Athersys, Inc. 424b3
Filed
Pursuant To Rule 424(b)(3)
Registration No. 333-144433
18,508,251 Shares
of Common Stock
Athersys,
Inc.
This prospectus relates to offers and resales or other
dispositions by certain of our stockholders or their transferees
of up to 18,508,251 shares of our common stock, par value
$0.001 per share, including 4,976,470 shares issuable upon
the exercise of warrants.
These shares may be sold by the selling stockholders from time
to time in the over-the-counter market or on any national
securities exchange or automated interdealer quotation system on
which our common stock is then listed or quoted, through
negotiated transactions or otherwise. The prices at which the
selling stockholders may sell the shares will be determined by
the prevailing market price for the shares or in negotiated
transactions. We will not receive any of the proceeds from the
disposition of these shares by the selling stockholders, other
than as a result of the exercise for cash of warrants held by
the selling stockholders. We will bear all costs, expenses and
fees in connection with the registration of these shares. The
selling stockholders will bear all commissions and discounts, if
any, attributable to their respective sales of shares.
On August 31, 2007, we changed our companys name with
the State of Delaware from BTHC VI, Inc. to Athersys, Inc.
Our common stock is currently quoted on the OTC
Bulletin Board under the symbol AHYS. The last
reported sales price of our common stock on the OTC
Bulletin Board was $8.00 per share on October 17,
2007.
Investing in our common stock involves risks that are
described in the Risk Factors section beginning on
page 5 of this prospectus. You should carefully consider
the risk factors before you decide whether to invest in shares
of our common stock.
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.
The date of this prospectus is October 18, 2007.
If it is against the law in any state or other jurisdiction
to make an offer to sell the common stock, or to solicit an
offer from someone to buy the common stock, registered pursuant
to the registration statement of which this prospectus forms a
part, then this prospectus does not apply to any person in that
state or other jurisdiction, and no offer or solicitation is
made by this prospectus to any such person.
You should rely only on the information contained in this
prospectus or any related prospectus supplement. Neither we nor
any selling stockholder has authorized anyone to provide you
with different information. You should not assume that the
information in this prospectus or any related prospectus
supplement is accurate as of any date other than the date on the
front of such document.
TABLE OF
CONTENTS
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F-1
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I-1
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INDUSTRY
AND MARKET DATA
Information about market and industry statistics contained in
this report is included based on information available to us
that we believe is accurate in all material respects. It is
generally based on academic and other publications that are not
produced for purposes of securities offerings or economic
analysis. We have not reviewed or included data from all
sources, and we cannot assure potential investors of the
accuracy or completeness of the data included in this report.
Forecasts and other forward-looking information obtained from
these sources, including estimates of future market size,
revenue and market acceptance of products and services, are
subject to the same qualifications and the additional
uncertainties accompanying any forward-looking statements.
This prospectus contains references to our trademarks
MultiStemtm
and Random Activation of Gene Expression
RAGEtm.
All other trademarks used in this prospectus are the property of
their respective owners.
This summary highlights selected information that is
contained elsewhere in this prospectus. This summary does not
contain all of the information that you should consider before
investing in our common stock. You should read the entire
prospectus carefully, including the Risk Factors
section and our consolidated financial statements and related
notes appearing elsewhere in this prospectus before making an
investment decision. On June 8, 2007, Athersys, Inc., a
Delaware corporation, merged with a wholly owned subsidiary of
BTHC VI, Inc., a Delaware corporation. On August 31,
2007, Athersys, Inc. changed its name to ABT Holding Company,
and BTHC VI, Inc. changed its name to Athersys, Inc. In this
prospectus, unless otherwise indicated or the context otherwise
requires, all references to we or us are
to Athersys, Inc., the Delaware corporation formerly known as
BTHC VI, Inc., together with its wholly owned subsidiary, ABT
Holding Company, the Delaware corporation formerly known as
Athersys, Inc. Specific discussions or comments relating only to
BTHC VI, Inc. prior to the merger described above reference
BTHC VI, while those relating only to our subsidiary
Athersys, Inc. prior to the merger reference
Athersys.
Our
Business
We are a biopharmaceutical company engaged in the discovery and
development of therapeutic product candidates designed to extend
and enhance the quality of human life. Through the application
of our proprietary technologies, we have established a pipeline
of therapeutic product development programs in multiple
diseases. We have one product candidate in clinical development
(ATHX-105) and intend to advance two to three additional product
development programs (from
MultiStem®
cardiovascular, oncology support or stroke, or from our
histamine H3 antagonist program) into clinical trials in 2007
and 2008. Our ability to initiate these trials will depend on
the success of our ongoing preclinical development efforts and
our obtaining necessary regulatory approvals. Our lead product
candidate is ATHX-105, which is a treatment for obesity we are
independently developing that acts by stimulating the 5HT2c
receptor, a key neurotransmitter receptor in the brain, which
regulates appetite. ATHX-105 has been shown in preclinical
testing in animal models to reduce food intake and body weight
by suppressing appetite without appearing to cause the adverse
side effects that have been observed with other weight loss
drugs. Results from clinical trials we conduct in humans may
differ from our preclinical results.
In July 2007, we initiated a Phase I clinical trial for ATHX-105
in the United Kingdom. The primary objective of the Phase I
clinical trial is to assess the short-term safety of ATHX-105
and to establish an appropriate dose range for subsequent
clinical studies that will be conducted in order to assess
safety and effectiveness. Following successful completion of the
Phase I clinical trial and concurrent non-clinical studies that
must be completed, we intend to initiate a Phase II
clinical trial in the United States that will examine
safety and effectiveness in clinically overweight or obese
patients. In addition to
ATHX-105, we
have a portfolio of other compounds that we are developing as
potential treatments for obesity.
We are also independently developing orally active
pharmaceutical products for the treatment of central nervous
system disorders, including sleep disorders such as narcolepsy
or excessive daytime sleepiness, and other potential indications
such as attention deficit hyperactivity disorder, or ADHD, and
other cognitive disorders. These histamine H3 antagonist
compounds are designed to act by elevating levels of
neurotransmitters in the sleep and cognitive centers of the
brain and stimulating neurological tone, resulting in an
enhanced state of wakefulness and cognition, without causing
hyperactivity or addiction.
In addition to our pharmaceutical development programs, we are
developing MultiStem, a proprietary stem cell product for the
treatment of multiple disease indications. MultiStem is a
biologic product that consists of human stem cells obtained from
adult bone marrow or other nonembryonic tissue sources. After
cells are isolated from a qualified donor, the cells may be
produced on a large scale for future clinical use and stored in
frozen form until needed. We believe that MultiStem may
potentially be used to treat a range of distinct disease
indications, with each indication representing a distinct
product development program requiring separate clinical trials.
In May 2006, we entered into a product co-development
collaboration with Angiotech Pharmaceuticals, Inc. to jointly
develop and ultimately market MultiStem for the treatment of
damage caused by myocardial infarction and peripheral vascular
disease. We are also independently developing MultiStem for
1
bone marrow transplant/oncology support, ischemic stroke and
potentially other disease indications. We retain the commercial
rights to these programs and other potential applications of
MultiStem.
In addition to our current product development programs, we have
developed our Random Activation of Gene Expression, or RAGE,
technology, a patented 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 product, it is a commercial technology that we have been
successfully applying in our collaborations 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 splicing) 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
inaccessible to most other companies 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 our ongoing collaboration with the Bristol-Myers Squibb
Company, and some have been produced for our internal drug
development programs.
We are in the early stage of product development, and we do not
have any approved therapeutic products. As of June 30,
2007, we had an accumulated deficit of $151.3 million. We
incurred net losses of $15.2 million in 2004,
$14.6 million in 2005, $10.6 million in 2006 and
$9.8 million in the first six months of 2007, and we
anticipate incurring losses for at least the next several years.
Recent
Developments
On May 24, 2007, BTHC VI, Inc., a Delaware corporation, and
its wholly owned subsidiary, B-VI Acquisition Corp., a Delaware
corporation, entered into an Agreement and Plan of Merger with
Athersys, Inc., a Delaware corporation. Pursuant to the terms of
the Agreement and Plan of Merger, B-VI Acquisition Corp., which
BTHC VI recently had incorporated in the state of Delaware for
the purpose of completing the merger transaction described in
this subsection, merged with and into Athersys on June 8,
2007, with Athersys continuing as the surviving entity in the
merger. We refer to the merger transaction as the merger, and to
June 8, 2007 as the closing or closing date. As a result of
the merger, Athersys became our wholly owned subsidiary, and the
business of Athersys became our sole operations. After receiving
the requisite approval of the stockholders of Athersys pursuant
to a written consent of stockholders, a Certificate of Merger
was filed with the Secretary of State of the State of Delaware
on the closing date, at which time the merger was deemed
effective. At the time the merger was deemed effective, each
share of common stock of Athersys was converted into
0.0358493 shares of our common stock, par value $0.001 per
share.
Prior to the merger, BTHC VI effected a
1-for-1.67
reverse stock split of the shares of its common stock. Following
the reverse stock split, 299,622 shares of our common stock
were issued and outstanding. BTHC VI amended its certificate of
incorporation to effect the reverse stock split and to increase
the number of authorized shares of common stock to 100,000,000.
As of the closing date, we acquired ownership of all of the
outstanding capital stock of Athersys, resulting in a change in
control of BTHC VI. As further described below, Athersys is a
biopharmaceutical company engaged in the discovery and
development of therapeutic product candidates designed to extend
and enhance the quality of human life. Following the merger, the
business of Athersys constitutes our only operations. We
experienced, as of the closing date, a change in control of our
ownership, management and
2
board of directors. The sole officer and director of
BTHC VI resigned immediately prior to the closing of the
merger and, immediately following the merger, Athersys
existing officers were elected as our officers, and certain
members of Athersys board of directors and other
individuals selected by Athersys were appointed to the board of
directors.
BTHC VIs acquisition of Athersys on June 8, 2007
effected a change in control and was accounted for as a
reverse acquisition whereby Athersys is the
accounting acquiror for financial statement purposes.
Accordingly, for all periods after the June 8, 2007
reverse acquisition transaction, our historical
financial statements reflect the financial statements of
Athersys since its inception and the operations of BTHC VI
subsequent to June 8, 2007.
On June 8, 2007, we entered into a Securities Purchase
Agreement by and among BTHC VI, Athersys and certain investors
pursuant to which we completed an offering of
13,000,000 shares of our common stock. We refer to this
offering throughout this document as the June offering.
Investors in the June offering also received five-year warrants
to purchase an aggregate of 3,250,000 shares of common
stock with an exercise price of $6.00 per share. Radius Venture
Partners II, L.P., Radius Venture Partners III, L.P. and certain
of their respective affiliates, whom we refer to collectively as
Radius, acted as the lead investors in the June offering and
received additional five-year warrants to purchase an aggregate
of 500,000 shares of common stock with a cash or cashless
exercise price of $6.00 per share in connection with their
$10.0 million investment. OrbiMed Advisors LLC, RA Capital
Fund, LP, Accipiter Capital Management LLC and
Hambrecht & Quist Capital Management LLC and their
respective affiliates also invested $15.0 million,
$6.0 million, $6.0 million and $4.0 million,
respectively, in the June offering. We received gross proceeds
of $65.0 million from the June offering. The placement
agents for the June offering received five-year warrants to
purchase an aggregate of 1,093,525 shares of common stock
with a cash or cashless exercise price of $6.00 per share.
On August 31, 2007, Athersys, Inc. changed its name to ABT
Holding Company and BTHC VI, Inc. changed its name to
Athersys, Inc.
Corporate
Information
We were incorporated in Delaware in June 2005. Our executive
offices are located at 3201 Carnegie Avenue, Cleveland, Ohio
44115. Our telephone number is
(216) 431-9900.
Our website address is www.athersys.com. The information on or
accessible through our website is not a part of this prospectus.
The
Offering
This prospectus relates to the resale by the selling
stockholders identified in this prospectus of up to
18,508,251 shares of common stock, of which
13,531,781 shares are issued and outstanding as of
September 30, 2007, and 4,976,470 shares are issuable
upon the exercise of certain warrants. All of the shares, when
sold, will be sold by these selling stockholders. The selling
stockholders may sell their shares of common stock from time to
time at market prices prevailing at the time of sale, at prices
related to the prevailing market price, or at negotiated prices.
We will not receive any proceeds from the sale of the shares of
common stock by the selling stockholders, other than as a result
of the exercise of warrants held by the selling stockholders for
cash.
3
Summary
Consolidated Financial Data
The following is a summary of our results of operations and
financial position (in thousands, except share and per share
data). You should read this information together with our
financial statements and the related notes appearing at the end
of this prospectus and the Managements Discussion
and Analysis of Financial Condition and Results of
Operations section of this prospectus.
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Six Months
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Ended
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Year Ended December 31,
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June 30,
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2004
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2005
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2006
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2006
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2007
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(Unaudited)
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Consolidated Statement of Operations Data:
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License fee and grant revenues
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$
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3,138
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$
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3,596
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$
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3,725
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$
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1,119
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$
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1,602
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Operating expenses
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18,536
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17,566
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|
13,616
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6,992
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11,614
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Loss from operations
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(15,398
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)
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(13,970
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)
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(9,891
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)
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(5,873
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)
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(10,012
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)
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Other income
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18
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|
208
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208
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1,500
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Interest income (expense), net
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244
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(647
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)
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(928
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)
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(423
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)
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(821
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)
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Accretion of premium on convertible debt
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(260
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)
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(456
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Cumulative effect of change in accounting principle
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306
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306
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Net loss
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$
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(15,154
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)
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$
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(14,599
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)
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$
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(10,565
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)
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$
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(5,782
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)
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|
$
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(9,789
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)
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Preferred stock dividends
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$
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(2,325
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)
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$
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(2,253
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)
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$
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(1,408
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)
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$
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(695
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)
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$
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(659
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)
|
Deemed dividend resulting from induced conversion of convertible
preferred stock
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(4,800
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)
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Net loss attributable to common stockholders
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$
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(17,479
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)
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$
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(16,852
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)
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|
$
|
(11,973
|
)
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|
$
|
(6,477
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)
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|
$
|
(15,248
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)
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Basic and diluted net loss per common share
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$
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(59.82
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)
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$
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(57.79
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)
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|
$
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(40.84
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)
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|
$
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(22.14
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)
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|
$
|
(5.99
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)
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Weighted average shares used in computing basic and diluted net
loss per common share
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292,173
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|
|
|
291,612
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|
|
|
293,142
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|
|
|
292,513
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|
|
|
2,547,265
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|
Please see Note A to our consolidated financial statements
contained elsewhere in this prospectus for an explanation of the
method used to calculate net loss attributable to common
stockholders and basic and diluted net loss per common share.
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June 30, 2007
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(Unaudited)
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Consolidated Balance Sheet Data:
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Cash, cash equivalents and investments
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$
|
58,939
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|
Working capital
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|
|
54,401
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|
Total assets
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|
|
61,065
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|
Total stockholders equity
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|
|
55,710
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|
4
An investment in our common stock involves a substantial
degree of risk. Accordingly, you should carefully consider the
following risk factors, together with all the other information
contained in this prospectus, before making a decision to invest
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, prospects, reputation, financial
condition, and results of operations could be seriously harmed.
In that case, the market price of our common stock could
decline, and you could lose all or a part of your investment.
For more information, see Forward-Looking
Statements.
Risks
Related To Our Business and Our Industry
Athersys
has incurred losses since inception and we expect to incur
significant net losses in the foreseeable future and may never
become profitable.
Since Athersys inception in 1995, it has incurred
significant losses and negative cash flows from operations.
Athersys has incurred net losses of $15.2 million in 2004,
$14.6 million in 2005 and $10.6 million in 2006. As of
June 30, 2007, we had an accumulated deficit of
$151.3 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 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 tested yet in humans. 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 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 Athersys
operations was $11.7 million in 2004, $12.1 million in
2005 and $8.4 million in 2006. Our current monthly burn
rate, excluding capital expenditures and non-cash charges, is
approximately $1.2 million to $1.6 million per month, and we
anticipate a higher monthly burn rate over certain periods
during the next several years as we begin costly clinical trials
of ATHX-105 and MultiStem and continue to advance our various
research and product development activities. We believe that our
planned capital needs will be met at least through 2009 from our
current cash on hand from the June offering as well as our cash
from operations. Our future capital requirements will depend on
many factors, including:
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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;
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our ability, or our partners ability and willingness, to advance
partnered products or programs;
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the cost of prosecuting, defending and enforcing patent claims
and other intellectual property rights;
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the progress, scope, costs, and results of our preclinical and
clinical testing of any current or future pharmaceutical or
MultiStem related products;
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the time and cost involved in obtaining regulatory approvals;
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the cost of manufacturing our product candidates;
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5
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expenses related to complying with Good Manufacturing Practices,
or GMP, of therapeutic product candidates;
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costs of financing the purchases of additional capital equipment
and development technologies;
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competing technological and market developments;
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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.
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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;
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costs associated with the integration of any new operation,
including costs relating to future mergers and acquisitions with
companies that have complementary capabilities;
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expenses related to the establishment of sales and marketing
capabilities for products awaiting approval or products that
have been approved;
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the level of our sales and marketing expenses; and
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our ability to introduce and sell new products.
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We cannot assure you that we will not need additional capital
sooner than currently anticipated. We will need to raise
substantial additional capital to fund our future operations. We
cannot be certain that additional financing 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, 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 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 our two key product candidates, ATHX-105
and MultiStem, and if we encounter delays or difficulties in the
development of either or both candidates, our business would be
harmed.
We are developing multiple therapeutic product candidates, but
we are heavily dependent upon the successful development of two
particular product candidates: ATHX-105 for the treatment of
obesity and MultiStem initially for the treatment of damage
caused by certain cardiovascular disorders and for the treatment
of bone marrow transplant support and graft versus host disease,
or GVHD. Our business would be materially harmed if we encounter
difficulties in the development of either of these product
candidates, such as:
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delays in the ability to make either product in quantities or in
a form that is suitable for any required preclinical studies or
clinical trials;
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delays in the design, enrollment, implementation or completion
of required preclinical studies and clinical trials;
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an inability to follow our current development strategy for
obtaining regulatory approval from the United States Food and
Drug Administration, or FDA, because of changes in the
regulatory approval process;
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less than desired or complete lack of efficacy or safety in
preclinical studies or clinical trials; and
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intellectual property constraints that prevent us from making,
using, or commercializing either product candidate.
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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
ATHX-105 and MultiStem, in animals, but we may not see positive
results when ATHX-105, MultiStem or any of 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:
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test safety;
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study the absorption, distribution, metabolism, and elimination
of the product candidate;
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study the biochemical and physiological effects of the product
candidate and the mechanisms of the drug action and the
relationship between drug concentration and effect; and
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understand the product candidates side effects at various
doses and schedules.
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Success in preclinical studies or completed clinical trials does
not ensure that later studies or trials, including continuing
preclinical studies and large-scale clinical trials, will be
successful nor does it necessarily predict future results. The
rate of failure 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.
Our
products 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 developed or 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 pharmaceutical strategy includes establishing
collaborations and licensing agreements with one or more
pharmaceutical, biotechnology or device companies, preferably
after
7
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 product co-development collaboration with
Angiotech to jointly develop and ultimately market MultiStem for
the treatment of damage caused by myocardial infarction and
peripheral vascular disease, our collaboration agreement with
Bristol-Myers Squibb pursuant to which we provide cell lines
produced using our RAGE technology, and our license with the
University of Minnesota pursuant to which we license certain of
the MultiStem technology. These arrangements do not have
specific termination dates; rather, each arrangement terminates
upon the occurrence of certain events.
The Angiotech collaboration terminates upon the earliest to
occur of (a) the five-year anniversary if we and Angiotech
have not approved any clinical development program, (b) if
at least one cell therapy product has obtained regulatory
approval and we and Angiotech have shared profits with respect
to sales of at least one cell therapy product, the date that
there has been no sales for 12 months of any cell therapy
product that has been the subject of profit-sharing, unless a
clinical development candidate is in at least a Phase III
clinical trial or later, or (c) the later of (1) the
expiration date of the last-to-expire patent licensed to
Angiotech or (2) the
15-year
anniversary. Neither we nor Angiotech may terminate the
collaboration at will, but either party may elect at certain
points to not move forward with individual product development
programs. However, Angiotech has the right to terminate the
collaboration if, among other things, Angiotech, in its
reasonable judgment, determines that a primary endpoint in a
clinical study within a clinical development plan has not been
fulfilled or met, at least one investigational new drug
application, or IND, has not been filed prior to the three-year
anniversary, the clinical efficacy
and/or
safety with respect to cells, a clinical development candidate
or a cell therapy product have not been demonstrated.
The Bristol-Myers Squibb collaboration terminates 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 a
product utilizing our cell line or ten years after commercial
sales of that product began.
The University of Minnesota license agreement terminates when
the last patent licensed to us expires. We may terminate the
license agreement at any time. The University of Minnesota may
terminate the license if we fail to pay royalties when due or
fail to perform the material terms of the license, such as our
obligation to use commercially reasonable efforts to
commercialize the MultiStem technology.
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 of 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
8
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.
Under the terms of our collaboration agreement with Angiotech,
either party may choose, following the completion of Phase I
studies, to opt-out of its obligation to fund further product
development on a
product-by-product
basis, provided no clinical studies concerning such product
candidate are currently ongoing. If Angiotech should decide to
opt-out of funding the development of any of the product
candidates for the covered indications, for any reason, we may
be unable to fund the development on our own and could be forced
to halt one or more MultiStem development programs.
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:
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health concerns, whether actual or perceived, or unfavorable
publicity regarding our obesity drugs, stem cell products or
those of our competitors;
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the timing of market entry as compared to competitive products;
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the rate of adoption of products by our collaborators and other
companies in the industry;
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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;
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convenience and ease of administration;
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pricing;
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perceived efficacy and side effects;
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marketing;
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availability of alternative treatments;
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levels of reimbursement and insurance coverage; and
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activities by our competitors.
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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 pharmaceutical formulations
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, including 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, including ATHX-105 and MultiStem,
are at an early stage of development, and none have yet been
tested in humans. 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
further clinical trials 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 commenced a Phase I clinical trial for ATHX-105 in
July 2007, but we do not know precisely when clinical
trials for our other products will commence or whether we will
initiate or complete any of our clinical trials on schedule or
at all. 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 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 products safety or
efficacy.
Many factors, known and unknown, can adversely affect clinical
trials and the ability to evaluate a products efficacy.
During the course of treatment, patients can die or suffer other
adverse events for 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
10
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:
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the size of the patient population;
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the proximity of patients to clinical sites;
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the eligibility criteria for the trial;
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the perceptions of investigators and patients regarding safety;
and
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the availability of other treatment options.
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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
ATHX-105, 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 ATHX-105 for 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.
We
will rely on third parties to manufacture our pharmaceutical
product candidates and our MultiStem product candidate. There
can be no guarantee that we can obtain sufficient and acceptable
quantities of our pharmaceutical product candidates of our
MultiStem product candidate on acceptable terms, which may delay
or impair our ability to develop, test and market such
products.
Our business strategy relies on third parties to manufacture and
produce our pharmaceutical product candidates and MultiStem
product candidate in accordance with good manufacturing
practices established by the FDA, or similar regulations in
other countries. Our pharmaceutical product candidates or
MultiStem product may be in competition with other products or
companies for access to these facilities and may be subject to
delays in manufacture if third parties give other products
greater priority than our product
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candidates. These third parties may not deliver sufficient
quantities of our pharmaceutical or MultiStem product
candidates, manufacture our pharmaceutical and 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 pharmaceutical product candidates or
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
pharmaceutical product candidates or 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 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 our contract manufacturers are not satisfying our needs and
we decide not to establish our own manufacturing capabilities,
it could be difficult and very expensive to change suppliers.
Any change in the location of manufacturing would require FDA
inspection and approval, which could interrupt the supply of
products and may be time-consuming and expensive to obtain. If
we are unable to identify alternative contract manufacturers
that are qualified to produce our products, we may have to
temporarily suspend the production of products, and would be
unable to generate revenue from the sale of 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
12
companies that currently have extensive 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 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., Senior Vice President,
Regenerative Medicine, and Laura Campbell, C.P.A., Vice
President of Finance.
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 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. Additionally,
Kurt R. Brunden, Ph.D., our former Senior Vice President of
Biopharmaceuticals, recently resigned and returned to a faculty
position. Dr. Brunden has entered into a consulting
agreement with us, but eventually we may have to hire another
individual to replace him.
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 do not adequately protect 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 sequences
relating to chemical synthesis techniques, 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 four patent applications
that seek to protect the composition of matter and method of use
related to ATHX-105, as well as other compounds that we have
identified in the same class. In addition, we are prosecuting
more than 20 distinct patent applications directed to
composition, methods of production, and methods of use of
MultiStem and related technologies. We have also filed four
patent applications with claims directed to compounds from our
histamine H3 program. If we are unsuccessful in obtaining these
patents, we may ultimately be unable to commercialize ATHX-105
or MultiStem or other 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:
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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;
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others will not independently develop similar or alternative
technologies or duplicate any of our technologies;
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others did not publicly disclose our claimed technology before
we conceived the subject matter included in any of our patent
applications;
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any of our pending or future patent applications will result in
issued patents;
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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;
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we will develop additional proprietary technologies that are
patentable;
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the patents of others will not have an adverse effect on our
ability to do business; or
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new proprietary technologies from third parties, including
existing licensors, will be available for licensing to us on
reasonable commercial terms, if at all.
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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 licensors 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 U.S. 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. As a result of this
license, we have agreed to use commercially reasonable efforts
to develop and commercialize this technology. If we fail to
comply with those obligations, we may lose 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
managements 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 managements time and
efforts. Even unsuccessful claims could result in significant
legal fees and other expenses, diversion of managements
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 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
15
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.
Many companies are engaged in the pursuit of safe and effective
obesity drugs. 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, such as ATHX-105, 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 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, Bristol-Myers Squibb, Merck, Roche, Sanofi-Aventis and
GlaxoSmithKline as well as smaller biotechnology or
biopharmaceutical companies such as Arena Pharmaceuticals,
Orexigen, VIVUS, Osiris, Geron, Aastrom, Stem Cells Inc.,
Viacell and Cytori Therapeutics. 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 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.
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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:
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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 the common stock;
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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;
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we may encounter difficulties in assimilating and integrating
the business, technologies, products, personnel or operations of
companies that we acquire;
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certain acquisitions may disrupt our relationship with existing
collaborators who are competitive to the acquired business;
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acquisitions may require significant capital infusions and the
acquired businesses, products or technologies may not generate
sufficient revenue to offset acquisition costs;
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an acquisition may disrupt our ongoing business, divert
resources, increase our expenses and distract our management;
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acquisitions may involve the entry into a geographic or business
market in which we have little or no prior experience; and
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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:
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changes and limits in import and export controls;
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increases in custom duties and tariffs;
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changes in currency exchange rates;
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economic and political instability;
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changes in government regulations and laws;
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absence in some jurisdictions of effective laws to protect our
intellectual property rights; and
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currency transfer and other restrictions and regulations that
may limit our ability to sell certain products or repatriate
profits to the United States.
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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 U.S. 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 U.S. 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.
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.
In connection with its 2006 audit, Athersys received a letter
regarding a material weakness in internal control over financial
reporting related to an over-accrued dividend that caused
Athersys to restate its 2005 audited financial statements. Such
restatement resulted in a favorable adjustment to net assets.
Since Athersys public company reporting obligations began
on June 8, 2007, we will be required to comply with
Section 404 of the Sarbanes-Oxley Act of 2002 for the first
time in 2007, and will be required to provide a management
report on internal control over financial reporting in
connection with our annual report on Form 10-K for the year
ending December 31, 2007. We are preparing for compliance
with Section 404 by strengthening, assessing and testing
our system of internal controls, but have not yet completed this
process. If we are unable to successfully implement improvements
to our management information and financial control systems in
an efficient and timely manner, or if we encounter deficiencies
in existing systems and controls, our management may not have
adequate information to manage our day-to-day operations and our
inability to manage our growth effectively could increase our
losses.
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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, as well as liability
insurance for conducting 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 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
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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 Our Common Stock; Liquidity Risks
The
price of our common stock is expected to be volatile and an
investment in our common stock could decline in
value.
The market price of our common stock, and the market prices for
securities of biotechnology companies in general, are expected
to be highly volatile. The following factors, in addition to
other risk factors described in this prospectus, and the
potentially low volume of trades in our common stock, may have a
significant impact on the market price of our common stock, some
of which are beyond our control:
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announcements of technological innovations and discoveries by us
or our competitors;
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developments concerning any research and development, clinical
trials, manufacturing, and marketing collaborations;
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new products or services that we or our competitors offer;
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actual or anticipated variations in operating results;
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the initiation, conduct
and/or
outcome of intellectual property
and/or
litigation matters;
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changes in financial estimates by securities analysts;
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conditions or trends in bio-pharmaceutical or other healthcare
industries;
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regulatory developments in the United States and other countries;
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changes in the economic performance
and/or
market valuations of other biotechnology and flavor companies;
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our announcement of significant acquisitions, strategic
partnerships, joint ventures or capital commitments;
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additions or departures of key personnel;
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global unrest, terrorist activities, and economic and other
external factors; and
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sales or other transactions involving our common stock.
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The stock market in general has recently experienced relatively
large price and volume fluctuations. In particular, market
prices of securities of biotechnology companies have experienced
fluctuations that often have been unrelated or disproportionate
to the operating results of these companies. Continued market
fluctuations could result in extreme volatility in the price of
the common stock, which could cause a decline in the value of
the common stock. Prospective investors should also be aware
that price volatility may be worse if the trading volume of the
common stock is low.
A
significant number of the shares of common stock will be
eligible for sale, and their sale could depress the market price
of our common stock.
The sale of a significant number of shares of our common stock
in the public market could harm the market price of our common
stock. As additional shares of our common stock become gradually
available for resale in the public market pursuant to the
registration of those shares and releases of
lock-up
agreements, the supply of our common stock will increase, which
could decrease its market price. We recently issued
13,000,000 shares of common stock in the June offering and
5,628,368 additional shares as a result of the
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completion of the merger and such June offering. Some or all of
the shares of common stock may be offered from time to time in
the open market pursuant to Rule 144 (or pursuant to a
registration statement, if one is effective), and these sales
may have a depressive effect on the market for the shares of
common stock. In general, a person who has held restricted
shares for a period of one year may, upon filing of a
notification on Form 144 with the Securities and Exchange
Commission, or SEC, sell into the market common stock in an
amount up to the greater of 1% of the outstanding shares or the
average weekly number of shares sold in the last four weeks
before such sale. Such sales may be repeated once each three
months, and any of the restricted shares may be sold by a
non-affiliate after they have been held two years. Our officers
and directors and substantially all of our employees and the
former Athersys stockholders that own greater than 1% of the
issued and outstanding common stock after consummation of the
merger and the June offering are subject to
lock-up
provisions relating to shares of common stock that they will own
that will prevent the sale or transfer of their shares of common
stock until 180 days after the effective date of the resale
registration statement.
It is
not anticipated that there will be an active public market for
our common stock in the near term and you may have to hold your
common stock for an indefinite period of time.
Although our common stock is eligible for trading on the OTC
Bulletin Board, there currently is a limited trading market
for the common stock, and we cannot assure you that any market
will further develop or be sustained. Because our common stock
is expected to be thinly traded, you cannot expect to be able to
liquidate your investment in case of an emergency or if you
otherwise desire to do so. It may be difficult for you to resell
a large number of your shares of common stock in a short period
of time or at or above their purchase price. Further, the sale
of shares of common stock may have adverse federal income tax
consequences.
If we
do not comply with registration rights granted to certain
holders of our restricted securities, we may be required to pay
damages to such holders.
We have agreed to use our best efforts to have the
resale registration statement of which this
prospectus forms a part declared effective by the SEC as soon as
possible and, in any event, within 90 days after the filing
(or within five days after receipt of a no review letter from
the SEC), and to maintain its effectiveness until such time as
all securities registered under the resale
registration statement have been sold or are otherwise able to
be sold under Rule 144 of the Securities Act without regard
to volume limitations, whichever is earlier. We cannot assure
you that we will be able to follow the required procedures or
obtain or maintain the effectiveness of the registration
statement of which this prospectus forms a part. Subject to
certain exceptions, if the registration statement of which this
prospectus forms a part is not declared effective by the SEC or
ceases to remain effective, a 1% cash penalty will be assessed
for each
30-day
period until the registration statement is declared effective or
becomes effective again, as applicable, capped at 10%. In
addition, there are other issues affecting the liquidity of the
securities required to be included in the registration statement
of which this prospectus forms a part.
Our
common stock may be considered a penny stock and may
be difficult to sell.
The SEC has adopted regulations which generally define
penny stock to be an equity security that has a
market or exercise price of less than $5.00 per share, subject
to specific exemptions. The market price of our common stock may
drop below $5.00 per share and therefore may be designated as a
penny stock according to SEC rules. This designation
requires any broker or dealer selling these securities to
disclose certain information concerning the transaction, obtain
a written agreement from the purchaser and determine that the
purchaser is reasonably suitable to purchase the securities.
These rules may restrict the ability of brokers or dealers to
sell our common stock and may affect the ability of our
stockholders to sell their shares. In addition, since our common
stock is eligible for trading on the OTC Bulletin Board,
our stockholders may find it difficult to obtain accurate
quotations of our common stock and may experience a lack of
buyers to purchase such stock or a lack of market makers to
support the stock price.
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Our
stockholders may experience future dilution.
Our charter permits our board of directors, without stockholder
approval, to authorize shares of preferred stock, which may also
be issued by the board of directors without stockholder
approval. The board of directors may classify or reclassify any
preferred stock to set the preferences, rights and other terms
of the classified or reclassified shares, including the issuance
of shares of preferred stock that have preference rights over
the common stock with respect to dividends, liquidation, voting
and other matters or shares of common stock having special
voting rights.
The issuance of additional shares of our capital stock could be
substantially dilutive to your shares and may negatively affect
the market price of our common stock.
Substantial
future issuances of our common stock could depress our stock
price.
The market price for our common stock could decline, perhaps
significantly, as a result of issuances of a large number of
shares of our common stock in the public market or even the
perception that such issuances could occur. Under an existing
registration rights agreement, certain holders of shares of
common stock and other securities will have demand, piggy-back
and
Form S-3
registration rights. Sales of a substantial number of these
shares of our common stock, or the perception that holders of a
large number of shares intend to sell their shares, could
depress the market price of our common stock. The existence of
such registration rights could also make it more difficult for
us to raise funds through future offerings of our equity
securities.
Our
stockholders may experience additional dilution upon the
exercise of warrants and options.
We recently issued warrants to investors to acquire
3,750,000 shares of common stock, warrants to the placement
agents to acquire 1,093,525 shares of common stock,
warrants to the former holders of Athersys 10% secured
convertible promissory notes to acquire 132,945 shares of
common stock, and warrants to our senior secured lenders to
acquire 149,026 shares of common stock, which is an
aggregate of 5,125,496 shares of common stock underlying
such warrants that, if exercised or converted, could decrease
the net tangible book value of our common stock. In addition,
there are 4,500,000 shares of common stock that may be
granted pursuant to our equity compensation plans, of which
options to purchase 3,625,000 shares of common stock have been
granted. If the holders of equity awards exercise those awards,
we may experience dilution in the net tangible book value of our
common stock.
We do
not intend to pay dividends in the foreseeable
future.
For the foreseeable future, we intend to retain any earnings to
finance the development of our business, and we do not
anticipate paying any cash dividends on our common stock. Any
future determination to pay dividends will be at the discretion
of our board of directors and will be dependent upon
then-existing conditions, including our financial condition and
results of operations, capital requirements, contractual
restrictions, business prospects and other factors that our
board of directors considers relevant. Accordingly, investors
must rely on sales of their common stock after price
appreciation, which may never occur, as the only way to realize
their investment.
If we
do not continue to meet the listing standards established by the
NASDAQ Capital Market or other similar markets, the common stock
may not remain listed for trading on one of those
markets.
We have applied to list our common stock for trading on the
NASDAQ Capital Market. The NASDAQ Capital Market has established
certain quantitative criteria and qualitative standards that
companies must meet in order to become and remain listed for
trading on these markets. We believe that we are currently
eligible for trading on the NASDAQ Capital Market. However, if
we are successful in having our common stock listed, we cannot
guarantee that we will be able to continue to meet all other
necessary requirements for continued listing; therefore, we
cannot guarantee that our common stock will continue to be
listed for trading on the NASDAQ Capital Market or other similar
markets.
22
Our
internal control over financial reporting may be insufficient to
allow us to accurately report our financial results or prevent
fraud, which could cause our financial statements to become
materially misleading and adversely affect the trading price of
our common stock.
Effective internal controls will be necessary for us to provide
reliable financial reports and effectively prevent fraud and to
operate successfully as a public company. Athersys
independent registered public accounting firm has issued a
letter to Athersys in which they identified certain matters as a
result of a restatement related to accounting for dividends
associated with a past partnership that they consider to
constitute a material weakness in its internal control over
financial reporting. If measures suggested by the independent
registered public accounting firm, together with other remedial
measures that management is in the process of implementing, are
insufficient to address the issues raised, or if material
weaknesses or additional significant deficiencies in our
internal control over financial reporting are discovered in the
future, we may fail to meet our financial reporting obligations.
If we fail to meet these obligations, our financial statements
could become materially misleading, which could adversely affect
the trading price of our common stock.
23
FORWARD-LOOKING
STATEMENTS
This prospectus contains forward-looking statements that involve
risks and uncertainties. These forward-looking statements relate
to, among other things, the expected timetable for development
of our product candidates, our growth strategy, and our future
financial performance, including our operations, economic
performance, financial condition, prospects, and other future
events. We have attempted to identify forward-looking statements
by using such words as anticipates,
believes, can, continue,
could, estimates, expects,
intends, may, plans,
potential, should, will, or
other similar expressions. These forward-looking statements are
only predictions and are largely based on our current
expectations. These forward-looking statements appear in a
number of places in this prospectus.
In addition, a number of known and unknown risks, uncertainties,
and other factors could affect the accuracy of these statements,
including the risks outlined under Risk Factors and
elsewhere in this prospectus. Some of the more significant known
risks that we face are the risks and uncertainties inherent in
the process of discovering, developing, and commercializing
products that are safe and effective for use as human
therapeutics, including the uncertainty regarding market
acceptance of our product candidates and our ability to generate
revenues. These risks may cause our actual results, levels of
activity, performance, or achievements to differ materially from
any future results, levels of activity, performance, or
achievements expressed or implied by these forward-looking
statements.
Other important factors to consider in evaluating our
forward-looking statements include:
|
|
|
|
|
the possibility of delays in, adverse results of, and excessive
costs of the development process;
|
|
|
|
changes in external market factors;
|
|
|
|
changes in our industrys 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 possible inability to execute our strategy due to changes in
our industry or the economy generally;
|
|
|
|
changes in productivity and reliability of suppliers; and
|
|
|
|
the success of our competitors and the emergence of new
competitors.
|
Although we currently believe that the expectations reflected in
the forward-looking statements are reasonable, we cannot
guarantee our future results, levels of activity or performance.
We do not expect to update any of the forward-looking statements
after the date of this prospectus or to conform these statements
to actual results, except as may be required by law.
DETERMINATION
OF OFFERING PRICE
We are not selling any of the common stock that we are
registering. The common stock will be sold by the selling
stockholders listed in this prospectus. The selling stockholders
may sell the common stock at the market price as of the date of
sale or a price negotiated in a private sale. Our common stock
is currently traded on the OTC Bulletin Board under the
symbol AHYS.
We will not receive any of the proceeds from the sale of shares
of our common stock by the selling stockholders, but will
receive proceeds related to the exercise of the warrants for
cash held by selling stockholders. We intend to use the net
proceeds generated by such warrant exercises for general
corporate purposes. We cannot estimate how many, if any,
warrants may be exercised as a result of this offering. We will
24
bear all costs, expenses and fees in connection with the
registration of shares of our common stock to be sold by the
selling stockholders. The selling stockholders will bear all
commissions and discounts, if any, attributable to their
respective sales of shares.
All of our assets consist of the capital stock of
ABT Holding Company. We would have to rely upon dividends
and other payments from 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, the terms of our indebtedness and applicable state laws.
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.
MARKET
PRICE OF AND DIVIDENDS ON THE REGISTRANTS COMMON EQUITY
AND
RELATED STOCKHOLDER MATTERS
Trading
Market and Outstanding Equity
Prior to the merger, BTHC VI was a shell company with no
operations and no or nominal assets. BTHC VIs common stock
was eligible for trading on the OTC Bulletin Board,
although no trading took place prior to the merger because none
of BTHC VIs then-outstanding shares were able to be
transferred under the terms of BTHC VIs bankruptcy plan
until the merger was consummated. Since June 8, 2007, our
common stock has been quoted on the OTC Bulletin Board at
the following prices:
|
|
|
|
|
|
|
|
|
High
|
|
Low
|
Year ending December 31, 2007:
|
|
|
|
|
|
|
Second Quarter
|
|
$
|
10.00
|
|
$
|
5.25
|
Third Quarter
|
|
$
|
8.75
|
|
$
|
7.00
|
Fourth Quarter (through October 17, 2007)
|
|
$
|
8.00
|
|
$
|
7.70
|
These over-the-counter market quotations reflect inter-dealer
prices, without retail
mark-up,
mark-down or commission and may not necessarily represent actual
transactions. The last reported sales price of our common stock
on the OTC Bulletin Board was $8.00 per share on
October 17, 2007. We have applied to list the common stock
for trading on the NASDAQ Capital Market.
As of September 30, 2007, we have 18,927,988 shares of
common stock issued and outstanding. Additionally,
5,125,496 shares of common stock are subject to outstanding
warrants to purchase our common stock. Of these warrant shares,
4,976,470 are subject to five-year warrants to purchase shares
of common stock with an exercise price of $6.00 per share, and
149,026 are subject to seven-year warrants with an exercise
price of $5.00 per share.
Holders
As of September 30, 2007, the number of holders of record
was approximately 962.
25
UNAUDITED
PRO FORMA FINANCIAL INFORMATION
The following unaudited financial information has been developed
by application of pro forma adjustments to the historical
financial statements of Athersys appearing elsewhere in this
prospectus. The unaudited pro forma information gives effect to
the merger, the conversion of the convertible notes and
preferred stock, the June offering, and the specific application
of the net proceeds from the June offering and the issuance of
various warrants as a result of the June offering. Such
transactions have been assumed to have occurred as of
January 1, 2006 for purposes of the statement of operations
for the year ended December 31, 2006 and the six months
ended June 30, 2007.
The unaudited pro forma adjustments are based upon available
information and certain assumptions, as described in the
accompanying notes, that we believe are reasonable under the
circumstances. The unaudited pro forma financial information is
presented for informational purposes only and does not purport
to represent what the results of our operations or financial
position would have been had the transactions described above
actually occurred on the dates indicated, nor do they purport to
project our financial condition for any future period or as of
any future date. The unaudited pro forma financial information
should be read in conjunction with the information contained in
Managements Discussion and Analysis of Financial
Condition and Results of Operations and Athersys
financial statements and notes thereto included elsewhere in
this prospectus.
26
Athersys,
Inc.
Unaudited
Pro Forma Statements of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Six Months Ended
|
|
|
|
December 31, 2006
|
|
|
June 30, 2007
|
|
|
|
As
|
|
|
|
|
|
Pro
|
|
|
As
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
Adjustments
|
|
|
Forma
|
|
|
Reported
|
|
|
Adjustments
|
|
|
Pro
|
|
|
|
(1)
|
|
|
(2)
|
|
|
(3)
|
|
|
(1)
|
|
|
(2)
|
|
|
Forma
|
|
|
|
(In thousands, except share and per share amounts)
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
License fees
|
|
$
|
1,908
|
|
|
$
|
|
|
|
$
|
1,908
|
|
|
$
|
623
|
|
|
$
|
|
|
|
$
|
623
|
|
Grant revenue
|
|
|
1,817
|
|
|
|
|
|
|
|
1,817
|
|
|
|
979
|
|
|
|
|
|
|
|
979
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
3,725
|
|
|
|
|
|
|
|
3,725
|
|
|
|
1,602
|
|
|
|
|
|
|
|
1,602
|
|
Costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
9,741
|
|
|
|
|
|
|
|
9,741
|
|
|
|
7,354
|
|
|
|
|
|
|
|
7,354
|
|
General and administrative
|
|
|
3,347
|
|
|
|
|
|
|
|
3,347
|
|
|
|
4,105
|
|
|
|
|
|
|
|
4,105
|
|
Depreciation
|
|
|
528
|
|
|
|
|
|
|
|
528
|
|
|
|
155
|
|
|
|
|
|
|
|
155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
13,616
|
|
|
|
|
|
|
|
13,616
|
|
|
|
11,614
|
|
|
|
|
|
|
|
11,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(9,891
|
)
|
|
|
|
|
|
|
(9,891
|
)
|
|
|
(10,012
|
)
|
|
|
|
|
|
|
(10,012
|
)
|
Other income
|
|
|
208
|
|
|
|
|
|
|
|
208
|
|
|
|
1,500
|
|
|
|
|
|
|
|
1,500
|
|
Interest income
|
|
|
119
|
|
|
|
|
|
|
|
119
|
|
|
|
222
|
|
|
|
|
|
|
|
222
|
|
Interest expense
|
|
|
(1,047
|
)
|
|
|
214
|
|
|
|
(833
|
)
|
|
|
(1,043
|
)
|
|
|
317
|
|
|
|
(726
|
)
|
Accretion of premium on convertible debt
|
|
|
(260
|
)
|
|
|
260
|
|
|
|
|
|
|
|
(456
|
)
|
|
|
456
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before cumulative effect of change in accounting principle
|
|
|
(10,871
|
)
|
|
|
474
|
|
|
|
(10,397
|
)
|
|
|
(9,789
|
)
|
|
|
773
|
|
|
|
(9,016
|
)
|
Preferred stock dividends
|
|
|
(1,408
|
)
|
|
|
1,408
|
|
|
|
|
|
|
|
(659
|
)
|
|
|
659
|
|
|
|
|
|
Deemed dividend resulting from induced conversion of convertible
preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,800
|
)
|
|
|
4,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss before cumulative effect of change in accounting
attributable to common stockholders
|
|
$
|
(12,279
|
)
|
|
|
|
|
|
$
|
(10,397
|
)
|
|
$
|
(15,248
|
)
|
|
|
|
|
|
$
|
(9,016
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share(4)
|
|
$
|
(41.89
|
)
|
|
|
|
|
|
$
|
(0.55
|
)
|
|
$
|
(5.99
|
)
|
|
|
|
|
|
$
|
(0.48
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, basic and diluted
|
|
|
293,142
|
|
|
|
|
|
|
|
18,927,988
|
|
|
|
2,547,265
|
|
|
|
|
|
|
|
18,927,988
|
|
Notes to Pro Forma Adjustments:
|
|
|
1) |
|
Actual historical balances for the period indicated. |
|
|
|
2) |
|
Reflects a reduction in interest expense and accretion of
premium on convertible debt related to the convertible notes and
a reduction in preferred stock dividends and deemed dividends
related to the convertible preferred stock, which convertible
notes and convertible preferred stock are assumed to be
converted into common stock as of January 1, 2006. |
|
|
|
3) |
|
The following expenses are nonrecurring charges that resulted
directly from the June offering and, therefore, have not been
included in the pro forma statement of operations for the year
ended December 31, 2006: (A) $350,000 of merger costs, (B)
$438,000 of interest expense related to the issuance of the
senior lender warrants for 149,026 shares of common stock
and (C) $507,000 related to a MAPC milestone. These expenses
were incurred in June 2007 and are included in the statement of
operations for the six months ended June 30, 2007. |
|
4) |
|
Per share information for the year ended December 31, 2006
and the six months ended June 30, 2007 have been reported
on a basis consistent with the consolidated financial
statements. Pro forma per share information has been calculated
using the weighted average numbers of shares issued as a result
of the June offering, assuming that those shares were issued at
January 1, 2006. |
27
(In thousands, except share and per share data)
BTHC VIs acquisition of Athersys on June 8, 2007
effected a change in control and was accounted for as a
reverse acquisition whereby Athersys is the
accounting acquiror for financial statement purposes.
Accordingly, for all periods after the June 8, 2007
reverse acquisition transaction, our historical
financial statements reflect the financial statements of
Athersys since its inception and the operations of BTHC VI
subsequent to June 8, 2007.
The tables below set forth selected financial data for Athersys
for the years ended December 31, 2002, 2003, 2004, 2005 and
2006 and for the six months ended June 30, 2006 and 2007.
Athersys derived the selected financial data as of
December 31, 2004, 2005 and 2006 and for the years then
ended from its consolidated audited financial statements, which
are included elsewhere in this prospectus. Athersys has derived
the selected financial data as of December 31, 2002 and
2003 and for the years then ended from its consolidated audited
financial statements. Athersys derived the selected financial
data as of June 30, 2006 and 2007 and for the six-month
periods then ended from its unaudited condensed consolidated
financial statements, which are included elsewhere in this
prospectus. Athersys has prepared its unaudited financial
statements on the same basis as its audited financial
statements. In the opinion of management, the unaudited
condensed consolidated financial statements include all
adjustments, consisting of normal recurring adjustments, that it
considers necessary for a fair presentation of the financial
position and operating results for these periods. Historical
results are not necessarily indicative of results to be expected
for any future period, and results for interim periods are not
necessarily indicative of a full years operations.
