<SEC-DOCUMENT>0001193125-11-343381.txt : 20111216
<SEC-HEADER>0001193125-11-343381.hdr.sgml : 20111216
<ACCEPTANCE-DATETIME>20111216111135
ACCESSION NUMBER:		0001193125-11-343381
CONFORMED SUBMISSION TYPE:	424B5
PUBLIC DOCUMENT COUNT:		2
FILED AS OF DATE:		20111216
DATE AS OF CHANGE:		20111216

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			STEMCELLS INC
		CENTRAL INDEX KEY:			0000883975
		STANDARD INDUSTRIAL CLASSIFICATION:	BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836]
		IRS NUMBER:				943078125
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		424B5
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-170300
		FILM NUMBER:		111265215

	BUSINESS ADDRESS:	
		STREET 1:		3155 PORTER DRIVE
		STREET 2:		.
		CITY:			PALO ALTO
		STATE:			CA
		ZIP:			94304
		BUSINESS PHONE:		6504753100

	MAIL ADDRESS:	
		STREET 1:		3155 PORTER DRIVE
		STREET 2:		.
		CITY:			PALO ALTO
		STATE:			CA
		ZIP:			94304

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	CYTOTHERAPEUTICS INC/DE
		DATE OF NAME CHANGE:	19930328
</SEC-HEADER>
<DOCUMENT>
<TYPE>424B5
<SEQUENCE>1
<FILENAME>d271097d424b5.htm
<DESCRIPTION>PROSPECTUS SUPPLEMENT
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<TITLE>PROSPECTUS SUPPLEMENT</TITLE>
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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2" COLOR="#de1a1e"><B>The information in this preliminary prospectus supplement and the accompanying prospectus
is not complete and may be changed. This preliminary prospectus supplement and the accompanying prospectus are not an offer to sell these securities and are not soliciting an offer to buy these securities in any jurisdiction where the offer or sale
is not permitted. </B></FONT></P> <P STYLE="font-size:10px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">PROSPECTUS SUPPLEMENT</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">Filed pursuant to Rule 424(b)(5)</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">(To Prospectus dated November&nbsp;3, 2010)</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">Registration No.&nbsp;333-170300&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD></TR>
</TABLE> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="3"><B>Subject to Completion </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>Dated December&nbsp;15, 2011 </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="4"><B>Units </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="4"><B>Each Unit Consisting of One Share of Common Stock </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="4"><B>and </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="4"><B>One Series A Warrant to Purchase One Share of Common Stock
</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="4"><B>and </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="4"><B>Series B Warrants, Each to Purchase One Unit </B></FONT></P> <P STYLE="margin-top:10px;margin-bottom:0px" ALIGN="center">


<IMG SRC="g271097g58d28.jpg" ALT="LOGO">
 </P> <P STYLE="margin-top:10px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="5"><B>STEMCELLS, INC. </B></FONT></P> <P STYLE="margin-top:10px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">We are offering up to&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; units, each of which consists of one share of our common stock and&nbsp;one Series A Warrant to purchase one share of our common stock
at an exercise price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per share. The units are being offered at a price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per unit. We are also offering up to&nbsp;&nbsp;&nbsp;&nbsp;
Series&nbsp;B Warrants, each to purchase one unit. </FONT></P> <P STYLE="margin-top:10px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Units will not be issued or certificated. Purchasers will receive only shares of common
stock, Series A Warrants and Series B Warrants. The common stock, the Series&nbsp;A Warrants and the Series B Warrants may be transferred separately immediately upon issuance. Purchasers in this offering will receive one Series B Warrant for each
unit purchased by them in this offering. </FONT></P> <P STYLE="margin-top:10px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Each Series A Warrant will be immediately exercisable at an initial exercise price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per share. The Series&nbsp;A Warrants will expire on the fifth anniversary of the date of issuance. </FONT></P> <P STYLE="margin-top:10px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Each Series B Warrant is exercisable for one unit, each of which consists of one share of our common stock and one Series&nbsp;A Warrant to purchase one share of our common stock. The Series&nbsp;B
Warrants are exercisable immediately at an initial exercise price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per unit. The Series&nbsp;B Warrants will expire 90 trading days after the date of issuance. </FONT></P>
<P STYLE="margin-top:10px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our common stock is quoted on The Nasdaq Global Market under the symbol &#147;STEM.&#148; On December&nbsp;15, 2011, the last reported sales price of our
common stock on The Nasdaq Global Market was $1.40 per share. We do not intend to list either series of warrants on any national securities exchange. </FONT></P> <P STYLE="margin-top:10px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>Investing in our securities involves a high degree of risk. Before buying any securities, you should read the discussion of material risks of investing in our common stock under the heading &#147;Risk
factors&#148; beginning on page S-2 of this prospectus supplement and the risk factors described in other documents incorporated by reference herein. </B></FONT></P> <P STYLE="margin-top:10px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus supplement
or the accompanying prospectus. Any representation to the contrary is a criminal offense. </B></FONT></P> <P STYLE="margin-top:10px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">We have retained Roth Capital Partners, LLC and
Chardan Capital Markets, LLC to act as our underwriters in connection with the arrangement of this transaction. We have agreed to pay the underwriters the underwriter&#146;s fee set forth in the table below, which assumes that we sell all of the
units we are offering. </FONT></P> <P STYLE="font-size:10px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Per&nbsp;Unit</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Total</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>


<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Public offering price</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Underwriter discounts and commissions</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Proceeds, before expenses, to us(1)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
</TABLE> <P STYLE="margin-top:4px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">(1)&nbsp; Excludes potential proceeds from the exercise of the warrants through this prospectus supplement. </FONT></P>
<P STYLE="margin-top:10px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">The underwriters expect to deliver the shares and warrants against payment on or about December&nbsp;&nbsp;&nbsp;&nbsp; , 2011. </FONT></P>
<P STYLE="margin-top:10px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="4"><B>ROTH CAPITAL PARTNERS&nbsp;&nbsp;&nbsp;&nbsp; CHARDAN CAPITAL MARKETS, LLC </B></FONT></P>
<P STYLE="margin-top:10px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">The date of this prospectus supplement is December&nbsp;&nbsp;&nbsp;&nbsp; , 2011. </FONT></P>

<p Style='page-break-before:always'>
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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>TABLE OF CONTENTS </B></FONT></P>
<P STYLE="line-height:0px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;
</P><DIV STYLE="position:relative;float:left; margin-right:1%; width:48%;padding-right:9px;padding-bottom:8px;overflow:hidden;padding-top:3px">
 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Prospectus supplement </B></FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#supp271097_1">Prospectus supplement summary</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">S-&nbsp;&nbsp;1</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#supp271097_2">Risk factors</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">S-&nbsp;&nbsp;2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#supp271097_3">The Offering</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">S-&nbsp;&nbsp;3</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#supp271097_4">Note regarding forward-looking statements</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">S-&nbsp;&nbsp;4</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#supp271097_5">Use of proceeds</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">S-&nbsp;&nbsp;5</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#supp271097_6">Dilution</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">S-&nbsp;&nbsp;6</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#supp271097_7">Description of securities</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">S-&nbsp;&nbsp;7</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#supp271097_8">Underwriting</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">S-10</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#supp271097_9">Where you can find more information</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">S-12</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#supp271097_10">Incorporation of certain documents by reference</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">S-12</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#supp271097_11">Legal matters</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">S-13</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#supp271097_12">Experts</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">S-13</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
</TABLE> </DIV><DIV STYLE="position:relative;float:right; width:48%;padding-right:9px;padding-bottom:8px;overflow:hidden;padding-top:3px">
 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Prospectus </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#tx271097_13">Summary</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">4</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#tx271097_14">Risk factors</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">5</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#tx271097_15">Note regarding forward-looking statements</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">5</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#tx271097_16">Use of proceeds</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">6</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#tx271097_17">Ratio of earnings to fixed charges</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">6</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#tx271097_18">Plan of distribution</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">7</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#tx271097_19">Description of Common Stock</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">9</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#tx271097_20">Description of Preferred Stock</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">9</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#tx271097_21">Description of Warrants</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#tx271097_22">Description of Debt Securities</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">11</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#tx271097_23">Legal matters </A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">18</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#tx271097_24">Experts </A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">18</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#tx271097_25">Where you can find more information</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">18</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#tx271097_26">Incorporation of certain documents by reference </A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">18</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
</TABLE> </DIV><div style="clear:both; height:0px; font-size:0px">&nbsp;</div>

