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UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


Form 10-K


|  |  |                                                                                             
|- |  | --------------------------------------------------------------------------------------------
|þ |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934    
| 
|  |  | For the fiscal year ended December 31, 2004                                                 
| 
|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                                                                               |  | 04-3244816                              
|(State or other jurisdiction of
    incorporation or organization)                     |  | (I.R.S. Employer
    Identification No.)
|                                                                                      
|245 First Street, Cambridge,
    Massachusetts(Address of principal executive offices) |  | 02142(Zip Code)                         

(617) 914-3400


(Registrants telephone number, including area code)


Securities registered under Section 12(b) of the
Exchange Act:


None


Securities registered under Section 12(g) of the
Exchange Act:




(Title of Class)


þ o


þ


o þ






DOCUMENTS INCORPORATED BY REFERENCE












---



ViaCell, Inc.


Annual Report on Form 10-K


For the Fiscal Year Ended December 31, 2004







TABLE OF CONTENTS


|                                                             |  |                                                                                                                         |  |         |     | 
|------------------------------------------------------------ |  | ----------------------------------------------------------------------------------------------------------------------- |  | ------- | --- | 
|                                                             |  |                                                                                                                         |  | Page No |    
|                                                             |  |                                                                                                                         |  |         |    
|PART I                                                      
|ITEM 1                                                       |  | DESCRIPTION OF BUSINESS                                                                                                 |  |         | 3   | 
|ITEM 2                                                       |  | DESCRIPTION OF PROPERTY                                                                                                 |  |         | 28  | 
|ITEM 3                                                       |  | LEGAL PROCEEDINGS                                                                                                       |  |         | 29  | 
|ITEM 4                                                       |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY
    HOLDERS                                                                 |  |         | 31  | 
|PART II                                                     
|ITEM 5                                                       |  | MARKET FOR THE REGISTRANTS COMMON
    STOCK, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
    EQUITY SECURITIES |  |         | 31  | 
|ITEM 6                                                       |  | SELECTED CONSOLIDATED FINANCIAL DATA                                                                                    |  |         | 32  | 
|ITEM 7                                                       |  | MANAGEMENTS DISCUSSION AND ANALYSIS
    OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                               |  |         | 34  | 
|                                                             |  | Risk Factors That May Affect Results                                                                                    |  |         | 53  | 
|ITEM 7A                                                      |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES
    ABOUT MARKET RISK                                                          |  |         | 68  | 
|ITEM 8                                                       |  | CONSOLIDATED FINANCIAL STATEMENTS                                                                                       |  |         | 68  | 
|ITEM 9                                                       |  | CHANGES IN AND DISAGREEMENTS WITH
    ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                                |  |         | 68  | 
|ITEM 9A                                                      |  | CONTROLS AND PROCEDURES                                                                                                 |  |         | 68  | 
|ITEM 9B                                                      |  | OTHER INFORMATION                                                                                                       |  |         | 69  | 
|PART III                                                    
|ITEM 10                                                      |  | DIRECTORS AND EXECUTIVE OFFICERS OF THE
    REGISTRANT                                                                  |  |         | 69  | 
|ITEM 11                                                      |  | EXECUTIVE COMPENSATION                                                                                                  |  |         | 73  | 
|ITEM 12                                                      |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
    OWNERS AND MANAGEMENT                                                      |  |         | 73  | 
|ITEM 13                                                      |  | CERTAIN RELATIONSHIPS AND RELATED
    TRANSACTIONS                                                                      |  |         | 73  | 
|ITEM 14                                                      |  | PRINCIPAL ACCOUNTING FEES AND SERVICES                                                                                  |  |         | 73  | 
|PART IV                                                     
|ITEM 15                                                      |  | EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
    REPORTS ON FORM 8-K                                                     |  |         | 73  | 
|                                                             |  | Signatures                                                                                                              |  |         | 77  | 
|                                                             |  | Financial Statements                                                                                                    |  |         | F-1 | 
|Ex-4.4 Warrant issued to former Investors                   
|Ex-10.1.2 Form of Nonstatutory Stock Option Certificate     
|Ex-10.1.3 Form of Incentive Stock Option Certificate        
|Ex-10.28.2 3rd Amendment to Lease Agreement                 
|Ex-10.35 Letter Agreement dated 10/10/04 - Mary Thistle     
|Ex-23.1 Consent of PricewaterhouseCoopers LLP               
|Ex-31.1 Sec 302 Certification of Principal Executive Officer
|Ex-31.2 Sec 302 Certification of Principal Financial Officer
|Ex-32.1 Sec 906 Certification of Principal Executive Officer
|Ex-32.2 Sec 906 Certification of Principal Financial Officer



2



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PART I




Preliminary Note Regarding Forward-Looking Statements


The information set forth in this report in Item 1
Description of Business and in Item 7
Managements Discussion and Analysis of Financial
Condition and Results of Operations includes
forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as
amended (the Exchange Act), and is subject to the
safe harbor created by that section. Such statements may
include, but are not limited to, projections of revenues, income
or loss, capital expenditures, plans for product development and
cooperative arrangements, future operations, financing needs or
plans of the Company, as well as assumptions relating to the
foregoing. The words believe, expect,
will, anticipate, estimate,
target, project, plan, and
similar expressions identify forward-looking statements, which
speak only as of the date the statement was made. Certain
factors that realistically could cause actual results to differ
materially from those projected in the forward-looking
statements are set forth in Item 7 Managements
Discussion and Analysis of Financial Condition and Results of
Operations  Risk Factors That May Affect
Results.







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

Overview










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Opportunities in Cellular Therapy






4



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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.                                       









| |   |                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | increased awareness about the availability and benefits of
    preserving cord blood;                                                                                            
|
| |  | growing endorsement by the medical community;                                                                                                                                    
|
| |  | new applications for cell therapy; and                                                                                                                                           
|
| |  | potential for expanding the number of stem cells in a single
    unit of cord blood, making it possible to treat larger, adult
    patients or multiple patients within a family.



5



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| |                                        
| | ---------------------------------------
| | Current Limitations of Cellular Therapy





| |   |                              
| | - | -----------------------------
| |  | Lack of Compatible Stem Cells





| |   |                                   
| | - | ----------------------------------
| |  | Difficulties Collecting Stem Cells





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| |   |                                  
| | - | ---------------------------------
| |  | Insufficient Number of Stem Cells







| |   |                                                                 
| | - | ----------------------------------------------------------------
| |  | Variability in Quality and Composition of Stem Cell
    Products





| |   |                                   
| | - | ----------------------------------
| |  | Difficulties in Preserving Oocytes

in vitro




| |                                  
| | ---------------------------------
| | Our Solutions in Cellular Therapy





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Increasing the Likelihood of Locating Compatible Stem
Cells.


Obtaining Stem Cells From an Abundant Source.


Increasing the Number of Stem Cells.


Producing Stem Cell Products of a Consistent Quality.




Preserving and Storing Oocytes.


Our Business Strategy




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| |                                                                                                            
| | -----------------------------------------------------------------------------------------------------------
| | Demonstrate the Clinical Benefit of and Obtain Approval
    for our Lead Stem Cell Product Candidate, CB001





| |                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------
| | Leverage our Technology to Commercialize Additional
    Products to Effectively Treat and Potentially Cure Patients with
    Unmet Clinical Needs





| |                                                                                                    
| | ---------------------------------------------------------------------------------------------------
| | Leverage ViaCell Reproductive Health to Provide Financial
    Stability and Create Additional Value





| |                                                                                            
| | -------------------------------------------------------------------------------------------
| | Continue to Develop and Grow Areas of Our Business that
    are Complementary to Each Other





| |                                                   
| | --------------------------------------------------
| | Continue to Build Strategic Business Relationships



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| |                                                                                            
| | -------------------------------------------------------------------------------------------
| | Strategically In-License or Acquire Complementary
    Products, Technologies and Businesses



Our Technology




| |                                                                         
| | ------------------------------------------------------------------------
| | Selective Amplification  Our Method to Expand
    Stem Cell Populations







| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.
    We then mix magnetic particles, which link to the antibodies on
    the surface of the differentiated cells, with the cell
    preparation. 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 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 will be
    harvested, characterized and packaged for use.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

10



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| |                                                                                
| | -------------------------------------------------------------------------------
| | Unrestricted Somatic Stem Cells (USSCs)  Our
    Proprietary Type of Stem Cell



in vitro


in vitro




| |                            
| | ---------------------------
| | Cryopreservation of Oocytes



Our Product and Product Candidates




|                      |  |                                                                                             |                           |  |             |  |                      | 
|--------------------- |  | ------------------------------------------------------------------------------------------- | ------------------------- |  | ----------- |  | -------------------- | 
|Product/Program       |  | Intended Use                                                                                |                           |  | Status      | 
|                      |  |                                                                                             |                           |  |             | 
|Viacord               |  | Pediatric hematopoietic stem cell transplantation for the donor and siblings                |                           |  | Marketed    | 
|Viacyte               |  |                                                                                             | Preservation of fertility |  |             |  | Pre-Commercial Stage | 
|Hematopoietic (CB001) |  | Hematopoietic stem cell transplantation for a variety of cancers and other serious diseases |                           |  | Phase I     | 
|Cardiac Disease       |  | Congestive heart failure; Myocardial infarction                                             |                           |  | Preclinical | 
|Other                 |  |                                                                                             | Diabetes                  |  |             |  | Research             | 

12



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| |                              
| | -----------------------------
| | Hematopoietic Program (CB001)

Background/ Target Market.




Program Status.




13



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| |        
| | -------
| | Viacord





Collection.


Comprehensive Testing.


Processing.


Cryopreservation.


14



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| |   |                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | experience in providing banked umbilical cord blood for stem
    cell transplantation, with sixteen of our customers
    umbilical cord blood units used in transplantations to date;
|
| |  | strong relationships in the cell therapy community, including
    leading transplant centers;                                                                                         
|
| |  | expertise in cord blood collection, testing and
    preservation; and                                                                                                                 
|
| |  | overall financial stability.                                                                                                                                                          







| |                                
| | -------------------------------
| | Oocyte Cryopreservation Program

Background/ Target Market. Human Reproduction,






| |   |                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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.



Program Status.




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| |                        
| | -----------------------
| | Cardiac Disease Program

Background/ Target Market.




Program Status.




| |               
| | --------------
| | Other Programs

Research Stage Programs.


Other Potential Applications.


Sales and Marketing


Viacord.


16



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Oocyte Preservation.


Cell Therapy Products.


Manufacturing and Cell Processing










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Collaborations, Licenses and Strategic Relationships






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







| |                                
| | -------------------------------
| | GlaxoSmithKline and Glaxo Group



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





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





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



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Acquisition of Kourion Therapeutics


in vitro.








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Intellectual Property




|                        |  |                                                                                                                                                                                      |  |                 |           | 
|----------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | --------------- | --------- | 
|Patent Number           |  | Title                                                                                                                                                                                |  | Expiration Date |          
|                        |  |                                                                                                                                                                                      |  |                 |          
|US Patent No. 5,674,750 |  | Continuous Selective Clonogenic Expansion of Relatively
    Undifferentiated Cells                                                                                                 |  |                 | 10/7/2014 | 
|US Patent No. 5,925,567 |  | Selective Expansion of Target Cell Populations                                                                                                                                     |  |                 | 10/7/2014 | 
|US Patent No. 6,338,942 |  | Selective Expansion of Target Cell Populations                                                                                                                                     |  |                 | 10/7/2014 | 
|US Patent No. 6,429,012 |  | Cell Population Containing Non-Fetal Hemangioblasts and
    Method for Producing Same                                                                                              |  |                 | 10/6/2017 | 
|US Patent No. 5,985,538 |  | Cryopreservation and cell culture medium comprising less
    than 50 mM sodium ions and greater than 100 mM choline salt                                                           |  |                 | 8/1/2017  | 
|US Patent No. 6,886,843 |  | Method of Transplanting in a Mammal and Treating Diabetes
    Mellitus by Administering Pseudo-Islet Like Aggregate
    Differentiated from a Nestin-Positive Pancreatic Stem Cell |  |                 | 12/5/2020 | 















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Competition










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Cord Blood Stem Cell Act.




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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 investigational new drug or IND
    application, 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
    (BLA) or new drug application (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.                                  





Premarket Clearance or Approval of Medical Devices.


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| |   |                                                                                                                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | QSRs, which require manufacturers to follow elaborate design,
    testing, control, documentation, and other quality assurance
    procedures during the manufacturing process;                                                                                                                         
|
| |  | labeling regulations;                                                                                                                                                                                                                                                                                   
|
| |  | FDAs general prohibition against promoting products for
    unapproved or off-label uses;                                                                                                                                                                                                            
|
| |  | Medical Device Reporting regulation, which requires
    manufacturers to report to the FDA if their device may have
    caused or contributed to a death or serious injury or
    malfunctioned in a way that would likely cause or contribute to
    a death or serious injury if it were to recur; and
|
| |  | special controls, such as performance standards, post-market
    surveillance, patient registries, and FDA guidelines that apply
    to Class II devices.                                                                                                                                               

Compliance Requirements after BLA Licensure, NDA Approval,
510(k) Clearance, or PMA Approval.




| |   |                                                                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | issuance of warning letters;                                                                                                                                                                              
|
| |  | fines, injunctions, and civil penalties;                                                                                                                                                                  
|
| |  | recall or seizure of products;                                                                                                                                                                            
|
| |  | cessation of clinical studies;                                                                                                                                                                            
|
| |  | operating restrictions, partial suspension or total shutdown of
    production;                                                                                                                           
|
| |  | the FDAs delay in granting BLA licensure, NDA approval,
    510(k) clearance, or PMA approval or refusal to grant BLA
    licensure, NDA approval, 510(k) clearance, or PMA approval of
    new products;
|
| |  | withdrawal of the BLA licensed, NDA approved, 510(k) cleared, or
    PMA approved product from the market; or                                                                                             

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| |   |                                                                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the imposition of civil or criminal penalties against the
    manufacturer, responsible persons within the company and/or
    holder of the BLA license, NDA approval, 510(k) clearance, or
    PMA approval.



Privacy Law.






Other Regulations.


26



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| |                                
| | -------------------------------
| | Regulations Relating To Viacord

FDA Regulations.




Privacy Law.




Other Regulations.




| |                                                
| | -----------------------------------------------
| | Regulations Relating To Oocyte Cryopreservation





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| |   |                                                                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a statement that our media supplier will need to conduct a
    clinical study that produces pregnancy and birth rates data to
    support the application; and
|
| |  | a request that various additional information be submitted,
    including stability, toxicity testing, biocompatibility and
    labeling information.         









Employees









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



28



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





29



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30



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





| |   |                                                                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the amendment of our corporate charter to adjust the minimum
    initial public offering price required under the corporate
    charter to implement the automatic conversion of our preferred
    stock into common stock; 
|
| |  | an increase in the number of shares of common stock available
    for issuance under our Amended and Restated 1998 Equity
    Incentive Plan by 1,200,000 shares to a total of
    7,200,000 shares;                        
|
| |  | the further amendment and restatement of our Amended and
    Restated 1998 Equity Incentive Plan with amended provisions
    which became effective upon the closing of the initial public
    offering of our common stock;
|
| |  | the approval and adoption of our 2004 Employee Stock Purchase
    Plan, which became effective upon the closing of the initial
    public offering of our common stock; and                                                 
|
| |  | the approval of a research agreement entered into with Genzyme
    Corporation.                                                                                                                                             






PART II







|        |                                                                                                                        
|------- | -----------------------------------------------------------------------------------------------------------------------
|ITEM 5. | MARKET FOR THE REGISTRANTS COMMON STOCK, RELATED
    STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
    SECURITIES

Market for Common Equity




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Holders




Dividends




Sales of Unregistered Securities




Use of Proceeds from Registered Securities.















