EXHIBIT 99

           CAUTIONARY FACTORS RELEVANT TO FORWARD-LOOKING INFORMATION

YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE MAKING AN
INVESTMENT DECISION REGARDING STEMCELLS, INC. WE MAY FACE OTHER RISKS NOT
DESCRIBED BELOW THAT WE DO NOT PRESENTLY KNOW ABOUT OR THAT WE CURRENTLY DEEM
IMMATERIAL.

           Our business, financial condition or results of operations could be
materially adversely affected by any of these risks. Consequentially, the
trading price of our common stock could decline, resulting in the loss of all or
part of your investment.

OUR FINANCIAL SITUATION IS PRECARIOUS AND, BASED ON CURRENTLY ESTIMATED
OPERATING EXPENSES OUR EXISTING CAPITAL RESOURCES ARE ONLY SUFFICIENT TO FUND
OUR OPERATIONS THROUGH THE END OF 2004.

           The Company has incurred significant operating losses and negative
cash flows since inception. The Company has not achieved profitability and may
not be able to realize sufficient revenues to achieve or sustain profitability
in the future. We do not expect to be profitable in the next several years, but
rather expect to incur additional operating losses. We have limited liquidity
and capital resources and must obtain significant additional capital resources
in order to sustain our product development efforts, for acquisition of
technologies and intellectual property rights, for preclinical and clinical
testing of our anticipated products, pursuit of regulatory approvals,
acquisition of capital equipment, laboratory and office facilities,
establishment of production capabilities, for general and administrative
expenses and other working capital requirements. We rely on cash reserves and
proceeds from equity and debt offerings, proceeds from the transfer or sale of
our intellectual property rights, equipment, facilities or investments, and
government grants and funding from collaborative arrangements, if obtainable, to
fund our operations. If we exhaust our cash reserves and are unable to realize
adequate financing, we may be unable to meet operating obligations and be
required to initiate bankruptcy proceedings Our existing capital resources are
only sufficient to fund our operations through the end of 2004, based on our
current estimates of operating expenses for this year. These conditions raise
doubt about StemCells' ability to continue as a going concern. 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.

           We intend to pursue opportunities to obtain additional financing in
the future through equity and debt financings, grants and collaborative research
arrangements. The source, timing and availability of any future financing will
depend principally upon market conditions, interest rates and, more
specifically, on our progress in our exploratory, preclinical and future
clinical development programs. Funding may not be available when needed--at all,
or on terms acceptable to us. Our existing capital resources are not sufficient
to fund our operations through the end of 2004. Lack of necessary funds may
require us to delay,


scale back or eliminate some or all of our research and product development
programs and/or our capital expenditures or to license our potential products or
technologies to third parties.

OUR TECHNOLOGY IS AT AN EARLY STAGE OF DISCOVERY AND DEVELOPMENT, AND WE MAY
FAIL TO DEVELOP ANY COMMERCIALLY ACCEPTABLE PRODUCTS.

           Our stem cell technology still in the pre-clinical stage for the
brain stem cell and at the discovery phase for the liver and pancreas stem cells
and has not yet led to the development of any product. We may fail to discover
the stem cells we are seeking, to develop any products, to obtain regulatory
approvals, to enter clinical trials, or to commercialize any products. Any
product using stem cell technology may fail to:

           - survive and persist in the desired location;

           - provide the intended therapeutic benefits;

           - properly integrate into existing tissue in the desired manner; or

           - achieve therapeutic benefits equal to or better than the standard
             of treatment at the time of testing.

           In addition, our products may cause undesirable side effects. Results
of early pre-clinical research may not be indicative of the results that will be
obtained in later stages of pre-clinical or clinical research. If regulatory
authorities do not approve our products, or if we fail to maintain regulatory
compliance, we would have limited ability to commercialize our products, and our
business and results of operations would be harmed. Furthermore, because stem
cells are a new form of therapy, the marketplace may not accept any products we
may develop. If we do succeed in developing products, we will face many
potential obstacles such as the need to obtain regulatory approvals, and to
develop or obtain manufacturing, marketing and distribution capabilities. In
addition, we will face substantial additional risks such as product liability.

