##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


Form 10-K


|           |  |                                                                                             
|---------- |  | --------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                             
|þ          |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934    
|          
|           |  | For the fiscal year ended December 31, 2005                                                 
|          
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
|          
|           |  | For the transition period
    from           to                                             

Commission file number: 0-51110


ViaCell, Inc.


(Exact name of registrant as specified in its charter)


|                                                                            |  |                                                    
|--------------------------------------------------------------------------- |  | ---------------------------------------------------
|Delaware(State or other jurisdiction of
     incorporation or organization) |  | 04-3244816(I.R.S. Employer
     Identification No.)
|                                                                           
|245 First Street,
    Cambridge, Massachusetts                              |  | 02142(Zip code)                                    
|(Address of principal executive offices)                                    |  |                                                    

(Registrants telephone number, including area code)


(617) 914-3400


Securities registered pursuant to Section 12(b) of the
Act:


None


Securities registered pursuant to Section 12(g) of the
Act:


Common Stock, $0.01 par value


(Title of class)


o þ


o þ


þ o


S-K 10-K 10-K. o


12b-2


o o þ


12b-2 o þ






DOCUMENTS INCORPORATED BY REFERENCE












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ViaCell, Inc.


Annual Report on
Form 10-K


For the Fiscal Year Ended December 31, 2005


NOTE ABOUT REFERENCES TO VIACELL




NOTE ABOUT TRADEMARKS


® ® sm


NOTE ABOUT FORWARD-LOOKING STATEMENTS




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##### 



TABLE OF CONTENTS







|                                                                    |  |                                                                                                    |     |         |    | 
|------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------- | --- | ------- | -- | 
|                                                                    |  |                                                                                                    |     | Page No |   
|                                                                    |  |                                                                                                    |     |         |   
|PART I                                                             
|ITEM 1                                                              |  | DESCRIPTION OF BUSINESS                                                                            |     |         | 4  | 
|ITEM 1A                                                             |  | RISK FACTORS THAT MAY AFFECT RESULTS                                                               |     |         | 19 | 
|ITEM 1B                                                             |  | UNRESOLVED STAFF COMMENTS                                                                          |     |         | 33 | 
|ITEM 2                                                              |  | DESCRIPTION OF PROPERTY                                                                            |     |         | 33 | 
|ITEM 3                                                              |  | LEGAL PROCEEDINGS                                                                                  |     |         | 34 | 
|ITEM 4                                                              |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                |     |         | 35 | 
|                                                                   
|PART II                                                            
|ITEM 5                                                              |  | MARKET FOR THE REGISTRANTS COMMON STOCK AND RELATED
    STOCKHOLDER MATTERS                       |     |         | 36 | 
|ITEM 6                                                              |  | SELECTED CONSOLIDATED FINANCIAL DATA                                                               |     |         | 38 | 
|ITEM 7                                                              |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND RESULTS OF OPERATIONS          |     |         | 39 | 
|ITEM 7A                                                             |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                         |     |         | 56 | 
|ITEM 8                                                              |  | CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                           |     |         | 56 | 
|ITEM 9                                                              |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE           |     |         | 56 | 
|ITEM 9A                                                             |  | CONTROLS AND PROCEDURES                                                                            |     |         | 56 | 
|ITEM 9B                                                             |  | OTHER INFORMATION                                                                                  |     |         | 57 | 
|                                                                   
|PART III                                                           
|ITEM 10                                                             |  | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                                 |     |         | 57 | 
|ITEM 11                                                             |  | EXECUTIVE COMPENSATION                                                                             |     |         | 59 | 
|ITEM 12                                                             |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
    AND RELATED STOCKHOLDER MATTERS |     |         | 60 | 
|ITEM 13                                                             |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                     |     |         | 60 | 
|ITEM 14                                                             |  | PRINCIPAL ACCOUNTING FEES AND SERVICES                                                             |     |         | 60 | 
|                                                                   
|PART IV                                                            
|ITEM 15                                                             |  | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES                                                         |     |         | 60 | 
|Signatures                                                          |  |                                                                                                    | 63  |        
|Financial Statements                                                |  |                                                                                                    | F-1 |        
|Ex-10.18 First Amendment dated February 14, 2006 to Lease Agreement
|EX-23.1 Consent of Independent Registered Public Accouting Firm    
|Ex-31.1 Section 302 Certification of C.E.O.                        
|Ex-31.2 Section 302 Certification of C.F.O.                        
|Ex-32.1 Section 906 Certification of C.E.O.                        
|Ex-32.2 Section 906 Certification of C.F.O.                        



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PART I







|        |                        
|------- | -----------------------
|ITEM 1. | DESCRIPTION OF BUSINESS

Overview


sm




Our Cellular Therapy Technology and Product Candidates






| |                  
| | -----------------
| | Stem Cell Therapy





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| |   |                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | replace diseased bone marrow with healthy, functioning bone
    marrow for patients with blood diseases such as aplastic anemia;                                      
|
| |  | replace bone marrow damaged by high-dose chemotherapy or
    radiation therapy used to treat patients with a variety of
    cancers such as leukemia and lymphoma; and
|
| |  | provide genetically healthy and functioning bone marrow to treat
    patients with genetic diseases such as sickle cell anemia.                                       









| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Need for HLA Matching. Stem cell therapy is
    dependent on the recipients body accepting the newly
    transplanted stem cells, thus facilitating the production of the
    targeted cells. This acceptance is contingent on the
    transplanted cells looking similar, at a molecular
    level, to the patients own cells. Cellular similarity is
    measured by the presence of certain cell surface molecules known
    as human leukocyte antigens, or HLA. Host cells recognize the
    HLA pattern of the transplanted stem cells and will either
    accept the cells if the HLA match is close, or reject the cells
    if the HLA profile is not close enough. In hematopoietic stem
    cell transplantation, HLA mismatching can give rise to a very
    serious condition called graft-versus-host disease, or GVHD.
    GVHD is an attack by the transplanted immune cells on tissues of
    the host potentially resulting in severe disease, significant
    disability and often, in the most severe forms, death. Time
    consuming and expensive searches of a donor registry are often
    required to locate compatible donors for bone marrow or cord
    blood stem cell transplants. Due to these difficulties, and
    others, many patients seeking transplants of hematopoietic stem
    cells from non-related individuals do not receive stem cells.
|
| |  | Harvesting Cells. In general, harvesting
    sufficient quantities of stem cells from a donor or a patient is
    extremely difficult. For example, all current methods of
    obtaining hematopoietic stem cells for therapy have significant
    limitations. Stem cells can be collected from bone marrow
    through a painful, costly and invasive surgical procedure. There
    are not enough bone marrow donors registered and, when called
    upon, a large number of donors fail to follow through with the
    procedure. Stem cells can also be collected from blood of the
    circulatory system through a procedure in which drugs are
    injected into the donor to stimulate the movement of stem cells
    from the bone marrow into the blood stream, where they can be
    harvested and then separated from the whole blood. This
    procedure is time-consuming and uncomfortable for the donor.
    Umbilical cord blood is also rich in stem cells, but the volume
    of blood collected is limited. A single cord blood unit is
    generally too small to be suitable to treat adult patients. Stem
    cells can also be derived from human embryonic tissue. However,
    the utility of embryonic stem cells is presently technically
    limited and is further hampered by ethical and regulatory issues
    that restrict their use.                  
|
| |  | Expansion. The number of stem cells collected from
    any particular tissue source is typically low compared to the
    quantity required for therapeutic benefit. For example, bone
    marrow, processed                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

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| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | circulating blood and umbilical cord blood are crude mixtures of
    largely differentiated cells with small numbers of stem cells,
    contributing to unpredictability in clinical responses. The
    likelihood and speed of successful stem cell engraftment are
    directly related to the number of stem cells transplanted.
    Consequently, the ideal approach to a successful transplant is
    to use a large number of stem cells. Researchers have been
    working for decades on methods for expanding populations of
    donated stem cells, but their efforts have been largely
    unsuccessful. Most attempts to increase the number of stem cells
    involve methods of growing or culturing stem cells in batches.
    Batch production of stem cells is generally not considered
    effective because differentiated cell populations outgrow stem
    cells and create by-products that hinder the growth and
    maintenance of stem cells. Few stem cells, if any, are produced
    using this process. The mixed populations of cells that result
    are also difficult to characterize, creating the possibility of
    clinical side effects as compared to a pure stem cell
    population. Furthermore, batch production of cells is expensive.
    Large amounts of materials and production capacity are required
    to accommodate large cultures that are needed given the low
    concentration of stem cells.



| |                           
| | --------------------------
| | Our Expansion Technologies



| |                        
| | -----------------------
| | Selective Amplification







| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Purification. We initially purify a population of cells
    containing targeted stem cells using a specially formulated
    mixture of antibodies. These antibodies bind to the surface of
    unwanted, differentiated cells but not to targeted stem cells.
    The antibodies, which have magnetic particles associated with
    them, link onto the surface of the differentiated cells. We then
    expose the cell preparation to a specially designed magnet,
    which removes the magnetic particles along with the antibodies
    and differentiated cells to which they are connected. This
    method of purification is referred to as negative
    immuno-magnetic selection because the target stem cells remain
    in the culture, unaffected by the antibodies or magnetic
    particles, while the unwanted differentiated cells are removed.
|
| | Growth. Following the initial purification of the target
    stem cell population, we place the cells into a liquid culture
    containing appropriate growth media. We then allow the culture
    to grow. During this time, the stem cells divide, producing both
    additional undifferentiated stem cells as well as differentiated
    cells.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| | Re-purification. After a specified growth period, we
    re-purify the target cells using negative immuno-magnetic
    selection. Re-purification both removes the differentiated cells
    and eliminates their deleterious impact on the target stem cell
    population.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| | Repeated Cycles of Growth and Purification. We repeat the
    growth and purification cycles at specified time points to
    optimize and control the expansion of the stem cell population
    and largely eliminate differentiated cells. This technique
    minimizes culture size and consumption of antibodies, growth
    factors and media, making it more cost effective than
    conventional cell culture techniques.                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| | Harvest, Characterize and Package. After a final step of
    reselection and growth, the amplified target cells are
    harvested, characterized and packaged for use.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

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| |                                             
| | --------------------------------------------
| | Our Product Candidates in Cellular Therapies



| |      
| | -----
| | CB001



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Background.






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Increasing the Likelihood of Locating Compatible Stem
    Cells. Umbilical cord blood contains a rich supply of
    stem cells. With approximately 4 million births per year in
    the United States, cord blood represents a large, natural
    resource provided it can be efficiently and cost-effectively
    converted into standardized medicine. Most cord blood units
    collected, preserved and stored do not contain sufficient stem
    cells to treat an adult patient. We are studying whether,
    through Selective Amplification, we will be able to expand the
    number of stem cells contained in each unit so that every unit
    is potentially suitable to treat a patient, regardless of size.
    In addition to size limitations that exist with unexpanded cord
    blood units, HLA matching limitations exist particularly for
    racial minorities that are proportionally underrepresented in
    current donor inventories. If every cord blood unit that is
    collected, preserved and stored can be expanded, the likelihood
    of locating compatible stem cells in sufficient quantities is
    increased.
|
| |  | Increasing the Number of Stem Cells. We have
    increased hematopoietic stem cell populations by more than
    100-fold, with an average of 35-fold expansion within a
    14-day period. The
    potency of a cord blood unit has been correlated with the number
    of hematopoietic stem cells in the graft. The number of stem
    cells in an average cord blood unit are generally considered to
    be insufficient to engraft an adult by a factor of 2 to 10. The
    increase in stem cell populations that we may be able to achieve
    may have significance in the potential for therapeutic effect.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

Program Status.


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| |                                          
| | -----------------------------------------
| | Unrestricted Somatic Stem Cells  Cardiac

in vitro


Background.




Status of Program.




| |                                 
| | --------------------------------
| | Pancreatic Stem Cells  Diabetes



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| |                        
| | -----------------------
| | Other Areas of Interest



Our ViaCord Reproductive Health Business






| |                                           
| | ------------------------------------------
| | ViaCord: Umbilical Cord Blood Preservation







| |                                                                                                                                                                                                                                                                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Collection. We provide a kit that contains all of the
    materials necessary for collecting the newborns umbilical
    cord blood at birth and packaging the unit for transportation to
    our laboratory. The kit also provides for collecting a maternal
    blood sample for later testing.                                                                                        
|
| | Comprehensive Testing. At our laboratory, we conduct
    several tests on the cord blood unit which are essential in the
    event the unit is ever needed for transplant. These tests
    include volume collected, number and viability of nucleated
    cells, sterility, blood typing and the percent of stem cells.
    The maternal blood sample is tested for infectious diseases.
|
| | Processing. At our
    state-of-the-art
    laboratory, we process the cord blood using a process designed
    to maximize the number of stem cells preserved.                                                                                                                                                                                                                           
|
| | Cryopreservation. After processing and testing, we freeze
    the cord blood unit in a controlled-manner and store it using
    liquid nitrogen. Published data indicates that cord blood
    retains viability and function for 15 years, and
    potentially longer, when stored in this manner.                                                                                       





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| |        
| | -------
| | ViaCyte



Background. in vitro


ViaCyte Product Candidate.




| |   |                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | using our existing operational infrastructure and facilities,
    including our cell processing and storage facility in Hebron,
    Kentucky where long-term storage of oocytes would be
    maintained; and        
|
| |  | utilizing our sales, marketing and clinical support staff and
    our current marketing channels to educate consumers and
    healthcare professionals, including obstetricians,
    gynecologists, and oncologists.

Status of Program.


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Collaborations, Licenses and Strategic Relationships






| |      
| | -----
| | Amgen









| |                                 
| | --------------------------------
| | Tyho Galileo Research Laboratory



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| |        
| | -------
| | Genzyme





| |                                 
| | --------------------------------
| | Johns Hopkins University License

Ex vivo




| |                               
| | ------------------------------
| | Massachusetts General Hospital



Intellectual Property




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Competition




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Government Regulation




| |                                
| | -------------------------------
| | Regulations Relating to ViaCell





| |                                                            
| | -----------------------------------------------------------
| | FDA Regulation of Biologics, Drugs, and Medical
    Devices



Premarket Approval of Biologics and Drugs.




| |   |                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | preclinical laboratory and animal tests to assess a drugs
    biological activity and to identify potential safety problems;                                                                              
|
| |  | submission to the FDA of an IND, which must receive FDA
    clearance before clinical trials may begin;                                                                                                    
|
| |  | adequate and well-controlled human clinical trials to establish
    the safety and efficacy of the product for its intended
    indication;                                                                
|
| |  | compliance with cGMP regulations and standards;                                                                                                                                                            
|
| |  | submission to the FDA of a biologics license application, or
    BLA, or new drug application, or NDA, for marketing
    that includes adequate results of preclinical testing and
    clinical trials; and
|
| |  | FDA review of the marketing application in order to determine,
    among other things, whether the product is safe, effective and
    potent for its intended uses.                                        





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Premarket Clearance or Approval of Medical Devices.






Compliance Requirements after Licensure, Approval or
Clearance.


Adverse Event Reporting.


Outside the U.S.


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| |                                
| | -------------------------------
| | Regulations Relating To ViaCord

FDA Regulations.


State Regulations.


Privacy Laws.




Other Regulations.


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Employees







ITEM 1A.     RISK FACTORS THAT
MAY AFFECT RESULTS


NOTE ABOUT FORWARD-LOOKING STATEMENTS






| |                                                                                     
| | ------------------------------------------------------------------------------------
| | We expect to continue to incur operating losses and may
    never become profitable.





| |                                                                                            
| | -------------------------------------------------------------------------------------------
| | We may not be able to sustain our current level of
    revenues or our recent growth rates.



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| |                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we do not prevail in the PharmaStem litigation, we may
    be prevented from selling our ViaCord product, or may have to
    incur significant expenses.













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| |                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we are not able to successfully develop and
    commercialize new products, we may not generate sufficient
    revenues to continue our business operations.







| |   |                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------
| |  | properly engraft into the recipients body in the desired
    manner;                                 
|
| |  | provide the intended therapeutic benefits; or                                                         
|
| |  | achieve benefits or a safety profile that is acceptable and
    better or equal to existing therapies.





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| |                                                                                                      
| | -----------------------------------------------------------------------------------------------------
| | We may not be able to successfully develop our ViaCyte
    oocyte cryopreservation product candidate.

in vitro


22



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| |                                                                                   
| | ----------------------------------------------------------------------------------
| | We may not be able to raise additional funds necessary to
    fund our operations.







| |   |                                                                                                                                                                                                                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the level of cash flows from sales of our ViaCord product;                                                                                                                                                                                                                                                                                                            
|
| |  | the scope and results of our research and development programs;                                                                                                                                                                                                                                                                                                       
|
| |  | the clinical pathway for each of our product candidates,
    including the number, size, scope and cost of clinical trials
    required to establish safety and efficacy;                                                                                                                                                                                             
|
| |  | the results of litigation;                                                                                                                                                                                                                                                                                                                                            
|
| |  | the timing of and the costs involved in obtaining regulatory
    approvals for our product candidates, which could be more
    lengthy or complex than obtaining approval for a new
    conventional drug given the FDAs relatively little
    experience with cellular-based therapeutics;                                                                          
|
| |  | the costs of research and development work focused on developing
    clinical and commercial scale processes for manufacturing
    cellular products and the costs of building and operating our
    manufacturing facilities, both in the near-term to support our
    clinical activities, and also in anticipation of growing our
    commercialization activities;
|
| |  | funds spent in connection with acquisitions of related
    technologies or businesses, including contingent payments that
    may be made in connection with our acquisition of Kourion
    Therapeutics;                                                                                                                                                             
|
| |  | the costs associated with expanding our portfolio of product
    candidates through licensing, collaborations or acquisitions;                                                                                                                                                                                                                                        
|
| |  | the costs of maintaining, expanding and protecting our
    intellectual property portfolio, including litigation costs and
    liabilities; and                                                                                                                                                                                                                       
|
| |  | our ability to establish and maintain collaborative arrangements
    and obtain milestones, royalties and other payments from
    collaborators.                                                                                                                                                                                                                      



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| |                                                                                             
| | --------------------------------------------------------------------------------------------
| | We depend on patents and other proprietary rights that may
    fail to protect our business.









24



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| |                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------
| | Third parties may own or control patents or patent
    applications that are infringed by our technologies or product
    candidates.









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| |                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------
| | Our success will depend in part on establishing and
    maintaining effective strategic partnerships and
    collaborations.





| |                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------
| | Our cell preservation activities are subject to
    regulations that may impose significant costs and restrictions
    on us.

Cord blood preservation.




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Oocyte cryopreservation.










| |                                                                                                                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We have only limited experience manufacturing cell therapy
    product candidates, and we may not be able to manufacture our
    product candidates in quantities sufficient for clinical studies
    or for commercial scale.





| |                                                                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We are dependent on our existing suppliers and
    establishing relationships with certain other suppliers for
    certain components of our product candidates. The loss of such
    suppliers or our inability to establish such relationships may
    delay development or limit our ability to manufacture our stem
    cell therapy products.





