursue multiple high value commercial opportunities from a single product platform. Based upon work that we and independent collaborators have conducted over the past several years, we believe that
MultiStem has the potential to treat a range of distinct disease indications, including ischemic injury and cardiovascular disease, certain neurological diseases, autoimmune disease, transplant support (including in oncology patients and solid organ
transplant areas), and a range of orphan disease indications. As a result, we believe we will be able to leverage our foundation of safety and efficacy data to add clinical indications efficiently, enabling us to reduce development costs and
timelines substantially.
MultiStem for Treating Immune System Disorders, and Neurological Conditions and Cardiovascular
Disease
Healthcare represents a significant part of the global economy. In the United States, it represented approximately
18% of all economic activity in 2009, or about $2.49 trillion dollars annually. However, the United States, along with many other nations, is experiencing an unprecedented demographic shift that is resulting in a significantly expanded population of
older individuals. According to United States Census data, in the next few years there will be a dramatic increase in the number of individuals over the age of 65, as this segment of the population increases from 40.2 million individuals in
2010 to more than 72 million people in 2030, representing an increase of approximately 80%. The aging of the population will create enormous financial pressure on the healthcare system in the United States and other countries around the world,
resulting in significant clinical challenges, but also resulting in substantial commercial opportunities.
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Data from the National Center for Health Statistics shows that as people get older, they
are more susceptible to a variety of age related conditions, including heart disease, stroke, certain forms of cancer, diabetes, progressive neurological disorders, various chronic inflammatory & immune conditions, renal disease and a range
of others. As a consequence, as people get older they spend far more on healthcare—on average they spend three to seven times more on healthcare annually at age 65 than when they are young and healthy. According to the Alliance for Aging
Research, 83% of healthcare spending is associated with chronic conditions, and other research shows that 62% of healthcare spending is associated with multiple chronic conditions. Traditional medical approaches have failed to adequately address
this problem.
Working with independent investigators at a number of leading institutions, such as the Cleveland Clinic,
University of Minnesota, the National Institutes of Health, the Medical College of Georgia, the University of Oregon Health Sciences Center, the University of Texas Health Science Center at Houston, KUL and other institutions. Through this network
of collaborations, we have studied MultiStem in a range of preclinical models that reflect various types of human disease or injury in the cardiovascular, neurological, and immunological areas. To date, we and our collaborators have published
research results illustrating the potential benefits of MultiStem in a range of indications including myocardial infarction, vascular disease, ischemic stroke, TBI, brain damage due to restricted blood flow in newborns, spinal cord injury, and bone
marrow transplant support/GvHD. In addition, we have explored and intend to further explore, the potential application of MultiStem in the treatment of a range of other conditions, including other forms of cardiovascular disease, neurological
conditions, and immune related disorders.
As stated above, we have consistently observed that MultiStem is safe and effective
in animal models. As a result, we have advanced MultiStem to clinical development stage in four clinical indications or disease areas: treatment of IBD (initially focused on UC); support in the hematologic malignancy setting to reduce certain
complications associated with traditional bone marrow or HSC transplantation; treatment for stroke caused by a blockage of blood flow in the brain; and treatment of damage caused by myocardial infarction. Additionally, in collaboration with a
leading transplant center in Europe, a fifth program in the solid organ transplant area has been advanced to clinical development.
We may expand to other clinical indication areas as results warrant and resources permit.
Immunological Disorders—MultiStem for IBD and HSC Transplant Support
Inflammatory & immune disorders also represent a significant burden to society. There are over 80 recognized autoimmune disorders, which are conditions caused by an acute or
chronic imbalance in the immune system. In these conditions, cells of the immune system begin to attack certain tissues or organs in the body, resulting in tissue damage and loss of function. Some inflammatory & immune conditions are
associated with aging related conditions (e.g., rheumatoid arthritis), but some are due to other causes that may be genetic, environmental or a combination of both (e.g., Type 1 diabetes, IBD). Still other conditions may reflect complications
associated with the treatment of other conditions (e.g., GvHD, a frequent complication associated with transplant procedures used to treat leukemia or related blood-borne cancers). Each of these conditions shares certain biological characteristics,
in that the immune system imbalance results from the inappropriate activation of certain populations of immune cells that results in significant tissue damage and destruction. This immune imbalance may result in a complex cascade of inflammation
that can result in pain, progressive tissue deterioration and loss of function. While currently available immunomodulatory drugs have proven to be effective for many patients, they have failed to adequately address the needs of many other patients
that suffer from inflammatory & immune disorders.
In multiple studies, MultiStem has shown potent immunomodulatory
properties, including the ability to reduce active inflammation through various modes of action, and restore immune system imbalance.
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Accordingly, we believe that MultiStem could have broad application in the area of treating immune system disorders, including certain autoimmune diseases and other conditions, including GvHD,
which is a frequent immunological complication associated with bone marrow or HSC transplantation.
In 2009, we entered into a
collaboration agreement with Pfizer to develop and commercialize MultiStem for the treatment of IBD for the worldwide market. IBD is a group of inflammatory and autoimmune conditions that affect the colon and small intestine, typically resulting in
severe abdominal pain, weight loss, vomiting and diarrhea. The most common forms of the disease include UC and Crohn's disease, which are estimated to affect 4 million people or more in the United States, five major European markets
(United Kingdom, Germany, France, Italy and Spain) and Japan. Chronic IBD can be a severely debilitating condition, and advanced cases may require surgery to remove the affected region of the bowel, and may also require temporary or permanent
colostomy or ileostomy. In many cases, surgery does not achieve a permanent cure, and patients suffer a return of the disease. In 2011, enrollment commenced in our Phase II clinical study being conducted with our partner, Pfizer, to administer
MultiStem to patients suffering from UC.
Another area of focus is the use of MultiStem as adjunctive treatment for HSC/bone
marrow transplant used as therapy in hematologic malignancy. For many types of cancer, such as leukemia or other blood-borne cancers, treatment typically involves radiation therapy or chemotherapy, alone or in combination. Such treatment can
substantially deplete the cells of the blood and immune system, by reducing the number of stem cells in the bone marrow from which they arise. The more intense the radiation treatment or chemotherapy, the more severe the resulting depletion is of
the bone marrow, blood, and immune system. Other tissues may also be affected, such as cells in the digestive tract and in the pulmonary system. The result may be severe anemia, immunodeficiency, substantial reduction in digestive capacity, and
other problems that may result in significant disability or death.
One strategy for treating the depletion of bone marrow is
to perform a peripheral blood stem cell transplant or a bone marrow transplant. This approach may augment the patient's ability to form new blood and immune cells and provide a significant survival advantage. However, finding a closely matched
donor is frequently difficult or even impossible. Even when such a donor is found, in many cases there are immunological complications, such as GvHD, which may result in serious disability or death.
Working with leading experts in the stem cell and bone marrow transplantation field, we have studied MultiStem in animal models of
radiation therapy and GvHD. In multiple animal models, MultiStem has been shown to be non-immunogenic, even when administered without the genetic matching that is typically required for conventional bone marrow or stem cell transplantation.
Furthermore, in animal model systems testing immune reactivity of T-cells against unrelated donor tissue, MultiStem has been shown to suppress the T-cell-mediated immune responses that are an important factor in causing GvHD. MultiStem-treated
animals also displayed a significant increase in survival relative to controls. As a result, we believe that the administration of MultiStem in conjunction with or following standard HSC transplantation may have the potential to reduce the incidence
or severity of complications and may enhance gastrointestinal function, which is frequently compromised as a result of radiation treatment or chemotherapy.
We completed a Phase I clinical trial examining the safety and tolerability of a single dose or repeat dosing of MultiStem administered intravenously to patients receiving a bone marrow or
hematopoietic stem cell transplant as part of their treatment of leukemia or other hematological condition. The trial was an open label, multicenter trial that involved leading experts in the field of bone marrow transplantation. In February 2012,
we announced the top-line results from the trial. We observed a consistent safety profile in both the single and multiple dose arms of the study, and at all dose levels tested. Although the trial was not specifically designed to demonstrate
efficacy, we also observed
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clinically meaningful improvement in medically important parameters relative to historical clinical experience, including reduced incidence and severity of acute GvHD, improved relapse free
survival, no graft failures, and enhanced engraftment rates relative to other forms of treatment.
In September 2010, we
announced that we had been granted orphan drug designation by the FDA for MultiStem in the prevention of GvHD. We met with the FDA to review the results from the Phase I trial and discuss plans for the next phase of clinical development, which could
include a Phase II/III study of MultiStem for GvHD prophylaxis and HSCT support. We are currently preparing our detailed clinical study plans and look forward to finalizing our design and undertaking operational planning. Based on current plans, we
intend to be ready to start this study in the second half of 2013, but the initiation will depend on the progress in our clinical trials and the achievement of certain business development and financial objectives.
Neurological Disease—MultiStem for Ischemic Stroke
Another focus of our regenerative medicine program is the use of MultiStem for the treatment of neurological injury as a result of acute or chronic conditions. Neurological injury and
disease represents an area of significant unmet medical need, a major burden on the healthcare system, and also represents a huge commercial opportunity.
Many neurological conditions require extensive long-term therapy, and many require extended hospitalization and/or institutional care, creating an enormous cost burden. Stroke represents
an area where the clinical need is particularly significant, since it represents a leading cause of death and significant long term disability. Currently, there are approximately 800,000 individuals in the United States that suffer a stroke
each year, more than two million stroke victims in the United States, Europe and Japan combined, and approximately 15 million people that suffer a stroke each year globally. The vast majority of these (approximately 85% to 90%) are ischemic
strokes, that are caused by a blockage of blood flow in the brain, that cuts off the supply of oxygen and nutrients, resulting in eventual tissue loss and long-term damage and disability. The remainder of these are hemorrhagic strokes, which occur
when a blood vessel bursts and bleeding into the brain ensues.
Studies show that in recent years there has been a dramatic
rise in ischemic strokes among young adults (i.e., individuals in the 25 to 45 age group), which is likely due to a combination of rising rates of obesity and other factors. Unfortunately, current therapeutic options for ischemic stroke victims are
limited, as the only available therapy, a clot dissolving agent or "thrombolytic," must be administered within several hours of the occurrence of the stroke. As a consequence of this limited time window, only a small percentage of stroke
victims are treated with the currently available therapy—most simply receive supportive or "palliative" care. The long-term costs of stroke are substantial, with many patients requiring extended hospitalization, extended physical
therapy or rehabilitation (for those patients that are capable of entering such programs), and many require long-term institutional or family care. Similarly, there are other acute and progressive neurological conditions that require substantial
healthcare resources, with limited existing treatment options that are only marginally clinically effective.
We have
published research with independent collaborating investigators that demonstrates that MultiStem conveys biological benefits in preclinical models of ischemic stroke, as well as other models of neurological damage and injury, including TBI, neonatal
hypoxic ischemia (a cause of neurological damage in infants), and spinal cord injury. We have also conducted preclinical work in other neurological areas, and have been awarded grants to support work in areas such as the indications described above
and for evaluating the potential of MultiStem to treat chronic conditions such as Multiple Sclerosis, or MS, or Parkinson's disease. Our research has shown that MultiStem conveys benefits through distinct mechanisms, including reducing
inflammatory damage, protecting at risk tissue at the site of injury, and through direct neurotrophic effects that stimulate the recovery of damaged neurons. As a result, we believe that MultiStem may have relevance to multiple forms of neurological
injury and disease.
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Our initial clinical focus in the neurological area involves evaluating administration of
MultiStem to treat ischemic stroke. Ischemic stroke is a leading cause of death and disability globally, and accounts for approximately 85% of all strokes. Recent progress toward the development of safer and more effective treatments for ischemic
stroke has been disappointing. Despite the fact that ischemic stroke is one of the leading causes of death and disability in the United States, there has been little progress toward the development of treatments that improve the prognosis for stroke
victims. The only FDA-approved drug currently available for ischemic stroke is the anti-clotting factor, tPA. According to current clinical guidelines, tPA must be administered to stroke patients within several hours after the occurrence of the
ischemic stroke to remove the clot while minimizing potential risks, such as bleeding into the brain. Administration of tPA after three to four hours is not recommended, since it can cause cerebral bleeding or even death. Given this limited
therapeutic window, it is estimated that less than 5% of ischemic stroke victims in the United States currently receive treatment with tPA.
In preclinical studies conducted by investigators, including at both the University of Minnesota, the Medical College of Georgia, and the University of Texas Health Science Center at
Houston, significant functional improvements have been observed in rodents that have undergone an experimentally induced stroke, or that have incurred significant neurological damage due to similar types of ischemic events, such as a result of
neonatal hypoxic ischemia or TBI, and then received treatment with MultiStem. Published research has demonstrated that administration of MultiStem even one week after a surgically induced stroke results in substantial long-term therapeutic benefit,
as evidenced by the improvement of treated animals compared with controls in a battery of tests examining mobility, strength, fine motor skills, and other aspects of neurological functional improvement.
Based on the research we and our collaborators have conducted, we believe MultiStem conveys significant benefits through several
mechanisms, including reduction of inflammation and immune system modulation in the ischemic area, and the protection and rescue of damaged or injured cells, including neuronal tissue. Research results presented at the 2011 and 2012 American Heart
Association International Stroke Conference by collaborators from the University of Texas Health Science Center at Houston demonstrated that administration of MultiStem 24 hours following a stroke reduced inflammatory damage in the brain and
resulted in significant functional improvement, and that some of these results were achieved by reducing the inflammatory response emanating from the spleen. These results confirm that MultiStem treatment is well tolerated, does not require
immunosuppression and results in a robust and durable therapeutic benefit, and are consistent with prior results that show MultiStem can provide significant benefits even when administered up to one week after the initial stroke event.
We are currently enrolling patients in a 136-patient Phase II clinical trial exploring the administration of MultiStem to patients that
have suffered an ischemic stroke. In this trial, MultiStem is administered 24 to 36 hours after a stroke has occurred. If shown to be safe and effective, this would represent a significant extension of the treatment window relative to existing
standard of care and could provide an important new therapeutic option for stroke patients. We believe that the potential market for a new therapy to treat stroke could be $15 billion or more annually.
We are also interested in the application of MultiStem for other neurological indications that represent areas of significant unmet
medical need, such as TBI, which represents the leading cause of disability among children and young adults, and a leading cause of death. Approximately 1.7 million cases of TBI are seen in the United States each year, nearly half a million
cases of which are children age 0 to 14 years old. The CDC estimates that more than 5.3 million individuals are living with a disability and have a long-term or lifelong need for help to perform activities of daily living as a result of a TBI. The
annual direct and indirect costs for TBI are approximately $60 billion a year, according to the National Institute of Neurological Disorders and Stroke, which is part of the National Institutes of Health. In preclinical studies of TBI,
administration of MultiStem dramatically reduced the extent of damage caused by a TBI,
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and promoted accelerated healing of the blood-brain barrier. Early in 2012, we announced grant funding aggregating $3.6 million to further advance our MultiStem programs and cell therapy
platform, including further development of MultiStem for the treatment of TBI and further development of our cell therapy formulations and manufacturing capabilities.
We are also conducting preclinical work exploring the application of MultiStem toward in other neurological indications. In June 2010, we announced that we and collaborators at the Center
for Stem Cell and Regenerative Medicine and Case Western Reserve University were awarded $1.0 million through the Ohio Third Frontier Biomedical Program to support preclinical and translational research into the treatment of spinal cord injury, or
SCI, with MultiStem. In October 2011, we announced the award of grant funding of up to $640,000 to investigate the potential for MultiStem to treat chronic progressive MS based on initial results in preclinical models. In October 2012, in
collaboration with scientists from Case Western Reserve University, and with the support of Fast Forward and the National Multiple Sclerosis Society, we reported research results that demonstrate the potential benefits of MultiStem therapy for
treating MS. In standard preclinical models of MS, researchers observed that MultiStem administration results in sustained behavioral improvements, arrests the demyelination process that is central to the pathology of MS, and supports remyelination
of affected axons.
Cardiovascular Disease—Evaluating MultiStem for Treating Damage from a Heart Attack
Cardiovascular disease is an area of significant clinical need that is expected to expand significantly in the
years ahead. Despite treatment advances in recent years, cardiovascular disease remains the leading cause of death, and represents one of the leading causes of disability around the world. In the United States, approximately 1,255,000 patients
suffer a heart attack each year, and approximately 5.7 million individuals in the United States are currently suffering from heart failure. Another eight million suffer from peripheral arterial disease, which is associated with significant
morbidity and mortality. According to projections published recently by the American Heart Association in February 2011 in the journal
Circulation
, aggregate costs for treating heart disease in the United States are expected to soar in the
coming years. In 2010, annual direct costs for treating cardiovascular disease were $273 billion, but by 2030 these are expected to nearly triple, to a projected $818 billion per year. This increase will occur primarily as a result of the aging
population, and may not fully reflect the impact of the dramatic escalation in obesity rates that has occurred for both adults and children in recent years, which could further exacerbate the long-term challenges and increase costs associated with
cardiovascular disease and other conditions.
In a Phase I clinical trial, we have explored the use of MultiStem as a
treatment for damage caused by AMI. Myocardial infarction is one of the leading causes of death and disability in the United States. Myocardial infarction is caused by the blockage of one or more arteries that supply blood to the heart. Such
blockages can be caused, for example, by the rupture of an atherosclerotic plaque deposit. According to the American Heart Association 2012 Statistical Update, there were approximately 935,000 cases of myocardial infarction that occurred in the
United States in 2008 and approximately 7.9 million individuals living in the United States that had previously suffered a heart attack. In addition, there were approximately 812,000 deaths that occurred from all forms of cardiovascular
disease, including 462,000 individuals that died as a result of coronary heart disease or heart failure. A variety of risk factors are associated with an elevated risk of myocardial infarction or atherosclerosis, including age, high blood pressure,
smoking, sedentary lifestyle and genetics. While advances in the diagnosis, prevention and treatment of heart disease have had a positive impact, there is clearly room for improvement—myocardial infarction remains a leading cause of death and
disability in the United States and the rest of the world.
MultiStem has been studied in validated animal models of AMI,
including at both the Cleveland Clinic and the University of Minnesota. Investigators demonstrated that the administration of allogeneic MultiStem into the hearts of animals damaged by experimentally induced heart attacks resulted in
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significant functional improvement in cardiac output and other functional parameters compared with animals that received placebo or no treatment. Furthermore, the administration of
immunosuppressive drug was not required and provided no additional benefit in this study, and supports the concept of using MultiStem as an allogeneic product.
Working with a contract research organization, we completed additional preclinical studies in established pig models of AMI using catheter delivery and examining various factors such as
the route and method of MultiStem administration, dose ranging, and timing of treatment. In 2008, we initiated a multicenter, open-label Phase I clinical trial in this indication, and the study is now completed. In July 2010, we announced the
preliminary results from this trial, which showed that MultiStem was well tolerated at all dose levels and exhibited a favorable safety profile. In addition, patients that received treatment with MultiStem exhibited meaningful improvements in
cardiovascular function, including left ventricular ejection fraction, wall motion scores, and other parameters. These results were recently published in
Circulation Research
in November 2011.
Pharmaceutical Programs
Novel 5HT2c Agonists for the Treatment of Obesity and Other Conditions
Obesity is a substantial contributing factor to a range of diseases that represent the major causes of death and disability in the developed world today. Individuals that are clinically
obese have elevated rates of cardiovascular disease, stroke, certain types of cancer and diabetes. According to the CDC, the incidence of obesity in the United States has increased at an epidemic rate during the past 20 years. CDC now estimates that
almost 70% of all Americans are overweight, including more than one-third that are considered clinically obese. The percentage of young people who are overweight has more than tripled since 1980. There has also been a dramatic rise in the rate of
obesity in Europe and Asia. Despite the magnitude of this problem, current approaches to clinical obesity are largely ineffective, and we are aware of relatively few new therapeutic approaches in clinical development.
