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 Zhang – Edison Investment Research Limited.

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 Zurich will present the next update this coming Friday, May 16, at the Annual Meeting of the American Spinal Injury Association, being held in San Antonio, Texas. This update will include on eight subjects with six months to 12 months of follow-up data.

The team from Zurich will also be presenting trial data at the 32nd Annual Symposium of the National Neurotrauma Society, which is to be held in San Francisco, June 29 to July 2.

You should also look for us to report the first interim clinical results from the ongoing Phase I/II trial in geographic atrophy of age-related macular degeneration and which will be done at the Annual Meeting of the International Society for Stem Cell Research in Vancouver, Canada that’s been held from June 18 to June 21.

We also plan to announce completion of enrollment in that study and of course that of course would be another major milestone of the company. We plan to initiation of the randomized Phase II proof-of-concept trial in cervical spinal cord injury.

And last, by no means lease to announce initiation of the randomized Phase II study in geographic atrophy of age-related macular degeneration. So, that is a very significant menu for the rest of the year. So before closing I would like to just share you a few thoughts that I think are very relevant to our field.

This field of cell-based therapeutics continues to be played by an abundance of hype around the premise of the various therapies that are either in pre-clinical testing or early uncontrolled open-label Phase I trials. In addition, there has been dirt of data from sufficiently powered well controlled trials at of higher clinical end points.

That said, some companies have invested the time and money to fully characterize their candidate cell in vitro and in vivo thereby establishing a well grounded rationale for the clinical targets that they have decided to pursue. Many of them then published the results in peer reviewed scientific journals for the world to see.

I’m proud to say that StemCells is one such company. We have worked deligenlty and methodically, since our scientist isolated and purified HuCNS-SC cells approximately 14 years ago to thoroughly these cells.

We have been rigorously evaluated them in various animal models of injuring disease, affecting the brain, eye, and the spinal cord prior to initiating clinical drugs.

So now with 30 patients transplanted to-date our human safety data base continues to grow and we’re now poised to zero in a measuring efficacy and clinical benefit in well controlled Phase II proof-of-concept studies. Study of this type are considered to be the most standard for demonstration of clinical utility.

Our initial reports are based on small open-label Phase I studies and Lysosomal Storage Disorders, Myelination Disorders, such as Pelizaeus-Merzbacher disease, chronic spinal cord injury, and age-related macular degeneration.

The safety, tolerability and feasibility of the approach combined with signs of preliminary efficacy from these early trails have been very important to our overall development plan.

With this progress and success we are now expanding the size and scope of our studies to multi center randomized controlled Phase II trails, the hard clinical end points sophistically powered their efficacy. And the data from these studies will start to become available next year.

So it’s an immediate future we look forward to sharing our clinical data later this quarter from the ongoing Phase I, Phase II studies and to updating on our ongoing progress on our next call. So with that I’ll turn the call over to Greg, who will discuss our financial results for the quarter..

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..

Thank you, sir. (Operator Instructions) Our first question comes from Keay Nakae from Asciendiant Capital. Your lines open. Please go ahead..

Thank you, good afternoon. Marty I’m wondering if you could at this time you are able to share any details about that close design of the Phase II cervical spine study.

I guess specifically I would be interested in knowing nine which specific metrics or instruments are going to be used using to measure upper body improvement?.

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..

Yes, so without going into too much detail there are number of validated and standardized ways of measuring motor and sensory outcome in the spinal cord research community and clinical community and those outcomes all measure hard end points in certain degrees of muscle strength for all the different muscle groups of the arms legs, so those are the type of evaluations that we’re going to focus on as we embark upon this trial, there are going to well recognized, well accepted metrics..

Okay. We’ll look forward to gain us more information about that when they are able to, maybe shifting gears to AMD.

I guess two questions, the first is at the upcoming presentation of the interim results, how many of the first cohort of the eight patients, will the date be covering, it’s a part of my question?.

Well, the data for that we’ll just – will cover seven of the eight patients and when we have adequate follow-up on and which should make an interim observation..

Okay, great. And then, maybe just theoretically as we think about the next study in AMD, which you’re planning on studying later this year.

Can you give us a sense of what that design might look like, obviously zero in on the growth and maybe perhaps with the second cohort a degree of the severity of disease that anything else you can give us regarding a potential design thoughts on a potential design would be helpful?.

So, without going in again into too much detail, the way we do that this next trial as an AMD is one that would provide us proof-of-concept and that proof-of-concept I think best done through a randomized controlled study, that’s going to give us the best sense of a data when we look at a group of patients who had been that have been transplanted versus a group of patients who have not.

