Document and Entity Information (USD $)	12 Months Ended
Document and Entity Information (USD $)	Dec. 31, 2011	Mar. 13, 2012	Jun. 30, 2011
Document and Entity Information
Entity Registrant Name	AASTROM BIOSCIENCES INC
Entity Central Index Key	0000887359
Document Type	10-K
Document Period End Date	Dec. 31, 2011
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Public Float			$ 105,712,991
Entity Common Stock, Shares Outstanding		38,755,642
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	FY

CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Dec. 31, 2011	Dec. 31, 2010
CURRENT ASSETS:
Cash and cash equivalents	$ 5,530	$ 31,248
Receivables, net	9	25
Other current assets	636	426
Total current assets	6,175	31,699
PROPERTY AND EQUIPMENT, NET	1,564	1,128
Total assets	7,739	32,827
CURRENT LIABILITIES:
Accounts payable and accrued expenses	2,963	2,900
Accrued employee benefits	1,042	796
Current portion of long-term debt	40	214
Warrant liabilities	16,625	25,954
Total current liabilities	20,670	29,864
LONG-TERM DEBT	40	41
COMMITMENTS AND CONTINGENCIES (Notes 7 and 8)
SHAREHOLDERS' EQUITY (DEFICIT):
Common Stock, no par value; shares authorized - 62,500 and 150,000 respectively; shares issued and outstanding - 38,616 and 38,635, respectively	228,877	225,102
Deficit accumulated during the development stage	(241,848)	(222,180)
Total shareholders' equity (deficit)	(12,971)	2,922
Total liabilities and shareholders' equity (deficit)	$ 7,739	$ 32,827

CONSOLIDATED BALANCE SHEETS (Parenthetical) In Thousands, unless otherwise specified	Dec. 31, 2011	Dec. 31, 2010
CONSOLIDATED BALANCE SHEETS
Common Stock, shares authorized	150,000	62,500
Common Stock, shares issued	38,635	38,616
Common Stock, shares outstanding	38,635	38,616

Total number of shares of common stock held by shareholders. May be all or portion of the number of common shares authorized. These shares represent the ownership interest of the common shareholders. Shares outstanding equals shares issued minus shares held in treasury and other adjustments, if any.

+ References+ Details

CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) In Thousands, except Per Share data, unless otherwise specified	6 Months Ended	12 Months Ended			273 Months Ended
	Dec. 31, 2010	Dec. 31, 2011	Jun. 30, 2010	Jun. 30, 2009	Dec. 31, 2011
REVENUES:
Product sales and rentals	$ 9	$ 18	$ 89	$ 182	$ 1,877
Research and development agreements					2,105
Grants	244				9,901
Total revenues	253	18	89	182	13,883
COSTS AND EXPENSES:
Cost of product sales and rentals	2	4	34	112	3,041
Research and development	8,609	21,330	12,658	11,289	190,705
Selling, general and administrative	3,265	7,724	5,201	4,950	84,848
Total costs and expenses	11,876	29,058	17,893	16,351	278,594
LOSS FROM OPERATIONS	(11,623)	(29,040)	(17,804)	(16,169)	(264,711)
OTHER INCOME (EXPENSE):
(Increase) decrease in fair value of warrants	(7,500)	9,329	3,171	(115)	12,289
Other income					1,249
Interest income	40	53	115	296	10,772
Interest expense	(5)	(10)	(40)	(73)	(479)
Total other income (expense)	(7,465)	9,372	3,246	108	23,831
NET LOSS	$ (19,088)	$ (19,668)	$ (14,558)	$ (16,061)	$ (240,880)
NET LOSS PER SHARE (Basic and Diluted) (in dollars per share)	$ (0.65)	$ (0.51)	$ (0.59)	$ (0.90)
Weighted average number of common shares outstanding (Basic) (in shares)	29,186	38,627	24,729	17,877
Weighted average number of common shares outstanding (Diluted) (in shares)	29,186	38,627	24,729	17,877

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) AND COMPREHENSIVE LOSS (USD $) In Thousands, unless otherwise specified	Total	Preferred Stock	Common Stock	Deficit Accumulated During the Development Stage	Series I Convertible Preferred Stock	Series I Convertible Preferred Stock Preferred Stock	Series I Convertible Preferred Stock Common Stock	Series III Convertible Preferred Stock	Series III Convertible Preferred Stock Preferred Stock	Series III Convertible Preferred Stock Common Stock
BALANCE at Mar. 24, 1989
Increase (Decrease) in Stockholders' Equity
Net loss and comprehensive loss	$ (187,566)			$ (187,566)
Issuance of common stock for cash, services and license rights	2,336		2,336
Issuance of common stock for cash, services and license rights (in shares)			149
Issuance of Series A through Series E Preferred Stock for cash, net of issuance costs of $342	34,218	34,218
Issuance of Series A through Series E Preferred Stock for cash, net of issuance costs of $342 (in shares)		9,452
Issuance of Series E Preferred Stock at $17.00 per Share		3,500	(3,500)
Issuance of Series E Preferred Stock at $17.00 per Share (in shares)		206
Exercise of stock options and stock purchase warrants, and issuance of stock under Employee Stock Purchase Plan	7,293		7,293
Exercise of stock options and stock purchase warrants, and issuance of stock under Employee Stock Purchase Plan (in shares)			1,088
Issuance of Stock Purchase Rights for cash in September 1995 and March 1996	3,500		3,500
Principal payment received under shareholder note Receivable	31		31
Initial public offering of common stock at $56.00 per share, net of issuance costs of $2,865	19,885		19,885
Initial public offering of common stock at $56.00 per share, net of issuance costs of $2,865 (in shares)			406
Conversion of preferred stock		(55,374)	55,374
Conversion of preferred stock (in shares)		(11,866)	2,720
Compensation expense related to stock options and warrants granted	8,379		8,379
Convertible Preferred Stock	9,930	9,930			4,689	4,540	149	2,810	2,720	90
Convertible Preferred Stock (in shares)		2,200				5	5		3	6
Issuance of common stock, net of issuance costs of $1,944, $1,265 and $10,215 during the period ended December 31, 2010 and June 30, 2010 and 2009, respectively	110,377		110,377
Issuance of common stock, net of issuance costs of $1,944, $1,265 and $10,215 during the period ended December 31, 2010 and June 30, 2010 and 2009, respectively (in shares)			15,491
Issuance of restricted stock, net of cancellations (in shares)			54
Issuance of stock under Direct Stock Purchase Plan	943		943
Issuance of stock under Direct Stock Purchase Plan (in shares)			94
Dividends and yields on preferred stock		466	502	(968)
Dividends and yields on preferred stock (in shares)			19
Repurchase and retirement of common shares outstanding	(73)		(73)
Repurchase and retirement of common shares outstanding (in shares)			(4)
BALANCE at Jun. 30, 2009	16,752		205,286	(188,534)
BALANCE (in shares) at Jun. 30, 2009			20,028
Increase (Decrease) in Stockholders' Equity
Net loss and comprehensive loss	(14,558)			(14,558)
Compensation expense related to stock options and warrants granted	710		710
Issuance of common stock, net of issuance costs of $1,944, $1,265 and $10,215 during the period ended December 31, 2010 and June 30, 2010 and 2009, respectively	11,877		11,877
Issuance of common stock, net of issuance costs of $1,944, $1,265 and $10,215 during the period ended December 31, 2010 and June 30, 2010 and 2009, respectively (in shares)			8,228
BALANCE at Jun. 30, 2010	14,781		217,873	(203,092)
BALANCE (in shares) at Jun. 30, 2010			28,256
Increase (Decrease) in Stockholders' Equity
Net loss and comprehensive loss	(19,088)			(19,088)
Exercise of stock options and stock purchase warrants, and issuance of stock under Employee Stock Purchase Plan	1,498		1,498
Exercise of stock options and stock purchase warrants, and issuance of stock under Employee Stock Purchase Plan (in shares)			360
Compensation expense related to stock options and warrants granted	1,043		1,043
Issuance of common stock, net of issuance costs of $1,944, $1,265 and $10,215 during the period ended December 31, 2010 and June 30, 2010 and 2009, respectively	4,688		4,688
Issuance of common stock, net of issuance costs of $1,944, $1,265 and $10,215 during the period ended December 31, 2010 and June 30, 2010 and 2009, respectively (in shares)			10,000
BALANCE at Dec. 31, 2010	2,922		225,102	(222,180)
BALANCE (in shares) at Dec. 31, 2010			38,616
Increase (Decrease) in Stockholders' Equity
Net loss and comprehensive loss	(19,668)			(19,668)
Exercise of stock options and stock purchase warrants, and issuance of stock under Employee Stock Purchase Plan	32		32
Exercise of stock options and stock purchase warrants, and issuance of stock under Employee Stock Purchase Plan (in shares)			19
Compensation expense related to stock options and warrants granted	3,743		3,743
BALANCE at Dec. 31, 2011	$ (12,971)		$ 228,877	$ (241,848)
BALANCE (in shares) at Dec. 31, 2011			38,635