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| |                                                                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If our cord blood processing and storage facility or our
    clinical manufacturing facilities are damaged or destroyed, our
    business and prospects would be negatively affected.









| |                                                                                                                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our competitors may have greater resources or capabilities
    or better technologies than we have, or may succeed in
    developing better products or develop products more quickly than
    we do, and we may not be successful in competing with
    them.



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)






| |                                                                                                                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Due to the nature of our cell preservation activities,
    harm to our reputation could have a significant negative impact
    on our financial condition, and damage to or loss of our
    customers property held in our custody could potentially
    result in significant legal liability.



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| |                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------
| | The manufacture and sale of products may expose us to
    product liability claims for which we could have substantial
    liability.





| |                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we are not able to recruit and retain qualified
    management and other personnel, we may fail in developing our
    technologies and product candidates.







| |                                                                                     
| | ------------------------------------------------------------------------------------
| | We may face difficulties in managing and maintaining the
    growth of our business.





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| |                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we acquire other businesses or technologies the
    transactions may be dilutive and we may be unable to integrate
    them successfully with our business, our financial performance
    could suffer.





| |                                                                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The successful commercialization of our other potential
    cell therapy products will depend on obtaining reimbursement for
    use of this product candidate from third party payers.







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| |                                                                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We face potential liability related to the privacy of
    health information we obtain from research collaborators or from
    providers who enroll patients and collect cord blood or human
    oocytes.







| |                                                                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Ethical and other concerns surrounding the use of stem
    cell therapy may negatively affect regulatory approval or public
    perception of our products and product candidates, thereby
    reducing demand for our products and product candidates.





| |                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------
| | Our business involves the use of hazardous materials that
    could expose us to environmental and other liability.

clean-up


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| |                              
| | -----------------------------
| | Volatility of Our Stock Price





| |   |                                                                                              
| | - | ---------------------------------------------------------------------------------------------
| |  | material public announcements;                                                               
|
| |  | the data, positive or negative, generated from the development
    of our product candidates;
|
| |  | setbacks or delays in any of our development programs;                                       
|
| |  | the outcome of material litigation;                                                          
|
| |  | the financial results achieved by our cord blood preservation
    business;                  
|
| |  | the impact of competition;                                                                   
|
| |  | unusual or unexpectedly high expenses;                                                       
|
| |  | developments related to patents and other proprietary rights;                                
|
| |  | market trends affecting stock prices in our industry; and                                    
|
| |  | economic or other external factors.                                                          






|         |                          
|-------- | -------------------------
|ITEM 1B. | UNRESOLVED STAFF COMMENTS








|        |                        
|------- | -----------------------
|ITEM 2. | DESCRIPTION OF PROPERTY









33



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|        |                  
|------- | -----------------
|ITEM 3. | LEGAL PROCEEDINGS















34



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|        |                                                    
|------- | ---------------------------------------------------
|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS



35



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PART II







|        |                                                                             
|------- | ----------------------------------------------------------------------------
|ITEM 5. | MARKET FOR THE REGISTRANTS COMMON STOCK AND RELATED
    STOCKHOLDER MATTERS

Market for Common Equity






|                                      |  |                 |       |  |     |   |      | 
|------------------------------------- |  | --------------- | ----- |  | --- | - | ---- | 
|                                      |  | Price per Share |      
|                                      |  |                 |      
|For the Year Ended December 31, 2005  |  | High            |       |  | Low |  
|                                      |  |                 |       |  |     |  
|First Quarter (from January 21, 2005) |  | $               | 14.60 |  |     | $ | 6.75 | 
|Second Quarter                        |  |                 | 11.39 |  |     |   | 5.42 | 
|Third Quarter                         |  |                 | 11.51 |  |     |   | 4.97 | 
|Fourth Quarter                        |  |                 | 6.37  |  |     |   | 4.66 | 



|                                                       |  |                                      |           |                         |                      |   |      |                           |  |  |           | 
|------------------------------------------------------ |  | ------------------------------------ | --------- | ----------------------- | -------------------- | - | ---- | ------------------------- |  |  | --------- | 
|                                                       |  | Equity Compensation Plan Information |          
|                                                       |  |                                      |          
|                                                       |  |                                      |           | Number of Securities    |                     
|                                                       |  |                                      |           | Remaining Available for |                     
|                                                       |  | Number of Securities to be           |           |                         | Weighted Average     |   |      | Future Issuance Under     | 
|                                                       |  | Issued Upon Exercise of              |           |                         | Exercise Price of    |   |      | Equity Compensation Plan  | 
|                                                       |  | Outstanding Options,                 |           |                         | Outstanding Options, |   |      | (Excluding Securities     | 
|Plan Category                                          |  | Warrants and Rights                  |           |                         | Warrants and Rights  |   |      | Referenced in Column (a)) | 
|                                                       |  |                                      |           |                         |                      |   |      |                           | 
|                                                       |  | (a)                                  |           |                         |                      |   |     
|Equity compensation plans approved by security holders |  |                                      | 3,930,694 |                         |                      | $ | 2.77 |                           |  |  | 2,080,738 | 

Holders




Dividends




Sales of Unregistered Securities




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Use of Proceeds from Registered Securities.


S-1 333-114209)








37



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|        |                                     
|------- | ------------------------------------
|ITEM 6. | SELECTED CONSOLIDATED FINANCIAL DATA



|                                                                                           |                            |                                                 |            |       |       |   |           |         |       |   |           |       |        |      |           |       |       |   |           |       |       | 
|------------------------------------------------------------------------------------------ | -------------------------- | ----------------------------------------------- | ---------- | ----- | ----- | - | --------- | ------- | ----- | - | --------- | ----- | ------ | ---- | --------- | ----- | ----- | - | --------- | ----- | ----- | 
|                                                                                           |                            | Years Ended December 31,                        |           
|                                                                                           |                            |                                                 |           
|                                                                                           |                            | 2005                                            |            |       | 2004  |   |           | 2003(1) |       |   | 2002      |       |        | 2001 |          
|                                                                                           |                            |                                                 |            |       |       |   |           |         |       |   |           |       |        |      |          
|                                                                                           |                            | (In thousands, except share and per share data) |           
|Consolidated Statement of Operations Data:                                                 |                            |                                                 |            |       |       |   |           |         |       |   |           |       |        |      |           |       |       |   |           |      
|Revenues                                                                                   |                            | $                                               | 44,443     |       |       | $ | 38,274    |         |       | $ | 31,880    |       |        | $    | 20,375    |       |       | $ | 7,298     |      
|Operating expenses:                                                                        |                            |                                                 |            |       |       |   |           |         |       |   |           |       |        |      |           |       |       |   |           |      
|Cost of processing and storage revenues:(2)                                                |                            |                                                 |            |       |       |   |           |         |       |   |           |       |        |      |           |       |       |   |           |      
|                                                                                           | Direct costs               |                                                 |            | 8,278 |       |   |           | 7,364   |       |   |           | 7,141 |        |      |           | 5,877 |       |   |           | 3,070 |      
|                                                                                           | Royalty (recovery) expense |                                                 |            |      |       |   |           | (3,258  | )     |   |           | 3,258 |        |      |           |      |       |   |           |      |      
|                                                                                           |                            |                                                 |            |       |       |   |           |         |       |   |           |       |        |      |          
|                                                                                           |                            | Total cost of processing and storage revenues   |            |       | 8,278 |   |           |         | 4,106 |   |           |       | 10,399 |      |           |       | 5,877 |   |           |       | 3,070 | 
|Research and development                                                                   |                            |                                                 | 13,359     |       |       |   | 15,134    |         |       |   | 13,226    |       |        |      | 11,429    |       |       |   | 6,978     |      
|Sales and marketing                                                                        |                            |                                                 | 24,702     |       |       |   | 19,322    |         |       |   | 20,959    |       |        |      | 16,578    |       |       |   | 9,349     |      
|General and administrative                                                                 |                            |                                                 | 12,193     |       |       |   | 13,468    |         |       |   | 15,222    |       |        |      | 10,920    |       |       |   | 7,086     |      
|In-process technology(3)                                                                   |                            |                                                 |           |       |       |   |          |         |       |   | 23,925    |       |        |      | 5,889     |       |       |   | 594       |      
|Stock-based compensation(4)                                                                |                            |                                                 | 2,163      |       |       |   | 3,429     |         |       |   | 3,232     |       |        |      | 6,464     |       |       |   | 4,490     |      
|Restructuring                                                                              |                            |                                                 | 305        |       |       |   | 2,945     |         |       |   |          |       |        |      |          |       |       |   |          |      
|                                                                                           |                            |                                                 |            |       |       |   |           |         |       |   |           |       |        |      |          
|Total operating expenses                                                                   |                            |                                                 | 61,000     |       |       |   | 58,404    |         |       |   | 86,963    |       |        |      | 57,157    |       |       |   | 31,567    |      
|                                                                                           |                            |                                                 |            |       |       |   |           |         |       |   |           |       |        |      |          
|Operating loss                                                                             |                            |                                                 | (16,557    | )     |       |   | (20,130   | )       |       |   | (55,083   | )     |        |      | (36,782   | )     |       |   | (24,269   | )    
|Interest (expense) income, net                                                             |                            |                                                 | 1,880      |       |       |   | (967      | )       |       |   | (385      | )     |        |      | 744       |       |       |   | 2,136     |      
|Income taxes                                                                               |                            |                                                 |           |       |       |   |          |         |       |   |          |       |        |      |          |       |       |   |          |      
|                                                                                           |                            |                                                 |            |       |       |   |           |         |       |   |           |       |        |      |          
|Net loss                                                                                   |                            | $                                               | (14,677    | )     |       | $ | (21,097   | )       |       | $ | (55,468   | )     |        | $    | (36,038   | )     |       | $ | (22,133   | )    
|                                                                                           |                            |                                                 |            |       |       |   |           |         |       |   |           |       |        |      |          
|Net loss attributable to common stockholders                                               |                            | $                                               | (15,663    | )     |       | $ | (34,168   | )       |       | $ | (64,884   | )     |        | $    | (44,182   | )     |       | $ | (28,753   | )    
|                                                                                           |                            |                                                 |            |       |       |   |           |         |       |   |           |       |        |      |          
|Net loss per common share, basic and diluted                                               |                            | $                                               | (0.44      | )     |       | $ | (12.62    | )       |       | $ | (24.63    | )     |        | $    | (17.60    | )     |       | $ | (12.22    | )    
|Weighted average shares used in computing net loss per common
    share, basic and diluted |                            |                                                 | 35,777,308 |       |       |   | 2,707,219 |         |       |   | 2,634,096 |       |        |      | 2,510,632 |       |       |   | 2,352,468 |      

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|                                                         |  |                                                 |        |                   |      |   |          |      |  |   |          |   |  |      |         |   |  |   |         |  
|-------------------------------------------------------- |  | ----------------------------------------------- | ------ | ----------------- | ---- | - | -------- | ---- |  | - | -------- | - |  | ---- | ------- | - |  | - | ------- | -
|                                                         |  |                                                 |        | As of December 31 |      |   |         
|                                                         |  |                                                 |        |                   |      |   |         
|                                                         |  | 2005                                            |        |                   | 2004 |   |          | 2003 |  |   | 2002     |   |  | 2001 |        
|                                                         |  |                                                 |        |                   |      |   |          |      |  |   |          |   |  |      |        
|                                                         |  | (In thousands, except share and per share data) |       
|Consolidated Balance Sheet Data:                         |  |                                                 |        |                   |      |   |          |      |  |   |          |   |  |      |         |   |  |   |         |  
|Cash, cash equivalents, short- and long-term investments |  | $                                               | 60,544 |                   |      | $ | 28,585   |      |  | $ | 46,832   |   |  | $    | 29,188  |   |  | $ | 53,787  |  
|Working capital                                          |  |                                                 | 60,946 |                   |      |   | 14,437   |      |  |   | 22,857   |   |  |      | 25,407  |   |  |   | 46,062  |  
|Total assets                                             |  |                                                 | 94,230 |                   |      |   | 61,091   |      |  |   | 78,161   |   |  |      | 56,119  |   |  |   | 70,981  |  
|Long-term debt obligations, including current portion    |  |                                                 | 1,627  |                   |      |   | 18,736   |      |  |   | 19,238   |   |  |      | 5,173   |   |  |   | 1,586   |  
|Redeemable convertible preferred stock                   |  |                                                 |       |                   |      |   | 175,173  |      |  |   | 162,141  |   |  |      | 110,912 |   |  |   | 101,268 |  
|Total stockholders equity (deficit)                     |  |                                                 | 56,010 |                   |      |   | (160,957 | )    |  |   | (130,151 | ) |  |      | (70,487 | ) |  |   | (38,749 | )






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | We acquired Kourion Therapeutics in September 2003, and our
    financial results for the year ended December 31, 2003
    include the results of Kourion Therapeutics operations for
    the three months ended December 31, 2003. Had we included
    the results of Kourion Therapeutics operations for the
    full fiscal year 2003, we would have reported additional
    revenues, operating expenses and net loss of $0.6 million,
    $2.8 million and $2.1 million, respectively.                                                                        
|   
|(2) | In October 2003, a jury awarded PharmaStem a royalty of
    $2.9 million on our cord blood processing and storage
    revenues based on a claim of patent infringement. As a result,
    we recorded an expense of $3.3 million, included in cost of
    processing and storage revenues, in 2003 to cover our exposure
    to PharmaStem. In 2004, the Delaware district court overturned
    the jury verdict. Based on the district courts ruling, we
    reversed the entire royalty accrual in 2004.                                                           
|   
|(3) | In-process technology expense for the year ended
    December 31, 2003 included $22.1 million, being the
    fair value of technology acquired in the purchase of Kourion
    Therapeutics, and $1.8 million in respect of technology
    acquired from Amgen and GlaxoSmithKline. The expense in the
    years ended December 31, 2002 and 2001 represented the fair
    value of warrants related to technology licensed from Amgen of
    $5.9 million and stock options granted to Genzyme for a
    research collaboration valued at $0.6 million, respectively.
|   
|(4) | Stock-based compensation expense represents the amortization of
    the excess of the fair value on the date of grant of the stock
    underlying the options granted to employees over the exercise
    price and the expense related to the fair value of options
    granted to non-employees. Total stock-based compensation for
    employees and non- employees for the periods reported, and the
    allocation of these expenses to operating expenses, is as
    follows:                                                                                   

|                                        |                                |                          |       |       |      |   |       |       |  |   |       |       |  |      |       |       |  |   |       |       | 
|--------------------------------------- | ------------------------------ | ------------------------ | ----- | ----- | ---- | - | ----- | ----- |  | - | ----- | ----- |  | ---- | ----- | ----- |  | - | ----- | ----- | 
|                                        |                                | Years Ended December 31, |      
|                                        |                                |                          |      
|                                        |                                | 2005                     |       |       | 2004 |   |       | 2003  |  |   | 2002  |       |  | 2001 |      
|                                        |                                |                          |       |       |      |   |       |       |  |   |       |       |  |      |      
|                                        |                                | (In thousands)           |      
|Cost of processing and storage revenues |                                | $                        | 20    |       |      | $ | 32    |       |  | $ | 7     |       |  | $    | 20    |       |  | $ |      |      
|Research and development                |                                |                          | 294   |       |      |   | 896   |       |  |   | 1,073 |       |  |      | 2,489 |       |  |   | 2,249 |      
|Sales and marketing                     |                                |                          | 207   |       |      |   | 175   |       |  |   | 414   |       |  |      | 670   |       |  |   | 222   |      
|General and administrative              |                                |                          | 1,642 |       |      |   | 2,083 |       |  |   | 1,738 |       |  |      | 3,283 |       |  |   | 2,019 |      
|Restructuring                           |                                |                          |      |       |      |   | 243   |       |  |   |      |       |  |      |      |       |  |   |      |      
|                                        |                                |                          |       |       |      |   |       |       |  |   |       |       |  |      |      
|                                        | Total stock-based compensation |                          | $     | 2,163 |      |   | $     | 3,429 |  |   | $     | 3,232 |  |      | $     | 6,464 |  |   | $     | 4,490 | 
|                                        |                                |                          |       |       |      |   |       |       |  |   |       |       |  |      |      






|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
    CONDITION AND RESULTS OF OPERATIONS



39



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Overview


sm






| |         
| | --------
| | Revenues







40



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| |                   
| | ------------------
| | Operating Expenses











41



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Results of Operations




| |                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------
| | Years Ended December 31, 2005, 2004 and 2003 (amounts
    in millions, year over year changes based on rounded amounts in
    millions)

|                                      |  |      |      |  |      |   |      |          |  |   |              |  |  |              |      |   |              |  |     |              |  |   |     |  |  |  |    |  
|------------------------------------- |  | ---- | ---- |  | ---- | - | ---- | -------- |  | - | ------------ |  |  | ------------ | ---- | - | ------------ |  | --- | ------------ |  | - | --- |  |  |  | -- | -
|                                      |  |      |      |  |      |   |      | $ Change |  |   | % Change     |  |  | $ Change     |      |   | % Change     | 
|                                      |  | 2005 |      |  | 2004 |   |      | 2003     |  |   | 2004 to 2005 |  |  | 2004 to 2005 |      |   | 2003 to 2004 |  |     | 2003 to 2004 | 
|                                      |  |      |      |  |      |   |      |          |  |   |              |  |  |              |      |   |              |  |     |              | 
|Processing revenues                   |  | $    | 36.1 |  |      | $ | 31.7 |          |  | $ | 27.8         |  |  | $            | 4.4  |   |              |  | 14  | %            |  | $ | 3.9 |  |  |  | 14 | %
|Storage revenues                      |  |      | 7.7  |  |      |   | 5.1  |          |  |   | 3.1          |  |  |              | 2.6  |   |              |  | 51  | %            |  |   | 2.0 |  |  |  | 65 | %
|                                      |  |      |      |  |      |   |      |          |  |   |              |  |  |              |      |   |              |  |     |              | 
|Total processing and storage revenues |  |      | 43.8 |  |      |   | 36.8 |          |  |   | 30.9         |  |  |              | 7.0  |   |              |  | 19  | %            |  |   | 5.9 |  |  |  | 19 | %
|Grant and contract revenues           |  |      | 0.6  |  |      |   | 1.5  |          |  |   | 1.0          |  |  |              | (0.9 | ) |              |  | (60 | )%           |  |   | 0.5 |  |  |  | 50 | %
|                                      |  |      |      |  |      |   |      |          |  |   |              |  |  |              |      |   |              |  |     |              | 
|Total revenues                        |  | $    | 44.4 |  |      | $ | 38.3 |          |  | $ | 31.9         |  |  | $            | 6.1  |   |              |  | 16  | %            |  | $ | 6.4 |  |  |  | 20 | %
|                                      |  |      |      |  |      |   |      |          |  |   |              |  |  |              |      |   |              |  |     |              | 