And again, those metrics that are determined, very define, well-recognize by the field and determining the progress of the disease in treated patients versus non-treated patient..

Okay, well that’s shall I have at this point. Thanks..

Thank you..

Thanks Nakae..

Thank you. Our next question comes form Stephen Dunn from LifeTech Capital. Your line is open, please go ahead..

Hi, Greg. Good afternoon guys, thanks for taking my question. I guess going back to the spinal cord, what kind of data we'll be seeing on Saturday of the interim results.

Is going to be more mature safety, more mature efficacy and which patients we see in?.

So, what we’ve discussed is that we have as Martin indicated, now follow-up that extends from six months to 12 months in the first eight subjects in the study.

So the data set will be an update from where we left of last year and which we were discussed in the outcome in the first three patients of study and whom we had adequate follow-up of that point, these six months to 12 months.

So now we are updating that with an additional five patients and their outcomes now as I said between six months and 12 months. And it will be full outcome of their safety and probability our intervention as well as our preliminary efficacy observations..

Okay.

So it going to be like in terms of that will be giving longer-term follow up data plus new data on five patients?.

Yes. So – the data that we are going to speak to is the Phase I/II study which has term of 12 months. And so we want to provide additional data on the patients that have come into their study and whom we have at least a minimum of six months data to after 12 months..

Okay. Great. That should be very significant catalyst. A little bit on Alzheimer’s are we expecting back an approval to publish and the others preclinical findings on the Alzheimer’s program..

So I believe that going to throw as already published, Steve on his preclinical work with the nerve cells and into the mouse brain and also believe these percent of data the human cells into the mouse brain. We can revisit the file that we make sure that you are may be efficacy is up to date..

So we see that data I was just curious the work is doing now the prepared for the IND in 2016 any more studies that we more mature publications that also?.

No we haven’t I mean the work that were doing currently with the systems the California Regenerative Medicine its all DNA activities a fair amount of which is repeating previous work that was done and after the famous lab and making sure that every thing all of the data, and all of the study compact is in compliance with CGMP leads FDA requirements..

So great. What final question this once for Greg, little housekeeping on the financials your cash burn was lower this first quarter.

As what you can give us a little guidance on what you are looking after full year 2014 as we begin additional move Phase II trails?.

Yes. So the guidance that we given year end that we say we are just remaining consistent natural we expected in net cash usage between $30 million to $34 million.

So slightly up for last year, not up substantially and that is a net and again this number wasn’t that we did have some cash came in from the California Institute for Regenerative Medicine, associated with expenses and cost that we are incurring, related to that Alzheimer – moving forward the Alzheimer's IND filing.

And so that’s one of the reasons that’s a little bit lower this quarter..

Okay great I’ll catch that in the queue. All right thanks very much guys..

You bet..

Thank you. Our next question comes from Jason Kolbert from Maxim. Your line is open, please go ahead..

Hi thanks.

Most of my questions have been answered, but I just want to make sure that I understand what data is going to be presented this Saturday on May 17, are we going to see any new data on new patients or is this going to be a rehash of kind of the original cohorts that were treated and presented?.

Yes. So we've already presented on the first three patients who have completed the study, we would be presenting the data on five additional patients data for which has not been previously released..

Okay, terrific. So that’s exciting and potentially it could represent additional proof-of-concept around the current trail and can you – and I’m sorry if I missed this earlier. Have you talked a little bit about the number of sites and the enrollment dynamics that you are preparing for the U.S.

Phase II trial in spine?.

We have spoken about it generally Jason, but we are anticipating that the number of sites involved in the Phase II spinal cord injury, trial would be in an around about a dozen..

Okay, and help me understand the math behind a dozen sites and in terms of the target enrollment so we can get an idea of how long it might take for that trial to enroll..

So what we've said Jason is that we anticipate based on the metrics that we've looked at, we anticipate approximately 12 month to enroll the patients that we are planning for this study and the study as I said will have higher clinical end points and will be sufficiently powered to give us the statistical confidence that we are looking for.

So about a year of enrollment..

Okay, thank you and kind of similar questions too as we approach the June 18, June 21 presentation, can you help us understand how kind of the next development cycle on AMD might move forward and again I apologize if I missed this and you spoke on it earlier..

No problem. So obviously the first data that will come out the AMD will be at the International Society StemCells research that’s June 18 to 21 in Vancouver Canada, the next catalyst I guess would be announcement of completion of enrollment in that Phase I/II study which is eminent. And then the initiation of the Phase II controlled study.

So all of those events on the agenda for this year..

