Equity

6 Months Ended

Mar. 31, 2013

Equity [Abstract]

Equity

Equity

Stock Sale

During August 2012, we filed a shelf registration statement on Form S-3 with the SEC pursuant to which we may, from time to time, sell up to an aggregate of $50 million of our common or preferred stock, warrants or debt securities. On August 23, 2012, the registration statement was declared effective by the SEC, which will allow us to access the capital markets for the three year period following this effective date. On September 28, 2012, we entered into an Underwriting Agreement with B. Riley & Co., LLC (the “Underwriter”) pursuant to which we agreed to sell and the Underwriter agreed to purchase 1,593,400 shares of our common stock at a price per share of $5.19. We also granted the Underwriter a 30-day option to purchase up to 239,010 additional shares of common stock at the same price per share. On October 3, 2012 we sold 1,832,410 shares of common stock for net proceeds of $9.5 million.

Equity Plans

We provide long-term incentives to eligible officers, directors, and employees in the form of equity-based awards.  We maintain three equity incentive compensation plans, collectively described below as our Equity Plans:

• the 2000 Stock Option Plan (2000 Plan),

• the 2010 Equity Incentive Plan (2010 Equity Plan),

• the 2012 Equity Incentive Plan (2012 Equity Plan).

We issue new shares of common stock to satisfy awards issued under our Equity Plans.

Stock Options

Most of our stock options vest and become exercisable over a four to five year period and have a contractual life of 10 years. Certain stock options awarded are intended to qualify as incentive stock options pursuant to Section 422A of the Internal Revenue Code.

The following table summarizes stock option activity under the Equity Plans for the six months ended March 31, 2013:

	Number of Shares		Weighted Average Exercise Price	Weighted Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value (*) (in thousands)
Outstanding as of September 30, 2012	2,032,215		$17.76
Granted	35,400		$5.11
Exercised	(76,179	)	$4.94		$	92
Forfeited	(44,088	)	$7.66
Expired	(178,515	)	$20.48
Outstanding as of March 31, 2013	1,768,833		$18.04	4.80
Exercisable as of March 31, 2013	1,456,747		$20.73	4.19	$	365
Vested and expected to vest as of March 31, 2013	1,731,105		$18.32	4.72	$	634

(*) 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.

As of March 31, 2013, there was approximately $0.8 million of unrecognized stock-based compensation expense, net of estimated forfeitures, related to non-vested stock options granted under the Equity Plans which is expected to be recognized over an estimated weighted average life of 2.2 years.

Valuation Assumptions

The fair value of each stock option grant was estimated on the date of grant using the Black-Scholes option valuation model, adhering to the straight-line attribution approach using the following weighted-average assumptions, of which the expected term and stock price volatility rate are highly subjective:

	For the Three Months Ended March 31,					For the Six Months Ended March 31,
	2013		2012			2013			2012
Black-Scholes weighted average assumptions:
Expected dividend rate	—	%	—		%	—		%	—		%
Expected stock price volatility rate	96.5	%	103.9		%	96.9		%	105.2		%
Risk-free interest rate	1.1	%	1.0		%	1.0		%	0.9		%
Expected term (in years)	6.0		5.0			6.0			5.0
Weighted average grant date fair value per share of stock options granted:	$4.28		$	3.46		$	3.94		$	3.23

Restricted Stock

Restricted stock awards (RSAs) and restricted stock units (RSUs) granted under the 2010 Equity Plan and 2012 Equity Plan typically vest over 3 years and are subject to forfeiture if employment terminates prior to the lapse of the restrictions. RSAs are considered issued and outstanding shares on the grant date and have the same dividend and voting rights as other common stock. RSUs are not considered issued or outstanding common stock until they vest.

The following table summarizes the activity related to RSAs and RSUs for the six months ended March 31, 2013:

Restricted Stock Activity	Restricted Stock Awards			Restricted Stock Units
	Number of Shares		Weighted Average Grant Date Fair Value	Number of Shares		Weighted Average Grant Date Fair Value
Non-vested as of September 30, 2012	216,703		$5.83	700,043		$4.44
Granted	—		—	480,800		$4.72
Vested	(102,630	)	$5.68	(174,175	)	$3.87
Forfeited	(4,063	)	$5.68	(25,720	)	$4.47
Non-vested as of March 31, 2013	110,010		$5.98	980,948		$4.68

Restricted stock awards: As of March 31, 2013, there was approximately $0.4 million of remaining unamortized stock-based compensation expense, net of estimated forfeitures, associated with RSAs, which will be expensed over a weighted average remaining service period of approximately 0.9 years.

