EXHIBIT 99

           CAUTIONARY FACTORS RELEVANT TO FORWARD-LOOKING INFORMATION

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

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

OUR FINANCIAL SITUATION IS PRECARIOUS AND OUR EXISTING CAPITAL RESOURCES ARE NOT
SUFFICIENT TO FUND OUR OPERATIONS THROUGH THE END OF THE SECOND QUARTER OF 2003.

      The Company has incurred significant operating losses and negative cash
flows since inception. The Company has not achieved profitability and may not be
able to realize sufficient revenues to achieve or sustain profitability in the
future. Although StemCells has taken actions to reduce its expense rates over
the last two quarters, we do not expect to be profitable in the next several
years, but rather expect to incur additional operating losses. We have very
limited liquidity and capital resources and must obtain significant additional
capital resources in order to sustain our product development efforts, for
acquisition of technologies and intellectual property rights, for preclinical
and clinical testing of our anticipated products, pursuit of regulatory
approvals, acquisition of capital equipment, laboratory and office facilities,
establishment of production capabilities, for general and administrative
expenses and other working capital requirements. We rely on cash reserves and
proceeds from equity and debt offerings, proceeds from the


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transfer or sale of our intellectual property rights, equipment, facilities or
investments, and government grants and funding from collaborative arrangements,
if obtainable, to fund our operations. If we exhaust our cash reserves and are
unable to realize adequate financing, we may be unable to meet operating
obligations and be required to initiate bankruptcy proceedings Our existing
capital resources are not sufficient to fund our operations through the end of
the second quarter of 2003. These conditions raise doubt about StemCells'
ability to continue as a going concern. The financial statements do not include
any adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts and classification of liabilities that
may result from the outcome of this uncertainty.

      We intend to pursue opportunities to obtain additional financing in the
future through equity and debt financings, grants and collaborative research
arrangements. The source, timing and availability of any future financing will
depend principally upon market conditions, interest rates and, more
specifically, on our progress in our exploratory, preclinical and future
clinical development programs. Funding may not be available when needed--at all,
or on terms acceptable to us. Our existing capital resources are not sufficient
to fund our operations through the end of the second quarter of 2003. Lack of
necessary funds may require us to delay, scale back or eliminate some or all of
our research and product development programs and/or our capital expenditures or
to license our potential products or technologies to third parties.

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

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

      - survive and persist in the desired location;

      - provide the intended therapeutic benefits;

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

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

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

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

      Prior to our reorganization in 1999 and the consolidation of our business
in California, we carried out our encapsulated cell therapy programs in Lincoln,
Rhode Island, where we also had our administrative offices. Although we have
vacated the Rhode Island facilities, we remain obligated to make lease payments
and payments for operating costs of approximately $1,300,000 per year for our
former science and


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administrative facility, which we have leased through June 30, 2013, and debt
service payments and payments for operating costs of approximately $600,000 per
year for our former encapsulated cell therapy pilot manufacturing facility,
which we own. We have currently subleased a portion of the science and
administrative facility, but cannot be sure that we will be able to do so for
the entire duration of our obligation. We are seeking to sublease the remaining
portion of the science and administrative facility. We have currently subleased
the entire pilot manufacturing facility, but may not be able to sublease or sell
the facility in the future once the current sublease agreements expire. These
continuing costs significantly reduce our cash resources and adversely affect
our ability to fund further development of our stem cell technology.

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

      Equity and debt financings alone may not be sufficient to fund the cost of
developing our stem cell technologies, and we may need to rely on our ability to
reach partnering arrangements to provide financial support for our stem cell
discovery and development efforts. In addition, in order to successfully develop
and commercialize our technology, we may need to enter into a wide variety of
arrangements with corporate sponsors, pharmaceutical companies, universities,
research groups and others. While we have engaged, and expect to continue to
engage, in discussions regarding such arrangements, we have not reached any
agreement, and we may fail to obtain any such agreement on terms acceptable to
us. Even if we enter into these arrangements, we may not be able to satisfy our
obligations under them or renew or replace them after their original terms
expire. Furthermore, these arrangements may require us to grant certain rights
to third parties, including exclusive marketing rights to one or more products,
may require us to issue securities to our collaborators or may contain other
terms that are burdensome to us. If any of our collaborators terminates its
relationship with us or fails to perform its obligations in a timely manner, the
development or commercialization of our technology and potential products may be
adversely affected.