You should read the following selected financial data in
conjunction with Managements Discussion and Analysis
of Financial Condition and Results of Operations and
Athersys financial statements and related notes, each
included elsewhere in this prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
|
|
|
|
Ended
|
|
|
|
Year Ended December 31,
|
|
|
June 30,
|
|
|
|
2002
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2006
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
Consolidated Statement of
Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
License fees
|
|
$
|
1,285
|
|
|
$
|
1,393
|
|
|
$
|
820
|
|
|
$
|
763
|
|
|
$
|
1,908
|
|
|
$
|
481
|
|
|
$
|
623
|
|
Grants
|
|
|
51
|
|
|
|
759
|
|
|
|
2,318
|
|
|
|
2,833
|
|
|
|
1,817
|
|
|
|
638
|
|
|
|
979
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
1,336
|
|
|
|
2,152
|
|
|
|
3,138
|
|
|
|
3,596
|
|
|
|
3,725
|
|
|
|
1,119
|
|
|
|
1,602
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
13,760
|
|
|
|
13,675
|
|
|
|
12,415
|
|
|
|
12,578
|
|
|
|
9,741
|
|
|
|
4,945
|
|
|
|
7,354
|
|
Purchased in-process R&D
|
|
|
|
|
|
|
9,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
6,280
|
|
|
|
10,882
|
|
|
|
4,717
|
|
|
|
3,755
|
|
|
|
3,347
|
|
|
|
1,754
|
|
|
|
4,105
|
|
Depreciation
|
|
|
1,996
|
|
|
|
1,803
|
|
|
|
1,297
|
|
|
|
982
|
|
|
|
528
|
|
|
|
293
|
|
|
|
155
|
|
Restructuring costs
|
|
|
|
|
|
|
1,076
|
|
|
|
107
|
|
|
|
251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(20,700
|
)
|
|
|
(34,784
|
)
|
|
|
(15,398
|
)
|
|
|
(13,970
|
)
|
|
|
(9,891
|
)
|
|
|
(5,873
|
)
|
|
|
(10,012
|
)
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
|
|
|
489
|
|
|
|
1,114
|
|
|
|
|
|
|
|
18
|
|
|
|
208
|
|
|
|
208
|
|
|
|
1,500
|
|
Interest income
|
|
|
1,213
|
|
|
|
644
|
|
|
|
317
|
|
|
|
317
|
|
|
|
119
|
|
|
|
67
|
|
|
|
222
|
|
Interest expense
|
|
|
(185
|
)
|
|
|
(135
|
)
|
|
|
(73
|
)
|
|
|
(964
|
)
|
|
|
(1,047
|
)
|
|
|
(490
|
)
|
|
|
(1,043
|
)
|
Accretion of premium on convertible
debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(260
|
)
|
|
|
|
|
|
|
(456
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before cumulative effect of
change in accounting principle
|
|
$
|
(19,183
|
)
|
|
$
|
(33,161
|
)
|
|
$
|
(15,154
|
)
|
|
$
|
(14,599
|
)
|
|
$
|
(10,871
|
)
|
|
$
|
(6,088
|
)
|
|
$
|
(9,789
|
)
|
Cumulative effect of change in
accounting principle
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
306
|
|
|
|
306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
|
|
|
|
Ended
|
|
|
|
Year Ended December 31,
|
|
|
June 30,
|
|
|
|
2002
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2006
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
Net loss
|
|
$
|
(19,183
|
)
|
|
$
|
(33,161
|
)
|
|
$
|
(15,154
|
)
|
|
$
|
(14,599
|
)
|
|
$
|
(10,565
|
)
|
|
$
|
(5,782
|
)
|
|
$
|
(9,789
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock dividends
|
|
|
(2,012
|
)
|
|
|
(2,164
|
)
|
|
|
(2,325
|
)
|
|
|
(2,253
|
)
|
|
|
(1,408
|
)
|
|
|
(695
|
)
|
|
|
(659
|
)
|
Deemed dividend resulting from induced conversion of convertible
preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,800
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to common stockholders
|
|
$
|
(21,195
|
)
|
|
$
|
(35,325
|
)
|
|
$
|
(17,479
|
)
|
|
$
|
(16,852
|
)
|
|
$
|
(11,973
|
)
|
|
$
|
(6,477
|
)
|
|
$
|
(15,248
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before cumulative change in accounting principle
|
|
$
|
(82.22
|
)
|
|
$
|
(130.90
|
)
|
|
$
|
(59.82
|
)
|
|
$
|
(57.79
|
)
|
|
$
|
(41.89
|
)
|
|
$
|
(23.19
|
)
|
|
$
|
(5.99
|
)
|
Cumulative effect of change in accounting principle
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.05
|
|
|
|
1.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(82.22
|
)
|
|
$
|
(130.90
|
)
|
|
$
|
(59.82
|
)
|
|
$
|
(57.79
|
)
|
|
$
|
(40.84
|
)
|
|
$
|
(22.14
|
)
|
|
$
|
(5.99
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used in computing basic and diluted net
loss per common share
|
|
|
257,771
|
|
|
|
269,861
|
|
|
|
292,173
|
|
|
|
291,612
|
|
|
|
293,142
|
|
|
|
292,513
|
|
|
|
2,547,265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2002
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2006
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and investments
|
|
$
|
43,871
|
|
|
$
|
25,992
|
|
|
$
|
17,279
|
|
|
$
|
4,561
|
|
|
$
|
1,528
|
|
|
$
|
3,975
|
|
|
$
|
58,939
|
|
Working capital (deficit)
|
|
|
26,753
|
|
|
|
18,514
|
|
|
|
17,018
|
|
|
|
1,828
|
|
|
|
(3,106
|
)
|
|
|
(87
|
)
|
|
|
54,401
|
|
Total assets
|
|
|
49,780
|
|
|
|
30,503
|
|
|
|
20,894
|
|
|
|
7,309
|
|
|
|
4,266
|
|
|
|
6,212
|
|
|
|
61,065
|
|
Long-term obligations, less current portion
|
|
|
1,062
|
|
|
|
578
|
|
|
|
7,215
|
|
|
|
4,684
|
|
|
|
9,310
|
|
|
|
8,289
|
|
|
|
|
|
Accrued dividends
|
|
|
6,747
|
|
|
|
8,911
|
|
|
|
11,236
|
|
|
|
7,473
|
|
|
|
8,882
|
|
|
|
8,168
|
|
|
|
|
|
Total stockholders equity (deficit)
|
|
|
35,913
|
|
|
|
14,951
|
|
|
|
1,151
|
|
|
|
(8,584
|
)
|
|
|
(20,007
|
)
|
|
|
(14,971
|
)
|
|
|
55,710
|
|
29
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion contains forward-looking statements
that involve numerous risks and uncertainties, such as
statements of our plans, objectives, expectations, and
intentions. Our actual results could differ materially from
those anticipated in the forward-looking statements. Factors
that could cause or contribute to these differences include
those discussed in this prospectus under Risk
Factors and Forward-Looking Statements, as
well as those discussed elsewhere in this prospectus. You should
read the following discussion and analysis in conjunction with
Selected Financial Data and Athersys financial
statements and related notes, each included elsewhere in this
prospectus.
Overview
We are a biopharmaceutical company engaged in the discovery and
development of therapeutic product candidates designed to extend
and enhance the quality of human life. Through the application
of our proprietary technologies, we have established a pipeline
of therapeutic product development programs in multiple
diseases. We have one product candidate in clinical development
(ATHX-105) and intend to advance two to three additional product
development programs (from MultiStem cardiovascular,
oncology support or stroke, or from our histamine H3 antagonist
program) into clinical trials in 2007 and 2008. Our ability to
initiate these trials will depend on the success of our ongoing
preclinical development efforts and our obtaining necessary
regulatory approvals. Our lead product candidate is ATHX-105,
which is a treatment for obesity. We are also developing
pharmaceutical products for the treatment of certain conditions
affecting the central nervous system, such as ADHD, narcolepsy
and other cognitive or attention disorders. In addition to these
drug development programs, we entered into a collaboration with
Angiotech to jointly develop our proprietary non-embryonic stem
cell product, MultiStem, for the treatment of myocardial
infarction and peripheral vascular disease. We are also
developing MultiStem for stroke, oncology support, and certain
other disease indications.
Athersys has incurred losses since inception of operations in
December 1995 and had an accumulated deficit of
$151.3 million at June 30, 2007. Athersys losses
have resulted principally from costs incurred in research and
development, acquisition and licensing costs, and general and
administrative costs associated with its operations. Athersys
has used the financing proceeds from private equity and debt
offerings and other sources of capital to develop its
technologies, such as RAGE, and to acquire its stem cell
technology. Athersys has also built drug development
capabilities that have enabled it to advance product candidates
into clinical trials, such as its lead product candidate,
ATHX-105. Athersys has established strategic collaborations that
provide revenues and capabilities to help to further advance its
product candidates. Athersys has also built a substantial
portfolio of intellectual property.
In 2003 and in 2005, Athersys completed restructurings that
resulted in reductions in its personnel. Athersys refocused its
activities to emphasize the development of its lead product
opportunities and reduced its spending in discovery activities.
As Athersys has evolved from a research-oriented company to a
product-oriented company, its staffing needs have evolved,
resulting in the reductions in personnel. Athersys is currently
optimizing the mix of its internal capabilities with the
capabilities of its outside collaborators, academic
institutions, and third-party contract research organizations.
In connection with the merger, all of Athersys shares of
preferred stock were converted into common stock of Athersys and
exchanged for shares of BTHC VI common stock. Also, all accrued
dividends related to the preferred stock were eliminated and
shares of stock held in treasury were retired.
On June 8, 2007, we completed the offering of
13,000,000 shares of our common stock and received gross
proceeds of $65.0 million. Investors in the June offering
also received five-year warrants to purchase an aggregate of
3,250,000 shares of common stock with an exercise price of
$6.00 per share. The lead investor in the June offering, Radius,
invested $10.0 million and received additional five-year
warrants to purchase an aggregate of 500,000 shares of
common stock with a cash or cashless exercise price of $6.00 per
share. The placement agents received cash fees in an amount
equal to approximately $5.5 million, which was based on
8.5% of the gross proceeds, excluding proceeds from existing
investors. The placement agents also received
30
five-year warrants to purchase an aggregate of 1,093,525 shares
of common stock with a cash or cashless exercise price of
$6.00 per share. In consideration for certain advisory
services, we paid an affiliate of BTHC VIs
then-largest stockholder a one-time fee of $350,000 in cash upon
consummation of the merger. In connection with the June
offering, all of Athersys convertible notes were converted
into shares of our common stock.
In May 2007, Athersys terminated the majority of stock option
awards to its officers, employees, directors and consultants.
Only a nominal number of option awards (5,052 option shares)
held by former employees and consultants were assumed by us.
Upon closing the merger, options for 3,625,000 shares of common
stock were issued under our equity incentive plans to employees,
directors and consultants at $5.00 per share. For the six-month
period ended June 30, 2007, stock compensation expense was
approximately $4.1 million, of which $2.0 million was
recorded as research and development expense and
$2.1 million was recorded as general and administrative
expense. At June 30, 2007, total unrecognized estimated
compensation cost related to unvested stock options was
approximately $6.6 million, which is expected to be
recognized by June 2010 using the straight-line method.
In May 2007, Athersys sold certain non-core assets related to
its asthma discovery program to Wyeth Pharmaceuticals for
$2.0 million, of which $1.5 million was received at
closing. The remaining $0.5 million was received in August
2007 when Athersys delivered certain ancillary assets related to
the program.
Results
of Operations
Since Athersys inception, its revenues have consisted of
license fees from its collaborators and grant proceeds from
federal and state grants. Athersys has derived no revenue on the
sale of FDA-approved products to date. Research and development
expenses consist primarily of salaries and related personnel
costs, legal expenses resulting from intellectual property
application processes, contracted service costs, and laboratory
supply and reagent costs. Athersys expenses research and
development costs as they are incurred. We expect to continue to
make significant investments in research and development to
enhance our technologies, conduct preclinical studies and
clinical trials of our products, and manufacture our products.
General and administrative expenses consist primarily of
salaries and related expenses for executive, business
development, finance, and other administrative personnel;
professional fees; and other corporate expenses. Our general and
administrative expenses are expected to increase as we expand
our regulatory affairs and product development capabilities, as
well as expand our business development and assume the
obligations of a public reporting company. Athersys depreciates
its fixed assets on a straight-line basis. To date, Athersys has
financed its operations through private equity and debt
financing and investments by strategic collaborators. We expect
to continue to incur substantial losses through at least the
next several years. We expect our development costs to increase
as we initiate clinical trials of our product candidates in 2007
and 2008.
The following table sets forth Athersys revenues and
expenses for the periods indicated. The following tables are
stated in thousands.
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
|
Years Ended December 31,
|
|
|
Ended June 30,
|
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2006
|
|
|
2007
|
|
|
License fees
|
|
$
|
820
|
|
|
$
|
763
|
|
|
$
|
1,908
|
|
|
$
|
481
|
|
|
$
|
623
|
|
Grants
|
|
|
2,318
|
|
|
|
2,833
|
|
|
|
1,817
|
|
|
|
638
|
|
|
|
979
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,138
|
|
|
$
|
3,596
|
|
|
$
|
3,725
|
|
|
$
|
1,119
|
|
|
$
|
1,602
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31
Research
and development expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
|
Years Ended December 31,
|
|
|
Ended June 30,
|
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2006
|
|
|
2007
|
|
|
Type of Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personnel costs
|
|
$
|
4,451
|
|
|
$
|
4,587
|
|
|
$
|
2,721
|
|
|
$
|
1,430
|
|
|
$
|
1,446
|
|
Research supplies
|
|
|
2,661
|
|
|
|
2,286
|
|
|
|
1,208
|
|
|
|
663
|
|
|
|
359
|
|
Facilities
|
|
|
1,079
|
|
|
|
1,127
|
|
|
|
879
|
|
|
|
463
|
|
|
|
375
|
|
Sponsored research, preclinical
and clinical costs
|
|
|
647
|
|
|
|
2,095
|
|
|
|
3,281
|
|
|
|
1,596
|
|
|
|
1,614
|
|
Patent legal fees
|
|
|
366
|
|
|
|
714
|
|
|
|
595
|
|
|
|
230
|
|
|
|
661
|
|
Other
|
|
|
1,203
|
|
|
|
968
|
|
|
|
781
|
|
|
|
404
|
|
|
|
868
|
|
Stock compensation expense
|
|
|
2,008
|
|
|
|
801
|
|
|
|
276
|
|
|
|
159
|
|
|
|
2,031
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
12,415
|
|
|
$
|
12,578
|
|
|
$
|
9,741
|
|
|
$
|
4,945
|
|
|
$
|
7,354
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
|
Years Ended December 31,
|
|
|
Ended June 30,
|
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2006
|
|
|
2007
|
|
|
Type of Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personnel costs
|
|
$
|
2,096
|
|
|
$
|
1,858
|
|
|
$
|
1,891
|
|
|
$
|
999
|
|
|
$
|
999
|
|
Facilities
|
|
|
319
|
|
|
|
286
|
|
|
|
291
|
|
|
|
140
|
|
|
|
151
|
|
Legal and professional fees
|
|
|
303
|
|
|
|
446
|
|
|
|
590
|
|
|
|
340
|
|
|
|
279
|
|
Other
|
|
|
518
|
|
|
|
508
|
|
|
|
392
|
|
|
|
184
|
|
|
|
574
|
|
Stock compensation expense
|
|
|
1,481
|
|
|
|
657
|
|
|
|
183
|
|
|
|
91
|
|
|
|
2,102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,717
|
|
|
$
|
3,755
|
|
|
$
|
3,347
|
|
|
$
|
1,754
|
|
|
$
|
4,105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six
Months Ended June 30, 2007 Compared to Six Months Ended
June 30, 2006
Revenues. Revenues increased to
$1.6 million for the six months ended June 30, 2007
from $1.1 million in the comparable period in 2006. License
fee revenues increased $142,000 for the six months ended
June 30, 2007 compared to the six months ended
June 30, 2006. The increase in license fee revenue over
this period was a result of the nature and timing of target
acceptances and milestone payments under Athersys
collaboration agreements with Bristol-Myers Squibb and Pfizer.
Grant revenue increased $341,000 for the six months ended
June 30, 2007 compared to the six months ended
June 30, 2006. In July 2003, Athersys was awarded a
$5.0 million state grant that spanned three years and was
completed in February 2006. This grant was renewed in May 2006
for approximately $3.5 million that will also span three
years. The increase in grant revenue for the six months ended
June 30, 2007 compared to the six months ended
June 30, 2006 was principally the result of recognizing six
months of revenue under this state grant in the six months ended
June 30, 2007 versus only three and a half months of
revenue in the comparable period of 2006.
Research and Development Expenses. Research
and development expenses increased to $7.4 million for the
six months ended June 30, 2007 from $4.9 million in
the comparable period in 2006. The increase of approximately
$2.5 million relates primarily to an increase of
$1.9 million in stock compensation expense, an increase of
$464,000 in other expenses, an increase of $431,000 in patent
legal fees, an increase of $18,000 in sponsored research,
preclinical and clinical costs and an increase of $16,000 in
personnel costs, partially offset by a decrease in research
supplies and facilities costs of $392,000, related to the
restructuring and reduction in force effected in late 2005 that
carried over into early 2006. Included in other expenses for the
six months ended June 30, 2007 was a milestone payment
related to our stem cell technology of $507,000 paid in cash and
stock to the former holders of the technology in connection with
a collaboration milestone. Included in other expenses for the
six months ended June 30, 2006 was a milestone payment
related to our stem cell
32
technology of $125,000 paid in stock to the former holders of
the technology, in connection with the issuance of a patent. The
increase in patent legal fees for the six months ended
June 30, 2007 was a result of maintaining Athersys
growing and maturing portfolio of patent applications and the
performance of patent legal work related to the May 2007 asthma
asset sale. Included in personnel costs for the six months ended
June 30, 2007 and 2006 was approximately $262,000 and
$121,000, respectively, of expense related the Athersys cash
incentive plan that resulted in bonus payments upon the
achievement of certain milestones. We do not track our research
expenses by project; rather, we track such expenses by the type
of cost incurred.
General and Administrative Expenses. General
and administrative expenses increased to $4.1 million for
the six months ended June 30, 2007 from $1.8 million
in the comparable period in 2006. The increase of approximately
$2.3 million relates primarily to a $2.0 million
increase in stock compensation expense, a $390,000 increase in
other expenses, and an $11,000 increase in personnel and
facilities costs, partially offset by a $61,000 decrease in
legal and professional fees. Included in other expenses for the
six months ended June 30, 2007 was a one-time advisory fee
of $350,000 related to the merger and approximately $50,000 of
other costs related to being a public company. Included in
personnel costs for the six months ended June 30, 2007 and
2006 was approximately $308,000 and $89,000, respectively, of
expense related to the Athersys cash incentive plan that
resulted in bonus payments upon the achievement of milestones.
Also included in personnel costs in May 2006 was approximately
$122,000 ($146,000 including taxes) in connection with the
forgiveness of a 2002 loan made to Gil Van Bokkelen.
Depreciation. Depreciation expense decreased
to $155,000 in the six months ended June 30, 2007 from
$293,000 in the six months ended June 30, 2006. The
decrease in depreciation expense was due to more laboratory
equipment, computer equipment, furniture, and leasehold
improvements becoming fully depreciated, combined with fewer
purchases of new equipment.
Other Income. In May 2007, Athersys sold
certain non-core assets related to its asthma discovery program
to a pharmaceutical company for $2.0 million, of which
$1.5 million was received at closing and recorded in other
income. The remaining $0.5 million was received and
recognized as other income in August 2007 upon Athersys
delivery of certain ancillary assets related to the program. In
January 2006, a milestone was achieved related to Athersys
joint venture with Oculus Pharmaceuticals, Inc. As a result,
Athersys received $100,000 of stock-based proceeds from Oculus,
which was recorded in other income. Similarly, Oculus also
received stock-based proceeds in another company in the amount
of $260,000. Athersys recorded its share of Oculus net
income (after recapturing past losses) of $117,000 in equity in
earnings of unconsolidated affiliate on the statement of
operations. No additional milestones were achieved related to
this joint venture in the six months ended June 30, 2007.
Interest Income. Interest income represents
interest earned on Athersys cash and available for sale
securities. Interest income increased to $222,000 for the six
months ended June 30, 2007 from $67,000 for the comparable
period in 2006 due to the increase in Athersys average
cash balances during those periods. Athersys obtained
$5.0 million in each of January 2007 and May 2006 as a
result of issuing subordinated convertible promissory notes to
Angiotech related to its co-development collaboration agreement.
In addition, in June 2007, we received net proceeds of
$58.5 million from the June offering.
Interest Expense. Interest expense on
Athersys debt outstanding under its senior loan and its
subordinated convertible promissory notes increased to
$1,043,000 for the six months ended June 30, 2007 from
$490,000 for the comparable period in 2006. The increase in
interest expense was due to the subordinated convertible
promissory notes issued by Athersys in May 2006, October 2006
and January 2007, and the recording $438,000 of interest expense
associated with the issuance of warrants to the senior lenders
in connection with the June offering.
Accretion of Premium on Convertible Debt. The
accretion of premium on convertible debt in the amount of
$456,000 for the six months ended June 30, 2007 was a
result of the $2.5 million subordinated convertible
promissory notes issued in October 2006. The notes, if not
converted, were repayable with accrued interest at maturity,
plus a repayment fee of 200% of the outstanding principal.
Athersys computed a premium on the debt in the amount of
$5.25 million due upon redemption, which was being accreted
over the term of the
33
notes using the effective interest method. This accretion was
reversed and recorded in additional
paid-in-capital
in June 2007 when the notes were converted into common stock
upon the closing of the June offering.
Cumulative Effect of Change in Accounting
Principle. Effective January 1, 2006,
Athersys adopted the fair value recognition provisions of SFAS
No. 123R, using the modified-prospective-transition method.
SFAS No. 123R requires Athersys to estimate forfeitures in
calculating the expense relating to share-based compensation,
while previously Athersys was permitted to recognize forfeitures
as an expense reduction upon occurrence. The adjustment to apply
estimated forfeitures to previously recognized share-based
compensation was accounted for as a cumulative effect of a
change in accounting principle at January 1, 2006 and
reduced net loss by $306,000 for the six months ended
June 30, 2006.
Deemed Dividend In connection with the merger,
all shares of Athersys convertible preferred stock were
converted into common stock, which resulted in a deemed dividend
in the amount of $4.8 million from the induced conversion
associated with the change in the conversion ratios. This amount
is reflected as an increase to the net loss attributable to
common stockholders in June 2007.
Year
Ended December 31, 2006 Compared to Year Ended
December 31, 2005
Revenues. Revenues increased to
$3.7 million for the year ended December 31, 2006 from
$3.6 million for the comparable period in 2005. License fee
revenues increased $1.1 million over this period as a
result of the nature and timing of target acceptances under
Athersys collaboration agreement with Bristol-Myers
Squibb. Grant revenue decreased $1.0 million for the year
ended December 31, 2006 compared to the year ended
December 31, 2005. In July 2003, Athersys was awarded a
$5.0 million state grant that spanned three years and was
completed in February 2006. This grant was renewed in May 2006
for approximately $3.5 million that will also span three
years. The decrease in grant revenue for the year ended
December 31, 2006 is principally the result of recognizing
eight months of revenue under this state grant in 2006 versus
twelve months of revenue in 2005. In addition, Athersys had
fewer active NIH grant awards in 2006 as compared to 2005.
Research and Development Expenses. Research
and development expenses decreased to $9.7 million in 2006
from $12.6 million in 2005. The decrease of approximately
$2.9 million in research and development expenses relates
primarily to a decrease in personnel costs of $1.9 million,
a decrease in research supplies expenses of $1.1 million,
and a decrease in facilities and other costs of $435,000 related
to the restructuring and reduction in force that occurred late
in 2005. In addition, patent legal fees decreased $119,000 and
stock compensation expense decreased $525,000 in 2006 compared
to 2005. These decreases were offset by an increase in sponsored
research, preclinical and clinical expenses of $1.2 million
in 2006 compared to 2005. As Athersys has evolved from a
research-oriented company to a product-oriented company, its
staffing needs have evolved, resulting in the reductions in
personnel and related costs. Athersys is currently optimizing
the mix of its internal capabilities with the capabilities of
its outside collaborators, academic institutions, and third
party contract research organizations resulting in an increase
in these costs.
General and Administrative Expenses. General
and administrative expenses decreased to $3.3 million in
2006 from approximately $3.8 million in 2005. The decrease
in general and administrative expenses was due primarily to a
decrease in stock compensation expense of $474,000 and a
decrease in other expenses of $116,000. These decreases were
offset by an increase in legal and professional fees of
$144,000, which was a result of legal costs associated with
potential financing and strategic transactions.
Depreciation. Depreciation expense decreased
to $528,000 in 2006 from $982,000 in 2005. The decrease in
depreciation expense was due to more laboratory equipment,
computer equipment, furniture, and leasehold improvements
becoming fully depreciated, combined with fewer purchases of new
equipment.
Restructuring Costs. Restructuring costs for
the year ended December 31, 2005 were a result of the
restructuring and reduction in force, which occurred late in
2005.
Other Income and Equity in Earnings of Unconsolidated
Affiliate. In January 2006, a milestone was
achieved related to Athersys joint venture with Oculus. As
a result, Athersys received $100,000 of stock-based proceeds
from Oculus, which was recorded in other income. Similarly,
Oculus also received stock-based
34
proceeds in another company in the amount of $260,000. Athersys
recorded its share of Oculus net income (after recapturing
past net losses) of $117,000 in equity in earnings of
unconsolidated affiliate on the statement of operations.
Interest Income. Interest income decreased to
$119,000 for the year ended December 31, 2006 from $317,000
in 2005. Changes in interest income was due to changes in
Athersys average cash balances and available for sale
securities during those periods.
Interest Expense. Interest expense on
Athersys debt outstanding under its senior loan and its
subordinated convertible promissory notes increased to
$1,047,000 for the year ended December 31, 2006 from
$964,000 for the comparable period in 2005. The increase in
interest expense is due to the subordinated convertible
promissory notes issued by Athersys in May 2006 and October 2006.
Accretion of Premium on Convertible Debt. The
accretion of premium on convertible debt for the year ended
December 31, 2006, is a result of the $2.5 million
subordinated secured convertible promissory notes issued in
October 2006. The notes, if not converted, are repayable with
accrued interest at maturity, plus a repayment fee of 200% of
the outstanding principal. Athersys has computed a premium on
the debt in the amount of $5,250,000 due upon redemption, which
is being accreted over the term of the notes using the effective
interest method. This accretion was reversed and recorded in
additional paid-in-capital in June 2007 when the notes were
converted into common stock upon the closing of the June
offering.
Cumulative effect of change in accounting
principle. Effective January 1, 2006,
Athersys adopted the fair value recognition provisions of
SFAS No. 123R using the
modified-prospective-transition method. SFAS No. 123R
requires Athersys to estimate forfeitures in calculating the
expense relating to share-based compensation, while previously
Athersys was permitted to recognize forfeitures as an expense
reduction upon occurrence. The adjustment to apply estimated
forfeitures to previously recognized share-based compensation
was accounted for as a cumulative effect of a change in
accounting principle at January 1, 2006 and reduced net
loss by $306,000 for the year ended December 31, 2006.
Year
Ended December 31, 2005 Compared to Year Ended
December 31, 2004
Revenues. Revenues increased to
$3.6 million in 2005 from $3.1 million in 2004.
License fee revenue decreased $57,000 from 2004 to 2005 due to
the nature and timing of target acceptances under Athersys
collaboration agreement with Bristol-Myers Squibb. The remaining
increase of $515,000 from 2004 to 2005 was due primarily to
increased grant revenue. In 2003, Athersys was awarded a
$5 million state grant that spanned three years and was
completed in February 2006.
Research and Development Expenses. Research
and development expenses increased to $12.6 million in 2005
from $12.4 million in 2004. The increase of $163,000 in
research and development expenses relates to a decrease in stock
compensation expense of $1.2 million, a decrease in
research supplies expenses of $375,000, an increase in outside
sponsored research and preclinical expenses of
$1.5 million, and an increase in patent legal costs of
$348,000.
General and Administrative Expenses. General
and administrative expenses decreased to $3.8 million in
2005 from $4.7 million in 2004. The decrease in general and
administrative expenses of $962,000 is due primarily to a
decrease in stock option expense of $824,000, a decrease in
payroll, facilities and other expense of $281,000 related to the
restructuring and reduction in force late in 2005, and an
increase in legal and professional fees of $143,000.
Depreciation. Depreciation expense decreased
to $1.0 million in 2005 from $1.3 million in 2004. The
decrease in depreciation expense was due to more laboratory
equipment, computer equipment, furniture, and leasehold
improvements becoming fully depreciated, combined with fewer
purchases of new equipment.
Restructuring Costs. Restructuring costs for
the year ended December 31, 2005 were a result of the
restructuring and reduction in force, which occurred late in
2005. Restructuring costs for the year ended December 31,
2004 were a result of the restructuring and reduction in force,
which occurred late in 2003.
35
Interest Income. Interest income was $317,000
in 2006 and 2005. Interest income was as result of
Athersys average cash balances and available for sale
securities during those periods.
Interest Expense. Interest expense on
Athersys debt under credit agreements increased to
$964,000 in 2005 from $73,000 in 2004. The increase in interest
expense was attributable to Athersys borrowing
$7.5 million under its senior loan late in 2004.
Liquidity
and Capital Resources
Athersys has primarily financed its operations through private
equity and debt financings that have resulted in aggregate
cumulative proceeds of approximately $200 million, which
includes gross proceeds of $65.0 million received in the
June offering described below.
On June 8, 2007, we completed an offering of
13,000,000 shares of our common stock. Investors in the
June offering also received five-year warrants to purchase an
aggregate of 3,250,000 shares of common stock with an
exercise price of $6.00 per share. The lead investor in the June
offering, Radius, invested $10,000,000 in the June offering and
received additional five-year warrants to purchase an aggregate
of 500,000 shares of common stock with a cash or cashless
exercise price of $6.00 per share. The placement agents for the
June offering received five-year warrants to purchase an
aggregate of 1,093,525 shares of common stock with a cash
or cashless exercise price of $6.00 per share. Upon the closing
of the June offering, we received net proceeds of approximately
$58.5 million. The placement agents received approximately
$5.5 million in fees from the gross proceeds.
In November 2004, Athersys entered into a Loan and Security
Agreement, or Senior Loan, with Venture Lending &
Leasing IV, Inc. and Costella Kirsch IV, L.P., or the Senior
Lenders, pursuant to which it borrowed $7.5 million
pursuant to notes that mature on June 1, 2008. Amounts
outstanding under the Senior Loan are payable in 30 monthly
installments following an initial interest-only period that
expired on December 1, 2005. The Senior Loan has an implied
fixed interest rate of approximately 13%. A final payment of
$487,500 is due on June 1, 2008. As of June 30, 2007,
the outstanding balance of the Senior Loan is approximately
$3.2 million. Athersys obligations under the Senior
Loan are secured by substantially all of its assets other than
its intellectual property. However, a lien on our intellectual
property could attach at any time if the ratio of our
unrestricted cash to four months expenses is less than
one-to-one. The agreement governing the Senior Loan contains
affirmative and negative covenants customary for such financings
and customary events of default. As of June 30, 2007,
Athersys was in compliance with these covenants.
The Senior Lenders have the right to receive a milestone payment
of $2.25 million upon the first to occur of the following
milestone events: (1) a firmly underwritten initial public
offering of common stock; (2) Athersys merger with or
into another entity where its stockholders do not hold at least
a majority of the voting power of the surviving entity;
(3) the sale of all or substantially all of Athersys
assets; and (4) Athersys liquidation or dissolution.
The milestone payment is payable in cash, except that if the
milestone event is an initial public offering, Athersys may
elect to pay 75% of the milestone in shares of common stock at
the per share offering price to the public. Although the June
offering did not constitute a milestone event under the Senior
Loan, we are discussing an amendment with the Senior Lenders to
include the occurrence of an additional significant financing or
financings as a milestone event that would obligate it to make
such milestone payment or otherwise restructure the milestone
payment since an initial public offering technically can no
longer occur. The Senior Lenders also received warrants to
purchase 149,026 shares of common stock with an exercise
price of $5.00 upon the closing of the June offering. We are
evaluating the potential restructuring or prepayment of the
Senior Loan.
In October 2006, Athersys completed a bridge financing of
$2.5 million in the form of 10% secured convertible
promissory notes. The notes and accrued interest were converted
into common stock at a conversion price of $5.00 upon the
closing of the June offering. The noteholders also received
warrants to purchase 999,977 shares of common stock, which
were exercised in connection with the merger and the closing of
the June offering.
36
In connection with developing MultiStem for the treatment of the
cardiovascular disorders of myocardial infarction and peripheral
vascular disease as part of a commercial collaboration with
Angiotech that was entered into in May 2006, in support of the
collaboration, Angiotech purchased subordinated convertible
promissory notes in the aggregate principal amount of
$10.0 million, which were converted along with accrued
interest into common stock upon the closing of the June offering
at a conversion price of $5.50, which was 110% of the price per
share paid in the June offering. Athersys may also receive
additional equity investments and cash payments based upon the
successful achievement of specified clinical development and
commercialization milestones.
Athersys contractual payment obligations as of
June 30, 2007 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less Than
|
|
|
|
|
|
|
|
|
More Than
|
|
Contractual Obligations
|
|
Total
|
|
|
1 Year
|
|
|
1 3 Years
|
|
|
3 5 Years
|
|
|
5 Years
|
|
|
Operating lease for facilities
|
|
$
|
201,000
|
|
|
$
|
201,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt (principal), net
|
|
$
|
3,235,000
|
|
|
$
|
3,235,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt (discount)
|
|
$
|
54,000
|
|
|
$
|
54,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt (interest)
|
|
$
|
252,000
|
|
|
$
|
252,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,742,000
|
|
|
$
|
3,742,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As noted above, the Senior Lenders have the right to receive a
one-time milestone payment of $2.25 million under the
Senior Loan upon the occurrence of certain events. Also,
Athersys may be required to make a cash payment in the amount of
$0.5 million to the former holders of the MAPC technology
upon the achievement of a milestone in connection with
Athersys filing of an IND with the FDA.
Athersys has an operating lease for its office and laboratory
space with options to renew through March 2009 at the existing
rental rate. Athersys has exercised options to renew the lease
through March 2008.
Athersys has never paid dividends on its capital stock, and all
accrued cumulative dividends were eliminated in June 2007 in
connection with the merger.
At June 30, 2007, Athersys had $58.9 million in cash
and cash equivalents.
Net cash used in operating activities was $8.4 million,
$12.1 million, and $11.7 million in 2006, 2005, and
2004, respectively, and represented the use of cash in funding
technology development and product development initiatives. Net
cash used in operating activities was $4.2 million in the
six months ended June 30, 2007 and $4.3 million for
the six months ended June 30, 2006, and was primarily
attributed to expenditures used to fund Athersys research
and product development activities.
Net cash provided by investing activities was $3.4 million,
$10.3 million, and $6.4 million in 2006, 2005, and
2004, respectively. Net cash used in investing activities was
$3,000 in the six months ended June 30, 2007 and net cash
provided was $713,000 in the six months ended June 30,
2006. The fluctuations from period to period are due to the
timing of purchases and maturity dates of investments, and the
purchase of equipment. Purchases of equipment were $3,000 in the
six months ended June 30, 2007 and $67,000 in the six-month
period ended June 30, 2006.
Financing activities provided cash of $5.4 million in 2006
and $4.0 million in 2004 and used cash of $446,000 in 2005.
These fluctuations relate primarily to proceeds and repayments
of loans and the issuance of a convertible promissory note in
2006. Financing activities provided cash of $61.7 million
in the six months ended June 30, 2007 and $3.8 million
in the six months ended June 30, 2006. The proceeds from
the June offering were received in the second quarter of 2007.
Also, proceeds from the issuance of convertible notes to
Angiotech were received in January 2007 in the amount of
$5.0 million, and in May 2006 also in the amount of
$5.0 million. The financing proceeds have been offset by
the repayment of debt in each period.
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
37
developing, commercializing and obtaining regulatory approval or
clearances for our technologies and products resulting from
these technologies.
We will require substantial additional funding in order to
continue our research and product development programs,
including preclinical testing and clinical trials of our product
candidates. While we believe that the net proceeds from the June
offering, combined with current capital resources and
anticipated cash flows from licensing activities, will be
sufficient to meet our capital and operating requirements
through at least 2009, we cannot assure you that we will not
require additional financing before that time. Our current
monthly burn rate, excluding capital expenditures and non-cash
charges, is approximately $1.2 million to $1.6 million
per month, and we anticipate a higher burn rate over certain
periods during the next several years as we begin costly
clinical trials and continue to advance our various research and
product development activities. Our funding requirements may
change at any time due to technological advances or competition
from other companies. Our future capital requirements will also
depend on numerous other factors, including scientific progress
in our research and development programs, additional personnel
costs, progress in preclinical testing and clinical trials, the
time and cost related to proposed regulatory approvals, if any,
and the costs in filing and prosecuting patent applications and
enforcing patent claims. We cannot assure you that adequate
funding will be available to us or, if available, that it will
be available on acceptable terms. Any shortfall in funding could
result in our having to curtail our research and development
efforts.
Critical
Accounting Policies and Management Estimates
The SEC defines critical accounting policies as those that are,
in managements view, important to the portrayal of our
financial condition and results of operations and demanding of
managements judgment. Our discussion and analysis of
financial condition and results of operation are based on
Athersys consolidated financial statements, which have
been prepared in accordance with U.S. generally accepted
accounting principles, or GAAP. The preparation of these
financial statements requires Athersys 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.
Athersys critical accounting polices include:
Revenue
Recognition
Our revenue recognition policies are in accordance with the SEC
Staff Accounting Bulletin No. 104, Revenue
Recognition, and Emerging Issues Task Force
No. 00-21,
Revenue Arrangements with Multiple Deliverables,
which provide guidance on revenue recognition in financial
statements and are based on the interpretations and practices
developed by the SEC. Some of our agreements contain multiple
elements, including technology access and development fees,
research funding, milestones and royalty obligations.
Revenue is recognized over the period that Athersys performs its
required activities under the terms of various agreements.
Revenue from transactions that do not require future performance
obligations from Athersys is recognized when performance is
complete and upon customer acceptance (if applicable), and when
collectibility is reasonably assured. We defer nonrefundable
upfront fees under our collaborations and recognize them over
the period in which we perform services, using various factors
specific to the collaboration. Amounts we receive for research
funding are recognized as revenue as the services are performed.
Revenue resulting from the achievement of milestone events
stipulated in the agreements is recognized when the milestone is
achieved.
Our license fee revenue primarily consists of fees received from
a collaborator, 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). Upon acceptance by the collaborator of a cell line
for use in its own product development efforts, we have no
further performance obligations with respect to the cell line or
products developed using the cell line. In addition, we receive
specified payments upon the collaborators achievement of
certain developmental milestones (e.g., clinical trial phases).
We recognize this nonrefundable license fee revenue when we have
completed our performance (and have no further performance
obligations) thereby triggering a payment to us, or, in the case
of our collaborators development milestones, when a
milestone is achieved by our collaborator.
38
Revenue from grants consists primarily of funding under cost
reimbursement programs from federal and state sources for
qualified research and development activities performed by
Athersys. Revenue from grants is recorded when earned under the
terms of the agreements.
Research
and Development
Research and development expenditures, including direct and
allocated overhead expenses, are charged to expense as incurred.
Royalties
Athersys may be required to remit royalty payments based on
product sales to certain parties under license agreements.
Athersys has not paid any such royalties for the three-year
period ended December 31, 2006 or the six-month period
ended June 30, 2007.
Long-Lived
Assets
Equipment is stated at acquired cost less accumulated
depreciation. Laboratory and office equipment are depreciated on
the straight-line basis over the estimated useful lives (three
to seven years).
Impairment of long-lived assets is recognized when events or
changes in circumstances indicate that the carrying amount of
the asset or related group of assets may not be recoverable. If
the expected future undiscounted cash flows are less than the
carrying amount of the asset, an impairment loss is recognized
at that time. Measurement of impairment may be based upon
appraisal, market value of similar assets or discounted cash
flows.
Patent
Costs and Rights
Patent costs and rights are expensed as incurred. Athersys has
filed for broad intellectual property protection on its
proprietary technologies. Athersys currently has numerous
U.S. patent applications and corresponding international
patent applications related to its technologies, as well as many
issued U.S. and international patents.
Stock-Based
Compensation
In December 2004, SFAS No. 123R, was issued as a
revision to Statement of Financial Accounting Standards
No. 123, Accounting for Stock Options, or
SFAS No. 123. SFAS No. 123R was required to
be adopted by nonpublic companies in January 2006. Prior to
January 1, 2006, Athersys elected to account for its
stock-based compensation in accordance with the intrinsic value
method as described in the provisions of Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations, as permitted by
SFAS No. 123. As such, compensation was recorded in
2004 and 2005 on the date of issuance or grant as the excess of
the current estimated market value of the underlying stock over
the purchase or exercise price of the stock option. Any unearned
compensation was recognized over the respective vesting periods
of the equity instruments, if any, using the graded vesting
method as prescribed by Financial Accounting Standards Board
Interpretation No. 28.
Effective January 1, 2006, Athersys adopted the fair value
recognition provisions of SFAS No. 123R using the
modified-prospective-transition method. Under that transition
method, compensation cost recognized in 2006 includes:
(1) compensation cost for all share-based payments granted
prior to, but not yet vested as of January 1, 2006, based
on the grant date fair value estimated in accordance with the
original provisions of SFAS No. 123; and
(2) compensation cost for all share-based payments granted
subsequent to January 1, 2006, based on the grant-date fair
value estimated in accordance with the provisions of
SFAS No. 123R. Results for prior periods have not been
restated. For some of the awards granted prior to the adoption
of SFAS No. 123R, Athersys recognized compensation
expense on the accelerated method. For awards granted subsequent
to adoption of SFAS No. 123R, Athersys will recognize
expense on the straight line method.
39
Income
Taxes
As of December 31, 2006, Athersys had net operating loss
and research and development credit carryforwards of
approximately $109.9 million and $5.8 million,
respectively. These carryforwards may be used to reduce future
tax liabilities and expire at various dates between 2013 and
2027. Athersys use of its current net operating loss and
research and development credit carryforwards will be
significantly limited under the Internal Revenue Code as a
result of the change in ownership related to the merger and June
offering.
Recently
Issued Accounting Standards
In July 2006, the Financial Accounting Standards Board issued
FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes, or FIN 48, which is
applicable for fiscal years beginning after December 15,
2006. FIN 48 clarifies the accounting for uncertainty in
income taxes recognized in an enterprises financial
statements in accordance with SFAS No. 109,
Accounting for Income Taxes. FIN 48 prescribes
a recognition threshold and measurement attribute for financial
statement recognition and measurement of a tax position reported
or expected to be reported on a tax return. FIN 48 also
provides guidance on derecognition, classification, interest and
penalties, accounting in interim periods, disclosure, and
transition. Athersys adopted the provisions of FIN 48 on
January 1, 2007. Upon adoption of FIN 48 and through
June 30, 2007, Athersys determined that it had no liability
for uncertain income taxes as prescribed by FIN 48.
Athersys policy is to recognize potential accrued interest
and penalties related to the liability for uncertain tax
benefits, if applicable, in income tax expense. Net operating
loss and credit carryforwards since inception remain open to
examination by taxing authorities, and will for a period post
utilization. We do not anticipate any events during 2007 that
would require Athersys to record a liability related to any
uncertain income taxes.
Quantitative
and Qualitative Disclosures About Market Risk
Interest
Rate Risk
Our exposure to interest rate risk is related to Athersys
investment portfolio and its borrowings. Fixed rate investments
and borrowings may have their fair market value adversely
impacted from changes in interest rates. Floating rate
borrowings will lead to additional interest expense if interest
rates increase. Due in part to these factors, Athersys
future investment income may fall short of expectations, and
Athersys interest expense may be above its expectations
due to changes in U.S. interest rates. Further, Athersys
may suffer losses in investment principal if it is forced to
sell securities that have declined in market value due to
changes in interest rates. Athersys invests its excess cash
primarily in debt instruments of the U.S. government and
its agencies.
Athersys enters into loan arrangements with financial
institutions when needed. At June 30, 2007, Athersys had
borrowings of approximately $3.2 million outstanding under
its Senior Loan, which bears interest at a fixed rate of
approximately 13%. All principal and interest outstanding under
the subordinated convertible promissory notes were converted
into common stock upon consummation of the merger.
40
Overview
We are a biopharmaceutical company engaged in the discovery and
development of therapeutic product candidates designed to extend
and enhance the quality of human life. Through the application
of our proprietary technologies, we have established a pipeline
of therapeutic product development programs in multiple
diseases. We have one product candidate in clinical development
(ATHX-105)
and intend to advance two to three additional product
development programs (from MultiStem cardiovascular,
oncology support or stroke, or from our histamine H3 antagonist
program) into clinical trials in 2007 and 2008. Our ability to
initiate these trials will depend on the success of our ongoing
preclinical development efforts and our obtaining necessary
regulatory approvals. Our lead product candidate is ATHX-105,
which is a treatment for obesity we are independently developing
that acts by stimulating the 5HT2c receptor, a key
neurotransmitter receptor in the brain, which regulates
appetite. ATHX-105 has been shown in preclinical testing in
animal models to reduce food intake and body weight by
suppressing appetite without appearing to cause the adverse side
effects that have been observed with other weight loss drugs.
Results from clinical trials we conduct in humans may differ
from our preclinical results.
In July 2007, we initiated a Phase I clinical trial for
ATHX-105 in
the United Kingdom. The primary objective of the Phase I
clinical trial is to assess the short-term safety of ATHX-105
and to establish an appropriate dose range for subsequent
clinical studies that will be conducted in order to assess
safety and effectiveness. Following successful completion of the
Phase I clinical trial and concurrent non-clinical studies that
must be completed, we intend to initiate a Phase II
clinical trial in the United States that will examine safety and
effectiveness in clinically overweight or obese patients. In
addition to ATHX-105, we have a portfolio of other compounds
that we are developing as potential treatments for obesity.
We are also independently developing novel orally active
pharmaceutical products for the treatment of central nervous
system disorders, including sleep disorders such as narcolepsy
or excessive daytime sleepiness, and other potential indications
such as attention deficit hyperactivity disorder and other
cognitive disorders. These histamine H3 antagonist compounds are
designed to act by elevating levels of neurotransmitters in the
sleep and cognitive centers of the brain and stimulating
neurological tone, resulting in an enhanced state of wakefulness
and cognition, without causing hyperactivity or addiction.
In addition to our pharmaceutical development programs, we are
developing
MultiStem®,
a proprietary stem cell product for the treatment of multiple
disease indications. MultiStem is a biologic product that
consists of human stem cells obtained from adult bone marrow or
other nonembryonic tissue sources. After cells are isolated from
a qualified donor, the cells may be produced on a large scale
for future clinical use and stored in frozen form until needed.
We believe that MultiStem may potentially be used to treat a
range of distinct disease indications, with each indication
representing a distinct product development program requiring
separate clinical trials. In May 2006, we entered into a product
co-development collaboration with Angiotech to jointly develop
and ultimately market MultiStem for the treatment of damage
caused by myocardial infarction and peripheral vascular disease.
We are also independently developing MultiStem for bone marrow
transplant/oncology support, ischemic stroke and potentially
other disease indications. We retain the commercial rights to
these programs and other potential applications of MultiStem.
In addition to our current product development programs, we have
developed our RAGE technology, a patented 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 product, it is a commercial
technology that we have been successfully applying in our
collaborations 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 splicing) 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
41
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
inaccessible to most other companies 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 our ongoing collaboration with Bristol-Myers Squibb, and
some have been produced for our internal drug development
programs.
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.
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Apply our proprietary technologies toward the rapid
identification, validation, and development of therapeutic
product candidates. We will continue to use our
proprietary technologies to identify and validate therapeutic
product candidates. We believe our technologies, including RAGE
and MultiStem, provide us a competitive advantage in drug
discovery and product development by allowing us to move
products quickly from the discovery phase into clinical trials
using a fast follower approach, thereby mitigating
risk and reducing costs.
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Enter into licensing or co-development arrangements for
certain product candidates. We intend to license
certain of our product candidates to, or co-develop them with,
qualified collaborators to broaden and accelerate our product
development efforts. In order to enhance the value of our
product candidates in these potential licensing or collaboration
arrangements, we plan to internally develop our product
candidates through at least Phase II clinical trials
whenever possible. We anticipate that this strategy will help us
to enhance our return on product candidates for which we enter
into collaborations through the receipt of strategic equity
investments, license fees, milestone payments, and profit
sharing or royalties.
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Internally develop, manufacture, and market other therapeutic
products. We will apply the capital we obtain
from financing and collaborating activities toward the
development of our other therapeutic product candidates. Our
intention is to ultimately manufacture, market, and distribute
these product candidates on our own after they have received FDA
approval. We will select candidates for internal development
based on several factors, including the required regulatory
approval pathway and the potential market into which the product
can be sold, and our ability to feasibly fund development
activities through commercialization and marketing of the
approved product.
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Continue to expand our intellectual property
portfolio. Our intellectual property is important
to our business and we take significant steps to protect its
value. We have an ongoing research and development effort, both
through internal activities and through collaborative research
activities with others, which aims 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.
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Out-license non-core applications of our
technologies. Certain elements of our
technologies, such as their application toward the development
of novel diagnostics or their use for the analysis and
characterization of therapeutic product candidates, may not be
relevant to the key elements of our corporate strategy. We
believe these applications may have significant potential value,
however, and can provide capital to us that can be applied to
our other development efforts. Where appropriate, we may seek to
license non-core applications of our technologies to others to
realize this value.
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Our
Current Programs
By applying our core technologies and capabilities, we have
established preclinical drug development programs in the areas
of obesity and central nervous system disorders. In addition,
applying our proprietary cell therapy platform, MultiStem, we
have established therapeutic product development programs in the
areas of cardiovascular disease, oncology support and stroke. We
currently intend to advance multiple programs into clinical
development in 2007 and 2008.
Pharmaceutical
Programs
ATHX-105
for Obesity
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. The percentage of
individuals who are defined as clinically obese has risen
dramatically over the past several decades. According to the
United States Centers for Disease Control and Prevention, or
CDC, the incidence of obesity in the United States has increased
at an epidemic rate during the past 20 years. CDC now
estimates that 66% of all Americans are overweight and more than
30% are obese. This increase is not limited to adults. The
percentage of young people who are overweight has more than
tripled since 1980. Among children and teens aged six to
19 years, 16% (over nine million young people) are
considered overweight. There has been a similar dramatic rise in
the rate of obesity in Europe and Asia. Furthermore, the cost of
this epidemic is significant. The FDA estimates that the total
economic cost of obesity is currently about $117 billion
per year in the United States, including more than
$50 billion in avoidable medical costs. 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.