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





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|                                                                                           |                            |                                                 |           |        |         |   |           |       |        |   |           |       |       |      |           |       |       |   |           |     |     | 
|------------------------------------------------------------------------------------------ | -------------------------- | ----------------------------------------------- | --------- | ------ | ------- | - | --------- | ----- | ------ | - | --------- | ----- | ----- | ---- | --------- | ----- | ----- | - | --------- | --- | --- | 
|                                                                                           |                            | Years Ended December 31,                        |          
|                                                                                           |                            |                                                 |          
|                                                                                           |                            | 2004                                            |           |        | 2003(1) |   |           | 2002  |        |   | 2001      |       |       | 2000 |          
|                                                                                           |                            |                                                 |           |        |         |   |           |       |        |   |           |       |       |      |          
|                                                                                           |                            | (In thousands, except share and per share data) |          
|Consolidated Statement of Operations Data:                                                 |                            |                                                 |           |        |         |   |           |       |        |   |           |       |       |      |           |       |       |   |           |    
|Revenues                                                                                   |                            | $                                               | 38,274    |        |         | $ | 31,880    |       |        | $ | 20,375    |       |       | $    | 7,298     |       |       | $ | 2,394     |    
|Operating expenses:                                                                        |                            |                                                 |           |        |         |   |           |       |        |   |           |       |       |      |           |       |       |   |           |    
|Cost of processing and storage revenues:(2)                                                |                            |                                                 |           |        |         |   |           |       |        |   |           |       |       |      |           |       |       |   |           |    
|                                                                                           | Direct costs               |                                                 |           | 7,364  |         |   |           | 7,141 |        |   |           | 5,877 |       |      |           | 3,070 |       |   |           | 991 |    
|                                                                                           | Royalty (recovery) expense |                                                 |           | (3,258 | )       |   |           | 3,258 |        |   |           |      |       |      |           |      |       |   |           |    |    
|                                                                                           |                            |                                                 |           |        |         |   |           |       |        |   |           |       |       |      |          
|                                                                                           |                            | Total cost of revenues                          |           |        | 4,106   |   |           |       | 10,399 |   |           |       | 5,877 |      |           |       | 3,070 |   |           |     | 991 | 
|Research and development                                                                   |                            |                                                 | 15,134    |        |         |   | 13,226    |       |        |   | 11,429    |       |       |      | 6,978     |       |       |   | 3,854     |    
|Sales and marketing                                                                        |                            |                                                 | 19,322    |        |         |   | 20,959    |       |        |   | 16,578    |       |       |      | 9,349     |       |       |   | 2,177     |    
|General and administrative                                                                 |                            |                                                 | 13,468    |        |         |   | 15,222    |       |        |   | 10,920    |       |       |      | 7,086     |       |       |   | 3,879     |    
|In-process technology(3)                                                                   |                            |                                                 |          |        |         |   | 23,925    |       |        |   | 5,889     |       |       |      | 594       |       |       |   |          |    
|Stock-based compensation(4)                                                                |                            |                                                 | 3,429     |        |         |   | 3,232     |       |        |   | 6,464     |       |       |      | 4,490     |       |       |   | 196       |    
|Restructuring                                                                              |                            |                                                 | 2,945     |        |         |   |          |       |        |   |          |       |       |      |          |       |       |   |          |    
|                                                                                           |                            |                                                 |           |        |         |   |           |       |        |   |           |       |       |      |          
|Total operating expenses                                                                   |                            |                                                 | 58,404    |        |         |   | 86,963    |       |        |   | 57,157    |       |       |      | 31,567    |       |       |   | 11,097    |    
|                                                                                           |                            |                                                 |           |        |         |   |           |       |        |   |           |       |       |      |          
|Operating loss                                                                             |                            |                                                 | (20,130   | )      |         |   | (55,083   | )     |        |   | (36,782   | )     |       |      | (24,269   | )     |       |   | (8,703    | )  
|Interest (expense) income, net                                                             |                            |                                                 | (967      | )      |         |   | (385      | )     |        |   | 744       |       |       |      | 2,136     |       |       |   | 991       |    
|Income taxes                                                                               |                            |                                                 |          |        |         |   |          |       |        |   |          |       |       |      |          |       |       |   |          |    
|                                                                                           |                            |                                                 |           |        |         |   |           |       |        |   |           |       |       |      |          
|Net loss                                                                                   |                            | $                                               | (21,097   | )      |         | $ | (55,468   | )     |        | $ | (36,038   | )     |       | $    | (22,133   | )     |       | $ | (7,712    | )  
|                                                                                           |                            |                                                 |           |        |         |   |           |       |        |   |           |       |       |      |          
|Net loss attributable to common stockholders                                               |                            | $                                               | (34,168   | )      |         | $ | (64,884   | )     |        | $ | (44,182   | )     |       | $    | (28,753   | )     |       | $ | (10,262   | )  
|                                                                                           |                            |                                                 |           |        |         |   |           |       |        |   |           |       |       |      |          
|Net loss per common share, basic and diluted                                               |                            | $                                               | (12.62    | )      |         | $ | (24.63    | )     |        | $ | (17.60    | )     |       | $    | (12.22    | )     |       | $ | (5.55     | )  
|Weighted average shares used in computing net loss per common
    share, basic and diluted |                            |                                                 | 2,707,219 |        |         |   | 2,634,096 |       |        |   | 2,510,632 |       |       |      | 2,352,468 |       |       |   | 1,849,073 |    

|                                                         |  |                                                 |          |   |         |   |          |      |  |   |         |   |  |      |         |   |  |   |         |  
|-------------------------------------------------------- |  | ----------------------------------------------- | -------- | - | ------- | - | -------- | ---- |  | - | ------- | - |  | ---- | ------- | - |  | - | ------- | -
|                                                         |  | Years Ended December 31,                        |         
|                                                         |  |                                                 |         
|                                                         |  | 2004                                            |          |   | 2003(1) |   |          | 2002 |  |   | 2001    |   |  | 2000 |        
|                                                         |  |                                                 |          |   |         |   |          |      |  |   |         |   |  |      |        
|                                                         |  | (In thousands, except share and per share data) |         
|Consolidated Balance Sheet Data:                         |  |                                                 |          |   |         |   |          |      |  |   |         |   |  |      |         |   |  |   |         |  
|Cash, cash equivalents, short- and long-term investments |  | $                                               | 28,585   |   |         | $ | 46,832   |      |  | $ | 29,188  |   |  | $    | 53,787  |   |  | $ | 55,287  |  
|Working capital                                          |  |                                                 | 14,437   |   |         |   | 22,857   |      |  |   | 25,407  |   |  |      | 46,062  |   |  |   | 53,144  |  
|Total assets                                             |  |                                                 | 61,091   |   |         |   | 78,161   |      |  |   | 56,119  |   |  |      | 70,981  |   |  |   | 67,775  |  
|Long-term debt obligations, including current portion    |  |                                                 | 18,737   |   |         |   | 19,238   |      |  |   | 5,173   |   |  |      | 1,586   |   |  |   | 656     |  
|Redeemable convertible preferred stock                   |  |                                                 | 175,173  |   |         |   | 162,141  |      |  |   | 110,912 |   |  |      | 101,268 |   |  |   | 79,727  |  
|Total stockholders deficit                              |  |                                                 | (160,957 | ) |         |   | (130,151 | )    |  |   | (70,487 | ) |  |      | (38,749 | ) |  |   | (15,376 | )

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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 banking revenues through
    October 29, 2003, based on a claim of patent infringement.
    As a result we recorded an expense of $3.3 million,
    included in cost of revenues, in the fourth quarter of 2003 to
    cover our exposure for the jury award to PharmaStem plus 6.125%
    of our revenues for the remainder of 2003. We also recorded an
    expense of $0.5 million for the three months ended
    March 31, 2004, also based on 6.125% of our revenues. In
    September 2004, the federal district court overturned the jury
    verdict on one of the two patents in litigation and vacated the
    verdict and granted a new trial on the issues of infringement
    and damages (if any) concerning the second patent. Based on the
    judges ruling, we reversed the entire royalty accrual of
    $3.8 million in the quarter ended June 30, 2004. On
    December 14, 2004, the federal district court reversed its
    post-trial ruling granting a new trial on the issues of
    infringement and damages (if any) of the second patent and
    overturned the jurys verdict of infringement of that
    patent. In his September and December 2004 decisions, the judge
    found that there was no legally sufficient basis for finding
    infringement of either PharmaStem patent.
|   
|(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 options granted to
    nonemployees. Total stock-based compensation for employees and
    nonemployees for the periods reported, and the allocation of
    these expenses to operating expenses, is as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

|                           |                                |                         |       |       |      |   |       |       |  |   |       |       |  |      |       |       |  |   |    |     | 
|-------------------------- | ------------------------------ | ----------------------- | ----- | ----- | ---- | - | ----- | ----- |  | - | ----- | ----- |  | ---- | ----- | ----- |  | - | -- | --- | 
|                           |                                | Year Ended December 31, |      
|                           |                                |                         |      
|                           |                                | 2004                    |       |       | 2003 |   |       | 2002  |  |   | 2001  |       |  | 2000 |      
|                           |                                |                         |       |       |      |   |       |       |  |   |       |       |  |      |      
|                           |                                | (In thousands)          |      
|Cost of revenues           |                                | $                       | 32    |       |      | $ | 7     |       |  | $ | 20    |       |  | $    |      |       |  | $ |   |    
|Research and development   |                                |                         | 896   |       |      |   | 1,073 |       |  |   | 2,489 |       |  |      | 2,249 |       |  |   | 98 |    
|Sales and marketing        |                                |                         | 175   |       |      |   | 414   |       |  |   | 670   |       |  |      | 222   |       |  |   | 30 |    
|General and administrative |                                |                         | 2,082 |       |      |   | 1,738 |       |  |   | 3,285 |       |  |      | 2,019 |       |  |   | 68 |    
|Restructuring              |                                |                         | 244   |       |      |   |      |       |  |   |      |       |  |      |      |       |  |   |   |    
|                           |                                |                         |       |       |      |   |       |       |  |   |       |       |  |      |      
|                           | Total stock-based compensation |                         | $     | 3,429 |      |   | $     | 3,232 |  |   | $     | 6,464 |  |      | $     | 4,490 |  |   | $  | 196 | 
|                           |                                |                         |       |       |      |   |       |       |  |   |       |       |  |      |      






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



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Overview






| |   |                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | developing our Selective Amplification and other stem cell
    therapy technologies;                                                                         
|
| |  | expanding our ViaCell Reproductive Health franchise in the
    United States;                                                                                
|
| |  | expanding our pipeline of novel stem cell and other product
    candidates through internal development, and the acquisition of
    third party technologies;
|
| |  | expanding and strengthening our intellectual property position
    through internal programs, third party licenses, and
    acquisitions;                    
|
| |  | recruiting management, research, clinical, and sales and
    marketing personnel; and                                                                        
|
| |  | forming alliances with larger, more experienced biotechnology
    and pharmaceutical companies, including Amgen.                                             





| |   |                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------
| |  | the increasing costs of conducting clinical trials for our lead
    hematopoietic stem cell product candidate, CB001;                      
|
| |  | the working capital costs associated with anticipated growth of
    our ViaCell Reproductive Health franchise within the United
    States;
|
| |  | the increasing costs associated with preclinical and clinical
    studies for our other stem cell therapy product
    candidates; and      
|
| |  | the increasing costs associated with the development of Viacyte,
    our oocyte cryopreservation product candidate.                        







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



35



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







36



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37



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| |                    
| | -------------------
| | Kourion Acquisition





| |   |                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $3 million if by December 31, 2006 we receive final
    Phase II outcome data positive for a cardiac indication;                                                                
|
| |  | $3 million if by June 30, 2007 we receive final
    Phase II outcome data positive for a non-cardiac indication;                                                                
|
| |  | $3 million if by December 31, 2011 we receive all
    regulatory approvals to market a USSC product for cardiac
    indications in the United States and the European Union; and
|
| |  | $3 million if by December 31, 2012 we receive all
    regulatory approvals to market a USSC product for non-cardiac
    indications in the United States and the European Union.



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Results of Operations




| |                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------
| | Years Ended December 31, 2004, 2003 and 2002 (table
    amounts in millions, year over year changes based on rounded
    amounts in millions)

|                            |       |      |      |      |      |   |      |          |  |   |              |      |  |              |     |     |              |  |    |              |   |   |      |      |  |  |     |    |  
|--------------------------- | ----- | ---- | ---- | ---- | ---- | - | ---- | -------- |  | - | ------------ | ---- |  | ------------ | --- | --- | ------------ |  | -- | ------------ | - | - | ---- | ---- |  |  | --- | -- | -
|                            |       |      |      |      |      |   |      | $ Change |  |   | % Change     |      |  | $ Change     |     |     | % Change     | 
|                            |       | 2004 |      |      | 2003 |   |      | 2002     |  |   | 2003 to 2004 |      |  | 2003 to 2004 |     |     | 2002 to 2003 |  |    | 2002 to 2003 |  
|                            |       |      |      |      |      |   |      |          |  |   |              |      |  |              |     |     |              |  |    |              |  
|Processing revenues         |       | $    | 31.7 |      |      | $ | 27.8 |          |  | $ | 18.5         |      |  | $            | 3.9 |     |              |  | 14 | %            |   | $ | 9.3  |      |  |  | 50  | % 
|Storage revenues            |       |      | 5.1  |      |      |   | 3.1  |          |  |   | 1.6          |      |  |              | 2.0 |     |              |  | 65 | %            |   |   | 1.5  |      |  |  | 94  | % 
|                            |       |      |      |      |      |   |      |          |  |   |              |      |  |              |     |     |              |  |    |              |  
|                            | Total |      |      | 36.8 |      |   |      | 30.9     |  |   |              | 20.1 |  |              |     | 5.9 |              |  |    | 19           | % |   |      | 10.8 |  |  |     | 54 | %
|Grant and contract revenues |       |      | 1.5  |      |      |   | 1.0  |          |  |   | 0.3          |      |  |              | 0.5 |     |              |  | 50 | %            |   |   | 0.7  |      |  |  | 233 | % 
|                            |       |      |      |      |      |   |      |          |  |   |              |      |  |              |     |     |              |  |    |              |  
|Total revenues              |       | $    | 38.3 |      |      | $ | 31.9 |          |  | $ | 20.4         |      |  | $            | 6.4 |     |              |  | 20 | %            |   | $ | 11.5 |      |  |  | 56  | % 



|                  |                 |                        |   |      |      |  |   |          |      |  |              |     |     |              |   |      |              |   |  |              |     |    |   |     |     |  |  |     |    |  
|----------------- | --------------- | ---------------------- | - | ---- | ---- |  | - | -------- | ---- |  | ------------ | --- | --- | ------------ | - | ---- | ------------ | - |  | ------------ | --- | -- | - | --- | --- |  |  | --- | -- | -
|                  |                 |                        |   |      |      |  |   | $ Change |      |  | % Change     |     |     | $ Change     |   |      | % Change     |  
|                  |                 | 2004                   |   |      | 2003 |  |   | 2002     |      |  | 2003 to 2004 |     |     | 2003 to 2004 |   |      | 2002 to 2003 |   |  | 2002 to 2003 |    
|                  |                 |                        |   |      |      |  |   |          |      |  |              |     |     |              |   |      |              |   |  |              |    
|Cost of revenues: |                 |                        |   |      |      |  |   |          |      |  |              |     |     |              |   |      |              |   |  |              |     |    |   |     |     |  |  |    
|                  | Direct costs    |                        | $ | 7.4  |      |  | $ | 7.1      |      |  | $            | 5.9 |     |              | $ | 0.3  |              |   |  | 4            | %   |    | $ | 1.2 |     |  |  | 20  | % 
|                  | Royalty expense |                        |   | (3.3 | )    |  |   | 3.3      |      |  |              |    |     |              |   | (6.6 | )            |   |  | (200         | )%  |    |   | 3.3 |     |  |  | 100 | % 
|                  |                 |                        |   |      |      |  |   |          |      |  |              |     |     |              |   |      |              |   |  |              |    
|                  |                 | Total cost of revenues |   | $    | 4.1  |  |   | $        | 10.4 |  |              | $   | 5.9 |              |   | $    | (6.3         | ) |  |              | (61 | )% |   | $   | 4.5 |  |  |     | 76 | %







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|                               |  |      |      |  |      |   |      |          |  |   |              |  |  |              |      |   |              |  |    |              |  |   |     |  |  |  |    |  
|------------------------------ |  | ---- | ---- |  | ---- | - | ---- | -------- |  | - | ------------ |  |  | ------------ | ---- | - | ------------ |  | -- | ------------ |  | - | --- |  |  |  | -- | -
|                               |  |      |      |  |      |   |      | $ Change |  |   | % Change     |  |  | $ Change     |      |   | % Change     | 
|                               |  | 2004 |      |  | 2003 |   |      | 2002     |  |   | 2003 to 2004 |  |  | 2003 to 2004 |      |   | 2002 to 2003 |  |    | 2002 to 2003 | 
|                               |  |      |      |  |      |   |      |          |  |   |              |  |  |              |      |   |              |  |    |              | 
|Clinical development           |  | $    | 7.9  |  |      | $ | 7.3  |          |  | $ | 6.8          |  |  | $            | 0.6  |   |              |  | 8  | %            |  | $ | 0.5 |  |  |  | 7  | %
|Pre-clinical programs          |  |      | 3.5  |  |      |   | 2.1  |          |  |   | 1.5          |  |  |              | 1.4  |   |              |  | 67 | %            |  |   | 0.6 |  |  |  | 40 | %
|Basic research                 |  |      | 3.0  |  |      |   | 3.1  |          |  |   | 2.5          |  |  |              | (0.1 | ) |              |  | (3 | )%           |  |   | 0.6 |  |  |  | 24 | %
|Other R&D                      |  |      | 0.7  |  |      |   | 0.7  |          |  |   | 0.6          |  |  |              |     |   |              |  |   |              |  |   | 0.1 |  |  |  | 17 | %
|                               |  |      |      |  |      |   |      |          |  |   |              |  |  |              |      |   |              |  |    |              | 
|Total research and development |  | $    | 15.1 |  |      | $ | 13.2 |          |  | $ | 11.4         |  |  | $            | 1.9  |   |              |  | 14 | %            |  | $ | 1.8 |  |  |  | 16 | %



|                  |  |      |      |  |      |   |      |          |  |   |              |  |  |              |      |   |              |  |    |              |  |   |     |  |  |  |    |  
|----------------- |  | ---- | ---- |  | ---- | - | ---- | -------- |  | - | ------------ |  |  | ------------ | ---- | - | ------------ |  | -- | ------------ |  | - | --- |  |  |  | -- | -
|                  |  |      |      |  |      |   |      | $ Change |  |   | % Change     |  |  | $ Change     |      |   | % Change     | 
|                  |  | 2004 |      |  | 2003 |   |      | 2002     |  |   | 2003 to 2004 |  |  | 2003 to 2004 |      |   | 2002 to 2003 |  |    | 2002 to 2003 | 
|                  |  |      |      |  |      |   |      |          |  |   |              |  |  |              |      |   |              |  |    |              | 
|Sales & marketing |  | $    | 19.3 |  |      | $ | 21.0 |          |  | $ | 16.6         |  |  | $            | (1.7 | ) |              |  | (8 | )%           |  | $ | 4.4 |  |  |  | 27 | %



|                         |  |      |      |  |      |   |      |          |  |   |              |  |  |              |      |   |              |  |     |              |  |   |     |  |  |  |    |  
|------------------------ |  | ---- | ---- |  | ---- | - | ---- | -------- |  | - | ------------ |  |  | ------------ | ---- | - | ------------ |  | --- | ------------ |  | - | --- |  |  |  | -- | -
|                         |  |      |      |  |      |   |      | $ Change |  |   | % Change     |  |  | $ Change     |      |   | % Change     | 
|                         |  | 2004 |      |  | 2003 |   |      | 2002     |  |   | 2003 to 2004 |  |  | 2003 to 2004 |      |   | 2002 to 2003 |  |     | 2002 to 2003 | 
|                         |  |      |      |  |      |   |      |          |  |   |              |  |  |              |      |   |              |  |     |              | 
|General & administrative |  | $    | 13.5 |  |      | $ | 15.2 |          |  | $ | 10.9         |  |  | $            | (1.7 | ) |              |  | (11 | )%           |  | $ | 4.3 |  |  |  | 39 | %