We are developing novel pharmaceutical treatments for obesity, which are compounds designed to act by stimulating a
key receptor in the brain that regulates appetite and food intake—the 5HT2c receptor. The role of this receptor in regulating food intake is well understood in both animal models and humans. In 1996, Wyeth launched the anti-obesity drug Redux
®
(dexfenfluramine), a non-specific serotonin receptor agonist that was used with the stimulant
phentermine in a combination commonly known as fen-phen. This diet drug combination gained rapid and widespread acceptance in the clinical marketplace and was shown to be highly effective at regulating appetite, reducing food intake, and causing
significant weight loss. Unfortunately, in addition to stimulating the 5HT2c receptor, Redux also stimulated the 5HT2b receptor that is found in the heart. The activation of 5HT2b by Redux is believed to have caused significant cardiovascular
problems in a number of patients and, as a result, Redux was withdrawn from the market in 1997.
Since the withdrawal of Redux
from the market, several groups have published research and clinical data that implicate stimulation of the 5HT2b receptor as the underlying cause of the cardiovascular problems. These findings suggest that highly selective compounds that stimulate
the 5HT2c receptor, but that do not appreciably stimulate the 5HT2b receptor, could be developed that maintain the desired appetite suppressive effects without the cardiovascular toxicity. Recent clinical data supports this hypothesis and also
suggests that the 5HT2c agonists may also cause a statistically significant reduction in the amount of sugar in the blood, as measured by fasting blood glucose and HbA1c levels, which are both clinically relevant measures for patients suffering from
diabetes.
Recently, the FDA approved Lorcaserin, a 5HT2c agonist, for the treatment of obesity. We believe this represents a
significant event for our program because it illustrates that the FDA recognizes and agrees with the concept that 5HT2c agonists that display appropriate selectivity, biological activity and clinical safety are approvable for indications such as
obesity.
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Our drug development program is focused on creating potent and selective compounds that
stimulate the 5HT2c receptor, but that avoid the 5HT2b receptor and other receptors, such as 5HT2a. Our specific goal has been to develop an orally administered pill that reduces appetite by stimulating the 5HT2c receptor, but that does not
stimulate the 5HT2b receptor, the 5HT2a receptor, or other receptors that could cause adverse side effects. Based on extensive preclinical studies that we have conducted with compounds that we have generated, we have demonstrated the ability to
develop compounds that are highly potent and selective for the 5HT2c receptor, and that lack activity at either 5HT2a or 5HT2b. We believe that this achievement represents a significant advance in the field, and that the potency and selectivity
profile displayed by compounds we are developing will result in substantially better efficacy and a cleaner safety and tolerability profile in clinical trials, as well as a more convenient dosing schedule than other 5HT2c agonist programs including
Lorcaserin. We also evaluated certain of our compounds when administered as a monotherapy or in conjunction with other weight loss agents, and have observed effectiveness with both approaches and complementarity with other agents. We are conducting
preclinical evaluation of novel compounds that we have developed that exhibit outstanding receptor selectivity and are working toward the selection of a clinical development candidate for this program.
Certain potent and highly selective compounds that we have developed display a profile that we believe may have utility in treating
schizophrenia. We evaluated some of these compounds in preclinical models of schizophrenia and have observed that they exhibit efficacy in these models.
We are currently exploring partnering opportunities for this program and may elect to enter into a partnership to advance the development of this program for the treatment of obesity and
related indications, schizophrenia, or multiple indications.
Other Small Molecule Programs & Key Technologies
In addition to our other programs, we believe that there are significant opportunities for synergy between our small
molecule platform and related capabilities and our MultiStem technology. Specifically, we believe that substantial opportunities exist for identifying and utilizing small molecule modulators of therapeutically relevant biological activity exhibited
by MultiStem or other stem cell types. We believe that applying our capabilities in both areas could lead to next generation product development opportunities, including more potent stem cell based therapies that have been optimized for use in
specific indication areas.
In addition to our current product development programs, we developed our patented RAGE technology
that provides us with the ability to produce human cell lines that express specific, biologically well validated drug targets without relying upon cloned and isolated gene sequences. While our RAGE technology is not a therapeutic product, it is a
commercial technology that we have successfully applied for the benefit of our partners and that we have also used for our own internal drug development programs. Modern drug screening approaches typically require the physical isolation and
structural modification of a gene of interest, an approach referred to as gene cloning, in order to create a cell line that expresses a drug target of interest. Researchers may then use the genetically modified cell line to identify pharmaceutical
compounds that inhibit or stimulate the target of interest. The RAGE technology enables us to turn on or amplify the expression of a drug target without having to physically clone or isolate the gene. In effect, the technology works through the
random insertion of tiny, proprietary genetic switches that randomly turn genes on without requiring their physical isolation, or any advance knowledge of their structure. This technology provides us with broad freedom to work with targets that may
be otherwise unavailable as a result of intellectual property restrictions on the use of specific cloned and isolated genes. Over the past several years, we have produced cell lines that express drug targets in a range of disease areas such as
metabolic disease, infectious disease, oncology, cardiovascular disease, inflammation, and central nervous system disorders. Many of these were produced for drug development programs at major pharmaceutical companies that we have collaborated with,
such as Bristol-Myers Squibb, and some have been produced for our internal drug development programs.
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Collaborations and Partnerships
Pfizer
Late in 2009, we entered into a collaboration agreement with Pfizer to develop and commercialize MultiStem for the treatment of IBD for the worldwide market. Under the terms of the
agreement, we received a non-refundable up-front cash payment of $6.0 million from Pfizer and will receive research funding and support during the initial phase of the collaboration. In addition, we are also 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 these milestones, and no significant milestone payments were received as of
June 30, 2012. We are responsible for manufacturing and 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.
The Pfizer
collaboration does not have a specific termination date, but will terminate upon the last to expire royalty term, unless terminated earlier by either party. Either party can terminate the agreement for an uncured material breach or default. Pfizer
is permitted to terminate the agreement upon advance written notice to us if we sustain certain turnover levels for employees working on the program, if our license with the University of Minnesota is terminated, if we experience a specified change
of control event, or in its sole discretion. We can terminate the agreement if a certain milestone event has not occurred by a defined period of time, or if we reasonably believe that Pfizer has failed to satisfy its obligations to progress the
development of the program. Following termination of the agreement by us, all licenses granted to Pfizer to develop and commercialize MultiStem for IBD will terminate, other than certain more limited research licenses, and ownership of regulatory
and clinical data will revert to us. Following termination of the agreement by Pfizer, the licenses granted to Pfizer will remain in effect according to their terms, unless the termination is due to our breach, employee turnover or termination of
the license with University of Minnesota, in which case payments to us will be reduced from what was otherwise payable. Also, if Pfizer terminates in its sole discretion, then Pfizer retains its obligation to fund our research and development costs
as set forth in the agreement.
RTI
In 2010, we entered into an agreement with RTI to develop and commercialize MAPC technology-based biologic implants for certain orthopedic applications in the bone graft substitutes
market. Under the terms of our RTI agreement, we are entitled to a $5.0 million license fee in installments, of which $3.0 million was received in 2010 and 2011, and $2.0 million was contingent upon future events. In September 2012, RTI agreed
to make these $2.0 million license fee payments by December 31, 2012, and we agreed to provide RTI with certain technical support. In accordance with the agreement, we are also eligible to receive an additional $35.5 million in cash payments
upon the successful achievement of certain commercial milestones, though there can be no assurance that such milestones will be achieved. In addition, we will receive tiered royalties on worldwide commercial sales of implants using our technologies.
Angiotech
In November 2011, we reached an agreement with Angiotech to terminate the collaboration agreement and license between the parties, reflecting a change in Angiotech's business and
financial strategy. As a result of the termination, we regained ownership of all rights for developing our stem cell technologies and products for cardiovascular disease indications, including AMI, congestive heart failure, chronic ischemia, and
peripheral vascular disease, and Angiotech no longer has any license rights or options with
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respect to our technologies and products. Angiotech made its final cost-sharing payment in 2011 in connection with collaboration activities and has no further obligations to us. Though the
termination will affect our future costs of development for ongoing cardiovascular programs, such as AMI, it significantly improves our ability to explore cardiovascular and more comprehensive collaborative development and commercialization
arrangements with other pharmaceutical, biotechnology and medical products companies. In the case of a new AMI collaboration, Angiotech will be entitled to a future payment from us equal to a percentage of cash license fee payments we receive within
the first six months from a third-party related to such AMI collaboration, and is not entitled to other downstream payments, such as milestone payments, royalties or any profit-sharing payments. The future payment, if any, will be either
(i) 25% of third-party license fees if an AMI collaboration is established prior to the initiation of enrollment in a Phase II AMI clinical trial and within 12 months of the termination agreement, (ii) 15% of third-party license fees if an
AMI collaboration is established after the initiation of enrollment in a Phase II AMI clinical trial, but before we have spent $5.0 million on the clinical trial, and within 24 months of the termination agreement, or (iii) 10% of
third-party license fees up to a maximum of $5.0 million to Angiotech if an AMI collaboration is established after the initiation of enrollment in a Phase II AMI clinical trial, and after we have spent $5.0 million on the clinical trial, and
within 36 months of the termination agreement.
Bristol-Myers Squibb
In 2000, we entered into a collaboration with Bristol-Myers Squibb to provide cell lines expressing well validated drug targets produced
using our RAGE technology for compound screening and development. This initial collaboration was expanded in 2002 and again in 2006, and was in its final phase as amended in 2009. Bristol-Myers Squibb uses the cell lines in its internal drug
development programs and, in exchange, we receive license fee and milestone payments and will be entitled to receive royalties on the sale of any approved products. Depending on the use of a cell line by Bristol-Myers Squibb and the progress of drug
development programs benefiting from the use of such a cell line, we may receive as much as approximately $5.5 million per cell line in additional license fees and milestone payments, though we cannot assure you that any further milestones will be
achieved or that we will receive any additional milestone payments. In 2008, Bristol-Myers Squibb successfully advanced into Phase II clinical development a drug candidate discovered using a target provided by us, thereby triggering a clinical
development milestone payment to us.
We remain entitled to receive license fees for targets that were delivered to
Bristol-Myers Squibb under our completed 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. As of June 30, 2012, we received an aggregate amount of $1.7 million in milestone payments and $9.6 million in license fees since the inception of our collaboration with Bristol-Myers Squibb.
The Bristol-Myers Squibb collaboration does not have a specific termination date, but will terminate when Bristol-Myers Squibb no longer
has an obligation to pay us royalties, which obligation generally continues until the later of the expiration of the Bristol-Myers Squibb patent covering an approved product and ten years after commercial sales of that product began. Though we
expect Bristol-Myers Squibb to file for and be issued patents for products developed under the collaboration, we are not aware of any patents issued to Bristol-Myers Squibb covering any potential products related to the collaboration. If either
party breaches its material obligations and fails to cure that breach within 60 days after notice from the non-breaching party, the non-breaching party may terminate the collaboration.
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Competition
We face significant competition with respect to the various dimensions of our business. With regard to our efforts to develop MultiStem as a novel stem cell therapy, currently, there are a
number of companies that are actively developing stem cell products, which encompass a range of different cell types, including embryonic stem cells, umbilical cord stem cells, adult-derived stem cells and processed bone marrow derived cells.
Osiris is currently engaged in Phase II and Phase III clinical trials involving Prochymal, an allogeneic stem cell product
based on mesenchymal stem cells, or MSCs, that are obtained from healthy consenting donors, and are administered without tissue matching. However, in contrast to MultiStem, MSCs display greater donor to donor variability, limited expansion
potential, and limited biological plasticity. In November 2008, Osiris announced a partnership in which Genzyme acquired development rights to Prochymal and Chondrogen for certain markets outside the United States and Canada in exchange for
$130 million in license fees, up to $1.25 billion in clinical and sales milestones, and royalties. In February 2011, Sanofi acquired Genzyme, and in October 2012, Sanofi announced that the partnership had been terminated, and Osiris had regained
commercial development rights to Prochymal and Chondrogen.
Mesoblast is currently engaged in clinical trials evaluating the
safety and efficacy of Revascor, an allogeneic stem cell product based on mesenchymal stem cell precursors that are obtained from healthy consenting donors. These cells also appear to display limited expansion potential and biological plasticity. In
December 2010, Mesoblast announced a partnership with Cephalon, Inc., or Cephalon, in which Cephalon paid an upfront license fee of $130 million, and agreed to invest an additional $220 million in equity for a 19.9% stake in Mesoblast. In
addition, total regulatory milestone payments to Mesoblast could reach $1.7 billion, assuming that the agreement results in commercial treatments for conditions including congestive heart failure, AMI, Parkinson's disease and Alzheimer's
disease. In October 2011, Teva Pharmaceuticals announced that it had acquired Cephalon.
Other public companies are developing
stem-related therapies, including Aastrom Biosciences, Stem Cells Inc., Johnson & Johnson, Celgene, Advanced Cell Technology, Inc., CRYO-CELL International, Inc., Pluristem and Cytori. In addition, private companies, such as Gamida Cell
Ltd., Plureon Corporation, NeoStem, Inc., Tigenix NV and others, are also developing cell therapy related products or capabilities. Given the magnitude of the potential opportunity for stem cell therapy, we expect competition in this area to
intensify in the coming years.
We also face competition in our efforts to develop compounds for the treatment of obesity.
Recently, two new treatments were approved by the FDA for the treatment of obesity, Belviq (Lorcaserin), which was developed by Arena Pharmaceuticals, and Qsymia (a proprietary combination of phentermine and topiramate), which was developed by
Vivus. Prior to these recent approvals, there was one approved therapeutic product on the market for obesity, Xenical (also known as Alli), which is marketed by Roche. Potential side effects associated with taking Xenical / Alli include cramping,
intestinal discomfort, flatulence, diarrhea, and leakage of oily stool. Another obesity drug, Meridia, was approved for clinical use and marketed by Abbott Pharmaceuticals, but was withdrawn from the market due to concerns regarding increased risk
of cardiovascular disease and stroke among patients taking the drug.
There are many other companies that have previously
attempted or are attempting to develop novel treatments for obesity, and a wide range of approaches are being taken. Some of these companies include large, multinational pharmaceutical companies such as Bristol-Myers Squibb, Merck & Co.,
Inc., Roche, Sanofi, GlaxoSmithKline, Eli Lilly and Company and others. There are also a variety of biotechnology companies developing treatments for obesity, including Orexigen Therapeutics, Neurosearch, Amgen Inc., or Amgen, Regeneron
Pharmaceuticals, Inc., Nastech Pharmaceutical Company, Alizyme plc, Amylin Pharmaceuticals, Inc., Neurocrine Biosciences, Inc., Shionogi & Co., Ltd., Metabolic Pharmaceuticals Limited, Kyorin Pharmaceutical Co., Ltd., and others. It is
likely that, given the
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magnitude of the market opportunity, many companies will continue to focus on the obesity area, and that competition will remain high. If we are successful at developing a 5HT2c agonist as a safe
and effective treatment for obesity, it is likely that other companies will attempt to develop safer and more effective compounds in the same class, or will attempt to combine therapies in an effort to establish a safer and more effective
therapeutic product.
We believe our most significant competitors are fully integrated pharmaceutical companies and
biotechnology companies that have substantially greater financial, technical, sales, marketing, and human resources than we do. These companies may succeed in obtaining regulatory approval for competitive products more rapidly than we can for our
products. In addition, our competitors may develop technologies and products that are cheaper, safer or more effective than those being developed by us or that would render our technology obsolete. Furthermore, some of these companies may feel
threatened by our activities and attempt to delay or impede our efforts to develop our products or apply our technologies.
Intellectual Property
We rely on a combination of patent applications, patents, trademarks, and contractual provisions to protect our proprietary rights. We believe that to have a competitive advantage, we must
develop and maintain the proprietary aspects of our technologies. Currently, we require our officers, employees, consultants, contractors, manufacturers, outside scientific collaborators and sponsored researchers, and other advisors to execute
confidentiality agreements in connection with their employment, consulting, or advisory relationships with us, where appropriate. We also require our employees, consultants, and advisors who we expect to work on our products to agree to disclose and
assign to us all inventions conceived during the work day, developed using our property, or which relate to our business. We currently have an aggregate of 129 patents for our technologies.
We have a broad patent estate with claims directed to compositions, methods of production, and methods of use of certain non-embryonic stem cells and related technologies. We acquired
ownership of part of our stem cell technology and intellectual property as a result of our 2003 acquisition of a holding company, which held the rights to the technology originally discovered at the University of Minnesota. We also have an exclusive
license to additional MAPC-related inventions (or in other words, improvements) developed by the University of Minnesota through May 2009, and, under a collaborative research agreement with KUL, we have an exclusive license to MAPC-related
inventions developed at KUL using the MAPC technology or intellectual property or that result from sponsored research funded by us. We also own and license additional intellectual property develop by us and others. Our broad intellectual property
portfolio consists of more than 78 issued patents (of which eleven are United States patents) and more than 183 global patent applications around our stem cell technology and MultiStem product platform. This includes nine United States patents and
39 international patents that apply to MAPC and related products, such as MultiStem. The current intellectual property estate, which incorporates additional filings and may broaden over time, could provide coverage for our stem cell product
candidates, manufacturing processes and methods of use through 2030 and beyond. Furthermore, an extended period of market exclusivity may apply for certain products (e.g., exclusivity periods for orphan drug designation or biologics).
We have established a broad intellectual property portfolio related to our functional genomics technologies and small molecule product
candidates. We have a broad patent estate with claims directed to compositions, methods of making, and methods of using our small molecule drug candidates. We have six United States patents and two patent applications with broad claims directed to
selective 5HT2c agonists discovered at Athersys that currently provide patent coverage through as late as 2029. From our Histamine H3 program, we have six United States patents with broad claims directed to compounds discovered at Athersys from two
distinct chemical series that currently provide patent coverage through as late as 2028. In addition, we currently have 35 issued patents (sixteen United States patents and
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nineteen international patents) and three patent applications relating to compositions and methods for the RAGE technology that currently provide patent coverage through as late as 2017, and four
United States patents and seven patent applications relating to human proteins and candidate drug targets that we identified through the application of RAGE and our other technologies that currently provide patent coverage through as late as 2022.
The RAGE technology was developed by Dr. John Harrington and other Athersys scientists internally in the mid-1990s.
We
believe that we have broad freedom to use and commercially develop our technologies and product candidates. However, if successful, a patent infringement suit brought against us may force us or any of our collaborators or licensees to stop or delay
developing, manufacturing, or selling potential products that are claimed to infringe a third party's intellectual property, unless that party grants us rights to use its intellectual property. In such cases, we may be required to obtain
licenses to patents or proprietary rights of others to continue to commercialize our products. However, we may not be able to obtain any licenses required under any patents or proprietary rights of third parties on acceptable terms, or at all. Even
if we were able to obtain rights to the third party's intellectual property, these rights may be non-exclusive, thereby giving our competitors access to the same intellectual property. Ultimately, we may be unable to commercialize some of our
potential products or may have to cease some of our business operations as a result of patent infringement claims, which could severely harm our business.
Research and Development
Our research and development
costs, which consist primarily of costs associated with external clinical trial costs, preclinical study fees, manufacturing costs, salaries and related personnel costs, legal expenses resulting from intellectual property application processes, and
laboratory supply and reagent costs, were $10.6 million for the six months ended June 30, 2012, $18.9 million in 2011, $14.8 million in 2010 and $11.9 million in 2009.
Government Regulation
Any products we may develop and our
research and development activities are subject to stringent government regulation in the United States by the FDA and, in many instances, by corresponding foreign and state regulatory agencies. The European Union, or EU, has vested centralized
authority in the European Medicines Agency and Committee on Proprietary Medicinal Products to standardize review and approval across EU member nations.