Our most advanced drug development candidate is ATHX-105, a
compound we discovered internally and have extensively analyzed
and validated in preclinical studies. We believe that ATHX-105
represents a potential
best-in-class
obesity drug, based on its well validated mechanism of action,
as well as the potency and overall safety profile we have
observed in preclinical studies. We are developing ATHX-105 as a
once-per-day
orally administered pill to regulate appetite and reduce food
intake in clinically obese individuals, defined as those
individuals with a body mass index greater than 30. In addition
to ATHX-105, we are developing a diverse portfolio of
back-up
compounds that act by the same mechanism as ATHX-105, as well as
complementary obesity programs that act according to different
biological mechanisms of action.
ATHX-105 is 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 Pharmaceuticals 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 weight
loss. Unfortunately, in addition to stimulating the 5HT2c
receptor, fen-phen also stimulated the 5HT2b receptor that is
found in the heart. The activation of 5HT2b by fen-phen 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. In 1996, doctors wrote
18 million monthly prescriptions for drugs constituting the
fen/phen combination. In that same year, these drugs generated
sales of greater than $400 million, serving as a benchmark
for the substantial market opportunity for an effective drug to
treat clinical obesity.
Since the withdrawal of Redux from the market, several groups
have published research that implicates 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. Recently, Arena Pharmaceuticals
developed a selective 5HT2c agonist,
43
Lorcaserin, which exhibits significant selectivity for the 5HT2c
receptor relative to the 5HT2b receptor. In a Phase II
clinical trial recently conducted by Arena Pharmaceuticals,
Lorcaserin was demonstrated to reduce appetite and cause
statistically significant weight loss in patients that were
administered the drug for a period of three months, without
causing any apparent cardiovascular effects. However, at higher
doses the drug has been shown to cause dizziness, nausea and
headaches, which is believed to be a consequence of its
apparently more limited selectivity for the 5HT2c receptor
relative to another serotonin receptor expressed in the brain,
the 5HT2a receptor. Currently, Lorcaserin is undergoing a large
scale, two-year Phase III clinical study that is designed
to evaluate safety, including cardiovascular safety, and
effectiveness at causing weight loss in patients that are
administered Lorcaserin for a period of one year. Lorcaserin is
being administered twice per day at a dosage level that is half
the level previously observed to cause unacceptable levels of
dizziness, nausea and headaches in prior clinical studies.
We initiated a drug development program 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 is to develop a
once-per-day
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 ATHX-105, it has been shown
to be a highly potent and selective compound that fulfills all
of our criteria. We believe that the superior selectivity
displayed by ATHX-105 for the 5HT2c receptor relative to both
the 5HT2b receptor and the 5HT2a receptor will result in a
cleaner safety profile in clinical studies, and may allow us to
achieve better efficacy, as well as a more convenient dosing
schedule than other 5HT2C agonist programs.
In preclinical testing in rodents, obese animals that received
once-daily doses of ATHX-105 exhibited a 57% reduction in daily
food intake as compared to animals receiving placebo alone. In
addition, after receiving once-daily doses of ATHX-105 for two
weeks, these animals weighed 10% less than the animals that were
treated with placebo alone. The effect was dose proportional,
and animals that received increasing doses of ATHX-105 showed
progressively greater weight loss.
In dogs, oral administration of a low dose (0.1mg/kg) of
ATHX-105 resulted in a short-term reduction of food intake of
approximately 50%, while animals receiving a 10-fold higher dose
(1.0 mg/kg) of ATHX-105 exhibited a complete cessation of
short-term food intake that resolved over time as the drug
cleared. Based upon these results, and the results of other
studies that we have conducted, we calculate the effective dose
range in dogs to be approximately 0.1 to 0.2 mg/kg.
In extensive preclinical testing in both dogs and monkeys,
ATHX-105 appeared to be safe and well tolerated, even when
administered at doses substantially higher than those that
caused a significant reduction in food intake. In dogs, the
maximum tolerated dose was established at 36 mg/kg, a dose
level approximately 180 to 360 times higher than the effective
dose range observed in short-term food intake studies. We also
studied the safety profile of ATHX-105 in cynomolgous monkeys,
administering doses for two weeks that are 40 to 50 times
greater than the expected effective dose levels in humans, which
were well tolerated with no signs of adverse effects.
In July 2007, we initiated a Phase I clinical trial for ATHX-105
in the United Kingdom. The Phase I clinical trial will have a
standard design evaluating single dose administration, dose
escalation, and maximum tolerated dose, followed by a one-week
study examining the effect of administration of multiple doses
of ATHX-105 to healthy overweight or obese individuals, with a
body mass index of 25 to 35 at several different dose levels.
Safety monitoring will include the assessment of various
cardiovascular parameters. We believe that the Phase I clinical
trial can be completed within approximately six months from the
time we began enrollment. Concurrent with the Phase I clinical
trial, we will also conduct certain non-clinical studies that
must be completed prior to the commencement of subsequent
clinical studies.
In addition, we are developing other compounds that are designed
to stimulate the 5HT2c receptor with greater potency
and/or
specificity than ATHX-105. Some of these compounds have
demonstrated significant reductions in food intake in rodent
models. We plan to subject these compounds to further safety and
efficacy testing in animals while we continue to develop
ATHX-105. Furthermore, we have created cell lines that express
obesity targets that are distinct from 5HT2c by utilizing our
other technologies and have screened for
44
compounds using our compound library that are designed to
significantly reduce food intake by acting against these
targets. Although these compounds are at earlier stages of
preclinical development, we believe they represent promising
opportunities for future development.
H3
Antagonists for the Treatment of Sleep Disorders and Certain
Other Cognitive Disorders
In addition to our obesity program, we are developing a class of
pharmaceuticals that are designed to enhance wakefulness and
promote cognitive abilities. Individuals that suffer from
narcolepsy or other conditions that result in excessive daytime
sleepiness, or EDS, may experience persistent tiredness and lack
of energy. As a result, such individuals may experience
significant difficulty in performing certain tasks, and may
suffer an impaired quality of life. More than 100,000
individuals in the U.S. suffer from narcolepsy or EDS.
Historically, narcoleptics were treated with amphetamines and
related stimulants that had substantial side-effects, but more
recently have been prescribed Provigil (modafinil). This
compound works by an unknown mechanism, but appears to be
relatively free of the stimulant side-effects of amphetamines.
In addition to its use for narcolepsy, Provigil is also approved
for the treatment of shift work sleep disorder, or SWSD, and
sleep apnea. Sales of Provigil in 2006 were reported to be over
$700 million. Although Provigil appears to be an
improvement over previous narcolepsy drugs, certain safety
concerns were raised by the FDA when Cephalon, Inc. attempted to
gain approval of modafinil for ADHD, and the company
subsequently abandoned efforts in this market.
Similarly, individuals with attention or cognitive disorders may
suffer from an inability to focus, solve problems, process
information, communicate, and may have memory impairment.
Attention and cognitive disorders include ADHD, Alzheimers
disease and other forms of dementia. Datamonitor estimates that
23 million children in the seven major pharmaceutical
markets (United States, France, Germany, Italy, Spain, United
Kingdom and Japan) that suffer from ADHD. Research also shows
that 60% of children with ADHD maintain the disorder into
adulthood. Despite the low rate of diagnosis, ADHD drug revenues
reached $2.5 billion in 2004, 97% of which was generated
within the United States. Currently available treatments cause
side effects and do not adequately address the clinical need.
Ritalin®
(methylphenidate) is the most widely prescribed ADHD therapy. As
a stimulant with abuse potential, it has been classified as a
controlled substance by the FDA and the U.S. Drug
Enforcement Agency. We believe there exists a tremendous market
opportunity as diagnosis and awareness of ADHD is improved.
We are developing multiple classes of highly selective and
potent compounds designed to block the H3 receptor and have
established a program to develop non-stimulant, non-addictive,
orally administered drugs for the treatment of narcolepsy or
other conditions related to excessive daytime sleepiness.
Our histamine H3 receptor antagonists represent a new class of
drugs that could have an improved efficacy and safety profile
relative to existing drugs used for the treatment of narcolepsy
and related sleep disorders. The H3 receptor regulates levels of
histamine and other neurotransmitters in certain areas of the
brain that play a direct role in regulating sleep and cognitive
function. In animal models, H3 receptor antagonists have been
shown to increase histamine release in the brain and improve
wakefulness, attention and learning. In a preclinical study
recently conducted at an independent lab, we have tested one of
our more advanced compounds in a well validated rodent sleep
model. During the study, this compound significantly enhanced
wakefulness without causing apparent adverse events. In
comparison to modafinil or caffeine, this compound was far more
potent, achieving a comparable or better effect on wakefulness
at substantially lower doses. In addition, this compound did not
appear to cause the excessive rebound sleepiness that is a
characteristic of other agents used to promote wakefulness, such
as amphetamines.
We intend to continue the study of this compound for potential
applications in treating narcolepsy, excessive daytime
sleepiness, and certain attention or cognitive disorders. In
addition, we intend to conduct additional pharmacology and
safety testing. If these studies are successful, and depending
on the availability of capital resources, we would consider
filing an IND for the initiation of clinical trials. Recently,
pharmaceutical companies such as Glaxo-SmithKline and
Johnson & Johnson have advanced H3 antagonists into
clinical trials for the treatment of conditions such as
narcolepsy and dementia, respectively.
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Regenerative
Medicine Programs
MultiStem
A Novel Approach to Regenerative Medicine
In addition to our pharmaceutical programs, we are developing a
proprietary nonembryonic 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 such as in the treatment of
damage from heart attack, bone marrow transplant support and
GVHD, stroke, and potentially other areas. We believe that
MultiStem represents a significant advancement in the field of
stem cell therapy.
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, for several reasons, 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 inability
to efficiently produce significant quantities of stem cells, and
a range of potential safety issues. While the field of stem cell
therapy is very promising, it is also highly controversial and
fraught with challenges.
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 areas that utilize stem cell therapy or other forms
of regenerative medicine. In 2002, Dr. Catherine Verfaillie
and her team published research first describing a rare and
novel stem cell, the MAPC, which may be isolated from adult bone
marrow as well as other nonembryonic tissues. In their potential
product form, we refer to these cells as MultiStem. These cells
exhibit several important biological properties, including:
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Broad plasticity and multiple potential mechanisms of
action. MultiStem cells have a demonstrated
ability in animal models to form multiple cell types and appear
to be 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.
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Large scale production. Unlike conventional
stem cells, such as blood-forming or hematopoietic stem cells,
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 even millions of
individual doses.
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Off-the-shelf utility. Unlike
traditional bone marrow or hematopoietic stem cell transplants,
which require extensive genetic matching between donor and
recipient, MultiStem cells do not appear, based on preclinical
testing in animals, to require extensive tissue matching prior
to administration. MultiStem treatment may be allogeneic,
meaning that these cells do not need to be 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.
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Safety. Other stem cell types, such as
embryonic stem cells, can pose serious safety risks, such as the
formation of tumors or ectopic tissue. In contrast, MultiStem
cells have an outstanding safety profile that has been compiled
over several years of preclinical study in a range of animal
models by a variety of investigators.
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At each step of the MultiStem production process, cells are
analyzed and qualified 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. In March 2007, we and
our manufacturing partner, Lonza, announced the successful
establishment of a Master Cell Bank produced under GMP and the
production of clinical grade material for our initial clinical
trials.
MultiStem allows us to pursue multiple high value commercial
opportunities from a single product platform, since we believe
it has potential application in a range of disease states and
therapeutic areas. For example, based on numerous preclinical
discussions with the FDA, we believe that we will be able to use
data and information from preclinical safety studies for the
development of MultiStem for treating multiple distinct
46
diseases in parallel. This will be achieved by establishing a
central file with the FDA, also known as a Master File, that
contains data from multiple safety studies as well as
information related to product manufacturing and
characterization. As a result, we expect to be able to
efficiently add additional clinical indications as we further
expand the scope of potential applications for MultiStem,
enabling us to reduce costs and shorten development timelines in
comparison to traditional single-use drug development programs.
MultiStem
for Heart Disease, Stroke & Bone Marrow Transplant
Support/GVHD
Working with independent investigators at a number of leading
institutions, such as the University of Minnesota, the Cleveland
Clinic, the National Institutes of Health, the Medical College
of Georgia, and the University of Oregon Health Sciences Center,
we have studied MultiStem in a range of animal models that
reflect various types of human disease or injury, such as
myocardial infarction, stroke, brain damage due to restricted
blood flow in newborns, vascular disease, and bone marrow
transplant support/GVHD. In addition, we are exploring, or
intend to explore, the potential application of MultiStem in the
treatment of a range of other conditions such as certain blood
or immune deficiencies and various autoimmune diseases.
As stated above, we have consistently observed that MultiStem is
safe and effective in animal models. As a result, we initially
plan, subject to the availability of adequate resources, to
advance MultiStem into clinical development in three areas:
damage caused by myocardial infarction; support in the oncology
setting to reduce certain complications associated with bone
marrow transplantation; and for stroke caused by a blockage of
blood flow in the brain. For these areas, we intend to use one
MultiStem cell product, produced and validated with a single
manufacturing platform.
Heart
Disease
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. According to the American Heart
Association 2007 Statistical Update, there were approximately
865,000 cases of myocardial infarction that occurred in the
United States in 2004 and approximately 7.9 million
individuals living in the United States that had previously
suffered a heart attack. In addition, there were more than
452,000 deaths that occurred from various forms of ischemic
heart disease, and 156,000 deaths due directly to myocardial
infarction in 2004. 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 acute
myocardial infarction 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 significant functional improvement in cardiac output and
other functional parameters compared with animals that received
placebo or no treatment. Further, the administration of
immunosuppressive drug was not required and provided no
additional benefit in this study, and supports the concept of
potentially using MultiStem as an allogeneic product.
Working with a qualified contract research organization, we have
initiated additional preclinical studies in established pig
models of acute myocardial infarction, examining various factors
such as the route and method of MultiStem administration, dose
ranging, and timing of treatment. Pending the results of these
and other studies, we intend to file an IND for the use of
MultiStem for the treatment of acute myocardial infarction.
Oncology
Support
A second focus of our regenerative medicine program is the use
of MultiStem for bone marrow transplant and oncology support.
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
47
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 of the bone marrow,
blood, and immune system. However, 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, significant reduction in digestive capacity,
and other problems, which may result in significant disability
or death.
One strategy for treating the depletion of bone marrow is to
perform a bone marrow transplant. This approach may augment the
patients 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 death or serious disability.
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 bone marrow transplantation may have the potential to
reduce the incidence or severity of complications and may
enhance other important functions.
Several of our collaborators are leading experts in the field of
bone marrow transplantation, including Dr. Richard Maziarz
from Oregon Health Sciences University, Dr. John Wagner
from the University of Minnesota and Dr. Hillard Lazarus
from University Hospitals of Cleveland. We plan to initiate a
company-sponsored Phase I clinical trial to evaluate MultiStem
administration in support of bone marrow transplantation for the
treatment of certain cancers of the blood and immune system. We
are currently completing multiple preclinical studies, examining
various items such as cell distribution and persistence
following intravenous administration, general safety and
toxicity, and the impact of MultiStem in acute GVHD models in
rodents. Upon the successful completion of these studies, we
would expect to file an IND in this area.
Stroke
A third focus of our regenerative medicine program is the use of
MultiStem for the treatment of neurological injury as a result
of ischemic stroke, which accounts for 80% of all strokes.
Recent progress toward the development of safer and more
effective treatments for ischemic stroke has been disappointing.
Despite the fact that stroke is one of the leading causes of
death and disability in the United States, affecting more than
700,000 new patients annually according to the CDC, 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, which must be administered to the
patient within three to six hours of the onset of the stroke.
Administration of tPA after this time frame is not recommended,
since it can cause bleeding or even death. Given this limited
therapeutic window, it is estimated that less than 5% of
ischemic stroke victims currently receive treatment with tPA.
In preclinical studies conducted by investigators at both the
University of Minnesota and the Medical College of Georgia,
significant functional improvements have been observed in
rodents that have undergone an experimentally induced stroke, or
that have incurred significant neurological damage as a result
of neonatal hypoxic ischemia, and then received treatment with
MultiStem. Through research conducted by collaborators at the
Medical College of Georgia and presented at the annual American
Academy of Neurology meeting in April 2006, we observed 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. These results have been confirmed in
subsequent studies that
48
demonstrate MultiStem treatment is well tolerated, does not
require immunosuppression, and results in a robust and durable
therapeutic benefit even when administered one week after the
initial stroke event.
Upon completion of remaining preclinical safety studies, we
intend to submit an IND for this application. The initiation of
the initial clinical study will depend on the availability of
capital resources.
We believe that MultiStem could have broad potential to treat a
range of conditions. In addition to the above programs, we are
actively collaborating or intend to collaborate with other
highly qualified investigators to evaluate the potential
benefits of MultiStem in other disease indications, such as
various blood and immune deficiencies, certain autoimmune
diseases, and other potential indications.
Other Key
Technologies
In addition to our product development programs, we have
developed RAGE, a patented 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. This technology platform
provides us with broad freedom to work with drug targets that
may be inaccessible to most other companies 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, and some have been produced for our
internal drug development programs.
Competition
We face significant competition with respect to the various
dimensions of our business. With regards to our efforts to
develop ATHX-105 or other compounds for the treatment of
obesity, there are already approved therapeutic products on the
market, such as Xenical, which is marketed by Roche, and
Meridia, which is marketed by Abbott Pharmaceuticals. However,
both of these drugs can have side effects that we believe have
limited their adoption by patients and clinicians. For example,
potential side effects associated with taking Xenical include
cramping, intestinal discomfort, flatulence, diarrhea, and
leakage of oily stool. Potential side effects associated with
taking Meridia include increased blood pressure and heart rate,
headache, dry mouth, constipation, and insomnia. Individuals
with high blood pressure, heart disease, irregular heart beat,
or a history of stroke are cautioned not to take Meridia.
In addition to these products, other companies are actively
developing therapeutic products for the treatment of obesity,
including Sanofi-Aventis, which is developing the drug
Rimonabant, which acts by suppressing appetite by blocking the
CB1 receptor, also known as the marijuana receptor for its
recognized role as the site of action of the cannabinoids found
in marijuana that can stimulate appetite. Rimonabant has been
approved for use in Europe in treating obesity, but is not
approved for use in the United States. In Phase III
clinical trials, patients taking Rimonabant exhibited
statistically significant weight loss. Notable adverse events
among some patients taking the drug included respiratory
infection, dizziness, nausea, anxiety, and depression, which
were observed at higher frequency among patients taking the drug
relative to those taking placebo in the control group.
Other companies are also attempting to develop novel 5HT2c
agonists. One company, Arena Pharmaceuticals, recently completed
a Phase II clinical trial with its novel product candidate
APD356, also referred to as Lorcaserin. Clinically obese
patients taking 10 mg of the drug twice per day exhibited
statistically significant weight loss over the three-month study
period, exhibiting an average loss of 7.9 lbs, compared to those
taking the placebo, who lost an average of 0.7 lbs. All patients
on the study underwent cardiovascular safety monitoring both
during and after the study, and there were no reported adverse
events with respect to cardiovascular safety according to the
company. Potential side effects observed among patients taking
the drug at 10 mg dose twice per day included headache
(26.7% vs. 17.8% in the placebo group), dizziness (7.8% vs. 0%
in the placebo group), nausea (11.2% vs. 3.4% in the placebo
group), and vomiting (5.2% vs. 0.8% in the placebo group).
49
In February 2007, Arena Pharmaceuticals announced that it had
completed enrollment of 3,182 patients in a double blind,
randomized and placebo controlled Phase III study of
Lorcaserin designed to evaluate safety and efficacy of twice
daily 10 mg doses of Lorcaserin administered for one year.
The primary efficacy endpoint is the percentage of patients
exhibiting greater than 5% weight loss over baseline at
52 weeks. An independent Data Safety Monitoring Board will
evaluate cardiovascular safety in all patients at 6, 12, 18 and
24 months after initiation of the trial. The results of the
initial six-month review are expected in the third quarter of
2007.
There are many other companies 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 Pfizer, Bristol-Myers Squibb,
Merck, Roche, Sanofi-Aventis, GlaxoSmithKline, Eli Lilly
and others. There are also a variety of biotechnology companies
developing treatments for obesity, including Amgen, Inc.,
Regeneron, Nastech Pharmaceutical Company, Alizyme, Amylin
Pharmaceuticals, Neurocrine Biosciences, Shionogi, Metabolic
Pharmaceuticals, Kyorin Pharmaceutical, VIVUS and others. It is
likely that, given the 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
ATHX-105 or another compound as a safe and effective treatment
for obesity, it is likely that other companies will attempt to
develop safer and more effective 5HT2c agonists, or will attempt
to combine therapies in an effort to establish a safer and more
effective therapeutic product.
We also face significant competition with respect 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. These include both public companies, such as
Osiris, Genzyme, Geron, Genentech, Aastrom Biosciences, Stem
Cells Inc., Cell Genesys, Viacell, Celgene, Advanced Cell
Technology, CRYO-CELL International, Mesoblast Limited and
Cytori Therapeutics, and private companies, such as Cognate
Therapeutics, Neuronyx, Gamida Cell, Arteriocyte, Plureon and
others. Given the magnitude of the potential opportunity for
stem cell therapy, we expect competition in this area to
intensify in the coming years.
Finally, we face competition with respect to our ability to
produce drug targets for our drug development programs. There
are many companies with established intellectual property that
seek to restrict or protect the use of specific drug targets,
including Incyte, Millennium Pharmaceuticals, Human Genome
Sciences, Lexicon Genetics, CuraGen, Exelixis, Myriad Genetics,
Sangamo BioSciences, and others.
We believe our most significant competitors are fully integrated
pharmaceutical companies and more established 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 have established a broad intellectual property portfolio
related to our key functional genomics technologies and product
candidates. We have a broad patent estate with claims directed
to compositions,
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methods of making, and methods of using our small molecule drug
candidates. In our 5HT2c program, we have filed four patent
applications with broad claims directed to ATHX-105, related
compounds in the same chemical series from which ATHX-105 was
derived, and
back-up and
second generation compounds from distinct chemical series. In
our Histamine H3 program, we have filed four patent applications
with broad claims directed to compounds from two distinct
chemical series. All compounds described in these patent
applications were discovered at Athersys. In addition, we
currently have twelve issued U.S. patents and various
issued international patents relating to compositions and
methods for the RAGE technology. These patents will expire in
2017. In addition, we have five U.S. and various pending
international patents relating to the RAGE technology. There are
also several patent applications relating to human proteins and
candidate drug targets that we have identified through the
application of RAGE and our other technologies. The RAGE
technology was developed by Dr. John Harrington and other
Athersys scientists internally in the mid-1990s.
We have a broad patent estate with claims directed to
compositions, methods of production, and methods of use of
MultiStem and related technologies. We acquired ownership of the
stem cell technology for our MultiStem product candidate, MAPCs,
as a result of our 2003 acquisition of a holding company for the
intellectual property related to stem cells originally
discovered at the University of Minnesota. We have one issued
U.S. patent related to this technology, and three
U.S. patent applications, as well as many corresponding
international patent applications. In addition, there are five
pending applications related to research conducted by us and our
collaborators.
We also have an exclusive license to additional MAPC-related
inventions (or in other words, improvements) developed by the
University of Minnesota, which includes 16 pending patent
applications, and covers inventions made at the University of
Minnesota through May 2009. We pay all patent prosecution costs
for the inventions that we elect to license. This license
agreement terminates when the last patent licensed to us expires
(currently, no patents have been granted for inventions subject
to the license agreement). We may terminate the license
agreement at any time. The University of Minnesota may terminate
the license if we fail to pay royalties when due or fail to
perform the material terms of the license, such as our
obligation to use commercially reasonable efforts to
commercialize the MAPC technology. The University of Minnesota
is entitled to a royalty on net sales of products developed from
the MAPC technology.
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 partys 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
partys 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.
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 Evaluation 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, the
company must generate preclinical data to show safety before
human testing may be initiated. In the United States, the drug
company must submit an IND to the FDA prior to securing
authorization for human testing. The IND must contain adequate
data on
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product candidate chemistry, toxicology and metabolism and,
where appropriate, animal research testing to support initial
safety.
A CTA is the European equivalent of the U.S. IND. CTA
requirements are issued by the Medicines and Healthcare Products
Regulatory Agency, the United Kingdoms health authority
and were enacted through the U.K. Medicines for Human Use
(Clinical Trials) Regulations 2004, which implemented the EU
Clinical Trials Directive in the United Kingdom.
Any of our product candidates will require regulatory approval
and compliance with regulations made by U.S. 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.
The standard process required by the FDA before a pharmaceutical
agent may be marketed in the United States includes:
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preclinical tests in animals that demonstrate a reasonable
likelihood of safety and effectiveness in human patients;
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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 study;
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adequate and well controlled human clinical trials to establish
the safety and efficacy of the drug or biologic in the intended
disease indication;
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for drugs, submission of a New Drug Application, or NDA, or a
Biologic License Application, or BLA, with the FDA; and
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FDA approval of the NDA or BLA before any commercial sale or
shipment of the drug.
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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. Once
clinical trials are initiated, they generally take five to seven
years, or longer, to complete. After completion of clinical
trials of 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 FDAs 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 GMP requirements. We do not
currently have any GMP manufacturing capabilities, and will rely
on contract manufacturers to produce ATHX-105 or MultiStem for
any clinical studies 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
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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.
Collaborations
and Partnerships
Angiotech
In May 2006, we established a collaboration with Angiotech that
is focused on co-developing MultiStem for the treatment of
damage caused by myocardial infarction or peripheral vascular
disease. In support of the collaboration, Angiotech purchased
$10.0 million in aggregate principal amount of subordinated
convertible promissory notes, the principal amount of which was
automatically converted along with accrued interest into our
common stock upon the closing of the June offering. We may also
receive up to $8.75 million of additional equity
investments and $63.75 million of aggregate cash payments
based upon the successful achievement of specified clinical
development and commercialization milestones, though there can
be no assurance that we will achieve any milestones. The next
milestone is the FDA approval to initiate a phase I study,
upon which Angiotech will purchase $5.0 million of our
common stock unless it elects to defer the payment. In the
event that Angiotech elects to defer the payment, we may elect
as a replacement fee either (a) a $10.0 million cash
payment upon the successful completion of the first
phase III study or (b) an increase of our share of the
net profits from the sale of any approved products.
Under the terms of the collaboration, the parties plan to
jointly fund clinical development activity, whereby preclinical
costs will be borne solely by Athersys, costs for phase I and
phase II studies will be borne 50% by Athersys and 50% by
Angiotech, costs for the first phase III study will be borne 33%
by Athersys and 67% by Angiotech, and costs for any phase III
studies subsequent to the first phase III study will be borne
25% by Athersys and 75% by Angiotech. We will have lead
responsibility for preclinical and early clinical development
and manufacturing of the MultiStem product, and Angiotech will
take the lead on pivotal and later clinical trials and
commercialization. We will receive nearly half of the net
profits from the sale of any jointly developed, approved
products. In addition, we will retain the commercial rights to
MultiStem for all other therapeutic applications, including
treatment of stroke, bone marrow transplantation and oncology
support, blood and immune system disorders, autoimmune disease,
and other indications that we may elect to pursue.
The Angiotech collaboration does not have a specific termination
date, but will terminate upon the earliest to occur of:
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the five-year anniversary if we and Angiotech have not approved
any clinical development program;
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if at least one cell therapy product has obtained regulatory
approval and we and Angiotech have shared profits with respect
to sales of at least one cell therapy product, the date that
there has been no sales for 12 months of any cell therapy
product that has been the subject of profit-sharing, unless a
clinical development candidate is in at least a Phase III
clinical or later; and
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the later of (1) the expiration date of the last-to-expire
patent licensed to Angiotech, which is expected to be
August 5, 2019 based on currently issued patents, and
(2) the
15-year
anniversary.
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Neither we nor Angiotech may terminate the collaboration at
will; however, either party may elect at certain points to not
move forward with individual product development programs. 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. Angiotech has a right to immediately terminate
the collaboration upon certain bankruptcy events involving us.
Angiotech also has the right to terminate the collaboration upon
120 days prior notice if Angiotech, in its reasonable
judgment, determines that:
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a primary endpoint in a clinical study within a clinical
development plan has not been fulfilled or met;
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at least one IND has not been filed prior to the three-year
anniversary;
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the clinical efficacy
and/or
safety with respect to cells, or a clinical development
candidate or a cell therapy product have not been demonstrated;
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applicable regulatory requirements for cells, a clinical
development candidate or a cell therapy product in one or more
major markets shall have a material adverse impact on the
ability to obtain regulatory approval for a cell therapy product
in such markets;
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our data regarding cells, a clinical development candidate or a
cell therapy product were obtained, in whole or in part, through
scientific fraud; or
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a cell therapy product is not (or is not expected to be)
commercially viable or profitable in at least one major market.
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Bristol-Myers
Squibb
In December 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. 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 we will achieve any milestones or receive
any payments. Through June 30, 2007, we have received an
aggregate of approximately $5.2 million in license fees and
milestone payments from 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.
Litigation
From time to time, we may become subject to various legal
proceedings that are incidental to the ordinary conduct of our
business. We do not consider such proceedings, if any, to date,
either individually or in the aggregate, to be material to our
business or likely to result in a material adverse effect on our
future operating results, financial condition, or cash flows.
Employees
We believe that our success will be based on, among other
things, the quality of our science, 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
and executives with significant experience in the biotechnology
and pharmaceutical industries.
As of June 30, 2007, we employed 26 individuals, of whom 11
hold Ph.D. degrees and four hold other advanced degrees. In
addition to our employees, we also use the service and support
of several outside consultants and advisors. None of our
employees is represented by a union, and we believe
relationships with our employees are good.
Facilities
Our principal offices are located at 3201 Carnegie Avenue in
Cleveland, Ohio. We currently lease approximately
53,000 square feet of space for our corporate offices and
laboratories, with about 40,000 square feet of
state-of-the-art laboratory space. The lease currently expires
in March 2008, and we have an option to extend the lease in
six-month increments through March 2009 at our current rent of
$267,000 per year.
54
Directors
and Executive Officers
Our board of directors is responsible for the overall management
of Athersys and elects the executive officers who are
responsible for administering our day-to-day operations. Our
management team is comprised of experienced executives of
understanding that have participated in other development stage,
venture capital-funded,
start-up
companies and corporate development transactions and have held
executive positions in private and publicly traded companies.
The following persons have been elected to serve as our officers
and directors:
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Name
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Age
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Position
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Gil Van Bokkelen
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Chief Executive Officer and
Chairman of the Board of Directors
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William (BJ) Lehmann, Jr.
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President and Chief Operating
Officer
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John J. Harrington
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Executive Vice President, Chief
Scientific Officer and Director
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Robert J. Deans
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Senior Vice President
Regenerative Medicine
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Laura K. Campbell
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Vice President Finance
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William C. Mulligan(1)(2)
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Director
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George M. Milne, Jr.(2)
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63
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Director
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Jordan S. Davis(1)
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45
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Director
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Floyd D. Loop
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70
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Director
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Michael Sheffery(1)
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Director
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Lorin J. Randall(2)
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Director
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(1) |
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Member of the compensation committee. |
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(2) |
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Member of the audit committee. |
Gil Van
Bokkelen
Chief
Executive Officer and Chairman
Dr. Van Bokkelen has served as our Chief Executive
Officer and Chairman since June 2007. Dr. Van Bokkelen
co-founded Athersys in October 1995 and served as Chief
Executive Officer and Director since Athersys founding.
Prior to May 2006, he also served as Athersys President.
He has served as Chairman of Athersys board of directors
since August 2000. Dr. Van Bokkelen is the current Chairman
of the Center for Stem Cells and Regenerative Medicine, and has
served on a number of other boards, including the Biotechnology
Industry Organizations ECS board of directors from 2001 to
2004, the Kent State University Board of Trustees from 2001 to
2004 and serves as an advisor to Early Stage Partners, a venture
capital firm. 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.
William
(BJ) Lehmann, Jr.
President
and Chief Operating Officer
Mr. Lehmann has served as our President and Chief
Operating Officer since June 2007. Mr. Lehmann joined
Athersys in September 2001 and was Athersys Executive Vice
President of Corporate Development and Finance from August 2002
until May 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 firms
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
55
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.
John J.
Harrington
Chief
Scientific Officer and Executive Vice President, and
Director
Dr. Harrington has served as our Chief Scientific
Officer, Executive Vice President and Director since June 2007.
Dr. Harrington co-founded Athersys in October 1995 and has
served as Athersys Executive Vice President and Chief
Scientific Officer and as Director since Athersys
founding. Dr. Harrington led the development of the RAGE
technology as well as its application for gene discovery, drug
discovery and commercial protein production applications. He is
a listed inventor on 20 issued or pending U.S. patents, has
authored 20 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 Ph.D. in Cancer Biology from
Stanford University and his B.A. in Biochemistry and Cell
Biology from the University of California at San Diego.
Robert J.
Deans
Senior
Vice President Regenerative Medicine
Dr. Deans has served as our Senior Vice
President Regenerative Medicine since June 2007.
Dr. Deans has led Athersys regenerative medicine
research and development activities since February 2003 and has
served as Vice President of Regenerative Medicine since October
2003. He was named Senior Vice President of Regenerative
Medicine in June 2006. Dr. Deans is highly regarded as an
expert in stem cell therapeutics, with over fifteen 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
Therapeutics, Inc., 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.
Laura K.
Campbell
Vice
President Finance
Ms. Campbell has served as our Vice
President Finance since June 2007. Ms. Campbell
joined Athersys in January 1998 as Controller and has served as
Vice President of Finance since May 2006. Prior to joining
Athersys, she was at Ernst & Young LLP, a public
accounting firm, for 11 years, in the 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.
George M.
Milne
Director
Dr. Milne has served as our Director since June
2007. Dr. Milne has been Director of Athersys since January
2003 after his retirement in 2002 from Pfizer Inc, a
pharmaceutical company, where he most recently served as
President of Worldwide Strategic and Operations Management and
Executive Vice President of Global Research and Development. He
joined Pfizer Inc in 1970 and held a variety of positions
conducting both chemistry and pharmacology research.
Dr. Milne is a Venture Partner of Radius. Dr. Milne
became Director of the Department of Immunology and Infectious
Diseases at Pfizer Inc in 1981, was Executive Director from 1984
to 1985 and was Vice President of Research and Development from
1985 to 1988. He was
56
appointed Senior Vice President in 1988 and President of Central
Research in 1993 with global responsibility for Human and
Veterinary Medicine R&D. Dr. Milne serves as a
director of Mettler-Toledo, Inc., Charles River Laboratories,
Inc., MedImmune Inc., and Aspreva Pharmaceuticals Inc. He also
serves on the board of the New York Botanical Garden and the
Mystic Aquarium/Institute for Exploration. Dr. Milne
received his B.S. in Chemistry from Yale University and his
Ph.D. in Organic Chemistry from Massachusetts Institute of
Technology.
William
C. Mulligan
Director
Mr. Mulligan has served as our Director since June
2007. Mr. Mulligan has been Director of Athersys since
October 1998. Mr. Mulligan joined Primus Venture Partners,
a Cleveland-based private equity firm and an investor in
Athersys, in 1985 from McKinsey & Company, Inc.
Mr. Mulligan has served as a Managing Director of Primus
since 1987. His previous work experience includes management
positions at Deere and Company, and First Chicago Corporation.
Mr. Mulligan serves as a director of several private
companies and Universal Electronics, Inc. (NASDAQ: UEIC).
Mr. Mulligan is a trustee of The Cleveland Clinic
Foundation and chairs the Advisory Board of CCF Innovations,
which is responsible for commercializing technology developed at
the Cleveland Clinic. Mr. Mulligan is also a trustee of
Denison University, the Western Reserve Land Conservancy.
Mr. Mulligan received his B.A. in economics from Denison
University and his M.B.A. from the University of Chicago.
Jordan S.
Davis
Director
Mr. Davis has served as our Director since June
2007. Mr. Davis is a Managing Partner of Radius Ventures, a
health and life sciences venture capital firm, which he
co-founded in 1997. Mr. Davis currently serves on the board
of directors of several Radius portfolio companies, including
Health Language, Inc., Heartscape Technologies, Inc., Impliant,
Inc., and Zettacore, Inc. He also serves on the board of
American Bank Note Holographics, Inc. (OTC: ABHH).
Mr. Davis earned an M.B.A. from the Kellogg School of
Management at Northwestern University and a B.A. in Economics
from The State University of New York at Binghamton.
Floyd D.
Loop
Director
Dr. Loop has served as our Director since June 2007.
Dr. Loop is currently retired. Until his retirement in
October 2004, Dr. Loop was the CEO and Chairman of the
Board of Governors of The Cleveland Clinic Foundation from 1989
to 2004. Earlier, he chaired the Department of Thoracic and
Cardiovascular Surgery at the Cleveland Clinic from 1975 to
1989. Dr. Loop and his colleagues were responsible for
todays widespread use of arterial conduits in coronary
artery surgery, innovations in valve repair, reoperations and
numerous changes in technical procedure. As a surgeon,
Dr. Loop performed more than 12,000 open heart operations
and authored 350 papers on all aspects of cardiovascular
surgery. During his tenure as CEO, the Cleveland Clinic revenues
grew from $650 million to $3.6 billion. His
accomplishments included a significant development of basic and
applied research, creation of a delivery system comprised of 12
hospitals and 14 outpatient sites, a new medical school for
physician investigators and construction of two hospitals in
Florida. Dr. Loop is a Venture Partner of Radius.
Dr. Loop was president of the American Association for
Thoracic Surgery, Chairman of the Residency Review Committee,
and a member of the American Board of Thoracic Surgery.
Dr. Loop has received honorary degrees from Cleveland State
University, Purdue University, and St. Louis University
among many other international awards. He currently serves on
two public boards, Tenet Healthcare Corporation and Intuitive
Surgical, Inc. Dr. Loop received his M.D. from the George
Washington University.
57
Michael
B. Sheffery
Director
Dr. Sheffery has served as our Director since June
2007. Dr. Sheffery is a founding General Partner of OrbiMed
Advisors, LLC and Co-Head of Private Equity. Dr. Sheffery
was formerly Head of the Laboratory of Gene Structure and
Expression at Memorial Sloan-Kettering Cancer Center. He
received both his Ph.D. in Molecular Biology and his B.A. in
Biology from Princeton University. Dr. Sheffery joined
Mehta and Isaly in 1996 as a Senior Analyst covering the
biotechnology industry. Since 1998, Dr. Sheffery had been a
General Partner of OrbiMed Advisors, LLC. He is currently a
Director of Affimed Therapeutics, AG, Supernus Pharmaceuticals,
Inc., CoGenesys, Inc., and Sientra, Inc.
Lorin J.
Randall
Director
Mr. Randall has served as our Director since
September 4, 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 Point 5 Technologies, Inc., Rapid Micro
Biosystems, Inc., Acorda Therapeutics, Inc. and Opexa
Therapeutics, Inc. Mr. Randall received a B.S. in
accounting from The Pennsylvania State University and an M.B.A.
from Northeastern University.
Compensation
Committee Interlocks and Insider Participation
During 2006, BTHC VI did not maintain a compensation committee.
Since June 2007, the compensation committee of the board of
directors has consisted of Messrs. Davis and Mulligan and
Dr. Sheffery. Messrs. Timothy G. Biro and Mulligan
served as members of the compensation committee of the Athersys
board of directors during 2006. Upon the closing of the merger
and the June offering, all existing members of the Athersys
board of directors, other than Mr. Timothy Biro, along with
some new individuals, were appointed to our board of directors.
No interlocking relationship within the meaning of the rules of
the SEC exists regarding any of our executive officers and any
executive officer of any other company, and no interlocking
relationship has existed in the past.
COMPENSATION
DISCUSSION & ANALYSIS
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 we refer to further under
Executive Compensation below, and places in
perspective the data presented in the compensation tables and
narratives that follow.
Compensation
Objectives and Philosophy
Historically, Athersys board of directors has been
responsible for establishing and approving the compensation of
its executive officers and key employees. In connection with the
completion of the June offering, the compensation committee of
the board of directors was established, and will be responsible
for overseeing executive and other employee compensation, as
well as certain other matters. With respect to compensation
matters, the initial objective of the board of directors and
compensation committee will be to establish a compensation
program that attracts and helps retain talented and experienced
individuals for senior level positions throughout the
organization, as well as to authorize appropriate compensation
for our employees and key consultants.
58
The board of directors and the compensation committee will
oversee compensation programs designed to also:
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Recruit, retain, and motivate executives and employees that can
help us achieve our core business goals;
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Provide incentives to promote and reward superior performance
throughout the organization;
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Facilitate stock ownership and retention by our executives and
other employees; and
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Promote alignment between executives and other employees and the
long term interests of stockholders.
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The board of directors and compensation committee will seek to
achieve these objectives by:
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Establishing a compensation program that is market competitive
and internally fair; and
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Linking performance with certain elements of compensation
through the use of equity options, stock grants, cash
performance bonuses or other means of compensation the value of
which is substantially tied to the achievement of our company
goals.
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Components
of Compensation
Our executive compensation program will include the following
elements:
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Base salary;
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Discretionary and performance-based bonuses;
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Long-term incentive plan awards; and
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Retirement and health insurance benefits.
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The compensation committee will set a competitive rate of annual
base salary for each executive officer in order to attract and
retain top quality executives. However, the compensation
committee has not yet committed to the means by which it will
determine competitive rates of annual base salary in the market,
which means might include executive officer and director input,
input from a compensation consultant and third-party information.
We do not have a specific formula for allocating total
compensation between current and long-term compensation or
between cash and non-cash compensation. However, we do vary the
mix of our executive officers compensation elements based
on competitive practices and their relative management level to
recognize each individuals operating responsibilities and
reward his or her ability to impact short- and long-term results.
Elements
of Executive Compensation
We will pay our executive officers the following compensation:
Base Salary. We pay base salaries in order 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 reviewed
(1) at the time of renewal of an executives
employment agreement, or (2) annually, with adjustments
based on the individuals responsibilities, performance and
experience during the year. This review occurs each year at the
annual review.
Discretionary and Performance-Based
Bonuses. The board of directors expects to adopt
a formal process for determining and awarding discretionary and
performance-based annual bonuses later in 2007. The board of
directors intends to 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 will vary depending on
the individual executive and employee, but will 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
59
factors, including raising capital, improving our results of
operations and increasing the price per share of our common
stock. Commencing in 2007, the board of directors will have
authority to award discretionary annual bonuses to, or enter
into commitments for the award of an annual bonus with, our
executive officers.
In 2006, we made payments to our named executive officers and
others under our cash incentive plan that was implemented in
2005. We made these payments, which are set forth in the 2006
Summary Compensation Table, to reward our named executive
officers and others for helping us close the financing in which
Angiotech purchased $10.0 million in aggregate principal
amount of subordinated convertible promissory notes, the
principal amount of which was automatically converted along with
accrued interest into our common stock upon the closing of the
June offering. Under the cash incentive plan, bonuses generally
equal two months of our named executive officers salary at
the time of the incentive award. However, at the direction of
our Compensation Committee, only one-half of the earned bonus
was paid to the named executive officers in 2006, with the
remainder paid in 2007. The entire amount of the earned bonus is
reflected in the 2006 Summary Compensation Table. Please see the
discussion under 2006 Grants of Plan Based Awards
and Incentive Plans below for more information about
our cash incentive plan.
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 stock. We have
established the BTHC VI, Inc. Long-Term Incentive Plan and the
BTHC VI, Inc. Equity Incentive Compensation Plan, which we refer
to as our equity compensation plans, to provide our employees,
including executive officers, with incentives to help align
their interests with the interests of our stockholders. Our
board of directors believes that the use of stock and
stock-based awards offers the best approach to achieving our
compensative objective of fostering a culture of ownership,
which it believes will, in turn, motivate our executive officers
to create and enhance stockholder value. Historically, Athersys
has elected to use stock options as its primary long-term equity
incentive vehicle. 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.
Stock Options. Our equity compensation plans
authorize us to grant options to purchase shares of common stock
to our employees, directors and consultants. The compensation
committee of the board of directors administers our equity
compensation plans. Stock option grants are made at the
commencement of employment and, on occasion, following a
significant change in job responsibilities or to meet other
special retention objectives. The compensation committee
annually reviews and approves stock option awards to executive
officers based upon a review of competitive compensation data,
its assessment of individual performance, a review of each
executives existing long-term incentives and retention
considerations. Periodic stock option grants are made at the
discretion of the compensation committee to eligible employees,
including named executive officers, and, in appropriate
circumstances, the compensation committee considers the
recommendations of members of management. Our stock options are
generally exercisable for a period of ten years, have an
exercise price equal to the fair market value of our common
stock on the day of grant and typically vest over a four-year
period, with 25% vesting twelve months after the vesting
commencement date and the remainder vesting 25% per year (on a
quarterly basis) thereafter based upon continued employment.
Incentive stock options also include certain other terms
necessary to assure compliance with particular provisions of the
Internal Revenue Code.
In June 2007, upon the closing of the merger, we granted option
awards to purchase 3,250,000 shares of common stock with an
exercise price of $5.00 to our employees, including our
executive officers, and certain consultants. These option awards
generally vest 40% on the date of grant, and 20% in each of the
three years (on a quarterly basis) thereafter. Dr. Van
Bokkelen received stock option grants to purchase
712,500 shares of common stock at $5.00 per share;
Dr. John Harrington received stock option grants to
purchase 700,000 shares of common stock at $5.00 per share;
Mr. Lehmann received stock option grants to purchase
400,000 shares of common stock at $5.00 per share;
Dr. Brunden received stock option grants to purchase
50,000 shares of common stock at $5.00 per share;
Dr. Deans received stock option grants to purchase
240,000 shares of common stock at $5.00 per share; and
Ms. Campbell received stock option grants to purchase
200,000 shares of common stock at $5.00 per share. Also in
June 2007, option awards to purchase 75,000 shares of
common stock with an exercise price of $5.00 were granted to
each of our directors (options for a total of
60
375,000 shares), which stock 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.
We expect to continue to use stock options as a long-term
incentive vehicle because we believe:
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Stock options 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;
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The value of stock options is based on our performance, because
all the value received by the recipient of a stock option is
based on the growth of our stock price;
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Stock options 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
compensation rewards, vesting stock options reward increases in
stockholder value over the longer term; and
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The vesting period of stock options encourages executive
retention and their efforts to preserve stockholder value.
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In determining the number of stock options to be granted to
executives, we take into account the individuals position,
scope of responsibility, ability to affect profits and
stockholder value and the individuals historic and recent
performance and the value of stock options in relation to other
elements of the individual executives total compensation.
Restricted Stock and Restricted Stock
Units. Our equity compensation plans authorize us
to grant restricted stock and restricted stock units to our
employees, directors and consultants. To date, we have not
granted any restricted stock or restricted stock units under our
equity compensation plans. We anticipate that in order to
implement the long-term incentive goals of the compensation
committee, we may grant restricted stock or restricted stock
units in the future.
Retirement and Health Insurance
Benefits. Consistent with our compensation
philosophy, we intend to continue to maintain our current
benefits for our executive officers, including medical, dental,
vision and life and disability insurance coverage and the
ability to contribute to a 401(k) retirement plan; however, the
board of directors, in its discretion, may revise, amend or add
to the executive officers benefits if it deems it
advisable. We believe these benefits are currently lower than
median competitive levels for comparable companies. We have no
current plans to change the level of benefits provided to our
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.
Employment
Agreements and Arrangements
Athersys has historically entered into employment agreements
with its most senior executive officers, and currently has
employment agreements with each of its named executive officers
(except for Mr. Halter). We believe that entering into
these agreements 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 described below contains terms and arrangements
that Athersys agreed to through arms-length negotiation with its
named executive officers. We view these employment agreements as
reflecting the minimum level of compensation that our named
executive officers require in order to remain employed with us,
and thus the bedrock of our compensation program for our named
executive officers.
Dr. Gil Van Bokkelen. On December 1,
1998, Athersys 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 30 days before the end of any term.
Dr. Van Bokkelen is entitled to a base
61
salary of $350,000, which may be increased at the discretion of
the Athersys board of directors, and an annual discretionary
incentive bonus of up to 33% of his base salary. Dr. Van
Bokkelen also received options to purchase shares of Athersys
common stock. Dr. Van Bokkelen is also entitled to life
insurance coverage for the benefit of his family in the amount
of approximately $2 million and is provided the use of a
company automobile for business use. The agreement was amended
as of May 31, 2007 to provide technical accommodations for
the merger and June offering. For more information about
severance arrangements under the amended 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
Athersys under which, during his employment and for a period of
18 months thereafter, he is restricted from, among other
things, competing with Athersys.
Dr. John J. Harrington. On
December 1, 1998, Athersys 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.
Dr. Harrington is entitled to a base salary of $300,000,
which may be increased at the discretion of the Athersys board
of directors, and an annual discretionary incentive bonus of up
to 33% of his base salary. Dr. Harrington also received
options to purchase shares of Athersys common stock.
Dr. Harrington is also entitled to life insurance coverage
for the benefit of his family in the amount of approximately
$2 million. The agreement was amended as of May 31,
2007 to provide technical accommodations for the merger and June
offering. For more information about severance arrangements
under the amended 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 Athersys
under which, during his employment and for a period of
18 months thereafter, he is restricted from, among other
things, competing with Athersys.
Laura K. Campbell. On May 22, 1998,
Athersys 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. Ms. Campbell
is entitled to a base salary of $195,000, which may be increased
at the discretion of the Athersys board of directors.
Ms. Campbell also received options to purchase shares of
Athersys common stock. The agreement was amended as of
May 31, 2007 to provide technical accommodations for the
merger and June offering. For more information about severance
arrangements under the amended agreement, see the disclosure
under Potential Payments Upon Termination or Change of
Control.
Dr. Kurt Brunden. On September 25,
2000, a subsidiary of Athersys entered into a four-year
employment agreement with our former officer, Dr. Kurt
Brunden, to serve initially as vice president of drug discovery.
The agreement automatically renewed for subsequent one-year
terms on September 25 of each year unless either party gives
notice of termination at least thirty days before the end of any
term. Dr. Brunden has terminated his employment with us,
but has entered into a consulting agreement with us, as
described below.
Under the agreement, Dr. Brunden was entitled to a base
salary of $240,000, which could have been increased at the
discretion of the Athersys board of directors, and guaranteed
bonuses for 2001 and 2002. Dr. Brunden also received
options to purchase shares of Athersys common stock.
Dr. Brunden was also entitled to life insurance coverage
for the benefit of his family of approximately $1 million.
The agreement was amended as of May 31, 2007 to provide
technical accommodations for the merger and June offering.