 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">i </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="3"><B>ABOUT THIS PROSPECTUS SUPPLEMENT </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">This document consists of two parts. The first part is this prospectus supplement, which describes the specific terms of this offering.
The second part, the accompanying prospectus, gives more general information, some of which may not apply to this offering. Generally, when we refer only to the &#147;prospectus,&#148; we are referring to both parts combined. This prospectus
supplement may add to, update or change information in the accompanying prospectus and the documents incorporated by reference into this prospectus supplement or the accompanying prospectus. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">If information in this prospectus supplement is inconsistent with the accompanying prospectus, you should rely on this prospectus
supplement. This prospectus supplement, the accompanying prospectus and the documents incorporated into each by reference include important information about us, the units, warrants and shares being offered and other information you should know
before investing in shares of our common stock and warrants to purchase shares of our common stock. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">You should rely only on
this prospectus supplement, the accompanying prospectus and the information incorporated or deemed to be incorporated by reference in this prospectus supplement and the accompanying prospectus. We have not, and the underwriters have not, authorized
anyone to provide you with information that is in addition to, or different from, that contained or incorporated by reference in this prospectus supplement and the accompanying prospectus. If anyone provides you with different or inconsistent
information, you should not rely on it. We are not, and the underwriters are not, offering to sell these securities in any jurisdiction where the offer or sale is not permitted. You should not assume that the information contained or incorporated by
reference in this prospectus supplement or the accompanying prospectus is accurate as of any date other than as of the date of this prospectus supplement or the accompanying prospectus, as the case may be, or in the case of the documents
incorporated by reference, the date of such documents regardless of the time of delivery of this prospectus supplement and the accompanying prospectus or any sale of shares of our common stock and warrants to purchase shares of our common stock. Our
business, financial condition, liquidity, results of operations, and prospects may have changed since those dates. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">All
references in this prospectus to &#147;StemCells,&#148; the &#147;Company,&#148; &#147;we,&#148; &#147;us,&#148; or &#147;our&#148; mean StemCells, Inc., including our directly and indirectly wholly-owned subsidiaries, unless we state otherwise or
the context otherwise requires. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">ii </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="3"><B><A NAME="supp271097_1"></A>PROSPECTUS SUMMARY </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>The following is a summary of selected information contained elsewhere or incorporated by reference in this prospectus. It does not
contain all of the information that you should consider before buying our securities. You should read this entire prospectus carefully, especially the section entitled &#147;Risk Factors&#148; and the consolidated financial statements and the notes
to the consolidated financial statements incorporated by reference. </I></FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="3"><B>The Company </B></FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Business Overview </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We
are engaged in researching, developing, and commercializing stem cell therapeutics and enabling tools and technologies for stem cell-based research and drug discovery and development. Our research and development (R&amp;D) programs are primarily
focused on identifying and developing potential cell-based therapeutics which can either restore or support organ function. In particular, since we relocated our corporate headquarters to California in 1999, our R&amp;D efforts have been directed at
refining our methods for identifying, isolating, culturing, and purifying the human neural stem cell and human liver engrafting cells (hLEC) and developing these as potential cell-based therapeutics for the central nervous system (CNS) and the
liver, respectively. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%;padding-bottom:0px;"><FONT STYLE="font-family:Times New Roman" SIZE="2">In our CNS Program, our HuCNS-SC<FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT> product candidate (purified human neural stem cells) is currently in clinical development for spinal cord injury and Pelizeaus-Merzbacher Disease (PMD), a myelination
disorder in the brain. We are currently conducting a Phase I/II clinical trial in Switzerland of our HuCNS-SC cells for the treatment of chronic spinal cord injury. We successfully transplanted the first patient in this trail in September 2011 and
completed the enrollment of the first patient cohort in December 2011, when we transplanted the third patient in the trial. In February 2011, we completed patient accrual in our Phase I clinical trial in PMD, a fatal disorder in which patients do
not produce normal myelin in the brain; and in November 2011, we announced interim data from this study, including MRI analysis of a patient which shows changes consistent with the early development of new myelin in the regions in which the clinical
investigators transplanted our HuCNS-SC cells. The trial will be completed in February 2012 and we expect to report results of the trial in early 2012. In addition, we plan to submit in 2011 an IND to conduct a Phase I/II clinical trial in the dry
form of age-related macular degeneration. We previously completed a Phase I clinical trial in infantile and late infantile neuronal ceroid lipofuscinosis (NCL, also known as Batten disease), and the data from that trial showed that our HuCNS-SC
cells were well tolerated and non-tumorigenic, and that there was evidence of engraftment and long-term survival of the transplanted HuCNS-SC cells. In our liver program, we are focused on identifying and developing liver cells as potential
therapeutics for a range of liver diseases. For a brief description of our significant therapeutic research and development programs see &#147;Overview&#151;Research and Development Programs&#148; in the Business Section of Part I, Item&nbsp;1 of
our Form 10-K for the year ended December&nbsp;31, 2010. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We are also engaged in developing and commercializing applications
of our technologies to enable research, which we believe represent current and nearer-term commercial opportunities. Our portfolio of technologies includes cell technologies relating to embryonic stem cells, induced pluripotent stem (iPS) cells, and
tissue-derived (adult) stem cells; expertise and infrastructure for providing cell-based assays for drug discovery; a cell culture products and antibody reagents business; and an intellectual property portfolio with claims relevant to cell
processing, reprogramming and manipulation, as well as to gene targeting and insertion. Much of these enabling technologies were acquired in April 2009 as part of our acquisition of the operations of Stem Cell Sciences Plc. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">As of September&nbsp;30, 2011, we had cash, cash equivalents and marketable securities of approximately $12.5 million. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Our Corporate Information </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We are incorporated in Delaware. Our principal executive offices are located at 7707 Gateway Blvd., Suite 140, Newark, California 94560
and our telephone number is (510)&nbsp;456-4000. Our website is located at www.stemcellsinc.com. We have not incorporated by reference into this prospectus supplement or the accompanying prospectus the information in, or that can be accessed
through, our website, and you should not consider it to be a part of this prospectus supplement or the accompanying prospectus. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">S-1
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><A NAME="supp271097_2"></A>RISK FACTORS</B> </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>You should consider the &#147;Risk Factors&#148; included and incorporated by reference in the prospectus, this prospectus supplement
and any other applicable prospectus supplement, including the risk factors incorporated by reference from our most recent Annual Report on Form 10-K for the fiscal year ended December&nbsp;31, 2010, filed with the SEC on March&nbsp;11, 2011, as
updated by our Quarterly Reports on Form 10-Q and our other filings with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the &#147;Exchange Act&#148;) filed after such annual report. The
risks and uncertainties we describe are not the only ones facing us. Additional risks not presently known to us, or that we currently deem immaterial, may also impair our business operations. If any of these risks were to occur, our business,
financial condition, or results of operations would likely suffer. In that event, the trading price of our common stock could decline, and you could lose all or part of your investment. </I></FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">S-2
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><A NAME="supp271097_3"></A>THE OFFERING </B></FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD WIDTH="51%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="47%"></TD></TR>


<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Securities we are offering</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="text-indent:4.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">units, each consisting of one share of our common stock and one Series&nbsp;A Warrant to purchase one share of our common stock at a price per unit
equal to $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;. The Series&nbsp;A Warrants (including the Series&nbsp;A Warrants issuable upon exercise of the Series&nbsp;B Warrants) will be exercisable immediately and
expire on the fifth anniversary of the initial date of issuance at an initial exercise price per share equal to $&nbsp;&nbsp;&nbsp;&nbsp; . See &#147;Description of Securities&#151;Series&nbsp;A Warrants.&#148;</FONT></P></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="text-indent:2.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">In addition, we are offering&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Series&nbsp;B
Warrants, each to purchase one unit. Purchasers in this offering will receive one Series&nbsp;B Warrant for each unit purchased by them in this offering. The Series&nbsp;B Warrants are exercisable immediately at an initial exercise price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per unit. The Series&nbsp;B Warrants will expire at the close of business on the 90th trading day following the date of issuance. See &#147;Description of Securities &#151;Series&nbsp;B
Warrants.&#148;</FONT></P></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Common stock we are offering</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="text-indent:4.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Shares, excluding the shares underlying the Series&nbsp;A Warrants and Series&nbsp;B Warrants.</FONT></P></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Common stock to be outstanding after this offering</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="text-indent:4.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">shares, excluding the shares underlying the Series&nbsp;A Warrants and Series&nbsp;B Warrants.</FONT></P></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Use of proceeds</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">We intend to use the net proceeds of this offering for general corporate purposes, including working capital, product development and capital expenditures, as well as
acquisitions and other strategic purposes. See &#147;Use of Proceeds.&#148;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Nasdaq Global Market symbol</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">STEM</FONT></TD></TR>
</TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The number of shares of common stock shown above to be outstanding after this offering is based on the
14,283,853 shares outstanding as of September&nbsp;30, 2011 and excludes: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#216;</FONT></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">895,965 shares of our common stock subject to options outstanding as of September&nbsp;30, 2011 having a weighted average exercise price of $20.20 per share;
</FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#216;</FONT></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">289,675 shares of our common stock subject to outstanding restricted stock units as of September&nbsp;30, 2011 having a weighted average grant date fair value of
$11.40; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#216;</FONT></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,104,167 shares of our common stock that have been reserved for issuance in connection with future grants under our stock option plans as of September&nbsp;30, 2011;
</FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#216;</FONT></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,434,483 shares of our common stock that have been reserved for issuance upon exercise of outstanding warrants as of September&nbsp;30, 2011 having a weighted average
exercise price of $20.77 per share; and </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#216;</FONT></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">the shares of common stock issuable upon the exercise of warrants offered hereby. </FONT></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Except as otherwise indicated, share and share price information in this prospectus supplement has been adjusted to reflect the
one-for-ten reverse split of our outstanding common stock that took place on July&nbsp;6, 2011. The information contained in documents incorporated herein by reference that we filed with the SEC before July&nbsp;6, 2011 has not been revised to
reflect retroactive application of the one-for-ten reverse stock split. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">S-3
</FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><A NAME="supp271097_4"></A>NOTE REGARDING FORWARD-LOOKING STATEMENTS </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">This prospectus supplement, the accompanying prospectus and the documents incorporated in this prospectus supplement contains forward
looking statements that involve substantial risks and uncertainties. Such statements include, without limitation, all statements as to expectation or belief and statements as to our future results of operations; the progress of our research, product
development and clinical programs; the need for, and timing of, additional capital and capital expenditures; partnering prospects; costs of manufacture of products; the protection of, and the need for, additional intellectual property rights;
effects of regulations; the need for additional facilities; and potential market opportunities. Our actual results may vary materially from those contained in such forward-looking statements because of risks to which we are subject, including the
fact that additional trials will be required to confirm the safety and demonstrate the efficacy of our HuCNS-SC cells for the treatment of spinal cord injury, Pelizeaus-Merzbacher disease (PMD), age-related macular degeneration, or any other
disease; uncertainty as to whether the U.S. Food and Drug Administration (FDA), Swissmedic, or other regulatory authorities will permit us to proceed with clinical testing of proposed products despite the novel and unproven nature of our
technologies; the risk that our clinical trials or studies could be substantially delayed beyond their expected dates or cause us to incur substantial unanticipated costs; uncertainties in our ability to obtain the capital resources needed to
continue our current research and development operations and to conduct the research, preclinical development and clinical trials necessary for regulatory approvals; the uncertainty regarding our ability to obtain a corporate partner or partners, if
needed, to support the development and commercialization of our potential cell-based therapeutics products; the uncertainty regarding the outcome of our clinical trials or studies we may conduct in the future; the uncertainty regarding the validity
and enforceability of our issued patents; the risk that we may not be able to manufacture additional master and working cell banks when needed; the uncertainty whether any products that may be generated in our cell-based therapeutics programs will
prove clinically safe and effective; the uncertainty whether we will achieve significant revenue from product sales or become profitable; uncertainties regarding our obligations with respect to our former encapsulated cell therapy facilities in
Rhode Island; obsolescence of our technologies; competition from third parties; intellectual property rights of third parties; litigation risks; and other risks to which we are subject. All forward-looking statements attributable to us or to persons
acting on our behalf are expressly qualified in their entirety by the cautionary statements and risk factors set forth in &#147;Risk Factors&#148; in Part I, Item&nbsp;1A of our Form 10-K for the year ended December&nbsp;31, 2010, as updated by our
Quarterly Reports on Form 10-Q and our other filings with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act filed after such annual report. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">S-4
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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><A NAME="supp271097_5"></A>USE OF PROCEEDS </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We estimate that the net proceeds from the sale of the units offered in this offering will be approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; after deducting underwriting discounts and commissions and estimated offering expenses payable by us and excluding the proceeds, if any, from exercise of any warrants
issued in this offering. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We intend to use the net proceeds of this offering for general corporate purposes, including working
capital, capital expenditures, research and development expenditures and clinical trial expenditures. A portion of the net proceeds may also be used for the acquisition of businesses, products and technologies that are complementary to ours, or for
other strategic purposes. Pending use of the net proceeds, we intend to invest the net proceeds in short-term, interest-bearing, investment-grade securities. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">S-5
</FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><A NAME="supp271097_6"></A>DILUTION </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">If you invest in our common stock and warrants, you will experience dilution to the extent of the difference between the price per share
you pay in this offering and the net tangible book value per share of our common stock immediately after this offering. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our
net tangible book value as of September&nbsp;30, 2011 was approximately $11,206,175 million, or $0.78 per share of common stock. Net tangible book value per share is equal to our total tangible assets minus total liabilities, all divided by the
number of shares of common stock outstanding as of September&nbsp;30, 2011. After giving effect to the sale in this offering of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; units, less the
underwriting discounts and commissions and estimated offering expenses we expect to pay, but excluding any effects of exercises of the warrants issued in this offering, our pro forma net tangible book value as of September&nbsp;30, 2011 would have
been approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; million, or approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per share. This represents an immediate increase in net
tangible book value of approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per share to existing stockholders and an immediate dilution of approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per share to new investors. The
following table illustrates this calculation on a per share basis: </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="76%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD WIDTH="78%"></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>