These regulatory agencies enforce comprehensive statutes, regulations and guidelines governing the drug development process. This process involves several steps. Initially, a company must
generate preclinical data to show safety before human testing may be initiated. In the United States, a drug company must submit an IND to the FDA prior to securing authorization for human testing. The IND must contain adequate data on product
candidate chemistry, toxicology and metabolism and, where appropriate, animal research testing to support initial safety.
A
Clinical Trial Agreement, or CTA, is the European equivalent of the IND. CTA requirements are issued by each competent authority within the European Union and are enacted by local laws and Directives.
Any of our product candidates will require regulatory approval and compliance with regulations made by United States and foreign
government agencies prior to commercialization in such countries. The process of obtaining FDA or foreign regulatory agency approval has historically been extremely costly and time consuming. The FDA regulates, among other things, the development,
testing, manufacture, safety, efficacy, record keeping, labeling, storage, approval, advertising, promotion, sale, and distribution of biologics and new drugs.
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The standard process required by the FDA before a pharmaceutical agent may be marketed in
the United States includes:
•
preclinical tests in animals that demonstrate a reasonable likelihood of safety and effectiveness in human patients;
•
submission to the FDA of an IND, which must become effective before clinical trials in humans can commence. If Phase I clinical trials
are to be conducted initially outside the United States, a different regulatory filing is required, depending on the location of the trial;
•
adequate and well controlled human clinical trials to establish the safety and efficacy of the drug or biologic in the intended disease
indication;
•
for drugs, submission of a New Drug Application, or NDA, or a Biologic License Application, or BLA, with the FDA; and
•
FDA approval of the NDA or BLA before any commercial sale or shipment of the drug.
Preclinical studies can take several years to complete, and there is no guarantee that an IND based on those studies will become
effective to permit clinical trials to begin. The clinical development phase generally takes five to seven years, or longer, to complete (i.e., from the initiation of Phase I through completion of Phase III studies). After successful completion of
clinical trials for a new drug or biologic product, FDA approval of the NDA or BLA must be obtained. This process requires substantial time and effort and there is no assurance that the FDA will accept the NDA or BLA for filing and, even if filed,
that the FDA will grant approval. In the past, the FDA's approval of an NDA or BLA has taken, on average, one to two years, but in some instances may take substantially longer. If questions regarding safety or efficacy arise, additional studies
may be required, followed by a resubmission of the NDA or BLA. Review and approval of an NDA or BLA can take up to several years.
In addition to obtaining FDA approval for each product, each drug manufacturing facility must be inspected and approved by the FDA. All manufacturing establishments are subject to
inspections by the FDA and by other federal, state, and local agencies, and must comply with good manufacturing practices, or GMP, requirements. We do not currently have any GMP manufacturing capabilities, and will rely on contract manufacturers to
produce material for any clinical trials that we may conduct.
We must also obtain regulatory approval in other countries in
which we intend to market any drug. The requirements governing conduct of clinical trials, product licensing, pricing, and reimbursement vary widely from country to country. FDA approval does not ensure regulatory approval in other countries. The
current approval process varies from country to country, and the time spent in gaining approval varies from that required for FDA approval. In some countries, the sale price of the drug must also be approved. The pricing review period often begins
after market approval is granted. Even if a foreign regulatory authority approves a drug product, it may not approve satisfactory prices for the product.
In addition to regulations enforced by the FDA, we are also subject to regulation under the Occupational Safety and Health Act, the Environmental Protection Act, the Toxic Substances
Control Act, the Resource Conservation and Recovery Act, and other present and potential future federal, state, or local regulations. Our research and development involves the controlled use of hazardous materials, chemicals, biological materials,
and various radioactive compounds. Although we believe that our safety procedures for handling and disposing of such materials currently comply in all material respects with the standards prescribed by state and federal regulations, the risk of
accidental contamination or injury from these materials cannot be completely eliminated. In the event of such an accident, we could be held liable for any damages that result and any such liability could exceed our available resources.
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Employees
We believe that our success will be based on, among other things, the quality of our clinical programs, our ability to invent and develop superior and innovative technologies and products,
and our ability to attract and retain capable management and other personnel. We have assembled a high quality team of scientists, clinical development managers, and executives with significant experience in the biotechnology and pharmaceutical
industries.
As of September 30, 2012, we employed 48 employees, 17 with Ph.D. degrees. In addition to our employees, we
also use the service and support of outside consultants and advisors. None of our employees is represented by a union, and we believe relationships with our employees are good.
Legal Proceedings
From time to time, we may become subject
to various legal proceedings that are incidental to the ordinary conduct of our business. Currently, there are no such proceedings.
Properties
Our principal offices are located at 3201
Carnegie Avenue in Cleveland, Ohio. We currently lease approximately 45,000 square feet of space for our corporate offices and laboratories, with state-of-the-art laboratory space. The lease began in 2000 and currently expires in March 2013, and we
expect to extend the lease option periods. Our rent is $267,000 per year and our rental rate has not changed since the lease inception in 2000. Also, we currently lease office and laboratory space for our Belgian subsidiary. The lease currently
expires on December 31, 2012, and we have an option to renew annually through December 2014. The annual rent in Belgium is subject to adjustments based on an inflationary index. Our annual rent in Belgium was $93,000 in 2011.
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MANAGEMENT
Executive Officers and Directors
The following table sets forth certain information regarding our executive officers and directors as of September 30, 2012.
Name
Age
Position
Gil Van Bokkelen, Ph.D.
51
Chief Executive Officer and Chairman
William (BJ) Lehmann, Jr., J.D.
46
President and Chief Operating Officer
John J. Harrington, Ph.D.
45
Chief Scientific Officer, Executive Vice President and Director
Robert J. Deans, Ph.D.
61
Executive Vice President, Regenerative Medicine
Laura K. Campbell, CPA
48
Vice President of Finance
Lee E. Babiss
56
Director
Ismail Kola
55
Director
Lorin J. Randall
68
Director
Kenneth H. Traub
51
Director
Jack L. Wyszomierski
56
Director
Dr. Van Bokkelen
co-founded Athersys in October 1995 and has served as our Chief Executive
Officer and Chairman since August 2000. Dr. Van Bokkelen served as Chief Executive Officer and Director since Athersys' founding. Prior to May 2006, he also served as Athersys' President. Dr. Van Bokkelen is the current Chairman
of the Alliance for Regenerative Medicine, a Washington D.C. based consortium of companies, patient advocacy groups, disease foundations, and clinical and research institutions that are committed to the advancement of the field of regenerative
medicine. He is also the Chairman of the Board of Governors for the National Center for Regenerative Medicine, and has served on a number of other boards, including the Biotechnology Industry Organization's ECS board of directors (from 2001 to
2004, and from 2008 to present). He received his Ph.D. in Genetics from Stanford University, his B.A. in Economics from the University of California at Berkeley, and his B.A. in Molecular Biology from the University of California at Berkeley.
Dr. Van Bokkelen brings to the Board leadership, extensive business, operating, financial and scientific experience, and tremendous knowledge of our Company and the biopharmaceutical industry. Dr. Van Bokkelen also brings his broad strategic
vision for our Company to the Board of Directors and his service as the Chairman and CEO of Athersys creates a critical link between management and the Board, enabling the Board to perform its oversight function with the benefit of management's
perspectives on the business. In addition, having the CEO, and Dr. Van Bokkelen, in particular, on our Board of Directors provides our Company with ethical, decisive and effective leadership.
Mr. Lehmann
joined Athersys in September 2001 and has served as our President and Chief Operating Officer since June 2006. Prior to that time, Mr. Lehmann was
Athersys' Executive Vice President of Corporate Development and Finance from August 2002 until June 2006, when he became Athersys' President and Chief Operating Officer. From 1994 to 2001, Mr. Lehmann was with McKinsey &
Company, Inc., an international management consulting firm, where he worked extensively with new technology and service-based businesses in the firm's Business Building practice. Prior to joining McKinsey, he worked at Wilson, Sonsini,
Goodrich & Rosati, a Silicon Valley law firm, and worked with First Chicago Corporation, a financial institution. Mr. Lehmann received his J.D. from Stanford University, his M.B.A. from the University of Chicago, and his B.A. from the
University of Notre Dame.
Dr. Harrington
co-founded Athersys in October 1995 and has served as our Chief
Scientific Officer, Executive Vice President and Director since our founding. Dr. Harrington led the development of the RAGE technology as well as its application for gene discovery, drug discovery and commercial protein
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production applications. He is a listed inventor on over 20 issued or pending United States patents, has authored numerous scientific publications, and has received numerous awards for his work,
including being named one of the top international young scientists by MIT Technology Review in 2002. Dr. Harrington has overseen the therapeutic product development programs at Athersys since their inception, and during his career, he has also
held positions at Amgen and Scripps Clinic. He received his B.A. in Biochemistry and Cell Biology from the University of California at San Diego and his Ph.D. in Cancer Biology from Stanford University. Dr. Harrington's scientific experience
and deep understanding of our Company, combined with his drive for innovation and excellence, position him well to serve on the Board of Directors.
Dr. Deans
joined Athersys in February 2003 to lead the Company's regenerative medicine research and development activities and has served as our Executive Vice President
since June 2011. Prior to that time, Dr. Deans was Vice President of Regenerative Medicine, until he was named Senior Vice President of Regenerative Medicine in June 2006, and Executive Vice President in June 2011. Dr. Deans is highly
regarded as an expert in stem cell therapeutics, with over twenty years of experience in this field. From 2001 to 2003, Dr. Deans worked for early-stage biotechnology companies. Dr. Deans was formerly the Vice President of Research at
Osiris, a biotechnology company, from 1998 to 2001 and Director of Research and Development with the Immunotherapy Division of Baxter International, Inc., a global healthcare company, from 1992 to 1998. Dr. Deans was also previously on faculty
at USC Medical School in Los Angeles, between 1981 and 1998, in the departments of Microbiology and Neurology at the Norris Comprehensive Cancer Center. Dr. Deans was an undergraduate at MIT, received his Ph.D. at the University of Michigan,
and did his post-doctoral work at UCLA in Los Angeles.
Ms. Campbell
joined Athersys in January 1998 and has
served as our Vice President of Finance since June 2006. Ms. Campbell joined Athersys initially as Controller, followed by Director of Finance and Senior Director of Finance, and has served as Vice President of Finance since June 2006. Prior to
joining Athersys, she was at Ernst & Young LLP, a public accounting firm, for 11 years, in the firm's audit practice. During her tenure with Ernst & Young LLP, Ms. Campbell specialized in entrepreneurial services and the
biotechnology industry sector and participated in several initial public offerings. Ms. Campbell received her B.S., with distinction, in Business Administration from The Ohio State University.
Dr. Babiss
has served as our Director since August 2010. Dr. Babiss is currently Chief Scientific Officer and Executive
Vice President of Global Laboratory Services of PPD, Inc., a contract research organization, where he has served since February 2010, providing strategic direction and scientific leadership. Dr. Babiss was formerly President and Director of
Global Pharmaceutical Research at Roche in Switzerland, a pharmaceutical company, from 1998 until his appointment at PPD, Inc. Prior to Roche, Dr. Babiss spent seven years with Glaxo, Inc., now GlaxoSmithKline, a pharmaceutical company, where
he held senior positions, including Vice President of Biological Sciences and Genetics. Dr. Babiss received his doctorate in Microbiology from Columbia University and completed his postdoctoral fellowship at the Rockefeller University, where he
served as an assistant and associate professor. Dr. Babiss has received numerous fellowship awards and grants and serves on several scientific advisory committees. Dr. Babiss has authored over 60 technical publications in scientific and
medical journals. Dr. Babiss' brings over 20 years of experience developing and leading research and development programs. His strategic leadership and product development knowledge provide a valuable perspective to the Board.
Dr. Kola
has served as a Director since October 2010. Dr. Kola serves as Executive Vice President of UCB S.A. in
Belgium, a biopharmaceutical company dedicated to the development of innovative medicines focused on the fields of central nervous system and immunology disorders, and President of UCB New Medicines, UCB's discovery research through
proof-of-concept organization, since November 2009. Dr. Kola was formerly Senior Vice President, Discovery Research and Early Clinical Research & Experimental Medicine at Schering-Plough Research Institute, the pharmaceutical research
arm of
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Schering-Plough Corporation, and Chief Scientific Officer at Schering-Plough Corporation, a pharmaceutical company, from March 2007 until his appointment at UCB. Prior to Schering-Plough,
Dr. Kola held senior positions from January 2003 to March 2007 at Merck, a pharmaceutical company, where he was Senior Vice President and Site Head, Basic Research. From 2000 to 2003, Dr. Kola was Vice President, Research, and Global Head,
Genomics Science and Biotechnology, at Pharmacia Corporation. Prior to his position with Pharmacia, Dr. Kola spent 15 years as Professor of Human Molecular Genetics and was Director of the Centre for Functional Genomics and Human Disease at
Monash Medical School in Australia. Dr. Kola received his Ph.D. in Medicine from the University of Cape Town, South Africa, his B.Sc. from the University of South Africa, and his B.Pharm. from Rhodes University, South Africa. Dr. Kola
currently serves on the boards of directors of Astex Therapeutics (NASDAQ: ASTX) since May 2010, Biotie Therapies (and previously Synosia who merged with Biotie) since February 2011, and previously served on the board of directors of Ondek Pty Ltd
from 2009 to 2011 and Promega Corporation from 2003 to 2007. Dr. Kola has authored 160 technical publications in scientific and medical journals and is the named inventor on at least a dozen patents. Dr. Kola holds Adjunct Professorships
of Medicine at Washington University in St. Louis, Missouri, and Monash University Medical School; a Foreign Adjunct Professorship at the Karolinska Institute in Stockholm, Sweden; and was elected William Pitt Fellow at Pembroke College, Cambridge
University, United Kingdom in 2008. Dr. Kola has also been appointed a Visiting Professor at Oxford University, Nuffield School of Medicine, Oxford UK since September 2012. For more than 20 years, Dr. Kola has created a bridge between
the scientific and academic worlds though various projects funded by renowned institutes, and Dr. Kola's experience and leadership in taking numerous drugs from the research stage to market or late stage development brings a unique and
valuable perspective to our Board.
Mr. Randall
has served as a Director since September 2007. Mr. Randall is
an independent financial consultant and previously was Senior Vice President and Chief Financial Officer of Eximias Pharmaceutical Corporation, a development-stage drug development company, from 2004 to 2006. From 2002 to 2004, Mr. Randall
served as Senior Vice President and Chief Financial Officer of i-STAT Corporation, a publicly-traded manufacturer of medical diagnostic devices that was acquired by Abbott Laboratories in 2004. From 1995 to 2001, Mr. Randall was Vice President
and Chief Financial Officer of CFM Technologies, Inc., a publicly-traded manufacturer of semiconductor manufacturing equipment. Mr. Randall currently serves on the boards of directors of Acorda Therapeutics, Inc. (NASDAQ: ACOR) since 2006,
where he serves as chairman of the audit committee and is a member of the compensation and nominations and governance committees, Nanosphere, Inc. (NASDAQ: NSPH) since 2008, where he serves as chairman of the audit committee, and Tengion, Inc.
(OTCQB: TNGN) since 2008, where he serves as chairman of the audit committee and a member of the compensation committee. He previously served on the board of directors of Opexa Therapeutics, Inc. (NASDAQ: OPXA) from 2007 to 2009, where he served as
chair of the audit committee. Mr. Randall received a B.S. in accounting from The Pennsylvania State University and an M.B.A. from Northeastern University. Mr. Randall's strong financial and human resources background and his service
on the audit and compensation committees of other companies provides expertise to the Board, including an understanding of financial statements, compensation policies and practices, corporate finance, developing and maintaining effective internal
controls, accounting, employee benefits, investments and capital markets. These qualities also formed the basis for the Board's decision to appoint Mr. Randall as chairman of the Audit Committee and the Compensation Committee.
Mr. Traub
has served as a Director since June 2012. Mr. Traub has been the President and Chief Executive Officer of
Ethos Management LLC, a private consulting and investment firm since 2009. Mr. Traub served as President, Chief Executive Officer and a director of American Bank Note Holographics, Inc., or ABNH, a global leader in product and document
security, from 1999 until its sale in 2008 to JDS Uniphase Corporation, or JDSU, a provider of optical products and measurement solutions for the communications industry. Mr. Traub managed the rebuilding, growth and sale of ABNH. Following the
sale of ABNH, Mr. Traub served as vice president of JDSU in 2008. In 1994,
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Mr. Traub co-founded Voxware, Inc., a pioneer in 'Voice over IP', and acted as its Executive Vice President, Chief Financial Officer and director until January 1998. Prior to
Voxware, he was Vice President of Finance of Trans-Resources, Inc. Mr. Traub currently serves on the boards of the following publicly traded companies: MRV Communications, Inc. (OTC: MRVC) since November 2011 and as Chairman since January 2012
where he is a member of the Audit Committee, Compensation Committee and Nominating and Governance Committee; iPass Inc. (NASDAQ: IPAS) since June 2009, where he is a member of the Compensation Committee and Corporate Governance and Nominating
Committee; DSP Group, Inc. (NASDAQ: DSPG) since May 2012; and MIPS Technologies, Inc. (NASDAQ: MIPS) since December 2011 where he is a member of the Audit Committee. Mr. Traub also served on the board of Phoenix Technologies Ltd. (NASDAQ: PTEC)
from November 2009 through its sale in December 2010, where he was a member of the Audit Committee and Compensation Committee. Mr. Traub received a Master's in Business Administration from Harvard Business School in 1988 and a Bachelor of
Arts degree from Emory University in 1983. As a director for Athersys, Mr. Traub contributes his extensive experience and expertise in managing and growing companies to maximize shareholder value.
Mr. Wyszomierski
has served as a Director since June 2010 and is currently retired. From 2004 until his retirement in June
2009, Mr. Wyszomierski served as the Executive Vice President and Chief Financial Officer of VWR International, LLC, a supplier and distributor of laboratory supplies, equipment and supply chain solutions to the global research laboratory
industry. From 1982 to 2004, Mr. Wyszomierski held positions of increasing responsibility within the finance group at Schering-Plough Corporation, a pharmaceutical company, culminating with his appointment as Executive Vice President and Chief
Financial Officer in 1996. Prior to joining Schering-Plough, he was responsible for capitalization planning at Joy Manufacturing Company, a producer of mining equipment, and was a management consultant at Data Resources, Inc., a distributor of
economic data. Mr. Wyszomierski currently serves on the board of directors of Xoma Corporation (NASDAQ: XOMA) since 2010, where he serves as chairman of the compensation committee and as a member of the audit committee, Unigene Laboratories,
Inc. (OTC:UGNE) since 2012, where he serves as chairman of the audit committee, and Exelixis, Inc. (NASDAQ: EXEL) since 2004, where he serves as chairman of the audit committee. Mr. Wyszomierski holds a M.S. in Industrial Administration and a
B.S. in Administration, Management Science and Economics from Carnegie Mellon University. Mr. Wyszomierski's extensive financial reporting, accounting and finance experience and his service on the audit committees of other public
companies, as well as his experience in the healthcare and life sciences industries, provides financial expertise to the Board, including an understanding of financial statements, corporate finance, developing and maintaining effective internal
controls, accounting, investments and capital markets.