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|                      |  |      |   |  |      |   |      |          |  |   |              |  |  |              |       |   |              |  |      |              |  |   |      |  |  |  |     |  
|--------------------- |  | ---- | - |  | ---- | - | ---- | -------- |  | - | ------------ |  |  | ------------ | ----- | - | ------------ |  | ---- | ------------ |  | - | ---- |  |  |  | --- | -
|                      |  |      |   |  |      |   |      | $ Change |  |   | % Change     |  |  | $ Change     |       |   | % Change     | 
|                      |  | 2004 |   |  | 2003 |   |      | 2002     |  |   | 2003 to 2004 |  |  | 2003 to 2004 |       |   | 2002 to 2003 |  |      | 2002 to 2003 | 
|                      |  |      |   |  |      |   |      |          |  |   |              |  |  |              |       |   |              |  |      |              | 
|In-process technology |  |      |  |  |      | $ | 23.9 |          |  | $ | 5.9          |  |  | $            | (23.9 | ) |              |  | (100 | )%           |  | $ | 18.0 |  |  |  | 305 | %



|                         |  |      |     |  |      |   |     |          |  |   |              |  |  |              |     |  |              |  |   |              |  |   |      |   |  |  |     |   
|------------------------ |  | ---- | --- |  | ---- | - | --- | -------- |  | - | ------------ |  |  | ------------ | --- |  | ------------ |  | - | ------------ |  | - | ---- | - |  |  | --- | --
|                         |  |      |     |  |      |   |     | $ Change |  |   | % Change     |  |  | $ Change     |     |  | % Change     | 
|                         |  | 2004 |     |  | 2003 |   |     | 2002     |  |   | 2003 to 2004 |  |  | 2003 to 2004 |     |  | 2002 to 2003 |  |   | 2002 to 2003 | 
|                         |  |      |     |  |      |   |     |          |  |   |              |  |  |              |     |  |              |  |   |              | 
|Stock-based compensation |  | $    | 3.4 |  |      | $ | 3.2 |          |  | $ | 6.5          |  |  | $            | 0.2 |  |              |  | 6 | %            |  | $ | (3.3 | ) |  |  | (51 | )%



|              |  |      |     |  |      |  |   |          |  |  |              |  |  |              |     |  |              |  |     |              |  |  |   |  |  |  |   | 
|------------- |  | ---- | --- |  | ---- |  | - | -------- |  |  | ------------ |  |  | ------------ | --- |  | ------------ |  | --- | ------------ |  |  | - |  |  |  | - | 
|              |  |      |     |  |      |  |   | $ Change |  |  | % Change     |  |  | $ Change     |     |  | % Change     | 
|              |  | 2004 |     |  | 2003 |  |   | 2002     |  |  | 2003 to 2004 |  |  | 2003 to 2004 |     |  | 2002 to 2003 |  |     | 2002 to 2003 | 
|              |  |      |     |  |      |  |   |          |  |  |              |  |  |              |     |  |              |  |     |              | 
|Restructuring |  | $    | 2.9 |  |      |  |  |          |  |  |             |  |  | $            | 2.9 |  |              |  | 100 | %            |  |  |  |  |  |  |  | 



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|                                     |  |      |      |   |      |   |      |          |  |   |              |   |  |              |      |   |              |  |      |              |  |   |      |   |  |  |      |   
|------------------------------------ |  | ---- | ---- | - | ---- | - | ---- | -------- |  | - | ------------ | - |  | ------------ | ---- | - | ------------ |  | ---- | ------------ |  | - | ---- | - |  |  | ---- | --
|                                     |  |      |      |   |      |   |      | $ Change |  |   | % Change     |   |  | $ Change     |      |   | % Change     | 
|                                     |  | 2004 |      |   | 2003 |   |      | 2002     |  |   | 2003 to 2004 |   |  | 2003 to 2004 |      |   | 2002 to 2003 |  |      | 2002 to 2003 | 
|                                     |  |      |      |   |      |   |      |          |  |   |              |   |  |              |      |   |              |  |      |              | 
|Interest income                      |  | $    | 0.5  |   |      | $ | 0.3  |          |  | $ | 0.9          |   |  | $            | 0.2  |   |              |  | 67   | %            |  | $ | (0.6 | ) |  |  | (67  | )%
|Interest expense                     |  |      | (1.5 | ) |      |   | (0.7 | )        |  |   | (0.2         | ) |  |              | (0.8 | ) |              |  | (114 | )%           |  |   | (0.5 | ) |  |  | (250 | )%
|                                     |  |      |      |   |      |   |      |          |  |   |              |   |  |              |      |   |              |  |      |              | 
|Total interest income (expense), net |  | $    | (1.0 | ) |      | $ | (0.4 | )        |  | $ | 0.7          |   |  | $            | (0.6 | ) |              |  | (150 | )%           |  | $ | (1.1 | ) |  |  | (157 | )%



Liquidity and Capital Resources




|                                                    |  |                          |       |   |          |   |       |          |  |   |              |   |  |              |       |   |  |   |       |  
|--------------------------------------------------- |  | ------------------------ | ----- | - | -------- | - | ----- | -------- |  | - | ------------ | - |  | ------------ | ----- | - |  | - | ----- | -
|                                                    |  | Years Ended December 31, |       |   |          |   |      
|                                                    |  |                          |       |   | $ Change |   |       | $ Change | 
|                                                    |  | 2004                     |       |   | 2003     |   |       | 2002     |  |   | 2003 to 2004 |   |  | 2002 to 2003 |      
|                                                    |  |                          |       |   |          |   |       |          |  |   |              |   |  |              |      
|Net cash used in operating activities               |  | $                        | (15.1 | ) |          | $ | (22.5 | )        |  | $ | (21.1        | ) |  | $            | 7.4   |   |  | $ | (1.4  | )
|Net cash provided by (used in) investing activities |  |                          | (15.9 | ) |          |   | 6.3   |          |  |   | 18.5         |   |  |              | (22.2 | ) |  |   | (12.2 | )
|Net cash provided by (used in) financing activities |  |                          | (1.0  | ) |          |   | 39.6  |          |  |   | 1.4          |   |  |              | (40.6 | ) |  |   | 38.2  |  
|                                                    |  |                          |       |   |          |   |       |          |  |   |              |   |  |              |      
|Cash & cash equivalents, end of period              |  | $                        | 6.7   |   |          | $ | 39.0  |          |  | $ | 15.2         |   |  | $            | (32.3 | ) |  | $ | 23.8  |  





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43



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Commitments and Contingencies




|                              |  |       |      |                        |          |   |              |       |  |              |       |  |            |       |     |  |  |   |     | 
|----------------------------- |  | ----- | ---- | ---------------------- | -------- | - | ------------ | ----- |  | ------------ | ----- |  | ---------- | ----- | --- |  |  | - | --- | 
|                              |  |       |      | Payments due by Period |         
|                              |  |       |      |                        |         
|                              |  |       |      | Less than              |          |   | One to Three |       |  | Four to Five |       |  | After Five |      
|Contractual Obligations       |  | Total |      |                        | One Year |   |              | Years |  |              | Years |  |            | Years |    
|                              |  |       |      |                        |          |   |              |       |  |              |       |  |            |       |    
|Operating lease obligations   |  | $     | 17.3 |                        |          | $ | 2.0          |       |  | $            | 5.6   |  |            | $     | 3.4 |  |  | $ | 6.3 | 
|Capital lease obligations     |  |       | 0.2  |                        |          |   | 0.1          |       |  |              | 0.1   |  |            |       |    |  |  |   |    | 
|Short and long-term debt(1)   |  |       | 3.4  |                        |          |   | 1.8          |       |  |              | 1.6   |  |            |       |    |  |  |   |    | 
|Notes payable(1)(2)           |  |       | 15.4 |                        |          |   | 15.4         |       |  |              |      |  |            |       |    |  |  |   |    | 
|Consulting agreements         |  |       | 1.5  |                        |          |   | 0.8          |       |  |              | 0.5   |  |            |       | 0.1 |  |  |   | 0.1 | 
|License agreements(3)         |  |       | 2.9  |                        |          |   | 0.3          |       |  |              | 0.9   |  |            |       | 0.6 |  |  |   | 1.1 | 
|                              |  |       |      |                        |          |   |              |       |  |              |       |  |            |       |    
|Total contractual obligations |  | $     | 40.7 |                        |          | $ | 20.4         |       |  | $            | 8.7   |  |            | $     | 4.1 |  |  | $ | 7.5 | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes interest and principal obligations.                                                                                                                                                                                                                                                                                                                                                                           
|   
|(2) | These notes relate to our acquisition of Kourion Therapeutics in
    September 2003 and are payable in full at the earliest to occur
    of an initial public offering of our common stock (IPO), the
    sale of the Company, or September 2007. Because our IPO closed
    in January 2005 this note was paid in full at that time.                                                                                  
|   
|(3) | 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 $2.9 million
    payable under license agreements, $2.0 million relates to
    these cancelable agreements.



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




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





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











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

Promissory Note.


Milestones.


45



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





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

Amgen Collaboration Agreement.




46



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Net Operating Loss Carryforwards




Legal Proceedings










47



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48



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Critical Accounting Estimates






| |   |                                                                                 
| | - | --------------------------------------------------------------------------------
| |  | revenue recognition;                                                            
|
| |  | accounting for royalty expense in connection with the PharmaStem
    litigation;
|
| |  | accounting for research and development expenses;                               
|
| |  | accounting for the valuation of equity instruments;                             
|
| |  | purchase accounting and in-process technology;                                  
|
| |  | accounting for our product guarantee program; and                               
|
| |  | accounting for our physician indemnification program.                           

Revenue Recognition.






Revenue
Arrangements with Multiple Deliverables.


Accounting for royalty expense in connection with the
PharmaStem litigation.


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Accounting for research and development expenses.


Accounting for the valuation of equity instruments.


Purchase accounting and in-process technology.


50



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Accounting for our product guarantee program. Accounting for Contingencies.


Accounting for our physician indemnification program. Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others


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Recent Accounting Pronouncements


Accounting
for Certain Instruments with Characteristics of both Liabilities
and Equity








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Risk Factors That May Affect Results




| |                                                                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our cellular therapy product candidates are at an early
    stage of development, and if we are not able to successfully
    develop and commercialize them, 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 that are better or equal to existing therapies.     







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



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





| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We and several other defendants, representing a majority
    of the industry, are defendants in lawsuits alleging
    infringement of patents relating to our Viacord umbilical cord
    stem cell cryopreservation business. If we are not able to
    resolve the suits favorably, we could be permanently enjoined
    from further engaging in this business, which would result in
    the loss of the current source of almost all of our revenues, or
    we may be required to pay a royalty.





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







| |   |                                                                                                                                                                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the level of cash flows from our umbilical cord blood
    preservation activities;                                                                                                                                                                            
|
| |  | the scope and results of our research and development programs;                                                                                                                                                                                               
|
| |  | the scope and results of our clinical trials, particularly those
    involving CB001, which is currently in a Phase I trial;                                                                                                                                  
|
| |  | the timing of and the costs involved in obtaining regulatory
    approvals, 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 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;                                                 

55



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| |   |                                                                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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 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.                                                         





| |                                                                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If the potential of stem cell therapy to treat serious
    diseases is not realized, the value of our Selective
    Amplification technology and our development programs could be
    significantly reduced.





| |                                                                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We cannot market and sell CB001 or our other product
    candidates in the United States or in other countries if we fail
    to obtain the necessary regulatory approvals or
    licensure.





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| |                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------
| | 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.




| |   |                                                                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a statement that our media supplier will need to conduct a
    clinical study that produces pregnancy and birth rates data to
    support the application; and
|
| |  | a request that various additional information be submitted,
    including stability, toxicity testing, biocompatibility and
    labeling information.         







| |   |                                                                                                                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | cryopreservation of oocytes requires biologic marketing
    approval, entailing an Investigational New Drug
    (IND) application to conduct clinical trials and extensive
    clinical and nonclinical data and a biologics license
    application (BLA) for market approval; and/or
|
| |  | components used to cryopreserve the oocytes require PMAs.                                                                                                                                                                                                                             





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



58



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| |                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------
| | CB001 and our other cellular product candidates represent
    new forms of therapy or products that the marketplace may not
    accept.





| |   |                                                                                                  
| | - | -------------------------------------------------------------------------------------------------
| |  | the number and relative efficacy of products that compete with
    our product;                  
|
| |  | our ability to supply a sufficient amount of our product to meet
    demand;                     
|
| |  | our ability to build and maintain, or access through third
    parties, a capable sales force;   
|
| |  | our ability to successfully fund launch costs; and                                               
|
| |  | our ability to obtain insurance coverage and reimbursement for
    our cellular therapy products.



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



59



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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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| |                                                                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We may be involved in lawsuits to protect or enforce our
    patents or the patents of our collaborators or licensors, which
    could be expensive and time consuming.









| |                                                                                                                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In order to commercialize CB001 or other product
    candidates using our Selective Amplification technology, we may
    need to obtain additional license rights to third party patents,
    which may not be available to us on reasonable terms, or at
    all.





| |                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The successful commercialization of CB001, or any of our
    other potential cell therapy products, will depend on obtaining
    reimbursement for use of this product from third party
    payers.



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| |                                                                                                                                                                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We have only limited experience manufacturing cell therapy
    product candidates in connection with our preclinical and
    clinical work to date, and we may not be able to manufacture our
    product candidates in quantities sufficient for later stage
    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.



62



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| |                                                                                                                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Material for clinical studies and future cellular products
    must be manufactured using components made to a certain
    standard, and we may have difficulty finding sources of these
    components made to this standard.





| |                                                                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.







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| |                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we are not able to recruit and retain qualified
    management and scientific 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 and are
    unable to integrate them successfully with our business, our
    financial performance could suffer.





| |                                                                                                                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.





65



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in vitro






| |                                                                                                                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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 stem cell products may expose
    us to product liability claims for which we could have
    substantial liability.





| |                                                                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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, thereby reducing demand for our
    products.





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



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

Quantitative and Qualitative Disclosure About Market Risks




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





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





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








|        |                                  
|------- | ---------------------------------
|ITEM 8. | CONSOLIDATED FINANCIAL STATEMENTS








|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|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







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MANAGEMENT


Executive Officers and Key Employees




|                         |  |     |    |  |           |                                                                                    
|------------------------ |  | --- | -- |  | --------- | -----------------------------------------------------------------------------------
|Name                     |  | Age |    |  | Positions
|                         |  |     |    |  |          
|Executive Officers:      |  |     |    |  |           |                                                                                    
|Marc D. Beer             |  |     | 40 |  |           | President, Chief Executive Officer and Director                                    
|Stephen G. Dance         |  |     | 54 |  |           | Senior Vice President, Finance and Chief Financial Officer                         
|Christoph M. Adams, Ph.D |  |     | 48 |  |           | Senior Vice President, Business Development                                        
|Kurt C. Gunter, M.D      |  |     | 50 |  |           | Senior Vice President, Clinical and Regulatory Affairs and
    Government Relations
|Mary T. Thistle          |  |     | 45 |  |           | Senior Vice President, General Manager, ViaCell Reproductive
    Health            
|Stephan Wnendt, Ph.D     |  |     | 42 |  |           | Senior Vice President, Research and Development                                    
|Key Employees:           |  |     |    |  |           |                                                                                    
|Morey Kraus              |  |     | 46 |  |           | Vice President and Chief Technical Officer                                         
|Mary Larson-Marlowe      |  |     | 39 |  |           | Vice President, Therapeutic Development Operations                                 



| |                   
| | ------------------
| | Executive Officers

Marc D. Beer.


Stephen G. Dance.


Christoph M. Adams, Ph.D.


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Kurt C. Gunter, M.D.


Stephan Wnendt, Ph.D.


Mary T. Thistle.




| |              
| | -------------
| | Key Employees

Morey Kraus.


Mary Larson-Marlowe.


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Medical and Scientific Advisory Board




C. Glenn Begley, M.D., Ph.D.


Barbara E. Bierer, M.D.


George Daley, M.D., Ph.D.


Peter Wernet, Ph.D.


Leonard I. Zon, M.D.


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Viacord Executive Medical Director


Robert Dracker, M.D., M.H.A.







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








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








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








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



PART IV







|         |                                                                    
|-------- | -------------------------------------------------------------------
|ITEM 15. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
    FORM 8-K







| |  |                                                                                                       
| |  | ------------------------------------------------------------------------------------------------------
| |  | 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 Income             |  |                | F-5 | 
|Consolidated Statements of Changes in Stockholders Deficit |  |                | F-6 | 
|Consolidated Statements of Cash Flows                       |  |                | F-7 | 
|Notes to Consolidated Financial Statements                  |  |                | F-8 | 

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| |                                                                                                                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.