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) AND COMPREHENSIVE LOSS (Parenthetical) (USD $) In Thousands, except Per Share data, unless otherwise specified	6 Months Ended	12 Months Ended	243 Months Ended
	Dec. 31, 2010	Jun. 30, 2010	Jun. 30, 2009
Series A Preferred Stock, issuance costs			$ 342
Series E Preferred Stock, par value (in dollars per share)			$ 17.00
Initial public offering of common stock, par value (in dollars per share)			$ 56.00
Initial public offering of common stock, issuance costs			2,865
Convertible Preferred Stock, rate of interest (in percentage)			5.50%
Convertible Preferred Stock, par value (in dollars per share)			$ 5.00
Convertible Preferred Stock, issuance costs			1,070
Common stock, issuance costs	1,944	1,265	10,215
Series I Convertible Preferred Stock
Convertible Preferred Stock, par value (in dollars per share)			$ 1,000
Convertible Preferred Stock, issuance costs			460
Series III Convertible Preferred Stock
Convertible Preferred Stock, par value (in dollars per share)			$ 1,000
Convertible Preferred Stock, issuance costs			$ 280

- Definition

Face amount or stated value per share of nonredeemable preferred stock (or preferred stock redeemable solely at the option of the issuer); generally not indicative of the fair market value per share.

+ References+ Details

CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended			273 Months Ended
	Dec. 31, 2010	Dec. 31, 2011	Jun. 30, 2010	Jun. 30, 2009	Dec. 31, 2011
OPERATING ACTIVITIES:
Net loss	$ (19,088)	$ (19,668)	$ (14,558)	$ (16,061)	$ (240,880)
Adjustments to reconcile net loss to net cash used for operating activities:
Depreciation and amortization	259	647	592	704	7,498
Loss on property held for resale					110
Amortization of discounts and premiums on investments				(30)	(1,704)
Stock compensation expense	1,043	3,743	710	1,362	13,885
Increase (decrease) in fair value of warrant liabilities	7,500	(9,329)	(3,171)	115	(12,289)
Inventory write downs and reserves					2,240
Stock issued pursuant to license agreement					3,300
Provision for losses on accounts receivable					204
Changes in operating assets and liabilities:
Receivables	(9)	16	42	(40)	(258)
Inventories			1	(1)	(2,335)
Other current assets	(43)	(210)	72	592	(616)
Accounts payable and accrued expenses	976	63	896	(54)	2,731
Accrued employee benefits	110	246	331	(392)	1,042
Net cash used for operating activities	(9,252)	(24,492)	(15,085)	(13,805)	(227,072)
INVESTING ACTIVITIES:
Organizational costs					(73)
Purchase of short-term investments			(5,000)		(217,041)
Maturities of short-term investments	5,000			6,000	218,745
Property and equipment purchases	(305)	(1,031)	(120)	(35)	(7,217)
Proceeds from sale of property held for resale					400
Net cash provided by (used for) investing activities	4,695	(1,031)	(5,120)	5,965	(5,186)
FINANCING ACTIVITIES:
Net proceeds from issuance of preferred stock					51,647
Net proceeds from issuance of common stock and warrants	21,805	32	17,526	8,534	184,708
Payments received for stock purchase rights					3,500
Restricted cash used as compensating balance			277	259
Proceeds from long-term debt					751
Payments on long-term debt	(119)	(227)	(479)	(445)	(2,800)
Other, net					(18)
Net cash provided by (used for) financing activities	21,686	(195)	17,324	8,348	237,788
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	17,129	(25,718)	(2,881)	508	5,530
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	14,119	31,248	17,000	16,492
CASH AND CASH EQUIVALENTS AT END OF PERIOD	31,248	5,530	14,119	17,000	5,530
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid	11	16	40	73	491
Equipment acquired under capital lease obligations	$ 69	$ 52			$ 1,295

Organization and Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2011

Organization and Summary of Significant Accounting Policies

Organization and Summary of Significant Accounting Policies

1. Organization and Summary of Significant Accounting Policies

Aastrom Biosciences, Inc. was incorporated in March 1989 (Inception), began employee-based operations in 1991, and is in the development stage. The Company operates its business in one reportable segment — research and product development involving the development of patient specific cell products for use in regenerative medicine.

Successful future operations are subject to several technical hurdles and risk factors, including satisfactory product development, timely initiation and completion of clinical trials, regulatory approval and market acceptance of the Company’s products and the Company’s continued ability to obtain future funding.