For more information about severance arrangements under the
amended agreement, see the disclosure under Potential
Payments Upon Termination or Change of Control.
Dr. Brunden had also entered into a non-competition and
confidentiality agreement with Athersys under which, during his
employment and for a period of 18 months thereafter, he was
and is restricted from, among other things, competing with
Athersys.
Dr. Robert Deans. On October 3,
2003, a subsidiary of Athersys 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.
Dr. Deans is entitled to a base salary of $235,000, which
may be increased at the discretion of the Athersys board of
directors, and an annual
62
discretionary incentive bonus of up to 30% of his base salary.
Dr. Deans also received options to purchase shares of
Athersys common stock. Dr. Deans is also entitled to life
insurance coverage for the benefit of his family of
approximately $1 million. The agreement was amended as of
May 31, 2007 to provide technical accommodations for the
merger and June offering. For more information about severance
arrangements under the amended agreement, see the disclosure
under Potential Payments Upon Termination or Change of
Control. Dr. Deans has also entered into a
non-competition and confidentiality agreement with Athersys
under which, during his employment and for a period of
18 months thereafter, he is restricted from, among other
things, competing with Athersys.
William (BJ) Lehmann. On January 1, 2004,
a subsidiary of Athersys entered into a four-year employment
agreement with William (BJ) 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 30 days before the end of any term.
Mr. Lehmann is entitled to a base salary of $300,000, which
may be increased at the discretion of the Athersys board of
directors. Mr. Lehmann is entitled to life insurance
coverage for the benefit of his family in the amount of
approximately $1 million. The agreement was amended as of
May 31, 2007 to provide technical accommodations for the
merger and June offering. For more information about severance
arrangements under the amended 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 Athersys
under which, during his employment and for a period of
18 months thereafter, he is restricted from, among other
things, competing with Athersys.
Recoupment
of Incentive Payments
We do not have a formal policy regarding adjusting or recovering
discretionary or performance-based bonuses or long-term
incentive plan awards or payments if the relevant performance
metrics upon which such awards or payments are based are later
restated or otherwise adjusted in a manner that reduces the
actual size of the award or payment. We will consider making
such adjustments on a
case-by-case
basis if such situations arise.
General
Tax Deductibility of Executive Compensation
We intend to structure our compensation program to comply with
Internal Revenue Code Sections 162(m) and 409A. Under
Section 162(m) of the Internal Revenue Code, a limitation
was placed 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. If an executive is
entitled to nonqualified deferred compensation benefits that are
subject to Section 409A, and such benefits do not comply
with Section 409A, then the benefits are taxable in the
first year they are not subject to a substantial risk of
forfeiture. In such case, the executive is subject to regular
federal income tax, interest and an additional federal income of
20% of the benefit includible in income. We intend for our
compensation committee to generally manage our incentive
programs to qualify for the performance based exemption. The
compensation committee 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.
The following tables and narratives provide, for the fiscal year
ended December 31, 2006, descriptions of (1) the
compensation paid by BTHC VI for that year to Timothy Halter,
BTHC VIs President, Chief Executive Officer, Chief
Financial Officer and Director (BTHC VIs only executive
officer) and (2) the cash compensation paid by us, as well
as certain other compensation paid or accrued, for that year to
Dr. Gil Van Bokkelen, Chief Executive Officer; and Laura
Campbell, Vice President Finance; and the four most
highly compensated executive officers other than Dr. Van
Bokkelen and Ms. Campbell who were serving as executive
officers as of December 31, 2006. We refer to these
individuals as our named executive officers. The stock option
information set forth in this section is historical information
and is based on, for all named executive officers other than
Mr. Halter, the option plans of Athersys. All employee and
director options under the
63
Athersys stock option plans were terminated upon closing of the
merger, and new options were granted under our incentive plans.
BTHC VI did not maintain any equity plans during 2006.
2006
Summary Compensation Table
The following table shows compensation information for 2006 for
our named executive officers:
|
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|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive Plan
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All Other
|
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|
|
|
|
|
|
|
Salary
|
|
|
Option Awards
|
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|
Compensation
|
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|
Compensation
|
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Total
|
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Name and Principal Position
|
|
Year
|
|
|
($)(1)
|
|
|
($)(2)
|
|
|
($)(3)
|
|
|
($)
|
|
|
($)
|
|
(a)
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|
(b)
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|
|
(c)
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|
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(f)
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(g)
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(i)
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|
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(j)
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Dr. Gil Van Bokkelen,
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|
2006
|
|
|
$
|
350,000
|
|
|
$
|
0
|
|
|
$
|
50,000
|
|
|
$
|
149,604
|
(7)
|
|
$
|
549,604
|
|
Chief Executive Officer(4)
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|
|
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William Lehmann, Jr.,
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2006
|
|
|
$
|
300,000
|
|
|
$
|
91,015
|
|
|
$
|
41,666
|
|
|
$
|
1,000
|
|
|
$
|
433,681
|
|
President and Chief Operating
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr. John Harrington,
|
|
|
2006
|
|
|
$
|
300,000
|
|
|
$
|
0
|
|
|
$
|
42,334
|
|
|
$
|
1,000
|
|
|
$
|
343,334
|
|
Chief Scientific Officer and
Executive Vice President(4)
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr. Kurt Brunden,
|
|
|
2006
|
|
|
$
|
240,000
|
|
|
$
|
75,570
|
|
|
$
|
36,666
|
|
|
$
|
2,000
|
|
|
$
|
354,236
|
|
former Vice President
Biopharmaceuticals(5)
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|
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Dr. Robert Deans,
|
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|
2006
|
|
|
$
|
235,000
|
|
|
$
|
105,119
|
|
|
$
|
33,334
|
|
|
$
|
6,000
|
|
|
$
|
379,453
|
|
Vice President
Regenerative
Medicine
|
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|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
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Laura Campbell,
|
|
|
2006
|
|
|
$
|
195,000
|
|
|
$
|
20,056
|
|
|
$
|
28,438
|
|
|
$
|
0
|
|
|
$
|
243,494
|
|
Vice President Finance
|
|
|
|
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|
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Timothy Halter,
|
|
|
2006
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Former President, Chief Executive
Officer, Chief Financial Officer and Director(6)
|
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|
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(1) |
|
The 2006 salary increase was approved by Athersys
compensation committee effective June 1, 2006, but payment
was deferred until the closing of the June offering. |
|
(2) |
|
Amounts in column (f) do not necessarily reflect
compensation actually received by Athersys named executive
officers. The amounts in column (f) reflect the dollar
amount recognized for financial statement reporting purposes for
the fiscal year ended December 31, 2006, in accordance with
SFAS No. 123R, for option awards granted prior to
2006. Assumptions used in the calculation of these amounts are
included in Notes A and J to Athersys audited
consolidated financial statements for the fiscal year ended
December 31, 2006, included elsewhere in this prospectus. |
|
(3) |
|
Amounts in column (g) reflect payments under our cash incentive
plan, of which one-half was actually paid in 2006 and the
remainder was paid in 2007. |
|
(4) |
|
Drs. Van Bokkelen and Harrington also served as Athersys
Directors for 2006, but did not receive any compensation as
Athersys Directors. |
|
(5) |
|
Dr. Brunden resigned effective July 31, 2007 and
returned to a faculty position. Dr. Brunden has entered
into a consulting agreement with us, as further described in
Compensation Discussion and Analysis. |
|
(6) |
|
Mr. Halter resigned as our President, Chief Executive
Officer, Chief Financial Officer and Director, effective
June 8, 2007, in connection with the merger. He did not
receive compensation from BTHC VI for his service as an officer
or director of BTHC VI. |
|
(7) |
|
Includes $145,604 representing a loan which was forgiven by
Athersys board of directors, including certain tax
benefits. |
2006
Grants of Plan-Based Awards
Athersys implemented an incentive plan in 2005, which was
amended in June 2007, which provides the named executive
officers with cash (or equity, as applicable) bonus payments
upon the achievement of certain thresholds from financing
transactions, mergers or acquisitions, and asset sale
transactions. Payments under this plan are set forth in the 2006
Summary Compensation Table. No plan-based awards were granted to
our named executive officers during 2006.
64
Certain of our named executive officers are parties to
employment agreements with us. For more information about these
agreements, see Compensation Discussion &
Analysis Employment Agreements and
Arrangements above. For more information about the
compensation arrangements in which our named executive officers
participate and the proportion of our named executive
officers total compensation represented by base salary and
bonus, see 2006 Summary Compensation Table above.
Outstanding
Equity Awards at 2006 Fiscal Year End Table
The following table shows all outstanding equity awards held by
our named executive officers at the end of 2006. Upon the close
of the merger, the majority of Athersys outstanding stock
options were terminated, including all of the stock options
listed in the table below. Following the merger, new grants were
made to employees, including the named executive officers. The
Athersys equity awards in the following table were not assumed
by BTHC VI, and therefore the shares underlying the equity
awards in the following table have not been retroactively
restated to reflect shares of BTHC VI common stock after giving
effect to the merger.
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Option Awards
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Number
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Number of
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Equity Incentive
|
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of
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Securities
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Plan Awards:
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Securities
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Underlying
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Number
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Underlying
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Unexercised
|
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|
of Securities
|
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Unexercised
|
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|
Options
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Underlying
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|
|
Option
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|
|
|
|
Options
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(#)
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Unexercised
|
|
|
Exercise
|
|
|
Option
|
|
|
|
(#)
|
|
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Unexercisable
|
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Unearned Options
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Price
|
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Expiration
|
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Name
|
|
Exercisable
|
|
|
(1)
|
|
|
(#)
|
|
|
($)
|
|
|
Date
|
|
(a)
|
|
(b)
|
|
|
(c)
|
|
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(d)
|
|
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(e)
|
|
|
(f)
|
|
|
Dr. Van Bokkelen
|
|
|
199,980
|
|
|
|
|
|
|
|
|
|
|
$
|
1.65
|
|
|
|
April 1, 2008
|
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|
|
|
100,020
|
|
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$
|
1.20
|
|
|
|
April 1, 2008
|
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|
45,000
|
|
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|
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|
|
|
|
|
|
$
|
3.25
|
|
|
|
April 2, 2013
|
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|
|
|
|
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|
|
|
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|
345,000
|
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Lehmann
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
$
|
1.00
|
|
|
|
November 14, 2011
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
$
|
15.60
|
|
|
|
November 14, 2011
|
|
|
|
|
75,000
|
|
|
|
|
|
|
|
|
|
|
$
|
4.00
|
|
|
|
December 9, 2013
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
|
|
|
$
|
4.00
|
|
|
|
December 9, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
135,000
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr. Harrington
|
|
|
199,980
|
|
|
|
|
|
|
|
|
|
|
$
|
1.50
|
|
|
|
April 1, 2008
|
|
|
|
|
100,020
|
|
|
|
|
|
|
|
|
|
|
$
|
1.50
|
|
|
|
April 1, 2008
|
|
|
|
|
457,500
|
|
|
|
|
|
|
|
|
|
|
$
|
1.50
|
|
|
|
April 1, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
757,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr. Brunden
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
$
|
1.00
|
|
|
|
September 25, 2010
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
$
|
15.60
|
|
|
|
September 25, 2010
|
|
|
|
|
70,000
|
|
|
|
|
|
|
|
|
|
|
$
|
4.00
|
|
|
|
December 9, 2013
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
|
|
|
$
|
4.00
|
|
|
|
December 9, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
130,000
|
|
|
|
20,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr. Deans
|
|
|
7,500
|
|
|
|
|
|
|
|
|
|
|
$
|
13.00
|
|
|
|
October 3, 2013
|
|
|
|
|
37,500
|
|
|
|
|
|
|
|
|
|
|
$
|
3.25
|
|
|
|
October 3, 2013
|
|
|
|
|
30,000
|
|
|
|
|
|
|
|
|
|
|
$
|
4.00
|
|
|
|
December 9, 2013
|
|
|
|
|
|
|
|
|
2,500
|
|
|
|
|
|
|
$
|
13.00
|
|
|
|
October 3, 2013
|
|
|
|
|
|
|
|
|
12,500
|
|
|
|
|
|
|
$
|
3.25
|
|
|
|
October 3, 2013
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
|
$
|
4.00
|
|
|
|
December 9, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ms. Campbell
|
|
|
60,000
|
|
|
|
|
|
|
|
|
|
|
$
|
1.50
|
|
|
|
May 22, 2008
|
|
|
|
|
30,000
|
|
|
|
|
|
|
|
|
|
|
$
|
1.00
|
|
|
|
February 22, 2010
|
|
|
|
|
30,000
|
|
|
|
|
|
|
|
|
|
|
$
|
7.00
|
|
|
|
February 22, 2010
|
|
|
|
|
30,000
|
|
|
|
|
|
|
|
|
|
|
$
|
4.00
|
|
|
|
December 9, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Halter
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65
|
|
|
(1) |
|
The stock options listed in column (c) for Mr. Lehmann
were granted on December 9, 2003, vest at a rate of 25% on
each grant date anniversary, and will be fully exercisable on
December 9, 2007. The stock options listed in column
(c) for Dr. Brunden were granted on December 9,
2003, vest at a rate of 11% on the date of grant, and 22% on
each subsequent grant date anniversary thereafter, and will be
fully exercisable on December 9, 2007. The stock options
listed in column (c) for Dr. Deans were granted on
October 3, 2003, October 3, 2003, and December 9,
2003, respectively, vest at a rate of 25% on each grant date
anniversary, and will be fully exercisable on October 3,
2007, October 3, 2007 and December 9, 2007,
respectively. |
2006
Options Exercised and Stock Vested
None of our named executive officers stock awards vested
during 2006, and none of our named executive officers exercised
any stock options during 2006.
Potential
Payments Upon Termination or Change of Control
Upon termination, the named executive officers may be entitled
to certain potential payments. In the event that an executive
officer is terminated without cause or terminates employment for
good reason including a change of control, 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, this
period is eighteen months, and for all other executive officers,
the period is six months. Assuming a termination event for each
of our named executive officers on December 29, 2006, we
estimate that the named executive officers would have received
the following aggregate payment amounts, consisting of salary
and monthly health and dental benefits:
Dr. Van Bokkelen, $543,730; Mr. Lehmann,
$156,243; Dr. Harrington, $468,730; Dr. Brunden,
$126,243; Dr. Deans, $119,473; Ms. Campbell, $103,743;
and Mr. Halter, $0. In addition, we would be obligated to
continue the participation of the executive officer in all
medical, life and other employee welfare benefit
programs for a period of eighteen months to the extent available
and possible under the programs.
In the event than an executive officer is terminated for cause,
other than for good reason, or as a result of death, we would be
obligated to pay full base salary and other benefits, including
any unpaid expense reimbursements, through the date of
termination, and would have no further obligations to the
executive officer. In the event that an executive officer is
unable to perform duties as a result of a disability, we would
be obligated to pay full base salary and other benefits until
employment is terminated and for a period of twelve months from
the date of such termination.
2006 Director
Compensation Table
Our non-employee directors received the following compensation
for 2006. The Athersys equity awards referenced in the notes to
the following table were not assumed by BTHC VI, and therefore
the shares underlying the equity awards in the notes to the
following table have not been retroactively restated to reflect
shares of BTHC VI common stock after giving effect to the merger:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned or
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid in
|
|
|
Option
|
|
|
All Other
|
|
|
|
|
|
|
Cash
|
|
|
Awards
|
|
|
Compensation
|
|
|
Total
|
|
Name
|
|
($)
|
|
|
($)(1)
|
|
|
($)
|
|
|
($)
|
|
(a)
|
|
(b)
|
|
|
(d)
|
|
|
(g)
|
|
|
(h)
|
|
|
Dr. George M. Milne
|
|
$
|
25,000
|
|
|
$
|
38,481
|
(2)
|
|
$
|
0
|
|
|
$
|
63,481
|
|
William C. Mulligan
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Timothy G. Biro
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
(1) |
|
Amounts in column (d) do not necessarily reflect
compensation actually received by Athersys directors. The
amounts in column (d) reflect the dollar amount recognized
for financial statement reporting purposes for the fiscal year
ended December 31, 2006, in accordance with
SFAS No. 123R, for option awards granted prior to
2006. Assumptions used in the calculation of these amounts are
included in Notes A and J to Athersys audited
consolidated financial statements for the fiscal year ended
December 31, 2006, which |
66
|
|
|
|
|
are included elsewhere in this prospectus. No grants of stock
awards or stock options were made by Athersys to its directors
in 2006. The non-employee directors had option awards
outstanding as of December 31, 2006 for the following
number of shares of Athersys common stock (which option awards
were terminated upon the closing of the merger): Dr. Milne,
100,000; Mr. Mulligan, 150,000; and Mr. Biro, 150,000. |
|
(2) |
|
The amount in column (d) for Dr. Milne relates to an
option that Athersys granted Dr. Milne in January 2003 for
33,000 shares of Athersys common stock, at an exercise
price of $10.00 per share, and an option that Athersys granted
Dr. Milne in January 2003 for 67,000 shares of
Athersys common stock at an exercise price of $3.25 per share.
These options vested over a four-year period, and were
terminated in connection with the merger. |
Athersys directors typically have not received cash for
services they provide as directors; however, Dr. Milne has
historically received $25,000 annually for his services as a
board member. Also, Athersys non-employee directors have
historically received grants of options to purchase shares of
Athersys common stock. During 2006, none of Athersys other
non-employee directors received any compensation for his service
as a director.
Upon the closing of the merger and the June offering, all
existing members of the Athersys board of directors, other than
Mr. Timothy Biro, along with some new individuals, were
appointed to our board of directors. The new directors are
Mr. Jordan Davis, Dr. Floyd Loop, and Mr. Michael
Sheffery. Mr. Lorin Randall was appointed on September 4,
2007.
The Board approved a compensation program for the Board
beginning in June 2007. The new compensation program includes 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. Each of our non-employee directors received a grant
of stock options to purchase 75,000 shares of common stock
at $5.00 per share in June 2007.
Additionally, the non-employee directors will 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 will 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.
The non-employee directors also receive 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 receives
additional cash compensation of $10,000 per year, paid
quarterly, and the chair of the compensation committee receives
additional cash compensation of $6,000 per year, paid quarterly.
All audit committee and compensation committee members also
receive additional daily fees of $1,000 for participating in
person, or $500 for participating by telephone, at each audit
committee or compensation committee meeting. Directors, however,
cannot receive more than $2,500 in any one day for participation
in Board and committee meetings. Directors will be reimbursed
for reasonable out-of-pocket expenses incurred while attending
Board and committee meetings.
Incentive
Plans
Athersys has a cash incentive plan that generally will result in
the payment of bonuses of one month of salary to its employees
(two months of salary for officers) upon achievement of certain
milestones, which included the sale of certain non-core assets
related to Athersys asthma discovery program and the
completion of this June offering. Additionally, Mr. Lehmann
was eligible for a one-time bonus in the amount of $50,000 in
connection with the completion of the June offering pursuant to
the terms of his employment agreement. In connection with
the sale of the non-core assets and the completion of the June
offering, the named executive officers received the following
cash bonuses: Dr. Van Bokkelen $74,537;
Dr. Harrington $63,889;
Mr. Lehmann $113,889;
Dr. Brunden $51,111; Dr. Deans
$50,047; and Ms. Campbell $41,528.
67
Equity
Incentive Plans
Upon the close of the merger, the majority of Athersys
outstanding options were terminated. However, pursuant to the
terms of the merger Agreement, we assumed 5,052 options granted
to former employees and consultants of Athersys. In June 2007,
we adopted our equity plans, which authorize the Board, or a
committee thereof, to provide equity-based compensation in the
form of stock options, stock appreciation rights restricted
stock, restricted stock units, performance shares and units, and
other stock-based awards, which will be used to attract and
retain qualified employees, directors and consultants. Equity
awards will be granted from time to time under the guidance and
approval of the compensation committee. Total awards under these
plans are limited to 4,500,000 shares of common stock.
Option awards to purchase 3,250,000 shares of common stock
with an exercise price of $5.00 were granted to our employees,
including our executive officers, and certain consultants in
June 2007 upon the closing of the merger. Theses option awards
generally vest 40% on the date of grant, and 20% in each of the
three years (on a quarterly basis) thereafter. Also in June
2007, option awards to purchase 375,000 shares of common
stock with an exercise price of $5.00 were granted to our
non-employee directors, which options vest 50% in the first year
(on a quarterly basis), and 25% in each of the two years (on a
quarterly basis) thereafter.
Equity
Compensation Plan Information Table
The following table contains information as of December 31,
2006 regarding BTHC VI:
Equity
Compensation Plan Information(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
Number of
|
|
|
|
|
|
Securities
|
|
|
|
Securities to be
|
|
|
|
|
|
Remaining Available
|
|
|
|
Issued Upon
|
|
|
Weighted-Average
|
|
|
for Future Issuance
|
|
|
|
Exercise of
|
|
|
Exercise Price of
|
|
|
Under Equity
|
|
|
|
Outstanding
|
|
|
Outstanding
|
|
|
Compensation Plans
|
|
|
|
Options, Warrants
|
|
|
Options, Warrants
|
|
|
(Excluding Securities
|
|
Plan Category
|
|
and Rights
|
|
|
and Rights
|
|
|
Reflected in Column (a))
|
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
Equity compensation plans approved
by security holders
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans not
approved by security holders
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
BTHC VI did not maintain any equity plans during 2006. |
401(k)
Plan
In 1997, Athersys adopted a tax-qualified employee savings and
retirement plan, also known as a 401(k) plan, that covered all
of its employees, which was replaced with a new plan in 2004.
Under Athersys current 401(k) plan, eligible employees may
elect to reduce their current compensation by up to the
statutorily prescribed annual limit, which was $15,000 in 2006
and is $15,500 in 2007, 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. Athersys may make
matching or profit-sharing contributions to the 401(k) plan in
amounts to be determined by its board of directors. Athersys has
not made any matching or profit-sharing contributions to the
401(k) plan as of the date of this prospectus. 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 Athersys makes
will be deductible when made.
68
Limitation
of Liability and Indemnification Matters
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
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 current amended 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 current amended
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 require us to indemnify our directors to the
fullest extent permitted by the DGCL, and permit 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.
Under our current amended 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 current amended 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 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. We believe that these provisions, policies,
and agreements will help us attract and retain qualified persons
as directors and executive officers.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons pursuant to the foregoing or otherwise, we
have been advised that, in the opinion of the SEC, such
indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
CERTAIN
RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
BTHC VI
Relationships, Indebtedness, and Related Party
Transactions
In September 1999, Ballantrae Healthcare LLC and affiliated
limited liability companies, including BTHC VI, LLC, which we
refer to collectively as Ballantrae, was organized for the
purpose of operating nursing homes throughout the United States.
On March 28, 2003, Ballantrae filed a petition for
reorganization under Chapter 11 of the United States
Bankruptcy Code in the United States Bankruptcy Court, Northern
District of
69
Texas. On November 29, 2004, the Bankruptcy Court approved
the First Amended Joint Plan of Reorganization of Ballantrae and
its creditors, or the bankruptcy plan. On April 11, 2006,
pursuant to the bankruptcy plan, BTHC VI, LLC was merged into
BTHC VI, Inc., a Delaware corporation.
Halter Financial Group, L.P., or HFG, participated with
Ballantrae and their creditors in structuring the bankruptcy
plan. As part of the bankruptcy plan, HFG provided $76,500 to be
used to pay professional fees associated with the bankruptcy
plan confirmation process. HFG was granted an option to be
repaid through the issuance of equity securities in 17 of the
reorganized Ballantrae entities, including the registrant. HFG
exercised the option, and as provided in the bankruptcy plan,
70% of BTHC VIs then-outstanding common stock, or
350,000 shares, were issued to HFG, in satisfaction of
HFGs administrative claims. The remaining 30% of the
registrants then-outstanding common stock, or
150,000 shares, were issued to 499 holders of
administrative and tax claims and unsecured debt. The
500,000 shares, which we refer to as the Plan Shares, were
issued pursuant to Section 1145 of the Bankruptcy Code. As
further consideration for the issuance of the 350,000 Plan
Shares to HFG, the bankruptcy plan required HFG to assist BTHC
VI in identifying a potential merger or acquisition candidate.
HFG was responsible for the payment of BTHC VIs operating
expenses and HFG was obligated to provide BTHC VI with
consulting services at no cost to BTHC VI, including assisting
BTHC VI with formulating the structure of any proposed merger or
acquisition. Additionally, HFG was responsible for paying BTHC
VIs expenses incurred in consummating a merger or
acquisition. On February 15, 2006, HFG transferred its
350,000 Plan Shares to Halter Financial Investments L.P., a
Texas limited partnership controlled by Timothy P. Halter, or
HFI. Timothy P. Halter is the sole officer, director and
shareholder of HFG and an officer and member of Halter Financial
Investments GP, LLC, general partner of HFI. Mr. Halter
recently served as BTHC VIs President, Chief Executive
Officer, Chief Financial Officer and sole director until his
resignation in connection with merger.
Other than the participation of HFG and Timothy P. Halter in the
Plan of Reorganization and the issuance to HFG of
350,000 shares of common stock for satisfaction of certain
administrative claims and for HFGs agreement to provide
BTHC VI with certain services as described, there were no
relationships or transactions between BTHC VI and any of its
directors, officers and principal stockholders.
Athersys paid HFG a one-time consulting fee of $350,000 in cash
in connection with the merger.
Athersys
Relationships, Indebtedness, and Related Person
Transactions
The following is a description of transactions during 2004, 2005
and 2006 to which Athersys has been a party, in which the amount
involved in the transaction exceeds $120,000 and in which any of
Athersys directors, executive officers or holders (or
immediate family members of holders) of more than 5% of its
capital stock had or will have a direct or indirect material
interest, other than compensation arrangements, which are
described under Executive Compensation. Athersys
believes the terms obtained or consideration that was paid or
received, as applicable, in connection with the transactions
described below were comparable to terms available or the
amounts that would be paid or received, as applicable, in
arms-length transactions.
In 2006 and 2007, Athersys issued $10.0 million in
aggregate principal amount of 5% unsecured convertible
promissory notes to Angiotech, one of its collaborators. In
2006, Athersys also issued $2,500,000 in aggregate principal
amount of 10% secured convertible promissory notes to bridge
investors. Investors in the bridge financing consisted primarily
of existing Athersys stockholders and Drs. Van Bokkelen and
Harrington and Ms. Campbell. Upon the closing of the June
offering on June 8, 2007, the convertible promissory notes
were converted into shares of common stock. The securities
offered in these financings to such persons were sold at their
fair market value upon the same price, terms and conditions that
were given to unaffiliated third parties.
In 2006, a subsidiary of Athersys forgave a 2002 loan made to
Dr. Van Bokkelen in aggregate principal and accrued
interest amount of approximately $122,000. In connection with
loan forgiveness, Athersys paid Dr. Van Bokkelen
approximately $24,000 as a partial gross up for his tax
obligations in connection with such forgiveness.
70
Director
Independence
Our board of directors will review at least annually the
independence of each director. During these reviews, our board
of directors will consider transactions and relationships
between each director (and his or her immediate family and
affiliates) and our company and its management to determine
whether any such transactions or relationships are inconsistent
with a determination that the director was independent. Our
board of directors will conduct its annual review of director
independence and to determine if any transactions or
relationships exist that would disqualify any of the individuals
who then served as a director under the rules of the NASDAQ
Capital Market, or require disclosure under SEC rules.
Currently, we have two members of management who also serve on
the board of directors, Dr. Van Bokkelen, who is also our
Chairman and Chief Executive Officer, and Dr. Harrington,
who is our Chief Scientific Officer and Executive Vice
President. Neither Dr. Van Bokkelen nor Dr. Harrington
would be considered independent under the independence rules of
the NASDAQ Capital Market.
Related
Person Transaction Policy
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:
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we were, are or are to be a participant;
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the amount involved exceeds $120,000; and
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any of our directors, director nominees, executive officers or
greater-than five percent shareholders (or any of their
immediate family members) had or will have a direct or indirect
material interest.
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To identify related person transactions in advance, we rely on
information supplied by our executive officers, directors and
certain significant stockholders. Although we currently do not
have a comprehensive written policy for the review, approval or
ratification of related person transactions, our board of
directors reviews all related person transactions identified by
us, and memorializes its decisions in the written minutes of
Board meetings. The board of directors approves or ratifies only
those related person transactions that are determined by the
board of directors to be, under all of the circumstances, in the
best interest of our company and its shareholders.
Agreements
with Directors and Executive Officers
We have entered into employment agreements with each of our
executive officers. See Compensation
Discussion & Analysis Employment
Agreements and Arrangements.
Indemnification
Agreements
We have entered into indemnification agreements with 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. See Executive Compensation
Limitation of Liability and Indemnification Matters.
Terms of
Transactions
All future transactions, including any loans from our company to
our officers, directors, principal stockholders, or affiliates,
will be approved by a majority of the board of directors,
including a majority of the independent and disinterested
members of the board of directors or, if required by law, a
majority of disinterested stockholders, and will be on terms no
less favorable to our company than could be obtained from
unaffiliated third parties.
71
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to us
regarding the beneficial ownership of our common stock as of
September 30, 2007 by:
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each person known by us to beneficially own more than 5% of our
common stock;
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each of our directors;
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each of our executive officers named in the summary compensation
table; and
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all of our directors and executive officers as a group.
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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 September 30, 2007 are
considered outstanding. These shares, however, are not
considered outstanding when computing the percentage ownership
of each other person.
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. Percentage of ownership before
the offering is based on 18,927,988 shares of common stock
outstanding on September 30, 2007.
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Name of Beneficial Owner
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Number of Shares
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Percent of Class
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Greater Than 5%
Stockholders
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OrbiMed Advisors LLC and
affiliates(1)
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3,750,000
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19.06
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%
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Radius Venture Partners and
affiliates(2)
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2,400,000
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12.17
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%
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Angiotech Pharmaceuticals, Inc.(3)
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1,885,890
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9.96
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%
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RA Capital Biotech Fund, LP and
affiliates(4)
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1,500,000
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7.80
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%
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Accipiter Capital Management LLC
and affiliates(5)
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1,500,000
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7.80
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%
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Hambrecht & Quist
Capital Management LLC and affiliates(6)
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1,000,000
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5.23
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%
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Directors and Executive
Officers
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Gil Van Bokkelen(7)
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392,887
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2.04
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%
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John Harrington(8)
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371,127
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1.93
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%
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William Mulligan(9)
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515,235
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2.72
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%
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George Milne(10)
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2,415,000
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12.23
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%
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Jordan Davis(11)
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2,400,000
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12.17
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%
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Michael Sheffery(12)
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3,750,000
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19.06
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%
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Floyd Loop(13)
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2,400,000
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12.17
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%
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Lorin Randall
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*
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William (BJ) Lehmann(14)
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166,250
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*
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Kurt Brunden(15)
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*
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Robert Deans(16)
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96,000
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*
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Laura Campbell(17)
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83,329
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*
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Timothy Halter(18)
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135,481
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*
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All directors and executive
officers as a group (11 persons)
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7,789,828
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39.79
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%
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* |
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Less than 1% |
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(1) |
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Includes 3,000,000 shares (2,971,698 shares held by
Caduceus Private Investment III, L.P. and 28,302 shares
held by OrbiMed Associates III, LP) of common stock. Also
includes 750,000 shares (742,925 shares held by
Caduceus Private Investment III, L.P. and 7,075 shares held
by OrbiMed Associates III, LP) of common stock issuable upon the
exercise of warrants at $6.00 per share. OrbiMed has indicated
it may be deemed a director of ours by virtue of nominating a
representative Mr. Sheffery to
serve on our board of directors. OrbiMed has indicated that
Samuel Isaly is the beneficial owner of |
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these shares. The address for OrbiMed Advisors LLC and its
affiliates is 767 3rd Avenue, 30th Floor, New York, New York
10017. |
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(2) |
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Includes 1,600,000 shares (800,000 shares held by
Radius Venture Partners II, L.P., 103,766 shares held by
Radius Venture Partners III, L.P., and 696,234 shares held
by Radius Venture Partners III QP, L.P.) of common stock.
Also includes 800,000 shares (400,000 shares held by
Radius Venture Partners II, L.P., 51,883 shares held by
Radius Venture Partners III, L.P., and 348,117 shares held
by Radius Venture Partners III QP, L.P.) of common stock
issuable upon the exercise of warrants at $6.00 per share.
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 held by Radius
Venture Partners II, L.P., Radius Venture Partners III, L.P. and
Radius Venture Partners III QP, L.P., but Jordan S. Davis
reports that he has sole voting and dispositive power with
respect to 75,000 shares pursuant to an option. The address
for Radius Venture Partners II, L.P. and its affiliates is 400
Madison Avenue, 8th Floor, New York, New York 10017. |
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(3) |
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Represents shares received upon the conversion of subordinated
convertible promissory notes upon the closing of the June
offering. The address for Angiotech Pharmaceuticals, Inc. is
1618 Station Street, Vancouver, British Columbia, Canada V6A 1B6. |
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(4) |
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Includes 1,200,000 shares (1,178,880 shares held by RA
Capital Biotech Fund, LP and 21,120 shares held by RA
Capital Biotech Fund II, LP) of common stock. Also includes
300,000 shares (294,720 shares held by RA Capital
Biotech Fund, LP and 5,280 shares held by RA Capital
Biotech Fund II, LP) of common stock issuable upon the
exercise of warrants at $6.00 per share. RA Capital has
indicated that Peter Kolchinsky and Richard Aldrich are the
beneficial owners of these shares. The address for RA Capital
Biotech Fund, LP and its affiliates is 111 Huntington Avenue,
Suite 610, Boston, Massachusetts 02199. |
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(5) |
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Includes 1,200,000 shares (319,950 shares held by
Accipiter Life Sciences Fund (Offshore), Ltd.,
318,500 shares held by Accipiter Life Sciences Fund, L.P.,
271,450 shares held by Accipiter Life Sciences Fund II
(Offshore), Ltd., 157,750 shares held by Accipiter Life
Sciences Fund II (QP), L.P., and 132,350 shares held
by Accipiter Life Sciences Fund II, L.P.) of common stock.
Also includes 300,000 shares (79,988 shares held by
Accipiter Life Sciences Fund (Offshore), Ltd.,
79,625 shares held by Accipiter Life Sciences Fund, L.P.,
67,863 shares held by Accipiter Life Sciences Fund II
(Offshore), Ltd., 39,437 shares held by Accipiter Life
Sciences Fund II (QP), L.P., and 33,087 shares held by
Accipiter Life Sciences Fund II, L.P.) of common stock
issuable upon the exercise of warrants at $6.00 per share.
Additionally, Cadens Capital, LLC reports that it shares voting
and dispositive power with respect to 760,749 of such
1,500,000 shares, Accipiter Capital Management, LLC reports
that it shares voting and dispositive power with respect to
739,251 of such 1,500,000 shares, and Gabe Hoffman reports
that he shares voting and dispositive power with respect to all
such 1,500,000 shares. The address for Accipiter Capital
Management LLC and its affiliates is 399 Park Avenue, 38th
Floor, New York, New York 10022. |
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(6) |
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Includes 800,000 shares (472,000 shares held by
H&Q Healthcare Investors and 328,000 shares held by
H&Q Life Sciences Investors) of common stock. Also includes
200,000 shares (118,000 shares held by H&Q
Healthcare Investors and 82,000 shares held by H&Q
Life Sciences Investors) of common stock issuable upon the
exercise of warrants at $6.00 per share. Hambrecht &
Quist has indicated that Daniel R. Olmstead is the
beneficial owner of these shares. The address for
Hambrecht & Quist Capital Management LLC and its
affiliates is 30 Roews Wharf, Boston, Massachusetts 02110. |
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(7) |
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Includes 41,299 shares (537 of which are held in trust for
his children) of common stock issued upon exchange of the
Athersys shares of capital stock upon consummation of the
merger. Also includes 21,271 shares of common stock issued
upon conversion of a secured subordinated convertible promissory
note and the exercise of a related warrant for
39,999 shares of common stock at $0.01 per share. Also
includes warrants to purchase 5,318 shares of common stock
at $6.00 per share that were issued upon the conversion of the
note. Also includes vested options of 285,000 granted with an
exercise price of $5.00. |
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(8) |
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Includes 24,539 shares of common stock issued upon exchange
of the Athersys shares of capital stock upon consummation of the
merger. Also includes 21,271 shares of common stock issued
upon conversion of a secured subordinated convertible promissory
note and the exercise of a related warrant for |
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39,999 shares of common stock at $0.01 per share. Also
includes warrants to purchase 5,318 shares of common stock
at $6.00 per share that were issued upon the conversion of the
note. Also includes vested options of 280,000 granted with an
exercise price of $5.00. |
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(9) |
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Includes 182,292 shares (175,004 shares held by Primus
Capital Fund IV Limited Partnership and 7,288 shares
held by Primus Executive Fund Limited Partnership) of
common stock issued upon exchange of the Athersys shares of
capital stock upon consummation of the merger. Also includes
106,356 (102,102 shares held by Primus Capital Fund IV
Limited Partnership and 4,245 shares held by Primus
Executive Fund Limited Partnership) shares of Common issued
upon conversion of a secured subordinated convertible promissory
note and the exercise of a related warrant for
199,998 shares (191,999 shares held by Primus Capital
Fund IV Limited Partnership and 7,999 shares held by
Primus Executive Fund Limited Partnership) of common stock
at $0.01 per share. Also includes warrants to purchase
26,589 shares (25,526 shares held by Primus Capital
Fund IV Limited Partnership and 1,063 shares held by
Primus Executive Fund Limited Partnership) of common stock
at $6.00 per share that were issued upon the conversion of the
note. Mr. Mulligan is a limited partner of the General
Partner of Primus Venture Partners, L.P. and disclaims
beneficial ownership of the reported securities except to the
extent of his pecuniary interest therein. Mr. Mulligan was
appointed to our board of directors in June 2007 (formerly on
Athersys board since 1998). |
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(10) |
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Includes 1,600,000 shares (800,000 shares held by
Radius Venture Partners II, L.P., 103,766 shares held by
Radius Venture Partners III, L.P., and 696,234 shares held
by Radius Venture Partners III QP, L.P.) of common stock.
Also includes 800,000 shares (400,000 shares held by
Radius Venture Partners II, L.P., 51,883 shares held by
Radius Venture Partners III, L.P., and 348,117 shares held
by Radius Venture Partners III QP, L.P.) of common stock
issuable upon the exercise of warrants at $6.00 per share. Also
includes 10,000 shares of common stock purchased by
Dr. Milne in this June offering, and related warrants to
purchase 5,000 shares of common stock at $6.00 per share.
Dr. Milne is a venture partner of Radius Ventures, LLC and
disclaims beneficial ownership of the reported securities except
to the extent of his pecuniary interest therein. Dr. Milne
was appointed to our board of directors in June 2007 (formerly
on Athersys board since 2003). The address for Dr. Milne is
c/o Athersys,
Inc., 3201 Carnegie Avenue, Cleveland, Ohio 44115. |
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(11) |
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Includes 1,600,000 shares (800,000 shares held by
Radius Venture Partners II, L.P., 103,766 shares held by
Radius Venture Partners III, L.P., and 696,234 shares held
by Radius Venture Partners III QP, L.P.) of common stock.
Also includes 800,000 shares (400,000 shares held by
Radius Venture Partners II, L.P., 51,883 shares held by
Radius Venture Partners III, L.P., and 348,117 shares held
by Radius Venture Partners III QP, L.P.) of common stock
issuable upon the exercise of warrants at $6.00 per share.
Mr. Davis is a managing member of the General Partner of
each of Radius Venture Partners II, L.P., Radius Venture
Partners III, L.P. and Radius Venture Partners III QP,
L.P., and disclaims beneficial ownership of the reported
securities except to the extent of his pecuniary interest
therein. Mr. Davis was appointed to our board of directors
in June 2007. The address for Mr. Davis is Radius Ventures,
LLC, 400 Madison Avenue, 8th Floor, New York, New York 10017. |
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(12) |
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Includes 3,000,000 shares (2,971,698 shares held by
Caduceus Private Investment III, L.P. and 28,302 shares
held by OrbiMed Associates III, L.P.) of common stock. Also
includes 750,000 shares (742,925 shares held by
Caduceus Private Investment III, L.P. and 7,076 shares held
by OrbiMed Associates III, L.P.) of common stock issuable upon
the exercise of warrants at $6.00 per share. Mr. Sheffery
is a partner of OrbiMed Advisors LLC and disclaims beneficial
ownership of the reported securities except to the extent of his
pecuniary interest therein. Mr. Sheffery was appointed to
our board of directors in June 2007. The address for
Mr. Sheffery is 767 Third Avenue, 30th Floor, New York, New
York 10017. |
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(13) |
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Includes 1,600,000 shares (800,000 shares held by
Radius Venture Partners II, L.P., 103,766 shares held by
Radius Venture Partners III, L.P., and 696,234 shares held
by Radius Venture Partners III QP, L.P.) of common stock.
Also includes 800,000 shares (400,000 shares held by
Radius Venture Partners II, L.P., 51,883 shares held by
Radius Venture Partners III, L.P., and 348,117 shares held
by Radius Venture Partners III QP, L.P.) of common stock
issuable upon the exercise of warrants at $6.00 per share.
Dr. Loop is venture partner of Radius Ventures, LLC and
disclaims beneficial ownership of the reported securities except
to the extent of his pecuniary interest therein. Dr. Loop
was appointed to our board of directors in |
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June 2007. The address for Dr. Loop is
c/o Athersys,
Inc., 3201 Carnegie Avenue, Cleveland, Ohio 44115. |
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(14) |
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Includes 5,000 shares of common stock purchased by
Mr. Lehmann in the June offering, and related warrants to
purchase 1,250 shares of common stock at $6.00 per share.
Also includes vested options of 160,000 granted with an exercise
price of $5.00. |
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(15) |
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Dr. Brunden resigned on July 31, 2007. |
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(16) |
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Includes vested options of 96,000 granted with an exercise price
of $5.00. |
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(17) |
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Includes 1,064 shares of common stock issued upon
conversion of a secured subordinated convertible promissory note
and the exercise of a related warrant for 1,999 shares of
common stock at $0.01 per share. Also includes warrants to
purchase 266 shares of common stock at $6.00 per share that
were issued upon the conversion of the note. Also includes
vested options of 80,000 granted with an exercise price of $5.00. |
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(18) |
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Mr. Halter resigned as our President, Chief Executive
Officer, Chief Financial Officer and Director, effective
June 8, 2007, in connection with the merger. Mr. Halter is
an officer and member of Halter Financial Investments GP, LLC, a
Texas limited liability company, which is the sole general
partner of Halter Financial Investments, L.P., a Texas limited
partnership, or HFI, controlled by Mr. Halter. HFI owns the
shares disclosed for Mr. Halter in this table, and Mr. Halter
may be deemed to be a beneficial owner of the shares held of
record by HFI. |
75
DESCRIPTION
OF CAPITAL STOCK
Common
Stock
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
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.
Warrants
As of the closing of the June offering, we issued warrants to
investors to acquire 3,750,000 shares of common stock,
warrants to the placement agents to acquire
1,093,525 shares of common stock, warrants to the former
holders of Athersys 10% secured convertible promissory
notes to acquire 132,945 shares of common stock, and
warrants to our senior secured lenders to acquire
149,026 shares of common stock, as further described below,
for an aggregate of 5,125,496 shares of common stock
underlying such warrants.
Investor
Warrants
The warrants issued to investors have a cash exercise price of
$6.00 per share and a term of five years from the closing date
of the June offering. Additionally, if at any time after the
one-year anniversary of the issuance of the warrants there is no
effective resale registration statement for the
common stock issuable upon exercise of the warrants, then the
warrants provide for cashless exercise. The shares of common
stock issuable upon exercise of the warrants will be afforded
the same registration rights as all other shares of common stock
sold in the June offering and are included in the shares of
common stock offered by this prospectus.
Placement
Agent Warrants
The warrants issued to the placement agents have a cash or
cashless exercise price of $6.00 per share and a term of five
years from the closing date of the June offering. The shares of
common stock issuable upon exercise of the placement
agents warrants will be afforded the same registration
rights as all other shares of common stock sold in the June
offering and are included in the shares of common stock offered
by this prospectus.
Lead
Investor Warrants
The warrants issued to the lead investor, Radius, have a cash or
cashless exercise price of $6.00 per share and a term of five
years from the closing date of the June offering. The shares of
common stock issuable upon exercise of the Radius warrants will
be afforded the same registration rights as all other shares of
common stock sold in the June offering and are included in the
shares of common stock offered by this prospectus.
76
10%
Secured Convertible Promissory Note Warrants
The warrants issued to the former holders of Athersys 10%
secured convertible promissory notes have a cash exercise price
of $6.00 per share and a term of five years from the closing
date of the June offering. Additionally, if at any time after
the one-year anniversary of the issuance of the noteholder
warrants there is no effective resale registration
statement for the common stock issuable upon exercise of the
noteholder warrants, then the noteholder warrants will provide
for cashless exercise. The shares of common stock issuable upon
exercise of the noteholder warrants will be afforded the same
registration rights as all other shares of common stock sold in
the June offering and are included in the shares of common stock
offered by this prospectus.
Lender
Warrants
The warrants issued to the lenders under Athersys Senior
Loan Agreement have a cash or cashless exercise price of $5.00
per share and a term of seven years from the closing date of the
June offering.
Registration
Rights
Prior to the merger, Athersys entered into a registration rights
agreement that provided demand and piggyback
registration rights to some of its stockholders, which rights
are described below. As a condition to the closing of the June
offering, the holders: waived their demand rights until
180 days after the effective date of the resale
registration statement; and waived their piggyback
rights in connection with the filing of the resale
registration statement.
Piggyback
Rights
Former holders of shares of Athersys capital stock that now own
3,256,847 shares of common stock are entitled to
piggyback registration rights. If we propose to
register any of our securities, we will be obligated to provide
to these holders notice of the registration and include, at our
expense, their shares of common stock in the registration,
subject to certain limitations.
Demand
Rights
Long-Form
Certain former holders of shares of Athersys capital stock that
hold shares of common stock have the right to require us to file
a long-form registration statement under the Securities Act with
respect to shares of common stock owned by them. We will be
required to use our reasonable best efforts to effect the
requested registration.
Short-Form
Certain former holders of shares of Athersys capital stock that
hold shares of common stock have the right to require us to file
a short-form registration statement under the Securities Act
with respect to shares of common stock owned by them, and we
will be required to use our reasonable best efforts to effect
the requested registration; provided, that the reasonably
anticipated price to the public for those shares requested to be
registered would have equal or exceed $500,000.
All of these registration rights are subject to various
conditions and limitations, among them our right to limit the
number of shares included in a registration and our right to not
effect a requested registration (1) within 180 days
after the effective date of an initial public offering,
(2) within 90 days after the effective date of a
previous registration on a
Form S-1
or (3) within 90 days after the effective date of a
registration that included all shares requested by holders of
registrable shares. We will bear all of the expenses incurred in
connection with all exercises of these registration rights
excluding discounts and commissions.
77
Delaware
Anti-Takeover Law
We are subject to Section 203 of the General Corporation
Law of the State of Delaware, or DGCL. Section 203
generally prohibits a public Delaware corporation from engaging
in a business combination with an interested
stockholder for a period of three years after the date of
the transaction in which the person became an interested
stockholder, unless:
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prior to the date of the transaction, the board of directors of
the corporation approved either the business combination or the
transaction that resulted in the stockholder becoming an
interested stockholder;
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the interested stockholder owned at least 85% of the voting
stock of the corporation outstanding at the time the transaction
commenced, excluding for purposes of determining the number of
shares outstanding (1) shares owned by persons who are
directors and also officers and (2) shares owned by
employee stock plans in which employee participants do not have
the right to determine whether shares held subject to the plan
will be tendered in a tender or exchange offer; or
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on or subsequent to the date of the transaction, the business
combination is approved by the board and authorized at an annual
or special meeting of stockholders, and not by written consent,
by the affirmative vote of at least
662/3%
of the outstanding voting stock that is not owned by the
interested stockholder.
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Section 203 defines a business combination to include:
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any merger or consolidation involving the corporation and the
interested stockholder;
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any sale, transfer, pledge or other disposition involving the
interested stockholder of 10% or more of the assets of the
corporation;
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subject to exceptions, any transaction that results in the
issuance or transfer by the corporation of any stock of the
corporation to the interested stockholder; and
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the receipt by the interested stockholder of the benefit of any
loans, advances, guarantees, pledges or other financial benefits
provided by or through the corporation.
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In general, Section 203 defines an interested stockholder
as any entity or person beneficially owning 15% or more of the
outstanding voting stock of the corporation and any entity or
person affiliated with or controlling or controlled by the
entity or person.
Transfer
Agent And Registrar
We have appointed National City Bank as the transfer agent and
registrar for our common stock.
Listing
Our common stock is currently quoted on the OTC
Bulletin Board under the symbol AHYS. We have
applied to have our common stock listed for quotation on the
NASDAQ Capital Market under the symbol ATHX.
78
SHARES
ELIGIBLE FOR FUTURE SALE
As of September 30, 2007, we have 18,927,988 shares of
common stock issued and outstanding. Additionally,
5,125,496 shares of common stock are subject to outstanding
warrants to purchase our common stock. Of these warrant shares,
4,976,470 are subject to five-year warrants to purchase shares
of common stock with an exercise price of $6.00 per share, and
149,026 are subject to seven-year warrants with an exercise
price of $5.00 per share.
Future sales of substantial amounts of our common stock in the
public market could cause our prevailing market prices to
decline. A large number of our shares of common stock
outstanding will not be available for sale shortly after this
offering because of contractual and legal restrictions on resale
as described below. Sales of substantial amounts of our common
stock in the public market after these restrictions lapse could
depress our prevailing market price and limit our ability to
raise equity capital in the future.
Of the 18,927,988 shares of common stock that we had issued
and outstanding, 299,622 shares of common stock will be
freely tradeable without further restriction or further
registration under the Securities Act. The remaining
18,628,366 shares are deemed to be restricted
securities as that term is defined under Rule 144
promulgated under the Securities Act. This includes
13,531,781 shares that are being registered under this
registration statement, all of which, unless purchased by our
affiliates, as that term is defined in Rule 144
under the Securities Act or subject to lockup agreements, may be
resold in the public market immediately. We also are registering
under this registration statement for reserve by the selling
security holders 4,976,470 shares issuable upon the
exercise of warrants.
