Equity

9 Months Ended

Jun. 30, 2011

Equity [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

Equity

We provide long-term incentives to eligible officers, directors, and employees in the form of stock-based awards.  We maintain two stock award plans: the 2000 Stock Option Plan, or the 2000 Plan, and the 2010 Equity Incentive Plan, or the 2010 Equity Plan and, together with the 2000 Plan, the Stock Plans. The 2000 Plan expired in February 2010 and no additional shares are available for grant under this plan. We issue new shares of common stock to satisfy awards issued under our Stock Plans.

On June 14, 2011, our shareholders approved an increase in the number of stock-based awards that may be granted under the 2010 Equity Plan from 4,000,000 to 7,000,000 stock-based awards.

Stock Options

Most of our stock options vest and become exercisable over four to five years and have a contractual life of ten years. Certain stock options awarded are intended to qualify as incentive stock options pursuant to Section 422A of the Internal Revenue Code. The following tables summarize the activity related to stock options under the Stock Plans:

	Number of Shares		Weighted Average Exercise Price	Weighted Average Remaining Contractual Life (in years)
Outstanding as of September 30, 2010	8,722,125		$4.70	7.02
Granted	917,500
Exercised	(197,960	)
Forfeited	(200,276	)
Cancelled	(143,842	)
Outstanding as of June 30, 2011	9,097,547		$4.47	6.60
Exercisable as of June 30, 2011	5,388,106		$5.69	5.56
Vested and expected to vest as of June 30, 2011	8,623,099		$4.59	6.50

As of June 30, 2011	Number of Stock Options Outstanding			Options Exercisable
Exercise Price  of Stock Options	Number Outstanding	Weighted- Average Exercise Price	Weighted Average Remaining Contractual Life (in years)	Number Exercisable	Weighted- Average Exercise Price
$0.54 to $1.25	2,835,750	$1.19	8.29	499,867	$1.23
$1.26 to $5.76	3,140,098	$3.76	5.51	2,352,748	$3.94
$5.80 to $8.38	2,607,136	$8.05	6.14	2,127,203	$8.03
$8.49 to $12.57	514,563	$9.13	5.71	408,288	$9.14
Total	9,097,547	$4.47	6.60	5,388,106	$5.69

As of June 30, 2011, there was approximately $5.3 million of unrecognized stock-based compensation expense, net of estimated annual forfeitures, related to non-vested stock options granted under the Stock Plans which is expected to be recognized over an estimated weighted average life of 2.3 years.

Intrinsic value for stock options represents the “in-the-money” portion or the positive variance between a stock option's exercise price and the underlying stock price. The total intrinsic value related to stock options exercised during the three and nine months ended June 30, 2011 was approximately $20,000 and $176,000, respectively. No stock options were exercised during the nine months ended June 30, 2010. The intrinsic value related to fully vested and expected to vest stock options as of June 30, 2011 and 2010 was approximately $4.7 million and $5,000, respectively. The intrinsic value related to exercisable stock options as of June 30, 2011 and 2010 was approximately $1.1 million and $3,000, respectively.

Restricted Stock

The following tables summarize the activity related to restricted stock awards under the 2010 Equity Plan:

	Number of Shares		Weighted Average Grant Date Fair Value
Non-vested as of September 30, 2010	—		—
Granted	1,715,900		$1.45
Vested	—		—
Cancelled	(55,000	)	$1.42
Non-vested as of June 30, 2011	1,660,900		$1.45

As of June 30, 2011, there was approximately $1.8 million of remaining unamortized stock-based compensation expense associated with restricted stock awards, which will be expensed over a weighted average remaining service period of approximately 2.6 years.

Employee Stock Purchase Plan

We maintain an Employee Stock Purchase Plan, or ESPP, that provides employees an opportunity to purchase common stock through payroll deductions. The ESPP is a 6-month duration plan and the purchase price is set at 85% of the average high and low market price of the Company's common stock on either the first or last day of the participation period, whichever is lower, and contributions are limited to the lower of 10% of an employee's compensation or $25,000. We issue new shares of common stock to satisfy the issuance of shares under this stock-based compensation plan. On June 14, 2011, our shareholders approved an increase in the number of shares of common stock that may be granted under the ESPP from 4,500,000 shares to 7,000,000 shares. The amount of shares issued in the ESPP are as follows:

	Number of Common Stock Shares		Purchase Price per Share of Common Stock
Number of shares reserved for the ESPP	7,000,000
Number of shares issued for calendar years 2000 through 2008	(1,716,446	)	$0.88 - $40.93
Number of shares issued for calendar year 2009	(1,073,405	)	$0.92
Number of shares issued for calendar year 2010	(651,700	)	$0.74
Number of shares issued for calendar year 2011	(781,802	)	$0.71
Remaining number of shares reserved for the ESPP	2,776,647

Officer and Director Share Purchase Plan

On January 21, 2011, the Compensation Committee of the Board of Directors approved an Officer and Director Share Purchase Plan, or ODPP, which allows executive officers and directors to purchase shares of the Company's common stock at fair market value in lieu of salary or, in the case of directors, director fees. Eligible individuals may voluntarily participate in the ODPP by authorizing payroll deductions or, in the case of directors, deductions from director fees for the purpose of purchasing common stock. Elections to participate in the ODPP may only be made during open trading windows under our insider trading policy when the participant does not otherwise possess material non-public information concerning the Company. The Board of Directors has authorized 500,000 shares to be made available for purchase by officers and directors under the ODPP. As of June 30, 2011, 21,030 shares had been purchased under the ODPP.