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|                                              |                 |      |     |     |      |   |     |          |   |   |              |     |  |              |     |     |              |  |     |              |   |   |      |      |   |  |     |      |   
|--------------------------------------------- | --------------- | ---- | --- | --- | ---- | - | --- | -------- | - | - | ------------ | --- |  | ------------ | --- | --- | ------------ |  | --- | ------------ | - | - | ---- | ---- | - |  | --- | ---- | --
|                                              |                 |      |     |     |      |   |     | $ Change |   |   | % Change     |     |  | $ Change     |     |     | % Change     | 
|                                              |                 | 2005 |     |     | 2004 |   |     | 2003     |   |   | 2004 to 2005 |     |  | 2004 to 2005 |     |     | 2003 to 2004 |  |     | 2003 to 2004 |  
|                                              |                 |      |     |     |      |   |     |          |   |   |              |     |  |              |     |     |              |  |     |              |  
|Cost of processing and storage revenues:      |                 |      |     |     |      |   |     |          |   |   |              |     |  |              |     |     |              |  |     |              |   |   |      |      |   |  |     |     
|                                              | Direct costs    |      | $   | 8.3 |      |   | $   | 7.4      |   |   | $            | 7.1 |  |              | $   | 0.9 |              |  |     | 12           | % |   | $    | 0.3  |   |  |     | 4    | % 
|                                              | Royalty expense |      |     |    |      |   |     | (3.3     | ) |   |              | 3.3 |  |              |     | 3.3 |              |  |     | 100          | % |   |      | (6.6 | ) |  |     | (200 | )%
|                                              |                 |      |     |     |      |   |     |          |   |   |              |     |  |              |     |     |              |  |     |              |  
|Total cost of processing and storage revenues |                 | $    | 8.3 |     |      | $ | 4.1 |          |   | $ | 10.4         |     |  | $            | 4.2 |     |              |  | 102 | %            |   | $ | (6.3 | )    |   |  | (61 | )%  
|                                              |                 |      |     |     |      |   |     |          |   |   |              |     |  |              |     |     |              |  |     |              |  





|                               |  |      |      |  |      |   |      |          |  |   |              |  |  |              |      |   |              |  |     |              |  |   |      |   |  |  |    |   
|------------------------------ |  | ---- | ---- |  | ---- | - | ---- | -------- |  | - | ------------ |  |  | ------------ | ---- | - | ------------ |  | --- | ------------ |  | - | ---- | - |  |  | -- | --
|                               |  |      |      |  |      |   |      | $ Change |  |   | % Change     |  |  | $ Change     |      |   | % Change     | 
|                               |  | 2005 |      |  | 2004 |   |      | 2003     |  |   | 2004 to 2005 |  |  | 2004 to 2005 |      |   | 2003 to 2004 |  |     | 2003 to 2004 | 
|                               |  |      |      |  |      |   |      |          |  |   |              |  |  |              |      |   |              |  |     |              | 
|Clinical development           |  | $    | 9.4  |  |      | $ | 7.9  |          |  | $ | 7.3          |  |  | $            | 1.5  |   |              |  | 19  | %            |  | $ | 0.6  |   |  |  | 8  | % 
|Pre-clinical programs          |  |      | 0.7  |  |      |   | 3.5  |          |  |   | 2.1          |  |  |              | (2.8 | ) |              |  | (80 | )%           |  |   | 1.4  |   |  |  | 67 | % 
|Basic research                 |  |      | 2.5  |  |      |   | 3.0  |          |  |   | 3.1          |  |  |              | (0.5 | ) |              |  | (17 | )%           |  |   | (0.1 | ) |  |  | (3 | )%
|Other R&D                      |  |      | 0.8  |  |      |   | 0.7  |          |  |   | 0.7          |  |  |              | 0.1  |   |              |  | 14  | %            |  |   |     |   |  |  | 0  | % 
|                               |  |      |      |  |      |   |      |          |  |   |              |  |  |              |      |   |              |  |     |              | 
|Total research and development |  | $    | 13.4 |  |      | $ | 15.1 |          |  | $ | 13.2         |  |  | $            | (1.7 | ) |              |  | (11 | )%           |  | $ | 1.9  |   |  |  | 14 | % 
|                               |  |      |      |  |      |   |      |          |  |   |              |  |  |              |      |   |              |  |     |              | 







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|                    |  |      |      |  |      |   |      |          |  |   |              |  |  |              |     |  |              |  |    |              |  |   |      |   |  |  |    |   
|------------------- |  | ---- | ---- |  | ---- | - | ---- | -------- |  | - | ------------ |  |  | ------------ | --- |  | ------------ |  | -- | ------------ |  | - | ---- | - |  |  | -- | --
|                    |  |      |      |  |      |   |      | $ Change |  |   | % Change     |  |  | $ Change     |     |  | % Change     | 
|                    |  | 2005 |      |  | 2004 |   |      | 2003     |  |   | 2004 to 2005 |  |  | 2004 to 2005 |     |  | 2003 to 2004 |  |    | 2003 to 2004 | 
|                    |  |      |      |  |      |   |      |          |  |   |              |  |  |              |     |  |              |  |    |              | 
|Sales and marketing |  | $    | 24.7 |  |      | $ | 19.3 |          |  | $ | 21.0         |  |  | $            | 5.4 |  |              |  | 28 | %            |  | $ | (1.7 | ) |  |  | (8 | )%



|                           |  |      |      |  |      |   |      |          |  |   |              |  |  |              |      |   |              |  |     |              |  |   |      |   |  |  |     |   
|-------------------------- |  | ---- | ---- |  | ---- | - | ---- | -------- |  | - | ------------ |  |  | ------------ | ---- | - | ------------ |  | --- | ------------ |  | - | ---- | - |  |  | --- | --
|                           |  |      |      |  |      |   |      | $ Change |  |   | % Change     |  |  | $ Change     |      |   | % Change     | 
|                           |  | 2005 |      |  | 2004 |   |      | 2003     |  |   | 2004 to 2005 |  |  | 2004 to 2005 |      |   | 2003 to 2004 |  |     | 2003 to 2004 | 
|                           |  |      |      |  |      |   |      |          |  |   |              |  |  |              |      |   |              |  |     |              | 
|General and administrative |  | $    | 12.2 |  |      | $ | 13.5 |          |  | $ | 15.2         |  |  | $            | (1.3 | ) |              |  | (10 | )%           |  | $ | (1.7 | ) |  |  | (11 | )%





|                      |  |      |   |      |  |      |   |          |              |          |              |  |          |              |   |          |              |  |     |  |  |   |       |   |  |  |      |   
|--------------------- |  | ---- | - | ---- |  | ---- | - | -------- | ------------ | -------- | ------------ |  | -------- | ------------ | - | -------- | ------------ |  | --- |  |  | - | ----- | - |  |  | ---- | --
|                      |  |      |   |      |  |      |   | $ Change |              | % Change |              |  | $ Change |              |   | % Change |             
|                      |  | 2005 |   | 2004 |  | 2003 |   |          | 2004 to 2005 |          | 2004 to 2005 |  |          | 2003 to 2004 |   |          | 2003 to 2004 | 
|                      |  |      |   |      |  |      |   |          |              |          |              |  |          |              |   |          |              | 
|In-process technology |  | $    |  |      |  | $    |  |          |              | $        | 23.9         |  |          | $            |  |          |              |  | N/A |  |  | $ | (23.9 | ) |  |  | (100 | )%



|                         |  |      |     |  |      |   |     |          |  |   |              |  |  |              |      |   |              |  |     |              |  |   |     |  |  |  |   |  
|------------------------ |  | ---- | --- |  | ---- | - | --- | -------- |  | - | ------------ |  |  | ------------ | ---- | - | ------------ |  | --- | ------------ |  | - | --- |  |  |  | - | -
|                         |  |      |     |  |      |   |     | $ Change |  |   | % Change     |  |  | $ Change     |      |   | % Change     | 
|                         |  | 2005 |     |  | 2004 |   |     | 2003     |  |   | 2004 to 2005 |  |  | 2004 to 2005 |      |   | 2003 to 2004 |  |     | 2003 to 2004 | 
|                         |  |      |     |  |      |   |     |          |  |   |              |  |  |              |      |   |              |  |     |              | 
|Stock-based compensation |  | $    | 2.2 |  |      | $ | 3.4 |          |  | $ | 3.2          |  |  | $            | (1.2 | ) |              |  | (35 | )%           |  | $ | 0.2 |  |  |  | 6 | %





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-Share-Based Payment.


|              |  |      |     |  |      |   |     |          |  |              |          |  |              |          |      |              |          |  |              |    |  |   |     |  |  |  |     |  
|------------- |  | ---- | --- |  | ---- | - | --- | -------- |  | ------------ | -------- |  | ------------ | -------- | ---- | ------------ | -------- |  | ------------ | -- |  | - | --- |  |  |  | --- | -
|              |  |      |     |  |      |   |     | $ Change |  |              | % Change |  |              | $ Change |      |              | % Change | 
|              |  | 2005 |     |  | 2004 |   |     | 2003     |  | 2004 to 2005 |          |  | 2004 to 2005 |          |      | 2003 to 2004 |          |  | 2003 to 2004 |   
|              |  |      |     |  |      |   |     |          |  |              |          |  |              |          |      |              |          |  |              |   
|Restructuring |  | $    | 0.3 |  |      | $ | 2.9 |          |  | $            |         |  |              | $        | (2.6 | )            |          |  | (90          | )% |  | $ | 2.9 |  |  |  | 100 | %







|                                     |  |      |      |   |      |   |      |          |  |   |              |   |  |              |     |  |              |  |     |              |  |   |      |   |  |  |      |   
|------------------------------------ |  | ---- | ---- | - | ---- | - | ---- | -------- |  | - | ------------ | - |  | ------------ | --- |  | ------------ |  | --- | ------------ |  | - | ---- | - |  |  | ---- | --
|                                     |  |      |      |   |      |   |      | $ Change |  |   | % Change     |   |  | $ Change     |     |  | % Change     | 
|                                     |  | 2005 |      |   | 2004 |   |      | 2003     |  |   | 2004 to 2005 |   |  | 2004 to 2005 |     |  | 2003 to 2004 |  |     | 2003 to 2004 | 
|                                     |  |      |      |   |      |   |      |          |  |   |              |   |  |              |     |  |              |  |     |              | 
|Interest income                      |  | $    | 2.2  |   |      | $ | 0.5  |          |  | $ | 0.3          |   |  | $            | 1.7 |  |              |  | 340 | %            |  | $ | 0.2  |   |  |  | 67   | % 
|Interest expense                     |  |      | (0.3 | ) |      |   | (1.5 | )        |  |   | (0.7         | ) |  |              | 1.2 |  |              |  | 80  | %            |  |   | (0.8 | ) |  |  | (114 | )%
|                                     |  |      |      |   |      |   |      |          |  |   |              |   |  |              |     |  |              |  |     |              | 
|Total interest income (expense), net |  | $    | 1.9  |   |      | $ | (1.0 | )        |  | $ | (0.4         | ) |  | $            | 2.9 |  |              |  | 290 | %            |  | $ | (0.6 | ) |  |  | (150 | )%
|                                     |  |      |      |   |      |   |      |          |  |   |              |   |  |              |     |  |              |  |     |              | 



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Liquidity and Capital Resources






|                                                    |  |                          |      |   |          |   |       |          |  |   |              |   |  |              |       |  |  |   |       |  
|--------------------------------------------------- |  | ------------------------ | ---- | - | -------- | - | ----- | -------- |  | - | ------------ | - |  | ------------ | ----- |  |  | - | ----- | -
|                                                    |  | Years Ended December 31, |      |   |          |   |      
|                                                    |  |                          |      |   | $ Change |   |       | $ Change | 
|                                                    |  | 2005                     |      |   | 2004     |   |       | 2003     |  |   | 2004 to 2005 |   |  | 2003 to 2004 |      
|                                                    |  |                          |      |   |          |   |       |          |  |   |              |   |  |              |      
|Net cash used in operating activities               |  | $                        | (1.4 | ) |          | $ | (15.1 | )        |  | $ | (22.5        | ) |  | $            | $13.7 |  |  | $ | 7.4   |  
|Net cash provided by (used in) investing activities |  |                          | (9.1 | ) |          |   | (15.2 | )        |  |   | 9.5          |   |  |              | 6.1   |  |  |   | (24.7 | )
|Net cash provided by (used in) financing activities |  |                          | 37.1 |   |          |   | (1.7  | )        |  |   | 36.4         |   |  |              | 38.8  |  |  |   | (38.1 | )
|Cash and cash equivalents, end of period            |  | $                        | 33.1 |   |          | $ | 6.7   |          |  | $ | 39.0         |   |  | $            | 26.4  |  |  | $ | (32.3 | )





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Commitments and Contingencies




|                             |                               |       |      |           |          |   |              |       |  |              |       |     |            |       |     |     |  |   |     |      | 
|---------------------------- | ----------------------------- | ----- | ---- | --------- | -------- | - | ------------ | ----- |  | ------------ | ----- | --- | ---------- | ----- | --- | --- |  | - | --- | ---- | 
|                             |                               |       |      | Less Than |          |   | One to Three |       |  | Four to Five |       |     | After Five |      
|Contractual Obligations      |                               | Total |      |           | One Year |   |              | Years |  |              | Years |     |            | Years |    
|                             |                               |       |      |           |          |   |              |       |  |              |       |     |            |       |    
|Operating lease obligations  |                               | $     | 17.9 |           |          | $ | 2.2          |       |  | $            | 4.1   |     |            | $     | 4.1 |     |  | $ | 7.5 |     
|Capital lease obligations    |                               |       | 0.2  |           |          |   | 0.1          |       |  |              | 0.1   |     |            |       |    |     |  |   |    |     
|Short and long-term debt(1)  |                               |       | 1.5  |           |          |   | 1.5          |       |  |              |      |     |            |       |    |     |  |   |    |     
|Consulting agreements        |                               |       | 0.8  |           |          |   | 0.5          |       |  |              | 0.1   |     |            |       | 0.1 |     |  |   | 0.1 |     
|License agreements(2)        |                               |       | 3.1  |           |          |   | 0.6          |       |  |              | 0.5   |     |            |       | 0.6 |     |  |   | 1.4 |     
|Contingent purchase price(3) |                               |       | 8.2  |           |          |   |             |       |  |              | 3.0   |     |            |       |    |     |  |   | 5.2 |     
|                             |                               |       |      |           |          |   |              |       |  |              |       |     |            |       |    
|                             | Total contractual obligations |       | $    | 31.7      |          |   | $            | 4.9   |  |              | $     | 7.8 |            |       | $   | 4.8 |  |   | $   | 14.2 | 
|                             |                               |       |      |           |          |   |              |       |  |              |       |     |            |       |    

47



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|    |                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes interest and principal obligations.                                                                                                                                                                                                                                                                                                                                                                           
|   
|(2) | We have included several patent license agreements for
    technologies that are in early stages of development. While we
    are currently making license payments under some of these
    agreements, we can cancel each of these agreements at any time
    without further financial obligation. Of the $3.1 million
    payable under license agreements, $1.9 million relates to
    these cancelable agreements.
|   
|(3) | See Notes 3 and 9 to our consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                            



Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others


S-K.




| |                
| | ---------------
| | Loan Obligation





| |                  
| | -----------------
| | Lease Obligations



48



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| |                                    
| | -----------------------------------
| | Acquisition of Kourion Therapeutics

Promissory Notes.


Milestones.


49



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| |                   
| | ------------------
| | License Agreements





| |                   
| | ------------------
| | Other Arrangements



| |                              
| | -----------------------------
| | Amgen Collaboration Agreement









50



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Net Operating Loss Carryforwards




Legal Proceedings












51



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Critical Accounting Estimates




52



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| |   |                                                                                 
| | - | --------------------------------------------------------------------------------
| |  | revenue recognition;                                                            
|
| |  | accounting for accounts receivable;                                             
|
| |  | accounting for royalty expense in connection with the PharmaStem
    litigation;
|
| |  | accounting for research and development expenses;                               
|
| |  | accounting for our product guarantee program; and                               
|
| |  | accounting for our physician indemnification program.                           

Revenue Recognition.


00-21




00-21, Revenue Arrangements with Multiple Deliverables.


Accounting for accounts receivable.


Accounting for royalty expense in connection with the
PharmaStem litigation.


53



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Accounting for research and development expenses.


Accounting for our product guarantee program. Accounting for Contingencies.


Accounting for our physician indemnification program.


54



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Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others


Recent Accounting Pronouncements


Share-Based
Payment.




55



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|         |                                                               
|-------- | --------------------------------------------------------------
|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
    RISK

Quantitative and Qualitative Disclosures About Market
Risks




| |                
| | ---------------
| | Investment Risk





| |                      
| | ---------------------
| | Foreign Exchange Risk





| |                   
| | ------------------
| | Interest Rate Risk








|        |                                                             
|------- | ------------------------------------------------------------
|ITEM 8. | CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY
    DATA








|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
    ACCOUNTING AND FINANCIAL DISCLOSURE








|         |                        
|-------- | -----------------------
|ITEM 9A. | CONTROLS AND PROCEDURES





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|         |                  
|-------- | -----------------
|ITEM 9B. | OTHER INFORMATION






PART III







|         |                                                   
|-------- | --------------------------------------------------
|ITEM 10. | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT







MANAGEMENT


Executive Officers and Key Employees




|                     |  |     |  |                                                                        
|-------------------- |  | --- |  | -----------------------------------------------------------------------
|Name                 |  | Age |  | Positions                                                              
|                     |  |     |  |                                                                        
|Executive Officers:  |  |     |  |                                                                        
|Marc D. Beer         |  | 41  |  | President, Chief Executive Officer and Director                        
|Stephen G. Dance     |  | 55  |  | Senior Vice President, Finance and Chief Financial Officer             
|Anne Marie Cook      |  | 44  |  | Senior Vice President, Legal and General Counsel                       
|Mary T. Thistle      |  | 46  |  | Senior Vice President, General Manager, ViaCell Reproductive
    Health
|Stephan Wnendt, Ph.D |  | 43  |  | Senior Vice President, Research and Development                        
|Key Employee:        |  |     |  |                                                                        
|Morey Kraus          |  | 47  |  | Vice President and Chief Technical Officer                             

Executive Officers


Marc D. Beer.


57



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Stephen G. Dance.


Anne Marie Cook.


Mary T. Thistle.


Stephan Wnendt, Ph.D.




| |             
| | ------------
| | Key Employee

Morey Kraus.