Lock-Up
Agreements
Our officers and directors and substantially all of our
employees and the former Athersys stockholders that own greater
than 1% of the issued and outstanding common stock after
consummation of the merger and the June offering have agreed not
to transfer or dispose of, directly or indirectly, any shares of
our common stock, excluding shares being registered pursuant to
the registration statement of which this prospectus forms a
part, or any securities convertible into or exercisable or
exchangeable for shares of our common stock for a period of
180 days after the date the registration statement of which
this prospectus is a part is declared effective. Transfers or
dispositions can be made sooner with the prior written consent
of Cowen and Company, LLC and National Securities Corporation.
Rule 144
In general, under Rule 144, beginning 90 days after
the date of this prospectus, a person who has beneficially owned
shares of our common stock for at least one year would be
entitled to sell within any three-month period a number of
shares that does not exceed the greater of:
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189,279 shares immediately after this offering; or
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the average weekly trading volume of the common stock on the OTC
Bulletin Board during the four calendar weeks preceding the
filing of a notice on Form 144 with respect to the sale.
|
Sales under Rule 144 must comply with manner of sale
provisions and notice requirements, and information about us
must be publicly available.
Rule 144(k)
Under Rule 144(k), a person who has not been one of our
affiliates at any time during the 90 days preceding a sale,
and who has beneficially owned the shares proposed to be sold
for at least two years, is entitled to sell those shares without
complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144. Therefore,
unless otherwise restricted, 144(k) shares may be sold
immediately upon the completion of this offering.
79
We are unable to estimate the number of shares that will be sold
under Rules 144 and 144(k) because the number will depend
on the market price for the common stock, the personal
circumstances of the sellers and other factors.
Stock
Options
We intend to file a registration statement on
Form S-8
under the Securities Act covering, among other things, shares of
common stock to be issued options pursuant to granted under our
stock option plans. Based on the number of shares covered by
outstanding options and reserved for issuance under our stock
plans as of June 8, 2007, the registration statement would
cover approximately 4,500,000 shares. The registration
statement will become effective upon filing. Accordingly, shares
registered under the registration statement on
Form S-8
will be available for sale in the open market immediately
thereafter, after complying with Rule 144 volume
limitations applicable to affiliates and with applicable
180-day
lock-up
agreements.
80
The following table sets forth certain information concerning
the resale of the shares of our common stock by the selling
stockholders as of September 30, 2007. Unless otherwise
described below, to our knowledge, no selling stockholder nor
any of their affiliates has held any position or office with,
been employed by or otherwise has had any material relationship
with us or our affiliates during the three years prior to the
date of this prospectus. Unless otherwise described below, the
selling stockholders have confirmed to us that they are not
broker-dealers or affiliates of a broker-dealer with the meaning
of Rule 405 of the Securities Act.
The following table assumes that the selling stockholders will
sell all of the shares of our common stock offered by them in
this offering. However, the selling stockholders may offer all
or some portion of our shares of common stock or any shares of
common stock issuable upon exercise of outstanding warrants held
by them. Accordingly, no estimate can be given as to the amount
or percentage of our common stock that will be held by the
selling stockholders upon termination of sales pursuant to this
prospectus. In addition, the selling stockholders identified
below may have sold, transferred or disposed of all or a portion
of their shares since the date on which they provided the
information regarding their holdings in transactions exempt from
the registration requirements of the Securities Act. The term
selling stockholder includes the stockholders listed
below and their respective transferees, assignees, pledges,
donees and other successors.
We will bear all costs, expenses and fees in connection with the
registration of shares of our common stock to be sold by the
selling stockholders. The selling stockholders will bear all
commissions and discounts, if any, attributable to their
respective sales of shares.
As of September 30, 2007, there were 18,927,988 shares
of our common stock outstanding. Unless otherwise indicated, the
selling stockholders have the sole power to direct the voting
and investment over shares owned by them.
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Shares of Common Stock Beneficially Owned
|
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Shares of Common Stock Beneficially
|
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After the Offering
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Owned Prior to the Offering
|
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Number of
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|
Number of
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Shares
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Shares
|
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Number of
|
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Beneficially
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Beneficially
|
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Percent of
|
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Shares Being
|
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Owned
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Percent of
|
Selling Stockholder
|
|
Owned(1)
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Class
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Offered(2)
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(1)(2)
|
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Class
|
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Caduceus Private Investment III,
L.P. (3)
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3,714,623
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18.88
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%
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3,714,623
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0
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*
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767 3rd Avenue, 30th Floor
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New York, NY 10017
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RA Capital Biotech Fund, LP (4)
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1,473,600
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7.67
|
%
|
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|
1,473,600
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0
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*
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111 Huntington Avenue,
Suite 610
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Boston, MA 02199
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Radius Venture Partners II,
L.P. (5)
|
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1,200,000
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|
6.21
|
%
|
|
|
1,200,000
|
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0
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*
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400 Madison Avenue, 8th Floor
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New York, NY 10017
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Attn: Jordan Davis
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|
Radius Venture Partners III QP,
L.P. (6)
|
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|
1,044,351
|
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|
|
5.42
|
%
|
|
|
1,044,351
|
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0
|
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|
*
|
|
400 Madison Avenue, 8th Floor
|
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New York, NY 10017
|
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Attn: Jordan Davis
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H&Q Healthcare
Investors (7)
|
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|
590,000
|
|
|
|
3.10
|
%
|
|
|
590,000
|
|
|
|
0
|
|
|
|
*
|
|
c/o Hambrecht &
Quist Capital Management LLC
|
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|
30 Rowes Wharf, Suite 430
|
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Boston, MA 02110
|
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|
Sigma Capital Corp. (8)
|
|
|
567,500
|
|
|
|
2.97
|
%
|
|
|
567,500
|
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|
|
0
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|
*
|
|
Residencial Acropolis
|
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|
Calle Jaboncillo, de Aptos
Terranova 600 Mts. S.O
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|
Escazu, Costa Rica
|
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|
81
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of Common Stock Beneficially Owned
|
|
|
Shares of Common Stock Beneficially
|
|
After the Offering
|
|
|
Owned Prior to the Offering
|
|
Number of
|
|
|
|
|
Number of
|
|
|
|
|
|
Shares
|
|
|
|
|
Shares
|
|
|
|
Number of
|
|
Beneficially
|
|
|
|
|
Beneficially
|
|
Percent of
|
|
Shares Being
|
|
Owned
|
|
Percent of
|
Selling Stockholder
|
|
Owned(1)
|
|
Class
|
|
Offered(2)
|
|
(1)(2)
|
|
Class
|
|
National Securities
Corporation (9)
|
|
|
235,242
|
|
|
|
2.81
|
%
|
|
|
235,242
|
|
|
|
0
|
|
|
|
*
|
|
875 Michigan Avenue Suite 1560
|
|
|
|
|
|
|
|
|
|
|
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|
|
Chicago, IL 60611
|
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|
|
|
|
|
|
Cowen & Company,
LLC (10)
|
|
|
546,762
|
|
|
|
2.81
|
%
|
|
|
546,762
|
|
|
|
0
|
|
|
|
*
|
|
1221 Avenue of the Americas
6th Floor
|
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|
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|
|
|
New York, NY 10020
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
SF Capital Partners Ltd. (11)
|
|
|
500,000
|
|
|
|
2.63
|
%
|
|
|
500,000
|
|
|
|
0
|
|
|
|
*
|
|
c/o Stark
Offshore Management, LLC
|
|
|
|
|
|
|
|
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|
|
3600 South Lake Drive
|
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|
St. Francis, WI 53235
|
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|
|
|
|
|
Highbridge International
LLC (12)
|
|
|
500,000
|
|
|
|
2.63
|
%
|
|
|
500,000
|
|
|
|
0
|
|
|
|
*
|
|
c/o Highbridge
Capital Management
|
|
|
|
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|
|
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|
9 West 57th Street,
27th Floor
|
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|
|
|
New York, NY 10019
|
|
|
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|
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|
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|
|
|
|
|
|
|
|
Capital Ventures
International (13)
|
|
|
500,000
|
|
|
|
2.63
|
%
|
|
|
500,000
|
|
|
|
0
|
|
|
|
*
|
|
c/o Heights
Capital Management
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
101 California Street,
Suite 3250
|
|
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|
|
|
|
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|
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|
|
|
|
|
|
|
San Francisco, CA 94111
|
|
|
|
|
|
|
|
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|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
Primus Capital Fund IV,
LP (14)
|
|
|
494,631
|
|
|
|
2.61
|
%
|
|
|
127,628
|
|
|
|
367,003
|
|
|
|
1.94
|
%
|
Attn: William Mulligan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5900 Landerbrook Drive #200
|
|
|
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|
|
Mayfield Hts, OH 44124
|
|
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|
|
|
|
|
|
|
|
|
|
MPM Bioequities Master
Fund L.P. (15)
|
|
|
493,625
|
|
|
|
2.59
|
%
|
|
|
493,625
|
|
|
|
0
|
|
|
|
*
|
|
601 Gateway Blvd., Suite 350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
South San Francisco, CA 94080
|
|
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|
|
|
|
|
|
A.M. Pappas Life Science
Ventures III, LP (16)
|
|
|
423,660
|
|
|
|
2.23
|
%
|
|
|
423,660
|
|
|
|
0
|
|
|
|
*
|
|
c/o Pappas
Ventures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2520 Meridian Parkway
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Durham, NC 27713
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
H&Q Life Science
Investors (17)
|
|
|
410,000
|
|
|
|
2.16
|
%
|
|
|
410,000
|
|
|
|
0
|
|
|
|
*
|
|
c/o Hambrecht &
Quist Capital Management LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30 Rowes Wharf, Suite 430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Boston, MA 02110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accipiter Life Sciences Fund
(Offshore), Ltd. (18)
|
|
|
399,938
|
|
|
|
2.10
|
%
|
|
|
399,938
|
|
|
|
0
|
|
|
|
*
|
|
c/o Accipiter
Capital Management, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
399 Park Avenue, 38th Floor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New York, NY 10022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accipiter Life Sciences Fund,
L.P. (19)
|
|
|
398,125
|
|
|
|
2.09
|
%
|
|
|
398,125
|
|
|
|
0
|
|
|
|
*
|
|
c/o Accipiter
Capital Management, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
399 Park Avenue, 38th Floor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New York, NY 10022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
Gil Van Bokkelen (20)
|
|
|
392,887
|
|
|
|
2.04
|
%
|
|
|
26,589
|
|
|
|
366,298
|
|
|
|
1.91
|
%
|
c/o Athersys,
Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3201 Carnegie Avenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cleveland, OH
44115-2634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
John Harrington (21)
|
|
|
371,127
|
|
|
|
1.93
|
%
|
|
|
26,589
|
|
|
|
344,538
|
|
|
|
1.79
|
%
|
c/o Athersys,
Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3201 Carnegie Avenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cleveland, OH
44115-2634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frantz Medical Ventures
Fund I, LP (22)
|
|
|
357,944
|
|
|
|
1.89
|
%
|
|
|
157,945
|
|
|
|
199,999
|
|
|
|
1.05
|
%
|
7740 Metric Drive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mentor, OH 44060
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of Common Stock Beneficially Owned
|
|
|
Shares of Common Stock Beneficially
|
|
After the Offering
|
|
|
Owned Prior to the Offering
|
|
Number of
|
|
|
|
|
Number of
|
|
|
|
|
|
Shares
|
|
|
|
|
Shares
|
|
|
|
Number of
|
|
Beneficially
|
|
|
|
|
Beneficially
|
|
Percent of
|
|
Shares Being
|
|
Owned
|
|
Percent of
|
Selling Stockholder
|
|
Owned(1)
|
|
Class
|
|
Offered(2)
|
|
(1)(2)
|
|
Class
|
|
Accipiter Life Sciences
Fund II (Offshore), Ltd. (23)
|
|
|
339,313
|
|
|
|
1.79
|
%
|
|
|
339,313
|
|
|
|
0
|
|
|
|
*
|
|
c/o Accipiter
Capital Management, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
399 Park Avenue, 38th Floor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New York, NY 10022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Blue Chip Capital Fund II
LP (24)
|
|
|
297,017
|
|
|
|
1.57
|
%
|
|
|
47,860
|
|
|
|
249,157
|
|
|
|
1.32
|
%
|
Attn: John McIlwraith
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1100 Chiquita Center
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
250 E. Fifth St.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cincinnati, OH 45202
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
West Houle & Laurie
Houle (25)
|
|
|
250,000
|
|
|
|
1.32
|
%
|
|
|
250,000
|
|
|
|
0
|
|
|
|
*
|
|
11792 Valley Creek Rd
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Woodbury, MN 55129
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Al Steffes (26)
|
|
|
250,000
|
|
|
|
1.32
|
%
|
|
|
250,000
|
|
|
|
0
|
|
|
|
*
|
|
901 Sibley Hwy St.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul, MN 55118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crystal Cascades, L.P. (27)
|
|
|
226,238
|
|
|
|
1.19
|
%
|
|
|
149,190
|
|
|
|
77,048
|
|
|
|
*
|
|
1301 Fifth Avenue,
Suite 4000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Seattle, WA 98101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Silver Investments Holdings
Corp. (28)
|
|
|
213,750
|
|
|
|
1.13
|
%
|
|
|
213,750
|
|
|
|
0
|
|
|
|
*
|
|
c/o Inversiones
Bahia
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
P.O. Box 527948
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Miami, FL 33152
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Venture Lending & Leasing
IV, LLC (29)
|
|
|
211,653
|
|
|
|
1.11
|
%
|
|
|
39,884
|
|
|
|
171,769
|
|
|
|
*
|
|
Maurice Werdegar, Partner
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 North First Street,
Suite 310
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
San Jose, CA 95131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wexford Spectrum Investors
LLC (30)
|
|
|
206,250
|
|
|
|
1.09
|
%
|
|
|
206,250
|
|
|
|
0
|
|
|
|
*
|
|
c/o Wexford
Capital LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
411 West Putnam Avenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Greenwich, CT 06830
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Passport Global Master
Fund SPC, Ltd. (31)
|
|
|
200,000
|
|
|
|
1.05
|
%
|
|
|
200,000
|
|
|
|
0
|
|
|
|
*
|
|
c/o Passport
Management
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30 Hotaling Street, Suite 300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
San Francisco, CA 94111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cornell Capital Partners,
L.P. (32)
|
|
|
200,000
|
|
|
|
1.05
|
%
|
|
|
200,000
|
|
|
|
0
|
|
|
|
*
|
|
101 Hudson Street, Suite 3700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jersey City, NJ 07302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accipiter Life Sciences
Fund II (QP), L.P. (33)
|
|
|
197,187
|
|
|
|
1.04
|
%
|
|
|
197,187
|
|
|
|
0
|
|
|
|
*
|
|
c/o Accipiter
Capital Management, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
399 Park Avenue, 38th Floor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New York, NY 10022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accipiter Life Sciences
Fund II, L.P. (34)
|
|
|
165,437
|
|
|
|
*
|
|
|
|
165,437
|
|
|
|
0
|
|
|
|
*
|
|
c/o Accipiter
Capital Management, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
399 Park Avenue, 38th Floor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New York, NY 10022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Radius Venture Partners III,
L.P. (35)
|
|
|
155,649
|
|
|
|
*
|
|
|
|
155,649
|
|
|
|
0
|
|
|
|
*
|
|
400 Madison Avenue, 8th Floor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New York, NY 10017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attn: Jordan Davis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
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|
|
|
|
|
|
|
Cranshire Capital, L.P. (36)
|
|
|
98,750
|
|
|
|
*
|
|
|
|
98,750
|
|
|
|
0
|
|
|
|
*
|
|
3100 Dundee Road, Suite 703
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
Northbrook, IL 60062
|
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|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of Common Stock Beneficially Owned
|
|
|
Shares of Common Stock Beneficially
|
|
After the Offering
|
|
|
Owned Prior to the Offering
|
|
Number of
|
|
|
|
|
Number of
|
|
|
|
|
|
Shares
|
|
|
|
|
Shares
|
|
|
|
Number of
|
|
Beneficially
|
|
|
|
|
Beneficially
|
|
Percent of
|
|
Shares Being
|
|
Owned
|
|
Percent of
|
Selling Stockholder
|
|
Owned(1)
|
|
Class
|
|
Offered(2)
|
|
(1)(2)
|
|
Class
|
|
HSMR Capital Partners (QP),
L.P. (37)
|
|
|
88,750
|
|
|
|
*
|
|
|
|
88,750
|
|
|
|
0
|
|
|
|
*
|
|
20 Dayton Avenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Greenwich, CT 06830
|
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|
|
|
|
|
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|
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|
|
|
|
|
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|
|
|
|
|
|
|
|
Craig R. Whited (38)
|
|
|
87,500
|
|
|
|
*
|
|
|
|
87,500
|
|
|
|
0
|
|
|
|
*
|
|
31145 Palos Verdes Rancho
|
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|
|
|
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|
Palos Verdes, CA
|
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|
|
|
|
|
|
Kevin OConnell (39)
|
|
|
108,953
|
|
|
|
*
|
|
|
|
56,906
|
|
|
|
52,047
|
|
|
|
*
|
|
P.O. Box 1541
|
|
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|
Litchfield Park, AL 85340
|
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|
|
|
|
|
|
Sio Partners, LP (40)
|
|
|
50,000
|
|
|
|
*
|
|
|
|
50,000
|
|
|
|
0
|
|
|
|
*
|
|
757 Third Avenue 20th floor
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
New York, NY 10017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LBJ 8001 LP (41)
|
|
|
50,000
|
|
|
|
*
|
|
|
|
50,000
|
|
|
|
0
|
|
|
|
*
|
|
306 Cimarron Trail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Irving, TX 75063
|
|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
Bristol Investment Fund,
Ltd. (42)
|
|
|
50,000
|
|
|
|
*
|
|
|
|
50,000
|
|
|
|
0
|
|
|
|
*
|
|
c/o Bristol
Capital Advisors, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10990 Wilshire Blvd.,
Suite 1410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Los Angeles, CA 90024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attn: Amy Wang
|
|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
Arthur G. Caputo (43)
|
|
|
50,000
|
|
|
|
*
|
|
|
|
50,000
|
|
|
|
0
|
|
|
|
*
|
|
100 Hartford Ave. West
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
West Mendon, MA 01756
|
|
|
|
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|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UBS OConnor LLC FBO
OConnor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global Multi-Strategy Alpha Master
Limited (44)
|
|
|
163,951
|
|
|
|
*
|
|
|
|
49,190
|
|
|
|
114,761
|
|
|
|
*
|
|
Attn: Raymond Yee
1 N. Wacker Drive 32 Floor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chicago, IL 60606
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chestnut Ridge Partners,
LP (45)
|
|
|
47,500
|
|
|
|
*
|
|
|
|
47,500
|
|
|
|
0
|
|
|
|
*
|
|
50 Tile Blvd.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Woodcliff Lake, NJ 07677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attn: Kenneth Holz, CEO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Camber Capital Fund, L.P. (46)
|
|
|
46,250
|
|
|
|
*
|
|
|
|
46,250
|
|
|
|
0
|
|
|
|
*
|
|
575 Boylston Street, 4th Floor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Boston, MA 02116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RHP Master Fund, Ltd. (47)
|
|
|
43,750
|
|
|
|
*
|
|
|
|
43,750
|
|
|
|
0
|
|
|
|
*
|
|
c/o Rock
Hill Investment Management, L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Bala Plaza-East,
Suite 585
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bala Cynwyd, PA 19004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attn: Keith Marlowe
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mike Kooyman (48)
|
|
|
37,500
|
|
|
|
*
|
|
|
|
37,500
|
|
|
|
0
|
|
|
|
*
|
|
1875 Saragossa St.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pomona, CA 91768
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manzoor Hasan (49)
|
|
|
37,500
|
|
|
|
*
|
|
|
|
37,500
|
|
|
|
0
|
|
|
|
*
|
|
1120 Nasa Parkway Ste. 205
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Houston, TX 77058
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OrbiMed Associates III,
L.P. (50)
|
|
|
35,377
|
|
|
|
*
|
|
|
|
35,377
|
|
|
|
0
|
|
|
|
*
|
|
767 3rd Avenue, 30th Floor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New York, NY 10017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cogene Biotech Ventures LP (51)
|
|
|
135,987
|
|
|
|
*
|
|
|
|
26,589
|
|
|
|
109,398
|
|
|
|
*
|
|
Attn: Robert Dussler
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4400 Post Oak Parkway
Suite 1400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Houston, TX 77027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of Common Stock Beneficially Owned
|
|
|
Shares of Common Stock Beneficially
|
|
After the Offering
|
|
|
Owned Prior to the Offering
|
|
Number of
|
|
|
|
|
Number of
|
|
|
|
|
|
Shares
|
|
|
|
|
Shares
|
|
|
|
Number of
|
|
Beneficially
|
|
|
|
|
Beneficially
|
|
Percent of
|
|
Shares Being
|
|
Owned
|
|
Percent of
|
Selling Stockholder
|
|
Owned(1)
|
|
Class
|
|
Offered(2)
|
|
(1)(2)
|
|
Class
|
|
Ohio Innovation Fund I
LP (52)
|
|
|
107,079
|
|
|
|
*
|
|
|
|
26,589
|
|
|
|
80,490
|
|
|
|
*
|
|
Attn: Tim Biro
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
234 Bersham Drive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hudson, OH 44236
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RA Capital Biotech Fund II,
LP (53)
|
|
|
26,400
|
|
|
|
*
|
|
|
|
26,400
|
|
|
|
0
|
|
|
|
*
|
|
111 Huntington Avenue,
Suite 610
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Boston, MA 02199
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
PV III CEO Fund, LP (54)
|
|
|
26,340
|
|
|
|
*
|
|
|
|
26,340
|
|
|
|
0
|
|
|
|
*
|
|
c/o Pappas
Ventures
|
|
|
|
|
|
|
|
|
|
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|
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|
|
2520 Meridian Parkway
|
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|
|
Durham, NC 27713
|
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|
|
|
|
Steve Huffman (55)
|
|
|
25,000
|
|
|
|
*
|
|
|
|
25,000
|
|
|
|
0
|
|
|
|
*
|
|
1162 East Sonterra Blvd. Ste. 210
|
|
|
|
|
|
|
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|
San Antonio, TX 78258
|
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|
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|
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|
|
|
|
Robert A. Koch (56)
|
|
|
25,000
|
|
|
|
*
|
|
|
|
25,000
|
|
|
|
0
|
|
|
|
*
|
|
28665 Faith Ct
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
Cannon Falls, MN 55009
|
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|
|
|
|
Paul Yurfest (57)
|
|
|
25,000
|
|
|
|
*
|
|
|
|
25,000
|
|
|
|
0
|
|
|
|
*
|
|
1218 W. Paces Ferry Road
|
|
|
|
|
|
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|
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|
Atlanta, GA 30327
|
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|
|
Paul Duncan (58)
|
|
|
25,000
|
|
|
|
*
|
|
|
|
25,000
|
|
|
|
0
|
|
|
|
*
|
|
15410 Catalpo Cove Ln.
|
|
|
|
|
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|
Ft. Myers, FL 33908
|
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|
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|
|
Meythaler Investment Partners,
LC (59)
|
|
|
25,000
|
|
|
|
*
|
|
|
|
25,000
|
|
|
|
0
|
|
|
|
*
|
|
399 Wahackme Road
|
|
|
|
|
|
|
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|
New Canaan, CT 06840
|
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|
|
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|
|
|
|
|
|
Mark Peeples (60)
|
|
|
25,000
|
|
|
|
*
|
|
|
|
25,000
|
|
|
|
0
|
|
|
|
*
|
|
421 Office Park Drive
|
|
|
|
|
|
|
|
|
|
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|
|
Birmingham, AL 35233
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leonard DeOliveira (61)
|
|
|
25,000
|
|
|
|
*
|
|
|
|
25,000
|
|
|
|
0
|
|
|
|
*
|
|
10 Chippewa Ct
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
Holmdel, NJ 07733
|
|
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|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kathleen Ammann (62)
|
|
|
25,000
|
|
|
|
*
|
|
|
|
25,000
|
|
|
|
0
|
|
|
|
*
|
|
Mount Kenya Game Ranch
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
437 Nanyulei
10-400, Kenya
|
|
|
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|
|
|
|
|
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
John Anthony DeRungs (63)
|
|
|
25,000
|
|
|
|
*
|
|
|
|
25,000
|
|
|
|
0
|
|
|
|
*
|
|
37-21st
St.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
Newport, MN 55055
|
|
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
Goldberg &
Associates (64)
|
|
|
25,000
|
|
|
|
*
|
|
|
|
25,000
|
|
|
|
0
|
|
|
|
*
|
|
777 Larkfiel Road
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
Commack, NY 11725
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary W. Sargent (65)
|
|
|
25,000
|
|
|
|
*
|
|
|
|
25,000
|
|
|
|
0
|
|
|
|
*
|
|
7100 Lakes End Ct
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mansfield, TX 76063
|
|
|
|
|
|
|
|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Garry Ard (66)
|
|
|
25,000
|
|
|
|
*
|
|
|
|
25,000
|
|
|
|
0
|
|
|
|
*
|
|
120 Office Park Dr., Ste 200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Birmingham, AL 35223
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Barry and Lisa Bergman,
JTWROS (67)
|
|
|
25,000
|
|
|
|
*
|
|
|
|
25,000
|
|
|
|
0
|
|
|
|
*
|
|
1111 Park Avenue, Apt. 11A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New York, NY10128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
85
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of Common Stock Beneficially Owned
|
|
|
Shares of Common Stock Beneficially
|
|
After the Offering
|
|
|
Owned Prior to the Offering
|
|
Number of
|
|
|
|
|
Number of
|
|
|
|
|
|
Shares
|
|
|
|
|
Shares
|
|
|
|
Number of
|
|
Beneficially
|
|
|
|
|
Beneficially
|
|
Percent of
|
|
Shares Being
|
|
Owned
|
|
Percent of
|
Selling Stockholder
|
|
Owned(1)
|
|
Class
|
|
Offered(2)
|
|
(1)(2)
|
|
Class
|
|
Anthony W. McCarthy (68)
|
|
|
25,000
|
|
|
|
*
|
|
|
|
25,000
|
|
|
|
0
|
|
|
|
*
|
|
195 Bleakhouse Rd
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Howick, Ruckland, New Zealand
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Louis Joseph Knauff &
Carolyn Hope Knauff (69)
|
|
|
18,750
|
|
|
|
*
|
|
|
|
18,750
|
|
|
|
0
|
|
|
|
*
|
|
604 Grange Rd. Hudson, WI 54016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jennifer R. Hohneke &
West Thomas Houle (70)
|
|
|
18,750
|
|
|
|
*
|
|
|
|
18,750
|
|
|
|
0
|
|
|
|
*
|
|
436 New Century Dr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hudson, WI 54016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Coates (71)
|
|
|
18,750
|
|
|
|
*
|
|
|
|
18,750
|
|
|
|
0
|
|
|
|
*
|
|
Cilag Gmbh Intl Landis and
gyrstrassel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zug, 6300 Switzerland
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George M. Milne, Jr. (72)
|
|
|
15,000
|
|
|
|
*
|
|
|
|
15,000
|
|
|
|
0
|
|
|
|
*
|
|
30 Bishops Bay Drive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Niantic, CT 06357
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilip J. Mehta (73)
|
|
|
15,000
|
|
|
|
*
|
|
|
|
15,000
|
|
|
|
0
|
|
|
|
*
|
|
870 United Nations Plaza
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New York, NY 10017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Biakum Trading Inc. (74)
|
|
|
15,000
|
|
|
|
*
|
|
|
|
15,000
|
|
|
|
0
|
|
|
|
*
|
|
Edificio Global Bank Piso 16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
officina D Via Gral Nioanor A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
De Obarrion, Caslle 5o
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Panama, Republic of de Panama
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costella Kirsch IV, LP (75)
|
|
|
70,550
|
|
|
|
*
|
|
|
|
13,295
|
|
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|
57,255
|
|
|
|
*
|
|
Bill Kirsch, Managing Director
|
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873 Santa Cruz Avenue,
Suite 207
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Menlo Park, CA 94025
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Judson C. Martin (76)
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33,294
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|
*
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|
|
13,295
|
|
|
|
19,999
|
|
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|
*
|
|
1226 Meadowlark Drive
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Scottsbluff, AZ 69361
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|
Yadon Arad Sep IRA (77)
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12,500
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*
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|
12,500
|
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|
0
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|
*
|
|
228 Mountain View Aveune
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Mountain View, CA 55009
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|
|
William F. Herbes (78)
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12,500
|
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|
*
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|
12,500
|
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0
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*
|
|
39 Highcrest Dr.
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Sparta, NJ 07871
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|
Tom Coehlo (79)
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12,500
|
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*
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|
12,500
|
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0
|
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*
|
|
9 Gilbert Hill
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Smiths FL, Bermuda
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|
Tom & Molly
Hicks (80)
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|
|
12,500
|
|
|
|
*
|
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|
12,500
|
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|
|
0
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*
|
|
3018 Corunna Rd
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Flint, MI 48503
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|
Timothy J. Smidt (81)
|
|
|
12,500
|
|
|
|
*
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|
|
12,500
|
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|
|
0
|
|
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|
*
|
|
1393 W. Jarrettsville Road
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Forest Hill, MD 21050
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|
|
Thomas P. Darmstadter (82)
|
|
|
12,500
|
|
|
|
*
|
|
|
|
12,500
|
|
|
|
0
|
|
|
|
*
|
|
2712 S. Medford Drive
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Lufkin, TX 75915
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|
|
Theodore R. Reviglio (83)
|
|
|
12,500
|
|
|
|
*
|
|
|
|
12,500
|
|
|
|
0
|
|
|
|
*
|
|
950 S. Rock Blvd.
|
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|
Sparks, NY 89431
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86
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|
Shares of Common Stock Beneficially Owned
|
|
|
Shares of Common Stock Beneficially
|
|
After the Offering
|
|
|
Owned Prior to the Offering
|
|
Number of
|
|
|
|
|
Number of
|
|
|
|
|
|
Shares
|
|
|
|
|
Shares
|
|
|
|
Number of
|
|
Beneficially
|
|
|
|
|
Beneficially
|
|
Percent of
|
|
Shares Being
|
|
Owned
|
|
Percent of
|
Selling Stockholder
|
|
Owned(1)
|
|
Class
|
|
Offered(2)
|
|
(1)(2)
|
|
Class
|
|
Steven J. & Sherri L.
Glock (84)
|
|
|
12,500
|
|
|
|
*
|
|
|
|
12,500
|
|
|
|
0
|
|
|
|
*
|
|
2718 Fallsbrooke Manor Dr.
|
|
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|
|
|
|
|
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|
Fallston, MD 21047
|
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|
|
|
|
|
|
|
Roger J. Wall & M. Jenai
Sullivan Wall (85)
|
|
|
12,500
|
|
|
|
*
|
|
|
|
12,500
|
|
|
|
0
|
|
|
|
*
|
|
4360 Kahala Avenue
|
|
|
|
|
|
|
|
|
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|
Honolulu, HI 96816
|
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|
|
|
|
|
|
|
|
|
Rocco Fuschetto (86)
|
|
|
12,500
|
|
|
|
*
|
|
|
|
12,500
|
|
|
|
0
|
|
|
|
*
|
|
1988 Rt. 22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scotch Plain, NY 07076
|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
Richard H. Kantor (87)
|
|
|
12,500
|
|
|
|
*
|
|
|
|
12,500
|
|
|
|
0
|
|
|
|
*
|
|
10649 Deerfield Road
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
Montgomery, OH 45242
|
|
|
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|
|
|
|
|
|
|
|
|
|
Richard & Kathleen
Basch (88)
|
|
|
12,500
|
|
|
|
*
|
|
|
|
12,500
|
|
|
|
0
|
|
|
|
*
|
|
60 Wolfpack Road
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mercerville, NJ 08619
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
R & F Industries
Inc. (89)
|
|
|
12,500
|
|
|
|
*
|
|
|
|
12,500
|
|
|
|
0
|
|
|
|
*
|
|
402 W. Davis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
Luling, TX 78648
|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
Maurice & Karen
DeVerteuil (90)
|
|
|
12,500
|
|
|
|
*
|
|
|
|
12,500
|
|
|
|
0
|
|
|
|
*
|
|
20 San Pedro Estate
|
|
|
|
|
|
|
|
|
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|
|
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|
|
Tortuga, Trinidad and Tobago
|
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|
|
|
|
|
|
|
|
|
|
|
Mark J. Ehlert (91)
|
|
|
12,500
|
|
|
|
*
|
|
|
|
12,500
|
|
|
|
0
|
|
|
|
*
|
|
80 W. Paddock Street
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
|
|
Crystal Lake, IL 60014
|
|
|
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|
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|
|
|
|
|
|
|
|
Mark A. Koerner (92)
|
|
|
12,500
|
|
|
|
*
|
|
|
|
12,500
|
|
|
|
0
|
|
|
|
*
|
|
2060 Dean Dr.
|
|
|
|
|
|
|
|
|
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|
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|
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|
|
|
Washington, MI 48094
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Magnus Coxner (93)
|
|
|
12,500
|
|
|
|
*
|
|
|
|
12,500
|
|
|
|
0
|
|
|
|
*
|
|
Jakobsdalsg 33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gothenburg SE-41268, Sweden
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
Lloyd Schill & Deborah
Schill (94)
|
|
|
12,500
|
|
|
|
*
|
|
|
|
12,500
|
|
|
|
0
|
|
|
|
*
|
|
18 Brookwood Ct
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Montgomery, TX 77356
|
|
|
|
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph Sensi Jr. (95)
|
|
|
12,500
|
|
|
|
*
|
|
|
|
12,500
|
|
|
|
0
|
|
|
|
*
|
|
20 Galloping Brook Road
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
Allentown, NJ 08501
|
|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph G. Ruppert (96)
|
|
|
12,500
|
|
|
|
*
|
|
|
|
12,500
|
|
|
|
0
|
|
|
|
*
|
|
5265 Winterview Drive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alexandria, VA 22312
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
Joseph C. Pillari &
Loretta A. Pillari (97)
|
|
|
12,500
|
|
|
|
*
|
|
|
|
12,500
|
|
|
|
0
|
|
|
|
*
|
|
44 Roosevelt St.
|
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|
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|
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|
|
Little Ferry, NJ 07643
|
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|
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|
|
|
|
Joseph A. ManFredo (98)
|
|
|
12,500
|
|
|
|
*
|
|
|
|
12,500
|
|
|
|
0
|
|
|
|
*
|
|
990 Spruce St.
|
|
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|
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|
|
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|
|
Trenton, NJ 08648
|
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|
|
|
|
|
|
|
|
John P. Gangl & Kathleen
J. Gangl (99)
|
|
|
12,500
|
|
|
|
*
|
|
|
|
12,500
|
|
|
|
0
|
|
|
|
*
|
|
7605 N. 128th
|
|
|
|
|
|
|
|
|
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|
|
St. Paul, MN 55110
|
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|
|
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|
|
|
|
|
John Gregory Van Schaack (100)
|
|
|
12,500
|
|
|
|
*
|
|
|
|
12,500
|
|
|
|
0
|
|
|
|
*
|
|
55 Mountain Farm Road
|
|
|
|
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|
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|
|
Tuxedo Park, NY 10987
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of Common Stock Beneficially Owned
|
|
|
Shares of Common Stock Beneficially
|
|
After the Offering
|
|
|
Owned Prior to the Offering
|
|
Number of
|
|
|
|
|
Number of
|
|
|
|
|
|
Shares
|
|
|
|
|
Shares
|
|
|
|
Number of
|
|
Beneficially
|
|
|
|
|
Beneficially
|
|
Percent of
|
|
Shares Being
|
|
Owned
|
|
Percent of
|
Selling Stockholder
|
|
Owned(1)
|
|
Class
|
|
Offered(2)
|
|
(1)(2)
|
|
Class
|
|
John Cotter (101)
|
|
|
12,500
|
|
|
|
*
|
|
|
|
12,500
|
|
|
|
0
|
|
|
|
*
|
|
10918 Yukon Ave
|
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|
Bloomington, MN 55438
|
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|
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|
|
|
|
|
|
|
|
|
|
Jeff Pengra & Allen
Ofstehage (102)
|
|
|
12,500
|
|
|
|
*
|
|
|
|
12,500
|
|
|
|
0
|
|
|
|
*
|
|
558 E. Villaume Ave
|
|
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|
South St. Paul, MN 55075
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
James T. & Linda J. Bego (103)
|
|
|
12,500
|
|
|
|
*
|
|
|
|
12,500
|
|
|
|
0
|
|
|
|
*
|
|
2480 S. Sunland Street
|
|
|
|
|
|
|
|
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|
|
Ridgecrest, CA 93555
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
Ira & Paula Spodek (104)
|
|
|
12,500
|
|
|
|
*
|
|
|
|
12,500
|
|
|
|
0
|
|
|
|
*
|
|
1220 Ave L
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brooklyn, NY 11230
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gerald Singer (105)
|
|
|
12,500
|
|
|
|
*
|
|
|
|
12,500
|
|
|
|
0
|
|
|
|
*
|
|
119 Kemp Rd
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
East Greensboro, NC 27410
|
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fergus Burke (106)
|
|
|
12,500
|
|
|
|
*
|
|
|
|
12,500
|
|
|
|
0
|
|
|
|
*
|
|
Eurovillage co
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Al-Khobar 31952 Saudi Arabia
|
|
|
|
|
|
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eldon Marier (107)
|
|
|
12,500
|
|
|
|
*
|
|
|
|
12,500
|
|
|
|
0
|
|
|
|
*
|
|
4660 Barbato Ct
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inver Grove Heights, MN 55077
|
|
|
|
|
|
|
|
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|
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|
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|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David T. Gallagher (108)
|
|
|
12,500
|
|
|
|
*
|
|
|
|
12,500
|
|
|
|
0
|
|
|
|
*
|
|
18524 Carpenter Street
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homewood, IL 60430
|
|
|
|
|
|
|
|
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|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel I. & Sally E. Waki (109)
|
|
|
12,500
|
|
|
|
*
|
|
|
|
12,500
|
|
|
|
0
|
|
|
|
*
|
|
125 South Wakea Avenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kahului, HI 96732
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christian Tonsberg (110)
|
|
|
12,500
|
|
|
|
*
|
|
|
|
12,500
|
|
|
|
0
|
|
|
|
*
|
|
27 Woody Lane
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Westport, CT 06880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles Lowden (111)
|
|
|
12,500
|
|
|
|
*
|
|
|
|
12,500
|
|
|
|
0
|
|
|
|
*
|
|
11 Woods End Rd
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rumson, NJ 07760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brian E. Rabune (112)
|
|
|
12,500
|
|
|
|
*
|
|
|
|
12,500
|
|
|
|
0
|
|
|
|
*
|
|
2801 Bristol St.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costa Mesa, CA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bobby Sweeney (113)
|
|
|
12,500
|
|
|
|
*
|
|
|
|
12,500
|
|
|
|
0
|
|
|
|
*
|
|
10211 Garden Glen
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Missouri, TX 77459
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bill Feniger (114)
|
|
|
12,500
|
|
|
|
*
|
|
|
|
12,500
|
|
|
|
0
|
|
|
|
*
|
|
805 Chicago St.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Toledo, OH 43611
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bartholomew Murphy (115)
|
|
|
12,500
|
|
|
|
*
|
|
|
|
12,500
|
|
|
|
0
|
|
|
|
*
|
|
1355 Valencia Street
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
San Francisco, CA 94110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adel Sheshtawy (116)
|
|
|
12,500
|
|
|
|
*
|
|
|
|
12,500
|
|
|
|
0
|
|
|
|
*
|
|
6324 Cunningham Rd
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Houston, TX 77041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adam Tymrakiewicz (117)
|
|
|
12,500
|
|
|
|
*
|
|
|
|
12,500
|
|
|
|
0
|
|
|
|
*
|
|
26052 Colman Drive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warren, MI 48091
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of Common Stock Beneficially Owned
|
|
|
Shares of Common Stock Beneficially
|
|
After the Offering
|
|
|
Owned Prior to the Offering
|
|
Number of
|
|
|
|
|
Number of
|
|
|
|
|
|
Shares
|
|
|
|
|
Shares
|
|
|
|
Number of
|
|
Beneficially
|
|
|
|
|
Beneficially
|
|
Percent of
|
|
Shares Being
|
|
Owned
|
|
Percent of
|
Selling Stockholder
|
|
Owned(1)
|
|
Class
|
|
Offered(2)
|
|
(1)(2)
|
|
Class
|
|
Stevan Birnbaum Trust (118)
|
|
|
12,000
|
|
|
|
*
|
|
|
|
12,000
|
|
|
|
0
|
|
|
|
*
|
|
17308 Avenida de la Herradura
|
|
|
|
|
|
|
|
|
|
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|
|
Pacific Palisades, CA 90272
|
|
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|
|
Gries Sports Enterprises Inc (119)
|
|
|
30,791
|
|
|
|
*
|
|
|
|
11,965
|
|
|
|
18,826
|
|
|
|
*
|
|
1801 East Ninth Street Ste. 1600
|
|
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|
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Cleveland, OH 44114
|
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|
|
NG Company (120)
|
|
|
11,250
|
|
|
|
*
|
|
|
|
11,250
|
|
|
|
0
|
|
|
|
*
|
|
556 Rd. 3212 Block 332
|
|
|
|
|
|
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|
Manama, Bahrain
|
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|
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|
|
|
|
|
|
|
|
|
|
|
William N Strawbridge (121)
|
|
|
10,000
|
|
|
|
*
|
|
|
|
10,000
|
|
|
|
0
|
|
|
|
*
|
|
11 Graceful Elm C
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
The Woodlands, TX 77381
|
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|
|
|
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|
|
|
|
|
|
|
Richard Carver (122)
|
|
|
10,000
|
|
|
|
*
|
|
|
|
10,000
|
|
|
|
0
|
|
|
|
*
|
|
3 West Point, New Hyth Lane
|
|
|
|
|
|
|
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|
Larkfield, Maidstone England ME206XT
|
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|
|
|
|
|
|
|
|
|
|
Philip Halpern (123)
|
|
|
10,000
|
|
|
|
*
|
|
|
|
10,000
|
|
|
|
0
|
|
|
|
*
|
|
1375 East 57th Street
|
|
|
|
|
|
|
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|
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|
Chicago, IL 60637
|
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|
|
|
|
|
|
|
|
Nayer Imam (124)
|
|
|
10,000
|
|
|
|
*
|
|
|
|
10,000
|
|
|
|
0
|
|
|
|
*
|
|
6185 Steeplechase Avenue
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
Roanoke, VA 24018
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
Matthew Caldwell-Nicholls (125)
|
|
|
10,000
|
|
|
|
*
|
|
|
|
10,000
|
|
|
|
0
|
|
|
|
*
|
|
Boldero Road Bury St.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Edmuns, UK IP327BS
|
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary Gengenbach (126)
|
|
|
10,000
|
|
|
|
*
|
|
|
|
10,000
|
|
|
|
0
|
|
|
|
*
|
|
3566 E. 106th St.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carmel, IN 46033
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chester P. Sadowski IRA (127)
|
|
|
10,000
|
|
|
|
*
|
|
|
|
10,000
|
|
|
|
0
|
|
|
|
*
|
|
6445 Sweet Gum Street
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Katy, TX 77493
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Shively (128)
|
|
|
9,250
|
|
|
|
*
|
|
|
|
9,250
|
|
|
|
0
|
|
|
|
*
|
|
116 Westbluff Court
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bakersfield, CA 93305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard C. Ernest (129)
|
|
|
7,500
|
|
|
|
*
|
|
|
|
7,500
|
|
|
|
0
|
|
|
|
*
|
|
1365 Wild Rose Lane
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lake Forest, IL 60045
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mayank C. Patel (130)
|
|
|
7,500
|
|
|
|
*
|
|
|
|
7,500
|
|
|
|
0
|
|
|
|
*
|
|
73 Old Dublin Pike Ste. 13C
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Doylestown, PA 18901
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Harriet J. Goldberg Declaration
of Trust (131)
|
|
|
16,922
|
|
|
|
*
|
|
|
|
6,647
|
|
|
|
10,275
|
|
|
|
*
|
|
PO Box 578
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gates Mills, OH 44040
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard Heibel, Trustee of the
Geraldine Heibel Trust (132)
|
|
|
19,494
|
|
|
|
*
|
|
|
|
6,647
|
|
|
|
12,847
|
|
|
|
*
|
|
128 Golden Gate Point
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sarasota, FL 34236
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Drew C. Forhan (133)
|
|
|
20,581
|
|
|
|
*
|
|
|
|
6,647
|
|
|
|
13,934
|
|
|
|
*
|
|
7572 Mannheim Court
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hudson, OH 44236
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MPM Bioequities Investors
Fund LLC (134)
|
|
|
6,375
|
|
|
|
*
|
|
|
|
6,375
|
|
|
|
0
|
|
|
|
*
|
|
601 Gateway Blvd., Suite 350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
South San Francisco, CA 94080
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
89
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of Common Stock Beneficially Owned
|
|
|
Shares of Common Stock Beneficially
|
|
After the Offering
|
|
|
Owned Prior to the Offering
|
|
Number of
|
|
|
|
|
Number of
|
|
|
|
|
|
Shares
|
|
|
|
|
Shares
|
|
|
|
Number of
|
|
Beneficially
|
|
|
|
|
Beneficially
|
|
Percent of
|
|
Shares Being
|
|
Owned
|
|
Percent of
|
Selling Stockholder
|
|
Owned(1)
|
|
Class
|
|
Offered(2)
|
|
(1)(2)
|
|
Class
|
|
William Ristvedt (135)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
4501 Eastwood Rd
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minnetonka, MN 55345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William Campbell (136)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
5571 Mount Audubon Place
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Longmont, CO 80503
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William C. Baisley (137)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
421 Hurst Lane
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dayton, TN 37321
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wayne & Chen Lin (138)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
13 Merlin Place
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pinebrook, NJ 07058
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W.P. Malone Inc. (139)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
518 Clay St.
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
Arkadelphia, AR 71923
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
V. Gopikrishna Reddy (140)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
2790 Covington Way
|
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|
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|
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|
|
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|
Lanett, AL 36863
|
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|
|
|
|
|
|
Thomas R. Bollinger (141)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
609 S. Chestnut St.
|
|
|
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|
Seymour, IN 47274
|
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|
|
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|
|
|
|
|
|
|
Tees & Novelties Inc.
