MBOT - NASDAQ

Gregory T. Schiffman – Chief Financial Officer and Executive Vice President Martin M. McGlynn – President, Chief Executive Officer and Director Stephen Huhn – Vice President, Head of the CNS Program

Keay T. Nakae – Ascendiant Capital Markets LLC Stephen M. Dunn – LifeTech Capital, Inc. Jason H. Kolbert – Maxim Group LLC Ling Wang – Chardan Capital Markets LLC Jason

Good day ladies and gentleman and welcome to the StemCells’ First Quarter 2014 Earnings Release Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder today’s conference maybe recorded. I would now like to hand the conference over to Mr. Greg Schiffman, Chief Financial Officer. Sir, you may begin.

Thank you. Welcome everybody and thank you for joining us today. With me today are Martin McGlynn, our President and Chief Executive Officer, Dr. Stephen Huhn, our Vice President of CNS Clinical Research. Before I proceed, I would like to remind everyone that during today’s call, we will be making some forward-looking statements which reflect our current views and are based upon certain assumptions that may or may not ultimately prove valid. We assume no obligation to update these forward-looking statements anytime in the future and our actual results may differ materially from anything projected during today’s call, due to risks and uncertainties to which we are subject. These risks and uncertainties are described in our public filings with the Securities and Exchange Commission and at the end of our earning release, which you’re encouraged to consult. Now with that, I will turn the call over to Martin.

Thanks Greg. So this afternoon I’ll limited my prepared remarks, to the notable progress in our clinical translational efforts. Since our last call on March 12 and what you should be looking for, for the rest of 2014 as it unfolds. So let’s start with the progress report. We achieved a major milestone for the company when we completed enrollment in the 12 patient Phase I/II thoracic spinal cord injury trial. This trial enrolls seven patients with no motor or sensory function below the side of injury; these are classified as AIS A patients. And five patients with no motor function and limited sensory function below the side of injury otherwise classified as AIS B according to the American Spinal Injury Association Impairment Scale. So this brings the 30 the total number of patients who have been successfully transplanted that the companies proprietary expandable HuCNS-SC sales. Secondly, in our geographic atrophy of age-related macular degeneration clinical trial, we received the green light from an independent data monitoring committee after a through review of all of the available data to proceed to transplanting the last eight patients in cohort II in the companies 16 patient Phase I/II trial. Age-related macular degeneration is the leading cost of blindness in elderly. And you may recall that the eight patients in cohort I are in a very advance stage of the diseases with very poor vision. The first four patients received the low-dose of 200,000 cells into the most affected eye, while the second group or four received 1 million cells. The eight patients to be transplanted now in cohort II will each receive 1 million cells into the most affected eye excuse me however their condition will be less severe than those enrolled in the first cohort. Thirdly, we finalized the design of a randomized controlled Phase II clinical trial in spinal cord injury, and we’ve made significant progress in the planning and preparation for this trial, which is planned to begin later this year. Now as I mentioned in our last call, this study will involve patients with injury to the cervical spinal cord, which usually results in loss of both arm and leg function. These patients account for approximately 60% of all spinal cord injuries. The end points in this trial will focus on measuring direct changes in strength and function of the upper extremities. Now, it’s important to remember that even slight improvements in motor function, can result in significant quality of life improvements for patient suffering from spinal cord injuries as well as substantial savings to the healthcare system. So turning now for the rest of 2014, you should look for the company to do a number of things. Number one, to provide clinical trial updates from the ongoing Phase I/II trial in drastic spinal cord injury. Dr. Armin Curt, the Principal Investigator for the trial at Balgrist Hospital in

Thank you Martin. I share Martin’s enthusiasm, this is a very exciting time for the company and I am looking forward to the upcoming data releases from our ongoing clinical trials. Now let me quickly go over our financial results for the quarter. Q1 2014 total revenue was up year-over-year by approximately $55,000 or 19%. Our SC Proven sales increased Q1 2014 over Q1 2013 by 51% or approximately $107,000. We see opportunities for the SC Proven business and expect to see a continued growth in their revenues. Licensing and other revenue in the first quarter of 2014 was significant. Operating expenses were up quarter-over-quarter by approximately 10% or $677,000. This increase primarily reflects cost associated with the increase enrollment in the ongoing Phase I/II trials and activities taking place as we prepare to initiate the two Phase II efficacy proof-of-concept studies later this year. Similarly loss from operations increased by approximately or approximately $643,000 driven by the $677,000 growth in operating expenses. In Q1 2014 we reported approximately $720,000 or net other expense of which approximately $327,000 is associated with the change in the fair value of our warrant liability. This is a non-cash item driven by change in the value of our stock price. Just a reminder and the warrant liability accounting changes in warrant liability or cash in the statement of operations is either income or expense, depending on the direction of the stock price movement. In addition to warrant liability we had approximately $380,000 of interest expense. We reported a net loss of $0.14 per share this quarter or an aggregate net loss of $7.6 million. In 2013 we reported a net loss of $0.17 per share or $6.4 million; the net loss increased year-over-year is primarily driven by the increased expenses associated with our ramp up, in clinical activities. The non-cash expenses associated with the change and our warrant liability and the interest expenses associated with the loan from Silicon Valley Bank. Our net cash usage was approximately 4.1 million for Q1 2014. This included the receipt of approximately $3.8 million from the California Institute for Regenerative Medicine, associated with progress made in our IND filing for Alzheimer's. Our cash and cash equivalents are approximately $26.4 million given us a strong balance sheet to continue to move our clinical operations forward. I’ll turn the call back over to Martin for some final closing comments.

Thanks Greg. So as I have mentioned before 2014 really is transformational year for StemCells, Inc. we are making great strides on our goal of bringing breakthrough therapies to marketplace on propitiatory HuCNS-SC human neural stem cells technology. This quarter we would be releasing a lot of new clinical data, which for the investors in this call to translates into much better inside in the near-term into the capabilities of the technology. Over the next 2.5 years we’ll have final result from our controlled Phase II proof-of-concept efficacy studies and on top of this we’re looking to file an IND for Alzheimer's in 2016. So I hope you can see why I’m excited about our prospects going forward. And with that, I would like to open the call for questions.

Okay, we are not yet ready to the slows, a lot of detail about the design of the trial, but I certainly can have Dr. Huhn share with you some of that techniques that we’ll be planning to use to evaluate function in upper extremities.

Thank you.

Thanks Nakae.

You bet.

Okay sure.

Thanks Jason.

Thank you. And our next question comes from Jason

You’re welcome.

Thank you. I am showing no further questions at this time. I’d like to hand the conference over to Mr. Martin McGlynn for closing remarks.

Well, thank you very much everybody for joining us today on our quarterly call, and of course we look forward to updating you on our clinical progress as the year progresses. And once again thank you for your time and thanking you for joining us.