           Moreover, because our cell therapy treatments will be derived from
tissue of individuals other than the patient (that is, they will be "non-self"
or "allogeneic" transplant products), patients will require the use of
immunosuppressive drugs such as cyclosporine, FK506, or others to prevent
rejection of the cells. While immunosuppression is now standard in connection
with allogeneic transplants of various kinds, long-term maintenance on
immunosuppressive drugs can produce complications that include infection,
cancer, cardiovascular disease, renal dysfunction and other side effects
depending upon which immunosuppressive regimen employed. Immunosuppression has
not been tested with our therapies since we have not yet conducted any clinical
trials.

WE HAVE PAYMENT OBLIGATIONS RESULTING FROM REAL PROPERTY OWNED OR LEASED BY US
IN RHODE ISLAND, WHICH DIVERTS FUNDING FROM OUR STEM CELL RESEARCH AND
DEVELOPMENT.

           Prior to our reorganization in 1999 and the consolidation of our
business in California, we carried out our encapsulated cell therapy programs in
Lincoln, Rhode Island, where we also had our administrative offices. Although we
have vacated the Rhode Island facilities, we remain obligated to make on
average, lease payments and payments for operating costs of approximately
$1,450,000 per year before sub-tenant rent income for our former science and
administrative facility, which we have leased through June 30, 2013, and debt
service payments and payments for operating costs of approximately $500,000 per
year for our former encapsulated cell therapy pilot manufacturing facility,
which we own. We have currently subleased a portion of the science and
administrative facility, and are seeking to sublease the remaining portion, but
we cannot be sure that we will be able to keep any part of the facility
subleased for the duration of our obligation. We have currently subleased the
entire pilot manufacturing facility, but may not be able to sublease or sell the
facility in the future once the current sublease agreements expire. These
continuing costs significantly reduce our cash resources and adversely affect
our ability to fund further development of our stem cell technology.

WE MAY NEED BUT FAIL TO OBTAIN PARTNERS TO SUPPORT OUR STEM CELL DEVELOPMENT
EFFORTS AND TO COMMERCIALIZE OUR TECHNOLOGY.

           Equity and debt financings alone may not be sufficient to fund the
cost of developing our stem cell technologies, and we may need to rely on our
ability to reach partnering arrangements to provide financial support for our
stem cell discovery and development efforts. In addition, in order to
successfully develop and commercialize our technology, we may need to enter into
a wide variety of arrangements with corporate sponsors, pharmaceutical
companies, universities, research groups and others.



While we have engaged, and expect to continue to engage, in discussions
regarding such arrangements, we have not reached any agreement, and we may fail
to obtain any such agreement on terms acceptable to us. Even if we enter into
these arrangements, we may not be able to satisfy our obligations under them or
renew or replace them after their original terms expire. Furthermore, these
arrangements may require us to grant certain rights to third parties, including
exclusive marketing rights to one or more products, may require us to issue
securities to our collaborators or may contain other terms that are burdensome
to us. If any of our collaborators terminates its relationship with us or fails
to perform its obligations in a timely manner, the development or
commercialization of our technology and potential products may be adversely
affected.

WE HAVE A HISTORY OF OPERATING LOSSES AND WE MAY FAIL TO OBTAIN REVENUES OR
BECOME PROFITABLE.

           We expect to continue to incur substantial operating losses in the
future in order to conduct our research and development activities, and, if
those activities are successful, to fund clinical trials and other expenses.
These expenses include the cost of acquiring technology, product testing,
acquiring regulatory approvals, establishing production, marketing, sales and
distribution programs and administrative expenses. We have not earned any
revenues from sales of any product. All of our past revenues have been derived
from, and any revenues we may obtain for the foreseeable future are expected to
be derived from, cooperative agreements, research grants, investments and
interest on invested capital. We currently have no cooperative agreements and we
have only one current research grant for our stem cell technology, and we may
not obtain any such agreements or additional grants in the future or receive any
revenues from them.