(142)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
102 Passic St.
|
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|
Garfield, NJ 07026
|
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|
|
|
|
|
|
Steven Yaroch & Rita
Yaroch (143)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
4921 Hogans Lake Place
|
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|
Annanoale, VA 22003
|
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|
|
Stephen Weiss (144)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
1 Buffalo Ave. Apt. 22
|
|
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|
Concord, NC 28025
|
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|
|
|
|
|
|
|
|
Sowmini Sriram (145)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
6579 Jeremiw Dr
|
|
|
|
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|
San Jose, CA 95127
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
Robert Jerone (146)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
408 Abington Place
|
|
|
|
|
|
|
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|
|
East Meadow, NY 11554
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert Deane (147)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
20 Chestnut Crescent Bridgemant
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
Corrigaline, Co.
|
|
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|
Cork, Ireland
|
|
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|
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|
|
|
|
|
|
|
|
Richard Ward & Jeffrey
Ward (148)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
24 Oak Lane
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Montville, NJ 07045
|
|
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|
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter Ohler (149)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
3109 Lapour Shibakuen
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tokyo, Japan
105-0014
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
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|
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|
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|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
Paradise Wire & Cable
Defined Benefit Pension Plan (150)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
3116 E. Shea Blvd. PMB 191
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
Phoenix, AZ 85028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of Common Stock Beneficially Owned
|
|
|
Shares of Common Stock Beneficially
|
|
After the Offering
|
|
|
Owned Prior to the Offering
|
|
Number of
|
|
|
|
|
Number of
|
|
|
|
|
|
Shares
|
|
|
|
|
Shares
|
|
|
|
Number of
|
|
Beneficially
|
|
|
|
|
Beneficially
|
|
Percent of
|
|
Shares Being
|
|
Owned
|
|
Percent of
|
Selling Stockholder
|
|
Owned(1)
|
|
Class
|
|
Offered(2)
|
|
(1)(2)
|
|
Class
|
|
William O. Lehmann, Jr. (151)
|
|
|
166,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
160,000
|
|
|
|
*
|
|
c/o Athersys,
Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3201 Carnegie Avenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cleveland, OH
44115-2634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noah Drezner (152)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
2400 Chestnut St.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Apt. 3205
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Movans-Sartoux, France
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nelson Penarreta &
Patricia Davila (153)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
San Jose E 1336y Carlos Arcos
Franco
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quito, Ecuador
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
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|
|
|
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Neil H. & Karen J. Rolstad
(154)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
4681-160th Lane
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NW Andover, MN 55304
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael Moeller (155)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
24808 Upper Trail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carmel, CA 93923
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark Wiley (156)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
4155 E. 1650th Rd
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earlville, IL 60518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark & Judith Bowers (157)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
22 Clovergate Circle
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Woodlands, TX 77382
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marc Kadish (158)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
108 Woodchester Drive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Newton, MA 02467
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Khuan K. Phu (159)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
700 N. San Fernando
Rd
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Los Angeles, CA 90065
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kathleen Egan-Jerone (160)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
408 Abington Place
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
East Meadow, NY 11554
|
|
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|
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|
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
Joseph Q. Gibson (161)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
16417 China Gulch Dr.
|
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|
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|
|
Anderson, CA 96007
|
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|
|
|
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|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
John W. & Linda C. Irvine (162)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
45 Jefferson Dr.
|
|
|
|
|
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|
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|
Hudson, OH 44236
|
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John Boulton (163)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
32 Wayburn Lane
|
|
|
|
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|
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|
|
Huckhall Nottingham, N915-6QN, UK
|
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|
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joel Hirsh (164)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
308 Ambrey Rd
|
|
|
|
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|
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|
Wynnewood, PA 19096
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jim Swift (165)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
420 Mississippi Rvr Blvd.
|
|
|
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|
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|
N. St. Paul, MN 55104
|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
James Hess Inc. ESOP (166)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
2344 Van Ness Ave. #9
|
|
|
|
|
|
|
|
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|
|
|
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|
|
San Francisco, CA 94109
|
|
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|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of Common Stock Beneficially Owned
|
|
|
Shares of Common Stock Beneficially
|
|
After the Offering
|
|
|
Owned Prior to the Offering
|
|
Number of
|
|
|
|
|
Number of
|
|
|
|
|
|
Shares
|
|
|
|
|
Shares
|
|
|
|
Number of
|
|
Beneficially
|
|
|
|
|
Beneficially
|
|
Percent of
|
|
Shares Being
|
|
Owned
|
|
Percent of
|
Selling Stockholder
|
|
Owned(1)
|
|
Class
|
|
Offered(2)
|
|
(1)(2)
|
|
Class
|
|
James H. & Carole A. Deney
(167)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
7106 Agusta Pines Parkway
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
East Spring, TX 77389
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J. Russell LaBarge Jr. Revocable
Trust (168)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
44200 Riverview Ridge
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clinton, MI 48038
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Higginbotham Family Trust (169)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
991 Tulare Street
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pismo Beach, CA 93449
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Henry Schwarzbach (170)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
78 Enterprise Ter
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kingston, RI 02881
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Graham A. Wilshier (171)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
2 Ranforly St.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Otorohanga, New Zealand 2564
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary B. Kabat (172)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
23 Hyde Park Road
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beachwood, OH 44122
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frederick Stanley Shenstone (173)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
8 Currawong Ave
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Normanhurst, Australia NSW2076
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Elco Securities Ltd. (174)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
Loyalist Plaza, Don Mackay Blvd.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marsh Harbor, Abaco, Bahamas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilmus R. Richey (175)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
2361 River Grand Drive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Birmingham, AL 35243
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dennis Weichert (176)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
97 Manchester St.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Glen Rock, PA 17327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David W. Drezner (177)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
60 Sutton Place South, Apt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9K- North
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New York, NY 10022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David E. Anglemeyer (178)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
35253 HWY 64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gilmen, WI 54433
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
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|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cyber Calling Inc. (179)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
5600 Mowry School Rd
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Newark, CA 94560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clay Gibson (180)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
1248 South River Oaks
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Blackshear, GA 31516
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles P. Nicholson (181)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
60 Pine Place
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Norris, TN 37828
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casey C. Christofferson (182)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
2070 Regal Oaks Court
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beloit, WI 53511
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of Common Stock Beneficially Owned
|
|
|
Shares of Common Stock Beneficially
|
|
After the Offering
|
|
|
Owned Prior to the Offering
|
|
Number of
|
|
|
|
|
Number of
|
|
|
|
|
|
Shares
|
|
|
|
|
Shares
|
|
|
|
Number of
|
|
Beneficially
|
|
|
|
|
Beneficially
|
|
Percent of
|
|
Shares Being
|
|
Owned
|
|
Percent of
|
Selling Stockholder
|
|
Owned(1)
|
|
Class
|
|
Offered(2)
|
|
(1)(2)
|
|
Class
|
|
Bernie & Ritas
Limited Partnership (183)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
232 Oceanic Avenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lauderdale by the Sea, FL 33308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ata Rahman (184)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
133 Davis Bridge Road
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
Bernville, PA 19506
|
|
|
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|
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|
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|
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|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Antonius Dekonink (185)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
16 Cranberry Drive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cream Ridge, NJ 08514
|
|
|
|
|
|
|
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|
|
|
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|
|
|
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|
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alan M. Johnson III &
Marta I. Johnson (186)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
10712 Burbank Dr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Potomac, MD 20854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alan Kushner (187)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
14-08
209 St.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bayside, NY 11360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ahmed Mohamed (188)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
150-38
16th Rd
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Whitestone, NY 11357
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Abraham Garfinkel (189)
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
0
|
|
|
|
*
|
|
879 E. 27 St.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brooklyn, NY 11210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lisbeth Kelsey (190)
|
|
|
15,582
|
|
|
|
*
|
|
|
|
5,583
|
|
|
|
9,999
|
|
|
|
*
|
|
Costella Kirsch
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
873 Santa Cruz Avenue,
Suite 207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Menlo Park, CA 94025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Primus Executive Fund, LP (191)
|
|
|
20,604
|
|
|
|
*
|
|
|
|
5,317
|
|
|
|
15,287
|
|
|
|
*
|
|
Attn: William Mulligan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5900 Landerbrook Drive #200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mayfield Hts., OH 44124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard Ginn, Managing
Director & CFO (192)
|
|
|
6,658
|
|
|
|
*
|
|
|
|
2,659
|
|
|
|
3,999
|
|
|
|
*
|
|
Costella Kirsch
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
873 Santa Cruz Avenue,
Suite 207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Menlo Park, CA 94025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kelly Cook, Managing Director (193)
|
|
|
6,658
|
|
|
|
*
|
|
|
|
2,659
|
|
|
|
3,999
|
|
|
|
*
|
|
Costella Kirsch
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
873 Santa Cruz Avenue,
Suite 207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Menlo Park, CA 94025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William Kirsch, Managing Director
(194)
|
|
|
4,393
|
|
|
|
*
|
|
|
|
2,393
|
|
|
|
2,000
|
|
|
|
*
|
|
Costella Kirsch
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
873 Santa Cruz Avenue,
Suite 207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Menlo Park, CA 94025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Laura Campbell (195)
|
|
|
83,329
|
|
|
|
*
|
|
|
|
1,330
|
|
|
|
81,999
|
|
|
|
*
|
|
c/o Athersys,
Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3201 Carnegie Avenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cleveland, OH
44115-2634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John R. Van Bokkelen (196)
|
|
|
4,530
|
|
|
|
*
|
|
|
|
1,330
|
|
|
|
3,200
|
|
|
|
*
|
|
c/o Bond
Services of CA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2300 Clayton Road #1440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Concord, CA 94520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roger Monteforte (197)
|
|
|
3,172
|
|
|
|
*
|
|
|
|
3,172
|
|
|
|
0
|
|
|
|
*
|
|
16 Greene St. Apt. 1N
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New York, NY 10013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of Common Stock Beneficially Owned
|
|
|
Shares of Common Stock Beneficially
|
|
After the Offering
|
|
|
Owned Prior to the Offering
|
|
Number of
|
|
|
|
|
Number of
|
|
|
|
|
|
Shares
|
|
|
|
|
Shares
|
|
|
|
Number of
|
|
Beneficially
|
|
|
|
|
Beneficially
|
|
Percent of
|
|
Shares Being
|
|
Owned
|
|
Percent of
|
Selling Stockholder
|
|
Owned(1)
|
|
Class
|
|
Offered(2)
|
|
(1)(2)
|
|
Class
|
|
Peter Viglione (197)
|
|
|
276
|
|
|
|
*
|
|
|
|
276
|
|
|
|
0
|
|
|
|
*
|
|
35 Hudson At. Apt. 2810
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jersey City, NJ 07302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard Perez (197)
|
|
|
276
|
|
|
|
*
|
|
|
|
276
|
|
|
|
0
|
|
|
|
*
|
|
180 West End Ave. Apt. 25J
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New York, NY 10023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James Eichner (197)
|
|
|
1,243
|
|
|
|
*
|
|
|
|
1,243
|
|
|
|
0
|
|
|
|
*
|
|
29-23 210th Place
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bayside, NY 11360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael Burkoff (197)
|
|
|
553
|
|
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*
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553
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0
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*
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2 Copper Beach Circle
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White Plains, NY 10605
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Kenneth Drekou (197)
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595
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*
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595
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0
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*
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15 Jones St.
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New York, NY 10014
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Damien Defex (197)
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595
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*
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595
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0
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*
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36 E. 36th Street
Apt 7C
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New York, NY, 10016
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Dominic Carlo (197)
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204
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*
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204
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0
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*
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9 Sheridan Ave.
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Staten Island, NY, 10304
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Franz Pierre (197)
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383
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*
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383
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0
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*
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970 Kent Ave. Ste. 505
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Brooklyn, NY 10025
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Peter Phan (197)
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276
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*
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276
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0
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*
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86 Nassau Street, Apt #1,
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New York, NY 10038
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Phil Rodriguez (197)
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1,714
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*
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1,714
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0
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*
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235 Sackett St.
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Brooklyn, NY 11231
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Dan Quinn (197)
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1,768
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*
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1,768
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0
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*
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26 W. 91st. Apt. 1A
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New York, NY 10024
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Kevin Clarkin (197)
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1,505
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*
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1,505
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0
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*
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85 Prospect St. Unit D
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Ridgefield, CT 06877
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Hans Winkler (197)
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1,205
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*
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1,205
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0
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*
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137 E. 38th St. Apt.
3G
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New York, NY 10016
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Andrew Tang (197)
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300
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*
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300
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0
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*
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48-18 38th St.
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Long Island City, NY 11107
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Jodi Viverito (197)
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50
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*
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50
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0
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*
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174 Redwood Ave.
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Inwood, NY 11096
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Joon Rhee (197)
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15,970
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*
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15,970
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0
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*
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153 Page Road
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Valley Stream, NY 11581
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John Phillips (197)
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1,155
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*
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1,155
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0
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*
|
|
9 Zerman Place 1st Floor
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Weehawken, NJ 07068
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94
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Shares of Common Stock Beneficially Owned
|
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Shares of Common Stock Beneficially
|
|
After the Offering
|
|
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Owned Prior to the Offering
|
|
Number of
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Number of
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Shares
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Shares
|
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Number of
|
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Beneficially
|
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|
|
Beneficially
|
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Percent of
|
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Shares Being
|
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Owned
|
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Percent of
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Selling Stockholder
|
|
Owned(1)
|
|
Class
|
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Offered(2)
|
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(1)(2)
|
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Class
|
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Glenn Hechler (197)
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|
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3,263
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*
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3,263
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0
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*
|
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13 Susan Pl.
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Katonah, NY 10536
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Edwin Soenarya (197)
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165
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*
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165
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0
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*
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100 Wilson Ave
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Edison, NJ 08817
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Abhijit Kukreja (197)
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|
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330
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*
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330
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0
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*
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|
100 Warren St. #1705
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Jersey City, NJ 07302
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Hong Liu (197)
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935
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*
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935
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0
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*
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78 Ferncliff Road
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Bloom Field, NJ 07003
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Steven Rednaud (197)
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2,356
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*
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2,356
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0
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*
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6 Woodland Drive
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Darien, CT 06820
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Ronald Cole (197)
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1,870
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*
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1,870
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0
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*
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3 Outlook Drive
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Darien, CT 06820
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Brian Steed (197)
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1,122
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*
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1,122
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0
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*
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30 Meads Street
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Greenwich, CT 06830
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Christopher Bond (197)
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770
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*
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|
770
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0
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|
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|
*
|
|
7 Bentley Road
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Plainview, NY 11809
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Ting Bai (197)
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|
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660
|
|
|
|
*
|
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|
|
660
|
|
|
|
0
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|
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*
|
|
1720 Sunset Ridge Drive
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Grand Prairie, TX 75050
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Keith Medeck (197)
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20,405
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*
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20,405
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0
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*
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250 S. Gillette Ave.
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Bayport, NY 11705
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John Burnham (197)
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3,575
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*
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3,575
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0
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*
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484 East 74th St. Apt 9
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New York, NY 10021
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Dan Kasht (197)
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2,083
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*
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2,083
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0
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*
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19 Old Mamaroneck Ave Apt 3A
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White Plains, NY 10605
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Peter Tagliaferro (197)
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825
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*
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825
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0
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*
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107-49 87th Street
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Ozone Park, NY 11417
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Glen Rauch (197)
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2,233
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*
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2,233
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0
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*
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25 Northgate Dr.
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Syosset, NY 11791
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Stephen Jones (197)
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11
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*
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11
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0
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*
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400 W. 43rd St. #21S
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New York, NY 10036
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Melvin Stoutenburg (197)
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170
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*
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170
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0
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*
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11 South 30th Street
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Wyandanch, NY 11798
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Michael Stanton (197)
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511
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*
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511
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0
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*
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52 Scheurman Terrace
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Warren NJ 07059
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95
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Shares of Common Stock Beneficially Owned
|
|
|
Shares of Common Stock Beneficially
|
|
After the Offering
|
|
|
Owned Prior to the Offering
|
|
Number of
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|
|
Number of
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|
Shares
|
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Shares
|
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|
Number of
|
|
Beneficially
|
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|
|
Beneficially
|
|
Percent of
|
|
Shares Being
|
|
Owned
|
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Percent of
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Selling Stockholder
|
|
Owned(1)
|
|
Class
|
|
Offered(2)
|
|
(1)(2)
|
|
Class
|
|
Richard Perlongo (197)
|
|
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128
|
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|
*
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128
|
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0
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*
|
|
146 Lorraine Loop
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Staten Island, NY 10309
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William Gennity (197)
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255
|
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|
*
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255
|
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0
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*
|
|
142 Wirt Avenue
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Staten Island, NY 10309
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Joe Shabrack (197)
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255
|
|
|
|
*
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255
|
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0
|
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|
*
|
|
94 Hawthorne Ave
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Hawthorne, NJ 07506
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Eric Lyon (197)
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16
|
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*
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16
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0
|
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|
*
|
|
2413 NW 32nd St.
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Boca Raton, FL 33431
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Tom Holly (197)
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16
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*
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16
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0
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|
|
*
|
|
2595 NW 23rd Way
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Boca Raton, FL 33431
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Sam Ruth (197)
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|
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211
|
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|
|
*
|
|
|
|
211
|
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0
|
|
|
|
*
|
|
23402 Savona Court
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Boca Raton, FL 33433
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David LeDoux (197)
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|
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211
|
|
|
|
*
|
|
|
|
211
|
|
|
|
0
|
|
|
|
*
|
|
3114 W. Buena Vista
Dr.
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|
Margate, FL 33063
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Jim Rollerson (197)
|
|
|
542
|
|
|
|
*
|
|
|
|
542
|
|
|
|
0
|
|
|
|
*
|
|
106 N Creek Lane
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Hailey, ID 83333
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Carter Mansbach (197)
|
|
|
1,530
|
|
|
|
*
|
|
|
|
1,530
|
|
|
|
0
|
|
|
|
*
|
|
1404 Langham Terrace
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Heathrow, FL 32746
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NYPPEX (197)
|
|
|
833
|
|
|
|
*
|
|
|
|
833
|
|
|
|
0
|
|
|
|
*
|
|
55 Old Field Point Rd.
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Greenwich, CT 06830
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|
Mark Goldwasser (197)
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|
|
54,000
|
|
|
|
*
|
|
|
|
54,000
|
|
|
|
0
|
|
|
|
*
|
|
2 Cornell St.
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Scarsdale, NY 10583
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|
|
Brian Friedman (197)
|
|
|
52,000
|
|
|
|
*
|
|
|
|
52,000
|
|
|
|
0
|
|
|
|
*
|
|
530 Susan Ln.
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|
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Deerfield, IL 60015
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|
David McCoy (197)
|
|
|
13,000
|
|
|
|
*
|
|
|
|
13,000
|
|
|
|
0
|
|
|
|
*
|
|
2 Gold St. #2710
|
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New York, NY 10038
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|
Robert Daskal (197)
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|
|
13,000
|
|
|
|
*
|
|
|
|
13,000
|
|
|
|
0
|
|
|
|
*
|
|
55 W. Delaware Place Apt.
1007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Chicago, IL 60610
|
|
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|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher Dewey (197)
|
|
|
54,000
|
|
|
|
*
|
|
|
|
54,000
|
|
|
|
0
|
|
|
|
*
|
|
173 Lamington Road Box 23
|
|
|
|
|
|
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|
Oldwick, NJ 08858
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Malcom Plett (197)
|
|
|
8,000
|
|
|
|
*
|
|
|
|
8,000
|
|
|
|
0
|
|
|
|
*
|
|
21 Huguenot Dr.
|
|
|
|
|
|
|
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|
Larchmont, NY 10538
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ryan Rauch (197)
|
|
|
15,000
|
|
|
|
*
|
|
|
|
15,000
|
|
|
|
0
|
|
|
|
*
|
|
102 Calle Cita
|
|
|
|
|
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|
|
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|
San Clemente, CA 92672
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
Shares of Common Stock Beneficially Owned
|
|
|
Shares of Common Stock Beneficially
|
|
After the Offering
|
|
|
Owned Prior to the Offering
|
|
Number of
|
|
|
|
|
Number of
|
|
|
|
|
|
Shares
|
|
|
|
|
Shares
|
|
|
|
Number of
|
|
Beneficially
|
|
|
|
|
Beneficially
|
|
Percent of
|
|
Shares Being
|
|
Owned
|
|
Percent of
|
Selling Stockholder
|
|
Owned(1)
|
|
Class
|
|
Offered(2)
|
|
(1)(2)
|
|
Class
|
|
Kay Johnson (197)
|
|
|
8,000
|
|
|
|
*
|
|
|
|
8,000
|
|
|
|
0
|
|
|
|
*
|
|
4720 Somerset Avenue SE
Bellevue, WA 98006
|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rick Wlasiuk (197)
|
|
|
4,000
|
|
|
|
*
|
|
|
|
4,000
|
|
|
|
0
|
|
|
|
*
|
|
7109 Bergen Court
Brooklyn, NY 11234
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leo Satriawan (197)
|
|
|
4,000
|
|
|
|
*
|
|
|
|
4,000
|
|
|
|
0
|
|
|
|
*
|
|
28309 54th Avenue S
Auburn, WA 98001
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter Menachem (197)
|
|
|
10,000
|
|
|
|
*
|
|
|
|
10,000
|
|
|
|
0
|
|
|
|
*
|
|
175 E. Delaware Apt. 7012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chicago, IL 60611
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Shares of common stock issuable under stock options and warrants
that are exercisable within 60 days after
September 30, 2007 are deemed outstanding for computing the
percentage ownership of the selling stockholder holding the
options or warrants, prior to and after giving effect to the
offering, but are not deemed outstanding for computing the
percentage ownership of any other selling stockholder. |
|
|
|
(2) |
|
We do not know when or in what amounts a selling stockholder may
offer shares for sale. The selling stockholders might not sell
any or all of the shares offered by this prospectus. Because the
selling stockholders may offer all or some of the shares
pursuant to this offering and because there are currently no
agreements, arrangements or understandings with respect to the
sale of any of the shares, we cannot estimate the number of the
shares that will be held by the selling stockholders after
completion of the offering. However, for purposes of this table,
we have assumed that, after completion of the offering, none of
the shares covered by this prospectus will be held by the
selling stockholders. |
|
(3) |
|
Samuel D. Isaly, as Managing Partner of the General Partner, has
voting and investment power over the shares of common stock and
warrants to purchase common stock held by Caduceus Private
Investments III, LP. The shares listed in the first column
consist of 2,971,698 shares of common stock and warrants to
purchase 742,925 shares of common stock with an exercise
price equal to $6.00 per share. |
|
(4) |
|
RA Capital has indicated that Peter Kolchinsky and Richard
Aldrich are the beneficial owners of these shares. The shares
listed in the first column consist of 1,178,880 shares of
common stock and warrants to purchase 294,720 shares of
common stock with an exercise price equal to $6.00 per share. |
|
(5) |
|
Jordan S. Davis and Daniel C. Lubin have voting and investment
power over the shares of common stock and warrants to purchase
common stock held by Radius Venture Partners II, L.P. George
Milne, a venture partner at Radius Ventures, LLC, the investment
advisor of Radius Venture Partners II, L.P., serves on our board
of directors. The shares listed in the first column consist of
800,000 shares of common stock and warrants to purchase
400,000 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(6) |
|
Jordan S. Davis and Daniel C. Lubin have voting and investment
power over the shares of common stock and warrants to purchase
common stock held by Radius Venture Partners III QP, L.P.
George Milne, a venture partner at Radius Ventures, LLC, the
investment advisor of Radius Venture Partners III QP, L.P.,
serves on our board of directors. The shares listed in the first
column consist of 696,234 shares of common stock and
warrants to purchase 348,117 shares of common stock with an
exercise price equal to $6.00 per share. |
97
|
|
|
(7) |
|
Hambrecht & Quist has indicated that Daniel Olmstead is the
beneficial owner of these shares. The shares listed in the first
column consist of 472,000 shares of common stock and
warrants to purchase 118,000 shares of common stock with an
exercise price equal to $6.00 per share. |
|
(8) |
|
National Securities Corporation has indicated that Jaime
Montealegre is the beneficial owner of these shares. The shares
listed in the first column consist of 400,000 shares of
common stock and warrants to purchase 167,500 shares of
common stock with an exercise price equal to $6.00 per share. |
|
(9) |
|
Shares listed include 235,242 shares of common stock that
may be purchased upon exercise of presently exercisable warrants
at $6.00 per share. National Securities, a NASD member, was
entitled to receive these securities as partial compensation for
its services as placement agent in the ordinary course of
business and at the time of receiving the securities had no
agreements or understandings, directly or indirectly, with any
person to distribute them. These securities are subject to a
180-day
lock-up
agreement in accordance with the requirements of NASD
Rule 2710(g)(1). |
|
(10) |
|
Cowen & Company, LLC is a NASD member. Cowen is a
broker-dealer registered with the SEC under the Securities
Exchange Act of 1934, and as such may be deemed to be an
underwriter within the meaning of the Securities Act
with respect to the securities that it is offering for resale.
David M. Malcolm, on behalf of Cowen in his capacity as
Executive Vice Chairman, has voting control and investment
discretion over the securities being offered. Mr. Malcolm
disclaims beneficial ownership of such shares. Shares listed
include 546,762 shares of common stock that may be
purchased upon exercise of presently exercisable warrants at
$6.00 per share. Cowen and Company, a NASD member, was entitled
to receive these securities as partial compensation for its
services as placement agent in the ordinary course of business
and at the time of receiving the securities had no agreements or
understandings, directly or indirectly, with any person to
distribute them. These securities are subject to a
180-day
lock-up
agreement in accordance with the requirements of NASD
Rule 2710(g)(1). |
|
(11) |
|
Michael A. Roth and Brian J. Stark have voting and investment
power over the shares of common stock and warrants to purchase
common stock held by SF Capital Partners Ltd., but
Messrs. Roth and Stark disclaim beneficial ownership of
such securities. SF Capital Partners Ltd. has indicated that it
is an affiliate of Reliant Trading, a NASD-registered broker
dealer, but that it purchased the shares in the ordinary course
of business and at a time when it had no agreement or
understanding, directly or indirectly, with any person to
distribute the shares. The shares listed in the first column
consist of 400,000 shares of common stock and warrants to
purchase 100,000 shares of common stock with an exercise
price equal to $6.00 per share. |
|
(12) |
|
Highbridge Capital Management, LLC is the trading manager of
Highbridge International LLC and has voting control and
investment discretion over the securities held by Highbridge
International LLC. Glenn Dubin and Henry Swieca control
Highbridge Capital Management, LLC and have voting control and
investment discretion over the securities held by Highbridge
International LLC. Each of Highbridge Capital Management, LLC,
Glenn Dubin and Henry Swieca disclaims beneficial ownership of
the securities held by Highbridge International LLC. The shares
listed in the first column consist of 400,000 shares of
common stock and warrants to purchase 100,000 shares of
common stock with an exercise price equal to $6.00 per share. |
|
(13) |
|
Capital Ventures International is under common control with one
or more NASD members, none of whom are currently expected to
participate in the offering contemplated by this prospectus.
Capital Ventures International has indicated that it purchased
the shares in the ordinary course of business and at a time when
it had no agreement or understanding, directly or indirectly,
with any person to distribute the shares. Heights Capital
Management, Inc. has indicated that it, as the authorized agent
of Capital Ventures International, or CVI, has discretionary
authority to vote and dispose of the shares held by CVI and may
be deemed to be the beneficial owner of these shares. Heights
Capital Management, Inc. has also indicated that Martin
Kobinger, in his capacity as Investment Manager of Heights
Capital Management, Inc., may also be deemed to have investment
discretion and voting power over the shares held by CVI, but
that Mr. Kobinger disclaims any such beneficial ownership
of the shares. The shares listed |
98
|
|
|
|
|
in the first column consist of 400,000 shares of common
stock and warrants to purchase 100,000 shares of common
stock with an exercise price equal to $6.00 per share. |
|
(14) |
|
The following directors of Primus Venture Partners IV, Inc.
share voting and investment power over the shares of common
stock and warrants to purchase common stock held by Primus
Venture Partners IV, Inc. for the benefit of its partners:
William C. Mulligan, Loyal W. Wilson, James T. Bartlett,
Jonathan E. Dick and Steve Rothman. Mr. Mulligan is one of
our directors. Limited partners BankAmerica Capital Corporation,
Firstar Capital Corporation, National City Venture Corporation,
Pagic Equity LLC and Banc One Capital Investment Corporation may
be affiliates of various NASD members. Primus has indicated that
it purchased the shares in the ordinary course of business and
at a time when it had no agreement or understanding, directly or
indirectly, with any person to distribute the shares. The shares
listed in the first column consist of 469,105 shares of
common stock and warrants to purchase 25,526 shares of
common stock with an exercise price equal to $6.00 per share. |
|
(15) |
|
Kurt von Emster has voting power over the shares of common stock
and warrants to purchase common stock held by MPM BioEquities
Master Fund LP. The shares listed in the first column
consist of 394,900 shares of common stock and warrants to
purchase 98,725 shares of common stock with an exercise
price equal to $6.00 per share. |
|
(16) |
|
Arthur M. Pappas is chairman of the Investment Committee for
Pappas Ventures, which has voting power over the shares of
common stock and warrants to purchase common stock held by
A.M. Pappas Life Science Ventures III, LP. Wachovia
Investors, Inc. and affiliates of Credit Suisse are limited
partners in the entity that owns the shares of common stock and
warrants to purchase common stock. The shares listed in the
first column consist of 338,928 shares of common stock and
warrants to purchase 84,732 shares of common stock with an
exercise price equal to $6.00 per share. |
|
(17) |
|
Hambrecht & Quist has indicated that Daniel Olmstead is the
beneficial owner of these shares. The shares listed in the first
column consist of 328,000 shares of common stock and
warrants to purchase 82,000 shares of common stock with an
exercise price equal to $6.00 per share. |
|
(18) |
|
Gabe Hoffman has voting and investment power over the shares of
common stock and warrants to purchase common stock held by
Accipiter Life Sciences Fund (Offshore), Ltd. The shares listed
in the first column consist of 319,950 shares of common
stock and warrants to purchase 79,988 shares of common
stock with an exercise price equal to $6.00 per share. |
|
(19) |
|
Gabe Hoffman has voting and investment power over the shares of
common stock and warrants to purchase common stock held by
Accipiter Life Sciences Fund, LP. The shares listed in the first
column consist of 318,500 shares of common stock and
warrants to purchase 79,625 shares of common stock with an
exercise price equal to $6.00 per share. |
|
(20) |
|
The shares listed in the first column consist of
102,569 shares of common stock, warrants to purchase
5,318 shares of common stock with an exercise price equal
to $6.00 per share, and options to purchase 285,000 shares
of common stock with an exercise price equal to $5.00 per share. |
|
(21) |
|
The shares listed in the first column consist of
85,809 shares of common stock and warrants to purchase
5,318 shares of common stock with an exercise price equal
to $6.00 per share, and options to purchase 280,000 shares
of common stock with an exercise price equal to $5.00 per share. |
|
(22) |
|
Mark G. Frantz and Lorelei D. Davis, Ph.D. have voting and
investment power over the shares of common stock and warrants to
purchase common stock held by Frantz Medical Ventures
Fund I, LP. The shares listed in the first column consist
of 326,355 shares of common stock and warrants to purchase
31,589 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(23) |
|
Gabe Hoffman has voting and investment power over the shares of
common stock and warrants to purchase common stock held by
Accipiter Life Sciences Fund II (Offshore), Ltd. The shares
listed in the first column consist of 271,450 shares of
common stock and warrants to purchase 67,863 shares of
common stock with an exercise price equal to $6.00 per share. |
99
|
|
|
(24) |
|
John H. Wyant and John C. McIlwraith, each as Managing Director,
have voting and investment power over the shares of common stock
and warrants to purchase common stock held by Blue Chip Capital
Fund II LP. The shares listed in the first column consist
of 287,445 shares of common stock and warrants to purchase
9,572 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(25) |
|
The shares listed in the first column consist of
200,000 shares of common stock and warrants to purchase
50,000 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(26) |
|
The shares listed in the first column consist of
200,000 shares of common stock and warrants to purchase
50,000 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(27) |
|
Crystal Cascades has indicated that Tim Flaherty is the
beneficial owner of these shares. The shares listed in the first
column consist of 196,400 shares of common stock and
warrants to purchase 29,838 shares of common stock with an
exercise price equal to $6.00 per share. |
|
(28) |
|
Silver Investments Holdings has indicated that Alberto Motta,
Jr. and Stanley Motta are the beneficial owners of these shares.
The shares listed in the first column consist of
151,000 shares of common stock and warrants to purchase
62,750 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(29) |
|
Messrs. Ronald Swenson, Salvadore Gutierrez, Martin Eng,
Brian Best, Jay Cohan, Maurice Werdegar and David Wanek have
voting and investment power over the shares of common stock and
warrants to purchase common stock held by Venture
Lending & Leasing IV, LLC. The shares listed in the
first column consist of 91,906 shares of common stock,
warrants to purchase 7,977 shares of common stock with an
exercise price equal to $6.00 per share, and warrants to
purchase 111,770 shares of common stock with an exercise
price equal to $5.00 per share. |
|
(30) |
|
Wexford Spectrum Investors has indicated that Arthur Amron, as
investment advisor for Wexford Capital LLC, is the beneficial
owner of these shares. The shares listed in the first column
consist of 165,000 shares of common stock and warrants to
purchase 41,250 shares of common stock with an exercise
price equal to $6.00 per share. |
|
(31) |
|
Passport Management, LLC has indicated that it, as the
investment manager of Passport Global Master Fund SPC Ltd
for and on behalf of Portfolio A-Global Strategy, or Passport
Global, shares voting and dispositive power over these shares
with Passport Global. Passport Management, LLC has also
indicated that Passport Capital, LLC, a Delaware limited
liability company, is the managing member of Passport
Management, LLC and that John H. Burbank III, a natural person,
is the sole managing member of Passport Capital, LLC. As a
result, Passport Management, LLC has indicated that each of
Passport Management, LLC, Passport Capital, LLC and John Burbank
may be considered to indirectly beneficially own these shares.
The shares listed in the first column consist of
160,000 shares of common stock and warrants to purchase
40,000 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(32) |
|
Mark Angelo has voting and investment power over the shares of
common stock and warrants to purchase common stock held by
Cornell Capital Partners, L.P. The shares listed in the first
column consist of 160,000 shares of common stock and
warrants to purchase 40,000 shares of common stock with an
exercise price equal to $6.00 per share. |
|
(33) |
|
Gabe Hoffman has voting and investment power over the shares of
common stock and warrants to purchase common stock held by
Accipiter Life Sciences Fund II, LP. The shares listed in
the first column consist of 157,750 shares of common stock
and warrants to purchase 39,437 shares of common stock with
an exercise price equal to $6.00 per share. |
|
(34) |
|
Accipiter has indicated that Gabe Hoffman is the beneficial
owner of these shares. The shares listed in the first column
consist of 132,350 shares of common stock and warrants to
purchase 33,087 shares of common stock with an exercise
price equal to $6.00 per share. |
|
(35) |
|
Jordan S. Davis and Daniel C. Lubin have voting and investment
power over the shares of common stock and warrants to purchase
common stock held by Radius Venture Partners III, L.P. George
Milne, a |
100
|
|
|
|
|
venture partner at Radius Ventures, LLC, the investment advisor
of Radius Venture Partners III, L.P., serves on our board of
directors. The shares listed in the first column consist of
103,766 shares of common stock and warrants to purchase
51,883 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(36) |
|
Mitchell P. Kopin, President of Downsview Capital, Inc., the
general partner of Cranshire Capital, L.P., has sole voting and
investment power over the shares of common stock and warrants to
purchase common stock held by Cranshire Capital, L.P. Each of
Mr. Kopin and Downside Capital, Inc. disclaims beneficial
ownership of the securities. The shares listed in the first
column consist of 79,000 shares of common stock and
warrants to purchase 19,750 shares of common stock with an
exercise price equal to $6.00 per share. |
|
(37) |
|
HSMR Capital Partners has indicated that Richard Vanden Broek is
the beneficial owner of these shares. The shares listed in the
first column consist of 71,000 shares of common stock and
warrants to purchase 17,750 shares of common stock with an
exercise price equal to $6.00 per share. |
|
(38) |
|
The shares listed in the first column consist of
70,000 shares of common stock and warrants to purchase
17,500 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(39) |
|
The shares listed in the first column consist of
97,572 shares of common stock and warrants to purchase
11,381 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(40) |
|
Sio Partners has indicated that Michael Castor, General Partner
of Sio Partners LLC, is the beneficial owner of these shares.
The shares listed in the first column consist of
40,000 shares of common stock and warrants to purchase
10,000 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(41) |
|
Yuanzheng Huang, as General Partner, has voting and investment
power over the shares of common stock and warrants to purchase
common stock held by LBJ 8001 LP. The shares listed in the first
column consist of 40,000 shares of common stock and
warrants to purchase 10,000 shares of common stock with an
exercise price equal to $6.00 per share. |
|
(42) |
|
Bristol Capital Advisors, LLC is the investment advisor to
Bristol Investment Fund, Ltd. Paul Kessler is the manager of
Bristol Capital Advisors, LLC and as such has voting and
investment power over the shares of common stock and warrants to
purchase common stock held by Bristol Investment Fund, Ltd.
Mr. Kessler disclaims beneficial ownership of such
securities. The shares listed in the first column consist of
40,000 shares of common stock and warrants to purchase
10,000 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(43) |
|
The shares listed in the first column consist of
40,000 shares of common stock and warrants to purchase
10,000 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(44) |
|
The selling stockholder is a fund that cedes investment control
to UBS OConnor LLC, who is the investment manager. The
investment manager makes all of the investment/voting decisions.
The shares listed in the first column consist of
154,113 shares of common stock and warrants to purchase
9,838 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(45) |
|
Kenneth Pasternak, as Managing Member of the General Partner,
has voting and investment power over the shares of common stock
and warrants to purchase common stock held by Chestnut Ridge
Partners, LP. Mr. Pasternak has indicated that he is also a
limited partner of Hudson Holdings, which is a NASD member
broker dealer. Chestnut Ridge Partners has indicated that it
purchased the shares in the ordinary course of business and at a
time when it had no agreement or understanding, directly or
indirectly, with any person to distribute the shares.
Mr. Pasternak is a passive investor and plays no role
regarding Hudson securities. The shares listed in the first
column consist of 38,000 shares of common stock and
warrants to purchase 9,500 shares of common stock with an
exercise price equal to $6.00 per share. |
101
|
|
|
(46) |
|
Camber Capital Fund has indicated that Stephen Dubois is the
beneficial owner of these shares. The shares listed in the first
column consist of 37,000 shares of common stock and
warrants to purchase 9,250 shares of common stock with an
exercise price equal to $6.00 per share. |
|
(47) |
|
RHP Master Fund, Ltd. is a party to an investment management
agreement with Rock Hill Investment Management, L.P., a limited
partnership of which the general partner is RHP General Partner,
LLC. Pursuant to such agreement, Rock Hill Investment Management
directs the voting and disposition of shares owned by RHP Master
Fund. Messrs. Wayne Bloch and Peter Lockhart own all of the
interests in RHP General Partner. The aforementioned entities
and individuals disclaim beneficial ownership of our securities
owned by the RHP Master Fund. The shares listed in the first
column consist of 35,000 shares of common stock and
warrants to purchase 8,750 shares of common stock with an
exercise price equal to $6.00 per share. |
|
(48) |
|
The shares listed in the first column consist of
30,000 shares of common stock and warrants to purchase
7,500 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(49) |
|
The shares listed in the first column consist of
30,000 shares of common stock and warrants to purchase
7,500 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(50) |
|
OrbiMed has indicated that Samuel Isaly is the beneficial owner
of these shares. The shares listed in the first column consist
of 28,302 shares of common stock and warrants to purchase
7,075 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(51) |
|
The shares listed in the first column consist of
130,669 shares of common stock and warrants to purchase
5,318 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(52) |
|
Timothy G. Biro, Athersys former director, has voting
and investment power over the shares of common stock and
warrants to purchase common stock held by Ohio Innovation
Fund I, LP. The limited partners of the Fund have
beneficial ownership of the securities through the Fund. The
shares listed in the first column consist of 101,761 shares
of common stock and warrants to purchase 5,318 shares of
common stock with an exercise price equal to $6.00 per share. |
|
(53) |
|
RA Capital has indicated that Peter Kolchinsky and Richard
Aldrich are the beneficial owners of these shares. The shares
listed in the first column consist of 21,120 shares of
common stock and warrants to purchase 5,280 shares of
common stock with an exercise price equal to $6.00 per share. |
|
(54) |
|
Arthur M. Pappas is chairman of the Investment Committee for
Pappas Ventures, which has voting power over the shares of
common stock and warrants to purchase common stock held by PV
III CEO Fund, LP. The shares listed in the first column consist
of 21,072 shares of common stock and warrants to purchase
5,268 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(55) |
|
The shares listed in the first column consist of
20,000 shares of common stock and warrants to purchase
5,000 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(56) |
|
The shares listed in the first column consist of
20,000 shares of common stock and warrants to purchase
5,000 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(57) |
|
The shares listed in the first column consist of
20,000 shares of common stock and warrants to purchase
5,000 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(58) |
|
The shares listed in the first column consist of
20,000 shares of common stock and warrants to purchase
5,000 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(59) |
|
L. Charles Meythaler has voting and investment power over the
shares of common stock and warrants to purchase common stock
held by Meythaler Investment Partners, LC. The shares listed in
the first column consist of 20,000 shares of common stock
and warrants to purchase 5,000 shares of common stock with
an exercise price equal to $6.00 per share. |
|
(60) |
|
The shares listed in the first column consist of
20,000 shares of common stock and warrants to purchase
5,000 shares of common stock with an exercise price equal
to $6.00 per share. |
102
|
|
|
(61) |
|
The shares listed in the first column consist of
20,000 shares of common stock and warrants to purchase
5,000 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(62) |
|
The shares listed in the first column consist of
20,000 shares of common stock and warrants to purchase
5,000 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(63) |
|
The shares listed in the first column consist of
20,000 shares of common stock and warrants to purchase
5,000 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(64) |
|
Goldberg & Associates has indicated that Anthony Onurato is
the beneficial owner of these shares. The shares listed in the
first column consist of 20,000 shares of common stock and
warrants to purchase 5,000 shares of common stock with an
exercise price equal to $6.00 per share. |
|
(65) |
|
The shares listed in the first column consist of
20,000 shares of common stock and warrants to purchase
5,000 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(66) |
|
The shares listed in the first column consist of
20,000 shares of common stock and warrants to purchase
5,000 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(67) |
|
Barry Bergman has indicated that he may be affiliated with NASD
member Credit Suisse, but that he purchased the shares in the
ordinary course of business and at a time when he had no
agreement or understanding, directly or indirectly, with any
person to distribute the shares. The shares listed in the first
column consist of 20,000 shares of common stock and
warrants to purchase 5,000 shares of common stock with an
exercise price equal to $6.00 per share. |
|
(68) |
|
The shares listed in the first column consist of
20,000 shares of common stock and warrants to purchase
5,000 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(69) |
|
The shares listed in the first column consist of
15,000 shares of common stock and warrants to purchase
3,750 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(70) |
|
The shares listed in the first column consist of
15,000 shares of common stock and warrants to purchase
3,750 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(71) |
|
The shares listed in the first column consist of
15,000 shares of common stock and warrants to purchase
3,750 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(72) |
|
The shares listed in the first column consist of
10,000 shares of common stock and warrants to purchase
5,000 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(73) |
|
The shares listed in the first column consist of
10,000 shares of common stock and warrants to purchase
5,000 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(74) |
|
Raul Alvarez has voting and investment power over the shares of
common stock and warrants to purchase common stock held by
Biakum Trading Inc. The shares listed in the first column
consist of 10,000 shares of common stock and warrants to
purchase 5,000 shares of common stock with an exercise
price equal to $6.00 per share. |
|
(75) |
|
William Kirsch has voting and investment power over the shares
of common stock and warrants to purchase common stock held by
Costella Kirsch IV, L.P. The shares listed in the first column
consist of 30,635 shares of common stock, warrants to
purchase 2,659 shares of common stock with an exercise
price equal to $6.00 per share, and warrants to purchase
37,256 shares of common stock with an exercise price equal
to $5.00 per share. |
|
(76) |
|
Mr. Martin is a partner in the following limited liability
companies that hold our securities: Athersys Investors, LLC;
Athersys Investors II, LLC; and Athersys Investors III, LLC. The
shares listed in the first column consist of 30.635 shares
of common stock and warrants to purchase 2,659 shares of
common stock with an exercise price equal to $6.00 per share. |
|
(77) |
|
The shares listed in the first column consist of
10,000 shares of common stock and warrants to purchase
2,500 shares of common stock with an exercise price equal
to $6.00 per share. |
103
|
|
|
(78) |
|
The shares listed in the first column consist of
10,000 shares of common stock and warrants to purchase
2,500 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(79) |
|
The shares listed in the first column consist of
10,000 shares of common stock and warrants to purchase
2,500 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(80) |
|
The shares listed in the first column consist of
10,000 shares of common stock and warrants to purchase
2,500 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(81) |
|
The shares listed in the first column consist of
10,000 shares of common stock and warrants to purchase
2,500 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(82) |
|
The shares listed in the first column consist of
10,000 shares of common stock and warrants to purchase
2,500 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(83) |
|
The shares listed in the first column consist of
10,000 shares of common stock and warrants to purchase
2,500 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(84) |
|
The shares listed in the first column consist of
10,000 shares of common stock and warrants to purchase
2,500 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(85) |
|
The shares listed in the first column consist of
10,000 shares of common stock and warrants to purchase
2,500 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(86) |
|
The shares listed in the first column consist of
10,000 shares of common stock and warrants to purchase
2,500 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(87) |
|
The shares listed in the first column consist of
10,000 shares of common stock and warrants to purchase
2,500 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(88) |
|
The shares listed in the first column consist of
10,000 shares of common stock and warrants to purchase
2,500 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(89) |
|
R & F Industries has indicated that Ray McGlothlin and Stan
McGlothlin are the beneficial owners of these shares. The shares
listed in the first column consist of 10,000 shares of
common stock and warrants to purchase 2,500 shares of
common stock with an exercise price equal to $6.00 per share. |
|
(90) |
|
The shares listed in the first column consist of
10,000 shares of common stock and warrants to purchase
2,500 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(91) |
|
The shares listed in the first column consist of
10,000 shares of common stock and warrants to purchase
2,500 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(92) |
|
The shares listed in the first column consist of
10,000 shares of common stock and warrants to purchase
2,500 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(93) |
|
The shares listed in the first column consist of
10,000 shares of common stock and warrants to purchase
2,500 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(94) |
|
The shares listed in the first column consist of
10,000 shares of common stock and warrants to purchase
2,500 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(95) |
|
Joseph Sensi has indicated that he may be affiliated with NASD
member TFS Securities, but that he purchased the shares in the
ordinary course of business and at a time when he had no
agreement or understanding, directly or indirectly, with any
person to distribute the shares. The shares listed in the first
column consist of 10,000 shares of common stock and
warrants to purchase 2,500 shares of common stock with an
exercise price equal to $6.00 per share. |
|
(96) |
|
The shares listed in the first column consist of
10,000 shares of common stock and warrants to purchase
2,500 shares of common stock with an exercise price equal
to $6.00 per share. |
104
|
|
|
(97) |
|
The shares listed in the first column consist of
10,000 shares of common stock and warrants to purchase
2,500 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(98) |
|
The shares listed in the first column consist of
10,000 shares of common stock and warrants to purchase
2,500 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(99) |
|
The shares listed in the first column consist of
10,000 shares of common stock and warrants to purchase
2,500 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(100) |
|
The shares listed in the first column consist of
10,000 shares of common stock and warrants to purchase
2,500 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(101) |
|
The shares listed in the first column consist of
10,000 shares of common stock and warrants to purchase
2,500 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(102) |
|
The shares listed in the first column consist of
10,000 shares of common stock and warrants to purchase
2,500 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(103) |
|
The shares listed in the first column consist of
10,000 shares of common stock and warrants to purchase
2,500 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(104) |
|
The shares listed in the first column consist of
10,000 shares of common stock and warrants to purchase
2,500 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(105) |
|
The shares listed in the first column consist of
10,000 shares of common stock and warrants to purchase
2,500 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(106) |
|
The shares listed in the first column consist of
10,000 shares of common stock and warrants to purchase
2,500 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(107) |
|
The shares listed in the first column consist of
10,000 shares of common stock and warrants to purchase
2,500 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(108) |
|
The shares listed in the first column consist of
10,000 shares of common stock and warrants to purchase
2,500 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(109) |
|
The shares listed in the first column consist of
10,000 shares of common stock and warrants to purchase
2,500 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(110) |
|
Christian Tonsberg has indicated that he may be affiliated with
NASD member Carnegie Inc., but that he purchased the shares in
the ordinary course of business and at a time when he had no
agreement or understanding, directly or indirectly, with any
person to distribute the shares. The shares listed in the first
column consist of 10,000 shares of common stock and
warrants to purchase 2,500 shares of common stock with an
exercise price equal to $6.00 per share. |
|
(111) |
|
The shares listed in the first column consist of
10,000 shares of common stock and warrants to purchase
2,500 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(112) |
|
The shares listed in the first column consist of
10,000 shares of common stock and warrants to purchase
2,500 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(113) |
|
The shares listed in the first column consist of
10,000 shares of common stock and warrants to purchase
2,500 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(114) |
|
The shares listed in the first column consist of
10,000 shares of common stock and warrants to purchase
2,500 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(115) |
|
The shares listed in the first column consist of
10,000 shares of common stock and warrants to purchase
2,500 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(116) |
|
The shares listed in the first column consist of
10,000 shares of common stock and warrants to purchase
2,500 shares of common stock with an exercise price equal
to $6.00 per share. |
105
|
|
|
(117) |
|
The shares listed in the first column consist of
10,000 shares of common stock and warrants to purchase
2,500 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(118) |
|
Stevan A. Birnbaum has voting and investment power over the
shares of common stock and warrants to purchase common stock
held by the Stevan Birnbaum Trust. The shares listed in the
first column consist of 9,600 shares of common stock and
warrants to purchase 2,400 shares of common stock with an
exercise price equal to $6.00 per share. |
|
(119) |
|
The shares listed in the first column consist of
28,398 shares of common stock and warrants to purchase
2,393 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(120) |
|
NG Company has indicated that Mohammed Ishaq is the beneficial
owner of these shares. The shares listed in the first column
consist of 9,000 shares of common stock and warrants to
purchase 2,250 shares of common stock with an exercise
price equal to $6.00 per share. |
|
(121) |
|
The shares listed in the first column consist of
8,000 shares of common stock and warrants to purchase
2,000 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(122) |
|
The shares listed in the first column consist of
8,000 shares of common stock and warrants to purchase
2,000 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(123) |
|
The shares listed in the first column consist of
8,000 shares of common stock and warrants to purchase
2,000 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(124) |
|
The shares listed in the first column consist of
8,000 shares of common stock and warrants to purchase
2,000 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(125) |
|
The shares listed in the first column consist of
8,000 shares of common stock and warrants to purchase
2,000 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(126) |
|
The shares listed in the first column consist of
8,000 shares of common stock and warrants to purchase
2,000 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(127) |
|
The shares listed in the first column consist of
8,000 shares of common stock and warrants to purchase
2,000 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(128) |
|
The shares listed in the first column consist of
7,400 shares of common stock and warrants to purchase
1,850 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(129) |
|
The shares listed in the first column consist of
6,000 shares of common stock and warrants to purchase
1,500 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(130) |
|
The shares listed in the first column consist of
6,000 shares of common stock and warrants to purchase
1,500 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(131) |
|
The shares listed in the first column consist of
15,593 shares of common stock and warrants to purchase
1,329 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(132) |
|
The shares listed in the first column consist of
18,165 shares of common stock and warrants to purchase
1,329 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(133) |
|
The shares listed in the first column consist of
19,252 shares of common stock and warrants to purchase
1,329 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(134) |
|
Kurt von Emster has voting power over the shares of common stock
and warrants to purchase common stock held by MPM BioEquities
Investors Fund LLC. The shares listed in the first column
consist of 5,100 shares of common stock and warrants to
purchase 1,275 shares of common stock with an exercise
price equal to $6.00 per share. |
|
(135) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
106
|
|
|
(136) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(137) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(138) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(139) |
|
W.P. Malone has indicated that Fred Harris is the beneficial
owner of these shares. The shares listed in the first column
consist of 5,000 shares of common stock and warrants to
purchase 1,250 shares of common stock with an exercise
price equal to $6.00 per share. |
|
(140) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(141) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(142) |
|
Tees & Novelties has indicated that Sanford Ehrlich is the
beneficial owner of these shares. The shares listed in the first
column consist of 5,000 shares of common stock and warrants
to purchase 1,250 shares of common stock with an exercise
price equal to $6.00 per share. |
|
(143) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(144) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(145) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(146) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(147) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(148) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(149) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(150) |
|
Ira Gaines has voting and investment power over the shares of
common stock and warrants to purchase common stock held by
Paradise Wire & Cable Defined Benefit Pension Plan.
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(151) |
|
The shares listed in the first column consist of
5,000 shares of common stock, warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share, and options to purchase 160,000 shares
of common stock with an exercise price equal to $5.00 per share. |
|
(152) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(153) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(154) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
107
|
|
|
(155) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(156) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(157) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(158) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(159) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(160) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(161) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(162) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(163) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(164) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(165) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(166) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(167) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(168) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(169) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(170) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(171) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(172) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(173) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(174) |
|
Elco Securities has indicated that Isaac Coolie is the
beneficial owner of these shares. The shares listed in the first
column consist of 5,000 shares of common stock and warrants
to purchase 1,250 shares of common stock with an exercise
price equal to $6.00 per share. |
|
(175) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
108
|
|
|
(176) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(177) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(178) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(179) |
|
Cyber Calling has indicated that Ou Ou is the beneficial owner
of these shares. The shares listed in the first column consist
of 5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(180) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(181) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(182) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(183) |
|
Bernard and Rita Petreccia have voting and investment power over
the shares of common stock and warrants to purchase common stock
held by Bernies & Ritas Limited
Partnership. The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(184) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(185) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(186) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(187) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(188) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(189) |
|
The shares listed in the first column consist of
5,000 shares of common stock and warrants to purchase
1,250 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(190) |
|
The shares listed in the first column consist of
15,316 shares of common stock and warrants to purchase
266 shares of common stock with an exercise price equal to
$6.00 per share. |
|
(191) |
|
The following directors of Primus Venture Partners IV, Inc.
share voting and investment power over the shares of common
stock and warrants to purchase common stock held by Primus
Executive Fund, LP for the benefit of its partners: William C.