Director Independence
The Board reviews the independence of each Director at least annually. During these reviews, the Board will consider transactions and
relationships between each Director (and his or her immediate family and affiliates) and the Company and our management to determine whether any such transactions or relationships are inconsistent with a determination that the Director was
independent. The Board conducted its annual review of Director independence to determine if any transactions or relationships exist that would disqualify any of the individuals who serve as a Director under the rules of The NASDAQ Capital Market or
require disclosure under Securities and Exchange Commission, or SEC, rules. Based upon the foregoing review, the Board determined the following individuals are independent under the rules of The NASDAQ Capital Market: Lee E. Babiss, Ismail Kola,
Lorin J. Randall, Kenneth H. Traub and Jack L. Wyszomierski. In making this determination with respect to Dr. Babiss, the Board determined that the provision of certain contract research services to the Company by PPD, Inc., of which
Dr. Babiss serves as an executive officer, did not create a material relationship or impair the independence of Dr. Babiss because Dr. Babiss receives no material direct or indirect benefit from such transactions, which were
undertaken in the ordinary course of business. Currently, we have two members of management who also serve on the Board: Dr. Van Bokkelen, who is also our Chairman and
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Chief Executive Officer, and Dr. Harrington, who is our Executive Vice President and Chief Scientific Officer. Neither Dr. Van Bokkelen nor Dr. Harrington is considered independent
under the independence rules of The NASDAQ Capital Market.
Compensation Discussion and Analysis
Executive Summary
This section discusses the principles underlying our executive compensation policies and decisions and the most important factors relevant to an analysis of these policies and decisions.
It provides qualitative information regarding the manner and context in which compensation is awarded to and earned by our named executive officers, which include Dr. Gil Van Bokkelen, our Chief Executive Officer, Ms. Laura Campbell, our
Vice President of Finance, Mr. William (B.J.) Lehmann, Jr., our President and Chief Operating Officer, Dr. John Harrington, our Executive Vice President and Chief Scientific Officer, and Dr. Robert Deans, our Executive Vice President
of Regenerative Medicine, and places in perspective the data presented in the compensation tables and narratives that follow.
We are an international biotechnology company that is focused in the field of regenerative medicine. We are committed to the discovery
and development of best-in-class therapies designed to extend and enhance the quality of human life, and we have established a portfolio of therapeutic product development programs to address significant unmet medical needs in multiple disease
areas. As further discussed in this section, our compensation and benefit programs help us attract, retain and motivate individuals who will maximize our business results by working to meet or exceed established company or individual objectives. In
addition, we reward our executive officers for meeting certain developmental milestones, such as completing advancements in product candidate development, strategic partnerships or other financial transactions that add to our capital resources or
create value for stockholders.
The following are the highlights of our 2011 compensation and benefit programs:
•
increased the base salaries of our named executive officers; and
•
made awards of cash bonuses to our named executive officers.
The following discussion and analysis of our compensation and benefit programs for 2011 should be read together with the compensation
tables and related disclosures that follow this section. This discussion includes forward-looking statements based on our current plans, considerations, expectations and determinations about our compensation program. Actual compensation decisions
that we may make for 2012 and beyond may differ materially from our recent past.
Compensation Objectives and Philosophy
Our compensation programs are designed to:
•
recruit, retain, and motivate executives and employees that can help us achieve our core business goals;
•
provide incentives to promote and reward superior performance throughout the organization;
•
facilitate stock ownership and retention by our executives and other employees; and
•
promote alignment between executives and other employees and the long-term interests of stockholders.
The Compensation Committee seeks to achieve these objectives by:
•
establishing a compensation program that is market competitive and internally fair;
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•
linking performance with certain elements of compensation through the use of equity grants, cash performance bonuses or other means of
compensation, the value of which is substantially tied to the achievement of company goals; and
•
when appropriate, given the nature of our business, rewarding our executive officers for both company and individual achievements with
discretionary bonuses.
Components of Compensation
Our executive compensation program includes the following elements:
•
Base salary;
•
Cash bonuses;
•
Long-term equity incentive plan awards; and
•
Retirement and health insurance benefits.
Our Compensation Committee has not adopted any formal or informal policies or guidelines for allocating compensation between long-term and currently paid-out compensation, between cash and
non-cash compensation or among different forms of non-cash compensation. We consider competitive practices, relative management level and operating responsibilities of each executive officer when determining the compensation elements to reward his
or her ability to impact short-term and long-term results.
Role of the Chief Executive Officer
Historically, our Chief Executive Officer has taken the lead in providing our Board of Directors with advice regarding executive
compensation. For 2011, the Compensation Committee considered recommendations from our Chief Executive Officer regarding the compensation for and performance of our executive officers in relation to company-specific strategic goals that were
established by the Compensation Committee and approved by the Board of Directors related to potential bonus payments and salary adjustments. The Compensation Committee considers the recommendations made by our Chief Executive Officer because of his
knowledge of the business and the performance of the other executive officers. The Compensation Committee is not bound by the input it receives from our Chief Executive Officer. Instead, the Compensation Committee exercises independent discretion
when making executive compensation decisions. We describe and discuss the particular compensation decisions made by the Compensation Committee regarding the 2011 compensation of our named executive officers below under "Elements of Executive
Compensation."
Elements of Executive Compensation
Base Salary.
We pay base salaries to attract executive officers and provide a basic level of financial security. We establish base salaries for our executives based on the scope of
their responsibilities, taking into account competitive market compensation paid by other companies for similar positions. Base salaries are generally reviewed annually, with adjustments based on the individual's responsibilities, performance
and experience during the year. This review generally occurs each year following an annual review of individual performance.
In 2011, the Compensation Committee and the Board of Directors approved that each of the named executive officers be entitled to receive
a 3.52% increase in such officer's salary for 2011 as compared to 2010 based primarily on Company performance for the year ending December 31, 2010. Effective April 1, 2011, Dr. Deans' salary was further increased to a base
of $300,000 per annum based on his performance.
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In 2011, the Compensation Committee and the Board of Directors approved that the Chief
Executive Officer will be entitled to receive a 6.30% increase in salary for 2012 as compared to 2011, an adjustment based primarily on competitive information provided to the Compensation Committee by its independent compensation consultant. Also
for 2012, the Compensation Committee and the Board of Directors approved that each of the named executive officers be entitled to receive an increase in such officer's salary for 2012 as compared to 2011 based primarily on company performance
for the year ended December 31, 2011. The increases are as follows: Mr. Lehmann—3.5%; Dr. Harrington—3.0%; Dr. Deans—2.5% (taking into consideration his salary adjustment in April 2011); and
Ms. Campbell—2.75%.
Cash Bonuses.
We utilize annual incentive bonuses to
reward officers and other employees for achieving financial and operational goals and for achieving individual annual performance objectives. These objectives vary depending on the individual executive and employee, but relate generally to strategic
factors, including establishment and maintenance of key strategic relationships, advancement of our product candidates, identification and advancement of additional programs or product candidates, and to financial factors, including raising capital
and improving our results of operations.
In 2005, in connection with a restructuring of our internal programs, the Board
established an incentive program designed to retain and motivate our executives. The program provided for payments to the executives upon the occurrence of certain business transactions and time-limited financing milestones. The program continues to
provide the named executive officers financial participation in the event of certain merger or acquisition or asset sale transactions. In the event of a defined transaction, we would be obligated to make a payment to the named executive officers
representing five percent of the consideration received from the transaction, and in the event of a stock-based transaction, the executives would receive fifty percent of any payments due to them in stock. There were no payments under this program
in 2011.
In addition, given the nature of our business, when appropriate, we reward our executive officers with discretionary
bonuses. Discretionary bonuses were paid to our named executive officers in 2012, for the year ended December 31, 2011, as described in the following paragraph.
The Compensation Committee recommended and the Board approved a cash bonus incentive program for the year ended December 31, 2011 for our named executive officers. Under the 2011
incentive program, each participant is eligible to earn a target bonus of a specified percentage of the named executive officer's salary during the award term, weighted on the achievement of specific corporate goals, with the remainder based on
individual/functional performance, as set forth below:
Weighted on
Target Bonus
Corporate Goals
Functional Performance
Dr. Van Bokkelen
40
%
100
%
0
%
Dr. Harrington
33
%
80
%
20
%
Mr. Lehmann
33
%
80
%
20
%
Dr. Deans
30
%
60
%
40
%
Ms. Campbell
25
%
60
%
40
%
The evaluation of goal achievement is at the discretion of the Compensation Committee of the Board of
Directors based on input from the Chief Executive Officer (with respect to the named executive officers other than the Chief Executive Officer, whose bonus potential is based 100% on achievement of specified corporate goals). The 2011 corporate
goals included progress on MultiStem clinical development, execution against the established budget and operating plan, and achievement of one or more strategic partnerships. However, any bonus ultimately paid under the 2011 incentive program is at
the discretion of the Board of Directors based on the recommendation of the Compensation Committee, after good faith consideration of executive officer performance, overall company performance, market
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conditions and cash availability. There was no formally adopted plan document for the 2011 incentive program, although the Compensation Committee recommended and the Board of Directors approved
the specific corporate goals, target bonus levels and weightings between corporate and functional performance. The Compensation Committee and the Board of Directors agreed that each of our named executive officers would be entitled to a bonus under
the 2011 incentive program as a result of individual performance and the achievement of operational and strategic objectives in 2011, specifically the achievement of patient enrollment goals for the Company's clinical trials and other program
development goals, resulting in the payment of bonuses based on a percentage of such officers' 2011 base salaries as follows:
Bonus Achieved
Cash Bonus Paid
Dr. Van Bokkelen
9.9
%
$
40,000
Dr. Harrington
7.8
%
$
27,000
Mr. Lehmann
7.8
%
$
27,000
Dr. Deans
8.1
%
$
24,300
Ms. Campbell
6.8
%
$
15,300
For the year ending December 31, 2012, the Compensation Committee recommended and the Board of
Directors approved a similar cash bonus incentive plan for our named executive officers. The 2012 plan has no change to the target bonus percentage or the functional performance weightings for our named executive officers. The 2012 corporate goals
include advancing and achieving enrollment goals for our clinical programs for MultiStem, executing against the established operating plan and capital acquisition objectives, and advancement of strategic partnership and program activities.
Long-Term Incentive Program
.    We believe that we can encourage superior long-term
performance by our executive officers and employees through encouraging them to own, and assisting them with the acquisition of, our common stock. Our equity compensation plans provide our employees, including named executive officers, with
incentives to help align their interests with the interests of our stockholders. We believe that the use of common stock and stock-based awards offers the best approach to achieving our objective of fostering a culture of ownership, which we believe
will, in turn, motivate our named executive officers to create and enhance stockholder value. We have not adopted stock ownership guidelines, but our equity compensation plans provide a principal method for our executive officers to acquire equity
in our Company.
Our equity compensation plans authorize us to grant, among other types of awards, options, restricted stock
and restricted stock units to our employees, Directors and consultants. Historically, we elected to use stock options as our primary long-term equity incentive vehicle. To date, we have not granted any restricted stock or restricted stock units
under our equity compensation plans to our named executive officers or Directors. However, in 2011, we granted restricted stock units to our other employees. We expect to continue to use equity-based awards as a long-term incentive vehicle because
we believe:
•
equity-based awards align the interests of our executives with those of our stockholders, support a pay-for-performance culture, foster
an employee stock ownership culture and focus the management team on increasing value for our stockholders;
•
the value of equity-based awards is based on our performance, because all the value received by the recipient of equity-based awards is
based on the growth of our stock price;
•
equity-based awards help to provide a balance to the overall executive compensation program because, while base salary and our
discretionary annual bonus program focus on short-term performance, vesting equity-based awards reward increases in stockholder value over the longer term; and
•
the vesting period of equity-based awards encourages executive retention and efforts to preserve stockholder value.
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In the past, in determining the number of equity-based awards to be granted to executives,
we took into account the individual's position, scope of responsibility, ability to affect results and stockholder value, the individual's historic and recent performance and the value of equity-based awards in relation to other elements
of the individual executive's total compensation. Currently, awards of equity-based awards are granted from time to time under the guidance and approval of the Compensation Committee and the Board of Directors. The Compensation Committee and
the Board of Directors periodically review and approve equity-based awards to executive officers based upon a review of competitive compensation data, an assessment of individual performance, a review of each executive's existing long-term
incentives, retention considerations and a subjective determination of the individual's potential to positively impact future stockholder value. No equity-based awards were conferred to our named executive officers in 2011.
Retirement and Health Insurance Benefits.
Consistent with our compensation philosophy, we maintain
benefits for our executive officers, including medical, dental, vision, life and disability insurance coverage and the ability to contribute to a 401(k) retirement plan. The executive officers and employees have the ability to participate in these
benefits at the same levels. We began making employer contributions to our 401(k) retirement plan in 2011 and contributed approximately $88,000 in 2011. We provide such retirement and health insurance benefits to our employees to retain qualified
personnel. In addition, Dr. Van Bokkelen, Dr. Harrington, Mr. Lehmann, Dr. Deans and Ms. Campbell also receive company-paid life insurance benefits in the amounts of $2 million for Dr. Van Bokkelen, Dr. Harrington
and Mr. Lehmann, and $1 million for Dr. Deans and Ms. Campbell. These additional life insurance policies are provided to these officers due to their extensive travel requirements and contributions to our company. We have no current
plans to change the level of these benefits provided to our named executive officers.
Severance Arrangements
See the disclosure under "Potential Payments Upon Termination or Change of Control" for more information
about severance arrangements with our named executive officers. We provide such severance arrangements to attract and retain qualified personnel.
Employment Agreements and Arrangements
We believe
that entering into employment agreements with each of our named executive officers was necessary for us to attract and retain talented and experienced individuals for our senior level positions. In this way, the employment agreements help us meet
the initial objective of our compensation program. Each agreement contains terms and arrangements that we agreed to through arms-length negotiation with our named executive officers. We view these employment agreements as reflecting the minimum
level of compensation that our named executive officers require to remain employed with us, and thus the bedrock of our compensation program for our named executive officers. For more details of our employment agreements and arrangements, see the
disclosure under "2011 Summary Compensation Table."
The 2005 incentive program for our named executive officers
provides substantial equity participation in the event of the sale of the Company or substantially all of its assets. The Compensation Committee believes that this program coupled with existing, vested stock option holdings provides strong equity
incentives to our named executive officers.
General Tax Deductibility of Executive Compensation
We structure our compensation program to comply with Internal Revenue Code Section 162(m). Under Section 162(m) of the Internal
Revenue Code, there is a limitation on tax deductions of any publicly-held corporation for individual compensation to certain executives of such corporation exceeding $1.0 million in any taxable year, unless the compensation is performance-based.
The Compensation Committee
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manages our incentive programs to qualify for the performance-based exemption; however, it also reserves the right to provide compensation that does not meet the exemption criteria if, in its
sole discretion, it determines that doing so advances our business objectives.
2011 Summary Compensation
Table
The following table and narrative set forth certain information with respect to the compensation earned during the
fiscal year ended December 31, 2011 by our named executive officers.
Name and Principal
Position (a)
Year
(b)
Salary
($) (c)
Bonus ($)
(d)
Option
Awards 
($)
(1)
(f)
All Other
Compensation
($) (i)
Total
(4)
(j)
Gil Van Bokkelen,
Chief Executive
Officer
(2)
2011
2010
2009
$
$
$
404,500
390,741
383,079
$
$
$
40,000
52,750
76,616
$
$
$
0
0
98,250
$
$
$
12,620
9,620
5,000
$
$
$
457,120
453,111
562,945
Laura Campbell,
Vice President
of Finance
2011
2010
2009
$
$
$
225,365
217,699
213,430
$
$
$
15,300
29,389
42,686
$
$
$
0
0
68,775
$
$
$
5,109
2,109
0
$
$
$
245,774
249,197
324,891
William (BJ) Lehmann, Jr.,
President and
Chief Operating Officer
2011
2010
2009
$
$
$
346,714
334,921
328,354
$
$
$
27,000
45,214
65,671
$
$
$
0
0
88,425
$
$
$
4,673
1,673
1,000
$
$
$
378,387
381,808
483,450
John Harrington,
Chief Scientific Officer
and Executive Vice
President
(2)
2011
2010
2009
$
$
$
346,714
334,921
328,354
$
$
$
27,000
45,214
65,671
$
$
$
0
0
88,425
$
$
$
4,355
1,355
1,000
$
$
$
378,069
381,490
483,450
Robert Deans,
Executive Vice President,
Regenerative Medicine
2011
2010
2009
$
$
$
292,898
262,355
257,211
$
$
$
24,300
35,418
51,442
$
$
$
0
0
78,600
$
$
$
5,620
5,620
6,000
$
$
$
322,818
303,393
393,253
(1)
Amounts in column (f) do not necessarily reflect compensation actually received by our named executive officers. The amounts in
column (f) reflect the full grant date fair value of the equity awards made during the fiscal year ended December 31, 2009 in accordance with Accounting Standards Codification 718, or ASC 718. Assumptions used in the calculation of these
amounts are included in the notes to the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2011.
(2)
Drs. Van Bokkelen and Harrington also served as our Directors for 2011, 2010 and 2009, but did not receive any compensation as our
Directors.
Employment Agreements and Arrangements
Dr. Gil Van Bokkelen.
On December 1, 1998, we entered into a one-year employment agreement,
effective April 1, 1998, with Dr. Gil Van Bokkelen, to serve initially as President and Chief Executive Officer. The agreement automatically renews for subsequent one-year terms on April 1 of each year unless either party gives notice
of termination at least thirty days before the end of any term. Under the terms of the agreement, Dr. Van Bokkelen was entitled to an initial base salary of $150,000, which may be increased at the discretion of the Board of Directors, and an
annual discretionary incentive bonus of up to 33% of his base salary. His salary for 2012 is $430,000 and his target annual incentive bonus is 40% of his base salary. Dr. Van Bokkelen also received options to purchase shares of Common Stock
upon his employment that were terminated in 2007, and his current stock options are described in the table below. Dr. Van Bokkelen is also entitled to life insurance coverage for the benefit of his family in the amount of at least $1.0 million
(which is $2.0 million for 2012) and is provided the use of a company automobile for business use. For more information about severance arrangements under the agreement, see the disclosure under "Potential Payments Upon Termination or Change of
Control." Dr. Van Bokkelen has also entered into a non-competition and confidentiality agreement with us under which, during his employment and for a period of 18 months thereafter, he is restricted from, among other things, competing with
us.
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Dr. John J. Harrington.
On December 1,
1998, we entered into a one-year employment agreement, effective April 1, 1998, with Dr. John J. Harrington to serve initially as Executive Vice President and Chief Scientific Officer. The agreement automatically renews for subsequent
one-year terms on April 1 of each year unless either party gives notice of termination at least thirty days before the end of any term. Under the terms of the agreement, Dr. Harrington was entitled to an initial base salary of $150,000,
which may be increased at the discretion of the Board of Directors, and an annual discretionary incentive bonus of up to 33% of his base salary. His salary for 2012 is $357,116 and his target annual incentive bonus is 33% of his base salary.
Dr. Harrington also received options to purchase shares of Common Stock upon his employment that were terminated in 2007, and his current stock options are described in the table below. Dr. Harrington is also entitled to life insurance
coverage for the benefit of his family in the amount of at least $1.0 million (which is $2.0 million for 2012). For more information about severance arrangements under the agreement, see the disclosure under "Potential Payments Upon Termination
or Change of Control." Dr. Harrington has also entered into a non-competition and confidentiality agreement with us under which, during his employment and for a period of 18 months thereafter, he is restricted from, among other things,
competing with us.
Laura K. Campbell.
On May 22, 1998, we entered into a two-year
employment agreement with Laura K. Campbell to serve initially as Controller. The agreement automatically renews for subsequent one-year terms on May 22 of each year unless either party gives notice of termination at least thirty days
before the end of any term. Under the terms of the agreement, Ms. Campbell was entitled to an initial base salary of $70,200, which may be increased at the discretion of the Board of Directors. Her salary for 2012 is $231,562 and her target
annual incentive bonus is 25% of her base salary. Ms. Campbell also received options to purchase shares of Common Stock upon her employment that were terminated in 2007, and her current stock options are described in the table below. For more
information about severance arrangements under the agreement, see the disclosure under "Potential Payments Upon Termination or Change of Control."
