We are passionate about helping our clients achieve their objectives.

Chardan Capital Markets Completes $10 Million Common Stock Financing for StemCells Inc.

January 7, 2011

StemCells, Inc. (NASDAQ: STEM) announced today that it has entered into an agreement to sell ten million shares of its common stock to selected institutional investors at a price of $1.00 per share, which represents a 10% discount to the closing price per share of January 6. The offering is expected to close today, subject to customary closing conditions, and StemCells expects to receive net proceeds, after deducting offering expenses and fees, of approximately $9.4 million. The Company also granted the investors an option, exercisable until February 18, 2011, to purchase an additional six million shares at $1.00 per share.

The shares are being offered under the Company's effective shelf registration statement previously filed with the Securities and Exchange Commission (SEC). The securities will be offered by means of a prospectus supplement and accompanying prospectus, forming a part of the Company's previously filed effective registration statement, copies of which may be obtained, when available, at the SEC's website at http://www.sec.gov. The net proceeds of the financing will be used for general corporate purposes, including working capital, product development and capital expenditures, as well as for other strategic purposes.

This press release does not and shall not constitute an offer to sell or the solicitation of an offer to buy, nor will there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

About StemCells Inc.

StemCells, Inc. is engaged in the research, development, and commercialization of cell-based therapeutics and tools for use in

stem cell-based research and drug discovery. In its therapeutic product development programs, StemCells is targeting disorders

of the central nervous system and the liver. StemCells' lead product candidate, HuCNS-SCĀ® cells (purified human neural stemcells), is currently in clinical development for spinal cord injury and the treatment of two fatal neurodegenerative disorders in children, and in preclinical development for retinal disorders such as age-related macular degeneration. StemCells also markets stem cell research products, including media and reagents, under the SC ProvenĀ® brand, and is developing stem cell-based assay platforms for use in pharmaceutical research, drug discovery and drug development.

Chardan Capital Markets, LLC

Chardan is an international investment bank headquartered in New York City, with offices in Los Angeles, San Francisco, Beijing and Sydney. Chardan provides a wide array of banking and advisory services to public and private companies and institutional investors around the world including Initial Public Offerings (IPOs), Private Investments in Public Equity (PIPEs), Specified Purpose Acquisition Companies (SPACs), Merger and Acquisition Advisory Services, Debt Financing, Private Equity Financing, Venture Capital Financing, Equity/Derivatives Trading, Non Deal Road Shows, Third Party Marketing of Hedge Funds, Research and Restructuring.

StemCells

$10 Million

Registered Direct

January, 2011

Sole Placement Agent