Restricted stock units: As of March 31, 2013, there was approximately $3.1 million of remaining unamortized stock-based compensation expense, net of estimated forfeitures, associated with RSUs, which will be expensed over a weighted average remaining service period of approximately 2.2 years. The 1.0 million outstanding non-vested RSUs have an aggregate intrinsic value of approximately $5.7 million and a weighted average remaining contractual term of 1.4 years. Of the 1.0 million outstanding non-vested RSUs, approximately 0.9 million RSUs are expected to vest and have an aggregate intrinsic value of approximately $5.0 million and a weighted average remaining contractual term of 1.4 years.

Stock-based compensation

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

Stock-based Compensation Expense - by award type	For the Three Months Ended March 31,				For the Six Months Ended March 31,
(in thousands)	2013		2012		2013		2012
Employee stock options	$	123	$	1,088	$	381	$	2,135
Restricted stock awards and units	515		946		921		1,521
Employee stock purchase plan	125		189		256		413
401(k) match in common stock	257		245		513		475
Outside director fees in common stock	31		74		62		178
Total stock-based compensation expense	$	1,051	$	2,542	$	2,133	$	4,722

Stock-based Compensation Expense - by expense type	For the Three Months Ended March 31,				For the Six Months Ended March 31,
(in thousands)	2013		2012		2013		2012
Cost of revenue	$	290	$	593	$	605	$	1,069
Selling, general, and administrative	459		1,233		841		2,246
Research and development	302		716		687		1,407
Total stock-based compensation expense	$	1,051	$	2,542	$	2,133	$	4,722

Income (Loss) Per Share.

The following table sets forth the computation of basic and diluted net income (loss) per share:

Basic and Diluted Net Income (Loss) Per Share	For the Three Months Ended March 31,						For the Six Months Ended March 31,
(in thousands, except per share)	2013			2012			2013			2012
Numerator - Net income (loss)	$	11,697		$	(9,335	)	$	14,523		$	(23,564	)
Less: Undistributed earnings allocated to participating securities	(94		)	—			(118		)	—
Undistributed earnings allocated to common shareholders for basic net income (loss) per share	$	11,603		$	(9,335	)	$	14,405		$	(23,564	)
Undistributed earnings allocated to common shareholders for diluted net income (loss) per share	$	11,603		$	(9,335	)	$	14,405		$	(23,564	)
Denominator:
Denominator for basic net income (loss) per share - weighted average shares outstanding	26,310			23,529			26,142			23,577
Dilutive options outstanding, unvested stock units and ESPP	332			—			290			—
Denominator for diluted net income (loss) per share - adjusted weighted average shares outstanding	26,642			23,529			26,432			23,577
Basic net income (loss) per share	$	0.44		$	(0.40	)	$	0.55		$	(1.00	)
Diluted net income (loss) per share	$	0.44		$	(0.40	)	$	0.54		$	(1.00	)
Weighted average antidilutive options, unvested restricted stock units and warrants excluded from the computation	1,869			3,587			2,265			3,384
Average market price of common stock	$	5.66		$	4.72		$	5.16		$	4.31

The antidilutive stock options and unvested stock were excluded from the computation of diluted net income (loss) per share due to the assumed proceeds from the award’s exercise or vesting being greater than the average market price of the common shares or due to the Company incurring a net loss for the periods presented.

Future Issuances

As of March 31, 2013, we had common stock reserved for the following future issuances:

Future Issuances	Number of Common Stock Shares Available for Future Issuances
Exercise of outstanding stock options	1,768,833
Unvested restricted stock units	980,948
Purchases under the employee stock purchase plan	636,001
Issuance of stock-based awards under the Equity Plans	588,650
Exercise of outstanding warrants	400,001
Purchases under the officer and director share purchase plan	94,811
Total reserved	4,469,244