And have we – Martin have you discuss the size same thing the size and number of sites and how long it might take once you start the Phase II to get it enrolled..

Yes, so approximately same number of sites as the spinal cord injury trial and enrollment anticipated to take approximately a year from initiation. We have not specifically issued the number of patients that we would be targeting for the trial, but we’ll be discussing that in greater detail as the year unfolds..

Yes, I think for us its going to be really helpful as we start of think of stem as a Phase II trial, as a Phase II company to really understand the Phase II trials and kind of the powering assumptions and the potential for P values that what powering and as we start treat you more or like any other Phase II trials. So we look forward to that clarity.

Thanks very much for the update today..

Okay sure..

Thanks Jason..

Thank you. And our next question comes from Ling Wang from Chardan Capital Markets. Your line is open. Please go ahead..

Thank for taking my question. Just a couple follow-up for the Phase I/II spinal cord injury study that will be updated at the conference this Saturday. Can you remind us for the first three patient how long the follow-up time and also what additional five patient are those a mix of the AIS A or B or mostly you know the A patient. Thank you..

So, first of all Dr. LaFerla will be presenting on Friday of this week. I’m sorry....

Friday or Saturday?.

On Friday, Friday the 16, not Saturday. So the answer to your second question yes there will be a mix of AIS As and Bs in the data set..

I see, and also I mean given this is a single arm study, I guess from that you can share some inside with that what kind of [indiscernible] patients are going to be new data that is what will some of the key things you will look at as a positive side the data from this trial..

So obviously we were looking for safety, tolerability, we would be looking for signs of any rationale adverse events associated with this all – immunosuppression are the surgery I mean that is the primary purpose of this Phase I/II study, safety and some things can take for granted all though there will also be talking about elements that we’ve spoken about for the first three patients who have completed the trial.

So, we would be looking at similar data sets and data points..

(Inaudible).

Well, our most recent information is that it’s this coming Friday..

Okay, great. Thank you..

Thank you. And our next question comes from Jason Zhang from Edison Investment. Your line is open. Please go ahead..

Hi, so you have laid out a very good I guess what data to be look at for this spinal cord presentation.

For that AMD that will be presented in June, you said there will be eight patient from the cohort I, could you also kind of describe to us what type of data are you going to be presenting there, are those all new data or is this somewhat update of what you’ve reported before?.

Hey, Jason. So, first of all the data set we’ll looking for seven of the eight patients in the first cohort. We again will look at safety, tolerability, looking trying to concept evidence of adverse events and then we will be looking at a number of different aspects of signs of potential benefit in this patient.

We haven’t announced any of data sets on the AMD study so far..

Okay, and then for the Phase II trial, you obviously have some idea about the trial design all may be, everything already internally determinant. With the data that will be come out for both of the spinal cord injury and AMD Phase I trial.

How are you going to use that data to help this Phase II trial design in each case?.

Well, I’ll ask Dr. Huhn to address that, but essentially the data that we have seen and we’ve reported on to-date as well as that, which is not yet been reported has helped us and has helped in former thinking in terms of the design of these studies. But I will have Dr. Huhn, expand on that.

So, the other things we can glean and have insight with the guards of development for both programs in spinal cord injury and AMD that that were observing in the first two studies their helping us shape the design and structure and how we approach the proof-of-concept studies and we definitely have benefitted from that.

Perhaps the one that’s most concrete that we can talk about today is the fact that how you would administer ourselves is a very important aspect of the therapy.

And it gets to the wounded administration, the dose, the surgical technique and we have now developed a huge experience not only spinal cord injury, but now getting 12 is very big number for this particularly field, but it very good experience now they in dealer having best dose the first day patient so we a lot of comfort in our surgical approach the technique, the cell dose, but really as a lot of baring on being able to ask even more complex question with their meaningful dose in our future studies.

So that’s really one big outcome of our first couple of studies..

And also have the impact of Phase II assuming that page number to a certain can be in more than volume have experience before.

How are you preparing on the manufacturing side? Are you also improving the process and hopefully try to spend arise that process and you know anticipation of Phase III trials down the road?.

So the manufacturing process has been fully established in better down and there will be no change to the manufacturing process that we used for the Phase II studies, obviously going beyond that scale up would be the most important consideration.

We invested last year in the build out – design build out and start up of our own GMP manufacturing facility here in California. And that facility is fully up and operational and we have produce them and released patient product from that new facility. So we have a very, very good handled on the manufacturing process and the supply chain..

Okay. That’s a very helpful..

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..

Ladies and gentlemen thank you for participating in today's conference. This concludes our program. You may all disconnect and have a wonderful day..