Medical and Scientific Advisory Board






| |                                                                                                                                                                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Graham Molineux. Dr. Molineux has been a scientific
    advisor since November 2005. He is currently Director of
    Hematology and Oncology Research at Amgen Inc. Before joining
    Amgen in 1994 he spent nearly twenty years at the Paterson
    Institute for Cancer Research at Christie Hospital in

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Manchester, England. He trained at University of Manchester
    specializing in stem cell biology. Dr. Molineux received
    his Ph.D. from the University of Manchester Institute of Science
    and Technology, a MS in Experimental Immunology and Oncology and
    a BSc from Liverpool University.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| | Barbara E. Bierer, M.D. Dr. Bierer has been a
    member of our scientific advisory board since 2001 and has
    served on our Board of Directors since June 2005. Dr. Bierer is
    the Senior Vice President for Research at Brigham and
    Womens Hospital in Boston and Professor of Medicine and
    Pediatrics at Harvard Medical School. Previously, she was the
    Chief of the Laboratory of Lymphocyte Biology at the National
    Heart, Lung and Blood Institute at the National Institutes of
    Health (NIH) in Bethesda, MD. She also served as the
    Director of Pediatric Stem Cell Transplantation at the
    Dana-Farber Cancer Institute and The Childrens Hospital in
    Boston and was Professor of Pediatrics at Harvard Medical
    School. A graduate of Harvard Medical School, she specializes in
    immunology and stem cell transplantation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| | George Daley, M.D., Ph.D. Dr. Daley has
    been one of our scientific consultants since 1998 and
    Co-Chairman of our medical and scientific advisory board since
    2000. He is currently an Associate Professor in the Division of
    Pediatric Hematology/Oncology, Childrens Hospital and Dana
    Farber Cancer Institute, Boston and the Department of Biological
    Chemistry and Molecular Pharmacology, Harvard Medical School.
    Previously, Dr. Daley was a Whitehead Fellow at the
    Whitehead Institute for Biomedical Research and an Assistant
    Professor of Medicine and staff member in Hematology/ Oncology
    at the Massachusetts General Hospital from 1995 to 2003. He is
    board certified in Internal Medicine and Hematology.
    Dr. Daley has a Bachelors degree magna cum laude from
    Harvard University, a Ph.D. in biology from the Massachusetts
    Institute of Technology and an M.D. summa cum laude from Harvard
    University.                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| | Leonard I. Zon, M.D. Dr. Zon has been a member
    of our medical and scientific advisory board since February
    2002. Dr. Zon is an attending physician in hematology at
    Childrens Hospital Boston and in Oncology at Dana-Farber
    Cancer Institute. He is an Associate in
    Medicine-Hematology/Oncology, at Childrens Hospital and
    Professor of Pediatric Medicine at Harvard Medical School. He is
    also an Investigator for Howard Hughes Medical Institute.
    Dr. Zon is board certified in Medical Oncology and
    Hematology. He received a B.S. degree in chemistry and natural
    sciences from Muhlenberg College and an M.D. degree from
    Jefferson Medical College. He subsequently did an internal
    medicine residency at New England Deaconess Hospital and a
    fellowship in medical oncology at Dana-Farber Cancer Institute.
    His postdoctoral research was in the laboratory of Stuart Orkin.                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| | Kurt Gunter, M.D. Dr. Gunter has been a member
    of our medical and scientific advisory board since September
    2005. He is currently Vice President, Clinical &
    Medical Affairs/ Government Relations at ZymeQuest, Inc., a
    private company focused on blood conversion products for use in
    blood transfusion medicine. He also serves as an industry
    representative on the FDAs Cellular, Tissue and Gene
    Therapies Advisory Committee. Previously, he was Senior Vice
    President, Clinical and Regulatory Affairs and Government
    Relations at ViaCell, Inc. and served as Vice President,
    Clinical and Regulatory Affairs at Transkaryotic Therapies, Inc.
    Before joining the biotechnology industry, Dr. Gunter was
    Director of Stem Cell Processing, Hematology and Blood Donor
    Center in the Department of Laboratory Medicine at
    Childrens National Medical Center in Washington, D.C.
    Dr. Gunter has also held positions at the FDAs Center
    for Biologics Evaluation and Research, including Acting Deputy
    Director for the Division of Cellular and Gene Therapies and
    Chief of the Cytokine and Cell Biology Branch. Dr. Gunter
    is board-certified in clinical and anatomical pathology and
    transfusion medicine. He has a B.S. from Stanford University and
    a M.D. from the University of Kansas School of Medicine.






|         |                       
|-------- | ----------------------
|ITEM 11. | EXECUTIVE COMPENSATION



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|         |                                                                                                   
|-------- | --------------------------------------------------------------------------------------------------
|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
    MANAGEMENT AND RELATED STOCKHOLDER MATTERS








|         |                                               
|-------- | ----------------------------------------------
|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS








|         |                                       
|-------- | --------------------------------------
|ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES






PART IV







|         |                                           
|-------- | ------------------------------------------
|ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES





| |                                      
| | -------------------------------------
| | (1) Consolidated Financial Statements



| |                                                                                                       
| | ------------------------------------------------------------------------------------------------------
| | The following consolidated financial statements of ViaCell, Inc.
    are filed as part of this report.

|                                                          |  |                |     | 
|--------------------------------------------------------- |  | -------------- | --- | 
|                                                          |  | Page Number in |    
|                                                          |  | This Form 10-K |    
|                                                          |  |                |    
|Report of Independent Registered Public Accounting Firm   |  |                | F-2 | 
|Consolidated Balance Sheets                               |  |                | F-3 | 
|Consolidated Statements of Operations                     |  |                | F-4 | 
|Consolidated Statements of Comprehensive Loss             |  |                | F-5 | 
|Consolidated Statements of Stockholders Equity (Deficit) |  |                | F-6 | 
|Consolidated Statements of Cash Flows                     |  |                | F-7 | 
|Notes to Consolidated Financial Statements                |  |                | F-8 | 



| |                                  
| | ---------------------------------
| | (2) Financial Statement Schedules



| |                                                                                                                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | All financial statement schedules have been omitted because they
    are not applicable or not required or because the information is
    included elsewhere in the Consolidated Financial Statements or
    the Notes thereto.

Exhibits


|            |    |                         |  |                                                                                                                                                                                                              
|----------- | -- | ----------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |    | Description of Document
|            |    |                        
|            | 3  | .1(1)                   |  | Sixth Amended and Restated Certificate of Incorporation.                                                                                                                                                     
|           
|            | 3  | .2(1)                   |  | Amended and Restated By-laws.                                                                                                                                                                                
|           
|            | 4  | .1(1)                   |  | Specimen Stock Certificate.                                                                                                                                                                                  
|           
|            | 4  | .2(7)                   |  | Form of Warrant to purchase Common Stock, together with a list
    of holders.                                                                                                                               
|           
|            | 4  | .3(1)                   |  | Warrant issued to Amgen Inc. on April 9, 2002 to
    purchase 560,000 shares Common Stock.                                                                                                                   
|           
|            | 4  | .4(8)                   |  | Form Warrant issued to former investors in the Companys
    Series J convertible preferred stock on January 26,
    2005 to purchase up to a total aggregate amount of
    2,190,000 shares of common stock.
|           
|            | 10 | .1(6)                   |  | Amended and Restated 1998 Equity Incentive Plan.**                                                                                                                                                           

60



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|            |    |                         |  |                                                                                                                                                                                   
|----------- | -- | ----------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |    | Description of Document
|            |    |                        
|           
|            | 10 | .1.2(8)                 |  | Form of Nonstatutory Stock Option Certificate.**                                                                                                                                  
|           
|            | 10 | .1.3(8)                 |  | Form of Incentive Stock Option Certificate.**                                                                                                                                     
|           
|            | 10 | .2(7)                   |  | Letter Agreement dated June 7, 2001 between ViaCell and
    Chris Adams.**                                                                                                        
|           
|            | 10 | .3(7)                   |  | Letter Agreement dated May 2, 2000 between ViaCell and Marc
    Beer.**                                                                                                           
|           
|            | 10 | .4(7)                   |  | Letter Agreement dated May 14, 2001 between ViaCell and
    Kurt Gunter.**                                                                                                        
|           
|            | 10 | .5(7)                   |  | Letter Agreement dated April 11, 2000 between ViaCell and
    Morey Kraus.**                                                                                                      
|           
|            | 10 | .6(1)                   |  | Letter Agreement dated September 12, 2003 between ViaCell
    and Jan van Heek.**                                                                                                 
|           
|            | 10 | .7(1)                   |  | Letter Agreement dated November 4, 2003 between ViaCell and
    Vaughn M. Kailian.**                                                                                              
|           
|            | 10 | .8(7)                   |  | Letter Agreement dated December 15, 2002 between ViaCell
    and Paul Hastings.**                                                                                                 
|           
|            | 10 | .9(1)                   |  | Stock Purchase Agreement dated September 30, 2003 by and
    among ViaCell, Kourion Therapeutics AG and the shareholders of
    Kourion Therapeutics signatory thereto.           
|           
|            | 10 | .10(3)                  |  | Amendment to Stock Purchase Agreement dated October 25,
    2004 by and among ViaCell, Kourion Therapeutics AG and the
    shareholders of Kourion Therapeutics signatory thereto.
|           
|            | 10 | .11.1(1)                |  | Form of Promissory Note issued by ViaCell to General Electric
    Capital Corporation.                                                                                            
|           
|            | 10 | .11.2(1)                |  | Master Security Agreement dated October 16, 2003 by and
    between ViaCell and General Electric Capital Corporation, as
    amended by an Amendment dated October 16, 2003.      
|           
|            | 10 | .11.3(1)                |  | Form of Security Deposit Pledge Agreement by and between ViaCell
    and General Electric Capital Corporation.                                                                    
|           
|            | 10 | .12(1)                 |  | Non-Exclusive License Agreement dated January 1, 2003
    between ViaCell and SmithKline Beecham Corporation d/b/a
    GlaxoSmithKline and Glaxo Group Limited.                   
|           
|            | 10 | .13(1)                 |  | Collaboration Agreement dated December 23, 2003 between
    ViaCell and Amgen Inc.                                                                                                
|           
|            | 10 | .14(1)                 |  | License Agreement dated March 15, 2002 between ViaCell
    Endocrine Science, Inc. and the General Hospital Corporation,
    d/b/a Massachusetts General Hospital.                
|           
|            | 10 | .15(1)                 |  | License Agreement dated August 1, 2002 between ViaCell and
    Massachusetts Institute of Technology.                                                                             
|           
|            | 10 | .16(1)                  |  | Lease Agreement dated April 12, 2002 between ViaCell and
    Dugan Financing LLC.                                                                                                 
|           
|            | 10 | .17(1)                  |  | Lease Agreement dated December 22, 2003 between ViaCell and
    MA-Riverview/245 First Street, LLC.                                                                               
|           
|            | 10 | .18                     |  | First Amendment dated February 14, 2006 to Lease Agreement
    dated December 22, 2003 between ViaCell and
    MA-Riverview/245 First Street, LLC.                                
|           
|            | 10 | .19(1)                  |  | Letter Agreement dated March 11, 2004 between ViaCell and
    Stephen Dance.**                                                                                                    
|           
|            | 10 | .20(3)                 |  | License Agreement dated September 1, 2004 between Tyho
    Galileo Research Laboratory, LLC and ViaCell, Inc.                                                                     
|           
|            | 10 | .21(5)                 |  | Research Agreement dated December 13, 2004 between Genzyme
    Corporation and ViaCell.                                                                                           
|           
|            | 10 | .22(6)                  |  | Letter Agreement dated December 29, 2004 from ViaCell to
    Stephan Wnendt.**                                                                                                    
|           
|            | 10 | .23(8)                  |  | Letter Agreement dated October 10, 2004 from ViaCell to
    Mary Thistle.**                                                                                                       
|           
|            | 10 | .24(9)                 |  | Development Agreement between ViaCell, Inc. and Miltenyi Biotec
    GmbH, dated January 24, 2005                                                                                  
|           
|            | 10 | .25(9)                 |  | Supply Agreement between ViaCell, Inc. and Miltenyi Biotec GmbH,
    dated January 24, 2005                                                                                       
|           
|            | 10 | .26(10)                |  | Amendment No. 1 to Collaboration Agreement between ViaCell,
    Inc. and Amgen, Inc., dated August 29, 2005                                                                       
|           
|            | 10 | .27(10)                 |  | Warrant Purchase Agreement between ViaCell, Inc. and Amgen,
    Inc., dated August 29, 2005                                                                                       
|           
|            | 10 | .28(10)                 |  | Purchase Warrant issued to Amgen, Inc., dated August 29,
    2005                                                                                                                 
|           
|            | 10 | .29(10)                |  | Exclusive License Agreement among Johns Hopkins University,
    Zheijiang University and ViaCell, Inc., dated August 29,
    2005                                                 
|           
|            | 10 | .30(10)                 |  | Letter Agreement dated August 1, 2005 from ViaCell to Anne
    Marie Cook.**                                                                                                      
|           
|            | 21 | .1(1)                   |  | Subsidiaries of ViaCell.                                                                                                                                                          

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|            |    |                         |  |                                                                           
|----------- | -- | ----------------------- |  | --------------------------------------------------------------------------
|Exhibit No. |    | Description of Document
|            |    |                        
|           
|            | 23 | .1                      |  | Consent of PricewaterhouseCoopers LLP                                     
|            | 31 | .1                      |  | Rule 13a-14(a)/15d-14(a) Certification of Principal
    Executive Officer.
|            | 31 | .2                      |  | Rule 13a-14(a)/15d-14(a) Certification of Principal
    Financial Officer.
|            | 32 | .1                      |  | Section 1350 Certification of Chief Executive Officer.                    
|            | 32 | .2                      |  | Section 1350 Certification of Chief Financial Officer.                    






|    |                                                                                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Incorporated by reference to the Companys registration
    statement on
    Form S-1 (No.
    333-114209) filed with
    the Securities and Exchange Commission (the SEC) on
    April 5, 2004.
|   
|(2) | Incorporated by reference to the Companys Amendment
    No. 1 to the registration statement on
    Form S-1 (No.
    333-114209) filed with
    the SEC on May 25, 2004.                         
|   
|(3) | Incorporated by reference to the Companys Amendment
    No. 3 to the registration statement on
    Form S-1 (No.
    33-114209) filed with
    the SEC on October 26, 2004.                      
|   
|(4) | Incorporated by reference to the Companys Amendment
    No. 4 to the registration statement on
    Form S-1 (No.
    333-114209) filed with
    the SEC on December 15, 2004.                    
|   
|(5) | Incorporated by reference to the Companys Amendment
    No. 5 to the registration statement on
    Form S-1 (No.
    333-114209) filed with
    the SEC) on December 27, 2004.                   
|   
|(6) | Incorporated by reference to the Companys Amendment
    No. 6 to the registration statement on
    Form S-1 (No.
    333-114209) filed with
    the SEC on January 3, 2005.                      
|   
|(7) | Incorporated by reference to the Companys registration
    statement on
    Form S-1 (No.
    333-81650) filed with
    the SEC on January 30, 2002.                                             
|   
|(8) | Incorporated by reference to the Companys annual report on
    Form 10-K (No.
    0-51110) filed with the SEC on March 31, 2005.                                                                 
|   
|(9) | Incorporated by reference to the Companys quarterly report
    on Form 10-Q (No.
    0-51110) filed with the SEC on May 13, 2005.                                                                



|     |                                                                                                                                        
|---- | ---------------------------------------------------------------------------------------------------------------------------------------
|(10) | Incorporated by reference to the Companys quarterly report
    on Form 10-Q (No.
    0-51110) filed with the SEC on November 14, 2005.



| |   |                                                                                                                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | This exhibit has been filed separately with the Commission
    pursuant to an application for confidential treatment. The
    confidential portions of this exhibit have been omitted and are
    marked by an asterisk.



|   |                                                      
|-- | -----------------------------------------------------
|** | Indicates a management contract or compensatory plan.

62



---



##### Table of Contents






SIGNATURES






| |              
| | -------------
| | ViaCell, Inc.



| |    |                 
| | -- | ----------------
| | By | /s/ Marc D. Beer

| |                        
| | -----------------------
| |                        
| | Marc D. Beer           
| | Chief Executive Officer





|                                               |  |                                                                                            |  |                |  | 
|---------------------------------------------- |  | ------------------------------------------------------------------------------------------ |  | -------------- |  | 
|Signature                                      |  | Title                                                                                      |  | Date          
|                                               |  |                                                                                            |  |               
|                                              
|/s/ Marc D. BeerMarc D. Beer                   |  | Chief Executive Officer and Director (Principal Executive
    Officer)                     |  | March 31, 2006
|                                              
|/s/ Stephen G. DanceStephen G. Dance           |  | Chief Financial Officer
    (Principal Financial Officer and Principal Accounting Officer) |  | March 31, 2006
|                                              
|/s/ Vaughn M. KailianVaughn M. Kailian         |  | Director                                                                                   |  | March 31, 2006
|                                              
|/s/ James SiglerJames Sigler                   |  | Director                                                                                   |  | March 31, 2006
|                                              
|/s/ Paul BlakePaul Blake                       |  | Director                                                                                   |  | March 31, 2006
|                                              
|/s/ Paul HastingsPaul Hastings                 |  | Director                                                                                   |  | March 31, 2006
|                                              
|/s/ Denise Pollard-KnightDenise Pollard-Knight |  | Director                                                                                   |  | March 31, 2006
|                                              
|/s/ James TullisJames Tullis                   |  | Director                                                                                   |  | March 31, 2006
|                                              
|/s/ Jan van HeekJan van Heek                   |  | Director                                                                                   |  | March 31, 2006
|                                              
|/s/ Barbara BiererBarbara Bierer               |  | Director                                                                                   |  | March 31, 2006

63



---



##### Table of Contents






Index to Consolidated Financial Statements


ViaCell, Inc.


|                                                              |  |      |     | 
|------------------------------------------------------------- |  | ---- | --- | 
|                                                              |  | Page |    
|                                                              |  |      |    
|Report of Independent Registered Public
    Accounting Firm   |  |      | F-2 | 
|Consolidated Balance Sheets                                   |  |      | F-3 | 
|Consolidated Statements of Operations                         |  |      | F-4 | 
|Consolidated Statements of Comprehensive
    Loss             |  |      | F-5 | 
|Consolidated Statements of
    Stockholders Equity (Deficit) |  |      | F-6 | 
|Consolidated Statements of Cash Flows                         |  |      | F-7 | 
|Notes to Consolidated Financial
    Statements                |  |      | F-8 | 

F-1



---



##### Table of Contents






Report of Independent Registered Public Accounting Firm












F-2



---



##### Table of Contents



ViaCell, Inc.