Current Reports on Form 8-K




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                      |  | 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. Filed herewith.
|           
|            | 10 | .1(6)                   |  | Amended and Restated 1998 Equity Incentive Plan.**                                                                                                                                                                           
|           
|            | 10 | .1.2                    |  | Form of Nonstatutory Stock Option Certificate. Filed herewith**                                                                                                                                                              
|           
|            | 10 | .1.3                    |  | Form of Incentive Stock Option Certificate. Filed herewith**                                                                                                                                                                 
|           
|            | 10 | .2(6)                   |  | 2004 Employee Stock Purchase Plan.**                                                                                                                                                                                         
|           
|            | 10 | .3(1)                   |  | Early Separation Agreement and Mutual General Release dated
    January 2, 2004 between ViaCell and Jeffrey Sacher.**                                                                                                        
|           
|            | 10 | .4(1)                   |  | Early Separation Agreement and Mutual General Release dated
    February 18, 2004 between ViaCell and Grant Bogle.**                                                                                                         
|           
|            | 10 | .5(7)                   |  | Letter Agreement dated June 7, 2001 between ViaCell and
    Chris Adams.**                                                                                                                                                   
|           
|            | 10 | .6.(7)                  |  | Letter Agreement dated May 2, 2000 between ViaCell and Marc
    Beer.**                                                                                                                                                      
|           
|            | 10 | .7(7)                   |  | Letter Agreement dated May 14, 2001 between ViaCell and
    Kurt Gunter.**                                                                                                                                                   
|           
|            | 10 | .8(7)                   |  | Letter Agreement dated April 11, 2000 between ViaCell and
    Morey Kraus.**                                                                                                                                                 
|           
|            | 10 | .9(1)                   |  | Letter Agreement dated September 12, 2003 between ViaCell
    and Jan van Heek.**                                                                                                                                            
|           
|            | 10 | .10(1)                  |  | Letter Agreement dated November 4, 2003 between ViaCell and
    Vaughn M. Kailian.**                                                                                                                                         
|           
|            | 10 | .11(7)                  |  | Letter Agreement dated December 15, 2002 between ViaCell
    and Paul Hastings.**                                                                                                                                            
|           
|            | 10 | .12(1)                  |  | Letter Agreement dated August 13, 2003 between ViaCell and
    George Daley.**                                                                                                                                               
|           
|            | 10 | .13(1)                  |  | Stock Purchase Agreement dated September 30, 2003 by and
    among ViaCell, Kourion Therapeutics AG and the shareholders of
    Kourion Therapeutics signatory thereto.                                                      
|           
|            | 10 | .14(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. Filed
    previously.                     
|           
|            | 10 | .15.1(1)                |  | Form of Promissory Note issued by ViaCell to General Electric
    Capital Corporation.                                                                                                                                       
|           
|            | 10 | .15.2(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 | .15.3(1)                |  | Form of Security Deposit Pledge Agreement by and between ViaCell
    and General Electric Capital Corporation. Filed previously.                                                                                             
|           
|            | 10 | .16(1)                 |  | Non-Exclusive License Agreement dated January 1, 2003
    between ViaCell and SmithKline Beecham Corporation d/b/a
    GlaxoSmithKline and Glaxo Group Limited.                                                              
|           
|            | 10 | .17(1)                 |  | Co-Development and License Agreement dated July 15, 2003
    between ViaCell and Gamete Technology, Inc.                                                                                                                     

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|            |    |          |                         |                                                                                                                                                                                           
|----------- | -- | -------- | ----------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |    |          | Description of Document
|            |    |          |                        
|           
|            | 10 | .17.1(4) |                         | Letter Agreement dated October 18, 2004 between Gamete
    Technology, Inc. and ViaCell.                                                                                                  
|           
|            | 10 | .18(1)  |                         | Collaboration Agreement dated December 23, 2003 between
    ViaCell and Amgen Inc.                                                                                                        
|           
|            | 10 | .19(1)  |                         | License Agreement dated January 18, 2001 between
    Cerebrotec, Inc., now ViaCell Neuroscience, Inc., and the
    General Hospital Corporation, d/b/a Massachusetts General
    Hospital.
|           
|            | 10 | .20(1)  |                         | License Agreement dated March 15, 2002 between ViaCell
    Endocrine Science, Inc. and the General Hospital Corporation,
    d/b/a Massachusetts General Hospital.                        
|           
|            | 10 | .21(1)  |                         | License Agreement dated August 1, 2002 between ViaCell and
    Massachusetts Institute of Technology.                                                                                     
|           
|            | 10 | .23(7)   |                         | Sublease Agreement dated November 1, 2001 between ViaCell
    and ARIAD Corporation.                                                                                                      
|           
|            | 10 | .24(7)   |                         | Lease Agreement dated April 20, 1999 between Viacord, Inc.
    and Molded Antennas for Telecommunications, Inc.                                                                           
|           
|            | 10 | .25(1)   |                         | Lease Agreement dated April 12, 2002 between ViaCell and
    Dugan Financing LLC.                                                                                                         
|           
|            | 10 | .26(1)   |                         | Sublease Agreement dated April 11, 2002 between ViaCell and
    Advanced Cell Technology, Inc.                                                                                            
|           
|            | 10 | .26.1(3) |                         | The First Amendment to Sublease Agreement, dated
    February 14, 2003, between ViaCell and ARIAD Corporation.                                                                            
|           
|            | 10 | .26.2(3) |                         | The Second Amendment to Sublease Agreement, dated
    December 18, 2003, between ViaCell and ARIAD Corporation.
    Filed previously.                                                     
|           
|            | 10 | .27(1)   |                         | Lease Agreement dated March 25, 2002 between ViaCell and
    Singapore Science Park Limited.                                                                                              
|           
|            | 10 | .28(7)   |                         | Lease Agreement dated February 24, 2000, as amended
    May 31, 2001, between ViaCell and ARE-One Innovation Drive,
    LLC.                                                              
|           
|            | 10 | .28.1(3) |                         | The Second Amendment to Lease Agreement, dated April 4,
    2002, between ViaCell and ARE-One Innovation Drive, LLC.                                                                      
|           
|            | 10 | .28.2    |                         | The Third Amendment to Lease Agreement, dated December 17,
    2004, between ViaCell and ARE-One Innovation Drive, LLC. Filed
    herewith.                                               
|           
|            | 10 | .29(1)   |                         | Lease Agreement dated December 22, 2003 between ViaCell and
    MA-Riverview/245 First Street, LLC.                                                                                       
|           
|            | 10 | .30(1)   |                         | Summary of Lease Agreement dated October 1, 2002 between
    Kourion Therapeutics AG and W.H.L. Grundstücksgemeinschaft
    GbR                                                           
|           
|            | 10 | .31(1)   |                         | Letter Agreement dated March 11, 2004 between ViaCell and
    Stephen Dance.**                                                                                                            
|           
|            | 10 | .32(3)  |                         | License Agreement dated September 1, 2004 between Tyho
    Galileo Research Laboratory, LLC and ViaCell, Inc.                                                                             
|           
|            | 10 | .33(5)  |                         | Research Agreement dated December 13, 2004 between Genzyme
    Corporation and ViaCell.                                                                                                   
|           
|            | 10 | .34(6)   |                         | Letter Agreement dated December 29, 2004 from ViaCell to
    Stephan Wnendt.**                                                                                                            
|           
|            | 10 | .35      |                         | Letter Agreement dated October 10, 2004 from ViaCell to
    Mary Thistle. ** Filed herewith                                                                                               
|           
|            | 21 | .1(1)    |                         | Subsidiaries of ViaCell.                                                                                                                                                                  
|           
|            | 23 | .1       |                         | Consent of PricewaterhouseCoopers LLP. Filed herewith                                                                                                                                     
|           
|            | 31 | .1       |                         | Rule 13a-14(a)/15d-14(a) Certification of Principal
    Executive Officer. Filed herewith                                                                                                 
|           
|            | 31 | .2       |                         | Rule 13a-14(a)/15d-14(a) Certification of Principal
    Financial Officer. Filed herewith                                                                                                 
|           
|            | 32 | .1       |                         | Section 1350 Certification of Chief Executive Officer.
    Filed herewith                                                                                                                 
|           
|            | 32 | .2       |                         | Section 1350 Certification of Chief Financial Officer.
    Filed herewith                                                                                                                 






|    |                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 05, 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.                          

75



---



##### Table of Contents





|    |                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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. 33-114209) filed with the SEC on January 3, 2005.                         
|   
|(7) | Incorporated by reference to the Companys registration
    statement on Form S-1 (No. 333-81650) filed with the
    Securities and Exchange Commission (the SEC) on
    January 30, 2002.



| |   |                                                                                                                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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.

76



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##### Table of Contents






SIGNATURES






| |              
| | -------------
| | Viacell, Inc.



| |    |              
| | -- | -------------
| | By | /s/ Marc Beer

| |                        
| | -----------------------
| |                        
| | Marc Beer              
| | Chief Executive Officer





|                                                               |  |                                                                                   |  |                |  | 
|-------------------------------------------------------------- |  | --------------------------------------------------------------------------------- |  | -------------- |  | 
|Signature                                                      |  | Title                                                                             |  | Date          
|                                                               |  |                                                                                   |  |               
|                                                              
|/s/ Marc D. BeerMarc
    D. Beer                               |  | Chief Executive Officer and Director (Principal Executive
    Officer)            |  | March 31, 2005
|                                                              
|/s/ Stephen G. DanceStephen
    G. Dance                       |  | Chief Financial Officer (Principal Financial Officer and
    Principal Accounting |  | March 31, 2005
|                                                              
|/s/ Vaughn M. KailianVaughn
    M. Kailian                     |  | Director                                                                          |  | March 31, 2005
|                                                              
|/s/ George
    Daley, M.D., Ph.D.George
    Daley, M.D., Ph.D. |  | Director                                                                          |  | March 31, 2005
|                                                              
|/s/ Ansbert
    Gadicke, M.D.Ansbert
    Gadicke, M.D.         |  | Director                                                                          |  | March 31, 2005
|                                                              
|/s/ Paul HastingsPaul
    Hastings                             |  | Director                                                                          |  | March 31, 2005
|                                                              
|/s/ Denise
    Pollard-KnightDenise
    Pollard-Knight         |  | Director                                                                          |  | March 31, 2005
|                                                              
|/s/ James TullisJames
    Tullis                               |  | Director                                                                          |  | March 31, 2005
|                                                              
|/s/ Jan van HeekJan
    van Heek                               |  | Director                                                                          |  | March 31, 2005

77



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##### 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 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






PricewaterhouseCoopers
LLP






F-2



---



##### Table of Contents



ViaCell, Inc.


Consolidated Balance Sheets


|                                                                                                                                                                       |                                                                                                                                                                                                            |                                                                                         |             |              |              |   |             |              |              |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------- | ----------- | ------------ | ------------ | - | ----------- | ------------ | ------------ | -
|                                                                                                                                                                       |                                                                                                                                                                                                            | As of December 31,                                                                      |            
|                                                                                                                                                                       |                                                                                                                                                                                                            |                                                                                         |            
|                                                                                                                                                                       |                                                                                                                                                                                                            | 2004                                                                                    |             |              | 2003         |  
|                                                                                                                                                                       |                                                                                                                                                                                                            |                                                                                         |             |              |              |  
|ASSETS                                                                                                                                                                
|Current assets:                                                                                                                                                        |                                                                                                                                                                                                            |                                                                                         |             |              |              |   |             |             
|                                                                                                                                                                       | Cash and cash equivalents                                                                                                                                                                                  |                                                                                         | $           | 6,745,727    |              |   | $           | 39,007,880   |             
|                                                                                                                                                                       | Short-term investments                                                                                                                                                                                     |                                                                                         |             | 21,339,471   |              |   |             | 7,823,852    |             
|                                                                                                                                                                       | Accounts receivable, net                                                                                                                                                                                   |                                                                                         |             | 10,807,837   |              |   |             | 7,676,439    |             
|                                                                                                                                                                       | Prepaid expenses and other current assets                                                                                                                                                                  |                                                                                         |             | 4,765,967    |              |   |             | 4,106,358    |             
|                                                                                                                                                                       | Restricted cash                                                                                                                                                                                            |                                                                                         |             | 161,818      |              |   |             |             |             
|                                                                                                                                                                       |                                                                                                                                                                                                            |                                                                                         |             |              |              |  
|                                                                                                                                                                       |                                                                                                                                                                                                            | Total current assets                                                                    |             |              | 43,820,820   |   |             |              | 58,614,529   |  
|Property and equipment, net                                                                                                                                            |                                                                                                                                                                                                            |                                                                                         | 6,738,211   |              |              |   | 7,892,116   |             
|Goodwill                                                                                                                                                               |                                                                                                                                                                                                            |                                                                                         | 3,620,750   |              |              |   | 3,620,750   |             
|Intangible assets, net                                                                                                                                                 |                                                                                                                                                                                                            |                                                                                         | 3,024,997   |              |              |   | 3,274,721   |             
|Long-term investments                                                                                                                                                  |                                                                                                                                                                                                            |                                                                                         | 499,797     |              |              |   |            |             
|Restricted cash                                                                                                                                                        |                                                                                                                                                                                                            |                                                                                         | 1,952,889   |              |              |   | 2,834,109   |             
|Other assets                                                                                                                                                           |                                                                                                                                                                                                            |                                                                                         | 1,433,218   |              |              |   | 1,924,870   |             
|                                                                                                                                                                       |                                                                                                                                                                                                            |                                                                                         |             |              |              |  
|                                                                                                                                                                       |                                                                                                                                                                                                            | Total assets                                                                            |             | $            | 61,090,682   |   |             | $            | 78,161,095   |  
|                                                                                                                                                                       |                                                                                                                                                                                                            |                                                                                         |             |              |              |  
|                                                                                                                                                                      
|LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
    STOCKHOLDERS DEFICIT                                                                                     
|Current liabilities:                                                                                                                                                   |                                                                                                                                                                                                            |                                                                                         |             |              |              |   |             |             
|                                                                                                                                                                       | Current portion of long-term debt obligations                                                                                                                                                              |                                                                                         | $           | 1,742,447    |              |   | $           | 1,611,604    |             
|                                                                                                                                                                       | Accounts payable                                                                                                                                                                                           |                                                                                         |             | 1,271,130    |              |   |             | 3,363,875    |             
|                                                                                                                                                                       | Accrued expenses                                                                                                                                                                                           |                                                                                         |             | 7,489,795    |              |   |             | 10,011,022   |             
|                                                                                                                                                                       | Note payable to related party                                                                                                                                                                              |                                                                                         |             | 15,422,400   |              |   |             | 14,280,000   |             
|                                                                                                                                                                       | Contingent purchase price                                                                                                                                                                                  |                                                                                         |             |             |              |   |             | 4,245,896    |             
|                                                                                                                                                                       | Deferred revenue                                                                                                                                                                                           |                                                                                         |             | 3,458,443    |              |   |             | 2,244,972    |             
|                                                                                                                                                                       |                                                                                                                                                                                                            |                                                                                         |             |              |              |  
|                                                                                                                                                                       |                                                                                                                                                                                                            | Total current liabilities                                                               |             |              | 29,384,215   |   |             |              | 35,757,369   |  
|Deferred revenue                                                                                                                                                       |                                                                                                                                                                                                            |                                                                                         | 6,728,393   |              |              |   | 3,157,884   |             
|Deferred rent                                                                                                                                                          |                                                                                                                                                                                                            |                                                                                         | 1,035,062   |              |              |   |            |             
|Contingent purchase price                                                                                                                                              |                                                                                                                                                                                                            |                                                                                         | 8,155,000   |              |              |   | 3,909,104   |             
|Long-term debt obligations, net of current portion                                                                                                                     |                                                                                                                                                                                                            |                                                                                         | 1,572,040   |              |              |   | 3,346,672   |             
|                                                                                                                                                                       |                                                                                                                                                                                                            |                                                                                         |             |              |              |  
|                                                                                                                                                                       |                                                                                                                                                                                                            | Total liabilities                                                                       |             |              | 46,874,710   |   |             |              | 46,171,029   |  
|Redeemable convertible preferred stock (at redemption value)
    authorized 30,396,809 shares in 2003 and 2004, issued and
    outstanding 25,628,075 in 2003 and 2004 |                                                                                                                                                                                                            |                                                                                         | 175,172,875 |              |              |   | 162,141,437 |             
|Commitments and contingencies (Notes 8 and 9)                                                                                                                          |                                                                                                                                                                                                            |                                                                                         |             |              |              |   |             |             
|Stockholders deficit:                                                                                                                                                 |                                                                                                                                                                                                            |                                                                                         |             |              |              |   |             |             
|                                                                                                                                                                       | Convertible preferred stock, $0.01 par value; authorized                                                                                                                                                   |                                                                                         |             | 1,829        |              |   |             | 1,829        |             
|                                                                                                                                                                       | 428,191 shares; issued and outstanding 182,857 shares
    (liquidation preference of $245,000) in 2003 and 2004.                                                                                           |                                                                                         |             |              |              |   |             |              |             
|                                                                                                                                                                       | Common stock, $0.01 par value; authorized 35,000,000 and
    80,000,000 shares in 2003 and 2004 respectively; issued and
    outstanding 2,659,854 and 2,763,961 shares in 2003 and
    2004, respectively |                                                                                         |             | 27,640       |              |   |             | 26,599       |             
|                                                                                                                                                                       | Additional paid-in capital                                                                                                                                                                                 |                                                                                         |             |             |              |   |             | 1,437,260    |             
|                                                                                                                                                                       | Deferred compensation                                                                                                                                                                                      |                                                                                         |             | (2,529,830   | )            |   |             | (3,422,375   | )           
|                                                                                                                                                                       | Accumulated deficit                                                                                                                                                                                        |                                                                                         |             | (158,765,668 | )            |   |             | (128,678,779 | )           
|                                                                                                                                                                       | Accumulated other comprehensive income                                                                                                                                                                     |                                                                                         |             | 309,126      |              |   |             | 484,095      |             
|                                                                                                                                                                       |                                                                                                                                                                                                            |                                                                                         |             |              |              |  
|                                                                                                                                                                       |                                                                                                                                                                                                            | Total stockholders deficit                                                             |             |              | (160,956,903 | ) |             |              | (130,151,371 | )
|                                                                                                                                                                       |                                                                                                                                                                                                            |                                                                                         |             |              |              |  
|                                                                                                                                                                       |                                                                                                                                                                                                            | Total liabilities, redeemable convertible preferred stock and
    stockholders deficit |             | $            | 61,090,682   |   |             | $            | 78,161,095   |  
|                                                                                                                                                                       |                                                                                                                                                                                                            |                                                                                         |             |              |              |  



F-3



---



##### Table of Contents



ViaCell, Inc.





