- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------- FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): SEPTEMBER 8, 2000 ---------------------- STEMCELLS, INC. (formerly CYTOTHERAPEUTICS, INC.) (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 0-19871 94-3078125 (State or other jurisdiction (Commission File Number) (I.R.S. Employer of incorporation) (Identification Number) 525 DEL REY AVENUE, SUITE C SUNNYVALE, CA 94085 (Address of principal executive offices, including zip code) (408) 731-8670 (Registrant's Telephone number including area code) ---------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Page 1 of 6

Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. Pro Forma Financial Information During the third quarter of 1999, management reached a decision to exit the Company's Encapsulated Cell Therapy (ECT) activities, dispose of the related intellectual property, facilities and equipment and relocate the Lincoln, RI corporate headquarters to Sunnyvale, CA. At the same time, the Company accrued various estimated expenses associated with the exit and wind-down of the ECT activities, disposal of the related property and relocation of the corporate headquarters. Additional accruals were provided in December 1999 for expenses relating to settlement of a 1989 funding arrangement with the Rhode Island Partnership for Science and Technology, further adjustment to asset carrying values and estimated carrying costs associated with the Rhode Island facilities through the expected disposition date. In addition, during December 1999, the Company liquidated certain ECT equipment and sold its ECT intellectual property to Neurotech, S.A. for $3,000,000. The tabular unaudited pro forma consolidated statement of operations presents the effects of the sale, wind-down and relocation, as if they had occurred at January 1, 1999. The tabular unaudited pro forma consolidated balance sheet along with the accompanying notes are presented as if the sale, wind-down and relocation had occurred at December 31, 1999. The pro forma effects and adjustments were determined based on available information and certain allocations that management believes are reasonable. The pro forma financial information does not purport to represent what the Company's operating results would have been had the sale occurred at January 1, 1999 and may not be indicative of the Company's financial position or operating results for any future date or period. Page 2 of 6

CYTOTHERAPEUTICS, INC. December 31, 1999 PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) Historical Pro Forma Consolidated Consolidated 12/31/1999 Adjustments(A) 12/31/1999 ------------ --------------- ----------- Revenue from collaborative agreements $ 5,021,707 $ (5,021,707)(1) $ -- Operating expenses: 9,984,027 (5,332,331)(2) 4,651,696 Research and development 4,927,303 (2,309,315)(3) 2,517,988 General and administrative 6,047,808 (6,047,806)(4) -- ------------ ------------ ----------- Encapsulated Cell Therapy Wind down and Corporate Relocation 20,959,136 (13,689,452) 7,269,684 ------------ ------------ ----------- Loss from operations (15,937,429) 8,687,745 (7,269,684) Other income (expense): Interest income 584,006 -- 584,006 Interest expense (335,203) -- -- ------------ ------------ ----------- 228,803 -- 584,006 ------------ ------------ ----------- ------------ ------------ ----------- Net loss $(15,708,826) $ 8,667,745 $(6,705,678) ------------ ------------ ----------- ------------ ------------ ----------- Basic and diluted net loss per share ($0.84) $0.46 $(0.36) ------------ ------------ ----------- ------------ ------------ ----------- Shares used in computing basic and diluted net loss per share 18,705,838 18,705,838 18,705,838 ------------ ------------ ----------- ------------ ------------ ----------- Page 3 of 6

CYTOTHERAPEUTICS, INC. December 31, 1999 PRO FORMA CONSOLIDATED BALANCE SHEET (UNAUDITED) Historical Pro Forma December 31, 1999 Adjustments(A) December 31, 1999 ----------------- ------------- ----------------- ASSETS Current assets: Cash and cash equivalents $ 4,760,064 $ -- $ 4,760,064 Marketable securities -- -- Accrued interest receivable 42,212 42,212 Technology sale receivable 3,000,000 3,000,000 Assets held for sale -- 3,300,000(5) 3,300,000 Other current assets 1,168,579 1,168,579 ------------- ----------- ------------- Total current assets 8,970,865 3,300,000 12,270,855 Property, plant and equipment, net 5,251,376 (3,600,000)(5) 1,651,376 Other assets, net 1,858,768 1,858,768 ------------- ----------- ------------- Total assets $ 18,080,999 $ (300,000) $ 15,780,999 ------------- ----------- ------------- ------------- ----------- ------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 631,315 $ 631,315 Accrued expenses 2,905,068 (300,000)(5) 2,605,068 Current maturities of capitalized lease obligations 324,187 324,187 ------------- ----------- ------------- Total current liabilities 3,860,550 (300,000) 3,580,550 Capitalized lease obligations, less current maturities 2,937,083 2,937,083 Deposits 26,000 26,000 Deferred Rent 502,353 502,353 Commitments and contingencies -- -- Redeemable common stock, $.01 par value; 524,337 shares issued and outstanding 5,248,610 5,248,610 Stockholders equity: Convertible preferred stock, $.01 par value; 1,000,000 shares authorized; no shares issued and outstanding -- -- Common stock, $.01 par value; 45,000,000 shares authorized; 18,635,565 shares issued and outstanding 186,355 186,355 Additional paid-in capital 123,917,758 123,917,758 Accumulated deficit (119,372,710) (119,372,710) Unrealized losses on marketable securities -- -- ------------- ----------- ------------- Accumulated other comprehensive loss (119,372,710) -- (119,372,710) Deferred compensation (1,225,000) (1,225,000) ------------- ----------- ------------- Total stockholders' equity 3,506,403 -- 3,506,403 ------------- ----------- ------------- Total liabilities and stockholders' equity $ 16,080,999 $ (300,000) $ 15,780,999 ------------- ----------- ------------- ------------- ----------- ------------- Page 4 of 6

NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS AND BALANCE SHEET Note A-Pro Forma Adjustments (1) To eliminate of Encapsulated Cell Therapy collaborative revenue arrangements. (2) To eliminate research and development expenses directly related to the Encapsulated Cell Therapy activities. (3) To eliminate general and administrative costs related to Encapsulated Cell Therapy based on historical allocations and assumptions made by management. (4) To eliminate Encapsulated Cell Therapy wind-down and corporate relocation expenses, including Rhode Island facility carrying costs, employee severance arrangements and settlement of a 1989 funding arrangement with the Rhode Island Partnership for Science and Technology. (5) To reclassify the net book value of the Rhode Island property, plant and equipment. Page 5 of 6

SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. STEMCELLS, INC. By /s/ George W. Dunbar, Jr. ----------------------------------- Title: Acting President and Chief Executive Officer Date: September 8, 2000 Page 6 of 6