The Company is subject to certain risks related to the operation of its business and development of its products and product candidates. The Company believes that it will have adequate liquidity to finance its planned operations, including development of its products and product candidates, via its cash and investments on hand as of December 31, 2011 and the net proceeds of $37,800,000 from the financing that closed in March 2012, see note 10, until at least until December 31, 2012. While the Company’s budgeted cash usage and operating plan for 2012 does not currently contemplate taking additional actions to reduce the use of cash over the next twelve months, the Company could, if necessary, delay or forego certain budgeted discretionary expenditures such as anticipated hiring plans or certain non-critical research and development expenditures, as well as slow down or delay certain clinical trial activity (without jeopardizing our Phase 3 clinical trial for CLI). On a longer-term basis, the Company will need to raise additional funds in order to complete its product development programs, complete clinical trials needed to market its products, and commercialize these products. The Company cannot be certain that such funding will be available on favorable terms, if at all. Some of the factors that will impact the Company’s ability to raise additional capital and its overall success include: the rate and degree of progress for its product development, the rate of regulatory approval to proceed with clinical trial programs, the level of success achieved in clinical trials, the requirements for marketing authorization from regulatory bodies in the United States and other countries, the liquidity and market volatility of the Company’s equity securities, regulatory and manufacturing requirements and uncertainties, technological developments by competitors, and other factors. If the Company cannot raise such funds, it may not be able to develop or enhance products, take advantage of future opportunities, or respond to competitive pressures or unanticipated requirements, which would likely have a material adverse impact on the Company’s business, financial condition and results of operations.

Principles of Consolidation — The consolidated financial statements include the accounts of Aastrom and its wholly-owned subsidiary, Aastrom Biosciences GmbH, located in Berlin, Germany and Aastrom Biosciences, SL, located in Barcelona, Spain (collectively, the Company). All inter-company transactions and accounts have been eliminated in consolidation.

Fiscal Year Change — On November 11, 2010, the Board of Directors approved the change in the Company’s fiscal year end from June 30 to December 31. The change became effective at the end of the quarter ended December 31, 2010. All references to “years”, unless otherwise noted, refer to the 12-month fiscal year, which prior to July 1, 2010, ended on June 30, and beginning with January 1, 2011, ends on December 31, of each year. In addition, the Company presents the Consolidated Statement of Operations and Consolidated Statement of Cash Flows for the six month transition period ended December 31, 2010.

Cash and Cash Equivalents — Cash and cash equivalents include cash and highly liquid short-term investments with original maturities of three months or less.

Fair Value Measurements — Fair value is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is determined based upon assumptions that market participants would use in pricing an asset or liability. Fair value measurements are rated on a three-tier hierarchy as follows:

· Level 1 inputs: Quoted prices (unadjusted) for identical assets or liabilities in active markets;

· Level 2 inputs: Inputs, other than quoted prices included in Level 1 that are observable either directly or indirectly; and

· Level 3 inputs: Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions.

In many cases, a valuation technique used to measure fair value includes inputs from multiple levels of the fair value hierarchy described above. The lowest level of significant input determines the placement of the entire fair value measurement in the hierarchy.

See Note 5 for disclosures related to the fair value of the Company’s warrants. The Company does not have any other assets or liabilities on the balance sheet as of December 31, 2011 that are measured at fair value.

Diversity of Credit Risk — The Company has established guidelines relative to diversification and maturities of its investments in an effort to limit risk. These guidelines are periodically reviewed and modified to take advantage of trends in yields and interest rates. The Company has not experienced any losses on its cash equivalents.

Property and Equipment — Property and equipment is recorded at cost and depreciated or amortized using the straight-line method over the estimated useful life of the asset (primarily three to five years) or the underlying lease term for leasehold improvements, whichever is shorter. When assets are disposed of, the cost and accumulated depreciation are removed from the accounts. Repairs and maintenance are charged to expense as incurred.

Revenue Recognition — The Company’s revenue can be generated from grants and research agreements, collaborative agreements, licensing fees and product sales. Revenue from grants and research agreements is recognized on a cost reimbursement basis consistent with the performance requirements of the related agreement. Revenue from collaborative agreements is recognized when the scientific or clinical results stipulated in the agreement have been met and there are no ongoing obligations on the Company’s part. Revenue from product sales is recognized when title to the product transfers and there are no remaining obligations that will affect the customer’s final acceptance of the sale. Revenue from licensing fees under licensing agreements is recognized when there are no future performance obligations remaining with respect to such revenues. Payments received before all obligations are fulfilled are classified as deferred revenue.

Research and Development Costs — Research and development costs are expensed as incurred. These costs include direct research and development costs such as salaries, clinical trial expenses, consulting fees and other expenses that are specific to the Company’s research and development programs, as well as an allocation of indirect costs such as facility expenses, human resources and information technology expenses.

Stock-Based Compensation — Calculating stock-based compensation expense requires the input of highly subjective assumptions. We apply the Black-Scholes option-pricing model to determine the fair value of our stock options. Inherent in this model are assumptions related to expected stock-price volatility, option life, risk-free interest rate and dividend yield. We estimate the volatility of our common stock at the date of grant based on historical volatility. We estimate the expected life of options that vest solely on service using the “simplified method” provided for in the Securities and Exchange Commission Staff Accounting Bulletin No. 110. The “simplified method” is permitted for estimating the expected term of “plain-vanilla” stock options for which the historical stock option exercise experience is likely not indicative of future exercise patterns. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected life of the options. The dividend rate is based on our historical rate, which we anticipate to remain at zero. The assumptions used in calculating the fair value of stock options represent our best estimates, however these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and different assumptions are used, the stock-based compensation expense could be materially different in the future. In addition, we are required to estimate the expected forfeiture rate and only recognize expense for those stock options expected to vest over the service period. We estimate the forfeiture rate considering the historical experience of our stock-based awards. If the actual forfeiture rate is different from the estimate, we adjust the expense accordingly.

Income Taxes — Deferred tax assets are recognized for deductible temporary differences and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Net Loss Per Share — Net loss per common share is computed using the weighted-average number of common shares outstanding during the period. Common equivalent shares are not included in the diluted per share calculation where the effect of their inclusion would be anti-dilutive. The aggregate number of common equivalent shares (related to options and warrants) that have been excluded from the computations of diluted net loss per common share for the years ended June 30, 2009 and 2010 was approximately 2,228,200 and 12,200,500, respectively, and 19,599,700 for the six month transition period ended December 31, 2010 and 23,382,190 for the year ended December 31, 2011.

Use of Estimates — The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reported period. Actual results could differ from those estimates.

Financial Instruments — The Company’s financial instruments include cash equivalents and receivables for which the current carrying amounts approximate market value based upon their short-term nature.

Warrants — Warrants that could require cash settlement or have anti-dilution price protection provisions are recorded as liabilities at their estimated fair value at the date of issuance, with subsequent changes in estimated fair value recorded in other income (expense) in our statement of operations in each subsequent period. In general, warrants with anti-dilution provisions are measured using the Monte Carlo valuation model, while the others are measured using the Black-Scholes valuation model. Both of the methodologies are based, in part, upon inputs for which there is little or no observable market data, requiring the Company to develop its own assumptions. The assumptions used in calculating the estimated fair value of the warrants represent our best estimates, however these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and different assumptions are used, the warrant liability and the change in estimated fair value could be materially different.