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

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

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

      We own or license a number of patents and pending patent applications
covering human nerve stem cell cultures, central nervous system stem cell
cultures, neuroblast cultures, peripheral nervous system stem cell cultures, and
an animal model for liver failure. Patent protection for products such as those
we propose to develop is highly uncertain and involves complex and continually
evolving factual and legal questions. The governmental authorities that consider
patent applications can deny or significantly reduce the patent coverage
requested in an application before or after issuing the patent. Consequently, we
do not know whether any of our pending applications will result in the issuance
of patents, or if any existing or future


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patents will provide sufficient protection or significant commercial advantage
or if others will circumvent these patents. We cannot be certain that we were
the first to make the inventions covered by each of our pending patent
applications or that we were the first to file patent applications for such
inventions because patent applications are secret until patents are issued in
the United States or until the applications are published in foreign countries,
and because publication of discoveries in the scientific or patent literature
often lags behind actual discoveries. Patents may not issue from our pending or
future patent applications or, if issued, may not be of commercial benefit to
us, or may not afford us adequate protection from competing products. In
addition, third parties may challenge our patents or governmental authorities
may declare them invalid. In the event that a third party has also filed a
patent application relating to inventions claimed in our patent applications, we
may have to participate in proceedings to determine priority of invention. This
could result in substantial uncertainties and cost for us, even if the eventual
outcome is favorable to us, and the outcome might not be favorable to us. Even
if a patent issues, a court could decide that the patent was issued invalidly.
Further, patents issue for a limited term and our patents may expire before we
utilize them profitably.

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

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

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

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

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

WE COMPETE WITH COMPANIES THAT HAVE SIGNIFICANT ADVANTAGES OVER US.


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      The market for therapeutic products that address degenerative diseases is
large and competition is intense. For example, while we believe that our neural
stem cells may have application to Parkinson's disease, we have no clinical
program directed toward that disease at this time. More than twenty companies
worldwide, including Merck, Roche, Cephalon, Schering AG and Pharmacia Corp.,
have at least one clinical trial for Parkinson's disease in progress at some
phase, and some have more than one. At least seven companies already have
products on the market. We expect competition to increase.

      In general, we believe that our most significant competitors will be fully
integrated pharmaceutical companies and more established biotechnology
companies, such as Biogen, Inc., Genzyme, and Celgene. These companies already
produce or are developing treatments for degenerative diseases that are not stem
cell-based, and they have significantly greater capital resources and expertise
in research and development, manufacturing, testing, obtaining regulatory
approvals and marketing than we do. Many of these potential competitors have
significant products approved or in development that could be competitive with
our potential products, and also operate large, well-funded research and
development programs. In addition, we expect to compete with other companies,
some of which are smaller and may be privately owned, including CellFactors,
Diacrin, Geron, Athersys, Titan Pharmaceuticals, Vesta Therapeutics, Layton
Bioscience Inc., NeuralStem Biopharmaceuticals, NeuroNova, and ReNeuron, and
with universities and other research institutions who are developing treatments
for degenerative diseases that are stem cell-based. Our competitors may succeed
in developing technologies and products that are more effective than the ones we
are developing, or that would render our technology obsolete or non-competitive.
The relative speed with which we and our competitors can develop products,
complete the clinical testing and approval processes, and supply commercial
quantities of a product to market will affect our ability to gather market
acceptance and market share. With respect to clinical testing, competition may
delay progress by limiting the number of clinical investigators and patients
available to test our potential products.