IF WE ARE UNABLE TO PROTECT OUR PATENTS AND PROPRIETARY RIGHTS, OUR BUSINESS,
FINANCIAL CONDITION AND RESULTS OF OPERATIONS WILL BE HARMED.

           We own or license a number of patents and pending patent applications
related to various stem and progenitor cells and methods of deriving and using
them, including human neural stem cell cultures. Patent protection for products
such as those we propose to develop is highly uncertain and involves complex and
continually evolving factual and legal questions. The governmental authorities
that consider patent applications can deny or significantly reduce the patent
coverage requested in an application before or after issuing the patent.
Consequently, we do not know whether any of our pending applications will result
in the issuance of patents, or if any existing or future patents will provide
sufficient protection or significant commercial advantage or if others will
circumvent these patents. We cannot be certain that we were the first to make
the inventions covered by each of our pending patent applications or that we
were the first to file patent applications for such inventions because patent
applications are secret until they are published, and because publication of
discoveries in the scientific or patent literature often lags behind actual
discoveries. Patents may not issue from our pending or future patent
applications or, if issued, may not be of commercial benefit to us, or may not
afford us adequate protection from competing products. In addition, third
parties may challenge our patents or governmental authorities may declare them
invalid. In the event that a third party has also filed a patent application
relating to inventions claimed in our patent applications, we may have to
participate in proceedings to determine priority of invention. This could result
in substantial uncertainties and cost for us, even if the eventual outcome is
favorable to us, and the outcome might not be favorable to us. Even if a patent
issues, a court could decide that the patent was issued invalidly. Further,
patents issue for a limited term and our patents may expire before we utilize
them profitably. Under the procedures of the European Patent Office, third
parties may oppose our issued European patents during the relevant opposition
period. Such oppositions could result in substantial uncertainties and cost for
us, even if the eventual outcome is favorable to us, and the outcome might not
be favorable to us. One party has opposed two of our granted European patents.
While we are confident in our position, there is no guarantee that we will
prevail. If we are unsuccessful in our defense of the opposed patents, all
claimed rights in the opposed patents will be lost in Europe.

           Proprietary trade secrets and unpatented know-how are also important
to our research and development activities. We cannot be certain that others
will not independently develop the same or similar technologies on their own or
gain access to our trade secrets or disclose such technology, or that we will be
able to meaningfully protect our trade secrets and unpatented know-how and keep
them secret. We require our employees, consultants, and significant scientific
collaborators and sponsored researchers to execute confidentiality agreements
upon the commencement of an employment or consulting relationship with us. These
agreements may, however, fail to provide meaningful protection or adequate
remedies for us in the event of unauthorized use, transfer or disclosure of such
information or inventions.

IF OTHERS ARE FIRST TO DISCOVER AND PATENT THE STEM CELLS WE ARE SEEKING TO
DISCOVER, WE COULD BE BLOCKED FROM FURTHER WORK ON THOSE STEM CELLS.



           Because the first person or entity to discover and obtain a valid
patent to a particular stem or progenitor cell may effectively block all others,
it will be important for us or our collaborators to be the first to discover any
stem cell that we are seeking to discover. Failure to be the first could prevent
us from commercializing all of our research and development affected by that
patent.

IF WE ARE UNABLE TO OBTAIN NECESSARY LICENSES TO THIRD PARTY PATENTS AND OTHER
RIGHTS, WE MAY NOT BE ABLE TO COMMERCIALLY DEVELOP OUR EXPECTED PRODUCTS.