Long-Lived Assets — The Company reviews its long-lived assets for impairment whenever an event or change in circumstances indicates that the carrying values of an asset may not be recoverable. If such an event or change in circumstances occurs and potential impairment is indicated because the carrying values exceed the estimated future undiscounted cash flows of the asset, the Company would measure the impairment loss as the amount by which the carrying value of the asset exceeds its fair value. No significant events or changes in circumstances were identified by the Company that would indicate that the carrying value of an asset was not recoverable for any of the periods presented in the accompanying financial statements.

Selected Balance Sheet Information

12 Months Ended

Dec. 31, 2011

Selected Balance Sheet Information

Selected Balance Sheet Information

2. Selected Balance Sheet Information

Property and Equipment (in thousands):

	December 31,			December 31,
	2010			2011
Machinery and equipment	$	2,729		$	3,041
Furniture and fixtures	469			678
Computer software	410			410
Computer equipment	414			467
Office equipment	75			105
Leasehold improvements	922			998
	5,019			5,699
Less accumulated depreciation	(3,891		)	(4,135		)
	$	1,128		$	1,564

Accounts Payable and Accrued Expenses (in thousands):

	December 31,		December 31,
	2010		2011
Accounts payable	$	2,083	$	2,239
Accrued clinical trial expense	281		—
Other accruals	536		724
	$	2,900	$	2,963

Accrued Employee Benefits (in thousands):

	December 31,		December 31,
	2010		2011
Vacation pay and other	$	239	$	398
Bonus	522		644
Severance	35		—
	$	796	$	1,042

Stock-Based Compensation

12 Months Ended

Dec. 31, 2011

Stock-Based Compensation

Stock-Based Compensation

3. Stock-Based Compensation

Stock Option and Equity Incentive Plans

The Company has historically had various stock incentive plans and agreements that provide for the issuance of nonqualified and incentive stock options as well as other equity awards. Such awards may be granted by the Company’s Board of Directors to certain of the Company’s employees, directors and consultants. Options granted under these plans expire no later than ten years from the date of grant, and other than those granted to non-employee directors, generally become exercisable over a four-year period, under a graded-vesting methodology, following the date of grant. The Company generally issues new shares upon the exercise of stock options.

In December 2009, the shareholders approved the 2009 Omnibus Incentive Plan (the 2009 Plan). The 2009 Plan provides incentives through the grant of stock options, stock appreciation rights, restricted stock awards and restricted stock units. The exercise price of stock options granted under the 2009 Plan shall not be less than the fair market value of the Company’s common stock on the date of grant. The 2009 Plan replaced the 1992 Stock Option Plan, the 2001 Stock Option Plan and the Amended and Restated 2004 Equity Incentive Plan (the Prior Plans), and no new awards will be granted under the Prior Plans. However, the expiration or forfeiture of options previously granted under the Prior Plans will increase the awards available for issuance under the 2009 Plan.

As of December 31, 2011, there were 408,527 awards available for future grant under the 2009 Plan.

Service-Based Stock Options

During the period ended December 31, 2011, the Company granted 4,310,550 service-based options to purchase common stock. These were granted with exercise prices equal to the fair value of the Company’s stock at the grant date, vest over four years (other than 505,975 non-employee director options which vest over three years) and have lives of ten years. The weighted average grant-date fair value of service-based options granted during the years ended June 30, 2009 and 2010 was $2.08 and $1.33, respectively, $0.99 for the six month transition period ended December 31, 2010, and $1.54 for the year ended December 31, 2011.

The net compensation costs recorded for the service-based stock options related to employees and directors (including the impact of the forfeitures) were $1,292,000 and $698,000 for the years ended June 30, 2009 and 2010, respectively, $1,043,000 for the six month transition period ended December 31, 2010 and $3,743,000 for the year ended December 31, 2011.

The fair value of each service-based stock option grant for the reported periods is estimated on the date of the grant using the Black-Scholes option-pricing model using the weighted average assumptions noted in the following table.

	Year Ended June 30,		Six Month Period December 31,	Year Ended December 31,
Service-Based Stock Options	2009	2010	2010	2011
Expected dividend rate	0%	0%	0%	0%
Expected stock price volatility	61.2% - 72.7%	70.2% - 72.8%	70.6% - 77.4%	72.1% - 78.9%
Risk-free interest rate	2.0% - 3.3%	2.4% - 3.1%	1.5% - 2.1%	1.4% - 2.7%
Expected life (years)	6.6	5.5 - 6.3	6.1 - 6.3	6.0 - 6.3

The following table summarizes the activity for service-based stock options for the indicated periods:

Service-Based Stock Options	Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at June 30, 2008	1,066,898		$	10.48	7.8	$	1,000
Granted	498,750		$	3.12
Forfeited or expired	(200,266	)	$	10.88
Outstanding at June 30, 2009	1,365,382		$	7.76	7.9	$	114,000
Granted	2,508,525		$	2.02
Forfeited or expired	(590,727	)	$	7.63
Outstanding at June 30, 2010	3,283,180		$	3.40	8.6	$	2,750
Granted	1,700,000		$	1.54
Exercised	(7,500	)	$	1.80		$	3,000
Forfeited or expired	(678,471	)	$	4.85
Outstanding at December 31, 2010	4,297,209		$	2.43	8.9	$	3,159,000
Granted	4,310,550		$	2.31
Exercised	(19,688	)	$	1.64		$	21,000
Forfeited or expired	(508,404	)	$	2.33
Outstanding at December 31, 2011	8,079,667		$	2.38	8.4	$	674,000
Exercisable at December 31, 2011	2,487,332		$	3.01	7.1	$	281,000

As of December 31, 2011, there was approximately $4,373,000, of total unrecognized compensation cost related to non-vested service-based stock options granted under the 2009 Plan and the Prior Plans. That cost is expected to be recognized over a weighted-average period of 3.0 years.

The total fair value of stock options vested during the years ended June 30, 2009 and 2010 was $1,678,000 and $1,084,000, respectively, $622,000 for the six month transition period ended December 31, 2010, and $2,182,000 for the year ended December 31, 2011.