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

      Our research and development efforts, as well as any future clinical
trials, and the manufacturing and marketing of any products we may develop, will
be subject to and restricted by extensive regulation by governmental authorities
in the United States and other countries. The process of obtaining U.S. Food and
Drug Administration and other necessary regulatory approvals is lengthy,
expensive and uncertain. We or our collaborators may fail to obtain the
necessary approvals to commence or continue clinical testing or to manufacture
or market our potential products in reasonable time frames, if at all. In
addition, the U.S. Congress and other legislative bodies may enact regulatory
reforms or restrictions on the development of new therapies that could adversely
affect the regulatory environment in which we operate or the development of any
products we may develop. We base our research and development on the use of
human stem and progenitor cells obtained from fetal tissue. The federal and
state governments and other jurisdictions impose restrictions on the use of
fetal tissue. These restrictions change from time to time and may become more
onerous. Additionally, we may not be able to identify or develop reliable
sources for the cells necessary for our potential products-that is, sources that
follow all state and federal guidelines for cell procurement. Further, we may
not be able to obtain such cells in the quantity or quality sufficient to
satisfy the commercial requirements of our potential products. As a result, we
may be unable to develop or produce our products in a profitable manner.

      Although we do not use embryonic stem cells, government regulation and
threatened regulation of embryonic tissue may lead outstanding researchers to
leave the field of stem cell research, or the country, in order to assure that
their careers will not be impeded by restrictions on their work. Similarly,
these factors may induce the best graduate students to choose other fields less
vulnerable to changes in regulatory oversight, thus exacerbating the risk,
discussed below, that we may not be able to attract and retain the


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scientific personnel we need in face of the competition among pharmaceutical,
biotechnology and health care companies, universities and research institutions
for what may become a shrinking class of qualified individuals. In addition, we
cannot assure you that constraints on use of embryonic stem cells will not be
extended to use of fetal stem cells. Moreover, it is possible that concerns
regarding research using embryonic stem cells will impact our ability to attract
collaborators and investors and our stock price.

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

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

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

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

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


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

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

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

      Our common stock is quoted on the Nasdaq SmallCap Market. In order to
continue to be included in the Nasdaq Small Cap Market, a company must meet
Nasdaq's maintenance criteria. The maintenance criteria most applicable to us
requires a minimum bid price of $1.00 per share and additionally, we must
maintain $2.5 million in stockholders' equity. Stockholders' equity is composed
of three fundamental sources: capital stock, additional paid-in-capital, and
retained earnings. Capital stock represents ownership interest in the
corporation. Additional paid-in-capital represents additional monies paid into
the corporation by investors above the par value of shares issued. Retained
earnings represents income (loss) that the corporation has accumulated as a
result of its day-to-day operating activities. Our stockholders' equity at the
end of 2002 was $3,787,571. Failure to meet these maintenance criteria may
result in the delisting of our common stock from the Nasdaq SmallCap Market. If
our common stock were delisted, in order to have our common stock relisted on
the SmallCap Market we would be required to meet the criteria for initial
listing, which are more stringent than the maintenance criteria. Accordingly, we
cannot assure you that if we were delisted we would be able to have our common
stock relisted on the Nasdaq SmallCap Market. If our common stock were delisted
from the Nasdaq SmallCap Market, we would not be able to draw down any
additional funds on our existing equity line, and we also may be required to pay
damages to holders of our common stock under agreements we previously entered
into with them in connection with equity financings. Finally, if our common
stock were removed from listing on the Nasdaq SmallCap Market, it might become
more difficult for us to raise funds through the sale of our common stock or
securities convertible into our common stock.

THE SALE AND ISSUANCE OF THE 3% CUMULATIVE CONVERTIBLE REDEEMABLE PREFERRED
STOCK WILL HAVE AN IMPACT TO EARNINGS AVAILABLE TO COMMON STOCKHOLDERS.

      Of the proceeds from our sale of the 3% cumulative convertible redeemable
preferred stock in 2001, approximately $3.1 million was allocated to the common
stock warrants and the conversion feature included with the subscription
agreements, and was reflected as an increase to additional paid-in capital and a


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decrease to the 3% cumulative convertible redeemable preferred stock. This $3.1
million will be accreted to the preferred stock over the term of the redemption
period. This accretion, along with the preferred stock dividends, will increase
the net loss (reduce the net income) available to common stockholders.


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