William (B.J.) Lehmann, Jr
.    On January 1, 2004, we entered into a four-year employment agreement with Mr. Lehmann to serve initially as
Executive Vice President of Corporate Development and Finance. The agreement automatically renews for subsequent one-year terms on January 1 of each year unless either party gives notice of termination at least thirty days before the end of any
term. Under the terms of the agreement, Mr. Lehmann was entitled to an initial base salary of $250,000, which may be increased at the discretion of the Board of Directors. His salary for 2012 is $358,849 and his target annual incentive bonus is
33% of his base salary. Mr. Lehmann also received options to purchase shares of Common Stock upon his employment that were terminated in 2007, and his current stock options are described in the table below. For more information about severance
arrangements under the agreement, see the disclosure under "Potential Payments Upon Termination or Change of Control." Mr. Lehmann has also entered into a non-competition and confidentiality agreement with us under which, during his
employment and for a period of six months thereafter, he is restricted from, among other things, competing with us.
Dr. Robert Deans
.    On October 3, 2003, we entered into a four-year employment agreement
with Dr. Robert Deans to serve initially as Vice President of Regenerative Medicine. The agreement automatically renews for subsequent one-year terms on October 3 of each year unless either party gives notice of termination at least thirty
days before the end of any term. Under the terms of the agreement, Dr. Deans was entitled to an initial base salary of $200,000, which may be increased at the discretion of the Board of Directors, and an annual discretionary incentive bonus of
up to 30% of his base salary. His salary for 2012 is $307,500 and his target annual incentive bonus is 30% of his base salary. Dr. Deans also received options to purchase shares of Common Stock upon his employment that were terminated in 2007,
and his current stock options are described in the table below. For more information about severance arrangements under the agreement, see the disclosure under "Potential Payments Upon Termination or Change of Control." Dr. Deans has
also entered into a non-competition and
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confidentiality agreement with us under which, during his employment and for a period of six months thereafter, he is restricted from, among other things, competing with us.
Equity Compensation Plans
In June 2007, we adopted two equity compensation plans, which authorize the Board of Directors, or a committee thereof, to provide equity-based compensation in the form of stock options,
restricted stock, restricted stock units and other stock-based awards, which are used to attract and retain qualified employees, Directors and consultants. Equity awards are granted from time to time under the guidance and approval of the
Compensation Committee. Total awards under these plans, as amended, are limited to 5,500,000 shares of common stock.
401(k) Plan
We have a tax-qualified employee savings and retirement plan, also known as a 401(k) plan that covers all of our employees. Under our 401(k) plan, eligible employees may elect to reduce
their current compensation by up to the statutorily prescribed annual limit, which was $16,500 in both 2011 and 2010, and have the amount of the reduction contributed to the 401(k) plan. The trustees of the 401(k) plan, at the direction of each
participant, invest the assets of the 401(k) plan in designated investment options. We may make matching or profit-sharing contributions to the 401(k) plan in amounts to be determined by the Board of Directors. We made matching contributions to the
401(k) plan during fiscal 2011 at a maximum rate of fifty cents for every dollar of the first 6% of participant contributions, up to a dollar maximum of $3,000 per participant, which amounted to approximately $88,000 in 2011. We did not make any
matching or profit-sharing contributions to the 401(k) plan during fiscal 2010 or 2009. The 401(k) plan is intended to qualify under Section 401 of the Internal Revenue Code, so that contributions to the 401(k) plan and income earned on the
401(k) plan contributions are not taxable until withdrawn, and so that any contributions we make will be deductible when made.
Outstanding Equity Awards at 2011 Fiscal Year-End
The
following table sets forth outstanding options held by our named executive officers at December 31, 2011.
Option Awards
Name (a)
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
(b)
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
(c)
Option
Exercise
Price
($)(e)
Option Expiration
Date
(f)
Gil Van Bokkelen
712,500
0
$
5.00
June 8, 2017
(1)
25,000
0
$
5.28
December 23, 2019
(2)
Laura Campbell
200,000
0
$
5.00
June 8, 2017
(1)
17,500
0
$
5.28
December 23, 2019
(2)
William (BJ) Lehmann, Jr.
400,000
0
$
5.00
June 8, 2017
(1)
22,500
0
$
5.28
December 23, 2019
(2)
John Harrington
700,000
0
$
5.00
June 8, 2017
(1)
22,500
0
$
5.28
December 23, 2019
(2)
Robert Deans
240,000
0
$
5.00
June 8, 2017
(1)
20,000
0
$
5.28
December 23, 2019
(2)
(1)
These options were granted on June 8, 2007, vested at a rate of 40% on the grant date and vested 20% in each of the three years
thereafter (on a quarterly basis), and were fully exercisable on June 8, 2010.
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(2)
These options were granted on December 23, 2009, vested at a rate of 25% per quarter and were fully exercisable on
December 24, 2010.
2011 Options Exercised and Stock Vested
None of our named executive officers exercised any stock options during 2011. As of December 31, 2011, our named executive officers
did not have any other stock awards other than options.
Potential Payments Upon Termination or Change in
Control
Under their employment agreements, the named executive officers may be entitled to certain potential payments
upon termination. In the event that an executive officer is terminated without cause or terminates employment for good reason, as defined in the agreements, we would be obligated to pay full base salary and other benefits for a defined period,
subject to mitigation related to other employment. For Dr. Gil Van Bokkelen and Dr. John Harrington, the defined payment period is 18 months and, for all other executive officers, the period is six months. We would also be obligated to
continue the participation of Dr. Gil Van Bokkelen and Dr. John Harrington in all other medical, life and employee "welfare" benefit programs for a period of eighteen months at our expense, to the extent available and possible
under the programs.
The agreements define "cause" to mean willful and continuous neglect of such executive
officer's duties or responsibilities or willful misconduct by the executive officer that is materially and manifestly injurious to Athersys. "Good reason" includes, among other things, demotion, salary reduction, relocation, failure
to provide an executive officer with adequate and appropriate facilities and termination by the executive officer within 90 days of a change in control. A "change in control" occurs when (1) a person or group of persons purchases 50%
or more of our consolidated assets or a majority of our voting shares, or (2) if, following a public offering, the directors of Athersys immediately following the offering no longer constitute a majority of the Board of Directors. Upon a change
in control, or if the named executive officer should die or become permanently disabled, all unvested stock options become immediately vested and exercisable. As of December 31, 2011, none of the named executive officers held unvested stock
options.
In the event that an executive officer is terminated for cause or as a result of death, we would be obligated to pay
full base salary and other benefits, including any unpaid expense reimbursements, through the date of termination, and would have no further obligations to the executive officer. In the event that an executive officer is unable to perform duties as
a result of a disability, we would be obligated to pay full base salary and other benefits until employment is terminated and for a period of twelve months from the date of such termination.
Additionally, in 2005, in connection with the restructuring of the Company's internal programs, the Board of Directors established an incentive program intended to promote retention
and motivation of our executives. The program provides the named executive officers financial participation in the event of certain merger or acquisition or asset sale transactions, obligating us to make a payment to the named executive officers
representing five percent of the consideration received from the transaction.
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The table below reflects the amount of compensation payable to each named executive officer
in the event of termination of such executive's employment, pursuant to such executive's employment agreement. The amounts shown assume that such termination was effective as of December 31, 2011 and thus includes amounts earned
through such time and are estimates of the amounts that would be paid out to executives upon their termination.
Executive Benefit and
Payments Upon
Separation
Termination
Without
Cause or
Voluntary For
Good Reason
Gil Van Bokkelen
Cash Severance Payment
$
606,750
Continuation of Benefits
$
23,944
Total
$
630,694
William (BJ) Lehmann, Jr.
Cash Severance Payment
$
173,357
Continuation of Benefits
—
Total
$
173,357
John Harrington
Cash Severance Payment
$
520,071
Continuation of Benefits
$
23,944
Total
$
544,015
Robert Deans
Cash Severance Payment
$
150,000
Continuation of Benefits
$
—
Total
$
150,000
Laura Campbell
Cash Severance Payment
$
112,682
Continuation of Benefits
$
—
Total
$
112,682
(1)
Does not include any amounts payable upon a change in control pursuant to the incentive program established in 2005 as described on the
preceding page.
Director Compensation Table for 2011
The following table summarizes compensation paid to our non-employee Directors in 2011:
Name(a)
Fees Earned or
Paid in Cash
($)(b)
Option
Awards
($)
(1)
(d)
Total
($)(h)
Lee E. Babiss
$
47,250
$
34,950
$
82,200
Ismail Kola
$
44,625
$
34,950
$
79,575
George M. Milne, Jr.
$
52,625
$
34,950
$
87,575
Lorin J. Randall
$
66,500
$
34,950
$
101,450
Jack L. Wyszomierski
$
53,125
$
34,950
$
88,075
(1)
Amounts in column (d) do not necessarily reflect compensation actually received by our Directors. The amounts in column
(d) reflect the full grant date fair value of the equity awards made during the fiscal year ended December 31, 2011, in accordance with ASC 718. Assumptions used in the calculation of these amounts are included in the notes to the 2011
audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2011. The Directors had option awards outstanding as of December 31, 2011 for shares of Common Stock
as follows: Lee Babiss—90,000; Ismail Kola 90,000; George Milne—135,000; Lorin Randall—135,000; and Jack Wyszomierski—90,000.
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Under our Director compensation program for non-employee Directors prior to 2011, new
Directors received an initial stock option grant to purchase 75,000 shares of common stock at fair market value on the date of grant, which options vest at a rate of 50% in the first year (on a quarterly basis) and 25% in each of the two years (on a
quarterly basis) thereafter. Effective April 1, 2011, after consultation with the independent compensation advisor, the Board approved a revised initial grant for new directors equal to 30,000 shares of common stock, which options vest at a
rate of 50% in the first year (on a quarterly basis) and 25% in each of the two years (on a quarterly basis) thereafter.
Additionally, the non-employee Directors receive, at each anniversary of service, an option award to purchase 15,000 shares of common
stock at fair market value on the date of grant. These additional awards vest at a rate of 50% in the first year (on a quarterly basis), and 25% in each of the two years (on a quarterly basis) thereafter. Effective April 1, 2011, after
consultation with the independent compensation advisor, the Board approved a change to the vesting schedule for anniversary stock option awards such that new awards vest quarterly over a one-year period, with such anniversary awards issued in June
of each year, in connection with our annual stockholder meeting. In June 2011, all five of our non-employee Directors each received such an anniversary stock option award. Also, effective April 1, 2011, all new initial and anniversary stock
option awards granted to non-employee Directors have a term of ten years and upon the termination of the Director's service, the Director will have 18 months in which to exercise the vested portion of his options prior to forfeiture.
For 2010, the non-employee Directors also received cash compensation of $30,000 per year, paid quarterly, plus daily fees of
$1,500 for participating in person, or $500 for participating by telephone, at Board meetings. The chair of the Audit Committee received additional cash compensation of $10,000 per year, paid quarterly, and the chair of the Compensation Committee
received additional cash compensation of $6,000 per year, paid quarterly. All Audit Committee and Compensation Committee members also received additional meeting fees of $1,000 for participating in person, or $500 for participating by telephone, at
each Audit Committee or Compensation Committee meeting. Directors, however, could not receive more than $2,500 in any one day for participation in Board and committee meetings. Effective April 1, 2011, the Board approved a revised cash
compensation program for Directors with annual retainers paid quarterly as set forth below, with no meeting fees:
Board Member
$
40,000
Audit Committee—Chairman
$
15,000
Audit Committee—Member
$
7,500
Compensation Committee—Chairman
$
10,000
Compensation Committee—Member
$
5,000
Nominations and Corporate Governance Committee—Chairman
$
6,000
Nominations and Corporate Governance Committee—Member
$
3,000
Directors are reimbursed for reasonable out-of-pocket expenses incurred while attending Board of Director
and committee meetings.
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CERTAIN RELATIONSHIPS AND RELATED-PARTY
TRANSACTIONS
We give careful attention to related person transactions because they may present the potential for conflicts
of interest. We refer to "related person transactions" as those transactions, arrangements, or relationships in which:
•
we were, are or are to be a participant;
•
the amount involved exceeds $120,000; and
•
any of our directors, director nominees, executive officers or greater-than five percent stockholders (or any of their immediate family
members) had or will have a direct or indirect material interest.
To identify related person transactions
in advance, we rely on information supplied by our executive officers, Directors and certain significant stockholders. We maintain a comprehensive written policy for the review, approval or ratification of related person transactions, and our Audit
Committee reviews all related person transactions identified by us. The Audit Committee approves or ratifies only those related person transactions that are determined by it to be, under all of the circumstances, in the best interest of our company
and its stockholders. No related person transactions occurred in the last three fiscal years that required a review by the Audit Committee.
In November 2011, we entered into the Aspire Purchase Agreement with Aspire Capital, 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, and the terms and conditions set forth therein. As part of the Aspire Purchase 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, and received 266,667 additional shares as compensation for its commitment. As a result of this transaction, combined with shares of our common stock that Aspire
Capital held prior to the November 2011 transaction, Aspire Capital became one of our largest stockholders, owning more than 5% of our shares of common stock outstanding upon completion of the transaction.
As of September 30, 2012, we sold an additional 800,000 shares to Aspire Capital pursuant to the Aspire Purchase Agreement at an
average price of $1.57 per share. Also, in our March 2012 private placement, Aspire Capital purchased an additional 966,184 shares of common stock and five-year warrants to purchase 966,184 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, for a total purchase price to Aspire Capital of
approximately $2.0 million.
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BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information known to us regarding the beneficial ownership of our common stock as
of October
5
, 2012 by:
•
each person known by us to beneficially own more than 5% of our common stock;
•
each of our directors;
•
each of our named executive officers; and
•
all of our directors and executive officers as a group.
We have determined beneficial ownership in accordance with the rules of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that
person, shares of common stock that could be issued upon the exercise of outstanding options and warrants held by that person that are exercisable within 60 days of October 5, 2012 are considered outstanding. These shares, however, are not
considered outstanding when computing the percentage ownership of each other person.
Percentage ownership calculations for
beneficial ownership for each person or entity are based on 30,052,843 shares of common stock outstanding as of October 5, 2012.
Except as indicated in the footnotes to this table and pursuant to state community property laws, each stockholder named in the table has sole voting and investment power for the shares
shown as beneficially owned by them.
Name of Beneficial Owner
Number of
Shares
Percent of Class
Greater Than 5% Stockholders
Radius Venture Partners and affiliates
(1)
1,600,000
5.3
%
Angiotech Pharmaceuticals, Inc.
(2)
1,885,890
6.3
%
Aspire Capital Fund, LLC
(3)
2,728,967
9.1
%
Directors, Director Nominees and Executive Officers
Gil Van Bokkelen
(4)
976,986
3.2
%
Lee Babiss
(5)
79,688
*
John Harrington
(6)
819,144
2.7
%
Ismail Kola
(7)
75,000
*
Lorin Randall
(8)
60,938
*
Kenneth Traub
(9)
3,750
*
Jack Wyszomierski
(10)
79,688
*
Laura Campbell
(11)
240,563
*
Robert Deans
(12)
264,000
*
William (BJ) Lehmann, Jr.
(13)
429,400
1.4
%
All directors and executive officers as a group (10 persons)
3,029,157
9.3
%
*
Less than 1%.
(1)
A Schedule 13D/A filed with the SEC on May 7, 2008 reported that Radius Venture Partners (defined below) beneficially owned
1,600,000 shares (800,000 shares beneficially owned by Radius Venture Partners II, L.P., or Radius II, 103,766 shares beneficially owned by Radius Venture Partners III, L.P., or Radius III, and 696,234 shares beneficially owned by Radius Venture
Partners III QP, L.P., or Radius III QP) of common stock. Radius Venture Partners II, LLC is the general partner of Radius II.
Radius Venture Partners III, LLC (which together with Radius Venture Partners II, LLC, we refer to as Radius Venture Partners) is the general partner of
Radius III and Radius III QP. Daniel C. Lubin and Jordan S. Davis are the managing members of Radius
footnotes continued on following page
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Venture Partners. Radius II has the sole power to vote or direct the vote and to dispose or direct the disposition of the shares beneficially owned by Radius II. Messrs. Lubin and Davis, by
virtue of their positions as managing members of the general partner of Radius II, may be deemed to have the shared power to vote or direct the vote of and shared power to dispose or direct the disposition of the shares held by Radius II. Radius III
has the sole power to vote or direct the vote and to dispose or direct the disposition of the shares beneficially owned by Radius III, and Radius III QP has the sole power to vote or direct the vote and to dispose or direct the disposition of the
shares beneficially owned by Radius III QP. Messrs. Lubin and Davis, by virtue of their positions as managing members of the general partner of Radius III and Radius III QP, may be deemed to have the shared power to vote or direct the vote of and
shared power to dispose or direct the disposition of the shares beneficially owned by Radius III and Radius III QP. Additionally, each of Daniel C. Lubin, Jordan S. Davis, Radius Venture Partners II, LLC and Radius Venture Partners III, LLC disclaim
beneficial ownership of the shares beneficially owned by Radius II, Radius III and Radius III QP. The address for Radius Venture Partners and its affiliates is 400 Madison Avenue, 8th Floor, New York, New York 10017.
(2)
A Schedule 13G filed with the SEC on June 18, 2007 reported that Angiotech beneficially owned 1,885,890 shares of common stock and
that Angiotech has sole voting and dispositive power over such shares. The address for Angiotech is 1618 Station Street, Vancouver, British Columbia, Canada V6A 1B6.
(3)
To our knowledge, Aspire Capital has direct beneficial ownership of 2,728,967 shares of common stock. Aspire Capital also holds
warrants to purchase 1,066,084 shares of common stock; however, these warrants are exercisable only if the holder beneficially owns less than 4.99% of the outstanding shares of common stock and, therefore, the shares underlying these warrants are
not beneficially owned by Aspire Capital as of the date hereof. Aspire Capital Partners, LLC, or Aspire Partners, as the managing member of Aspire Capital, SGM Holdings Corp., or SGM, as the managing member of Aspire Partners, Steven G. Martin, the
president and sole shareholder of SGM and a principal of Aspire Partners, Erik J. Brown, a principal of Aspire Partners, and Christos Komissopoulos, a principal of Aspire Partners, may be deemed to have shared voting and investment power over shares
of common stock owned by Aspire Capital. Each of Aspire Partners, SGM, Mr. Martin, Mr. Brown and Mr. Komissopoulos disclaims beneficial ownership of the shares of common stock held by Aspire Capital. The address for Aspire Capital and
its affiliates is 155 North Wacker Drive, Suite 1600, Chicago, Illinois 60606.
(4)
Includes vested options for 737,500 shares of common stock at a weighted average exercise price of $5.01 per share.
(5)
Includes vested options for 79,688 shares of common stock at a weighted average exercise price of $3.02 per share.
(6)
Includes vested options for 722,500 shares of common stock at a weighted average exercise price of $5.01 per share.
(7)
Includes vested options for 75,000 shares of common stock at a weighted average exercise price of $2.72 per share.
(8)
Includes vested options for 60,938 shares of common stock at a weighted average exercise price of $2.20 per share.
(9)
Includes vested options for 3,750 shares of common stock at a weighted average exercise price of $1.43 per share.
(10)
Includes vested options for 79,688 shares of common stock at a weighted average exercise price of $2.94 per share.
(11)
Includes vested options for 217,500 shares of common stock at a weighted average exercise price of $5.02 per share.
(12)
Includes vested options for 260,000 shares of common stock at a weighted average exercise price of $5.02 per share.