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 123R

-Paragraph 64, 65, A240

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher AICPA

-Name Statement of Position (SOP)

-Number 93-6

-Paragraph 53

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef

-Publisher SEC

-Name Staff Accounting Bulletin (SAB)

-Number Topic 14

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-Name Accounting Standards Codification

-Topic 505

-SubTopic 50

-Section 50

-Paragraph 1

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-URI http://asc.fasb.org/extlink&oid=6418621&loc=d3e17540-113929

+ Details

Shareholders' Equity

12 Months Ended

Dec. 31, 2011

Shareholders' Equity

Shareholders' Equity

4. Shareholders’ Equity

In October 2008, the Company entered into a common stock purchase agreement with Fusion Capital Fund II, LLC (Fusion Capital) pursuant to which the Company was entitled to sell up to $15,000,000 of its common stock to Fusion Capital. In April 2009, the Company concluded the sales of the registered shares under this common stock purchase agreement. Under this purchase agreement the Company issued 2,836,583 shares of common stock for net proceeds of approximately $8,600,000. In connection with entering into this common stock purchase agreement, the Company issued to Fusion Capital 242,040 shares of its common stock as a commitment fee. The Company also issued to Fusion Capital an additional 139,229 shares as a pro rata commitment fee.

In June 2009, the Company entered into a $30,000,000 common stock purchase agreement with Fusion Capital. Pursuant to the purchase agreement with Fusion Capital, the Company had the right to sell to Fusion Capital up to $30,000,000 of its common stock over a 25-month period, which began on July 1, 2009. Such sales were to be made from time to time in amounts between $100,000 and $4,000,000, depending on certain conditions as set forth in the agreement. In consideration for entering into the purchase agreement, the Company issued 181,530 shares of its common stock to Fusion Capital as an initial commitment fee. During fiscal 2010, 1,718,538 shares of the Company’s common stock (including 51,432 shares related to its commitment fee) were issued to Fusion Capital for net proceeds of approximately $5,100,000. The Company terminated the agreement with Fusion Capital in November 2010.

On January 21, 2010, the Company completed the sale of 6,509,637 units (including 740,387 units sold to the underwriter pursuant to the exercise of its over-allotment option) at a public offering price of $2.08 per unit. Each unit consisted of (i) one share of the Company’s common stock, (ii) a Class A warrant to purchase 0.75 of a share of the Company’s common stock at an exercise price of $2.52 per share (as adjusted from $2.97 per share for the anti-dilution provision triggered in the December 2010 financing) and (iii) a Class B warrant to purchase 0.50 of a share of the Company’s common stock at an exercise price of $2.08 per share. The Company received approximately $12,400,000 in net proceeds from the sale of the units (including the partially exercised option of the over-allotment), after underwriting discounts and commissions and other offering expenses.

On December 15, 2010, the Company completed the sale of 10,000,000 units at a public offering price of $2.25 per unit. Each unit consisted of one share of the Company’s common stock and a warrant to purchase one share of the Company’s common stock at an exercise price of $3.22 per share. The Company received approximately $20,600,000 in net proceeds from the sale of the units, after underwriting discounts and commissions and other offering expenses. The warrants to purchase 10,000,000 shares of the Company’s common stock are exercisable for a five year period commencing on December 15, 2010.

On June 16, 2011, the Company entered into an At the Market Sales Agreement (ATM) with McNicoll, Lewis & Vlak LLC (MLV), pursuant to which the Company may sell shares of its common stock through MLV, as sales agent, in registered transactions from its shelf registration statement filed in November 2010, for aggregate proceeds of up to $20,300,000. Shares of common stock sold under the ATM are to be sold at market prices. The Company will pay up to 3% of the gross proceeds to MLV as a commission. As of December 31, 2011, the Company had not sold any shares under the ATM.

On August 11, 2011, the Board of Directors of the Company adopted a Shareholder Rights Plan, as set forth in the Shareholder Rights Agreement between the Company and the rights agent, the purpose of which is, among other things, to enhance the Board’s ability to protect shareholder interests and to ensure that shareholders receive fair treatment in the event any coercive takeover attempt of the Company is made in the future. The Shareholder Rights Plan could make it more difficult for a third party to acquire, or could discourage a third party from acquiring, the Company or a large block of the Company’s common stock. The following summary description of the Shareholder Rights Plan should be read in conjunction with the Company’s Shareholder Rights Plan, which was filed with the Securities and Exchange Commission as an exhibit to a Registration Statement on Form 8-A on August 12, 2011.

In connection with the adoption of the Shareholder Rights Plan, the Board of Directors of the Company declared a dividend distribution of one preferred stock purchase right (a “Right”) for each outstanding share of common stock to stockholders of record as of the close of business on August 15, 2011. In addition, one Right will automatically attach to each share of common stock issued between August 15, 2011 and the distribution date. The Rights currently are not exercisable and are attached to and trade with the outstanding shares of common stock. Under the Shareholder Rights Plan, the Rights become exercisable if a person or group becomes an “acquiring person” by acquiring 15% or more of the outstanding shares of common stock or if a person or group commences a tender offer that would result in that person owning 15% or more of the common stock. If a person or group becomes an “acquiring person,” each holder of a Right (other than the acquiring person and its affiliates, associates and transferees) would be entitled to purchase, at the then-current exercise price, such number of shares of the Company’s preferred stock which are equivalent to shares of common stock having a value of twice the exercise price of the Right. If the Company is acquired in a merger or other business combination transaction after any such event, each holder of a Right would then be entitled to purchase, at the then-current exercise price, shares of the acquiring company’s common stock having a value of twice the exercise price of the Right.

The Rights may be redeemed in whole, but not in part, at a price of $0.001 per Right (payable in cash, common stock or other consideration deemed appropriate by the Board of Directors) by the Board of Directors only until the earlier of (i) the time at which any person becomes an “acquiring person” or (ii) the expiration date of the Rights Agreement. Immediately upon the action of the Board of Directors ordering redemption of the Rights, the Right will terminate and thereafter the only right of the holders of Rights will be to receive the redemption price. The Rights will expire at the close of business on August 15, 2021, unless previously redeemed or exchanged by the Company as described above.

Dividends

No cash dividends have been declared or paid by the Company since its Inception.

- Definition

The entire disclosure for shareholders' equity, comprised of portions attributable to the parent entity and noncontrolling interest, if any, including other comprehensive income (as applicable). Including, but not limited to: (1) balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings; (2) accumulated balance for each classification of other comprehensive income and total amount of comprehensive income; (3) amount and nature of changes in separate accounts, including the number of shares authorized and outstanding, number of shares issued upon exercise and conversion, and for other comprehensive income, the adjustments for reclassifications to net income; (4) rights and privileges of each class of stock authorized; (5) basis of treasury stock, if other than cost, and amounts paid and accounting treatment for treasury stock purchased significantly in excess of market; (6) dividends paid or payable per share and in the aggregate for each class of stock for each period presented; (7) dividend restrictions and accumulated preferred dividends in arrears (in aggregate and per share amount); (8) retained earnings appropriations or restrictions, such as dividend restrictions; (9) impact of change in accounting principle, initial adoption of new accounting principle and correction of an error in previously issued financial statements; (10) shares held in trust for Employee Stock Ownership Plan (ESOP); (11) deferred compensation related to issuance of capital stock; (12) note received for issuance of stock; (13) unamortized discount on shares; (14) description, terms, and number of warrants or rights outstanding; (15) shares under subscription and subscription receivables, effective date of new retained earnings after quasi-reorganization and deficit eliminated by quasi-reorganization and, for a period of at least ten years after the effective date, the point in time from which the new retained dates; and (16) retroactive effective of subsequent change in capital structure.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 235