<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Offering price for one unit consisting of one share of common stock and one Series A Warrant</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:2.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Net tangible book value per share as of September&nbsp;30, 2011</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">0.78</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:2.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Increase per share attributable to the offering</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">As adjusted net tangible book value per share after this offering</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Dilution per share to new investors</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">The number of shares of common stock shown above to be outstanding after this offering is based on the 14,283,853 shares
outstanding as of September&nbsp;30, 2011 and excludes: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#216;</FONT></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">895,965 shares of our common stock subject to options outstanding as of September&nbsp;30, 2011 having a weighted average exercise price of $20.20 per share;
</FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#216;</FONT></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">289,675 shares of our common stock subject to outstanding restricted stock units as of September&nbsp;30, 2011 having a weighted average grant date fair value of
$11.40; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#216;</FONT></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,104,167 shares of our common stock that have been reserved for issuance in connection with future grants under our stock option plans as of September&nbsp;30, 2011;
</FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#216;</FONT></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,434,483 shares of our common stock that have been reserved for issuance upon exercise of outstanding warrants as of September&nbsp;30, 2011 having a weighted average
exercise price of $20.77 per share; and </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#216;</FONT></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">the shares of commons stock issuable upon the exercise of warrants offered hereby. </FONT></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">To the extent that any options or warrants are exercised, new options are issued under our equity incentive plans or we otherwise issue
additional shares of common stock in the future at a price less than the combined public offering price, there will be further dilution to new investors. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">S-6
</FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><A NAME="supp271097_7"></A>DESCRIPTION OF SECURITIES </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We are offering units, each unit consisting of one share of our common stock and one Series A Warrant to purchase one share of our common
stock. We are also offering Series B Warrants, each to purchase one unit. The underwriters will receive one Series B Warrant for each unit purchased by them in this offering. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">The units will not be issued or certificated. The shares of common stock, the Series A Warrants and the Series B Warrants that we are issuing are immediately separable and will be issued separately. The
shares of common stock issuable from time to time upon exercise of the Series A Warrants and Series B Warrants, if any, are also being offered pursuant to this prospectus. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I>Common Stock </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The material terms and provisions of our common stock
are described under the caption &#147;Description of Common Stock&#148; starting on page&nbsp;9 of the accompanying prospectus. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Series
A Warrants </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The following summary of certain terms and provisions of Series A Warrants that are being offered hereby is
not complete and is subject to, and qualified in its entirety by the provisions of the Series A Warrant, the form of which will be filed as an exhibit to a Current Report on Form 8-K that we will file in connection with this offering. Prospective
investors should carefully review the terms and provisions of the form of Series A Warrant for a complete description of the terms and conditions of the Series A Warrants. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><I>Duration and Exercise Price</I>. The Series A Warrants offered hereby will entitle the holders thereof to purchase up to an aggregate
of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares of our common stock at an initial exercise price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per share, commencing immediately on the
date of issuance and will expire on the fifth anniversary of the initial date of issuance. The Series A Warrants will be issued separately from the common stock included in the units, and may be transferred separately immediately thereafter. If the
Series B Warrants described below are exercised in full, we will issue additional Series A Warrants to purchase up to an aggregate of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares of our
common stock. All Series A Warrants will have the same expiration date. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Anti-Dilution Protection</I>. The Series A
Warrants contain full-ratchet anti-dilution protection upon the issuance of any common stock, securities convertible into common stock or certain other issuances at a price below the then-existing exercise price of the Series A Warrants, with
certain exceptions. The terms of the Series A Warrants, including these anti-dilution protections, may make it difficult for us to raise additional capital at prevailing market terms in the future. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Cashless Exercise</I>. If, at any time during the Series A Warrant exercisability period, the issuance of shares of our common stock
upon exercise of the Series A Warrant is not covered by an effective registration statement, we or the holder are permitted to effect a cashless exercise of the Series A Warrants (in whole or in part) by having the holder deliver to us a duly
executed exercise notice, canceling a portion of the Series A Warrant in payment of the purchase price payable in respect of the number of shares of our common stock purchased upon such exercise. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Transferability.</I>&nbsp;The Series A Warrants may be transferred at the option of the Series A Warrant holder upon surrender of the
Series A Warrants with the appropriate instruments of transfer. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Exchange Listing. </I>We do not plan on making an
application to list the Series A Warrants on The Nasdaq Global Market, any national securities exchange or other nationally recognized trading system. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><I>Rights as a Stockholder. </I>Except by virtue of a holder&#146;s ownership of shares of our common stock, the holders of the Series A Warrants do not have the rights or privileges of holders of our
common stock, including any voting rights, until they exercise their Series A Warrants. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">S-7
</FONT></P>


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<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Fundamental Transactions. </I>In the event of any fundamental transaction, as described
in the Series A Warrants and generally including any merger with another entity, the sale, transfer or other disposition of all or substantially all of our assets to another entity, or the acquisition by a person of more than 50% of our common
stock, then the holders of the Series A Warrants will thereafter have the right to receive upon exercise of the Series A Warrants such shares of stock, securities or assets as would have been issuable or payable with respect to or in exchange for a
number of shares of our common stock equal to the number of shares of our common stock issuable upon exercise of the Series A Warrants immediately prior to the fundamental transaction, had the fundamental transaction not taken place, and appropriate
provision will be made so that the provisions of the Series A Warrants (including, for example, provisions relating to the adjustment of the exercise price) will thereafter be applicable, as nearly equivalent as may be practicable in relation to any
share of stock, securities or assets deliverable upon the exercise of the Series A Warrants after the fundamental transaction. In lieu of the right to receive upon exercise the shares of stock, securities or assets as would have been issuable or
payable with respect to or in exchange for a number of shares of our common stock, the holders of the Series A Warrants may require us under certain circumstances to redeem the Series A Warrant for a purchase price payable in cash of the
Black-Scholes value of the Series A Warrant, as calculated pursuant to the terms of the Series A Warrant. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B></B><I>Limits on
Exercise of Series A Warrants</I><B></B>. Except upon at least 61&nbsp;days&#146; prior notice from the holder to us, the holder will not have the right to exercise any portion of the Series A Warrant if the holder, together with its affiliates,
would beneficially own in excess of 4.99% of the number of shares of our common stock (including securities convertible into common stock) outstanding immediately after the exercise.<B> </B></FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I>Series B Warrants </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The following summary of certain terms and
provisions of the Series B Warrants that are being offered hereby is not complete and is subject to, and qualified in its entirety by the provisions of the Series B Warrant, the form of which will be filed as an exhibit to a Current Report on Form
8-K that we will file in connection with this offering. Prospective investors should carefully review the terms and provisions of the Series B Warrant for a complete description of the terms and conditions of the Series B Warrants. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Duration and Exercise Price</I>. The Series B Warrants offered hereby will entitle the holders thereof to purchase up to an aggregate
of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; additional units, commencing immediately on the date of issuance and will expire 90 trading days after the date of issuance. The Series B Warrants
will be issued separately from the common stock included in the units, and may be transferred separately immediately thereafter. If the Series B Warrants described below are exercised in full, we will issue additional shares of Common Stock and
Series A Warrants to purchase up to an aggregate of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares of our common stock. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><I>Transferability.</I>&nbsp;The Series B Warrants may be transferred at the option of the Series B Warrant holder upon surrender of the Series B Warrants with the appropriate instruments of transfer.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Exchange Listing. </I>We do not plan on making an application to list the Series B Warrants on The Nasdaq Global Market,
any national securities exchange or other nationally recognized trading system. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Rights as a Stockholder. </I>Except by
virtue of a holder&#146;s ownership of shares of our common stock, the holders of the Series B Warrants do not have the rights or privileges of holders of our common stock, including any voting rights, until they exercise their Series B Warrants.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Fundamental Transactions. </I>In the event of any fundamental transaction, as described in the Series B Warrants and
generally including any merger with another entity, the sale, transfer or other disposition of all or substantially all of our assets to another entity, or the acquisition by a person of more than 50% of our common stock, then the holders of the
Series B Warrants will thereafter have the right to receive upon exercise of the Series B Warrants such shares of stock, securities or assets as would have been issuable or payable with respect to or in exchange for a number of shares of our common
stock equal to the number of shares of our common stock issuable upon exercise of the Series B Warrants immediately prior to the fundamental transaction, had the fundamental transaction not taken place, and appropriate provision will be made so that
the provisions of the Series B Warrants (including, for example, provisions relating to the adjustment of the exercise price) will thereafter be applicable, as nearly equivalent as may be </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">S-8
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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
practicable in relation to any share of stock, securities or assets deliverable upon the exercise of the Series B Warrants after the fundamental transaction. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B></B><I>Limits on Exercise of Series B Warrants</I><B></B>. The holder will not have the right to exercise any portion of the Series B
Warrant if the holder, together with its affiliates, would beneficially own in excess of 4.99% of the number of shares of our common stock (including securities convertible into common stock) outstanding immediately after the exercise.<B>
</B></FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">S-9
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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><A NAME="supp271097_8"></A>UNDERWRITING </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We and Chardan Capital Markets, LLC, and Roth Capital Partners, LLC, the representatives of the underwriters, have entered into an
underwriting agreement with respect to the units and Series B Warrants being offered. Subject to certain conditions, the underwriters are committed to purchase all of the units offered hereby, together with the Series B Warrants. </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD WIDTH="50%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="49%"></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:46pt"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Underwriters</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"> <P STYLE="border-bottom:1px solid #000000;width:57pt" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Number of Units</B></FONT></P></TD></TR>


<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Roth Capital Partners, LLC</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Chardan Capital Markets, LLC</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD></TR>
</TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Units and Series B Warrants sold by the underwriters to the public will be offered at the public offering
price set forth on the cover of this prospectus. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We estimate that the total fees and expenses payable by us, excluding
underwriting discounts and commissions, will be approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;. The following table shows the underwriting fees to be paid to the underwriters by us in connection with this
offering. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD WIDTH="50%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="49%"></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="border-bottom:1px solid #000000;width:63pt"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Underwriting Fees</B></FONT></P></TD></TR>