           A number of pharmaceutical, biotechnology and other companies,
universities and research institutions have filed patent applications or have
received patents relating to cell therapy, stem cells and other technologies
potentially relevant to or necessary for our expected products. We cannot
predict which, if any, of the applications will issue as patents. If third party
patents or patent applications contain claims infringed by our technology and
these claims are valid, we may be unable to obtain licenses to these patents at
a reasonable cost, if at all, and may also be unable to develop or obtain
alternative technology. If we are unable to obtain such licenses at a reasonable
cost, our business could be significantly harmed. We have obtained rights from
universities and research institutions to technologies, processes and compounds
that we believe may be important to the development of our products. Licensors
may cancel our licenses or convert them to non-exclusive licenses if we fail to
use the relevant technology or otherwise breach these agreements. Loss of these
licenses could expose us to the risks of third party patents and/or technology.
We can give no assurance that any of these licenses will provide effective
protection against our competitors.

WE COMPETE WITH COMPANIES THAT HAVE SIGNIFICANT ADVANTAGES OVER US.

           The market for therapeutic products to treat diseases of, or injuries
to, the central nervous system (CNS) is large and competition is intense. The
majority of the products currently on the market or in development are small
molecule pharmaceutical compounds. Many of the world's pharmaceutical companies,
including Merck, Pfizer, Abbott, Bristol-Myers Squibb, Novartis and
GlaxoSmithKline, have made significant commitments to the CNS field. Any
cell-based therapy to treat diseases of, or injuries to, the CNS is likely to
face intense competition from the small molecule sector. In addition, a number
of biotechnology companies with resources far greater than ours may also emerge
as competitors. These include Genzyme, Amgen, Cephalon, Transkaryotic Therapies,
BioMarin, Celgen, Biogen, and Titan Pharmaceuticals. Finally, we also expect to
compete with smaller biotechnology companies, some of which are privately owned,
such as Neuralstem, Geron, NeuroNova, ReNeuron, ES Cell International, and
CellFactors/Diacrin.

           We believe that our human neural stem cells may have application to
many or most of the Lysosomal Storage Diseases ("LSDs") with CNS involvement. We
intend to submit our first IND for Batten's Disease, which is one of the
Lysosomal Storage Diseases (LSDs) that affect the CNS. There are, so far as we
know, no approved therapies for Battens or any of the other CNS-specific LSDs,
but other companies, including Genzyme, BioMarin, and Transkaryotic Therapies,
have products approved to treat peripheral aspects of some of the other LSDs,
and other products are in clinical trials.

           In the field of diabetes, a number of major companies currently
market products for the treatment of diabetes and are also engaged in the
research and development of new therapies. Such companies include Eli Lilly,
Novo Nordisk, J&J, Amylin, Serono. Consequently, should StemCells Inc,
successfully develop a cell-based therapy for diabetes, we would expect to face
severe competition from these and similar companies.

           In the liver field, there are no broad-based therapies for the
treatment of liver disease at present. The primary therapy is liver
transplantation, which is limited by the availability of matched donor organs.
Liver-assist devices, when and if they become available, could also be used to
help patients while they await suitably matched organs for transplantation.

DEVELOPMENT OF OUR TECHNOLOGY IS SUBJECT TO AND RESTRICTED BY EXTENSIVE
GOVERNMENT REGULATION, WHICH COULD IMPEDE OUR BUSINESS.

           Our research and development efforts, as well as any future clinical
trials, and the manufacturing and marketing of any products we may develop, will
be subject to and restricted by extensive regulation by governmental authorities
in the United States and other countries. The process of obtaining U.S. Food and
Drug Administration and other necessary regulatory approvals is lengthy,
expensive and uncertain. We or our collaborators may fail to obtain the
necessary approvals to commence or continue clinical testing or to manufacture
or market our potential products in reasonable time frames, if at all. In
addition, the U.S. Congress and other legislative bodies may enact regulatory
reforms or restrictions on the development of new therapies that could adversely
affect the regulatory environment in which we operate or the development of any
products we may develop.