-SubTopic 10

-Section S99

-Paragraph 1

-Subparagraph (SX 210.4-08.(d),(e))

-URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690

Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 505

-SubTopic 10

-Section S99

-Paragraph 4

-Subparagraph (SAB TOPIC 4.C)

-URI http://asc.fasb.org/extlink&oid=6959260&loc=d3e187143-122770

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-Name Staff Accounting Bulletin (SAB)

-Number Topic 4

-Section C

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-Name Accounting Standards Codification

-Topic 310

-SubTopic 10

-Section S99

-Paragraph 2

-Subparagraph (SAB TOPIC 4.E)

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-Publisher FASB

-Name Accounting Standards Codification

-Glossary Preferred Stock

-URI http://asc.fasb.org/extlink&oid=6521494

Reference 14: http://www.xbrl.org/2003/role/presentationRef

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-Name Accounting Standards Codification

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Reference 15: http://www.xbrl.org/2003/role/presentationRef

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-Name Accounting Principles Board Opinion (APB)

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-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 16: http://www.xbrl.org/2003/role/presentationRef

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-Name Regulation S-X (SX)

-Number 210

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Reference 17: http://www.xbrl.org/2003/role/presentationRef

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-Name Regulation S-X (SX)

-Number 210

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-Name Accounting Research Bulletin (ARB)

-Number 43

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-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 19: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 129

-Paragraph 2, 3, 4, 5, 6, 7, 8

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 20: http://www.xbrl.org/2003/role/presentationRef

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-Name Regulation S-X (SX)

-Number 210

-Section 08

-Article 4

Reference 21: http://www.xbrl.org/2003/role/presentationRef

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-Name Statement of Financial Accounting Standard (FAS)

-Number 5

-Paragraph 15

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 22: http://www.xbrl.org/2003/role/presentationRef

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-Number 210

-Section 02

-Paragraph 29, 30, 31

-Article 5

Reference 23: http://www.xbrl.org/2003/role/presentationRef

-Publisher SEC

-Name Staff Accounting Bulletin (SAB)

-Number Topic 4

-Section E

+ Details

Stock Purchase Warrants

12 Months Ended

Dec. 31, 2011

Stock Purchase Warrants

Stock Purchase Warrants

5. Stock Purchase Warrants

The Company has historically issued warrants to purchase shares of the Company’s common stock in connection with certain of its common stock offerings. The following warrants were outstanding during the years ended June 30, 2009 and 2010, the six month transition period ended December 31, 2010, and the year ended December 31, 2011, and include provisions that could require cash settlement of the warrants or have anti-dilution price protection provisions requiring each to be recorded as liabilities of the Company at the estimated fair value at the date of issuance, with changes in estimated fair value recorded as non-cash income or expense in the Company’s statement of operations in each subsequent period:

(i) warrants to purchase an aggregate of 740,131 shares of the Company’s common stock, issued on October 17, 2007 in connection with the Company’s registered direct offering, exercisable from April 18, 2008 through April 17, 2013 at an exercise price of $12.72 per share, all of which remained outstanding as of December 31, 2011;

(ii) Class A warrants to purchase an aggregate of 4,882,228 shares of the Company’s common stock, issued on January 21, 2010 in connection with the Company’s registered public offering, exercisable for a five year period commencing on July 21, 2010 at an exercise price of $2.52 per share (as adjusted from $2.97 per share for the anti-dilution provision triggered in the December 2010 financing), 4,525,978 of which remained outstanding as of December 31, 2011; and

(iii) warrants to purchase an aggregate of 10,000,000 shares of the Company’s common stock, issued on December 15, 2010 in connection with the Company’s registered public offering, exercisable for a five year period commencing on December 15, 2010 at an exercise price of $3.22 per share, all of which remained outstanding as of December 31, 2011.

All of the warrants listed above could require net cash settlement in the event that registered shares are not available at the time of exercise of such warrant. The Class A warrants and the December 2010 warrants also contain anti-dilution provisions that adjust the exercise price of the warrant if the Company issues or sells, or is deemed to have issued or sold, any shares of its common stock or securities exercisable or convertible into shares of common stock for no consideration or for a consideration per share less than the applicable exercise price in effect immediately prior to the time of such issue or sale. In the event of such a subsequent issuance of common stock of the Company, (i) the exercise price of the Class A warrants would be adjusted to a point between the current exercise price per share of such Class A warrant and the price per share at which the new shares of common stock of the Company are being issued based on a weighted average calculation as outlined in the Class A warrant agreement, and (ii) the exercise price of the December 2010 warrants would be adjusted to the price per share at which the new shares of common stock of the Company are being issued. Notwithstanding the foregoing, there are certain issuances of the Company that would not trigger the anti-dilution provisions of the Class A warrants or the December 2010 warrants, including but not limited to, issuances under any duly authorized Company stock option, restricted stock plan or stock purchase plan whether now existing or hereafter approved by the Company and its stockholders in the future, or as an inducement grant to employees, consultants, directors or officers. The December 2010 warrants also contain a feature that allows the warrant holder to put the warrants back to the Company and receive cash in the event of a fundamental transaction, such as a change in control of the Company or a sale of all or substantially all of its assets. The value received by the warrant holder upon exercise of the put right is based on a Black-Scholes model using a defined set of inputs outlined in the December 2010 warrant agreement.

The Class A warrants and the December 2010 warrants are measured using the Monte Carlo valuation model, while the other warrants listed above are measured using the Black-Scholes valuation model. Both of the methodologies are based, in part, upon inputs for which there is little or no observable market data, requiring the Company to develop its own assumptions. The assumptions used in calculating the estimated fair value of the warrants represent the Company’s best estimates; however, these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and different assumptions are used, the warrant liabilities and the change in estimated fair value of the warrants could be materially different.

Inherent in both the Monte Carlo and Black-Scholes valuation models are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its common stock based on historical volatility that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero.