Consolidated Statements of Operations


|                                                                                     |                                          |                                               |                      |            |            |             |             |            |            |             |             |            |            |             |  
|------------------------------------------------------------------------------------ | ---------------------------------------- | --------------------------------------------- | -------------------- | ---------- | ---------- | ----------- | ----------- | ---------- | ---------- | ----------- | ----------- | ---------- | ---------- | ----------- | -
|                                                                                     |                                          | Years Ended December 31,                      |                     
|                                                                                     |                                          |                                               |                     
|                                                                                     |                                          | 2004                                          |                      |            | 2003       |             |             | 2002       |           
|                                                                                     |                                          |                                               |                      |            |            |             |             |            |           
|Processing and storage revenues                                                      |                                          | $                                             | 36,804,554           |            |            | $           | 30,884,201  |            |            | $           | 20,087,773  |           
|Grant and contract revenues                                                          |                                          |                                               | 1,469,085            |            |            |             | 995,494     |            |            |             | 286,862     |           
|                                                                                     |                                          |                                               |                      |            |            |             |             |            |           
|                                                                                     | Total revenues                           |                                               |                      | 38,273,639 |            |             |             | 31,879,695 |            |             |             | 20,374,635 |           
|                                                                                     |                                          |                                               |                      |            |            |             |             |            |           
|Operating expenses:                                                                  |                                          |                                               |                      |            |            |             |             |            |            |             |             |           
|                                                                                     | Cost of processing and storage revenues: |                                               |                      |            |            |             |             |            |            |             |             |            |           
|                                                                                     |                                          | Direct costs                                  |                      |            | 7,364,053  |             |             |            | 7,141,581  |             |             |            | 5,877,402  |            
|                                                                                     |                                          | Royalty expense                               |                      |            | (3,257,639 | )           |             |            | 3,257,639  |             |             |            |           |            
|                                                                                     |                                          |                                               |                      |            |            |             |             |            |           
|                                                                                     |                                          | Total cost of processing and storage revenues |                      |            | 4,106,414  |             |             |            | 10,399,220 |             |             |            | 5,877,402  |            
|                                                                                     | Research and development                 |                                               |                      | 15,133,646 |            |             |             | 13,225,957 |            |             |             | 11,429,043 |           
|                                                                                     | Sales and marketing                      |                                               |                      | 19,322,331 |            |             |             | 20,959,187 |            |             |             | 16,578,500 |           
|                                                                                     | General and administrative               |                                               |                      | 13,467,847 |            |             |             | 15,221,356 |            |             |             | 10,919,794 |           
|                                                                                     | In-process technology                    |                                               |                      |           |            |             |             | 23,925,023 |            |             |             | 5,888,713  |           
|                                                                                     | Stock-based compensation(1)              |                                               |                      | 3,428,930  |            |             |             | 3,232,179  |            |             |             | 6,463,519  |           
|                                                                                     | Restructuring                            |                                               |                      | 2,945,260  |            |             |             |           |            |             |             |           |           
|                                                                                     |                                          |                                               |                      |            |            |             |             |            |           
|                                                                                     |                                          | Total operating expenses                      |                      |            | 58,404,428 |             |             |            | 86,962,922 |             |             |            | 57,156,971 |            
|                                                                                     |                                          |                                               |                      |            |            |             |             |            |           
|                                                                                     |                                          |                                               | Loss from operations |            |            | (20,130,789 | )           |            |            | (55,083,227 | )           |            |            | (36,782,336 | )
|Interest income (expense):                                                           |                                          |                                               |                      |            |            |             |             |            |            |             |             |           
|                                                                                     | Interest income                          |                                               |                      | 529,435    |            |             |             | 348,476    |            |             |             | 891,772    |           
|                                                                                     | Interest expense                         |                                               |                      | (1,495,942 | )          |             |             | (733,499   | )          |             |             | (147,464   | )         
|                                                                                     |                                          |                                               |                      |            |            |             |             |            |           
|                                                                                     |                                          | Total interest income (expense), net          |                      |            | (966,507   | )           |             |            | (385,023   | )           |             |            | 744,308    |            
|                                                                                     |                                          |                                               |                      |            |            |             |             |            |           
|Net loss                                                                             |                                          |                                               | (21,097,296          | )          |            |             | (55,468,250 | )          |            |             | (36,038,028 | )         
|Accretion on redeemable convertible preferred stock                                  |                                          |                                               | (13,070,414          | )          |            |             | (9,416,114  | )          |            |             | (8,143,606  | )         
|                                                                                     |                                          |                                               |                      |            |            |             |             |            |           
|Net loss attributable to common stockholders                                         |                                          | $                                             | (34,167,710          | )          |            | $           | (64,884,364 | )          |            | $           | (44,181,634 | )         
|                                                                                     |                                          |                                               |                      |            |            |             |             |            |           
|Net loss per share                                                                   |                                          |                                               |                      |            |            |             |             |            |            |             |             |           
|Net loss per common share, basic and diluted                                         |                                          | $                                             | (12.62               | )          |            | $           | (24.63      | )          |            | $           | (17.60      | )         
|Weighted average shares used in basic and diluted net loss per
    share computation |                                          |                                               | 2,707,219            |            |            |             | 2,634,096   |            |            |             | 2,510,632   |           






|    |                                                              
|--- | -------------------------------------------------------------
|(1) | Allocation of stock-based compensation expense is as follows:

|                                        |                                        |                          |           |           |      |   |           |           |  |   |           |           | 
|--------------------------------------- | -------------------------------------- | ------------------------ | --------- | --------- | ---- | - | --------- | --------- |  | - | --------- | --------- | 
|                                        |                                        | Years Ended December 31, |          
|                                        |                                        |                          |          
|                                        |                                        | 2004                     |           |           | 2003 |   |           | 2002      | 
|                                        |                                        |                          |           |           |      |   |           |           | 
|Cost of processing and storage revenues |                                        | $                        | 32,035    |           |      | $ | 7,282     |           |  | $ | 19,792    |          
|Research and development                |                                        |                          | 895,706   |           |      |   | 1,073,325 |           |  |   | 2,488,801 |          
|Sales and marketing                     |                                        |                          | 174,889   |           |      |   | 413,571   |           |  |   | 670,412   |          
|General and administrative              |                                        |                          | 2,082,683 |           |      |   | 1,738,001 |           |  |   | 3,284,514 |          
|Restructuring                           |                                        |                          | 243,617   |           |      |   |          |           |  |   |          |          
|                                        |                                        |                          |           |           |      |   |           |           | 
|                                        | Total stock-based compensation expense |                          | $         | 3,428,930 |      |   | $         | 3,232,179 |  |   | $         | 6,463,519 | 
|                                        |                                        |                          |           |           |      |   |           |           | 



F-4



---



##### Table of Contents



ViaCell, Inc.





Consolidated Statements Of Comprehensive Loss


|                   |                                         |                          |             |          |      |   |             |         |  |   |             |   | 
|------------------ | --------------------------------------- | ------------------------ | ----------- | -------- | ---- | - | ----------- | ------- |  | - | ----------- | - | 
|                   |                                         | Years Ended December 31, |            
|                   |                                         |                          |            
|                   |                                         | 2004                     |             |          | 2003 |   |             | 2002    | 
|                   |                                         |                          |             |          |      |   |             |         | 
|Net loss           |                                         | $                        | (21,097,296 | )        |      | $ | (55,468,250 | )       |  | $ | (36,038,028 | )
|                   | Foreign currency translation adjustment |                          |             | (174,969 | )    |   |             | 484,095 |  |   |             |  | 
|                   |                                         |                          |             |          |      |   |             |         | 
|Comprehensive loss |                                         | $                        | (21,272,265 | )        |      | $ | (54,984,155 | )       |  | $ | (36,038,028 | )
|                   |                                         |                          |             |          |      |   |             |         | 



F-5



---



##### Table of Contents



ViaCell, Inc.





Consolidated Statement of Stockholders Deficit


|                                                            |  |                 |         |     |              |            |       |        |     |  |           |         |       |             |          |       |              |             |            |         |               |   |            |               |  |         |              |   |  |   |          |   |  |   |              |  
|----------------------------------------------------------- |  | --------------- | ------- | --- | ------------ | ---------- | ----- | ------ | --- |  | --------- | ------- | ----- | ----------- | -------- | ----- | ------------ | ----------- | ---------- | ------- | ------------- | - | ---------- | ------------- |  | ------- | ------------ | - |  | - | -------- | - |  | - | ------------ | -
|                                                            |  | Preferred Stock |         |     | Common Stock |            |       |        |     |  |           |         |       |             |          |      
|                                                            |  |                 |         |     |              |            |       |        |     |  |           |         |       | Accumulated |          |       |             
|                                                            |  |                 |         |     |              | Additional |       |        |     |  |           |         | Other |             |          | Total |             
|                                                            |  |                 |         | Par |              |            |       |        | Par |  |           | Paid-in |       |             | Deferred |       |              | Accumulated |            |         | Comprehensive |   |            | Stockholders | 
|                                                            |  | Shares          |         |     | Value        |            |       | Shares |     |  | Value     |         |       | Capital     |          |       | Compensation |             |            | Deficit |               |   | Income     |               |  | Deficit |             
|                                                            |  |                 |         |     |              |            |       |        |     |  |           |         |       |             |          |       |              |             |            |         |               |   |            |               |  |         |             
|Balance, December 31, 2001                                  |  |                 | 182,857 |     |              | $          | 1,829 |        |     |  | 2,427,879 |         |       | $           | 24,279   |       |              |             | 7,321,178  |         |               | $ | (8,923,891 | )             |  | $       | (37,172,501  | ) |  | $ |         |   |  | $ | (38,749,106  | )
|Stock option exercises                                      |  |                 |        |     |              |            |      |        |     |  | 102,362   |         |       |             | 1,024    |       |              |             | 30,319     |         |               |   |           |               |  |         |             |   |  |   |         |   |  |   | 31,343       |  
|Stock warrant exercises                                     |  |                 |        |     |              |            |      |        |     |  | 13,333    |         |       |             | 133      |       |              |             | 39,866     |         |               |   |           |               |  |         |             |   |  |   |         |   |  |   | 39,999       |  
|Issuance of common stock                                    |  |                 |        |     |              |            |      |        |     |  | 15,000    |         |       |             | 150      |       |              |             | 19,900     |         |               |   |           |               |  |         |             |   |  |   |         |   |  |   | 20,050       |  
|Stock warrants issued to collaborator                       |  |                 |        |     |              |            |      |        |     |  |          |         |       |             |         |       |              |             | 5,888,713  |         |               |   |           |               |  |         |             |   |  |   |         |   |  |   | 5,888,713    |  
|Non-employee stock compensation                             |  |                 |        |     |              |            |      |        |     |  |          |         |       |             |         |       |              |             | 449,012    |         |               |   |           |               |  |         |             |   |  |   |         |   |  |   | 449,012      |  
|Deferred compensation                                       |  |                 |        |     |              |            |      |        |     |  |          |         |       |             |         |       |              |             | 3,216,296  |         |               |   | (3,216,296 | )             |  |         |             |   |  |   |         |   |  |   |             |  
|Amortization of deferred compensation                       |  |                 |        |     |              |            |      |        |     |  |          |         |       |             |         |       |              |             |           |         |               |   | 6,014,507  |               |  |         |             |   |  |   |         |   |  |   | 6,014,507    |  
|Accretion of redeemable preferred stock to redemption value |  |                 |        |     |              |            |      |        |     |  |          |         |       |             |         |       |              |             | (8,143,606 | )       |               |   |           |               |  |         |             |   |  |   |         |   |  |   | (8,143,606   | )
|Net loss                                                    |  |                 |        |     |              |            |      |        |     |  |          |         |       |             |         |       |              |             |           |         |               |   |           |               |  |         | (36,038,028  | ) |  |   |         |   |  |   | (36,038,028  | )
|                                                            |  |                 |         |     |              |            |       |        |     |  |           |         |       |             |          |       |              |             |            |         |               |   |            |               |  |         |             
|Balance, December 31, 2002                                  |  |                 | 182,857 |     |              |            | 1,829 |        |     |  | 2,558,574 |         |       |             | 25,586   |       |              |             | 8,821,678  |         |               |   | (6,125,680 | )             |  |         | (73,210,529  | ) |  |   |         |   |  |   | (70,487,116  | )
|Stock option exercises                                      |  |                 |        |     |              |            |      |        |     |  | 101,280   |         |       |             | 1,013    |       |              |             | 52,996     |         |               |   |           |               |  |         |             |   |  |   |         |   |  |   | 54,009       |  
|Issuance of stock warrant                                   |  |                 |        |     |              |            |      |        |     |  |          |         |       |             |         |       |              |             | 1,449,826  |         |               |   |           |               |  |         |             |   |  |   |         |   |  |   | 1,449,826    |  
|Accretion of redeemable preferred stock                     |  |                 |        |     |              |            |      |        |     |  |          |         |       |             |         |       |              |             | (9,416,114 | )       |               |   |           |               |  |         |             |   |  |   |         |   |  |   | (9,416,114   | )
|Non-employee stock compensation                             |  |                 |        |     |              |            |      |        |     |  |          |         |       |             |         |       |              |             | 251,480    |         |               |   |           |               |  |         |             |   |  |   |         |   |  |   | 251,480      |  
|Deferred compensation                                       |  |                 |        |     |              |            |      |        |     |  |          |         |       |             |         |       |              |             | 804,323    |         |               |   | (804,323   | )             |  |         |             |   |  |   |         |   |  |   |             |  
|Amortization of deferred compensation                       |  |                 |        |     |              |            |      |        |     |  |          |         |       |             |         |       |              |             | (526,929   | )       |               |   | 3,507,628  |               |  |         |             |   |  |   |         |   |  |   | 2,980,699    |  
|Net loss                                                    |  |                 |        |     |              |            |      |        |     |  |          |         |       |             |         |       |              |             |           |         |               |   |           |               |  |         | (55,468,250  | ) |  |   |         |   |  |   | (55,468,250  | )
|Translation adjustment                                      |  |                 |        |     |              |            |      |        |     |  |          |         |       |             |         |       |              |             |           |         |               |   |           |               |  |         |             |   |  |   | 484,095  |   |  |   | 484,095      |  
|                                                            |  |                 |         |     |              |            |       |        |     |  |           |         |       |             |          |       |              |             |            |         |               |   |            |               |  |         |             
|Balance, December 31, 2003                                  |  |                 | 182,857 |     |              |            | 1,829 |        |     |  | 2,659,854 |         |       |             | 26,599   |       |              |             | 1,437,260  |         |               |   | (3,422,375 | )             |  |         | (128,678,779 | ) |  |   | 484,095  |   |  |   | (130,151,371 | )
|Stock option exercises                                      |  |                 |        |     |              |            |      |        |     |  | 89,915    |         |       |             | 899      |       |              |             | 107,294    |         |               |   |           |               |  |         |             |   |  |   |         |   |  |   | 108,193      |  
|Accretion of redeemable preferred stock                     |  |                 |        |     |              |            |      |        |     |  |          |         |       |             |         |       |              |             | (4,080,821 | )       |               |   |           |               |  |         | (8,989,593   | ) |  |   |         |   |  |   | (13,070,414  | )
|Non-employee stock compensation                             |  |                 |        |     |              |            |      |        |     |  | 14,192    |         |       |             | 142      |       |              |             | 414,751    |         |               |   |           |               |  |         |             |   |  |   |         |   |  |   | 414,893      |  
|Deferred compensation                                       |  |                 |        |     |              |            |      |        |     |  |          |         |       |             |         |       |              |             | 2,882,201  |         |               |   | (2,882,201 | )             |  |         |             |   |  |   |         |   |  |   |             |  
|Forfeiture of stock options                                 |  |                 |        |     |              |            |      |        |     |  |          |         |       |             |         |       |              |             | (413,601   | )       |               |   | 413,601    |               |  |         |             |   |  |   |         |   |  |   |             |  
|Modification of stock options                               |  |                 |        |     |              |            |      |        |     |  |          |         |       |             |         |       |              |             | 774,294    |         |               |   |           |               |  |         |             |   |  |   |         |   |  |   | 774,294      |  
|Amortization of deferred compensation                       |  |                 |        |     |              |            |      |        |     |  |          |         |       |             |         |       |              |             | (1,121,378 | )       |               |   | 3,361,145  |               |  |         |             |   |  |   |         |   |  |   | 2,239,767    |  
|Net loss                                                    |  |                 |        |     |              |            |      |        |     |  |          |         |       |             |         |       |              |             |           |         |               |   |           |               |  |         | (21,097,296  | ) |  |   |         |   |  |   | (21,097,296  | )
|Translation adjustment                                      |  |                 |        |     |              |            |      |        |     |  |          |         |       |             |         |       |              |             |           |         |               |   |           |               |  |         |             |   |  |   | (174,969 | ) |  |   | (174,969     | )
|                                                            |  |                 |         |     |              |            |       |        |     |  |           |         |       |             |          |       |              |             |            |         |               |   |            |               |  |         |             
|Balance, December 31, 2004                                  |  |                 | 182,857 |     |              | $          | 1,829 |        |     |  | 2,763,961 |         |       | $           | 27,640   |       |              | $           |           |         |               | $ | (2,529,830 | )             |  | $       | (158,765,668 | ) |  | $ | 309,126  |   |  | $ | (160,956,903 | )
|                                                            |  |                 |         |     |              |            |       |        |     |  |           |         |       |             |          |       |              |             |            |         |               |   |            |               |  |         |             



F-6



---



##### Table of Contents



ViaCell, Inc.