(13)
Includes vested options for 422,500 shares of common stock at a weighted average exercise price of $5.01 per share.
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DESCRIPTION OF CA
PITAL STOCK
We are authorized to issue 100,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares of preferred stock, par
value $0.001 per share.
Common Stock
This section describes the general terms and provisions of our common stock. For more detailed information, you should refer to our Certificate of Incorporation and Bylaws, copies of which
have been filed as exhibits to the registration statement of which this prospectus forms a part.
Holders of shares of common
stock will be entitled to receive dividends if and when declared by the board of directors from funds legally available therefor, and, upon liquidation, dissolution or winding-up of our company, will be entitled to share ratably in all assets
remaining after payment of liabilities. The holders of shares of common stock will not have any preemptive rights, but will be entitled to one vote for each share of common stock held of record. Stockholders will not have the right to cumulate their
votes for the election of directors. The shares of common stock offered hereby, when issued, will be fully paid and nonassessable.
Preferred Stock
This section describes the general terms
and provisions of our preferred stock. For more detailed information, you should refer to our Certificate of Incorporation and Bylaws, copies of which have been filed as exhibits to the registration statement of which this prospectus forms a part.
Our board of directors is authorized, without action by our stockholders, to designate and issue up to 10,000,000 shares of
preferred stock, par value $0.001 per share, in one or more series. The board of directors can fix the rights, preferences and privileges of the shares of each series and any of its qualifications, limitations or restrictions. Our board of directors
may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of common stock. The issuance of preferred stock, while providing flexibility in connection
with possible future financings, acquisitions and other corporate purposes could, under certain circumstances, have the effect of delaying, deferring or preventing a change in control of us and could adversely affect the market price of our common
stock. We do not have any shares of preferred stock outstanding, and we have no current plans to issue any preferred stock.
Transfer Agent and Registrar
We have appointed Computershare Investor Services as the transfer agent and registrar for our common stock.
Listing
Our common stock is listed on The NASDAQ Capital
Market under the symbol "ATHX."
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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
TO NON-U.S. HOLDERS
General
The following is a discussion of the material U.S. federal income tax consequences of the acquisition, ownership, and disposition of our common stock by a non-U.S. holder, as defined
below, that acquires our common stock pursuant to this offering. This discussion assumes that a non-U.S. holder will hold our common stock issued pursuant to this offering as a capital asset within the meaning of Section 1221 of the Code. This
discussion does not address all aspects of U.S. federal income taxation that may be relevant to a particular investor in light of the investor's individual circumstances. In addition, this discussion does not address (i) U.S. federal
non-income tax laws, such as gift or estate tax laws, (ii) state, local or non-U.S. tax consequences, (iii) the special tax rules that may apply to certain investors, including, without limitation, banks, insurance companies, financial
institutions, controlled foreign corporations, passive foreign investment companies, broker-dealers, grantor trusts, personal holding companies, taxpayers who have elected mark-to-market accounting, tax-exempt entities, regulated investment
companies, real estate investment trusts, a partnership or other entity or arrangement classified as a partnership for United States federal income tax purposes or other pass-through entities, or an investor in such entities or arrangements, or U.S.
expatriates or former long-term residents of the United States, (iv) the special tax rules that may apply to an investor that acquires, holds, or disposes of our common stock as part of a straddle, hedge, constructive sale, conversion or other
integrated transaction, or (v) the impact, if any, of the alternative minimum tax.
This discussion is based on current
provisions of the Code, applicable U.S. Treasury Regulations promulgated thereunder, judicial opinions, and published rulings of the Internal Revenue Service, or the IRS, all as in effect on the date of this prospectus and all of which are subject
to differing interpretations or change, possibly with retroactive effect. We have not sought, and will not seek, any ruling from the IRS or any opinion of counsel with respect to the tax consequences discussed herein, and there can be no assurance
that the IRS will not take a position contrary to the tax consequences discussed below or that any position taken by the IRS would not be sustained.
As used in this discussion, the term "U.S. person" means a person that is, for U.S. federal income tax purposes, (i) a citizen or individual resident of the United States,
(ii) a corporation (or other entity taxed as a corporation) created or organized (or treated as created or organized) in the United States or under the laws of the United States or any state thereof or the District of Columbia, (iii) an
estate the income of which is subject to U.S. federal income taxation regardless of its source, or (iv) a trust if (A) a court within the United States is able to exercise primary supervision over the administration of the trust and one or
more U.S. persons have the authority to control all substantial decisions of the trust, or (B) it has in effect a valid election under applicable U.S. Treasury Regulations to be treated as a U.S. person. As used in this discussion, the term
"non-U.S. holder" means a beneficial owner of our common stock (other than a partnership or other entity treated as a partnership or as a disregarded entity for U.S. federal income tax purposes) that is not a U.S. person.
The tax treatment of a partnership and each partner thereof will generally depend upon the status and activities of the partnership and
such partner. A holder that is treated as a partnership for U.S. federal income tax purposes or a partner in such partnership should consult its own tax advisor regarding the U.S. federal income tax consequences applicable to it and its partners of
the acquisition, ownership and disposition of our common stock.
THIS DISCUSSION IS ONLY A SUMMARY OF MATERIAL U.S. FEDERAL
INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK. IT IS NOT TAX ADVICE. EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR WITH RESPECT TO THE
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PARTICULAR TAX CONSEQUENCES OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL, AND NON-U.S. TAX LAWS, AS WELL AS U.S.
FEDERAL ESTATE AND GIFT TAX LAWS, AND ANY APPLICABLE TAX TREATY.
Income Tax Consequences of an Investment in Common Stock
Distributions on Common Stock
As discussed under "Dividend Policy," we do not anticipate paying dividends. If we pay cash or distribute property to holders of shares of common stock, such distributions
generally will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Distributions in excess of current and
accumulated earnings and profits will constitute a return of capital that will be applied against and reduce (but not below zero) the holder's adjusted tax basis in our common stock. Any remaining excess will be treated as gain from the sale or
exchange of the common stock and will be treated as described under "—Gain or Loss on Sale, Exchange or Other Taxable Disposition of Common Stock" below.
Dividends paid to a non-U.S. holder that are not effectively connected with the non-U.S. holder's conduct of a trade or business in the United States generally will be subject to
withholding of U.S. federal income tax at a rate of 30% or such lower rate as may be specified by an applicable income tax treaty. A non-U.S. holder that wishes to claim the benefit of an applicable tax treaty withholding rate generally will be
required to (i) complete IRS Form W-8BEN (or other applicable form) and certify under penalties of perjury that such holder is not a U.S. person and is eligible for the benefits of the applicable tax treaty or (ii) if our common stock is
held through certain foreign intermediaries, satisfy the relevant certification requirements of applicable U.S. Treasury Regulations. These forms may need to be periodically updated.
A non-U.S. holder eligible for a reduced rate of withholding of U.S. federal income tax pursuant to an income tax treaty may obtain a refund of any excess amounts withheld by timely filing
an appropriate claim for refund with the IRS. Non-U.S. holders should consult their own tax advisors regarding their entitlement to benefits under an applicable income tax treaty and the manner of claiming the benefits of such treaty (including,
without limitation, the need to obtain a U.S. taxpayer identification number).
Dividends that are effectively connected with
a non-U.S. holder's conduct of a trade or business in the United States, and, if required by an applicable income tax treaty, attributable to a permanent establishment or fixed base maintained by the non-U.S. holder in the United States, are
subject to U.S. federal income tax on a net income basis at the U.S. federal income tax rates generally applicable to a U.S. holder and are not subject to withholding of U.S. federal income tax, provided that the non-U.S. holder establishes an
exemption from such withholding by complying with certain certification and disclosure requirements. Any such effectively connected dividends (and, if required, dividends attributable to a U.S. permanent establishment or fixed base) received by a
non-U.S. holder that is treated as a foreign corporation for U.S. federal income tax purposes may be subject to an additional branch profits tax at a 30% rate, or such lower rate as may be specified by an applicable income tax treaty.
Gain or Loss on Sale, Exchange or Other Taxable Disposition of Common Stock
Any gain recognized by a non-U.S. holder on a sale or other taxable disposition of our common stock generally will not be subject to U.S.
federal income tax, unless:
(i)
the gain is effectively connected with a trade or business of the non-U.S. holder in the United States (and, if required by an applicable income tax
treaty, is attributable to a U.S. permanent establishment or fixed base of the non-U.S. holder),
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(ii)
the non-U.S. holder is an individual who is present in the United States for 183 days or more in the taxable year of that disposition, and certain other
conditions are met, or
(iii)
we are or have been a United States real property holding corporation, or a USRPHC, for U.S. federal income tax purposes at any time during the shorter
of the five-year period ending on the date of disposition or the period that the non-U.S. holder held the common stock, and, in the case where the shares of our common stock are regularly traded on an established securities market, the non-U.S.
holder holds or held (at any time during the shorter of the five-year period ending on the date of disposition or the non-U.S. holder's holding period) more than 5% of our common stock. A corporation generally is a USRPHC if the fair market
value of its U.S. real property interests equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests plus its other assets used or held for use in a trade or business. We believe that we currently are a
USRPHC, and we expect to remain a USRPHC.
Any gain recognized by a non-U.S. holder that is described in clause
(i) or (iii) of the preceding paragraph generally will be subject to tax at the U.S. federal income tax rates generally applicable to a U.S. person and be required to file a U.S. tax return. Such non-U.S. holders are urged to consult their
tax advisors regarding the possible application of these rules. Any gain of a corporate non-U.S. holder that is described in clause (i) above may also be subject to an additional branch profits tax at a 30% rate, or such lower rate as may be
specified by an applicable income tax treaty. An individual non-U.S. holder that is described in clause (ii) of such paragraph generally will be subject to a flat 30% tax (or a lower applicable tax treaty rate) on the U.S. source capital gain
derived from the disposition, which may be offset by U.S. source capital losses during the taxable year of the disposition.
Information Reporting and Backup Withholding
We generally must report annually to the IRS and to each non-U.S. holder of our common stock the amount of dividends paid to such holder on our common stock and the tax, if any, withheld
with respect to those dividends. Copies of the information returns reporting those dividends and withholding may also be made available to the tax authorities in the country in which the non-U.S. holder is a resident under the provisions of an
applicable income tax treaty or agreement. Information reporting also is generally required with respect to the proceeds from sales and other dispositions of our common stock to or through the U.S. office (and in certain cases, the foreign office)
of a broker.
Under some circumstances, U.S. Treasury Regulations require backup withholding of U.S. federal income tax,
currently at a rate of 28%, on reportable payments with respect to our common stock. A non-U.S. holder generally may eliminate the requirement for information reporting (other than in respect to dividends, as described above) and backup withholding
by providing certification of its foreign status, under penalties of perjury, on a duly executed applicable IRS Form W-8 or by otherwise establishing an exemption. Notwithstanding the foregoing, backup withholding and information reporting may apply
if either we or our paying agent has actual knowledge, or reason to know, that a holder is a U.S. person.
Backup withholding
is not a tax. Rather, the amount of any backup withholding will be allowed as a credit against a non-U.S. holder's U.S. federal income tax liability, if any, and may entitle such non-U.S. holder to a refund, provided that certain required
information is timely furnished to the IRS. Non-U.S. holders should consult their own tax advisors regarding the application of backup withholding and the availability of and procedure for obtaining an exemption from backup withholding in their
particular circumstances.
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UNDERWRITING
We are offering the shares of common stock described in this prospectus through Piper Jaffray & Co. as underwriter. Subject to the
terms and conditions of the underwriting agreement, we have agreed to sell to the underwriter, and the underwriter has agreed to purchase from us, 17,000,000 shares of common stock.
The underwriter is committed to purchase all the shares of common stock offered by us if it purchases any shares, other than those shares covered by the over-allotment option described
below.
The underwriter has advised us that it proposes to offer the shares of common stock directly to the public at the
initial public offering price set forth on the cover page of this prospectus and to certain dealers at that same price less a concession not in excess of $         per share. The underwriter may allow and the
dealers may re-allow a concession of not more than $         per share on sales to certain other brokers and dealers. After the offering, these figures may be changed by the underwriter.
We have granted to the underwriter an option to purchase up to an additional 2,550,000 shares of common stock from us at the same price
to the public as set forth above to cover over-allotments. The underwriter may exercise this option any time during the 30-day period after the date of this prospectus, but only to cover over-allotments, if any.
The underwriting fee is equal to the public offering price per share of common stock less the amount paid by the underwriter to us per
share of common stock. The following table shows the per share and total underwriting discounts to be paid to the underwriter in connection with this offering. These amounts are shown assuming both no exercise and full exercise of the over-allotment
option.
No Exercise
Full Exercise
Per share
Total
We estimate that the total fees and expenses payable by us, excluding underwriting discounts and
commissions, will be approximately $            .
We have agreed
to indemnify the underwriter against certain liabilities, including liabilities under the Securities Act, or to contribute to payments that the underwriter may be required to make in respect of those liabilities.
We and each of our directors and executive officers are subject to lock-up agreements that prohibit us and them from offering for sale,
pledging, announcing the intention to sell, selling, contracting to sell, selling any option or contract to purchase, purchasing any option or contract to sell, granting any option, right or warrant to purchase, or otherwise transferring or
disposing of, directly or indirectly, any shares of our common stock or any securities convertible into or exercisable or exchangeable for shares of our common stock, or from entering into any swap or other agreement that transfers, in whole or in
part, any of the economic consequences of ownership of the common stock, for a period of at least 90 days following the date of the underwriting agreement without the prior written consent of Piper Jaffray & Co. The lock-up agreements do not
prohibit our directors and executive officers from transferring shares of our common stock for bona fide estate or tax planning purposes, subject to certain requirements, including that the transferee be subject to the same lock-up terms,
participating in any exchange of "underwater" options with us, acquiring or exercising stock options issued pursuant to our existing stock option plans, or entering into plans that satisfy the requirements of Rule 10b5-1(c)(1)(i)(B) under
the Exchange Act, provided that no sales are made under such plans during the lock-up period.
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The lock-up agreements do not prohibit us from issuing shares upon the exercise or
conversion of securities outstanding on the date of this prospectus. The lock-up provisions do not prevent us from selling shares to the underwriter pursuant to the underwriting agreement, or prevent us from granting options to acquire securities
under our existing stock option plans or issuing shares upon the exercise or conversion of securities outstanding on the date of this prospectus.
The 90-day lock-up period in all of the lock-up agreements is subject to extension if (i) during the last 17 days of the lock-up period we issue an earnings release or material
news or a material event relating to us occurs or (ii) prior to the expiration of the lock-up period, we announce that we will release earnings results during the 16-day period beginning on the last day of the lock-up period, in which case the
restrictions imposed in these lock-up agreements shall continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event, unless Piper Jaffray &
Co. waives the extension in writing.
Our shares are quoted on The NASDAQ Capital Market under the symbol "ATHX."
To facilitate the offering, the underwriter may engage in transactions that stabilize, maintain or otherwise affect the price
of our common stock during and after the offering. Specifically, the underwriter may over-allot or otherwise create a short position in the common stock for its own account by selling more shares of common stock than we have sold to it. Short sales
involve the sale by the underwriter of a greater number of shares than it is required to purchase in the offering. The underwriter may close out any short position by either exercising its option to purchase additional shares or purchasing shares in
the open market.
The underwriter may also engage in passive market making transactions in our common stock. Passive market
making consists of displaying bids on The NASDAQ Capital Market limited by the prices of independent market makers and effecting purchases limited by those prices in response to order flow. Rule 103 of Regulation M promulgated by the SEC limits the
amount of net purchases that each passive market maker may make and the displayed size of each bid. Passive market making may stabilize the market price of our common stock at a level above that which might otherwise prevail in the open market and,
if commenced, may be discontinued at any time.
This prospectus in electronic format may be made available on web sites
maintained by the underwriter, and the underwriter may distribute prospectus supplements electronically.
From time to time in
the ordinary course of their respective businesses, the underwriter and certain of its affiliates may in the future engage in commercial banking or investment banking transactions with us and our affiliates.
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LEGAL MATTERS
The validity of the issuance of the common stock offered by this prospectus will be passed upon for us by Jones Day. Goodwin Procter LLP,
New York, New York has acted as counsel for the underwriter in connection with certain legal matters related to this offering.
EXPERTS
The consolidated
financial statements of Athersys, Inc. appearing in Athersys, Inc.'s Annual Report (Form 10-K) for the year ended December 31, 2011 have been audited by Ernst & Young LLP, independent registered public accounting firm, as set
forth in their report thereon, included therein and incorporated herein by reference. Such consolidated financial statements are incorporated herein by reference in reliance upon such report given on the authority of such firm as experts in
accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the Securities Act to register our common stock being offered in
this prospectus. This prospectus, which constitutes a part of the registration statement, does not contain all the information set forth in the registration statement or the exhibits and schedules filed thereto. For further information about us and
the our common stock offered by this prospectus, we refer you to the registration statement and the exhibits and schedules filed with the registration statement. Any statement contained in this prospectus regarding the contents of any contract or
any other document that is filed as an exhibit to the registration statement is not necessarily complete and each such statement is qualified in all respects by reference to the full text of such contract or other document filed as an exhibit to the
registration statement.
You may read and copy any materials we file with the SEC, including the registration statement, at
the SEC's Public Reference Room at 100 F Street, NE, Washington, D.C. 20549, on official business days during the hours of 10:00 a.m. to 3:00 p.m. You may obtain information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. The SEC also maintains an Internet website that contains reports, proxy statements and other information about issuers, like us, that file electronically with the SEC. The address of that website is http://www.sec.gov. Information on
or accessible through the SEC's website is not a part of this prospectus. You may also inspect our SEC reports and other information at our website at www.athersys.com. Information on or accessible through our website is not a part of this
prospectus.
We are subject to the information reporting requirements of the Exchange Act, as amended, and file reports, proxy
statements and other information with the SEC. These reports, proxy statements and other information are available for inspection and copying at the public reference room and website of the SEC referred to above.
INFORMATION WE INCORPORATE BY REFERENCE
The SEC allows us to "incorporate by reference" into this prospectus the information in documents we file with it, which means
that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be a part of this prospectus, and information that we file later with the SEC will automatically update
and supersede this information. Any statement contained in any document incorporated or deemed to be incorporated by reference in this prospectus shall be deemed to be modified or superseded to the extent that a statement contained in or omitted
from this prospectus, or in any other subsequently filed document that also is or is deemed to be incorporated by reference, modifies or supersedes such statement. Any such statement so modified or
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superseded shall not be deemed, except as so modified or superseded, to constitute a part of this prospectus.
We incorporate by reference the documents listed below:
•
our annual report on Form 10-K for the year ended December 31, 2011;
•
our quarterly reports on Form 10-Q for the quarters ended March 31, 2012 and June 30, 2012;
•
our definitive proxy statement on Schedule 14A filed with the SEC on April 27, 2012;
•
our current reports on Form 8-K filed on February 27, 2012, March 15, 2012 and June 22, 2012; and
•
the description of our common stock set forth in the registration statement on Form 8-A filed on December 6, 2007, and all
amendments and reports filed for the purpose of updating that description.
We do not, however, incorporate
by reference in this prospectus any documents or portions thereof that are not deemed "filed" with the SEC, including any information furnished pursuant to Item 2.02 or Item 7.01 of our current reports on Form 8-K.
You may obtain copies of these filings without charge by accessing the investors section of www.athersys.com or by requesting
the filings in writing or telephoning us at the following address and telephone number:
Athersys, Inc.
3201 Carnegie Avenue
Cleveland, Ohio 44115-2634
(216) 431-9900 Attn:
Secretary
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17,000,000 Shares
Athersys, Inc.
Common Stock
PROSPECTUS
, 2012
Table of Contents
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 13.