The Monte Carlo model is used for the Class A warrants and the December 2010 warrants to appropriately value the potential future exercise price adjustments triggered by the anti-dilution provisions as well as the value of the put feature of the December 2010 warrants. These both require Level 3 inputs which are based on the Company’s estimates of the probability and timing of potential future financings and fundamental transactions. The other assumptions used by the Company are summarized in the following tables for warrants that were outstanding as of any of the balance sheet dates presented on our consolidated balance sheets:

October 2007 Warrants	December 31, 2010			December 31, 2011
Closing stock price	$	2.56		$	1.82
Expected dividend rate	0		%	0		%
Expected stock price volatility	100.3		%	93.6		%
Risk-free interest rate	0.6		%	0.1		%
Expected life (years)	2.25			1.25

January 2010 Class A Warrants	December 31, 2010			December 31, 2011
Closing stock price	$	2.56		$	1.82
Expected dividend rate	0		%	0		%
Expected stock price volatility	79.6		%	86.1		%
Risk-free interest rate	2.0		%	0.5		%
Expected life (years)	4.50			3.50

December 2010 Warrants	December 31, 2010			December 31, 2011
Closing stock price	$	2.56		$	1.82
Expected dividend rate	0		%	0		%
Expected stock price volatility	78.0		%	83.6		%
Risk-free interest rate	2.0		%	0.6		%
Expected life (years)	4.96			3.96

The following table summarizes the change in the estimated fair value of the Company’s warrant liabilities (in thousands):

Warrant Liabilities
Balance at June 30, 2010	$	3,010
Warrants issued	15,868
Warrants exercised	(424		)
Increase in fair value	7,500
Balance at December 31, 2010	25,954
Decrease in fair value	(9,329		)
Balance at December 31, 2011	$	16,625

Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes

Income Taxes

6. Income Taxes

A reconciliation of income taxes computed using the federal statutory rate to the taxes reported in our consolidated statements of operations is as follows (in thousands):

	Year Ended June 30,						Six Months Ended December 31,			December 31,
	2009			2010			2010			2011
Loss before income taxes	$	16,061		$	14558		$	19,088		$	19,668
Federal statutory rate	34		%	34		%	34		%	34		%
Taxes computed at federal statutory rate	(5,461		)	(4,950		)	(6,490		)	(6,687		)
Loss attributable to foreign operations	437			116			—			—
Warrants	41			(1076		)	2,550			(3,172		)
Nondeductible stock compensation	—			—			—			1,559
Michigan business tax repeal	—			—			—			1,214
Other	79			136			397			336
Change in valuation allowance	4,904			5,776			3,543			6,750
Reported income taxes	$	—		$	—		$	—		$	—

Deferred tax assets consist of the following (in thousands):

	December 31,			December 31,
	2010			2011
Net operating loss carryforwards	$	46,533		$	53,224
Research and development credit carryforwards	1,600			1,600
Employee benefits and stock compensation	1,178			1,167
Other, net	294			364
Total deferred tax assets	49,605			56,355
Valuation allowance	(49,605		)	(56,355		)
Net deferred tax assets	$	—		$	—

As of December 31, 2011, the Company’s U.S. federal tax net operating loss and tax credit carryforwards are $156,542,000 and $1,600,000, respectively. These net operating loss carryforwards will expire between 2012 and 2031. The tax credit carryforwards will expire between 2022 and 2030. Effective January 1, 2012, the Michigan Business Tax (MBT) has been repealed. As a result of this repeal, the MBT net operating loss of $65,520,000 will not carry forward and has been derecognized.

The Company’s net operating losses are subject to the limitations imposed under section 382 of the Internal Revenue Code. These limits are triggered when a change in control occurs, and are computed based upon several variable factors including the share price of the Company’s common stock on the date of the change in control. A change in control is generally defined as a cumulative change of 50% or more in the ownership positions of certain stockholders during a rolling three year period. Based on common stock issuances over the Company’s history and the likelihood of additional issuances, it is possible that the use of the Company’s existing net operating losses will be limited. If a limitation occurs, it is likely that a significant portion of our net operating losses will expire unutilized regardless of the amount of future profitability.

Due to the historical losses incurred by the Company, a full valuation allowance for deferred tax assets, including the deferred tax assets for the aforementioned net operating losses and credits, has been provided since they are not more likely than not to be realized. If the Company achieves profitability, these deferred tax assets may be available to offset future income taxes. The increase in the valuation allowance was $3,543,000 and $6,750,000 for the six month transition period ended December 31, 2010 and the year ended December 31, 2011, respectively.

The Company assesses uncertain tax positions in accordance with the provisions of Financial Accounting Standards Board Accounting Standards Codification (ASC) 740-10-5, “Accounting for Uncertain Tax Positions.” This pronouncement prescribes a recognition threshold and measurement methodology for recording within the financial statements uncertain tax positions taken, or expected to be taken, in the Company’s income tax returns. As of December 31, 2010 and December 2011, the Company had an unrecognized tax benefit of $2,100,000. There were no increases, decreases, or settlements related to uncertain tax positions in 2010 or 2011. Income tax expense would be reduced by zero if the gross unrecognized tax benefits were recognized due to the valuation allowance. It is not anticipated that the unrecognized tax benefits will significantly increase or decrease within the next twelve months.

The Company files U.S. federal and Michigan income tax returns. Due to the Company’s net operating loss carryforwards, Federal income tax returns from incorporation are still subject to examination. Michigan tax returns for the year ended June 30, 2007 and forward are subject to examination.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher SEC

-Name Regulation S-X (SX)

-Number 210

-Section 08

-Paragraph h

-Article 4

Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 109

-Paragraph 136, 172

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

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+ Details

Licenses, Royalties and Collaborative Agreements and Commitments

12 Months Ended

Dec. 31, 2011

Licenses, Royalties and Collaborative Agreements and Commitments

Licenses, Royalties and Collaborative Agreements and Commitments

7. Licenses, Royalties and Collaborative Agreements and Commitments

University of Michigan — In August 1989, the Company entered into a research agreement with the University of Michigan (the University). In March 1992, and as provided for under the research agreement, the Company also entered into a license agreement for the technology developed under the research agreement. The license agreement, as amended, provides for a royalty to be paid to the University equal to 2% of net sales of products containing the licensed technology sold by the Company. Such royalties have been nominal since Inception. This license agreement will expire in 2014.

Corning Incorporated — In December 2002, the Company entered into an agreement with Corning Incorporated (Corning) that granted Corning an exclusive sublicense relating to the Company’s cell transfection technology. Under the terms of the agreement, the Company retains exclusive rights to the applications of the technologies involving cells for therapeutic applications. In addition, the agreement provides for future royalty payments on net sales of licensed products sold under the sublicense amounting to 5% of such sales up to $50,000,000. However, the Company does not expect to receive material revenue from this source for several years, if ever.

RealBio Technologies — In May 2009, the Company entered into an agreement with RealBio Technologies, Inc. (RealBio) that granted RealBio an exclusive license to utilize our technology outside of the Company’s core area of focus - human regenerative medicine. In return for this license, the Company received a minority equity interest in RealBio, which was not material as of December 31, 2011.

Manufacture, Supply and Other Agreements — The Company has entered into various agreements relating to the manufacture of its products and the supply of certain components. If the manufacturing or supply agreements expire or are otherwise terminated, the Company may not be able to identify and obtain ancillary materials that are necessary to develop its product and such expiration and termination could have a material effect on the Company’s business.