We base our research and development on the use of human stem and progenitor
cells obtained from fetal tissue. The federal and state governments and other
jurisdictions impose restrictions on the use of fetal tissue. These restrictions
change from time to time and may become more onerous. Additionally, we may not
be able to identify or develop reliable sources for the cells necessary for our
potential products-that is, sources that follow all state and federal guidelines
for cell procurement. Further, we may not be able to obtain such cells in the
quantity or quality sufficient to satisfy the commercial requirements of our
potential products. As a result, we may be unable to develop or produce our
products in a profitable manner.

           Although we do not use embryonic stem cells, government regulation
and threatened regulation of embryonic tissue may lead outstanding researchers
to leave the field of stem cell research, or the country, in order to assure
that their careers will not be impeded by restrictions on their work. Similarly,
these factors may induce the best graduate students to choose other fields less
vulnerable to changes in regulatory oversight, thus exacerbating the risk,
discussed below, that we may not be able to attract and retain the scientific
personnel we need in face of the competition among pharmaceutical, biotechnology
and health care companies, universities and research institutions for what may
become a shrinking class of qualified individuals. In addition, we cannot assure
you that constraints on use of embryonic stem cells will not be extended to use
of fetal stem cells. Moreover, it is possible that concerns regarding research
using embryonic stem cells will impact our ability to attract collaborators and
investors and our stock price.

           We may apply for status under the Orphan Drug Act for some of our
therapies to gain a seven year period of marketing exclusivity for those
therapies. The U.S. Congress in the past has considered, and in the future again
may consider, legislation that would restrict the extent and duration of the
market exclusivity of an orphan drug. If enacted, such legislation could prevent
us from obtaining some or all of the benefits of the existing statute even if we
were to apply for and be granted orphan drug status with respect to a potential
product.

IF WE LOSE THE SERVICES OF KEY PERSONNEL OR ARE UNABLE TO ATTRACT AND RETAIN
ADDITIONAL QUALIFIED PERSONNEL, WE MAY HAVE TO DELAY, REDUCE OR ELIMINATE SOME
OR ALL OF OUR RESEARCH AND DEVELOPMENT PROGRAMS.

           We are highly dependent on the principal members of our management
and scientific staff and some of our outside consultants, including the members
of our scientific advisory board, our chief executive officer, our vice
president and the directors of our neural stem cell and liver stem cell
programs. Although we have entered into employment agreements with some of these
individuals, they may terminate their agreements at any time. In addition, our
operations are dependent upon our ability to attract and retain additional
qualified scientific and management personnel. We may not be able to attract and
retain the personnel we need on acceptable terms given the competition for
experienced personnel among pharmaceutical, biotechnology and health care
companies, universities and research institutions.

SINCE HEALTH CARE INSURERS AND OTHER ORGANIZATIONS MAY NOT PAY FOR OUR PRODUCTS
OR MAY IMPOSE LIMITS ON REIMBURSEMENTS, OUR ABILITY TO BECOME PROFITABLE COULD
BE REDUCED.

           In both domestic and foreign markets, sales of potential products are
likely to depend in part upon the availability and amounts of reimbursement from
third party health care payor organizations, including government agencies,
private health care insurers and other health care payors, such as health
maintenance organizations and self-insured employee plans. There is considerable
pressure to reduce the cost of therapeutic products, and government and other
third party payors are increasingly attempting to contain health care costs by
limiting both coverage and the level of reimbursement for new therapeutic
products, and by refusing, in some cases, to provide any coverage for uses of
approved products for disease indications for which the U.S. Food and Drug
Administration has not granted marketing approval. Significant uncertainty
exists as to the reimbursement status of newly approved health care products. We
can give no assurance that reimbursement will be provided by such payors at all
or without substantial delay, or, if such reimbursement is provided, that the
approved reimbursement amounts will be sufficient to enable us to sell products
we develop on a profitable basis. Changes in reimbursement policy could also
adversely affect the willingness of pharmaceutical companies to collaborate with
us on the development of our stem cell technology. In certain foreign markets,
pricing or profitability of prescription pharmaceuticals is subject to
government control. We also expect that there will continue to be a number of
federal and state proposals to implement government control over health care
costs. Efforts at health care reform are likely to continue in future
legislative sessions. We do not know what legislative proposals federal or state
governments will adopt or what actions federal, state or private payers for
health care goods and services may take in response to health care reform
proposals or legislation. We cannot predict the effect government control and
other health care reforms may have on our business.