Consolidated Balance Sheets


|                                                                                                                                                                                                              |                                                                                                          |                                                                                                  |          |        |        |  |          |        |          |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------ | -------- | ------ | ------ |  | -------- | ------ | -------- | -
|                                                                                                                                                                                                              |                                                                                                          | As of December 31,                                                                               |         
|                                                                                                                                                                                                              |                                                                                                          |                                                                                                  |         
|                                                                                                                                                                                                              |                                                                                                          | 2005                                                                                             |          |        | 2004   | 
|                                                                                                                                                                                                              |                                                                                                          |                                                                                                  |          |        |        | 
|                                                                                                                                                                                                              |                                                                                                          | (In thousands except                                                                             |         
|                                                                                                                                                                                                              |                                                                                                          | share data)                                                                                      |         
|ASSETS                                                                                                                                                                                                       
|Current assets:                                                                                                                                                                                               |                                                                                                          |                                                                                                  |          |        |        |  |          |       
|                                                                                                                                                                                                              | Cash and cash equivalents                                                                                |                                                                                                  | $        | 33,138 |        |  | $        | 6,746  |         
|                                                                                                                                                                                                              | Short-term investments                                                                                   |                                                                                                  |          | 27,406 |        |  |          | 21,339 |         
|                                                                                                                                                                                                              | Accounts receivable, less allowances of $1.1 million and
    $1.2 million in 2005 and 2004, respectively |                                                                                                  |          | 13,736 |        |  |          | 10,808 |         
|                                                                                                                                                                                                              | Prepaid expenses and other current assets                                                                |                                                                                                  |          | 2,679  |        |  |          | 4,766  |         
|                                                                                                                                                                                                              | Restricted cash                                                                                          |                                                                                                  |          | 162    |        |  |          | 162    |         
|                                                                                                                                                                                                              |                                                                                                          |                                                                                                  |          |        |        | 
|                                                                                                                                                                                                              |                                                                                                          | Total current assets                                                                             |          |        | 77,121 |  |          |        | 43,821   |  
|Property and equipment, net                                                                                                                                                                                   |                                                                                                          |                                                                                                  | 8,702    |        |        |  | 6,738    |       
|Goodwill                                                                                                                                                                                                      |                                                                                                          |                                                                                                  | 3,621    |        |        |  | 3,621    |       
|Intangible assets, net                                                                                                                                                                                        |                                                                                                          |                                                                                                  | 2,823    |        |        |  | 3,025    |       
|Long-term investments                                                                                                                                                                                         |                                                                                                          |                                                                                                  |         |        |        |  | 500      |       
|Restricted cash                                                                                                                                                                                               |                                                                                                          |                                                                                                  | 1,932    |        |        |  | 1,953    |       
|Other assets                                                                                                                                                                                                  |                                                                                                          |                                                                                                  | 31       |        |        |  | 1,433    |       
|                                                                                                                                                                                                              |                                                                                                          |                                                                                                  |          |        |        | 
|                                                                                                                                                                                                              |                                                                                                          | Total assets                                                                                     |          | $      | 94,230 |  |          | $      | 61,091   |  
|                                                                                                                                                                                                              |                                                                                                          |                                                                                                  |          |        |        | 
|                                                                                                                                                                                                             
|LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
    STOCKHOLDERS EQUITY (DEFICIT)                                                                                                                   
|Current liabilities:                                                                                                                                                                                          |                                                                                                          |                                                                                                  |          |        |        |  |          |       
|                                                                                                                                                                                                              | Current portion of long-term debt obligations                                                            |                                                                                                  | $        | 1,543  |        |  | $        | 1,742  |         
|                                                                                                                                                                                                              | Accounts payable                                                                                         |                                                                                                  |          | 1,141  |        |  |          | 1,271  |         
|                                                                                                                                                                                                              | Accrued expenses                                                                                         |                                                                                                  |          | 7,706  |        |  |          | 7,490  |         
|                                                                                                                                                                                                              | Notes payable to related party                                                                           |                                                                                                  |          |       |        |  |          | 15,422 |         
|                                                                                                                                                                                                              | Deferred revenue                                                                                         |                                                                                                  |          | 5,785  |        |  |          | 3,459  |         
|                                                                                                                                                                                                              |                                                                                                          |                                                                                                  |          |        |        | 
|                                                                                                                                                                                                              |                                                                                                          | Total current liabilities                                                                        |          |        | 16,175 |  |          |        | 29,384   |  
|Deferred revenue                                                                                                                                                                                              |                                                                                                          |                                                                                                  | 9,930    |        |        |  | 6,729    |       
|Deferred rent                                                                                                                                                                                                 |                                                                                                          |                                                                                                  | 3,876    |        |        |  | 1,035    |       
|Contingent purchase price                                                                                                                                                                                     |                                                                                                          |                                                                                                  | 8,155    |        |        |  | 8,155    |       
|Long-term debt obligations, net of current portion                                                                                                                                                            |                                                                                                          |                                                                                                  | 84       |        |        |  | 1,572    |       
|                                                                                                                                                                                                              |                                                                                                          |                                                                                                  |          |        |        | 
|                                                                                                                                                                                                              |                                                                                                          | Total liabilities                                                                                |          |        | 38,220 |  |          |        | 46,875   |  
|Redeemable convertible preferred stock (at redemption value)
    authorized 30,396,809 shares in 2004, issued and
    outstanding 25,628,075 in 2004                                                          |                                                                                                          |                                                                                                  |         |        |        |  | 175,173  |       
|Commitments and contingencies (Note 9)                                                                                                                                                                        |                                                                                                          |                                                                                                  |          |        |        |  |          |       
|Stockholders equity (deficit):                                                                                                                                                                               |                                                                                                          |                                                                                                  |          |        |        |  |          |       
|Convertible preferred stock, $0.01 par value; authorized
    428,191 shares; issued and outstanding 182,857 shares
    (liquidation preference of $245,000) in 2004                                           |                                                                                                          |                                                                                                  |         |        |        |  | 2        |       
|Preferred stock, $0.01 par value; authorized
    5,000,000 shares in 2005                                                                                                                                     |                                                                                                          |                                                                                                  |         |        |        |  |         |       
|Common stock, $0.01 par value; authorized 100,000,000 and
    80,000,000 shares in 2005 and 2004, respectively; issued
    and outstanding 38,117,725 and 2,763,961 shares in 2005 and
    2004, respectively |                                                                                                          |                                                                                                  | 381      |        |        |  | 28       |       
|Additional paid-in capital                                                                                                                                                                                    |                                                                                                          |                                                                                                  | 229,955  |        |        |  |         |       
|Deferred compensation                                                                                                                                                                                         |                                                                                                          |                                                                                                  | (1,087   | )      |        |  | (2,530   | )     
|Accumulated deficit                                                                                                                                                                                           |                                                                                                          |                                                                                                  | (173,443 | )      |        |  | (158,766 | )     
|Accumulated other comprehensive income                                                                                                                                                                        |                                                                                                          |                                                                                                  | 204      |        |        |  | 309      |       
|                                                                                                                                                                                                              |                                                                                                          |                                                                                                  |          |        |        | 
|                                                                                                                                                                                                              |                                                                                                          | Total stockholders equity (deficit)                                                             |          |        | 56,010 |  |          |        | (160,957 | )
|                                                                                                                                                                                                              |                                                                                                          |                                                                                                  |          |        |        | 
|                                                                                                                                                                                                              |                                                                                                          | Total liabilities, redeemable convertible preferred stock and
    stockholders equity (deficit) |          | $      | 94,230 |  |          | $      | 61,091   |  
|                                                                                                                                                                                                              |                                                                                                          |                                                                                                  |          |        |        | 



F-3



---



##### Table of Contents



ViaCell, Inc.





Consolidated Statements of Operations


|                                                                                     |                                          |                                                |                                               |                          |                      |       |           |         |        |       |           |         |       |        |        |         |  
|------------------------------------------------------------------------------------ | ---------------------------------------- | ---------------------------------------------- | --------------------------------------------- | ------------------------ | -------------------- | ----- | --------- | ------- | ------ | ----- | --------- | ------- | ----- | ------ | ------ | ------- | -
|                                                                                     |                                          | Years Ended December 31,                       |                                              
|                                                                                     |                                          |                                                |                                              
|                                                                                     |                                          | 2005                                           |                                               |                          | 2004                 |       |           | 2003    |       
|                                                                                     |                                          |                                                |                                               |                          |                      |       |           |         |       
|                                                                                     |                                          | (In thousands except share and per share data) |                                              
|Processing and storage revenues                                                      |                                          | $                                              | 43,775                                        |                          |                      | $     | 36,805    |         |        | $     | 30,884    |        
|Grant and contract revenues                                                          |                                          |                                                | 668                                           |                          |                      |       | 1,469     |         |        |       | 996       |        
|                                                                                     |                                          |                                                |                                               |                          |                      |       |           |         |       
|                                                                                     | Total revenues                           |                                                |                                               | 44,443                   |                      |       |           | 38,274  |        |       |           | 31,880  |      
|Operating expenses:                                                                  |                                          |                                                |                                               |                          |                      |       |           |         |        |       |           |        
|                                                                                     | Cost of processing and storage revenues: |                                                |                                               |                          |                      |       |           |         |        |       |           |         |      
|                                                                                     |                                          | Direct costs                                   |                                               |                          | 8,278                |       |           |         | 7,364  |       |           |         | 7,141 |       
|                                                                                     |                                          | Royalty (recovery)expense                      |                                               |                          |                     |       |           |         | (3,258 | )     |           |         | 3,258 |       
|                                                                                     |                                          |                                                |                                               |                          |                      |       |           |         |       
|                                                                                     |                                          |                                                | Total cost of processing and storage revenues |                          |                      | 8,278 |           |         |        | 4,106 |           |         |       | 10,399 |       
|                                                                                     | Research and development                 |                                                |                                               | 13,359                   |                      |       |           | 15,134  |        |       |           | 13,226  |      
|                                                                                     | Sales and marketing                      |                                                |                                               | 24,702                   |                      |       |           | 19,322  |        |       |           | 20,959  |      
|                                                                                     | General and administrative               |                                                |                                               | 12,193                   |                      |       |           | 13,468  |        |       |           | 15,222  |      
|                                                                                     | In-process technology                    |                                                |                                               |                         |                      |       |           |        |        |       |           | 23,925  |      
|                                                                                     | Stock-based compensation(1)              |                                                |                                               | 2,163                    |                      |       |           | 3,429   |        |       |           | 3,232   |      
|                                                                                     | Restructuring                            |                                                |                                               | 305                      |                      |       |           | 2,945   |        |       |           |        |      
|                                                                                     |                                          |                                                |                                               |                          |                      |       |           |         |       
|                                                                                     |                                          |                                                |                                               | Total operating expenses |                      |       | 61,000    |         |        |       | 58,404    |         |       |        | 86,963 |        
|                                                                                     |                                          |                                                |                                               |                          | Loss from operations |       |           | (16,557 | )      |       |           | (20,130 | )     |        |        | (55,083 | )
|Interest income (expense):                                                           |                                          |                                                |                                               |                          |                      |       |           |         |        |       |           |        
|                                                                                     | Interest income                          |                                                |                                               | 2,216                    |                      |       |           | 530     |        |       |           | 348     |      
|                                                                                     | Interest expense                         |                                                |                                               | (336                     | )                    |       |           | (1,497  | )      |       |           | (733    | )    
|                                                                                     |                                          |                                                |                                               |                          |                      |       |           |         |       
|                                                                                     |                                          |                                                | Total interest income (expense), net          |                          |                      | 1,880 |           |         |        | (967  | )         |         |       | (385   | )     
|                                                                                     |                                          |                                                |                                               |                          |                      |       |           |         |       
|Net loss                                                                             |                                          |                                                | (14,677                                       | )                        |                      |       | (21,097   | )       |        |       | (55,468   | )      
|Accretion on redeemable convertible preferred stock                                  |                                          |                                                | (986                                          | )                        |                      |       | (13,071   | )       |        |       | (9,416    | )      
|                                                                                     |                                          |                                                |                                               |                          |                      |       |           |         |       
|Net loss attributable to common stockholders                                         |                                          | $                                              | (15,663                                       | )                        |                      | $     | (34,168   | )       |        | $     | (64,884   | )      
|                                                                                     |                                          |                                                |                                               |                          |                      |       |           |         |       
|Net loss per share:                                                                  |                                          |                                                |                                               |                          |                      |       |           |         |        |       |           |        
|Net loss per common share, basic and diluted                                         |                                          | $                                              | (0.44                                         | )                        |                      | $     | (12.62    | )       |        | $     | (24.63    | )      
|Weighted average shares used in basic and diluted net loss per
    share computation |                                          |                                                | 35,777,308                                    |                          |                      |       | 2,707,219 |         |        |       | 2,634,096 |        






|                                        |                                        |                          |       |       |      |   |       |       |  |   |       |       | 
|--------------------------------------- | -------------------------------------- | ------------------------ | ----- | ----- | ---- | - | ----- | ----- |  | - | ----- | ----- | 
|                                        |                                        | Years Ended December 31, |      
|                                        |                                        |                          |      
|                                        |                                        | 2005                     |       |       | 2004 |   |       | 2003  | 
|                                        |                                        |                          |       |       |      |   |       |       | 
|                                        |                                        | (In thousands)           |      
|Cost of processing and storage revenues |                                        | $                        | 20    |       |      | $ | 32    |       |  | $ | 7     |      
|Research and development                |                                        |                          | 294   |       |      |   | 896   |       |  |   | 1,073 |      
|Sales and marketing                     |                                        |                          | 207   |       |      |   | 175   |       |  |   | 414   |      
|General and administrative              |                                        |                          | 1,642 |       |      |   | 2,083 |       |  |   | 1,738 |      
|Restructuring                           |                                        |                          |      |       |      |   | 243   |       |  |   |      |      
|                                        |                                        |                          |       |       |      |   |       |       | 
|                                        | Total stock-based compensation expense |                          | $     | 2,163 |      |   | $     | 3,429 |  |   | $     | 3,232 | 
|                                        |                                        |                          |       |       |      |   |       |       | 



F-4



---



##### Table of Contents



ViaCell, Inc.





Consolidated Statements of Comprehensive Loss


|                   |                                         |                          |         |      |      |   |         |      |   |   |         |     | 
|------------------ | --------------------------------------- | ------------------------ | ------- | ---- | ---- | - | ------- | ---- | - | - | ------- | --- | 
|                   |                                         | Years Ended December 31, |        
|                   |                                         |                          |        
|                   |                                         | 2005                     |         |      | 2004 |   |         | 2003 |  
|                   |                                         |                          |         |      |      |   |         |      |  
|                   |                                         | (In thousands)           |        
|Net loss           |                                         | $                        | (14,677 | )    |      | $ | (21,097 | )    |   | $ | (55,468 | )  
|                   | Foreign currency translation adjustment |                          |         | (105 | )    |   |         | (175 | ) |   |         | 484 | 
|                   |                                         |                          |         |      |      |   |         |      |  
|Comprehensive loss |                                         | $                        | (14,782 | )    |      | $ | (21,272 | )    |   | $ | (54,984 | )  
|                   |                                         |                          |         |      |      |   |         |      |  



F-5



---



##### Table of Contents



ViaCell, Inc.





Consolidated Statements of Stockholders Equity
(Deficit)