Other Expenses of Issuance and Distribution.
The following table shows the costs and expenses to be paid by the registrant in connection with this offering. All amounts shown except the SEC registration fee and The NASDAQ Capital Market listing fee
are estimates.
Amount
SEC Registration Fee
$
3,494
FINRA Filing Fee
*
NASDAQ Capital Market Listing Fee
*
Accounting Fees and Expenses
*
Legal Fees and Expenses
*
Printing and Engraving Expenses
*
Transfer Agent and Registrar Fees and Expenses
*
Miscellaneous Expenses
*
Total
*
*
To be provided by amendment.
Item 14.    Indemnification of Officers and Directors.
Delaware law provides that directors of a company will not be personally liable for monetary damages for breach of their fiduciary duty as directors, except for liabilities:
•
for any breach of their duty of loyalty to the company or its stockholders;
•
for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
•
for unlawful payment of dividend or unlawful stock repurchase or redemption, as provided under Section 174 of the General Corporation Law of the
State of Delaware (the "DGCL"); or
•
for any transaction from which the director derived an improper personal benefit.
The provisions of Delaware law that relate to indemnification expressly state that the rights provided by the statute are not exclusive and are in
addition to any rights provided in bylaws, by agreement, or otherwise. Our certificate of incorporation also provides that if Delaware law is amended to further eliminate or limit the liability of directors, then the liability of our directors shall
be eliminated or limited, without further stockholder action, to the fullest extent permissible under Delaware law as so amended.
Our
certificate of incorporation requires us to indemnify, to the fullest extent permitted by the DGCL, any and all persons we have the power to indemnify under the DGCL from and against any and all expenses, liabilities or other matters covered by the
DGCL. Additionally, our certificate of incorporation requires us to indemnify each of our directors and officers in each and every situation where the DGCL permits or empowers us (but does not obligate us) to provide such indemnification, subject to
the provisions of our bylaws. Our bylaws requires us to indemnify our directors to the fullest extent permitted by the DGCL, and permits us, to the extent authorized by the board of directors, to indemnify our officers and any other person we have
the power to indemnify against liability, reasonable expense or other matters.
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Under our certificate of incorporation, indemnification may be provided to directors and officers acting in
their official capacity, as well as in other capacities. Indemnification will continue for persons who have ceased to be directors, officers, employees or agents, and will inure to the benefit of their heirs, executors and administrators.
Additionally, under our certificate of incorporation, except under certain circumstances, our directors are not personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director. At present, there is no
pending litigation or proceeding involving any of our directors, officers, or employees in which indemnification is sought, nor are we aware of any threatened litigation that may result in claims for indemnification.
Our bylaws also permit us to secure insurance on behalf of any officer, director, employee, or agent for any liability arising out of actions in his or
her capacity as an officer, director, employee, or agent. We have obtained an insurance policy that insures our directors and officers against losses, above a deductible amount, from specified types of claims. Finally, we have entered into
indemnification agreements with most of our directors and executive officers, which agreements, among other things, require us to indemnify them and advance expenses to them relating to indemnification suits to the fullest extent permitted by law.
Item 15.
Recent Sales of Unregistered Securities.
On each of September 25, 2012, September 6, 2012, August 8, 2012, July 18, 2012, July 9,
2012, June 27, 2012, February 8, 2012 and February 3, 2012, we issued 7,500 shares of our common stock to our former lenders pursuant to a 2004 loan agreement. Also pursuant to the 2004 loan agreement, we issued shares of
our common stock to our former lenders as follows: 347,937 on March 9, 2012, 50,000 on November 11, 2011, and 205,236 on February 2, 2011. 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 the issuance by us did not involve a public offering. The offerings were not public offerings due to
the number of persons involved, the manner of the issuance and the number of securities issued. In addition, the lenders acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof and
appropriate legends were affixed to the securities issued in these transactions, and the lenders had the necessary investment intent since they agreed to and received share certificates bearing a legend stating that such securities are restricted.
We did not receive any proceeds from these issuances.
On each of September 7, 2011 and September 9, 2010, we issued 1,345 shares of
our common stock to Katholieke Universiteit Leuven, or KUL, pursuant to a license agreement with KUL. 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 the issuance by us did not involve a public offering. The offerings were not public offerings due to the number of persons involved, the manner of the
issuance and the number of securities issued. In addition, KUL had the necessary investment intent since KUL agreed to and received share certificates bearing a legend stating that such securities are restricted. We did not receive any proceeds from
these issuances.
On November 11, 2011, we issued to Aspire Capital 266,667 shares of our common stock as the commitment shares for a new
financing of up to $20.0 million, which may be provided to us by Aspire Capital, and Aspire Capital purchased 666,667 shares of common stock, for an aggregate purchase price of $1.0 million. The issuance of these unregistered shares qualifies as an
exempt transaction pursuant to Section 4(2) of the Securities Act of 1933. The issuance qualified for exemption under Section 4(2) of the Securities Act of 1933 because the issuance by us did not involve a public offering. The 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, Aspire Capital had the necessary investment intent since Aspire Capital agreed to and received share
certificates bearing a legend stating that such securities are restricted.
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On each of
February 3, February 8, June 27, July 9, July 18, August 8, September 6 and September 25, 2012, we sold an additional 100,000 shares of common stock, or 800,000 shares in the
aggregate, to Aspire Capital at purchase prices of $185,000, $185,000, $145,000, $145,000, $151,000, $149,000, $148,000 and $147,670, respectively. 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 since Aspire Capital agreed to and received share certificates each bearing a legend
stating that such securities are restricted.
On March 14, 2012, we sold 4,347,827 shares of our common stock and warrants to purchase up
to 4,347,827 shares of common stock to various purchasers for an aggregate purchase price of approximately $9.0 million. The total purchase price for one share of common stock and a warrant to purchase one share of common stock was $2.07. The
issuance of these unregistered securities qualifies as an exempt transaction pursuant to Section 4(2) of the Securities Act of 1933. The issuance qualified for exemption under Section 4(2) of the Securities Act of 1933 because the issuance
by us did not involve a public offering. The 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, the purchasers had the necessary investment intent
since they agreed to and received share certificates and warrant certificates each bearing a legend stating that such securities are restricted.
Item 16.
Exhibits and Financial Statement Schedules.
(a) Exhibits
Exhibit No.
Exhibit Description
1.1
**
Form of Underwriting Agreement
3.1
Certificate of Incorporation of Athersys, Inc., as amended as of August 31, 2007 (incorporated herein by reference to Exhibit 3.1 to the registrant's Registration Statement
on Form S-3/A (Registration No. 333-144433) filed with the Commission on October 10, 2007)
3.2
Bylaws of Athersys, Inc., as amended as of October 30, 2007 (incorporated herein by reference to Exhibit 3.1 to the registrant's Current Report on Form 8-K
(Commission No. 000-52108) filed with the Commission on October 31, 2007)
4.1
Form of Warrant (incorporated herein by reference to Exhibit 4.1 to the registrant's Current Report on Form 8-K (Commission No. 001-33876) filed with the Commission on March
15, 2012)
4.2
Form of Warrant (incorporated herein by reference to Exhibit 4.1 to the registrant's Current Report on Form 8-K (Commission No. 001-33876) filed with the Commission on
January 28, 2011)
5.1
**
Opinion of Jones Day
10.1
*
Research Collaboration and License Agreement, dated as of December 8, 2000, by and between Athersys, Inc. and Bristol-Myers Squibb Company (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 14, 2007)
10.2
*
Cell Line Collaboration and License Agreement, dated as of July 1, 2002, by and between Athersys, Inc. and Bristol-Myers Squibb Company (incorporated herein by reference to
Exhibit 10.2 to the registrant's Current Report on Form 8-K/A (Commission No. 000-52108) filed with the Commission on September 27, 2007)
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Exhibit No.
Exhibit Description
10.3
*
Extended Collaboration and License Agreement, dated as of January 1, 2006, by and between Athersys, Inc. and Bristol-Myers Squibb Company (incorporated herein by reference to
Exhibit 10.3 to the registrant's Current Report on Form 8-K/A (Commission No. 000-52108) filed with the Commission on September 27, 2007)
10.4
License Agreement, effective as of May 5, 2006, by and between Athersys, Inc. and Angiotech Pharmaceuticals (incorporated herein by reference to Exhibit 10.4 to the
registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.5
Sublicense Agreement, effective as of May 5, 2006, by and between Athersys, Inc. and Angiotech Pharmaceuticals (incorporated herein by reference to Exhibit 10.5 to the
registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.6
Amended and Restated Registration Rights Agreement, dated as of April 28, 2000, by and among Athersys, Inc. and the stockholders of Athersys, Inc. parties thereto
(incorporated herein by reference to Exhibit 10.6 to the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.7
Amendment No. 1 to Athersys, Inc. Amended and Restated Registration Rights Agreement, dated as of January 29, 2002, by and among Athersys, Inc., the New Stockholders, the
Investors, Biotech and the Stockholders (each as defined in the Amended and Restated Registration Rights Agreement, dated as April 28, 2000, by and among Athersys, Inc. and the stockholders of Athersys, Inc. parties thereto) (incorporated herein by
reference to Exhibit 10.7 to the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.8
Amendment No. 2 to Athersys, Inc. Amended and Restated Registration Rights Agreement, dated as of November 19, 2002, by and among Athersys, Inc., the New Stockholders, the
Investors, Biotech and the Stockholders (each as defined in the Amended and Restated Registration Rights Agreement, dated as April 28, 2000, as amended, by and among Athersys, Inc. and the stockholders of Athersys, Inc. parties thereto)
(incorporated herein by reference to Exhibit 10.8 to the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.9
Amendment No. 3 to Amended and Restated Registration Rights Agreement, dated as of May 15, 2007, by and among Athersys, Inc. and the Existing Stockholders (as defined
therein) (incorporated herein by reference to Exhibit 10.9 to the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.10†
Athersys, Inc. Equity Incentive Compensation Plan (incorporated herein by reference to Exhibit 10.11 to the registrant's Current Report on Form 8-K (Commission No.
000-52108) filed with the Commission on June 14, 2007)
10.11
Loan and Security Agreement, and Supplement, dated as of November 2, 2004, by and among Athersys, Inc., Advanced Biotherapeutics, Inc., Venture Lending & Leasing IV, Inc.,
and Costella Kirsch IV, L.P. (incorporated herein by reference to Exhibit 10.1 to the registrant's Quarterly Report on Form 10-Q (Commission No. 000-52108) filed with the Commission on November 14, 2007)
10.12
Second Amendment to Loan and Security Agreement, dated as of October 30, 2007, by and among ABT Holding Company, Advanced Biotherapeutics, Inc., Venture Lending and Leasing IV,
Inc., and Costella Kirsch IV, L.P. (incorporated herein by reference to Exhibit 10.2 to the registrant's Quarterly Report on Form 10-Q (Commission No. 000-52108) filed with the Commission on November 14,
2007)
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Table of Contents
Exhibit No.
Exhibit Description
10.13
Amendment to Loan and Security Agreement, dated as of September 29, 2006, by and among Athersys, Inc., Advanced Biotherapeutics, Inc., Venture Lending & Leasing IV, Inc., and
Costella Kirsch IV, L.P. (incorporated herein by reference to Exhibit 10.13 to the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.14†
Amended and Restated Employment Agreement, dated as of December 1, 1998 but effective as of April 1, 1998, by and between Athersys, Inc. and Dr. Gil Van Bokkelen (incorporated
herein by reference to Exhibit 10.14 to the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.15†
Amendment No. 1 to Amended and Restated Employment Agreement, dated as of May 31, 2007, by and between Advanced Biotherapeutics, Inc. and Gil Van Bokkelen (incorporated
herein by reference to Exhibit 10.15 to the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.16†
Non-Competition and Confidentiality Agreement, dated as of December 1, 1998, by and between Athersys, Inc. and Dr. Gil Van Bokkelen (incorporated herein by reference to Exhibit
10.16 to the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.17†
Amended and Restated Employment Agreement, dated as of December 1, 1998 but effective as of April 1, 1998, by and between Athersys, Inc. and Dr. John J. Harrington (incorporated
herein by reference to Exhibit 10.17 to the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.18†
Amendment No. 1 to Amended and Restated Employment Agreement, dated as of May 31, 2007, by and between Advanced Biotherapeutics, Inc. and John Harrington (incorporated herein by
reference to Exhibit 10.18 to the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.19†
Non-Competition and Confidentiality Agreement, dated as of December 1, 1998, by and between Athersys, Inc. and Dr. John J. Harrington (incorporated herein by reference to Exhibit
10.19 to the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.20†
Employment Agreement, dated as of May 22, 1998, by and between Athersys, Inc. and Laura K. Campbell (incorporated herein by reference to Exhibit 10.20 to the
registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.21†
Amendment No. 1 to Employment Agreement, dated as of May 31, 2007, by and between Advanced Biotherapeutics, Inc. and Laura Campbell (incorporated herein by reference to Exhibit
10.21 to the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.22†
Employment Agreement, dated as of October 3, 2003, by and between Advanced Biotherapeutics, Inc. and Robert Deans, Ph.D. (incorporated herein by reference to Exhibit 10.25
to the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.23†
Amendment No. 1 to Employment Agreement, dated as of May 31, 2007, by and between Advanced Biotherapeutics, Inc. and Robert Deans (incorporated herein by reference to Exhibit
10.26 to the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
II-5
Table of Contents
Exhibit No.
Exhibit Description
10.24†
Non-Competition and Confidentiality Agreement, dated as of October 3, 2003, by and among Athersys, Inc., Advanced Biotherapeutics, Inc. and Robert Deans (incorporated herein by
reference to Exhibit 10.27 to the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.25†
Employment Agreement, dated as of January 1, 2004, by and between Advanced Biotherapeutics, Inc. and William Lehmann (incorporated herein by reference to Exhibit 10.28 to
the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.26†
Amendment No. 1 to Employment Agreement, dated as of May 31, 2007, by and between Advanced Biotherapeutics, Inc. and William Lehmann (incorporated herein by reference to
Exhibit 10.29 to the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.27†
Non-Competition and Confidentiality Agreement, dated as of September 10, 2001, by and among Athersys, Inc., Advanced Biotherapeutics, Inc. and William Lehmann (incorporated
herein by reference to Exhibit 10.30 to the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.28†
Form Incentive Agreement by and between Advanced Biotherapeutics, Inc. and named executive officers, and acknowledged by Athersys, Inc. and ReGenesys, LLC (incorporated herein by
reference to Exhibit 10.31 to the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.29†
Form Amendment No. 1 to Incentive Agreement by and between Advanced Biotherapeutics, Inc. and named executive officers, and acknowledged by Athersys, Inc. and ReGenesys, LLC
(incorporated herein by reference to Exhibit 10.32 to the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.30
Securities Purchase Agreement, dated as of June 8, 2007, by and among Athersys, BTHC VI, Inc. and Investors (as defined therein) (incorporated herein by reference to Exhibit
10.33 to the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.31*
Exclusive License Agreement, dated as of May 17, 2002, by and between Regents of the University of Minnesota and MCL LLC, assumed by ReGenesys, LLC through operation of
merger on November 4, 2003 (incorporated herein by reference to Exhibit 10.34 to the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.32*
Strategic Alliance Agreement, by and between Athersys, Inc. and Angiotech, dated as of May 5, 2006 (incorporated herein by reference to Exhibit 10.35 to the registrant's
Current Report on Form 8-K/A (Commission No. 000-52108) filed with the Commission on October 9, 2007)
10.33
Amendment No. 1 to Cell Line Collaboration and License Agreement, dated as of January 1, 2006, by and between Athersys, Inc. and Bristol-Myers Squibb Company (incorporated
herein by reference to Exhibit 10.36 to the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.34
Form Indemnification Agreement for Directors, Officers and Directors and Officers (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 August 6, 2007)
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Exhibit No.
Exhibit Description
10.35†
Summary of Athersys, Inc. 2011 Cash Bonus Incentive Plan (incorporated herein by reference to Exhibit 10.41 to the registrant's Annual Report on Form 10-K for the year ended
December 31, 2010 (Commission No. 001-33876) filed with the Commission on March 25, 2011)
10.36†
Summary of Athersys, Inc. 2012 Cash Bonus Incentive Plan (incorporated herein by reference to Exhibit 10.36 to the registrant's Annual Report on Form 10-K for the year ended
December 31, 2011 (Commission No. 001-33876) filed with the Commission on March 28, 2012)
10.37*
Collaboration and License Agreement, dated as of December 18, 2009, by and between Athersys, Inc., ABT Holding Company, and Pfizer (incorporated herein by reference to
Exhibit 10.42 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2009 (Commission No. 001-33876) filed with the Commission on March 11, 2010)
10.38*
Stand-by License Agreement, dated as of December 18, 2009, by and between Regents of the University of Minnesota, ABT Holding Company and Pfizer Inc. (incorporated herein by
reference to Exhibit 10.43 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2009 (Commission No. 001-33876) filed with the Commission on March 11, 2010)
10.39
Amendment dated as of March 31, 2009 to the Extended Collaboration and License Agreement, by and between Athersys, Inc. and Bristol-Myers Squibb Company effective January 1, 2006
(incorporated herein by reference to Exhibit 10.1 to the registrant's Current Report on Form 8-K (Commission No. 001-33876) filed with the Commission on April 9, 2009)
10.40
Amendment No. 4 to Amended and Restated Registration Rights Agreement, dated as of March 8, 2010, by and among Athersys, Inc. and the Existing Stockholders (as defined therein)
(incorporated herein by reference to Exhibit 10.45 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2009 (Commission No. 001-33876) filed with the Commission on March 11, 2010)
10.41*
License and Technical Assistance Agreement, dated as of September 10, 2010, between ABT Holding Company and RTI Biologics, Inc. (incorporated herein by reference to Exhibit 10.1
to the registrant's Quarterly Report on Form 10-Q (Commission No. 001-33876) filed with the Commission on November 8, 2010)
10.42†
Form of Incentive Stock Option Agreement (incorporated herein by reference to Exhibit 10.47 to the registrant's Annual Report on Form 10-K for the year ended December
31, 2010 (Commission No. 001-33876) filed with the Commission on March 25, 2011)
10.43†
Form of Nonqualified Stock Option Agreement for Non-Employee Directors (incorporated herein by reference to Exhibit 10.48 to the registrant's Annual Report on Form 10-K for
the year ended December 31, 2010 (Commission No. 001-33876) filed with the Commission on March 25, 2011)
10.44†
Athersys, Inc. Amended and Restated 2007 Long-Term Incentive Plan (Amended and Restated Effective June 16, 2011) (incorporated herein by reference to Exhibit 10.1 to
registrant's Current Report on Form 8-K (Commission No. 001-33876) filed with the Commission on June 20, 2011)
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Table of Contents
Exhibit No.