Consolidated Statements of Cash Flows


|                                                                                |                                                                           |                          |             |             |      |   |             |            |   |   |             |             |  
|------------------------------------------------------------------------------- | ------------------------------------------------------------------------- | ------------------------ | ----------- | ----------- | ---- | - | ----------- | ---------- | - | - | ----------- | ----------- | -
|                                                                                |                                                                           | Years Ended December 31, |            
|                                                                                |                                                                           |                          |            
|                                                                                |                                                                           | 2004                     |             |             | 2003 |   |             | 2002       |  
|                                                                                |                                                                           |                          |             |             |      |   |             |            |  
|Cash flows from operating activities:                                           |                                                                           |                          |             |             |      |   |             |            |   |   |             |            
|Net loss                                                                        |                                                                           | $                        | (21,097,296 | )           |      | $ | (55,468,250 | )          |   | $ | (36,038,028 | )          
|Adjustments to reconcile net loss to net cash used in operating
    activities: |                                                                           |                          |             |             |      |   |             |            |   |   |             |            
|                                                                                | Depreciation and amortization                                             |                          |             | 2,577,151   |      |   |             | 2,517,646  |   |   |             | 1,987,743   |  
|                                                                                | Stock-based compensation                                                  |                          |             | 3,428,930   |      |   |             | 3,232,179  |   |   |             | 6,463,519   |  
|                                                                                | Reserve for bad debt                                                      |                          |             | 248,465     |      |   |             | 776,687    |   |   |             | 158,277     |  
|                                                                                | Non-cash charge for acquired in-process research and development          |                          |             |            |      |   |             | 23,925,023 |   |   |             | 5,888,713   |  
|                                                                                | Non-cash interest expense on related party note payable                   |                          |             | 1,142,400   |      |   |             | 280,000    |   |   |             |            |  
|                                                                                | Loss on write-down of fixed assets                                        |                          |             | 2,154,450   |      |   |             |           |   |   |             |            |  
|                                                                                | Fixed asset additions reimbursed by Landlord                              |                          |             | 1,004,000   |      |   |             |           |   |   |             |            |  
|                                                                                | Other                                                                     |                          |             | 29,153      |      |   |             | 4,359      |   |   |             |            |  
|Changes in assets and liabilities, excluding the effect of
    acquisitions:    |                                                                           |                          |             |             |      |   |             |            |   |   |             |            
|                                                                                | Accounts receivable                                                       |                          |             | (3,376,176  | )    |   |             | (2,033,456 | ) |   |             | (3,212,616  | )
|                                                                                | Prepaid expenses and other current assets                                 |                          |             | (615,472    | )    |   |             | (2,266,483 | ) |   |             | 10,465      |  
|                                                                                | Accounts payable                                                          |                          |             | (2,191,575  | )    |   |             | 414,683    |   |   |             | 757,354     |  
|                                                                                | Accrued expenses                                                          |                          |             | (2,542,108  | )    |   |             | 4,629,771  |   |   |             | 1,308,179   |  
|                                                                                | Deferred revenue                                                          |                          |             | 4,091,719   |      |   |             | 1,497,998  |   |   |             | 1,580,282   |  
|                                                                                | Deferred rent                                                             |                          |             | 31,062      |      |   |             |           |   |   |             |            |  
|                                                                                |                                                                           |                          |             |             |      |   |             |            |  
|Net cash used in operating activities                                           |                                                                           |                          | (15,115,297 | )           |      |   | (22,489,843 | )          |   |   | (21,096,112 | )          
|Cash flows from investing activities:                                           |                                                                           |                          |             |             |      |   |             |            |   |   |             |            
|                                                                                | Purchase of property and equipment                                        |                          |             | (2,392,354  | )    |   |             | (1,825,870 | ) |   |             | (4,816,312  | )
|                                                                                | Proceeds from maturities of investments                                   |                          |             | 22,681,759  |      |   |             | 15,812,672 |   |   |             | 38,973,455  |  
|                                                                                | Purchase of investments                                                   |                          |             | (36,697,176 | )    |   |             | (9,687,260 | ) |   |             | (15,579,979 | )
|                                                                                | (Increase) decrease in other assets                                       |                          |             | 488,269     |      |   |             | (1,751,350 | ) |   |             | (71,631     | )
|                                                                                | Cash acquired in acquisition, net of acqusition costs                     |                          |             |            |      |   |             | 3,737,929  |   |   |             |            |  
|                                                                                |                                                                           |                          |             |             |      |   |             |            |  
|Net cash provided by (used in) investing activities                             |                                                                           |                          | (15,919,502 | )           |      |   | 6,286,121   |            |   |   | 18,505,533  |            
|Cash flows from financing activities:                                           |                                                                           |                          |             |             |      |   |             |            |   |   |             |            
|                                                                                | Proceeds from issuance of redeemable convertible preferred
    stock, net |                          |             |            |      |   |             | 36,887,171 |   |   |             | 1,500,000   |  
|                                                                                | Proceeds from exercise of stock options and warrants                      |                          |             | 108,193     |      |   |             | 42,599     |   |   |             | 71,342      |  
|                                                                                | Proceeds from issuance of common stock                                    |                          |             |            |      |   |             |           |   |   |             | 20,050      |  
|                                                                                | (Increase) decrease in restricted cash                                    |                          |             | 731,966     |      |   |             | 3,210,105  |   |   |             | (3,792,909  | )
|                                                                                | Proceeds from credit facilities                                           |                          |             |            |      |   |             | 5,000,000  |   |   |             | 4,900,000   |  
|                                                                                | Repayments on credit facilities                                           |                          |             | (1,562,331  | )    |   |             | (5,451,556 | ) |   |             | (1,087,050  | )
|                                                                                | Repayment of note payable to related party                                |                          |             |            |      |   |             |           |   |   |             | (215,247    | )
|                                                                                | Payments on capital lease principal                                       |                          |             | (267,203    | )    |   |             | (49,375    | ) |   |             | (11,074     | )
|                                                                                |                                                                           |                          |             |             |      |   |             |            |  
|Net cash provided by (used in) financing activities                             |                                                                           |                          | (989,375    | )           |      |   | 39,638,944  |            |   |   | 1,385,112   |            
|Effect of change in exchange rates on cash                                      |                                                                           |                          | (237,979    | )           |      |   | 333,569     |            |   |   |            |            
|                                                                                |                                                                           |                          |             |             |      |   |             |            |  
|Net increase (decrease) in cash and cash equivalents                            |                                                                           |                          | (32,262,153 | )           |      |   | 23,768,791  |            |   |   | (1,205,467  | )          
|Cash and cash equivalents, beginning of period                                  |                                                                           |                          | 39,007,880  |             |      |   | 15,239,089  |            |   |   | 16,444,556  |            
|                                                                                |                                                                           |                          |             |             |      |   |             |            |  
|Cash and cash equivalents, end of period                                        |                                                                           | $                        | 6,745,727   |             |      | $ | 39,007,880  |            |   | $ | 15,239,089  |            
|                                                                                |                                                                           |                          |             |             |      |   |             |            |  
|Supplemental disclosures of cash flow information and non
    cash transactions |                                                                           |                          |             |             |      |   |             |            |   |   |             |            
|Interest paid                                                                   |                                                                           | $                        | 325,338     |             |      | $ | 260,117     |            |   | $ | 183,452     |            
|Acquisitions (Note 3)                                                           |                                                                           |                          |            |             |      |   | 28,705,000  |            |   |   |            |            
|Accretion of redeemable convertible preferred stock                             |                                                                           |                          | 13,070,414  |             |      |   | 9,416,114   |            |   |   | 8,143,606   |            
|Equipment purchased under capital lease (Note 2)                                |                                                                           |                          | 139,593     |             |      |   | 154,855     |            |   |   |            |            



F-7



---



##### Table of Contents



ViaCell, Inc.





Notes to Consolidated Financial Statements




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













|   |                                           
|-- | ------------------------------------------
|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




|                                                               |                       |           |            |            |            |   |            |            |  |           |         |         |   |            |            |            |        |   |            |            |  |   |        |        |  
|-------------------------------------------------------------- | --------------------- | --------- | ---------- | ---------- | ---------- | - | ---------- | ---------- |  | --------- | ------- | ------- | - | ---------- | ---------- | ---------- | ------ | - | ---------- | ---------- |  | - | ------ | ------ | -
|                                                               |                       | 2004      |            |            | 2003       |  
|                                                               |                       |           |            |            |            |  
|                                                               |                       | Amortized |            |            |            |   | Unrealized |            |  | Amortized |         |         |   |            | Unrealized |           
|                                                               |                       | Cost      |            |            | Fair Value |   |            | (Loss)     |  |           | Cost    |         |   | Fair Value |            |            | (Loss) |  
|                                                               |                       |           |            |            |            |   |            |            |  |           |         |         |   |            |            |            |        |  
|Cash and cash equivalents                                      |                       |           |            |            |            |   |            |            |  |           |         |         |   |            |            |            |        |   |            |            |  |   |        |       
|                                                               | Money market accounts |           | $          | 3,612,939  |            |   | $          | 3,612,939  |  |           | $       |        |   |            | $          | 30,393,707 |        |   | $          | 30,393,707 |  |   | $      |       |  
|                                                               | Government securities |           |            | 1,485,208  |            |   |            | 1,485,208  |  |           |         |        |   |            |            | 1,725,006  |        |   |            | 1,725,006  |  |   |        |       |  
|                                                               | Cash                  |           |            | 1,647,580  |            |   |            | 1,647,580  |  |           |         |        |   |            |            | 6,889,167  |        |   |            | 6,889,167  |  |   |        |       |  
|                                                               |                       |           |            |            |            |   |            |            |  |           |         |         |   |            |            |            |        |  
|Total cash and cash equivalents                                |                       |           | 6,745,727  |            |            |   | 6,745,727  |            |  |           |        |         |   |            | 39,007,880 |            |        |   | 39,007,880 |            |  |   |       |       
|                                                               |                       |           |            |            |            |   |            |            |  |           |         |         |   |            |            |            |        |  
|Short-term investments                                         |                       |           |            |            |            |   |            |            |  |           |        |         |   |            |            |            |        |   |            |            |  |   |       |       
|                                                               | Commercial paper      |           |            | 21,339,471 |            |   |            | 21,261,698 |  |           |         | (77,773 | ) |            |            | 7,823,852  |        |   |            | 7,815,775  |  |   |        | (8,077 | )
|Long-term investments                                          |                       |           |            |            |            |   |            |            |  |           |        |         |   |            |            |            |        |   |            |            |  |   |       |       
|                                                               | Commercial paper      |           |            | 499,797    |            |   |            | 498,394    |  |           |         | (1,403  | ) |            |            |           |        |   |            |           |  |   |        |       |  
|                                                               |                       |           |            |            |            |   |            |            |  |           |         |         |   |            |            |            |        |  
|Total investments                                              |                       |           | 21,839,268 |            |            |   | 21,760,092 |            |  |           | (79,176 | )       |   |            | 7,823,852  |            |        |   | 7,815,775  |            |  |   | (8,077 | )     
|                                                               |                       |           |            |            |            |   |            |            |  |           |         |         |   |            |            |            |        |  
|Total cash, cash equivalents, short- and long-term investments |                       | $         | 28,584,995 |            |            | $ | 28,505,819 |            |  | $         | (79,176 | )       |   | $          | 46,831,732 |            |        | $ | 46,823,655 |            |  | $ | (8,077 | )     
|                                                               |                       |           |            |            |            |   |            |            |  |           |         |         |   |            |            |            |        |  



Revenue Recognition


Revenue Recognition in Financial
Statements.




F-9



---



##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)


Revenue
Arrangements with Multiple Deliverables




| |                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------
| | 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.













Accounting for Consideration Given by a
Vendor,






F-10



---



##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)


Cost of Revenues






Advertising Costs




Research and Development Expenses




In-process Technology




Foreign Currency Translation


Foreign Currency Translation.


F-11



---



##### 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;       
|
| |  | purchased technology rights;
|
| |  | customer lists; and         
|
| |  | trademarks.                 

F-12



---



##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)


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



---



##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)




|                                           |                              |              |   |           |              |  |  |            |  |            |        |         |   |  |   |           | 
|------------------------------------------ | ---------------------------- | ------------ | - | --------- | ------------ |  |  | ---------- |  | ---------- | ------ | ------- | - |  | - | --------- | 
|                                           |                              | Balance at   |   |           | Additions to |  |  |            |  | Balance at |       
|                                           |                              | Beginning of |   |           | Costs and    |  |  |            |  | End of     |       
|Description                                |                              | Period       |   |           | Expenses     |  |  | Deductions |  |            | Period |        
|                                           |                              |              |   |           |              |  |  |            |  |            |        |        
|Allowance for doubtful accounts receivable |                              |              |   |           |              |  |  |            |  |            |        |         |   |  |   |          
|                                           | Year ended December 31, 2004 |              | $ | 1,043,568 |              |  |  | 248,465    |  |            |        | (95,175 | ) |  | $ | 1,196,858 | 
|                                           | Year ended December 31, 2003 |              | $ | 268,981   |              |  |  | 776,667    |  |            |        | (2,080  | ) |  | $ | 1,043,568 | 
|                                           | Year ended December 31, 2002 |              | $ | 150,200   |              |  |  | 158,277    |  |            |        | (39,496 | ) |  | $ | 268,981   | 





Redeemable Convertible Preferred Stock




Stock-Based Compensation


Accounting for Stock Issued to
Employees, Accounting for Stock-Based
Compensation.


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)








|                                                                                                                    |             |      |             |        |      |   |             |        |   |   |             |        |  
|------------------------------------------------------------------------------------------------------------------- | ----------- | ---- | ----------- | ------ | ---- | - | ----------- | ------ | - | - | ----------- | ------ | -
|                                                                                                                    |             | 2004 |             |        | 2003 |   |             | 2002   |  
|                                                                                                                    |             |      |             |        |      |   |             |        |  
|Net loss attributable to common stockholders as reported                                                            |             | $    | (34,167,710 | )      |      | $ | (64,884,364 | )      |   | $ | (44,181,634 | )     
|Add: employee stock-based compensation expense included in
    reported net loss                                    |             |      | 3,014,179   |        |      |   | 2,980,699   |        |   |   | 6,014,507   |       
|Deduct: total employee stock-based compensation expense
    determined under fair value based method for all awards |             |      | (5,175,664  | )      |      |   | (4,256,829  | )      |   |   | (4,017,251  | )     
|                                                                                                                    |             |      |             |        |      |   |             |        |  
|Pro forma net loss attributable to common stockholders                                                              |             | $    | 36,329,195  |        |      | $ | (66,160,494 | )      |   | $ | (42,184,378 | )     
|                                                                                                                    |             |      |             |        |      |   |             |        |  
|Basic and diluted net loss per share                                                                                |             |      |             |        |      |   |             |        |   |   |             |       
|                                                                                                                    | As reported |      | $           | (12.62 | )    |   | $           | (24.63 | ) |   | $           | (17.60 | )
|                                                                                                                    |             |      |             |        |      |   |             |        |  
|                                                                                                                    | Pro forma   |      | $           | (13.42 | )    |   | $           | (25.12 | ) |   | $           | (16.80 | )
|                                                                                                                    |             |      |             |        |      |   |             |        |  





|                                |  |              |         |   |      |  |         |      |  |  |         |  
|------------------------------- |  | ------------ | ------- | - | ---- |  | ------- | ---- |  |  | ------- | -
|                                |  | December 31, |        
|                                |  |              |        
|                                |  | 2004         |         |   | 2003 |  |         | 2002 | 
|                                |  |              |         |   |      |  |         |      | 
|Risk-free interest rate         |  |              | 2.86    | % |      |  | 2.00    | %    |  |  | 3.82    | %
|Expected life                   |  |              | 5 years |   |      |  | 5 years |      |  |  | 5 years |  
|Expected volatility             |  |              | 100     | % |      |  | 100     | %    |  |  | 110     | %
|Dividend yield                  |  |              | 0       | % |      |  | 0       | %    |  |  | 0       | %
|Per share grant date fair value |  |              | $8.00   |   |      |  | $8.15   |      |  |  | $5.00   |  



F-15



---



##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)


Segment Information






|                  |                                  |              |   |           |              |  |   |           | 
|----------------- | -------------------------------- | ------------ | - | --------- | ------------ |  | - | --------- | 
|                  |                                  | December 31, |   |           | December 31, | 
|                  |                                  | 2004         |   |           | 2003         | 
|                  |                                  |              |   |           |              | 
|Long-lived assets |                                  |              |   |           |              |  |   |          
|                  | United States                    |              | $ | 6,310,040 |              |  | $ | 6,161,717 | 
|                  | Germany                          |              |   | 87,892    |              |  |   | 1,408,991 | 
|                  | Singapore                        |              |   | 340,279   |              |  |   | 321,408   | 
|                  |                                  |              |   |           |              | 
|                  | Total long-lived tangible assets |              | $ | 6,738,211 |              |  | $ | 7,892,116 | 
|                  |                                  |              |   |           |              | 



|              |               |              |            |            |              |   |            |            | 
|------------- | ------------- | ------------ | ---------- | ---------- | ------------ | - | ---------- | ---------- | 
|              |               | December 31, |            |            | December 31, |  
|              |               | 2004         |            |            | 2003         |  
|              |               |              |            |            |              |  
|United States |               | $            | 36,996,639 |            |              | $ | 31,246,807 |           
|Germany       |               |              | 990,057    |            |              |   | 381,372    |           
|Singapore     |               |              | 286,943    |            |              |   | 251,516    |           
|              |               |              |            |            |              |  
|              | Total Revenue |              | $          | 38,273,639 |              |   | $          | 31,879,695 | 
|              |               |              |            |            |              |  

Comprehensive Loss




Net Loss Per Common Share




F-16



---



##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)




|                                             |                                                      |                         |             |           |      |   |             |           |  |   |             |           | 
|-------------------------------------------- | ---------------------------------------------------- | ----------------------- | ----------- | --------- | ---- | - | ----------- | --------- |  | - | ----------- | --------- | 
|                                             |                                                      | Year Ended December 31, |            
|                                             |                                                      |                         |            
|                                             |                                                      | 2004                    |             |           | 2003 |   |             | 2002      | 
|                                             |                                                      |                         |             |           |      |   |             |           | 
|Basic and diluted net loss per share         |                                                      |                         |             |           |      |   |             |           |  |   |             |          
|Net loss attributable to common stockholders |                                                      | $                       | (34,167,710 | )         |      | $ | (64,884,364 | )         |  | $ | (44,181,634 | )        
|                                             | Weighted average number of common shares outstanding |                         |             | 2,707,219 |      |   |             | 2,634,096 |  |   |             | 2,510,632 | 
|                                             |                                                      |                         |             |           |      |   |             |           | 
|Basic and diluted net loss per share         |                                                      | $                       | (12.62      | )         |      | $ | (24.63      | )         |  | $ | (17.60      | )        
|                                             |                                                      |                         |             |           |      |   |             |           | 



|                            |  |                         |            |  |      |  |            |      |  |  |            | 
|--------------------------- |  | ----------------------- | ---------- |  | ---- |  | ---------- | ---- |  |  | ---------- | 
|                            |  | Year Ended December 31, |           
|                            |  |                         |           
|                            |  | 2004                    |            |  | 2003 |  |            | 2002 | 
|                            |  |                         |            |  |      |  |            |      | 
|Options                     |  |                         | 4,222,211  |  |      |  | 4,374,160  |      |  |  | 3,824,199  | 
|Warrants                    |  |                         | 1,428,750  |  |      |  | 1,413,906  |      |  |  | 1,246,666  | 
|Convertible preferred stock |  |                         | 25,810,932 |  |      |  | 25,810,932 |      |  |  | 20,544,516 | 

Recent Accounting Pronouncements


Accounting for Certain Instruments with Characteristics of
both Liabilities and Equity






F-17



---



##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)






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

Acquisition of Kourion Therapeutics AG










F-18



---



##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)




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



|                          |  |   |            |  
|------------------------- |  | - | ---------- | -
|Cash and cash equivalents |  | $ | 4,563,000  |  
|Other current assets, net |  |   | 1,125,000  |  
|Property and equipment    |  |   | 1,432,000  |  
|Other assets              |  |   | 139,000    |  
|Current liabilities       |  |   | (513,000   | )
|Capital lease obligation  |  |   | (141,000   | )
|In-process technology     |  |   | 22,100,000 |  
|                          |  |   |           
|                          |  | $ | 28,705,000 |  
|                          |  |   |           





Pro Forma Results of Operations (Unaudited)




|              |  |      |             |   |      |   |             |  
|------------- |  | ---- | ----------- | - | ---- | - | ----------- | -
|              |  | 2003 |             |   | 2002 |  
|              |  |      |             |   |      |  
|Total revenue |  | $    | 32,505,000  |   |      | $ | 21,441,000  |  
|Net loss      |  | $    | (36,277,000 | ) |      | $ | (39,654,000 | )

F-19



---



##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)






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



|                                                |  |              |            |   |              |   |            |  
|----------------------------------------------- |  | ------------ | ---------- | - | ------------ | - | ---------- | -
|                                                |  | December 31, |            |   | December 31, |  
|                                                |  | 2004         |            |   | 2003         |  
|                                                |  |              |            |   |              |  
|Software                                        |  | $            | 2,700,096  |   |              | $ | 2,714,477  |  
|Laboratory equipment                            |  |              | 4,674,531  |   |              |   | 5,647,104  |  
|Office and computer equipment                   |  |              | 1,867,498  |   |              |   | 2,147,608  |  
|Leasehold improvements                          |  |              | 3,129,401  |   |              |   | 2,310,729  |  
|Furniture and fixtures                          |  |              | 717,195    |   |              |   | 358,172    |  
|Construction in progress                        |  |              | 379,575    |   |              |   | 274,030    |  
|                                                |  |              |            |   |              |  
|Property and equipment, gross                   |  |              | 13,468,296 |   |              |   | 13,452,120 |  
|Less: accumulated depreciation and amortization |  |              | (6,730,085 | ) |              |   | (5,560,004 | )
|                                                |  |              |            |   |              |  
|Property and equipment, net                     |  | $            | 6,738,211  |   |              | $ | 7,892,116  |  
|                                                |  |              |            |   |              |  









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



Goodwill and Other Intangible
Assets.