Mulligan, Loyal W. Wilson, James T. Bartlett, Jonathan E. Dick
and Steve Rothman. Mr. Mulligan is one of our directors.
Limited partner Jeffrey S. Stein has indicated that he may be an
affiliate of NASD member Key Banc Capital Markets, Inc. Primus
has indicated that it purchased the shares in the ordinary
course of business and at a time when it had no agreement or
understanding, directly or indirectly, with any person to
distribute the shares. The shares listed in the first column
consist of 19,541 shares of common stock and warrants to
purchase 1,063 shares of common stock with an exercise
price equal to $6.00 per share. |
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(192) |
|
Richard Ginn is a member of the general partner of Costella
Kirsch IV, LP. The shares listed in the first column consist of
6,126 shares of common stock and warrants to purchase
532 shares of common stock with an exercise price equal to
$6.00 per share. |
109
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(193) |
|
Kelly Cook is a member of the general partner of Costella Kirsch
IV, LP. The shares listed in the first column consist of
6,126 shares of common stock and warrants to purchase
532 shares of common stock with an exercise price equal to
$6.00 per share. |
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(194) |
|
The shares listed in the first column consist of
3,064 shares of common stock and warrants to purchase
1,329 shares of common stock with an exercise price equal
to $6.00 per share. |
|
(195) |
|
The shares listed in the first column consist of
3,063 shares of common stock, warrants to purchase
266 shares of common stock with an exercise price equal to
$6.00 per share, and options to purchase 80,000 shares of
common stock with an exercise price of $5.00 per share. |
|
(196) |
|
The shares listed in the first column consist of
4,264 shares of common stock and warrants to purchase
266 shares of common stock with an exercise price equal to
$6.00 per share. |
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(197) |
|
The shares listed in the first column consist solely of warrants
to purchase shares of common stock with an exercise price equal
to $6.00 per share. National Securities Corporation, or NSC, has
advised us that the listed selling stockholder is an associated
person of NSC, received these warrants as a designee of NSC in
the ordinary course of business and at the time of receiving the
securities had no agreements or understandings, directly or
indirectly, with any person to distribute them. NSC was entitled
to receive these securities as partial compensation for its
services as placement agent in the ordinary course of business
and at the time of receiving the securities had no agreements or
understandings, directly or indirectly, with any person to
distribute them. These securities are subject to a
180-day
lock-up agreement in accordance with the requirements of NASD
Rule 2710(g)(1). |
110
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Previous
Independent Accountants
In connection with the merger, on June 11, 2007, we elected
to dismiss S. W. Hatfield, CPA as our registered independent
certified public accounting firm. The reports of S. W. Hatfield,
CPA on the financial statements of BTHC VI for each of the past
two fiscal years contained no adverse opinion or a disclaimer of
opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principles.
The decision to change independent accountants was approved by
the audit committee of our board of directors on June 12,
2007.
During BTHC VIs two most recent fiscal years and through
the date of this prospectus, BTHC VI has had no disagreements
with S. W. Hatfield, CPA on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope
or procedure, which disagreements, if not resolved to the
satisfaction of S. W. Hatfield, CPA, would have caused it to
make reference to the subject matter of such disagreements in
its report on the financial statements of BTHC VI for such
periods.
During BTHC VIs two most recent fiscal years and through
the date of this prospectus, there were no reportable events as
defined under Item 304(a)(1)(v) of
Regulation S-K
adopted by the SEC.
BTHC VI provided S. W. Hatfield, CPA with a copy of this
disclosure before its filing with the SEC. BTHC VI requested the
S. W. Hatfield, CPA furnish it with a letter addressed to the
SEC stating whether it agreed with the above statements. A copy
of such letter, dated June 11, 2007, was filed as
Exhibit 16.1 to our Current Report on
Form 8-K
filed with the SEC on June 14, 2007.
New
Independent Accountants.
The audit committee of our board of directors appointed
Ernst & Young, LLP as our new independent registered
public accounting firm as of June 12, 2007. During the two
most recent fiscal years and through the date of
Ernst & Youngs engagement by us, BTHC VI did not
consult Ernst & Young regarding either (1) the
application of accounting principles to a specified transaction,
either completed or proposed, or the type of audit opinion that
might be rendered on BTHC VIs financial statements, or
(2) any matter that was either the subject of a
disagreement (as defined in
Regulation S-K
Item 304(a)(1)(iv) and the related instructions to
Item 304) or a reportable event (as defined in
Regulation S-K
Item 304(a)(1)(v)). Ernst & Young served as
Athersys independent registered public accounting firm
before the merger.
111
The selling stockholders may, from time to time, sell any or all
of their shares of common stock on any stock exchange, market or
trading facility on which the shares are traded or in private
transactions. These sales may be at fixed or negotiated prices.
The selling stockholders may use any one or more of the
following methods when selling shares:
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ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
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block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction;
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purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
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an exchange distribution in accordance with the rules of the
applicable exchange;
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privately negotiated transactions;
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short sales;
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broker-dealers may agree with the selling stockholders to sell a
specified number of such shares at a stipulated price per share;
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a combination of any such methods of sale; and
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any other method permitted pursuant to applicable law.
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The selling stockholders may also sell shares under
Rule 144 under the Securities Act, if available, rather
than under this prospectus.
Broker-dealers engaged by the selling stockholders may arrange
for other brokers-dealers to participate in sales.
Broker-dealers may receive commissions or discounts from the
selling stockholders (or, if any broker-dealer acts as agent for
the purchaser of shares, from the purchaser) in amounts to be
negotiated. The selling stockholders do not expect these
commissions and discounts to exceed what is customary in the
types of transactions involved. No such broker-dealer will
receive compensation in excess of that permitted by NASD
Rule 2440 and IM-2440. In no event will any broker-dealer
receive total compensation in excess of 8%. Any profits on the
resale of shares of common stock by a broker-dealer acting as
principal might be deemed to be underwriting discounts or
commissions under the Securities Act. Discounts, concessions,
commissions and similar selling expenses, if any, attributable
to the sale of shares will be borne by a selling stockholder.
The selling stockholders may agree to indemnify any agent,
dealer or broker-dealer that participates in transactions
involving sales of the shares if liabilities are imposed on that
person under the Securities Act.
The selling stockholders may from time to time pledge or grant a
security interest in some or all of the shares of common stock
owned by them and, if they default in the performance of their
secured obligations, the pledgees or secured parties may offer
and sell the shares of common stock from time to time under this
prospectus after we have filed a supplement to this prospectus
under Rule 424(b)(3) or other applicable provision of the
Securities Act supplementing or amending the list of selling
stockholders to include the pledgee, transferee or other
successors in interest as selling stockholders under this
prospectus.
The selling stockholders also may transfer the shares of common
stock in other circumstances, in which case the transferees,
pledgees or other successors in interest will be the selling
beneficial owners for purposes of this prospectus and may sell
the shares of common stock from time to time under this
prospectus after we have filed a supplement to this prospectus
under Rule 424(b)(3) or other applicable provision of the
Securities Act supplementing or amending the list of selling
stockholders to include the pledgee, transferee or other
successors in interest as selling stockholders under this
prospectus.
The selling stockholders and any broker-dealers or agents that
are involved in selling the shares of common stock may be deemed
to be underwriters within the meaning of the
Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any
profit on
112
the resale of the shares of common stock purchased by them may
be deemed to be underwriting commissions or discounts under the
Securities Act.
We are required to pay all fees and expenses incident to the
registration of the shares of common stock (other than
underwriting discounts and commissions). We have agreed to
indemnify the selling stockholders against certain losses,
claims, damages and liabilities, including liabilities under the
Securities Act.
The selling stockholders have advised us that they have not
entered into any agreements, understandings or arrangements with
any underwriters or broker-dealers regarding the sale of their
shares of common stock, nor is there an underwriter or
coordinating broker acting in connection with a proposed sale of
shares of common stock by any selling stockholder. If we are
notified by any selling stockholder that any material
arrangement has been entered into with a broker-dealer for the
sale of shares of common stock, if required, we will file a
supplement to this prospectus. If the selling stockholders use
this prospectus for any sale of the shares of common stock, they
will be subject to the prospectus delivery requirements of the
Securities Act.
We have agreed with the selling stockholders to keep the
registration statement of which this prospectus constitutes a
part effective until the earlier of (1) such time as all of
the shares covered by this prospectus have been disposed of
pursuant to and in accordance with the registration statement or
(2) the date on which the shares may be sold pursuant to
Rule 144(k) of the Securities Act. Notwithstanding anything
contained herein to the contrary, an aggregate of
1,093,525 shares of common stock issuable upon exercise of
warrants held by National Securities Corporation, Cowen and
Company, LLC
and/or
associated persons of National Securities
Corporation are subject to a 180 day
lock-up
agreement in accordance with the requirements of NASD
Rule 2710(g)(1) and will not be sold, pledged, assigned,
transferred or hypothecated for a period of 180 days from
the effective date of this prospectus except in accordance with
the requirements of NASD Rule 2710(g)(2).
The anti-manipulation rules of Regulation M under the
Securities Exchange Act of 1934 may apply to sales of our
common stock and activities of the selling stockholders.
Jones Day will pass upon the validity of shares of common stock
being offered hereby. As of September 30, 2007, partners in
the firm of Jones Day owned an aggregate of 3,900 shares of
our common stock.
The consolidated financial statements of Athersys, Inc. at
December 31, 2006 and 2005, and for each of the three years
in the period ended December 31, 2006, appearing in this
prospectus and the registration statement of which this
prospectus forms a part have been audited by Ernst &
Young LLP, independent registered public accounting firm, as set
forth in their report thereon (which contains an explanatory
paragraph describing conditions that raise substantial doubt
about Athersys, Inc.s ability to continue as a going
concern as described in Note A to the consolidated
financial statements) appearing elsewhere herein, and are
included in reliance upon such report given on the authority of
such firm as experts in accounting and auditing.
The consolidated balance sheets of BTHC VI, Inc. as of
December 31, 2006 and 2005 and the related statements of
operations and comprehensive loss, changes in stockholders
equity and cash flows for the years ended December 31, 2006
and 2005 and for the period from November 29, 2004 (date of
bankruptcy settlement) through December 31, 2006,
respectively, incorporated by reference in this prospectus and
the registration statement of which this prospectus forms a part
have been audited by S.W. Hatfield, CPA, independent registered
public accounting firm, as set forth in its report thereon
(which contains an explanatory paragraph describing conditions
that raise substantial doubt about BTHC VI, Inc.s
ability to continue as a going concern as described in
Note D to the consolidated financial statements) appearing
elsewhere herein, and are included in reliance upon such report
given on the authority of such firm as experts in accounting and
auditing.
113
WHERE
YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on
Form S-3
under the Securities Act of 1933 with respect to the common
stock we are offering. This prospectus contains all information
about us and our common stock that would be material to an
investor. The registration statement includes exhibits and
schedules to which you should refer for additional information
about us.
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 herein shall be deemed to be modified or superseded
for purposes of this prospectus to the extent that a statement
contained in or omitted from this prospectus or any accompanying
prospectus supplement, or in any other subsequently filed
document which also is or is deemed to be incorporated by
reference herein, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of
this prospectus.
You may inspect a copy of the registration statement and the
exhibits and schedules to the registration statement without
charge at the offices of the SEC at 100 F Street,
N.E., Washington, DC 20549. You may obtain copies of all or any
part of the registration statement from the Public Reference
Section of the SEC, 100 F Street, N.E., Washington, DC
20549, upon the payment of the prescribed fees. You may obtain
information on the operation of the Public Reference Room by
calling the SEC at
1-800-SEC-0330.
The SEC maintains a web site at www.sec.gov that contains
reports, proxy, and information statements, and other
information regarding registrants like us that file
electronically with the SEC. You can also inspect our
registration statement on the SECs website.
We are required to file annual, quarterly, and current reports,
proxy statements, and other information with the SEC. We intend
to make these filings available on our website. You may read and
copy any reports, statements, or other information we file with
the SEC at the Public Reference Room. You may also request
copies of these documents, for a copying fee, by writing the
SEC, or you can review these documents on the SECs
website, as described above.
All documents that we file under Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act (excluding any information
furnished pursuant to Item 2.02 or Item 7.01 of any
Current Report on
Form 8-K)
that are deemed filed with the SEC will be deemed
incorporated by reference into this prospectus, and will
automatically update and supersede this information. We
specifically incorporate by reference the documents listed below:
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our Annual Report on
Form 10-KSB
for the fiscal year ended December 31, 2006;
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our Quarterly Report on
Form 10-QSB
for the quarter ended March 31, 2007;
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our Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2007, as amended by
Amendment No. 1 to our Quarterly Report on Form 10-Q/A,
filed on October 9, 2007;
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our Current Reports on
Form 8-K,
filed on May 24, 2007; June 14, 2007; July 27,
2007; August 6, 2007; September 6, 2007 and October 9,
2007;
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our Current Reports on
Form 8-K/A,
filed on September 27, 2007 and October 9, 2007; and
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the description of our common stock in our Registrant Statement
on
Form 10-SB,
filed on July 6, 2006, and all amendments or reports filed
for the purpose of updating such description.
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114
We will provide any person, including our beneficial
stockholders, that receives a copy of this prospectus with a
copy of any document incorporated by reference in this
prospectus and any exhibit specifically incorporated by
reference in those documents, at no cost, upon written or oral
request to the following address or phone number:
Laura K. Campbell
Athersys, Inc.
3201 Carnegie Avenue
Cleveland,
Ohio 44115-2634
Telephone: (216)
431-9900
We intend to send our stockholders annual reports containing
audited financial statements and to make available quarterly
reports containing unaudited financial statements for the first
three quarters of each fiscal year.
115
ATHERSYS,
INC.
INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS
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Page
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F-2
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F-3
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F-4
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F-5
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F-6
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F-7
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F-1
Report
of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Athersys, Inc.
We have audited the accompanying consolidated balance sheets of
Athersys, Inc. as of December 31, 2005 and 2006, and the
related consolidated statements of operations, changes in
stockholders equity (deficit), and cash flows for each of
the three years in the period ended December 31, 2006.
These financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. We were not engaged to perform an
audit of the Companys internal control over financial
reporting. Our audits included consideration of internal control
over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of
the Companys internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Athersys, Inc. at December 31, 2005
and 2006, and the consolidated results of its operations and its
cash flows for each of the three years in the period ended
December 31, 2006, in conformity with U.S. generally
accepted accounting principles.
The accompanying financial statements have been prepared
assuming that Athersys, Inc. will continue as a going concern.
As more fully described in Note A, the Company has incurred
recurring operating losses from its inception and lacks
sufficient liquidity to fund its operations. These conditions
raise substantial doubt about the Companys ability to
continue as a going concern. Managements plans in regard
to these matters are also described in Note A. The
financial statements do not include any adjustments to reflect
the possible future effects on the recoverability and
classification of assets or the amounts and classification of
liabilities that may result from the outcome of this uncertainty.
As discussed in Note A to the consolidated financial
statements, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 123(R), Share-Based
Payment, effective January 1, 2006.
As discussed in Note I to the consolidated financial
statements, the Company restated the consolidated balance sheet
at December 31, 2005, and the statement of changes in
stockholders equity (deficit) for the year ended
December 31, 2005.
Cleveland, Ohio
March 22, 2007, except for Notes M and N
as to which the date is July 9, 2007
F-2
Athersys,
Inc.
Consolidated Balance Sheets
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December 31
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2005
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2006
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(Restated)
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(In thousands, except share and per share amounts)
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ASSETS
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Current assets:
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|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,080
|
|
|
$
|
1,528
|
|
Available for sale securities
|
|
|
3,481
|
|
|
|
|
|
Accounts receivable
|
|
|
628
|
|
|
|
872
|
|
Prepaid expenses and other
|
|
|
375
|
|
|
|
361
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
5,564
|
|
|
|
2,761
|
|
Notes receivable from related
parties
|
|
|
682
|
|
|
|
562
|
|
Equipment, net
|
|
|
954
|
|
|
|
509
|
|
Accounts receivable, net
|
|
|
|
|
|
|
117
|
|
Equity investment and other assets
|
|
|
109
|
|
|
|
317
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
7,309
|
|
|
$
|
4,266
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS EQUITY (DEFICIT)
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
365
|
|
|
$
|
898
|
|
Accrued compensation and related
benefits
|
|
|
119
|
|
|
|
423
|
|
Accrued expenses and other
|
|
|
721
|
|
|
|
1,214
|
|
Current portion of long-term debt
|
|
|
2,531
|
|
|
|
3,332
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
3,736
|
|
|
|
5,867
|
|
Long-term debt
|
|
|
4,684
|
|
|
|
1,800
|
|
Convertible promissory notes, net
|
|
|
|
|
|
|
7,510
|
|
Accrued interest
|
|
|
|
|
|
|
214
|
|
Accrued dividends
|
|
|
7,473
|
|
|
|
8,882
|
|
Stockholders
equity see Note N:
|
|
|
|
|
|
|
|
|
Convertible preferred stock, at
stated value; 481,540 shares authorized; 364,524 shares
issued and outstanding at December 31, 2005 and 2006;
aggregate liquidation preference of $68,187 at December 31,
2005 and 2006
|
|
|
68,301
|
|
|
|
68,301
|
|
Common stock, $.001 par
value; 40,000,000 shares authorized; 290,941 and
293,770 shares issued and outstanding at December 31,
2005 and 2006, respectively
|
|
|
|
|
|
|
|
|
Additional paid-in capital
|
|
|
55,179
|
|
|
|
53,495
|
|
Treasury stock, at cost
|
|
|
(250
|
)
|
|
|
(250
|
)
|
Accumulated other comprehensive
loss
|
|
|
(17
|
)
|
|
|
|
|
Unearned compensation
common stock options
|
|
|
(809
|
)
|
|
|
|
|
Accumulated deficit
|
|
|
(130,988
|
)
|
|
|
(141,553
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
(deficit)
|
|
|
(8,584
|
)
|
|
|
(20,007
|
)
|
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders equity (deficit)
|
|
$
|
7,309
|
|
|
$
|
4,266
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
F-3
Athersys,
Inc.
Consolidated Statements of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31
|
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
|
(In thousands, except share and per share amounts)
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
License fees
|
|
$
|
820
|
|
|
$
|
763
|
|
|
$
|
1,908
|
|
Grant revenue
|
|
|
2,318
|
|
|
|
2,833
|
|
|
|
1,817
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
3,138
|
|
|
|
3,596
|
|
|
|
3,725
|
|
Costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
(including stock compensation expense of $2,008, $801, and $276
in 2004, 2005, and 2006, respectively)
|
|
|
12,415
|
|
|
|
12,578
|
|
|
|
9,741
|
|
General and administrative
(including stock compensation expense of $1,481, $657, and $183
in 2004, 2005, and 2006, respectively)
|
|
|
4,717
|
|
|
|
3,755
|
|
|
|
3,347
|
|
Depreciation
|
|
|
1,297
|
|
|
|
982
|
|
|
|
528
|
|
Restructuring costs (including
stock compensation expense of $56 and $(128) in 2004 and 2005,
respectively)
|
|
|
107
|
|
|
|
251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
18,536
|
|
|
|
17,566
|
|
|
|
13,616
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(15,398
|
)
|
|
|
(13,970
|
)
|
|
|
(9,891
|
)
|
Other income
|
|
|
|
|
|
|
18
|
|
|
|
91
|
|
Equity in earnings of
unconsolidated affiliate
|
|
|
|
|
|
|
|
|
|
|
117
|
|
Interest income
|
|
|
317
|
|
|
|
317
|
|
|
|
119
|
|
Interest expense
|
|
|
(73
|
)
|
|
|
(964
|
)
|
|
|
(1,047
|
)
|
Accretion of premium on
convertible debt
|
|
|
|
|
|
|
|
|
|
|
(260
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before cumulative effect
of change in accounting principle
|
|
|
(15,154
|
)
|
|
|
(14,599
|
)
|
|
|
(10,871
|
)
|
Cumulative effect of change in
accounting principle
|
|
|
|
|
|
|
|
|
|
|
306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(15,154
|
)
|
|
$
|
(14,599
|
)
|
|
$
|
(10,565
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock
dividends
|
|
|
(2,325
|
)
|
|
|
(2,253
|
)
|
|
|
(1,408
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to common
stockholders
|
|
$
|
(17,479
|
)
|
|
$
|
(16,852
|
)
|
|
$
|
(11,973
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per
common share attributable to common
stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before cumulative effect of
change in accounting principle
|
|
$
|
(59.82
|
)
|
|
$
|
(57.79
|
)
|
|
$
|
(41.89
|
)
|
Cumulative effect of change in
accounting principle
|
|
|
|
|
|
|
|
|
|
|
1.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(59.82
|
)
|
|
$
|
(57.79
|
)
|
|
$
|
(40.84
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding, basic and diluted
|
|
|
292,173
|
|
|
|
291,612
|
|
|
|
293,142
|
|
See accompanying notes.
F-4
Athersys,
Inc.
Consolidated Statements of Changes in Stockholders Equity
(Deficit)
(In thousands, except share and per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
Unearned
|
|
|
|
|
|
Total
|
|
|
|
Convertible Preferred Stock
|
|
|
Common Stock
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
Compensation
|
|
|
|
|
|
Stockholders
|
|
|
|
Number
|
|
|
Stated
|
|
|
Number
|
|
|
Par
|
|
|
Paid-in
|
|
|
Treasury
|
|
|
Comprehensive
|
|
|
Common Stock
|
|
|
Accumulated
|
|
|
Equity
|
|
|
|
of Shares
|
|
|
Value
|
|
|
of Shares
|
|
|
Value
|
|
|
Capital
|
|
|
Stock
|
|
|
Income (Loss)
|
|
|
Options
|
|
|
Deficit
|
|
|
(Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2004
|
|
|
422,468
|
|
|
$
|
68,301
|
|
|
|
292,068
|
|
|
$
|
|
|
|
$
|
54,720
|
|
|
$
|
|
|
|
$
|
35
|
|
|
$
|
(6,870
|
)
|
|
$
|
(101,235
|
)
|
|
|
14,951
|
|
Issuance of common stock, net
|
|
|
|
|
|
|
|
|
|
|
189
|
|
|
|
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
|
|
Issuance of common stock warrant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
189
|
|
Unearned compensation
common stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
Amortization of unearned
compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,489
|
|
|
|
|
|
|
|
3,489
|
|
Compensation expense related to
options issued to employees and consultants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56
|
|
Forfeitures of common stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(833
|
)
|
|
|
|
|
|
|
|
|
|
|
833
|
|
|
|
|
|
|
|
|
|
Accrued dividends
Class C preferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,208
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,208
|
)
|
Accrued dividends
Class E preferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,117
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,117
|
)
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,154
|
)
|
|
|
(15,154
|
)
|
Unrealized loss on available for
sale securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(70
|
)
|
|
|
|
|
|
|
|
|
|
|
(70
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,224
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2004
|
|
|
422,468
|
|
|
|
68,301
|
|
|
|
292,257
|
|
|
|
|
|
|
|
51,831
|
|
|
|
|
|
|
|
(35
|
)
|
|
|
(2,557
|
)
|
|
|
(116,389
|
)
|
|
|
1,151
|
|
Issuance of common stock, net
|
|
|
|
|
|
|
|
|
|
|
72
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
Repurchase of common and preferred
stock
|
|
|
(57,944
|
)
|
|
|
|
|
|
|
(1,388
|
)
|
|
|
|
|
|
|
|
|
|
|
(250
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(250
|
)
|
Amortization of unearned
compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,330
|
|
|
|
|
|
|
|
1,330
|
|
Forfeitures of common stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(418
|
)
|
|
|
|
|
|
|
|
|
|
|
418
|
|
|
|
|
|
|
|
|
|
Accrued dividends
Class C preferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,306
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,306
|
)
|
Accrued dividends
Class E preferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(947
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(947
|
)
|
Reversal of Class E accrued
preferred dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,016
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14,599
|
)
|
|
|
(14,599
|
)
|
Unrealized loss on available for
sale securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14,581
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2005
(Restated)
|
|
|
364,524
|
|
|
|
68,301
|
|
|
|
290,941
|
|
|
|
|
|
|
|
55,179
|
|
|
|
(250
|
)
|
|
|
(17
|
)
|
|
|
(809
|
)
|
|
|
(130,988
|
)
|
|
|
(8,584
|
)
|
Issuance of common stock
|
|
|
|
|
|
|
|
|
|
|
2,829
|
|
|
|
|
|
|
|
130
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
130
|
|
Issuance of common stock warrant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
250
|
|
Adoption of FAS 123R
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(809
|
)
|
|
|
|
|
|
|
|
|
|
|
809
|
|
|
|
|
|
|
|
|
|
Stock based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
153
|
|
Accrued dividends
Class C preferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,408
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,408
|
)
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,565
|
)
|
|
|
(10,565
|
)
|
Unrealized loss on available for
sale securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,548
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31,
2006
|
|
|
364,524
|
|
|
$
|
68,301
|
|
|
|
293,770
|
|
|
$
|
|
|
|
$
|
53,495
|
|
|
$
|
(250
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(141,553
|
)
|
|
$
|
(20,007
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
F-5
Athersys,
Inc.
Consolidated Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31
|
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(15,154
|
)
|
|
$
|
(14,599
|
)
|
|
$
|
(10,565
|
)
|
Adjustments to reconcile net loss
to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
1,297
|
|
|
|
982
|
|
|
|
528
|
|
Fixed asset impairment
|
|
|
|
|
|
|
87
|
|
|
|
|
|
Gain on sale of equipment
|
|
|
|
|
|
|
(18
|
)
|
|
|
|
|
Equity in earnings of
unconsolidated affiliate
|
|
|
|
|
|
|
|
|
|
|
(117
|
)
|
Accretion of premium on
convertible debt
|
|
|
|
|
|
|
|
|
|
|
260
|
|
Forgiveness of note receivable
from related party
|
|
|
|
|
|
|
|
|
|
|
122
|
|
Compensation common
stock options
|
|
|
3,545
|
|
|
|
1,330
|
|
|
|
459
|
|
Income from cumulative effect of
change in accounting principle
|
|
|
|
|
|
|
|
|
|
|
(306
|
)
|
Amortization of premium (discount)
on available for sale securities and other
|
|
|
125
|
|
|
|
(44
|
)
|
|
|
15
|
|
Changes in operating assets and
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(119
|
)
|
|
|
22
|
|
|
|
(361
|
)
|
Prepaid expenses and other assets
|
|
|
(65
|
)
|
|
|
10
|
|
|
|
21
|
|
Accounts payable and accrued
expenses
|
|
|
(1,297
|
)
|
|
|
112
|
|
|
|
1,546
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating
activities
|
|
|
(11,668
|
)
|
|
|
(12,118
|
)
|
|
|
(8,398
|
)
|
Investing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of available for sale
securities
|
|
|
(12,238
|
)
|
|
|
(5,006
|
)
|
|
|
(3,426
|
)
|
Maturities of available for sale
securities
|
|
|
18,809
|
|
|
|
15,563
|
|
|
|
6,932
|
|
Proceeds from sale of equipment
|
|
|
|
|
|
|
23
|
|
|
|
|
|
Purchases of equipment
|
|
|
(173
|
)
|
|
|
(239
|
)
|
|
|
(83
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by investing
activities
|
|
|
6,398
|
|
|
|
10,341
|
|
|
|
3,423
|
|
Financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal payments on debt
|
|
|
(4,148
|
)
|
|
|
(199
|
)
|
|
|
(2,083
|
)
|
Proceeds from long-term debt
|
|
|
7,500
|
|
|
|
|
|
|
|
|
|
Proceeds from convertible
promissory notes and warrants
|
|
|
|
|
|
|
|
|
|
|
7,500
|
|
Deferred financing costs
|
|
|
(44
|
)
|
|
|
|
|
|
|
|
|
Cash released from collateral for
debt
|
|
|
670
|
|
|
|
|
|
|
|
|
|
Repurchase of common and preferred
stock held in treasury
|
|
|
|
|
|
|
(250
|
)
|
|
|
|
|
Proceeds from issuance of common
stock, net
|
|
|
15
|
|
|
|
3
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by
financing activities
|
|
|
3,993
|
|
|
|
(446
|
)
|
|
|
5,423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and
cash equivalents
|
|
|
(1,277
|
)
|
|
|
(2,223
|
)
|
|
|
448
|
|
Cash and cash equivalents at
beginning of year
|
|
|
4,580
|
|
|
|
3,303
|
|
|
|
1,080
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end
of year
|
|
$
|
3,303
|
|
|
$
|
1,080
|
|
|
$
|
1,528
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
F-6
Athersys,
Inc.
Notes to Consolidated Financial Statements
|
|
A.
|
Background
and Accounting Policies
|
Background
Athersys, Inc. (Athersys or the Company) is a biopharmaceutical
company engaged in the development and commercialization of
therapeutic products in one business segment. Operations consist
primarily of research and product development activities. Prior
to 2005, the Company had been considered in the development
stage.
The accompanying consolidated financial statements have been
prepared on the basis that the Company will continue as a going
concern. Since inception, the Company has incurred annual losses
and negative cash flows from operations and has an accumulated
deficit at December 31, 2006. The Company expects to incur
additional operating losses over the next several years. The
Company has limited liquidity and capital resources and must
obtain significant additional capital resources in order to
sustain its product development efforts, including preclinical
and clinical testing of anticipated products, pursuit of
regulatory approval, and establishment of production
capabilities, and meet other working capital requirements. The
Company relies on proceeds from equity and debt offerings,
proceeds from the transfer or sale of intellectual property
rights, grant proceeds, and funding from collaborative
arrangements to fund its operations. The Company is currently
pursuing multiple potential collaborative and fundraising
opportunities. If the Company exhausts its liquid assets and is
unable to obtain adequate funding, it may be unable to continue
operations and meet contractual obligations. The financial
statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification
of assets or the amounts and classification of liabilities that
may result from the outcome of this uncertainty.
Principles
of Consolidation
The consolidated financial statements include the accounts and
results of operations of the Company and its wholly owned
subsidiaries. All intercompany accounts and transactions have
been eliminated in consolidation. Investments in joint ventures
and collaborations are accounted for using the equity method
when the Company does not control the investee but has the
ability to exercise significant influence over the
investees operations and financial policies.
Revenue
Recognition
The Companys revenue recognition policies are in
accordance with the SEC Staff Accounting Bulletin No. 104,
Revenue Recognition, and Emerging Issues Task Force
No. 00-21,
Revenue Arrangements with Multiple Deliverables,
which provide guidance on revenue recognition in financial
statements and are based on the interpretations and practices
developed by the SEC. Some of the Companys agreements
contain multiple elements, including technology access and
development fees, research funding, milestones and royalty
obligations.
Revenue is recognized over the period that Athersys performs its
required activities under the terms of various agreements.
Revenue from transactions that do not require future performance
obligations from Athersys is recognized when performance is
complete and upon customer acceptance (if applicable), and when
collectibility is reasonably assured. Athersys defers
nonrefundable upfront fees under its collaborations and
recognize them over the period in which it performs services,
using various factors specific to the collaboration. Amounts
Athersys receives for research funding are recognized as revenue
as the services are performed. Revenue resulting from the
achievement of milestone events stipulated in the agreements is
recognized when the milestone is achieved.
Our license fee revenue primarily consists of fees received from
a collaborator, 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). Upon acceptance by the collaborator of a cell line
for use in its
F-7
Athersys,
Inc.
Notes to
Consolidated Financial
Statements (Continued)
own product development efforts, we have no further performance
obligations with respect to the cell line or products developed
using the cell line. In addition, we receive specified payments
upon the collaborators achievement of certain
developmental milestones (e.g., clinical trial phases). We
recognize this nonrefundable license fee revenue when we have
completed our performance (and have no further performance
obligations) thereby triggering a payment to us, or, in the case
of our collaborators development milestones, when a
milestone is achieved by our collaborator.
Revenue from grants consists primarily of funding under cost
reimbursement programs from federal and state sources for
qualified research and development activities performed by
Athersys. Revenue from grants is recorded when earned under the
terms of the agreements.
Cash
and Cash Equivalents
The Company considers all highly liquid investments with a
maturity of three months or less, when purchased, to be cash
equivalents. Cash equivalents are primarily invested in money
market funds. The carrying amount of the Companys cash
equivalents approximates fair value due to the short maturity of
the investments.
Research
and Development
Research and development expenditures, including direct and
allocated overhead expenses, are charged to expense as incurred.
Royalties
The Company may be required to remit royalty payments based on
product sales to certain parties under license agreements. The
Company has not paid any such royalties for the three-year
period ended December 31, 2006.
Financial
Instruments
Management determines the appropriate classification of
investment securities at the time of purchase and reevaluates
such designation as of each balance sheet date. The
Companys investments typically consist primarily of
U.S. government obligations, all of which are classified as
available-for-sale. Available-for-sale securities are carried at
fair value, with the unrealized gains and losses, net of tax,
reported as a separate component of stockholders equity.
The amortized cost of the 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.
Long-Lived
Assets
Equipment is stated at acquired cost less accumulated
depreciation. Laboratory and office equipment are depreciated on
the straight-line basis over the estimated useful lives (three
to seven years).
Impairment of long-lived assets is recognized when events or
changes in circumstances indicate that the carrying amount of
the asset or related group of assets may not be recoverable. If
the expected future undiscounted cash flows are less than the
carrying amount of the asset, an impairment loss is recognized
at that time. Measurement of impairment may be based upon
appraisal, market value of similar assets or discounted cash
flows. No such impairment losses were recorded in 2004 or 2006.
See Note B regarding an impairment loss recorded in 2005.
F-8
Athersys,
Inc.
Notes to
Consolidated Financial
Statements (Continued)
Patent
Costs and Rights
Patent costs and rights are expensed as incurred. As of
December 31, 2006, the Company has filed for broad
intellectual property protection on its proprietary
technologies. The Company currently has numerous
U.S. patent applications and corresponding international
patent applications related to its technologies, as well as many
issued U.S. and international patents.
Comprehensive
Loss
Unrealized gains and losses on the Companys available for
sale securities is the only component of total comprehensive
income or loss. Total comprehensive income or loss has been
disclosed in the consolidated statement of changes in
stockholders equity.
Concentration
of Credit Risk
Accounts receivable are subject to concentration of credit risk
due to the absence of a large number of customers. At
December 31, 2006 and 2005, one customer accounted for 78%
and 15% of accounts receivables, respectively. The Company does
not require collateral from its customers.
Use of
Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those
estimates.
Stock-Based
Compensation
In December 2004, FASB Statement No. 123(R), Share-Based
Payments, was issued as a revision to FASB Statement
No. 123, Accounting for Stock Options. The new
statement is required to be adopted by nonpublic companies in
January 2006. Prior to January 1, 2006, the Company elected
to account for its stock-based compensation in accordance with
the intrinsic value method as described in the provisions of
Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees, and related interpretations,
as permitted by Statement of Financial Accounting Standards
SFAS No. 123. As such, compensation was recorded in
2004 and 2005 on the date of issuance or grant as the excess of
the current estimated market value of the underlying stock over
the purchase or exercise price of the stock option. Any unearned
compensation was recognized over the respective vesting periods
of the equity instruments, if any, using the graded vesting
method as prescribed by Financial Accounting Standards Board
Interpretation No. 28.
Effective January 1, 2006, the Company adopted the fair
value recognition provisions of FASB Statement No. 123(R),
Share-Based Payment, using the
modified-prospective-transition method. Under that transition
method, compensation cost recognized in 2006 includes:
(a) compensation cost for all share-based payments granted
prior to, but not yet vested as of January 1, 2006, based
on the grant date fair value estimated in accordance with the
original provisions of Statement 123, and (b) compensation
cost for all share- based payments granted subsequent to
January 1, 2006, based on the grant-date fair value
estimated in accordance with the provisions of Statement 123(R).
Results for prior periods have not been restated. For some of
the awards granted prior to the adoption of SFAS 123R, the
Company recognized compensation expense on the accelerated
method. For awards granted subsequent to adoption of
SFAS 123R, the Company will recognize expense on the
straight line method.
SFAS No. 123R requires the Company to estimate
forfeitures in calculating the expense relating to share-based
compensation, while previously the Company was permitted to
recognize forfeitures as an expense reduction upon occurrence.
The adjustment to apply estimated forfeitures to previously
recognized share-based compensation was accounted for as a
cumulative effect of a change in accounting principle at
January 1, 2006,
F-9
Athersys,
Inc.
Notes to
Consolidated Financial
Statements (Continued)
and reduced net loss by $305,587 for the year ended
December 31, 2006. As a result of adopting
SFAS No. 123R, the Companys loss from operations
for the year ended December 31, 2006 increased $197,100.
The following table illustrates the effect on net income if the
Company had applied the fair value recognition provisions of
Statement 123 to options granted under the Companys stock
option plans in all periods presented prior to the adoption of
Statement 123(R). For purposes of this pro forma disclosure, the
value of the options is estimated using a Black-Scholes-Merton
option-pricing formula and amortized to expense over the
options vesting periods (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31
|
|
|
|
2004
|
|
|
2005
|
|
|
Net loss attributable to common
stockholders:
|
|
|
|
|
|
|
|
|
As reported
|
|
$
|
(17,479
|
)
|
|
$
|
(16,852
|
)
|
Total stock compensation expense
included in net loss, as reported
|
|
|
3,384
|
|
|
|
1,260
|
|
Total stock compensation expense
under the fair value method for all awards
|
|
|
(3,030
|
)
|
|
|
(2,312
|
)
|
|
|
|
|
|
|
|
|
|
Pro forma net loss attributable to
common stockholders
|
|
$
|
(17,125
|
)
|
|
$
|
(17,904
|
)
|
|
|
|
|
|
|
|
|
|
Net loss per common share:
|
|
|
|
|
|
|
|
|
Basic and diluted as
reported
|
|
$
|
(59.82
|
)
|
|
$
|
(57.79
|
)
|
Basic and diluted pro
forma
|
|
$
|
(58.61
|
)
|
|
$
|
(61.40
|
)
|
The following weighted-average input assumptions were used in
determining the fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
Volatility
|
|
|
51.9
|
%
|
|
|
49.8
|
%
|
|
|
53.6
|
%
|
Risk-free interest rate
|
|
|
3.4
|
%
|
|
|
3.7
|
%
|
|
|
4.8
|
%
|
Expected life of option
|
|
|
4 years
|
|
|
|
4 years
|
|
|
|
4 years
|
|
Expected dividend yield
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
Net
Loss per Share
Basic and diluted net loss per share attributable to common
stockholders has been computed using the weighted-average number
of common stock outstanding during the period. During the three
years ended December 31, 2006, the Company had outstanding
certain options, warrants, convertible debt and convertible
preferred stock which have not been used in the calculation of
diluted net loss per share because, to do so would be
anti-dilutive. As such, the numerator and the denominator used
in computing both basic and diluted net loss per share are equal.
For the years ended December 31, 2004, 2005 and 2006,
outstanding stock options to purchase 149,017, 138,795 and
116,083 shares of common stock, respectively, were not
included in computing diluted earnings per share because their
effects were anti-dilutive.
For the years ended December 31, 2004, 2005 and 2006,
warrants to purchase 39,830, 25,639 and 25,639 shares of common
stock, respectively, and warrants that were issuable but not
outstanding, were not included in computing diluted earnings per
share because their effects were anti-dilutive.
For the years ended December 31, 2004, 2005 and 2006,
443,798, 364,524 and 364,524 shares, respectively, issuable
upon conversion of the convertible preferred stock, were not
included in the computation of diluted earnings per share
because to do so would have been anti-dilutive.
F-10
Athersys,
Inc.
Notes to
Consolidated Financial
Statements (Continued)
For the year ended December 31, 2006, an estimated
160,000 shares issuable upon conversion of the convertible
promissory notes, were not included in the computation of
diluted earnings per share because to do so would have been
anti-dilutive.
Equipment consists of (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
|
2005
|
|
|
2006
|
|
|
Laboratory equipment
|
|
$
|
5,755
|
|
|
$
|
5,825
|
|
Office equipment and leasehold
improvements
|
|
|
3,321
|
|
|
|
3,334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,076
|
|
|
|
9,159
|
|
Accumulated depreciation
|
|
|
(8,122
|
)
|
|
|
(8,650
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
954
|
|
|
$
|
509
|
|
|
|
|
|
|
|
|
|
|
In connection with a restructuring in 2005 (also see
Note J), the Company reduced the carrying value of certain
laboratory equipment to its realizable value, resulting in an
impairment loss of $87,000. The fair value of the equipment was
determined based on prices for similar assets. The impairment
loss is included in restructuring costs in the statement of
operations.
|
|
C.
|
Notes
Receivable From Related Parties
|
The Company had a note receivable from an officer with an unpaid
principal and interest balance of $122,000 in connection with a
loan made in 2002, which was forgiven in 2006. Also, the Company
has a note receivable from the former owner of MCL LLC
(MCL) with an unpaid principal balance of $511,000 as a
result of the merger between the Company and MCL in November
2003 (see Note L). Under the terms of the note, interest
accrued on the unpaid principal at approximately 5% per annum
for the first two years of the note, at which time the accrual
of interest is dependent on certain events at the Company, as
defined in the note agreement. In November 2005, interest on the
note ceased to accrue. Principal and accrued interest is
repayable (i) out of a percentage of proceeds, as defined,
from the sale of shares of the Companys stock held by the
note holder as he elects to sell his shares (the holder owned
27,359 shares at December 31, 2006), and
(ii) upon the achievement of a $500,000 cash milestone
related to the filing of an investigational new drug application
with the U.S. Food and Drug Administration, whereby the Company
has the right to offset $300,000 as repayment on the note unless
the holder elects to receive stock in lieu of cash. If the
proceeds that are subject to repayment of the note are
insufficient to repay the principal and interest in full, then
any remaining balance due will be forgiven by the Company after
the holder has sold all shares of the Companys stock and
the holder is no longer entitled to any milestone consideration
related to the merger.
Investments
The following is a summary of available for sale securities (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
Estimated
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Losses
|
|
|
Gains
|
|
|
Value
|
|
|
December 31, 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government obligations
|
|
$
|
3,498
|
|
|
$
|
(17
|
)
|
|
$
|
|
|
|
$
|
3,481
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-11
Athersys,
Inc.
Notes to
Consolidated Financial
Statements (Continued)
The Company had no significant realized gains or losses on the
sale of available for sale securities for any of the periods
presented. The net unrealized losses on available for sale
securities is included as a component of accumulated other
comprehensive income or loss in stockholders equity and
was $(17,000) as of December 31, 2005.
The amortized cost of available for sale securities approximated
fair value at December 31, 2005, and all maturities were
due in one year or less. Actual maturities may differ from
contractual maturities because the issuers of the securities may
have the right to repay the obligations without prepayment
penalties.
Financing
Arrangements
The Company leases office and laboratory space under an
operating lease. The Company entered into the lease in
April 1, 2000, and a letter agreement in 2003, which
together provide the Company options to renew the lease in
six-month increments through March 2009 at the initial rental
rate. The Company has executed its option to renew through
September 2007. Rent expense for the facility was approximately
$267,000 in each of 2004, 2005, and 2006. The future annual
minimum lease commitment at December 31, 2006, is
approximately $200,000 for 2007.
Long-Term
Debt
A summary of the Companys long-term debt outstanding is as
follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
|
2005
|
|
|
2006
|
|
|
Notes payable to lenders
|
|
$
|
7,215
|
|
|
$
|
5,132
|
|
Less current portion
|
|
|
2,531
|
|
|
|
3,332
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,684
|
|
|
$
|
1,800
|
|
|
|
|
|
|
|
|
|
|
In November 2004, the Company entered into a $7,500,000 note
payable to lenders, the proceeds of which are unrestricted and
used for general corporate purposes. The notes are payable in
30 monthly payments after the initial interest-only period
that expired December 1, 2005, with a fixed interest rate
of 13% and a maturity date of June 1, 2008. A terminal
payment of $487,500 (6.5% of the borrowings) is due June 1,
2008. The debt has no financial covenants, and is secured by
substantially all of the Companys assets. Intellectual
property, however, was initially subject only to a negative
pledge with an automatic spring lien available to the lenders in
the event the cash balance fell below a defined threshold. The
spring lien is in effect starting February 2006, in accordance
with the terms of the agreement. The lien can be released in
accordance with the agreement upon the achievement of certain
levels of financing.
Deferred financing costs of $44,000 were capitalized in 2004 in
connection with the note, which are being amortized over the
term of the note using the effective interest method. As of
December 31, 2006 and 2005, the unamortized deferred
financing costs were $9,000 and $24,000, respectively.
The lenders have the right to receive a milestone payment of
$2,250,000 upon the Companys initial public offering,
sale, merger, or dissolution, as defined. The milestone is
payable in cash; however, if the milestone payment relates to an
initial public offering, the Company may elect to pay 75% of
such milestone in common stock at the per share public offering
price. No amounts have been recorded in relation to the
milestone as of December 31, 2006.
The lenders also have the right to receive warrants upon the
Companys initial public offering, sale, merger, or next
financing event with financial investors. The warrants will be
issued in an amount equal to 7% of loans advanced, and will be
exercisable for the type of equity instrument issued in the
financing event (or common stock if initial public offering,
sale or merger) with an exercise price equal to the price per
share in
F-12
Athersys,
Inc.
Notes to
Consolidated Financial
Statements (Continued)
the financing. In connection with the 2006 loan amendment, the
lenders also have the right to receive additional warrants equal
to 50% of the two deferred principal payments, with the same
terms as the initial warrant rights. No warrants were issued as
of December 31, 2006.
Fair value of the Companys long-term debt at
December 31, 2006, is not determinable due to lack of
marketability of the fixed-rate debt. Interest expense is
representative of cash paid for the years ended
December 31, 2004 and 2005, and the Company paid interest
expense of $832,000 during the year ended December 31, 2006.
In September 2006, the loan was amended to provide for a
potential deferral of four monthly principal payments. Two such
principal payments were deferred, and were subsequently repaid
along with accumulated interest in January 2007. The
amortization of the remaining loan balance is based on the
original terms and was not adjusted as a result of the amendment.
The scheduled maturities of long-term debt are as follows (in
thousands):
|
|
|
|
|
2007
|
|
$
|
3,332
|
|
2008
|
|
|
1,800
|
|
|
|
|
|
|
|
|
$
|
5,132
|
|
|
|
|
|
|
In 2006, the Company entered into a co-development collaboration
with Angiotech Pharmaceuticals, Inc. (Angiotech).
The Company issued a $5 million convertible promissory note
to the collaborator at the inception of the program, which was
followed by the issuance of an additional convertible promissory
note of $5 million in January 2007 upon the achievement of
certain milestones. The notes bear interest at 5%, have a
6-year term,
are unsecured, and are subordinated to the Companys
long-term secured debt. The notes are only convertible into
shares of stock of the same class as issued in the
Companys next bona fide equity financing, as defined, at a
conversion price of 110% of the price per share in the bona fide
equity financing. The notes, if not converted, are repayable
with accrued interest at maturity.
The Company may also receive equity investments and cash
payments based upon the successful achievement of specified
clinical development and commercialization milestones. Under the
terms of the collaboration, the parties plan to jointly fund
clinical development activity. The Company will have lead
responsibility for preclinical and early clinical development
and manufacturing, and Angiotech will take the lead on pivotal
and later clinical trials and commercialization. The parties
will share net profits from the sale of any approved products.
Also in 2006, the Company completed a bridge financing of
$2.5 million in the form of convertible promissory notes.
The notes were issued primarily to existing stockholders of the
Company. The notes bear interest at 10%, have a
3-year term,
and are secured by all the assets of the Company (subordinated
to the Companys secured long-term debt). The notes are
only convertible into shares of stock of the same class as
issued in the Companys next bona fide equity financing, as
defined, at a conversion price equal to the price per share in
the bona fide equity financing. The notes, if not converted, are
repayable with accrued interest at maturity, plus a repayment
fee of 200% of the outstanding principal. Of the total amount
due under the bridge financing at December 31, 2006,
$205,000 is due to three members of management.
The bridge investors also received warrants in connection with
the bridge financing. The warrants are exercisable for shares of
common stock only upon a restructuring of the Companys
capital stock in connection with a bona fide financing. The
number of shares that can be purchased under the warrants is
based on a formula whereby the bridge investors would receive
warrants valued at two times their investment divided by the
pre-money value of the Company upon a restructuring and bona
fide equity financing. The exercise price
F-13
Athersys,
Inc.
Notes to
Consolidated Financial
Statements (Continued)
of the warrants is $0.01 per share. The Company allocated
$250,000 of the purchase price of the debt to the warrants based
on the relative fair value of the notes and the warrants.
The Company has computed a premium on the debt in the amount of
$5,250,000 due upon redemption, which is being accreted over the
term of the notes using the effective interest method.
At December 31, 2006, the Company had net operating loss
and research and development tax credit carry forwards of
approximately $109,909,000 and $5,759,000, respectively, for
income tax purposes. Such losses and credits may be used to
reduce future taxable income and tax liabilities and expire at
various dates between 2013 and 2027.
Significant components of the Companys deferred tax assets
are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
|
2005
|
|
|
2006
|
|
|
Net operating loss carryforwards
|
|
$
|
31,160
|
|
|
$
|
37,369
|
|
Research and development credit
carryforwards
|
|
|
5,132
|
|
|
|
5,759
|
|
Compensation expense
|
|
|
4,224
|
|
|
|
4,275
|
|
Equity in loss of joint ventures
|
|
|
3,077
|
|
|
|
|
|
Other
|
|
|
381
|
|
|
|
568
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
43,974
|
|
|
|
47,971
|
|
Valuation allowance for deferred
tax assets
|
|
|
(43,974
|
)
|
|
|
(47,971
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Because of the Companys cumulative losses, the deferred
tax assets have been fully offset by a valuation allowance. The
Company has not paid income taxes for the three-year period
ended December 31, 2006.
In 2004, the Company issued a warrant to purchase
699 shares of the Companys common stock at $435 per
share related to consulting services provided in 2003. In
January 2007, the warrant was repurchased and cancelled by the
Company for a nominal fee.