|                                                                          |  |                                  |          |     |              |   |    |            |     |  |            |         |  |         |          |  |              |             |         |         |               |   |         |               |  |                  |          |   |  |   |      |   |  |   |          |  
|------------------------------------------------------------------------- |  | -------------------------------- | -------- | --- | ------------ | - | -- | ---------- | --- |  | ---------- | ------- |  | ------- | -------- |  | ------------ | ----------- | ------- | ------- | ------------- | - | ------- | ------------- |  | ---------------- | -------- | - |  | - | ---- | - |  | - | -------- | -
|                                                                          |  | Preferred Stock                  |          |     | Common Stock |   |    |            |     |  |            |         |  |         |          | 
|                                                                          |  |                                  |          |     |              |   |    | Additional |     |  |            |         |  |         | Other    |  |              | Total       |        
|                                                                          |  |                                  |          | Par |              |   |    |            | Par |  |            | Paid-In |  |         | Deferred |  |              | Accumulated |         |         | Comprehensive |   |         | Stockholders | 
|                                                                          |  | Shares                           |          |     | Value        |   |    | Shares     |     |  | Value      |         |  | Capital |          |  | Compensation |             |         | Deficit |               |   | Income  |               |  | Equity (Deficit) |         
|                                                                          |  |                                  |          |     |              |   |    |            |     |  |            |         |  |         |          |  |              |             |         |         |               |   |         |               |  |                  |         
|                                                                          |  | (In thousands except share data) |         
|Balance, December 31, 2002                                                |  |                                  | 182,857  |     |              | $ | 2  |            |     |  | 2,558,574  |         |  | $       | 26       |  |              | $           | 8,822   |         |               | $ | (6,126  | )             |  | $                | (73,211  | ) |  | $ |     |   |  | $ | (70,487  | )
|Stock option exercises                                                    |  |                                  |          |     |              |   |    |            |     |  | 101,280    |         |  |         | 1        |  |              |             | 53      |         |               |   |         |               |  |                  |          |   |  |   |      |   |  |   | 54       |  
|Issuance of stock warrant                                                 |  |                                  |          |     |              |   |    |            |     |  |            |         |  |         |          |  |              |             | 1,450   |         |               |   |         |               |  |                  |          |   |  |   |      |   |  |   | 1,450    |  
|Accretion of redeemable preferred stock                                   |  |                                  |          |     |              |   |    |            |     |  |            |         |  |         |          |  |              |             | (9,416  | )       |               |   |         |               |  |                  |          |   |  |   |      |   |  |   | (9,416   | )
|Non-employee stock compensation                                           |  |                                  |          |     |              |   |    |            |     |  |            |         |  |         |          |  |              |             | 251     |         |               |   |         |               |  |                  |          |   |  |   |      |   |  |   | 251      |  
|Deferred compensation                                                     |  |                                  |          |     |              |   |    |            |     |  |            |         |  |         |          |  |              |             | 804     |         |               |   | (804    | )             |  |                  |          |   |  |   |      |   |  |   |         |  
|Amortization of deferred compensation                                     |  |                                  |          |     |              |   |    |            |     |  |            |         |  |         |          |  |              |             | (527    | )       |               |   | 3,508   |               |  |                  |          |   |  |   |      |   |  |   | 2,981    |  
|Net loss                                                                  |  |                                  |          |     |              |   |    |            |     |  |            |         |  |         |          |  |              |             |         |         |               |   |         |               |  |                  | (55,468  | ) |  |   |      |   |  |   | (55,468  | )
|Translation adjustment                                                    |  |                                  |          |     |              |   |    |            |     |  |            |         |  |         |          |  |              |             |         |         |               |   |         |               |  |                  |          |   |  |   | 484  |   |  |   | 484      |  
|                                                                          |  |                                  |          |     |              |   |    |            |     |  |            |         |  |         |          |  |              |             |         |         |               |   |         |               |  |                  |         
|Balance, December 31, 2003                                                |  |                                  | 182,857  |     |              | $ | 2  |            |     |  | 2,659,854  |         |  | $       | 27       |  |              | $           | 1,437   |         |               | $ | (3,422  | )             |  | $                | (128,679 | ) |  | $ | 484  |   |  | $ | (130,151 | )
|Stock option exercises                                                    |  |                                  |          |     |              |   |    |            |     |  | 89,915     |         |  |         | 1        |  |              |             | 107     |         |               |   |         |               |  |                  |          |   |  |   |      |   |  |   | 108      |  
|Accretion of redeemable preferred stock                                   |  |                                  |          |     |              |   |    |            |     |  |            |         |  |         |          |  |              |             | (4,081  | )       |               |   |         |               |  |                  | (8,990   | ) |  |   |      |   |  |   | (13,071  | )
|Non-employee stock compensation                                           |  |                                  |          |     |              |   |    |            |     |  | 14,192     |         |  |         |          |  |              |             | 415     |         |               |   |         |               |  |                  |          |   |  |   |      |   |  |   | 415      |  
|Deferred compensation                                                     |  |                                  |          |     |              |   |    |            |     |  |            |         |  |         |          |  |              |             | 2,882   |         |               |   | (2,882  | )             |  |                  |          |   |  |   |      |   |  |   |         |  
|Forfeiture of stock options                                               |  |                                  |          |     |              |   |    |            |     |  |            |         |  |         |          |  |              |             | (413    | )       |               |   | 413     |               |  |                  |          |   |  |   |      |   |  |   |         |  
|Modification of stock options                                             |  |                                  |          |     |              |   |    |            |     |  |            |         |  |         |          |  |              |             | 774     |         |               |   |         |               |  |                  |          |   |  |   |      |   |  |   | 774      |  
|Amortization of deferred compensation                                     |  |                                  |          |     |              |   |    |            |     |  |            |         |  |         |          |  |              |             | (1,121  | )       |               |   | 3,361   |               |  |                  |          |   |  |   |      |   |  |   | 2,240    |  
|Net loss                                                                  |  |                                  |          |     |              |   |    |            |     |  |            |         |  |         |          |  |              |             |         |         |               |   |         |               |  |                  | (21,097  | ) |  |   |      |   |  |   | (21,097  | )
|Translation adjustment                                                    |  |                                  |          |     |              |   |    |            |     |  |            |         |  |         |          |  |              |             |         |         |               |   |         |               |  |                  |          |   |  |   | (175 | ) |  |   | (175     | )
|                                                                          |  |                                  |          |     |              |   |    |            |     |  |            |         |  |         |          |  |              |             |         |         |               |   |         |               |  |                  |         
|Balance, December 31, 2004                                                |  |                                  | 182,857  |     |              | $ | 2  |            |     |  | 2,763,961  |         |  | $       | 28       |  |              | $           |        |         |               | $ | (2,530  | )             |  | $                | (158,766 | ) |  | $ | 309  |   |  | $ | (160,957 | )
|Stock option exercises                                                    |  |                                  |          |     |              |   |    |            |     |  | 685,157    |         |  |         | 7        |  |              |             | 1,157   |         |               |   |         |               |  |                  |          |   |  |   |      |   |  |   | 1,164    |  
|Initial public offering                                                   |  |                                  |          |     |              |   |    |            |     |  | 8,625,000  |         |  |         | 86       |  |              |             | 56,062  |         |               |   |         |               |  |                  |          |   |  |   |      |   |  |   | 56,148   |  
|Initial public offering offering costs                                    |  |                                  |          |     |              |   |    |            |     |  |            |         |  |         |          |  |              |             | (2,899  | )       |               |   |         |               |  |                  |          |   |  |   |      |   |  |   | (2,899   | )
|Accretion of redeemable preferred stock                                   |  |                                  |          |     |              |   |    |            |     |  |            |         |  |         |          |  |              |             | (986    | )       |               |   |         |               |  |                  |          |   |  |   |      |   |  |   | (986     | )
|Conversion of reedemable convertible preferred stock
    (Series A and B) |  |                                  | (182,857 | )   |              |   | (2 | )          |     |  | 182,857    |         |  |         | 2        |  |              |             |        |         |               |   |         |               |  |                  |          |   |  |   |      |   |  |   |         |  
|Conversion of reedemable convertible preferred stock
    (Series C and K) |  |                                  |          |     |              |   |    |            |     |  | 25,628,075 |         |  |         | 256      |  |              |             | 175,903 |         |               |   |         |               |  |                  |          |   |  |   |      |   |  |   | 176,159  |  
|Issuance of common stock upon exercise of warrants, net                   |  |                                  |          |     |              |   |    |            |     |  | 229,818    |         |  |         | 2        |  |              |             | (2      | )       |               |   |         |               |  |                  |          |   |  |   |      |   |  |   |         |  
|Non-employee stock compensation                                           |  |                                  |          |     |              |   |    |            |     |  | 2,857      |         |  |         |         |  |              |             | 20      |         |               |   |         |               |  |                  |          |   |  |   |      |   |  |   | 20       |  
|Deferred compensation, net                                                |  |                                  |          |     |              |   |    |            |     |  |            |         |  |         |          |  |              |             | 700     |         |               |   | 1,443   |               |  |                  |          |   |  |   |      |   |  |   | 2,143    |  
|Net loss                                                                  |  |                                  |          |     |              |   |    |            |     |  |            |         |  |         |          |  |              |             |         |         |               |   |         |               |  |                  | (14,677  | ) |  |   |      |   |  |   | (14,677  | )
|Translation adjustment                                                    |  |                                  |          |     |              |   |    |            |     |  |            |         |  |         |          |  |              |             |         |         |               |   |         |               |  |                  |          |   |  |   | (105 | ) |  |   | (105     | )
|                                                                          |  |                                  |          |     |              |   |    |            |     |  |            |         |  |         |          |  |              |             |         |         |               |   |         |               |  |                  |         
|Balance, December 31, 2005                                                |  |                                  |         |     |              | $ |   |            |     |  | 38,117,725 |         |  | $       | 381      |  |              | $           | 229,955 |         |               | $ | $(1,087 | )             |  | $                | (173,443 | ) |  | $ | 204  |   |  | $ | 56,010   |  
|                                                                          |  |                                  |          |     |              |   |    |            |     |  |            |         |  |         |          |  |              |             |         |         |               |   |         |               |  |                  |         



F-6



---



##### Table of Contents



ViaCell, Inc.





Consolidated Statements of Cash Flows


|                                                                                             |                                                     |                          |         |        |      |   |         |         |   |   |         |         |  
|-------------------------------------------------------------------------------------------- | --------------------------------------------------- | ------------------------ | ------- | ------ | ---- | - | ------- | ------- | - | - | ------- | ------- | -
|                                                                                             |                                                     | Years Ended December 31, |        
|                                                                                             |                                                     |                          |        
|                                                                                             |                                                     | 2005                     |         |        | 2004 |   |         | 2003    |  
|                                                                                             |                                                     |                          |         |        |      |   |         |         |  
|                                                                                             |                                                     | (In thousands)           |        
|Cash flows from operating activities:                                                        |                                                     |                          |         |        |      |   |         |         |   |   |         |        
|Net loss                                                                                     |                                                     | $                        | (14,677 | )      |      | $ | (21,097 | )       |   | $ | (55,468 | )      
|Adjustments to reconcile net loss to net cash used in operating
    activities:              |                                                     |                          |         |        |      |   |         |         |   |   |         |        
|Depreciation and amortization                                                                |                                                     |                          | 2,110   |        |      |   | 2,577   |         |   |   | 2,518   |        
|Stock-based compensation                                                                     |                                                     |                          | 2,163   |        |      |   | 3,429   |         |   |   | 3,232   |        
|Reserve for bad debt                                                                         |                                                     |                          | 515     |        |      |   | 248     |         |   |   | 777     |        
|Non-cash charge for acquired in-process R & D                                                |                                                     |                          |        |        |      |   |        |         |   |   | 23,925  |        
|Non-cash interest expense on related party notes                                             |                                                     |                          | 88      |        |      |   | 1,142   |         |   |   | 280     |        
|Loss on write-down of fixed assets                                                           |                                                     |                          | 17      |        |      |   | 2,155   |         |   |   |        |        
|Tenant improvement allowance                                                                 |                                                     |                          | 2,437   |        |      |   | 1,004   |         |   |   |        |        
|Other                                                                                        |                                                     |                          | 17      |        |      |   | 29      |         |   |   | 4       |        
|Changes in assets and liabilities, excluding the effect of
    acquisition:                  |                                                     |                          |         |        |      |   |         |         |   |   |         |        
|Accounts receivable                                                                          |                                                     |                          | (3,276  | )      |      |   | (3,376  | )       |   |   | (2,034  | )      
|Prepaid expenses and other current assets                                                    |                                                     |                          | 2,853   |        |      |   | (615    | )       |   |   | (2,267  | )      
|Accounts payable                                                                             |                                                     |                          | (115    | )      |      |   | (2,192  | )       |   |   | 415     |        
|Accrued expenses                                                                             |                                                     |                          | 34      |        |      |   | (2,542  | )       |   |   | 4,630   |        
|Deferred revenue                                                                             |                                                     |                          | 5,527   |        |      |   | 4,092   |         |   |   | 1,498   |        
|Deferred rent                                                                                |                                                     |                          | 873     |        |      |   | 31      |         |   |   |        |        
|                                                                                             |                                                     |                          |         |        |      |   |         |         |  
|                                                                                             | Net cash used in operating activities               |                          |         | (1,434 | )    |   |         | (15,115 | ) |   |         | (22,490 | )
|                                                                                             |                                                     |                          |         |        |      |   |         |         |  
|Cash flows from investing activities:                                                        |                                                     |                          |         |        |      |   |         |         |   |   |         |        
|Purchases of property and equipment                                                          |                                                     |                          | (3,923  | )      |      |   | (2,393  | )       |   |   | (1,826  | )      
|Proceeds from maturities of investments                                                      |                                                     |                          | 36,532  |        |      |   | 22,682  |         |   |   | 15,813  |        
|Purchase of investments                                                                      |                                                     |                          | (42,099 | )      |      |   | (36,697 | )       |   |   | (9,688  | )      
|Proceeds from return of security deposits on debt obligations                                |                                                     |                          | 414     |        |      |   | 403     |         |   |   |        |        
|Decrease in restricted cash                                                                  |                                                     |                          |        |        |      |   | 732     |         |   |   | 3,210   |        
|(Increase) decrease in long-term other assets                                                |                                                     |                          | 7       |        |      |   | 85      |         |   |   | (1,751  | )      
|Cash acquired in acquisition, net of acquisition costs                                       |                                                     |                          |        |        |      |   |        |         |   |   | 3,738   |        
|                                                                                             |                                                     |                          |         |        |      |   |         |         |  
|                                                                                             | Net cash provided by (used in) investing activities |                          |         | (9,069 | )    |   |         | (15,188 | ) |   |         | 9,496   |  
|                                                                                             |                                                     |                          |         |        |      |   |         |         |  
|Cash flows from financing activities:                                                        |                                                     |                          |         |        |      |   |         |         |   |   |         |        
|Proceeds from issuance of redeemable convertible preferred
    stock, net                    |                                                     |                          |        |        |      |   |        |         |   |   | 36,887  |        
|Proceeds from exercise of stock options                                                      |                                                     |                          | 1,164   |        |      |   | 108     |         |   |   | 43      |        
|Net proceeds from sale of common stock in initial public
    offering, net of offering costs |                                                     |                          | 53,249  |        |      |   |        |         |   |   |        |        
|Proceeds from credit facilities                                                              |                                                     |                          |        |        |      |   |        |         |   |   | 5,000   |        
|Repayments on credit facilities                                                              |                                                     |                          | (1,674  | )      |      |   | (1,562  | )       |   |   | (5,452  | )      
|Repayment of notes payable to related party, including accrued
    interest                  |                                                     |                          | (15,510 | )      |      |   |        |         |   |   |        |        
|Payments on capital lease principal                                                          |                                                     |                          | (86     | )      |      |   | (267    | )       |   |   | (49     | )      
|                                                                                             |                                                     |                          |         |        |      |   |         |         |  
|                                                                                             | Net cash provided by (used in) financing activities |                          |         | 37,143 |      |   |         | (1,721  | ) |   |         | 36,429  |  
|                                                                                             |                                                     |                          |         |        |      |   |         |         |  
|Effect of change in exchange rates on cash                                                   |                                                     |                          | (248    | )      |      |   | (238    | )       |   |   | 334     |        
|Net increase (decrease) in cash and cash equivalents                                         |                                                     |                          | 26,392  |        |      |   | (32,262 | )       |   |   | 23,769  |        
|Cash and cash equivalents, beginning of period                                               |                                                     |                          | 6,746   |        |      |   | 39,008  |         |   |   | 15,239  |        
|                                                                                             |                                                     |                          |         |        |      |   |         |         |  
|Cash and cash equivalents, end of period                                                     |                                                     | $                        | 33,138  |        |      | $ | 6,746   |         |   | $ | 39,008  |        
|                                                                                             |                                                     |                          |         |        |      |   |         |         |  
|Supplemental disclosures of cash flow information and non cash
    transactions:             |                                                     |                          |         |        |      |   |         |         |   |   |         |        
|Interest paid                                                                                |                                                     | $                        | 273     |        |      | $ | 325     |         |   | $ | 260     |        
|Income taxes paid                                                                            |                                                     |                          | 153     |        |      |   | 73      |         |   |   | 9       |        
|Acquisitions (Note 3)                                                                        |                                                     |                          |        |        |      |   |        |         |   |   | 28,705  |        
|Accretion of redeemable convertible preferred stock                                          |                                                     |                          | 986     |        |      |   | 13,071  |         |   |   | 9,416   |        
|Equipment purchased under capital lease, net of disposals
    (Note 2)                       |                                                     |                          | 56      |        |      |   | 140     |         |   |   | 155     |        



F-7



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##### Table of Contents



ViaCell, Inc.





Notes to Consolidated Financial Statements




|   |                                    
|-- | -----------------------------------
|1. | Organization and Nature of Business

sm












|   |                                           
|-- | ------------------------------------------
|2. | Summary of Significant Accounting Policies



| |                      
| | ---------------------
| | Basis of Presentation





| |                 
| | ----------------
| | Use of Estimates



F-8



---



##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)




| |                                       
| | --------------------------------------
| | Cash, Cash Equivalents and Investments

held-to held-to held-to


|                                             |  |                   |        |  |                   |   |            |        |  |           |      |   |  |            |            |  |        |   |        |  |  |   |     |  
|-------------------------------------------- |  | ----------------- | ------ |  | ----------------- | - | ---------- | ------ |  | --------- | ---- | - |  | ---------- | ---------- |  | ------ | - | ------ |  |  | - | --- | -
|                                             |  | December 31, 2005 |        |  | December 31, 2004 |  
|                                             |  |                   |        |  |                   |  
|                                             |  | Amortized         |        |  |                   |   | Unrealized |        |  | Amortized |      |   |  |            | Unrealized | 
|                                             |  | Cost              |        |  | Fair Value        |   |            | (Loss) |  |           | Cost |   |  | Fair Value |            |  | (Loss) |  
|                                             |  |                   |        |  |                   |   |            |        |  |           |      |   |  |            |            |  |        |  
|Cash and cash equivalents                    |  |                   |        |  |                   |   |            |        |  |           |      |   |  |            |            |  |        |   |        |  |  |   |     |  
|Money market accounts                        |  | $                 | 29,807 |  |                   | $ | 29,807     |        |  | $         |     |   |  | $          | 3,613      |  |        | $ | 3,613  |  |  | $ |    |  
|Government securities                        |  |                   | 1,432  |  |                   |   | 1,432      |        |  |           |     |   |  |            | 1,485      |  |        |   | 1,485  |  |  |   |    |  
|Cash                                         |  |                   | 1,899  |  |                   |   | 1,899      |        |  |           |     |   |  |            | 1,648      |  |        |   | 1,648  |  |  |   |    |  
|                                             |  |                   |        |  |                   |   |            |        |  |           |      |   |  |            |            |  |        |  
|Total cash and cash equivalents              |  |                   | 33,138 |  |                   |   | 33,138     |        |  |           |     |   |  |            | 6,746      |  |        |   | 6,746  |  |  |   |    |  
|                                             |  |                   |        |  |                   |   |            |        |  |           |      |   |  |            |            |  |        |  
|Short-term investments                       |  |                   |        |  |                   |   |            |        |  |           |      |   |  |            |            |  |        |   |        |  |  |   |     |  
|Commercial paper                             |  |                   | 27,406 |  |                   |   | 27,362     |        |  |           | (44  | ) |  |            | 21,339     |  |        |   | 21,262 |  |  |   | (77 | )
|Long-term investments                        |  |                   |        |  |                   |   |            |        |  |           |      |   |  |            |            |  |        |   |        |  |  |   |     |  
|Commercial paper                             |  |                   |       |  |                   |   |           |        |  |           |     |   |  |            | 500        |  |        |   | 498    |  |  |   | (2  | )
|                                             |  |                   |        |  |                   |   |            |        |  |           |      |   |  |            |            |  |        |  
|Total investments                            |  |                   | 27,406 |  |                   |   | 27,362     |        |  |           | (44  | ) |  |            | 21,839     |  |        |   | 21,760 |  |  |   | (79 | )
|                                             |  |                   |        |  |                   |   |            |        |  |           |      |   |  |            |            |  |        |  
|Total cash, cash equivalents and investments |  | $                 | 60,544 |  |                   | $ | 60,500     |        |  | $         | (44  | ) |  | $          | 28,585     |  |        | $ | 28,506 |  |  | $ | (79 | )
|                                             |  |                   |        |  |                   |   |            |        |  |           |      |   |  |            |            |  |        |  







| |                    
| | -------------------
| | Revenue Recognition

Revenue Recognition in Financial
Statements.


F-9



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##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)


00-21, Revenue Arrangements with Multiple Deliverables 00-21). 00-21




| |                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------
| | a) The delivered items have value to a customer on a
    standalone basis;                                                              
|
| | b) There is objective and reliable evidence of the fair
    value of the undelivered items; and                                         
|
| | c) Delivery or performance is probable and within the
    control of the vendor for any delivered items that have a right
    of return.



00-21










01-09), Accounting for Consideration Given by a Vendor 01-09




F-10



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##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)






| |                    
| | -------------------
| | Accounts Receivable





| |                                        
| | ---------------------------------------
| | Cost of Processing and Storage Revenues







| |                  
| | -----------------
| | Advertising Costs





| |                                  
| | ---------------------------------
| | Research and Development Expenses





| |                      
| | ---------------------
| | In-process Technology





| |                             
| | ----------------------------
| | Foreign Currency Translation

Foreign Currency Translation.


F-11



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##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)






| |             
| | ------------
| | Income Taxes





| |                       
| | ----------------------
| | Property and Equipment

Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use




|                              |  |             |               | 
|----------------------------- |  | ----------- | ------------- | 
|                              |  | Estimated   |              
|Asset Classification          |  | Useful Life |              
|                              |  |             |              
|Software                      |  |             | 2-3 years     | 
|Laboratory equipment          |  |             | 5-10 years    | 
|Office and computer equipment |  |             | 3-5 years     | 
|Leasehold improvements        |  |             | Life of lease | 
|Furniture and fixtures        |  |             | 5-7 years     | 





| |                                    
| | -----------------------------------
| | Fair Value of Financial Instruments





| |                                     
| | ------------------------------------
| | Goodwill and Other Intangible Assets





| |   |                      
| | - | ---------------------
| |  | goodwill;            
|
| |  | employment contracts;

F-12



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##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)




| |   |                    
| | - | -------------------
| |  | customer lists; and
|
| |  | trademarks.        