Commitments, Contingencies and Debt

12 Months Ended

Dec. 31, 2011

Commitments, Contingencies and Debt

Commitments, Contingencies and Debt

8. Commitments, Contingencies and Debt

During 2007 the Company entered into a new operating lease with Domino’s Farms Office Park, LLC, for approximately 30,000 square feet. This lease has a noncancelable term of six years, which began on May 14, 2007, and has two five-year market value renewals that the Company, at its option, can exercise six months prior to May 14, 2013 and May 14, 2018. The Company’s leased facility includes a Class 100,000 modular manufacturing clean room, laboratories and office space. The lease also provides the Company the right of first refusal on certain additional space.

As of December 31, 2011, future minimum payments related to our operating and capital leases and long-term debt are as follows (in thousands):

			Payments Due by Period
Contractual Obligations	Total		2012		2013		2014		2015		More then 5 Years
Operating leases	$	1,502	$	1,124	$	378	$	—	$	—	$	—
Capital leases	80		40		34		6		—		—
Total	$	1,582	$	1,164	$	412	$	6	$	—	$	—

Rent expense for the years ended June 30, 2009 and 2010, six month transition period ended December 31, 2010, year ended December 31, 2011 and for the period from March 24, 1989 (Inception) to December 31, 2011, was $1,153,000, $1,175,000, $548,000, $1,099,000, and $12,092,000 respectively.

- Definition

The entire disclosure for commitments and contingencies.

+ References

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-Name FASB Interpretation (FIN)

-Number 14

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-Name Accounting Standards Codification

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+ Details

Employee Savings Plan

12 Months Ended

Dec. 31, 2011

Employee Savings Plan

Employee Savings Plan

9. Employee Savings Plan

The Company has a 401(k) savings plan that allows participating employees to contribute a portion of their salary, subject to annual limits and minimum qualifications. The Board may, at its sole discretion, approve Company matching contributions to the plan. The Company made contributions of $195,000 and $200,000 for the years ended June 30, 2009 and 2010, respectively, $88,000 for the six month transition period ended December 31, 2010, $159,000 for the year ended December 31, 2011 and $1,704,000 for the period from March 24, 1989 (Inception) to December 31, 2011.

- Definition

The entire disclosure for pension and other postretirement benefits.

+ References

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-Number FAS88

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+ Details

Subsequent Events

12 Months Ended

Dec. 31, 2011

Subsequent Events

Subsequent Events

10. Subsequent Events

On March 9, 2012, the Company completed the sale of 12,308 shares of Series B convertible preferred stock at an offering price of $3,250 per share. We received approximately $37,800,000 in net proceeds from the sale of the shares, after offering expenses. The Series B preferred stock consists of Series B-1 non-voting convertible preferred stock, which was issued at the closing and Series B-2 voting convertible preferred stock. The Series B-1 non-voting convertible preferred stock will not be entitled to vote on matters on which the common shareholders are generally entitled to vote. The Series B-2 preferred stock will be entitled to vote with the holders of the common stock as a single class, with each share of Series B-2 voting convertible preferred stock having the number of votes equal to the number of shares of common stock issuable upon conversion of such Series B-2 preferred stock. Any holder of Series B-1 preferred stock may exchange its shares for shares of Series B-2 preferred stock on a one-for-one basis if the shareholder approval required in accordance with Nasdaq Marketplace Rule 5635(b) has been obtained and subject to certain terms and limitations. The Series B preferred stock will, with respect to dividend rights and rights on liquidation, winding-up and dissolution, rank on parity with any other class or series of the Company capital stock that we may issue in the future which is designated as being on parity with the Series B preferred stock, and rank senior to our common stock and Series A preferred stock. The Series B preferred stock is convertible, at the option of the holder thereof at any time after the five year anniversary of the closing of the offering, into shares of our common stock at a conversion price of $3.25 per share of common stock, subject to the Company obtaining any shareholder approval required in accordance with Nasdaq Marketplace Rule 5635(b). At any time after the five year anniversary of issuance, the Company may elect to convert any or all outstanding shares of Series B preferred stock into shares of our common stock, subject to certain limitations. Dividends on the Series B preferred stock will be cumulative and compound daily, at a rate of 11.5% per annum, payable upon conversion, liquidation, redemption or other similar events, and payable in Series B preferred stock until the five year anniversary of issuance. Following the five year anniversary of issuance and until the earlier of the tenth anniversary of the closing of the offering and the date no Series B preferred stock remain outstanding, dividends will accrue at a rate of 8% per annum and will be payable in cash or Series B preferred stock, at our option. Unless prohibited by Michigan law governing distributions to shareholders, the Series B-1 preferred stock shall be redeemable at the option of holder of the Series B-1 preferred stock commencing at any time after the five year anniversary of issuance, liquidation, winding up, dissolution or other similar events, subject to certain terms and limitations.

Quarterly Financial Data (Unaudited)

12 Months Ended

Dec. 31, 2011

Quarterly Financial Data (Unaudited)

Quarterly Financial Data (Unaudited)

11. Quarterly Financial Data (Unaudited)

The following is a summary of the Company’s quarterly consolidated results of operations (unaudited) for the year ended December 31, 2011 and 2010. The sum of quarterly net loss per share, basic and diluted, may not equal total net loss per share, basic and diluted, due to variation in shares outstanding. (in thousands per share)

Year Ended December 31, 2011	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Fiscal Year
Revenues	$	9		$	—		$	9		$	—		$	18
Loss from operations	(6,260		)	(7,507		)	(7,439		)	(7,834		)	(29,040		)
Net loss	(4,988		)	(9,957		)	(1,934		)	(2,789		)	(19,668		)
Net loss per common share	$	(0.13	)	$	(0.26	)	$	(0.05	)	$	(0.07	)	$	(0.51	)

Net loss includes the (increase) / decrease in fair value of warrants of $1,254,000, ($2,465,000), $5,496,000, $5,044,000 and $9,329,000 for the first quarter, second quarter, third quarter, fourth quarter and fiscal year, respectively.

Year Ended December 31, 2010	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Fiscal Year
Revenues	$	—		$	—		$	—		$	253		$	253
Loss from operations	(4,263		)	(5,140		)	(5,853		)	(5,770		)	(21,026		)
Net loss	(2,679		)	(3,767		)	(5,932		)	(13,156		)	(25,534		)
Net loss per common share	$	(0.10	)	$	(0.13	)	$	(0.21	)	$	(0.44	)	$	(0.90	)

Net loss includes the (increase) / decrease in fair value of warrants of $1,559,000, $1,348,000, ($99,000), ($7,401,000) and ($4,593,000) for the first quarter, second quarter, third quarter, fourth quarter and fiscal year, respectively.

- Definition

The entire disclosure for the quarterly financial data in the annual financial statements. The disclosure may include a tabular presentation of financial information for each fiscal quarter for the current and previous year, including revenues, gross profit, income or loss before extraordinary items and earnings per share data. It also includes an indication if the information in the note is unaudited, comments on the aggregate effect of year-end adjustments, and an explanation of matters or transactions that affect comparability or are pertinent to an understanding of the information furnished.

+ References+ Details