F-20



---



##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)




|                               |  |              |            |   |              |   |            |  
|------------------------------ |  | ------------ | ---------- | - | ------------ | - | ---------- | -
|                               |  | December 31, |            |   | December 31, |  
|                               |  | 2004         |            |   | 2003         |  
|                               |  |              |            |   |              |  
|Goodwill                       |  | $            | 3,620,750  |   |              | $ | 3,620,750  |  
|                               |  |              |            |   |              |  
|Intangible assets              |  |              |            |   |              |   |            |  
|Trademark                      |  | $            | 4,400,000  |   |              | $ | 4,400,000  |  
|Employment agreements          |  |              | 288,338    |   |              |   | 288,338    |  
|                               |  |              |            |   |              |  
|Less: accumulated amortization |  |              | (1,663,341 | ) |              |   | (1,413,617 | )
|                               |  |              |            |   |              |  
|Intangible assets, net         |  | $            | 3,024,997  |   |              | $ | 3,274,721  |  
|                               |  |              |            |   |              |  





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



|                            |  |              |           |  |              |   |            | 
|--------------------------- |  | ------------ | --------- |  | ------------ | - | ---------- | 
|                            |  | December 31, |           |  | December 31, |  
|                            |  | 2004         |           |  | 2003         |  
|                            |  |              |           |  |              |  
|Accrued patent royalties    |  | $            |          |  |              | $ | 3,257,639  | 
|Payroll and payroll related |  |              | 1,016,375 |  |              |   | 1,487,932  | 
|Management incentive        |  |              | 722,915   |  |              |   | 481,209    | 
|Professional fees           |  |              | 2,026,540 |  |              |   | 2,766,042  | 
|Accrued marketing           |  |              | 911,843   |  |              |   | 865,455    | 
|Accrued restructuring       |  |              | 907,296   |  |              |   |           | 
|Other                       |  |              | 1,904,826 |  |              |   | 1,152,745  | 
|                            |  |              |           |  |              |  
|                            |  | $            | 7,489,795 |  |              | $ | 10,011,022 | 
|                            |  |              |           |  |              |  



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



|                          |  |      |             |   |      |   |             |      |  |   |             |  
|------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | ---- |  | - | ----------- | -
|                          |  | 2004 |             |   | 2003 |   |             | 2002 | 
|                          |  |      |             |   |      |   |             |      | 
|Domestic                  |  | $    | (16,018,802 | ) |      | $ | (52,299,065 | )    |  | $ | (35,667,790 | )
|Foreign                   |  |      | (5,078,494  | ) |      |   | (3,169,185  | )    |  |   | (370,238    | )
|                          |  |      |             |   |      |   |             |      | 
|Total Income Before Taxes |  | $    | (21,097,296 | ) |      | $ | (55,468,250 | )    |  | $ | (36,038,028 | )
|                          |  |      |             |   |      |   |             |      | 

F-21



---



##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)




|                              |  |                     |       |    |      |  |       |      |  |  |       |   
|----------------------------- |  | ------------------- | ----- | -- | ---- |  | ----- | ---- |  |  | ----- | --
|                              |  | For the Years Ended |      
|                              |  | December 31,        |      
|                              |  |                     |      
|                              |  | 2004                |       |    | 2003 |  |       | 2002 | 
|                              |  |                     |       |    |      |  |       |      | 
|US Statutory rate             |  |                     | 34.0  | %  |      |  | 34.0  | %    |  |  | 34.0  | % 
|State taxes, net              |  |                     | 3.7   | %  |      |  | 2.0   | %    |  |  | 6.9   | % 
|Foreign rate differential     |  |                     | 1.8   | %  |      |  | 0.4   | %    |  |  | (0.1  | )%
|Benefit of tax credits        |  |                     | 2.6   | %  |      |  | 1.3   | %    |  |  | 1.6   | % 
|Change in valuation allowance |  |                     | (36.8 | )% |      |  | (14.8 | )%   |  |  | (41.5 | )%
|Stock based compensation      |  |                     | (5.1  | )% |      |  | (8.1  | )%   |  |  | 0.0   | % 
|In process R&D                |  |                     | 0     | %  |      |  | (14.7 | )%   |  |  | 0.0   | % 
|Other                         |  |                     | (0.2  | )% |      |  | (0.1  | )%   |  |  | (0.9  | )%
|                              |  |                     |       |    |      |  |       |      | 
|Effective tax rate            |  |                     | 0.0   | %  |      |  | 0.0   | %    |  |  | 0.0   | % 
|                              |  |                     |       |    |      |  |       |      | 



|                             |                         |                    |             |           |      |   |             |           |   | 
|---------------------------- | ----------------------- | ------------------ | ----------- | --------- | ---- | - | ----------- | --------- | - | 
|                             |                         | 2004               |             |           | 2003 |  
|                             |                         |                    |             |           |      |  
|Deferred tax assets          |                         |                    |             |           |      |   |             |          
|Operating loss carryforwards |                         | $                  | 35,435,742  |           |      | $ | 31,159,658  |          
|Tax credit carryforwards     |                         |                    | 3,484,494   |           |      |   | 2,542,262   |          
|Stock based compensation     |                         |                    | 3,790,367   |           |      |   | 3,782,964   |          
|Temporary differences        |                         |                    | 8,509,660   |           |      |   | 6,151,824   |          
|                             |                         |                    |             |           |      |  
|                             |                         |                    | 51,220,263  |           |      |   | 43,636,708  |          
|Less: valuation allowance    |                         |                    | (50,002,096 | )         |      |   | (42,233,874 | )        
|                             |                         |                    |             |           |      |  
|                             | Net deferred tax assets |                    |             | 1,218,167 |      |   |             | 1,402,834 |  
|Deferred tax liabilities     |                         |                    |             |           |      |   |             |          
|Intangible assets            |                         |                    | (1,218,167  | )         |      |   | (1,402,834  | )        
|                             |                         |                    |             |           |      |  
|                             |                         | Net deferred taxes |             | $         |     |   |             | $         |  | 
|                             |                         |                    |             |           |      |  





F-22



---



##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)




|            |  |              |            |  |           |  |            |            |            |  |               |  |  |   |            | 
|----------- |  | ------------ | ---------- |  | --------- |  | ---------- | ---------- | ---------- |  | ------------- |  |  | - | ---------- | 
|            |  | Balance at   |            |  |           |  |            |            |           
|            |  | Beginning of |            |  |           |  |            |            | Balance at | 
|Description |  | Period       |            |  | Additions |  |            | Deductions |            |  | End of Period | 
|            |  |              |            |  |           |  |            |            |            |  |               | 
|2004        |  | $            | 42,233,874 |  |           |  | 7,768,222  |            |            |  |              |  |  | $ | 50,002,096 | 
|            |  |              |            |  |           |  |            |            |            |  |               | 
|2003        |  | $            | 28,965,573 |  |           |  | 13,268,301 |            |            |  |              |  |  | $ | 42,233,874 | 
|            |  |              |            |  |           |  |            |            |            |  |               | 
|2002        |  | $            | 13,520,000 |  |           |  | 15,445,573 |            |            |  |              |  |  | $ | 28,965,573 | 
|            |  |              |            |  |           |  |            |            |            |  |               | 



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



|                                             |  |              |             |   |      |   |             |  
|-------------------------------------------- |  | ------------ | ----------- | - | ---- | - | ----------- | -
|                                             |  | December 31, |            
|                                             |  |              |            
|                                             |  | 2004         |             |   | 2003 |  
|                                             |  |              |             |   |      |  
|Debt facility loans                          |  | $            | 3,135,512   |   |      | $ | 4,668,690   |  
|Related party note payable                   |  |              | 15,422,400  |   |      |   | 14,280,000  |  
|Capital lease obligations                    |  |              | 178,975     |   |      |   | 289,586     |  
|                                             |  |              |             |   |      |  
|Total long-term debt                         |  |              | 18,736,887  |   |      |   | 19,238,276  |  
|Less: current portion                        |  |              | (17,164,847 | ) |      |   | (15,891,604 | )
|                                             |  |              |             |   |      |  
|Total long-term debt, net of current portion |  | $            | 1,572,040   |   |      | $ | 3,346,672   |  
|                                             |  |              |             |   |      |  



Debt facility










F-23



---



##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)






Note Payable to Related Party




Capital Lease Obligations


Accounting for Leases.




|                         |  |   |             |  
|------------------------ |  | - | ----------- | -
|Year Ending December 31, |  |   |             |  
|2005                     |  | $ | 17,334,137  |  
|2006                     |  |   | 1,573,035   |  
|2007                     |  |   | 36,652      |  
|2008                     |  |   | 12,217      |  
|Thereafter               |  |   |            |  
|                         |  |   |            
|Total payment            |  |   | 18,956,041  |  
|Less: interest           |  |   | (219,154    | )
|                         |  |   |            
|Total debt               |  |   | 18,736,887  |  
|Less: current portion    |  |   | (17,164,847 | )
|                         |  |   |            
|Total long-term debt     |  | $ | 1,572,040   |  
|                         |  |   |            



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

Leases




F-24



---



##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)




|                         |                      |  |   |            | 
|------------------------ | -------------------- |  | - | ---------- | 
|Year Ending December 31, |                      |  |   |           
|                         | 2005                 |  | $ | 2,022,015  | 
|                         | 2006                 |  |   | 1,889,384  | 
|                         | 2007                 |  |   | 1,931,998  | 
|                         | 2008                 |  |   | 1,758,897  | 
|                         | 2009                 |  |   | 1,704,181  | 
|                         | Thereafter           |  |   | 8,041,094  | 
|                         |                      |  |  
|                         | Total lease payments |  | $ | 17,347,569 | 
|                         |                      |  |  







Agreements








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)








Litigation








F-27



---



##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)












F-28



---



##### 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


F-29



---



##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)




Viacord Guarantee Program


Accounting for Contingencies.




|                                                    |  |                     |        |  |      |   |        | 
|--------------------------------------------------- |  | ------------------- | ------ |  | ---- | - | ------ | 
|                                                    |  | For the Years Ended |       
|                                                    |  | December 31,        |       
|                                                    |  |                     |       
|                                                    |  | 2004                |        |  | 2003 |  
|                                                    |  |                     |        |  |      |  
|Balance at the beginning of the period              |  | $                   | 43,000 |  |      | $ | 5,000  | 
|Accrual for additional units sold during the period |  |                     | 30,000 |  |      |   | 38,000 | 
|                                                    |  |                     |        |  |      |  
|Balance at the end of the period                    |  | $                   | 73,000 |  |      | $ | 43,000 | 
|                                                    |  |                     |        |  |      |  

F-30



---



##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)




|    |                                                                                       
|--- | --------------------------------------------------------------------------------------
|10. | Redeemable Convertible Preferred Stock, Preferred Stock, and
    Stockholders Deficit



|                                             |                                                                                                                                                            |                                |             |            |      |   |             |            | 
|-------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------ | ----------- | ---------- | ---- | - | ----------- | ---------- | 
|                                             |                                                                                                                                                            | Carrying Value at December 31, |            
|                                             |                                                                                                                                                            |                                |            
|                                             |                                                                                                                                                            | 2004                           |             |            | 2003 |  
|                                             |                                                                                                                                                            |                                |             |            |      |  
|Series C, $0.01 par value                    |                                                                                                                                                            |                                |             |            |      |   |             |           
|                                             | Authorized, issued and outstanding; 919,220 shares                                                                                                         |                                | $           | 1,587,467  |      |   | $           | 1,469,871  | 
|Series D, $0.01 par value                    |                                                                                                                                                            |                                |             |            |      |   |             |           
|                                             | Authorized, issued and outstanding; 1,500,000 shares                                                                                                       |                                |             | 3,885,686  |      |   |             | 3,597,857  | 
|Series E, $0.01 par value                    |                                                                                                                                                            |                                |             |            |      |   |             |           
|                                             | Authorized, issued and outstanding; 1,983,334 shares                                                                                                       |                                |             | 9,171,726  |      |   |             | 8,492,339  | 
|Series F, $0.01 par value                    |                                                                                                                                                            |                                |             |            |      |   |             |           
|                                             | Authorized, issued and outstanding; 2,666,666 shares                                                                                                       |                                |             | 11,513,685 |      |   |             | 10,660,819 | 
|Series G, $0.01 par value                    |                                                                                                                                                            |                                |             |            |      |   |             |           
|                                             | Authorized, issued and outstanding; 3,666,667 shares                                                                                                       |                                |             | 15,831,322 |      |   |             | 14,658,631 | 
|Series H, $0.01 par value                    |                                                                                                                                                            |                                |             |            |      |   |             |           
|                                             | Authorized, issued and outstanding; 7,577,334 shares                                                                                                       |                                |             | 66,459,697 |      |   |             | 61,515,916 | 
|Series I, $0.01 par value                    |                                                                                                                                                            |                                |             |            |      |   |             |           
|                                             | Authorized, 5,575,000 shares; issued and outstanding;
    2,062,500, 2,624,854, and 2,624,854 shares at
    December 31, 2002, 2003 and 2004, respectively |                                |             | 25,975,325 |      |   |             | 24,074,390 | 
|Series J, $0.01 par value                    |                                                                                                                                                            |                                |             |            |      |   |             |           
|                                             | Authorized, 3,750,000 shares; issued and outstanding;
    2,190,000, and 2,190,000 shares at December 31, 2003
    and 2004, respectively                  |                                |             | 17,958,127 |      |   |             | 16,073,828 | 
|Series K, $0.01 par value                    |                                                                                                                                                            |                                |             |            |      |   |             |           
|                                             | Authorized, issued and outstanding;                                                                                                                        |                                |             |            |      |   |             |            | 
|                                             | 2,500,000, and 2,500,000 shares at December 31, 2003,
    and 2004, respectively                                                                           |                                |             | 22,789,840 |      |   |             | 21,597,786 | 
|                                             |                                                                                                                                                            |                                |             |            |      |  
|Total redeemable convertible preferred stock |                                                                                                                                                            | $                              | 175,172,875 |            |      | $ | 162,141,437 |           
|                                             |                                                                                                                                                            |                                |             |            |      |  