Goodwill and Other Intangible Assets






| |                                                   
| | --------------------------------------------------
| | Accounting for the Impairment of Long-Lived Assets

Accounting
for the Impairment or Disposal of Long-Lived Assets.




| |   |                                                                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a significant change in the manner in which an asset is used;                                                                                                                                            
|
| |  | a significant decrease in the market value of an asset;                                                                                                                                                  
|
| |  | a significant adverse change in its business or the industry in
    which it is sold; and                                                                                                                
|
| |  | a current period operating cash flow loss combined with a
    history of operating or cash flow losses or a projection or
    forecast that demonstrates continuing losses associated with the
    asset.





| |                                                                   
| | ------------------------------------------------------------------
| | Concentration of Credit Risk and Other Risks and
    Uncertainties







F-13



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##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)




|                                           |                   |              |   |       |              |  |  |            |  |            |        |      |   |  |   |       | 
|------------------------------------------ | ----------------- | ------------ | - | ----- | ------------ |  |  | ---------- |  | ---------- | ------ | ---- | - |  | - | ----- | 
|                                           |                   | Balance at   |   |       | Additions to |  |  |            |  | Balance at |       
|                                           |                   | Beginning of |   |       | Costs and    |  |  |            |  | End of     |       
|                                           |                   | Period       |   |       | Expenses     |  |  | Deductions |  |            | Period |     
|                                           |                   |              |   |       |              |  |  |            |  |            |        |     
|Allowance for doubtful accounts receivable |                   |              |   |       |              |  |  |            |  |            |        |      |   |  |   |      
|                                           | December 31, 2005 |              | $ | 1,197 |              |  |  | 515        |  |            |        | (644 | ) |  | $ | 1,068 | 
|                                           | December 31, 2004 |              | $ | 1,044 |              |  |  | 248        |  |            |        | (95  | ) |  | $ | 1,197 | 
|                                           | December 31, 2003 |              | $ | 269   |              |  |  | 777        |  |            |        | (2   | ) |  | $ | 1,044 | 







| |                                       
| | --------------------------------------
| | Redeemable Convertible Preferred Stock





| |                         
| | ------------------------
| | Stock-Based Compensation

Accounting for Stock Issued to
Employees Accounting for
Stock-Based Compensation Accounting for Stock-Based Compensation 
Transition and Disclosure  an amendment of FASB
Statement No. 123.


Accounting for Equity Instruments That Are
Issued to Other Than Employees for Acquiring, or in Conjunction
with Selling, Goods or Services




F-14



---



##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)








|                                                                                                                    |  |                         |         |   |      |   |         |      |  |   |         |  
|------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                                                                    |  | Years Ended December 31 |        
|                                                                                                                    |  |                         |        
|                                                                                                                    |  | 2005                    |         |   | 2004 |   |         | 2003 | 
|                                                                                                                    |  |                         |         |   |      |   |         |      | 
|Net loss attributable to common stockholders as reported                                                            |  | $                       | (15,663 | ) |      | $ | (34,168 | )    |  | $ | (64,884 | )
|Add: employee stock-based compensation expense included in
    reported net loss                                    |  |                         | 2,143   |   |      |   | 3,014   |      |  |   | 2,981   |  
|Deduct: total employee stock-based compensation expense
    determined under fair value based method for all awards |  |                         | (4,630  | ) |      |   | (5,175  | )    |  |   | (4,257  | )
|                                                                                                                    |  |                         |         |   |      |   |         |      | 
|Pro forma net loss attributable to common stockholders                                                              |  | $                       | (18,150 | ) |      | $ | (36,329 | )    |  | $ | (66,160 | )
|                                                                                                                    |  |                         |         |   |      |   |         |      | 
|Basic and diluted net loss per share as reported                                                                    |  | $                       | (0.44   | ) |      | $ | (12.62  | )    |  | $ | (24.63  | )
|                                                                                                                    |  |                         |         |   |      |   |         |      | 
|Pro forma basic and diluted net loss per share                                                                      |  | $                       | (0.51   | ) |      | $ | (13.42  | )    |  | $ | (25.12  | )
|                                                                                                                    |  |                         |         |   |      |   |         |      | 



|                                |  |              |         |   |      |   |         |      |  |   |         |  
|------------------------------- |  | ------------ | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                |  | December 31, |        
|                                |  |              |        
|                                |  | 2005         |         |   | 2004 |   |         | 2003 | 
|                                |  |              |         |   |      |   |         |      | 
|Risk-free interest rate         |  |              | 3.92    | % |      |   | 2.86    | %    |  |   | 2.00    | %
|Expected life                   |  |              | 5 years |   |      |   | 5 years |      |  |   | 5 years |  
|Expected volatility             |  |              | 100     | % |      |   | 100     | %    |  |   | 100     | %
|Dividend yield                  |  |              | 0       | % |      |   | 0       | %    |  |   | 0       | %
|Per share grant date fair value |  | $            | 6.26    |   |      | $ | 8.00    |      |  | $ | 8.15    |  





| |                    
| | -------------------
| | Segment Information



F-15



---



##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)




|                       |                                       |              |   |       |              |  |   |       | 
|---------------------- | ------------------------------------- | ------------ | - | ----- | ------------ |  | - | ----- | 
|                       |                                       | December 31, |   |       | December 31, | 
|                       |                                       | 2005         |   |       | 2004         | 
|                       |                                       |              |   |       |              | 
|Long-lived assets, net |                                       |              |   |       |              |  |   |      
|                       | United States                         |              | $ | 8,430 |              |  | $ | 6,310 | 
|                       | Germany                               |              |   |      |              |  |   | 88    | 
|                       | Singapore                             |              |   | 272   |              |  |   | 340   | 
|                       |                                       |              |   |       |              | 
|                       | Total long-lived tangible assets, net |              | $ | 8,702 |              |  | $ | 6,738 | 
|                       |                                       |              |   |       |              | 



|              |                |              |        |        |              |   |        |        | 
|------------- | -------------- | ------------ | ------ | ------ | ------------ | - | ------ | ------ | 
|              |                | December 31, |        |        | December 31, |  
|              |                | 2005         |        |        | 2004         |  
|              |                |              |        |        |              |  
|United States |                | $            | 43,812 |        |              | $ | 36,997 |       
|Germany       |                |              | (101   | )      |              |   | 990    |       
|Singapore     |                |              | 732    |        |              |   | 287    |       
|              |                |              |        |        |              |  
|              | Total Revenues |              | $      | 44,443 |              |   | $      | 38,274 | 
|              |                |              |        |        |              |  



| |                   
| | ------------------
| | Comprehensive Loss





| |                          
| | -------------------------
| | Net Loss Per Common Share





|                                             |                                                      |                          |         |        |      |   |         |       |  |   |          |       | 
|-------------------------------------------- | ---------------------------------------------------- | ------------------------ | ------- | ------ | ---- | - | ------- | ----- |  | - | -------- | ----- | 
|                                             |                                                      | Years Ended December 31, |        
|                                             |                                                      |                          |        
|                                             |                                                      | 2005                     |         |        | 2004 |   |         | 2003  | 
|                                             |                                                      |                          |         |        |      |   |         |       | 
|Basic and diluted net loss per share         |                                                      |                          |         |        |      |   |         |       |  |   |          |      
|Net loss attributable to common stockholders |                                                      | $                        | (15,663 | )      |      | $ | (34,168 | )     |  | $ | $(64,884 | )    
|                                             | Weighted average number of common shares outstanding |                          |         | 35,777 |      |   |         | 2,707 |  |   |          | 2,634 | 
|                                             |                                                      |                          |         |        |      |   |         |       | 
|Basic and diluted net loss per share         |                                                      | $                        | (0.44   | )      |      | $ | (12.62  | )     |  | $ | (24.63   | )    
|                                             |                                                      |                          |         |        |      |   |         |       | 

F-16



---



##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)




|                            |  |                          |           |  |      |  |            |      |  |  |            | 
|--------------------------- |  | ------------------------ | --------- |  | ---- |  | ---------- | ---- |  |  | ---------- | 
|                            |  | Years Ended December 31, |          
|                            |  |                          |          
|                            |  | 2005                     |           |  | 2004 |  |            | 2003 | 
|                            |  |                          |           |  |      |  |            |      | 
|Options                     |  |                          | 3,746,395 |  |      |  | 4,222,211  |      |  |  | 4,374,160  | 
|Warrants                    |  |                          | 3,349,455 |  |      |  | 1,428,750  |      |  |  | 1,413,906  | 
|Convertible preferred stock |  |                          | 1,433,941 |  |      |  | 25,810,932 |      |  |  | 25,810,932 | 



| |                                 
| | --------------------------------
| | Recent Accounting Pronouncements

Share-Based
Payment.






|   |             
|-- | ------------
|3. | Acquisitions



| |                                       
| | --------------------------------------
| | Acquisition of Kourion Therapeutics AG



F-17



---



##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)












|                                     |                      |   |        |        | 
|------------------------------------ | -------------------- | - | ------ | ------ | 
|Series I convertible preferred stock |                      | $ | 4,400  |       
|Note payable to related party        |                      |   | 14,000 |       
|Acquisition costs                    |                      |   | 2,150  |       
|Contingent consideration             |                      |   | 8,155  |       
|                                     |                      |   |       
|                                     | Total purchase price |   | $      | 28,705 | 
|                                     |                      |   |       



|                          |                           |   |        |        | 
|------------------------- | ------------------------- | - | ------ | ------ | 
|Cash and cash equivalents |                           | $ | 4,563  |       
|Other current assets, net |                           |   | 1,125  |       
|Property and equipment    |                           |   | 1,432  |       
|Other assets              |                           |   | 139    |       
|Current liabilities       |                           |   | (513   | )     
|Capital lease obligation  |                           |   | (141   | )     
|In-process technology     |                           |   | 22,100 |       
|                          |                           |   |       
|                          | Total net assets acquired |   | $      | 28,705 | 
|                          |                           |   |       

F-18



---



##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)








|   |                       
|-- | ----------------------
|4. | Property and Equipment



|                                                |  |              |        |   |      |   |        |  
|----------------------------------------------- |  | ------------ | ------ | - | ---- | - | ------ | -
|                                                |  | December 31, |       
|                                                |  |              |       
|                                                |  | 2005         |        |   | 2004 |  
|                                                |  |              |        |   |      |  
|Software                                        |  | $            | 3,098  |   |      | $ | 2,700  |  
|Laboratory equipment                            |  |              | 5,230  |   |      |   | 4,674  |  
|Office and computer equipment                   |  |              | 2,611  |   |      |   | 1,867  |  
|Leasehold improvements                          |  |              | 5,267  |   |      |   | 3,130  |  
|Furniture and fixtures                          |  |              | 767    |   |      |   | 717    |  
|Construction in progress                        |  |              | 8      |   |      |   | 380    |  
|                                                |  |              |        |   |      |  
|Property and equipment, gross                   |  |              | 16,981 |   |      |   | 13,468 |  
|Less: accumulated depreciation and amortization |  |              | (8,279 | ) |      |   | (6,730 | )
|                                                |  |              |        |   |      |  
|Property and equipment, net                     |  | $            | 8,702  |   |      | $ | 6,738  |  
|                                                |  |              |        |   |      |  









|   |                               
|-- | ------------------------------
|5. | Long-Lived Assets and Goodwill



F-19



---



##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)






|                               |  |              |        |   |      |   |        |  
|------------------------------ |  | ------------ | ------ | - | ---- | - | ------ | -
|                               |  | December 31, |       
|                               |  |              |       
|                               |  | 2005         |        |   | 2004 |  
|                               |  |              |        |   |      |  
|Goodwill                       |  | $            | 3,621  |   |      | $ | 3,621  |  
|                               |  |              |        |   |      |  
|Intangible assets              |  |              |        |   |      |   |        |  
|Trademark                      |  | $            | 4,400  |   |      | $ | 4,400  |  
|Employment agreements          |  |              | 288    |   |      |   | 288    |  
|                               |  |              |        |   |      |  
|Less: accumulated amortization |  |              | (1,865 | ) |      |   | (1,663 | )
|                               |  |              |        |   |      |  
|Intangible assets, net         |  | $            | 2,823  |   |      | $ | 3,025  |  
|                               |  |              |        |   |      |  





|   |                 
|-- | ----------------
|6. | Accrued Expenses



|                                |  |              |       |  |      |   |       | 
|------------------------------- |  | ------------ | ----- |  | ---- | - | ----- | 
|                                |  | December 31, |      
|                                |  |              |      
|                                |  | 2005         |       |  | 2004 |  
|                                |  |              |       |  |      |  
|Payroll and payroll related     |  | $            | 1,541 |  |      | $ | 1,016 | 
|Management incentive            |  |              | 881   |  |      |   | 723   | 
|Professional fees               |  |              | 1,206 |  |      |   | 2,026 | 
|Accrued marketing               |  |              | 1,260 |  |      |   | 913   | 
|Accrued restructuring (Note 14) |  |              | 632   |  |      |   | 907   | 
|Deferred rent, current          |  |              | 619   |  |      |   | 238   | 
|Accrued taxes                   |  |              | 537   |  |      |   | 647   | 
|Other                           |  |              | 1,030 |  |      |   | 1,020 | 
|                                |  |              |       |  |      |  
|Accrued expenses                |  | $            | 7,706 |  |      | $ | 7,490 | 
|                                |  |              |       |  |      |  



|   |             
|-- | ------------
|7. | Income Taxes



|                               |  |      |         |   |      |   |         |      |  |   |         |  
|------------------------------ |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                               |  | 2005 |         |   | 2004 |   |         | 2003 | 
|                               |  |      |         |   |      |   |         |      | 
|Domestic                       |  | $    | (13,104 | ) |      | $ | (16,019 | )    |  | $ | (52,299 | )
|Foreign                        |  |      | (1,573  | ) |      |   | (5,078  | )    |  |   | (3,169  | )
|                               |  |      |         |   |      |   |         |      | 
|Total Loss Before Income Taxes |  | $    | (14,677 | ) |      | $ | (21,097 | )    |  | $ | (55,468 | )
|                               |  |      |         |   |      |   |         |      | 

F-20



---



##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)




|                              |  |                          |        |    |      |  |        |      |  |  |        |   
|----------------------------- |  | ------------------------ | ------ | -- | ---- |  | ------ | ---- |  |  | ------ | --
|                              |  | Years Ended December 31, |       
|                              |  |                          |       
|                              |  | 2005                     |        |    | 2004 |  |        | 2003 | 
|                              |  |                          |        |    |      |  |        |      | 
|US Statutory rate             |  |                          | 34.00  | %  |      |  | 34.00  | %    |  |  | 34.00  | % 
|State taxes, net              |  |                          | (0.66  | )% |      |  | 3.70   | %    |  |  | 2.00   | % 
|Foreign rate differential     |  |                          | 0.02   | %  |      |  | 1.80   | %    |  |  | 0.40   | % 
|Benefit of tax credits        |  |                          | 4.37   | %  |      |  | 2.60   | %    |  |  | 1.30   | % 
|Change in valuation allowance |  |                          | (34.41 | )% |      |  | (36.80 | )%   |  |  | (14.80 | )%
|Stock-based compensation      |  |                          | (1.41  | )% |      |  | (5.10  | )%   |  |  | (8.10  | )%
|In process R&D                |  |                          | 0.00   | %  |      |  | 0.00   | %    |  |  | (14.70 | )%
|Other                         |  |                          | (1.03  | )% |      |  | (0.20  | )%   |  |  | (0.10  | )%
|Change in local tax rate      |  |                          | (1.89  | )% |      |  | 0.00   | %    |  |  | 0.00   | % 
|                              |  |                          |        |    |      |  |        |      | 
|Effective tax rate            |  |                          | (1.01  | )% |      |  | 0.00   | %    |  |  | 0.00   | % 
|                              |  |                          |        |    |      |  |        |      | 



|                             |                         |                          |         |       |      |   |         |       | 
|---------------------------- | ----------------------- | ------------------------ | ------- | ----- | ---- | - | ------- | ----- | 
|                             |                         | Years Ended December 31, |        
|                             |                         |                          |        
|                             |                         | 2005                     |         |       | 2004 |  
|                             |                         |                          |         |       |      |  
|Deferred tax assets:         |                         |                          |         |       |      |   |         |      
|Operating loss carryforwards |                         | $                        | 37,323  |       |      | $ | 35,436  |      
|Tax credit carryforwards     |                         |                          | 4,315   |       |      |   | 3,484   |      
|Stock-based compensation     |                         |                          | 2,802   |       |      |   | 3,790   |      
|Temporary differences        |                         |                          | 10,238  |       |      |   | 8,510   |      
|                             |                         |                          |         |       |      |  
|                             |                         |                          | 54,678  |       |      |   | 51,220  |      
|Less: valuation allowance    |                         |                          | (53,614 | )     |      |   | (50,002 | )    
|                             |                         |                          |         |       |      |  
|                             | Net deferred tax assets |                          |         | 1,064 |      |   |         | 1,218 | 
|Deferred tax liabilities:    |                         |                          |         |       |      |   |         |      
|Intangible assets            |                         |                          | (1,064  | )     |      |   | (1,218  | )    
|                             |                         |                          |         |       |      |  
|Net deferred taxes           |                         | $                        |        |       |      | $ |        |      
|                             |                         |                          |         |       |      |  



F-21



---



##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)




SFAS-109




|            |  |              |        |           |  |            |        |               |  |  |   |  |  |   |        | 
|----------- |  | ------------ | ------ | --------- |  | ---------- | ------ | ------------- |  |  | - |  |  | - | ------ | 
|            |  | Balance at   |        |           |  |            |        |              
|            |  | Beginning of |        |           |  |            |        | Balance at   
|Description |  | Period       |        | Additions |  | Deductions |        | End of Period
|            |  |              |        |           |  |            |        |              
|2005        |  | $            | 50,002 |           |  |            | 3,612  |               |  |  |  |  |  | $ | 53,614 | 
|2004        |  | $            | 42,234 |           |  |            | 7,768  |               |  |  |  |  |  | $ | 50,002 | 
|2003        |  | $            | 28,966 |           |  |            | 13,268 |               |  |  |  |  |  | $ | 42,234 | 



|   |                           
|-- | --------------------------
|8. | Long-Term Debt Obligations



|                                             |  |              |        |   |      |   |         |  
|-------------------------------------------- |  | ------------ | ------ | - | ---- | - | ------- | -
|                                             |  | December 31, |       
|                                             |  |              |       
|                                             |  | 2005         |        |   | 2004 |  
|                                             |  |              |        |   |      |  
|Debt facility loans                          |  | $            | 1,480  |   |      | $ | 3,135   |  
|Notes payable to related party               |  |              |       |   |      |   | 15,422  |  
|Capital lease obligations                    |  |              | 147    |   |      |   | 179     |  
|                                             |  |              |        |   |      |  
|Total long-term debt                         |  |              | 1,627  |   |      |   | 18,736  |  
|Less: current portion                        |  |              | (1,543 | ) |      |   | (17,164 | )
|                                             |  |              |        |   |      |  
|Total long-term debt, net of current portion |  | $            | 84     |   |      | $ | 1,572   |  
|                                             |  |              |        |   |      |  



| |                    
| | -------------------
| | Debt facility loans







F-22



---



##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)








| |                               
| | ------------------------------
| | Notes Payable to Related Party





| |                          
| | -------------------------
| | Capital Lease Obligations

Accounting for Leases.




|                         |      |   |        |       | 
|------------------------ | ---- | - | ------ | ----- | 
|Year Ending December 31, |      |   |        |      
|                         | 2006 |   | $      | 1,594 | 
|                         | 2007 |   |        | 56    | 
|                         | 2008 |   |        | 30    | 
|                         |      |   |       
|Total payment            |      |   | 1,680  |      
|Less: interest           |      |   | (53    | )    
|                         |      |   |       
|Total debt               |      |   | 1,627  |      
|Less: current portion    |      |   | (1,543 | )    
|                         |      |   |       
|Total long-term debt     |      | $ | 84     |      
|                         |      |   |       



|   |                              
|-- | -----------------------------
|9. | Commitments and Contingencies



| |                          
| | -------------------------
| | Contingent Purchase Price



F-23



---



##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)






| |       
| | ------
| | Leases



| |                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------
| | The Company conducts its operations in leased facilities under
    noncancelable operating leases expiring through 2014.
|
| | Future minimum rental payments under the operating leases are
    approximately as follows (in thousands):              

|                         |                      |  |   |        | 
|------------------------ | -------------------- |  | - | ------ | 
|Year Ending December 31, |                      |  |   |       
|                         | 2006                 |  | $ | 1,994  | 
|                         | 2007                 |  |   | 1,896  | 
|                         | 2008                 |  |   | 1,744  | 
|                         | 2009                 |  |   | 1,704  | 
|                         | 2010                 |  |   | 1,730  | 
|                         | Thereafter           |  |   | 6,564  | 
|                         |                      |  |  
|                         | Total lease payments |  | $ | 15,632 | 
|                         |                      |  |  











| |           
| | ----------
| | Agreements



F-24



---



##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)












| |           
| | ----------
| | Litigation







F-25



---



##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)














F-26



---



##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)








| |                                  
| | ---------------------------------
| | Physician Indemnification Program

Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others




| |                          
| | -------------------------
| | ViaCord Guarantee Program

Accounting for Contingencies.