<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Per share paid by us</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Total</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD></TR>
</TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">In addition, upon any solicited exercise of Series B Warrants, we will pay the applicable underwriters a
financial advisory fee equal to &nbsp;&nbsp;&nbsp;&nbsp;% of the gross proceeds we receive from such exercise. We will provide the representatives with written notice of each exercise of Series B Warrants within three business days of the applicable
exercise date. Any such fees will be paid to the underwriters not less than two (2)&nbsp;business days after the notice of exercise giving rise to such fee. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">We have agreed to indemnify the underwriters against certain liabilities, including civil liabilities under the Securities Act, or to contribute to payments that the underwriters may be required to make
in respect of those liabilities. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We and our subsidiaries have agreed to certain restrictions on the ability to sell
additional shares of our common stock for a period ending 30 days after the date that the underwriting agreement is signed. Subject to certain exceptions, we and our subsidiaries have agreed not to directly or indirectly offer for sale, sell,
contract to sell, grant any option for the sale of, or otherwise issue or dispose of, any shares of common stock, or any securities of the Company or our subsidiaries which would entitle the holder thereof to acquire at any time common stock,
including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, common stock, without
the prior written consent of Roth Capital Partners, LLC or Chardan Capital Markets, LLC on behalf of the underwriters. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our
officers and our directors have agreed, subject to limited exceptions, for a period of 30 days after the date of the underwriting agreement, not to offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale or otherwise
dispose of, directly or indirectly any shares of common stock or any securities convertible into or exchangeable for our common stock either owned as of the date of the underwriting agreement or thereafter acquired at a per share price less than the
public offering price of the units without the prior written consent of the representative. The representatives may, in their sole discretion and at any time or from time to time before the termination of the lock-up period, without notice, release
all or any portion of the securities subject to the lock-up. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">S-10
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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">To facilitate the offering, the underwriters may engage in transactions that stabilize,
maintain or otherwise affect the price of our common stock during and after the offering. Specifically, the underwriters may over-allot or otherwise create a short position in the common stock for their own account by selling more common stock than
have been sold to them by us. Short sales involve the sale by the underwriters of a greater number of shares of common stock than they are required to purchase in this offering. &#147;Naked&#148; short sales are sales in excess of the number sold to
them by us. The underwriters must close out any naked short position by purchasing common stock in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the
price of the common stock in the open market after pricing that could adversely affect investors who purchase in this offering. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">In addition, the underwriters may stabilize or maintain the price of the common stock by bidding for or purchasing common stock in the
open market and may impose penalty bids. If penalty bids are imposed, selling concessions allowed to syndicate members or other broker dealers participating in the offering are reclaimed if common stock previously distributed in the offering are
repurchased, whether in connection with stabilization transactions or otherwise. The effect of these transactions may be to stabilize or maintain the market price of the common stock at a level above that which might otherwise prevail in the open
market. The imposition of a penalty bid may also affect the price of the common stock to the extent that it discourages resales of the common stock. The magnitude or effect of any stabilization or other transactions is uncertain. These transactions
may be effected on the Nasdaq Global Market or otherwise and, if commenced, may be discontinued at any time. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">From time to time in the
ordinary course of their respective business, certain of the underwriters and their affiliates may in the future engage in commercial banking or investment banking transactions with us and our affiliates. We have no present arrangements with any of
the underwriters for any such transactions. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">LifeTech Capital, a division of Aurora Capital LLC (&#147;LifeTech&#148;), is acting as financial
advisor to the Company and not as an underwriter or selling group member and is not a party to the underwriting agreement. LifeTech will receive from the Company a fee separate and apart from the underwriter&#146;s fee in an amount equal to
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">S-11
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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><A NAME="supp271097_9"></A>WHERE YOU CAN FIND MORE INFORMATION </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We file annual, quarterly, and special reports, proxy statements, and other information with the SEC. These documents are on file with
the SEC under file number 000-19871. You may read and copy any document we file at the SEC&#146;s public reference room at 100 F Street, N.E., Washington, D.C., 20549. You can request copies of these documents by contacting the SEC and paying a fee
for the copying cost. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. Our SEC filings are also available to the public from the SEC&#146;s website at www.sec.gov. </FONT></P>
<P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><A NAME="supp271097_10"></A>INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">This prospectus supplement and the accompanying prospectus are part of a registration statement on Form S-3 filed by us with the SEC.
This prospectus supplement and the accompanying prospectus do not contain all of the information set forth in the registration statement, certain parts of which are omitted in accordance with the rules and regulations of the SEC. Statements
contained in this prospectus supplement, the accompanying prospectus or the documents incorporated by reference into this prospectus supplement or the accompanying prospectus as to the contents of any contract or other document referred to are not
necessarily complete and in each instance reference is made to the copy of that contract or other document filed with the SEC. For further information about us and the securities offered by this prospectus supplement, we refer you to the
registration statement and its exhibits and schedules which may be obtained as described herein. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The SEC allows us to
&#147;incorporate by reference&#148; the information contained in documents that we file with them, 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 part of this prospectus supplement and the accompanying prospectus, and information in documents that we file later with the SEC will automatically update and supersede information in this prospectus supplement and the accompanying
prospectus. We incorporate by reference the documents listed below into this prospectus supplement, and any future filings made by us with the SEC under Section&nbsp;13(a), 13(c), 14 or 15(d) of the Exchange Act until the offering of all the
securities by this prospectus supplement is completed, including all filings made after the date of this prospectus supplement. We hereby incorporate by reference the documents listed below: </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149; our Annual Report on Form 10-K for the fiscal year ended December&nbsp;31, 2010 as filed on March&nbsp;3, 2011, as amended
April&nbsp;29, 2011; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149; our Quarterly Report on Form 10-Q for the quarter ended September&nbsp;30, 2011 as filed on
November&nbsp;3, 2011; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149; our Quarterly Report on Form 10-Q for the quarter ended June&nbsp;30, 2011 as filed on
August&nbsp;5, 2011; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149; our Quarterly Report on Form 10-Q for the quarter ended March&nbsp;31, 2011 as filed on
May&nbsp;10, 2011; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149; our Current Reports on Form 8-K filed on January&nbsp;6, 2011,&nbsp;January&nbsp;7,
2011,&nbsp;January&nbsp;11, 2011,&nbsp;February&nbsp;18, 2011,&nbsp;March&nbsp;4, 2011,&nbsp;March&nbsp;15, 2011 (excluding the information furnished pursuant to Item&nbsp;7.01, including the exhibit furnished therewith), May&nbsp;4, 2011 (the
information presented in Item&nbsp;2.05 only), July&nbsp;6, 2011,&nbsp;July&nbsp;18, 2011,&nbsp;July&nbsp;28, 2011 (the information presented in Item&nbsp;9.01 only), September&nbsp;22, 2011 and October&nbsp;28, 2011; and </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149; the description of our common stock contained in our registration statements on Form 8-A filed August&nbsp;3, 1998, under the
Exchange Act, including any amendment or report filed for the purpose of updating such description. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Upon request and at no
cost to the requesting person, we will provide each person to whom this prospectus supplement is delivered a copy of all of the information that has been incorporated by reference in this prospectus supplement or the accompanying prospectus but not
delivered with this prospectus supplement and the accompanying prospectus. You may obtain copies of these </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">S-12
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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
filings, at no cost, through the &#147;Investor Relations&#148; section of our website (www.stemcellsinc.com), and you may request copies of these filings, at no cost, by writing or telephoning
us at: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">StemCells, Inc. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="2">7707 Gateway Blvd., Suite 140 </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">Newark, CA 94560 </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">Attention: Investor Relations </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Phone: (510)&nbsp;456-4000 </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">e-mail: <U>irpr@stemcellsinc.com</U> </FONT></P>
<P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><A NAME="supp271097_11"></A>LEGAL MATTERS </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Various legal matters with respect to the validity of the shares of common stock and the warrants offered by this prospectus supplement will be passed upon for us by Ropes&nbsp;&amp; Gray LLP, Boston,
Massachusetts. Certain legal matters related to the offering will be passed upon for the underwriters by Ellenoff Grossman&nbsp;&amp; Schole&nbsp;LLP, New York, New York. </FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><A NAME="supp271097_12"></A>EXPERTS </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The audited financial statements and
schedules, and management&#146;s assessment of the effectiveness of internal control over financial reporting incorporated by reference in this prospectus supplement and elsewhere in the registration statement have been so incorporated by reference
in reliance upon the reports of Grant Thornton LLP, independent registered public accountants, upon the authority of said firm as experts in giving said reports. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">S-13
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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">PROSPECTUS </FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="3">$100,000,000 </FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="6"><B>STEMCELLS, INC. </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="3">Common Stock </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="3">Preferred Stock </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="3">Warrants </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="3">Debt
Securities </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We may offer to the public, from time to time, in one or more series or issuances: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">shares of our common stock; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">shares of our preferred stock; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">warrants to purchase shares of our common stock, preferred stock and/or debt securities; or </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">debt securities consisting of debentures, notes or other evidences of indebtedness. </FONT></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">This prospectus provides a general description of the securities we may offer. Each time we sell securities, we will provide specific
terms of the securities offered in a supplement to this prospectus. The prospectus supplement may also add, update or change information contained in this prospectus. This prospectus may not be used to consummate a sale of securities unless
accompanied by the applicable prospectus supplement. You should read both this prospectus and any prospectus supplement together with additional information described under the heading &#147;Where You Can Find More Information&#148; before you make
your investment decision. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We will sell these securities directly to our stockholders or to purchasers or through agents on
our behalf or through underwriters or dealers as designated from time to time. If any agents or underwriters are involved in the sale of any of these securities, the applicable prospectus supplement will provide the names of the agents or
underwriters and any applicable fees, commissions or discounts. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our common stock is traded on the Nasdaq Global Market under
the symbol &#147;STEM.&#148; On November&nbsp;1, 2010, the closing price of our common stock was $0.88. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Investing in our
securities involves certain risks. Please carefully consider &#147;Risk Factors&#148; on page 5 and other information included and incorporated by reference in this prospectus, and in any applicable prospectus supplement, for a discussion of the
factors you should consider carefully before deciding to purchase our securities.</B> </FONT></P> <P STYLE="font-size:24px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center>
<P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Neither the
Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.</B>
</FONT></P> <P STYLE="font-size:24px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center>
<P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">The date of this prospectus is November&nbsp;16, 2010 </FONT></P>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

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


<TR>
<TD WIDTH="96%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Page</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>