In 2005, the Company purchased shares of the Companys
common stock, Class F Convertible Preferred stock and
Class A Convertible Preferred Stock from a stockholder, and
the shares are held in treasury at December 31, 2005 and
2006.
Also see Note D regarding warrants related to the
Companys long-term debt, and Note E regarding
warrants issued in connection with a bridge financing.
F-14
Athersys,
Inc.
Notes to
Consolidated Financial
Statements (Continued)
The following shares of common stock were reserved for future
issuance (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
|
2005
|
|
|
2006
|
|
|
Stock option plans
|
|
|
267
|
|
|
|
277
|
|
Conversion of Class A, B, C,
D, F, and G preferred stock
|
|
|
364
|
|
|
|
364
|
|
Conversion of Blank Check
preferred stock
|
|
|
9
|
|
|
|
9
|
|
Warrants to purchase common stock
|
|
|
26
|
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
666
|
|
|
|
676
|
|
|
|
|
|
|
|
|
|
|
Conversion of notes issued in
connection with collaboration
|
|
|
|
|
|
|
Note E
|
|
Conversion of notes issued in
connection with bridge financing
|
|
|
|
|
|
|
Note E
|
|
Warrants issuable to lenders
related to long-term debt
|
|
|
|
|
|
|
Note D
|
|
Warrants issued to investors in
bridge financing
|
|
|
|
|
|
|
Note E
|
|
Athersys owns 50.2% of Oculus Pharmaceuticals, Inc. (Oculus)
related to a 2001 joint venture. Athersys accounts for its
investment in Oculus under the equity method due to significant
minority investor rights (i.e., substantive
participating rights, as defined by
EITF 96-16)
retained by the other investors. In 2006, a milestone was
achieved and Athersys received $100,000 of stock-based proceeds
in another company related to its investment in Oculus, which is
included in other income on the Companys
2006 statement of operations.
Also in connection with the milestone achievement in 2006,
Oculus received stock based proceeds in another company in the
amount of $260,000. Athersys recognized approximately $117,000
as its share of the Oculus net income, after recapturing prior
losses in excess of the Companys investment in and
advances to the joint venture. Consistent with its
wind-up
strategy, Oculus will remain in existence as a dormant entity
only as long as it is necessary to serve as a pass through of
any further milestone-based consideration and final distribution
to its remaining shareholders. As of December 31, 2005 and
2006, Oculus had no significant assets, liabilities,
stockholders equity or results of operations, other than
the milestone proceeds in 2006 as described above.
In 1999, the Company entered into an agreement to establish a
joint venture with a pharmaceutical company. The joint venture
had no significant assets, liabilities, stockholders
equity or results of operations as of December 31, 2005 and
2006. In November 2006, the Company terminated the related
collaboration agreements with the pharmaceutical company and
dissolved the joint venture effective January 2007. There were
no significant costs or proceeds related to this dissolution.
|
|
I.
|
Convertible
Preferred Stock
|
Each share of the Companys preferred stock, except for
Class E Preferred Stock, is convertible at the
stockholders option at any time into one share of
Athersys common stock, subject to adjustment if the fair value
of each share of common stock is less than the stated value of
the convertible preferred shares, as defined. When and if
declared, all classes of preferred stock, except for
Class C Convertible Preferred Stock and Class E
Preferred Stock, have a noncumulative dividend rate of 8% per
annum. Dividends on the Class C Convertible Preferred Stock
are cumulative at a rate of 8% per annum. Preferred
stockholders, except for Class E Preferred Stockholders,
are entitled to the number of votes they would have upon
conversion of their preferred shares into common stock.
F-15
Athersys,
Inc.
Notes to
Consolidated Financial
Statements (Continued)
The Class E Preferred Stock has limited voting rights and
liquidation rights. As of October 2005, the shares of
Class E Preferred stock were no longer convertible into
shares of common stock, and the 7% accrued dividend was no
longer payable. As the dividend was no longer payable effective
October 2005, the balance sheet and statement of changes in
stockholders equity (deficit) at December 31, 2005,
have been restated to reflect the reversal of accrued dividends
that had been incorrectly recorded in the balance sheet. This
restatement decreases previously reported accrued dividends by
$6,016,000 and increases additional paid-in capital by
$6,016,000. The Company terminated the inactive joint venture
with the Class E Preferred stockholder in November 2006
(see Note H).
In the event of liquidation of the Company, holders of
Class A, B, C, D, E, F, and G Preferred stock shall have
liquidation preferences of $17.89, $36,27, $102.45, $40.40,
$12,015.00, $331.97 and $51.43 per share, respectively, together
with any declared, but unpaid, or accrued dividends over holders
of common stock. The Class F Preferred Stock has a
liquidation preference over the other classes of Preferred Stock.
The authorized, issued and outstanding Class A, B, C, D, E,
F, and G shares of preferred stock were as follows (in
thousands, except per share data) at December 31, 2005 and
2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Issuance
|
|
|
Aggregate
|
|
|
|
Shares
|
|
|
Issued and
|
|
|
Price
|
|
|
Liquidation
|
|
|
|
Authorized
|
|
|
Outstanding
|
|
|
per Share
|
|
|
Preference
|
|
|
Class A
|
|
|
141
|
|
|
|
98
|
|
|
$
|
17.89
|
|
|
$
|
1,753
|
|
Class B
|
|
|
11
|
|
|
|
11
|
|
|
$
|
36.27
|
|
|
|
399
|
|
Class C
|
|
|
148
|
|
|
|
99
|
|
|
$
|
102.45
|
|
|
|
10,143
|
|
Class D
|
|
|
5
|
|
|
|
5
|
|
|
$
|
40.40
|
|
|
|
202
|
|
Class E
|
|
|
1
|
|
|
|
1
|
|
|
$
|
12,015.00
|
|
|
|
12,015
|
|
Class F
|
|
|
144
|
|
|
|
128
|
|
|
$
|
331.97
|
|
|
|
42,492
|
|
Class G
|
|
|
23
|
|
|
|
23
|
|
|
$
|
51.43
|
|
|
|
1,183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
473
|
|
|
|
365
|
|
|
|
|
|
|
$
|
68,187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There were no issuances of preferred stock in 2004 through 2006.
In addition, the Company had 8,962 shares of Blank Check
Preferred Stock authorized at December 31, 2005 and 2006,
that are not included in the table above. These shares were not
issued or outstanding at December 31, 2005 or 2006.
|
|
J.
|
Stock
Option Plans and Restructurings
|
In 1995, the Company adopted the 1995 Incentive Plan of
Athersys, Inc. (the 1995 Plan). The 1995 Plan provides for the
grant of incentive stock options, nonqualified stock options,
stock bonus awards and restricted shares for employees,
directors and consultants. The 1995 Plan carried a
10-year term
and expired in November 2005. No new awards can be granted under
the 1995 Plan, but outstanding awards will continue in full
force and effect according to their terms. As of
December 31, 2006, 92,796 shares of common stock are
reserved to cover outstanding awards under the 1995 Plan. The
options generally vest over periods ranging from three to four
years and generally expire at the end of ten years.
In 2000, the Company adopted the 2000 Stock Incentive Plan (the
2000 Plan). The 2000 Plan provides for the grant of incentive
stock options, nonqualified stock options, appreciation rights,
performance units, performance shares, restricted shares and
deferred shares. The payment of dividend equivalents on awards
granted under the plan is also permitted. As of
December 31, 2006, 181,995 shares of common stock were
authorized for issuance under the 2000 Plan. The options
generally vest over periods ranging from three to four years and
generally expire at the end of ten years.
F-16
Athersys,
Inc.
Notes to
Consolidated Financial
Statements (Continued)
In 2003, the Company completed a restructuring that involved a
reduction in force and an internal prioritization on certain
therapeutic development opportunities. In connection with the
restructuring, the Company granted 1,981 options to certain
employees who were terminated. The stock options were granted
under a separate plan approved by the Companys Board of
Directors, and therefore were not granted under the 1995 Plan or
the 2000 Plan. There are no additional options reserved under
this plan. The options are immediately exercisable and expire at
the end of five years. Of the total restructuring costs,
$107,000 was recognized in 2004 (including stock compensation
related to these options of approximately $56,000) and is
disclosed separately on the statement of operations.
In 2005, the Company completed a restructuring that involved a
reduction in force and the refocusing of the Companys
internal activities, which was completed by December 31,
2005. The total cost of the 2005 restructuring, which primarily
consists of severance payments, reduction of equipment carrying
values, and reversal of stock option compensation, was $251,000
in 2005, and is disclosed separately on the statement of
operations. At December 31, 2005, the severance liability
was $36,000, which was paid in 2006. Also see Note B.
A summary of the Companys stock option activity and
related information is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
|
|
Number
|
|
|
Exercise
|
|
|
Fair
|
|
|
|
of Options
|
|
|
Price
|
|
|
Value
|
|
|
Outstanding January 1, 2004
|
|
|
162,554
|
|
|
$
|
99.86
|
|
|
$
|
132.50
|
|
Granted below deemed market value
|
|
|
215
|
|
|
|
130.27
|
|
|
|
263.32
|
|
Granted equal to deemed market
value
|
|
|
897
|
|
|
|
362.63
|
|
|
|
163.18
|
|
Exercised
|
|
|
(190
|
)
|
|
|
79.50
|
|
|
|
47.14
|
|
Forfeited
|
|
|
(14,459
|
)
|
|
|
191.64
|
|
|
|
186.89
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding December 31, 2004
|
|
|
149,017
|
|
|
|
92.61
|
|
|
|
127.76
|
|
Granted equal to deemed market
value
|
|
|
1,470
|
|
|
|
362.63
|
|
|
|
154.81
|
|
Exercised
|
|
|
(63
|
)
|
|
|
41.84
|
|
|
|
23.71
|
|
Forfeited
|
|
|
(11,628
|
)
|
|
|
133.89
|
|
|
|
121.62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding December 31, 2005
|
|
|
138,796
|
|
|
|
92.05
|
|
|
|
128.59
|
|
Granted equal to deemed market
value
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(72
|
)
|
|
|
83.68
|
|
|
|
41.00
|
|
Forfeited
|
|
|
(22,641
|
)
|
|
|
150.91
|
|
|
|
148.40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding December 31, 2006
|
|
|
116,083
|
|
|
$
|
80.62
|
|
|
$
|
124.69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-17
Athersys,
Inc.
Notes to
Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2006
|
|
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
Number
|
|
|
Remaining
|
|
|
Average
|
|
|
Number
|
|
|
Average
|
|
|
|
of
|
|
|
Contractual
|
|
|
Exercise
|
|
|
of
|
|
|
Exercise
|
|
Exercise Price
|
|
Options
|
|
|
Life
|
|
|
Price
|
|
|
Options
|
|
|
Price
|
|
|
$ 27.89 - 33.47
|
|
|
10,038
|
|
|
|
2.97
|
|
|
$
|
29.85
|
|
|
|
10,038
|
|
|
$
|
29.85
|
|
$ 41.84 - 46.03
|
|
|
51,515
|
|
|
|
1.31
|
|
|
$
|
42.40
|
|
|
|
51,515
|
|
|
$
|
42.40
|
|
$ 69.74 - 83.68
|
|
|
21,008
|
|
|
|
2.18
|
|
|
$
|
70.02
|
|
|
|
21,008
|
|
|
$
|
70.02
|
|
$ 90.66 - 195.26
|
|
|
26,496
|
|
|
|
5.54
|
|
|
$
|
111.02
|
|
|
|
23,804
|
|
|
$
|
110.18
|
|
$223.16 - 435.15
|
|
|
7,026
|
|
|
|
4.99
|
|
|
$
|
348.40
|
|
|
|
6,274
|
|
|
$
|
346.45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
116,083
|
|
|
|
|
|
|
|
|
|
|
|
112,639
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at December 31, 2004, 2005, and 2006,
were approximately 126,082, 127,516, and 112,674, respectively.
The total fair value of shares vested in 2004, 2005, and 2006
was $3,030,000, $2,312,000, and $428,000, respectively. The
aggregate intrinsic value of fully vested option shares and
option shares expected to vest as of December 31, 2006 was
approximately $300,000 and $0, respectively.
|
|
K.
|
Profit
Sharing Plan and 401(k) Plan
|
The Company has a profit sharing and 401(k) plan that covers
substantially all employees. The Plan allows for discretionary
contributions by the Company. The Company made no contributions
to this Plan in 2004, 2005, or 2006.
In 2003, the Company completed a merger with MCL related to the
multipotent adult stem cell (MAPC) technology. The Company
formed a wholly owned subsidiary, ReGenesys LLC, as the entity
into which MCL merged. The results of operations of ReGenesys
LLC have been included since the effective date of the merger.
In addition to the purchase price for the merger, the Company
may be obligated to make certain milestone payments. In 2006,
the first milestone was conferred resulting in the issuance of
2,758 shares of Athersys stock to the former members of MCL
related to the issuance of a patent. The value placed on the
shares was approximately $125,000 using fair value estimates at
the time of the milestone achievement. The Company may be
required to issue up to an additional 1,379 shares of the
Companys common stock and up to $1,000,000 (payable in
cash or shares of common stock at the holders option) in
the event that certain additional milestones relating to the
MAPC technology are achieved, which are related to the receipt
of license fees or equity payments, as defined, of at least
$10 million from collaboration activities and the filing of
an investigational new drug application with the U.S. Food and
Drug Administration.
In April 2007, a 1996 warrant was exercised for
3,215 shares of common stock for a nominal exercise price.
On June 8, 2007, the Company effected a merger into a
wholly-owned subsidiary of a public company (the Merger). The
public company, BTHC VI, Inc. (BTHC VI), was a shell corporation
with substantially no assets, liabilities or operations as of
the date of the merger, and had 299,622 shares of common stock
outstanding. Upon the closing of the Merger, the officers and
directors of Athersys assumed control over the operations of
BTHC VI, and Athersys operations became the sole
operations of BTHC VI on a consolidated basis.
F-18
Athersys,
Inc.
Notes to
Consolidated Financial
Statements (Continued)
In June 2007, prior to the consummation of the Merger, the
Company negotiated with holders of its convertible preferred
stock a planned restructuring of its capital stock, which
included the conversion of the preferred stock into shares of
the Companys common stock, the termination of the warrants
issued to the former holders of Class C Convertible
Preferred Stock and rights to preferred dividends, including the
elimination of the accrued dividends payable to the former
holders of Class C Convertible Preferred Stock. As a
result, immediately prior to the consummation of the Merger, all
convertible preferred stock (including termination of warrants
and elimination of accrued dividends) was converted into
53,341,747 shares of common stock. Upon closing of the Merger,
the 53,341,747 shares of common stock were exchanged for
1,912,356 shares of BTHC VI common stock using the Merger
exchange rate. The Company also retired the shares of preferred
and common stock held in treasury.
Immediately after the Merger, BTHC completed an offering of
13,000,000 shares of common stock for aggregate gross
proceeds of $65,000,000 (The Offering). The Offering included
the issuance of warrants to purchase 3,250,000 shares of
common stock to the investors with an exercise price of $6.00
and a five-year term. BTHC also issued warrants to purchase
500,000 shares of common stock to the lead investor and
warrants to purchase 1,093,525 shares of common stock to the
placement agents, both with an exercise price of $6.00 and a
five-year term. The placement agents received fees of 8.5% of
the gross proceeds, less proceeds from existing investors in the
Company. In consideration for certain advisory services, the
Company paid an affiliate and largest stockholder of BTHC a
one-time fee of $350,000 in cash upon consummation of the merger.
The $10,000,000 of convertible notes issued to the
pharmaceutical company were converted (See
Note E) along with accrued interest upon the closing
of the Offering into 1,885,890 shares of common stock at a
conversion price of $5.50 per share, which was 110% of the price
per share in the Offering in accordance with the note.
The notes issued to the bridge investors (see Note E) were
converted along with accrued interest upon the closing of the
Offering into 531,781 shares of common stock, at a
conversion price of $5.00 per share, which was the price per
share in the Offering. The bridge investors also exercised their
$0.01 warrants upon the conversion of convertible preferred
stock in connection with the Merger for 999,977 shares of
common stock at an exercise price of $10,000. Upon the
conversion of the bridge notes, the bridge investors also
received warrants to purchase 132,945 shares of common
stock at $6.00 per share with a five-year term, which was
consistent with the warrants issued to new investors in the
Offering.
Upon the closing of the Offering, the Company achieved a
milestone related to its stem cell technology and issued
1,379 shares of common stock and paid $500,000 cash to the
former holders of the technology.
In connection with the Merger and the required
Form 8-K
Current Report, these consolidated financial statements have
been updated to include earnings per share data in the
consolidated statement of operations and notes to the
consolidated financial statements. In addition Note O,
Quarterly Financial Data (unaudited), has been included in the
notes to the financial statements.
|
|
N.
|
Restatement
Related to Merger
|
Athersys was deemed to have been the accounting acquirer in the
Merger, as described in Note M. Accordingly, the financial
statements of the Company presented reflect the historical
results of Athersys and do not include the historical financial
results of BTHC VI prior to the consummation of the Merger. The
Companys authorized and issued shares of common and
preferred stock have been retroactively restated for all periods
presented to reflect the Merger exchange rate of 0.0358493.
Basic and diluted net loss per share attributable to common
stockholders has been computed using the retroactively restated
common stock.
F-19
Athersys,
Inc.
Notes to
Consolidated Financial
Statements (Continued)
|
|
O.
|
Quarterly
Financial Data (Unaudited)
|
The following table presents quarterly data for the years ended
December 31, 2005 and 2006, in thousands, except per share
data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
|
First Quarter
|
|
|
Second Quarter
|
|
|
Third Quarter
|
|
|
Fourth Quarter
|
|
|
Full Year
|
|
|
Revenues
|
|
$
|
952
|
|
|
$
|
870
|
|
|
$
|
833
|
|
|
$
|
941
|
|
|
$
|
3,596
|
|
Net loss
|
|
$
|
(3,804
|
)
|
|
$
|
(3,888
|
)
|
|
$
|
(3,542
|
)
|
|
$
|
(3,365
|
)
|
|
$
|
(14,599
|
)
|
Preferred stock dividends
|
|
$
|
(617
|
)
|
|
$
|
(617
|
)
|
|
$
|
(617
|
)
|
|
$
|
(402
|
)
|
|
$
|
(2,253
|
)
|
Net loss attributable to common stockholders
|
|
$
|
(4,421
|
)
|
|
$
|
(4,505
|
)
|
|
$
|
(4,159
|
)
|
|
$
|
(3,767
|
)
|
|
$
|
(16,852
|
)
|
Net loss per share, basic and diluted
|
|
$
|
(15.13
|
)
|
|
$
|
(15.41
|
)
|
|
$
|
(14.30
|
)
|
|
$
|
(12.95
|
)
|
|
$
|
(57.79
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
|
First Quarter
|
|
|
Second Quarter
|
|
|
Third Quarter
|
|
|
Fourth Quarter
|
|
|
Full Year
|
|
|
Revenues
|
|
$
|
629
|
|
|
$
|
490
|
|
|
$
|
1,126
|
|
|
$
|
1,480
|
|
|
$
|
3,725
|
|
Loss before cumulative effect of change in accounting principle
|
|
$
|
(2,793
|
)
|
|
$
|
(3,295
|
)
|
|
$
|
(2,067
|
)
|
|
$
|
(2,716
|
)
|
|
$
|
(10,871
|
)
|
Net loss
|
|
$
|
(2,487
|
)
|
|
$
|
(3,295
|
)
|
|
$
|
(2,067
|
)
|
|
$
|
(2,716
|
)
|
|
$
|
(10,565
|
)
|
Preferred stock dividends
|
|
$
|
(348
|
)
|
|
$
|
(347
|
)
|
|
$
|
(347
|
)
|
|
$
|
(366
|
)
|
|
$
|
(1,408
|
)
|
Net loss attributable to common stockholders
|
|
$
|
(2,835
|
)
|
|
$
|
(3,642
|
)
|
|
$
|
(2,414
|
)
|
|
$
|
(3,082
|
)
|
|
$
|
(11,973
|
)
|
Basic and diluted net loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before cumulative effect of change in accounting principle
|
|
$
|
(10.78
|
)
|
|
$
|
(12.40
|
)
|
|
$
|
(8.22
|
)
|
|
$
|
(10.49
|
)
|
|
$
|
(41.89
|
)
|
Cumulative effect of change in accounting principle
|
|
|
1.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(9.73
|
)
|
|
$
|
(12.40
|
)
|
|
$
|
(8.22
|
)
|
|
$
|
(10.49
|
)
|
|
$
|
(40.84
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-20
BTHC VI,
INC.
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE
SIX MONTHS ENDED JUNE 30, 2006 AND 2007
I-1
BTHC VI,
Inc.
Unaudited Condensed Consolidated Balance
Sheets
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
June 30
|
|
|
|
2006
|
|
|
2007
|
|
|
|
(In thousands, except share and per share data)
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,528
|
|
|
$
|
58,939
|
|
Accounts receivable
|
|
|
872
|
|
|
|
384
|
|
Prepaid expenses and other
|
|
|
361
|
|
|
|
433
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
2,761
|
|
|
|
59,756
|
|
Notes receivable from related parties
|
|
|
562
|
|
|
|
562
|
|
Equipment, net
|
|
|
509
|
|
|
|
355
|
|
Accounts receivable, net
|
|
|
117
|
|
|
|
75
|
|
Equity investment and other assets
|
|
|
317
|
|
|
|
317
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
4,266
|
|
|
$
|
61,065
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
898
|
|
|
$
|
1,008
|
|
Accrued compensation and related benefits
|
|
|
423
|
|
|
|
65
|
|
Accrued expenses and other
|
|
|
1,214
|
|
|
|
1,047
|
|
Current portion of long-term debt, net
|
|
|
3,332
|
|
|
|
3,235
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
5,867
|
|
|
|
5,355
|
|
Long-term debt
|
|
|
1,800
|
|
|
|
|
|
Convertible promissory notes, net
|
|
|
7,510
|
|
|
|
|
|
Accrued interest
|
|
|
214
|
|
|
|
|
|
Accrued dividends
|
|
|
8,882
|
|
|
|
|
|
Stockholders equity (deficit):
|
|
|
|
|
|
|
|
|
Convertible preferred stock, at stated value; no shares
authorized, issued or outstanding at June 30, 2007;
481,540 shares authorized and 364,524 shares issued
and outstanding December 31, 2006
|
|
|
68,301
|
|
|
|
|
|
Preferred stock, 10,000,000 shares authorized and no shares
issued and outstanding at June 30, 2007; no shares
authorized, issued or outstanding at December 31, 2006
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value; 100,000,000 shares
authorized and 18,927,988 shares issued and outstanding at
June 30, 2007; 40,000,000 shares authorized and
293,770 shares issued and outstanding December 31, 2006
|
|
|
|
|
|
|
19
|
|
Additional paid-in capital
|
|
|
53,495
|
|
|
|
207,033
|
|
Treasury stock
|
|
|
(250
|
)
|
|
|
|
|
Accumulated deficit
|
|
|
(141,553
|
)
|
|
|
(151,342
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity (deficit)
|
|
|
(20,007
|
)
|
|
|
55,710
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity (deficit)
|
|
$
|
4,266
|
|
|
$
|
61,065
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited condensed consolidated
financial statements.
I-2
BTHC VI,
Inc.
Unaudited Condensed Consolidated Statements of
Operations
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2007
|
|
|
|
(In thousands, except share and per share data)
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
License fees
|
|
$
|
481
|
|
|
$
|
623
|
|
Grant revenue
|
|
|
638
|
|
|
|
979
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
1,119
|
|
|
|
1,602
|
|
Costs and expenses
|
|
|
|
|
|
|
|
|
Research and development (including stock compensation expense
of $159 and $2,031 in the six months ended June 30, 2006
and 2007, respectively)
|
|
|
4,945
|
|
|
|
7,354
|
|
General and administrative (including stock compensation expense
of $91 and $2,102 in the six months ended June 30, 2006 and
2007, respectively)
|
|
|
1,754
|
|
|
|
4,105
|
|
Depreciation
|
|
|
293
|
|
|
|
155
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
6,992
|
|
|
|
11,614
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(5,873
|
)
|
|
|
(10,012
|
)
|
Other income (loss)
|
|
|
208
|
|
|
|
1,500
|
|
Interest income
|
|
|
67
|
|
|
|
222
|
|
Interest expense see Note 7
|
|
|
(490
|
)
|
|
|
(1,043
|
)
|
Accretion of premium on convertible debt
|
|
|
|
|
|
|
(456
|
)
|
|
|
|
|
|
|
|
|
|
Loss before cumulative effect of change in accounting
principle
|
|
|
(6,088
|
)
|
|
|
(9,789
|
)
|
Cumulative effect of change in accounting principle
|
|
|
306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(5,782
|
)
|
|
$
|
(9,789
|
)
|
|
|
|
|
|
|
|
|
|
Preferred stock dividends
|
|
$
|
(695
|
)
|
|
$
|
(659
|
)
|
Deemed dividend resulting from induced conversion of convertible
preferred stock
|
|
|
|
|
|
|
(4,800
|
)
|
|
|
|
|
|
|
|
|
|
Net loss attributable to common stockholders
|
|
$
|
(6,477
|
)
|
|
$
|
(15,248
|
)
|
|
|
|
|
|
|
|
|
|
Dividends declared per common share
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per common share:
|
|
|
|
|
|
|
|
|
Net loss before cumulative effect of change in accounting
principle
|
|
$
|
(23.19
|
)
|
|
$
|
(5.99
|
)
|
Cumulative effect of change in accounting principle
|
|
|
1.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(22.14
|
)
|
|
$
|
(5.99
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, basic and diluted
|
|
|
292,513
|
|
|
|
2,547,265
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited condensed consolidated
financial statements.
I-3
BTHC VI,
Inc.
Unaudited Condensed Consolidated Statements of Cash
Flows
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Operating activities
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(5,782
|
)
|
|
$
|
(9,789
|
)
|
Adjustments to reconcile net loss
to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
293
|
|
|
|
155
|
|
Equity in earnings of
unconsolidated affiliate
|
|
|
(117
|
)
|
|
|
|
|
Accretion of premium on
convertible debt
|
|
|
|
|
|
|
456
|
|
Forgiveness of note receivable
from related party
|
|
|
122
|
|
|
|
|
|
Compensation common
stock options
|
|
|
250
|
|
|
|
4,133
|
|
Expense related to warrants issued
to lenders
|
|
|
|
|
|
|
438
|
|
Income from cumulative effect of
change in accounting principle
|
|
|
(306
|
)
|
|
|
|
|
Amortization of premium on
available for sale securities and other
|
|
|
24
|
|
|
|
7
|
|
Changes in operating assets and
liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
239
|
|
|
|
530
|
|
Prepaid expenses and other assets
|
|
|
143
|
|
|
|
(72
|
)
|
Accounts payable and accrued
expenses
|
|
|
819
|
|
|
|
(95
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in operating
activities
|
|
|
(4,315
|
)
|
|
|
(4,237
|
)
|
Investing activities
|
|
|
|
|
|
|
|
|
Purchase of available for sale
securities
|
|
|
(3,024
|
)
|
|
|
|
|
Maturities of available for sale
securities
|
|
|
3,804
|
|
|
|
|
|
Purchases of equipment
|
|
|
(67
|
)
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by
investing activities
|
|
|
713
|
|
|
|
(3
|
)
|
Financing activities
|
|
|
|
|
|
|
|
|
Principal payments on debt
|
|
|
(1,222
|
)
|
|
|
(1,843
|
)
|
Proceeds from convertible
promissory note
|
|
|
5,000
|
|
|
|
5,000
|
|
Proceeds from issuance of common
stock, net
|
|
|
6
|
|
|
|
58,494
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing
activities
|
|
|
3,784
|
|
|
|
61,651
|
|
|
|
|
|
|
|
|
|
|
Increase in cash and cash
equivalents
|
|
|
182
|
|
|
|
57,411
|
|
Cash and cash equivalents at
beginning of the period
|
|
|
1,080
|
|
|
|
1,528
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end
of the period
|
|
$
|
1,262
|
|
|
$
|
58,939
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited condensed consolidated
financial statements.
I-4
BTHC VI,
Inc.
Notes to Unaudited Condensed Consolidated
Financial Statements
|
|
1.
|
Background;
Recent Merger and Offering
|
On May 24, 2007, BTHC VI, Inc. (BTHC VI) and
its wholly owned subsidiary, B-VI Acquisition Corp., entered
into an Agreement and Plan of Merger with Athersys, Inc.
(Athersys). Pursuant to the terms of the Agreement
and Plan of Merger, B-VI Acquisition Corp., which BTHC VI
recently had incorporated for the purpose of completing the
merger transaction described herein, merged with and into
Athersys on June 8, 2007, with Athersys continuing as the
surviving entity in the merger (the Merger). As a
result of the Merger, Athersys became our wholly-owned
subsidiary, and the business of Athersys became our sole
operations. Unless otherwise indicated, all references to
the Company are to BTHC VI, together with its
wholly-owned subsidiary, Athersys.
Prior to the consummation of the Merger, the Company negotiated
with holders of its convertible preferred stock a planned
restructuring of its capital stock, which included the
conversion of the preferred stock into shares of the
Companys common stock, the termination of the warrants
issued to the former holders of Class C Convertible
Preferred Stock and the termination of rights to preferred
dividends, including the elimination of the accrued dividends
payable to the former holders of Class C Convertible
Preferred Stock. As a result, immediately prior to the
consummation of the Merger, all convertible preferred stock
(including termination of warrants and elimination of accrued
dividends) was converted into 53,341,747 shares of common stock.
The change to the conversion ratios of the convertible preferred
stock was deemed to be an induced conversion, which resulted in
a $4.8 million deemed dividend and an increase to the net
loss attributable to common stockholders in June 2007. Upon
closing of the Merger, the 53,341,747 shares of common stock
were exchanged for 1,912,356 shares of BTHC VI common stock
using the Merger exchange rate. The Company also retired the
shares of preferred and common stock held in treasury.
At the time the Merger was deemed effective, each share of
common stock of Athersys was converted into 0.0358493 shares of
BTHC VI common stock, par value $0.001 per share. Prior to the
Merger, BTHC VI effected a 1-for-1.67 reverse stock split of its
shares of common stock and increased the number of authorized
shares of common stock to 100,000,000.
BTHC VIs acquisition of Athersys on June 8, 2007
effected a change in control and was accounted for as a reverse
acquisition whereby Athersys is the accounting acquirer for
financial statement purposes. Accordingly, the financial
statements of the Company presented reflect the historical
results of Athersys and do not include the historical financial
results of BTHC VI prior to the consummation of the Merger. The
Companys authorized and issued shares of common and
preferred stock have been retroactively restated for all periods
present to reflect the Merger exchange rate of 0.0358493. Basic
and diluted net loss per share attributable to common
stockholders has been computed using the retroactively restated
common stock.
Immediately after the Merger, BTHC VI completed an offering of
13,000,000 shares of common stock for aggregate gross proceeds
of $65.0 million (the Offering). Offering costs
in the amount of approximately $6.5 million were netted
against the proceeds of the Offering, resulting in net proceeds
from the Offering of approximately $58.5 million. The
Offering included the issuance of warrants to purchase
3,250,000 shares of common stock to the investors with an
exercise price of $6.00 and a five-year term. BTHC VI also
issued warrants to purchase 500,000 shares of common stock
to the lead investor and warrants to purchase
1,093,525 shares of common stock to the placement agents,
each with an exercise price of $6.00 and a five-year term. The
placement agents also received cash fees in an amount equal to
8.5% of the gross proceeds, excluding proceeds from existing
investors in the Company. In consideration for certain advisory
services, the Company paid an affiliate and largest stockholder
of BTHC VI a one-time fee of $350,000 in cash upon consummation
of the Merger.
Athersys is a biopharmaceutical company engaged in the
development and commercialization of therapeutic products in one
business segment. Operations consist primarily of research and
product development activities.
I-5
BTHC VI,
Inc.
Notes to Unaudited Condensed Consolidated Financial
Statements (Continued)
The accompanying unaudited condensed consolidated financial
statements should be read in conjunction with the audited
financial statements and notes thereto included in this filing.
The accompanying financial statements have been prepared in
accordance with U.S. generally accepted accounting
principles (GAAP) for interim financial information
and Article 10 of
Regulation S-X.
Accordingly, since they are interim statements, the accompanying
financial statements do not include all of the information and
notes required by GAAP for complete financial statements. The
accompanying financial statements reflect all adjustments,
consisting of normal recurring adjustments, that are, in the
opinion of management, necessary for a fair presentation of
financial position and results of operations for the interim
periods presented. Interim results are not necessarily
indicative of results for a full year.
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and
accompanying notes. The Companys critical accounting
policies, estimates and assumptions are described in
Managements Discussion and Analysis of Financial
Condition and Results of Operations.
Basic and diluted net loss per share attributable to common
stockholders are presented in conformity with SFAS No. 128,
Earnings per Share, for all periods presented. In
accordance with SFAS No. 128, basic and diluted net loss
per share has been computed using the weighted-average number of
common stock outstanding during the period. The change to the
conversion ratios of the convertible preferred stock represents
an induced conversion which resulted in a deemed dividend in the
amount of $4.8 million which is included in determining the
net loss attributable to common stockholders.
The Company has outstanding certain options and warrants, and
prior to June 8, 2007, had outstanding certain convertible
debt and convertible preferred stock, which have not been used
in the calculation of diluted net loss per share because to do
so would be anti-dilutive. As such, the numerator and the
denominator used in computing both basic and diluted net loss
per share attributable to common stock holders are equal.
Outstanding stock options to purchase 3,629,814 and
127,686 shares of common stock for the six-month periods
ended June 30, 2007 and June 30, 2006, respectively,
were not included in the calculation of diluted net loss per
share attributable to common stockholders because their effects
were antidilutive.
Warrants to purchase 5,125,496 and 25,639 shares of common
stock for the six-month periods ended June 30, 2007 and
June 30, 2006, respectively, were not included in the
calculation of diluted net loss per share attributable to common
stockholders because their effects were antidilutive.
Shares of common stock issuable upon the conversion of
convertible preferred stock in the amount of 319,839 on a
historical basis (1,679,915 taking into consideration the
restructuring of Athersys stock that occurred in 2007 at the
time of the Merger) for the six-month period ended June 30,
2007, and 364,093 on a historical basis (1,912,356 taking into
consideration the restructuring of Athersys stock that occurred
in 2007 at the time of the Merger) for the six-month period
ended June 30, 2006, were not included in the calculation
of diluted net loss per share attributable to common
stockholders because their effects were antidilutive.
Shares of common stock issuable upon the conversion of
convertible promissory notes in the amount of 224,197 on a
historical basis (2,028,281 taking into consideration the
closing of the Offering in 2007) for the six-month period ended
June 30, 2007, and 31,156 on a historical basis (281,866 taking
into consideration the closing of the Offering in 2007) for the
six-month period ended June 30, 2006, were not included in
the calculation of diluted net loss per share attributable to
common stockholders because their effects were antidilutive.
I-6
BTHC VI,
Inc.
Notes to Unaudited Condensed Consolidated Financial
Statements (Continued)
In accordance with SFAS No. 130, Reporting Comprehensive
Loss, all components of comprehensive loss, including net
loss, are reported in the financial statements in the period in
which they are recognized. Comprehensive loss is defined as the
change in equity during a period from transactions and other
events and circumstances from non-owner sources. Below is the
reconciliation, in thousands, of net loss to comprehensive loss
for all periods presented.
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
|
Ended June 30,
|
|
|
|
2007
|
|
|
2006
|
|
Net loss
|
|
$
|
(9,789
|
)
|
|
$
|
(5,782
|
)
|
Unrealized gain on available-for-sale securities
|
|
|
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
$
|
(9,789
|
)
|
|
$
|
(5,769
|
)
|
|
|
|
|
|
|
|
|
|
Immediately prior to the Merger (see Note 1), all shares of
Athersys preferred stock were converted into shares of Athersys
common stock. The preferred stock on the balance sheet was
eliminated and accounted for as common stock issued and
additional paid-in capital. Also, $250,000 of treasury stock
held by Athersys was retired in connection with the Merger and
reversed to additional paid-in capital. Accrued dividends on
Athersys convertible preferred stock were eliminated and
reversed to additional paid-in capital. Additionally, warrants
that were issued to the former holders of convertible preferred
stock were terminated.
|
|
6.
|
Share-based
Compensation
|
Equity
Compensation Plans
BTHC VI adopted an incentive plan prior to closing the Merger
that made available 3,035,000 shares of common stock for
awards to employees, directors and consultants. Upon closing the
Merger, another similar incentive plan was adopted that made
available 1,465,000 shares of common stock for awards to
employees, directors and consultants. These equity incentive
plans authorize the issuance of equity-based compensation in the
form of stock options, stock appreciation rights, restricted
stock, restricted stock units, performance shares and units, and
other stock-based awards to qualified employees, directors and
consultants. Total awards under these plans are limited to
4,500,000 shares of common stock in the aggregate.
In May 2007, the majority of Athersys outstanding
options were terminated. New option awards to purchase
3,625,000 shares of common stock with an exercise price of
$5.00 were granted to employees, directors and certain
consultants in June 2007 upon the closing of the Merger. The
options that were granted to employees vest approximately 40% on
the date of grant, and ratably over three years thereafter. The
option awards granted to non-employees and board members
generally vest at varying percentages over three years. Upon the
closing of the Merger, BTHC VI assumed 5,052 options
granted to former employees and consultants of Athersys, which
will be governed by the former Athersys equity plans until the
awards expire.
Impact
of Adoption of SFAS No. 123R
In December 2004, SFAS No. 123 (revised 2004),
Share-Based Payment (SFAS No. 123R), was
issued as a revision to SFAS No. 123, Accounting for
Stock Options (SFAS No. 123). The new
statement was adopted by the Company on January 1, 2006.
Prior to January 1, 2006, the Company elected to account
for its stock-based compensation in accordance with the
intrinsic value method as described in the provisions of
Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees, and related interpretations,
as permitted by SFAS No. 123. As such, compensation was
determined prior to 2006 on the
I-7
BTHC VI,
Inc.
Notes to Unaudited Condensed Consolidated Financial
Statements (Continued)
date of issuance or grant as the excess of the current estimated
market value of the underlying stock over the purchase or
exercise price of the stock option. Compensation expense was
recognized over the respective vesting periods of the equity
instruments, if any, using the graded vesting method as
prescribed by Financial Accounting Standards Board
Interpretation No. 28.
On January 1, 2006, the Company adopted the fair value
recognition provisions of SFAS No. 123R using the
modified-prospective-transition method. Under that transition
method, compensation cost recognized subsequent to adoption
includes: (a) compensation cost for all share-based
payments granted prior to, but not yet vested as of
January 1, 2006, based on the grant date fair value
estimated in accordance with the original provisions of SFAS
No. 123, and (b) compensation cost for all share-based
payments granted subsequent to January 1, 2006, based on
the grant-date fair value estimated in accordance with the
provisions of SFAS No. 123R. For some of the awards granted
prior to the adoption of SFAS No. 123R, the Company
recognized compensation expense on the accelerated method. For
awards granted subsequent to adoption of SFAS No. 123R, the
Company recognizes expense on the straight-line method. Upon
adoption of SFAS 123R, Athersys estimated forfeitures in
calculating the expense relating to share-based compensation,
while previously Athersys was permitted to recognize forfeitures
as an expense reduction upon occurrence. The adjustment to apply
estimated forfeitures to previously recognized share-based
compensation was accounted for as a cumulative effect of a
change in accounting principle at January 1, 2006 and
reduced net loss by $306,000 for the six months ended
June 30, 2006.
Valuation
of Share-based Compensation under SFAS
No. 123R
The Company uses a Black-Scholes option pricing model to
estimate the grant-date fair value of share-based awards under
SFAS No. 123R. The expected term of options granted
represents the period of time that option grants are expected to
be outstanding. The Company used the simplified
method under SAB No. 107 to calculate the expected life of
option grants in 2007 given its limited history. We determine
volatility by using the historical stock volatility of other
companies with similar characteristics. Estimates of fair value
are not intended to predict actual future events or the value
ultimately realized by persons who receive equity awards.
SFAS No. 123R requires forfeitures to be estimated at the
time of grant and revised, if necessary, in subsequent periods
if actual forfeitures differ from those estimates. If actual
forfeitures vary from the estimate, the Company will recognize
the difference in compensation expense in the period the actual
forfeitures occur or when options vest.
In May 2007, Athersys terminated the majority of stock option
awards to its officers, employees, directors and consultants.
Only a nominal number of option awards (5,052 option
shares) held by former employees and consultants were assumed by
BTHC VI. Upon closing the Merger, options for
3,625,000 shares of stock were issued under the BTHC VI
equity incentive plans to employees, directors and consultants
at an exercise price of $5.00 per share.
The Company accounted for the termination of the Athersys
options to employees, directors, and consultants as a settlement
and any previously unrecognized compensation expense ($385,000)
was recognized on the termination date in May 2007. The options
for 5,052 shares that were assumed by BTHC VI were fully
vested when they were assumed, and no additional compensation
was recognized.
The fair value of unvested stock options granted to consultants
is measured on a quarterly basis using the Black-Scholes method
and the related expense is recognized over the period that
services are provided. The key assumptions used in the
computation of expense at June 30, 2007 included the fair
value of the Companys stock of $7.75 at June 30,
2007, volatility of 75.3%, risk-free interest rate of 5.5%, and
an expected life represented by the contractual term of
5 years.
I-8
BTHC VI,
Inc.
Notes to Unaudited Condensed Consolidated Financial
Statements (Continued)
The weighted-average estimated fair value of stock options
granted under the equity compensation plans during the six
months ended June 30, 2007 was $2.91 per share for
employees and directors using the following assumptions:
|
|
|
|
|
Expected volatility
|
|
|
75.9%
|
|
Risk-free interest rate
|
|
|
5.5%
|
|
Weighted average expected life (years)
|
|
|
5.75 years
|
|
Dividend yield
|
|
|
0.0%
|
|
Share-based
Award Activity
The following table summarizes the Companys stock option
activity during the six months ended June 30, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
Weighted-Average
|
|
|
|
|
|
|
Exercise
|
|
|
Remaining
|
|
|
|
Options
|
|
|
Price
|
|
|
Contractual Term
|
|
|
|
|
|
|
|
|
|
(In years)
|
|
Outstanding at January 1, 2007
|
|
|
116,083
|
|
|
$
|
80.61
|
|
|
|
2.86
|
|
Granted
|
|
|
3,625,000
|
|
|
|
5.00
|
|
|
|
9.68
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited/cancelled/expired
|
|
|
(111,269
|
)
|
|
|
78.66
|
|
|
|
2.88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2007
|
|
|
3,629,814
|
|
|
$
|
5.21
|
|
|
|
9.67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and exercisable at June 30, 2007
|
|
|
1,225,814
|
|
|
$
|
5.61
|
|
|
|
9.67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2007, a total of 875,000 shares are
available for issuance under the Companys equity
compensation plans. For the six-month period ended June 30,
2007, stock compensation expense was approximately
$4.1 million. At June 30, 2007, total unrecognized
estimated compensation cost related to unvested stock options
was approximately $6.6 million, which is expected to be
recognized by June 30, 2010 using the straight-line method.
A summary of the Companys long-term debt outstanding is as
follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
Notes payable to lenders
|
|
$
|
3,235
|
|
|
$
|
5,132
|
|
Less current portion
|
|
|
3,235
|
|
|
|
3,332
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
1,800
|
|
|
|
|
|
|
|
|
|
|
In November 2004, the Company issued $7.5 million of
notes payable to lenders, the proceeds of which are unrestricted
and used for general corporate purposes. The notes are payable
in 30 monthly payments after the initial interest-only
period that expired December 1, 2005, with a fixed interest
rate of 13% and a maturity date of June 1, 2008.
The lenders have the right to receive a milestone payment of
$2.25 million upon the first to occur of the following
milestone events: (1) a firmly underwritten initial public
offering of common stock; (2) a merger with or into another
entity where the Companys stockholders do not hold at
least a majority of the voting power of the surviving entity;
(3) the sale of all or substantially all of the
Companys assets; and (4) the liquidation or
dissolution of the Company. The milestone payment is payable in
cash, except that if the milestone event is an initial public
offering, the Company may elect to pay 75% of the milestone in
shares of
I-9
BTHC VI,
Inc.
Notes to Unaudited Condensed Consolidated Financial
Statements (Continued)
common stock at the per share offering price to the public. No
amounts have been recorded in relation to the milestone as of
June 30, 2007.
Upon the closing of the Offering, warrants to purchase
149,026 shares of common stock with an exercise price of
$5.00 per share and a seven-year term were issued to the
Companys lenders in accordance with the loan agreement.
The value of the warrants was $492,000 based on the
Black-Scholes valuation of the underlying security, of which
$438,000 was recognized in June 2007 as additional interest
expense and the remaining $54,000 will be recognized over the
remaining term of the loan.
Collaboration
Convertible Notes
In 2006, the Company entered into a collaboration with Angiotech
Pharmaceuticals, Inc. The Company issued a $5.0 million
convertible promissory note to the collaborator at the inception
of the program, which was followed by the issuance of an
additional convertible promissory note in the aggregate
principal amount of $5.0 million in January 2007 upon
the achievement of certain milestones. Upon the closing of the
Offering, the convertible notes aggregating $10.0 million
were converted along with accrued interest into 1,885,890 shares
of common stock at a conversion price of $5.50 per share, which
was 110% of the price per share in the Offering in accordance
with the terms of the notes.
Bridge
Notes and Warrants
Also in 2006, the Company completed a bridge financing of
$2.5 million in the form of convertible promissory notes.
The notes were issued primarily to existing stockholders of the
Company. The notes bore interest at 10%, had a three-year term,
and were secured by a lien on substantially all of the assets of
the Company. The notes, if not converted, were repayable with
accrued interest at maturity, plus a repayment fee of 200% of
the outstanding principal. The Company computed a premium on the
debt in the amount of $5.25 million due upon redemption,
which was being accreted over the term of the notes using the
effective interest method.
The bridge noteholders also received warrants to purchase common
stock, which were exercisable only upon a restructuring of the
Companys capital stock in connection with a financing. The
exercise price was $0.01 per share and the number of shares
issuable was based on a formula tied to the pre-money value of
the Company. The Company recognized a $250,000 discount on the
notes, which was allocated to the fair value of the warrants in
2006.
Upon the closing of the Offering, the bridge notes were
converted along with accrued interest into 531,781 shares
of common stock at a conversion price of $5.00 per share, which
was the price per share in the Offering. The notes were reversed
and the related premium and discount we reeliminated and
recorded as additional paid-in capital. The bridge noteholders
also exercised their warrants upon the closing of the Offering
for 999,977 shares of common stock at an aggregate exercise
price of $10,000. Upon the conversion of the bridge notes, the
bridge noteholders also received warrants to purchase
132,945 shares of common stock at $6.00 per share with a
five-year term, which was consistent with the warrants issued to
new investors in the Offering.
As of June 30, 2007, the Company had the following
outstanding warrants to purchase shares of common stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of underlying shares
|
|
Exercise Price
|
|
Expiration
|
|
|
|
4,976,470
|
|
|
$
|
6.00
|
|
|
|
June 8, 2012
|
|
|
|
|
149,026
|
|
|
$
|
5.00
|
|
|
|
June 8, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,125,496
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
I-10
BTHC VI,
Inc.
Notes to Unaudited Condensed Consolidated Financial
Statements (Continued)
In May 2007, Athersys sold certain non-core assets related
to its asthma discovery program to Wyeth Pharmaceuticals, Inc.
for $2.0 million, of which $1.5 million was received
at closing. The remaining $0.5 million was received in
August 2007 upon Athersys delivery of certain
ancillary assets related to the program. Athersys recognized a
gain on the sale (other income) of these assets in the amount of
$2.0 million, of which $1.5 million was recognized in
May 2007 and $0.5 million will be recognized in
August 2007.
Upon the closing of the Offering, the Company achieved a
milestone related to its stem cell technology and issued
1,379 shares of common stock and paid $500,000 cash to the
former holders of the technology. The issued shares were
recorded at fair value on the date the milestone was achieved.
The consideration paid under this arrangement has been recorded
as research and development expense. The Company may be required
to pay cash of $0.5 million to the former holders of the
technology upon the achievement of an additional milestone in
connection with the Companys filing of an investigational
new drug application with the FDA.
The Company filed a resale registration statement
with the SEC in July 2007 covering 18,508,251 shares
of common stock, which includes all shares of common stock
issued in the Offering and shares of common stock issuable upon
exercise of warrants issued in the Offering (as well as the
531,781 shares of common stock issued to the bridge
noteholders and the 132,945 shares underlying their warrants).
Subject to certain exceptions, if the resale
registration statement is not declared effective (within
90 days of the filing date) by the SEC or ceases to remain
effective, a cash penalty will be assessed representing 1% of
the amount invested in the Offering for each
30-day
period (capped at 10%) until the registration statement is
either declared effective or becomes effective again, as
applicable.
Athersys has net operating loss and research and development
credit carryforwards that result in deferred tax assets that
have been fully offset by a valuation allowance. Athersys
use of its current net operating loss and research and
development credit carryforwards will be significantly limited
under Section 382 of the Internal Revenue Code as a result
of the change in ownership related to the Merger and the
Offering.
In July 2006, the Financial Accounting Standards Board
issued FASB Interpretation No. 48
(FIN 48), Accounting for Uncertainty in
Income Taxes, which is applicable for fiscal years beginning
after December 15, 2006. FIN 48 clarifies the
accounting for uncertainty in income taxes recognized in an
enterprises financial statements in accordance with SFAS
No. 109, Accounting for Income Taxes. FIN 48
prescribes a recognition threshold and measurement attribute for
financial statement recognition and measurement of a tax
position reported or expected to be reported on a tax return.
FIN 48 also provides guidance on derecognition,
classification, interest and penalties, accounting in interim
periods, disclosure, and transition. Athersys adopted the
provisions of FIN 48 on January 1, 2007. Upon adoption
of FIN 48 and through June 30, 2007, Athersys
determined that it had no liability for uncertain income taxes
as prescribed by FIN 48. Athersys policy is to
recognize potential accrued interest and penalties related to
the liability for uncertain tax benefits, if applicable, in
income tax expense. Net operating loss and credit carryforwards
since inception remain open to examination until the statute
expires for the period in which the carryforwards are utilized,
and will for a period post utilization. Athersys does not
anticipate any events during 2007 that would require it to
record a liability related to any uncertain income taxes.
I-11