Stock-based compensation

The effect of recording stock-based compensation expense was as follows:

(in thousands, except per share data)	For the Three Months Ended June 30,						For the Nine Months Ended June 30,
	2011			2010			2011			2010
Stock-based compensation expense by award type:
Employee stock options	$	2,223		$	1,994		$	3,945		$	6,927
Restricted stock awards	213			—			303			—
Employee stock purchase plan	207			101			419			417
Total stock-based compensation expense	$	2,643		$	2,095		$	4,667		$	7,344
Stock-based compensation expense by expense category:
Cost of revenue	$	498		$	474		$	754		$	1,349
Selling, general, and administrative	1,247			1,026			2,571			4,702
Research and development	898			595			1,342			1,293
Total stock-based compensation expense	$	2,643		$	2,095		$	4,667		$	7,344
Net effect on net loss per basic and diluted share	$	(0.03	)	$	(0.02	)	$	(0.05	)	$	(0.09	)

We also incur stock-based compensation expense related to other compensatory stock issuances which include a company-match in the form of common stock for the employees' 401(k) savings plan and outside director fees. For the three and nine months ended June 30, 2011, other compensatory stock expense totaled $0.3 million and $0.9 million, respectively. For the three and nine months ended June 30, 2010, other compensatory stock expense totaled $0.4 million and $0.9 million, respectively.

Valuation Assumptions

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option valuation model and the straight-line attribution approach using the following weighted-average assumptions. The option-pricing model requires the input of highly subjective assumptions, including the option's expected life and the price volatility of the underlying stock. The weighted-average grant date fair value of stock options granted during the three and nine months ended June 30, 2011 was $1.73 and $1.06, respectively. There were no stock options granted during the three months ended June 30, 2010. The weighted-average grant date fair value of stock options granted during the nine months ended June 30, 2010 was $0.77.

Assumptions used in Black-Scholes Option Valuation Model	For the Three Months Ended June 30,				For the Nine Months Ended June 30,
	2011		2010		2011		2010
Expected dividend yield	—		—		—		—
Expected stock price volatility	101.3	%	—	%	99.2	%	97.1	%
Risk-free interest rate	1.7	%	—	%	1.4	%	2.4	%
Expected term (in years)	5.0		—		4.9		4.6

Warrants

As of June 30, 2011 and September 30, 2010, 3,000,003 warrants were outstanding. On February 20, 2008, in conjunction with a private placement transaction, we issued 1,400,003 warrants representing the right to purchase up to an aggregate of 1,400,003 shares of the Company's common stock, or the 2008 Warrants. On October 1, 2009, we entered into an equity line of credit with Commerce Court Small Cap Value Fund, Ltd. wherein we issued three warrants representing the right to purchase up to an aggregate of 1,600,000 shares of the Company's common stock, or the 2009 Warrants, and together with the 2008 Warrants, the 2008 and 2009 Warrants.

During the quarter ended March 31, 2011, we determined that the 2008 Warrants should have been accounted for as a liability since these warrants met the definition of a derivative instrument and did not qualify for equity classification. The valuation of the warrants was based on a Monte Carlo option pricing model which resulted in a fair value of approximately $8.2 million, $1.8 million, $0.4 million, $0.1 million, and $0.2 million as of February 20, 2008, September 30, 2008, September 30, 2009, September 30, 2010 and December 31, 2010, respectively. During the three months ended March 31, 2011, we adjusted common stock and accumulated deficit, both equity-related accounts, by $8,218,000 and $8,022,000, respectively, and recorded the liability related to the fair value of the warrants as of January 1, 2011 of $196,000 to correct the initial accounting treatment of the warrants from equity to liability accounting as an out-of-period adjustment. We also reclassified the 2008 and 2009 Warrants from a non-current liability to a current liability during the quarter ended March 31, 2011 since these warrant agreements include a fundamental transaction clause whereby, in the event that another person becomes the beneficial owner of 50% of the outstanding shares of the Company's common stock, and if other conditions are met, we may be required to purchase the warrants from the holders by paying cash in an amount equal to the Black-Scholes value of the remaining unexercised portion of the warrants on the date of such fundamental transaction. See Footnote 15 - Fair Value Accounting for additional information related to the valuation of our warrants.

Private Placement

On May 31, 2011, we completed an equity private placement transaction with Shanghai Di Feng Investment Co. Ltd. pursuant to which we sold 4,407,603 shares of our common stock for approximately $9.7 million.

The common stock was offered solely to "accredited investors" as defined in Regulation D promulgated under the Securities Act of 1933, as amended, the Act, in reliance on the exemptions from registration afforded by Section 4(2) of the Act. In connection with this transaction, we also entered into a registration rights agreement pursuant to which we agreed to register the shares issued with the SEC on a Form S-1 registration statement within 60 days of the closing date of the transaction and to use commercially reasonable efforts to have the registration statement declared effective within 120 days of the closing date. We filed the registration statement on Form S-1 with the SEC on July 25, 2011. If the registration statement is not declared effective within specified time periods, or upon the occurrence of certain other events that would prevent Shanghai Di Feng Investment Co. Ltd. from selling the acquired shares, Shanghai Di Feng Investment Co. Ltd. would be entitled to receive liquidated damages, up to certain maximums and other limitations, in cash equal to 1.5% of the purchase price for each share that at such time remains subject to resale restrictions.

Future Issuances

As of June 30, 2011, we had 19.8 million shares of common stock reserved for future issuances as follows:

	Number of Common Stock Shares Available for Future Issuances
For future exercise of outstanding stock options	9,097,547
For future issuances to employees under the ESPP	2,776,647
For future stock-based awards under the 2010 Equity Plan	4,464,600
For future exercise of warrants	3,000,003
For future issuance under the ODPP	478,970
Total reserved	19,817,767