<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#tx271097_13">Prospectus Summary</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">4</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#tx271097_14">Risk Factors</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">5</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#tx271097_15">Note Regarding Forward-Looking Statements</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">5</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#tx271097_16">Use of Proceeds</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">6</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#tx271097_17">Ratio of Earnings to Fixed Charges</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">6</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#tx271097_18">Plan of Distribution</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">7</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#tx271097_19">Description of Common Stock</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">9</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#tx271097_20">Description of Preferred Stock</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">9</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#tx271097_21">Description of Warrants</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#tx271097_22">Description of Debt Securities</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">11</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#tx271097_23">Legal Matters</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">18</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#tx271097_24">Experts</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">18</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#tx271097_25">Where You Can Find More Information</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">18</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#tx271097_26">Incorporation of Certain Documents by Reference</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">18</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
</TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">This prospectus is part of a registration statement that we filed with the Securities and Exchange
Commission (the &#147;SEC&#148;) utilizing a &#147;shelf&#148; registration process. Under this shelf process, we may sell different types of securities described in this prospectus in one or more offerings. This prospectus provides you with a
general description of the securities we may offer. Each time we offer securities, we will provide a prospectus supplement and attach it to this prospectus. The prospectus supplement will contain specific information about the nature of the persons
offering securities and the terms of the securities being offered at that time. The prospectus supplement may also add, update or change information contained in this prospectus. You should read both this prospectus and any prospectus supplement,
including all documents incorporated herein by reference, together with additional information described under the headings &#147;Where You Can Find More Information&#148; and &#147;Incorporation of Certain Documents By Reference.&#148; </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">This prospectus does not contain all of the information that is in the registration statement. We omitted certain parts of the
registration statement from this prospectus as permitted by the SEC. We refer you to the registration statement and its exhibits for additional information about us and the securities that may be sold under this prospectus. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">All references in this prospectus to &#147;StemCells,&#148; the &#147;Company,&#148; &#147;we,&#148; &#147;us,&#148; or &#147;our&#148;
mean StemCells, Inc. and its subsidiaries unless we state otherwise or the context otherwise requires. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">You should rely only
on the information contained or incorporated by reference in this prospectus. We have not authorized anyone to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We
are not making an offer to sell these securities in any jurisdiction where the offer is not permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this
prospectus or the time of any sale of our securities. Our business, financial condition, results of operations, and prospects may have changed since such date. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">3 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><A NAME="tx271097_13"></A>PROSPECTUS SUPPLEMENT </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>The following is a summary of selected information contained elsewhere or incorporated by reference in this prospectus. It does not
contain all of the information that you should consider before buying our securities. You should read this entire prospectus carefully, especially the section entitled &#147;Risk Factors&#148; and the consolidated financial statements and the notes
to the consolidated financial statements incorporated by reference. </I></FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Our Company </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We are engaged in researching, developing, and commercializing stem cell therapeutics and technologies for stem cell-based research, drug
discovery and development. Our research and development efforts primarily support our therapeutic product programs, where we are engaged in identifying and developing potential cell-based therapeutics which can either restore or support organ
function. In particular, since we relocated our corporate headquarters to California in 1999, our efforts have been directed at refining our methods for identifying, isolating, culturing, and purifying the human neural stem cell and human liver
engrafting cells (hLEC) and developing these as potential cell-based therapeutics for the central nervous system (CNS) and the liver, respectively. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%;padding-bottom:0px;"><FONT
STYLE="font-family:Times New Roman" SIZE="2">In our CNS Program, our HuCNS-SC<FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT> product candidate (purified human
neural stem cells) is currently in clinical development for two neurodegenerative brain disorders, and our goal is to initiate clinical testing of our HuCNS-SC cells for spinal cord injury in 2011 and for degenerative retinal disorders in 2012. We
have completed a six patient Phase I clinical trial in infantile and late infantile neuronal ceroid lipofuscinosis (NCL), a lysomal storage disorder often referred to as Batten disease. The data from this trial showed that the HuCNS-SC cells were
well tolerated, and there was evidence of engraftment and long-term survival of the HuCNS-SC cells. In October 2010, we initiated a second clinical trial in NCL to further assess the safety of HuCNS-SC cells and to examine their ability to affect
the progression of the disease. We are also currently conducting a Phase I clinical trial to assess the safety and preliminary effectiveness of HuCNS-SC cells as a treatment for Pelizeaus-Merzbacher Disease (PMD), a myelination disorder in the
brain. Two of the four planned patients for this trial have been enrolled and transplanted with our HuCNS-SC cells, and we anticipate completing enrollment in early 2011. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">In our Liver Program, we have identified a subset of our human liver engrafting cells which we believe may be a candidate for product development, and we are working to purify and characterize this
subset. We have also conducted research on several other cell types and in other areas, which could lead to other possible product candidates, process improvements or further research activities. For a brief description of our significant
therapeutic research and development programs, see &#147;Business &#151; Overview &#151; Cellular Medicine Programs&#148; in Part I, Item&nbsp;1 included in our Annual Report on Form 10-K for the fiscal year ended December&nbsp;31, 2009 (the 2009
10-K). </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We are also engaged in developing and commercializing applications of our technologies to enable stem cell-based
research, which we believe represent nearer-term commercial opportunities. Our portfolio of enabling technologies includes cell technologies relating to embryonic stem cells, induced pluripotent stem (iPS) cells, and tissue-derived (adult) stem
cells; expertise and infrastructure for providing cell-based assays for drug discovery; a cell culture products business; and an intellectual property portfolio with claims relevant to cell processing, reprogramming and manipulation, as well as to
gene targeting and insertion. Many of our enabling technologies were acquired in April 2009 as part of our acquisition of the operations of Stem Cell Sciences Plc. For a brief description of our significant enabling technologies programs, see
&#147;Business &#151; Overview &#151; Enabling Technologies Programs&#148; in Part I, Item&nbsp;1 included in our 2009 10-K. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our principal executive offices are located at StemCells, Inc., 3155 Porter Drive, Palo Alto, CA 94304 and our phone number is
(650)&nbsp;475-3100. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">4 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><A NAME="tx271097_14"></A>RISK FACTORS </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>You should consider the &#147;Risk Factors&#148; included and incorporated by reference in this prospectus and any applicable
prospectus supplement, including the risk factors incorporated by reference from our most recent Annual Report on Form 10-K for this fiscal year ended December&nbsp;31, 2009, filed with the SEC on March&nbsp;11, 2010, as updated by our Quarterly
Reports on Form 10-Q and our other filings with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the &#147;Exchange Act&#148;) filed after such annual report. The risks and uncertainties we
describe are not the only ones facing us. Additional risks not presently known to us, or that we currently deem immaterial, may also impair our business operations. If any of these risks were to occur, our business, financial condition, or results
of operations would likely suffer. In that event, the trading price of our common stock could decline, and you could lose all or part of your investment. </I></FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><A NAME="tx271097_15"></A>NOTE REGARDING FORWARD-LOOKING STATEMENTS </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">This
prospectus and the documents incorporated in this prospectus by reference may contain &#147;forward-looking statements&#148;. Except for strictly historical information contained herein, matters discussed in this report constitute forward-looking
statements. Generally, these statements may be identified by the use of forward-looking words or phrases such as &#147;anticipate,&#148; &#147;believe,&#148; &#147;could,&#148; &#147;estimate,&#148; &#147;expect,&#148; &#147;intend,&#148; &#147;look
forward,&#148; &#147;may,&#148; &#147;planned,&#148; &#147;potential,&#148; &#147;should,&#148; &#147;will,&#148; and &#147;would,&#148; and similar terms. These forward-looking statements reflect our current expectations and are based upon
currently available data. The Private Securities Litigation Reform Act of 1995 provides a &#147;safe harbor&#148; for such forward-looking statements. In order to comply with the terms of the safe harbor, we note that a variety of factors could
cause actual results and experience to differ materially from the anticipated results or other expectations expressed in the forward-looking statements. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Such statements include, without limitation, all statements as to expectation or belief and statements as to our future results of operations; the progress of our research, product development and
clinical programs; the need for, and timing of, additional capital and capital expenditures; partnering prospects; costs of manufacture of products; the protection of, and the need for, additional intellectual property rights; effects of
regulations; the need for additional facilities; and potential market opportunities. Our actual results may vary materially from those contained in such forward-looking statements because of risks to which we are subject, including uncertainty as to
whether the U.S. Food and Drug Administration (FDA) or other regulatory authorities will permit us to proceed or continue with clinical testing of proposed products despite the novel and unproven nature of our technologies; the risk that our initial
clinical trial and any other clinical trials or studies could be substantially delayed beyond their expected dates or cause us to incur substantial unanticipated costs; uncertainties in our ability to obtain the capital resources needed to continue
our current research and development operations and to conduct the research, preclinical development and clinical trials necessary for regulatory approvals; the uncertainty regarding our ability to obtain a corporate partner or partners, if needed,
to support the development and commercialization of our potential cell-based therapeutics products; the uncertainty about the design of current and future clinical trials and whether we will receive the necessary support of a clinical trial site and
its institutional review board to pursue current and future clinical trials in NCL, PMD or in proposed therapies for other diseases or conditions; the uncertainty regarding the outcome of our proposed clinical trial in NCL and any other clinical
trials or studies we may conduct in the future; the uncertainty regarding the validity and enforceability of our issued patents; the uncertainty whether any products that may be generated in our cell-based therapeutics programs will prove clinically
safe and effective; the uncertainty regarding our ability to commercialize a therapeutic product and its ability to successfully compete with other products on the market; the uncertainty whether we will achieve revenue from product sales or become
profitable; uncertainties regarding our obligations with respect to our former encapsulated cell therapy facilities in Rhode Island; obsolescence of our technologies; competition from third parties; intellectual property rights of third parties;
litigation risks; and other risks to which we are subject. All forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the cautionary statements and risk factors set forth in
&#147;Risk Factors&#148; in this prospectus. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The forward-looking statements included in this prospectus represent our
estimates as of the date of this prospectus. We specifically disclaim any obligation to update these forward-looking statements in the future. These forward-looking statements should not be relied upon as representing our estimates or views as of
any date subsequent to the date of this prospectus. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">5 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><A NAME="tx271097_16"></A>USE OF PROCEEDS </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Except as otherwise provided in the applicable prospectus supplement, we intend to use the net proceeds from the sale of the securities
covered by this prospectus for general corporate purposes, which may include working capital, capital expenditures, research and development expenditures, clinical trial expenditures, acquisitions of new technologies or businesses, and investments.
Additional information on the use of net proceeds from the sale of securities covered by this prospectus may be set forth in the prospectus supplement relating to the specific offering. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><A NAME="tx271097_17"></A>RATIO OF EARNINGS TO FIXED CHARGES </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Our earnings are inadequate to cover fixed charges. The following table sets forth the dollar amount of the coverage. We have not included a ratio of earnings to combined fixed charges and preferred stock
dividends because we do not have any preferred stock outstanding. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD WIDTH="58%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="18" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Year Ended December&nbsp;31,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Nine</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="1"><B>Months</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Ended</B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>September</B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>30, 2010</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>2005</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>2006</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>2007</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>2008</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD COLSPAN="2" VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="22" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>(in thousands)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>