Exhibit Description
10.45†
Form of Nonqualified Stock Option Agreement for Non-Employee Directors pursuant to the Athersys, Inc. Amended and Restated 2007 Long-Term Incentive Plan (Amended and Restated
Effective June 16, 2011) (incorporated herein by reference to Exhibit 10.49 to the registrant's Quarterly Report on Form 10-Q (Commission No. 001-33876) filed with the Commission on May 6, 2011)
10.46
Common Stock Purchase Agreement, dated as of November 11, 2011, by and between Athersys, Inc. and Aspire Capital Fund, LLC (incorporated herein by reference to Exhibit 10.1
to the registrant's Current Report on Form 8-K (Commission No. 001-33876) filed with the Commission on November 14, 2011)
10.47
Termination Agreement, dated as of November 11, 2011, by and between Athersys, Inc. and ABT Holding Company (f/k/a Athersys, Inc.) and Angiotech (incorporated by reference
to Exhibit 10.1 to the registrant's Current Report on Form 8-K (Commission No. 001-33876) filed with the Commission on November 14, 2011)
10.48
First Amendment to Common Stock Purchase Agreement, dated as of November 17, 2011, by and between Athersys, Inc. and Aspire Capital Fund, LLC (incorporated by reference to
Exhibit 10.47 to the registrant's Registration Statement on Form S-1 (Commission No. 333-178418) filed with the Commission on December 9, 2011)
10.49†
Form of Restricted Stock Unit Agreement (incorporated herein by reference to Exhibit 10.2 to the registrant's Quarterly Report on Form 10-Q (Commission No. 001-33876) filed
with the Commission on August 10, 2011)
10.50
Registration Rights Agreement, dated as of November 11, 2011, by and between Athersys, Inc. and Aspire Capital Fund, LLC (incorporated herein by reference to Exhibit 10.2 to the
registrant's Current Report on Form 8-K (Commission No. 001-33876) filed with the Commission on November 14, 2011)
10.51
Amendment No. 3 to Extended Collaboration and License Agreement, dated January 31, 2012, by and between ABT Holding Company and Bristol-Myers Squibb Company (incorporated by
reference to Exhibit 10.3 to the registrant's Quarterly Report on Form 10-Q (Commission No. 001-33876) filed with the Commission on May 14, 2012)
10.52
First Amendment to License and Technical Assistance Agreement, dated September 17, 2012, by and between ABT Holding, Inc. and RTI Biologics, Inc.
10.53
Registration Rights Agreement, dated as of March 9, 2012, by and between Athersys, Inc. and the signatories thereto (incorporated herein by reference to Exhibit 10.2 to the
registrant's Current Report on Form 8-K (Commission No. 001-33876) filed with the Commission on March 15, 2012)
21.1
List of Subsidiaries (incorporated herein by reference to Exhibit 21.1 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2011
(Commission No. 001-33876) filed with the Commission on March 28, 2012)
23.1
Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm
23.2**
Consent of Jones Day (included in Exhibit 5.1)
24.1
Power of Attorney
*
Confidential treatment requested as to certain portions, which portions have been filed separately with the Commission.
**
To be filed by amendment.
†
Indicates management contract or compensatory plan, contract or arrangement in which one or more directors or executive officers of the registrant may
be participants.
II-8
Table of Contents
(b) Financial Statement Schedules
No financial statement schedules are provide because the information called for is not applicable or is shown in the financial statements or notes thereto incorporated by reference herein.
Item 17.
Undertakings.
The undersigned registrant
hereby undertakes:
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in
the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
For the purpose of determining any liability under the Securities Act of 1933, each
post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide
offering thereof.
II-9
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Cleveland, Ohio, on the 9th day of October, 2012.
Athersys, Inc.
By:
/s/    Gil Van
Bokkelen
Gil Van Bokkelen
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been
signed by the following persons in the capacities and on the dates indicated.
Signature
Title
Date
/s/    Gil Van
Bokkelen
Gil Van Bokkelen
Chief Executive Officer and Chairman of the Board of Directors (Principal Executive Officer)
October 9, 2012
/s/    Laura K.
Campbell
Laura K. Campbell
Vice President of Finance (Principal Financial Officer and Principal Accounting Officer)
October 9, 2012
*
John J. Harrington
Executive Vice President, Chief Scientific Officer and Director
October 9, 2012
*
Lorin J. Randall
Director
October 9, 2012
*
Kenneth Traub
Director
October 9, 2012
*
Jack L. Wyszomierski
Director
October 9, 2012
*
Lee Babiss
Director
October 9, 2012
Ismail Kola
Director
October 9, 2012
*
The undersigned by signing his name hereto does sign and execute this registration statement on Form S-1 pursuant to the Power of Attorney executed
by the above-named directors and officers of the registrant, which is being filed herewith on behalf of such directors and officers.
By:
/s/    Gil Van Bokkelen
Attorney-in-Fact
Table of Contents
EXHIBIT INDEX
Exhibit No.
Exhibit Description
1.1
**
Form of Underwriting Agreement
3.1
Certificate of Incorporation of Athersys, Inc., as amended as of August 31, 2007 (incorporated herein by reference to Exhibit 3.1 to the registrant's
Registration Statement on Form S-3/A (Registration No. 333-144433) filed with the Commission on October 10, 2007)
3.2
Bylaws of Athersys, Inc., as amended as of October 30, 2007 (incorporated herein by reference to Exhibit 3.1 to the registrant's Current Report on Form 8-K
(Commission No. 000-52108) filed with the Commission on October 31, 2007)
4.1
Form of Warrant (incorporated herein by reference to Exhibit 4.1 to the registrant's Current Report on Form 8-K (Commission No. 001-33876) filed with the
Commission on March 15, 2012)
4.2
Form of Warrant (incorporated herein by reference to Exhibit 4.1 to the registrant's Current Report on Form 8-K (Commission No. 001-33876) filed with the
Commission on January 28, 2011)
5.1
**
Opinion of Jones Day
10.1
*
Research Collaboration and License Agreement, dated as of December 8, 2000, by and between Athersys, Inc. and Bristol-Myers Squibb Company (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 14, 2007)
10.2
*
Cell Line Collaboration and License Agreement, dated as of July 1, 2002, by and between Athersys, Inc. and Bristol-Myers Squibb Company (incorporated herein by
reference to Exhibit 10.2 to the registrant's Current Report on Form 8-K/A (Commission No. 000-52108) filed with the Commission on September 27, 2007)
10.3
*
Extended Collaboration and License Agreement, dated as of January 1, 2006, by and between Athersys, Inc. and Bristol-Myers Squibb Company (incorporated herein by
reference to Exhibit 10.3 to the registrant's Current Report on Form 8-K/A (Commission No. 000-52108) filed with the Commission on September 27, 2007)
10.4
License Agreement, effective as of May 5, 2006, by and between Athersys, Inc. and Angiotech Pharmaceuticals (incorporated herein by reference to Exhibit 10.4 to
the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.5
Sublicense Agreement, effective as of May 5, 2006, by and between Athersys, Inc. and Angiotech Pharmaceuticals (incorporated herein by reference to Exhibit 10.5
to the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.6
Amended and Restated Registration Rights Agreement, dated as of April 28, 2000, by and among Athersys, Inc. and the stockholders of Athersys, Inc. parties thereto
(incorporated herein by reference to Exhibit 10.6 to the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.7
Amendment No. 1 to Athersys, Inc. Amended and Restated Registration Rights Agreement, dated as of January 29, 2002, by and among Athersys, Inc., the New
Stockholders, the Investors, Biotech and the Stockholders (each as defined in the Amended and Restated Registration Rights Agreement, dated as April 28, 2000, by and among Athersys, Inc. and the stockholders of Athersys, Inc. parties thereto)
(incorporated herein by reference to Exhibit 10.7 to the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
Table of Contents
Exhibit No.
Exhibit Description
10.8
Amendment No. 2 to Athersys, Inc. Amended and Restated Registration Rights Agreement, dated as of November 19, 2002, by and among Athersys, Inc., the New
Stockholders, the Investors, Biotech and the Stockholders (each as defined in the Amended and Restated Registration Rights Agreement, dated as April 28, 2000, as amended, by and among Athersys, Inc. and the stockholders of Athersys, Inc.
parties thereto) (incorporated herein by reference to Exhibit 10.8 to the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.9
Amendment No. 3 to Amended and Restated Registration Rights Agreement, dated as of May 15, 2007, by and among Athersys, Inc. and the Existing Stockholders
(as defined therein) (incorporated herein by reference to Exhibit 10.9 to the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.10†
Athersys, Inc. Equity Incentive Compensation Plan (incorporated herein by reference to Exhibit 10.11 to the registrant's Current Report on Form 8-K
(Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.11
Loan and Security Agreement, and Supplement, dated as of November 2, 2004, by and among Athersys, Inc., Advanced Biotherapeutics, Inc., Venture Lending &
Leasing IV, Inc., and Costella Kirsch IV, L.P. (incorporated herein by reference to Exhibit 10.1 to the registrant's Quarterly Report on Form 10-Q (Commission No. 000-52108) filed with the Commission on November 14, 2007)
10.12
Second Amendment to Loan and Security Agreement, dated as of October 30, 2007, by and among ABT Holding Company, Advanced Biotherapeutics, Inc., Venture Lending
and Leasing IV, Inc., and Costella Kirsch IV, L.P. (incorporated herein by reference to Exhibit 10.2 to the registrant's Quarterly Report on Form 10-Q (Commission No. 000-52108) filed with the Commission on November 14, 2007)
10.13
Amendment to Loan and Security Agreement, dated as of September 29, 2006, by and among Athersys, Inc., Advanced Biotherapeutics, Inc., Venture Lending &
Leasing IV, Inc., and Costella Kirsch IV, L.P. (incorporated herein by reference to Exhibit 10.13 to the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.14†
Amended and Restated Employment Agreement, dated as of December 1, 1998 but effective as of April 1, 1998, by and between Athersys, Inc. and Dr. Gil Van Bokkelen
(incorporated herein by reference to Exhibit 10.14 to the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.15†
Amendment No. 1 to Amended and Restated Employment Agreement, dated as of May 31, 2007, by and between Advanced Biotherapeutics, Inc. and Gil Van Bokkelen
(incorporated herein by reference to Exhibit 10.15 to the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.16†
Non-Competition and Confidentiality Agreement, dated as of December 1, 1998, by and between Athersys, Inc. and Dr. Gil Van Bokkelen (incorporated herein by
reference to Exhibit 10.16 to the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.17†
Amended and Restated Employment Agreement, dated as of December 1, 1998 but effective as of April 1, 1998, by and between Athersys, Inc. and Dr. John J.
Harrington (incorporated herein by reference to Exhibit 10.17 to the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14,
2007)
Table of Contents
Exhibit No.
Exhibit Description
10.18†
Amendment No. 1 to Amended and Restated Employment Agreement, dated as of May 31, 2007, by and between Advanced Biotherapeutics, Inc. and John Harrington
(incorporated herein by reference to Exhibit 10.18 to the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.19†
Non-Competition and Confidentiality Agreement, dated as of December 1, 1998, by and between Athersys, Inc. and Dr. John J. Harrington (incorporated herein by
reference to Exhibit 10.19 to the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.20†
Employment Agreement, dated as of May 22, 1998, by and between Athersys, Inc. and Laura K. Campbell (incorporated herein by reference to Exhibit 10.20 to the
registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.21†
Amendment No. 1 to Employment Agreement, dated as of May 31, 2007, by and between Advanced Biotherapeutics, Inc. and Laura Campbell (incorporated herein by
reference to Exhibit 10.21 to the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.22†
Employment Agreement, dated as of October 3, 2003, by and between Advanced Biotherapeutics, Inc. and Robert Deans, Ph.D. (incorporated herein by reference to
Exhibit 10.25 to the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.23†
Amendment No. 1 to Employment Agreement, dated as of May 31, 2007, by and between Advanced Biotherapeutics, Inc. and Robert Deans (incorporated herein by
reference to Exhibit 10.26 to the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.24†
Non-Competition and Confidentiality Agreement, dated as of October 3, 2003, by and among Athersys, Inc., Advanced Biotherapeutics, Inc. and Robert Deans
(incorporated herein by reference to Exhibit 10.27 to the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.25†
Employment Agreement, dated as of January 1, 2004, by and between Advanced Biotherapeutics, Inc. and William Lehmann (incorporated herein by reference to
Exhibit 10.28 to the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.26†
Amendment No. 1 to Employment Agreement, dated as of May 31, 2007, by and between Advanced Biotherapeutics, Inc. and William Lehmann (incorporated herein by
reference to Exhibit 10.29 to the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.27†
Non-Competition and Confidentiality Agreement, dated as of September 10, 2001, by and among Athersys, Inc., Advanced Biotherapeutics, Inc. and William Lehmann
(incorporated herein by reference to Exhibit 10.30 to the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.28†
Form Incentive Agreement by and between Advanced Biotherapeutics, Inc. and named executive officers, and acknowledged by Athersys, Inc. and ReGenesys, LLC
(incorporated herein by reference to Exhibit 10.31 to the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.29†
Form Amendment No. 1 to Incentive Agreement by and between Advanced Biotherapeutics, Inc. and named executive officers, and acknowledged by Athersys, Inc. and
ReGenesys, LLC (incorporated herein by reference to Exhibit 10.32 to the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14,
2007)
Table of Contents
Exhibit No.
Exhibit Description
10.30
Securities Purchase Agreement, dated as of June 8, 2007, by and among Athersys, BTHC VI, Inc. and Investors (as defined therein) (incorporated herein by reference
to Exhibit 10.33 to the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.31*
Exclusive License Agreement, dated as of May 17, 2002, by and between Regents of the University of Minnesota and MCL LLC, assumed by ReGenesys, LLC through
operation of merger on November 4, 2003 (incorporated herein by reference to Exhibit 10.34 to the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.32*
Strategic Alliance Agreement, by and between Athersys, Inc. and Angiotech, dated as of May 5, 2006 (incorporated herein by reference to Exhibit 10.35 to the
registrant's Current Report on Form 8-K/A (Commission No. 000-52108) filed with the Commission on October 9, 2007)
10.33
Amendment No. 1 to Cell Line Collaboration and License Agreement, dated as of January 1, 2006, by and between Athersys, Inc. and Bristol-Myers Squibb Company
(incorporated herein by reference to Exhibit 10.36 to the registrant's Current Report on Form 8-K (Commission No. 000-52108) filed with the Commission on June 14, 2007)
10.34
Form Indemnification Agreement for Directors, Officers and Directors and Officers (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 August 6, 2007)
10.35†
Summary of Athersys, Inc. 2011 Cash Bonus Incentive Plan (incorporated herein by reference to Exhibit 10.41 to the registrant's Annual Report on Form 10-K
for the year ended December 31, 2010 (Commission No. 001-33876) filed with the Commission on March 25, 2011)
10.36†
Summary of Athersys, Inc. 2012 Cash Bonus Incentive Plan (incorporated herein by reference to Exhibit 10.36 to the registrant's Annual Report on Form 10-K
for the year ended December 31, 2011 (Commission No. 001-33876) filed with the Commission on March 28, 2012)
10.37*
Collaboration and License Agreement, dated as of December 18, 2009, by and between Athersys, Inc., ABT Holding Company, and Pfizer (incorporated herein by
reference to Exhibit 10.42 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2009 (Commission No. 001-33876) filed with the Commission on March 11, 2010)
10.38*
Stand-by License Agreement, dated as of December 18, 2009, by and between Regents of the University of Minnesota, ABT Holding Company and Pfizer Inc.
(incorporated herein by reference to Exhibit 10.43 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2009 (Commission No. 001-33876) filed with the Commission on March 11, 2010)
10.39
Amendment dated as of March 31, 2009 to the Extended Collaboration and License Agreement, by and between Athersys, Inc. and Bristol-Myers Squibb Company
effective January 1, 2006 (incorporated herein by reference to Exhibit 10.1 to the registrant's Current Report on Form 8-K (Commission No. 001-33876) filed with the Commission on April 9, 2009)
10.40
Amendment No. 4 to Amended and Restated Registration Rights Agreement, dated as of March 8, 2010, by and among Athersys, Inc. and the Existing Stockholders (as
defined therein) (incorporated herein by reference to Exhibit 10.45 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2009 (Commission No. 001-33876) filed with the Commission on March 11,
2010)
Table of Contents
Exhibit No.
Exhibit Description
10.41*
License and Technical Assistance Agreement, dated as of September 10, 2010, between ABT Holding Company and RTI Biologics, Inc. (incorporated herein by reference
to Exhibit 10.1 to the registrant's Quarterly Report on Form 10-Q (Commission No. 001-33876) filed with the Commission on November 8, 2010)
10.42†
Form of Incentive Stock Option Agreement (incorporated herein by reference to Exhibit 10.47 to the registrant's Annual Report on Form 10-K for the year ended
December 31, 2010 (Commission No. 001-33876) filed with the Commission on March 25, 2011)
10.43†
Form of Nonqualified Stock Option Agreement for Non-Employee Directors (incorporated herein by reference to Exhibit 10.48 to the registrant's Annual Report
on Form 10-K for the year ended December 31, 2010 (Commission No. 001-33876) filed with the Commission on March 25, 2011)
10.44†
Athersys, Inc. Amended and Restated 2007 Long-Term Incentive Plan (Amended and Restated Effective June 16, 2011) (incorporated herein by reference to Exhibit 10.1
to registrant's Current Report on Form 8-K (Commission No. 001-33876) filed with the Commission on June 20, 2011)
10.45†
Form of Nonqualified Stock Option Agreement for Non-Employee Directors pursuant to the Athersys, Inc. Amended and Restated 2007 Long-Term Incentive Plan (Amended and
Restated Effective June 16, 2011) (incorporated herein by reference to Exhibit 10.49 to the registrant's Quarterly Report on Form 10-Q (Commission No. 001-33876) filed with the Commission on May 6, 2011)
10.46
Common Stock Purchase Agreement, dated as of November 11, 2011, by and between Athersys, Inc. and Aspire Capital Fund, LLC (incorporated herein by reference to
Exhibit 10.1 to the registrant's Current Report on Form 8-K (Commission No. 001-33876) filed with the Commission on November 14, 2011)
10.47
Termination Agreement, dated as of November 11, 2011, by and between Athersys, Inc. and ABT Holding Company (f/k/a Athersys, Inc.) and Angiotech (incorporated by
reference to Exhibit 10.1 to the registrant's Current Report on Form 8-K (Commission No. 001-33876) filed with the Commission on November 14, 2011)
10.48
First Amendment to Common Stock Purchase Agreement, dated as of November 17, 2011, by and between Athersys, Inc. and Aspire Capital Fund, LLC (incorporated by
reference to Exhibit 10.47 to the registrant's Registration Statement on Form S-1 (Commission No. 333-178418) filed with the Commission on December 9, 2011)
10.49†
Form of Restricted Stock Unit Agreement (incorporated herein by reference to Exhibit 10.2 to the registrant's Quarterly Report on Form 10-Q (Commission No.
001-33876) filed with the Commission on August 10, 2011)
10.50
Registration Rights Agreement, dated as of November 11, 2011, by and between Athersys, Inc. and Aspire Capital Fund, LLC (incorporated herein by reference to
Exhibit 10.2 to the registrant's Current Report on Form 8-K (Commission No. 001-33876) filed with the Commission on November 14, 2011)
10.51
Amendment No. 3 to Extended Collaboration and License Agreement, dated January 31, 2012, by and between ABT Holding Company and Bristol-Myers Squibb Company
(incorporated by reference to Exhibit 10.3 to the registrant's Quarterly Report on Form 10-Q (Commission No. 001-33876) filed with the Commission on May 14, 2012)
10.52
First Amendment to License and Technical Assistance Agreement, dated September 17, 2012, by and between ABT Holding, Inc. and RTI Biologics,
Inc.
Table of Contents
Exhibit No.
Exhibit Description
10.53
Registration Rights Agreement, dated as of March 9, 2012, by and between Athersys, Inc. and the signatories thereto (incorporated herein by reference to Exhibit
10.2 to the registrant's Current Report on Form 8-K (Commission No. 001-33876) filed with the Commission on March 15, 2012)
21.1
List of Subsidiaries (incorporated herein by reference to Exhibit 21.1 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2011
(Commission No. 001-33876) filed with the Commission on March 28, 2012)
23.1
Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm
23.2**
Consent of Jones Day (included in Exhibit 5.1)
24.1
Power of Attorney
*
Confidential treatment requested as to certain portions, which portions have been filed separately with the Commission.
**
To be filed by amendment.
†
Indicates management contract or compensatory plan, contract or arrangement in which one or more directors or executive officers of the registrant may
be participants.