F-31



---



##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)




|                              |  |          |         |  |          |   |           |          |  |  |           |  |  |          |           |  |         |  |           |        |  |   |           |  |  |        |           |  |         |   |            |  |  |  |           |  |  |   |            | 
|----------------------------- |  | -------- | ------- |  | -------- | - | --------- | -------- |  |  | --------- |  |  | -------- | --------- |  | ------- |  | --------- | ------ |  | - | --------- |  |  | ------ | --------- |  | ------- | - | ---------- |  |  |  | --------- |  |  | - | ---------- | 
|                              |  | Series C |         |  | Series D |   |           | Series E |  |  | Series F  |  |  | Series G |          
|                              |  |          |         |  |          |   |           |          |  |  |           |  |  |          |          
|                              |  | Shares   |         |  | Amounts  |   |           | Shares   |  |  | Amounts   |  |  | Shares   |           |  | Amounts |  |           | Shares |  |   | Amounts   |  |  | Shares |           |  | Amounts |  
|                              |  |          |         |  |          |   |           |          |  |  |           |  |  |          |           |  |         |  |           |        |  |   |           |  |  |        |           |  |         |  
|Balance December 31, 2001     |  |          | 919,220 |  |          | $ | 1,242,271 |          |  |  | 1,500,000 |  |  | $        | 3,040,740 |  |         |  | 1,983,334 |        |  | $ | 7,268,522 |  |  |        | 2,666,666 |  |         | $ | 9,146,877  |  |  |  | 3,666,667 |  |  | $ | 12,576,961 | 
|Issuance of Shares            |  |          |        |  |          |   |          |          |  |  |          |  |  |          |          |  |         |  |          |        |  |   |          |  |  |        |          |  |         |   |           |  |  |  |          |  |  |   |           | 
|Accretion to Redemption Value |  |          |        |  |          |   | 118,726   |          |  |  |          |  |  |          | 290,609   |  |         |  |          |        |  |   | 594,755   |  |  |        |          |  |         |   | 697,585    |  |  |  |          |  |  |   | 995,846    | 
|                              |  |          |         |  |          |   |           |          |  |  |           |  |  |          |           |  |         |  |           |        |  |   |           |  |  |        |           |  |         |  
|Balance December 31, 2002     |  |          | 919,220 |  |          |   | 1,360,997 |          |  |  | 1,500,000 |  |  |          | 3,331,349 |  |         |  | 1,983,334 |        |  |   | 7,863,277 |  |  |        | 2,666,666 |  |         |   | 9,844,462  |  |  |  | 3,666,667 |  |  |   | 13,572,807 | 
|Issuance of Shares            |  |          |        |  |          |   |          |          |  |  |          |  |  |          |          |  |         |  |          |        |  |   |          |  |  |        |          |  |         |   |           |  |  |  |          |  |  |   |           | 
|Accretion to Redemption Value |  |          |        |  |          |   | 108,874   |          |  |  |          |  |  |          | 266,508   |  |         |  |          |        |  |   | 629,062   |  |  |        |          |  |         |   | 816,357    |  |  |  |          |  |  |   | 1,085,824  | 
|                              |  |          |         |  |          |   |           |          |  |  |           |  |  |          |           |  |         |  |           |        |  |   |           |  |  |        |           |  |         |  
|Balance December 31, 2003     |  |          | 919,220 |  |          |   | 1,469,871 |          |  |  | 1,500,000 |  |  |          | 3,597,857 |  |         |  | 1,983,334 |        |  |   | 8,492,339 |  |  |        | 2,666,666 |  |         |   | 10,660,819 |  |  |  | 3,666,667 |  |  |   | 14,658,631 | 
|                              |  |          |         |  |          |   |           |          |  |  |           |  |  |          |           |  |         |  |           |        |  |   |           |  |  |        |           |  |         |  
|Issuance of Shares            |  |          |        |  |          |   |          |          |  |  |          |  |  |          |          |  |         |  |          |        |  |   |          |  |  |        |          |  |         |   |           |  |  |  |          |  |  |   |           | 
|Accretion to Redemption Value |  |          |        |  |          |   | 117,596   |          |  |  |          |  |  |          | 287,829   |  |         |  |          |        |  |   | 679,387   |  |  |        |          |  |         |   | 852,866    |  |  |  |          |  |  |   | 1,172,691  | 
|                              |  |          |         |  |          |   |           |          |  |  |           |  |  |          |           |  |         |  |           |        |  |   |           |  |  |        |           |  |         |  
|Balance December 31, 2004     |  |          | 919,220 |  |          | $ | 1,587,467 |          |  |  | 1,500,000 |  |  | $        | 3,885,686 |  |         |  | 1,983,334 |        |  | $ | 9,171,726 |  |  |        | 2,666,666 |  |         | $ | 11,513,685 |  |  |  | 3,666,667 |  |  | $ | 15,831,322 | 
|                              |  |          |         |  |          |   |           |          |  |  |           |  |  |          |           |  |         |  |           |        |  |   |           |  |  |        |           |  |         |  

|                              |  |          |           |  |          |   |            |          |  |  |           |  |  |        |            |  |         |  |           |        |  |   |            |  |  |       |           |  |  |   |            |  |  |   |             | 
|----------------------------- |  | -------- | --------- |  | -------- | - | ---------- | -------- |  |  | --------- |  |  | ------ | ---------- |  | ------- |  | --------- | ------ |  | - | ---------- |  |  | ----- | --------- |  |  | - | ---------- |  |  | - | ----------- | 
|                              |  | Series H |           |  | Series I |   |            | Series J |  |  | Series K  |  |  |       
|                              |  |          |           |  |          |   |            |          |  |  |           |  |  |       
|                              |  | Shares   |           |  | Amounts  |   |            | Shares   |  |  | Amounts   |  |  | Shares |            |  | Amounts |  |           | Shares |  |   | Amounts    |  |  | Total |          
|                              |  |          |           |  |          |   |            |          |  |  |           |  |  |        |            |  |         |  |           |        |  |   |            |  |  |       |          
|Balance December 31, 2001     |  |          | 7,577,334 |  |          | $ | 52,849,978 |          |  |  | 1,875,000 |  |  | $      | 15,162,722 |  |         |  |          |        |  |   |           |  |  |       |          |  |  |   |           |  |  | $ | 101,288,071 | 
|Issuance of Shares            |  |          |          |  |          |   |           |          |  |  | 187,500   |  |  |        | 1,500,000  |  |         |  |          |        |  |   |           |  |  |       |          |  |  |   |           |  |  |   | 1,500,000   | 
|Accretion to Redemption Value |  |          |          |  |          |   | 4,099,367  |          |  |  |          |  |  |        | 1,326,718  |  |         |  |          |        |  |   |           |  |  |       |          |  |  |   |           |  |  |   | 8,123,606   | 
|                              |  |          |           |  |          |   |            |          |  |  |           |  |  |        |            |  |         |  |           |        |  |   |            |  |  |       |          
|Balance December 31, 2002     |  |          | 7,577,334 |  |          |   | 56,949,345 |          |  |  | 2,062,500 |  |  |        | 17,989,440 |  |         |  |          |        |  |   |           |  |  |       |          |  |  |   |           |  |  |   | 110,911,677 | 
|Issuance of Shares            |  |          |          |  |          |   |           |          |  |  | 562,354   |  |  |        | 4,498,832  |  |         |  | 2,190,000 |        |  |   | 15,622,160 |  |  |       | 2,500,000 |  |  |   | 21,597,786 |  |  |   | 41,718,778  | 
|Accretion to Redemption Value |  |          |          |  |          |   | 4,566,571  |          |  |  |          |  |  |        | 1,586,118  |  |         |  |          |        |  |   | 451,668    |  |  |       |          |  |  |   |           |  |  |   | 9,510,982   | 
|                              |  |          |           |  |          |   |            |          |  |  |           |  |  |        |            |  |         |  |           |        |  |   |            |  |  |       |          
|Balance December 31, 2003     |  |          | 7,577,334 |  |          |   | 61,515,916 |          |  |  | 2,624,854 |  |  |        | 24,074,390 |  |         |  | 2,190,000 |        |  |   | 16,073,828 |  |  |       | 2,500,000 |  |  |   | 21,597,786 |  |  |   | 162,141,437 | 
|                              |  |          |           |  |          |   |            |          |  |  |           |  |  |        |            |  |         |  |           |        |  |   |            |  |  |       |          
|Issuance of Shares            |  |          |          |  |          |   |           |          |  |  |          |  |  |        |           |  |         |  |          |        |  |   |           |  |  |       |          |  |  |   |           |  |  |   |            | 
|Accretion to Redemption Value |  |          |          |  |          |   | 4,943,781  |          |  |  |          |  |  |        | 1,900,935  |  |         |  |          |        |  |   | 1,884,299  |  |  |       |          |  |  |   | 1,192,054  |  |  |   | 13,031,438  | 
|                              |  |          |           |  |          |   |            |          |  |  |           |  |  |        |            |  |         |  |           |        |  |   |            |  |  |       |          
|Balance December 31, 2004     |  |          | 7,577,334 |  |          | $ | 66,459,697 |          |  |  | 2,624,854 |  |  | $      | 25,975,325 |  |         |  | 2,190,000 |        |  | $ | 17,958,127 |  |  |       | 2,500,000 |  |  | $ | 22,789,840 |  |  | $ | 175,172,875 | 
|                              |  |          |           |  |          |   |            |          |  |  |           |  |  |        |            |  |         |  |           |        |  |   |            |  |  |       |          



|                                  |                                                                                                                                |      |       |       |      |   |       |       | 
|--------------------------------- | ------------------------------------------------------------------------------------------------------------------------------ | ---- | ----- | ----- | ---- | - | ----- | ----- | 
|                                  |                                                                                                                                | 2004 |       |       | 2003 |  
|                                  |                                                                                                                                |      |       |       |      |  
|Series A, $0.01 par value         |                                                                                                                                |      |       |       |      |   |       |      
|                                  | Authorized, issued and outstanding 
    100,000 shares (liquidation preference of $100,000 at
    December 31, 2004 and 2003) |      | $     | 1,000 |      |   | $     | 1,000 | 
|Series B, $0.01 par value         |                                                                                                                                |      |       |       |      |   |       |      
|                                  | Authorized, issued and outstanding 
    82,857 shares (liquidation preference of $145,000 at
    December 31, 2004 and 2003   |      |       | 829   |      |   |       | 829   | 
|                                  |                                                                                                                                |      |       |       |      |  
|Total convertible preferred stock |                                                                                                                                | $    | 1,829 |       |      | $ | 1,829 |      
|                                  |                                                                                                                                |      |       |       |      |  





F-32



---



##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)


















F-33



---



##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)






Dividends






Liquidation, Distribution, or Winding-Up




Voting Rights




F-34



---



##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)


Conversion




Redemption




Common Stock






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









F-35



---



##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)










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





F-36



---



##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)




|                               |  |            |           |  |             |  |            |          |  |          |                |         |  |          |            |   |  |   |      | 
|------------------------------ |  | ---------- | --------- |  | ----------- |  | ---------- | -------- |  | -------- | -------------- | ------- |  | -------- | ---------- | - |  | - | ---- | 
|                               |  |            |           |  |             |  |            |          |  | Weighted |               
|                               |  | Number of  |           |  | Number of   |  |            |          |  |          |                | Average | 
|                               |  | Options    |           |  | Options     |  |            | Exercise |  |          | Aggregate      |         |  | Exercise |           
|                               |  | Authorized |           |  | Outstanding |  |            | Price    |  |          | Exercise Price |         |  | Price    |           
|                               |  |            |           |  |             |  |            |          |  |          |                |         |  |          |           
|Outstanding, December 31, 2001 |  |            | 4,000,000 |  |             |  | 3,561,008  |          |  | $        | 0.10-2.00      |         |  | $        | 3,066,894  |   |  | $ | 0.86 | 
|Authorized                     |  |            | 1,000,000 |  |             |  |            |          |  |          |                |         |  |          |            |   |  |   |      | 
|Granted                        |  |            |           |  |             |  | 1,383,468  |          |  |          | 2.00-5.00      |         |  |          | 5,407,790  |   |  |   | 3.91 | 
|Exercised                      |  |            |           |  |             |  | (102,362   | )        |  |          | 0.10-2.00      |         |  |          | (31,343    | ) |  |   | 0.31 | 
|Canceled                       |  |            |           |  |             |  | (466,362   | )        |  |          | 0.30-5.00      |         |  |          | (816,272   | ) |  |   | 1.75 | 
|                               |  |            |           |  |             |  |            |          |  |          |                |         |  |          |           
|Outstanding, December 31, 2002 |  |            | 5,000,000 |  |             |  | 4,375,752  |          |  |          | 0.10-5.00      |         |  |          | 7,627,069  |   |  |   | 1.74 | 
|Authorized                     |  |            | 1,000,000 |  |             |  |            |          |  |          |                |         |  |          |            |   |  |   |      | 
|Granted                        |  |            |           |  |             |  | 713,436    |          |  |          | 5.00           |         |  |          | 3,567,180  |   |  |   | 5.00 | 
|Exercised                      |  |            |           |  |             |  | (101,280   | )        |  |          | 0.15-5.00      |         |  |          | (54,009    | ) |  |   | 0.53 | 
|Canceled                       |  |            |           |  |             |  | (282,572   | )        |  |          | 0.30-5.00      |         |  |          | (1,096,129 | ) |  |   | 3.88 | 
|                               |  |            |           |  |             |  |            |          |  |          |                |         |  |          |           
|Outstanding, December 31, 2003 |  |            | 6,000,000 |  |             |  | 4,705,336  |          |  |          | 0.10-5.00      |         |  |          | 10,044,111 |   |  |   | 2.13 | 
|Authorized                     |  |            | 1,200,000 |  |             |  |            |          |  |          |                |         |  |          |            |   |  |   |      | 
|Granted                        |  |            |           |  |             |  | 903,500    |          |  |          | 5.00           |         |  |          | 4,517,500  |   |  |   | 5.00 | 
|Exercised                      |  |            |           |  |             |  | (89,915    | )        |  |          | 0.30-5.00      |         |  |          | (108,568   | ) |  |   | 1.21 | 
|Cancelled                      |  |            |           |  |             |  | (1,063,383 | )        |  |          | 0.30-5.00      |         |  |          | (4,308,492 | ) |  |   | 4.03 | 
|                               |  |            |           |  |             |  |            |          |  |          |                |         |  |          |           
|Outstanding, December 31, 2004 |  |            | 7,200,000 |  |             |  | 4,455,538  |          |  | $        | 0.30-5.00      |         |  | $        | 10,144,551 |   |  | $ | 2.28 | 
|                               |  |            |           |  |             |  |            |          |  |          |                |         |  |          |           
|Exercisable, December 31, 2002 |  |            |           |  |             |  | 1,233,069  |          |  | $        | 0.15-5.00      |         |  | $        | 719,246    |   |  | $ | 0.58 | 
|                               |  |            |           |  |             |  |            |          |  |          |                |         |  |          |           
|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 | 
|                               |  |            |           |  |             |  |            |          |  |          |                |         |  |          |           

|               |  |                                          |           |                        |                   |  |      |                  |  |   |           |  |  |                  |           |  |  |   |      | 
|-------------- |  | ---------------------------------------- | --------- | ---------------------- | ----------------- |  | ---- | ---------------- |  | - | --------- |  |  | ---------------- | --------- |  |  | - | ---- | 
|               |  |                                          |           | Options Exercisable at |                  
|               |  | Options Outstanding at December 31, 2004 |           |                        | December 31, 2004 | 
|               |  |                                          |           |                        |                   | 
|               |  |                                          |           | Weighted Average       |                   |  |      |                  | 
|               |  | Number of                                |           |                        | Remaining         |  |      | Weighted Average |  |   | Number of |  |  | Weighted Average |          
|Exercise Price |  | Shares                                   |           |                        | Contractual Life  |  |      | Exercise Price   |  |   | Shares    |  |  | Exercise Price   |          
|               |  |                                          |           |                        |                   |  |      |                  |  |   |           |  |  |                  |          
|$0.30          |  |                                          | 1,471,000 |                        |                   |  | 5.39 |                  |  | $ | 0.30      |  |  |                  | 1,171,000 |  |  | $ | 0.30 | 
|0.75           |  |                                          | 48,950    |                        |                   |  | 6.08 |                  |  |   | 0.75      |  |  |                  | 37,775    |  |  |   | 0.75 | 
|0.95           |  |                                          | 624,092   |                        |                   |  | 6.50 |                  |  |   | 0.95      |  |  |                  | 512,758   |  |  |   | 0.95 | 
|2.00           |  |                                          | 792,588   |                        |                   |  | 6.97 |                  |  |   | 2.00      |  |  |                  | 62,590    |  |  |   | 2.00 | 
|4.00           |  |                                          | 73,175    |                        |                   |  | 7.25 |                  |  |   | 4.00      |  |  |                  | 53,021    |  |  |   | 4.00 | 
|5.00           |  |                                          | 1,445,733 |                        |                   |  | 8.89 |                  |  |   | 5.00      |  |  |                  | 391,566   |  |  |   | 5.00 | 
|               |  |                                          |           |                        |                   |  |      |                  |  |   |           |  |  |                  |          
|               |  |                                          | 4,455,538 |                        |                   |  | 7.00 |                  |  | $ | 2.28      |  |  |                  | 2,228,710 |  |  | $ | 1.42 | 
|               |  |                                          |           |                        |                   |  |      |                  |  |   |           |  |  |                  |          





F-37



---



##### Table of Contents



ViaCell, Inc.


Notes to Consolidated Financial
Statements  (Continued)








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





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



FOOTNOTE DISCLOSURE


|                         |  |               |   |           |  |   |            |  |  |               |          |   |      |   |            |   |  |   |         | 
|------------------------ |  | ------------- | - | --------- |  | - | ---------- |  |  | ------------- | -------- | - | ---- | - | ---------- | - |  | - | ------- | 
|                         |  | Balance as of |   |           |  |   |            |  |  | Balance as of |         
|                         |  | December 31,  |   |           |  |   |            |  |  | December 31,  |         
|                         |  | 2003          |   | Additions |  |   | Writedowns |  |  | Payments      |          |   | 2004 |  
|                         |  |               |   |           |  |   |            |  |  |               |          |   |      |  
|Severance related        |  | $             |  |           |  | $ | 1,315,604  |  |  | $             |         |   |      | $ | (894,841   | ) |  | $ | 420,763 | 
|Contractual terminations |  |               |  |           |  |   | 295,833    |  |  |               |         |   |      |   | (290,292   | ) |  |   | 5,541   | 
|Facility related         |  |               |  |           |  |   | 1,333,823  |  |  |               | (852,831 | ) |      |   |           |   |  |   | 480,992 | 
|                         |  |               |   |           |  |   |            |  |  |               |          |   |      |   |           
|                         |  | $             |  |           |  | $ | 2,945,260  |  |  | $             | (852,831 | ) |      | $ | (1,185,133 | ) |  | $ | 907,296 | 
|                         |  |               |   |           |  |   |            |  |  |               |          |   |      |   |           

F-38



---



##### 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, 2004                 |  |                                       |         |   |         |   |        |         |  |   |         |   |  |   |         |  
|Total revenues                               |  | $                                     | 9,019   |   |         | $ | 9,676  |         |  | $ | 9,938   |   |  | $ | 9,641   |  
|Gross profit                                 |  | $                                     | 6,675   |   |         | $ | 11,604 |         |  | $ | 8,099   |   |  | $ | 7,790   |  
|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  | )       |  | $ | (3.50   | ) |  | $ | (3.06   | )
|                                             |  |                                       |         |   |         |   |        |         |  |   |         |  
|                                            
|Year ended December 31, 2003                 |  |                                       |         |   |         |   |        |         |  |   |         |   |  |   |         |  
|Total revenues                               |  | $                                     | 6,365   |   |         | $ | 7,196  |         |  | $ | 9,071   |   |  | $ | 9,248   |  
|Gross profit                                 |  | $                                     | 4,755   |   |         | $ | 5,361  |         |  | $ | 7,240   |   |  | $ | 4,125   |  
|Net loss attributable to common stockholders |  | $                                     | (10,175 | ) |         | $ | (9,735 | )       |  | $ | (30,538 | ) |  | $ | (14,436 | )
|                                             |  |                                       |         |   |         |   |        |         |  |   |         |  
|Net loss per share (basic and diluted)       |  | $                                     | (3.92   | ) |         | $ | (3.74  | )       |  | $ | (11.69  | ) |  | $ | (5.52   | )
|                                             |  |                                       |         |   |         |   |        |         |  |   |         |  



|    |                 
|--- | ----------------
|16. | Subsequent Event



F-39