<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Ratio of earnings to fixed charges (1)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Deficiency of earnings available to</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:1px; margin-left:2.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">cover fixed charges</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">(13,726</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">(20,927</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">(27,107</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">(31,307</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">(29,156</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">(18,110</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">)&nbsp;</FONT></TD></TR>
</TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000;width:10%">&nbsp;</P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">In each of the periods presented, our earnings were insufficient to cover fixed charges and accordingly ratios are not presented. </FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">6 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><A NAME="tx271097_18"></A>PLAN OF DISTRIBUTION </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We may sell securities in any of the ways described below, including any combination thereof: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="6%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">to or through underwriters or dealers; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="6%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">through one or more agents; or </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="6%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">directly to purchasers or to a single purchaser. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">The distribution of the securities may be effected from time to time in one or more transactions: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="6%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">at a fixed price, or prices, which may be changed from time to time; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="6%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">at market prices prevailing at the time of sale; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="6%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">at prices related to such prevailing market prices; or </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="6%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">at negotiated prices. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Each prospectus supplement will describe the method of distribution of the securities and any applicable restrictions. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">The prospectus supplement with respect to the securities of a particular series will describe the terms of the offering of the securities, including the following: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="6%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the name or names of any underwriters, dealers or agents and the amounts of securities underwritten or purchased by each of them;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="6%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the initial public offering price of the securities and the proceeds to us and any discounts, commissions or concessions allowed or reallowed or paid
to dealers; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="6%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">any securities exchanges on which the securities may be listed. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers may be changed from time to
time. In no event will any underwriter or dealer receive fees, commissions and markups, which, in the aggregate, would exceed eight percent of the price of the securities being registered. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Only the agents or underwriters named in the prospectus supplement are agents or underwriters in connection with the securities being
offered. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We may authorize underwriters, dealers or other persons acting as our agents to solicit offers by certain
institutions to purchase securities from us pursuant to delayed delivery contracts providing for payment and delivery on the date stated in the prospectus supplement. Each contract will be for an amount not less than, and the aggregate amount of
securities sold pursuant to such contracts shall not be less nor more than, the respective amounts stated in the prospectus supplement. Institutions with whom the contracts, when authorized, may be made include commercial and savings banks,
insurance companies, pension funds, investment companies, educational and charitable institutions and other institutions, but shall in all cases be subject to our approval. Delayed delivery contracts will be subject only to those conditions set
forth in the prospectus supplement, and the prospectus supplement will set forth any commissions we pay for solicitation of these contracts. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Agents, underwriters and other third parties described above may be entitled to indemnification by us against certain civil liabilities, including liabilities under the Securities Act, or to contribution
with respect to payments which the agents or underwriters may be required to make in respect thereof. Agents, underwriters and such other third parties may be customers of, engage in transactions with, or perform services for us in the ordinary
course of business. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">7 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">One or more firms, referred to as &#147;remarketing firms,&#148; may also offer or sell the
securities, if the prospectus supplement so indicates, in connection with a remarketing arrangement upon their purchase. Remarketing firms will act as principals for their own accounts or as our agents. These remarketing firms will offer or sell the
securities in accordance with the terms of the securities. The prospectus supplement will identify any remarketing firm and describe the terms of its agreement, if any, with us and the remarketing firm&#146;s compensation. Remarketing firms may be
deemed to be underwriters in connection with the securities they remarket. Remarketing firms may be entitled under agreements that may be entered into with us to indemnification by us against certain civil liabilities, including liabilities under
the Securities Act, and may be customers of, engage in transactions with or perform services for us in the ordinary course of business. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Certain of the underwriters may use this prospectus and the accompanying prospectus supplement for offers and sales related to market-making transactions in the securities. These underwriters may act as
principal or agent in these transactions, and the sales will be made at prices related to prevailing market prices at the time of sale. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">The securities may be new issues of securities and may have no established trading market. The securities may or may not be listed on a national securities exchange. Underwriters may make a market in
these securities, but will not be obligated to do so and may discontinue any market making at any time without notice. We can make no assurance as to the liquidity of, or the existence of trading markets for, any of the securities. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Certain persons participating in this offering may engage in overallotment, stabilizing transactions, short covering transactions and
penalty bids in accordance with rules and regulations under the Exchange Act. Overallotment involves sales in excess of the offering size, which create a short position. Stabilizing transactions permit bids to purchase the underlying security so
long as the stabilizing bids do not exceed a specified maximum. Short covering transactions involve purchases of the securities in the open market after the distribution is completed to cover short positions. Penalty bids permit the underwriters to
reclaim a selling concession from a dealer when the securities originally sold by the dealer are purchased in a covering transaction to cover short positions. Those activities may cause the price of the securities to be higher than it would
otherwise be. If commenced, the underwriters may discontinue any of the activities at any time. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">8 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><A NAME="tx271097_19"></A>DESCRIPTION OF COMMON STOCK </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The following summary of the terms of our common stock is subject to and qualified in its entirety by reference to our charter and
by-laws, copies of which are on file with the SEC as exhibits to previous SEC filings. Please refer to &#147;Where You Can Find More Information&#148; below for directions on obtaining these documents. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We have authority to issue 250,000,000 shares of common stock. As of November&nbsp;1, 2010, we had 127,029,870 shares of common stock
outstanding. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>General </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Holders of common stock are entitled to one vote per share on matters on which our stockholders vote. There are no cumulative voting rights. Holders of common stock are entitled to receive dividends, if
declared by our board of directors, out of funds that we may legally use to pay dividends. If we liquidate or dissolve, holders of common stock are entitled to share ratably in our assets once our debts and any liquidation preference owed to any
then-outstanding preferred stockholders are paid. Our certificate of incorporation does not provide the common stock with any redemption, conversion or preemptive rights. All shares of common stock that are outstanding as of the date of this
prospectus and, upon issuance and sale, all shares we are offering by this prospectus, will be fully-paid and nonassessable. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Transfer
Agent and Registrar </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The transfer agent and registrar for our common stock is Computershare Trust Company, N.A. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Nasdaq Global Market </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our common stock is listed for quotation on the Nasdaq Global Market under the symbol &#147;STEM.&#148; </FONT></P>
<P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><A NAME="tx271097_20"></A>DESCRIPTION OF PREFERRED STOCK </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">We have authority to issue 1,000,000 shares of undesignated preferred stock. As of November&nbsp;1, 2010, no shares of our preferred stock were outstanding. The following summary of certain provisions of
our preferred stock does not purport to be complete. You should refer to our restated certificate of incorporation and our amended and restated by-laws, both of which are included as exhibits to the registration statement we have filed with the SEC
in connection with this offering. The summary below is also qualified by provisions of applicable law. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our board of directors
is authorized, without stockholder approval, from time to time, to issue shares of preferred stock in series and may, at the time of issuance, subject to Delaware law and our charter and by-laws, determine the rights, preferences and limitations of
each series, including voting rights, dividend rights and redemption and liquidation preferences. Satisfaction of any dividend preferences of outstanding shares of preferred stock would reduce the amount of funds available for the payment of
dividends on shares of our common stock. Holders of shares of preferred stock may be entitled to receive a preference payment in the event of any liquidation, dissolution or winding-up of our company before any payment is made to the holders of
shares of our common stock. In some circumstances, the issuance of shares of preferred stock may render more difficult or tend to discourage a merger, tender offer or proxy contest, the assumption of control by a holder of a large block of our
securities or the removal of incumbent management. Upon the affirmative vote of our board of directors, without stockholder approval, we may issue shares of preferred stock with voting and conversion rights which could adversely affect the holders
of shares of our common stock. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">If we offer a specific series of preferred stock under this prospectus, we will describe the
terms of the preferred stock in the prospectus supplement for such offering and will file a copy of the certificate establishing the terms of the preferred stock with the SEC. To the extent required, this description will include: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">the title and stated value; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">the number of shares offered, the liquidation preference per share and the purchase price; </FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">9 </FONT></P>


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<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">the dividend rate(s), period(s) and/or payment date(s), or method(s) of calculation for such dividends; </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">whether dividends will be cumulative or non-cumulative and, if cumulative, the date from which dividends will accumulate; </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">the procedures for any auction and remarketing, if any; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">the provisions for a sinking fund, if any; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">the provisions for redemption, if applicable; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">any listing of the preferred stock on any securities exchange or market; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">whether the preferred stock will be convertible into our common stock, and, if applicable, the conversion price (or how it will be calculated) and conversion period;
</FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">whether the preferred stock will be exchangeable into debt securities, and, if applicable, the exchange price (or how it will be calculated) and exchange period;
</FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">voting rights, if any, of the preferred stock; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">a discussion of any material and/or special U.S. federal income tax considerations applicable to the preferred stock; </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">the relative ranking and preferences of the preferred stock as to dividend rights and rights upon liquidation, dissolution or winding up of the affairs of StemCells,
Inc.; and </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">any material limitations on issuance of any class or series of preferred stock ranking senior to or on a parity with the series of preferred stock as to dividend rights
and rights upon liquidation, dissolution or winding up of StemCells, Inc. </FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The preferred stock offered by this
prospectus will, when issued, be fully paid and nonassessable and will not have, or be subject to, any preemptive or similar rights. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Transfer Agent and Registrar </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">The transfer agent and registrar for any series or class of preferred stock will be set forth in the applicable prospectus supplement. </FONT></P>
<P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><A NAME="tx271097_21"></A>DESCRIPTION OF WARRANTS </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">We may issue warrants to purchase shares of our common stock, preferred stock and/or debt securities in one or more series together with other securities or separately, as described in the applicable
prospectus supplement. Below is a description of certain general terms and provisions of the warrants that we may offer. Particular terms of the warrants will be described in the warrant agreements and the prospectus supplement to the warrants.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The applicable prospectus supplement will contain, where applicable, the following terms of, and other information relating
to, the warrants: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">the specific designation and aggregate number of, and the price at which we will issue, the warrants; </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">the currency or currency units in which the offering price, if any, and the exercise price are payable; </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">the designation, amount and terms of the securities purchasable upon exercise of the warrants; </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">if applicable, the exercise price for shares of our common stock and the number of shares of common stock to be received upon exercise of the warrants;
</FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">if applicable, the exercise price for shares of our preferred stock, the number of shares of preferred stock to be received upon exercise, and a description of that
series of our preferred stock; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">if applicable, the exercise price for our debt securities, the amount of debt securities to be received upon exercise, and a description of that series of debt
securities; </FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">10 </FONT></P>