WE HAVE LIMITED LIQUIDITY AND CAPITAL RESOURCES AND MAY NOT OBTAIN THE
SIGNIFICANT CAPITAL RESOURCES WE WILL NEED TO SUSTAIN OUR RESEARCH AND
DEVELOPMENT EFFORTS.

           We have limited liquidity and capital resources and must obtain
substantial additional capital to support our research and development programs,
for acquisition of technology and intellectual property rights, and, to the
extent we decide to undertake these activities ourselves, for pre-clinical and
clinical testing of our anticipated products, pursuit of regulatory approvals,
establishment of production capabilities, establishment of marketing and sales
capabilities and distribution channels, and general administrative expenses. If
we do not obtain the necessary capital resources, we may have to delay, reduce
or eliminate some or all of our research and development programs or license our
technology or any potential products to third parties rather than
commercializing them ourselves. If we are unable to draw down on our existing
equity line or choose not to do so, we intend to pursue our needed capital
resources through equity and debt financings, corporate alliances, grants and
collaborative research arrangements. We may fail to obtain the necessary capital
resources from any such sources when needed or on terms acceptable to us. Our
ability to complete any such arrangements successfully will depend upon market
conditions and, more specifically, on continued progress in our research and
development efforts. We are prohibited from entering into other stand-by equity
based credit facilities during the term of the common stock purchase agreement
that governs our existing equity line.

IF OUR COMMON STOCK PRICE DROPS SIGNIFICANTLY, WE MAY BE DELISTED FROM THE
NASDAQ SMALLCAP MARKET, WHICH COULD ELIMINATE THE TRADING MARKET FOR OUR COMMON
STOCK.

           Our common stock is quoted on the Nasdaq SmallCap Market. In order to
continue to be included in the Nasdaq Small Cap Market, a company must meet
Nasdaq's maintenance criteria. The maintenance criteria most applicable to us
requires a minimum bid price of $1.00 per share and additionally, we must
maintain $2.5 million in stockholders' equity. Stockholders' equity is composed
of three fundamental sources: capital stock, additional paid-in-capital, and
retained earnings. Capital stock represents ownership interest in the
corporation. Additional paid-in-capital represents additional monies paid into
the corporation by investors above the par value of shares issued. Retained
earnings represents income (loss) that the corporation has accumulated as a
result of its day-to-day operating activities. Our stockholders' equity at the
end of 2003 was $10,963,558 Failure to meet these maintenance criteria may
result in the delisting of our common stock from the Nasdaq SmallCap Market. If
our common stock were delisted, in order to have our common stock relisted on
the SmallCap Market we would be required to meet the criteria for initial
listing, which are more stringent than the maintenance criteria. Accordingly, we
cannot assure you that if we were delisted we would be able to have our common
stock relisted on the Nasdaq SmallCap Market. If our common stock were delisted
from the Nasdaq SmallCap Market, we would not be able to draw down any
additional funds on our existing equity line, and we also may be required to pay
damages to holders of our common stock under agreements we previously entered
into with them in connection with equity financings. Finally, if our common
stock were removed from listing on the Nasdaq SmallCap Market, it might become
more difficult for us to raise funds through the sale of our common stock or
securities convertible into our common stock.