F-27



---



##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)




|                                                    |  |              |    |  |      |   |    | 
|--------------------------------------------------- |  | ------------ | -- |  | ---- | - | -- | 
|                                                    |  | For the      |   
|                                                    |  | Years Ended  |   
|                                                    |  | December 31, |   
|                                                    |  |              |   
|                                                    |  | 2005         |    |  | 2004 |  
|                                                    |  |              |    |  |      |  
|Balance at the beginning of the period              |  | $            | 73 |  |      | $ | 43 | 
|Accrual for additional units sold during the period |  |              | 19 |  |      |   | 30 | 
|                                                    |  |              |    |  |      |  
|Balance at the end of the period                    |  | $            | 92 |  |      | $ | 73 | 
|                                                    |  |              |    |  |      |  



|    |                                                                              
|--- | -----------------------------------------------------------------------------
|10. | Redeemable Convertible Preferred Stock, Preferred Stock, and
    Common Stock



|                                  |  |   |          |  
|--------------------------------- |  | - | -------- | -
|Balance, December 31, 2004        |  | $ | 175,173  |  
|Accretion                         |  |   | 986      |  
|Conversion to Common Stock at IPO |  |   | (176,159 | )
|                                  |  |   |         
|Balance, December 31, 2005        |  | $ |         |  
|                                  |  |   |         





|                                  |  |          |        |   |          |   |      |       |  |   |        |  
|--------------------------------- |  | -------- | ------ | - | -------- | - | ---- | ----- |  | - | ------ | -
|                                  |  | Series A |        |   | Series B |   |      | Total | 
|                                  |  |          |        |   |          |   |      |       | 
|Balance, December 31, 2004        |  | $        | 1,000  |   |          | $ | 829  |       |  | $ | 1,829  |  
|Conversion to Common Stock at IPO |  |          | (1,000 | ) |          |   | (829 | )     |  |   | (1,829 | )
|                                  |  |          |        |   |          |   |      |       | 
|Balance, December 31, 2005        |  | $        |       |   |          | $ |     |       |  | $ |       |  
|                                  |  |          |        |   |          |   |      |       | 











F-28



---



##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)














F-29



---



##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)




| |                           
| | --------------------------
| | Common and Preferred Stock





|    |         
|--- | --------
|11. | Warrants









F-30



---



##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)






|    |                  
|--- | -----------------
|12. | Stock Option Plan





|                               |  |            |           |  |             |  |            |                |  |           |                |         |          |       |           |   |  |   |      | 
|------------------------------ |  | ---------- | --------- |  | ----------- |  | ---------- | -------------- |  | --------- | -------------- | ------- | -------- | ----- | --------- | - |  | - | ---- | 
|                               |  |            |           |  |             |  |            |                |  | Weighted  |               
|                               |  | Number of  |           |  | Number of   |  |            |                |  |           |                | Average |         
|                               |  | Options    |           |  | Options     |  |            |                |  | Aggregate |                |         | Exercise |      
|                               |  | Authorized |           |  | Outstanding |  |            | Exercise Price |  |           | Exercise Price |         |          | Price |          
|                               |  |            |           |  |             |  |            |                |  |           |                |         |          |       |          
|Outstanding, December 31, 2002 |  |            | 5,000,000 |  |             |  | 4,375,752  |                |  |           | $0.10-5.00     |         |          | $     | 7,627     |   |  | $ | 1.74 | 
|Authorized                     |  |            | 1,000,000 |  |             |  |            |                |  |           |                |         |          |       |           |   |  |   |      | 
|Granted                        |  |            |           |  |             |  | 713,436    |                |  |           | 5.00           |         |          |       | 3,567     |   |  |   | 5.00 | 
|Exercised                      |  |            |           |  |             |  | (101,280   | )              |  |           | 0.15-5.00      |         |          |       | (54       | ) |  |   | 0.53 | 
|Canceled                       |  |            |           |  |             |  | (282,572   | )              |  |           | 0.30-5.00      |         |          |       | (1,096    | ) |  |   | 3.88 | 
|                               |  |            |           |  |             |  |            |                |  |           |                |         |          |       |          
|Outstanding, December 31, 2003 |  |            | 6,000,000 |  |             |  | 4,705,336  |                |  |           | 0.10-5.00      |         |          |       | 10,044    |   |  |   | 2.13 | 
|Authorized                     |  |            | 1,200,000 |  |             |  |            |                |  |           |                |         |          |       |           |   |  |   |      | 
|Granted                        |  |            |           |  |             |  | 903,500    |                |  |           | 5.00           |         |          |       | 4,518     |   |  |   | 5.00 | 
|Exercised                      |  |            |           |  |             |  | (89,915    | )              |  |           | 0.30-5.00      |         |          |       | (109      | ) |  |   | 1.21 | 
|Canceled                       |  |            |           |  |             |  | (1,063,383 | )              |  |           | 0.30-5.00      |         |          |       | (4,308    | ) |  |   | 4.03 | 
|                               |  |            |           |  |             |  |            |                |  |           |                |         |          |       |          
|Outstanding, December 31, 2004 |  |            | 7,200,000 |  |             |  | 4,455,538  |                |  |           | 0.30-5.00      |         |          |       | 10,145    |   |  |   | 2.28 | 
|Authorized                     |  |            |           |  |             |  |            |                |  |           |                |         |          |       |           |   |  |   |      | 
|Granted                        |  |            |           |  |             |  | 420,200    |                |  |           | 5.31-11.10     |         |          |       | 3,065     |   |  |   | 7.30 | 
|Exercised                      |  |            |           |  |             |  | (689,164   | )              |  |           | 0.30-5.00      |         |          |       | (1,170    | ) |  |   | 1.70 | 
|Canceled                       |  |            |           |  |             |  | (255,880   | )              |  |           | 0.75-11.10     |         |          |       | (1,164    | ) |  |   | 4.55 | 
|                               |  |            |           |  |             |  |            |                |  |           |                |         |          |       |          
|Outstanding, December 31, 2005 |  |            | 7,200,000 |  |             |  | 3,930,694  |                |  |           | $0.30-11.10    |         |          | $     | 10,876    |   |  | $ | 2.77 | 
|                               |  |            |           |  |             |  |            |                |  |           |                |         |          |       |          
|Exercisable, December 31, 2003 |  |            |           |  |             |  | 1,806,628  |                |  |           | $ 0.30-5.00    |         |          | $     | 1,784,266 |   |  | $ | 0.99 | 
|                               |  |            |           |  |             |  |            |                |  |           |                |         |          |       |          
|Exercisable, December 31, 2004 |  |            |           |  |             |  | 2,228,710  |                |  |           | $ 0.30-5.00    |         |          | $     | 3,161,845 |   |  | $ | 1.42 | 
|                               |  |            |           |  |             |  |            |                |  |           |                |         |          |       |          
|Exercisable, December 31, 2005 |  |            |           |  |             |  | 2,080,738  |                |  |           | $0.30-11.10    |         |          | $     | 4,090,384 |   |  | $ | 1.97 | 
|                               |  |            |           |  |             |  |            |                |  |           |                |         |          |       |          

F-31



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##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)


|               |  |                                          |           |                        |                   |  |      |                  |  |   |           |  |  |                  |           |  |  |   |       | 
|-------------- |  | ---------------------------------------- | --------- | ---------------------- | ----------------- |  | ---- | ---------------- |  | - | --------- |  |  | ---------------- | --------- |  |  | - | ----- | 
|               |  |                                          |           | Options Exercisable at |                  
|               |  | Options Outstanding at December 31, 2005 |           |                        | December 31, 2005 | 
|               |  |                                          |           |                        |                   | 
|               |  |                                          |           | Weighted Average       |                   |  |      |                  | 
|               |  | Number of                                |           |                        | Remaining         |  |      | Weighted Average |  |   | Number of |  |  | Weighted Average |          
|Exercise Price |  | Shares                                   |           |                        | Contractual Life  |  |      | Exercise Price   |  |   | Shares    |  |  | Exercise Price   |          
|               |  |                                          |           |                        |                   |  |      |                  |  |   |           |  |  |                  |          
|$ 0.30         |  |                                          | 1,396,843 |                        |                   |  | 4.56 |                  |  | $ | 0.30      |  |  |                  | 1,096,843 |  |  | $ | 0.30  | 
|0.75           |  |                                          | 45,450    |                        |                   |  | 5.08 |                  |  |   | 0.75      |  |  |                  | 45,450    |  |  |   | 0.75  | 
|0.95           |  |                                          | 130,987   |                        |                   |  | 5.49 |                  |  |   | 0.95      |  |  |                  | 130,987   |  |  |   | 0.95  | 
|2.00           |  |                                          | 731,425   |                        |                   |  | 6.02 |                  |  |   | 2.00      |  |  |                  | 197,650   |  |  |   | 2.00  | 
|4.00           |  |                                          | 51,775    |                        |                   |  | 6.23 |                  |  |   | 4.00      |  |  |                  | 43,174    |  |  |   | 4.00  | 
|5.00           |  |                                          | 1,233,619 |                        |                   |  | 7.62 |                  |  |   | 5.00      |  |  |                  | 502,876   |  |  |   | 5.00  | 
|5.31           |  |                                          | 138,781   |                        |                   |  | 9.72 |                  |  |   | 5.31      |  |  |                  | 8,694     |  |  |   | 5.31  | 
|5.62           |  |                                          | 18,000    |                        |                   |  | 9.93 |                  |  |   | 5.62      |  |  |                  | 249       |  |  |   | 5.62  | 
|7.25           |  |                                          | 25,000    |                        |                   |  | 9.32 |                  |  |   | 7.25      |  |  |                  | 4,687     |  |  |   | 7.25  | 
|8.17           |  |                                          | 102,064   |                        |                   |  | 9.44 |                  |  |   | 8.17      |  |  |                  | 39,398    |  |  |   | 8.17  | 
|9.00           |  |                                          | 7,500     |                        |                   |  | 9.11 |                  |  |   | 9.00      |  |  |                  |          |  |  |   | 9.00  | 
|10.89          |  |                                          | 40,000    |                        |                   |  | 9.53 |                  |  |   | 10.89     |  |  |                  | 10,000    |  |  |   | 10.89 | 
|11.10          |  |                                          | 9,250     |                        |                   |  | 9.53 |                  |  |   | 11.10     |  |  |                  | 730       |  |  |   | 11.10 | 
|               |  |                                          |           |                        |                   |  |      |                  |  |   |           |  |  |                  |          
|               |  |                                          | 3,930,694 |                        |                   |  |      |                  |  | $ | 2.77      |  |  |                  | 2,080,738 |  |  | $ | 1.97  | 
|               |  |                                          |           |                        |                   |  |      |                  |  |   |           |  |  |                  |          









|    |                      
|--- | ---------------------
|13. | Employee Benefit Plan





|    |              
|--- | -------------
|14. | Restructuring



F-32



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##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)










|                         |  |               |     |  |           |   |            |  |             |   |   |          |               |   |      |  |  |   |      |   |  |   |     | 
|------------------------ |  | ------------- | --- |  | --------- | - | ---------- |  | ----------- | - | - | -------- | ------------- | - | ---- |  |  | - | ---- | - |  | - | --- | 
|                         |  | Balance as of |     |  |           |   |            |  |             |   |   |          | Balance as of |  
|                         |  | December 31,  |     |  |           |   |            |  |             |   |   |          | December 31,  |  
|                         |  | 2004          |     |  | Additions |   | Writedowns |  | Adjustments |   |   | Payments |               |   | 2005 | 
|                         |  |               |     |  |           |   |            |  |             |   |   |          |               |   |      | 
|Severance related        |  | $             | 421 |  |           | $ |           |  |             | $ |  |          |               | $ |     |  |  | $ | (421 | ) |  | $ |    | 
|Contractual terminations |  |               | 5   |  |           |   |           |  |             |   |  |          |               |   |     |  |  |   | (5   | ) |  |   |    | 
|Facility related         |  |               | 481 |  |           |   |           |  |             |   |  |          |               |   | 255  |  |  |   | (104 | ) |  |   | 632 | 
|                         |  |               |     |  |           |   |            |  |             |   |   |          |               |   |      |  |  |  
|                         |  | $             | 907 |  |           | $ |           |  |             | $ |  |          |               | $ | 255  |  |  | $ | (530 | ) |  | $ | 632 | 
|                         |  |               |     |  |           |   |            |  |             |   |   |          |               |   |      |  |  |  

|                         |  |               |   |           |  |   |            |  |  |             |      |               |  |   |      |  |  |   |        |   |  |   |     | 
|------------------------ |  | ------------- | - | --------- |  | - | ---------- |  |  | ----------- | ---- | ------------- |  | - | ---- |  |  | - | ------ | - |  | - | --- | 
|                         |  | Balance as of |   |           |  |   |            |  |  |             |      | Balance as of | 
|                         |  | December 31,  |   |           |  |   |            |  |  |             |      | December 31,  | 
|                         |  | 2003          |   | Additions |  |   | Writedowns |  |  | Adjustments |      | Payments      |  |   | 2004 | 
|                         |  |               |   |           |  |   |            |  |  |             |      |               |  |   |      | 
|Severance related        |  | $             |  |           |  | $ | 1,316      |  |  | $           |     |               |  | $ |     |  |  | $ | (895   | ) |  | $ | 421 | 
|Contractual terminations |  |               |  |           |  |   | 296        |  |  |             |     |               |  |   |     |  |  |   | (291   | ) |  |   | 5   | 
|Facility related         |  |               |  |           |  |   | 1,334      |  |  |             | (853 | )             |  |   |     |  |  |   |       |   |  |   | 481 | 
|                         |  |               |   |           |  |   |            |  |  |             |      |               |  |   |      |  |  |  
|                         |  | $             |  |           |  | $ | 2,946      |  |  | $           | (853 | )             |  | $ |     |  |  | $ | (1,186 | ) |  | $ | 907 | 
|                         |  |               |   |           |  |   |            |  |  |             |      |               |  |   |      |  |  |  

F-33



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##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)




|    |                                          
|--- | -----------------------------------------
|15. | Unaudited Quarterly Financial Information

Selected Quarterly Consolidated Financial Data:


|                                             |  |                                       |         |   |         |   |        |         |  |   |         |   |  |   |        |  
|-------------------------------------------- |  | ------------------------------------- | ------- | - | ------- | - | ------ | ------- |  | - | ------- | - |  | - | ------ | -
|                                             |  | First                                 |         |   | Second  |   |        | Third   |  |   | Fourth  |  
|                                             |  | Quarter                               |         |   | Quarter |   |        | Quarter |  |   | Quarter |  
|                                             |  |                                       |         |   |         |   |        |         |  |   |         |  
|                                             |  | (In thousands, except per share data) |        
|Year ended December 31, 2005                 |  |                                       |         |   |         |   |        |         |  |   |         |   |  |   |        |  
|Total revenues                               |  | $                                     | 10,140  |   |         | $ | 11,383 |         |  | $ | 11,690  |   |  | $ | 11,230 |  
|                                             |  |                                       |         |   |         |   |        |         |  |   |         |  
|Loss from operations                         |  | $                                     | (4,196  | ) |         | $ | (3,515 | )       |  | $ | (3,976  | ) |  | $ | (4,870 | )
|                                             |  |                                       |         |   |         |   |        |         |  |   |         |  
|Net loss attributable to common stockholders |  | $                                     | (5,023  | ) |         | $ | (3,095 | )       |  | $ | (3,558  | ) |  | $ | (3,987 | )
|                                             |  |                                       |         |   |         |   |        |         |  |   |         |  
|Net loss per share (basic and diluted)       |  | $                                     | (0.17   | ) |         | $ | (0.08  | )       |  | $ | (0.09   | ) |  | $ | (0.10  | )
|                                             |  |                                       |         |   |         |   |        |         |  |   |         |  
|Year ended December 31, 2004                 |  |                                       |         |   |         |   |        |         |  |   |         |   |  |   |        |  
|Total revenues                               |  | $                                     | 9,019   |   |         | $ | 9,676  |         |  | $ | 9,938   |   |  | $ | 9,641  |  
|                                             |  |                                       |         |   |         |   |        |         |  |   |         |  
|Loss from operations                         |  | $                                     | (7,197  | ) |         | $ | (2,088 | )       |  | $ | (5,919  | ) |  | $ | (4,926 | )
|                                             |  |                                       |         |   |         |   |        |         |  |   |         |  
|Net loss attributable to common stockholders |  | $                                     | (10,761 | ) |         | $ | (5,650 | )       |  | $ | (9,454  | ) |  | $ | (8,303 | )
|                                             |  |                                       |         |   |         |   |        |         |  |   |         |  
|Net loss per share (basic and diluted)       |  | $                                     | (4.03   | ) |         | $ | (2.10  | )       |  | $ | (3.49   | ) |  | $ | (3.00  | )
|                                             |  |                                       |         |   |         |   |        |         |  |   |         |  

F-34