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<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">the date on which the right to exercise the warrants will begin and the date on which that right will expire or, if you may not continuously exercise the warrants
throughout that period, the specific date or dates on which you may exercise the warrants; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">whether the warrants will be issued in fully registered form or bearer form, in definitive or global form or in any combination of these forms, although, in any case,
the form of a warrant included in a unit will correspond to the form of the unit and of any security included in that unit; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">any applicable material U.S. federal income tax consequences; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">the identity of the warrant agent for the warrants and of any other depositaries, execution or paying agents, transfer agents, registrars or other agents;
</FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">the proposed listing, if any, of the warrants or any securities purchasable upon exercise of the warrants on any securities exchange; </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">if applicable, the date from and after which the warrants and the common stock, preferred stock and/or debt securities will be separately transferable;
</FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">if applicable, the minimum or maximum amount of the warrants that may be exercised at any one time; </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">information with respect to book-entry procedures, if any; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">the anti-dilution provisions of the warrants, if any; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">any redemption or call provisions; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">whether the warrants are to be sold separately or with other securities as parts of units; and </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">any additional terms of the warrants, including terms, procedures and limitations relating to the exchange and exercise of the warrants. </FONT></TD></TR></TABLE>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Transfer Agent and Registrar </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">The transfer agent and registrar for any warrants will be set forth in the applicable prospectus supplement. </FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><A NAME="tx271097_22"></A>DESCRIPTION OF DEBT SECURITIES </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We will issue
the debt securities offered by this prospectus and any accompanying prospectus supplement under an indenture to be entered into between us and the trustee identified in the applicable prospectus supplement. The terms of the debt securities will
include those stated in the indenture and those made part of the indenture by reference to the Trust Indenture Act of 1939, as in effect on the date of the indenture. We have filed a copy of the form of indenture as an exhibit to the registration
statement in which this prospectus is included. The indenture will be subject to and governed by the terms of the Trust Indenture Act of 1939. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">We may offer under this prospectus up to an aggregate principal amount of $100,000,000 in debt securities; or if debt securities are issued at a discount, or in a foreign currency, foreign currency units
or composite currency, the principal amount as may be sold for an initial public offering price of up to $100,000,000. Unless otherwise specified in the applicable prospectus supplement, the debt securities will represent direct, unsecured
obligations of StemCells, Inc. and will rank equally with all of our other unsecured indebtedness. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The following statements
relating to the debt securities and the indenture are summaries, qualified in their entirety to the detailed provisions of the indenture. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>General </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We may issue
the debt securities in one or more series with the same or various maturities, at par, at a premium, or at a discount. We will describe the particular terms of each series of debt securities in a prospectus supplement relating to that series, which
we will file with the SEC. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">11 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The prospectus supplement will set forth, to the extent required, the following terms of the
debt securities in respect of which the prospectus supplement is delivered: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">the title of the series; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">the aggregate principal amount; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">the issue price or prices, expressed as a percentage of the aggregate principal amount of the debt securities; </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">any limit on the aggregate principal amount; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">the date or dates on which principal is payable; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">the interest rate or rates (which may be fixed or variable) or, if applicable, the method used to determine such rate or rates; </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">the date or dates from which interest, if any, will be payable and any regular record date for the interest payable; </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">the place or places where principal and, if applicable, premium and interest, is payable; </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">the terms and conditions upon which we may, or the holders may require us to, redeem or repurchase the debt securities; </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">the denominations in which such debt securities may be issuable, if other than denominations of $1,000 or any integral multiple of that number;
</FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">whether the debt securities are to be issuable in the form of certificated debt securities (as described below) or global debt securities (as described below);
</FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">the portion of principal amount that will be payable upon declaration of acceleration of the maturity date if other than the principal amount of the debt securities;
</FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">the currency of denomination; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">the designation of the currency, currencies or currency units in which payment of principal and, if applicable, premium and interest, will be made;
</FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">if payments of principal and, if applicable, premium or interest, on the debt securities are to be made in one or more currencies or currency units other than the
currency of denomination, the manner in which the exchange rate with respect to such payments will be determined; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">if amounts of principal and, if applicable, premium and interest may be determined by reference to an index based on a currency or currencies or by reference to a
commodity, commodity index, stock exchange index or financial index, then the manner in which such amounts will be determined; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">the provisions, if any, relating to any collateral provided for such debt securities; </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">any addition to or change in the covenants and/or the acceleration provisions described in this prospectus or in the indenture; </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">any events of default, if not otherwise described below under &#147;Events of Default&#148;; </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">the terms and conditions, if any, for conversion into or exchange for shares of common stock or preferred stock; </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">any depositaries, interest rate calculation agents, exchange rate calculation agents or other agents; and </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">the terms and conditions, if any, upon which the debt securities shall be subordinated in right of payment to other indebtedness of StemCells, Inc.
</FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We may issue discount debt securities that provide for an amount less than the stated principal amount to be
due and payable upon acceleration of the maturity of such debt securities in accordance with the terms of the indenture. We may also issue debt securities in bearer form, with or without coupons. If we issue discount debt securities or
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">12 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
debt securities in bearer form, we will describe material U.S. federal income tax considerations and other material special considerations which apply to these debt securities in the applicable
prospectus supplement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We may issue debt securities denominated in or payable in a foreign currency or currencies or a
foreign currency unit or units. If we do, we will describe the restrictions, elections, and general tax considerations relating to the debt securities and the foreign currency or currencies or foreign currency unit or units in the applicable
prospectus supplement. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Exchange and/or Conversion Rights </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">We may issue debt securities which can be exchanged for or converted into shares of common stock or preferred stock. If we do, we will describe the terms of exchange or conversion in the prospectus
supplement relating to these debt securities. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Transfer and Exchange </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We may issue debt securities that will be represented by either: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;book-entry securities,&#148; which means that there will be one or more global securities registered in the name of a depositary or a nominee of a depositary; or
</FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;certificated securities,&#148; which means that they will be represented by a certificate issued in definitive registered form. </FONT></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We will specify in the prospectus supplement applicable to a particular offering whether the debt securities offered will be book-entry
or certificated securities. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Certificated Debt Securities </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">If you hold certificated debt securities, you may transfer or exchange such debt securities at the trustee&#146;s office or at the paying agent&#146;s office or agency in accordance with the terms of the
indenture. You will not be charged a service charge for any transfer or exchange of certificated debt securities but may be required to pay an amount sufficient to cover any tax or other governmental charge payable in connection with such transfer
or exchange. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">You may effect the transfer of certificated debt securities and of the right to receive the principal of,
premium, and/or interest, if any, on the certificated debt securities only by surrendering the certificate representing the certificated debt securities and having us or the trustee issue a new certificate to the new holder. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Global Securities </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">If we
decide to issue debt securities in the form of one or more global securities, then we will register the global securities in the name of the depositary for the global securities or the nominee of the depositary, and the global securities will be
delivered by the trustee to the depositary for credit to the accounts of the holders of beneficial interests in the debt securities. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">The prospectus supplement will describe the specific terms of the depositary arrangement for debt securities of a series that are issued in global form. None of our company, the trustee, any payment agent
or the security registrar will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in a global debt security or for maintaining, supervising or reviewing any
records relating to these beneficial ownership interests. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>No Protection in the Event of Change of Control </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The indenture does not have any covenants or other provisions providing for a put or increased interest or otherwise that would afford
holders of debt securities additional protection in the event of a recapitalization transaction, a change of control of StemCells, Inc., or a highly leveraged transaction. If we offer any covenants or
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">13 </FONT></P>



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<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
provisions of this type with respect to any debt securities covered by this prospectus, we will describe them in the applicable prospectus supplement. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Covenants </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Unless
otherwise indicated in this prospectus or a prospectus supplement, the debt securities will not have the benefit of any covenants that limit or restrict our business or operations, the pledging of our assets or the incurrence by us of indebtedness.
We will describe in the applicable prospectus supplement any material covenants in respect of a series of debt securities. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Consolidation,
Merger and Sale of Assets </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We have agreed in the indenture that we will not consolidate with or merge into any other person
or convey, transfer, sell or lease our properties and assets substantially as an entirety to any person, unless: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">the person formed by the consolidation or into or with which we are merged or the person to which our properties and assets are conveyed, transferred, sold or leased,
is a corporation organized and existing under the laws of the U.S., any state or the District of Columbia or a corporation or comparable legal entity organized under the laws of a foreign jurisdiction and, if we are not the surviving person, the
surviving person has expressly assumed all of our obligations, including the payment of the principal of and, premium, if any, and interest on the debt securities and the performance of the other covenants under the indenture; and
</FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">immediately before and immediately after giving effect to the transaction, no event of default, and no event which, after notice or lapse of time or both, would become
an event of default, has occurred and is continuing under the indenture. </FONT></TD></TR></TABLE> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Events of Default </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Unless otherwise specified in the applicable prospectus supplement, the following events will be events of default under the indenture
with respect to debt securities of any series: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">we fail to pay any principal or premium, if any, when it becomes due; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">we fail to pay any interest within 30 days after it becomes due; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">we fail to comply with any other covenant in the debt securities or the indenture for 60 days after written notice specifying the failure from the trustee or the
holders of not less than 25% in aggregate principal amount of the outstanding debt securities of that series; and </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">certain events involving bankruptcy, insolvency or reorganization of StemCells, Inc. or any of our significant subsidiaries. </FONT></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The trustee may withhold notice to the holders of the debt securities of any series of any default, except in payment of principal of or
premium, if any, or interest on the debt securities of a series, if the trustee considers it to be in the best interest of the holders of the debt securities of that series to do so. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">If an event of default (other than an event of default resulting from certain events of bankruptcy, insolvency or reorganization) occurs,
and is continuing, then the trustee or the holders of not less than 25% in aggregate principal amount of the outstanding debt securities of any series may accelerate the maturity of the debt securities. If this happens, the entire principal amount,
plus the premium, if any, of all the outstanding debt securities of the affected series plus accrued interest to the date of acceleration will be immediately due and payable. At any time after the acceleration, but before a judgment or decree based
on such acceleration is obtained by the trustee, the holders of a majority in aggregate principal amount of outstanding debt securities of such series may rescind and annul such acceleration if: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">all events of default (other than nonpayment of accelerated principal, premium or interest) have been cured or waived; </FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">14 </FONT></P>



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<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">all lawful interest on overdue interest and overdue principal has been paid; and </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">the rescission would not conflict with any judgment or decree. </FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">In addition, if the acceleration occurs at any time when we have outstanding indebtedness which is senior to the debt securities, the payment of the principal amount of outstanding debt securities may be
subordinated in right of payment to the prior payment of any amounts due under the senior indebtedness, in which case the holders of debt securities will be entitled to payment under the terms prescribed in the instruments evidencing the senior
indebtedness and the indenture. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">If an event of default resulting from certain events of bankruptcy, insolvency or
reorganization occurs, the principal, premium and interest amount with respect to all of the debt securities of any series will be due and payable immediately without any declaration or other act on the part of the trustee or the holders of the debt
securities of that series. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The holders of a majority in principal amount of the outstanding debt securities of a series will
have the right to waive any existing default or compliance with any provision of the indenture or the debt securities of that series and to direct the time, method and place of conducting any proceeding for any remedy available to the trustee,
subject to certain limitations specified in the indenture. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">No holder of any debt security of a series will have any right to
institute any proceeding with respect to the indenture or for any remedy under the indenture, unless: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">the holder gives to the trustee written notice of a continuing event of default; </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">the holders of at least 25% in aggregate principal amount of the outstanding debt securities of the affected series make a written request and offer reasonable
indemnity to the trustee to institute a proceeding as trustee; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">the trustee fails to institute a proceeding within 60 days after such request; and </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">the holders of a majority in aggregate principal amount of the outstanding debt securities of the affected series do not give the trustee a direction inconsistent with
such request during such 60-day period. </FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">These limitations do not, however, apply to a suit instituted for
payment on debt securities of any series on or after the due dates expressed in the debt securities. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Modification and Waiver
</B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">From time to time, we and the trustee may, without the consent of holders of the debt securities of one or more series,
amend the indenture or the debt securities of one or more series, or supplement the indenture, for certain specified purposes, including: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">to provide that the surviving entity following a change of control of StemCells, Inc. permitted under the indenture will assume all of our obligations under the
indenture and debt securities; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">to provide for certificated debt securities in addition to uncertificated debt securities; </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">to comply with any requirements of the SEC under the Trust Indenture Act of 1939; </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">to cure any ambiguity, defect or inconsistency, or make any other change that does not materially and adversely affect the rights of any holder; and
</FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">to appoint a successor trustee under the indenture with respect to one or more series. </FONT></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">From time to time we and the trustee may, with the consent of holders of at least a majority in principal amount of the outstanding
series of debt securities, amend or supplement the indenture or the debt securities of such series, or waive compliance in a particular instance by us with any provision of the indenture or the debt securities. We may not, however, without the
consent of each holder affected by such action, modify or supplement the indenture or the debt securities or waive compliance with any provision of the indenture or the debt securities in order to: </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">15 </FONT></P>



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<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">reduce the amount of debt securities whose holders must consent to an amendment, supplement, or waiver to the indenture or such debt security; </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">reduce the rate of or change the time for payment of interest; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">reduce the principal of or change the stated maturity of the debt securities; </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">make any debt security payable in money other than that stated in the debt security; </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">change the amount or time of any payment required or reduce the premium payable upon any redemption, or change the time before which no such redemption may be made;
</FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">waive a default in the payment of the principal of, premium, if any, or interest on the debt securities or a redemption payment; </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">waive a redemption payment with respect to any debt securities or change any provision with respect to redemption of debt securities; or </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">take any other action otherwise prohibited by the indenture to be taken without the consent of each holder affected by the action. </FONT></TD></TR></TABLE>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Defeasance of Debt Securities and Certain Covenants in Certain Circumstances </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The indenture permits us, at any time, to elect to discharge our obligations with respect to one or more series of debt securities by
following certain procedures described in the indenture. These procedures will allow us either: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">to defease and be discharged from any and all of our obligations with respect to any debt securities except for the following obligations (which discharge is referred
to as &#147;legal defeasance&#148;): </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(1)&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">to register the transfer or exchange of such debt securities; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(2)&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">to replace temporary or mutilated, destroyed, lost or stolen debt securities; </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(3)&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">to compensate and indemnify the trustee; or </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(4)&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">to maintain an office or agency in respect of the debt securities and to hold monies for payment in trust; or </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">to be released from our obligations with respect to the debt securities under certain covenants contained in the indenture, as well as any additional covenants which
may be contained in the applicable supplemental indenture (which release is referred to as &#147;covenant defeasance&#148;). </FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">In order to exercise either defeasance option, we must deposit with the trustee or other qualifying trustee, in trust for that purpose: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">money; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">U.S. Government Obligations (as described below) or Foreign Government Obligations (as described below) which through the scheduled payment of principal and interest in
accordance with their terms will provide money; or </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">a combination of money and/or U.S. Government Obligations and/or Foreign Government Obligations sufficient in the written opinion of a nationally-recognized firm of
independent accountants to provide money; </FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">which in each case specified above, provides a sufficient amount to pay the principal
of, premium, if any, and interest, if any, on the debt securities of the series, on the scheduled due dates or on a selected date of redemption in accordance with the terms of the indenture. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">In addition, defeasance may be effected only if, among other things: </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">16 </FONT></P>



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<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">in the case of either legal or covenant defeasance, we deliver to the trustee an opinion of counsel, as specified in the indenture, stating that as a result of the
defeasance neither the trust nor the trustee will be required to register as an investment company under the Investment Company Act of 1940; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">in the case of legal defeasance, we deliver to the trustee an opinion of counsel stating that we have received from, or there has been published by, the Internal
Revenue Service a ruling to the effect that, or there has been a change in any applicable federal income tax law with the effect that (and the opinion shall confirm that), the holders of outstanding debt securities will not recognize income, gain or
loss for U.S. federal income tax purposes solely as a result of such legal defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner, including as a result of prepayment, and at the same times as would have
been the case if legal defeasance had not occurred; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">in the case of covenant defeasance, we deliver to the trustee an opinion of counsel to the effect that the holders of the outstanding debt securities will not recognize
income, gain or loss for U.S. federal income tax purposes as a result of covenant defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if covenant
defeasance had not occurred; and </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">certain other conditions described in the indenture are satisfied. </FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">If we fail to comply with our remaining obligations under the indenture and applicable supplemental indenture after a covenant defeasance of the indenture and applicable supplemental indenture, and the
debt securities are declared due and payable because of the occurrence of any undefeased event of default, the amount of money and/or U.S. Government Obligations and/or Foreign Government Obligations on deposit with the trustee could be insufficient
to pay amounts due under the debt securities of the affected series at the time of acceleration. We will, however, remain liable in respect of these payments. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">The term &#147;U.S. Government Obligations&#148; as used in the above discussion means securities which are direct obligations of or non-callable obligations guaranteed by the United States of America for
the payment of which obligation or guarantee the full faith and credit of the United States of America is pledged. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The term
&#147;Foreign Government Obligations&#148; as used in the above discussion means, with respect to debt securities of any series that are denominated in a currency other than U.S. dollars (1)&nbsp;direct obligations of the government that issued or
caused to be issued such currency for the payment of which obligations its full faith and credit is pledged or (2)&nbsp;obligations of a person controlled or supervised by or acting as an agent or instrumentality of such government the timely
payment of which is unconditionally guaranteed as a full faith and credit obligation by that government, which in either case under clauses (1)&nbsp;or (2), are not callable or redeemable at the option of the issuer. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Regarding the Trustee </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We will identify the trustee with respect to any series of debt securities in the prospectus supplement relating to the applicable debt
securities. You should note that if the trustee becomes a creditor of StemCells, Inc., the indenture and the Trust Indenture Act of 1939 limit the rights of the trustee to obtain payment of claims in certain cases, or to realize on certain property
received in respect of any such claim, as security or otherwise. The trustee and its affiliates may engage in, and will be permitted to continue to engage in, other transactions with us and our affiliates. If, however, the trustee acquires any
&#147;conflicting interest&#148; within the meaning of the Trust Indenture Act of 1939, it must eliminate such conflict or resign. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">The holders of a majority in principal amount of the then outstanding debt securities of any series may direct the time, method and place of conducting any proceeding for exercising any remedy available
to the trustee. If an event of default occurs and is continuing, the trustee, in the exercise of its rights and powers, must use the degree of care and skill of a prudent person in the conduct of his or her own affairs. Subject to that provision,
the trustee will be under no obligation to exercise any of its rights or powers under the indenture at the request of any of the holders of the debt securities, unless they have offered to the trustee reasonable indemnity or security. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">17 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><A NAME="tx271097_23"></A>LEGAL MATTERS </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The validity of the issuance of the securities offered hereby will be passed upon for us by Ropes&nbsp;&amp; Gray LLP, Boston,
Massachusetts. The validity of any securities will be passed upon for any underwriters or agents by counsel that we will name in the applicable prospectus supplement. </FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><A NAME="tx271097_24"></A>EXPERTS </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The consolidated financial statements,
and management&#146;s assessment of the effectiveness of internal control over financial reporting, have been incorporated by reference herein and in the registration statement in reliance upon the reports of Grant Thornton LLP, independent
registered public accountants upon the authority of said firm as experts in accounting and auditing. </FONT></P>
<P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><A NAME="tx271097_25"></A>WHERE YOU CAN FIND MORE INFORMATION </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We file annual, quarterly reports and special reports, proxy statements, and other information with the SEC. We make these documents
publicly available, free of charge, on our website at www.stemcellsinc.com as soon as reasonably practicable after filing such documents with the SEC. You can read our SEC filings, including the registration statement, on the SEC&#146;s website at
http://www.sec.gov. You also may read and copy any document we file with the SEC at its public reference facility at: </FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">Public
Reference Room </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">100 F Street N.E. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Washington, DC 20549. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Please call the SEC at 1-800-732-0330 for further
information on the operation of the public reference facilities. </FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><A NAME="tx271097_26"></A>INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">This prospectus is part of a registration statement on Form S-3 filed by us with the SEC. This
prospectus does not contain all of the information set forth in the registration statement, certain parts of which are omitted in accordance with the rules and regulations of the SEC. Statements contained in this prospectus as to the contents of any
contract or other document referred to are not necessarily complete and in each instance reference is made to the copy of that contract or other document filed as an exhibit to the registration statement. For further information about us and the
securities offered by this prospectus, we refer you to the registration statement and its exhibits and schedules which may be obtained as described herein. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">The SEC allows us to &#147;incorporate by reference&#148; the information contained in documents that we file with them, 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 part of this prospectus, and information in documents that we file later with the SEC will automatically update and supersede information in this prospectus. We
incorporate by reference the documents listed below into this prospectus, and any future filings made by us with the SEC under Section&nbsp;13(a), 13(c), 14 or 15(d) of the Exchange Act until the offering of all of the securities by this prospectus
is completed, including all filings made after the date of this initial registration statement and prior to its effectiveness. We hereby incorporate by reference the following documents (File No. 000-19871): </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our Annual Report on Form 10-K for the year ended December&nbsp;31, 2009 (File No. 000-19871); </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our Quarterly Reports on Form 10-Q for the quarters ended March&nbsp;31, 2010,&nbsp;June&nbsp;30, 2010 and September&nbsp;30, 2010 (File No. 000-19871);
</FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our Current Reports on Form 8-K filed on February&nbsp;11, 2010,&nbsp;May&nbsp;7, 2010,&nbsp;June&nbsp;7, 2010,&nbsp;June&nbsp;9, 2010,&nbsp;June&nbsp;30,
2010,&nbsp;August&nbsp;10, 2010,&nbsp;August&nbsp;13, 2010,&nbsp;August&nbsp;19, 2010,&nbsp;September&nbsp;21, 2010,&nbsp;October&nbsp;7, 2010, and October&nbsp;28, 2010 (File No. 000-19871); </FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">18 </FONT></P>



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<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our Definitive Proxy Statement on Schedule 14A filed on April&nbsp;13, 2010; and </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">The description of our common stock contained in our registration statements on Form 8-A filed August&nbsp;3, 1998, under the Exchange Act, including any amendment or
report filed for the purpose of updating such description. </FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We will provide each person to whom a prospectus is
delivered a copy of all of the information that has been incorporated by reference in this prospectus but not delivered with the prospectus. You may obtain copies of these filings, at no cost, through the &#147;Investor Relations&#148; section of
our website (<U>www.stemcellsinc.com</U>), and you may request copies at no cost, by writing or telephoning us at the following address: </FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="2">StemCells, Inc. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">3155 Porter Drive </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">Palo Alto, Ca 94304 </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">Attention: Investor Relations </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Phone: (650)&nbsp;475-3100 </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">email: irpr@stemcellsinc.com </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The information contained on our website is not a part of this prospectus. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">19 </FONT></P>



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<IMG SRC="g271097g58d28.jpg" ALT="LOGO">
 </P> <P STYLE="font-size:24px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:0px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P>
<P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="3"><B>Units </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="3"><B>Each Unit Consisting of One Share of Common Stock </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="3"><B>and </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="3"><B>One Series A Warrant to Purchase One Share of Common Stock,
</B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="3"><B>and </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="3"><B>Series B Warrants, Each to Purchase One Unit </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:72px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="3"><B>PROSPECTUS SUPPLEMENT
</B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">December&nbsp;&nbsp;&nbsp;&nbsp; , 2011 </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="4"><B>ROTH CAPITAL PARTNERS&nbsp;&nbsp;&nbsp;&nbsp; CHARDAN CAPITAL MARKETS, LLC </B></FONT></P>
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end
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
